<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
Commission File Number 0-22278
QUEENS COUNTY BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1377322
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
38-25 Main Street, Flushing, New York 11354
(Address of principal executive offices)
(Registrant's telephone number, including area code) 718: 359-6400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(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
10,155,055
Number of shares outstanding at
August 8, 1997
<PAGE> 2
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
THREE MONTHS ENDED JUNE 10, 1997
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Condition as of
June 30, 1997 (unaudited) and December 31, 1996 1
Consolidated Statements of Income
for the Three and Six Months Ended June 30, 1997
and 1996 (unaudited) 2
Consolidated Statement of Changes in
Stockholders' Equity for the Six Months
Ended June 30, 1997 (unaudited) 3
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997 and
1996 (unaudited) 4
Notes to Unaudited Consolidated Financial
Statements 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 25
Item 2. CHANGES IN SECURITIES 25
Item 3. DEFAULTS UPON SENIOR SECURITIES 25
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY 25
HOLDERS
Item 5. OTHER INFORMATION 25
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES 26
EXHIBITS 27
</TABLE>
<PAGE> 3
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(in thousands) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,211 $ 14,045
Money market investments 11,850 7,000
Securities held to maturity (estimated market value of
$71,033 and $86,483, respectively) 70,971 86,495
Mortgage-backed securities held to maturity (estimated market
value of $62,427 and $74,192, respectively) 61,732 73,732
Mortgage loans:
1-4 family 242,000 256,903
Multi-family 967,451 822,364
Commercial real estate 60,299 63,452
Construction 948 1,598
-------------------- ----------------------
Total mortgage loans 1,270,698 1,144,317
Other loans 11,533 12,276
Less: Unearned loan fees (1,402) (1,082)
Allowance for loan losses (9,431) (9,359)
-------------------- ----------------------
Loans, net 1,271,398 1,146,152
Premises and equipment, net 10,961 11,077
Deferred tax asset, net 5,757 3,312
Other assets 19,026 16,843
-------------------- ----------------------
Total assets $ 1,466,906 $ 1,358,656
==================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW and money market accounts $ 66,082 $ 69,443
Savings accounts 274,312 277,783
Certificates of deposit 664,967 651,705
Non-interest-bearing accounts 25,758 24,999
-------------------- ----------------------
Total deposits 1,031,119 1,023,930
-------------------- ----------------------
Official checks outstanding 20,649 26,729
FHLB borrowings 217,010 81,393
Accounts payable and accrued expenses 930 1,169
Mortgagors' escrow 15,298 7,356
Other liabilities 8,013 6,650
-------------------- ----------------------
Total liabilities 1,293,019 1,147,227
-------------------- ----------------------
Stockholders' equity:
Preferred stock at par $0.01 (5,000,000 shares authorized;
none issued) -- --
Common stock at par $0.01 (30,000,000 shares authorized;
13,764,816 shares issued; 10,180,765 and 11,445,154 shares
outstanding at June 30, 1997 and December 31, 1996, respectively) 138 92
Paid-in capital in excess of par 120,091 116,607
Retained earnings (substantially restricted) 161,615 154,886
Less:Treasury stock (3,584,051 and 2,319,901 shares, respectively) (90,597) (42,397)
Unallocated common stock held by ESOP (14,169) (14,820)
Common stock held by SERP and Deferred Compensation Plans (2,003) (1,411)
Unearned common stock held by RRPs (1,188) (1,528)
-------------------- ----------------------
Total stockholders' equity 173,887 211,429
-------------------- ----------------------
Total liabilities and stockholders' equity $ 1,466,906 $ 1,358,656
==================== ======================
</TABLE>
See accompanying notes to financial statements
1
<PAGE> 4
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(in thousands, except per share data) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Mortgage and other loans $26,250 $ 22,608 $51,039 $ 44,310
Securities held to maturity 1,107 1,019 2,271 2,072
Mortgage-backed securities held to maturity 1,007 1,353 2,099 2,783
Money market investments 78 85 138 414
------- -------- ------- --------
Total interest income 28,442 25,065 55,547 49,579
------- -------- ------- --------
INTEREST EXPENSE:
NOW and money market accounts 447 511 917 1,054
Savings accounts 1,646 1,694 3,279 3,399
Certificates of deposit 8,778 7,596 17,396 15,241
FHLB borrowings 2,071 809 3,258 1,620
Mortgagors' escrow 10 12 20 15
------- -------- ------- --------
Total interest expense 12,952 10,622 24,870 21,329
------- -------- ------- --------
Net interest income 15,490 14,443 30,677 28,250
(Reversal of) provision for loan losses -- (2,000) -- (2,000)
------- -------- ------- --------
Net interest income after reversal of
provision for loan losses 15,490 16,443 30,677 30,250
------- -------- ------- --------
OTHER OPERATING INCOME:
Fee income 301 416 580 773
Other 214 54 239 183
------- -------- ------- --------
Total other operating income 515 470 819 956
------- -------- ------- --------
OPERATING EXPENSE:
Compensation and benefits 4,685 3,775 9,233 7,532
Occupancy and equipment 631 600 1,300 1,220
General and administrative 1,183 1,120 2,322 2,099
Other 193 38 349 139
------- -------- ------- --------
Total operating expense 6,692 5,533 13,204 10,990
------- -------- ------- --------
Income before income taxes 9,313 11,380 18,292 20,216
Income tax expense 3,972 5,115 5,819 8,693
------- -------- ------- --------
Net income $ 5,341 $ 6,265 $12,473 $ 11,523
======= ======== ======= ========
Net income per common share(a) $ 0.55 $ 0.55 $ 1.21 $ 1.01
</TABLE>
(a) Reflects shares issued as a result of a 3-for-2 stock split on April 10,
1997 and a 4-for-3 stock split on August 22, 1996.
See accompanying notes to financial statements
2
<PAGE> 5
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(in thousands) (unaudited)
- --------------------------------------------------------------------------
<S> <C>
COMMON STOCK (PAR VALUE: $0.01):
Balance at beginning of period $ 92
Shares issued 46
---------
Balance at end of period 138
PAID-IN CAPITAL IN EXCESS OF PAR:
Balance at beginning of period 116,607
Shares issued and fractional shares (51)
Tax benefit effect on stock plans 1,240
Common stock acquired by SERP 592
Allocation of ESOP stock 1,703
---------
Balance at end of period 120,091
---------
RETAINED EARNINGS:
Balance at beginning of period 154,886
Net income 12,473
Dividends paid on common stock (3,390)
Exercise of stock options (97,864 shares) (2,354)
---------
Balance at end of period 161,615
---------
TREASURY STOCK:
Balance at beginning of period (42,397)
Purchase of Treasury stock (1,389,291 shares) (53,155)
Common stock acquired by SERP 592
Exercise of stock options (97,864 shares) 4,363
---------
Balance at end of period (90,597)
---------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (14,820)
Allocation of ESOP stock 651
---------
Balance at end of period (14,169)
---------
SERP AND DEFERRED COMPENSATION PLANS:
Balance at beginning of year (1,411)
Common stock acquired by SERP (592)
---------
Balance at end of period (2,003)
---------
RECOGNITION AND RETENTION PLANS:
Balance at beginning of period (1,528)
Earned portion of RRPs 340
---------
Balance at end of period (1,188)
---------
Total stockholders' equity $ 173,887
=========
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 6
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(in thousands) 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,473 $ 11,523
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 466 360
(Reversal of) provision for loan losses -- (2,000)
Amortization of premiums, net 100 235
Amortization (accretion) of net deferred loan origination fees 320 (160)
Net gain on redemption of securities and
mortgage-backed securities (1) (2)
Net (gain) loss on sale of foreclosed real estate (43) 2
Earned portion of RRPs 340 542
Earned portion of ESOP 2,354 1,924
Changes in assets and liabilities:
(Increase) decrease in other assets (2,183) 2,338
(Increase) decrease in deferred income taxes (2,445) 1,063
Decrease in accounts payable and accrued expenses (239) (782)
Decrease in official checks outstanding (6,080) (10,298)
Increase (decrease) in other liabilities 1,363 (1,017)
----------------- -----------------
Total adjustments (6,048) (7,795)
----------------- -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,425 3,728
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of mortgage-backed
securities held to maturity 20,995 8,371
Proceeds from maturity of securities held to maturity 30,000 42,000
Purchase of securities held to maturity (23,570) (41,968)
Net increase in loans (126,632) (86,718)
Proceeds from sale of loans and foreclosed real estate 1,104 478
Purchase of premises and equipment, net (350) (323)
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (98,453) (78,160)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in mortgagors' escrow 7,942 3,634
Net increase in deposits 7,189 44,902
Net increase in FHLB borrowings 135,617 26,619
Cash dividends paid and options exercised, net (5,744) (3,180)
Purchase of Treasury stock, net of stock options exercised
and shares acquired by SERP (46,960) (12,468)
----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 98,044 59,507
Net increase (decrease) in cash and cash equivalents 6,016 (14,925)
Cash and cash equivalents at beginning of period 21,045 38,990
----------------- -----------------
Cash and cash equivalents at end of period $ 27,061 $ 24,065
================= =================
Supplemental information:
Cash paid for:
Interest $24,864 $21,328
Income taxes 2,576 8,575
Transfers to foreclosed real estate from loans -- 184
Transfers to real estate held for investment
from foreclosed real estate 115 598
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 7
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Queens County Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, Queens County Savings Bank (the "Bank").
The statements reflect all normal recurring adjustments which are, in the
opinion of management, necessary to present a fair statement of the results for
the periods presented. The results of operations for the three and six months
ended June 30, 1997 are not necessarily indicative of the results of operations
that may be expected for all of 1997.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's 1996 Annual Report to Shareholders and SEC Form 10-K.
NOTE 2. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 defines a fair value-based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value-based
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees." Entities electing to remain
with the accounting method prescribed in APB Opinion No. 25 must make a pro
forma disclosure of net income and, if presented, earnings per share, as if the
fair value-based method of accounting defined in this statement had been
applied.
SFAS No. 123 is effective for transactions entered into in fiscal years that
begin after December 15, 1995, though this statement may be adopted on issuance.
The disclosure requirements of this statement are effective for financial
statements for fiscal years beginning after December 15, 1995 or for an earlier
fiscal year for which this statement is initially adopted for recognizing
compensation cost. Pro forma disclosures required for entities that elect to
continue to measure compensation cost using APB Opinion No. 25 must include the
effects of all awards granted in fiscal years that begin after December 15,
1994.
5
<PAGE> 8
In the first quarter of 1997, the Company initiated a stock option plan, which
meets the criteria of SFAS No. 123. The Bank is applying APB Opinion No. 25 and
related interpretations in its accounting for this plan; accordingly, no
compensation cost has been recognized. Pro forma disclosures of net income and
earnings per share reflecting the fair value-based method of accounting as
defined in SFAS No. 123 will be made in the Company's 1997 annual report.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities, based on consistent
application of a financial components approach focusing on control. Under this
approach, after a transfer of financial assets, an entity recognizes said assets
when control has been surrendered, and derecognizes liabilities when they have
been extinguished. In addition, SFAS No. 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
consist of secured borrowings.
In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125." SFAS No. 127 delays the
effective date of certain provisions of SFAS No. 125 until after December 31,
1997.
SFAS No. 125, as amended by SFAS No. 127, is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
either December 31, 1996 or December 31, 1997, depending on the transaction, and
is to be applied prospectively. Earlier or retroactive application is not
permitted. SFAS No. 125 has had no impact, nor is it expected to have an impact,
on the Company's financial statements.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS No.
128 simplifies the standards for computing earnings per share previously found
in APB Opinion No. 15, "Earnings per Share." It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for the
period. 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 or resulted in the issuance of common stock that would then
share in the earnings of the entity.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods with earlier application not
permitted. SFAS No. 128 requires restatement of all prior-period EPS data
presented. The Company is currently evaluating the effects of SFAS No. 128.
6
<PAGE> 9
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about
Capital Structure," which establishes standards for disclosing information about
an entity's capital structure.
SFAS No. 129 is effective for financial statements issued for periods ending
after December 15, 1997 and will have no impact on the Company's financial
statements when it becomes effective.
7
<PAGE> 10
QUEENS COUNTY BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Queens County Bancorp, Inc. (the "Company") is the holding company for Queens
County Savings Bank (the "Bank"), the first savings bank chartered by the State
of New York in the New York City Borough of Queens. The primary business of the
Bank is gathering deposits from its customers in Queens and Nassau County and
investing these funds in the origination of residential mortgage loans
throughout metropolitan New York.
