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, 2001
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
33,240,287 shares of Common Stock outstanding as of May 11, 2001.
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, 2001 and December 31, 2000)
Unaudited Statements of Income 2
(For three months ended March 31, 2001 and 2000)
Unaudited Statement of Changes in Stockholders' Equity 3
(For three months ended March 31, 2001)
Unaudited Statements of Cash Flows 4
(For the three months ended March 31, 2001 and 2000)
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 19
--------------------------------
Signatures 20
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
March 31, 2001 December 31, 2000
-------------- -----------------
(000's omitted)
ASSETS unaudited
ASSETS:
Cash and due from banks ............................... $ 100,813 $ 92,103
Federal funds sold .................................... -- 12,000
Securities available for sale ......................... 1,791,199 1,888,946
Loans, net ............................................ 2,924,850 2,847,660
Loans held for sale, net .............................. 378,317 116,163
Accrued interest receivable ........................... 28,307 30,905
Bank premises and equipment, net ...................... 31,843 31,883
Intangible assets, net ................................ 60,786 62,447
Other assets .......................................... 163,253 158,757
----------- -----------
Total assets .......................................... $ 5,479,368 $ 5,240,864
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due Depositors-
Savings ............................................... $ 786,821 $ 760,238
Certificates of deposit ............................... 998,855 947,584
Money market .......................................... 161,086 142,394
NOW accounts .......................................... 97,756 94,699
Demand deposits ....................................... 452,374 400,298
----------- -----------
Total deposits ........................................ 2,496,892 2,345,213
Borrowed funds ........................................ 2,329,789 2,241,011
Advances from borrowers for taxes and insurance ....... 16,071 11,534
Accrued interest and other liabilities ................ 66,024 57,574
----------- -----------
Total liabilities ..................................... 4,908,776 4,655,332
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 100,000,000
shares authorized, 45,130,312 issued and 33,692,187
outstanding at March 31,2001 and 45,130,312 issued and
34,920,945 outstanding at December 31, 2000 451 451
Additional paid-in-capital ............................ 538,407 537,744
Retained earnings-substantially restricted ............ 300,167 291,345
Unallocated common stock held by ESOP ................. (32,275) (32,962)
Unearned common stock held by RRP ..................... (19,584) (19,784)
Treasury stock (11,438,125 shares at March 31, 2001
and 10,209,325 at December 31, 2000), at cost ......... (216,996) (188,321)
----------- -----------
570,170 588,473
Accumulated other comprehensive income, net of taxes .. 422 (2,941)
----------- -----------
Total stockholders' equity ............................ 570,592 585,532
----------- -----------
Total liabilities and stockholders' equity ............ $ 5,479,368 $ 5,240,864
=========== ===========
1
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31,
-----------------------------------
2001 2000
-----------------------------------
(000's omitted)
unaudited
Interest Income:
Loans .................................................. $ 59,449 $ 44,126
Securities, available for sale ......................... 30,850 36,820
Federal funds sold ..................................... 379 460
------------ ------------
Total interest income ............................... 90,678 81,406
------------ ------------
Interest Expense:
Savings and escrow ..................................... 4,361 4,933
Certificates of deposits ............................... 13,930 9,073
Money market and NOW ................................... 1,747 1,384
Borrowed funds ......................................... 34,801 30,314
------------ ------------
Total interest expense .............................. 54,839 45,704
------------ ------------
Net interest income ................................. 35,839 35,702
Provision for Loan Losses .............................. 600 18
------------ ------------
Net interest income after provision for loan losses 35,239 35,684
Other Income (Loss):
Service and fee income ................................. 4,890 4,079
Loan fees and gains .................................... 11,642 4,309
Securities transactions ................................ (6) (224)
------------ ------------
16,526 8,164
Other Expenses:
Personnel .............................................. 12,747 11,233
Commissions ............................................ 4,898 1,841
Occupancy and equipment ................................ 3,188 2,377
Amortization of intangible assets ...................... 1,387 1,217
Data processing ........................................ 1,539 1,148
Marketing .............................................. 673 480
Professional fees ...................................... 608 568
Other .................................................. 4,520 3,494
------------ ------------
Total other expenses ................................ 29,560 22,358
------------ ------------
Income before provision for income taxes ............ 22,205 21,490
Provision for Income Taxes ............................. 8,209 8,327
------------ ------------
Net Income ............................................. $ 13,996 $ 13,163
============ ============
Earnings (Loss) Per Share:
Basic .................................................. $ 0.45 $ 0.38
Diluted ................................................ $ 0.45 $ 0.38
Weighted Average:
Common Shares .......................................... 45,130,312 45,130,312
Less: Unallocated ESOP/RRP Shares ...................... 2,928,776 3,179,824
Less: Treasury Shares .................................. 10,910,164 6,976,562
------------ ------------
31,291,372 34,973,926
============ ============
2
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Unallocated
Additional Common Unearned
Common Paid-In Stock RRP Treasury Comprehensive
Stock Capital Held by ESOP Shares Stock Income
--------------------------------------------------------------------------------------
unaudited
Balance January 1, 2001.............. $ 451 $ 537,744 $ (32,962) $ (19,784) $ (188,321)
Change in unrealized
appreciation (depreciation)
on securities, net of tax............ 3,363
Allocation of 57,226 ESOP shares..... 654 687
Vesting of 11,000 RRP shares......... 9 200
Treasury stock (1,228,800) at cost... (28,675)
Net Income........................... 13,996
---------
17,359
Dividends paid.......................
