UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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 (I.R.S. Employer
incorporation 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
61,659,940 shares of Common Stock outstanding as of May 6, 2002.
Table of Contents PAGE
- ----------------- ----
Part I Financial Information
Item 1 Financial Statements
Unaudited Statements of Condition
(As of March 31, 2002 and December 31, 2001) 1
Unaudited Statements of Income
(For three months ended March 31 2002 and 2001) 2
Unaudited Statement of Changes in Stockholders' Equity
(For three months ended March 31, 2002) 3
Unaudited Statements of Cash Flows
(For the three months ended March 31, 2002 and 2001) 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial Condition an
Results of Operations 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 23
Part II Other Information
Item 1 Legal Proceedings 25
Item 2 Changes in Securities and Use of Proceeds 25
Item 3 Defaults Upon Senior Securities 24
Item 4 Submission of Matters to a Vote of Security Holders 24
Item 5 Other Information 24
Item 6 Exhibits and Reports on Form 8-K 24
Signatures 25
STATEN ISLAND BANCORP, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
March 31, 2002 December 31, 2001
-------------- -----------------
(000's omitted)
unaudited
ASSETS
ASSETS:
Cash and due from banks ....................................... $ 95,422 $ 116,846
Federal funds sold ............................................ 84,000 38,000
Securities available for sale ................................. 1,681,340 1,528,639
Loans, net .................................................... 2,992,957 2,806,619
Loans held for sale, net ...................................... 998,123 1,187,373
Accrued interest receivable ................................... 29,190 28,601
Bank premises and equipment, net .............................. 40,095 38,939
Intangible assets, net ........................................ 58,980 58,871
Other assets .................................................. 190,443 189,558
----------- -----------
Total assets ......................................... $ 6,170,550 $ 5,993,446
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due Depositors-
Savings ....................................................... $ 938,108 $ 868,028
Certificates of deposit ....................................... 1,089,982 1,083,900
Money market .................................................. 449,795 350,558
NOW accounts .................................................. 119,285 115,349
Demand deposits ............................................... 498,862 483,493
----------- -----------
Total deposits ....................................... 3,096,032 2,901,328
Borrowed funds ................................................ 2,449,767 2,451,762
Advances from borrowers for taxes and insurance ............... 19,354 17,495
Accrued interest and other liabilities ........................ 55,950 70,665
----------- -----------
Total liabilities .................................... 5,621,103 5,441,250
----------- -----------
STOCKHOLDERS' EQUITY: (1)
Common stock, par value $.01 per share, 100,000,000 shares
authorized, 90,260,624 issued and 61,874,940 outstanding at March
31, 2002 and 90,260,624 issued and 62,487,286 outstanding at
December 31, 2001 ............................................... 903 903
Additional paid-in-capital .................................... 544,990 543,123
Retained earnings ............................................. 357,548 340,270
Unallocated common stock held by ESOP ......................... (29,529) (30,215)
Unearned common stock held by RRP ............................. (14,176) (14,333)
Treasury stock (28,385,684 shares at March 31, 2002
and 27,773,338 at December 31, 2001), at cost .............. (304,592) (289,469)
----------- -----------
555,144 550,279
Accumulated other comprehensive income (loss), net of taxes ... (5,697) 1,917
----------- -----------
Total stockholders' equity ........................... 549,447 552,196
----------- -----------
Total liabilities and stockholders' equity ........... $ 6,170,550 $ 5,993,446
=========== ===========
(1) Prior period share and related amounts have been adjusted to reflect
the 2-for-1 stock split on November 19, 2001.
