UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from __________ to __________
Commission File Number 1-13503
STATEN ISLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3958850
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
15 Beach Street
STATEN ISLAND, NEW YORK 10304
- ------------------------------------ ---------------------------
(Address of principal executive office) (Zip Code)
(718-556-6518)
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 DAYS. YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. The Registrant had
36,791,023 shares of Common Stock outstanding as of May 8, 2000.
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
Table of Contents PAGE
- ----------------- ----
Part 1 Financial Information
Item 1 Financial Statements
Unaudited Statements of Condition 1
(As of March 31, 2000 and December 31, 1999)
Unaudited Statements of Income 2
(For three months ended March 31, 2000 and 1999)
Unaudited Statement of Changes in Stockholders' Equity 3
(For three months ended March 31, 2000)
Unaudited Statements of Cash Flows 4
(For the three months ended March 31, 2000 and 1999)
Notes to Unaudited Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
Part II Other Information
Item 1 Legal Proceedings 19
-----------------
Item 2 Changes in Securities and Use of Proceeds 19
-----------------------------------------
Item 3 Defaults Upon Senior Securities 19
-------------------------------
Item 4 Submission of Matters to a Vote of Security Holders 19
---------------------------------------------------
Item 5 Other Information 19
-----------------
Item 6 Exhibits and Reports on Form 8-K 20
--------------------------------
Signatures 21
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
--------------------------------------------
March 31, 2000 December 31, 1999
-------------------- --------------------
(000's omitted)
unaudited
ASSETS
ASSETS:
Cash and due from banks ............................ $ 71,340 $ 80,998
Federal funds sold ................................. 7,325 20,400
Securities available for sale ...................... 2,053,890 1,963,954
Loans, net ......................................... 2,419,638 2,150,039
Loans held for sale, net ........................... 37,997 46,588
Accrued interest receivable ........................ 25,171 23,621
Bank premises and equipment, net ................... 29,718 24,731
Intangible assets, net ............................. 62,275 15,431
Other assets ....................................... 168,945 163,552
----------- -----------
Total assets ....................................... $ 4,876,299 $ 4,489,314
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due Depositors-
Savings ............................................ $ 793,502 $ 737,794
Time ............................................... 775,717 573,043
Money market ....................................... 129,595 89,004
NOW accounts ....................................... 91,965 80,352
Demand deposits .................................... 385,520 340,040
----------- -----------
2,176,299 1,820,233
Borrowed funds ..................................... 2,080,548 2,049,411
Advances from borrowers for taxes and insurance .... 14,187 10,805
Accrued interest and other liabilities ............. 45,884 37,488
----------- -----------
Total liabilities .................................. 4,316,918 3,917,937
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 100,000,000
shares authorized, 45,130,312 issued and 37,341,123
outstanding at March 31, 2000 and 45,130,312 issued 451 451
and 38,693,623 outstanding at December 31, 1999 ....
Additional paid-in-capital ......................... 536,831 536,539
Retained earnings-substantially restricted ......... 259,834 251,315
Unallocated common stock held by ESOP .............. (35,022) (35,709)
Unearned common stock held by RRP .................. (25,440) (25,439)
Treasury stock 7,789,189 shares at March 31, 2000
and 6,436,689 at December 31, 1999 at cost ......... (143,966) (121,149)
----------- -----------
592,688 606,008
Accumulated other comprehensive income, net of taxes (33,307) (34,631)
----------- -----------
Total stockholders' equity ......................... 559,381 571,377
----------- -----------
Total liabilities and stockholders' equity ......... $ 4,876,299 $ 4,489,314
=========== ===========
1
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended
March 31,
-----------------------------------
2000 1999
------------------------------------
(000's omitted except per share data)
(unaudited)
Interest Income:
Loans .................................................. $ 44,127 $ 30,665
Securities, available for sale ......................... 36,819 31,352
Federal funds sold ..................................... 460 727
------------ ------------
Total interest income ............................... 81,406 62,744
------------ ------------
Interest Expense:
Savings and escrow ..................................... 4,933 4,562
Time ................................................... 9,073 6,469
Money market and NOW ................................... 1,384 982
Borrowed funds ......................................... 30,314 17,714
------------ ------------
Total interest expense .............................. 45,704 29,727
------------ ------------
Net interest income ................................. 35,702 33,017
Provision for Loan Losses .............................. 18 59
------------ ------------
Net interest income after provision for loan losses 35,684 32,958
Other Income (Loss):
Service and fee income ................................. 8,387 5,494
Securities transactions ................................ (223) 124
------------ ------------
8,164 5,618
Other Expenses:
Personnel .............................................. 13,074 10,406
Occupancy and equipment ................................ 2,377 1,884
Amortization of intangible assets ...................... 1,217 553
FDIC Insurance ......................................... 112 50
Data processing ........................................ 1,148 927
Marketing .............................................. 480 348
Professional fees ...................................... 568 558
Other .................................................. 3,382 2,953
------------ ------------
Total other expenses ................................ 22,358 17,679
------------ ------------
Income before provision for income taxes ............ 21,490 20,897
Provision for Income Taxes ............................. 8,327 8,577
------------ ------------
Net Income ............................................. $ 13,163 $ 12,320
============ ============
Earnings Per Share:
Basic .................................................. $ 0.38 $ 0.31
Fully Diluted .......................................... $ 0.38 $ 0.31
Weighted Average:
Common Shares Outstanding .............................. 45,130,312 45,130,312
Less: Unallocated ESOP/RRP Shares ...................... 3,179,824 3,432,046
Less: Treasury Shares .................................. 6,976,562 2,060,780
------------ ------------
34,973,926 39,637,486
============ ============
2
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
unaudited
(000's omitted)
Unallocated
Additional Common Unearned
Common Paid-In Stock RRP Treasury Comprehensive
Stock Capital Held by ESOP Shares Stock Income
--------------------------------------------------------------------------
Balance January 1, 2000............. $ 451 $ 536,539 $ (35,709) $ (25,440) $ (121,149)
Change in unrealized
appreciation (depreciation)
on securities, net of tax........... $ 1,324
Allocation of 57,226 ESOP shares.... 292 687
Treasury stock (1,352,500) at cost (22,817)
Net Income.......................... 13,163
---------
Comprehensive Income................ 14,487
=========
Dividends paid......................