--------------------------------------------------------------------------------------
Balance March 31, 2001............... $ 451 $ 538,407 $ (32,275) $ (19,584) $ (216,996)
======================================================================================
Accumulated
Other
Retained Comprehensive
Income Income Total
------------------------------------------
Balance January 1, 2001.............. $ 291,345 $ (2,941) $ 585,532
Change in unrealized
appreciation (depreciation)
on securities, net of tax............ 3,363 3,363
Allocation of 57,226 ESOP shares..... 1,341
Vesting of 11,000 RRP shares......... 209
Treasury stock (1,228,800) at cost... (28,675)
Net Income........................... 13,996 13,996
Dividends paid....................... (5,174) (5,174)
--------------------------------------------
Balance March 31, 2001............... $ 300,167 $ 422 $ 570,592
============================================
3
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001, 2000
2001 2000
------ ------
(000's omitted)
unaudited
Cash Flows From Operating Activities:
Net Income $ 13,996 $ 13,163
Adjustments to reconcile net income to net cash
provided by operating activities----
Depreciation and amortization 951 690
Amortization of bond and mortgage premiums 8 (648)
Amortization of intangible assets 1,387 1,217
Loss (Gain) on sale of available for sale securities 6 223
Other noncash income (3,543) (3,360)
Expense charge relating to allocation and earned
portions of employee benefit plan 2,391 2,061
Provision for possible loan losses 600 18
Decrease in deferred loan fees (81) (1,003)
Decrease in accrued interest receivable 2,598 2,649
Increase in other assets (8,667) (2,820)
Increase in accrued interest and other liabilities 7,369 7,898
Decrease in deferred income taxes 1,939 1,042
Recoveries of loans 256 102
-------------------------------
Net cash provided by operating activities 19,210 21,232
-------------------------------
Cash Flows From Investing Activities:
Maturities of available for sale securities 101,681 44,221
Sales of available for sale securities 113,018 107,730
Purchases of available for sale securities (110,022) (15,283)
Principal collected on loans 295,012 22,521
Loans made to customers (712,981) (272,408)
Purchases of loans (140,091) (3,030)
Sales of loans 220,521 85,690
Capital expenditures (783) (1,603)
Acquisition of FSB, net of cash acquired 0 (46,688)
-------------------------------
Net cash used in investing activities (233,645) (78,850)
-------------------------------
Cash Flows From Financing Activities:
Net increase in deposit accounts 156,216 31,209
Borrowings 88,778 31,137
Dividends paid (5,174) (4,644)
Purchase of Treasury Stock (28,675) (22,817)
Net cash provided by financing activities 211,145 34,885
Net decrease in cash and cash equivalents (3,290) (22,733)
Cash and equivalents, beginning of year 104,103 101,398
-------------------------------
Cash and equivalents, end of period $ 100,813 $ 78,665
==============================
Supplemental Disclosures Of Cash Flow Information:
Cash paid for-
Interest $ 55,435 $ 44,832
Income taxes $ 3,889 $ 3,788
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
. 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, SI Bank &
Trust (the "Bank"), and the Bank's subsidiaries. The Bank's wholly owned
subsidiaries are SIB Mortgage Corp. (the "Mortgage Company"), SIB Investment
Corporation ("SIBIC"), Staten Island Funding Corporation ("SIFC") and 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 ending
March 31, 2001 are not necessarily indicative of the results to be expected for
the year ending December 31, 2001. 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
2000 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 SI Bank &
Trust. The Bank, which is a traditional full service community oriented bank,
operates seventeen full service branches, one supermarket branch and three
limited service branches on Staten Island, two full service branches in
Brooklyn, five full service branches in Ocean County, New Jersey and two full
service branches in Monmouth County, New Jersey, three full service branches in
Union County, New Jersey and one full service branch in Middlesex County, New
Jersey. The Bank also has a lending center and a Trust Department on Staten
Island. Commercial lending offices are also located in Bay Ridge, Brooklyn 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 27 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.