Acting under the Board of Directors' January 21, 1997 share repurchase
authorization, the Company accelerated its repurchase of shares of Queens County
Bancorp stock in the second quarter of the year. Including 375,392 shares
repurchased in the first quarter, the number of shares repurchased in the six
months ended June 30, 1997 totaled 1,389,291, representing an investment of
$53.2 million in the Company. The number of shares repurchased has been
adjusted to reflect the 3-for-2 stock split which occurred at the close of
business on April 10, 1997.
On July 16, 1997, the Board of Directors announced an additional 500,000 share
repurchase authorization, bringing the number of shares still available for
repurchase to 733,735 at that date. The 733,735 represented 7.21% of shares
outstanding on the day the announcement was made.
Also in July, the Board of Directors declared a $0.25 per share quarterly cash
dividend, representing a 25% increase from the dividend paid in May. The
dividend will be paid on the 15th of August to shareholders of record on August
1st.
BALANCE SHEET SUMMARY
The Company recorded total assets of $1.5 billion at June 30, 1997, up $108.3
million, or 8.0%, from the level recorded at December 31, 1996. The increase in
assets was driven by significant mortgage loan production: the mortgage loan
portfolio grew $126.4 million, or 11.1%, to $1.3 billion, triggered by a $145.1
million, or 17.6%, rise in multi-family mortgage loans. Mortgage originations
totaled $140.0 million in the second quarter; of these, $135.5 million were
secured by multi-family properties.
The balance of the mortgage loan portfolio at the close of the second quarter
consisted of $242.0 million in loans secured by one-to-four family homes, $60.3
million in commercial real estate loans, and $948,000 in construction loans.
Also in the asset mix were other loans of $11.5 million; securities held to
maturity ("securities") of $71.0 million; mortgage-backed securities held to
maturity ("mortgage backed securities") of $61.7 million; and money market
investments of $11.9 million.
The allowance for loan losses rose to $9.4 million, reflecting recoveries of
$72,000 stemming from the disposition of non-performing loans. The allowance
represented 111.17% of non-performing loans at June 30, 1997, and 0.74% of
loans, net at that date. Non-performing loans totaled $8.5 million, or 0.67%
8
<PAGE> 11
of loans, net, while foreclosed real estate equaled $1.4 million at quarter's
end. Non-performing assets thus equaled $9.9 million, representing 0.68% of
total assets, down from $10.3 million, or 0.76%, at December 31st.
Deposits rose $7.2 million to $1.0 billion at June 30, 1997, largely reflecting
a $13.3 million increase in certificates of deposit ("CDs") to $665.0 million,
representing 64.5% of total deposits at that date. To provide additional funding
for the significant rise in loan production, the Company drew on its Federal
Home Loan Bank of New York ("FHLB") line of credit. As a result, FHLB borrowings
totaled $217.0 million at the end of the quarter, up from $81.4 million at
year-end 1996.
Stockholders' equity declined to $173.9 million, representing 11.85% of total
assets and a book value of $19.83 per share (based on 8,769,024 shares
outstanding, after excluding the Company's unallocated ESOP shares). The level
of stockholders' equity reflects the allocation of $53.2 million toward the
repurchase of 1,389,291 shares under the Company's stock repurchase program. The
impact of this expenditure was offset by net income of $12.5 million less
dividends paid and options exercised of $6.4 million, and by the addition of
$5.1 million in non-cash expenses relating to the amortization and appreciation
of shares in the Company's stock-related benefit plans and associated tax
benefits.
As further indication of its capital strength, the Bank continued to exceed the
minimum regulatory capital requirements and to fulfill the requirements for
classification as a well-capitalized institution under the FDIC Improvement Act
("FDICIA").
LOANS
Fueled by a record $140.0 million in mortgage loan originations in the second
quarter, the mortgage loan portfolio grew to $1.3 billion at June 30, 1997, up
$126.4 million from the level recorded at year-end 1996. The 11.1% increase
stemmed entirely from a $145.1 million, or 17.6%, rise in multi-family mortgage
loans outstanding to $967.5 million. Multi-family mortgage loans accounted for
76.1% of mortgage loans outstanding at the close of the quarter, and $189.1
million, or 94.8%, of originations year-to-date.
The majority of the Company's multi-family mortgage loans are originated for
terms of ten years at a rate of interest that adjusts to a point over prime in
each of years six through ten of the mortgage. In years one through five, the
loan may feature either a fixed rate of interest or a rate that steps up
annually by 50 basis points. At June 30, 1997, 95.7% of multi-family mortgage
loans featured adjustable rates of interest, including $439.3 million in loans,
the interest rates of which are scheduled to step up over the next twelve
months. Specifically, $96.1 million, $111.3 million, $141.6 million, and $90.3
million in loans, respectively, will reprice upward over the next four
quarters.
The decisive growth in the portfolio of multi-family mortgages has corresponded
with a steady decline in the portfolio of other mortgage loans. At June 30,
1997, one-to-four family mortgage loans represented $242.0 million, or 19.1%, of
mortgage loans outstanding, down $14.9 million after originations of $7.2
million in the first six months of the year. Also included in the mortgage loan
portfolio at quarter's end were $60.3 million in commercial real estate loans
(down $3.2 million from the year-earlier level after originations of $2.9
million) and $948,000 in construction loans (down $650,000 after originations of
$280,000).
In addition to mortgage loans, the Company originates a modest volume of
consumer loans. At June 30, 1997, this portfolio totaled $11.5 million, down
from $12.3 million at year-end 1996.
9
<PAGE> 12
With $109.9 million in mortgage loans in the pipeline at the close of the
quarter, the Company is well on track to exceed the record $303.1 million in
mortgage originations achieved in the twelve months ended December 31, 1996.
Despite increased competition for product in the multi-family real estate
market, management believes that its presence in this market may continue to
expand. However, the Company's ability to originate these and other types of
loans could be adversely impacted by such factors as a marked increase in
interest rates, a significant increase in competition, or a decline in loan
demand.
ASSET QUALITY
The Company's asset quality, which has been viewed as consistently stellar,
experienced additional improvement in the second quarter of the year. Besides
recording no charge-offs for the eighth consecutive quarter, the Company
recovered $26,000, bringing to $72,000 the total balance of funds recovered
following the disposition of non-performing loans in the first six months of the
year. The allowance for loan losses thus rose to $9.4 million, representing
111.17% of non-performing loans and 0.74% of loans, net, at June 30th. As
evidence of the real extent of the coverage provided by the loan loss allowance,
the $9.4 million allowance is equivalent to 661.37% of net accumulated
charge-offs for the ten years ended June 30, 1997.
Further improvement was found in the level of non-performing loans which
totaled $8.5 million, or 0.67% of loans, net, at the close of the quarter, down
from $8.8 million, or 0.75% of loans, net at March 31, 1997, and from $9.7
million, or 0.84% of loans, net, at December 31st. Included in the June 30,
1997 amount were 48 non-accrual mortgage loans of $7.0 million and 28 loans 90
days or more delinquent totaling $1.5 million.
Foreclosed real estate, consisting of 5 properties, totaled $1.4 million, as
compared to $1.5 million at March 31, 1997 and $627,000 at December 31, 1996.
Non-performing assets thus amounted to $9.9 million, or 0.68% of total assets,
as compared to $10.3 million at the end of both March and December, representing
0.75% and 0.76% of total assets, respectively, at the corresponding dates. With
the exception of two foreclosed commercial real estate parcels totaling $1.3
million, the Company's non-performing assets were all secured by one-to-four
family residences at June 30, 1997. The Company also maintains a portfolio of
real estate investments, included in "other assets"on the balance sheet. At
quarter's end, the Company had ten such investments, totaling $1.0 million,
which were providing an 8.0% rate of return to the Bank.
For additional information, see the Asset Quality Analysis that follows and the
discussion of the loan loss provision beginning on page 18 of this report.
10
<PAGE> 13
<TABLE>
<CAPTION>
ASSET QUALITY ANALYSIS
At or For the At or For the
Six Months Ended Year Ended
June 30, December 31,
1997 1996
(dollars in thousands) (unaudited)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of period $9,359 $ 11,359
Loan recoveries 72 --
Reversal of loan losses -- (2,000)
------ --------
Balance at end of period $9,431 $ 9,359
====== ========
NON-PERFORMING ASSETS AT PERIOD-END:
Non-accrual mortgage loans $6,997 $ 6,861
Loans 90 days or more delinquent
and still accruing interest 1,486 2,798
------ --------
Total non-performing loans $8,483 $ 9,659
Foreclosed real estate 1,420 627
------ --------
Total non-performing assets $9,903 $ 10,286
====== ========
RATIOS:
Non-performing loans to loans, net 0.67% 0.84%
Non-performing assets to total assets 0.68 0.76
Allowance for loan losses to non-performing loans 111.17 96.90
Allowance for loan losses to loans, net 0.74 0.82
Allowance for loan losses to net accumulated
charge-offs for the past 10 years 661.37 625.00
</TABLE>
SECURITIES HELD TO MATURITY AND MONEY MARKET INVESTMENTS
As a matter of policy, the Company limits its securities investments to
short-term U.S. Treasuries and FNMA securities, and typically rolls over said
securities upon maturity. The balance of the portfolio consists of stock in the
Federal Home Loan Bank.
Reflecting management's emphasis on mortgage loan origination during the second
quarter of 1997, the Company's portfolio of securities declined to $71.0 million
at June 30th from $86.5 million at year-end 1996. U.S. Treasuries comprised
$46.0 million of the Company's portfolio at the close of the second quarter,
while FNMA securities comprised $13.3 million. The average maturity of the
Company's securities portfolio was 11 months. In addition, the market value of
the Company's securities equaled 100.1% and 100.6% of carrying value,
respectively, at June 30, 1997 and December 31, 1996.
Money market investments, consisting entirely of Federal funds sold, totaled
$11.9 million at the close of the second quarter, up from $7.0 million at
year-end 1996.
11
<PAGE> 14
MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The balance of mortgage-backed securities declined to $61.7 million at June 30,
1997 from $73.7 million at December 31, 1996. Continuing a downward trend that
began three years ago, the $12.0 million decline reflects both prepayments and
the absence of any new investments in such assets since the first quarter of
1994. As a matter of policy, all of the Company's mortgage-backed securities are
held to maturity; the average maturity of these securities was 2.5 years at June
30th.
The market value of the Company's mortgage-backed securities amounted to 101.1%
and 100.0% of carrying value, respectively, at June 30, 1997 and December 31,
1996.
FUNDING SOURCES
The Company's funding has primarily stemmed from deposits, loan interest and
principal payments, and the interest and maturity of its securities and
mortgage-backed securities. In the past six months, management has increasingly
leveraged the balance sheet, using FHLB borrowings to finance the significant
level of loan growth.
At June 30, 1997, the Company recorded deposits of $1.0 billion, up $7.2 million
from the level recorded at year-end 1996. The increase was prompted by a $13.3
million rise in CDs to $665.0 million (representing 64.5% of total deposits) and
supported by a $759,000 increase in non-interest-bearing accounts to $25.8
million. These increases occurred in tandem with a $3.5 million drop in savings
accounts to $274.3 million and a $3.4 million decrease in NOW and money market
accounts to $66.1 million.
The increasing concentration of CDs among the Company's deposits extends a trend
that has continued since the first quarter of 1996. The stability of interest
rates has proved a strong incentive for customers to invest their funds in
longer-term, higher yielding depository accounts. In the Bank's experience, the
vast majority of maturing CDs have been rolled over: in the twelve months ended
June 30, 1997, the retention rate on maturing CDs was 89.7%. CDs scheduled to
mature within twelve months of the close of the quarter totaled $521.8 million
and, while no assurances can be made, it is management's belief that the
majority will again be renewed with the Bank.
The Bank's ability to maintain and attract deposits was enhanced with the
relocation of a customer service center to a full-service branch office on July
7, 1997. Located in the Murray Hill section of Queens, the new branch offers
ample on-site parking, extended evening and Saturday hours, and an ATM.
Previously operated by Chase Bank, the office is within the Bank's traditional
market and has already been well received by its customer base.
As indicated above, the Company has increasingly drawn on its FHLB line of
credit to provide additional funding in times of substantial loan demand. FHLB
borrowings thus rose to $217.0 million at the close of the second quarter from
$81.4 million at year-end 1996. The higher cost of funds incurred through the
use of FHLB advances has been more than offset by the yields on the loans they
have been utilized to fund. Accordingly, management anticipates drawing further
on this line of credit to support greater loan production in the quarter ahead.
