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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
For Annual and Transition reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
[x] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1999
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File No.: 0-21628
HAVEN BANCORP, INC.
(exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
11-3153802
(I.R.S. Employer I.D. No.)
615 Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices)
(516) 683-4100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $0.01 per share (Title of class)
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. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [x] Yes [ ] No
The aggregate market value of the voting stock held by non-
affiliates of the registrant, i.e., persons other than directors
and executive officers of the registrant is $134,843,707 and is
based upon the last sales price as quoted on the Nasdaq Stock
Market for March 29, 2000.
The registrant had 9,026,661 shares outstanding as of March 29,
2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year
ended December 31, 1999, are incorporated by reference into Parts
I and II of this Form 10-K.
Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III of this
Form 10-K.
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INDEX
PART I Page
Item 1. Description of Business .......................... 1 - 50
Business ....................................... 1 - 2
Recent Developments ............................ 2 - 3
Market Area and Competition .................... 3 - 4
Lending Activities ............................. 4 - 11
Delinquencies and Classified Assets ............ 11 - 15
Allowances for Loan and REO Losses ............. 15 - 18
Investment Activities .......................... 18 - 20
Mortgage-Backed Securities ..................... 21 - 25
Sources of Funds ............................... 25 - 29
Borrowings ..................................... 30 - 32
Subsidiary Activities .......................... 33 - 34
Personnel ...................................... 34
Regulation and Supervision ..................... 34 - 46
Federal and State Taxation ..................... 46 - 48
Item 2. Properties ....................................... 48 - 50
Item 3. Legal Proceedings ................................ 50
Item 4. Submission of Matters to a Vote of Security
Holders ........................................ 50
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ...................... 51
Item 6. Selected Financial Data .......................... 52
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............. 52
Item 7a. Quantitative and Qualitative Disclosures
about Market Risk ................................ 52
Item 8. Financial Statements and Supplementary Data ...... 52
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure .............. 52
PART III
Item 10. Directors and Executive Officers of the
Registrant ...................................... 52
Item 11. Executive Compensation ........................... 53
Item 12. Security Ownership of Certain Beneficial
Owners and Management ............................ 53
Item 13. Certain Relationships and Related Transactions ... 53
PART IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K .............................. 53 - 56
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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
Statements made herein that are forward-looking in nature within
the meaning of the Private Securities Litigation Reform Act of
1995, are subject to risks and uncertainties that could cause
actual results to differ materially. Such risks and
uncertainties include, but are not limited to, estimates with
respect to the financial condition, results of operations and
business of Haven Bancorp, Inc. that are subject to various
factors which could cause actual results to differ materially
from these estimates. These factors include, but are not limited
to, those related to overall business conditions, particularly in
the consumer financial services, mortgage and insurance markets
in which Haven Bancorp, Inc. operates, fiscal and monetary
policy, competitive products and pricing, credit risk management,
the ability of Haven Bancorp, Inc. to undertake a suitable
transaction with respect to its residential mortgage lending
division and changes in regulations affecting financial
institutions.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS
Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") was
incorporated under Delaware law on March 25, 1993 as the holding
company for CFS Bank ("CFS" or the "Bank") in connection with the
Bank's conversion from a federally chartered mutual savings bank
to a federally chartered stock savings bank. The Company is a
savings and loan holding company and is subject to regulation by
the Office of Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation ("FDIC") and the Securities and Exchange
Commission ("SEC"). The Company is headquartered in Westbury,
New York and its principal business currently consists of the
operation of its wholly owned subsidiary, the Bank. At December
31, 1999, the Company had consolidated total assets of $2.97
billion and stockholders' equity of $105.6 million.
Currently, the Company does not transact any material business
other than through its subsidiary, the Bank.
The Bank was established in 1889 as a New York-chartered building
and loan association and converted to a New York-chartered
savings and loan association in 1940. The Bank converted to a
federally chartered mutual savings bank in 1983. As the Bank
expanded its presence in the New York tri-state area it changed
its name to CFS Bank in 1997. The Bank is a member of the
Federal Home Loan Bank ("FHLB") System, and its deposit accounts
are insured to the maximum allowable amount by the FDIC. At
December 31, 1999, the Bank had total assets of $2.96 billion and
stockholders' equity of $147.0 million.
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The Bank's principal business has been and continues to be
attracting retail deposits from the general public and investing
those deposits, together with funds generated from operations and
borrowings, primarily in one- to four-family, owner-occupied
residential mortgage loans. Since 1994, the Bank has gradually
increased its activity in multi-family and commercial real estate
lending. In addition, the Bank will invest in debt, equity and
mortgage-backed securities and other marketable securities to
supplement its lending portfolio. Effective January 1, 1999, the
Bank indefinitely discontinued offering certain consumer loans,
including home equity loans and home equity lines of credit.
On May 1, 1998, the Bank completed the purchase of the loan
production franchise of Intercounty Mortgage, Inc. ("IMI"). The
business operates as a division of the Bank under the name CFS
Mortgage originating and purchasing residential loans for the
Bank's portfolio and for sale in the secondary market, primarily
through six loan origination offices located in New York, New
Jersey and Pennsylvania. Loan sales in the secondary market are
primarily on a servicing-released basis, for which the Bank earns
servicing-released premiums. The Company has retained an
investment banking firm to pursue various strategic alternatives
for the Company including the sale of parts of CFS Mortgage,
which the Company expects to complete in early 2000.
On November 2, 1998, the Company purchased 100% of the
outstanding common stock of Century Insurance Agency, Inc. The
insurance agency operates as a wholly owned subsidiary of the
Company under the name CFS Insurance Agency, Inc. ("CIA"),
providing automobile, homeowners and casualty insurance to
individuals, and various lines of commercial insurance to
individuals.
The Bank's results of operations are dependent primarily on its
net interest income, which is the difference between the interest
income earned on its loan and securities portfolios and its cost
of funds, which consists of the interest paid on its deposits and
borrowed funds. The Bank's net income is also affected by its
non-interest income, its provision for loan losses and its
operating expenses consisting primarily of compensation and
benefits, occupancy and equipment, federal deposit insurance
premiums and other general and administrative expenses. The
earnings of the Bank are significantly affected by general
economic and competitive conditions, particularly changes in
market interest rates, and to a lesser extent by government
policies and actions of regulatory authorities.
RECENT DEVELOPMENTS
On March 24, 2000, the Company announced that it retained the
investment banking firm of Lehman Brothers Inc. to advise the
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Board of Directors on strategic alternatives for the Company. In
addition, the Company formed a three-person committee of outside
Board members to work with Lehman Brothers in these efforts.
Chaired by Michael A. McManus, Jr., the committee includes Hanif
Dahya and Robert M. Sprotte. The Company had previously
announced that it had engaged Lehman Brothers to assist in
evaluating options with respect to the Company's residential
mortgage origination division. The Company expects a resolution
regarding its residential mortgage division in the near future,
which will result in the Company recording a restructuring
charge, the amount of which cannot be determined at this time.
In addition, the Board approved a plan to reduce operating
expenses through a reduction in the Company's workforce and
elimination of certain other expenses across all departments and
divisions. The Company expects to realize approximately $7
million in annualized savings as a result of these measures. The
Company started to implement these initiatives as of March 24,
2000.
MARKET AREA AND COMPETITION
The Bank has been, and continues to be, a community oriented
savings institution offering a variety of traditional financial
services to meet the needs of the communities in which it
operates. Management considers the Bank's reputation and
customer service as its major competitive advantage in attracting
and retaining customers in its market area.
The Bank's primary market area is concentrated in the
neighborhoods surrounding its eight full service banking and
sixty-three in-store banking facilities located in the New York
City boroughs of Queens, Brooklyn, Manhattan and Staten Island,
the New York counties of Nassau, Suffolk, Rockland and
Westchester and in New Jersey and Connecticut. During 1999, the
Bank opened six in-store branches. Management believes that in-
store branching is a cost effective way to extend the Bank's
franchise and put its sales force in touch with more prospective
customers than possible through conventional bank branches.
Management believes that all of its branch offices are located in
communities that can generally be characterized as stable,
residential neighborhoods of predominantly one- to four-family
residences and middle income families.
During the past five years, the Bank's expanded loan work-out and
resolution efforts have successfully contributed toward reducing
non-performing assets to manageable levels. Although there are
encouraging signs in the local economy and the Bank's real estate
markets, it is unclear how these factors will affect the Bank's
asset quality in the future. See "Delinquencies and Classified
Assets."
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The New York City metropolitan area has a large number of
financial institutions, many of which are significantly larger
and have greater financial resources than the Bank, and all of
which are competitors of the Bank to varying degrees. The Bank's
competition for loans and deposits comes principally from savings
and loan associations, savings banks, commercial banks, mortgage
banking companies, insurance companies and credit unions. In
addition, the Bank faces increasing competition for deposits from
non-bank institutions such as brokerage firms and insurance
companies in such areas as short-term money market funds,
corporate and government securities funds, mutual funds and
annuities and insurance. Competition may also increase as a
result of the lifting of restrictions on the interstate
operations of financial institutions and the recent passage of
the Gramm-Leach-Bliley Act. See "Regulation and Supervision."
LENDING ACTIVITIES
LOAN PORTFOLIO COMPOSITION. The Bank's loan portfolio consists
primarily of conventional first mortgage loans secured by owner
occupied one- to four-family residences, and, to a lesser extent,
multi-family residences, commercial real estate and construction
and land loans. Also, the Bank's loan portfolio includes
cooperative loans, which the Bank has not originated since 1990
except to facilitate the sale of real estate owned ("REO") or to
restructure a problem asset. During 1999, loan originations and
purchases totaled $1.38 billion (comprised of $1.20 billion of
residential one- to four-family mortgage loans, $158.7 million of
commercial and multi-family real estate loans, $11.2 million of
construction loans and $8.9 million of consumer loans). One- to
four-family mortgage loan originations and purchases included
$634.8 million of loans originated and purchased for sale in the
secondary market. During 1999, the Bank sold $561.7 million of
one- to four-family mortgage loans in the secondary market on a
servicing-released basis.
At December 31, 1999, the Bank had total mortgage loans
outstanding of $1.77 billion, of which $1.33 billion were one- to
four-family residential mortgage loans, or 74.0% of the Bank's
total loans. At that same date, multi-family residential
mortgage loans totaled $268.4 million, or 14.9% of total loans.
The remainder of the Bank's mortgage loans, included $167.5
million of commercial real estate loans, or 9.3% of total loans,
$3.7 million of cooperative apartment loans, or 0.2% of total
loans and $3.2 million of construction and land loans, or 0.2% of
total loans. Other loans in the Bank's portfolio principally
consisted of home equity lines of credit and consumer loans
totaling $25.9 million, or 1.4% of total loans at December 31,
1999.
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The following table sets forth the composition of the Bank's loan
portfolio, excluding loans held for sale, in dollar amounts and
in percentages of the respective portfolios at the dates
indicated.
<TABLE>
<CAPTION>
At December 31,
---------------
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ---------------
Percent Percent Percent Percent Percent
of of of of of
Amount Total Amount Total Amount Total Amount Total Amount Total
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family $1,332,169 73.98% $888,610 67.85% $805,690 69.93% $556,818 65.63% $325,050 57.03%
Multi-family 268,358 14.90 215,542 16.46 143,559 12.46 105,341 12.42 79,008 13.86
Commercial 167,518 9.30 163,935 12.52 148,745 12.91 127,956 15.08 111,038 19.48
Cooperative 3,669 0.20 3,970 0.30 19,596 1.70 19,936 2.35 10,187 1.79
Construction and land 3,168 0.18 2,731 0.20 2,263 0.20 4,227 0.50 5,737 1.01
--------- ----- --------- ----- ------- ----- ------- ----- ------- -----
Total mortgage loans 1,774,882 98.56 1,274,788 97.33 1,119,853 97.20 814,278 95.98 531,020 93.17
Other loans:
Home equity lines of
credit 11,328 0.63 15,173 1.16 15,449 1.34 15,677 1.85 16,454 2.89
Property improvement
loans 1,502 0.08 2,634 0.20 4,392 0.38 6,957 0.82 10,248 1.80
Loans on deposit
accounts 749 0.04 957 0.07 895 0.08 809 0.10 821 0.14
Commercial loans 422 0.02 445 0.03 453 0.04 351 0.04 479 0.08
Guaranteed student loans 667 0.04 774 0.06 882 0.08 985 0.12 1,181 0.21
Unsecured consumer loans 978 0.05 2,029 0.16 450 0.04 809 0.10 1,950 0.34
Other loans 10,302 0.58 12,914 0.99 9,770 0.84 8,506 0.99 7,834 1.37
--------- ------ --------- ------ ------- ------ ------- ------ ------- ------
Total other loans 25,948 1.44 34,926 2.67 32,291 2.80 34,094 4.02 38,967 6.83
--------- ------ --------- ------ ------- ------ ------- ------ ------- ------
Total loans 1,800,830 100.00% 1,309,714 100.00% 1,152,144 100.00% 848,372 100.00% 569,987 100.00%
====== ====== ====== ====== ======
Less:
Unearned discounts,
premiums and deferred
loan fees, net 5,995 966 (1,363) (786) (1,029)
Allowance for loan
losses (16,699) (13,978) (12,528) (10,704) (8,573)
--------- --------- ------- ------- -------
Loans, net $1,790,126 $1,296,702 $1,138,253 $836,882 $560,385
========= ========= ======= ======= =======
</TABLE>
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The following table shows the estimated contractual maturity of
the Bank's loan portfolio at December 31, 1999, assuming no
prepayments.
<TABLE>
<CAPTION>
At December 31, 1999
Mortgage Other Total
Loans Loans Loans
-------- ----- -------
(In thousands)
<S> <C> <C> <C>
Amounts due:
Within one year $ 75,797 $16,497 92,294
------- ------ -------
After one year:
One to three years 171,079 1,390 172,469
Three to five years 335,096 1,652 336,748
Five to ten years 595,617 2,337 597,954
Ten to twenty years 354,481 4,072 358,553
Over twenty years 242,812 - 242,812
--------- ------ ---------
Total due after one year 1,699,085 9,451 1,708,536
--------- ------ ---------
Total $1,774,882 $25,948 $1,800,830
========= ====== =========
</TABLE>
The following table sets forth at December 31, 1999, the dollar
amount of all loans due after December 31, 2000, and whether such
loans have fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
Due After December 31, 2000
Fixed Adjustable Total
----- ---------- -----
(In thousands)
<S> <C> <C> <C>
Mortgage loans:
One- to four-family $534,265 $ 759,164 $1,293,429
Multi-family 38,586 217,360 255,946
Commercial 28,475 117,566 146,041
Cooperative 954 2,715 3,669
Other loans 7,466 1,985 9,451
------- --------- ---------
Total $609,746 $1,098,790 $1,708,536
======= ========= =========
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The following table sets forth the Bank's loan originations, loan
purchases, sales and principal repayments for the periods
indicated:
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Mortgage loans (gross):
At beginning of year $1,274,788 $1,119,853 $814,278 $531,020 $483,232
Mortgage loans originated(1):
One- to four-family 568,072 177,544 121,498 98,783 64,139
Multi-family 102,305 88,504 64,181 46,310 11,726
Commercial real estate 56,395 68,319 69,495 35,886 26,047
Cooperative - 34 - - 63
Construction and land loans 11,188 2,806 3,773 1,562 4,367
--------- ------- ------- ------- -------
Total mortgage loans
originated 737,960 337,207 258,947 182,541 106,342
Mortgage loans purchased - 297,906 200,900 172,300 26,241
Transfer of mortgage loans
to REO (622) (623) (1,695) (3,470) (4,638)
Transfer of mortgage loans from/
(to) loans held for sale 44,569 - - 10,594 (12,038)
Principal repayments (259,143) (269,164) (151,215) (78,209) (67,274)
Sales of mortgage loans (2) (22,670) (104,700) (1,362) (498) (845)
Transfer of loans to MBSs - (105,691) - - -
--------- --------- --------- ------- -------
At end of year $1,774,882 $1,274,788 $1,119,853 $814,278 $531,020
========= ========= ========= ======= =======
Other loans (gross):
At beginning of year $ 34,926 $ 32,291 $ 34,094 $ 38,967 $ 41,025
Other loans originated 8,874 16,413 11,491 8,735 10,746
Principal repayments (17,852) (13,778) (13,294) (13,608) (12,804)
------- ------- ------- ------- -------
At end of year $ 25,948 $ 34,926 $ 32,291 $ 34,094 $ 38,967
======= ======= ======= ======= =======
</TABLE>
(1) Includes wholesale loan purchases.
(2) During 1999, the Bank sold $20.5 million of adjustable-rate
mortgage loans previously held in the Bank's portfolio. During
1998, the Bank sold $83.3 million of adjustable-rate mortgage
loans in several bulk sale transactions. Also during 1998, the
Bank sold $14.0 million of cooperative apartment loans.
ONE- TO FOUR-FAMILY MORTGAGE LENDING. The Bank offers both
fixed-rate and adjustable-rate mortgage ("ARM") loans secured by
one- to four-family residences located primarily in Long Island
(in the New York counties of Nassau and Suffolk), the New York
City boroughs of Queens, Manhattan, Brooklyn and Staten Island,
the New York counties of Rockland and Westchester, as well as in
Albany and Rochester, New York, New Jersey, Pennsylvania and
Connecticut.
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Loan originations are generally obtained from existing or past
customers, members of the local communities, local real estate
brokers and attorney referrals. The substantial majority of the
Bank's loans are originated through efforts of Bank-employed
sales representatives who solicit loans from the communities
served by the Bank by calling on real estate attorneys, brokers
and individuals who have expressed an interest in obtaining a
mortgage loan. The Bank also originates loans from its customer
base in its branch offices. In 1995, the Bank also began
purchasing loans on a flow basis from correspondent mortgage
bankers in New York, New Jersey and Connecticut to supplement its
one- to four-family loan originations.
The Bank generally originates one- to four-family residential
mortgage loans in amounts up to 95% of the lower of the appraised
value or selling price of the property securing the loan.
Properties securing such loans are primarily owner-occupied
principal residences. One- to four-family mortgage loans may be
originated with loan-to-value ratios of up to 97% of the
appraised value of the property under the Fannie Mae ("FNMA")
Community Home Buyers Program, which targets low to low/moderate
income borrowers. Residential condominium loans are originated
in amounts up to a maximum of 95% of the appraised value of the
condominium unit. Private Mortgage Insurance ("PMI") is required
whenever loan-to-value ratios exceed 80% of the price or
appraised value of the property securing the loan. Loan amounts
generally conform to Federal Home Loan Mortgage Corporation
("FHLMC") limits. Mortgage loans originated by the Bank
generally include due-on-sale clauses that provide the Bank with
the contractual right to deem the loan immediately due and
payable in the event that the borrower transfers ownership of the
property without the Bank's consent. Due-on-sale clauses are an
important means of enabling the Bank to redeploy funds at current
rates thereby causing the Bank's loan portfolio to be more
interest rate sensitive. The Bank has generally exercised its
rights under these clauses.
The Bank currently offers fixed-rate loans up to $1.0 million on
one- to four-family residences with terms up to 30 years, as well
as 30 year and 15 year fixed-rate bi-weekly loans. Interest
rates charged on fixed-rate mortgage loans are competitively
priced based on market conditions and the Bank's cost of funds.
Origination fees on fixed-rate loans typically range from 0% to
3% of the principal amount of the loan. Generally, the Bank's
standard underwriting guidelines conform to the FNMA/FHLMC
guidelines.
The Bank currently offers ARM loans up to $1.0 million which
adjust either annually, or in 3, 5, 7, 10 or 15 years with
maximum loan terms of 30 years. The Bank's ARM loans typically
carry an initial interest rate below the fully-indexed rate for
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the loan. For one year ARMs, the Bank qualifies borrowers based
upon a rate of 2% over the initial rate. The initial discounted
rate is determined by the Bank in accordance with market and
competitive factors. The Bank currently charges origination fees
ranging from 0% to 2.0% for its one- to four-family ARM loans.
ARM loans generally pose a risk that as interest rates rise, the
amount of a borrower's monthly loan payment also rises, thereby
increasing the potential for delinquencies and loan losses. This
potential risk is mitigated by the Bank's policy of originating
ARM loans with annual and lifetime interest rate caps that limit
the amount that a borrower's monthly payment may increase and by
qualifying borrowers based upon a rate of 2% over the initial
rate. During 1999, the Bank originated or purchased $443.6
million of one- to four-family ARM loans for portfolio.
The Bank originates 30 year and 15 year fixed-rate loans for
immediate sale, primarily to private investors, while it
generally retains ARM loans, 10, and 20 year fixed-rate loans,
and 15 and 30 year bi-weekly fixed-rate loans for portfolio. The
Bank arranges for the sale of such loans at the acceptance of the
commitment by the applicant to the investor through "assignments
of trade" or "best efforts" commitments. The Bank sells loans on
a servicing-released basis. For the year ended December 31,
1999, the Bank originated and purchased approximately $634.8
million of primarily fixed rate, one- to four-family loans for
sale in the secondary market, $561.7 million of which were sold
in 1999 and $44.6 million of which were transferred to portfolio.
COOPERATIVE APARTMENT LOANS. Until 1990, the Bank originated
loans secured by cooperative units. Since 1990, the Bank has not
originated any loans secured by cooperative units with the
exception of loans to facilitate the restructuring of a
classified asset or sale of REO. In 1994, the Bank was approved
as a seller/servicer in a FNMA pilot program, enabling it to
originate cooperative apartment loans for immediate sale to FNMA.
MULTI-FAMILY LENDING. The Bank originates multi-family loans
with contractual terms of up to 15 years where the interest rate
generally reprices during the term of the loan and is tied to
matching U.S. Treasury Notes plus a margin. These loans are
generally secured by apartment and mixed-use (commercial and
residential, with the majority of income coming from the
residential units) properties, located in the Bank's primary
market area and are made in amounts of up to 75% of the appraised
value of the property. In making such loans, the Bank bases its
underwriting decision primarily on the net operating income
generated by the real estate to support the debt service, the
financial resources, credit history and ownership/ management
experience of the principals/guarantors, and the marketability of
the property. The Bank generally requires a debt service
coverage ratio of at least 1.20x and sometimes requires personal
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guarantees from borrowers. As of December 31, 1999, $268.4
million, or 14.9% of the Bank's total loan portfolio, consisted
of multi-family residential loans.
Multi-family, commercial real estate and construction and land
lending are generally believed to involve a higher degree of
credit risk than one- to four-family lending because such loans
typically involve higher principal amounts and the repayment of
such loans generally is dependent on income produced by the
property to cover operating expenses and debt service. Economic
events that are outside the control of the borrower or lender
could adversely impact the value of the security for the loan or
the future cash flows from the borrower's property. In
recognition of these risks, the Bank applies stringent
underwriting criteria for all of its loans. See "Commercial Real
Estate Lending" and "Construction and Land Lending".
COMMERCIAL REAL ESTATE LENDING. The Bank originates commercial
real estate loans that are generally secured by properties used
exclusively for business purposes such as retail stores, mixed-
use properties (residential and retail or professional office
combined where the majority of the income from the property comes
from the commercial business), light industrial and small office
buildings located in the Bank's primary market area. The Bank's
commercial real estate loans are generally made in amounts up to
the lesser of 70% of the appraised value of the property or 65%
for owner occupied properties. Commercial real estate loans are
made on a negotiated basis for terms of up to 15 years where the
interest rate generally reprices during the term of the loan and
is tied to the prime rate or the U.S. Treasury Note rate matched
to the repricing frequency of the loan. The Bank's underwriting
standards and procedures are similar to those applicable to its
multi-family loans, whereby the Bank considers the net operating
income of the property and the borrower's expertise, credit
history and profitability. The Bank generally requires that the
properties securing commercial real estate loans have debt
service coverage ratios of not less than 1.30x and also generally
requires personal guarantees from the borrowers or the principals
of the borrowing entity. At December 31, 1999, the Bank's
commercial real estate loan portfolio totaled $167.5 million, or
9.3% of the Bank's total loan portfolio.
CONSTRUCTION AND LAND LENDING. The Bank's construction loans
primarily have been made to finance the construction of one- to
four-family residential properties, multi-family residential
properties and retail properties. The Bank's policies provide
that construction and land development loans may generally be
made in amounts up to 70% of the value when completed for
commercial properties and 75% for multi-family. The Bank
generally requires personal guarantees and evidence that the
borrower has invested an amount equal to at least 20% of the
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estimated cost of the land and improvements. Construction loans
generally are made on a floating rate basis (subject to daily
adjustment) and a maximum term of 18 months, subject to renewal.
Construction loans are generally made based on pre-sales or pre-
leasing. Loan proceeds are disbursed in increments as
construction progresses and as inspections warrant. As of
December 31, 1999, the Bank had $3.2 million, or 0.2% of its
total loan portfolio invested in construction and land loans.
OTHER LOANS. As of December 31, 1999, other loans totaled $25.9
million, or 1.4% of the Bank's total loan portfolio. Effective
January 1, 1999, the Bank indefinitely discontinued offering
consumer loan products, including home equity loans and home
equity lines of credit, due to shrinking volume and spreads
coupled with high origination costs.
LOAN APPROVAL PROCEDURES AND AUTHORITY. For one- to four-family
real estate loans each loan is reviewed and approved by an
underwriter and another departmental officer with credit
authority appropriate for the loan amount and type in accordance
with the policies approved by the Board of Directors. Multi-
family, commercial and construction loans are approved by
designated lending officers respective of the amounts within
their lending authorities which are approved by the Board of
Directors. Commercial loans up to $3.0 million must be approved
by the Officers Loan Committee, whereas, loans exceeding $3.0
million must be approved by the Board of Directors Loan
Committee. Loans not secured by real estate as well as unsecured
loans, depending on the amount of the loan and the loan-to-value
ratio, where applicable, require the approval of at least one
lending officer and/or underwriter designated by the Board of
Directors.
For all loans originated by the Bank, upon receipt of a completed
loan application from a prospective borrower, a credit report is
ordered and certain other information is verified by the Bank's
loan underwriters and, if necessary, additional financial
information is requested. An appraisal of the real estate
intended to secure the proposed loan is performed, as required by
OTS regulations and prepared by an independent appraiser
designated and approved by the Bank. The Board of Directors
annually approves the independent appraisers used by the Bank and
approves the Bank's appraisal policy. It is the Bank's policy to
obtain title insurance on all real estate first mortgage loans.
Borrowers must also obtain hazard insurance prior to closing and
flood insurance and PMI where required. Borrowers generally are
required to advance funds on a monthly basis together with each
payment of principal and interest to a mortgage escrow account
from which the Bank makes disbursements for items such as real
estate taxes, and in some cases, hazard insurance premiums.
11
<PAGE>
LOAN CONCENTRATIONS. Under OTS regulations, the Bank may not
extend credit to a single borrower or related group of borrowers
in an amount greater than 15% of the Bank's unimpaired capital
and surplus. An additional amount of credit may be extended,
equal to 10% of unimpaired capital and surplus, if the loan is
secured by readily marketable collateral, which does not include
real estate.
At December 31, 1999, the Bank's loans-to-one borrower limit was
$24.6 million. None of the Bank's borrowers exceeded this limit
in accordance with applicable regulatory requirements.
DELINQUENCIES AND CLASSIFIED ASSETS
DELINQUENT LOANS. The Bank entered into a sub-servicing
agreement with Norwest Mortgage, Inc. ("Norwest"), commencing on
November 16, 1998, under which Norwest performs all residential
mortgage loan servicing functions on behalf of the Bank for the
Bank's portfolio loans, as well as for loans serviced for third
party investors. Norwest's collection procedures for mortgage
loans include sending a notice after the loan is 16 days past
due. In the event that payment is not received after the late
notice, phone calls are made to the borrower by Norwest's
collection department. When contact is made with the borrower at
any time prior to foreclosure, the collection department attempts
to obtain full payment or the loss mitigation department attempts
to work out a repayment schedule with the borrower to avoid
foreclosure. Generally, foreclosure procedures are initiated
when a loan is over 95 days delinquent. Loss mitigation efforts
continue throughout the foreclosure process.
CLASSIFIED ASSETS. Federal regulations and the Bank's
Classification of Assets Policy provide for the classification of
loans and other assets considered by the Bank to be of lesser
quality as "substandard", "doubtful" or "loss" assets. An asset
is considered substandard if it is inadequately protected by the
current net worth and paying capacity of the obligor and/or of
the collateral pledged, if any. Substandard assets include those
characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the
weaknesses inherent in those classified substandard with the
added characteristic that the weaknesses present make "collection
or liquidation in full," on the basis of currently existing
facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered
"uncollectible" and of such little value that their continuance
as assets without the establishment of a specific loss reserve is
not warranted. Pursuant to OTS guidelines, the Bank is no longer
required to classify assets as "special mention" if such assets
possess weaknesses but do not expose the Bank to sufficient risk
to warrant classification in one of the aforementioned
12
<PAGE>
categories. However, the Bank continues to classify assets as
"special mention" for internal monitoring purposes.
Non-performing loans (consisting of non-accrual loans and
restructured loans) decreased each year during the five-year
period ended December 31, 1999 from $16.9 million at December 31,
1995 to $7.7 million at December 31, 1999. The continued decline
in the balance of non-performing loans during this period was due
to the Bank's ongoing efforts to reduce non-performing assets, as
well as to an improved economy. REO decreased each year during
this period from $2.0 million at December 31, 1995 (net of an
allowance for REO of $178,000) to a balance at December 31, 1999
of $324,000. The Bank intends to continue its efforts to reduce
non-performing assets in the normal course of business, but it
may continue to seek opportunities to dispose of its non-
performing assets through sales to investors or otherwise. The
Bank also has restructured loans, which has enabled the Bank to
avoid the costs involved with foreclosing on the properties
securing such loans while continuing to collect payments on the
loans under their modified terms. Troubled debt restructurings
("TDRs") are loans for which certain concessions, such as the
reduction of interest rates or the deferral of interest or
principal payments, have been granted due to the borrower's
financial condition.
At December 31, 1999, the Bank had 8 restructured loans with an
aggregate principal balance of $0.7 million. Of this amount,
68.6% were residential loans (including cooperative apartment
loans) and 31.4% were multi-family loans. Management is able to
avoid the costs of foreclosing on loans that it has restructured.
However, restructured loans have a higher probability of becoming
delinquent than loans that have no previous history of
delinquency. To the extent that the Bank is unable to return
these loans to performing status, the Bank would have to
foreclose on such loans, which would increase the Bank's REO.
The Bank's policy is to recognize income on a cash basis for
restructured loans for a period of six months, after which such
loans are returned to an accrual basis if they are performing in
accordance with their modified terms. At December 31, 1999, the
Bank had 7 restructured loans with an aggregate principal balance
of $0.6 million that were on accrual status. For restructured
loans that are 90 days or more past due, the loan is returned to
non-accrual status and previously accrued but uncollected
interest is reversed.
At December 31, 1999, the Bank's classified assets consisted of
$6.5 million of loans and REO of which $133,000 were classified
as a loss or doubtful. The Bank's assets classified as
substandard at December 31, 1999 consisted of $6.1 million of
loans and $324,000 of gross REO. Classified assets in total
13
<PAGE>
declined $4.6 million, or 41.1% since December 31, 1997. At
December 31, 1999, the Bank also had $6.1 million of commercial
real estate loans that it had designated special mention. These
loans were performing in accordance with their terms at December
31, 1999 but were deemed to warrant close monitoring by
management due to one or more factors, such as the absence of
current financial information relating to the borrower and/or the
collateral, financial difficulties of the borrower or inadequate
cash flow from the security property.
At December 31, 1999, 1998 and 1997, delinquencies in the Bank's
loan portfolio were as follows:
<TABLE>
<CAPTION>
At December 31, 1999 At December 31, 1998
-------------------------------- ---------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
---------------- --------------- ---------------- ----------------
Number Principal Number Principal Number Principal Number Principal
of Balance of Balance of Balance of Balance
Loans of Loans Loans of Loans Loans of Loans Loans of Loans
------ -------- ------ --------- ------ -------- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family 28 $ 991 31 $ 3,485 50 $ 5,201 40 $ 3,843
Multi-family - - 2 1,139 2 591 - -
Commercial - - 5 1,365 2 306 7 2,175
Cooperative 11 36 10 384 - - 26 303
Construction and
land loans - - - - - - - -
Other loans 30 104 52 621 94 1,177 47 207
-- ------ --- ------ --- ------ --- ------
Total loans 69 $ 1,131 100 $ 6,994 148 $ 7,275 120 $ 6,528
== ====== === ====== === ====== === ======
Delinquent loans
to total loans (1) 0.06% 0.39% 0.56% 0.50%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1997
---------------------------------
60-89 Days 90 Days or More
---------------- ----------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
------ --------- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
One- to four-family 8 $ 1,339 42 $ 3,534
Multi-family - - 9 2,362
Commercial 1 33 9 3,305
Cooperative 3 128 8 699
Construction and
land loans - - 1 100
Other loans 26 452 19 396
--- ------ --- ------
Total loans 38 $ 1,952 88 $10,396
=== ====== === ======
Delinquent loans
to total loans (1) 0.17% 0.90%
==== ====
</TABLE>
(1) Restructured loans that have become seasoned for the
required six month period and are currently performing in
accordance with their restructured terms are not included in
delinquent loans. There were no restructured loans included in
14
<PAGE>
loans delinquent 90 days or more at December 31, 1999. At
December 31, 1998, there was 1 restructured loan for $183,000
that was included in loans delinquent 90 days or more because it
had not yet performed in accordance with its modified terms for
the required six-month seasoning period.
NON-PERFORMING ASSETS. The Bank does not accrue interest on
loans 90 days past due and restructured loans that have not yet
performed in accordance with their modified terms for at least
six months. If non-accrual loans had been performing in
accordance with their original terms, the Bank would have
recorded interest income from such loans of approximately
$468,000, $425,000 and $736,000 for the years ended December 31,
1999, 1998 and 1997, respectively, compared to $144,000, $117,000
and $146,000, which was recognized on non-accrual loans for such
periods, respectively. If all restructured loans, as of December
31, 1999, 1998 and 1997, had been performing in accordance with
their original loan terms (prior to being restructured), the Bank
would have recognized interest income from such loans of
approximately $180,000, $396,000 and $197,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. The following
table sets forth information regarding all non-accrual loans
(which consist of loans 90 days or more past due and restructured
loans that have not yet performed in accordance with their
modified terms for the required six-month seasoning period),
restructured loans and REO.
<TABLE>
<CAPTION>
At December 31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans $ 6,373 $ 6,321 $ 10,000 $ 10,358 $ 9,116
Restructured mortgage loans 717 1,857 2,136 3,160 7,072
Non-accrual other loans 621 207 396 375 689
------- ------- ------- ------- -------
Total non-performing loans 7,711 8,385 12,532 13,893 16,877
Real estate owned, net of
related reserves 324 200 455 1,038 2,033
------- ------- ------- ------- -------
Total non-performing assets $ 8,035 $ 8,585 $ 12,987 $ 14,931 $ 18,910
======= ======= ======= ======= =======
Non-performing loans to total loans 0.42% 0.64% 1.09% 1.64% 2.97%
Non-performing assets to total assets 0.27 0.36 0.66 0.94 1.28
Non-performing loans to total assets 0.26 0.35 0.63 0.88 1.15
</TABLE>
ALLOWANCES FOR LOAN AND REO LOSSES
The allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries). Impaired loans
and related reserves have been identified and calculated in
accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan", and the amendment thereof, SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income
15
<PAGE>
Recognition and Disclosures". The total allowance for loan
losses has been determined in accordance with the provisions of
SFAS No. 5, "Accounting for Contingencies". The Bank's allowance
for loan losses is intended to be maintained at a level
sufficient to absorb all estimable and probable losses inherent
in the loan portfolio. The Bank reviews the adequacy of the
allowance for loan losses on a monthly basis taking into account
past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying
collateral, current and prospective economic conditions and
current regulatory guidance.
During the five years ended December 31, 1999, the allowance for
loan losses as a percentage of non-performing loans increased
steadily to 216.56% at December 31, 1999. The increase is a
direct result of the steady decline in non-performing loans
during that five year period. Non-performing loans as a
percentage of total loans declined steadily from 2.97% at
December 31, 1995 to 0.42% at December 31, 1999. The decline is
due to the decrease in non-performing loans, as well as an
increase in total loans.
The Bank's provision for loan losses has remained relatively
stable over the last five years. Specifically, the Bank made
provisions for loan losses of $3.6 million, $2.7 million, $2.8
million, $3.1 million and $2.8 million for December 31, 1999,
1998, 1997, 1996 and 1995, respectively.
The Bank will continue to monitor and modify its allowances for
loan and REO losses as conditions dictate. Although the Bank
maintains its allowances at levels that it considers adequate to
provide for potential losses, there can be no assurance that such
losses will not exceed the estimated amounts.
16
<PAGE>
The following table sets forth the changes in the Bank's
allowance for loan losses at the dates indicated.
<TABLE>
<CAPTION>
At or For the Years Ended December 31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $13,978 $12,528 $10,704 $ 8,573 $10,847
Charge-offs:
One- to four-family (314) (435) (964) (771) (472)
Cooperative (34) (256) (370) (524) (2,142)
Multi-family - (708) - (30) (1,299)
Non-residential and other (1,002) (935) (352) (560) (1,541)
------ ------ ------ ------ ------
Total charge-offs (1,350) (2,334) (1,686) (1,885) (5,454)
Recoveries 446 1,119 760 891 405
------ ------ ------ ------ ------
Net charge-offs (904) (1,215) (926) (994) (5,049)
Provision for loan losses 3,625 2,665 2,750 3,125 2,775
------ ------ ------ ------ ------
Balance at end of year $16,699 $13,978 $12,528 $10,704 $ 8,573
====== ====== ====== ====== ======
Ratio of net charge-offs during
the year to average loans out-
standing during the year 0.06% 0.09% 0.09% 0.15% 0.93%
Ratio of allowance for loan
losses to total loans at
the end of year (1) 0.92 1.07 1.09 1.26 1.51
Ratio of allowance for loan
losses to non-performing loans
at the end of the year (2) 216.56 166.70 99.97 77.05 50.80
</TABLE>
(1) The steady decline in the ratio of allowance for loan losses
to total loans is attributable to a decline in non-performing
loans as previously mentioned coupled with growth in the Bank's
total loans outstanding.
(2) The ratio of allowance for loan losses to non-performing
loans has increased significantly over the last five years as
non-performing loans have declined.
17
<PAGE>
The following table sets forth the Bank's allocation of its
allowance for loan losses to the total amount of loans in each of
the categories listed.
<TABLE>
<CAPTION>
At December 31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
% of % of % of % of % of
Loans in Loans in Loans in Loans in Loans in
Category Category Category Category Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential (1) $12,112 89.08% $10,139 84.62% $7,039 84.09% $5,929 80.40% $3,838 72.67%
Commercial 4,372 9.30 3,579 12.51 5,201 12.91 4,340 15.08 4,175 19.48
Construction - 0.18 - 0.21 - 0.20 - 0.50 69 1.00
Other loans 215 1.44 260 2.66 288 2.80 435 4.02 491 6.85
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Total allowance for
loan losses (2) $16,699 100.00% $13,978 100.00% $12,528 100.00% $10,704 100.00% $8,573 100.00%
====== ====== ====== ====== ===== ====== ====== ====== ====== ======
</TABLE>
(1) Includes one- to four-family, multi-family and cooperative
loans.
(2) In order to comply with certain regulatory reporting
requirements, management has prepared the above allocation of the
Bank's allowance for loan losses among various categories of the
loan portfolio for each of the years in the five-year period
ended December 31, 1999. In management's opinion, such
allocation has, at best, a limited utility. It is based on
management's assessment as of a given point in time of the risk
characteristics of each of the component parts of the total loan
portfolio and is subject to changes as and when the risk factors
of each such component change. Such allocation is not indicative
of either the specific amounts or the loan categories in which
future charge-offs may be taken, nor should it be taken as an
indicator of future loss trends. In addition, by presenting such
allocation, management does not mean to imply that the allocation
is exact or that the allowance has been precisely determined from
such allocation.