American Construction Lending Services (ACLS), which operates as
a division of the Mortgage Company, originates short-term, generally six months
to one year, construction loans primarily to individuals for their own
residences. ACLS operates throughout the United States and the Bank will provide
5
permanent loans for construction loans originated by ACLS for certain properties
located in the New York City metropolitan area.
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
27 states and had assets totaling $657.9 million at March 31, 2001 and
originated $528.6 million of loans during the three months ended March 31, 2001.
The Mortgage Company currently holds $118.0 million of residential loans in it's
own portfolio for investment and the Bank has retained $182.6 million in higher
yielding residential ARMS.
SIFC 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 $667.5
million at March 31, 2001.
SIBIC 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, 2001 were $876.3 million.
SIBFSC was incorporated in the State of New York in January 2000.
SIBFSC was formed as a licensed life insurance agency to sell the products of
the SBLI USA Mutual Life Insurance Co. The assets of SIBFSC were $482,000 as of
March 31, 2001.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." In June 1999, the FASB issued SFAS NO. 137, "Accounting For
Derivative Instruments and Hedging Activities Deferral of the Effective Date of
SFAS No. 133," which amended the effective date of SFAS No. 133. SFAS No. 133 is
now effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. The statement established accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments as fair value. Effective
January 1, 2001 the Company adopted SFAS Nos. 133 and 137 and it did not have a
material effect on the Company's fiancial statements.
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, 2001
and December 31,2000.
March 31, 2001 December 31, 2000
Bonds - Available For Sale --------------------------- --------------------------
- -------------------------- Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ---------- --------- ----------
(000's omitted) (000's omitted)
U.S. Treasuries ..................................... $ 3,075 $ 3,146 $ 4,340 $ 4,393
Govt. Sponsored Agencies ............................ 128,142 128,963 174,011 173,693
Industrial and Finance .............................. 158,320 146,814 170,230 157,647
Foreign ............................................. 250 250 250 250
---------- ---------- ---------- ----------
Total Debt Securities ............................... 289,787 279,173 348,831 335,983
---------- ---------- ---------- ----------
G.N.M.A. - M.B.S .................................... 13,469 13,931 14,264 14,632
F.H.L.M.C. - M.B.S .................................. 330,451 332,480 317,450 319,482
F.N.M.A. - M.B.S .................................... 351,953 355,810 380,578 383,114
Agency C.M.O.s ...................................... 214,510 215,368 223,224 221,267
Privately Issued C.M.O.s ............................ 404,322 407,699 412,374 410,752
---------- ---------- ---------- ----------
Total Mortgage-Backed and Mortgage Related Securities 1,314,705 1,325,288 1,347,890 1,349,247
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Bonds - Available For Sale ................... 1,604,492 1,604,461 1,696,721 1,685,230
---------- ---------- ---------- ----------
Equity Securities
- ----------------- Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
Preferred Stock ..................................... 52,213 46,985 69,913 62,888
Common Stock ........................................ 104,318 107,937 98,632 105,084
IIMF Capital Appreciation Fund ...................... 29,364 31,816 29,337 35,744
---------- ---------- ---------- ----------
Total Equity Securities ............................. 185,895 186,738 197,882 203,716
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Investments ................................... $1,790,387 $1,791,199 $1,894,603 $1,888,946
========== ========== ========== ==========
7
Loan Portfolio Composition. The following table sets forth the composition of
the Bank's loans at the dates indicated.