---------------------------------------------------------------------------
Balance March 31, 2000.............. $ 451 $ 536,831 $ (35,022) $ (25,440)$ (143,966)
==========================================================================
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
unaudited
(000's omitted)
Accumulated
Other
Retained Comprehensive
Earnings Income(Loss) Total
-------------------------------------
Balance January 1, 2000............. $ 251,315 $ (34,631) $ 571,376
Change in unrealized
appreciation (depreciation)
on securities, net of tax........... 1,324 1,324
Allocation of 57,226 ESOP shares.... 979
Treasury stock (1,352,500) at cost (22,817)
Net Income.......................... 13,163 13,163
Comprehensive Income................
Dividends paid...................... (4,644) (4,644)
------------------------------------
Balance March 31, 2000.............. $ 259,834 $ (33,307) $ 559,381
=====================================
3
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
2000 1999
---- ----
(000's omitted)
unaudited
Cash Flows From Operating Activities:
Net Income $13,163 $12,320
Adjustments to reconcile net income to net cash
provided by operating activities----
Depreciation and amortization 690 654
Accretion and amortization of bond and mortgage premiums (648) 636
Amortization of intangible assets 1,217 553
Loss (Gain) on sale of available for sale securities 223 (124)
Other noncash expense (income) (3,360) (4,453)
Expense charge relating to allocation and earned
portions of employee benefit plan 2,061 2,193
Provision for possible loan losses 18 59
Decrease in deferred loan fees (1,003) (486)
Decrease (increase) in accrued interest receivable 2,649 (402)
Decrease (increase) in other assets (2,820) 9,499
(Decrease) increase in accrued interest and other liabilities 7,898 7,394
(Increase) decrease in deferred income taxes 1,042 4,699
Recoveries of loans 102 334
-----------------------------
Net cash provided by operating activities 21,232 32,876
-----------------------------
Cash Flows From Investing Activities:
Maturities of available for sale securities 44,221 150,686
Sales of available for sale securities 107,730 12,010
Purchases of available for sale securities (15,283) (195,192)
Principal collected on loans 22,521 49,921
Loans made to customers (272,408) (342,867)
Purchases of loans (3,030) (4,052)
Sales of loans 85,690 169,783
Capital expenditures (1,603) (795)
Acquisition of FSB, net of cash acquired (46,688)
-----------------------------
Net cash (used in) investing activities (78,850) (160,506)
-----------------------------
Cash Flows From Financing Activities:
Net increase in deposit accounts 31,209 44,366
Borrowings 31,137 103,885
Dividends paid (4,644) (3,897)
Purchase of Treasury Stock (22,817) (25,690)
Net cash provided by financing activities 34,885 118,664
Net (decrease) increase in cash and cash equivalents (22,733) (8,966)
Cash And Equivalents, beginning of year............................... 101,398 133,109
-----------------------------
Cash And Equivalents, end of period................................... $78,665 $124,143
Supplemental Disclosures Of Cash Flow Information:
Cash paid for-
Interest $44,832 $28,154
Income taxes 3,788 2,337
Acquisition of FSB
Fair value of assets acquired 370,579 -
Fair value of liabilities acquired 331,280 -
4
STATEN ISLAND BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Item 1. Financial Information
Note 1. Summary of Significant Accounting Policies
The accounting and reporting policies of Staten Island Bancorp, Inc.
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practice within the banking industry.
Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary Staten Island
Savings Bank (the "Bank") and the Bank's subsidiaries. The Bank's wholly owned
subsidiaries are SIB Mortgage Corp. (the "Mortgage Company"), SIB Investment
Corporation ("SIBIC"), Staten Island Funding Corporation ("SIFC"), American
Construction Lending Service, Inc. ("ACLS") and SIB Financial Services
Corporation ("SIBFSC"). All significant intercompany transactions and balances
are eliminated in consolidation.
The unaudited consolidated financial statements included herein reflect
all normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
presented. The results of operations for the three month period ended March 31,
2000 are not necessarily indicative of the results to be expected for the year
ending December 31, 2000. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
1999 Annual Report and Form 10-K.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported assets,
liabilities, revenues and expenses as of the dates of the financial statements.
Actual results could differ significantly from those estimates.
Business
Staten Island Bancorp, Inc. is the holding company for Staten Island
Savings Bank. The Bank, which is a traditional full service community oriented
bank, operates sixteen full service branches, one supermarket branch and three
limited service branches on Staten Island and one full service branch in
Brooklyn. In addition, as a result of the acquisition of First State Bancorp
(FSB) in January 2000, the holding company for First State Bank, the Bank
operates four full service branches in Ocean County, and two full service
branches in Monmouth County, New Jersey. The Bank also has a lending center and
a Trust Department on Staten Island. Commercial lending offices are also located
in the Bay Ridge, Brooklyn branch and the Howell, New Jersey branch.