INVESTMENT ACTIVITIES
The investment policy of the Bank, which is established by the
Board of Directors and implemented by the Bank's Asset/Liability
Committee ("ALCO"), is designed primarily to provide and maintain
liquidity, to generate a favorable return on investments without
incurring undue interest rate and credit risks, and to complement
the Bank's lending activities. Federally chartered savings
institutions have the authority to invest in various types of
liquid assets, including U.S. Treasury obligations, securities of
various federal agencies, certain certificates of deposit of
18
<PAGE>
insured banks and savings institutions, certain bankers'
acceptances, repurchase agreements and federal funds. Subject to
various restrictions, federally chartered savings institutions
may also invest their assets in commercial paper, investment
grade corporate debt securities and mutual funds whose assets
conform to the investments that a federally chartered savings
institution is otherwise authorized to make directly.
Additionally, the Bank must maintain minimum levels of
investments that qualify as liquid assets under OTS regulations.
See "Regulation and Supervision-Federal Savings Institution
Regulation-Liquidity." Historically, the Bank has maintained
liquid assets above the minimum OTS requirements and at a level
believed to be adequate to meet its normal daily activities. At
December 31, 1999, the Bank had money market investments and debt
and equity securities available for sale with aggregate carrying
amounts of $1.2 million and $195.4 million, respectively.
On June 30, 1998, the Company transferred the then remaining
$138.2 million of MBSs and $45.4 million of debt securities held
to maturity to securities available for sale ("AFS"). The
transfer was done to enhance liquidity and take advantage of
market opportunities. At December 31, 1999, the securities AFS
portfolio totaled $937.3 million, of which $184.5 million were
adjustable-rate securities and $752.8 million were fixed-rate
securities.
The following table sets forth certain information regarding the
carrying and market values of the Company's money market
investments, debt and equity securities and FHLB-NY stock at the
dates indicated:
<TABLE>
<CAPTION>
At December 31,
1999 1998 1997
------ ------ ------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
-------- ------ -------- ------ ------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Debt and Equity Securities:
U.S. Government and
agency obligations $ 92,142 $ 92,142 $ 77,705 $ 77,705 $135,672 $135,715
Corporate debt securities 93,798 93,798 19,684 19,684 45,390 45,315
Preferred stock 9,453 9,453 11,590 11,590 4,123 4,123
------- ------- ------- ------- ------- -------
Subtotal 195,393 195,393 108,979 108,979 185,185(1) 185,153(1)
------- ------- ------- ------- ------- -------
Federal Funds sold - - - - - -
FHLB-NY stock 27,865 27,865 21,990 21,990 12,885 12,885
Money market investments 1,238 1,238 1,720 1,720 4,561 4,561
------- ------- ------- ------- ------- -------
Total $224,496 224,496 $132,689 $132,689 $202,631 $202,599
======= ======= ======= ======= ======= =======
</TABLE>
(1) Includes debt and equity securities held to maturity at
December 31, 1997, with a carrying value and market value of
$66.4 million.
19
<PAGE>
The table below sets forth certain information regarding the
carrying value, weighted average yields and maturities of the
Company's money market investments and debt and equity securities
at December 31, 1999.
<TABLE>
<CAPTION>
At December 31, 1999
----------------------------------------------------------------------------------------------------------------
Total Money Market Investments
More than More than Five and Debt and Equity Securities
One Year or Less One to Five Years to Ten Years Due After 10 Years ---------------------------------------
----------------- ----------------- --------------- ------------------ Average
Weighted Weighted Weighted Weighted Remaining Estimated Weighted
Carrying Average Carrying Average Carrying Average Carrying Average Years to Carrying Fair Average
Value Yield Value Yield Value Yield Value Yield Maturity Value Value Yield
-------- -------- -------- -------- -------- -------- -------- -------- --------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
securities and
agency
obligations $ 15 8.13% $ 38,665 5.59% $ 22,803 6.00% $ 30,659 7.60 10.3 $ 92,142 $ 92,142 6.36%
Corporate debt
securities - - 19,943 7.50 - - 73,855 7.85 23.9 93,798 93,798 7.78
Money market
investments 1,238 4.08 - - - - - - - 1,238 1,238 -
------- ------- ------- ------- ------- -------
Total $ 1,253 4.13% $ 58,608 6.24% $ 22,803 6.00% $104,514 7.78% 17.1 $187,178 $187,178 7.06%
======= ======= ======= =======
Preferred Stock $ 9,453 $ 9,453 5.00%
FHLB-NY stock $ 27,865 $ 27,865 7.00%
------- -------
Total 224,496 224,496
======= =======
</TABLE>
20
<PAGE>
MORTGAGE-BACKED SECURITIES
The Bank also invests in mortgage-backed securities ("MBSs"). At
December 31, 1999, total MBSs, net, aggregated $741.9 million, or
25.0% of total assets. At December 31, 1999, 42.8% of the MBS
portfolio, including Collateralized Mortgage Obligations ("CMOs")
and Real Estate Mortgage Investment Conduits ("REMICs"), were
insured or guaranteed by either FNMA, FHLMC or the Government
National Mortgage Association ("GNMA"). At December 31, 1999,
$184.5 million, or 24.9% of total MBSs were adjustable-rate and
$557.4 million, or 75.1% of total MBSs were fixed-rate.
The following table sets forth the carrying amount of the
Company's MBS portfolio in dollar amounts and in percentages at
the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1999 1998 1997
------ ------ ------
Percent Percent Percent
Carrying of Carrying of Carrying of
Value Total Value Total Value Total
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
MBSs(1):
CMOs and REMICS - Agency-backed(2) $164,272 22.14% $106,552 13.66% $174,707 32.14%
CMOs and REMICS - Non-agency(2) 424,709 57.25 442,352 56.69 169,480 31.17
FHLMC 32,509 4.38 52,167 6.69 91,110 16.76
FNMA 120,178 16.20 178,767 22.91 107,377 19.75
GNMA 238 0.03 434 0.05 982 0.18
------- ------ ------- ------ ------- ------
Net MBSs $741,906 100.00% $780,272 100.00% $543,656 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
(1) Includes MBSs held to maturity at December 31, 1997, with an
aggregate carrying value of $163.1 million and an aggregate fair
value of $163.3 million.
(2) Included in total MBSs are CMOs and REMICs, which, at
December 31, 1999, had a gross carrying value of $589.0 million.
A CMO is a special type of pass-through debt in which the stream
of principal and interest payments on the underlying mortgages or
MBSs is used to create classes with different maturities and, in
some cases, amortization schedules, as well as a residual
interest, with each such class possessing different risk
characteristics. The Bank has in recent periods increased its
investment in REMICs and CMOs because these securities generally
exhibit a more predictable cash flow than mortgage pass-through
securities. The Bank's policy is to limit its purchases of
REMICs to non high-risk securities as defined by the OTS.
21
<PAGE>
The following tables set forth certain information regarding the
carrying and market values and percentage of total carrying
values of the Bank's mortgage-backed and related securities
portfolio.
<TABLE>
<CAPTION>
At December 31,
1999 1998 1997
------ ------ ------
Carrying % of Market Carrying % of Market Carrying % of Market
Value Total Value Value Total Value Value Total Value
-------- ----- ------ -------- ----- ------ -------- ----- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to maturity:
MBSs:
FHLMC $ - - % $ - $ - - $ - $ 27,472 5.05% $ 27,769
FNMA - - - - - - 61,492 11.31 61,093
------- ----- ------- ------- ----- ------- ------- ----- -------
Total MBSs - - - - - - 88,964 16.36 88,862
------- ----- ------- ------- ----- ------- ------- ----- -------
Mortgage-related securities:
CMOs and REMICS-Agency
backed - - - - - - 21,217 3.90 21,101
CMOs and REMICS-
Non-agency - - - - - - 52,876 9.73 53,363
------- ----- ------- ------- ----- ------- ------- ----- -------
Total mortgage-related
securities - - - - - - 74,093 13.63 74,464
------- ----- ------- ------- ----- ------- ------- ----- -------
Total mortgage-backed and
related securities
held to maturity - - - - - - 163,057 29.99 163,326
------- ----- ------- ------- ----- ------- ------- ----- -------
Available for sale:
MBSs:
GNMA 238 0.03 238 434 0.05 434 982 0.18 982
FHLMC 32,509 4.38 32,509 52,167 6.69 52,167 63,638 11.71 63,638
FNMA 120,178 16.20 120,178 178,767 22.91 178,767 45,885 8.44 45,885
------- ----- ------- ------- ----- ------- ------- ----- -------
Total MBSs 152,925 20.61 152,925 231,368 29.65 231,368 110,505 20.33 110,505
------- ----- ------- ------- ----- ------- ------- ----- -------
Mortgage-related securities:
CMOs and REMICs-Agency
backed 164,272 22.14 164,272 106,552 13.66 106,552 153,490 28.23 153,490
CMOs and REMICs-
Non-agency 424,709 57.25 424,709 442,352 56.69 442,352 116,604 21.45 116,604
------- ----- ------- ------- ----- ------- ------- ----- -------
Total mortgage-related
securities 588,981 79.39 588,981 548,904 70.35 548,904 270,094 49.68 270,094
------- ------ ------- ------- ----- ------- ------- ----- -------
Total mortgage-backed
and mortgage-related
securities available
for sale 741,906 100.00 741,906 780,272 100.00 780,272 380,599 70.01 380,599
------- ------ ------- ------- ----- ------- ------- ----- -------
Total mortgage-backed and
related securities $741,906 100.00% $741,906 $780,272 100.00% $780,272 $543,656 100.00% $543,925
======= ====== ======= ======= ====== ======= ======= ====== =======
</TABLE>
22
<PAGE>
The table below sets forth certain information regarding the
carrying value, weighted average yields and maturities of the
Company's mortgage-backed and related securities at December
31, 1999.
<TABLE>
<CAPTION>
At December 31, 1999
Over One to Over Five to Mortgage-Backed
One Year or Less Five Years Ten Years Over Ten Years and Related Securities Totals
---------------- ----------- ------------ -------------- -----------------------------
Average
Weighted Weighted Weighted Weighted Remaining Estimated Weighted
Carrying Average Carrying Average Carrying Average Carrying Average Years to Carrying Market Average
Value Yield Value Yield Value Yield Value Yield Maturity Value Value Yield
-------- -------- -------- -------- -------- -------- -------- -------- --------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
FNMA $ - - % $ 3,014 6.00% $ 4,912 6.21% $112,252 6.71% 18 $120,178 $120,178 6.68%
FHLMC - - 3,331 6.85 3,813 7.64 25,365 6.96 21 32,509 32,509 7.03
GNMA - - - - - - 238 6.88 24 238 238 6.88
CMOs and REMICs 12,084 6.81 - - 15,028 6.65 561,869 6.44 26 588,981 588,981 6.45
------ ---- ------ ---- ------ ---- ------- ---- ---- ------- ------- ----
Total mortgage-
backed and
related
securities $12,084 6.81 $ 6,345 6.45% $23,753 6.72% $699,724 6.50% 24 $741,906 $741,906 6.51%
====== ==== ====== ==== ====== ==== ======= ==== ==== ======= ======= ====
</TABLE>
At December 31, 1999, the weighted average contractual maturity
of the Bank's mortgage-backed and related securities portfolio
was 24.5 years.
23
<PAGE>
The following table shows the carrying value, maturity or period
to repricing of the Company's mortgage-backed and related
securities portfolio at December 31, 1999.
<TABLE>
<CAPTION>
At December 31, 1999
Total
Adjustable Fixed- Adjust- Mortgage-
Rate Rate able Backed
Fixed-Rate MBSs & CMOs & Rate and Related
MBSs REMICs REMICs CMOs Securities
---------- ---------- ------ ---- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Amounts due or repricing:
Within one year $ - $ 38,962 $ - $140,812 $179,774
------- ------- ------ ------- -------
After one year:
One to three years 19 - 12,770 - 12,789
Three to five years 6,532 - - - 6,532
Five to 10 years 8,987 - - - 8,987
10 to 20 years 58,922 - 12,582 - 71,504
Over 20 years 43,751 - 452,012 - 495,763
------- ------- ------- ------- -------
Total due or repricing
after one year 118,211 - 477,364 - 595,575
------- ------- ------- ------- -------
Total
Adjusted for:
Unrealized gain(loss) (4,510) 360 (28,618) (675) (33,443)
------- ------- ------- ------- -------
Total mortgage-backed and
related securities $113,701 $ 39,322 $448,746 $140,137 $741,906
======= ======= ======= ======= =======
</TABLE>
24
<PAGE>
The following table sets forth the carrying value and the
activity in the Company's mortgage-backed and related securities
portfolio during the periods indicated.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Mortgage-backed and related
securities:
At beginning of period $780,272 $543,656 $421,964
Loans securitized - 105,691 -
MBSs purchased - - 56,941
MBSs sold - (6,618) (18,932)
CMOs and REMICs purchased 403,658 687,923 365,002
CMOs and REMICs sold (156,203) (349,464) (206,901)
Amortization and repayments (250,264) (199,636) (76,771)
Change in unrealized gain (loss) (35,557) (1,280) 2,353
-------- ------- -------
Balance of mortgage-backed and
related securities at end
of period $741,906 $780,272 $543,656(1)
======= ======= =======
</TABLE>
(1) Includes mortgage-backed and related securities held to
maturity at December 31, 1997, with a carrying amount and fair
value of $163.1 million and $163.3 million, respectively.
The Banks ALCO Committee determines when to make substantial
changes in the MBS portfolio. In 1999, the Company purchased
$403.7 million of CMOs and REMICs, of which $55.2 million were
adjustable-rate and $348.4 million were fixed-rate securities.
During 1999, the Bank continued to emphasize MBSs reflecting
management's strategy to improve duration and yield of the AFS
portfolio. At December 31, 1999, $152.9 million, or 20.6% of the
Bank's MBS portfolio, was directly insured or guaranteed by the
FNMA, FHLMC or GNMA. FNMA and FHLMC provide the certificate
holder a guarantee of timely payments of interest and scheduled
principal payments, whether or not they have been collected. The
GNMA MBSs provide a guarantee to the holder of timely payments of
principal and interest and are backed by the full faith and
credit of the U.S. Government. The privately-issued CMOs and
REMICs contained in the Bank's AFS portfolio at December 31, 1999
totaling $589.0 million, or 79.4% of MBSs have generally been
underwritten by large investment banking firms with the timely
payment of principal and interest on these securities supported
(credit enhanced) in varying degrees by either insurance issued
by a financial guarantee insurer, letters of credit or
25
<PAGE>
subordination techniques. Substantially all such securities are
rated AAA by one or more of the nationally recognized securities
rating agencies.
MBSs generally yield less than the loans that underlie such
securities, because of the cost of payment guarantees or credit
enhancements that result in nominal credit risk. The MBS
portfolio had a weighted average yield of 6.51% for the year
ended December 31, 1999. In addition, MBSs are more liquid than
individual mortgage loans and may be used to collateralize
obligations of the Bank. In general, MBSs issued or guaranteed
by FNMA and FHLMC and certain AA-rated mortgage-backed pass-
through securities are weighted at no more than 20% for risk-
based capital purposes, and MBSs issued or guaranteed by GNMA are
weighted at 0% for risk-based capital purposes, compared to an
assigned risk weighting of 50% to 100% for whole residential
mortgage loans. These types of securities thus allow the Bank to
optimize regulatory capital to a greater extent than non-
securitized whole loans.
SOURCES OF FUNDS
GENERAL. Deposits, loan, mortgage-backed and debt securities
repayments, retained earnings and, to a lesser extent, FHLB
advances are the primary source of the Company's and the Bank's
funds for use in lending, investing and for other general
purposes.
DEPOSITS. The Bank offers a variety of deposit accounts having a
range of interest rates and terms. The Bank's deposits consist
of savings, NOW, checking, money market and certificate accounts.
The flow of deposits is influenced significantly by general
economic conditions, changes in money market rates, prevailing
interest rates and competition.
During 1996, the Bank implemented its in-store banking program.
During September of 1996, the Bank and Pathmark Stores, Inc.
entered into a fifteen year contract to open approximately 44
full-service bank branches in Pathmark supermarkets then existing
in New York by early 1999. The contract also provides that the
Bank will open a branch in all new Pathmark supermarkets that
open in the counties of New York (excluding one store in New York
City), Bronx, Queens, Kings, Richmond, Nassau, Suffolk,
Westchester and Rockland. By the end of 1996, the Bank had
opened four in-store branches with deposits totaling $12.1
million.
During 1998, the Bank opened twenty-eight in-store branches
resulting in a total of thirty-two locations at December 31, 1998
with deposits totaling $157.2 million. During 1999, the Bank
opened an additional six in-store branches resulting in a total
26
<PAGE>
of sixty-three locations at December 31, 1999 with deposits
totaling $842.3 million. The in-store branches are located in
the New York City boroughs of Queens, Brooklyn, Manhattan and
Staten Island, the New York counties of Nassau, Suffolk, Rockland
and Westchester and in New Jersey and Connecticut. At December
31, 1999, the Bank had 39 branches in Pathmark Stores, Inc., 15
in ShopRite Supermarket, Inc., 5 in Edward Super Food Stores, 2
in Big Y Food Stores, 1 in Shaws and 1 mini-branch in The Grand
Union Co. Core deposits equaled 46.7% of total in-store branch
deposits, compared to 44.1% in traditional branches. Overall
core deposits represented 45.4% of total deposits at December 31,
1999 compared to 47.7% at December 31, 1998. The Bank believes
that in-store branching is a cost-effective way to extend its
franchise and put its sales force in touch with a significant
number of prospective customers. The branches are open seven
days a week and provide a broad range of traditional banking
services, as well as the full package of financial services
offered by CFS Investments, Inc. ("CFSI"). The Bank has
established a relationship with ShopRite Stores under which the
Bank has the right to open in-store branches in all new or
renovated ShopRite Stores in New Jersey and Connecticut. In
2000, the Bank anticipates opening one additional in-store branch
in a new Pathmark location. Pathmark, has, however, announced
that it recently initiated discussions with its bondholders
toward developing consensual restructuring plan to reduce its
debt. The restructuring could take a variety of forms,
including, without limitation, a consensual out-of-court
restructuring of Pathmark or an in-court restructuring under a
bankruptcy proceeding. If, as part of any restructuring,
Pathmark sells a supermarket where the Bank operates a branch,
the sale would be subject to the Bank's license related to that
supermarket. If Pathmark closes a supermarket where the Bank
operates a branch, the license would be subject to termination,
and the Bank would be entitled to, among other things, a rebate
of some of the costs it incurred to open the branch. Management
cannot predict to what extent any restructuring of Pathmark will
affect the Bank's in-store branches.
The Bank's deposits are obtained primarily from the areas in
which its branch offices are located. The Bank relies primarily
on customer service and long-standing relationships with
customers to attract and retain these deposits. Certificate
accounts in excess of $100,000 are not actively solicited by the
Bank nor does the Bank use brokers to obtain deposits. During
1999, the Bank continued to offer competitive rates without
jeopardizing the value of existing core deposits. During 1997,
the Bank experienced a shift in deposits from certificate of
deposit accounts into savings and checking accounts which
continued in 1998. However, during the second half of 1999
market interest rates increased, therefore, certificates of
deposit increased from 52.3% of total deposits at December 31,
27
<PAGE>
1998 to 54.6% of total deposits at December 31, 1999. During
1998, the Bank introduced a "Liquid Asset" savings account in all
in-store branches which pays the account holder a fixed-rate of
interest in the first year on account balances of $2,500 or more.
The Liquid Asset account currently pays 4.25% for the first year.
The Company has been able to maintain a substantial level of core
deposits which the Company believes helps to limit interest rate
risk by providing a relatively stable, low cost long-term funding
base. The Company expects to attract a higher percentage of core
deposits from its in-store branch locations as these locations
continue to grow and mature.
The following table presents the deposit activity of the Bank for
the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Deposits $7,667,241 $5,753,644 $3,208,355
Withdrawals 7,380,765 5,458,274 3,031,457
--------- --------- ---------
Net deposits 286,476 295,370 176,898
Interest credited on deposits 71,427 62,328 50,326
--------- --------- ---------
Total increase in deposits $ 357,903 $ 357,698 $ 227,224
========= ========= =========
</TABLE>
Time deposits by maturity at December 31, 1999 over $100,000 are
as follows:
Maturity Period Amount
--------------- ------
(In thousands)
Three months or less $27,007
Over three through six months 36,213
Over six through 12 months 34,653
Over 12 months 15,927
-------
Total $113,800
=======
28
<PAGE>
The following table sets forth the distribution of the Bank's
deposit accounts for the periods indicated and the weighted
average nominal interest rates for each category of deposits
presented.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
------ ------ ------
Percent Weighted Percent Weighted Percent Weighted
of Average of Average of Average
Average Total Nominal Average Total Nominal Average Total Nominal
Balance Deposits Rate Balance Deposits Rate Balance Deposits Rate
------- -------- ------ ------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts $626,428 32.77% 3.14% $441,759 28.22% 2.81% $371,872 30.01% 2.51%
Checking accounts 239,614 12.53 0.70 187,297 11.96 0.73 134,546 10.86 1.31
------- ----- ---- ------- ----- ----- ------- ----- -----
Total savings and checking
accounts 866,042 45.30 2.46 629,056 40.18 2.19 506,418 40.87 2.07
------- ----- ---- ------- ----- ----- ------- ----- -----
Money market accounts 57,132 2.99 3.21 57,597 3.68 3.54 54,107 4.37 3.37
------- ----- ---- ------- ----- ----- ------- ----- -----
Certificate accounts:
91 days 5,022 0.26 3.40 5,620 0.36 3.87 5,799 0.47 3.83
6 months 192,686 10.09 4.91 164,647 10.52 5.33 85,558 6.90 5.37
7 months 9,062 0.47 4.14 4,519 0.29 3.93 13,116 1.06 5.26
One year 508,995 26.63 5.26 382,497 24.43 5.62 265,891 21.45 5.69
13 months 59,361 3.10 5.15 27,514 1.76 5.53 21,314 1.72 5.79
18 months 9,050 0.47 4.50 33,985 2.17 5.77 34,321 2.77 5.79
2 to 4 years 115,928 6.06 5.63 160,667 10.26 5.99 145,081 11.71 6.04
Five years 82,684 4.32 6.22 93,898 5.99 6.23 101,972 8.23 6.23
7 to 10 years 5,831 0.31 6.31 5,644 0.36 6.31 5,547 0.45 6.31
--------- ------ ---- -------- ------ ---- ------- ------ ----
Total certificate accounts 988,619 51.71 5.29 878,991 56.14 5.68 678,599 54.76 5.79
--------- ------ ---- --------- ------ ---- --------- ------ ----
Total deposits $1,911,793 100.00% 3.95% $1,565,644 100.00% 4.20% $1,239,124 100.00% 4.16%
========= ====== ==== ========= ====== ==== ========= ====== ====
</TABLE>
<PAGE>
The following table presents, by various rate categories, the
amount of certificate accounts outstanding at December 31, 1999,
1998 and 1997 and the periods to maturity of the certificate
accounts outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Period of Maturity from December 31, 1999
-----------------------------------------
Within One to Two to Over
At December 31, One Two Three Three
1999 1998 1997 Year Years Years Years Total
------ ------ ------ ------ ------ ------ ----- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Certificate accounts:
3.99% or less $ 34,563 $ 31,712 $ 6,682 $ 24,581 $ 4,973 $ 732 $ 4,277 $ 34,563
4.00% to 4.99% 78,062 131,330 6,942 74,311 2,916 393 442 78,062
5.00% to 5.99% 911,169 610,219 548,849 835,255 61,808 2,036 12,070 911,169
6.00% to 6.99% 107,204 123,436 211,302 37,513 23,800 41,943 3,948 107,204
7.00% to 7.99% 4,435 5,052 7,808 4,435 - - - 4,435
--------- ------- ------- ------- ------- ------ ------ ---------
Total $1,135,433 $901,749 $781,583 $976,095 $93,497 $45,104 $20,737 $1,135,433
========= ======= ======= ======= ======= ====== ====== =========
</TABLE>
29
<PAGE>
BORROWINGS
Although deposits are the Bank's primary source of funds, the
Bank has from time to time utilized borrowed funds as an
alternative or less costly source of funds. The Bank's primary
source of borrowed funds is advances from the FHLB-NY. These
advances are collateralized by the capital stock of the FHLB-NY
held by the Bank and certain of the Bank's MBSs. See "Regulation
and Supervision-Federal Home Loan Bank System." Such advances
are made pursuant to several different credit programs, each of
which has its own interest rate and range of maturities. The
maximum amount that the FHLB-NY will advance to member
institutions, including the Bank, for purposes other than meeting
withdrawals, fluctuates from time to time in accordance with the
policies of the OTS and the FHLB-NY. At December 31, 1999, the
Bank had $537.0 million of advances outstanding from the FHLB-NY.
In addition, the Bank may, from time to time, enter into sales of
securities under agreements to repurchase ("reverse repurchase
agreements") with terms generally up to 30 days with nationally
recognized investment banking firms. Reverse repurchase
agreements are accounted for as borrowed funds by the Bank and
are secured by designated securities. The proceeds of these
transactions are used to meet cash flow or asset/liability needs
of the Bank. At December 31, 1999, the Bank had $160.8 million
of reverse repurchase agreements outstanding.
On February 12, 1997, Haven Capital Trust I ("Trust I"), a trust
formed under the laws of the State of Delaware, issued $25.0
million of 10.46% capital securities. The Company is the owner
of all the beneficial interests represented by common securities
of Trust I. Trust I used the proceeds from the sale of capital
securities and the common securities to purchase the Company's
10.46% junior subordinated deferrable interest debentures due in
2027. See Note 9 of Notes to Consolidated Financial Statements
in the Registrant's 1999 Annual Report to Stockholders on page 35
which is incorporated herein by reference.
On May 26, 1999, Haven Capital Trust II, a trust formed under the
laws of the State of Delaware ("Trust II"), issued $22.0 million
of 10.25% capital securities. On June 18, 1999, an additional
$3.3 million of capital securities were issued in connection with
the exercise of the over-allotment option by the underwriters.
The Company is the owner of all of the beneficial interests
represented by common securities of the Trust II. The Trust II
used the proceeds from the sale of the capital securities and the
common securities to purchase the Company's 10.25% junior
subordinated deferrable interest debentures due in 2029. See
Note 9 of the Notes to Consolidated Financial Statements in the
Registrant's 1999 Annual Report to Stockholders on page 35 which
is incorporated herein by reference.
30
<PAGE>
The Bank has an ESOP loan from an unrelated third party lender
with an outstanding balance of $1.2 million and an interest rate
of 7.81% at December 31, 1999. See Note 12 of Notes to
Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Stockholders on page 40 which is incorporated herein by
reference. The loan, as amended on December 29, 1995, is payable
in thirty-two equal quarterly installments beginning December
1995 through September 2003. The loan bears interest at a
floating rate based on the federal funds rate plus 250 basis
points.
31
<PAGE>
The following table sets forth certain information regarding
borrowed funds for the dates indicated:
<TABLE>
<CAPTION>
At or For the Years Ended December 31,
1999 1998 1997
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
FHLB-NY Advances:
Average balance outstanding $445,926 $301,557 $191,550
Maximum amount outstanding at any
month-end during the period 537,000 431,000 247,000
Balance outstanding at end of period 537,000 325,200 247,000
Weighted average interest rate
during the period 5.28% 5.19% 5.69%
Weighted average interest rate
at end of period 5.42% 5.13% 5.86%
Securities Sold under Agreements to
Repurchase:
Average balance outstanding $180,298 $142,348 $172,310
Maximum amount outstanding at any
month-end during the period 242,429 191,291 229,280
Balance outstanding at end of period 160,786 88,690 193,028
Weighted average interest rate
during the period 5.40% 5.71% 5.68%
Weighted average interest rate
at end of period 6.42% 5.50% 5.94%
Other Borrowings (1):
Average balance outstanding $ 41,029 $ 26,626 $ 25,231
Maximum amount outstanding at any
month-end during the period 51,543 26,766 30,120
Balance outstanding at end of period 51,446 26,456 26,766
Weighted average interest rate
during the period 10.35% 10.32% 8.15%
Weighted average interest rate
at end of period 10.24% 10.20% 10.29%
Total Borrowings:
Average balance outstanding $667,253 $470,531 $389,091
Maximum amount outstanding at any
month-end during the period 780,478 649,057 466,794
Balance outstanding at end of period 749,232 440,346 466,794
Weighted average interest rate
during the period 5.61% 5.95% 5.86%
Weighted average interest rate
at end of period 5.97% 5.51% 6.15%
</TABLE>
(1) Includes the CMO, ESOP loan and Capital Securities issued by
Haven Capital Trust I and Haven Capital Trust II.
32
<PAGE>
SUBSIDIARY ACTIVITIES
COLUMBIA RESOURCES CORP ("Columbia Resources"). Columbia
Resources is a wholly owned subsidiary of the Bank and was formed
in 1984 for the sole purpose of acting as a conduit for a
partnership to acquire and develop a parcel of property in New
York City. Columbia Resources acquired the property, but never
developed it. The property was later sold. During 1996, two REO
commercial properties totaling $524,000 were transferred from the
Bank to Columbia Resources to limit exposure to the Bank from
unknown creditors. By December 31, 1996 the properties were
written down to a combined value of $440,000. The properties
were subsequently sold during 1998 and the subsidiary is
inactive.
CFS INVESTMENTS, INC. ("CFSI"). CFSI is a wholly owned
subsidiary of the Bank organized in 1989 that is engaged in the
sale of tax deferred annuities, securities brokerage activities
and insurance. CFSI participates with FISERV Investor Services,
Inc., which is registered as a broker-dealer with the SEC, NASD,
and state securities regulatory authorities. All employees of
CFSI engaged in securities brokerage activities are dual
employees of FISERV. Products offered through FISERV include
debt and equity securities, mutual funds, unit investment trusts
and variable annuities. Fixed annuities, life and health
insurance, and long term nursing care products are offered
through CFSI, which is a licensed general agent with the New York
State Department of Insurance.
HAVEN CAPITAL TRUST I. On February 12, 1997, Haven Capital Trust
I, a statutory business trust formed under the laws of the State
of Delaware issued $25 million of 10.46% capital securities. See
Note 9 of Notes to Consolidated Financial Statements in the
Registrant's 1999 Annual Report to Stockholders which is
incorporated herein by reference.
HAVEN CAPITAL TRUST II. On May 26, 1999, Haven Capital Trust II,
a trust formed under the laws of the State of Delaware, issued
$22.0 million of 10.25% capital securities. On June 18, 1999, an
additional $3.3 million of capital securities were issued in
connection with exercise of the over-allotment option by the
underwriters. See Note 9 of Notes to Consolidated Financial
Statements in the Registrant's Annual Report to Stockholders.
COLUMBIA PREFERRED CAPITAL CORPORATION ("CPCC"). On June 9,
1997, the Bank established a real estate investment trust
("REIT") subsidiary, CPCC. At December 31, 1999, the REIT held
$414.3 million of the Bank's residential loan portfolio. The
establishment of the REIT enables the Bank to achieve certain
business goals including providing the Bank with a contingency
funding mechanism without disrupting its investment policies and
enhancing the Bank's ability to track and manage the mortgage
33
<PAGE>
portfolio transferred to CPCC since the transferred portion of
its mortgage loan portfolio is segregated into a separate legal
entity.
CFS INVESTMENTS NEW JERSEY, INC. ("CFSI NJ"). On December 23,
1999, the Bank established a New Jersey Investment Company, a
Delaware corporation. CFSI NJ is a wholly owned subsidiary of
the Bank. The Bank contributed 100% of its interest in CPCC to
CFSI NJ in exchange for 100% of CFSI NJ's voting common stock.
CFSI NJ was established to provide the Bank with the opportunity
to expand its current New Jersey operations. CFSI NJ will
primarily engage in investment activities in which the Bank may
currently engage, including the investment in CPCC, whose primary
investment activity is the purchase of residential and commercial
real estate loans originated by the Bank. CFSI NJ will also
enhance the Bank's income through the recognition of certain
income tax benefits.
CFS TRAVEL SERVICES, INC. The Company, through its wholly owned
subsidiary, CFS Travel Services, Inc. ("CFS Travel"), established
February 28, 1998, offered customers and their families and
friends, organized, escorted day long excursions and overnight
trips. This subsidiary was subsequently dissolved on March 31,
1999.
CFS INSURANCE AGENCY, INC. On November 2, 1998, the Company
completed the purchase of 100% of the outstanding common stock of
CIA. CIA, headquartered in Centereach, New York, provides
automobile, homeowners and casualty insurance to individuals and
various lines of commercial insurance to businesses. CIA
operates as a wholly-owned subsidiary of the Company.
PERSONNEL
As of December 31, 1999, the Bank had 985 full-time employees and
41 part-time employees. Although the employees are not
represented by a collective bargaining unit, the Bank considers
its relationship with its employees to be good.
REGULATION AND SUPERVISION
GENERAL
The Bank is subject to regulation, examination and supervision by
the OTS, as its chartering agency, and the FDIC, as the deposit
insurer. The Bank is a member of the FHLB System and its deposit
accounts are insured up to applicable limits by the Savings
Association Insurance Fund ("SAIF") managed by the FDIC. The
Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining
regulatory approvals prior to entering into certain transactions
34
<PAGE>
such as mergers with, or acquisitions of, other financial
institutions. Periodic examinations by the OTS and the FDIC
monitor the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the
insurance fund and depositors.
IMPACT OF ENACTMENT OF THE GRAMM-LEACH-BLILEY ACT
On November 12, 1999, President Clinton signed the Gramm-Leach-
Bliley Act (the "GLB Act"), which, among other things,
establishes a comprehensive framework to permit affiliations
among commercial banks, insurance companies and securities firms.
Generally, the new law (i) repeals the historical restrictions
and eliminates many federal and state law barriers to
affiliations among banks and securities firms, insurance
companies and other financial service providers, (ii) provides a
uniform framework for the activities of banks, savings
institutions and their holding companies, (iii) broadens the
activities that may be conducted by subsidiaries of national
banks and state banks, (iv) provides an enhanced framework for
protecting the privacy of information gathered by financial
institutions regarding their customers and consumers, (v) adopts
a number of provisions related to the capitalization, membership,
corporate governance and other measures designed to modernize the
Federal Home Loan Bank System, (vi) requires public disclosure of
certain agreements relating to funds expended in connection with
an institution's compliance with the Community Reinvestment Act,
and (vii) addresses a variety of other legal and regulatory
issues affecting both day-to-day operations and long-term
activities of financial institutions, including the functional
regulation of bank securities and insurance activities.
The GLB Act also restricts the powers of new unitary savings and
loan association holding companies. Unitary savings and loan
holding companies that are "grandfathered," i.e., unitary savings
and loan holding companies in existence or with applications
filed with the OTS on or before May 4, 1999, such as the Company,
retain their authority under the prior law. All other unitary
savings and loan holding companies are limited to financially
related activities permissible for bank holding companies, as
defined under the GLB Act. The GLB Act also prohibits non-
financial companies from acquiring grandfathered unitary savings
and loan association holding companies, such as the Company.
The GLB Act also requires financial institutions to disclose on
ATM machines any non-customer fees and to disclose to their
customers upon the issuance of an ATM card any fees that may be
imposed by the institutions on ATM users. For older ATMs,
financial institutions will have until December 31, 2004 to
provide such notices.
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Banking holding companies are permitted to engage in a wider
variety of financial activities than permitted under the prior
law, particularly with respect to insurance and securities
activities. In addition, in a change from the prior law, bank
holding companies are in a position to be owned, controlled or
acquired by any company engaged in financially related
activities.
We do not believe that the new law will have a material adverse
affect upon our operations in the near term. However, to the
extent that the new law permits banks, securities firms and
insurance companies to affiliate, the financial services industry
may experience further consolidation. This type of consolidation
could result in a growing number of larger financial institutions
that offer a wider variety of financial services than we
currently offer and that can aggressively compete in the markets
we currently serve.
FEDERAL SAVINGS INSTITUTION REGULATION
Business Activities. The activities of federal savings
institutions are governed by the Home Owners' Loan Act, as
amended (the "HOLA") and, in certain respects, the Federal
Deposit Insurance Act ("FDI Act") and the regulations issued by
the agencies to implement these statutes. These laws and
regulations delineate the nature and extent of the activities in
which federal associations may engage. In particular, many types
of lending authority for federal associations, (e.g., commercial,
non-residential real property loans, consumer loans), are limited
to a specified percentage of the institutions's capital or
assets.
Loans to One Borrower. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one
borrower. Generally, this limit is 15% of the Bank's unimpaired
capital and surplus, plus an additional 10% of unimpaired capital
and surplus if such loan is secured by readily-marketable
collateral, which is defined to include certain financial
instruments and bullion. At December 31, 1999, the Bank's
unimpaired capital and surplus was $163.7 million and its limit
on loans to one borrower was $24.6 million. At December 31,
1999, the Bank's largest aggregate amount of loans to one
borrower had an aggregate balance of $12.7 million.
QTL Test. The HOLA requires savings institutions to meet a
Qualified Thrift Lender ("QTL") test. Under the QTL test, a
savings association is required to maintain at least 65% of its
"portfolio assets" (total assets less: (i) specified liquid
assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct
business) in certain "qualified thrift investments" (primarily
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residential mortgages and related investments, including certain
mortgage-backed and related securities) in at least 9 months out
of each 12 month period. A savings association that fails the
QTL test must either convert to a bank charter or operate under
certain restrictions. As of December 31, 1999, the Bank
maintained 75.07% of its portfolio assets in qualified thrift
investments and had more than 65% of its portfolio assets in
qualified thrift investments in each of the prior 12 months.
Therefore, the Bank met the QTL test.
Limitation on Capital Distributions. OTS regulations impose
limitations upon all capital distributions by savings
institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another
institution in a cash-out merger and other distributions charged
against capital. Effective April 1, 1999, the OTS amended its
capital distribution regulations. Under these regulations, as
the subsidiary of a savings and loan holding company, the Bank
currently must file a notice with the OTS for each capital
distribution. However, if the total amount of all capital
distributions (including a proposed capital distribution) for the
applicable calendar year exceeds net income for that year to date
plus the retained net income for the preceding two years, then
the Bank must file an application to receive the approval of the
OTS for the proposed capital distribution.
In addition to the OTS limits, the Bank may not pay dividends if,
after paying those dividends, it would fail to meet the required
minimum levels under risk-based capital guidelines and the
minimum leverage and tangible capital ratio requirements or the
OTS notified the Bank that it was in need of more than normal
supervision. Under the Federal Deposit Insurance Act ("FDIA"),
an insured depositary institution such as the Bank is prohibited
from making capital distributions, including the payment of
dividends, if, after making such distribution, the institution
would become "undercapitalized" (as such term is used in the
FDIA). Payment of dividends by the Bank also may be restricted
at any time at the discretion of the appropriate regulator if it
deems the payment to constitute an unsafe and unsound banking
practice.
Liquidity. The Bank is required to maintain an average daily
balance of specified liquid assets equal to a monthly average of
not less than a specified percentage (currently 4%) of its net
withdrawable deposit accounts plus short-term borrowings.
Monetary penalties may be imposed for failure to meet the
liquidity requirements. The Bank's average liquidity ratio for
December 31, 1999 was 4.31% which exceeded the then applicable
requirement. The Bank has never been subject to monetary
penalties for failure to meet its liquidity requirements.
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Assessments. Savings institutions are required by regulation to
pay assessments to the OTS to fund the agency's operations. The
general assessment, paid on a semi-annual basis, is computed upon
the savings institution's total assets, including consolidated
subsidiaries, as reported in the Bank's latest quarterly Thrift
Financial Report. The assessments paid by the Bank for the years
ended December 31, 1999 and 1998, totaled $371,000 and $322,000,
respectively. The OTS adopted amendments to its regulations,
effective January 1, 1999, that are intended to assess savings
associations on a more equitable basis. The new regulations base
the assessment for an individual savings association on three
components: the size of the association on which the basic
assessment is based; the association's supervisory condition,
which results in an additional assessment based on a percentage
of the basic assessment for any savings institution with a
composite rating of 3, 4 or 5 in its most recent safety and
soundness examination; and the complexity of the association's
operations, which results in an additional assessment based on a
percentage of the basic assessment for any savings association
that managed over $1 billion in trust assets, serviced for others
loans aggregating more than $1 billion, or had certain off-
balance sheet assets aggregating more than $1 billion. In order
to avoid a disproportionate impact on smaller savings
institutions, which are those whose total assets never exceeded
$100 million, the regulations provide that the portion of the
assessment based on asset size will be the lesser of the
assessment under the amended regulations or the regulations
before the amendment. Management believes that any change in its
rate of OTS assessments under the amended regulations will not be
material.