March 31, 2001 December 31, 2000
----------------- --------------------
(Dollars in Thousands)
Mortgage loans:
Single-family residential.............. $ 2,232,336 $ 2,206,972
Multi-family residential............... 48,570 49,034
Commercial real estate................. 304,743 307,407
Construction and land.................. 205,892 152,956
Home equity............................ 11,200 10,699
----------------- -----------------
Total mortgage loans................... 2,802,741 2,727,068
Other loans:
Student loans.......................... 486 333
Passbook loans......................... 6,073 6,237
Commercial business loans.............. 55,417 52,980
Other consumer loans................... 63,350 63,984
----------------- -----------------
Total other loans...................... 125,326 123,534
----------------- -----------------
Total loans receivable................. 2,928,067 2,850,602
Premium (discount) on loans purchased.. 5,581 5,713
Allowance for loan losses.............. (14,701) (14,638)
Deferred loan costs (fees)............. 5,903 5,983
----------------- -----------------
Loans receivable, net.................. $ 2,924,850 $ 2,847,660
================= =================
8
Delinquent Loans: The following table sets forth information concerning
delinquent loans at March 31, 2001 on which the Company is accruing interest and
as a percentage of each category of the Company'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, 2001
----------------------------------------------------------------------------------------
30-59 Days 60-89 Days 90 Days or More
------------------------ ------------------------ ----------------------------
Percent of Loan Percent of Loan Percent of Loan
Amount Category Amount Category Amount Category
------ ----------- ------ ------------ -------- ----------
(Dollars in Thousands)
Mortgage loans:
Single-family residential $17,275 0.77% $ 5,875 0.26% $ 7,070 0.32%
Multi-family residential -- 0.00% -- 0.00% -- 0.00%
Commercial real estate .. 2,270 0.74% 270 0.09% 51 0.02%
Construction and land ... 2,876 1.40% 1,260 0.61% 68 0.03%
Home equity ............. 615 5.49% 29 0.26% 18 0.16%
------- ---- ------- ---- ------- ----
Total mortgage loans .... 23,036 0.82% 7,434 0.27% 7,207 0.26%
Other loans:
Commercial business loans 2,637 4.76% 690 1.25% 86 0.16%
Other loans ............. 2,170 3.10% 810 1.16% 390 0.56%
------- ---- ------- ---- ------- ----
Total other loans ....... 4,807 3.84% 1,500 1.20% 476 0.38%
------- ---- ------- ---- ------- ----
Total loans ............. 27,843 0.95% 8,934 0.31% 7,683 0.26%
======= ==== ======= ==== ======= ====
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, 2001 December 31, 2000
-------------- ------------------
(000's omitted)
Non-Accruing Assets
Mortgage loans:
Single-family residential ......................... $ 4,903 $ 3,335
Multi-family residential .......................... 65 340
Commercial real estate ............................ 2,688 2,979
Construction and land ............................. 1,305 524
Home equity ....................................... 43 5
Other loans:
Commercial business loans ......................... 721 1,482
Other consumer loans .............................. 1,179 1,111
---------- ----------
Total non-accrual loans ........................... 10,904 9,776
Other real estate owned and repossessed assets, net 1,123 893
---------- ----------
Total non-accruing assets ......................... 12,027 10,669
Loans past due 90 days or more and still accruing . 7,683 7,068
Non-accruing assets and loans past due 90 days
---------- ----------
or more and still accruing ........................ $ 19,710 $ 17,737
========== ==========
Non-accruing assets to total loans ................ 0.41% 0.37%
Non-accruing assets to total assets ............... 0.22% 0.20%
Non-accruing loans to total loans ................. 0.37% 0.34%
Non-accruing loans to total assets ................ 0.20% 0.19%
10
Allowance 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,
----------------------------- -----------
2001 2000 2000
---------- ----------- ----------
(000's omitted)
Allowance at beginning of period ......... $ 14,638 $ 14,271 $ 14,271
Provisions ............................... 600 18 652
Increase as a result of acquisition ...... -- 847 847
Charge-offs:
Mortgage loans:
Construction, land and land development -- -- 6
Single-family residential ............. 50 63 120
Multi-family residential .............. -- -- --
Commercial real estate ................ -- -- 134
Other loans .............................. 743 190 1,926
---------- ---------- ----------
Total charge-offs ..................... 793 253 2,186
Recoveries:
Mortgage loans:
Construction, land and land development -- -- --
Single-family residential ............. 13 9 19
Multi-family residential .............. -- -- --
Commercial real estate ................ -- -- 27
Other loans .............................. 243 93 1,008
---------- ---------- ----------
Total recoveries ...................... 256 102 1,054
---------- ---------- ----------
Allowance at end of period ............... $ 14,701 $ 14,985 $ 14,638
========== ========== ==========
Allowance for possible loan losses
to total non-accruing loans at
end of period ............................ 134.82% 109.92% 149.73%
Allowance for possible loan losses
to total loans at end of period .......... 0.50% 0.62% 0.51%
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.