1
STATEN ISLAND BANCORP, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31,
------------------------------------------------
2002 2001
(000's omitted, except per share and share data)
------------------------------------------------
unaudited
Interest Income:
Loans ............................................... $ 69,883 $ 59,449
Securities, available for sale ...................... 23,825 30,850
Federal funds sold .................................. 509 379
------------ ------------
Total interest income .......................... 94,217 90,678
------------ ------------
Interest Expense:
Savings and escrow .................................. 4,483 4,361
Certificates of deposits ............................ 10,346 13,930
Money market and NOW ................................ 3,357 1,747
Borrowed funds ...................................... 28,140 34,801
------------ ------------
Total interest expense ......................... 46,326 54,839
------------ ------------
Net interest income ............................... 47,891 35,839
Provision for Loan Losses ........................... 1,500 600
------------ ------------
Net interest income after provision for loan losses 46,391 35,239
------------ ------------
Other Income (Loss):
Service and fee income .............................. 5,052 4,890
Net gains on loan sales ............................. 34,855 9,555
Loan fees ........................................... 6,780 2,087
Securities transactions ............................. (333) (6)
------------ ------------
46,354 16,526
Other Expenses:
Personnel ........................................... 19,308 12,747
Commissions ......................................... 20,639 4,898
Occupancy and equipment ............................. 3,621 3,188
Amortization of intangible assets ................... 145 1,387
Data processing ..................................... 1,706 1,539
Marketing ........................................... 1,110 673
Professional fees ................................... 2,660 608
Other ............................................... 8,398 4,520
------------ ------------
Total other expenses ........................... 57,587 29,560
------------ ------------
Income before provision for income taxes ....... 35,158 22,205
============ ============
Provision for Income Taxes .......................... 13,175 8,209
------------ ------------
Net Income .......................................... $ 21,983 $ 13,996
============ ============
Earnings Per Share:(1)
Basic .......................................... $ 0.39 $ 0.22
Fully Diluted .................................. $ 0.38 $ 0.22
Weighted Average: Fully Diluted(1)
Common Shares .................................. 90,260,624 90,260,624
Less: Unallocated ESOP/RRP Shares .............. 5,390,001 5,857,552
Less: Treasury Shares .......................... 26,979,496 21,752,162
------------ ------------
57,891,127 62,650,910
============ ============
(1) Prior period amounts have been adjusted to reflect the 2-for-1 stock
split on November 19, 2001.
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 Retained
Stock Capital Held by ESOP Shares Stock Income Income
---------------------------------------------------------------------------------------
(000's omitted)
unaudited
Balance January 1, 2002 .......... $ 903 $ 543,123 $ (30,215) $ (14,333) $(289,469) $ 340,270
Change in unrealized
appreciation (depreciation)
on securities, net of tax ... (7,614)
Allocation of 114,452 ESOP shares 1,455 686
Vesting of 17,200 RRP shares ..... 4 157
Exercise of 448,842 stock options 408 5,151 1,524
Treasury stock (1,103,520) at cost (20,274)
Net Income ....................... 21,983 21,983
---------
14,369
Cash Dividends paid .............. (6,229)
---------------------------------------------------------------------------------------
Balance March 31, 2002 ........... $ 903 $ 544,990 $ (29,529) $ (14,176) $(304,592) $ 357,548
=======================================================================================
Accumulated
Other
Comprehensive
Income (Loss) Total
------------------------
Balance January 1, 2002 .......... $ 1,917 $ 552,196
Change in unrealized
appreciation (depreciation)
on securities, net of tax ... (7,614) (7,614)
Allocation of 114,452 ESOP shares 2,141
Vesting of 17,200 RRP shares ..... 161
Exercise of 448,842 stock options 7,083
Treasury stock (1,103,520) at cost (20,274)
Net Income ....................... 21,983
Cash Dividends paid .............. (6,229)
-----------------------
Balance March 31, 2002 ........... $ (5,697) $ 549,447
=======================
3
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
For the Three Months
Ended March 31,
2002 2001
---- ----
(000's omitted)
unaudited
Cash Flows From Operating Activities:
Net Income $ 21,983 $ 13,996
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 940 951
(Accretion) and amoritzation of bond and mortgage premiums and discount (250) 8
Amortization of intangible assets 145 1,387
Realized Loss on sale of available for sale securities 333 6
Other noncash income (4,458) (3,543)
Expense charge relating to allocation and earned
portions of employee benefit plan 2,966 2,391
Provision for possible loan losses 1,500 600
Increase in net deferred loan fees and costs (149) (81)
Decrease (increase) in accrued interest receivable (589) 2,598
Decrease (increase) in other assets 5,242 (8,667)
(Decrease) increase in accrued interest other liabilities (14,665) 7,369
(Increase) decrease in deferred income taxes (129) 1,939
Recoveries of loans 255 256
-------------------------------
Net cash provided by operating activities 13,124 19,210
-------------------------------
Cash Flows From Investing Activities:
Maturities of available for sale securities 181,784 101,681
Sales of available for sale securities 18,293 113,018
Purchases of available for sale securities (366,392) (110,022)
Principal collected on loans 329,828 295,012
Loans made to customers (1,513,462) (712,981)
Purchases of loans (96,917) (140,091)
Sales of loans 1,286,952 220,521
Capital expenditures (2,258) (783)
-------------------------------
Net cash used in investing activities (162,172) (233,645)
-------------------------------
Cash Flows From Financing Activities:
Net increase in deposit accounts 194,704 151,679
Net increase in advances from borrowers for taxes and insurance 1,859 4,537
Increase (decrease) in borrowings (1,995) 88,778
Cash dividends paid (6,229) (5,174)
Purchase of treasury stock (20,274) (28,675)
Exercise of stock options 5,559 --
-------------------------------
Net cash provided by financing activities 173,624 211,145
-------------------------------
Net decrease (increase) in cash and cash equivalents 24,576 (3,290)
Cash and cash equivalents, beginning of year 154,846 104,103
Cash and cash equivalents, end of period $ 179,422 $ 100,813
===============================
Supplemental Disclosures Of Cash Flow Information:
Cash paid for-
Interest $ 45,973 $ 55,435
Income taxes $ 34,823 $ 3,889
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 ended March 31,
2002 are not necessarily indicative of the results to be expected for the year
ending December 31, 2002. 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
Annual Report on Form 10-K for the year ended December 31, 2001.