The Mortgage Company does business as Ivy Mortgage and is headquartered
in Branchburg, New Jersey. The Mortgage Company originates loans in 22 states
and sells them to investors generating fee income for the Bank. The Bank retains
for its own portfolio certain adjustable rate mortgage loans ("ARMS") originated
by the mortgage company in order to supplement the ARMS originated directly by
the Bank in its efforts to manage interest rate risk.
ACLS originates short-term, generally six-month to one year,
construction loans primarily to individuals for their own residences. ACLS
operates throughout the United States and the Bank will provide permanent loans
for construction loans originated by ACLS for certain properties located in the
New York City metropolitan area.
5
The Bank's deposits are insured by the Bank Insurance Fund ("BIF") to
the maximum extent permitted by law. The Bank is subject to examination and
regulation by the Office of Thrift Supervision ("OTS") which is the Bank's
chartering authority and primary regulator. The Bank is also regulated by the
Federal Deposit Insurance Corporation ("FDIC"), the administrator of the BIF.
The Bank is also subject to certain reserve requirements established by the
Board of Governors of the Federal Reserve System ("FRB") and is a member of the
Federal Home Loan Bank ("FHLB") of New York, which is one of the 12 regional
banks comprising the FHLB system.
Organization Form of Ownership
The Bank was originally founded as a New York State chartered savings
bank in 1864. In August 1997, the Bank converted to a federally chartered mutual
savings bank and is now regulated by the OTS. On April 16, 1997, the Board of
Directors of the Bank adopted a Plan of Conversion to convert from a federally
chartered mutual savings bank to a federally chartered stock savings bank with
the concurrent formation of a holding company (the "Conversion"). The Company
completed its initial public offering and Conversion on December 22, 1997 and
issued 45,130,312 shares of common stock, $.01 par value per share.
The Bank has the following wholly owned subsidiaries:
The Mortgage Company was incorporated in the State of New Jersey in
1998. The Mortgage Company was formed to purchase substantially all of the
assets of Ivy Mortgage Corp. The Mortgage Company currently originates loans in
22 states and had assets totaling $46.9 million at March 31, 2000 and originated
$125.7 million of loans during the three months ended March 31, 2000.
Staten Island Funding Corporation is a wholly-owned subsidiary of SIBIC
incorporated in the State of Maryland in 1998 for the purpose of establishing a
real estate investment trust ("REIT"). The Bank transferred real estate mortgage
loans totaling $648.0 million, net, which included certain other associated
assets and liabilities. In return the Bank received all the shares of common
stock and the majority of the preferred stock in SIFC. The assets of SIFC
totaled $665.2 million at March 31, 2000.
SIB Investment Corporation was incorporated in the State of New Jersey
in 1998 for the purpose of managing certain investments of the Bank. The Bank
transferred the common stock and a majority of the preferred stock of SIFC to
SIBIC. The consolidated assets of SIBIC at March 31, 2000 were $730.2 million.
American Construction Lending Services, Inc. is a wholly owned
subsidiary of the Bank incorporated in the state of Delaware in May 1999 and is
headquartered in the state of Connecticut. ACLS's main business line is
originating residential construction loans throughout the country. The assets of
ACLS totaled $11.6 million as of March 31, 2000.
SIB Financial Services Corporation is a wholly owned subsidiary of the
Bank incorporated in the State of New York in January 2000. SIBFSC was formed as
a licensed life insurance agency to sell the product of the SBLI Mutual
Insurance Co. of New York. The assets of SIBFSC were $58,000 as of March 31,
2000.
6
Securities - Available for Sale. The following table sets forth certain
information regarding amortized cost and estimated fair values of debt, equity,
mortgage-backed and mortgage related securities of the Company at March 31, 2000
and December 31, 1999.
March 31, 2000 December 31, 1999
--------------------------- -----------------------
Bonds and Mortgage-Related Securities - Available For Sale
- ---------------------------------------------------------- Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------- ---------- ------------
(000's omitted)
U.S. Treasuries ............................................................ $ 9,673 $ 9,697 $ 12,212 $ 12,275
Govt. Sponsored Agencies ................................................... 307,036 300,468 152,024 143,482
Industrial and Finance ..................................................... 148,565 140,117 162,796 152,319
Foreign .................................................................... 350 350 560 498
---------- ---------- ---------- ----------
Total Debt Securities ...................................................... 465,624 450,632 327,592 308,574
---------- ---------- ---------- ----------
G.N.M.A. - M.B.S ........................................................... 16,596 16,069 17,112 16,532
F.H.L.M.C. - M.B.S ......................................................... 324,165 313,362 329,198 318,832
F.N.M.A. - M.B.S ........................................................... 448,218 438,383 467,322 458,247
Agency C.M.O.'s ............................................................ 247,702 237,499 248,376 238,617
Privately Issued C.M.O.'s .................................................. 431,441 414,439 436,604 418,202
---------- ---------- ---------- ----------
Total Mortgage-Backed and Mortgage Related Securities ...................... 1,468,122 1,419,752 1,498,612 1,450,430
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Bonds and Mortgage-Related Securities- Available For Sale ........... 1,933,746 1,870,384 1,826,204 1,759,004
---------- ---------- ---------- ----------
Equity Securities
- ----------------- Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
Preferred Stock ............................................................ 71,494 62,326 79,870 69,558
Common Stock ............................................................... 85,957 88,832 97,787 101,046
IIMF Cap. Apprec ........................................................... 26,745 32,348 26,691 34,346
---------- ---------- ---------- ----------
Total Equity Securities ................................................... 184,196 183,506 204,348 204,950
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Investments........................................................... $2,117,942 $2,053,890 $2,030,552 $1,963,954
========== ========== ========== ==========
7
Loan Portfolio Composition.