12
<PAGE> 15
INTEREST RATE SENSITIVITY
Given the extent to which changes in market interest rates may influence net
interest income, one of management's primary objectives is managing the
Company's interest rate risk. This is achieved by matching the maturities and
repricing dates of the Company's interest-earning assets with the maturities and
repricing dates of its interest-bearing liabilities.
In order to enhance this match, management has traditionally emphasized the
origination of adjustable rate mortgage loans on multi-family properties and
one-to-four family houses, and has confined its other investments to short-term
securities with an average maturity of under one year. On the liability side of
the balance sheet, management has closely monitored the pricing of its
depository products and has limited its use of FHLB borrowings to times when
market conditions have been particularly conducive to a high level of loan
origination activity.
While the majority of the Company's mortgage loans feature an annual rate
adjustment, the majority of multi-family mortgage originations over the past
four quarters have featured a fixed rate of interest for the first five years of
the loan. At the same time, the Company has increasingly utilized CDs and FHLB
borrowings as its primary sources of funding. As a result, the gap between the
Company's interest rate sensitive assets and interest rate sensitive liabilities
repricing within a one-year period was a negative 1.96% at June 30, 1997. The
presence of a negative gap indicates that more liabilities than assets will be
subject to repricing as a result of changes in interest rates.
LIQUIDITY AND CAPITAL POSITION
Liquidity
To ensure that its liquid resources are sufficient to fund its operations and
obligations, the Company maintains a portfolio of highly liquid money market
investments in the form of Federal funds sold, and invests in short-term
securities with a maturity of less than one year.
Federal funds sold, together with cash and due from banks, are the Company's
most liquid assets, and totaled $27.1 million, collectively, at June 30, 1997.
Securities, as stated previously, totaled $61.7 million, including $46.0 million
in U.S. Treasuries and $13.3 million in FNMA securities with a combined average
maturity of 11 months.
In addition to the funding that stems from its deposits, the Company derives
funding from principal and interest payments on loans and proceeds from maturing
securities and mortgage-backed securities. Still additional funding has been
provided through the Bank's FHLB line of credit, which totaled $440.1 million at
June 30th. Another $8.8 million was available through a Federal Reserve Bank of
New York line of credit, and $10.0 million more through a line of credit with a
money center bank.
The Bank's cash flows are derived from operating, investing, and financing
activities. In the six months ended June 30, 1997, the net cash provided by
operating activities increased to $6.4 million from $3.7 million in the
year-earlier six months. The difference stemmed primarily from a $2.2 million
increase in other assets as compared to a $2.3 million decrease in the
year-earlier period.
13
<PAGE> 16
The net cash used in investing activities rose to $98.5 million from $78.2
million in the six months ended June 30, 1996. The $20.3 million difference
primarily reflects a $126.6 million net increase in loans, versus $86.7 million
in the year-earlier period, together with a $12.6 million increase in proceeds
from the redemption of mortgage-backed securities to $21.0 million. These
increases were partially offset by a $12.0 million reduction in the proceeds
from maturing securities to $30.0 million and an $18.4 million decline in funds
utilized to purchase securities to $23.6 million.
The net cash provided by financing activities increased as well, to $98.0
million from $59.5 million in the first six months of 1996. The $38.5 million
increase primarily stemmed from a net increase of $135.6 million in FHLB
borrowings, versus $26.6 million in the year-earlier period. In addition, the
Company expended $47.0 million to purchase Treasury stock, net of exercised
stock options, up from $12.5 million in the prior six-month period. These
increases were somewhat offset by a net increase in deposits of $7.2 million,
down from $44.9 million in the first six months of 1996.
Capital
At June 30, 1997, the Company recorded stockholders' equity of $173.9 million,
representing 11.85% of total assets, as compared to $211.4 million, or 15.56%,
at year-end 1996. The 1997 amount reflects the allocation of $53.2 million for
the purchase of 1,389,291 shares under the Company's stock repurchase program.
Of the 1.5 million shares authorized for repurchase in January 1997 (as adjusted
for the subsequent 3-for-2 stock split and options exercised through the end of
the quarter), 235,851 shares remained available for repurchase at June 30th.
Reflecting activity through July 15th, this number was increased to 733,735 with
the Board of Directors' authorization on that date to repurchase up to an
additional 500,000 shares.
Also included in stockholders' equity at quarter's end was net income of $12.5
million less dividends paid and options exercised of $6.4 million, and $5.1
million relating to the amortization and appreciation of allocated shares in the
Company's stock related benefit plans and the tax benefits associated therewith.
Book value per share equaled $19.83 per share at the close of the current
quarter, based on 8,769,024 shares, the number of shares outstanding after
excluding 1,411,741 in unallocated ESOP shares.
The following regulatory capital analysis depicts the extent to which the Bank's
regulatory capital ratios exceeded the minimum Federal requirements at June 30,
1997.
REGULATORY CAPITAL ANALYSIS (Bank Only)
<TABLE>
<CAPTION>
At June 30, 1997
----------------
Risk-Based Capital
------------------
(dollars in thousands) Leverage Capital Tier 1 Total
---------------- ------ -----
Amount Ratio Amount Ratio Amount Ratio
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Total savings bank equity $143,149 10.32% $143,149 16.46% $152,579 17.55%
Regulatory capital
requirement 41,631 3.00 34,778 4.00 69,556 8.00
-------- ----- -------- ----- -------- -----
Excess $101,518 7.32% $108,371 12.46% $ 83,023 9.55%
-------- ----- -------- ----- -------- -----
</TABLE>
14
<PAGE> 17
In addition, the Bank continued to exceed the requirements for classification as
a well-capitalized institution. As defined by FDICIA, said institution has a
ratio of leverage capital to adjusted total assets of 5.00% or more; a ratio of
Tier 1 risk-based capital to risk-weighted assets of 6.00% or more; and a ratio
of total risk-based capital to risk-weighted assets of 10.0% or more.
The Company is also required to meet minimum regulatory capital requirements on
a consolidated basis which are imposed by the Federal Reserve Board and are
similar to the requirements imposed on the Bank. At June 30, 1997, the Company
exceeded all applicable regulatory capital requirements on a consolidated basis.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
NET INCOME
The Company recorded earnings of $5.3 million, or $0.55 per share, in the three
months ended June 30, 1997. In the year-earlier quarter, the Company's earnings
reflected the reversal of $2.0 million from the allowance for loan losses and
related tax consequences, and equaled $6.3 million, or $0.55 per share.
The Company's cash earnings, meanwhile, rose to $8.2 million from $7.5 million,
representing a 27.3% increase in cash earnings per share to $0.84 from $0.66.
Cash earnings are determined by adding back to reported earnings the non-cash
expenses related to the amortization and appreciation of allocated shares in the
Company's stock-related benefit plans and the associated tax benefits. In the
second quarter of 1997, such non-cash expenses totaled $2.9 million; in the
year-earlier quarter, they totaled $1.3 million.
The difference between the Company's cash and reported earnings is more clearly
delineated when comparing the resultant returns on average assets and
stockholders' equity ("ROA" and "ROE"). On the basis of reported earnings, the
Company's ROA was 1.54% in the current second quarter, while its ROE was 12.67%.
When these measures are determined on the basis of cash earnings, the
improvement is dramatic, with ROA rising to 2.36% and ROE rising to 19.44%. In
addition, the Company's efficiency ratio, which was 41.81% on the basis of
reported earnings, improves to 29.10% when cash earnings are factored in.
In the second quarter of 1997, the Company's earnings were primarily driven by a
$1.0 million increase in net interest income, a $45,000 increase in other
operating income, and a $1.1 million reduction in income tax expense. Net
interest income rose to $15.5 million, accompanied by an interest rate spread of
3.97% (consistent with the year-earlier level) and a net interest margin of
4.60% (down from 4.74%). While the increased use of borrowings contributed to a
$2.3 million rise in interest expense to $13.0 million, the record level of
mortgage originations fueled a $3.3 million increase in interest income to $28.4
million.
Other operating income, meanwhile, rose to $515,000, while income tax expense
declined to $4.0 million. The latter decline was triggered by a $2.1 million
drop in pre-tax income to $9.3 million from $11.4 million, reflecting the $2.0
million reversal from the allowance for loan losses in the second quarter of
1996.
These favorable factors combined to exceed the benefit of the $2.0 million
reversal in the year-earlier second quarter and a $1.2 million increase in
operating expense to $6.7 million in the current three-month period. The higher
1997 amount reflects a $910,000 increase in compensation and benefits expense to
$4.7 million, including $2.0 million in non-cash expenses stemming from the
amortization and appreciation of shares in the Company's stock-related benefit
plans.
15
<PAGE> 18
INTEREST INCOME
The Company derives interest income from its portfolio of interest-earning
assets, primarily comprised of mortgage and other loans. The balance of the
Company's interest-earning assets consists of securities, mortgage-backed
securities, and money market investments.
In the three months ended June 30, 1997, interest income totaled $28.4 million,
representing a $3.3 million increase from $25.1 million in the year-earlier
three months. The 13.5% increase reflects a $129.5 million rise in the average
balance of interest-earning assets to $1.3 billion, supported by a 21-basis
point rise in the average yield to 8.44%.
Average mortgage and other loans generated $26.3 million, or 92.3%, of total
interest income for the quarter, up from $22.6 million, or 90.2%, in the
year-earlier three months. In addition to a $153.2 million rise in the average
balance to $1.3 billion, the 16.1% increase in interest income derived from
these interest-earning assets stemmed from an 11-basis point rise in the average
yield to 8.71%. Reflecting the significant level of mortgage loan production,
the average balance of mortgage and other loans represented 89.4% of
interest-earning assets for the quarter, up from 86.3% in the second quarter of
1996.
Average securities meanwhile, provided $1.1 million in interest income, up
$88,000 from the level provided in the year-earlier three months. While the
average balance of securities fell $988,000 to $72.3 million, this decline was
offset by a 56-basis point rise in the average yield to 6.12%. Average
securities represented 5.4% of the quarter's interest-earning assets, down from
6.0% in the second quarter of 1996.
Reflecting a declining average balance and yield, the interest income provided
by mortgage-backed securities dropped to $1.0 million from $1.4 million in the
three months ended June 30, 1996. Specifically, the average balance of these
interest-earning assets fell $22.0 million to $65.0 million while the yield on
these interest-earning assets fell 2 basis points to 6.20%. Average
mortgage-backed securities represented 4.8% of average interest-earning assets,
as compared to the year-earlier 7.1%.
Average money market investments provided $78,000 in interest income, as
compared to $85,000 in the second quarter of 1996. The modest decline was the
net effect of a $711,000 reduction in the average balance to $5.9 million and a
14-basis point rise in the average yield to 5.30%.
INTEREST EXPENSE
The Company's interest expense stems primarily from the interest paid on its
depository products and, to a lesser extent, from the interest paid on its FHLB
borrowings and mortgagors' escrow accounts.
Interest expense rose $2.3 million to $13.0 million in the current second
quarter, fueled by a $160.0 million rise in average interest-bearing liabilities
to $1.2 billion and a 21-basis point increase in the average cost of funds to
4.47%. The increases stemmed primarily from a rise in the average balances of
CDs and FHLB borrowings, each of which were accompanied by higher funding
costs.
CDs remained the favored form of depository account in the current second
quarter. The average balance of CDs rose $85.3 million to $650.6 million,
representing 55.9% of average interest-bearing liabilities and generating 67.8%
of total second quarter 1997 interest expense. The interest expense stemming
from CDs rose $1.2 million to $8.8 million, reflecting the higher average
balance, which was accompanied by a one-basis point jump in cost to 5.41%.
16
<PAGE> 19
Savings accounts furnished $1.6 million in interest expense in the current
second quarter, down from $1.7 million in the second quarter of 1996. The
reduction stemmed from a $9.3 million decline in the average balance of savings
accounts to $275.9 million, while the cost of these funds held steady at 2.39%.
Savings accounts represented 23.7% and 28.4%, respectively, of average
interest-bearing liabilities in the current and year-earlier quarter, and 12.7%
and 15.9%, respectively, of total interest expense.
NOW & money market accounts contributed $447,000 in interest expense in the
current second quarter, as compared to $511,000 in the year-earlier three
months. The reduction was due to a $6.6 million decline in the average balance
to $68.1 million, accompanied by a 12-basis point drop in the average cost to
2.63%. NOW & money market accounts represented 5.9% and 7.4% of average
interest-bearing liabilities in the three months ended June 30, 1997 and 1996,
and 3.4% and 4.8%, respectively, of total interest expense.