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 on Staten Island, two full service branches in
Brooklyn, six full service branches in Ocean County, New Jersey, two full
service branches in Monmouth County, New Jersey, three full service branches in
Union County, New Jersey and three full service branches 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 42 states
and sells them to investors generating fee income for the Bank. The Bank, in its
efforts to manage interest rate risk and maintain yields, retains for its own
portfolio certain loans originated by the Mortgage Company.
The Bank's deposits are insured by the Bank Insurance Fund ("BIF") to
the maximum extent permitted by law. The Bank is subject to examination and
regulation by the Office of Thrift Supervision ("OTS") which is the Bank's
chartering authority and primary regulator. The Bank is also regulated by the
Federal Deposit Insurance Corporation ("FDIC"), the administrator of the BIF.
The Bank is also subject to certain reserve requirements established by the
Board of Governors of the Federal Reserve System ("FRB") and is a member of the
Federal Home Loan Bank ("FHLB") of New York, which is one of the 12 regional
banks comprising the FHLB system.
5
Organization and 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 Company, on November 19, 2001, paid a stock dividend of one share
for each share of stock held (two-for-one stock split) to shareholders of record
on November 5, 2001. At March 31, 2002 the number of shares issued was
90,260,624 and the number of shares outstanding was 61,874,940. All share
amounts and earnings per share amounts have been adjusted for the stock split.
The Bank has the following wholly owned subsidiaries:
The Mortgage Company was incorporated in the State of New Jersey in
1998. The Mortgage Company currently originates loans in 42 states and, as of
March 31, 2002, had assets totaling $1.3 billion of which $998.1 million were
loans held for sale, net.
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 assets of SIFC totaled $665.7 million at March 31, 2002.
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, 2002 were $917.9 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. In the second quarter of 2002, it is
anticipated that this subsidiary will begin to offer certain non-deposit
investment products such as mutual funds and annuities along with additional
insurance products using a third party vendor. The assets of SIBFSC were
$527,600 as of March 31, 2002.
Earnings Per Share
Earnings per share are computed by dividing net income by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding, adjusted for the unallocated portion of shares held by the ESOP and
unearned RRP shares in accordance with the Statement of Positions 93-6. The
following table is a reconciliation of the earnings per share calculation for
the three months ended March 31, 2002 and 2001.
6
Earnings Per Share Reconciliation
Weighted
Average
Shares Per Share
Net Income Outstanding Amount
---------- ----------- ------
(Dollars and shares in thousands,
except per share amounts)
Three Months ended March 31, 2002
--------------------------------------
Basic EPS
Net income $ 21,983 56,739 $ 0.39
Effect of Dilutive Securities
Incremental shares from assumed
exercise of outstanding options -- 1,152 $ (0.01)
Diluted EPS
-------- ------ --------
$ 21,983 57,891 $ 0.38
======== ====== ========
Three Months ended March 31, 2001
--------------------------------------
Basic EPS
Net income $ 13,996 62,583 $ 0.22
Effect of Dilutive Securities
Incremental shares from assumed
exercise of outstanding options -- $ 68
-------- ------ --------
Diluted EPS $ 13,996 62,651 $ 0.22
======== ====== ========
7
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, 2002
and December 31, 2001.