The following table sets forth the composition of Bank's loans at the
dates indicated.
March 31, 2000 December 31, 1999
--------------------------------- -------------------------------
Percent of Percent of
Amount Total Amount Total
------------ -------------- ------------ ------------
(000's omitted))
Mortgage loans:
Single-family residential ........... $ 1,909,550 78.92% $ 1,737,913 80.83%
Multi-family residential ............ 46,575 1.92% 42,501 1.76%
Commercial real estate .............. 278,172 11.50% 223,809 9.25%
Construction and land ............... 79,832 3.30% 60,105 2.48%
Home equity ......................... 9,134 0.38% 5,390 0.22%
----------- ---------- ----------- ----------
Total mortgage loans ................ 2,323,263 96.02% 2,069,718 94.54%
Other loans:
Student loans ....................... 904 0.04% 657 0.03%
Passbook loans ...................... 11,247 0.46% 5,357 0.22%
Commercial business loans ........... 35,821 1.48% 33,646 1.39%
Other consumer loans ................ 56,333 2.33% 49,395 2.04%
----------- ---------- ----------- ----------
Total other loans ................... 104,305 4.31% 89,055 3.68%
----------- ---------- ----------- ----------
Total loans receivable .............. 2,427,568 100.33% 2,158,773 98.22%
Less:
Premium (discount) on loans purchased 5,154 0.21% 4,640 0.19%
Allowance for loan losses ........... (14,985) (0.62)% (14,271) (0.59)%
Deferred loan costs (fees) .......... 1,901 0.08% 897 2.18%
----------- ---------- ----------- ----------
Loans receivable, net ............... $ 2,419,638 100.00% $ 2,150,039 100.00%
=========== ========== =========== ==========
8
Delinquent Loans. The following table sets forth information concerning
delinquent loans at March 31, 2000 on which the company is accruing interest and
as a percentage of each category of the Bank's loan portfolio. The amount
presented represents the total outstanding principal balance of related loans,
rather than the actual payment amounts which are past due.
March 31, 2000
------------------------------ ------------------------------ -------------------------------
30-59 Days 60-89 Days 90 Days or More
------------------------------ ------------------------------ -------------------------------
Percent of Loan Percent of Loan Percent of Loan
Amount Category Amount Category Amount Category
------------- --------------- ------------- --------------- ------------- ----------------
(000's omitted)
Mortgage loans:
Single-family residential $29,909 1.57% $ 7,535 0.39% $ 6,586 0.34%
Multi-family residential 547 1.17% -- 0.00% -- 0.00%
Commercial real estate .. 12,107 4.35% 1,396 0.50% 239 0.09%
Construction and land ... 5,732 7.18% 192 0.24% 2,001 2.51%
Home equity ............. 156 1.71% 30 0.33% 45 0.49%
------- ------- -------
Total mortgage loans ..... 48,451 2.09% 9,153 0.39% 8,871 0.38%
Other loans:
Commercial business loans 1,474 4.11% 391 1.09% 516 1.44%
Other loans ............. 1,859 2.71% 318 0.46% 276 0.40%
------- ------- -------
Total other loans ..... 3,333 3.20% 709 0.68% 792 0.76%
------- ------- -------
Total loans ........... $51,784 2.13% $ 9,862 0.41% $ 9,663 0.40%
======= ======= =======
9
Loans Past Due 90 Days or More and Still Accruing And Non-Accruing Assets. The
following table sets forth information with respect to non-accruing loans, other
real estate owned, repossessed assets and loans past due 90 days or more and
still accruing.
March 31, 2000 December 31, 1999
-------------- -----------------
(Dollars in Thousands)
Non-Accruing Assets
Mortgage loans:
Single-family residential ...................... $ 4,172 $ 2,899
Multi-family residential ....................... 115 --
Commercial real estate ......................... 5,975 5,568
Construction and land .......................... 1,330 1,793
Home equity .................................... 6 106
Other loans:
Commercial business loans ...................... 1,644 1,783
Other consumer loans ........................... 391 325
------- -------
Total non-accrual loans ........................... 13,633 12,474
Other real estate owned and repossessed assets, net 1,470 887
------- -------
Total non-accruing assets ....................... 15,103 13,361
Loans past due 90 days or more and still accruing . 9,663 6,886
------- -------
Non-accruing assets and loans past due 90 days
or more and still accruing ..................... $24,766 $20,247
======= =======
Non-accruing assets to total loans ................ 0.62% 0.62%
Non-accruing assets to total assets ............... 0.31% 0.30%
Non-accruing loans to total loans ................. 0.56% 0.58%
Non-accruing loans to total assets ................ 0.28% 0.28%
10
Allowances for Loan Losses. The following table sets forth the activity in the
Bank's allowance for loan losses during the periods indicated.