Changes in Financial Condition
Total assets at March 31, 2001 were $5.5 billion representing an
increase of $238.5 million or 4.6%. Driving this increase was growth of $77.2
million or 2.7% in loans, net and growth of $262.2 million or 225.7% in loans
held for sale. These increases were partially offset by a $97.7 million or 5.2%
decrease in securities available for sale. The increase in loans, net was
primarily due to the growth of single family residential loans as a result of
the Bank's program to retain for its own portfolio higher yielding adjustable
rate loans originated by the Bank or the Mortgage Company. The funding for these
loans was provided by the sales, amortization and prepayments from the
securities portfolio. The increase in loans held for sale is primarily due to
the record volumes of originations at the Mortgage Company due to the current
interest rate environment and the Company's expansion in the year 2000.
Total deposits at March 31, 2001 were $2.5 billion compared to
$2.3 billion at December 31, 2000. The increase of $151.7 million or 6.5% was
primarily due to our current emphasis on deposit generation through competitive
rates and the introduction of new products. Core deposits which consist of
savings, money market, NOW and non-interest bearing DDA accounts represented
60.0% of deposits at March 31, 2001. Within our core deposit base 18.1% of total
deposits are non-interest bearing DDA accounts. The weighted average cost of
deposits at March 31, 2001 was 3.31%. Occasionally brokered deposits are used to
supplement retail deposits in raising funds in financing and liquidity needs.
Included in total deposits at March 31, 2001 were $74.9 million in brokered CD's
with an average cost of 6.71%.
Borrowed funds as of March 31, 2001 were $2.3 billion compared to
$2.2 billion at December 31, 2000. The increase of $88.8 million was primarily
used to fund originations of the loans held for sale by the Mortgage Company.
The borrowings consist of advances from the Federal Home Loan Bank of NY (FHLB)
and reverse repurchase agreements with both the FHLB and nationally recognized
brokerage firms. At the present time, it is the Company's intention to shift its
liability emphasis from borrowings to deposits and reduce the utilization of
borrowed funds except to meet the liquidity needs resulting from the activities
of the Mortgage Company.
Stockholders' equity amounted to $570.6 million at March 31, 2001
and $585.5 million at December 31, 2000 or 10.7% and 11.2% of total assets at
such dates, respectively. The decrease of $14.9 million was due to the use of
$28.7 million to repurchase 1.2 million shares of stock and an aggregate cash
dividend payment of $5.2 million. These two decreases were partially offset by
net income of $14.0 million, an allocation of Employee Stock Ownership Plan
(ESOP) and Recognition and Retention (RRP) shares resulting in an increase of
$1.5 million and a decrease of $3.4 million in unrealized depreciation on
securities available for sale, net of taxes. The tangible book value per share
was $15.13 at March 31, 2001 compared to $14.98 at December 31, 2000.
12
Results of Operations
The Company reported net income of $14.0 million or $0.45 per
basic and fully diluted share for the three months ended March 31, 2001 compared
to net income of $13.2 million or $0.38 per basic and fully diluted share for
the three month period ended March 31, 2000. Cash earnings were $16.9 million or
$0.54 per share for the first quarter of 2001 compared to cash earnings of $15.6
million or $0.45 per share for the same time period last year. Cash earnings
represent the Company's net income increased by adding back non-cash expenses
net of applicable taxes related to the ESOP and RRP and the amortization of
goodwill.
The increase in net income for the quarter ended March 31, 2001
compared to the same quarter one year ago was primarily due to an increase of
$8.4 million in other income partially offset by a $7.2 million increase in
total other expenses and a $582,000 increase in the provision for loan losses.