In the second quarter of 1997, the Company increasingly accessed its FHLB line
of credit to support its record production of mortgage loans. As a result, the
average balance of borrowings rose $87.5 million to $146.4 million, representing
12.6% of average interest-bearing liabilities, up from the year-earlier 5.9%.
Reflecting the higher average balance and a 15-basis point rise in the average
cost to 5.67%, the interest expense stemming from FHLB borrowings rose to $2.1
million from $809,000 in the second quarter of 1996. FHLB borrowings thus
represented 16.0% of total interest expense in the current second quarter, as
compared to 7.6% in the year-earlier three months.
Mortgagors' escrow, meanwhile, provided interest expense of $10,000, down from
$12,000 in the second quarter of 1996. The reduction was the net effect of a
7-basis point drop in the average cost of these funds to 0.18%, and a $3.1
million increase in the average balance to $22.3 million.
NET INTEREST INCOME
Net interest income is the Company's principal source of income; its level is
influenced significantly by the volume of the Company's interest-earning assets
and interest-bearing liabilities, and by the spread between the yield on such
assets and the cost of such liabilities.
In the second quarter of 1997, the Company's earnings were boosted by a $1.1
million rise in net interest income to $15.5 million from $14.4 million in the
year-earlier three months. While interest expense rose $2.3 million in the
current second quarter, this increase was exceeded by the $3.4 million rise in
interest income, which was supported by the growing balance of interest-earning
assets and the higher yields provided by the Company's loan and securities
portfolios. In addition to increasing from the year-earlier quarter, net
interest income rose from $15.2 million in the first quarter of 1997.
While consistent with the level recorded in the year-earlier quarter, the
interest rate spread rose 10 basis points to 3.97% from 3.87% in the trailing
three-month period. At 4.60%, the Company's net interest margin contracted 4 and
14 basis points, respectively, from the trailing and year-earlier quarters.
Despite the increased use of borrowings to fund its loan production, the Company
anticipates that its net interest income will continue to rise. While higher
cost liabilities tend to pressure spreads and margins, the benefit of such
funding is reflected in the growing balance of higher-yielding interest-earning
assets and the interest income they have produced. This said, it should be
cautioned that the level of net interest income could be adversely impacted by a
more significant increase in interest rates than is currently anticipated, and
by factors that could hamper the Company's ability to originate loans. Among
these would be a downturn in the real estate market and a substantial increase
in competition for both funding and loans.
17
<PAGE> 20
<TABLE>
<CAPTION>
NET INTEREST INCOME ANALYSIS
(dollars in thousands) Three Months Ended June 30,
---------------------------
1997 1996
------------------- -------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage and other loans, net $1,204,850 $ 26,250 8.71% $1,051,651 $ 22,608 8.60%
Securities held to maturity 72,311 1,107 6.12 73,299 1,019 5.56
Mortgage-backed securities held to maturity 64,997 1,007 6.20 86,995 1,353 6.22
Money market investments 5,883 78 5.30 6,594 85 5.16
---------- ---------- ------ ---------- -------- ------
Total interest-earning assets 1,348,041 28,442 8.44% 1,218,539 25,065 8.23%
Non-interest-earning assets 39,733 40,667
-------- ------
Total assets $1,387,774 $1,259,206
========== ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW and money market accounts $ 68,076 $ 447 2.63% $ 74,701 $ 511 2.75%
Savings accounts 275,877 1,646 2.39 285,179 1,694 2.39
Certificates of deposit 650,636 8,778 5.41 565,334 7,596 5.40
FHLB borrowings 146,424 2,071 5.67 58,903 809 5.52
Mortgagors' escrow 22,281 10 0.18 19,148 12 0.25
---------- ---------- ------ ---------- -------- ------
Total interest-bearing liabilities 1,163,294 12,952 4.47% 1,003,265 10,622 4.26%
Non-interest-bearing deposits 26,351 ---------- 23,154 --------
Other liabilities 29,468 21,716
---------- ----------
Total liabilities 1,219,113 1,048,135
Stockholders' equity 168,661 211,071
---------- ----------
Total liabilities and stockholders' equity $1,387,774 $1,259,206
========== ==========
Net interest income/interest rate spread $ 15,490 3.97% $ 14,443 3.97%
========= ======= ======== ======
Net interest-earning assets/net
interest margin $ 184,747 4.60 $ 215,274 4.74
========== ======= ========== ======
Ratio of interest-earning assets
to interest-bearing liabilities 115.88 121.46
======= ======
</TABLE>
PROVISION FOR LOAN LOSSES
The second quarter of 1997 was the eighth consecutive quarter in which the
Company suspended its provision for loan losses, and its eighth consecutive
quarter without any charge-offs being recorded. Reflecting these achievements,
and the recovery of $72,000 following the disposition of non-performing loans,
the allowance for loan losses rose to $9.4 million, representing 111.17% of
non-performing loans and 0.74% of loans, net, at the current quarter's end. In
the year-earlier quarter, the Company recovered $2.0 million from the allowance
for loan losses, which resulted in a $750,000 boost to net income.
18
<PAGE> 21
Non-performing assets declined to $9.9 million at the close of the second
quarter, from $10.3 million at both March 31, 1997 and December 31, 1996.
Included in the June 30, 1997 amount were $8.5 million in non-performing loans,
representing 0.67% of loans, net, and $1.4 million in foreclosed real estate.
The allowance for loan losses is reviewed on a regular basis. Such review
includes an analysis of several factors, including the level of coverage
provided given the current and prospective quality of the loan portfolio. Given
the current quality of its assets and the coverage provided by the loan loss
allowance, the Company will likely continue its suspension of the loan loss
provision in the quarter ahead. However, a significant change in the quality of
the Company's assets or a significant downturn in the real estate market could
result in loan loss provisions again being made.
For more information regarding asset quality and the allowance for loan losses,
see the discussion and analysis on page 10 of this report.
OTHER OPERATING INCOME
In the second quarter of 1997, the Company recorded other operating income of
$515,000, up from $470,000 in the second quarter of 1996. The $45,000 increase
reflects a $160,000 rise in other income to $214,000, offsetting a $115,000
decline in fee income to $301,000.
OPERATING EXPENSE
Operating expense consists primarily of compensation and benefits expense,
together with occupancy and equipment and general and administrative ("G&A")
expenses.
In the quarters ended June 30, 1997 and 1996, operating expense totaled $6.7
million and $5.5 million, respectively, representing 1.93% and 1.76% of average
assets in the corresponding periods. The higher amount in 1997 reflects a
$910,000 increase in compensation and benefits expense to $4.7 million,
including $2.0 million in non-cash expenses related to the amortization and
appreciation of shares held in the Company's stock-related benefit plans. The
price of a share of Company stock rose 85.7% to $45.50 at June 30, 1997 from
$24.50 per share (as adjusted for the stock splits on August 22, 1996 and April
10, 1997) at June 30, 1996.
The impact of these non-cash expenses is especially evident when the Company's
efficiency ratio is considered. On the basis of reported earnings, the
efficiency ratio equaled 41.81% in the three months ended June 30, 1997. On the
basis of cash earnings, which exclude these non-cash expenses, the Company's
efficiency ratio improves to 29.10%.
Together with the related tax benefit of $823,000, the total impact on the
balance sheet of the Company's non-cash expenses was $2.9 million, all of
which was added back to capital at June 30th.
Lesser increases were recorded in occupancy and equipment expense, which rose
$31,000 to $631,000; G&A expense, which rose $63,000 to $1.2 million; and other
operating expenses, which rose $155,000 to $193,000.
The number of full-time equivalent employees at the close of the quarter was
283.
19
<PAGE> 22
INCOME TAX EXPENSE
Income tax expense, including Federal, state, and local income taxes, declined
to $4.0 million in the current second quarter from $5.1 million in the second
quarter of 1996.
The $1.1 million decline was triggered by a $2.1 million reduction in pre-tax
income to $9.3 million from $11.4 million in the year-earlier three months. As
previously indicated, the decline in pre-tax income reflects the reversal of
$2.0 million from the allowance for loan losses in the second quarter of 1996.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
EARNINGS SUMMARY
The Company recorded earnings of $12.5 million, or $1.21 per share, in the six
months ended June 30, 1997, up from $11.5 million, or $1.01 per share, for the
comparable period in 1996. The 1997 amount includes the reversal of $1.3 million
in income tax charges during the first quarter, while the 1996 figure reflects
the reversal of $2.0 million from the allowance for loan losses and related tax
consequences in the second quarter of the year. Earnings per share for both
periods reflect a 3-for-2 stock split on April 10, 1997 and a 4-for-3 stock
split on August 22, 1996.
The Company's cash earnings rose to $17.5 million from the year-earlier $14.0
million, representing a 40.2% increase in cash earnings per share to $1.71 from
$1.22. These increases reflect both the leveraging of the Company's balance
sheet between June 30, 1996 and June 30, 1997 and the accretive effect of its
share repurchases. On the basis of cash earnings, the Company's ROA and ROE were
2.57% and 18.99%, respectively, for the current six-month period, as compared to
2.24% and 13.20% for the year-earlier six months. The efficiency ratio improved,
as well, to 29.77% from 30.62%.
The Company's 1997 earnings were substantially augmented by a $2.4 million
increase in net interest income to $30.7 million and by a $2.9 million reduction
in income tax expense to $5.8 million. The rise in net interest income was the
net effect of a $6.0 million increase in interest income to $55.5 million and a
$3.5 million increase in interest expense to $24.9 million. The rise in interest
income stemmed from significant growth in the average balance and yield of
interest-earning assets, while the higher level of interest expense reflects an
increased concentration of higher-cost CDs and FHLB borrowings. The Company's
interest rate spread rose 3 basis points to 3.92% for the period, while its net
interest margin narrowed 5 basis points to 4.62%.
The decline in income tax expense reflects a decline in pre-tax income to $18.3
million from $20.2 million in the year-earlier period, combined with the first
quarter 1997 reversal of $1.3 million in income tax charges.
These favorable factors combined to exceed a $2.2 million rise in operating
expense to $13.2 million and a $137,000 decline in other operating income to
$819,000. The higher level of operating expense primarily stemmed from an
increase in compensation and benefits expense to $9.2 million, including $3.8
million in non-cash expenses related to the amortization and appreciation of
allocated shares in the Company's stock-related benefit plans.
The provision for loan losses continued to be suspended in the first six months
of 1997.
20
<PAGE> 23
INTEREST INCOME
The Company's interest income rose to $55.5 million in the first six months of
1997 from $49.6 million in the first six months of 1996. The $6.0 million, or
12.0%, increase reflects both a $120.2 million, or 9.9%, rise in average
interest-earning assets to $1.3 billion and a 16-basis point rise in the average
yield to 8.36%.
The rise in interest income was substantially driven by the higher level of
interest income derived from average mortgage and other loans. The average
balance of such assets increased $149.4 million, or 14.5%, to $1.2 billion and
generated a yield of 8.65%, up 5 basis points. Accordingly, average mortgage and
other loans provided $51.0 million in interest income, up $6.7 million, or
15.2%, from the year-earlier amount. In the six months ended June 30, 1997,
average mortgage and other loans represented 88.8% of average interest-earning
assets and generated 91.9% of total interest income for the period.
The rise in interest income in the current six-month period also reflects an
increase in the average balance and yield on securities. Specifically, the
average balance of securities rose $2.4 million to $75.2 million, while the
yield grew 35 basis points to 6.04%. As a result, the interest income provided
by average securities rose $199,000 to $2.3 million, representing 4.1% of
interest income for the current six- month period. Average securities
represented 5.7% of average interest-earning assets, as compared to 6.0% in the
first six months of 1996.
The increased interest income provided by these average interest-earning assets
substantially exceeded declines in the interest income provided by the Company's
average money market investments and mortgage-backed securities. Average money
market investments provided $138,000 in year-to-date interest income, down from
$414,000 in the first six months of 1996. The average balance fell $10.6 million
to $5.3 million, while the yield on these assets dropped 3 basis points to
5.17%.
Average mortgage-backed securities, meanwhile, generated $2.1 million in
interest income, down $684,000 from $2.8 million in the year-earlier six months.
The decrease reflects a $21.0 million reduction in the average balance to $68.1
million (representing 5.1% of average interest-earning assets), and an 8-basis
point decrease in the yield on these assets to 6.17%.
INTEREST EXPENSE
The Company recorded interest expense of $24.9 million in the first six months
of 1997 and $21.3 million in the first six months of 1996. The $3.6 million
increase stemmed from a $135.1 million rise in the average balance of
interest-bearing liabilities to $1.1 billion, together with a 13-basis point
rise in the cost of funds to 4.44%.