Branching. OTS regulations permit federally chartered savings
associations to branch nationwide under certain conditions.
Generally, federal savings associations may establish interstate
networks and geographically diversify their loan portfolios and
lines of business. The OTS authority preempts any state law
purporting to regulate branching by federal savings associations.
Transactions with Related Parties. The Bank's authority to
engage in transactions with related parties or "affiliates"
(i.e., any company that controls or is under common control with
an institution, including the Company and its non-savings
institution subsidiaries) is limited by Sections 23A and 23B of
the Federal Reserve Act ("FRA"). Section 23A limits the
aggregate amount of covered transactions with any individual
affiliate to 10% of the capital and surplus of the savings
institution and also limits the aggregate amount of transactions
with all affiliates to 20% of the savings institution's capital
and surplus. Certain transactions with affiliates are required
to be secured by collateral in an amount and of a type described
in Section 23A, and the purchase of low quality assets from
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affiliates is generally prohibited. Section 23B generally
requires that certain transactions with affiliates, including
loans and asset purchases, must be on terms and under
circumstances, including credit underwriting standards, that are
substantially the same or at least as favorable to the
institution as those prevailing at the time for comparable
transactions with non-affiliated companies. Notwithstanding
Sections 23A and 23B, savings institutions are prohibited from
lending to any affiliate that is engaged in activities that are
not permissible for bank holding companies under Section 4(c) of
the Bank Holding Company Act ("BHC Act"). Further, no savings
institution may purchase the securities of any affiliate other
than a subsidiary.
The Bank's authority to extend credit to its executive officers,
directors and 10% shareholders, as well as to entities controlled
by such persons, is currently governed by Sections 22(g) and
22(h) of the FRA, and Regulation O thereunder. Among other
things, these regulations require that such loans be made on
terms and conditions, including credit underwriting standards,
substantially the same as those offered to unaffiliated
individuals and not involve more than the normal risk of
repayment. Regulation O also places individual and aggregate
limits on the amount of loans the Bank may make to such persons
based, in part, on the Bank's capital position, and requires that
certain board approval procedures be followed. HOLA and the OTS
regulations, with certain minor variances, apply Regulation O to
savings institutions.
Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties,"
including controlling stockholders, and any stockholders,
attorneys, appraisers and accountants who knowingly or recklessly
participate in any violation of applicable law or regulation or
breach of fiduciary duty or certain other wrongful actions that
causes or is likely to cause a more than a minimal loss or other
significant adverse effect on an insured savings association.
Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of
officers or directors, receivership, conservatorship or
termination of deposit insurance. Civil penalties cover a wide
range of violations and can amount to $5,000 per day for less
serious violations, and up to $1 million per day in more
egregious cases. Under the FDI Act, the FDIC has the authority
to recommend to the Director of the OTS that enforcement action
be taken with respect to a particular savings institution. If
action is not taken by the Director of the OTS, the FDIC has
authority to take such action under certain circumstances.
Federal law also establishes criminal penalties for certain
violations.
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Standards for Safety and Soundness. The FDI Act requires each
federal banking agency to prescribe for all insured depository
institutions standards relating to, among other things, internal
controls, information systems and audit systems, loan
documentation, credit underwriting, interest rate risk exposure,
asset growth, and compensation, fees and benefits and such other
operational and managerial standards as the agency deems
appropriate. The OTS and the federal banking agencies have
adopted a final rule and Interagency Guidelines Prescribing
Standards for Safety and Soundness ("Guidelines") to implement
these safety and soundness standards. The Guidelines set forth
the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The
Guidelines address internal controls and information systems;
internal audit system; credit underwriting; loan documentation;
interest rate risk exposure; asset growth; asset quality;
earnings; and compensation, fees and benefits. If the
appropriate federal banking agency determines that an institution
fails to meet any standard prescribed by the Guidelines, the
agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as
required by the FDI Act. The final rule establishes deadlines
for the submission and review of such safety and soundness
compliance plans, when such plans are required.
Capital Requirements. The OTS capital regulations require
savings institutions to meet three minimum capital standards: a
tangible capital ratio requirement, a core capital ratio
requirement and a risk-based capital ratio requirement. Tangible
capital is defined, generally, as common stockholders' equity
(including retained earnings), certain noncumulative perpetual
preferred stock and related earnings, minority interests in
equity accounts of fully consolidated subsidiaries, less
intangibles other than certain mortgage servicing rights and
investments in and loans to subsidiaries engaged in activities
not permissible for a national bank. Core capital (also called
"Tier 1" capital) is defined similarly to tangible capital, but
core capital also includes certain qualifying supervisory
goodwill and certain purchased credit card relationships; (i) the
core capital ratio was effectively increased from 3.0% to 4.0%
because under these regulations an institution with less than 4%
core capital is classified as "undercapitalized" (the core
capital ratio may be reduced to 3.0% for a depository institution
that has been assigned the highest composite rating of 1 under
the Uniform Financial Institution Rating System) and (ii) the
tangible capital requirement was effectively increased from 1.5%
to 2.0% because under these regulations an institution with less
than 2.0% tangible capital is classified as "critically
undercapitalized." See "- Prompt Corrective Regulatory Action."
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The risk-based capital standard for savings institutions requires
the maintenance of total capital (which is defined as core
capital and supplementary capital) to risk-weighted assets of at
least 8%. In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet assets, are
multiplied by a risk-weight of 0% to 100%, as assigned by the OTS
capital regulations based on the risks OTS believes are inherent
in the type of asset. The components of supplementary capital
currently include cumulative preferred stock, long-term perpetual
preferred stock, mandatory convertible debt securities,
subordinated debt and intermediate preferred stock and, within
specified limits, the allowance for loan and lease losses.
Overall, the amount of supplementary capital included as part of
total capital cannot exceed 100% of core capital.
The OTS has incorporated an interest rate risk component into its
risk-based capital rule. Under the rule, savings associations
with "above normal" interest rate risk exposure would be subject
to a deduction from total capital for purposes of calculating
their risk-based capital requirements. A savings association's
interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between
incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result
from a hypothetical 200-basis point increase or decrease in
market interest rates divided by the estimated economic value of
the association's assets, as calculated in accordance with
guidelines set forth by the OTS. A savings association whose
measured interest rate risk exposure exceeds 2% must deduct an
interest rate component in calculating its total capital under
the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the
institution's measured interest rate risk and 2%, multiplied by
the estimated economic value of the association's assets. That
dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement.
Under the rule, there is a two quarter lag between the reporting
date of an institution's financial data and the effective date
for the new capital requirement based on that data. A savings
association with assets of less than $300 million and risk-based
capital ratios in excess of 12% is not subject to the interest
rate risk component, unless the OTS determines otherwise. The
rule also provides that the Director of the OTS may waive or
defer an association's interest rate risk component on a
case-by-case basis. The OTS has indefinitely deferred the
implementation of the interest rate risk component in the
computation of an institution's risk-based capital requirement.
The OTS continues to monitor the interest rate risk of individual
institutions and retains the right to impose additional capital
requirements on individual institutions. If the Bank had been
subject to an interest rate risk capital component as of
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December 31, 1999, there would have been no material effect on
the Bank's risk-weighted capital.
At December 31, 1999, the Bank met each of its capital
requirements. A chart which sets forth the Bank's compliance
with its capital requirements appears in Note 15 to Notes to
Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Stockholders and is incorporated herein by reference.
PROMPT CORRECTIVE REGULATORY ACTION
Under the OTS prompt corrective action regulations, the OTS is
required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon
the institution's degree of capitalization. Generally, a savings
institution that has a total risk-based capital ratio of less
than 8.0% or either a leverage ratio or a Tier 1 risk-based
capital ratio that is less than 4.0% is considered to be
undercapitalized. A savings institution that has a total
risk-based capital ratio of less than 6.0%, a Tier 1 risk-based
capital ratio of less than 3.0% or a leverage ratio that is less
than 3.0% is considered to be "significantly undercapitalized"
and a savings institution that has a tangible capital to assets
ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." Subject to a narrow exception, the
institutions regulator is required to appoint a receiver or
conservator for an institution that is critically
undercapitalized. The regulation also provides that a capital
restoration plan must be filed with the OTS within 45 days of the
date an association receives notice that it is "under-
capitalized", "significantly undercapitalized" or "critically
undercapitalized." Compliance with the plan must be guaranteed
by any parent holding company. In addition, numerous mandatory
supervisory actions become immediately applicable to the
institution depending upon its category, including, but not
limited to, increased monitoring by regulators, restrictions on
growth,and capital distributions and limitations on expansion.
The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and
directors.
INSURANCE OF DEPOSIT ACCOUNTS
The FDIC has adopted a risk-based insurance assessment system.
The FDIC assigns an institution to one of three capital
categories based on the institution's financial information, as
of the reporting period ending seven months before the assessment
period, consisting of (1) well capitalized, (2) adequately
capitalized or (3) undercapitalized, and one of three supervisory
subcategories within each capital group. The supervisory
subgroup to which an institution is assigned is based on a
supervisory evaluation provided to the FDIC by the institution's
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primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial
condition and the risk posed to the deposit insurance funds. An
institution's assessment rate depends on the capital category and
supervisory category to which it is assigned.
Assessment rates currently range from 0.0% of deposits for an
institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to
0.27% of deposits for an institution in the lowest category
(i.e., undercapitalized and substantial supervisory concern).
The FDIC is authorized to raise the assessment rates as necessary
to maintain the required reserve ratio of 1.25%. As a result of
the Deposit Insurance Funds Act of 1996 (the "Funds Act"), both
the BIF and the SAIF currently satisfy the reserve ratio
requirement. If the FDIC determines that assessment rates should
be increased, institutions in all risk categories could be
affected. The FDIC has exercised this authority several times in
the past and could raise insurance assessment rates in the
future. If such action is taken by the FDIC, it could have an
adverse effect on the earnings of the Bank.
The Funds Act also amended the FDI Act to expand the assessment
base for the payments on the Financing Corporation ("FICO")
obligations. Beginning January 1, 1997, the assessment base
included the deposits of both BIF- and SAIF-insured institutions.
As of December 31, 1999, the rate of assessment for BIF-
assessable deposits is one-fifth of the rate imposed on SAIF-
assessable deposits. The annual rate of assessments for the
payments on the FICO obligations for the quarterly period
beginning on January 1, 2000 is 0.0212% for BIF-assessable
deposits and 0.0212% for SAIF-assessable deposits.
The OTS has recently proposed regulations implementing the
privacy protection provisions of the GLB Act. The proposed
regulations would require each financial institution to adopt
procedures to protect their customers' and consumers' "nonpublic
personal information" by November 13, 2000. The Bank would be
required to disclose its privacy policy, including identifying
with whom it shares "nonpublic personal information," to
customers at the time of establishing the customer relationship
and annually thereafter. In addition, the Bank would be required
to provide its customers with the ability to "opt-out" of having
their personal information shared with unaffiliated third
parties. The Bank currently has a privacy protection policy in
place and intends to review and amend that policy, if necessary,
for compliance with the regulations when they are adopted in
final form.
The GLB Act also provides for the ability of each state to enact
legislation that is more protective of consumers' personal
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information. Currently, there are a number of privacy bills
pending in the New York State Assembly. No action has been taken
on any of these bills, and the Company cannot predict what
impact, if any, these bills would have.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12
regional FHLBs. The FHLB provides a central credit facility
primarily for member institutions. The Bank, as a member of the
FHLB of New York, is required to acquire and hold shares of
capital stock in the FHLB in an amount at least equal to 1% of
the aggregate principal amount of its unpaid residential mortgage
loans and similar obligations at the beginning of each year, or
1/20 of its advances (borrowings) from the FHLB, whichever is
greater. The Bank was in compliance with this requirement with
an investment in FHLB stock at December 31, 1999 of $27.9
million. FHLB advances must be secured by specified types of
collateral, and all long-term advances may only be obtained for
the purpose of providing funds for residential housing finance.
The FHLBs are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing
programs. These requirements could reduce the amount of
dividends that the FHLBs pay to their members and could also
result in the FHLBs imposing a higher rate of interest on
advances to their members. For the years ended December 31,
1999, 1998 and 1997, dividends from the FHLB to the Bank amounted
to $1.6 million, $1.2 million and $710,000, respectively. If
dividends were reduced or interest on future FHLB advances
increased, the Bank's net interest income would likely also be
reduced. Further, there can be no assurance that the impact of
recent legislation on the FHLBs will not also cause a decrease in
the value of the FHLB stock held by the Bank.
Pursuant to the GLB Act, the foregoing minimum share ownership
requirements will be replaced by regulations to be promulgated by
FHLB. The GLB Act specifically provides that the minimum
requirements in existence immediately prior to adoption of the
GLB Act shall remain in effect until such regulations are
adopted. Formerly, federal savings associations were required to
be members of the FHLB Bank System. The new law removed the
mandatory membership requirement and authorized voluntary
membership for federal savings associations, as is the case for
all other eligible institutions.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board regulations require depository
institutions, including savings institutions, to maintain
non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The current
Federal Reserve Board regulations generally require that reserves
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be maintained against aggregate transaction accounts as follows:
for accounts aggregating $44.3 million (subject to adjustment by
the Federal Reserve Board) the reserve requirement is 3%; and for
accounts greater than $44.3 million, the reserve requirement is
$1,329,000 plus 10% (subject to adjustment by the Federal Reserve
Board between 8% and 14%) against that portion of total
transaction accounts in excess of $44.3 million. The first $5.0
million of otherwise reservable balances (subject to adjustments
by the Federal Reserve Board) are exempted from the reserve
requirements. The Bank is in compliance with the foregoing
requirements. Because required reserves must be maintained in
the form of either vault cash, a non-interest-bearing account at
a Federal Reserve Bank or a pass-through account as defined by
the Federal Reserve Board, the effect of this reserve requirement
is to reduce the Bank's interest-earning assets. FHLB System
members are also authorized to borrow from the Federal Reserve
"discount window," but Federal Reserve Board regulations require
institutions to exhaust all FHLB sources before borrowing from a
Federal Reserve Bank.
HOLDING COMPANY REGULATION
The Company is a non-diversified unitary savings and loan holding
company within the meaning of the HOLA. As such, the Company is
required to be registered with the OTS and is subject to OTS
regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority
over the Company and its non-savings institution subsidiaries.
Among other things, this authority permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to
the subsidiary savings institution.
As a unitary savings and loan holding company, the Company
generally is not restricted under existing laws as to the types
of business activities in which it may engage, provided that the
Bank continues to be a QTL. See "- Federal Savings Institution
Regulation - QTL Test" for a discussion of the QTL requirements.
Upon any non-supervisory acquisition by the Company of another
savings association, the Company would become a multiple savings
and loan holding company (if the acquired institution is held as
a separate subsidiary) and would be subject to extensive
limitations on the types of business activities in which it could
engage. The HOLA limits the activities of a multiple savings and
loan holding company and its non-insured institution subsidiaries
primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the BHC Act, subject to the prior
approval of the OTS, and to other activities authorized by OTS
regulation.
The HOLA prohibits a savings and loan holding company, directly
or indirectly, or through one or more subsidiaries, from
acquiring more than 5% of the voting stock of another savings
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institution or holding company thereof, without prior written
approval of the OTS; and from acquiring or retaining, with
certain exceptions, more than 5% of a non-subsidiary holding
company, or a non-subsidiary company engaged in activities other
than those permitted by the HOLA; or acquiring or retaining
control of a depository institution that is not insured by the
FDIC. In evaluating applications by holding companies to acquire
savings institutions, the OTS must consider the financial and
managerial resources and future prospects of the company and
institution involved, the effect of the acquisition on the risk
to the insurance funds, the convenience and needs of the
community and competitive factors.
The OTS is prohibited from approving any acquisition that would
result in a multiple savings and loan holding company controlling
savings institutions in more than one state, except: (i) the
approval of interstate supervisory acquisitions by savings and
loan holding companies, and (ii) the acquisition of a savings
institution in another state if the laws of the state of the
target savings institution specifically permit such acquisitions.
The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.
FEDERAL SECURITIES LAWS
The Company's Common Stock is registered with the Securities and
Exchange Commission under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is subject to the information, proxy solicitation,
insider trading restrictions and other requirements under the
Exchange Act.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION
General. The Company and the Bank report their income on a
calendar year basis using the accrual method of accounting and
will be subject to federal income taxation in the same manner as
other corporations with some exceptions. The following
discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules
applicable to the Bank or the Company. The Company and its
subsidiaries file a consolidated Federal income tax return on a
calendar-year basis. The Bank and the Company have not been
audited by the Internal Revenue Service during the last five
fiscal years.
Under the Small Business Job Protection Act of 1996 ("1996 Act"),
signed into law in August 1996, the special rules for bad debt
reserves of thrift institutions no longer apply and, therefore,
the Bank cannot make additions to the tax bad debt reserves but
is permitted to deduct bad debts as they occur. Additionally,
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under the 1996 Act, the Bank is required to recapture (that is,
include in taxable income) the excess of the balance of its bad
debt reserves as of December 31, 1995 over the balance of such
reserves as of December 31, 1987 ("base year"). The Bank's
federal tax bad debt reserves at December 31, 1995 exceeded its
base year reserves by $2.7 million which will be recaptured into
taxable income ratably over a six year period. This recapture
was suspended for 1996 and 1997, whereas, one-sixth of the excess
reserves was recaptured into taxable income for both 1998 and
1999. The base year reserves will be subject to recapture, and
the Bank could be required to recognize a tax liability, if (i)
the Bank fails to qualify as a "bank" for Federal income tax
purposes; (ii) certain distributions are made with respect to the
stock of the Bank (see "Distributions"); (iii) the Bank uses the
bad debt reserves for any purpose other than to absorb bad debt
losses; or (iv) there is a change in Federal tax law. Management
is not aware of the occurrence of any such event.
Distributions. To the extent that the Bank makes "non-dividend
distributions" to stockholders, such distributions will be
considered as made from the Bank's base year reserve to the
extent thereof, and then from the supplemental reserve for losses
on loans and an amount based on the amount distributed will be
included in the Bank's taxable income. Non-dividend
distributions include distributions in excess of the Bank's
current and accumulated earnings and profits, distributions in
redemption of stock, and distributions in partial or complete
liquidation. However, dividends paid out of the Bank's current
or accumulated earnings and profits, as calculated for federal
income tax purposes, will not be considered to result in a
distribution from the Bank's bad debt reserves.
Corporate Alternative Minimum Tax. The Internal Revenue Code of
1986, as amended, imposes a tax on alternative minimum taxable
income ("AMTI") at a rate of 20%. AMTI is increased by an amount
equal to 75% of the amount by which a corporation's adjusted
current earnings exceeds its AMTI (determined without regard to
this adjustment and prior to reduction for net operating losses).
Dividends Received Deduction and Other Matters. The Company may
exclude from its income 100% of dividends received from the Bank
as a member of the same affiliated group of corporations. The
corporate dividends received deduction is generally 70% in the
case of dividends received from unaffiliated corporations with
which the Company and the Bank will not file a consolidated tax
return, except that if the Company or the Bank owns more than 20%
of the stock of a corporation distributing a dividend, 80% of any
dividends received may be deducted.
STATE AND LOCAL TAXATION
New York State and New York City Taxation. The Bank and the
47
<PAGE>
Company are subject to New York State and City franchise taxes on
net income or one of several alternative bases, whichever results
in the highest tax. "Net income" means Federal taxable income
with adjustments. The Company's annual tax liability for each
year is the greatest of a tax on allocated entire net income;
allocated alternative entire net income; allocated assets to New
York State and/or New York City; or a minimum tax. Operating
losses cannot be carried back or carried forward for New York
State or New York City tax purposes. The Bank is also subject to
the 17% Metropolitan Commuter District Surcharge on its New York
State tax after the deduction of credits. The Company is also
subject to taxes in New Jersey and Connecticut due to the
establishment of in-store branches.
In response to the 1996 Act, the New York State and New York City
tax laws have been amended to prevent the recapture of existing
tax bad debt reserves and to allow for the continued use of the
PTI method to determine the bad debt deduction in computing New
York City and New York State tax liability.
Delaware Taxation. As a Delaware holding company not earning
income in Delaware, the Company is exempted from Delaware
Corporate income tax but is required to file an annual report
with and pay an annual franchise tax to the State of Delaware.
ITEM 2. PROPERTIES
The Bank conducts its business through eight full-service banking
and sixty-three in-store banking facilities located in the New
York City boroughs of Queens, Brooklyn, Manhattan and Staten
Island, the New York counties of Nassau, Suffolk, Rockland and
Westchester and in New Jersey and Connecticut. The Bank provides
residential mortgage banking services through its CFS Mortgage
division operating from six loan origination offices in New York,
New Jersey and Pennsylvania. The Company provides casualty
insurance through its subsidiary, CIA, from three offices located
in Long Island, New York. In December 1997, the Company
purchased an office building and land in Westbury, New York for
its new administrative headquarters. The purchase was
consummated under the terms of a lease agreement and Payment-in-
lieu-of-Tax ("PILOT") agreement with the Town of Hempstead
Industrial Development Agency ("IDA"). The Company completed
improvements to the building and began using the building as its
corporate headquarters in July 1998. The cost of the land and
building, including improvements was $12.8 million. The total
net book value of the Company's and the Bank's premises and
equipment was $35.9 million at December 31, 1999, which included
sixty-three in-store branches. The Company believes that the
Bank's current facilities are adequate to meet the present and
immediately foreseeable needs of the Bank and the Company.
48
<PAGE>
<TABLE>
<CAPTION>
Net Book Value
of Property or
Leasehold
Date Improvements
Leased or Leased or Date of Lease at December 31,
Location Owned Acquired Expiration(1) 1999
-------- --------- --------- ------------- ---------------
(in thousands)
<S> <C> <C> <C> <C>
Former Main Office Complex(2):
93-22/93-30 Jamaica Avenue Leased 1999 - $ -
Woodhaven, NY 11421
Traditional Branches:
80-35 Jamaica Avenue, Woodhaven, NY 11421 Owned 1979 - 240
82-10 153rd Avenue, Howard Beach, NY 11414 Owned 1971 - 550
98-16 101st Avenue, Ozone Park, NY 11416 Owned 1976 - 435
244-19 Braddock Avenue, Bellerose, NY 11426(3) Leased 1973 2003 88
106-17 Continental Ave, Forest Hills, NY 11375 Leased 1959 2013 -
343 Merrick Road, Amityville, NY 11701 Leased 1977 2001 393
104-08 Rockaway Beach Blvd., Rockaway
Beach, NY 11693 Leased 1996 2008 31
Supermarket Branches:
700-60 Patchogue Rd., Medford, NY 11763 Leased 1996 2001 150
1121 Jerusalem Avenue, Uniondale, NY 11553 Leased 1996 2001 166
533 Montauk Highway, Bayshore, NY 11708 Leased 1996 2001 195
625 Atlantic Avenue, Brooklyn, NY 11217 Leased 1996 2001 173
575 Montauk Highway, W. Babylon, NY 11704 Leased 1997 2002 178
2335 New Hyde Park Rd, New Hyde Park, NY 11040 Leased 1997 2002 195
1251 Deer Park Ave., N. Babylon, NY 11703 Leased 1997 2002 186
101 Wicks Road, Brentwood, New York 11717 Leased 1997 2002 195
3635 Hempstead Turnpike, Levittown, NY 11756 Leased 1997 2002 200
6070 Jericho Turnpike, Commack, NY 11726 Leased 1997 2002 199
2150 Middle Country Rd., Centereach, NY 11720 Leased 1997 2002 200
1897 Front Street, East Meadow, NY 11554 Leased 1997 2002 206
8101 Jericho Turnpike, Woodbury, NY 11796 Leased 1997 2002 200
92-10 Atlantic Avenue, Ozone Park, NY 11416 Leased 1997 2002 202
395 Route 112, Patchogue, NY 11772 Leased 1997 2002 193
1764 Grand Avenue, Baldwin, NY 11510 Leased 1997 2002 201
5145 Nesconset Hwy., Port Jefferson, NY 11776 Leased 1997 2002 219
31-06 Farrington Street, Whitestone, NY 11357 Leased 1997 2002 199
5801 Sunrise Highway, Sayville, NY 11741 Leased 1997 2002 193
531 Montauk Highway, W. Babylon, NY 11776 Leased 1997 2002 202
155 Islip Avenue, Islip, NY 11751 Leased 1997 2002 205
800 Montauk Highway, Shirley, NY 11967 Leased 1997 2002 208
253-01 Rockaway Turnpike, Woodmere, NY 11422 Leased 1997 2002 200
227 Cherry Street, New York, NY 10002 Leased 1997 2002 201
45 Route 59 Monsey, NY 10952 Leased 1997 2002 206
195 Rockland Center, Rte. 59, Nanuet, NY 10954 Leased 1997 2002 217
1905 Sunrise Highway, Bayshore, NY 11708 Leased 1997 2002 214
941 Carmens Road, Massapequa, NY 11758 Leased 1997 2002 75
500 South River Street, Hackensack, NJ 07470 Leased 1997 2002 159
1 Pathmark Plaza, Mount Vernon, NY Leased 1997 2002 238
2875 Richmond Avenue, Staten Island, NY 10306 Leased 1997 2002 229
111-10 Flatlands Avenue, Brooklyn, NY 11230 Leased 1997 2002 209
1245 61st Street, Boro Park, NY 11219 Leased 1998 2003 230
2650 Sunrise Highway, East Islip, NY 11730 Leased 1998 2003 220
492 E. Atlantic Avenue, E. Rockaway, NY 11554 Leased 1998 2003 218
1-37 12th Street, Brooklyn, NY 11205 Leased 1998 2003 216
130 Wheatley Plaza, Greenvale, NY 11548 Leased 1998 2003 230
335 Nesconset Highway, Hauppauge, NY 11788 Leased 1998 2003 257
360 No. Broadway, Jericho, NY 11753 Leased 1998 2003 218
42-02 Northern Blvd., L.I.C., NY 11100 Leased 1998 2003 211
2540 Central Park Ave, No. Yonkers, NY 10710 Leased 1998 2003 198
130 Midland Avenue, Portchester, NY 10573 Leased 1998 2003 247
1351 Forest Avenue, Staten Island, NY 10302 Leased 1998 2003 247
2424 Hylan Blvd., Staten Island, NY 10306 Leased 1998 2003 191
1757 Central Park Ave, Yonkers, NY 10710 Leased 1998 2003 263
Route 28 and Union Ave, Bound Brook, NJ 08805 Leased 1998 2003 199
Rte 70 & Chambers Bridge Rd, Bricktown, NJ 08723 Leased 1998 2003 191
367 Highway 22 West, Hillside, NJ 07205 Leased 1998 2003 207
201 Roosevelt Place, Palisades Park, NJ 07650 Leased 1998 2003 190
625 Hamburg Turnpike, Wayne, NJ 07470 Leased 1998 2003 168
145 Highway 36 West, Long Branch, NJ 07764 Leased 1998 2003 295
23 Marshall Hill Road, West Milford, NJ 07480 Leased 1998 2003 220
49
<PAGE>
404 Main Street, Ansonia, CT 06401 Leased 1998 2003 154
500 Sylvan Avenue, Bridgeport, CT 06610 Leased 1998 2003 205
533 South Broad Street, Meridan, CT 06450 Leased 1998 2003 207
157 Cherry Street, Milford, CT 06460 Leased 1998 2003 157
6 Queen Street, Newtown, CT 06460 Leased 1998 2003 180
650 Wolcott Street, Waterbury, CT 06705 Leased 1998 2003 203
131 Campbell Avenue, West Haven, CT 06516 Leased 1998 2003 157
2350 N. Ocean Avenue, Farmingville, NY 11738 Leased 1999 2004 242
4055 Merrick Road, Seaford, NY 11783 Leased 1999 2004 229
460 Franklin Avenue, Franklin Square, NY 11010 Leased 1999 2004 196
Corporate Headquarters:
615 Merrick Avenue, Westbury, NY Owned 1997 - 11,053
</TABLE>
(1) Rent expense for the year ended December 31, 1999 was $5.2
million.
(2) On March 25, 1999, the Bank sold the properties, consisting
of land, buildings and building improvements located at 93-22 and
93-30 Jamaica Avenue, Woodhaven, New York. During the second
quarter of 1999, the Bank sold properties located at 94-09 and
94-13 Jamaica Avenue and 87-14 and 86-35 94th Street, Woodhaven,
New York.
(3) Includes land that is adjacent to the branch office that was
acquired by the Bank in 1973.
ITEM 3. LEGAL PROCEEDINGS
In February, 1983, a burglary of the contents of safe deposit
boxes occurred at a branch office of the Bank. At December 31,
1999 and currently, the Bank has a class action lawsuit related
thereto pending, whereby the plaintiffs are seeking recovery of
approximately $12.9 million in actual damages and an additional
$12.9 million in unspecified damages. The Bank's ultimate
liability, if any, which might arise from the disposition of
these claims cannot presently be determined. Management believes
it has meritorious defenses against this action and has and will
continue to defend its position. Accordingly, no provision for
any liability that may result upon adjudication of this action
has been recognized in the accompanying consolidated financial
statements.
The Company is involved in various legal actions arising in the
ordinary course of business, which in the aggregate, are believed
by management to be immaterial to the financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
50
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information relating to the market for Company's common equity
and related stockholder matters appears under "Common Stock
Information" in the Registrant's 1999 Annual Report to
Stockholders on page 56, and is incorporated herein by reference.
Information relating to the payment of dividends by the Company
appears in Note 15 to Notes to Consolidated Financial
Statements in the Registrant's Annual Report on page 47 and is
incorporated herein by reference.
The Company initiated a quarterly cash dividend of $0.05 per
share in the third quarter of 1995 paid on October 20, 1995. The
following schedule summarizes the cash dividends paid for 1997,
1998 and 1999:
Dividend Payment Dividend Paid
Date Per Share (1) Record Date
---------------- ------------- -----------
January 1997 .075 December 1996
April 1997 .075 April 1997
July 1997 .075 June 1997
October 1997 .075 September 1997
January 1998 .075 December 1998
April 1998 .075 March 1998
July 1998 .075 June 1998
October 1998 .075 September 1998
January 1999 .075 December 1998
April 1999 .075 April 1999
July 1999 .075 July 1999
October 1999 .075 October 1999
January 2000 .075 December 1999
(1) As adjusted to reflect the 2-for-1 stock split effective
November 1997 ("stock split").
The following schedule summarizes the dividend payout ratio
(dividends declared per share divided by net income per share)
Dividends Net income
Year Paid per share per share Payout ratio
------ -------------- ---------- ------------
1997 $0.30 $1.32 .227%
1998 0.30 0.95 .316
1999 0.30 1.44 .206
51
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears in the Registrant's 1999
Annual Report to Stockholders on pages 10 and 11 and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The above-captioned information appears under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1999 Annual Report to Stockholders
on pages 12 through 24 and is incorporated herein by reference.
The information in the eighth paragraph under Item 1 -
Description of Business in this Report on Form 10-K is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The above-captioned information appears under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Asset/Liability Management" in the Registrant's 1999
Annual Report to Stockholders on pages 13 through 15 and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Haven Bancorp, Inc. and
its subsidiaries, and the notes related thereto together with the
report thereon by KPMG LLP appears in the Registrant's 1999
Annual Report to Stockholders on pages 25 through 54 and are
incorporated herein by reference.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to Directors and Executive Officers of
the Company is incorporated herein by reference to the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held
on May 17, 2000, under the caption "Information with Respect to
Nominees, Continuing Directors and certain Executive Officers.
52
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation is
incorporated herein by reference to the Company's Proxy Statement
for the Annual Meeting of Stockholders to be held on May 17,
2000, under the captions "Directors' Compensation" and "Executive
Compensation" (excluding the Report of the Compensation Committee
and the Stock Performance Graph).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information relating to security ownership of certain
beneficial owners and management is incorporated herein by
reference to the Company's Proxy Statement for the Annual Meeting
of Stockholders to be held on May 17, 2000, under the captions
"Security Ownership of Certain Beneficial Owners" and
"Information with Respect to the Nominees, Continuing Directors
and Certain Executive Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to certain relationships and related
transactions is incorporated herein by reference to the
Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 17, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements of the Company are
incorporated by reference to the following indicated pages of the
1999 Annual Report to Stockholders.
Pages
Consolidated Statements of Financial Condition
as of December 31, 1999 and 1998 ................... 25
Consolidated Statements of Income for the Years
Ended December 31, 1999, 1998 and 1997 ............. 26
Consolidated Statements of Changes In Stockholders'
Equity for the Three Years Ended December 31, 1999 . 27
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 ............. 28
Notes to Consolidated Financial Statements ......... 29 - 53
Independent Auditors' Report ....................... 54
The remaining information appearing in the Annual Report to
Stockholders is not deemed to be filed as part of this report,
except as expressly provided herein.
53
<PAGE>
(2) All schedules are omitted because they are not required or
applicable, or the required information is shown in the
consolidated financial statements or the notes thereto.
(3) Exhibits (filed herewith unless otherwise noted)
(a) The following exhibits are filed as part of this
report:
3.1 Amended Certificate of Incorporation of Haven
Bancorp, Inc.(1)
3.2 Certificate of Designations, Preferences and Rights
of Series A Junior Participating Preferred Stock(2)
3.3 Bylaws of Haven Bancorp, Inc.(3)
3.3(A) Fifth Amendment to the Bylaws of Haven Bancorp,
Inc. (filed herewith)
4.0 Rights Agreement between Haven Bancorp, Inc. and
Chase Manhattan Bank (formerly Chemical Bank)(2)
10.1(A) Employment Agreement between Haven Bancorp, Inc. and
Philip S. Messina dated as of 9/21/95(4)
10.1(B) Amendatory Agreement to the Employment Agreement
between Haven Bancorp, Inc. and Philip S. Messina
dated as of 5/28/97(5)
10.1(C) Employment Agreement between CFS Bank and Philip S.
Messina dated as of 5/28/97(5)
10.1(D) Employment Agreement between Haven Bancorp, Inc. and
Philip S. Messina dated as of November 22, 1999
(filed herewith)
10.1(E) Termination of the Bank Employment Agreement between
Haven Bancorp, Inc. and Philip S. Messina dated as
of November 22, 1999 (filed herewith)
10.2(A) Form of Change in Control Agreement between
Columbia Federal Savings Bank and certain executive
officers, as amended(4)
10.2(B) Form of Amendment to Change in Control Agreement
between CFS Bank and certain executive officers(5)
10.2(C) Form of Change in Control Agreement between Haven
Bancorp, Inc. and certain executive officers, as
amended(4)
10.2(D) Form of Amendment to Change in Control Agreement
between Haven Bancorp, Inc. and certain executive
officers (5)
10.2(E) Change in Control Agreement between Haven Bancorp,
Inc. and Mark A. Ricca dated as of April 10, 1998(8)
10.2(F) Change in Control Agreement between CFS Bank
and Mark A. Ricca dated as of April 10, 1998(8)
10.4 (a) Amended and Restated Columbia Federal Savings
Bank Recognition and Retention Plans for Officers
and Employees(6)
10.4 (b) Amended and Restated Columbia Federal Savings
Bank Recognition and Retention Plan for Outside
Directors(6)
10.5 Haven Bancorp, Inc. 1993 Incentive Stock Option
Plan(6)
54
<PAGE>
10.6 Haven Bancorp, Inc. 1993 Stock Option Plan for
Outside Directors(6)
10.7 Columbia Federal Savings Bank Employee Severance
Compensation Plan, as amended(4)
10.8 Columbia Federal Savings Bank Consultation and
Retirement Plan for Non-Employee Directors(6)
10.9 Form of Supplemental Executive Retirement
Agreement(3)
10.10 Haven Bancorp, Inc. 1996 Stock Incentive Plan(4)
10.11 Haven Bancorp, Inc. Key Executive Deferred
Compensation Plan (filed herewith)
10.12 Purchase and Assumption Agreement, dated as of
March 11, 1998, by and among Intercounty Mortgage,
Inc., CFS Bank and Resource Bancshares Mortgage
Group, Inc.(7)
11.0 Computation of earnings per share (filed herewith)
13.0 Portions of 1999 Annual Report to Stockholders
(filed herewith)
21.0 Subsidiary information is incorporated herein by
reference to "Part I - Subsidiaries"
23.0 Consent of Independent Auditors (filed herewith)
27.0 Financial Data Schedule (filed herewith)
99 Proxy Statement for 2000 Annual Meeting of
Stockholders to be held on May 17, 2000, which will
be filed with the SEC within 120 days after December
31, 1999, is incorporated herein by reference.
_______________
(1) Incorporated by reference into this document from the
Exhibits to Form 10-Q for the quarter ended September 30, 1998,
filed on November 16, 1998.
(2) Incorporated by reference into this document from the
Exhibits to Form 8-K, Current Report, filed on January 30, 1996.
(3) Incorporated by reference into this document from the
Exhibits to Form 10-Q for the quarter ended March 31, 1999, filed
on May 13, 1999.
(4) Incorporated by reference into this document from the
Exhibits to Form 10-K for the year ended December 31, 1995, filed
on March 29, 1996.
(5) Incorporated by reference into this document from the
Exhibits to Form 10-K for the year ended December 31, 1997, filed
on March 31, 1998.
(6) Incorporated by reference into this document from the
Exhibits to Form 10-K for the year ended December 31, 1994, filed
on March 30, 1995.
(7) Incorporated by reference into this document from the
Exhibits to Form 8-K, Current Report, filed on July 2, 1998.
55
<PAGE>
(8) Incorporated by reference into this document from the
Exhibits to Form 10-K for the year ended December 31, 1998, filed
on March 31, 1999.
(b) Reports on Form 8-K.
A report on Form 8-K was filed by the Company dated
November 30, 1999, which includes under Item 5 (Other Events)
portions of the Company's presentation to analysts on December 1,
1999.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HAVEN BANCORP, INC.
By: /s/ Philip S. Messina
---------------------
Philip S. Messina
Dated: March 30, 2000 Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Philip S. Messina Chairman of the Board March 30, 2000
- -------------------------- and Chief Executive Officer
Philip S. Messina
/s/ William J. Jennings II President and Chief March 30, 2000
- -------------------------- Operating Officer
William J. Jennings II
/s/ George S. Worgul Director March 30, 2000
- --------------------------
George S. Worgul
/s/ Robert M. Sprotte Director March 30, 2000
- --------------------------
Robert M. Sprotte
/s/ Michael J. Fitzpatrick Director March 30, 2000
- --------------------------
Michael J. Fitzpatrick
/s/ Michael J. Levine Director March 30, 2000
- --------------------------
Michael J. Levine
57
<PAGE>
/s/Msgr. Thomas J. Hartman Director March 30, 2000
- --------------------------
Msgr. Thomas J. Hartman
/s/Michael A. McManus, Jr. Director March 30, 2000
- --------------------------
Michael A. McManus, Jr.
/s/ Hanif Dahya Director March 30, 2000
- --------------------------
Hanif Dahya
/s/ Catherine Califano Senior Vice President and March 30, 2000
- -------------------------- Chief Financial Officer
Catherine Califano
</TABLE>
58
EXHIBIT 3.3(A)
FIFTH AMENDMENT TO
BYLAWS OF
HAVEN BANCORP, INC.
The first paragraph of Article II, Section 1 is hereby amended as
follows:
ARTICLE 11 - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be under the
direction of its Board of Directors. The number of Directors who
shall constitute the Whole Board shall be such number as the Board
of Directors shall from time to time have designated except in the
absence of such designation shall be nine. The Board of Directors
shall annually elect a Chairman of the Board from among its members
who shall, when present, preside at its meetings.