March 31, 2002 December 31, 2001
------------------------- -------------------------
Bonds - Available For Sale Amortized Fair Amortized Fair
- -------------------------- Cost Value Cost Value
---------- ----------- ---------- ----------
(000's omitted) (000's omitted)
U.S. Treasuries ..................................... $ 1,025 $ 1,057 $ 1,035 $ 1,082
Govt. Sponsored Agencies ............................ 79,530 79,577 55,476 56,470
Industrial and Finance .............................. 208,534 183,305 199,470 178,077
Foreign ............................................. 250 250 250 250
---------- ----------- ---------- ----------
Total Debt Securities ............................... 289,339 264,189 256,231 235,879
---------- ----------- ---------- ----------
G.N.M.A. - M.B.S .................................... 9,286 9,521 10,347 10,642
F.H.L.M.C. - M.B.S .................................. 375,639 375,777 295,432 299,975
F.N.M.A. - M.B.S .................................... 455,440 456,595 326,927 331,991
Agency C.M.O.s ...................................... 129,519 130,943 128,564 130,116
Privately Issued C.M.O.s ............................ 274,443 277,745 337,272 343,201
---------- ----------- ---------- ----------
Total Mortgage-Backed and Mortgage Related Securities 1,244,327 1,250,581 1,098,542 1,115,925
---------- ----------- ---------- ----------
Total Bonds - Available For Sale .................... 1,533,666 1,514,770 1,354,773 1,351,804
--------- --------- --------- ---------
Equity Securities Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
Preferred Stock ..................................... 10,622 9,874 20,352 19,842
Common Stock ........................................ 18,443 23,249 16,279 19,744
FHLB Common Stock ............ 97,900 97,900 102,900 102,900
IIMF Capital Appreciation Fund....................... 31,243 35,547 31,229 34,349
---------- ---------- ---------- ----------
Total Equity Securities ............................. 158,208 166,570 170,760 176,835
---------- ---------- ---------- ----------
Total Investments ................................... $1,691,874 $1,681,340 $1,525,533 $1,528,639
========== ========== ========== ==========
8
Loan Portfolio Composition. The following table sets forth the composition of
the Bank's held for investment loans at the dates indicated. (unaudited)
March 31, 2002 December 31, 2001
-------------- -----------------
Mortgage loans:(1)
Single-family residential ............. $2,241,378 $2,062,336
Multi-family residential .............. 48,659 48,783
Commercial real estate ................ 372,920 335,821
Construction and land ................. 221,162 245,515
Home equity ........................... 15,090 12,815
---------- ----------
Total mortgage loans ................ 2,899,209 2,705,270
Other loans:
Student loans ......................... 433 288
Passbook loans ........................ 8,475 7,477
Commercial business loans ............. 37,694 42,962
Other consumer loans .................. 56,841 60,292
---------- ----------
Total other loans ................... 103,443 111,019
---------- ----------
Total loans receivable .............. 3,002,652 2,816,289
Less:
Premium (discount) on loans purchased . 4,820 5,135
Allowance for loan losses ............. (21,168) (20,041)
Deferred loan costs (fees) ............ 6,653 5,236
---------- ----------
Loans receivable, net ............ $2,992,957 $2,806,619
========== ==========
(1) Mortgage loans held for sale, net at March 31, 2002 and December 31,
2001, were $998.1 million and $1.2 billion, respectively, and are not
included in this table.
9
Delinquent Loans: The following table sets forth information concerning accruing
loans which were delinquent 30 days or more at March 31, 2002, in dollar amounts
and as a percentage of each category of the Bank's loan portfolio. The amounts
presented represent the total outstanding principal balances of the related
loans, rather than the actual payment amounts which are past due.
March 31, 2002
--------------------------------------------------------------------
90 Days or More and
30-59 Days 60-89 Days Still Accruing
------------------ -------------------- ----------------------
Percent Percent Percent
of Loan of Loan of Loan
Amount Category Amount Category Amount Category
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
Mortgage loans:
Single-family residential... $21,487 0.67% $ 4,229 0.13% $ 4,456 0.14%
Multi-family residential ... 486 1.00% -- 0.00% -- 0.00%
Commercial real estate ..... 3,770 1.01% 1,119 0.30% -- 0.00%
Construction and land ...... 5,498 2.49% 404 0.18% -- 0.00%
Home equity .................. 229 1.52% 68 0.45% 27 0.18%
------- ---- ------- ---- ------- ----
Total mortgage loans .... 31,470 0.81% 5,820 0.15% 4,483 0.12%
Other loans:
Commercial business loans .. 1,043 2.77% 1,842 4.89% 27 0.07%
Other loans ................ 2,342 3.56% 794 1.21% 467 0.71%
------- ---- ------- ---- ------- ----
Total other loans ....... 3,385 3.27% 2,636 2.55% 494 0.48%
------- ---- ------- ---- ------- ----
Total ................... $34,855 0.88% $ 8,456 0.21% $ 4,977 0.13%
------- ---- ------- ---- ------- ----
10
Delinquent Loans: The following table sets forth information concerning
delinquent loans at the dates indicated. The amounts presented represent the
total outstanding principal balances of the related held in portfolio and held
for sale loans, rather than the actual payment amounts which are past due.