13
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Three Months Ended March 31,
-----------------------------------------------------------------------------------
2001 2000
---------------------------------------- -----------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------------- ----------- ---------- --------------- ------------- ---------
(Dollars in Thousands
Interest-earning assets:
Loans receivable (1):
Real estate loans............................ $ 2,982,436 $ 56,619 7.70% $ 2,231,443 $ 41,756 7.59%
Other loans.................................. 118,923 2,830 9.65% 100,146 2,370 9.60%
-------------- ----------- --------------- -------------
Total loans............................... 3,101,359 59,449 7.77% 2,331,589 44,126 7.68%
Securities................................... 1,878,220 30,850 6.66% 2,181,557 36,820 6.84%
Other interest-earning assets (2)............ 33,990 379 4.53% 32,946 460 5.66%
-------------- ----------- ---------- --------------- ------------- ---------
Total interest-earning assets................ 5,013,569 90,678 7.34% 4,546,092 81,406 7.26%
----------- ---------- ------------- ---------
Noninterest-earning assets................... 333,643 168,960
-------------- ---------------
Total assets................................. $ 5,347,212 $ 4,715,052
============== ===============
Interest-bearing liabilities:
Deposits:
NOW and money market deposits................ 242,022 1,747 2.93% 206,694 1,384 2.72%
Savings and escrow accounts.................. 784,874 4,361 2.25% 787,526 4,933 2.54%
Certificates of deposits..................... 979,737 13,930 5.77% 731,323 9,073 5.03%
-------------- ----------- ---------- --------------- ------------- ---------
Total deposits............................ 2,006,633 20,038 4.05% 1,725,543 15,390 3.62%
Total Other Borrowings....................... 2,296,831 34,801 6.14% 2,099,323 30,314 5.86%
-------------- ----------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities........... 4,303,464 54,839 5.17% 3,824,866 45,704 4.85%
----------- ---------- ------------- ---------
Noninterest-bearing liabilities (3).......... 462,513 329,000
-------------- ---------------
Total liabilities............................ 4,765,977 4,153,866
Stockholders' equity......................... 581,235 561,186
-------------- ---------------
Total liabilities and stockholders' equity... $ 5,347,212 $ 4,715,052
============== ===============
Net interest-earning assets.................. $ 710,105 $ 721,226
============== ----------- =============== -------------
Net interest income/interest rate spread..... $ 35,839 2.17% $ 35,702 2.42%
=========== ========== ============= =========
Net interest margin.......................... 2.90% 3.18%
============ =========
Ratio of average interest-earning assets
to average interest-bearing liabilities... 116.50% 118.86%
============ =========
- ------------------
(1) The average balance of loans receivable includes nonperforming loans,
interest on which is recognized on a cash basis.
(2) Includes money market accounts and Federal Funds sold.
(3) Consists primarily of demand deposit accounts.
14
Rate/Volume Analysis The following table sets forth the effects of changing
rates and volumes on net interest income of the Bank. Information is provided
with respect to (i) effects on interest income attributable (to change in volume
multiplied by prior rate}, (ii) effects aon 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,
2001 compared to 2000
-------------------------------------------------------------
Increase (decrease) due to
------------------------------------------ Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
-------- -------- -------- --------
(000's omitted)
Interest-earning assets:
Loans receivable:
Real estate loans ..................... $ 606 $ 14,053 $ 204 $ 14,863
Other loans ........................... 13 445 2 460
-------- -------- -------- --------
Total loans receivable ................ 619 14,498 206 15,323
Securities ............................ (988) (5,119) 137 (5,970)
Other interest-earning assets ......... (92) 14 (3) (81)
Total net change in income on interest-
-------- -------- -------- --------
earning assets ........................ (461) 9,393 340 9,272
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits ......... 108 237 18 363
Savings and escrow accounts ........... (557) (17) 2 (572)
Certificates of deposit ............... 1,325 3,082 450 4,857
-------- -------- -------- --------
Total deposits ........................ 876 3,302 470 4,648
Other Borrowings ...................... 1,494 2,852 141 4,487
Total net change in expense on
-------- -------- -------- --------
interest-bearing liabilities .......... 2,370 6,154 611 9,135
-------- -------- -------- --------
Net change in net interest income ..... $ (2,831) $ 3,239 $ (271) $ 137
======== ======== ======== ========
15
Interest Income
The Company's total interest income for the first quarter of 2001
was $90.7 million compared to $81.4 million for the first quarter of 2000. The
increase of $9.3 million was due to an increase of $15.3 million in interest
income from loans partially offset by a $6.0 million decrease in interest income
from securities. The primary reason for the increase in interest income from
loans was a $769.8 million increase in the average balance of loans and, to a
lesser extent, a 9 basis point increase in the average yield on loans. The
increase in the average balance of the loan portfolio was primarily due to the
growth of loans held for sale at the Mortgage Company, the retention of higher
yielding adjustable rate loans originated by the Mortgage Company and increased
loan demand. The decrease in interest income from securities was due to a $303.3
million decline in the average balance of securities and an 18 basis point
decline in the average yield on securities to 6.66% for the first quarter of
2001. The decline in the average balance of the securities portfolio reflects
management's plan to use cash flows and certain sales from the securities
portfolio to fund additional originations of relatively higher yielding loans.