Dated: December 22, 1999
EXHIBIT 10.1(D)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as
of November 22, 1999 by and between Haven Bancorp, Inc., a publicly
held business corporation organized and operating under the laws of
the State of Delaware and having an office at 615 Merrick Avenue,
Westbury, New York 11590 ("Company") and Philip S. Messina, an
individual residing at No. 8 Bryan Meadow Path, Fort Salonga, New
York 11768 ("Executive").
WITNESSETH:
WHEREAS, Executive currently serves the Company in the capacity of
Chief Executive Office and also serves as Chief Executive Officer
of CFS Bank, a wholly-owned subsidiary of the Company, ("Bank") and
as Chairman of the Board of Directors of the Company ("Board") and
the Board of Directors of the Bank ("Bank Board"); and
WHEREAS, the Company desires to assure for itself the continued
availability of Executive's services and the ability of Executive
to perform such services with a minimum of personal distraction in
the even of a pending or threatened Change in Control (as
hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Company and
the Bank on the terms and conditions hereinafter set forth; and
WHEREAS, the Company and Executive desire to restate and modify the
Employment Agreement by and between the Company and Executive dated
September 21, 1995 and the associated Amendatory Agreement, dated
May 28, 1997, to correct technical inaccuracies in the aforesaid
agreements along with the Bank Employment Agreement entered between
the Bank and Executive, dated May 28, 1997.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and conditions hereinafter set forth, the Company and
Executive hereby agree as follows:
Section 1. Employment.
The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and
upon the terms and conditions set forth in this Agreement.
Section 2. Employment Period; Remaining Unexpired Employment
Period.
(a) The terms and condition of this Agreement shall be and remain
in effect during the period of employment established under this
Section 2 ("Employment Period"). The Employment Period shall be
for an initial term of three (3) years beginning on the date of
this Agreement and ending on the third (3rd) anniversary date of
this Agreement, plus such extensions, if any, as are provided
pursuant to Section 2(b).
(b) Except as provided in Section 2(c), beginning on the date of
this Agreement, the Employment Period shall automatically be
extended for one (1) additional day each day, unless either the
Company or Executive elects not to extend the Agreement further by
giving written notice to the other party, in which case the
Employment Period shall end on the third (3rd) anniversary of the
date on which such written notice is given. For all purposes of
this Agreement, the Term "Remaining Unexpired Employment Period" as
of any date shall mean the period beginning on such date and ending
on: (i) if a notice of non-extension has been given in accordance
with this Section 2(b), the third anniversary of the date on which
such notice was given; or (ii) in all other cases, the third
anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of
Executive's employment with the Company for any reason whatsoever,
any daily extensions provided pursuant to this Section 2(b), if not
previously discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating Executive's employment during
the Employment Period with or without notice for any reason;
provided, however, that the relative rights and obligations of the
Company and Executive in the event of any such termination shall be
determined under this Agreement.
Section 3. Duties
Executive shall serve as Chief Executive Officer of the Company and
as Chairman of the Board, having such power, authority and
responsibility and performing such duties as are prescribed by or
under the By-Laws of the Company and as are customarily associated
with such positions. Executive shall devote his full business time
and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of
absence) to the business and affairs of the Company and shall use
his best efforts to advance the interests of the Company. The
Executive's principal place of employment shall be the location at
the effective date of this Agreement or within thirty (30) miles
thereof.
Executive shall also serve as Chief Executive Officer of the Bank
and as Chairman of the Bank Board without additional compensation
therefor, if duly elected or appointed to serve in such capacities
in accordance with the Bank prevailing practices, policies and
procedures. If the Executive is suspended or discharged, or is
subject to any regulatory prohibition or restriction with respect
to participation in the affairs of the Bank, he shall continue to
perform services for the Company in accordance with this Agreement
but shall not directly or indirectly provide services to or
participate in the affairs of the Bank in a manner inconsistent
with the terms of such suspension or discharge or any applicable
regulatory order.
Section 4. Cash Compensation
In consideration for the services to be rendered by Executive
hereunder, the Company shall pay to Executive a salary at an
initial annual rate of $600,000 payable in approximately equal
installments in accordance with the Company's customary payroll
practices for senior officers. Prior to each anniversary of the
date of this Agreement occurring during the Employment Period, or
on such other date as the Board may determine, but in no event
greater than twelve (12) months between reviews, the Board shall
review Executive's annual rate of salary and may, in its
discretion, approve an increase therein. In addition to salary,
Executive may receive other cash compensation from the Company or
Bank for services hereunder at such times, and in such amounts and
on such terms and conditions as the Board may determine from time
to time.
Section 5. Employee Benefit Plans and Programs
During the Employment Period, Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to
participate in and receive benefits under any and all qualified or
non-qualified retirement, pension, savings, profit-sharing or stock
bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and any other employee
benefit and compensation plans (including, but not limited to, any
incentive compensation plans or programs, stock option and
appreciation rights plans and restricted stock plans)(collectively,
"Benefit Plans") as may from time to time be maintained by, or
cover employees of, the Company or the Bank, in accordance with the
terms and conditions of such employee benefit plans and programs
and compensation plans and programs and consistent with the
Company's and the Bank's customary practices. Nothing paid to the
Executive under any such plan or arrangement will be deemed to be
in lieu of other compensation to which the Executive is entitled
under this Agreement.
Section 6. Supplemental Executive Retirement Benefits
Without limiting the generality of Section 5 hereof, in the event
that the amount of benefits or contributions Executive would have
received or accrued under the benefit formulas of the tax-qualified
Benefit Plans of the Company and the Bank is limited by Sections
401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Internal
Revenue Code of 1986 ("Benefit Limitations"), the Company shall
provide Executive with supplemental benefits equal to the benefits
attributable to employer contributions that he would have received
if the Benefit Limitations did not apply. Such supplemental
benefits shall be provided on a non-qualified, deferred
compensation basis and shall be determined under the benefit
formulas and actuarial assumptions of the applicable Benefit Plans.
Payment of such supplemental benefits shall be made in the same
manner and at the same time as payment of the Executive's benefits
under the applicable Benefit Plan.
Section 7. Indemnification
(a) During the Employment Period and for a period of six (6) years
thereafter, the Company shall cause to the extent commercially
available Executive to be covered by and named as an insured under
any policy or contract of insurance obtained by it or the Bank to
insure directors and officers against personal liability for acts
or omissions in connection with service as an officer or director
of the Company or the Bank, or service in other capacities at the
request of the Company or the Bank. The coverage provided to
Executive pursuant to this Section 7 shall be of the same scope and
on the same terms and conditions as the coverage (if any) provided
to other officers or directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, during
the Employment Period and for a period of six (6) years thereafter,
the Company shall indemnify Executive against and hold Executive
harmless from any costs, liabilities, losses and exposures to the
fullest extent and on the most favorable terms and conditions that
similar indemnification is offered to any director or officer of
the Company, the Bank or any subsidiary or affiliate thereof.
Section 8. Outside Activities
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as Executive may
disclose to and as may be approved by the Board (which approval
shall not be unreasonably withheld); provided, however, that such
service shall not materially interfere with the performance of his
duties under this Agreement. Executive may also engage in personal
business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided,
however, that such activities are not prohibited under any code of
conduct or investment or securities trading policy established by
the Company and generally applicable to all similarly situated
executives.
Section 9. Working Facilities and Expenses
Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such
other location within Nassau County at which the Company shall
maintain its principal executive offices, or at such other location
as the Company and Executive may mutually agree upon. The Company
shall provide Executive at his principal place of employment with
a private office, secretarial services, an automobile, and other
support services and facilities suitable to his position with the
Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The
Company shall reimburse Executive for his ordinary and necessary
business expenses, including, without limitation, all expenses
associated with his business of the aforementioned automobile,
membership fees, dues, capital contributions or such other
business-related charges required for, or related to, membership or
participation in such clubs and organizations as Executive and the
Company shall mutually agree are necessary and appropriate for
business purposes, and his travel and entertainment expenses
incurred in connection with the performance of his duties under
this Agreement, in each case upon presentation to the Company of an
itemized account of such expenses in such form as the Company may
reasonably require.
Section 10. Termination of Employment with Severance Benefits
Executive shall be entitled to the severance benefits described in
Section 11 hereof in the event that his employment with the Company
or the Bank terminates during the Employment Period under any of
the following circumstances:
(a) prior to a Change in Control, as defined in Section 14 hereof:
(i) If in the event the Executive shall not hold any one of the
positions of Chairman and Chief Executive Officer for reasons other
than for Disability, Retirement, Voluntary Resignation or Cause, or
(ii) In the event of a material breach of this Agreement by
Company, provided that he first resigns from all positions with the
Bank and Company. If the right to severance benefits should arise
pursuant to the terms of this paragraph, the Board, after first
having received thirty (30) days written notice, may take such
steps as necessary to cure, correct and/or reinstate the Executive
and if such cure, correction and/or reinstatement is effected
promptly after receipt of notice; no severance benefits shall be
payable.
(b) subsequent to a Change in Control, as defined in Section 14:
(i) Executive's voluntary resignation from employment with the
Company and the Bank and Executive's voluntary resignation of
membership with the Board and Bank Board; or
(ii) the termination by the Company or the Bank of Executive's
employment hereunder, for any reason, other than Death, Disability
or Cause.
Section ll. Severance Benefits
Upon termination of Executive's employment with the Company under
the circumstances described in Section 10 of this Agreement, the
Company shall pay and provide to Executive (or, in the event of his
death following his termination of employment, to his estate):
(a) his earned but unpaid compensation (including, without
limitation, all items which constitutes wages under Section 190.1
of the New York Labor Law and the payment of which is not otherwise
provided for under this Section 11) as of the date of the
termination of his employment with the Company, such payment to be
made at the time and in the manner prescribed by law applicable to
the payment of wages but in no event later than thirty (30) days
after termination of employment;
(b) the benefits, if any, to which Executive is entitled as a
former employee under the Benefits Plans maintained by the Company
and the Bank for their officers and employees;
(c) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term
disability insurance benefits, in addition to that provided
pursuant to Section 11(b), and after taking into account the
coverage provided by any subsequent employer, if and to the extent
necessary to provide coverage for Executive and his family
equivalent to the coverage to which Executive would be entitled
under the applicable Benefit Plans (as in effect on the date of his
termination of employment, or, if his termination of employment
occurs after a Change of Control, on the date of such Change of
Control, whichever benefits are greater), if Executive had
continued working for the Company and the Bank either:
(i) during the Remaining Unexpired Employment Period, if
Executive's termination of employment occurs under the
circumstances described in Section 10(a); or
(ii) until Executive's death, if the Executive's termination of
employment occurs under the circumstances described in Section
10(b); and during such period Executive received the highest annual
rate of compensation achieved during that portion of the Employment
Period prior to Executive's termination of employment, such
benefits to be provided without regard to whether Executive's
continued participation in the applicable Benefits Plans is
prohibited during such period and to include continuation coverage
for Executive and members of Executive's family following the
expiration of the applicable period set forth in Section 11(c)(i)
or (ii) above equivalent to the continuation coverage that they
would be entitled to under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA") if such benefits were provided under
the applicable Benefits Plans; and
(d) within thirty (30) days following his termination of
employment with the Company, a lump sum payment, in an amount equal
to the present value of the salary that Executive would have earned
if Executive had continued working for the Company and the Bank
during the Remaining Unexpired Employment Period at the highest
annual rate of salary achieved during that portion of the
Employment Period which is prior to Executive's termination of
employment with the Company and the Bank, where such present value
is to be determined using a discount rate equal to the applicable
short-term federal rate prescribed under Section 1274(d) of the
Internal Revenue Code of 1986 ("Code"), compounded using the
compounding period corresponding to the Company's and the Bank's
regular payroll periods for its officers;
(e) within thirty (30) days following his termination of
employment with the Company or the Bank, a lump sum payment in an
amount equal to the excess, if any, of:
(i) the present value of the aggregate benefits to which Executive
would be entitled under any and all qualified and non-qualified
defined benefit pension plans maintained by, or covering employees
of, the Company or the Bank, if Executive were 100% vested
thereunder and had continued working for the Company and the Bank
during the Remaining Unexpired Employment Period, such benefits to
be determined as of the date of termination of employment by adding
to the service actually recognized under such plans an additional
period equal to the Remaining Unexpired Employment Period and by
including in the compensation recognized under such plans all
amounts payable under Sections 11(a), (d), (h), (i), and (j) which
would be credited under such plans had they been paid over the
Remaining Unexpired Employment Period; over
(ii) the present value of the benefits to which Executive is
actually entitled under such defined benefit pension plans as of
the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under Section 471(e)(3)(A)(ii)(I) of the Code and
a discount rate, compounded monthly equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation for
the valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which
Executive's termination of employment occurs ("Applicable PBGC
Rate");
(f) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the present value of the additional employer
contributions to which Executive would have been entitled under any
and all qualified and non-qualified defined contribution plans
maintained by, or covering employees of, the Company or the Bank,
and if Executive were 100% vested thereunder and had continued
working for the Company and the Bank during the Remaining Unexpired
Employment Period at the highest annual rate of compensation
achieved during that portion of the Employment Period which is
prior to Executive's termination of employment and making the
maximum amount of employee contributions, if any, required under
such plan or plans, such present value to be determined on the
basis of a discount rate, compounded using the compounding period
that corresponds to the frequency with which employer contributions
are made to the relevant plan, equal to theapplicable short-term
federal rate prescribed under Section 1274(d) of the Code
("Applicable Federal Rate");
(g) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the fair market value (determined as of the date of
his termination of employment, or, if his termination of employment
occurs after a Change of Control, on the date of such Change of
Control, whichever value is greater) of any stock that would have
been allocated or awarded to Executive under any and all stock-
based qualified or non-qualified employee benefit plan or plans
maintained by, or covering employees of, the Company or the Bank,
if Executive were 100% vested thereunder and continued working for
the Company and the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation achieved during
that portion of the Employment Period which is prior to the
Executive's termination of employment;
(h) the payments that would have been made to Executive under any
cash bonus or long-term or short-term cash incentive compensation
plan maintained by, or covering employees of, the Company or the
Bank if Executive had continued working for the Company and the
Bank during the Remaining Unexpired Employment Period and had
earned the maximum bonus or incentive award in each calendar year
that ends during the Remaining Unexpired Employment Period, such
payments to be equal to the product of:
(i) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plan;
multiplied by
(ii) the salary that would have been paid to Executive during each
such calendar year at the highest annual rate of salary achieved
during that portion of the Employment Period which is prior to
Executive's termination of employment with the Company and the
Bank:
such payments to be made (without discounting for early payment)
within thirty (30) days following Executive's termination of
employment with the Company and the Bank;
(i) at the election of Executive made within thirty (30) days
following his termination of employment with the Company and the
Bank, upon the surrender of options or appreciation rights issued
to Executive under any stock option and appreciation rights plan or
program maintained by, or covering employees of, the Company or the
Bank, a lump sum payment in an amount equal to the product of:
(i) the excess of (A) the fair market value of a share of stock of
the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment with
the Company and the Bank, over (B) the exercise price per share for
such option or appreciation right, as specified in or under the
relevant plan or program; multiplied by
(ii) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this Section 11(i) and for purposes of determining
Executive's right following his termination of employment with the
Company to exercise any options or appreciation rights not
surrendered pursuant hereto, Executive shall be deemed fully vested
in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering
employees of, the Company or the Bank, even if Executive is not
vested under such plan or program;
(j) at the election of Executive made within thirty (30) days
following Executive's termination of employment with the Company or
the Bank, upon the surrender of any shares awarded to Executive
under any restricted stock plan maintained by, or covering
employees of, the Company or the Bank, a lump sum payment in an
amount equal to the product of:
(i) the fair market value of a share of stock of the same class of
stock granted under such plan, determined as of the date of
Executive's termination of employment; multiplied by
(ii) the number of shares which are being surrendered.
For purposes of this Section 11(j) and for purposes of determining
Executive's right following his termination of employment with the
Company to any stock not surrendered pursuant hereto, Executive
shall be deemed fully vested in all shares awarded under any
restricted stock plan maintained by, or covering employees of, the
Company or the Bank, even if Executive is not vested under such
plan;
(k) within thirty (30) days following his termination of
employment with the Company or the Bank, a lump sum payment in an
amount equal to the present value of the additional benefits to
which the Executive would have been entitled under Section 6 of
this Agreement if Executive had continued working for the Company
and the Bank during the Remaining Unexpired Employment Period at
the highest annual rate of salary achieved during that portion of
the Employment Period which is prior to Executive's termination of
employment, where such present value is to be determined using the
Applicable Mortality Table and Applicable Federal Rate and assuming
that the Benefit Limitations as in effect at the time of
Executive's termination remained in effect during the Remaining
Unexpired Employment Period;
(l) if Executive's termination of employment occurs under the
circumstances described in Section 10(b), within thirty (30) days
following his termination of employment with the Company and the
Bank, a lump sum payment in an amount equal to the excess, if any,
of:
(i) the present value of the aggregate benefits to which Executive
would be entitled under any and all qualified and non-qualified
defined benefit plans maintained by, or covering employees of, the
Company or the Bank, including the supplemental benefits relating
to such plans that are provided for under Section 6 of the
Agreement, if Executive were 100% vested thereunder and had
continued working for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of salary achieved
during that portion of the Employment Period which is prior to
Executive's termination of employment, and such plans provided for
an early retirement benefit commencing at the later of Executive's
attainment of age 55 or the expiration of the Remaining Unexpired
Employment Period, equal to the retirement benefit payable under
such plans as of Executive's normal retirement date thereunder and
without any actuarial reduction to reflect benefit commencement
prior to such normal retirement date, such benefits to be
determined in the same manner as specified for determining the
amount specified under Section 11(e)(i) of this Agreement; over
(ii) the sum of: (A) the present value of the benefits to which
Executive is actually entitled to receive under the qualified and
non-qualified defined benefit plans maintained by, or covering
employees of, the Company or the Bank, and the provisions of
Section 6 of this Agreement and (B) the payment to be made pursuant
to Section 11(e) of this Agreement;
where such present values are to be determined using the Applicable
Mortality Table and Applicable Federal Rate; and
(m) if Executive's termination of employment with the Company
occurs under the circumstances described in Section 10(b),
continuation, at no cost to Executive, of the fringe benefits and
perquisites made available or provided to Executive immediately
prior to the Change of Control for the Remaining Unexpired
Employment Period, including, but not limited to, use of the
automobile provided to Executive by the Company or the Bank
immediately prior to the Change of Control, and continued payment
of all membership fees, dues, capital contributions and other
expenses for membership in such clubs, associations or other
organizations for which expenses were paid by the Company or the
Bank on behalf of Executive during the Employment Period prior to
the Change of Control.
The Company and Executive hereby stipulate that the damages which
may be incurred by Executive following any termination of
employment with the Company and the Bank under the circumstances
described in Section 10 of this Agreement are not capable of
accurate measurement as of the date first above written and that
the payments and benefits contemplated by this Section 11
constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and
without regard to Executive's efforts, if any, to mitigate damages.
The Company and the Executive further agree that the Company may
condition the payments and benefits (if any) due under this
Agreement on receipt of the Executive's resignation from any and
all positions which he holds as an officer, director or committee
member with respect to the Company, the Bank or any subsidiary or
affiliate of either of them. The Executive agrees that in the
event he voluntarily resigns from any position with the Company or
the Bank, he shall resign from all positions with the Company and
its subsidiaries and affiliates.
Section 12. Termination for Disability.
(a) If, as a result of Executive's incapacity due to physical or
mental illness, he shall have been absent from his duties with the
Company and the Bank on a full-time basis for six (6) consecutive
months, and within thirty (30) days after written notice of
potential termination is given he shall not have returned to the
full-time performance of his duties, the Company and the Bank may
terminate Executive's employment for "Disability."
(b) The Company will pay Executive, as disability pay, three-
quarters (3/4) of Executive's rate of salary as in effect pursuant
to Section 4 on the effective date of such termination, payable in
approximately equal installments in accordance with the Company's
or Bank's customary payroll practices. These disability payments
shall commence on the effective date of Executive's termination and
will end on the earlier of (i) the date Executive returns to the
full-time employment of the Company in the same capacity as he was
employed prior to his termination for Disability and pursuant to an
employment agreement between Executive and the Company; (ii)
Executive's full-time employment by another employer; (iii)
Executive attaining the age of 65; (iv) Executive's death; or (v)
the expiration of the term of this Agreement. The disability pay
shall be reduced by the amount, if any, paid to the Executive under
any plan of the Company or the Bank providing disability benefits
to the Executive.
(c) The Company will cause to be continued life, medical, dental
and disability coverage substantially identical to the coverage
maintained by the Company or the Bank for Executive prior to his
termination for Disability. This coverage and payments shall cease
upon the earlier of (i) the date Executive returns to the full-time
employment of the Company, in the same capacity as he was employed
prior to his termination for Disability and pursuant to an
employment agreement between Executive and the Company; (ii)
Executive's full-time employment by another employer; (iii)
Executive's attaining the age of 65; (iv) the Executive's death; or
(v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in
the compensation otherwise payable to Executive during any period
during which Executive is incapable of performing his duties
hereunder by reason of temporary disability.
Section 13. Termination without Additional Company Liability
(a) In the event that Executive's employment with the Company or
the Bank shall terminate during the Employment Period on account
of:
(i) the discharge of Executive for "Cause," which, for purposes of
this Agreement, shall mean: (A) Executive intentionally engages in
dishonest conduct in connection with his performance of services
for the Company or one of its affiliates resulting in his
conviction of, or pleading guilty or nolo contendere to, a felony
or any crime involving moral turpitude; (B) a material loss to the
Company or one of its affiliates caused by the Executive's willful
failure or refusal to perform his duties under this Agreement and
his failure to cure such breach within sixty (60) days following
written notice thereof from the Company; (C) Executive breaches his
fiduciary duties to the Company or one of its affiliates for
personal profit; or (D) Executive's willful breach or violation of
any law, rule or regulation (other than traffic violations or
similar offenses), or final cease and desist order in connection
with his performance of services for the Company or one of its
affiliates;
(ii) Executive's voluntary resignation from employment with the
Company or the Bank for reasons other than those specified in
Section 10;
(iii) Executive's death; or
(iv) Executive's "Retirement," which, for purposes of this
Agreement, shall mean Executive's voluntary termination at a time
when he is eligible for a retirement benefit under the qualified
defined benefit pension plan or plans of the Company or the Bank,
or if no such plan is currently maintained, the Executive's
voluntary termination of employment with the Company and the Bank
at or after the attainment of age 65;
then the Company shall have no further obligations under this
Agreement, other than the payment to Executive (or, in the event of
his death, to his estate) of his earned but unpaid salary as of the
date of the termination of his employment with the Company and the
Bank, and the provision of such other benefits, if any, to which
Executive is entitled as a former employee under the employee
benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Company or the Bank.
(b) For purposes of Section 13(a)(i)(B) or (D), no act or failure
to act, on the part of Executive, shall be considered "willful"
unless it is done, or omitted to be done, by Executive in bad faith
or without reasonable belief that Executive's action or omission
was in the best interests of the Company or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the written
advice of counsel for the Company shall be conclusively presumed to
be done, or omitted to be done, by Executive in good faith and in
the best interests of the Company or its affiliates. The cessation
of employment of Executive shall not be deemed to be for "Cause"
within the meaning of Section 13(a)(i) unless and until there shall
have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of three-fourths of the non-
employee members of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to
Executive and Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Executive is guilty of the conduct
described in Section 13(a)(i) above, and specifying the particulars
thereof in detail.
Section 14. Change of Control.
(a) A Change of Control of the Company ("Change of Control") shall
be deemed to have occurred upon the happening of any of the
following events:
(i) approval by the stockholders of the Company of a transaction
that would result in the reorganization, merger or consolidation of
the Company, respectively, with one or more other persons, other
than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) at
least 51% of the outstanding equity ownership interests in the
Company; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the
Company;
(ii) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities of the Company entitled to vote generally in
the election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board do not belong to
any of the following groups:
(A) individuals who were members of the Board on the date of this
Agreement; or
(B) individuals who first became members of the Board after the
date of this Agreement either:
(I) upon election to serve as a member of the Board by affirmative
vote of three-quarters of the members of such board, or of a
nominating committee thereof, in office at the time of such first
election; or
(II) upon election by the stockholders of the Company to serve as
a member of the Board, but only if nominated for election by
affirmative vote of three-quarters of the members of the Board, or
of a nominating committee thereof, in office at the time of such
first nomination;
provided, however, that such individual's election or nomination
did not result from an actual or threatened election contest
(within the meaning of Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation
of proxies or consents (within the meaning of rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) other than by or
on behalf of the Board; or
(v) any event which would be described in Section 14(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of
the Company, the Bank, or a subsidiary of either of them, by the
Company, the Bank, or a subsidiary of either of them, or by any
employee benefit plan maintained by any of them. For purposes of
this Section 14(a), the term "person" shall have the meaning
assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
(b) Upon a Change in Control, the Company shall establish an
irrevocable grantor trust, which satisfies the requirements of
Revenue Procedure 92-64, 1992 C.B. 422, and shall contribute to
such trust an amount sufficient to provide for the benefits to be
paid to Executive pursuant to Section 6 of this Agreement, the
amounts to be paid to Executive pursuant to Section 11(c)(ii), if
such amounts may not be provided under the Benefit Plans, and the
fringe benefits and perquisites to be provided under Section 11(m).
Section 15. Tax Indemnification.
(a) This Section 15 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in
Section 14 of this Agreement); or (ii) a change "in the ownership
or effective control" of the Company or the Bank or "in the
ownership of a substantial portion of the assets" of the Company or
the Bank within the meaning of Section 280G of the Code. If this
Section 15 applies, then, if for any taxable year, Executive shall
be liable for the payment of an excise tax under Section 4999 of
the Code with respect to any payment in the nature of compensation
made by the Company, the Bank or any direct or indirect subsidiary
or affiliate of the Company or the Bank to (or for the benefit of)
Executive, the Company shall pay to Executive an amount equal to X
determined under the following formula:
X = E x P
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under Section
4999 of the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this Section 15;
FI = the highest marginal rate of income tax applicable to
Executive under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax
applicable to Executive under all applicable state and local laws
for the taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Executive under the terms of this
Agreement, or otherwise, and on which an excise tax under Section
4999 of the Code will be assessed, the payment determined under
this Section 15(a) shall be made to Executive on the earlier of (i)
the date the Company, the Bank or any direct or indirect subsidiary
or affiliate of the Company or the Bank is required to withhold
such tax, or (ii) the date the tax is required to be paid by
Executive.
(b) Notwithstanding anything in this Section 15 to the contrary,
in the event that Executive's liability for the excise tax under
Section 4999 of the Code for a taxable year is subsequently
determined to be different than the amount determined by the
formula (X + P) x E, where X, P and E have the meanings provided in
Section 15(a), Executive or the Company, as the case may be, shall
pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest,
such that the payment made under Section 15(a), when increased by
the amount of the payment made to Executive under this Section
15(b) by the Company, or when reduced by the amount of the payment
made to the Company under this Section 15(b) by Executive, equals
the amount that should have properly been paid to Executive under
Section 15(a). The interest paid under this Section 15(b) shall be
determined at the rate provided under Section 1274(b)(2)(B) of the
Code. To confirm that the proper amount, if any, was paid to
Executive under this Section 15, Executive shall furnish to the
Company a copy of each tax return which reflects a liability for an
excise tax payment made by the Company, at least 20 days before the
date on which such return is required to be filed with the Internal
Revenue Service.
Section 16. Covenant Not To Compete.
Executive hereby covenants and agrees that, in the event of his
termination of employment with the Company prior to the expiration
of the Employment Period for any reason other than the
circumstances provided under Section 10 hereof, for a period of one
(1) year following the date of his termination of employment with
the Company (or, if less, for the Remaining Unexpired Employment
Period), Executive shall not, without the written consent of the
Company, become an officer, employee, consultant, director or
trustee of any savings bank, savings and loan association, savings
and loan holding company, bank or bank holding company, or any
direct or indirect subsidiary or affiliate of any such entity, that
competes with the business of the Company and/or the Bank in any
city, town or county in which the Bank or the Company has an office
or has filed an application for regulatory approval to establish an
office as of the date of Executive's termination of employment;
provided, however, that if Executive's employment shall be
terminated on account of Disability as provided in Section 12 of
this Agreement, this Section 16 shall not prevent Executive from
accepting any position or performing any services if (a) Executive
first offers, by written notice, to accept a similar position with,
or perform similar services for, the Company on substantially the
same terms and conditions and (b) the Company declines to accept
such offer within ten (10) days after such notice is given.
Section 17. Confidentiality.
Unless Executive obtains the prior written consent of the Company,
Executive shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the
Company or any entity which is a subsidiary of the Company or of
which the Company is a subsidiary, any material document or
information obtained from the Company, or from its parent or
subsidiaries, in the course of his employment with any of them
concerning their properties, operations or business (unless such
document or information is readily ascertainable from public or
published information or trade sources or has otherwise been made
available to the public through no fault of his own) until the same
ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this Section 17 shall prevent
Executive, with or without the Company's consent, from
participating in or disclosing documents or information in
connection with any judicial or administrative investigation,
inquiry or proceeding to the extent that such participation or
disclosure is required under the applicable law.
Section 18. No Effect on Employee Benefit Plans or Programs.
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive,
shall have no effect on the rights and obligations of the parties
hereto under the Company's and the Bank's qualified or non-
qualified retirement, pension, savings, thrift, profit-sharing or
stock bonus plans, group life, health (including hospitalization,
medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or
programs, or compensation plans or programs, as may be maintained
by, or cover employees of, the Company or the Bank from time to
time.
Section 19. Successors and Assigns.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate
distributees, the Company and its successors and assigns, including
any successor by merger or consolidation or a statutory receiver or
any other person or firm or corporation to which all or
substantially all of the assets and business of the Company may be
sold or otherwise transferred. Failure of the Company to obtain
from any successor its express written assumption of the Company's
obligations hereunder at least sixty (60) days in advance of the
scheduled effective date of any such succession shall be deemed a
material breach of this Agreement.
Section 20. Notices.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be
deemed to have been given at such time as it is delivered
personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below or at such
other address as one such party may by written notice specify to
the other party:
If to Executive:
Philip S. Messina
No. 8 Bryan Meadow Path
Fort Salonga, New York 11768
If to the Company:
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, New York 11590
Attention: Chairman of the Compensation Committee
of the Board of Directors
With a copy to:
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, NY 11590
Attention: General Counsel
Section 21. Indemnification for Attorneys' Fees.
The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by
Executive in connection with or arising out of any action, suit or
proceeding in which Executive may be involved, as a result of his
efforts, in good faith, to defend or enforce the terms of this
Agreement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement
of the Company's obligations hereunder shall be conclusive evidence
of Executive's entitlement to indemnification hereunder, and any
such indemnification payments shall be in addition to amounts
payable pursuant to such settlement agreement, unless such
settlement agreement expressly provides otherwise.
Section 22. Severability.
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of
any other provision hereof.
Section 23. Waiver.
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such
term, covenant, or condition. A waiver of any provision of this
Agreement must be made in writing, designated as a waiver, and
signed by the party against whom its enforcement is sought. Any
waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of
such right or power at any other time or times.
Section 24. Counterparts.
This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
Section 25. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the
extent that federal law is inapplicable, in accordance with the
laws of the State of New York applicable to contracts entered into
and to be performed entirely within the State of New York.
Section 26. Headings and Construction.
The headings of Sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any
Section. Any reference to a Section number shall refer to a
Section of this Agreement, unless otherwise stated.
Section 27. Entire Agreement; Modifications.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its
entirety any and all prior agreements, understandings or
presentations relating to the subject matter hereof, including the
agreements made effective as of November 18, 1994, September 21,
1995 and the associated amendatory agreement, dated May 28, 1997 by
and between the Company and Executive. No modifications of this
Agreement shall be valid unless made in writing and signed by the
parties hereto. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer
benefits that those available to him without reference to this
Agreement.
Section 28. Non-duplication.
In the event that Executive shall perform services for the Bank or
any other direct or indirect subsidiary of the Company, any
compensation or benefits provided to Executive by such other
employer shall be applied to offset the obligations of the Company
hereunder, it being intended that this Agreement set forth the
aggregate compensation and benefits payable to Executive for all
services to the Company and all of its direct or indirect
subsidiaries.
Section 29. Required Regulatory Provision.
Notwithstanding anything in this Agreement to the contrary, any
payments to the Executive by the Company or the Bank, whether
pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1828(k), and any
regulations promulgated thereunder.
Nevertheless, it is the intention of the Company to be legally
obligated to make all payments due the Executive hereunder and to
meet their regulatory responsibilities to insure that all
obligations of the Company to the Executive are fully discharged.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day
and year first above written.
________________________
Philip S. Messina
ATTEST: HAVEN BANCORP, INC.
By ____________________________ By _____________________
Secretary Name:
Title:
COUNTY OF NASSAU )
) ss.:
STATE OF NEW YORK )
On the 18th day of January in the year 2000 before me, the
undersigned, a notary public in and for the said State personally
appeared PHILIP S. MESSINA personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me
that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon
behalf of which the individual acted, executed the instrument.
______________________________
Notary Public
COUNTY OF NASSAU )
) ss.:
STATE OF NEW YORK )
On the 18th day of January in the year 2000 before me, the
undersigned, a notary public in and for the said State personally
appeared WILLIAM J. JENNINGS
personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed
the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the
individual acted, executed the instrument.
______________________________
Notary Public
EXHIBIT 10.1(E)
TERMINATION OF THE BANK EMPLOYMENT AGREEMENT
This TERMINATION OF THE BANK EMPLOYMENT AGREEMENT
("Agreement") is made and entered into as of November 22, 1999 by
and between CFS BANK, a federally chartered savings bank, having an
office at 615 Merrick Avenue, Westbury, New York 11590 (the "Bank")
and PHILIP S. MESSINA, an individual residing at No. 8 Bryan Meadow
Path, Fort Salonga, New York 11768 ("Executive").
W I T N E S S E T H:
WHEREAS, Executive currently serves in the capacity of Chief
Executive Officer for the Bank and for HAVEN BANCORP, INC., the
Bank's parent company (the "Company"), and as Chairman of the Board
of Directors of the Bank and the Company; and
WHEREAS, the Bank and Executive are parties to the Bank Employment
Agreement, dated May 28, 1997 (the "Bank Employment Agreement"),
and the Company and Executive are parties to the Employment
Agreement dated as of November 22, 1999 (the "Company Employment
Agreement"); and
WHEREAS, concurrently herewith, the Bank and the Company are
entering into the Executive Services Agreement (the "Executive
Services Agreement") whereby the Bank and the Company agree, among
other things, to permit Executive to continue serving in his
present capacities for the Bank and its affiliates and for the Bank
to pay the Company for such services; and
WHEREAS, the Bank and Executive desire to terminate the Bank
Employment Agreement and release each other from the obligations
thereunder,
NOW, THEREFORE, in consideration of the foregoing, and for the
promises and mutual covenants and conditions set forth herein, the
receipt and sufficiency of which are hereby acknowledged, the Bank
and Executive hereby agree as follows:
1. Bank Employment Agreement Termination.
The Bank and Executive hereby agree that the Bank Employment
Agreement be terminated and of no further force and effect.
2. Condition Precedent.
This Agreement shall become effective upon the execution by the
Bank and Company of the Executive Services Agreement attached
hereto as Exhibit A.
3. Entire Agreement; Amendment and Modification.
This Agreement represents the parties' entire agreement and
understanding with respect to the matters set forth herein. No
amendment or modification to the terms and conditions of this
Agreement shall be made except by a writing signed by each of the
parties hereto.
4. Counterparts
This Agreement may be executed in any number of counterparts, each
of which, when so executed and delivered shall be an original, but
all of which together shall constitute one and the same instrument.
5. Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to its
principles of conflicts or choice of laws.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto the day and year first above written.
CFS BANK
BY:________________________
Name:
Title:
___________________________
PHILIP S. MESSINA
Exhibit 10.11
Haven Bancorp, Inc.
Key Executive
Deferred Compensation Plan
ARTICLE 1
INTRODUCTION
1.1 Purpose of Plan
The Company has adopted the Plan set forth herein to provide a
means by which certain Eligible Individuals may elect to defer
receipt of designated percentages or amounts of their Compensation.
1.2 Status of Plan
The Plan is intended to be a plan that is "unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees" within the meaning of sections 201(2) and
301(a)(3) of ERISA, and shall be interpreted and administered, to
the extent possible, in a manner consistent with that intent.
ARTICLE 2
DEFINITIONS
Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning clearly is required by the
context:
2.1 Account means, for each Participant, an account maintained on
the books and records of the Company that is established for his or
her benefit under Section 5.1.
2.2 Appeal Committee means the Compensation Committee of the Board
of Directors of the Company.
2.3 Cause means, when used in connection with the termination of
a Participant's employment, the termination of the Participant's
employment by the Company on account of: (i) the willful violation
by the Participant of (A) any federal or state law, (B) any rule of
the Company or (C) any rule or regulation of any regulatory body to
which the Company is subject including, without limitation, the
Office of Thrift Supervision and the Federal Deposit Insurance
Corporation, which would materially reflect on the Participant's
character, competence or integrity; (ii) a breach by a Participant
of the Participant's duty of loyalty to the Company in
contemplation of the Participant's termination of employment with
the Company; or (iii) the Participant's unauthorized removal from
the premises of the Company of any document (in any medium or form)
relating to the Company or its customers. Any such determination
shall be made in the Plan Administrator's sole discretion. The
Company's rights hereunder in the event a Participant's employment
is (or is deemed to have been) terminated for Cause are in addition
to any rights the Company may have under any other agreement with
the Participant or at law or in equity. If, subsequent to a
Participant's termination of employment it is determined that the
Participant's employment could have been terminated for Cause, such
Participant's employment shall, at the election of the Plan
Administrator in its sole discretion, be deemed to have been
terminated for Cause.
2.4 Code means the Internal Revenue Code of 1986. Reference to
any section or subsection of the Code includes reference to any
comparable or succeeding provisions of any legislation that amends,
supplements or replaces such section or subsection.
2.5 Company means Haven Bancorp, Inc. ("Haven") (or any successor
to all or a major portion of Haven's assets or business that
assumes the obligations of Haven hereunder) and each of its
subsidiaries and affiliates.
2.6 Compensation means, with respect to each calendar year, the
amount payable in cash to an Eligible Individual as: (i) base
salary; (ii) bonus; or (iii) other cash incentive compensation,
before giving effect to any compensation reduction election made in
connection with: (A) a cash or deferred arrangement within the
meaning of section 401(k) of the Code; or (B) a "cafeteria plan"
within time meaning of section 125 of the Code.
2.7 Deferral Date means, with respect to each calendar year, each
pay date or such other date or dates selected by the Plan
Administrator prior to the beginning of the calendar year to which
an Elective Deferral relates.
2.8 Deferral Election means any election by a Participant to make
an Elective Deferral hereunder by filing an Election Form in
accordance with Section 4.1 hereof.
2.9 Distribution Date means, with respect to each Participant, the
date the Participant ceases to be employed by the Company or any
affiliate of the Company.
2.10 Effective Date means May 26, 1999, the date as of which the
Plan first became effective.
2.11 Election Form means the participation election form approved
and prescribed by the Plan Administrator.
2.12 Elective Deferral means the portion of a Participant's
Compensation that is deferred by a Participant under Section 4.1.
2.13 Eligible Individual means, in a Plan Year, an employee of the
Company selected by the Committee to participate in the Plan whose
Compensation in the immediately preceding Plan Year was, and whose
Compensation for such Plan Year is expected to be, at least equal
to the Minimum Eligible Compensation. The Plan Administrator may,
in its sole discretion, limit the individuals or classes of
individuals who may be considered Eligible Individuals.
2.14 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time. Reference to any section or
subsection of ERISA includes reference to any comparable or
succeeding provisions of any legislation that amends, supplements
or replaces such section or subsection.
2.15 Interest Rate means, for each Plan Year other than the 1999
Plan Year, the rate paid by CFS Bank on one-year certificates of
deposit purchased in New York State on the last business day of the
immediately preceding Plan Year and, for the 1999 Plan Year, the
rate paid by CFS Bank on one-year certificates of deposit purchased
in New York State on July 31, 1999.