Three Months Ended Year Ended
March 31, December 31,
----------------------------------- -------------------
2000 1999 1999
----------- ----------- -------------
(Dollars in Thousands)
Allowance at beginning of period ......... $ 14,271 $ 16,617 $ 16,617
Provisions (Benefit) ..................... 18 59 (1,843)
Increase as a result of acquisition of FSB 847 -- --
Charge-offs:
Mortgage loans:
Construction, land and land development -- -- --
Single-family residential ............. 63 39 148
Multi-family residential .............. -- -- --
Commercial real estate ................ -- 216 474
Other loans .............................. 190 138 1,043
-------- -------- --------
Total charge-offs ..................... 253 393 1,665
Recoveries:
Mortgage loans:
Construction, land and land development -- -- --
Single-family residential ............. 9 236 456
Multi-family residential .............. -- -- --
Commercial real estate ................ -- 1 34
Other loans .............................. 93 97 672
-------- -------- --------
Total recoveries ...................... 102 334 1,162
-------- -------- --------
Allowance at end of period ............... $ 14,985 $ 16,617 $ 14,271
======== ======== ========
Allowance for possible loan losses
to total non-accruing loans at
end of period ............................ 109.92% 113.59% 114.40%
Allowance for possible loan losses
to total loans at end of period .......... 0.62% 1.03% 0.66%
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. In addition, in portions of this document and the Company's Annual
Report to Stockholders, the words "anticipate," "believe," "estimate," "expect,"
"intend," "should," and similar expressions, or the negative thereof, as they
relate to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future looking events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
Acquisition
After the close of business on January 14, 2000 the Company completed
the acquisition of First State Bancorp ("FSB"), the holding company for First
State Bank, a New Jersey chartered commercial bank located in Howell, New
Jersey. The four branches in Northern Ocean County and two in Monmouth County,
New Jersey are being operated as the First State Division of Staten Island
Savings Bank. The cost of the transaction, which was accounted for as a purchase
and paid in cash, was approximately $84.0 million. The excess of cost over the
fair value of the net assets acquired (goodwill) in the transaction was $46.4
million and is being amortized on a straight-line basis over a 15-year period.
The goodwill amount is subject to adjustment resulting from future purchase
contingencies which are not expected to be material.
Changes in Financial Condition
Total assets at March 31, 2000 were $4.9 billion compared to $4.5
billion as of December 31, 1999, which represents an increase of $387.0 million
or 8.6%. The increase in overall assets was primarily due to the completion of
the acquisition of FSB which resulted in a net increase of $336.4 million in
total assets. In addition to the asset growth resulting from such acquisition,
the Company experienced an increase in net loans of $176.5 million or 8.21%.
Loan originations for the quarter were $271.9 million of which $34.9 million
were for real estate secured commercial loans and construction loans. The
Mortgage Company had originations of $125.7 million and sales of $85.7 million
of one-to four-family residential loans. The Bank retained for its own portfolio
$39.5 million of ARM loans originated by the Mortgage Company. The increase in
net loans was partially offset by a decrease in securities available for sale of
$133.5 million exclusive of the acquisition of $223.5 million in securities from
FSB. The decrease was primarily due to sales of $107.7 million and prepayments
and amortization from the mortgage- backed securities portfolio. The primary
reason for this decrease in the securities available for sale portfolio was
management's plan to partially fund higher yielding loan originations by
decreasing the securities portfolio through amortization and sales which, as a
result of the additional cash available therefrom, is expected to reduce the
Company's emphasis on the utilization of borrowed funds to fund loan
originations.
Total deposits at March 31, 2000 were $2.2 billion compared to $1.8
billion at December 31, 1999. The increase of $356.1 million or 19.6% was
primarily due to an increase of $327.4 million from the acquisition of FSB and
an increase of $28.6 million from operations primarily due to an increase of
$21.1 million in non-interest bearing demand deposit accounts. The weighted
average cost of deposits was 3.0% as of March 31, 2000 primarily due to our core
deposit base which represents 64.4% of our deposits.
12
Borrowed funds increased $31.1 million during the first quarter of 2000
and totaled $2.1 billion at March 31, 2000. The increase was used to partially
fund the acquisition of FSB, since it is management's intention to reduce its
utilization of borrowings to fund asset growth and to emphasize more traditional
funding sources such as deposit growth in the future.
Stockholders' equity as of March 31, 2000 was $559.4 million or 11.47%
of total assets compared to $571.4 million or 12.73% of total assets as of
December 31, 1999. The decrease of $12.0 million was primarily due to the use of
$22.8 million to repurchase 1.4 million shares of stock and an aggregate cash
dividend payment of $4.6 million. These two decreases were partially offset by
net income of $13.2 million, the allocation of shares in the Employee Stock
Ownership Plan ("ESOP") resulting in an increase of $1.0 million and a decrease
of $1.3 million in the unrealized depreciation on securities available for sale,
net of taxes. The tangible book value per share as of March 31, 2000 was $13.31.
Results of Operations
The Company reported net income of $13.2 million or $0.38 per basic and
fully diluted share for the three months ended March 31, 2000 compared to net
income of $12.3 million or $0.31 per share for the same time period last year.
Cash earnings for the first quarter of 2000 were $15.6 million or $0.45 per
share compared to $14.2 million or $0.36 per share for the comparable time
period last year. Core earnings for the period were $13.3 million or $0.38 per
share compared to $12.2 million or $0.31 per share for the three months ended
March 31, 1999. Cash earnings represent the Company's net income adding back the
non-cash expenses net of taxes related to the "ESOP" and recognition and
retention plan ("RRP") and the amortization of goodwill. Core earnings represent
the Company's net income adjusted for securities transactions net of taxes.
The increase in net income for the quarter ended March 31, 2000
compared to the same quarter one year ago was primarily due to an increase in
net interest income of $2.7 million and an increase in other income of $2.5
million, which was partially offset by an increase in total other expenses of
$4.7 million.