Interest Expense
The Company's total interest expense for the three months ended
March 31, 2001 was $54.8 million compared to $45.7 million for the comparable
time period last year. The increase of $9.1 million or 20.0% was due to an
increase of $4.9 million in interest expense on time deposits and an increase of
$4.5 million in interest expense on borrowed funds. The increase in interest
expense on time deposits was due to an $248.4 million increase in the average
balance of time deposits and an increase in the average cost of time deposits
from 5.03% for the first quarter of 2000 to 5.77% for the first quarter of 2001.
The increase in the average balance of time deposits is due to management's
intention to increase retail deposits, the changing mix of deposits and, to a
lesser extent, the use of brokered certificate of deposits ("CDs"). The increase
in the average cost is primarily due to paying higher interest rates in light of
current market conditions and in furtherance of the Bank's efforts to retain and
increase deposits as well as the use of brokered CD's, which typically have
higher interest rates than retail deposits.
The increase in interest expense on borrowed funds was primarily
due to a $197.5 million increase in the average balance of borrowings and an
increase in the average cost of borrowings for the first quarter of 2001 to
6.14% from 5.86% for the first quarter of 2000. Management has continued to
de-emphasize its reliance on wholesale borrowings for asset growth, however,
borrowed funds remain a source of funds to meet funding needs at the Mortgage
Company and to fund certain higher yielding loan originations. The increase in
the average cost of borrowed funds is due to the higher rate environment for the
first nine months of 2000, however, in the current rate environment the average
cost of borrowings should decline as it did when compared to the fourth quarter
of 2000.
Net Interest Income
Net interest income for the first quarter of 2001 was $35.8
million compared to $35.7 million for the first quarter of 2000. The increase
was due to a $9.3 million increase in interest income partially offset by a $9.1
million increase in interest expense. The increase in interest income was due to
a $467.5 million increase in the average balance of interest earning assets and,
to a lesser extent, an increase in the average yield on interest earning assets
from 7.26% to 7.34%. The increase in interest expense was due to a $478.6
million increase in the average balance of interest bearing liabilities and an
increase in the average cost of interest bearing liabilities to 5.17% for the
first quarter of 2001 from 4.85% for the comparable time period last year.
The Company's interest rate spread and interest rate margin for
the three months ended March 31, 2001 was 2.17% and 2.90%, respectively,
compared to 2.42% and 3.18%, respectively, for the three months ended March 31,
2000.
16
The current trend in interest rates has resulted in an improved
interest rate spread and margin on a linked quarter basis. Exclusive of an
annual capital gain dividend of $2.5 million received in the fourth quarter of
2000, the net spread and margin for the fourth quarter would be 2.02% and 2.78%,
respectively, compared to 2.17% and 2.90%, respectively, for the first quarter
of 2001. The Company anticipates that in the current interest rate environment,
this trend will continue since the Company's liabilities reprice faster than its
assets.
Provision for Loan Losses
The provision for loan losses for the first quarter of 2001 was
$600,000 compared to a provision of $18,000 for the first quarter of 2000. The
provision for loan losses is based on management's continuing review of the
adequacy of the loan loss allowance. As a result of the changing mix of
commercial and construction loans, among other factors, management deemed it
prudent to add $600,000 to the allowance for loan losses in the first quarter of
2001. Management in its' review monitors the composition of the portfolio and
its' inherent risks, the level of non-accruing loans and delinquencies, local
economic conditions and current trends in regulatory supervision when
determining the adequacy of the reserve.