2.16 "Minimum Eligible Compensation" means, with respect to each
calendar year, an amount of Compensation paid by the Company in
such year to an individual that, when added to any Elective
Deferral under the Plan, equals or exceeds (1) in 1998 and 1999,
$100,000 and (2) in 2000 and thereafter, the product of 1.25 and
the dollar limit applicable for such calendar year under section
414(q)(1)(B)(i) of the Code.
2.17 Participant means any Eligible Individual who participates in
the Plan in accordance with Article 3.
2.18 Plan means this Haven Bancorp, Inc. Key Executive Deferred
Compensation Plan.
2.19 Plan Administrator means the person, persons, committee or
entity designated by the Company to administer the Plan. If no
such person, persons, committee or entity is so serving at any
time, the Company shall be the Plan Administrator.
2.20 Plan Year means the calendar year.
2.21 Unforeseeable Emergency means a severe financial hardship
resulting from a sudden unexpected illness or accident of the
Participant or of a dependent of the Participant, loss of the
Participant's property due to casualty, or other similar
circumstances as a result of events beyond the control of the
Participant that, in each case, would constitute an "unforeseeable
emergency" within the meaning of Treasury Regulation section 1.457-
2(h)(4), and that may not be relieved (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the
Participant's assets, to the extent the liquidation of such assets
would not itself cause severe financial hardship or (c) by
cessation of deferrals under the Plan. An Unforeseeable Emergency
shall not include the need to send a Participant's child to college
or the desire to purchase a home.
ARTICLE 3
PARTICIPATION
3.1 Commencement of Participation
Any Eligible Individual who elects to defer part of his or her
Compensation in accordance with Section 4.1 shall become a
Participant in the Plan as of the first Deferral Date an Elective
Deferral is credited to the Participant's Account in accordance
with Section 4.1.
3.2 Continued Participation
A Participant in the Plan shall continue to be a Participant so
long as any amount remains credited to his or her Account.
ARTICLE 4
ELECTIVE DEFERRALS
4.1 Elective Deferrals
(a) Elective Deferrals for 1999. Subject to Section 4.1(e)
hereof, an Eligible Individual may, by completing an Election Form
and filing it with the Plan Administrator no later than June 30,
1999, elect to defer a percentage or dollar amount of the Eligible
Individual's Compensation attributable to services rendered in 1999
on or after July 1, 1999, on such terms as the Plan Administrator
may permit in its sole discretion.
(b) Elective Deferrals for 2000 and Thereafter. Subject to Section
4.1(e) hereof, an Eligible Individual may, by completing an
Election Form and filing it with the Plan Administrator not later
than November 30 of each Plan Year beginning with the 1999 Plan
Year, elect to defer a percentage or dollar amount of the Eligible
Individual's Compensation attributable to the next succeeding Plan
Year, on such terms as the Plan Administrator may permit in its
sole discretion.
(c) Mechanics of Deferral. A Participant's Compensation shall be
reduced in accordance with the Participant's election hereunder and
amounts deferred hereunder shall be credited to the Participant's
Account as of the Deferral Date coincident with or next succeeding
the date as of which the Participant would have received an amount
deferred in the absence of having made a Deferral Election.
(d) Revocation of Deferral Election. To the extent permitted by
the Plan Administrator, a Participant may change or revoke his or
her Deferral Election with respect to Compensation payable for a
Plan Year by giving written notice to the Plan Administrator in
such form as may be required by the Plan Administrator, before the
first day of such Plan Year.
(e) Limit on Deferrals. No Eligible Individual shall be permitted
to elect to defer an amount of the Participant's Compensation
hereunder in any Plan Year in excess of the lesser of: (i) 10% of
such Eligible Individual's Compensation in such Plan Year; and (ii)
$20,000. If and to the extent an Eligible Individual's Election
Form specifies an amount as an Elective Deferral that would exceed
the 10% of Compensation or $20,000 limit described in the
immediately preceding sentence, such Election Form shall be deemed
to specify as an Elective Deferral the maximum amount that could be
deferred under this Paragraph (e).
ARTICLE 5
ACCOUNTS
5.1 Accounts
The Plan Administrator shall establish an Account for each
Participant that reflects the Participant's Elective Deferrals,
together with adjustments for interest (determined in accordance
with Section 5.2(b)), forfeitures and any distributions from the
Account. The Plan Administrator shall provide each Participant
with a periodic statement of his or her Account that reflects
deferrals, interest, forfeitures described in Section 6.1(b) hereof
and distributions added to or subtracted from, as the case may be,
such Account since the prior periodic statement.
5.2 Adjustment of Accounts
The amount of each Participant's Elective Deferral for a Plan Year
shall be credited to the Participant's Account as of the Deferral
Date or Deferral Dates for such Elective Deferral as described in
Section 4.1 hereof. The Account shall be adjusted from time to
time to reflect: (a) subsequent Elective Deferrals, if any; (b)
interest on the amount credited to the Account from time to time,
which interest shall be credited from the date as of which an
amount first is credited to the Account to and including the last
day of the month immediately preceding the month in which all
amounts credited to the Account are distributed to the Participant
and (c) forfeitures described in Section 6.1(b) hereof. The rate
at which interest is credited to all Accounts during a Plan Year
pursuant to Section 5.2(b) shall be the Interest Rate for such Plan
Year.
The Plan Administrator may, in its sole discretion, from time to
time, modify or amend the basis for crediting interest to a
Participant's Account, including a modification that would reduce
the rate or increase the periods between which the rate would be
reset, provided, however, no such modification or amendment shall
reduce an amount previously credited to a Participant's Account.
ARTICLE 6
VESTING
6.1 General
(a) Accounts Generally Vested. Without limitation on Section 11.1,
but subject to Paragraph (b) of this Section 6.1, each Participant
shall be immediately vested in and shall have a nonforfeitable
right to the balance credited to the Participant's Account.
(b) Forfeit of Interest for Termination for Cause. If a
Participant's employment is (or is deemed to have been) terminated
for Cause, in addition to any other rights or remedies the Company
may have at law or in equity, the Participant shall forfeit forty
percent (40%) of any amount credited (or to be credited) to the
Participant's Account as interest pursuant to Section 5.2(b).
ARTICLE 7
PAYMENTS
7.1 Time and Form of Payment
Unless sooner distributed in accordance with the terms hereof, each
Participant shall receive a distribution in a single lump sum of
the entire amount credited to the Participant's Account as of the
Participant's Distribution Date within 30 business days after the
Participant's Distribution Date.
7.2 Death
If a Participant dies prior to the distribution of the amount
credited to his or her Account, the amount credited to his or her
Account shall be paid as soon as practicable to the Participant's
designated beneficiary or beneficiaries in effect on the date of
the Participant's death.
Any designation of a beneficiary shall be made by the Participant
on an appropriate beneficiary election form filed with the Plan
Administrator and may be changed by the Participant at any time by
filing another beneficiary election form containing the revised
instructions. If no beneficiary is designated or no designated
beneficiary survives the Participant, payment shall be made to the
Participant's surviving spouse, or, if none, to the representative
of the Participant's estate. No payment shall be made to the
representative of a Participant's estate until the Plan
Administrator shall have been furnished with such evidence and
other documentation as it shall deem necessary or appropriate to
establish the validity of the payment.
7.3 Unforeseeable Emergency
If a Participant suffers an Unforeseeable Emergency, the Plan
Administrator, in its sole discretion, may pay to the Participant
only that portion, if any, of the Participant's Account that the
Plan Administrator determines is necessary to satisfy the emergency
need, including any amounts necessary to pay any Federal, State or
local income taxes reasonably anticipated to result from the
distribution. A Participant requesting an emergency payment shall
apply for the payment in writing in a form approved by the Plan
Administrator and shall provide such additional information as the
Plan Administrator may require.
7.4 Taxes
All Federal, State or local taxes that the Plan Administrator
determines are required to be withheld in respect of any Elective
Deferrals hereunder or from any distributions made pursuant to this
Article 7 shall be withheld from amounts payable hereunder or from
any other amounts payable to a Participant.
ARTICLE 8
PLAN AND APPEAL ADMINISTRATOR
8.1 Plan and Appeal Administration and Interpretation
The Plan shall be administered by the Plan Administrator, except as
provided in this Section 8.1 and Section 10.3 hereof. Subject to
Section 10.3 hereof, the Plan Administrator shall have complete
control and authority to administer the Plan, including, without
limitation, determining the rights and benefits and all claims,
demands and actions arising out of the provisions of the Plan of
any Participant, beneficiary, representative of a deceased
Participant's estate, or any other person having or claiming to
have any interest under the Plan. Subject to Section 10.3 hereof,
the Plan Administrator shall have complete discretion and power to
interpret the Plan and to decide all matters under the Plan.
Subject to Section 10.3, any interpretation or decision by the Plan
Administrator shall be final, conclusive and binding on all
Participants and any person claiming under or through any
Participant. The Appeal Committee shall have complete control and
authority with respect to any appeal requested by a Participant
pursuant to Section 10.3 hereof, including, without limitation,
determining the rights and benefits and all claims, demands and
actions arising out of the provisions of the Plan of any
Participant, beneficiary, representative of a deceased
Participant's estate, or any other person having or claiming to
have any interest under the Plan in connection with any such
appeal. In connection with any matter subject to an appeal under
Section 10.3 hereof, the Appeal Committee shall have complete
discretion and power to interpret the Plan and to decide all
matters under the Plan. With respect to any matter subject to
appeal pursuant to Section 10.3 hereof, any interpretation or
decision by the Appeal Committee shall be final, conclusive and
binding on all Participants and any person claiming under or
through any Participant. Any individual serving as Plan
Administrator or who is a member of the Appeal Committee who also
is a Participant shall not vote or act on any matter relating
solely to himself or herself. When making a determination or
calculation, the Plan Administrator or the Appeal Committee, as the
case may be, shall be entitled to rely on information furnished by
a Participant, a beneficiary or the Company. The Plan
Administrator shall have the responsibility for complying with any
reporting and disclosure requirements under ERISA.
8.2 Powers, Duties, Procedures, Etc.
In exercising its powers and duties, each of the Plan Administrator
and the Appeal Committee may adopt such rules and procedures,
appoint such officers or agents, delegate such powers and duties
and receive such reimbursements and compensation, in each case, as
it may establish or determine from time to time consistent with the
provisions of the Plan.
8.3 Indemnification of Plan Administrator and Appeal Committee
No individual who serves at any time as Plan Administrator and no
individual who is a member of the Appeal Committee shall be liable
for any action, omission, or determination relating to the Plan,
and the Company shall indemnify and hold harmless each individual
who serves as Plan Administrator or who is a member of the Appeal
Committee, and each other director or employee of the Company to
whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost or
expense (including counsel fees) or liability (including any sum
paid in settlement of a claim with the approval of the Plan
Administrator) unless such cost, expense or liability arises out of
any action, omission or determination that was taken or made by
such individual, director or employee in bad faith and without
reasonable belief that it was in or not opposed to the best
interests of the Company, and with respect to any criminal action
or proceeding, provided such individual, director or employee had
no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the
person acted in bad faith and without reasonable belief that such
action was in or not opposed to the best interests of the Company
or, with respect to any criminal proceeding, that the person had
reasonable cause to believe the person's conduct was unlawful.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 Amendments
Subject only to Section 9.3 hereof, the Company shall have the
right, in its sole discretion, to amend the Plan in any respect
from time to time.
9.2 Termination of Plan
This Plan is a strictly voluntary undertaking on the part of the
Company, and shall not be deemed to constitute a contract between
the Company and any Eligible Individual (or any other person) or
consideration for, or an inducement or condition of employment for,
the performance of the services by any Eligible Individual (or
other person). Subject only to Section 9.3 hereof, the Company
reserves the right to terminate the Plan at any time with respect
to any or all Participants, in whole or in part, by an instrument
in writing that has been executed on the Company's behalf by its
duly authorized officer. Upon termination, the Company may with
respect to each Participant affected by any termination (an
"Affected Participant") on a Participant-by-Participant basis,
(a) elect to continue to maintain part or all of the Affected
Participant's Account and pay benefits hereunder as they become due
as if the Plan had not terminated or (b) pay promptly to each
Affected Participant (or such Affected Participant's beneficiary or
beneficiaries) part or all of the balance of the Affected
Participant's Account (or combine, in any manner, the alternatives
described in Sections 9.2(a) and 9.2(b) hereof).
9.3 Existing Rights
No amendment or modification to, or termination of, the Plan shall
be effective to the extent that it would reduce the amount credited
to a Participant's Account immediately prior to the amendment,
modification or termination, without the Participant's prior
written consent.
ARTICLE 10
CLAIM PROCEDURES
10.1 Initial Determination of Benefits
Each Participant shall be notified not later than 30 business days
after such Participant's Distribution Date (or after the
Participant applies for a distribution upon an Unforeseeable
Emergency) whether and the extent to which such Participant is
entitled to a benefit under the Plan. All benefits shall be
computed by the Plan Administrator.
10.2 Denial of Benefits
If the Plan Administrator determines that a Participant is not
entitled to benefits under the Plan, the Participant will receive
a written notice of denial of benefits. Any such written notice of
denial of benefits shall include:
(a) the reason or reasons for the denial;
(b) reference to pertinent Plan provisions on which the denial is
based;
(c) a description of any additional material or information
necessary for the Participant to perfect the claim, together with
an explanation of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure, described
below.
10.3 Review of Denied Benefit
(a) Opportunity to Appeal. Each Participant who receives a
written notice of denial of benefits shall have a reasonable
opportunity to appeal a determination that such Participant is not
entitled to benefits under the Plan to the Appeal Committee for a
full and fair review. Each such Participant (or the Participant's
duly authorized representative):
(i) shall have 60 calendar days, after receipt of written
notification of the denial of benefits in which to request a
review;
(ii) may request a review upon written application to the Appeal
Committee;
(iii) may submit issues and comments in writing;
(iv) may review pertinent documents of the Plan; and
(v) may, upon request, meet with the Appeal Committee for the
purpose of reviewing the Participant's claim for benefits.
(b) Expenses of Appeal. Each Participant shall be responsible for
paying any expenses incurred in connection with the any appeal
described in this Section 10.3.
(c) Notice of Time and Location of Review. The Appeal Committee
shall notify a Participant who requests to meet with the Appeal
Committee under Section 10.3(a)(v) of the time and location for the
review, which shall be on reasonable notice and at a reasonable
time and location.
(d) Review Procedure. The review procedure provided for in this
Article 10 shall be deemed to provide for the review and final
decision for a claim for benefits provided under the Plan.
(e) Written Decision. The Appeal Committee shall issue a decision
on each reviewed claim for benefits promptly, to the extent
practicable, no later than 60 calendar days after receipt of the
review request or, if the Appeal Committee determines additional
time is necessary to make a decision and so notifies the
Participant, up to an additional 60 calendar days. The Appeal
Committee's decision shall be in writing and shall include: (i)
the reason for the decision; and (ii) references to the Plan
provisions on which the decision is based. If the Appeal Committee
does not provide a written decision on the review within the period
described herein, the claim shall be deemed to have been denied.
ARTICLE 11
MISCELLANEOUS
11.1 No Funding
The Plan constitutes a mere promise by the Company to make payments
in accordance with the terms of the Plan, and Participants and
beneficiaries shall have the status with respect to the amounts
credited to the Account from time to time only of general unsecured
creditors of the Company. Nothing in the Plan will be construed to
give any employee or any other person rights to any specific assets
of the Company or of any other person. In all events, it is the
intent of the Company that the Plan be treated as unfunded for tax
purposes and for purposes of Title I of ERISA, and the Plan shall
be interpreted accordingly.
11.2 Non-Assignability
None of the benefits, payments, proceeds or claims of any
Participant or beneficiary hereunder shall be subject to any claim
of any creditor of any Participant or beneficiary and, in
particular, such benefits, payments, proceeds or claims shall not
be subject to attachment or garnishment or other legal process by
any creditor of such Participant or beneficiary, nor shall any
Participant or beneficiary have any right to alienate, participate,
commute, pledge, encumber or assign any of the benefits, payments,
proceeds or claims that he or she may expect to receive,
contingently or otherwise, under the Plan.
11.3 Limitation of Participants' Rights
Nothing contained in the Plan shall confer upon any person a right
to be employed or to continue in the employ of the Company, or
interfere in any way with the right of the Company to terminate the
employment of a Participant at any time, with or without cause. In
addition, nothing shall confer on any individual a right to
participate in the Plan in any Plan Year. The fact that an
individual is an Eligible Individual in one year shall not give the
individual a right to participate in the Plan in any other year.
11.4 Participants Bound
Any action with respect to the Plan taken by the Plan Adminis-
trator, the Appeal Committee or the Company or any action
authorized by or taken at the direction of the Plan Administrator,
the Appeal Committee or the Company shall be conclusive upon all
Participants and beneficiaries (and any other persons) entitled to
benefits under the Plan.
11.5 Receipt and Release
Any payment to any Participant or beneficiary made in accordance
with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Company, the Plan, the
Plan Administrator and the Appeal Committee. The Plan
Administrator may require a Participant or beneficiary, as a
condition precedent to any payment hereunder, to execute a receipt
and release to such effect. If any Participant or beneficiary is
determined by the Plan Administrator to be incompetent by reason of
physical or mental disability (including minority) to give a valid
receipt and release, the Plan Administrator may cause the payment
or payments becoming due to such person to be made to another
person for his or her benefit without responsibility on the part of
the Plan Administrator, the Company or any other person to follow
the application or use of such funds.
11.6 Governing Law
The Plan shall be construed, administered, and governed in all
respects under and by the laws of the State of New York without
reference to the principles of conflicts of law (except if and to
the extent preempted by applicable Federal law). If any provision
of the Plan shall be held by a court of competent jurisdiction to
be invalid or unenforceable, the remaining provisions hereof shall
continue to be fully effective.
11.7 Headings and Subheadings
Headings and subheadings in this Plan are inserted for convenience
only and are not to be considered in the construction of the
provisions hereof.
Exhibit No. 11 Statement re Computation of Earnings Per Share
Year Ended
December 31, 1999
Net income $ 12,606,846
==========
Weighted average shares outstanding 8,749,336
=========
Basic earnings per share $ 1.44
=========
Weighted average shares outstanding 8,749,336
Additional diluted shares from assumed
conversions of options and warrants 416,526
---------
Adjusted weighted average shares
outstanding 9,165,862
=========
Diluted earnings per share $ 1.38
=========
EXHIBIT 13.0
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
December 31,
(In thousands) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total assets $ 2,965,850 2,395,523 1,974,890 1,583,545 1,472,816
Loans receivable, net 1,790,126 1,296,702 1,138,253 836,882 560,385
Securities available for sale 937,299 889,251 499,380 370,105 503,058
Debt securities held to maturity - 66,404 97,307 127,796
Mortgage-backed securities held to maturity - - 163,057 197,940 190,714
Real estate owned, net 324 200 455 1,038 2,033
Deposits 2,080,613 1,722,710 1,365,012 1,137,788 1,083,446
FHLB advances 537,000 325,200 247,000 178,450 134,175
Other borrowed funds 212,232 115,146 219,794 147,983 136,408
Stockholders' equity 105,583 119,867 112,865 99,384 98,519
</TABLE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or For the Years Ended December 31,
(Dollars in thousands,
except share and per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets 0.46% 0.37 0.62 0.62 0.63
Return on average assets excluding SAIF
assessment charge(1) 0.46 0.37 0.62 0.89 0.63
Return on average equity 11.03 6.92 10.41 9.83 9.27
Return on average equity excluding SAIF
assessment charge(1) 11.03 6.92 10.41 14.04 9.27
Stockholders' equity to total assets 3.56 5.00 5.72 6.28 6.69
Net interest spread 2.68 2.67 2.89 3.12 2.99
Net interest margin(2) 2.72 2.78 3.06 3.29 3.17
Average interest-earning assets to
average interest-bearing liabilities 101.01 102.28 104.02 103.95 104.23
Operating expenses to average assets(3) 2.95 3.49 2.54 2.04 2.18
Stockholders' equity per share(4) $ 11.73 13.53 12.85 11.49 10.92
Asset Quality Ratios:
Non-performing loans to total loans(5) 0.42% 0.64 1.09 1.64 2.97
Non-performing assets to total assets 0.27 0.36 0.66 0.94 1.28
Allowance for loan losses to non-
performing loans(5) 216.56 166.70 99.97 77.05 50.80
Allowance for loan losses to total loans 0.92 1.07 1.09 1.26 1.51
Other Data:
Number of deposit accounts 392,289 323,794 234,183 171,382 155,424
Mortgage loans serviced for others $ 271,705 269,089 174,866 197,017 219,752
Loan originations and purchases $ 1,381,653 1,221,526 471,338 363,576 143,329
Facilities:
Full service offices 71 65 40 14 9
</TABLE>
(1) Excludes the SAIF assessment charge in 1996 of $6.8 million.
(2) Calculation is based on net interest income before provision
for loan losses divided by average interest-earning assets.
(3) For purposes of calculating these ratios, operating expenses
equal non-interest expense less real estate operations, net, non-
performing loan (income) expense, amortization of goodwill, and
non-recurring expenses. Real estate operations, net was
($220,000), $8,000, $0.4 million, $0.3 million and $1.4 million for
the five years ended December 31, 1999, respectively. For the five
years ended December 31, 1999, non-performing loan expense (income)
was $166,000, ($1.0 million), $0.2 million, $0.4 million and $0.6
million, respectively. Amortization of goodwill for the five years
ended December 31, 1999 was $1.3 million, $0.8 million, $0.1
million, $0.1 million and $40,000, respectively. For the year
ended December 31, 1996, the SAIF assessment charge of $6.8 million
was also excluded.
(4) Based on 9,000,237, 8,859,692, 8,784,700, 8,650,814 and
9,022,914 shares outstanding at December 31, 1999, 1998, 1997, 1996
and 1995, respectively. For purposes of calculating these ratios,
non-performing loans consist of all non-accrual loans and
restructured loans.
SELECTED CONSOLIDATED OPERATING DATA
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands,
except per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Interest income $183,863 151,685 126,306 109,253 96,434
Interest expense 112,906 93,776 74,400 61,368 55,115
Net interest income 70,957 57,909 51,906 47,885 41,319
Provision for loan losses 3,625 2,665 2,750 3,125 2,775
Net interest income after provision
for loan losses 67,332 55,244 49,156 44,760 38,544
Non-interest income:
Loan fees and servicing income 2,740 1,627 3,110 1,807 2,241
Mortgage banking income 3,734 3,000 - - -
Savings/checking fees 15,747 9,822 5,478 3,378 2,861
Net gain (loss) on sales of
interest-earning assets 750 2,926 (5) 140 126
Insurance, annuity and mutual fund fees 8,259 5,874 3,758 3,114 2,525
Other 3,138 2,596 1,571 1,115 1,269
Total non-interest income 34,368 25,845 13,912 9,554 9,022
Non-interest expense:
Compensation and benefits 44,687 36,935 24,251 15,737 14,889
Occupancy and equipment 12,988 11,005 6,334 3,478 3,334
Real estate operations, net (220) 8 352 277 1,405
SAIF recapitalization charge - - - 6,800 -
Federal deposit insurance premiums 1,065 870 736 2,327 2,653
Other 23,710 21,195 14,174 9,836 9,511
Total non-interest expense 82,230 70,013 45,847 38,455 31,792
Income before income
tax expense 19,470 11,076 17,221 15,859 15,774
Income tax expense 6,863 2,926 6,138 6,434 7,230
Net income $ 12,607 8,150 11,083 9,425(1) 8,544
Net income per common share:
Basic $ 1.44 0.95 1.32 1.13(1) 0.99
Diluted $ 1.38 0.89 1.24 1.08(1) 0.96
(1) Net income for 1996 excluding the SAIF assessment charge
would have been $13.5 million, or $1.62 per basic common share
($1.55 per share, diluted).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") is the
Holding Company for CFS Bank ("CFS" or the "Bank"), a federally
chartered stock savings bank. The Company is headquartered in
Westbury, New York and its principal business currently consists
of the operation of its wholly owned subsidiary, CFS Bank.
The Bank's principal business has been and continues to be
attracting retail deposits from the general public and investing
those deposits, together with funds generated from operations
primarily in one- to four-family, owner occupied residential
mortgage loans. In addition, the Bank will invest in debt, equity
and mortgage-backed securities to supplement its lending
portfolio. The Bank also invests, to a lesser extent, in multi-
family residential mortgage loans, commercial real estate loans
and other marketable securities.
The Bank's results of operations are dependent primarily on its
net interest income, which is the difference between the interest
income earned on its loan and securities portfolios and its cost
of funds, which consist of the interest paid on its deposits and
borrowed funds. The Bank's net income also is affected by its
non-interest income, its provision for loan losses and its
operating expenses consisting primarily of compensation and
benefits, occupancy and equipment, real estate operations, net,
federal deposit insurance premiums and other general and
administrative expenses. The earnings of the Bank are
significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, and to
a lesser extent by government policies and actions of regulatory
authorities.
FINANCIAL CONDITION
The Company had total assets of $2.97 billion at December 31,
1999, compared to $2.40 billion at December 31, 1998, an increase
of $570.3 million, or 23.8%.
The Company's portfolio of debt and equity securities and
mortgage-backed securities ("MBSs") available for sale ("AFS")
totaled $937.3 million, an increase of $48.0 million, or 5.4% at
December 31, 1999, compared to $889.3 million at December 31,
1998. At December 31, 1999, $184.5 million of the AFS securities
portfolio were adjustable-rate securities and $752.8 million were
fixed-rate securities. The growth in the AFS portfolio in 1999
was primarily due to securities purchased with the investment of
deposit flows during the year not utilized for portfolio loan
originations. During 1999, the Company purchased $452.1 million
of debt and equity securities and MBSs for its AFS portfolio, of
which $103.5 million were adjustable-rate and $348.6 million were
fixed-rate. Principal repayments, calls and proceeds from sales
of AFS securities totaled $363.6 million.
Loans receivable, net, increased by $493.4 million, or 38.1%
during 1999 to $1.79 billion at December 31, 1999, from $1.30
billion at December 31, 1998. Loan originations and purchases
during 1999 totaled $1.38 billion (comprised of $1.20 billion of
residential one- to four-family mortgage loans, $158.7 million of
commercial and multi-family real estate loans, $11.2 million of
construction loans and $8.9 million of consumer loans).
Commercial and multi-family real estate loan originations were
$158.7 million in 1999, a slight increase over 1998 originations
of $156.8 million. Total loans increased substantially while the
Company continued towards its objective to invest in adjustable-
rate loans. At December 31, 1999, total loans were comprised of
$1.16 billion adjustable-rate loans and $646.2 million fixed-rate
loans. During 1999, principal repayments and satisfactions
totaled $259.1 million and $0.6 million was transferred to real
estate owned ("REO").
Loans held for sale increased by $28.5 million, or 52.6% from
$54.2 million at December 31, 1998, to $82.7 million at December
31, 1999. Loans originated for sale in 1999 totaled $634.8
million. During 1999, $561.7 million loans were sold to
investors on a servicing released basis, and $44.6 million in
loans previously originated for sale were transferred to the
Bank's portfolio.
Deposits totaled $2.08 billion at December 31, 1999, an increase
of $357.9 million, or 20.8% from $1.72 billion at December 31,
1998. Interest credited totaled $71.4 million in addition to
deposit growth of $286.5 million. As of December 31, 1999, the
Bank had sixty-three in-store branches with total deposits of
$842.3 million compared to fifty-seven locations with deposits
totaling $504.0 million at December 31, 1998. Total in-store
deposits increased $338.4 million, or 67.1% from December 31,
1998, to December 31, 1999. The in-store branches are located in
the New York City boroughs of Queens, Brooklyn, Manhattan, and
Staten Island, the New York State counties of Nassau, Suffolk,
Rockland and Westchester, and in Connecticut and New Jersey.
Core deposits, which includes savings, money market, NOW, and
demand accounts, equaled 46.7% of total in-store branch deposits,
compared to 44.1% in traditional branches. Overall, core
deposits represented 45.4% of total deposits at December 31,
1999, compared to 47.7% at December 31, 1998.
Borrowed funds increased 70.1% to $749.2 million at December 31,
1999, from $440.3 million at December 31, 1998. The increase in
borrowed funds were utilized primarily to fund real estate loan
originations. During 1999, the Company issued $25.3 million of
capital securities through Haven Capital Trust II. Additionally,
during 1999, the Bank completed a leverage program requiring
additional borrowings to fund purchases for the AFS portfolio to
offset the additional interest expense resulting from the capital
securities. In addition, at December 31, 1998, the Company had
$97.5 million in securities purchased, net of securities sold,
against commitments to brokers which was reflected as due to
broker in the statement of financial condition, with the related
securities included in securities AFS. These transactions settled
in January 1999, and the Company utilized borrowed funds to repay
the obligations to brokers. Including the effect of these
transactions, borrowed funds and due to broker increased by
$211.4 million, or 39.3%, from December 31, 1998 to December 31,
1999.
Stockholders' equity totaled $105.6 million, or 3.6% of total
assets at December 31, 1999, a decrease of $14.3 million, or
11.9% from $119.9 million, or 5.0% of total assets at December
31, 1998. The decrease is the result of the unrealized
depreciation in the value of securities AFS, net of tax, of $26.4
million, primarily as a result of the increase in market interest
rates, as well as dividends declared of $2.6 million. These were
partially offset by net income of $12.6 million, an increase of
$1.5 million related to the allocation of the Bank's Employee
Stock Ownership Plan ("ESOP") stock, amortization of awards of
shares of common stock by the Bank's Recognition and Retention
Plans and Trusts ("RRPs") and amortization of deferred
compensation plan benefits and $0.6 million related to stock
options exercised, and related tax effect.
ASSET/LIABILITY MANAGEMENT
As a financial institution, the Company's primary component of
market risk is interest rate volatility. Fluctuations in interest
rates will ultimately impact both the level of income and expense
recorded on a large portion of the Bank's assets and liabilities,
and the market value of all interest-earning assets, other than
those which possess a short term to maturity. Since virtually all
of the Company's interest-bearing liabilities and interest-
earning assets are held by the Bank, virtually all of the
Company's interest-rate risk exposure lies at the Bank level. As
a result, all significant interest rate risk management
procedures are performed at the Bank level. Based upon the Bank's
nature of operations, the Bank is not subject to foreign currency
exchange or commodity price risk. The Bank's real estate loan
portfolio, concentrated primarily within the New York
metropolitan area, is subject to risks associated with the local
economy. The Bank does not own any trading assets. The Bank's
interest rate management strategy is designed to stabilize net
interest income and preserve capital over a broad range of
interest rate movements.
The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring an institution's
interest rate sensitivity "gap". An asset or liability is said to
be interest rate sensitive within a specific time period if it
will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount
of interest-earning assets maturing or repricing within a
specific time period and the amount of interest-bearing
liabilities maturing or repricing within the same period. A gap
is considered positive when the amount of interest-earning assets
maturing or repricing exceeds the amount of interest-bearing
liabilities maturing or repricing within the same period. A gap
is considered negative when the amount of interest-bearing
liabilities maturing or repricing exceeds the amount of interest-
earning assets maturing or repricing within the same period.
Accordingly, in a rising interest rate environment, an
institution with a positive gap would be in a better position to
invest in higher yielding assets which would result in the yield
on its assets increasing at a pace closer to the cost of its
interest-bearing liabilities, than would be the case if it had a
negative gap. During a period of falling interest rates, an
institution with a positive gap would tend to have its assets
repricing at a faster rate than one with a negative gap, which
would tend to restrain the growth of its net interest income.
The Company closely monitors its interest rate risk as such risk
relates to its operational strategies. The Company's Board of
Directors has established an Asset/Liability Committee ("ALCO"),
responsible for reviewing its asset/liability policies and
interest rate risk position, which generally meets weekly and
reports to the Board on interest rate risk and trends on a
quarterly basis.
The following table ("gap table") sets forth the amounts of
interest-earning assets and interest-bearing liabilities
outstanding at December 31, 1999, which are anticipated by the
Company, based upon certain assumptions described below, to
reprice or mature in each of the future time periods shown.
Adjustable-rate assets and liabilities are included in the table
in the period in which their interest rates can next be adjusted.
For purposes of this table, prepayment assumptions for fixed
interest-rate assets are based upon industry standards as well as
the Company's historical experience and estimates. The
computation of the estimated one-year gap assumes that the
interest rate on savings account deposits is variable and,
therefore, interest sensitive. During the rising interest rate
environment throughout 1999, these funds were maintained at an
average rate of 3.14%. The Company has assumed that its savings,
NOW and money market accounts, which totaled $833.4 million at
December 31, 1999, are withdrawn at the annual percentages of
approximately 8%, 4% and 1%, respectively.
</TABLE>
<TABLE>
<CAPTION>
More Than More Than More Than More Than
Three One Year Three Five Years Ten Years
Months Three to to Years to to to More Than
(Dollars in thousands) or Less Twelve Months Three Years Five Years Ten Years Twenty Years Twenty Years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans (1) $ 103,909 246,835 709,499 452,168 256,098 - - 1,768,509
Other loans (1) 9,089 6,787 1,390 1,652 2,337 4,072 - 25,327
Loans held for sale 82,709 - - - - - - 82,709
Securities available for sale 937,299 - - - - - - 937,299
Money market investments 1,238 - - - - - - 1,238
Total interest-earning assets 1,134,244 253,622 710,889 453,820 258,435 4,072 - 2,815,082
Premiums, net of unearned
discount and deferred fees(2) 3,171 709 1,988 1,269 723 11 - 7,871
Net interest-earning assets 1,137,415 254,331 712,877 455,089 259,158 4,083 - 2,822,953
Interest-bearing liabilities:
Savings accounts 13,124 39,373 178,178 116,244 147,492 101,995 28,561 624,967
NOW accounts 1,406 4,233 74,093 19,800 26,429 14,779 2,741 143,481
Money market accounts 175 513 33,693 15,839 12,394 2,249 131 64,994
Certificate accounts 312,951 664,277 137,745 18,663 1,797 - - 1,135,433
Borrowed funds 243,696 120,310 76,710 20,232 238,000 - 50,284 749,232
Total interest-bearing liabilities $571,352 828,706 500,419 190,778 426,112 119,023 81,717 2,718,107
Interest sensitivity gap $566,063 (574,375) 212,458 264,311 (166,954) (114,940) (81,717) 104,846
Cumulative interest sensitivity gap $566,063 (8,312) 204,146 468,457 301,503 186,563 104,846
Cumulative interest sensitivity gap
as a percentage of total assets 19.09% (0.28%) 6.88% 15.80% 10.17% 6.29% 3.54%
Cumulative net interest-earning
assets as a percentage of
interest-sensitive liabilities 199.07% 99.41% 110.74% 122.40% 111.98% 107.08% 103.86%
</TABLE>
(1) For purposes of the gap analysis, mortgage and other loans
are reduced for non-accural loans but are not reduced for the
allowance for loan losses.
(2) For purposes of the gap analysis, premiums, unearned discount
and deferred fees are pro-rated.
At December 31, 1999, the Company's total interest-bearing
liabilities maturing or repricing within one year exceeded its
total interest-earning assets maturing or repricing within the
same time period by $8.3 million, representing a one year
negative cumulative gap ratio of 0.28%.
In order to reduce its sensitivity to interest rate risk, the
Company's current strategy includes emphasizing the origination
or purchase for portfolio of adjustable-rate loans, debt
securities and MBSs and maintaining an AFS securities portfolio.
During 1999, the Company purchased $54.4 million of adjustable-
rate MBSs which are expected to help protect net interest margins
during periods of rising interest rates. In 1999, the Company
originated or purchased $613.5 million of adjustable-rate
mortgage loans for portfolio. Historically, the Company has been
able to maintain a substantial level of core deposits which the
Company believes helps to limit interest rate risk by providing a
relatively stable, low cost long-term funding base. At December
31, 1999, core deposits represented 45.4% of deposits compared to
47.7% of deposits at December 31, 1998. Core deposits included
$223.7 million and $158.8 million of "liquid asset" account
balances at December 31, 1999 and 1998, respectively. This
account was introduced in the second quarter of 1998 and
currently pays an initial rate of 4.25% for balances over $2,500.
The Company expects to attract a higher percentage of core
deposits from its in-store branch locations as these locations
continue to grow and mature. The Company is also attempting to
continue attracting long-term certificate accounts. During 1999,
the Company replaced $114.0 million of short-term borrowed funds
with ten-year, fixed-rate borrowed funds, which can be called
after three or five years of the borrowing date. The Company
intends to continue this strategy in 2000.
The Company's interest rate sensitivity is also monitored by
management through the use of a model which internally generates
estimates of the change in net portfolio value ("NPV") over a
range of interest rate change scenarios. NPV is the present
value of expected cash flows from assets, liabilities, and off-
balance sheet contracts. The NPV ratio, under any interest rate
scenario, is defined as the NPV in that scenario divided by the
market value of assets in the same scenario. The Office of
Thrift Supervision ("OTS") also produces a similar analysis using
its own model, based upon data submitted on the Bank's quarterly
Thrift Financial Reports, the results of which may vary from the
Company's internal model primarily due to differences in
assumptions utilized between the Company's internal model and the
OTS model, including estimated loan prepayment rates,
reinvestment rates and deposit decay rates. For purposes of the
NPV table, prepayment rates similar to those used in the gap
table were used. At December 31, 1999, the Company was operating
within its Board approved interest rate risk guidelines, as
established by its ALCO. The following table sets forth the
Company's NPV as of December 31, 1999.
<TABLE>
<CAPTION>
Changes Net Portfolio Value
in Rates Net Portfolio Value as a % of Assets
in Basis Dollar Percentage NPV Percentage
Points Amount Change Change Ratio Change(1)
Dollars in thousands)
<S> <C> <C> <C> <C> <C>
200 $ 7,737 $(147,623) (95.02)% 0.29% (94.74)%
100 85,578 (69,782) (44.92) 3.05 (41.79)
Base case 155,360 - - 5.33 -
(100) 239,801 84,441 54.35 7.93 63.10
(200) 305,875 150,515 96.88 9.82 108.04
</TABLE>
(1) Based on the portfolio value of the Company's assets in the
base case scenario.
As in the case with the gap table, certain shortcomings are
inherent in the methodology used in the above interest rate risk
measurements. Modeling changes in NPV require the making of
certain assumptions which may or may not reflect the manner in
which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV model presented assumes
that the composition of the Company's interest-sensitive assets
and liabilities existing at the beginning of a period remains
constant over the period being measured and also assumes that a
particular change in interest rates is reflected uniformly across
the yield curve regardless of the duration to maturity or
repricing of specific assets and liabilities. Accordingly,
although the NPV measurements provide an indication of the
Company's interest rate risk exposure at a particular point in
time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest
rates on the Company's net portfolio value and will differ from
actual results.
ANALYSIS OF CORE EARNINGS
The Company's profitability is primarily dependent upon net
interest income, which represents the difference between income
on interest-earning assets and expense on interest-bearing
liabilities. Net interest income is dependent on the average
balances and rates received on interest-earning assets, and the
average balances and rates paid on interest-bearing liabilities.
Net income is further affected by non-interest income, non-
interest expense, the provision for loan losses, and income
taxes.
The following table sets forth certain information relating to
the Company's average consolidated statements of financial
condition and consolidated statements of income for the three
years ended December 31, 1999, and reflects the average yield on
assets and average cost of liabilities for the periods indicated.
Such yields and costs are derived by dividing income or expense
by the average balance of assets or liabilities, respectively,
for the periods shown. Average balances are derived from average
daily balances. The average balance of loans includes loans on
which the Company has discontinued accruing interest. The yields
and costs include fees which are considered adjustments to
yields.