13
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Three Months Ended March 31,
---------------------------------------------------------------------
2000 1999
-------------------------------- -----------------------------
Average
Average Yield/ Average
Balance Interest Cost Balance
---------------- ------------- --------- ----------------
(000's omitted)
Interest-earning assets:
Loans receivable (1):
Real estate loans........................... $ 2,231,443 $ 41,756 7.59% $ 1,517,366
Other loans................................ 100,146 2,370 9.60% 67,171
----------- -------- -----------
Total loans.............................. 2,331,589 44,126 7.68% 1,584,537
Securities.................................. 2,181,557 36,820 6.84% 2,008,668
Other interest-earning assets (2).......... 32,946 460 5.66% 63,593
----------- -------- ------- -----------
Total interest-earning assets............... 4,546,092 81,406 7.26% 3,656,798
-------- ---------
Noninterest-earning assets.................. 168,960 145,405
----------- -----------
Total assets................................ $ 4,715,052 $ 3,802,203
=========== ===========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............... 206,694 1,384 2.72% $ 158,311
Savings and escrow accounts................. 787,526 4,933 2.54% 740,484
Certificates of deposits.................... 731,323 9,073 5.03% 541,367
----------- -------- --------- -----------
Total deposits........................... 1,725,543 15,390 3.62% 1,440,162
Total other borrowings....................... 2,099,323 30,314 5.86% 1,359,641
----------- -------- --------- -----------
Total interest-bearing liabilities.......... 3,824,866 45,704 4.85% 2,799,803
-------- ---------
Noninterest-bearing liabilities (3)......... 329,000 343,288
----------- -----------
Total liabilities........................... 4,153,866 3,143,091
Stockholders' equity.......................... 561,186 659,112
----------- -----------
Total liabilities and stockholders' equity. $ 4,715,052 $ 3,802,203
=========== ===========
Net interest-earning assets................. $ 721,226 $ 856,995
=========== ===========
--------
Net interest income/interest rate spread... $ 35,702 2.42%
======== =========
Net interest margin......................... 3.18%
=========
Ratio of average interest-earning assets
to average interest-bearing liabilities... 118.86%
=========
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Three Months Ended March 31,
-----------------------------
1999
--------------------------
Average
Yield/
Interest Cost
-------- -------
(000's omitted)
Interest-earning assets:
Loans receivable (1):
Real estate loans........................... $ 29,299 7.83%
Other loans................................ 1,366 8.25%
--------
Total loans.............................. 30,665 7.85%
Securities.................................. 31,352 6.33%
Other interest-earning assets (2).......... 727 4.64%
-------- ---------
Total interest-earning assets............... 62,744 6.96%
Noninterest-earning assets..................
Total assets................................
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............... 982 2.52%
Savings and escrow accounts................. 4,562 2.50%
Certificates of deposits.................... 6,469 4.85%
-------- ---------
Total deposits........................... 12,013 3.38%
Total other borrowings....................... 17,714 5.28%
-------- ---------
Total interest-bearing liabilities.......... 29,727 4.31%
-------- ---------
Noninterest-bearing liabilities (3).........
Total liabilities...........................
Stockholders' equity.........................
Total liabilities and stockholders' equity.
Net interest-earning assets.................
--------
Net interest income/interest rate spread... $ 33,017 2.65%
======== =========
Net interest margin......................... 3.66%
=========
Ratio of average interest-earning assets
to average interest-bearing liabilities... 130.61%
=========
- ------------------
(1) The average balance of loans receivable includes nonaccruing loans,
interest on which is recognized on a cash basis.
(2) Includes money market accounts, time deposit accounts and Federal Funds
sold.
(3) Consists primarily of demand deposit accounts.
14
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes on net
interest income of the Company. Information is provided with respect to (i)
effects on interest income attributable to changes in volume (changes in volume
multiplied by prior rate); (ii) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume); and (iii) changes
in rate/volume (change in rate multiplied by change in volume).
Three Months Ended March 31,
--------------------------------------------------------------------
2000 compared to 1999
--------------------------------------------------------------------
Increase (decrease) due to
------------------------------------------------- Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
--------- ---------- ---------- ---------
(000's omitted)
Interest-earning assets:
Loans receivable:
Real estate loans .............................. $ (904) $ 13,788 $ (426) $ 12,458
Other loans .................................... 224 670 110 1,004
-------- -------- -------- --------
Total loans receivable ......................... (680) 14,458 (316) 13,462
Securities ..................................... 2,550 2,698 219 5,467
Federal funds sold and interest-bearing deposits 160 (350) (77) (267)
-------- -------- -------- --------
Total net change in income on interest-
earning assets ............................... 2,030 16,806 (174) 18,662
Interest-bearing liabilities:
Deposits:
NOW and money market deposits .................. 78 300 24 402
Savings and escrow accounts .................... 76 290 5 371
Certificates of deposit ........................ 247 2,270 87 2,604
-------- -------- -------- --------
Total deposits ................................. 401 2,860 116 3,377
Other Borrowings ............................... 1,919 9,637 1,044 12,600
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ................. 2,320 12,497 1,160 15,977
-------- -------- -------- --------
Net change in net interest income .............. $ (290) $ 4,309 $ (1,334) $ 2,685
======== ======== ======== ========
15
Interest Income
The Company's total interest income was $81.4 million for the three
months ended March 31, 2000 compared to $62.7 million for the comparable time
period last year. The $18.7 million or 29.7% increase was primarily due to a
$13.5 million increase in interest income from loans and a $5.5 million increase
in interest income from securities. The primary reason for the increase in
interest income from loans was a $747.1 million increase in the average balance
of loans which was partially offset by a 17 basis point decrease in the average
yield from 7.85% for the quarter ending March 31, 1999 to 7.68% for the quarter
ending March 31, 2000. The increase in interest income from securities was due
to a $172.9 million increase in the average balance of securities and a 51 basis
point increase in the average yield to 6.84% for the three months ending March
31, 2000 compared to the three months ended March 31, 1999. The increase in the
average balance of the loan portfolio was due to increased loan originations as
a result of, among other factors, the Bank's continued business development
efforts to increase loan originations especially in commercial loans, the
continued growth of the Bank's mortgage broker program and, to a lesser extent,
the acquisition of FSB. The decrease in the average yield on the loan portfolio
was due to the increase repayments of relatively higher yielding loans and loans
originated which had market interest rates that have been lower than the average
yield of the Bank's loan portfolio for a majority of the past year. The increase
in the average balance of the securities portfolio was due to the acquisition of
FSB. The increase in the average yield of the securities portfolio was due to
the repricing of certain adjustable-rate securities to higher yields and the
securities acquired in the acquisition of FSB being recorded at current market
values resulting in current market yields.