The bulk of these increases stemmed from the rising average balances of CDs and
FHLB borrowings. In the six months ended June 30, 1997 and 1996, average CDs
generated interest expense of $17.4 million and $15.2 million, respectively. The
$2.2 million increase was the net effect of a $91.2 million rise in the average
balance to $649.9 million, and a 9-basis point drop in the cost of these funds
to 5.40%. Average CDs represented 57.6% of average interest-bearing liabilities
in the current six-month period, and generated 70.0% of interest expense.
21
<PAGE> 24
FHLB borrowings generated interest expense of $3.3 million, up from $1.6 million
in the first six months of 1996. The average balance rose $58.4 million to
$116.7 million, and generated a cost of 5.63%, up 4 basis points. As a result,
average FHLB borrowings represented 10.3% of average interest-bearing
liabilities in the current period, as compared to the year-earlier 5.9%.
Similarly, the interest expense stemming from FHLB borrowings represented 13.1%
of interest expense in the period, up from the year-earlier 7.6%.
The rise in interest expense was partly offset by declines in the levels
provided by the Company's average savings accounts and NOW and money market
accounts. The interest expense generated by average savings accounts declined
$120,000 to $3.3 million, reflecting a $9.8 million decrease in the average
balance to $275.5 million, as the cost of these funds remained constant at
2.40%. Average savings accounts represented 24.4% of average interest-bearing
liabilities in the current period, and provided 13.2% of total interest expense.
The interest expense generated by average money market investments dropped
$137,000 to $917,000, as the average balance of these liabilities fell $6.7
million to $68.7 million and the cost of funds fell 12 basis points to 2.69%.
Average NOW and money market accounts represented 6.1% of average
interest-bearing liabilities and generated a modest 3.7% of interest expense.
Mortgagors' escrow contributed $20,000 to total interest expense, up from the
year-earlier $15,000, reflecting a $2.0 million increase in the average balance
to $18.6 million and a 4-basis point increase in the cost to 0.22%.
NET INTEREST INCOME
In the first six months of 1997, the Company's earnings were fueled by net
interest income of $30.7 million, up from $28.3 million in the year-earlier six
months. The $2.4 million increase was the net effect of a $6.0 million rise in
interest income to $55.5 million and a $3.6 million rise in interest expense to
$24.9 million. The growth in net interest income was accompanied by a 3-basis
point rise in interest rate spread to 3.92%, and by a 5-basis point drop in net
interest margin to 4.62%.
- continued -
22
<PAGE> 25
<TABLE>
<CAPTION>
NET INTEREST INCOME ANALYSIS
(dollars in thousands) Six Months Ended June 30,
-----------------------------
1997 1996
------------------- --------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage and other loans, net $1,180,222 $ 51,039 8.65% $1,030,787 $ 44,310 8.60%
Securities held to maturity 75,217 2,271 6.04 72,864 2,072 5.69
Mortgage-backed securities held to maturity 68,053 2,099 6.17 89,083 2,783 6.25
Money market investments 5,340 138 5.17 15,910 414 5.20
---------- ---------- ------ ---------- -------- ------
Total interest-earning assets 1,328,832 55,547 8.36% 1,208,644 49,579 8.20%
Non-interest-earning assets 38,335 40,640
---------- ---------
Total assets $1,367,167 $1,249,284
========== ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW and money market accounts $ 68,650 $ 917 2.69% $ 75,326 $ 1,054 2.81%
Savings accounts 275,500 3,279 2.40 285,349 3,399 2.40
Certificates of deposit 649,885 17,396 5.40 558,644 15,241 5.49
FHLB borrowings 116,683 3,258 5.63 58,260 1,620 5.59
Mortgagors' escrow 18,583 20 0.22 16,613 15 0.18
---------- ---------- ------ ---------- -------- ------
Total interest-bearing liabilities 1,129,301 24,870 4.44% 994,192 21,329 4.31%
Non-interest-bearing deposits 25,543 ---------- 22,855 --------
Other liabilities 27,565 20,300
---------- ----------
Total liabilities 1,182,409 1,037,347
Stockholders' equity 184,758 211,937
---------- ----------
Total liabilities and stockholders' equity $1,367,167 $1,249,284
========== ==========
Net interest income/interest rate spread $ 30,677 3.92% $ 28,250 3.89%
========== ====== ======== ======
Net interest-earning assets/net
interest margin $ 199,531 4.62 $ 214,452 4.67
========= ====== ========== ======
Ratio of interest-earning assets
to interest-bearing liabilities 117.67 121.57
====== ======
</TABLE>
PROVISION FOR LOAN LOSSES
As indicated in the second quarter discussion, the provision for loan losses has
been suspended since the second quarter of 1995. In the six months ended June
30, 1996, the Bank recovered $2.0 million from the loan loss allowance, which
resulted in a $750,0000 contribution to net income in said period.
For a further discussion of the provision and allowance for loan losses, see the
discussions on pages 10 and 18 of this report.
23
<PAGE> 26
OTHER OPERATING INCOME
The Company recorded other operating income of $819,000 in the six months ended
June 30, 1997, as compared to $956,000 in the six months ended June 30, 1996.
The $137,000 decline was the net effect of a $193,000 decrease in fee income to
$580,000 and a $56,000 rise in other income to $239,000.
OPERATING EXPENSE
In the six months ended June 30, 1997 and 1996, the Company recorded operating
expense of $13.2 million, or 1.93% of average assets, and $11.0 million, or
1.76% of average assets, respectively. The 1997 increase primarily stemmed from
a $1.7 million increase in compensation and benefits expense to $9.2 million,
including $3.8 million in non-cash expenses related to the amortization and
appreciation of shares in the Company's stock-related benefit plans. Together
with $1.3 million in related tax benefits, the $3.8 million was added back to
capital at June 30th. On the basis of cash earnings, the ratio of operating
expense to average assets improves to 1.37% for the current period from 1.43% in
the year-earlier six months.
The balance of the rise in 1997 operating expense stemmed from more modest
increases, as occupancy and equipment expense rose $80,000 to $1.3 million; G&A
expense rose $223,000 to $2.3 million, and other operating expenses rose
$210,0000 to $349,000. Despite the rise in operating expense, the Company's 1997
efficiency ratio continued to reflect management's focus on cost containment,
equaling 41.92% on the basis of reported earnings and 29.77% when cash earnings
are factored in.
INCOME TAX EXPENSE
Income tax expense declined to $5.8 million in the current six-month period from
$8.7 million in the first six months of 1996. The $2.9 million reduction was
triggered by a $2.0 million drop in pre-tax income to $18.3 million from
$20.2 million, combined with the reversal of $1.3 million in income tax charges
in the first quarter of 1997.
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements which are based on
management's current expectations regarding economic, legislative, and
regulatory issues that may impact the Company's earnings in future periods.
Factors that could cause future results to vary from current management
expectations include, but are not limited to, general economic conditions;
changes in interest rates, deposit flows, loan demand, real estate values, and
competition; changes in accounting principles, policies, or guidelines; changes
in legislation and regulation; and other economic, competitive, governmental,
regulatory, and technological factors affecting the Company's operations,
pricing, products, and services.
24
<PAGE> 27
QUEENS COUNTY BANCORP, INC.
PART 2 - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is sometimes involved in routine legal proceedings, none of which
management deems to be material to the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On July 15, 1997, the Board of Directors of Queens County Bancorp authorized
the repurchase of up to an additional 500,000 shares of Company stock under its
Stock Repurchase Program, bringing to 733,735 the number of shares still
available for repurchase on July 16, 1997, the date the authorization was
announced.
In addition, the Board of Directors increased the quarterly cash dividend 25% to
25 cents per share. The dividend will be paid on August 15, 1997 to shareholders
of record on August 1st.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Regulation S-K Exhibits
No. 10.1: Form of Company Employment Agreement
No. 10.2: Form of Bank Employment Agreement
No. 11: Statement re: Computation of Per Share Earnings
(b) Form 8-K
Not applicable.
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Queens County Bancorp, Inc.
(Registrant)
DATE: August 8, 1997 BY: /s/ Joseph R. Ficalora
----------------------
Joseph R. Ficalora
Chairman, President, and
Chief Executive Officer
(Duly Authorized Officer)
DATE: August 8, 1997 BY: /s/ Robert Wann
---------------
Robert Wann
Senior Vice President,
Comptroller, and
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 29
EXHIBIT INDEX
No. 10.1: Form of Company Employment Agreement
No. 10.2: Form of Bank Employment Agreement
No. 11: Statement re: Computation of Per Share Earnings
<PAGE> 1
QUEENS COUNTY BANCORP, INC.
EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AGREEMENT as amended and restated effective __, 1997 was first
made effective as of November 23, 1993, by and between Queens County Bancorp,
Inc. (the "Holding Company"), a corporation organized under the laws of
Delaware, with its principal administrative office at 38-25 Main Street,
Flushing, New York, and ________ (the "Executive"). Any reference to "Bank"
herein shall mean Queens County Savings Bank or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES:
During the period of his employment hereunder, Executive agrees to
serve as ________ of the Holding Company. The Executive shall render
administrative and management services to the Holding Company such as are
customarily performed by persons in a similar executive capacity. During said
period, Executive also agrees to serve, if elected, as ________ of the Holding
Company. Failure to reelect Executive as ________ of the Holding Company or
failure to reelect Executive as ________ of the Bank without the consent of the
Executive shall constitute a breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board of the Holding
Company or the Executive elects not to extend the term of the Agreement further
by giving written notice to the other party in accordance with Section 9 of this
Agreement, in which case the term of this Agreement shall be fixed and shall end
on the third anniversary of the date of such written notice; provided, that in
any event, the term of this Agreement shall end on the last day of the month in
which the Executive attains the age of 65. The Board will review the Agreement
and the Executive's performance annually for purposes of determining whether to
give notice not to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting.
1
<PAGE> 2
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Holding Company and participation in community
and civic organizations; provided, however, that, with the approval of the
Board, as evidenced by a resolution of such Board, from time to time, Executive
may serve, or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which, in such
Board's judgment, will not present any conflict of interest with the Holding
Company, or materially affect the performance of Executive's duties pursuant to
this Agreement.
(c) Notwithstanding anything herein contained to the contrary: (i)
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement; and (ii) nothing in this Agreement shall mandate
or prohibit a continuation of Executive's employment following the expiration of
the term of this Agreement upon such terms and conditions as the Board and
Executive may mutually agree.
(d) Upon the termination of Executive's employment with the Holding
Company, the daily extensions provided pursuant to section 2(a), shall cease (if
such extensions have not previously ceased), and, if such termination is under
circumstances described in section 4(a), the term "remaining term of the
Agreement" in section 4(b) shall mean the period of time commencing from the
date of such termination and ending on the last day of the employment period
computed with reference to all extensions prior to such termination.
(e) In the event that Executive's duties and responsibilities with
respect to the Bank are temporarily or permanently terminated pursuant to
Section 8 of the Employment Agreement dated November 23, 1993 between Executive
and the Bank ("Bank Agreement") and the course of conduct upon which such
termination is based would not constitute grounds for Termination for Cause
under Section 8 of this Agreement then Executive shall, to the extent
practicable, assume such duties and responsibilities formerly performed at the
Bank as part of his duties and responsibilities as of the Holding Company.
Nothing in this provision shall be interpreted as restricting the Holding
Company's right to remove Executive for Cause in accordance with Section 8 of
this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Holding
Company shall pay Executive as compensation a salary of not less than per
year ("Base Salary"). Base Salary shall include any amounts of compensation
deferred by Executive under a qualified plan maintained by the Bank. Such Base
Salary shall be payable bi-weekly. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted
2
<PAGE> 3
by the Salary and Personnel Committee designated by the Board, and the Board may
increase Executive's Base Salary. An increase shall become the "Base Salary" for
purposes of this Agreement. In no event shall Executive's annual rate of salary
under this Agreement in effect at a particular time be reduced without his prior
written consent. In addition to the Base Salary provided in this Section 3(a),
the Holding Company shall also provide Executive at no cost to Executive with
all such other benefits as are provided uniformly to permanent full-time
employees of the Holding Company and the Bank.
(b) The Holding Company will provide Executive with employee benefit
plans, arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Holding Company will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder, provided, however, that the Holding Company may make such
changes to such plans, agreements or perquisites generally provided on a
nondiscriminatory basis to all employees, without the Executive's consent.
Without limiting the generality of the foregoing provisions of this Subsection
(b), Executive will be entitled to participate in or receive benefits under any
employee benefit plans including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Holding Company in the future to its senior
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements. Executive will be entitled to incentive compensation and bonuses
as provided in any plan of the Holding Company in which Executive is eligible to
participate. 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.