<TABLE>
<CAPTION>
1999 1998 1997
Average Average Average
Average Yield/ Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans $1,587,615 $116,409 7.33% $1,265,803 $96,146 7.60% $ 956,819 $75,266 7.87%
Other loans 36,767 3,004 8.17 33,444 3,303 9.88 32,639 3,220 9.87
MBSs(1) 781,552 50,854 6.51 628,556 42,040 6.69 482,523 32,755 6.79
Money market investments 2,072 142 6.85 3,499 186 5.32 5,743 343 5.97
Debt and equity securities (1) 197,122 13,454 6.83 151,217 10,010 6.62 215,926 14,722 6.82
Total interest-earning assets 2,605,128 183,863 7.06 2,082,519 151,685 7.28 1,693,650 126,306 7.46
Non-interest earning assets 143,944 133,494 88,231
Total assets 2,749,072 2,216,013 1,781,881
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings accounts 626,428 19,665 3.14 441,759 12,415 2.81 371,872 9,338 2.51
Certificate accounts 988,619 52,269 5.29 878,991 49,965 5.68 678,599 39,309 5.79
NOW accounts 239,614 1,674 0.70 187,297 1,364 0.73 134,546 1,130 0.84
Money market accounts 57,132 1,833 3.21 57,597 2,041 3.54 54,107 1,823 3.37
Borrowed funds 667,253 37,465 5.61 470,531 27,991 5.95 389,091 22,800 5.86
Total interest-bearing liabilities 2,579,046 112,906 4.38 2,036,175 93,776 4.61 1,628,215 74,400 4.57
Other liabilities 55,768 62,121 47,247
Total liabilities 2,634,814 2,098,296 1,675,462
Stockholders' equity 114,258 117,717 106,419
Total liabilities and stockholders'
equity $2,749,072 $2,216,013 $1,781,881
Net interest income/net interest
rate spread (2) $70,957 2.68% $57,909 2.67% $51,906 2.89%
Net interest-earning assets/net
interest margin (3) $26,082 2.72% $46,344 2.78% $65,435 3.06%
Ratio of interest-earning assets
to interest-bearing liabilities 101.01% 102.28% 104.02%
</TABLE>
(1) Includes AFS securities and, in 1997, securities held to
maturity.
(2) Net interest rate spread represents the difference between
the average yield on interest-earning assets and the average cost
of interest-bearing liabilities.
(3 Net interest margin represents net interest income before
provision for loan losses divided by average interest-earning
assets.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998
GENERAL
The Company reported net income of $12.6 million, or $1.44 per
basic common share for 1999, compared to $8.2 million or $0.95
per basic common share for 1998. The $4.4 million increase in net
income was attributable to a $13.0 million increase in net
interest income before the provision for loan losses and a $8.5
million increase in non-interest income. These increases were
substantially offset by increases of $12.2 million in non-
interest expense and $1.0 million in the provision for loan
losses.
NET INTEREST INCOME
Net interest income for 1999 increased by $13.0 million, or
22.5%, to $71.0 million, from $57.9 million for 1998. Interest
income increased $32.2 million, or 21.2%, from $151.7 million in
1998 to $183.9 million in 1999. The increase in interest income
was attributable to the $522.6 million, or 25.1%, increase in the
average outstanding balance of interest-earning assets from $2.08
billion in 1998 to $2.61 billion in 1999. The average yield on
interest-earning assets declined by 22 basis points from 7.28% in
1998 to 7.06% in 1999. The decline in the overall yield on
interest-earning assets is primarily the result of the decline in
market interest rates during 1998 and early 1999 which caused an
increase in prepayments of loans and MBSs. These funds were
reinvested primarily in lower yielding loans and securities. The
average cost of interest-bearing liabilities also declined by 23
basis points from 4.61% in 1998 to 4.38% in 1999. The net
interest rate spread remained virtually flat at 2.68%, while the
net interest margin declined by 6 basis points to 2.72%.
The increase in interest income was primarily the result of the
increase in interest income from mortgage loans, which increased
by $20.3 million, or 21.1%, from $96.1 million in 1998 to $116.4
million in 1999. The average outstanding balance of mortgage
loans increased by $321.8 million, or 25.4%, to $1.59 billion.
Mortgage loan originations and purchases in 1999 were $1.38
billion. These were partially offset by sales of loans in the
secondary market of $561.7 million and principal repayments of
$259.1 million. The growth in the average balance was partially
offset by a 27 basis point decrease in the average yield on
mortgage loans from 7.60% in 1998 to 7.33% in 1999. Interest
income from MBSs increased by $8.8 million, or 21.0%, from $42.0
million in 1998 to $50.9 million in 1999. The increase was
attributable to a $153.0 million increase in the average balance
of MBSs, partially offset by an 18 basis point decline in the
average yield. Interest income from debt and equity securities
increased by $3.4 million, or 34.4%, from $10.0 million in 1998
to $13.5 million in 1999. The average balance of debt and equity
securities increased by $45.9 million, while the average yield
increased by 21 basis points. During 1999, the Bank purchased
$452.1 million of securities. These purchases were substantially
offset by sales and redemptions of securities of $363.6 million.
The growth in interest-earning assets was primarily funded by
growth in interest-bearing liabilities consisting of deposits and
borrowed funds. Interest expense on deposits and borrowed funds
increased by $19.1 million, or 20.4% from $93.8 million in 1998
to $112.9 million in 1999. The average outstanding balance of
deposits and borrowed funds was $2.58 billion in 1999, a $542.9
million, or 26.7% increase over 1998.
Interest expense on savings accounts increased by $7.3 million,
or 58.4%, from $12.4 million in 1998 to $19.7 million in 1999.
The average outstanding balance of savings accounts increased by
$184.7 million, or 41.8%. The average cost also increased by 33
basis points to 3.14%. The increase in the average cost is due
in part to the "Liquid Asset" account which pays a 4.25% for the
first year on account balances of $2,500 or more. At December 31,
1999, the balance of these accounts was $223.7 million, an
increase of $64.9 million over the prior year. Interest expense
on certificate accounts increased by $2.3 million, or 4.6%, to
$52.3 million in 1999, from $50.0 million in 1998. This was
partially offset by a 39 basis point decline in the average yield
on certificate accounts. Interest expense on borrowed funds
increased by $9.5 million, or 33.8%, from $28.0 million in 1998
to $37.5 million in 1999. The average outstanding balance of
borrowed funds increased by $196.7 million, or 41.8%, in 1999.
The increase includes the issuance of $25.3 million in capital
securities in June 1999. The capital securities provided the Bank
with leverage to borrow an additional $80 million to purchase
securities for the AFS portfolio. The remaining increase in the
average outstanding balance was utilized to supplement the
increase in deposit accounts to fund mortgage loan originations
and purchases of securities AFS.
PROVISION FOR LOAN LOSSES
The provision for loan losses for 1999 was $3.6 million compared
to $2.7 million for 1998. The provision for loan losses is
established based on management's periodic review of the loan
portfolio and the related allowance for loan losses.
The increase in the provision for loan losses in 1999 was
primarily due to the overall growth in the Bank's loan portfolio.
At December 31, 1999, the allowance for loan losses was $16.7
million, or 0.92% of total loans, and 216.56% of non-performing
loans. At December 31, 1998, the allowance for loan losses was
$14.0 million, or 1.07% of total loans, and 166.70% of non-
performing loans.
NON-INTEREST INCOME
Excluding net gains on sales of interest-earning assets, non-
interest income increased by $10.7 million, or 46.7%, from $22.9
million in 1998 to $33.6 million in 1999. Savings and checking
fees increased by $5.9 million, or 60.3%, to $15.7 million in
1999. Insurance, annuity, and mutual fund fees increased by $2.4
million, or 40.6%, to $8.3 million in 1999. The increases in
these fees was due primarily to the continued growth and maturity
of the Bank's in-store banking program. During 1999, the Bank
opened six in-store branches and increased in-store branch
deposits by $338.4 million, or 67.1%, to $842.3 million at
December 31, 1999, from $504.0 million at December 31, 1998.
Approximately $1.2 million of the growth in insurance, annuity
and mutual fund fees was the result of the operations of CFS
Insurance Agency ("CIA"), a subsidiary of Haven Bancorp, which
was acquired on November 1, 1998, and operated for a full twelve
months in 1999.
Loan fees and servicing income increased by $1.1 million in 1999
to $2.7 million, compared to $1.6 million in 1998. The increase
was due to a one-time $1.0 million commercial real estate loan
fee received in the fourth quarter of 1999. This fee was received
by the Bank in exchange for releasing the borrower from the
equity sharing provision of the loan, and for waiving the pre-
payment penalty provision for the term of the loan. Mortgage
banking income was $3.7 million in 1999, a $734,000 increase over
1998, which reflected only eight months of operations following
the May 1, 1998, acquisition of the residential mortgage
production franchise of Intercounty Mortgage, Inc. ("IMI", now
known as CFS Mortgage). Mortgage banking income represents fee
income recognized on loans sold in the secondary market,
including servicing-released premiums, less the direct costs
associated with the acquisition and sale of these loans.
Residential mortgage loans sold servicing released was $561.7
million in 1999 compared to $515.8 million in 1998. Other income,
consisting primarily of retail banking related fees, increased
$542,000, or 20.9% in 1999.
NON-INTEREST EXPENSE
Non-interest expense increased by $12.2 million, or 17.4%, from
$70.0 million in 1998 to $82.2 million in 1999. The increase was
primarily attributable to compensation and benefit expenses,
which increased by $7.8 million, or 21.0%, from $36.9 million in
1998 to $44.7 million in 1999. Occupancy and equipment expenses
increased by $2.0 million, or 18.0%, to $13.0 million in 1999
from $11.0 million in 1998. Federal deposit insurance premiums
increased by $195,000, or 22.4%, due to the growth in deposits.
Other expenses totaling $23.7 million in 1999, experienced a net
increase of $2.5 million, or 11.9%, from $21.2 million in 1998.
Other expenses consist primarily of costs associated with data
processing, telephone, stationary, postage and delivery,
consulting, amortization of goodwill and other general and
administrative expenses. The increases in these expenses were
primarily due to the continued growth of the in-store banking
program, including the addition of six new branches, and a full
year of operations of CIA and CFS Mortgage.
INCOME TAX EXPENSE
Income tax expense was $6.9 million in 1999, compared to $2.9
million in 1998. The effective tax rate in 1999 was 35.2%
compared to 26.4% in 1998. The 1998 tax rate reflects an
adjustment to the Bank's tax accrual on filing the Company's
federal, New York state and New York city tax returns for 1997 in
September of 1998. In general, the Company's state and local tax
liability is limited to taxes based on its asset size.
RATE/VOLUME ANALYSIS
The following table presents the extent to which changes in
interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the
Company's interest income and interest expense during the periods
indicated. Information is provided in each category with respect
to (i) changes attributable to changes in volume (changes in
volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume), and
(iii) the net change. The changes attributable to the combined
impact of volume and rate have been allocated proportionately to
the changes due to volume and the changes due to rate.
<TABLE>
<CAPTION
Year Ended December 31, 1999 Year Ended December 31, 1998
Compared to Compared to
Year Ended December 31, 1998 Year Ended December 31, 1997
Increase (Decrease) Increase (Decrease)
In Net Interest Income In Net Interest Income
Due to Due to
(In thousands) Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $23,777 (3,514) 20,263 23,545 (2,665) 20,880
Other loans 308 (607) (299) 80 3 83
MBSs (1) 9,974 (1,160) 8,814 9,775 (490) 9,285
Money market investments (89) 45 (44) (123) (34) (157)
Debt and equity securities (1) 3,118 326 3,444 (4,292) (420) (4,712)
Total 37,088 (4,910) 32,178 28,985 (3,606) 25,379
Interest-bearing liabilities:
Savings accounts 5,660 1,590 7,250 1,880 1,197 3,077
Certificate accounts 5,908 (3,604) 2,304 11,414 (758) 10,656
NOW accounts 368 (58) 310 397 (163) 234
Money market accounts (16) (192) (208) 123 95 218
Borrowed funds 11,150 (1,676) 9,474 4,836 355 5,191
Total 23,070 (3,940) 19,130 18,650 726 19,376
Net change in net interest income $14,018 (970) 13,048 10,335 (4,332) 6,003
</TABLE>
(1) Includes AFS securities and securities held to maturity.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31,
1998 AND 1997
GENERAL
The Company reported net income of $8.2 million, or $0.95 per
basic share for 1998 compared to net income of $11.1 million, or
$1.32 per basic share for 1997. The $2.9 million decrease in
earnings was primarily attributable to an increase of $31.5
million in non-interest expense and an increase of $19.4 million
in interest expense. These factors were substantially offset by
interest income which increased by $25.4 million and non-interest
income which increased by $19.2 million, combined with decreases
of $3.2 million in income tax expense and $85,000 in the
provision for loan losses.
NET INTEREST INCOME
Net interest income increased by $6.0 million, or 11.6% to $57.9
million in 1998 from $51.9 million in 1997. Interest income
increased by $25.4 million, or 20.1% to $151.7 million in 1998
from $126.3 million in 1997. The increase in interest income was
primarily attributable to a $388.9 million increase in average
interest-earning assets, partially offset by an 18 basis point
decrease in the overall average yield on interest-earning assets
from 7.46% in 1997 to 7.28% in 1998. The decrease was due to the
overall decline in market interest rates. The average cost of
interest-bearing liabilities increased by 4 basis points to 4.61%
in 1998 from 4.57% in 1997, primarily due to a shift to
certificate accounts and the introduction of the Liquid Asset
savings account in 1998.
Interest income on mortgage loans increased by $20.9 million, or
27.7% to $96.1 million in 1998 from $75.3 million in 1997
primarily as a result of an increase in the average mortgage loan
balance of $309.0 million, partially offset by a decrease in the
average yield on mortgage loans of 27 basis points. During 1998,
the Bank originated or purchased $635.1 million of mortgage loans
for portfolio. The decline in the average rate was primarily due
to decreases in the rate indices used for residential and
commercial real estate loans and the increasing percentage of
relatively lower yielding residential mortgages. These indices,
which are the 30 year treasury bond and the 5 year treasury note,
declined 83 and 116 basis points, respectively, during 1998. In
addition, loan principal repayments and satisfactions during 1998
totaled $265.7 million in 1998 compared to $151.2 million in
1997. Also during 1998, the Bank sold approximately $104.7
million in loans previously held in portfolio, including $83.3
million of adjustable-rate mortgage loans in several bulk sale
transactions, and $14.0 million of cooperative apartment loans,
and securitized $105.7 million of one- to four-family mortgage
loans with Fannie Mae.
Interest income on MBSs was $42.0 million for 1998, an increase
of $9.3 million, or 28.3% over the $32.8 million earned in 1997.
This reflects a $146.0 million increase in the average balance of
MBSs for 1998 to $628.6 million from $482.5 for 1997, partially
offset by a decrease in the average yield on the MBS portfolio of
10 basis points to 6.69% for 1998 from 6.79% in 1997. During
1998, the Company purchased $687.9 million of MBSs for its AFS
portfolio which were partially offset by sales totaling $357.3
million and principal repayments of $199.6 million. Also during
1998, the Bank securitized $105.7 million in residential real
estate loans and retained the underlying securities in its AFS
portfolio.
Interest income on debt and equity securities decreased by $4.7
million, or 32.0% to $10.0 million in 1998 from $14.7 million in
1997, primarily as a result of a decrease in the average balance
of $64.7 million, coupled with a decrease in the average yield of
20 basis points. The decrease in the average balance of debt and
equity securities during 1998 is due primarily to sales of $97.7
million, partially offset by purchases of $36.1 million.
Interest expense increased by $19.4 million, or 26.0% to $93.8
million in 1998 from $74.4 million in 1997. The increase was
primarily attributable to an increase in interest on deposits of
$14.2 million, or 27.5% to $65.8 million in 1998 from $51.6
million in 1997. The increase in interest on deposits was due to
an increase of $326.5 million, or 26.3% in average deposits to
$1.57 billion in 1998 from $1.24 billion in 1997, coupled with a
4 basis point increase in the average cost of deposits. Interest
expense on borrowed funds increased by $5.2 million, or 22.8%
during 1998, due to an increase of $81.4 million in the average
balance, coupled with a 9 basis point increase in the average
cost of borrowed funds.
The increase in the average balance of deposits is primarily
attributable to the Bank's continuing expansion of the in-store
banking program. As of December 31, 1998, the Bank had fifty-
seven in-store branches with deposits totaling $504.0 million, as
compared to thirty-two branches with deposits totaling $157.2
million as of December 31, 1997. Interest expense on certificate
accounts increased by $10.7 million, or 27.1% from 1997 to 1998.
The in-store banking expansion contributed to the increase in the
average balance of certificate accounts of $200.4 million, or
29.5%, partially offset by an 11 basis point decrease in the
average cost of certificate accounts. Interest expense on
savings accounts increased by $3.1 million, or 33.0%, from 1997
to 1998. This increase was also due to the in-store banking
expansion, as well as the introduction of a "Liquid Asset"
account in the in-store branches during the second quarter of
1998. As of December 31, 1998, the balance of these accounts was
$158.8 million. This account currently pays 4.25% for the first
year on account balances of $2,500 or more. Overall, the average
balance of savings accounts experienced a net increase of $69.9
million, or 18.8%, coupled with a 30 basis point increase in the
average cost, which is attributable to the aforementioned Liquid
Asset account. Interest expense on NOW accounts and money market
accounts increased by $234,000 and $218,000, respectively, in
1998 over 1997, primarily as a result of the increase in the
average balance of such accounts. The average yield paid on
money market accounts increased by 17 basis points to 3.54% for
1998, primarily as a result of a shift in the average balance of
such deposits from traditional branches to the in-store
locations, which paid comparatively higher money market rates.
Interest expense on borrowed funds increased by $5.2 million, or
22.8%, primarily as a result of the increase in the average
balance of borrowed funds of $81.4 million, or 20.9%, coupled
with a 9 basis point increase in the average cost of borrowed
funds from 5.86% in 1997 to 5.95% in 1998. The increase in the
average balance of borrowed funds is due primarily to fund the
increase in residential loan originations and purchases by CFS
Mortgage, the Bank's residential lending division, as well as to
fund purchases of securities for the Company's AFS portfolio.
PROVISION FOR LOAN LOSSES
The Bank provided $2.7 million for loan losses in 1998, which was
virtually flat as compared to 1997. The provision for loan losses
reflects management's periodic review and evaluation of the loan
portfolio. Non-performing loans continued to decline to $8.4
million at December 31, 1998, from $12.5 million at December 31,
1997. As of December 31, 1998, the allowance for loan losses was
$14.0 million compared to $12.5 million at December 31, 1997. As
of December 31, 1998, the allowance for loan losses was 1.07% of
total loans compared to 1.09% of total loans at December 31,
1997. The slight decrease was attributable to the substantial
growth in the loan portfolio. The allowance for loan losses was
166.70% of non-performing loans at December 31, 1998, compared to
99.97% at December 31, 1997. The increase is the result of the
significant decline in non-performing loans from December 31,
1997 to December 31, 1998.
NON-INTEREST INCOME
Non-interest income increased by $11.9 million, or 85.8%, from
$13.9 million in 1997 to $25.8 million in 1998. Savings and
checking fees were $9.8 million in 1998, a $4.3 million, or 79.3%
increase over 1997. In 1998, the Bank recognized $3.0 million in
mortgage banking income related to loans sold servicing released
in the secondary market. Net gains on sales of interest-earning
assets were $2.9 million in 1998. In 1997, the Company reported
a net loss on such sales of $5,000. Insurance, annuity and mutual
fund fees generated in 1998 were $5.9 million, a $2.1 million, or
56.3% increase over the $3.8 million earned in 1997. Other non-
interest income increased by $1.0 million, or 65.2%, to $2.6
million in 1998, from $1.6 million in 1997, primarily as a result
of the Bank's in-store banking expansion.
On May 1, 1998, the Bank completed the purchase of the loan
production franchise of IMI. In 1998, the Bank originated $1.04
billion in residential mortgage loans, $570.0 million of which
were originated for sale in the secondary market. During 1998,
the Bank sold $515.8 million to investors in the secondary market
on a servicing-released basis, and recognized $3.0 million.
Mortgage banking income represents fee income recognized on the
sale of loans sold in the secondary market, including servicing-
released premiums, less the direct costs associated with the
acquisition and sale of those loans.
The increase in savings and checking fees and fees generated from
the sale of insurance, annuities, and mutual funds were primarily
a result of the Bank's in-store banking expansion. During 1998,
the Bank opened twenty-five in-store branches, contributing to
the increase in in-store deposits of $346.8 million, or 220.6%
from December 31, 1997, to December 31, 1998. During 1998, the
Company sold $453.7 million in securities AFS, resulting in net
gains of $1.2 million. During the third quarter of 1998, the
Bank sold $14.0 million of cooperative apartment loans in a bulk
transaction as part of its ongoing effort to divest itself of
this portion of the portfolio, resulting in a $1.0 million gain.
During the fourth quarter of 1998, the Bank realized $0.7 million
in gains on bulk sales of adjustable-rate residential mortgage
loans previously held in portfolio. The loans were sold in
response to the high level of prepayments experienced with these
loans. Other non-interest income, which consists substantially
of fees associated with retail banking, increased primarily as a
result of the Bank's in-store branch expansion.
NON-INTEREST EXPENSE
Non-interest expense increased by $24.2 million, or 52.7%, from
$45.8 million in 1997 to $70.0 million in 1998. Compensation and
benefits expense increased by $12.7 million, or 52.3%, from $24.3
million in 1997 to $36.9 million in 1998. Occupancy and
equipment expense increased by $4.7 million, or 73.7% from $6.3
million in 1997 to $11.0 million in 1998. The increases in
compensation and benefits, occupancy and equipment, and
advertising and promotion expenses were due primarily to the
Bank's in-store banking expansion, as well as the expansion of
the Bank's residential lending function with the acquisition of
the loan production franchise of IMI. During 1998, the Bank
opened twenty-five new in-store branches, while the acquisition
of the loan production franchise of IMI added 6 primary loan
origination offices and several smaller satellite offices to the
Company's facilities. Occupancy and equipment expense also
increased as a result of the purchase of the Company's new
headquarters, which was completed in the third quarter of 1998.
Federal deposit insurance premiums increased by $134,000, or
18.2%, from $736,000 in 1997 to $870,000 in 1998, due to the
increase in insurable deposits as a result of the in-store
banking expansion. Other non-interest expenses increased by $7.0
million, or 49.5%, from $14.2 million in 1997 to $21.2 million in
1998, $1.4 million of which is due to the increase in data
processing expenses which increased as a result of the in-store
banking expansion and the increase in the number of transactions
processed. Advertising and promotion expense increased by $1.1
million, or 64.7% from $1.7 million in 1997 to $2.8 million in
1998. Other items that contributed to the increase in other non-
interest expense were telephone expenses, which increased by
$925,000, stationary, printing, and office supply expenses, which
increased by $570,000, and ATM transaction expenses, which
increased by $540,000. These increases were directly related to
the in-store banking expansion and the increase in the Bank's
residential lending operations. Amortization of goodwill
increased by $710,000, primarily as a result of the acquisition
of IMI. The balance of the increase in other non-interest
expenses were generally related to the Bank's in-store branch
expansion and the expansion of the residential lending operations
as a result of the acquisition of IMI. These increases were
partially offset by a $1.2 million reduction in non-performing
loan expense due to the recapture of reserves established for the
bulk sales on REO and non-performing loans in 1994. The increase
in non-interest expense was partially offset by a $344,000
decrease in REO operations, net.
INCOME TAX EXPENSE
Income tax expense was $2.9 million in 1998, compared to $6.1
million in 1997. The effective tax rate for 1998 was 26.4%
compared to 35.6% in 1997. The decrease in the effective tax
rate was primarily due to the establishment of Columbia Preferred
Capital Corp. ("CPCC"), the Bank's real estate investment trust
("REIT") subsidiary, during the second quarter of 1997. The tax
provision for 1998 includes the effect of CPCC's operations for
the full year of 1998 compared to one quarter in 1997. The lower
tax rate was also due to an adjustment of the Bank's tax accrual
upon the filing of the Company's federal, New York State and New
York City tax returns for 1997 during September 1998, as well as
a state tax credit recognized for mortgage recording taxes paid
on loans originated in certain counties of New York State.
NON-PERFORMING ASSETS
The following table sets forth information regarding non-
performing assets which include all non-accrual loans (which
consist of loans 90 days or more past due and restructured loans
that have not yet performed in accordance with their modified
terms for the required six-month seasoning period), accruing
restructured loans and real estate owned.
December 31,
(In thousands) 1999 1998 1997
Non-accrual loans:
One- to four-family $3,663 3,779 3,534
Cooperative 206 367 698
Multi-family 1,139 308 2,531
Non-residential and other 1,986 2,074 3,633
Total non-accrual loans 6,994 6,528 10,396
Restructured loans:
One- to four-family 314 544 679
Cooperative 178 183 290
Multi-family 225 1,130 1,167
Total restructured loans 717 1,857 2,136
Total non-performing loans 7,711 8,385 12,532
REO, net:
One- to four-family 268 66 126
Cooperative 56 38 295
Non-residential and other - 121 121
Total REO 324 225 542
Less allowance for REO - (25) (87)
REO, net 324 200 455
Total non-performing assets $8,035 8,585 12,987
The Company's expanded loan workout/resolution efforts have
successfully contributed toward reducing non-performing assets to
manageable levels. Since year-end 1997, non-performing assets
have declined by $5.0 million, or 38.1%, from a level of $13.0
million to $8.0 million at year-end 1999. The decrease in non-
performing assets is reflected in the following ratios: the ratio
of non-performing loans to total loans ratio was 0.42% for 1999
compared to 0.64% for 1998 and 1.09% for 1997; the ratio of non-
performing assets to total assets was 0.27% for 1999 compared to
0.36% for 1998 and 0.66% for 1997; and the ratio of non-
performing loans to total assets was 0.26% for 1999 compared to
0.35% for 1998 and 0.63% for 1997. There can be no assurance that
non-performing assets will continue to decline.
The decrease in non-performing assets in 1999 was primarily due
to the continued decline in restructured loans. Since year-end
1997, restructured loans have declined by $1.4 million, or 66.4%
from a level of $2.1 million to $0.7 million at year-end 1999.
Total non-accrual loans increased by $0.5 million during 1999.
The decrease in non-performing assets in 1998 was primarily due
to the continued decline in non-performing loans and sales of REO
properties. During 1998, the Company sold 21 REO properties with
a fair value of $0.7 million. Total non-performing loans
decreased by $4.1 million during 1998.
LIQUIDITY
The Bank is required to maintain minimum levels of liquid assets
as defined by the OTS regulations. This requirement, which may be
varied by the OTS depending upon economic conditions and deposit
flows, is based upon a percentage of withdrawable deposits and
short-term borrowings. The required ratio is currently 4%. The
Bank's ratio was 4.31% at December 31, 1999, compared to 4.24% at
December 31, 1998.
The Company's primary sources of funds are deposits, principal
and interest payments on loans, debt securities and MBSs,
retained earnings and advances from the Federal Home Loan Bank of
New York ("FHLB") and other borrowings. Proceeds from the sale of
AFS securities and loans held for sale are also a source of
funding, as are, to a lesser extent, the sales of annuities,
insurance products and securities brokerage activities conducted
by the Bank's wholly owned subsidiary, CFS Investments, Inc. and
the Company's wholly owned subsidiary, CIA. While maturities and
scheduled amortization of loans and securities are somewhat
predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates,
economic conditions, competition and regulatory changes.
The Company's most liquid assets are cash and short-term
investments. The levels of these assets are dependent on the
Company's operating, financing, lending and investing activities
during any given period. At December 31, 1999 and December 31,
1998, cash and short-term investments totaled $42.7 million and
$44.8 million, respectively.
The Company and the Bank have other sources of liquidity which
include debt securities maturing within one year and AFS
securities. Other sources of funds include FHLB advances, which
at December 31, 1999, totaled $537.0 million. If needed, the Bank
may borrow an additional $13.5 million from the FHLB.
The Company's cash flows are comprised of three primary
classifications: cash flows from operating activities; investing
activities and financing activities. Net cash (used in) provided
by operating activities, consisting primarily of interest and
dividends received less interest paid on deposits was ($74.8
million), $16.2 million and $24.6 million for the years ended
December 31, 1999, 1998 and 1997, respectively. Net cash used in
investing activities, consisting primarily of disbursements of
loan originations and securities purchases, offset by principal
collections on loans, proceeds from maturities of securities held
to maturity or sales of AFS securities, and disposition of assets
including REO was $592.2 million, $340.7 million and $385.8
million for the years ended December 31, 1999, 1998 and 1997,
respectively. Net cash provided by financing activities,
consisting primarily of net activity in deposits and borrowings,
purchases of treasury stock, payments of common stock dividends
and proceeds from stock options exercised was $664.9 million,
$329.0 milliion and $365.7 million, respectively. See Note 14 to
Notes to Consolidated Financial Statements.
CAPITAL RESOURCES
See Note 15 to Notes to Consolidated Financial Statements.
INFLATION AND CHANGING PRICES
The consolidated financial statements and notes thereto presented
herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars
without considering the changes in the relative purchasing power
of money over time and changes due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's
operations. Unlike most industrial companies, nearly all the
assets and liabilities of the Bank are monetary. As a result,
interest rates have a greater impact on the Bank's performance
than do the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or to the
same extent as the price of goods and services.
COMPUTER ISSUES FOR THE YEAR 2000
The Company has not experienced any significant disruptions in
its financial or operating activities caused by year 2000 related
failure of computerized systems of the Company or it's service
organizations. The Company does not expect year 2000 issues to
have a material adverse effect on the Company's operations or
financial results in 2000.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
See Note 1 to Notes to Consolidated Financial Statements.
STOCK DATA
Haven common stock, listed under the symbol HAVN is publicly
traded on the Nasdaq Stock Market. As of March 22, 2000, the
Company had approximately 406 stockholders of record (not
including the number of persons or entities holding stock in
nominee or street name through various brokerage firms) and
9,019,911 outstanding shares of common stock (excluding treasury
shares). The common stock traded in a high and low range of
$18.813 and $11.125 during the year ended December 31, 1999.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, December 31,
(Dollars in thousands,
except for share data) 1999 1998
ASSETS
Cash and due from banks $ 41,479 43,088
Money market investments 1,238 1,720
Securities available for sale 937,299 889,251
Loans held for sale 82,709 54,188
Federal Home Loan Bank of NY Stock, at cost 27,865 21,990
Loans receivable:
First mortgage loans 1,777,208 1,271,784
Cooperative apartment loans 3,669 3,970
Other loans 25,948 34,926
Total loans receivable 1,806,825 1,310,680
Less allowance for loan losses (16,699) (13,978)
Loans receivable, net 1,790,126 1,296,702
Premises and equipment, net 35,928 39,209
Accrued interest receivable 15,825 12,108
Other assets 33,381 37,267
Total assets $2,965,850 2,395,523
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $2,080,613 1,722,710
Borrowed funds 749,232 440,346
Due to broker - 97,458
Other liabilities 30,422 15,142
Total liabilities 2,860,267 2,275,656
Commitments and contingencies (Notes 5 and 14)
Stockholders' Equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000
shares authorized, 9,918,750 issued;
9,000,237 and 8,859,692 shares out-
standing in 1999 and 1998, respectively 100 100
Additional paid-in capital 52,336 51,383
Retained earnings, substantially restricted 89,083 79,085
Accumulated other comprehensive (loss) income:
Unrealized (loss) gain on securities
available for sale, net of tax effect (25,465) 945
Treasury stock, at cost (918,513
and 1,059,058 shares in 1999
and 1998, respectively) (8,934) (9,800)
Unallocated common stock held by ESOP (934) (1,222)
Unearned common stock held by Bank's
Recognition Plans and Trusts (231) (263)
Unearned compensation (372) (361)
Total stockholders' equity 105,583 119,867
Total liabilities and stockholders'
Equity $2,965,850 2,395,523
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(Dollars in thousands,
except per share data) 1999 1998 1997
Interest income:
Mortgage loans $ 116,409 96,146 75,266
Other loans 3,004 3,303 3,220
Mortgage-backed securities 50,854 42,040 32,755
Money market investments 142 186 343
Debt and equity securities 13,454 10,010 14,722
Total interest income 183,863 151,685 126,306
Interest expense:
Deposits:
Savings accounts 19,665 12,415 9,338
NOW accounts 1,674 1,364 1,130
Money market accounts 1,833 2,041 1,823
Certificate accounts 52,269 49,965 39,309
Borrowed funds 37,465 27,991 22,800
Total interest expense 112,906 93,776 74,400
Net interest income before
provision for loan losses 70,957 57,909 51,906
Provision for loan losses 3,625 2,665 2,750
Net interest income after
provision for loan losses 67,332 55,244 49,156
Non-interest income:
Loan fees and servicing income 2,740 1,627 3,110
Mortgage banking income 3,734 3,000 -
Savings/checking fees 15,747 9,822 5,478
Net gain (loss) on sales of
interest-earning assets 750 2,926 (5)
Insurance, annuity and mutual
funds fees 8,259 5,874 3,758
Other 3,138 2,596 1,571
Total non-interest income 34,368 25,845 13,912
Non-interest expense:
Compensation and benefits 44,687 36,935 24,251
Occupancy and equipment 12,988 11,005 6,334
Real estate owned operations, net (220) 8 352
Federal deposit insurance
Premiums 1,065 870 736
Other 23,710 21,195 14,174
Total non-interest expense 82,230 70,013 45,847
Income before income tax expense 19,470 11,076 17,221
Income tax expense 6,863 2,926 6,138
Net income $12,607 8,150 11,083
Net income per common share:
Basic $ 1.44 0.95 1.32
Diluted $ 1.38 0.89 1.24
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
The three years ended December 31, 1999
<TABLE>
<CAPTION>
Accumulated Unallocated Unearned
Additional Other Common Common
Common Paid-In Retained Comprehensive Treasury Stock Held Stock Held Unearned
Total Stock Capital Earnings Income Stock by ESOP by RRPs Compensation
(In thousands of dollars, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $99,384 100 48,794 65,092 (840) (11,049) (1,854) (267) (592)
Comprehensive income:
Net income 11,083 - - 11,083 - - - - -
Other comprehensive income,
net of tax
Net unrealized appreciation on
securities available for
sale, net of reclassification
adjustment (1) 2,511 - - - 2,511 - - - -
------
Comprehensive income 13,594
Dividends declared (2,608) - - (2,608) - - - - -
Treasury stock issued for RRP and
deferred compensation plan
(18,904 shares) - - 236 - - 113 - (206) (143)
Stock options exercised and related
tax effect (114,982 shares) 806 - 116 - - 690 - - -
Allocation of ESOP stock and
amortization of award of RRP
stock and related tax benefits 1,353 - 919 - - - 325 109 -
Amortization of deferred
compensation plan 336 - - - - - - - 336
------- ---- ------ ------- ------ ------- ------ -----
Balance at December 31, 1997 112,865 100 50,065 73,567 1,671 (10,246) (1,529) (364) (399)
Comprehensive income:
Net income 8,150 - - 8,150 - - - - -
Other comprehensive income,
net of tax
Net unrealized depreciation on
securities available for
sale, net of reclassification
adjustment (1) (1,607) - - - (1,607) - - - -
Net unrealized appreciation on
securities transferred from
held to maturity to available
for sale (note 3) 881 - - - 881 - - - -
------
Comprehensive income 7,424
Dividends declared (2,632) - - (2,632) - - - - -
Treasury stock issued for deferred
compensation plan (14,384 shares) - - 280 - - 86 - - (366)
Stock options exercised and related
tax effect (60,608 shares) 516 - 156 - - 360 - - -
Allocation of ESOP stock and
amortization of award of RRP
stock and related tax benefits 1,290 - 882 - - - 307 101 -
Amortization of deferred compensation
plan 404 - - - - - - - 404
------- ---- ------ ------- ------ ------- ------ -----
Balance at December 31, 1998 $119,867 100 51,383 79,085 945 (9,800) (1,222) (263) (361)
Comprehensive loss:
Net income 12,607 - - 12,607 - - - - -
Other comprehensive income,
net of tax
Net unrealized depreciation on
securities available for
sale, net of reclassification
adjustment (1) (26,410) - - - (26,410) - - - -
------
Comprehensive loss (13,803)
Dividends declared (2,609) - - (2,609) - - - - -
Treasury stock issued for deferred
compensation plan (34,357 shares) - - 338 - - 272 - (20) (590)
Stock options exercised and related
tax effect (106,188 shares) 568 - (26) - - 594 - - -
Allocation of ESOP stock and
amortization of award of RRP
stock and related tax benefits 981 - 641 - - - 288 52 -
Amortization of deferred compensation
plan 579 - - - - - - - 579
------- ---- ------ ------- ------ ------- ------ ----
Balance at December 31, 1999 $105,583 100 52,336 89,083 (25,465) (8,934) (934) (231) (372)
======= ==== ====== ======= ====== ======= ====== ====
</TABLE>
(1) Disclosure of reclassification adjustment:
For the years ended
(In thousands) 1999 1998 1997
Net unrealized holding
(losses) gains arising during the year $(26,392) (10) 2,499
Reclassificaton adjustment for net gains
(losses) included in net income 18 716 (12)
------ ---- -----
Net unrealized (losses) gains on securities
available for sale (26,410) (726) 2,511
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands) 1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $12,607 8,150 11,083
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of cost of stock benefit plans 1,382 1,526 1,689
Amortization of net deferred loan origination fees (667) (1,546) (231)
Premiums and discounts on loans, mortgage-backed and
debt securities (237) (1,503) 210
Provision for loan losses 3,625 2,665 2,750
Provision for losses on real estate owned 51 35 251
Deferred income taxes 1,214 1,139 (1,540)
Net increase in loans held for sale (28,521) (54,188) -
Net (gain) loss on sales of interest-earning assets (750) (2,926) 5
Depreciation and amortization 4,802 3,087 1,592
(Increase) decrease in accrued interest receivable (3,717) 321 (257)
Decrease (increase) in other assets 17,560 (22,930) (1,265)
(Decrease) increase in due to broker (97,458) 87,458 9,000
Increase (decrease)in other liabilities 15,270 (5,077) 1,315
Net cash (used in) provided by operating activities (74,839) 16,211 24,602
Cash flows from investing activities:
Net increase in loans receivable (496,638) (264,136) (306,328)
Proceeds from disposition of assets (including REO) 330 721 2,785
Purchases of securities available for sale (452,104) (749,013) (511,075)
Principal repayments on securities available for sale 169,566 195,118 48,377
Proceeds from sales of securities available for sale 194,053 454,971 337,696
Principal repayments, maturities and calls on debt
securities held to maturity - 21,020 30,954
Principal repayment on mortgage-backed securities
held to maturity - 24,834 34,660
Purchases of Federal Home Loan Bank Stock, net (5,875) (9,105) (2,995)
Net increase in premises and equipment (1,521) (15,102) (19,834)
Net cash used in investing activities (592,189) (340,692) (385,760)
Cash flows from financing activities:
Net increase in deposits 357,903 357,698 227,224
Net increase (decrease) in short term borrowed funds 161,896 (227,138) 157,072
Issuance of capital securities 25,300 - 24,984
Increase in long term borrowed funds 121,690 200,690 (41,695)
Payment of common stock dividends (2,599) (2,627) (2,598)
Stock options exercised 747 360 760
Net cash provided by financing activities 664,937 328,983 365,747
Net (decrease) increase in cash and cash equivalents (2,091) 4,502 4,589
Cash and cash equivalents at beginning of year 44,808 40,306 35,717
Cash and cash equivalents at end of year $ 42,717 44,808 40,306
Supplemental information:
Cash paid during the year for:
Interest $ 111,803 93,751 73,757
Income taxes 5,203 1,699 5,893
Additions to real estate owned 622 623 1,695
Securities purchased not yet received, net - 97,458 10,000
Loans transferred from loans held for sale 44,569 - -
Loans securitized - 105,691 -
Mortgage-backed securities and debt securities
held to maturity transferred to securities
available for sale - 183,639 -
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Haven Bancorp, Inc.
("the Holding Company") and CFS Bank ("the Bank") and its
subsidiaries (collectively referred to herein as the "Company")
conform to generally accepted accounting principles and to
general practices within the banking industry. The following
summarizes the significant policies and practices:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Holding Company and its subsidiary, the Bank, and
its wholly owned subsidiaries. All significant intercompany
transactions and balances are eliminated in consolidation. In
preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of each
consolidated statement of financial condition and revenues and
expenses for the year then ended. Actual results could differ
from those estimates. Certain reclassification adjustments have
been made to prior year amounts to conform to the current year
presentation.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks and money market investments.