Interest Expense
The Company's total interest expense was $45.7 million for the first
quarter of 2000 compared to $29.7 million for the comparable time period last
year. The primary reason for the increase was a $1.0 billion increase in the
average balance of interest-bearing liabilities and a 54 basis point increase in
the average cost of interest-bearing liabilities to 4.85% for the three months
ended March 31, 2000 compared to 4.31% for the three months ended March 31,
1999. The increase in the average balance of interest-bearing liabilities was
due to a $739.7 million increase in the average balance of borrowings and a
$285.4 million increase in the average balance of deposits. The increase in the
average balance of borrowings was due to the Company's strategy to fund loan and
investment growth with borrowed funds at acceptable spreads during 1999. The
increase in the average balance of deposits was primarily due to the acquisition
of FSB and to a lesser extent, deposit growth. The increase in the average cost
of borrowings was due to the rollover of borrowings in the current higher rate
environment. The increase in the average cost of deposits was primarily due to
the higher costing mix of deposits acquired in the acquisition of FSB.
Net Interest Income
Net interest income for the first quarter of 2000 was $35.7 million, an
increase of $2.7 million or 8.1% compared to $33.0 million for the first quarter
of 1999. The increase was due to a $18.7 million or 29.7% increase in interest
income, which was partially offset by a $16.0 million or 53.7% increase in
interest expense. The increase in interest income was due to a $889.3 million
increase in the average balance of interest-earning assets and a 30 basis point
increase to 7.26% in the average yield of interest-earning assets. The increase
in interest expense was due to a $1.0 billion increase in the average balance of
interest-bearing liabilities and a 54 basis point increase to 4.85% in the
average cost of interest-bearing liabilities.
The Company's interest rate spread and interest rate margin for the
three months ended March 31, 2000 was 2.42% and 3.18%, respectively, compared to
2.65% and 3.66%, respectively, for the three month period ended March 31, 1999.
The Bank's use of borrowed funds to leverage the balance sheet, its changing
deposit mix and rollovers of its interest-bearing liabilities to higher costing
market rates faster than its interest-earning assets repricing to higher yields
has resulted in the decreased interest rate spread and margin.
16
Provision for Loan Losses
The provision for loan losses was $18,000 for the three months ended
March 31, 2000 compared to $59,000 for the three months ended March 31, 1999.
The level of the loan loss reserve is continuously reviewed by management to
determine its adequacy. The review includes such factors as the composition of
the loan portfolio and its inherent characteristics, the level of non-accruing
loans and delinquencies, local economic conditions and current trends in
regulatory supervision.
Non-accruing assets totaled $15.1 million at March 31, 2000 compared to
$13.4 million as of December 31, 1999. The increase of $1.7 million was
primarily due to the acquisition of FSB which included $823,000 in ORE
properties. Non-accruing assets as a percent of assets was a .31% at March 31,
2000 compared to a .30% at December 31, 1999. The allowance for loan losses was
$15.0 million compared to $14.3 million at December 31, 1999. The increase of
$714,000 was a result of chargeoffs of $253,000, recoveries of $102,000,
provision for loan losses of $18,000 and an allowance for loan losses of
$847,000 acquired from FSB. As a result, the allowance for loan loss represents
109.9% of non-accruing loans at March 31, 2000 compared to 114.4% as of December
31, 1999. The Bank continues its efforts to enhance its loan administration area
and procedures to deal with delinquent loans and non-accruing loans.
Other Income
Total other income amounted to $8.2 million for the three months ended
March 31, 2000 compared to $5.6 million for the three months ended March 31,
1999. The increase of $2.5 million was primarily due to the $1.6 million
increase in the cash surrender value of the Bank Owned Life Insurance ("BOLI")
policy which was purchased in the third quarter of 1999 to fund employee
benefits, the increase in the fees generated by the Mortgage Company and
increases in various other deposit related fees.
Total Other Expenses
Total other expenses for the first quarter of 2000 were $22.4 million
or $4.7 million more than the same time period last year. This increase was
primarily the result of an increase of $2.7 million in personnel expense and an
increase of $664,000 in the amortization of intangible assets The increase in
personnel expense was due to increases of $784,000 and $770,000 in commission
expense and personnel expense, respectively of the Mortgage Company, as well as
$391,000 increase in personnel expenses of ACLS, increased personnel costs of
the Bank due to additional staff in the loan origination and administration
areas due to increased lending volumes and normal merit pay increase. The
increase in the amortization of intangible assets was due to the resultant
goodwill from the acquisition of FSB.