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3 and other compensation provided for by paragraph (b) of this
Section 3, the Holding Company shall pay or reimburse Executive for all
reasonable travel and other reasonable expenses incurred by Executive performing
his obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
(d) In the event that Executive assumes additional duties and
responsibilities pursuant to Section 2(c) of this Agreement by reason of one of
the circumstances contained in Section 2(c) of this Agreement, and the Executive
receives or will receive less than the full amount of compensation and benefits
formerly entitled to him under the Bank Agreement, the Holding Company shall
assume the obligation to provide Executive with his compensation and benefits in
accordance with the Bank Agreement less any compensation and benefits received
from the Bank, subject to the terms and conditions of this Agreement including
the termination for Cause provisions in Section 8.
3
<PAGE> 4
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Section 8.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than a Change in Control, as defined
in Section 5(a) hereof; for Disability, as defined in Section 6 hereof; upon
Retirement, as defined in Section 7 hereof; or for Cause, as defined in Section
8 hereof; (ii) Executive's resignation from the Holding Company's employ, upon
any (A) failure to elect or reelect or to appoint or reappoint Executive as ,
(B) unless consented to by the Executive, a material change in Executive's
function, duties, or responsibilities, which change would cause Executive's
position to become one of lesser responsibility, importance, or scope from the
position and attributes thereof described in Section 1, above, (and any such
material adverse change shall be deemed a continuing breach of this Agreement),
(C) a relocation of Executive's principal place of employment by more than 30
miles from its location at the effective date of this Agreement, or a material
reduction in the benefits and perquisites to the Executive from those being
provided as of the effective date of this Agreement, (D) liquidation or
dissolution of the Bank or Holding Company, or (E) material breach of this
Agreement by the Holding Company. Upon the occurrence of any event described in
clauses (A), (B), (C), (D) or (E), above, Executive shall have the right to
elect to terminate his employment under this Agreement by resignation upon not
less than thirty (30) days prior written notice given within a reasonable period
of time not to exceed, except in case of a continuing breach, four calendar
months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the Holding Company
shall be obligated to pay Executive, or, in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to the payments due
for the remaining term of the Agreement including Base Salary, bonuses and any
other cash or deferred compensation paid or to be paid to the executive for such
years, and the amount of any benefits received or to be received by the
Executive or contributions made or to be made on behalf of the Executive
pursuant to any employee benefit plans maintained by the Bank during such years.
At the election of the Executive, which election is to be made within thirty
(30) days of the Date of Termination, such payments shall be made in a lump sum
or paid monthly during the remaining term of the agreement following the
Executive's termination. In the event that no election is made, payment to the
Executive will be made on a monthly basis during the remaining term of the
Agreement. Such payments shall not be reduced in the event the Executive obtains
other employment following termination of employment.
4
<PAGE> 5
(c) Upon the occurrence of an Event of Termination, the Holding Company
will cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank or the Holding
Company for Executive prior to his termination. Such coverage shall cease upon
the expiration of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments
pursuant to Section 4(b) hereof, on an annual basis, thereafter, between the
dates of January 1 and January 31 of each year, Executive shall elect whether,
the balance of the amount payable under the Agreement at that time shall be paid
in a lump sum or on a pro rata basis. Such election shall be irrevocable for the
year for which such election is made.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or the Holding Company as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank or the Holding Company within the meaning of the Change in
Bank Control Act and the Rules and Regulations promulgated by the Federal
Deposit Insurance Corporation ("FDIC") at 12 C.F.R. Section 303.4(a) with
respect to the Bank and the Board of Governors of the Federal Reserve System
("FRB") at 12 C.F.R. Section 225.41(b) with respect to the Holding Company, as
in effect on the date hereof; or (iii) results in a transaction requiring prior
FRB approval under the Bank Holding Company Act of 1956 and the regulations
promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on
the date hereof except for the Holding Company's acquisition of the Bank; or
(iv) without limitation such a Change in Control shall be deemed to have
occurred at such time as (A) any "person" (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Bank or the Holding Company representing 20% or more of the Bank's or the
Holding Company's outstanding securities except for any securities of the Bank
purchased by the Holding Company in connection with the conversion of the Bank
to the stock form and any securities purchased by the Bank's employee stock
ownership plan and trust; or (B) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose nomination for
election by the Holding Company's stockholders was approved by the same
Nominating Committee serving under an Incumbent Board, shall be, for purposes of
this clause (B), considered as though he were a member of the Incumbent Board;
or (C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Bank or the Holding Company or similar
transaction occurs in which the Bank or Holding Company is not the resulting
entity; or (D) a proxy statement shall be distributed soliciting proxies from
stockholders of the Holding Company, by
5
<PAGE> 6
someone other than the current management of the Holding Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Holding Company or Bank or a similar transaction with one or more corporations
as a result of which the outstanding shares of the class of securities then
subject to such plan or transaction are exchanged for or converted into cash or
property or securities not issued by the Bank or the Holding Company; or (E) a
tender offer is made for 20% or more of the voting securities of the Bank or
Holding Company then outstanding.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board has determined that a Change in
Control has occurred, notwithstanding the provisions of Section 2(a), the term
of this Agreement shall be the be deemed to have commenced as of the date of the
Change in Control and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the date of the Change in Control, the
term of this Agreement shall be extended for one day each day.
(c) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the benefits provided in
paragraphs (d), (e), (f) and (g) of this Section 5 upon his subsequent
termination of employment at any time during the term of this Agreement
(regardless of whether such termination results from his dismissal or his
resignation at any time during the term of this Agreement following any
demotion, loss of title, office or significant authority or responsibility,
reduction in the annual compensation or benefits or relocation of his principal
place of employment by more than 30 miles from its location immediately prior to
the change in control), unless such termination is because of his death, or
termination for Cause.
(d) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Holding Company shall pay Executive,
or in the event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, as severance pay or liquidated damages, or both,
a sum equal to the greater of the payments due for the remaining term of the
Agreement or three (3) times the average of the three (3) preceding years' Base
Salary, including bonuses and any other cash or deferred compensation paid or to
be paid to the Executive during such years, and the amount of any contributions
made or to be made to any employee benefit plans, on behalf of the Executive,
maintained by the Bank or the Holding Company during such years except to the
extent such benefits are otherwise payable to the Executive under the terms of
such plans upon a Change in Control. For purposes of determining the benefit due
under this Section 5(d), when calculating the payments due for the remaining
term of this Agreement, it shall be assumed that for each year of the remaining
term of the Agreement, the Executive will receive (i) an annual increase in Base
Salary equal to the average increase received in the preceding three years, (ii)
the maximum bonus payable, and (iii) the maximum contribution by or on behalf of
the Executive with respect to any employee benefit plans maintained by the Bank.
At the election of the Executive, which election is to be made within thirty
(30) days of the Date of Termination following a Change in Control, such payment
may be made in a lump sum or paid in equal monthly installments during the
thirty-six (36)
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months following the Executive's termination. In the event that no election is
made, payment to the Executive will be made on a monthly basis during the
remaining term of the Agreement.
(e) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Holding Company will cause to be
continued life, medical, dental and disability coverage substantially identical
to the coverage maintained by the Bank for Executive prior to his severance.
Such coverage and payments shall cease upon the expiration of thirty-six (36)
months.
(f) In the event that the Executive is receiving monthly payments
pursuant to Section 5(d) hereof, on an annual basis, thereafter, between the
dates of January 1 and January 31 of each year, Executive shall elect whether
the balance of the amount payable under the Agreement at that time shall be paid
in a lump sum or on a pro rata basis pursuant to such section. Such election
shall be irrevocable for the year for which such election is made.
(g) In each calendar year that Executive is entitled to receive
payments or benefits under the provisions of the Employment Agreement with the
Bank and this Employment Agreement, the Holding Company shall determine if an
excess parachute payment (as defined in Section 4999 of the Internal Revenue
Code of 1986, as amended, and any successor provision thereto, (the "Code"))
exists. Such determination shall be made after taking any reductions permitted
pursuant to Section 280G of the Code and the regulations thereunder. Any amount
determined to be an excess parachute payment after taking into account such
reductions shall be hereafter referred to as the "Initial Excess Parachute
Payment". As soon as practicable after a Change in Control, the Initial Excess
Parachute Payment shall be determined. Upon the Date of Termination following a
Change in Control, the Holding Company shall pay Executive, subject to
applicable withholding requirements under applicable city, state or federal law
an amount equal to:
(1) twenty (20) percent of the Initial Excess Parachute Payment
(or such other amount equal to the tax imposed under Section
4999 of the Code; and
(2) such additional amount (tax allowance) as may be necessary to
compensate Executive for the payment by Executive of city,
state and federal income and excise taxes on the payment
provided under clause (1) and on any payments under this
Clause (2). In computing such tax allowance, the payment to be
made under Clause (1) shall be multiplied by the "gross up
percentage" ("GUP"). The GUP shall be determined as follows:
Tax Rate
GUP = _______
1 - Tax Rate
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The "Tax Rate" for purposes of computing the GUP shall be the sum of
the highest marginal federal, state and city income and
employment-related tax rates, including any applicable excise tax
rates, applicable to the Executive in the year in which the payment
under Clause (1) is made.
(3) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the Initial Excess Parachute Payment (such different amount being hereafter
referred to as the "Determinative Excess Parachute Payment") then the Holding
Company's independent accountants shall determine the amount (the "Adjustment
Amount") the Holding Company must pay to the Executive in order to put the
Executive in the same position as the Executive would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, independent accountants of the
Holding Company shall take into account any and all taxes (including any
penalties and interest) paid by or for Executive or refunded to Executive or for
Executive's benefit. As soon as practicable after the Adjustment Amount has been
so determined, the Holding Company shall pay the Adjustment Amount to Executive.
In no event however, shall Executive make any payment under this paragraph to
the Holding Company.
6. TERMINATION FOR DISABILITY
(a) If, as a result of Executive's incapacity due to physical or mental
illness, such incapacity being determined by a doctor selected by the Holding
Company, he shall have been absent from his duties with the Holding Company 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 Holding Company may
terminate Executive's employment for "Disability."
(b) The Holding Company will pay Executive, as disability pay, a bi-weekly
payment equal to seventy-five percent (75%) of Executive's bi-weekly rate of
Base Salary on the effective date of such termination. 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
Holding 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
Holding Company; (ii) Executive's full-time employment by another employer;
(iii) Executive attaining the normal age of retirement or receiving benefits
under the Bank's Defined Benefit Plan; (iv) Executive's death; or (v) the
expiration of the term of this Agreement. Notwithstanding any other provisions
to the contrary, the Holding Company may apply any proceeds from disability
income insurance for Executive which was paid for by the Bank or Holding Company
as partial satisfaction of its obligations under this Section.
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(c) The Holding Company will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Holding Company 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 Holding 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 Holding Company;
(ii) Executive's full-time employment by another employee; (iii) Executive's
attaining the normal age of retirement or receiving benefits under the Bank's
Defined Benefit Plan; (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 which Executive is
incapable of performing his duties hereunder by reason of temporary disability.
7. TERMINATION UPON RETIREMENT.
Termination by the Holding Company of the Executive based on
"Retirement" shall mean termination in accordance with the Holding Company's or
Bank's retirement policy or in accordance with any retirement arrangement
established with Executive's consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement plan of the Holding Company or the Bank and other plans to which
Executive is a party, and shall be entitled to the benefits, if any, as a former
employee under the Holding Company's or the Bank's employee benefit plans and
programs and compensation plans and programs.
8. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of
personal dishonesty which results in loss to the Holding Company or one of its
affiliates, intentional failure to perform stated duties, or willful violation
of any law, rule, regulation (other than traffic violations or similar offenses)
or final cease and desist order which results in substantial loss to the Holding
Company or one of its affiliates. For purposes of this Section, no act, or the
failure to act, on Executive's part shall be "willful" unless done, or omitted
to be done, not in good faith and without reasonable belief that the action or
omission was in the best interest of the Holding Company or its affiliates.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after termination for
Cause. Any stock options and related limited rights granted to Executive under
any stock option plan, or any unvested awards granted to Executive under any
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RRP of the Bank, the Holding Company or any subsidiary or affiliate thereof,
shall become null and void effective upon Executive's receipt of Notice of
Termination for Cause pursuant to Section 9 hereof, and shall not be exercisable
by or delivered to Executive at any time subsequent to such Termination for
Cause.