Money market investments represent instruments with maturities of
ninety days or less. These investments are carried at cost,
adjusted for premiums and discounts which are recognized in
interest income over the period to maturity.
DEBT, EQUITY AND MORTGAGE-BACKED SECURITIES
Debt and mortgage-backed securities ("MBSs") which the Company
has the positive intent and ability to hold until maturity are
carried at cost, adjusted for amortization of premiums and
accretion of discounts on a level yield method over the remaining
period to contractual maturity, adjusted, in the case of MBSs,
for actual prepayments. At December 31, 1999 and 1998, the
Company did not have any securities classified as held to
maturity. Debt and equity securities and MBSs to be held for
indefinite periods of time and not intended to be held to
maturity are classified as available for sale ("AFS") securities
and are recorded at fair value, with unrealized gains (losses),
net of tax, reported as accumulated other comprehensive income, a
separate component of stockholders' equity. Gains and losses on
the sale of securities are determined using the specific
identification method and are included in non-interest income.
LOANS RECEIVABLE AND LOANS HELD FOR SALE
Loans receivable are carried at their unpaid principal balances,
less unearned discounts and net deferred loan origination fees.
Loans held for sale are carried at the aggregate lower of cost or
market value. Loan origination fees, less certain direct loan
origination costs, are deferred and amortized as an adjustment of
the loan's yield over the life of the loan by the interest
method. When loans are sold, any remaining unaccreted net
deferred fees (costs) are recognized as income at the time of
sale. Purchased loans are recorded at cost. Related premiums or
discounts are amortized (accreted) to interest income using the
level-yield method over the estimated life of the loans.
The Company recognizes servicing assets on loans that have been
originated or purchased, and where the loans are subsequently
sold or securitized with the servicing rights retained. The total
cost of the mortgage loans is allocated between the loans and
the servicing assets based on their relative fair values. The
Company assesses servicing assets for impairment based on the
current fair values of those assets with any impairment
recognized through a valuation allowance.
Fees earned for servicing loans for others are reported as income
when the related mortgage loan payments are collected. Servicing
assets are amortized as a reduction to loan servicing fee income
using the interest method over the estimated remaining life of
the underlying mortgage loans.
MORTGAGE BANKING INCOME
The company sells loans on a servicing released basis to
investors in the secondary market. Generally, the sales of such
loans are arranged at the time of application through assignments
of trade or best effort commitments. Mortgage banking income
represents fee income, including servicing released premiums,
recognized on loans sold to investors, less the direct costs
associated with the acquisition and sale of those loans.
Mortgage banking income is recognized at the settlement date when
cash is received from the investor.
NON-ACCRUAL AND RESTRUCTURED LOANS
Loans are placed on non-accrual status when, in the opinion of
management, there is doubt as to the collectibility of interest
or principal, or when principal and interest are past due 90 days
or more, the loan is not well secured and in the process of
collection. Interest and fees previously accrued, but not
collected, are reversed and charged against interest income at
the time a loan is placed on non-accrual status. Interest
payments received on non-accrual loans are recorded as reductions
of principal if, in management's judgement, principal repayment
is doubtful. Loans may be reinstated to an accrual or performing
status if future payments of principal and interest are
reasonably assured and the loan has a demonstrated period of
performance.
Loans are classified as restructured loans when the Company has
granted, for economic or legal reasons related to the borrower's
financial condition, concessions to the borrower that it would
not otherwise consider. Generally, this occurs when the cash
flows of the borrower are insufficient to service the loan under
its original terms. Restructured loans are reported as such in
the year of restructuring. In subsequent reporting periods, if
the loan yields a market rate of interest, is performing in
accordance with the restructure terms, and management expects
such performance to continue, the loan is then removed from
restructured status.
The Company reviews commercial and multi-family mortgage loans,
and loans modified in a troubled-debt restructuring for
impairment. Specific factors utilized in the impaired loan
identification process include, but are not limited to,
delinquency status, loan-to-value ratio, the condition of the
underlying collateral, credit history, and debt coverage. At a
minimum, such loans are classified as impaired when they become
90 days past due. The Company generally measures impaired loans
based on the fair value of the underlying collateral. The amount
by which the recorded investment of an impaired loan exceeds the
measurement value is recognized by creating a valuation allowance
through a charge to the provision for loan losses. The Company's
impaired loan identification and measurement process is conducted
in conjunction with the Company's review of the adequacy of its
allowance for loan losses.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on a periodic analysis of
the loan portfolio and reflects an amount which, in management's
judgement, is adequate to provide for losses inherent to the loan
portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, such as present and potential
risks inherent in the loan portfolio, loan growth, prior loss
experience, current economic conditions and periodic examinations
conducted by regulatory agencies. While management uses available
information to estimate possible loan losses, future additions to
the allowance may be necessary based on adverse changes in
economic conditions.
PREMISES AND EQUIPMENT
Land is carried at cost. Buildings, leasehold improvements,
furniture, fixtures and equipment are carried at cost, less
accumulated depreciation and amortization. Premises and equipment
are depreciated using the straight-line method over the estimated
useful lives of the respective assets except for leasehold
improvements which are amortized over the related lease term or
estimated useful life.
REAL ESTATE OWNED
Real estate properties acquired through loan foreclosure are
recorded at the lower of cost or estimated fair value less
estimated selling costs at the time of foreclosure. Subsequent
valuations are periodically performed by management and the
carrying value may be adjusted by a valuation allowance,
established through charges to income and included in real estate
operations, net to reflect subsequent declines in the estimated
fair value of the real estate. Real estate owned ("REO") is shown
net of the allowance. Operating results of REO, including rental
income, operating expenses, and gains and losses realized from
the sales of properties owned, are also recorded in real estate
operations, net, as a separate component of non-interest expense.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are accounted for as financing
transactions. Accordingly, the collateral securities continue to
be carried as assets and a borrowing liability is established for
the transaction proceeds.
INCOME TAXES
The Company utilizes the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities. The effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the
enactment date. Additionally, the recognition of net deferred tax
assets is based upon the likelihood of realization of tax
benefits in the future. A valuation allowance would be provided
for deferred tax assets which are determined more than likely not
to be realized.
The Company and certain of its subsidiaries file consolidated tax
returns with the Federal, state and local authorities. Other
subsidiaries file separate domestic tax returns as required.
BENEFIT PLANS
The Company maintains various pension, savings, employee stock
ownership and other benefit plans and programs for its employees,
including the Bank's Retirement Income Plan (the "Retirement
Plan") covering substantially all employees who have attained
minimum service requirements. The Bank's funding policy is to
make contributions to the plan at least equal to the amounts
required by applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the
Internal Revenue Code of 1986, as amended (the "Code"). The Bank
periodically evaluates the overall effectiveness and economic
value of such programs, in the interest of maintaining a
comprehensive benefit package for employees. Based on an
evaluation of the Retirement Plan in 1996, the Bank concluded
that future benefit accruals under the Retirement Plan would
cease, or "freeze" on June 30, 1996. Although the benefit
accruals are frozen, the Bank will continue to maintain and
provide benefits under its Employee Stock Ownership Plan ("ESOP")
and Employee 401(k) Thrift Incentive Savings Plan ("401(k)
Plan"). In connection with the Retirement Plan "freeze," the Bank
resumed its matching of contributions to the 401(k) Plan on July
1, 1996.
Post-retirement and post-employment benefits are recorded on an
accrual basis with an annual provision that recognizes the
expense over the service life of the employee, determined on an
actuarial basis.
STOCK COMPENSATION PLANS
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," permits either the
recognition of compensation cost for the estimated fair value of
employee stock-based compensation arrangements on the date of
grant, or the continued application of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for its
plans with disclosure in the notes to the financial statements of
the pro forma effects on net income and earnings per share,
determined as if the fair value-based method had been applied in
measuring compensation cost. The Company has adopted the
disclosure option. Accordingly, no compensation cost has been
recognized for the Company's stock option plans.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company has utilized interest rate caps to manage its
interest rate risk. Generally, the net settlements on such
transactions used as hedges of non-trading liabilities are
accrued as an adjustment to interest expense over the life of the
agreements.
EARNINGS PER COMMON SHARE
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number
of common shares outstanding for the relevant period. The
weighted average number of shares outstanding does not include
the weighted-average number of unallocated shares by the ESOP.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised or converted into common stock that then shares in the
earnings of the entity.
COMPREHENSIVE INCOME
The Company's comprehensive income (or loss) for each period
represents net income plus the net change in unrealized gains or
losses on securities AFS, and is reported in the consolidated
statements of changes in stockholders' equity.
SEGMENT REPORTING
Operating segments are components of an enterprise that engage in
business activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the
enterprise's chief operating decision maker in deciding how to
allocate resources and in assessing performance, and for which
discrete financial information is available. The Company
currently does not manage its various business activities as
separate operating segments and does not readily produce
meaningful discrete financial information for any such business
activity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes 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
condition and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the
derivative and the resulting designation. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999 and does
not require restatement of prior periods. The implementation of
SFAS No. 133 has not had a material impact on the Company's
financial condition or results of operations.
In July 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133." SFAS No. 137 delays
the effective date of SFAS No. 133 for one year, to all fiscal
quarters of all fiscal years beginning after June 15, 2000.
Management of the Company currently believes the implementation
of SFAS No. 133 will not have a material impact on the Company's
financial condition or results of operations.
2. BUSINESS COMBINATIONS
ACQUISITION OF INTERCOUNTY MORTGAGE, INC.
On May 1, 1998, the Bank completed the purchase of the production
franchise of Intercounty Mortgage, Inc. ("IMI") from Resource
Bancshares Mortgage Group, Inc. The Bank paid approximately $5.6
million for IMI's production franchise and fixed assets. The
business operates as a division of the Bank under the name CFS
Mortgage originating and purchasing residential loans for the
Bank's portfolio and for sale in the secondary market, primarily
through six loan origination offices located in New York, New
Jersey, and Pennsylvania. Loan sales in the secondary market are
primarily on a servicing-released basis, for which the Company
earns servicing released premiums.
The transaction was accounted for under the purchase method. The
excess of cost over the fair value of net assets acquired
(goodwill) of approximately $5.1 million is being amortized over
5 years. The Company assesses the recoverability of goodwill by
determining whether the amortization of the goodwill over its
remaining life can be recovered through future operating cash
flow of the production franchise. The unamortized balance of
goodwill relating to the acquisition of IMI was approximately
$3.4 million and $4.4 million at December 31, 1999 and 1998,
respectively.
ACQUISITION OF CENTURY INSURANCE AGENCY
On November 2, 1998, the Company completed the purchase of 100%
of the outstanding common stock of Century Insurance Agency, Inc.
("CIA" or "CFS Insurance Agency") for approximately $1.2 million.
CIA, which is headquartered in Centereach, New York, provides
automobile, homeowners and casualty insurance to individuals and
various lines of commercial insurance to businesses. CIA operates
as a wholly owned subsidiary of the Company. The transaction was
accounted for under the purchase method. Goodwill of
approximately $1.6 million is being amortized over 10 years. The
Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill over its remaining life
can be recovered through future operating cash flow of CIA. The
unamortized balance of goodwill relating to the acquisition of
CIA was approximately $1.3 million and $1.6 million at December
31, 1999 and 1998, respectively.
3. SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities
available for sale at December 31, are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
(In thousands) Cost gains losses value
<S> <C> <C> <C> <C>
1999
Debt and equity securities available for sale:
U.S. Government and agency obligations $ 96,189 - (4,047) 92,142
Preferred stock 10,650 - (1,197) 9,453
Corporate debt securities 94,287 10 (499) 93,798
201,126 10 (5,743) 195,393
MBSs available for sale:
GNMA Certificates 236 2 - 238
FNMA Certificates 124,507 250 (4,579) 120,178
FHLMC Certificates 32,430 291 (212) 32,509
CMOs and REMICs 618,177 959 (30,155) 588,981
775,350 1,502 (34,946) 741,906
Total $ 976,476 1,512 (40,689) 937,299
1998
Debt and equity securities available for sale:
U.S. Government and agency obligations $ 78,017 141 (453) 77,705
Preferred stock 11,700 30 (140) 11,590
Corporate debt securities 19,850 - (166) 19,684
------- ----- ----- -------
109,567 171 (759) 108,979
------- ----- ----- -------
MBSs available for sale:
GNMA Certificates 430 4 - 434
FNMA Certificates 177,495 1,530 (258) 178,767
FHLMC Certificates 51,590 689 (112) 52,167
CMOs and REMICs 548,644 2,218 (1,958) 548,904
------- ----- ----- -------
778,159 4,441 (2,328) 780,272
------- ----- ----- -------
Total $ 887,726 4,612 (3,087) 889,251
======= ===== ====== =======
</TABLE>
Gross gains of approximately $1.0 million, $1.7 million and $1.0
million for the years ended December 31, 1999, 1998 and 1997,
respectively, were realized on sales of securities available for
sale. Gross losses amounted to approximately $1.0 million, $0.5
million and $1.1 million for the years ended December 31, 1999,
1998, and 1997 respectively.
The Company's portfolio of MBSs available for sale has an
estimated weighted average expected life of approximately 7.1
years at December 31, 1999. At December 31, 1999, $184.5 million
of MBSs available for sale were adjustable-rate securities.
The Company's privately-issued CMOs and REMICs have generally
been underwritten by large investment banking firms with the
timely payment of principal and interest on these securities
supported (credit enhanced) in varying degrees by either
insurance issued by a financial guarantee insurer, letters of
credit or subordination techniques. Substantially all such
securities are rated AAA by one or more of the nationally
recognized securities rating agencies. These securities are
subject to certain credit-related risks normally not associated
with U.S. Government and agency MBSs. Among such risks is the
limited loss protection generally provided by the various forms
of credit enhancements as losses in excess of certain levels are
not protected. Furthermore, the credit enhancement itself is
subject to the credit worthiness of the enhancer. Thus, in the
event a credit enhancer does not fulfill its obligations, the MBS
holder could be subject to risk of loss similar to the purchaser
of a whole loan pool. Management believes that the credit
enhancements are adequate to protect the Company from losses, and
therefore the Company has not provided an allowance for losses on
its privately issued MBSs.
U.S. Government and agency obligations at December 31, 1999, had
contractual maturities between March 14, 2000 and June 25, 2024.
Accrued interest receivable on securities available for sale
amounted to approximately $6.9 million and $4.9 million at
December 31, 1999 and 1998, respectively.
Corporate debt securities at December 31, 1999, had contractual
maturities between February 18, 2004 and May 27, 2029.
On June 30, 1998, the Company transferred the then remaining
$138.2 million of MBSs and $45.4 million of debt securities held
to maturity to securities available for sale.
In August 1998, the Company securitized $105.7 million of
residential mortgage loans with Fannie Mae. The resulting MBSs
were retained and are included in securities available for sale
as of December 31, 1999.
4. LOANS receivable and loans held for sale
Loans receivable, net at December 31, are summarized as follows:
(In thousands) 1999 1998
First mortgage loans:
Principal balances:
One- to four-family $1,330,565 886,405
Multi-family 268,358 215,542
Commercial 167,518 163,935
Construction 3,168 2,731
Partially guaranteed by VA or
insured by FHA 1,604 2,205
1,771,213 1,270,818
Less net deferred loan origination
fees, unearned discounts and
unamortized premiums 5,995 966
Total first mortgage loans 1,777,208 1,271,784
Cooperative apartment loans, net 3,669 3,970
Other loans:
Consumer loans 12,721 17,473
Home equity loans 11,328 15,173
Other 1,899 2,280
Total other loans 25,948 34,926
1,806,825 1,310,680
Less allowance for loan losses (16,699) (13,978)
Total $1,790,126 1,296,702
Included in total loans are loans on which interest is not being
accrued and loans which have been restructured and for which
interest has been reduced or foregone. The principal balances of
these loans at December 31 are summarized as follows:
(In thousands) 1999 1998
Non-accrual loans $ 6,994 6,528
Restructured loans 717 1,857
Total $ 7,711 8,385
If interest income on non-accrual loans had been current in
accordance with the original terms, approximately $468,000,
$425,000 and $736,000 of interest income would have been recorded
for the years ended December 31, 1999, 1998 and 1997,
respectively. Approximately $144,000, $117,000 and $146,000 of
interest income was recognized on non-accrual loans for the years
ended December 31, 1999, 1998 and 1997, respectively. The Bank
has no obligation to fund any additional monies on these loans.
The amount of interest income that would have been recorded if
restructured loans had been performing in accordance with their
original terms (prior to being restructured) was approximately
$180,000, $396,000 and $197,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
On June 30, 1999, the Company sold $20.5 million of adjustable-
rate mortgage ("ARM") loans previously held in portfolio in a
bulk sale transaction and recognized a gain of $261,000. The
Company retained the right to service the related loans and
accordingly recognized a servicing asset of $231,000.
In 1998, the Company sold $83.3 million of ARM loans previously
held in portfolio in two separate bulk sale transactions, which
settled on December 30, 1998. The Company recognized a net gain
of $670,000 as a result of these transactions. The Company sold
$68.6 million of the ARM loans servicing released, while $14.7
million of the ARM loans were sold servicing retained. In
connection with the latter transaction, the Company recognized a
servicing asset of $168,000.
In 1998, the Company securitized $105.7 million of residential
mortgage loans with Fannie Mae. The Company retained all of the
securities in its AFS portfolio, and is servicing the underlying
loans for Fannie Mae. During 1999, the Company sold a portion of
these securities and recognized a servicing asset of $242,000. In
1998, the Company also sold $14.0 million of cooperative
apartment loans as part of its ongoing efforts to dispose of this
portion of its portfolio. The Company recognized a $968,000 gain
as a result of this transaction.
At December 31, 1999 and 1998, the aggregate unamortized balance
of the Company's servicing assets was $517,000 and $168,000,
respectively. The amounts are included in other assets in the
Company's consolidated statements of financial condition. The
Company amortizes its servicing assets against service fee income
in proportion to and over the period of estimated net servicing
income. Servicing assets are periodically assessed for
impairment based on their fair value.
Loans held for sale, which consisted of, primarily fixed-rate,
one- to four-family loans, were $82.7 million and $54.2 million
at December 31, 1999 and 1998, respectively. The Bank originates
most fixed-rate loans for immediate sale, primarily to private
investors on a servicing released basis. During 1999 and 1998,
the Company sold $561.7 million and $515.8 million, respectively,
in residential mortgage loans to third party investors on a
servicing-released basis. During 1999 and 1998, the Company
recognized mortgage banking income of $3.7 million and $3.0
million, respectively. Mortgage banking income represents fee
income recognized on loans sold in the secondary market,
including servicing-released premiums, less the direct costs
associated with the acquisition and sale of these loans.
The Bank services for investors first mortgage loans which are
not included in the accompanying consolidated statements of
financial condition. The unpaid principal balances of such loans
were approximately $271.7 million and $269.1 million at December
31, 1999 and 1998, respectively.
The geographical location of the Bank's loan portfolio is
primarily within the New York City metropolitan area.
Accrued interest receivable on loans amounted to approximately
$8.9 million and $7.2 million at December 31, 1999 and 1998,
respectively.
5. ALLOWANCE FOR LOAN LOSSES
Impaired loans and related reserves have been identified and
calculated in accordance with the provisions of SFAS No. 114. The
total allowance for loan losses has been determined in accordance
with the provisions of SFAS No. 5, "Accounting for
Contingencies." As such, the Company has provided amounts for
anticipated losses that exceed the immediately identified losses
associated with loans that have been deemed impaired. Provisions
have been made and reserves established accordingly, based upon
experience and expectations, for losses associated with the
general population of loans, specific industry and loan types,
including residential and consumer loans which are not subject to
the provisions of SFAS No. 114.
The following table summarizes information regarding the
Company's impaired loans at December 31:
<TABLE>
<CAPTION>
1999 1998
Related Related
Allowance Allowance
Recorded for Loan Net Recorded for Loan Net
(In thousands) Investment Losses Investment Investment Losses Investment
<S> <C> <C> <C> <C> <C> <C>
Residential loans:
With a related allowance $ - - - 982 51 931
Without a related allowance 3,761 - 3,761 3,164 - 3,164
----- --- ----- ----- --- -----
Total residential loans 3,761 - 3,761 4,146 51 4,095
----- --- ----- ----- --- -----
Multi-family and non-residential loans:
With a related allowance 825 78 747 1,128 247 881
Without a related allowance 1,639 - 1,639 1,254 - 1,254
----- --- ----- ----- --- -----
Total multi-family and non-residential
loans 2,464 78 2,386 2,382 247 2,135
----- --- ----- ----- --- -----
Total impaired loans $ 6,225 78 6,147 6,528 298 6,230
===== === ===== ===== === =====
</TABLE>
The Company's average recorded investment in impaired loans for
the years ended December 31, 1999 and 1998 was $8.5 million and
$7.9 million, respectively. Interest income recognized on
impaired loans, which was not materially different from cash-
basis interest income, amounted to approximately $144,000,
$117,000 and $146,000 for the years ended December 31, 1999, 1998
and 1997, respectively.
Activity in the allowance for loan losses for the years ended
December 31, is as follows:
(In thousands) 1999 1998 1997
Balance at beginning of year $ 13,978 12,528 10,704
Charge-offs:
One- to four-family (314) (435) (964)
Cooperative (34) (256) (370)
Multi-family - (708) -
Non-residential and other (1,002) (935) (352)
Total charge-offs (1,350) (2,334) (1,686)
Recoveries 446 1,119 760
Net charge-offs (904) (1,215) (926)
Provision for loan losses 3,625 2,665 2,750
Balance at end of year $16,699 13,978 12,528
6. PREMISES AND EQUIPMENT
Premises and equipment at December 31, are summarized as follows:
(In thousands) 1999 1998
Land $ 1,475 1,720
Buildings and improvements 14,006 18,679
Leasehold improvements 19,110 17,136
Furniture, fixtures and equipment 14,624 13,128
Accumulated depreciation and amortization (13,287) (11,454)
Total $ 35,928 39,209
In December 1997, the Company purchased an office building and
land in Westbury, New York for its new administrative
headquarters. The purchase was consummated under the terms of a
lease agreement and Payment-in-lieu-of-Tax ("PILOT") agreement
with the Town of Hempstead Industrial Development Agency ("IDA")
(see note 14). The Company completed improvements to the building
and began using the building as its corporate headquarters in
July 1998. The cost of the land and building, including
improvements was $12.8 million. The building and improvements
are being depreciated on a straight-line basis over thirty-nine
years.
During the first quarter of 1999, the Bank sold two
administrative offices, located in Woodhaven, New York, in two
separate transactions. These properties, which consist of land,
buildings and building improvements, had an aggregate net
carrying value of approximately $2.4 million at the time of sale.
The Bank leased back a portion of one of these buildings to
continue its current use as a traditional retail banking branch
office and for certain administrative functions. This transaction
was accounted for as a sale-leaseback, and the lease is being
accounted for as an operating lease. The gain resulting from the
sale-leaseback transaction was deferred and is being accreted
over the term of the lease as a reduction to the related
operating lease expense.
Depreciation and amortization of premises and equipment, included
in occupancy and equipment expense, was approximately $4.8
million, $3.1 million and $1.6 million for the years ended
December 31, 1999, 1998 and 1997, respectively.
7. OTHER ASSETS
Other assets at December 31, are summarized as follows:
(In thousands) 1999 1998
Remittances due from custodians $ 1,278 10,037
Net deferred tax asset 18,502 5,424
Excess of cost over the fair value
of net assets acquired 4,836 6,193
Other 8,765 15,613
Total $33,381 37,267
8. DEPOSITS
Deposits at December 31, are summarized as follows:
Weighted
average
(Dollars in thousands) Amount Percent rates
1999
Savings accounts $ 624,967 30.0% 3.07%
Money market 64,994 3.1 3.58
NOW 143,481 6.9 1.27
Demand 111,738 5.4 -
945,180 45.4 2.47
Certificates of deposit 1,135,433 54.6 5.58
Total $2,080,613 100.0% 4.17%
1998
Savings accounts $ 547,264 31.8% 3.30%
Money market 58,984 3.4 3.21
NOW 130,288 7.6 1.28
Demand 84,425 4.9 -
820,961 47.7 2.63
Certificates of deposit 901,749 52.3 5.60
Total $1,722,710 100.0% 4.18%
The aggregate amount of certificates of deposit in denominations
of $100,000 or more amounted to approximately $113.8 million and
$84.5 million at December 31, 1999 and 1998, respectively.
Scheduled maturities of certificates of deposit at December 31,
are summarized as follows:
1999 1998
(Dollars in thousands) Amount Percent Amount Percent
Within six months $ 661,719 58.3% 553,835 61.4%
Six months to one year 314,376 27.7 214,041 23.7
One to two years 93,497 8.2 62,756 7.0
Over two years 65,841 5.8 71,117 7.9
Total $1,135,433 100.0% $901,749 100.0%
9. BORROWED FUNDS
Borrowed funds at December 31, are summarized as follows:
(Dollars in thousands) 1999 1998
Fixed-rate advances from the FHLB of New York:
4.25% to 5.36% due in 1999 $ - 104,200
3.60% to 5.74% due in 2000 144,000 62,000
5.29% due in 2001 20,000 20,000
5.66% due in 2002 40,000 20,000
5.62% due in 2003 20,000 20,000
5.00% to 5.38% due in 2008 49,000 99,000
5.27% to 6.43% due in 2009 189,000 -
Adjustable-rate advances - FHLB of New York
5.37% due in 2000 75,000 -
537,000 325,200
Securities sold under agreements to repurchase:
Fixed rate agreements:
5.25% to 5.45% due in 1999 - 72,290
5.90% to 7.08% due in 2000 144,386 -
6.27% due in 2002 16,400 16,400
160,786 88,690
Holding Company Obligated Mandatorily
Redeemable Capital Securities of Haven
Capital Trust I at 10.46% due 02/01/27 24,984 24,984
Capital Trust II at 10.25% due 06/30/29 25,300 -
Debt of Employee Stock Ownership Plan
(note 12) 1,162 1,472
Total $ 749,232 440,346
At December 31, 1999 and 1998, pursuant to a physical pledge
collateral agreement, advances from the FHLB of New York were
collateralized by MBSs with an estimated fair value of
approximately $565.2 million and $467.6 million, respectively. At
December 31, 1999 and 1998, advances from the FHLB of New York
were also collateralized by U.S. Government and agency
obligations with an estimated fair value of approximately $61.5
million and $6.2 million, respectively. At December 31, 1999,
the Bank has unused lines of credit totalling $13.5 million with
the FHLB of New York.
At December 31, 1999, all securities sold under agreements to
repurchase were delivered to primary dealers who arranged the
transactions. The securities will remain registered in the name
of the Bank and will be returned at maturity. During the years
ended December 31, 1999 and 1998, securities sold under
agreements to repurchase averaged $180.3 million and $142.3
million, respectively. The maximum amounts outstanding at any
month-end were $242.4 million and $191.3 million, respectively.
The average interest rate paid during the years ended December
31, 1999 and 1998 were 5.39% and 5.71%, respectively. MBSs with
an estimated fair value of approximately $132.4 million and
$100.0 million were pledged as collateral at December 31, 1999
and 1998, respectively. In addition, corporate bonds with an
estimated fair value of approximately $44.8 million were pledged
as collateral at December 31, 1999.
On February 12, 1997, Haven Capital Trust I, a trust formed under
the laws of the State of Delaware ("Trust I"), issued $25 million
of 10.46% capital securities. The Holding Company is the owner
of all the beneficial interests represented by common securities
of Trust I. Trust I exists for the sole purpose of issuing Trust
I securities (comprised of the capital securities and the common
securities) and investing the proceeds thereof in the 10.46%
junior subordinated deferrable interest debentures issued by the
Holding Company on February 12, 1997, which are scheduled to
mature on February 1, 2027. Interest on the capital securities
is payable in semi-annual installments, commencing on August 2,
1997. Trust I securities are subject to mandatory redemption (i)
in whole, but not in part upon repayment in full, at the stated
maturity of the junior subordinated debentures at a redemption
price equal to the principal amount of, plus accrued interest on,
the junior subordinated debentures, (ii) in whole but not in
part, at any time prior to February 1, 2007, contemporaneously
with the occurrence and continuation of a special event, defined
as a tax event or regulatory capital event, at a special event
redemption price equal to the greater of 100% of the principal
amount of the junior subordinated debentures or the sum of the
present values of the principal amount and premium payable with
respect to an optional redemption of the junior subordinated
debentures on the initial optional repayment date to and
including the initial optional prepayment date, discounted to the
prepayment date plus accrued and unpaid interest thereon, and
(iii) in whole or in part, on or after February 1, 2007,
contemporaneously with the optional prepayment by the Holding
Company of the junior subordinated debentures at a redemption
price equal to the optional prepayment price. Subject to prior
regulatory approval, if required, the junior subordinated
debentures are redeemable during the 12-month periods beginning
on or after February 1, 2007, at 105.23% of the principal amounts
outstanding, declining ratably each year thereafter to 100%, plus
accrued and unpaid interest thereon to the date of redemption.
Deferred issuance costs are being amortized over ten years.
On May 26, 1999, Haven Capital Trust II, a Delaware business
trust ("Trust II"), completed the offering of $22.0 million of
10.25% capital securities. On June 18, 1999, an additional $3.3
million of capital securities were issued in connection with the
exercise of the over-allotment option by the underwriters. The
Holding Company is the owner of all of the beneficial interests
represented by the common securities of Trust II. Trust II
exists for the sole purpose of issuing the Trust II securities
(comprised of the capital securities and the common securities)
and investing the proceeds thereof in the 10.25% junior
subordinated deferrable interest debentures, issued by the
Holding Company pursuant to an indenture, which are scheduled to
mature on September 30, 2029. The capital securities have a
mandatory redemption provision which is triggered by optional
prepayment of the junior subordinated debentures. The Chase
Manhattan Bank is the Property Trustee of TrustII. During the
second quarter, $21.5 million of the proceeds from the sale of
capital securities was contributed to the Bank to support the
Bank's in-store banking expansion. The remainder of the proceeds
was used for general corporate purposes.
10. FEDERAL, STATE AND LOCAL TAXES
FEDERAL INCOME TAXES
The Company and its subsidiaries file a consolidated Federal
income tax return on a calendar-year basis. Prior to January 1,
1997 thrift institutions such as the Bank which met certain
definitional tests primarily relating to their assets and the
nature of their business, were permitted to establish a tax
reserve for bad debts. Such thrift institutions were also
permitted to make annual additions to the reserve, to be deducted
in arriving at their taxable income within specified limitations.
The Bank's deduction was computed using an amount based on the
Bank's actual loss experience ("experience method"), or a
percentage equal to 8% of the Bank's taxable income ("PTI
method"). Similar deductions for additions to the Bank's bad
debt reserve were also permitted under the New York State Bank
Franchise Tax and the New York City Banking Corporation Tax;
however, for purposes of these taxes, the effective allowable
percentage under the PTI method was 32% rather than 8%.
Under the Small Business Job Protection Act of 1996 ("1996 Act"),
signed into law in August 1996, Section 593 of the Internal
Revenue Code ("Code"), the Bank is unable to make additions to
the tax bad debt reserves but is permitted to deduct bad debts as
they occur. Additionally, the 1996 Act requires institutions to
recapture (that is, include in taxable income), over a six-year
period, the excess of the balance of its bad debt reserves as of
December 31, 1995 over the balance of such reserves as of
December 31, 1987 ("base year"). The Bank's federal tax bad debt
reserves at December 31, 1995 exceeded its base year reserves by
$2.7 million. This recapture was frozen for 1996 and 1997,
whereas, two-sixths of the excess reserves were recaptured into
taxable income during the two-year period ended December 31,
1999. The remaining balance at December 31, 1999, to be
recaptured into taxable income was $1.8 million. The base year
reserves will be subject to recapture, and the Bank could be
required to recognize a tax liability, if (i) the Bank fails to
qualify as a "bank" for Federal income tax purposes; (ii) certain
distributions are made with respect to the stock of the Bank;
(iii) the Bank uses the bad debt reserves for any purpose other
than to absorb bad debt losses; and (iv) there is a change in
Federal tax law. Management is not aware of the occurrence of
any such event.
In response to the Federal legislation, the New York State and
New York City tax law has been amended to prevent the recapture
of existing tax bad debt reserves and to allow for the continued
use of the PTI method to determine the bad debt deduction in
computing New York State and New York City tax liability.
The components of the net deferred tax assets at December 31, are
as follows:
(In thousands) 1999 1998
Deferred tax assets:
Difference between financial statement
credit loss provision and tax
bad-debt deduction $ 7,054 5,952
Non-accrual interest and non-performing
loan expense 891 762
Securities marked to market for
financial statement purposes 13,712 -
Other 3,022 2,128
Total deferred tax assets 24,679 8,842
Deferred tax liabilities:
Recapture of Tax Bad Debt Reserve (625) (781)
Securities marked to market for
financial statement purposes - (580)
Basis difference of fixed assets (60) (131)
Deferred loan origination costs (5,421) (1,854)
Other (71) (72)
Total deferred tax liabilities (6,177) (3,418)
Net deferred tax assets $ 18,502 5,424
Income tax expense for the years ended December 31, are
summarized as follows:
(In thousands) 1999 1998 1997
Current:
Federal $ 5,157 1,486 6,433
State and local 492 301 1,245
5,649 1,787 7,678
Deferred:
Federal 1,194 741 (760)
State and local 20 398 (780)
1,214 1,139 (1,540)
Total income tax expense $ 6,863 2,926 6,138
The following is a reconciliation of statutory Federal income tax
expense to the combined effective tax expense for the years ended
December 31:
(In thousands) 1999 1998 1997
Statutory Federal income tax expense $ 6,815 3,877 6,027
State and local income taxes, net of
Federal income tax benefit 333 455 301
Reversal of prior years taxes - (785) -
Other, net (285) (621) (190)
Total income tax expense $ 6,863 2,926 6,138
The Company did not have a valuation allowance for its deferred
tax asset as of December 31, 1999 and 1998. The Company will
continue to review the recognition criteria as set forth in SFAS
No. 109, "Accounting for Income Taxes," on a quarterly basis and
determine the need for a valuation allowance accordingly.
STATE AND LOCAL TAXES
The Company and subsidiaries file combined New York State
franchise tax and New York City financial corporation tax returns
on a calendar-year basis. The Company's annual tax liability for
each year is the greater of a tax on (i) allocated entire net
income; (ii) allocated alternative entire net income; (iii)
allocated assets to New York State and/or New York City; or (iv)
a minimum tax. Operating losses cannot be carried back or carried
forward for New York State or New York City tax purposes. The
Company has provided for its 1999 New York State and New York
City tax liability based on allocated assets to New York State
and/or New York City. The Company has provided for New York State
and New York City taxes based on entire net income for the years
ended December 31, 1998 and 1997. The Company will also file a
New Jersey, Pennsylvania and Connecticut tax return for 1999 due
to the operation of in-store branches in those states.
11. EMPLOYEE BENEFIT PLANS AND POST-RETIREMENT BENEFITS
RETIREMENT PLAN
The Company's Retirement Plan is a qualified, non-contributory
defined benefit pension plan covering substantially all of its
eligible employees. The Company's policy is to fund pension costs
in accordance with the minimum funding requirements of the ERISA,
and to provide the Retirement Plan with sufficient assets with
which to pay pension benefits to plan participants. Based on an
evaluation of the Retirement Plan in 1996, the Bank concluded
that future benefit accruals under the Retirement Plan would
cease or "freeze" effective June 30, 1996. The Bank recognized a
curtailment gain of approximately $266,000 as of June 30, 1996.
The Bank made a cash contribution of $352,000 to the Retirement
Plan in 1997. There were no contributions to the Retirement Plan
in 1998 or 1999.
The following are disclosures related to the Retirement Plan as
determined by the Retirement Plan's actuary in accordance with
SFAS No. 87 and SFAS No. 132.
The following is a reconciliation of the projected benefit
obligation for the years ended December 31, 1999 and 1998,
respectively:
(In thousands) 1999 1998
Projected benefit obligation,
beginning of year $8,758 8,519
Interest cost 596 569
Actuarial (gain) loss (695) 202
Benefits paid (523) (532)
Projected benefit obligation, end of year $8,136 8,758
The following is a reconciliation of the change in fair value of
Retirement Plan assets for the years ended December 31, 1999 and
1998, respectively:
(In thousands) 1999 1998
Fair value of plan assets,
beginning of year $9,515 8,819
Actual return on plan assets 1,315 1,228
Benefits paid (523) (532)
Fair value of plan assets, end of year $10,307 9,515
The following is a reconciliation of the funded status of the
Retirement Plan as of December 31, 1999 and 1998,
respectively:
(In thousands) 1999 1998
Pension benefit obligation
Accumulated benefit obligation $8,136 8,758
Additional benefits based on
estimated future salary levels - -
Projected benefit obligation 8,136 8,758
Fair value of plan assets 10,307 9,515
Funded status 2,171 757
Unrecognized net gain (1,439) (261)
Prepaid pension cost $732 496
The following is a reconciliation of net periodic pension benefit
for the years ended December 31, 1999, 1998 and 1997:
(In thousands) 1999 1998 1997
Interest cost $596 569 557
Expected return on plan assets (832) (768) (746)
Net periodic pension benefit $(236) (199) (189)
Actuarial assumptions used to account for the Retirement Plan
include the following:
1999 1998 1997
Discount rate 7.75% 6.75% 6.75%
Expected long-term rate of return 9.00% 9.00% 9.00%
Rate of increase in compensation levels NA NA NA
THRIFT INCENTIVE SAVINGS PLAN
The Bank's 401(k) Plan provides for employee contributions on a
pre-tax basis up to a maximum of 16% of total compensation, with
matching contributions to be made by the Bank, not to exceed
employee contributions greater than 6% of total compensation. The
Bank matched employee contributions which totaled $357,000,
$234,000 and $199,000 for the years ended December 31, 1999, 1998
and 1997.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS
In 1999, the Company entered into a Company Employment Agreement
setting forth the supplemental executive retirement benefits for
the Chairman and Chief Executive Officer. The Company Employment
Agreement restates, modifies and supersedes the Employment
Agreements, dated November 18, 1994 and September 21, 1995, the
Amendatory Agreement dated May 28, 1997 and the Bank Employment
Agreement, dated May 28, 1997. The Company Employment Agreement
entitles the Chairman and Chief Executive Officer, in addition to
the severance benefits contained within the agreement, to the
supplemental executive retirement benefits due to him under the
Retirement Plan, the 401(k) Plan, the ESOP and any other benefit
plan of which he is a participant, had the federal income tax law
limitations on the accrual of benefits under these plans not been
applicable. During 1999, 1998 and 1997, the Bank accrued
$190,000, $180,000 and $50,000, respectively, in supplemental
executive retirement benefits. On December 31, 1999 and 1998 the
accumulated supplemental executive retirement benefit obligation
was $56,000 and $58,000, respectively. On December 31, 1999 and
1998 the projected supplemental executive retirement benefit
obligation was $56,000 and $58,000, respectively. In 1999, the
Company decided not to reinstate future benefit accruals under
the Retirement Plan. As a result, the accumulated and projected
supplemental executive retirement benefit obligations as of
December 31, 1999, were substantially reduced. The accumulated
and projected supplemental executive retirement benefit
obligations as of December 31, 1998, were restated to conform
with the 1999 presentation.
The Bank also has a Supplemental Retirement Agreement for the
former Chairman of the Board. The Supplemental Retirement
Agreement is unfunded and provides for an annual retirement
benefit of $120,000 for 10 years after retirement which occurred
in 1995. The Supplemental Retirement Agreement also provides for
a lump sum benefit of $1.2 million payable to the estate of the
former Chairman of the Board in the event of his death prior to
retirement, or in the event of a hostile change in control after
retirement but prior to the payment of the entire benefit; any
unpaid benefit shall be paid in a lump sum. The Company had
accrued the entire $1.2 million liability under the unfunded plan
as of December 31, 1995.
POST-RETIREMENT LIFE INSURANCE BENEFITS
The Company provides life insurance coverage to retirees under an
unfunded plan ("Post-retirement Plan"). Life insurance coverage
in the first year of retirement is equal to three times annual
pay at retirement, reduced by 10% (the "reduction amount"). For
the next four consecutive years, life insurance coverage will be
reduced each year by the reduction amount. The maximum benefit
will be $50,000 on the earlier of: (a) the fifth anniversary of
retirement; or (b) attaining age 70.