Non-accruing assets totaled $12.0 million at March 31, 2001
compared to $10.7 million at December 31, 2000. Non-accruing assets as a percent
of total assets was .22% at March 31, 2001 compared to .20% at December 31,
2000. The allowance for loan losses was $14.7 million at March 31, 2001 compared
to $14.6 million at December 31, 2000. The allowance for loan losses as a
percent of non-accruing loans was 134.8% as of March 31, 2001. The credit
quality of the loan portfolio remains strong primarily due to our concentration
of one to four family loans, maintaining sound credit standards for new loan
originations, procedures that are proactive in addressing problem and
non-accruing loans, as well as a strong real estate market.
Other Income
Other income was $16.5 million for the three months ended March
31, 2001 compared to $8.2 million for the comparable time period last year. The
increase of $8.4 million was primarily due to a $7.3 million increase in loan
fees and gains due to the increased volumes at the Mortgage Company as a result
of the current favorable rate environment and expansion of operations in the
year 2000. To a lesser extent, the increase was driven by a $900,000 increase in
banking related fees resulting from higher transaction volumes and increases in
certain fees charged by the Bank.
Total Other Expenses
Total other expenses for the first quarter of 2001 were $29.6
million compared to $22.4 million the first quarter of 2000. The increase of
$7.2 million was due to a $4.6 million increase in personnel expenses, an
$811,000 increase in occupancy and equipment expense and a $1.0 million increase
in other expenses. The increase in personnel cost was primarily due to a $3
million increase in commission expense and a $1.2 million increase in the
Mortgage Company's salary expense due to increased volumes and the expansion of
the back office. The increase in occupancy and equipment expense was primarily
due to the expansion of the Bank into the State of New Jersey and the geographic
expansion of the Mortgage Company in the second half of 2000. The increase in
other expenses was due to the increased volumes at the Mortgage Company
resulting in increased loan related expenses and the increase in other expansion
related expenses at both the Bank and the Mortgage Company.
Provision for Income Taxes
The provision for income taxes for the three months ended March
31, 2001 was $8.2 million resulting in an effective tax rate of 37.0%. For the
same time period last year the provision for income taxes was $8.3 million
resulting in an effective tax rate of 38.7%. The decline in the effective tax
rate primarily reflects the growth of the Bank outside of New York State and
City.
17
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 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, 2001, the total approved loan origination commitments outstanding
amounted to $494.4 million. At the same date the unadvanced portion of
construction loans totaled $93.5 million. Certificates of deposit scheduled to
mature in one year or less at March 31, 2001 totaled $851.6 million. Investment
securities scheduled to mature in one year or less at March 31, 2001 totaled
$2.6 million and amortization from investments and loans is projected at $950.0
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, 2001, 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 $ 80,188 1.50% $ 399,319 7.47% $ 319,131 5.97%
Core capital $ 213,913 4.00% $ 401,254 7.50% $ 187,341 3.50%
Risk-based capital $ 225,914 8.00% $ 415,773 14.72% $ 189,859 6.72%
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, 2001 as
compared to December 31, 2000. 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 2000 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, 2001, the Company's proxy statement was mailed
for the annual meeting of stockholders which was held on May
10, 2001.
b. Not applicable
c. There were 33,758,687 shares of Common Stock of the Company
eligible to be voted on at the annual meeting and 30,365,359
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 2004
FOR % WITHHELD
--- - --------
James R. Coyle 29,111,101 95.9 1,254,258 4.1
John R. Morris 29,092,901 95.8 1,272,458 4.2
Allan Weissglass 29,066,186 95.7 1,299,173 4.3
2. PROPOSAL to ratify the appointment of Arthur Andersen L.L.P.
as the Company's independent auditors for the year ending
December 31, 2001.
FOR % AGAINST % ABSTAIN %
--- - ------- - ------- -
30,033,583 98.9 274,228 0.9 57,548 0.2
3. STOCKHOLDERS PROPOSAL to remove anti-takeover defenses from
the Company's Certificate of Incorporation and Bylaws.
FOR % AGAINST % ABSTAIN % NON-VOTE
--- - ------- - ------- - ---------
11,740,595 47.1 12,600,698 50.5 585,926 2.4 5,438,140
d. Not applicable
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
a. No Form 8-K reports were filed during the quarter
19
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 14, 2001 By: /s/ Harry P. Doherty
------------------ -----------------------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: May 14, 2001 By: /s/ Edward Klingele
------------------ ----------------------------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
20