9. NOTICE.
(a) Any purported termination by the Holding Company or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) Subject to section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period, and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall not be less than thirty (30) days from the date such Notice of
Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Holding Company will
continue to pay Executive his full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, Base Salary) and
continue him as a participant in all compensation, benefit and insurance plans
in which he was participating when the notice of dispute was given, until the
dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
(d) The Holding Company may terminate the Executive's employment at any
time, but any termination by the Holding Company, other than Termination for
Cause, shall not prejudice Executive's right to compensation or other benefits
under this Agreement or under any other benefit or compensation plans or
programs maintained by the Holding Company from time to
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time. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 8
hereinabove.
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall
be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (1) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information
and assistance to the Holding Company as may reasonably be required by the
Holding Company in connection with any litigation in which it or any of its
subsidiaries or affiliates is, or may become, a party. The Holding Company will
reimburse the Executive for reasonable costs incurred by the Executive in
connection with furnishing such information and assistance to the Holding
Company.
11. NON-DISCLOSURE OF HOLDING COMPANY BUSINESS
Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Holding Company and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Bank. Executive will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of the
Holding Company. In the event of a breach or threatened breach by the Executive
of the provisions of this Section, the Holding Company will be entitled to an
injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Holding Company or affiliates thereof, or from rendering any services to any
person, firm, corporation, other entity to whom such knowledge, in whole or in
part, has been disclosed or is threatened to be disclosed. Nothing herein will
be construed as prohibiting the Holding Company from pursuing any other remedies
available to the Holding Company for such breach or threatened breach, including
the recovery of damages from Executive.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Holding Company subject to Section 13
hereof. The Holding Company may use insurance proceeds especially obtained
therefore as partial payment in the event of disability.
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<PAGE> 12
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Holding Company
or any predecessor of the Holding Company and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
14. EFFECT OF ACTION UNDER BANK AGREEMENT.
Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement of even date herewith
between Executive and the Bank, such compensation payments and benefits paid by
the Bank will be subtracted from any amount due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Holding Company Agreement shall be allocated in proportion to the level
of activity and the time expended on such activities by the Executive as
determined by the Holding Company and the Bank on a quarterly basis.
15. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
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17. SUCCESSOR AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Holding Company, its successors and assigns, including any successor by
purchase, merger, consolidation or otherwise 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 Holding Company may be sold or otherwise transferred.
Any such successor of the Holding company shall be deemed to have assumed this
Agreement and to have become obligated hereunder to the same extent as the
Holding Company, and Executive's obligations hereunder shall continue in favor
of such successor.
18. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
19. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
20. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware,
unless otherwise specified herein.
21. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under, or in connection with, this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any
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other cash compensation, fringe benefits and any compensation and benefits due
Executive under this Agreement.
22. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Holding Company shall indemnify, hold harmless and defend
Executive against reasonable costs, including legal fees, incurred by him in
connection with his consultation with legal counsel or arising out of any
action, suit or proceeding in which he may be involved, as a result of his
efforts, in good faith, to defend or enforce the terms of this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Holding Company shall indemnify, hold harmless and defend
Executive for all acts or omissions taken or not taken by him in good faith
while performing services for the Holding Company to the same extent and upon
the same terms and conditions as other similarly situated officers and directors
of the Holding Company. If and to the extent that the Holding Company maintains,
at any time during the Employment Period, an insurance policy covering the other
officers and directors of the Holding Company against law suits, the Holding
Company shall use its best efforts to cause Executive to be covered under such
policy upon the same terms and conditions as other similarly situated officers
and directors.
[Signatures appear on the following page.]
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SIGNATURES
IN WITNESS WHEREOF, Queens County Bancorp, Inc. has caused this Amended
and Restated Agreement to be executed and its seal to be affixed hereunto by its
duly authorized officer and its directors, and Executive has signed this Amended
and Restated Agreement, on the ______day of_________________, 1997.
ATTEST:_________________ QUEENS COUNTY BANCORP, INC.
________________________ BY: _________________________
Secretary Duly Authorized Officer
[SEAL]
WITNESS:
________________________ ______________________________
Executive
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QUEENS COUNTY SAVINGS BANK
EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AGREEMENT as amended and restated effective ___________, 1997, was
first made effective as of November 23, 1993, by and among Queens County Savings
Bank (the "Bank"), a New York chartered savings bank, with its principal
administrative office at 38-25 Main Street, Flushing, New York, Queens County
Bancorp, Inc., a corporation organized under the laws of the State of Delaware
which is the holding company for the Bank (the "Holding Company") and (the
"Executive").
WHEREAS, the Bank wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to
serve until December 31, 2000, as of the Bank. The
Executive shall render administrative and management services to the Bank such
as are customarily performed by persons situated in a similar executive
capacity. Failure to reelect Executive as shall constitute a
breach of this Agreement.
2. TERMS.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written (the "Effective
Date") and shall continue for a period of thirty-six (36) full calendar months
thereafter. Commencing with the Effective Date, the term of this Agreement shall
be extended for one day each day until such time as the Board of the Bank or the
Executive elects not to extend the term of the Agreement further by giving
written notice to the other party in accordance with Section 9 of this
Agreement, in which case the term of this Agreement shall be fixed and shall end
on the third anniversary of the date of such written notice; provided, that in
any event, the term of this Agreement shall end on the last day of the month in
which the Executive attains the age of 65. The Board will review the Agreement
and the Executive's performance annually for purposes of determining whether to
give notice not to extend the Agreement and the results thereof shall be
included in the minutes of the Board's meeting.
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(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank and participation in community and civic
organizations; provided, however, that, with the approval of the Board, as
evidenced by a resolution of such Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any other offices
or positions in, companies or organizations, which, in such Board's judgment,
will not present any conflict of interest with the Bank, or materially affect
the performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything herein contained to the contrary: (I)
Executive's employment with the Bank may be terminated by the Bank or Executive
during the term of this Agreement, subject to the terms and conditions of this
Agreement; and (ii) nothing in this Agreement shall mandate or prohibit a
continuation of Executive's employment following the expiration of the term of
this Agreement upon such terms and conditions as the Board and executive may
mutually agree.
(d) Upon the termination of Executive's employment with the Bank, the
daily extensions provided pursuant to section 2(a), shall cease (if such
extensions have not previously ceased), and, if such termination is under
circumstances described in section 4(a), the term "remaining term of the
Agreement" in section 4(b) shall mean the period of time commencing from the
date of such termination and ending on the last day of the employment period
computed with reference to all extensions prior to such termination.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Section 1. The Bank
shall pay Executive as compensation a salary of not less than per year
("Base Salary"). Base Salary shall include any amounts of compensation
deferred by Executive under a qualified plan maintained by the Bank. Such Base
Salary shall be payable bi-weekly. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by the Salary and Personnel Committee designated by
the Board, and the Board may increase Executive's Base Salary. Any increase
shall become the "Base Salary" for purposes of this Agreement. In no event shall
Executive's annual rate of salary under this Agreement in effect at a
particular time be reduced without his prior written consent. In addition to the
Base Salary provided in this Section 3(a), the Bank shall also provide Executive
at no cost to Executive with all such other benefits as are provided uniformly
to permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement and the
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Bank will not, without Executive's prior written consent, make any changes in
such plans, arrangements or perquisites which would adversely affect Executive's
rights or benefits thereunder provided, however, that the Bank may make changes
to such plans, agreements or perquisites generally provided on a
nondiscriminatory basis to all employees without the Executive's prior written
consent. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan of the Bank in which Executive is eligible to participate. 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.
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3 and other compensation provided for by paragraph (b) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Section 8.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than a Change in Control, as defined
in Section 5(a) hereof; upon Retirement, as defined in Section 7 hereof; for
Disability, as defined in Section 6 hereof; or for Cause, as defined in Section
8 hereof; (ii) Executive's resignation from the Bank's employ, upon any (A)
failure to elect or reelect or to appoint or reappoint Executive as
of the Bank or the Holding Company unless consented to by the Executive, (B)
material change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, (and any such material change shall be deemed a continuing
breach of this Agreement), (C) a relocation of Executive's principal place of
employment by more than 30 miles from its location at the effective date of this
Agreement, (D) liquidation or dissolution of the Bank or Holding Company, or (E)
breach of this Agreement by the Bank. Upon the occurrence of any event described
in clauses (A), (B), (C), (D) or (E),
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above, Executive shall have the right to elect to terminate his employment under
this Agreement by resignation upon not less than thirty (30) days prior written
notice given within a reasonable period of time not to exceed, except in case of
a continuing breach, four calendar months after the event giving rise to said
right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 9, the Bank shall be obligated to pay
Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to the Executive for the
remaining term of the Agreement including Base Salary, bonuses and any other
cash or deferred compensation paid or to be paid to the Executive, and the
amount of any benefits received or to be received pursuant to any employee
benefit plans maintained by the Bank or the Holding Company during the term of
the Agreement. At the election of the Executive, which election is to be made
within thirty (30) days of the Executive's Date of Termination, such payments
shall be made in a lump sum or paid monthly during the remaining term of the
agreement following the Executive's termination. In the event that no election
is made, payment to the Executive will be made on a monthly basis during the
remaining term of the agreement. Such payments shall not be reduced in the event
the Executive obtains other employment following termination of employment.
(c) Upon the occurrence of an Event of Termination, the Bank will cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, except to the extent such coverage may be changed in its
application to all Bank employees. Such coverage shall cease upon the expiration
of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments
pursuant to Section 4(b) hereof, on an annual basis, thereafter, between the
dates of January 1 and January 31 of each year, Executive shall elect whether
the balance of the amount payable under the Agreement at that time shall be paid
in a lump sum or on a pro rata basis. Such election shall be irrevocable for
the year for which such election is made.
5. CHANGE IN CONTROL.
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or the Holding Company, as set forth
below. For purposes of this Plan, a "Change in Control" of the Bank or the
Holding Company shall mean an event of a nature that; (i) would be required to
be reported in response to Item 1 of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank or the Holding Company within the meaning of the Change in
Bank Control Act and the Rules and Regulations promulgated by the Federal
Deposit Insurance Corporation ("FDIC") at 12 C.F.R. Section 303.4(a) with
respect to the Bank and the Board of Governors of the Federal Reserve System
("FRB") at 12 C.F.R. Section 225.41(b) with respect to the Holding Company, as
in effect on the date hereof; or (iii)
4
<PAGE> 5
results in a transaction requiring prior FRB approval under the Bank Holding
Company Act of 1956 and the regulations promulgated thereunder by the FRB at 12
C.F.R. Section 225.11, as in effect on the date hereof except for the Holding
Company's acquisition of the Bank; or (iv) without limitation such a Change in
Control shall be deemed to have occurred at such time as (A) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Bank or the Holding Company
representing 20% or more of the Bank's or the Holding Company's outstanding
securities except for any securities of the Bank purchased by the Holding
Company in connection with the conversion of the Bank to the stock form and any
securities purchased by the Bank's employee stock ownership plan and trust; or
(B) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as though
he were a member of the Incumbent Board; (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Holding Company or similar transaction occurs in which the Bank or Holding
Company is not the resulting entity; (D) a proxy statement shall be distributed
soliciting proxies from shareholders of the Holding Company, by someone other
than the current management of the company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Holding Company or Bank
or similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Holding Company; or (E) a tender offer is made for
20% or more of the voting securities of the Bank or the Holding Company.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board has determined that a Change in
Control has occurred, notwithstanding the provisions of Section 2(a), the term
of this Agreement shall be deemed to have commenced as of the date of the Change
in Control and shall continue for a period of thirty-six (36) full calendar
months thereafter. Commencing on the date of the Change in Control, the term of
this Agreement shall be extended for one day each day.
(c) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board has determined that a Change in
Control has occurred, Executive shall be entitled to the benefits provided in
paragraphs (d),(e),(f) and (g) of this Section 5 upon his subsequent termination
of employment at any time during the term of this Agreement (regardless of
whether such termination results from his dismissal or his resignation at any
time during the term of this Agreement following any demotion, loss of title,
office or significant authority or responsibility, reduction in annual
compensation or benefits or relocation of his principal place of employment by
more than 30 miles from its location immediately prior to the change in
control), unless such termination is because of his death, termination for Cause
or termination for Disability.