The following are disclosures related to the Company's Post-
retirement Plan as provided by the Post-retirement Plan's actuary
in accordance with SFAS No.s 106 and 132.
The following is a reconciliation of the accumulated post-
retirement benefit obligation ("APBO") for the years ended
December 31, 1999 and 1998:
(In thousands) 1999 1998
APBO, beginning of year $ 1,445 1,268
Service cost 70 63
Interest cost 94 85
Actuarial (gain) loss (166) 38
Benefits paid (94) (9)
APBO, end of year $ 1,349 1,445
The following is a reconciliation of the funded status of the
Post-retirement Plan as of December 31, 1999 and 1998,
respectively:
(In thousands) 1999 1998
APBO - Retirees and dependents $ 540 632
APBO - Actives fully eligible to retire 382 278
APBO - Actives not yet fully eligible to retire 427 535
Projected benefit obligation 1,349 1,445
Fair value of plan assets - -
Funded status (1,349) (1,445)
Unrecognized transition liability 253 278
Unrecognized net loss 367 563
Unrecognized prior service cost (68) (78)
Accrued post-retirement benefit liability $(797) (682)
The following is a reconciliation of net periodic post-retirement
benefit cost for the years ended December 31, 1999, 1998 and
1997:
(In thousands) 1999 1998 1997
Service cost $ 70 63 55
Interest cost 94 85 77
Amortization of transition obligation 25 25 25
Amortization of unrecognized gain or loss 30 31 28
Amortization of unrecognized prior service
liability (10) (10) (4)
Net periodic post-retirement cost $ 209 194 181
Actuarial assumptions used to account for the plan include the
following:
1999 1998 1997
Discount rate 7.75% 6.50% 6.75%
Rate of increase in compensation levels 4.50% 4.50% 4.50%
12. STOCK PLANS
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Bank established for eligible employees an ESOP in connection
with the Conversion. The ESOP borrowed $3.5 million from an
unrelated third party lender and purchased 694,312 common shares
issued in the Conversion. The Bank is expected to make scheduled
cash contributions to the ESOP sufficient to service the amount
borrowed over a period not to exceed 10 years. The unpaid balance
of the ESOP loan is included in borrowed funds and the
unamortized balance of unearned compensation is shown as
unallocated common stock held by the ESOP reflected as a
reduction of stockholders' equity. As of December 31, 1999, total
contributions to the ESOP which were used to fund principal and
interest payments on the ESOP debt totaled approximately $3.4
million. On December 31, 1999, the loan had an outstanding
balance of $1.2 million and an interest rate of 7.81%. The loan,
as amended on December 29, 1995, is payable in thirty-two equal
quarterly installments beginning December 1995 and ending
September 2003. The loan bears interest at a floating rate based
on the federal funds rate plus 250 basis points. Dividends
declared on common stock held in a participant's ESOP account are
allocated to such participant's account. Dividends declared on
common stock held by the ESOP and not allocated to the account of
a participant are used to repay the ESOP loan. The Company
recorded $889,000, $922,000 and $1.2 million of ESOP expense,
based on the fair market value of the shares allocated, for the
years ended December 31, 1999, 1998 and 1997, respectively. On
December 31, 1999, there were 244,365 shares remaining for future
allocation, of which 57,604 shares will be allocated for the 1999
year in the first quarter of 2000.
RECOGNITION AND RETENTION PLANS
The Bank has established several Recognition and Retention Plans
("RRPs") which purchased in the aggregate 297,562 shares of
common stock in the Conversion. The Bank contributed $1.5 million
to fund the purchase of the RRP shares. In 1995, the RRP for
officers and other key employees was amended to increase the
number of shares of common stock which may be granted by 19,836
shares and such shares were contributed to the RRP from treasury
stock. During 1996, the remaining previously unallocated shares
totaling 17,202 were awarded to directors and officers. In 1998,
the RRP for directors was amended to increase the number of
shares of common stock which may be granted by 9,916 shares and
such shares were contributed to the RRP from treasury stock. The
fair market value of these shares at the dates of the awards will
be amortized as compensation expense as participants become
vested. Participants generally become vested over a three or
five year period beginning on the date of the award. The
unamortized cost, which is comparable to deferred compensation,
is reflected as a reduction of stockholders' equity. For the
years ended December 31, 1999, 1998 and 1997, respectively,
$92,000, $200,000 and $168,000 of expense has been recognized.
STOCK OPTION AND INCENTIVE PLANS
In 1993, the Holding Company adopted the Haven Bancorp, Inc. 1993
Stock Option Plan for Outside Directors (the "1993 Directors
Plan") and the Haven Bacorp, Inc. 1993 Incentive Stock Option
Plan (the "1993 Stock Plan") of the Bank. The number of shares of
common stock reserved for issuance under the stock option plans
was equal to 10% of the total number of shares of common stock
issued pursuant to the Bank's Conversion to the stock form of
ownership. In 1995, the 1993 Stock Plan was amended to increase
the number of shares for which stock options may be granted by
69,430 shares. All options awarded to employees vest over a three
year period beginning one year from the date of grant. The stock
options awarded to directors become excercisable one year from
the date of grant. The option exercise price cannot be less than
the fair market value of the underlying common stock as of the
date of the option grant, and the maximum option term cannot
exceed ten years from the date of grant. In 1998, the 1993
Directors Plan was amended to increase the number of shares for
which stock options may be granted by 29,754 shares. None of
these shares have been granted as of December 31, 1999.
In 1996, the Holding Company adopted the 1996 Stock Incentive
Plan which provided 420,000 shares for the grant of options and
restricted stock awards. In 1998, effective upon shareholder
approval, the 1996 Stock Incentive Plan was amended to increase
the number of shares for which options and restricted stock
awards may be granted by 41,998 shares. During 1998 and 1997,
respectively, an aggregate of 14,384 and 8,988 shares of
restricted stock were granted to directors, officers and
employees. No shares of restricted stock were granted in 1999.
Shares of restricted stock granted to directors vest six months
from the date of grant. Shares granted to officers and employees
vest over a three year period beginning one year from the date of
grant. All shares were recorded as unearned compensation at
their fair market value on the date of the award (which is
reflected as a reduction of stockholders' equity), to be
amortized to expense over the vesting period. During 1999, 1998
and 1997, an aggregate of 206,500, 134,200 and 34,100 options,
respectively, were granted to directors and officers under the
1996 Stock Incentive Plan, which vest over a three year period
beginning one year from the date of grant. During 1999, an
aggregate of 42,903 shares of restricted stock were granted to
directors, officers and employees.
The following table summarizes certain information regarding the
stock option plans:
<TABLE>
<CAPTION>
Number of shares of
Non- Non- Weighted
Incentive Statutory Qualified Average
Stock Stock Options to Exercise
Options Options Directors Price
<S> <C> <C> <C> <C>
Balance outstanding at December 31, 1996 427,764 487,232 409,562 7.54
Granted 14,100 - 20,000 17.09
Forfeited - - (12,000) 12.14
Exercised (16,594) - (98,388) 6.61
Balance outstanding at December 31, 1997 425,270 487,232 319,174 7.90
Granted 134,200 - - 22.91
Forfeited - - - -
Exercised (23,414) - (37,194) 8.01
Balance outstanding at December 31, 1998 536,056 487,232 281,980 9.44
Granted 156,500 - 50,000 13.80
Forfeited (18,000) - - 20.47
Exercised (14,994) - (91,194) 7.05
Balance outstanding at December 31, 1999 659,562 487,232 240,786 10.13
Shares exercisable at December 31, 1999 423,562 487,232 184,119 8.44
</TABLE>
The fair value of each share grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1999,
1998 and 1997, respectively: dividend yield of 2.14% in 1999 and
1998 and 1.45% in 1997; expected volatility rates of 42.17% to
43.51% in 1999, 28.05% to 39.24% in 1998, and 26.95% in 1997;
risk-free interest rates of 6.29% in 1999, 4.59% in 1998 and
5.68% to 5.81% in 1997; and expected lives of 3 years for the
1993 Stock Plan, 8 years for the 1993 Directors Plan, 3 years for
grants to officers and employees under the 1996 Stock Incentive
Plan and 8 years for grants to directors under that plan.
Had compensation cost for the Company's three stock-based
compensation plans been determined consistent with SFAS No. 123,
the Company's net income and net income per common share would
have been reduced to the pro forma amounts indicated below for
the years ended December 31:
(In thousands, except per share data) 1999 1998 1997
Net income: As reported $ 12,607 8,150 11,083
Pro forma 12,095 7,560 10,557
Net income per common share:
Basic As reported $ 1.44 0.95 1.32
Pro forma 1.38 0.88 1.25
Diluted As reported $ 1.38 0.89 1.24
Pro forma 1.32 0.83 1.18
13. EARNINGS PER SHARE
The computation of basic and diluted EPS for the years ended
December 31, is presented in the following table.
(In thousands, except share and
per share data) 1999 1998 1997
Numerator for basic and diluted
earnings per share-net income $ 12,607 8,150 11,083
Denominator for basic earnings per
share"weighted-average shares 8,749,336 8,596,884 8,420,321
Effect of dilutive options 416,526 561,919 493,437
Denominator for diluted earnings
per share"weighted-average number
of common shares and dilutive
potential common shares 9,165,862 9,158,803 8,913,758
Basic earnings per share $ 1.44 0.95 $1.32
Diluted earnings per share $ 1.38 0.89 $1.24
14. COMMITMENTS and CONTINGENCIES
LEASE COMMITMENTS
At December 31, 1999, the Company was obligated under several
noncancelable operating leases on property used for office space
and banking purposes. Several of the leases contain escalation
clauses which provide for increased rentals, primarily based upon
increases in real estate taxes. Rent expense under these leases
was approximately $5.2 million, $4.2 million and $1.7 million for
the years ended December 31, 1999, 1998 and 1997, respectively.
The projected minimum rental payments under the terms of the
noncancelable leases at December 31, 1999 are as follows:
Years ending December 31, (In thousands)
2000 $ 5,130
2001 4,704
2002 3,569
2003 2,092
2004 1,516
Thereafter 12,772
$ 29,783
Sixty-three in-store branches have opened through December 31,
1999, and the leases related thereto are reflected in the table
above.
Under the IDA and PILOT agreements discussed in note 6, the Bank
assigned the building and land at its Westbury headquarters to
the IDA, is subleasing it for $1 per year for a 10 year period
and will repurchase the building for $1 upon expiration of the
lease term in exchange for IDA financial assistance.
LOAN COMMITMENTS
The Company had outstanding commitments totaling $258.4 million
to originate loans at December 31, 1999, of which $112.0 million
were fixed-rate loans and $146.4 million were variable rate
loans. For fixed-rate loan commitments at December 31, 1999, the
interest rates on mortgage loans ranged from 4.00% to 12.75%. The
standard commitment term for these loans is 45 days. Loan
commitments are made at current rates and no material difference
exists between book and market values of such commitments.
For commitments to originate loans, the Company's maximum
exposure to credit risk is represented by the contractual amount
of those instruments. Those commitments represent ultimate
exposure to credit risk only to the extent that they are
subsequently drawn upon by customers. The Company uses the same
credit policies and underwriting standards in making loan
commitments as it does for on-balance-sheet instruments. For loan
commitments, the Company would generally be exposed to interest
rate risk from the time a commitment is issued with a defined
contractual interest rate.
The Company delivers, primarily fixed-rate, one- to four-family
mortgage loans to investors in the secondary market under "best
efforts" commitments. Loans to be sold are generally committed
at the time the borrower's mortgage interest rate is "locked-in".
At December 31, 1999, the Company had $109.3 million of "locked-
in" fixed rate one- to four-family mortgage loans. The best
efforts commitment term is generally 70 days from the "lock-in"
date.
In connection with the securitization and sale of $48.6 million
of cooperative apartment loans in 1994, a letter of credit
totaling $6.8 million was established with the FHLB. The letter
of credit provides a level of protection of approximately 14% to
the buyer against losses on the cooperative apartment loans sold
behind a pool insurance policy the Bank purchased which provides
a level of protection of approximately 20%. The letter of credit
totalled $6.8 million at December 31, 1999.
LITIGATION AND LOSS CONTINGENCY
In February, 1983, a burglary of the contents of safe deposit
boxes occurred at a branch office of the Bank. At December 31,
1999, the Bank has a class action lawsuit related thereto
pending, whereby the plaintiffs are seeking recovery of
approximately $12.9 million in actual damages and an additional
$12.9 million of unspecified damages. The Bank's ultimate
liability, if any, which might arise from the disposition of
these claims cannot presently be determined. Management believes
it has meritorious defenses against these actions and has and
will continue to defend its position. Accordingly, no provision
for any liability that may result upon adjudication has been
recognized in the accompanying consolidated financial statements.
The Company is involved in various legal actions arising in the
ordinary course of business, which in the aggregate, are believed
by management to be immaterial to the financial position of the
Company.
15. STOCKHOLDERS' EQUITY
At the time of its conversion to a stock savings bank, the Bank
established a liquidation account in an amount equal to its total
retained earnings as of June 30, 1993. The liquidation account
will be maintained for the benefit of eligible account holders
who continue to maintain their accounts at the Bank, after the
conversion. The liquidation account will be reduced annually to
the extent that eligible account holders have reduced their
qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In
the event of a complete liquidation, each eligible account holder
will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the current adjusted
qualifying balances for accounts then held. The balance of the
liquidation account was approximately $13.0 million at December
31, 1999.
The Bank may not declare or pay cash dividends on or repurchase
any of its shares of common stock, if the effect would cause
stockholders' equity to be reduced below the amount required for
the liquidation account, applicable regulatory capital
maintenance requirements or if such declaration and payment would
otherwise violate regulatory requirements. Office of Thrift
Supervision ("OTS") regulations limit all capital distributions
by the Bank to the Company, including dividend payments. As the
subsidiary of a savings and loan holding company, the Bank must
file a notice with the OTS prior to making a capital
distribution. In addition, if the total amount of all capital
distributions for a calendar year would exceed net income for
that year to date plus the retained net income for the preceding
two years, then, prior to making a capital distribution, the Bank
would be required to apply for the prior approval of the OTS.
Unlike the Bank, the Company is not subject to these regulatory
restrictions on the payment of dividends to its stockholders.
However, the source of future dividends may depend upon dividends
from the Bank.
REGULATORY CAPITAL
As required by regulation of the OTS, savings institutions are
required to maintain regulatory capital in the form of a
"tangible capital requirement," a "core capital requirement,"
and a "risk- based capital requirement."
The Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
As of December 31, 1999, the Bank has been categorized as "well
capitalized" by the OTS under the regulatory framework for prompt
corrective action. There are no conditions or events since that
notification that management believes have changed the
institution's category. The following table sets forth the
required ratios and amounts, and the Bank's actual capital
amounts, and ratios at December 31:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
(Dollars in thousands) Amount Ratio(3) Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
1999
Tangible Capital $168,926 5.62% $ 60,073 2.00% N/A N/A
Core Capital (1) 168,926 5.62 120,147 4.00 150,183 5.00
Risk-based Capital (2) 184,485 11.83 124,707 8.00 155,884 10.00
1998
Tangible Capital $130,597 5.43% $ 48,087 2.00% N/A N/A
Core Capital (1) 130,597 5.43 96,173 4.00 $120,216 5.00%
Risk-based Capital (2) 144,104 11.96 96,404 8.00 120,505 10.00
</TABLE>
(1) Under the OTS's prompt corrective action regulations (i) the
tangible capital requirement was effectively increased from 1.50%
to 2.00%, because under these regulations an institution with
less than 2.00% tangible capital is classified as "critically
undercapitalized" and (ii) the core capital requirement was
effectively increased from 3.00% to 4.00% because under these
regulations an institution with less than 4.00% core capital is
classified as "undercapitalized."
(2) The OTS requirement that an interest rate risk component be
incorporated into its existing risk-based capital standard has
been indefinitely deferred by the OTS. However, the Bank does not
believe that its risk-based capital requirement would be
materially affected as a result of the interest rate risk
component.
(3) For tangible and core capital, the ratio is to adjusted
total assets. For risk-based capital, the ratio is to total risk-
weighted assets.
STOCKHOLDER RIGHTS PLAN
On January 26, 1996, the Board of Directors of the Holding
Company adopted a Stockholder Rights Plan (the "Rights Plan").
Under the Rights Plan, which expires in February, 2006, the Board
declared a dividend of one right on each outstanding share of the
Holding Company's common stock, which was paid on February 5,
1996 to stockholders of record on that date (the "Rights"). Until
it is announced that a person or group has acquired 10% or more
of the outstanding common stock of the Holding Company (an
"Acquiring Person") or has commenced a tender offer that could
result in the ownership of 10% or more of such common stock, the
Rights are initially redeemable for $.01 each, are evidenced
solely by the Holding Company's common stock certificates,
automatically trade with the Holding Company's common stock and
are not exercisable. Following any such announcement, separate
Rights would be distributed, with each Right entitling its owner
to purchase participating preferred stock of the Holding Company
having economic and voting terms similar to those of one share of
the Holding Company's common stock for an exercise price of $45.
Upon announcement that any person or group has become an
Acquiring Person and unless the Board acts to redeem the Rights,
then twenty business days thereafter (the "Flip-in Date"), each
Right (other than Rights beneficially owned by any Acquiring
Person or transferee thereof, which become void) will entitle the
holder to purchase, for the $45 exercise price, a number of
shares of the Holding Company's common stock having a market
value of $90. In addition, if after an Acquiring Person gains
control of the Board, the Holding Company is involved in a merger
or sells more than 50% of its assets or assets generating more
than 50% of its operating income or cash flow, or has entered
into an agreement to do any of the foregoing (or an Acquiring
Person is to receive different treatment than all other
stockholders), each Right will entitle its holder to purchase,
for the $45 exercise price, a number of shares of common stock of
the Acquiring Person having a market value of $90. If any person
or group acquires more than 50% of the outstanding common stock
of the Holding Company, the Board may, at its option, exchange
one share of such common stock for each Right. The Rights may
also be redeemed by the Board for $0.01 per Right prior to the
Flip-in Date.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments" requires the Company to disclose estimated fair
values for substantially all of its financial instruments. The
fair value of a financial instrument is the amount at which the
asset or obligation could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation
sale. Fair value estimates are made at a specific point in time
based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium
or discount that could result from offering for sale at one time
the entire holdings of a particular financial instrument. Because
no market value exists for a significant portion of the financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in
nature, involve uncertainties and matters of judgment and,
therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are determined for on and off-balance sheet
financial instruments, without attempting to estimate the value
of anticipated future business and the value of assets and
liabilities that are not considered financial instruments.
Additionally, tax consequences related to the realization of the
unrealized gains and losses can have a potential effect on fair
value estimates and have not been considered in many of the
estimates.
The following table summarizes the carrying values and estimated
fair values of the Company's on-balance sheet financial
instruments at December 31:
<TABLE>
<CAPTION>
1999 1998
Estimated Estimated
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 42,717 42,717 44,808 44,808
Securities available for sale 937,299 937,299 889,251 889,251
Loans held for sale 82,709 82,709 54,188 54,188
FHLB-NY stock 27,865 27,865 21,990 21,990
Loans receivable, net 1,790,126 1,727,837 1,296,702 1,313,057
Accrued interest receivable 15,825 15,825 12,108 12,108
Financial Liabilities:
Deposits 2,080,613 2,075,948 1,722,710 1,727,676
Borrowed funds 749,232 746,259 440,346 446,813
Due to broker - - 97,458 97,458
Accrued interest payable 2,774 2,774 1,670 1,670
</TABLE>
The methods and significant assumptions used to estimate fair
values for different categories of financial instruments are as
follows:
Cash and cash equivalents - The estimated fair values of cash and
cash equivalents are assumed to equal the carrying values as
these financial instruments are either due on demand or mature
within 90 days.
Securities available for sale - Estimated fair value for
substantially all of the Company's bonds, notes and equity
securities are based on market quotes as provided by an
independent pricing service. For MBSs, the Company obtains bids
from broker dealers to estimate fair value. For those occasional
securities for which a market price cannot be obtained, market
prices of comparable securities are used.
Loans held for sale - The estimated fair value is based on
current prices established in the secondary market.
FHLB-NY stock - The estimated fair value of the Company's
investment in FHLB-NY stock is deemed to be equal to its carrying
value which represents the price at which it may be redeemed.
Residential loans - Residential loans include one-to four-family
mortgages and individual cooperative apartment loans. Estimated
fair value is based on discounted cash flow analysis. The
residential loan portfolio is segmented by loan type (fixed
conventional, adjustable products, etc.) with weighted average
coupon rate, remaining term, and other pertinent information for
each segment. A discount rate is determined based on the U.S.
Treasury yield curve plus a pricing spread. The discount rate for
fixed rate products is based on the FNMA yield curve plus a
pricing spread. Expected principal prepayments, consistent with
empirical evidence and management's future expectations, are used
to modify the future cash flows. For potential problem loans, the
present value result is separately adjusted downward consistent
with management's assumptions in evaluating the adequacy of the
allowance for loan losses.
Commercial real estate and other loans - Estimated fair value is
based on discounted cash flow analysis which takes into account
the contractual coupon rate and maturity date of each loan. A
discount rate is determined based on the U.S. Treasury yield
curve, the prime rate or LIBOR plus a pricing spread, depending
on the index to which the product is tied. For potential problem
loans, the present value result is separately adjusted downward
consistent with management's assumptions regarding the value of
any collateral underlying the loans.
Deposits - Certificates of deposit are valued by performing a
discounted cash flow analysis of the remaining contractual
maturities of outstanding certificates. The discount rates used
are wholesale secondary market rates as of the valuation date.
For all other deposits, fair value is deemed to be equivalent to
the amount payable on demand as of the valuation date.
Borrowed funds - Borrowings are fair valued based on rates
available to the Company in either public or private markets for
debt with similar terms and remaining maturities.
Accrued interest receivable, accrued interest payable, and due to
broker - The fair values are estimated to equal the carrying
values of short-term receivables and payables, including accrued
interest, mortgage escrow funds and due to broker.
The estimated fair value of commitments to extend credit is
estimated using the fees charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the present credit worthiness of the
counterparties. Generally, for fixed-rate loan commitments, fair
value also considers the difference between current levels of
interest rates and the committed interest rates. The estimated
fair value of these off-balance sheet financial instruments
resulted in no unrealized gain or loss at December 31, 1999 and
1998.
17. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
The condensed financial statements of the Holding Company (parent
company only) are as follows:
Parent Company Condensed Statements of Financial Condition
December 31,
(In thousands) 1999 1998
Assets:
Cash and money market investments $ 3,809 1,730
Securities available for sale 1,445 2,569
Other assets 3,980 3,826
Investment in net assets of Bank 147,028 137,217
Investment in net assets of other subsidiaries 4,404 2,073
Total assets 160,666 147,415
Liabilities:
Junior subordinated debt issued to Haven
Capital Trust I 25,774 25,774
Capital Trust II 26,083 -
Other liabilities, net 3,226 1,774
Total liabilities 55,083 27,548
Total stockholders' equity 105,583 119,867
Total liabilities and stockholders' equity $ 160,666 147,415
Parent Company Only Condensed Statements of Operations
Years Ended December 31,
(In thousands) 1999 1998 1997
Dividend from Bank $ - 2,500 -
Dividend from Trust 134 81 72
Interest income 216 345 514
Interest expense (4,285) (2,697) (2,389)
Other operating expenses, net (1,317) (1,148) (935)
(Loss) before income tax
benefit and equity in undistributed
net income of Bank (5,252) (919) (2,738)
Income tax benefit (142) (1,403) (1,277)
Net (loss) income before equity in
undistributed net income of Bank (5,110) 484 (1,461)
Equity in undistributed net income of
Bank 17,717 7,666 12,544
Net income $12,607 8,150 11,083
Parent Company Only Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating activities:
Net income $12,607 8,150 11,083
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in undistributed net income of the Bank (17,717) (7,666) (12,544)
Gain on sale of interest earning assets - (109) -
Increase in other assets (154) (3) (3,462)
Increase (decrease) in other liabilities 1,452 (1,878) 3,189
Net cash used in operating activities (3,812) (1,506) (1,734)
Investing activities:
Purchases of securities available for sale - (2,135) (4,095)
Proceeds from sales of securities available for sale 1,067 3,704 -
Additional investment in the Bank (21,737) - (14,007)
Investment in net assets of other subsidiaries 2,331 (1,283) -
Net cash (used in) provided by investing activities (18,339) 286 (18,102)
Financing activities:
Proceeds from issuance of debt 26,083 - 24,984
Payment of common stock dividends (2,599) (2,627) (2,598)
Exercise of stock options 747 360 760
Net cash (used in) provided by financing activities 24,231 (2,267) 23,146
Net increase (decrease) in cash 2,080 (3,487) 3,310
Cash at beginning of year 1,730 5,217 1,907
Cash at end of year $ 3,810 1,730 5,217
</TABLE>
18. QUARTERLY FINANCIAL DATA (Unaudited)
The following table is a summary of financial data by quarter for
the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
(Dollars in thousands, 1st 2nd 3rd 4th 1st 2nd 3rd 4th
except for share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 40,480 44,236 48,478 50,669 34,963 36,732 39,979 40,011
Interest expense 24,274 26,316 29,926 32,390 21,469 22,582 25,041 24,684
Net interest income before
provision for loan losses 16,206 17,920 18,552 18,279 13,494 14,150 14,938 15,327
Provision for loan losses 675 880 1,035 1,035 670 650 670 675
Net interest income after
provision for loan losses 15,531 17,040 17,517 17,244 12,824 13,500 14,268 14,652
Non-interest income 8,798 9,028 8,115 8,427 4,459 4,406 7,763 9,217
Non-interest expense 20,126 20,729 20,792 20,583 14,067 16,204 19,389 20,353
Income before income
tax expense 4,203 5,339 4,840 5,088 3,216 1,702 2,642 3,516
Income tax expense 1,603 2,011 1,890 1,359 1,067 471 402 986
Net income $ 2,600 3,328 2,950 3,729 2,149 1,231 2,240 2,530
Net earnings per common share:
Basic $ 0.30 0.38 0.34 0.42 0.25 0.14 0.26 0.29
Diluted $ 0.29 0.37 0.32 0.40 0.24 0.13 0.24 0.28
Weighted average number of
shares outstanding:
Basic 8,634,171 8,723,706 8,760,665 8,791,511 8,526,864 8,567,111 8,590,777 8,611,172
Diluted 9,021,614 9,076,293 9,212,577 9,226,025 9,129,745 9,247,139 9,207,719 9,014,489
</TABLE>
Independent Auditors' report
To The Board of Directors and Stockholders of
Haven Bancorp, Inc.:
We have audited the accompanying consolidated statements of
financial condition of Haven Bancorp, Inc. and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated
statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1999. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Haven Bancorp, Inc. and subsidiaries as of December
31, 1999 and 1998, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1999 in conformity with generally accepted
accounting principles.
KPMG LLP
Melville, New York
January 27, 2000
Directors and officers
Directors
Haven Bancorp, Inc. and CFS Bank
Philip S. Messina
Chairman of the Board
George S. Worgul
Former Chairman of the Board and Retired President of Haven
Bancorp, Inc. and CFS Bank
Robert M. Sprotte
President, Schmelz Bros., Inc.
President, RDR Realty Corp.
President, Three Rams Realty
Michael J. Fitzpatrick
C.P.A., Financial Consultant
Retired, former Vice President, National Thrift Director,
E.F. Hutton & Co.
William J. Jennings II
President and Chief Operating Officer
Michael J. Levine
President, Norse Realty Group Inc. & Affiliates
Partner, Levine & Schmutter, CPAs
Msgr. Thomas J. Hartman
Director of Radio and Television for the Diocese of Rockville
Centre
Michael A. McManus, Jr.
President and Chief Executive Officer, Misonex, Inc.
Hanif Dahya
President and Chief Executive Officer, Farah Ashley Capital
Executive Officers
Haven Bancorp, Inc. and CFS Bank
Philip S. Messina
Chairman of the Board and Chief Executive Officer
William J. Jennings II
President and Chief Operating Officer
Thomas J. Seery
Executive Vice President, Operations
Catherine Califano
Senior Vice President and Chief Financial Officer
Mark A. Ricca
Senior Vice President, Residential and Consumer Lending and
Secretary
Dennis Hodne
Senior Vice President, Retail Banking
James J. Carpenter
Senior Vice President, Commercial Real Estate Lending
Stockholder Information
Administrative Headquarters
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, NY 11590
(516) 683-4100
Annual Meeting
The annual meeting of stockholders will be held on Wednesday, May
17, 2000 at 9:00 A.M., at the Huntington Hilton, 598 Broadhollow
Road, Melville, New York, 11747. A notice of the meeting, a proxy
statement and a proxy form are included with this mailing to
stockholders of record as of March 29, 2000.
Common Stock Information
Haven Bancorp common stock is traded on the Nasdaq National
Market under the symbol HAVN. The table below shows the reported
high and low sales prices of the common stock during the periods
indicated in 1999 and 1998.
1999 1998
High Low High Low
First Quarter 16 1/8 12 3/4 25 19 7/8
Second Quarter 16 1/2 10 1/2 28 3/4 24 3/4
Third Quarter 19 14 9/16 26 2/4 14 3/8
Fourth Quarter 17 1/8 14 3/8 17 5/8 10 3/8
As of March 22, 2000, the Company had approximately 406
stockholders of record, not including the number of persons or
entities holding stock in nominee or street name through various
brokers and banks. At December 31, 1999, there were 9,000,237
shares of common stock outstanding.
Transfer Agent and Registrar
Inquiries regarding stockholder administration and
services should be directed to:
ChaseMellon Shareholder Services, L.L.C.
Overpeck Center
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-851-9677
**World Wide Web Site: http://www.chasemellon.com
Independent Auditors
KPMG LLP
1305 Walt Whitman Road, Suite 200
Melville, NY 11747
Legal Counsel
Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10048
Investor Relations
Inquiries regarding Haven Bancorp, Inc.
should be directed to:
Catherine Califano
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, NY 11590
(516) 683-4100
Annual Report on Form 10-K
A copy of the annual report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange
Commission, is available to stockholders (excluding exhibits) at
no charge, upon written requests to:
Investor Relations
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, NY 11590
** World Wide Web Site: http://www.cfsb.com
Locations
Administrative Headquarters
Haven Bancorp, Inc.
615 Merrick Avenue, Westbury, NY 11590
CFS Bank Locations
Woodhaven
93-22 Jamaica Avenue, Woodhaven, NY 11421
Forest Parkway
80-35 Jamaica Avenue, Woodhaven, NY 11421
Forest Hills
106-19 Continental Avenue, Forest Hills, NY 11375
Ozone Park
98-16 101st Avenue, Ozone Park, NY 11416
Howard Beach
82-10 153rd Avenue, Howard Beach, NY 11414
Rockaway
104-08 Rockaway Beach Boulevard, Rockaway, NY 11694
Bellerose
244-19 Braddock Avenue, Bellerose, NY 11426
Snug Harbor
343 Merrick Road, Amityville, NY 11701
CFS Bank Supermarket Branches
NEW YORK
ATLANTIC TERMINAL in Pathmark Supermarket
625 Atlantic Avenue and Fort Green Pl., Brooklyn, NY 11217
BALDWIN in Pathmark Supermarket
1764 Grand Avenue, Baldwin, NY 11510
BAY SHORE in ShopRite Supermarket
1905 Sunrise Hwy., Bayshore, NY 11706
BORO PARK in Pathmark Supermarket
1245 61st Street, Boro Park, NY 11219
BRENTWOOD in Pathmark Supermarket
101 Wicks Road, Brentwood, NY 11717
CENTEREACH in Pathmark Supermarket
2150 Middle Country Road, Centereach, NY 11746
COMMACK in Pathmark Supermarket
6070 Jericho Turnpike, Commack, NY 11725
EAST ISLIP in Edwards Super Food Stores
2650 Sunrise Highway, East Islip, NY 11730
EAST MEADOW in Pathmark Supermarket
1897 Front Street, East Meadow, NY 11554
EAST ROCKAWAY in Pathmark Supermarket
492 East Atlantic Ave., East Rockaway, NY 11518
FARMINGVILLE in Edwards Super Food Store
2350 North Ocean Ave., Farmingville, NY 11738
FLUSHING in Pathmark Supermarket
155-15 Aguilar Ave, Flushing, NY 11367
FRANKLIN SQUARE in Pathmark Supermarket
460 Franklin Ave., Franklin Square, NY 11010
GOWANUS in Pathmark Supermarket
1-37 12th St., Brooklyn, NY 11205
GREENVALE in Pathmark Supermarket
130 Wheatley Plaza, Greenvale, NY 11548
HAUPPAUGE in ShopRite Supermarket
335 Nesconset Highway, Hauppauge, NY 11788
HOLBROOK in Pathmark Supermarket
5801 Sunrise Highway, Sayville, NY 11741
ISLIP in Pathmark Supermarket
155 Islip Avenue, Islip, NY 11751
JERICHO in Pathmark Supermarket
360 North Broadway, Jericho, NY 11753
LEVITTOWN in Pathmark Supermarket
3535 Hempstead Turnpike, Levittown, NY 11756
LONG ISLAND CITY in Pathmark Supermarket
42-02 Northern Blvd., Long Island City, NY 11100
MASSAPEQUA in Grand-Union Mini-branch
941 Carmans Road, Massapequa, NY 11758
MEDFORD in Edwards Super Food Stores
700-60 Patchogue-Yaphank Road, Medford, NY 11763
MONSEY in Pathmark Supermarket
45 Route 59, Monsey, NY 10952
MT. VERNON in Pathmark Supermarket
1 Pathmark Plaza, East 2nd & 3rd Ave., Mount Vernon, NY 10550
NANUET in Pathmark Supermarket
195 Rockland Center, Route 59 East, Nanuet, NY 10954
NEW HYDE PARK in Pathmark Supermarket
2335 New Hyde Park Road, New Hyde Park, NY 11040
NORTH BABYLON in Pathmark Supermarket
1251 Deer Park Avenue, North Babylon, NY 11703
NORTH YONKERS in Pathmark Supermarket
2540 Central Park Avenue, North Yonkers, NY 10710
OZONE PARK in Pathmark Supermarket
92-10 Atlantic Avenue, Ozone Park, NY 11416
PATCHOGUE in Pathmark Supermarket
395 Route 112, Patchogue, NY 11772
PIKE SLIP in Pathmark Supermarket
227 Cherry Street, New York, NY 10002
PORT CHESTER in Pathmark Supermarket
130 Midland Avenue, Port Chester, NY 10573
PORT JEFFERSON in Pathmark Supermarket
5145 Nesconset Hwy., Port Jefferson, NY 11776
SEAFORD in Pathmark Supermarket
4055 Merrick Road, Seaford, NY 11783
SHIRLEY in Pathmark Supermarket
800 Montauk Highway, Shirley, NY 11967
SPRINGFIELD GARDENS in Pathmark Supermarket
134-40 Springfield Blvd. Springfield Gardens, NY 11413
STARRETT CITY in Pathmark Supermarket
111-10 Flatlands Avenue, Brooklyn, NY 11207
STATEN ISLAND in Pathmark Supermarket
1351 Forest Avenue, Staten Island, NY 10302
STATEN ISLAND in Pathmark Supermarket
2875 Richmond Avenue, Staten Island, NY 10306
STATEN ISLAND in ShopRite Supermarket
2424 Hylan Blvd, Staten Island, NY 10306
UNIONDALE in ShopRite Supermarket
1121 Jerusalem Avenue, Uniondale, NY 11553
WEST BABYLON in Pathmark Supermarket
531 Montauk Highway, West Babylon, NY 11704
WEST BABYLON in Edwards Super Food Store
575 Montauk Highway, West Babylon, NY 11704
WHITESTONE in Pathmark Supermarket
31-06 Farrington Street, Whitestone, NY 11357
WOODBURY in Pathmark Supermarket
81-01 Jericho Turnpike, Woodbury, NY 11797
YONKERS in Pathmark Supermarket
1757 Central Park Avenue, Yonkers, NY 10710
New JERSEY
BOUND BROOK in ShopRite Supermarket
Route 28 & Union Avenue, Bound Brook, NJ 08805
BRICKTOWN in ShopRite Supermarket
Rt. 70 & Chambers Bridge Road, Bricktown, NJ 08723
HACKENSACK in ShopRite Supermarket
S. River St. & E. Main Moonachie Rd.,Hackensack, NJ 07601
HILLSIDE in Shoprite Supermarket
367 Highway 22 West, Hillside, NJ 07205
PALISADES PARK in ShopRite Supermarket
201 Roosevelt Place, Palisades Park, NJ 07650
WAYNE in ShopRite Supermarket
625 Hamburg Turnpike, Wayne, NJ 07470
WEST LONG BRANCH in ShopRite Supermarket
145 Highway 36, West Long Branch, NJ 07764
WEST MILFORD in ShopRite Supermarket
23 Marshall Hill Road, West Milford, NJ 07480
CONNECTICUT
ANSONIA In Big Y Supermarket
404 Main Street, Ansonia, CT 06401
BRIDGEPORT in Shaws Supermarket
500 Sylvan Avenue, Bridgeport, CT 06610
MERIDAN in ShopRite Supermarket
533 South Broad Street, Meridan, CT 06450
MILFORD in ShopRite Supermarket
157 Cherry Street, Milford, CT 06460
NEWTOWN in Big Y Supermarket
6 Queen Street, Newtown, CT 06470
WATERBURY in ShopRite Supermarket
650 Wolcott Street, Waterbury, CT 06705
WEST HAVEN in ShopRite Supermarket
1131 Campbell Avenue, West Haven, CT 06516
CFS INSURANCE LOCATIONS
Centereach
2100 Middle Country Road, Centereach, NY 11720
Holbrook
941 Main Street, Holbrook, NY 11741
Huntington
850 East Jericho Turnpike, Huntington, NY 11743
Exhibit 23.0
Consent of Independent Certified Public Accountants
The Stockholders and the
Board of Directors
Haven Bancorp, Inc.:
We consent to incorporation by reference in the Registration
Statement Nos. 333-79740, No. 333-85056, 333-07083, and No. 333-
20823 on Forms S-8 and the Registration Statement Nos. 333-31129
and 333-76191 on Forms S-3 of Haven Bancorp, Inc. of our report
dated January 27, 2000, relating to the consolidated statements of
financial condition of Haven Bancorp, Inc. as of December 31, 1999
and 1998, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1999, which
report is incorporated by reference in the December 31, 1999 Annual
Report on Form 10-K of Haven Bancorp, Inc.
KPMG LLP
Melville, New York
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at December 31, 1999 and
the Consolidated Statement of Operations for the twelve months Ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 41,479
<INT-BEARING-DEPOSITS> 1,967,136
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 937,299
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,806,825
<ALLOWANCE> 16,699
<TOTAL-ASSETS> 2,965,850
<DEPOSITS> 2,080,613
<SHORT-TERM> 288,386
<LIABILITIES-OTHER> 30,422
<LONG-TERM> 460,846
0
0
<COMMON> 100
<OTHER-SE> 105,483
<TOTAL-LIABILITIES-AND-EQUITY> 2,965,850
<INTEREST-LOAN> 119,413
<INTEREST-INVEST> 64,450
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 183,863
<INTEREST-DEPOSIT> 75,441
<INTEREST-EXPENSE> 112,906
<INTEREST-INCOME-NET> 70,957
<LOAN-LOSSES> 3,625
<SECURITIES-GAINS> 750
<EXPENSE-OTHER> 82,230
<INCOME-PRETAX> 19,470
<INCOME-PRE-EXTRAORDINARY> 19,470
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,607
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 7.06
<LOANS-NON> 6,994
<LOANS-PAST> 0
<LOANS-TROUBLED> 717
<LOANS-PROBLEM> 6,876
<ALLOWANCE-OPEN> 13,978
<CHARGE-OFFS> 1,350
<RECOVERIES> 446
<ALLOWANCE-CLOSE> 16,699
<ALLOWANCE-DOMESTIC> 16,699
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