Provision for Income Taxes
The provision for income taxes for the three months ended March 31,
2000 was $8.3 million compared to $8.6 million for the three months ended March
31, 1999. The decrease was due to a reduction in the effective tax rate from
41.0% for the first quarter of 1999 to 38.7% for the first quarter of 2000. The
reduction in the effective tax rate is primarily due to the tax planning
strategies which include BOLI.
Liquidity and Commitments
The Company's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Company's
primary sources of funds are deposits, amortization, prepayments and maturities
of outstanding loans and mortgage-backed securities, maturities of investment
securities and other short-term investments and funds provided from operations.
While scheduled payments from the amortization of loans and mortgage-backed
securities and maturing investment securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
17
competition. In addition, the Company invests excess funds in federal funds sold
and other short-term interest-earning assets which provide liquidity to meet
lending requirements.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as federal funds. The Company uses its sources of funds primarily to meet
its ongoing commitments, to pay maturing certificates of deposit and savings
withdrawals, fund loan commitments and maintain a portfolio of mortgage-backed
and mortgage-related securities and investment securities. At March 31, 2000,
the total approved loan origination commitments outstanding amounted to $302.4
million. At the same date, the unadvanced portion of construction loans totaled
$43.0 million. Certificates of deposit scheduled to mature in one year or less
at March 31, 2000 totaled $584.5 million. Investment securities scheduled to
mature in one year or less at March 31, 2000 totaled $6.6 million and
amortization from investments and loans is projected at $661.4 million over the
next 12 months. Based on historical experience, the current pricing strategy and
the strong core deposit base, management believes that a significant portion of
maturing deposits will remain with the Bank. The Bank anticipates that it will
continue to have sufficient funds, together with loan sales and security sales,
to meet its current commitments.
Capital
At March 31, 2000 the Bank had regulatory capital which was well in
excess of all regulatory requirements set by the OTS. The current requirements
and the Bank's actual levels are detailed below (dollars in thousands):
Required Capital Actual Capital Excess Capital
------------------------- ---------------------- --------------------
Amount Percent Amount Percent Amount Percent
--------- --------- -------- -------- --------- --------
Tangible capital $ 71,324 1.50% $ 394,243 8.29% $ 322,919 6.79%
Core capital $ 190,264 4.00% $ 395,896 8.32% $ 205,632 4.32%
Risk-based capital $ 183,546 8.00% $ 410,881 17.91% $ 227,335 9.91%
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------
The Company's primary market risk continues to be market interest rate
volatility due to the potential impact on net interest income and the market
value of all interest-earning assets and interest-bearing liabilities resulting
from changes in interest rates. The operation of the Company does not subject it
to foreign exchange or commodity price risk and the Company does not own any
trading assets. The real estate loan portfolio of the Company is concentrated
primarily within the New York metropolitan area making it subject to the risks
associated with the local economy. Management believes that there have been no
material changes in the Company's market risk at March 31, 2000 as compared to
December 31, 1999. For a complete discussion of the Company's asset and
liability management market risk and interest rate sensitivity , see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1999 Annual Report to Stockholders.
18
Part II Other Information
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities and Use of Proceeds
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a. On March 30, 2000, the Company's proxy statement was mailed
for the annual meeting of stockholders which was held on April
27, 2000.
b. Not applicable
c. There were 37,391,215 shares of Common Stock of the Company
eligible to be voted on at the annual meeting and 33,305,619
shares were represented at the meeting by the holders thereof,
which constituted a quorum. The items voted upon at the annual
meeting and the vote for each proposal were as follows:
1. ELECTION OF DIRECTORS for three-year term expiring in 2003
FOR % WITHHELD
--- - --------
Harry P. Doherty 31,192,306 93.7 2,113,313 6.3
William G. Horn 32,576,586 97.8 729,032 2.1
William E. O'Mara 32,606,477 97.9 699,142 2.1
2. PROPOSAL to ratify the appointment of Arthur Andersen L.L.P.
as the Company's independent auditors for the year ending
December 31, 2000.
FOR % AGAINST % ABSTAIN %
--- - ------- - ------- -
32,854,115 98.7 171,919 0.5 277,600 0.8
3. STOCKHOLDERS PROPOSAL that the Board of Directors take the
necessary steps to achieve a sale or merger of the Company.
FOR % AGAINST % ABSTAIN % NON-VOTE %
--- - ------- - ------- - --------- -
4,707,876 19.7 18,774,146 78.8 356,812 1.5 9,469,784 28.4
4. STOCKHOLDERS PROPOSAL to remove anti-takeover defenses from
the Company's Certificate of Incorporation and Bylaws.
FOR % AGAINST % ABSTAIN % NON-VOTE %
--- - ------- - ------- - -------- -
11,449,621 48.0 12,055,162 50.6 28,053 1.4 9,472,782 28.4
d. Not applicable
Item 5 Other Information
Not applicable
19
Item 6 Exhibits and Reports on Form 8-K
a. 27.0 Financial Data Schedule
b. On January 14, 2000 the Company filed form 8K regarding the
acquisition of First State Bancorp effective after the close
of business on January 14, 2000. The following exhibits were
included with the report:
Exhibit 21 - Agreement and Plan of Reorganization dated August 18,
1999 among SIB, the Bank, FSB and First State.
Exhibit 99.1 - Press release dated January 14, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STATEN ISLAND BANCORP, INC.
Date: May 15, 2000 By: /s/ Harry P. Doherty
------------- -------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: May 15, 2000 By: /s/ Edward Klingele
------------ ----------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
21