5
<PAGE> 6
(d) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the bank shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or
three (3) times the average of the three (3) preceding years' Base Salary,
including bonuses and any other cash or deferred compensation paid or to be paid
to the Executive during such years, and the amount of any contributions made or
to be made, on behalf of the Executive, to any employee benefit plans maintained
by the Bank during such years, except to the extent such benefits are otherwise
payable to the Executive under such plans upon a Change in Control. For purposes
of determining the benefit due under this Section 5(d), when calculating the
payments due for the remaining term of this Agreement, it shall be assumed that
for each year of the remaining term of the Agreement, the Executive will receive
(i) an annual increase in Base Salary equal to the average increase received in
the preceding three years, (ii) the maximum bonus payable, and (iii) the maximum
contribution by or on behalf of the Executive with respect to any employee
benefit plans maintained by the Bank. At the election of the Executive, which
election is to be made within thirty (30) days of the Date of Termination, such
payment may be made in a lump sum or paid in equal monthly installments during
the thirty-six (36) months following the Executive's termination. In the event
that no election is made, payment to the Executive will be made on a monthly
basis during the remaining term of the Agreement.
(e) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Bank will cause to be continued life,
medical, dental and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. Such coverage and
payments shall cease upon the expiration of thirty-six (36) months.
(f) In the event that the Executive is receiving monthly payments
pursuant to Section 5)(d) hereof, on an annual basis, thereafter, between the
dates of January 1 and January 31 of each year, Executive shall elect whether
the balance of the amount payable under the Agreement at that time shall be paid
in a lump sum or on a pro rata basis. Such election shall be irrevocable for the
year for which such election is made.
(g) In each calendar year that Executive is entitled to receive
payments or benefits under the provisions of his Employment Agreement with the
Holding Company and this Employment Agreement, the Holding Company shall
determine if an excess parachute payment (as defined in Section 4999 of the
Internal Revenue Code of 1986, as amended, and any successor provision thereto,
(the "Code")) exists. Such determination shall be made after taking any
reductions permitted pursuant to Section 280G of the Code and the regulations
thereunder. Any amount determined to be an excess parachute payment after taking
into account such reductions shall be hereafter referred to as the "Initial
Excess Parachute Payment". As soon as practicable after a Change in Control, the
Initial Excess Parachute Payment shall be determined. Upon the Date of
Termination following a Change in Control, the Holding Company shall pay
Executive, subject to applicable withholding requirements under applicable city,
state or federal law an amount equal to:
6
<PAGE> 7
(1) twenty (20) percent of the Initial Excess Parachute Payment (or such
other amount equal to the tax imposed under Section 4999 of the Code;
and
(2) such additional amount (tax allowance) as may be necessary to
compensate Executive for the payment by Executive of city, state and
federal income and excise taxes on the payment provided under clause
(1) and on any payments under this Clause (2). In computing such tax
allowance, the payment to be made under Clause (1) shall be multiplied
by the "gross up percentage" ("GUP"). The GUP shall be determined as
follows:
Tax Rate
GUP = ____________
1- Tax Rate
The "Tax Rate" for purposes of computing the GUP shall be the sum of
the highest marginal federal, state and city income and
employment-related tax rates, including any applicable excise tax
rates, applicable to the Executive in the year in which the payment
under Clause (1) is made.
(3) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the Initial Excess Parachute Payment (such different amount being hereafter
referred to as the "Determinative Excess Parachute Payment") then the Holding
Company's independent accountants shall determine the amount (the "Adjustment
Amount") the Holding Company must pay to the Executive in order to put the
Executive in the same position as the Executive would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, independent accountants of the
Holding Company shall take into account any and all taxes (including any
penalties and interest) paid by or for Executive or refunded to Executive or for
Executive's benefit. As soon as practicable after the Adjustment Amount has been
so determined, the Holding Company shall pay the Adjustment Amount to Executive.
In no event however, shall Executive make any payment under this paragraph to
the Holding Company.
6. TERMINATION FOR DISABILITY.
(a) If, as a result of Executive' incapacity due to physical or mental
illness, such incapacity being determined by a doctor selected by the Bank, he
shall have been absent from his duties with 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
7
<PAGE> 8
the full-time performance of his duties, the Bank may terminate Executive's
employment for "Disability."
(b) The Bank will pay Executive, as disability pay, a bi-weekly payment
equal to seventy-five percent (75%) of Executive's bi-weekly rate of Base Salary
on the effective date of such termination. 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
Bank in the same capacity as he was employed prior to his termination for
Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive' full-time employment by another employer; (iii) Executive
attaining the normal age of retirement or receiving benefits under the Bank's
Defined Benefit Plan; (iv) Executive's death; or (v) the expiration of the term
of this Agreement. Notwithstanding any other provision to the contrary, the Bank
may apply any proceeds from disability income insurance for Executive which was
paid for by the Bank or the Holding Company as partial satisfaction of its
obligation under this Section.
(c) The Bank will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by 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 Bank, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between Executive and the Bank; (ii) Executive's full-time employment by another
employer; (iii) Executive's attaining the normal age of retirement or receiving
benefits under the Bank's Defined Benefit Plan; (iv) the Executive's death; or
(v) the expiration of the time 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.
7. TERMINATION UPON RETIREMENT.
Termination by the Bank of the Executive based on "Retirement" shall
mean termination in accordance with the Bank's retirement policy or in
accordance with any retirement arrangement established with Executive's consent
with respect to him. Upon termination of Executive upon Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank and
other plans to which Executive is a party.
8. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty which results in a loss to the Bank or the
Holding Company, intentional failure to perform stated duties, willful
misconduct, any breach of fiduciary duty involving personal profit, willful
violation of any law, rule, regulation (other than traffic violations or
8
<PAGE> 9
similar offenses) or final cease-and-desist order which results in substantial
loss to the Bank or the Holding Company. For purposes of this Section, no act,
or the failure to act, on Executive's part, shall be "willful" unless done, or
omitted to be done, not in good faith and without reasonable belief that the
action was in the best interests of the Bank or the Holding Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying Termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause. Any stock options and related limited rights granted to Executive under
any stock option plan or unvested awards granted to Executive under any RRP of
the Bank, the Holding Company or any subsidiary or affiliate thereof, shall
become null and void effective upon Executive's receipt of Notice of Termination
for Cause pursuant to Section 9 hereof; and shall not be exercisable by or
delivered to Executive at any time subsequent to such Termination for Cause.
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Subject to section 9(c), "Date of Termination" shall mean (A) if
Executive's employment is terminated for Disability, thirty (30) days after a
Notice of Termination is given (provided that he shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) days
period), and (B) if his employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a Termination for
Cause, shall be immediate).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
date of termination shall be the date specified in the Notice, the Date of
Termination shall be date on which the dispute is finally determined, either by
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal there from having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith
9
<PAGE> 10
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
(d) The Bank may terminate the Executive's employment at any time, but
any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement or under any other benefit or compensation plans or programs
maintained by the Bank from time to time. Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause as defined in Section 8 hereinabove.
10. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall
be subject to Executive's compliance with paragraph (b) of this Section 10
during the term of this Agreement and for one (1) full year after the expiration
or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information
and assistance to the Bank as may reasonably be required by the Bank in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become, a party. The Bank shall reimburse the Executive
for reasonable expenses incurred in connection with furnishing such information
and assistance to the Bank.
11. NON-DISCLOSURE OF BANK BUSINESS
Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank. In the
event of a breach or threatened breach by the Executive of the provisions of
this Section 11, the Bank will be entitled to an injunction restraining
Executive from disclosing, in whole or in part, the knowledge of the past,
present, planned or considered business activities of the Bank or affiliates
thereof, or from rendering any services to any person, firm, corporation, other
entity to whom such knowledge, in whole
10
<PAGE> 11
or in part, has been disclosed or is threatened to be disclosed. Nothing herein
will be construed as prohibiting the Bank from pursuing any other remedies
available to the Bank for such breach or threatened breach, including the
recovery of damages from Executive.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Holding Company, however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Holding Company.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
14. EFFECT OF ACTION UNDER HOLDING COMPANY AGREEMENT
Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement of even date herewith
between Executive and the Holding Company, such compensation payments and
benefits paid by the Holding Company will be subtracted from any amounts due
simultaneously to Executive under similar provisions of this Agreement. Payments
pursuant to this Agreement and the Holding Company Agreement shall be allocated
in proportion to the level of activity and time expended on such activities by
the Executive as determined by the Holding Company and the Bank on a quarterly
basis.
15. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
16. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
11
<PAGE> 12
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
17. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
18. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
19. GOVERNING LAW.
The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of New York, without
reference to conflicts of law principles.
20. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Bank, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
12
<PAGE> 13
21. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with Executive's termination is resolved in favor of the Executive,
whether by judgment, arbitration or settlement, Executive shall be entitled to
the payment of all back-pay, including salary, bonuses and any other cash
compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
(c) The Bank shall indemnify, hold harmless and defend Executive for
all acts or omissions taken or not taken by him in good faith while performing
services for the Bank to the same extent and upon the same terms and conditions
as other similarly situated officers and directors of the Bank. If and to the
extent that the Bank maintains, at any time during the Employment Period, an
insurance policy covering the other officers and directors of the Bank against
law suits, the Bank shall use its best efforts to cause Executive to be covered
under such policy upon the same terms and conditions as other similarly situated
officers and directors.
22. SUCCESSOR TO THE BANK.
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Holding Company,
expressly and unconditionally to assume and agree to perform the Bank's
obligations under this Agreement, in the same manner and to the same extent that
the Bank would be required to perform if no such succession or assignment had
taken place.
[Signatures appear on the following page]
13
<PAGE> 14
SIGNATURES
IN WITNESS WHEREOF, Queens County Savings Bank and Queens County
Bancorp, Inc. Inc. have caused this Amended and Restated Agreement to be
executed and their seals to be affixed hereunto by their duly authorized
officers and directors, and Executive has signed this Amended and Restated
Agreement, on the __ day of _____________, 1997.
ATTEST: QUEENS COUNTY SAVINGS BANK
___________________ BY: ___________________________
Secretary
[SEAL]
ATTEST: QUEENS COUNTY BANCORP, INC.
(Guarantor)
___________________ BY:_____________________________
Secretary
[SEAL]
WITNESS:
___________________ ________________________________
Executive
14
<PAGE> 1
Reference Number 11
-------------------
QUEENS COUNTY BANCORP, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
1997 1996 1997 1996
------ ------- ------- -------
<S> <C> <C> <C> <C>
Net income $5,341 $ 6,265 $12,473 $11,523
------ ------- ------- -------
Weighted average common shares
outstanding 8,924 10,568 9,453 10,700
Common stock equivalents due to
dilutive effect of stock options 824 788 818 758
------ ------- ------- -------
Total weighted average common shares
and common share equivalents outstanding 9,748 11,356 10,271 11,458
====== ======= ======= =======
Earnings per common share and common share
equivalents $ 0.55 $ 0.55 $ 1.21 $ 1.01
====== ======= ======= =======
Total weighted average common shares
and common share equivalents outstanding 9,748 11,356 10,271 11,458
Additional dilutive shares using ending
period market value versus average market
value for the period when utilizing the
treasury stock method regarding stock
options 104 30 110 60
------ ------- ------- -------
Total shares for fully diluted earnings
per share 9,852 11,386 10,381 11,518
====== ======= ======= =======
Fully diluted earnings per common share
and common share equivalents(1) $ 0.54 $ 0.55 $ 1.20 $ 1.00
====== ======= ======= =======
</TABLE>
(1) Reflects shares issued as a result of the 3-for-2 stock split on April 10,
1997 and the 4-for-3 stock split on August 22, 1996.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,211
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 132,703
<INVESTMENTS-MARKET> 133,460
<LOANS> 1,280,829
<ALLOWANCE> 9,431
<TOTAL-ASSETS> 1,466,906
<DEPOSITS> 1,031,119
<SHORT-TERM> 217,010
<LIABILITIES-OTHER> 44,890
<LONG-TERM> 0
0
0
<COMMON> 138
<OTHER-SE> 173,749
<TOTAL-LIABILITIES-AND-EQUITY> 1,466,906
<INTEREST-LOAN> 51,039
<INTEREST-INVEST> 4,370
<INTEREST-OTHER> 138
<INTEREST-TOTAL> 55,547
<INTEREST-DEPOSIT> 21,612
<INTEREST-EXPENSE> 24,870
<INTEREST-INCOME-NET> 30,677
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 12,387
<INCOME-PRETAX> 18,292
<INCOME-PRE-EXTRAORDINARY> 18,292
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,473
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.20
<YIELD-ACTUAL> 8.36
<LOANS-NON> 6,997
<LOANS-PAST> 1,486
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,359
<CHARGE-OFFS> 0
<RECOVERIES> 72
<ALLOWANCE-CLOSE> 9,431
<ALLOWANCE-DOMESTIC> 9,431
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 9,431
</TABLE>