March 31, 2002 December 31, 2001
-------------- -----------------
90 Days or More (000s omitted)
- ---------------
Mortgage loans:
Single-family residential..... $4,456 $5,432
Multi-family residential ..... -- --
Commercial real estate ....... -- --
Construction and land ........ -- 509
Home equity .................. 27 30
----- -----
Total mortgage loans ....... 4,483 5,971
Other loans:
Commercial business loans .... 27 774
Other loans .................. 467 468
------ ------
Total other loans .......... 494 1,242
------ ------
Total ...................... $4,977 $7,213
====== ======
March 31, 2002 December 31, 2001
-------------- -----------------
60-89 Days
- ----------
Mortgage loans:
Single-family residential... $ 4,229 $ 5,945
Multi-family residential ... -- 162
Commercial real estate ..... 1,119 1,510
Construction and land ...... 404 5,339
Home equity ................ 68 258
Total mortgage loans ..... 5,820 13,214
Other loans:
Commercial business loans .. 1,842 42
Other loans ................ 794 586
------- -------
Total other loans ........ 2,636 628
------- -------
Total .................... $ 8,456 $13,842
======= =======
March 31, 2002 December 31, 2001
-------------- -----------------
30-59 Days
- ----------
Mortgage loans:
Single-family residential... $21,487 $15,634
Multi-family residential ... 486 567
Commercial real estate ..... 3,770 3,848
Construction and land ...... 5,498 9,113
Home equity ................ 229 62
------- -------
Total mortgage loans .. 31,470 29,224
Other loans:
Commercial business loans .. 1,043 1,257
Other loans ................ 2,342 2,645
------- -------
Total other loans ..... 3,385 3,902
------- -------
Total ................. $34,855 $33,126
======= =======
11
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 and repossessed assets, loans past due 90 days or more
and still accruing, and non-accruing securities.
March 31, 2002 December 31, 2001
-------------- -----------------
Non-Accruing Loans
Mortgage loans:
Single-family residential ........................ $10,037 $ 7,663
Multi-family residential ......................... 158 --
Commercial real estate ........................... 3,775 4,086
Construction and land ............................ 12,146 2,117
Home equity ...................................... 38 38
Other loans:
Commercial business loans ........................ 561 558
Other consumer loans ............................. 533 631
Total non-accrual loans .......................... 27,248 15,093
Other real estate owned and repossessed assets, net... 1,717 1,227
Total non-accruing loans and
real estate owned and repossessed assets ......... 28,965 16,320
Loans past due 90 days or more and still accruing ......... 4,977 7,213
Non-accruing loans and real estate owned and
repossessed assets and loans past due 90 days
or more and still accruing ....................... $33,942 $23,533
Non-accruing loan assets to total* HFI &** HFS loans ...... 0.73% 0.41%
Non-accruing loan assets to total assets .................. 0.47% 0.27%
Non-accruing loans to total *HFI & **HFS loans ............ 0.68% 0.38%
Non-accruing loans to total assets ........................ 0.44% 0.25%
Non-Accruing Security Assets
Non-accruing available for sale securities ....... $ 4,500 $ --
Non-accruing securities to total securities ............... 0.27% 0.00%
Non-accruing loans and securities assets to total assets .. 0.54% 0.27%
* Held for Investment
** Held for Sale
12
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,
--------------------- -------------
2002 2001 2001
------- ------- -------
(000's omitted)
Allowance at beginning of period ........... $20,041 $14,638 $14,638
Provisions ................................. 1,500 600 8,757
Charge-offs:
Mortgage loans:
Construction, land and land development... -- -- --
Single-family residential ................ 28 50 1,854
Multi-family residential ................. -- -- --
Commercial real estate ................... -- -- --
Other loans ................................ 600 743 2,411
------- ------- -------
Total charge-offs ........................ 628 793 4,265
Recoveries:
Mortgage loans:
Construction, land and land development .. 15 -- --
Single-family residential ................ -- 13 131
Multi-family residential ................. -- -- --
Commercial real estate ................... -- -- --
Other loans ................................ 240 243 780
------- ------- -------
Total recoveries ......................... 255 256 911
------- ------- -------
Allowance at end of period ................. $21,168 $14,701 $20,041
======= ======= =======
Allowance for possible loan losses
to total non-accruing loans at
end of period ........................... 77.69% 134.82% 132.78%
Allowance for possible loan losses
to total loans at end of period ......... 0.53% 0.45% 0.50%
13
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
The Company recorded total assets of $6.2 billion at March 31, 2002
compared to total assets of $6.0 billion at December 31, 2001. The growth of
$177.1 million or 3.0% was due to an increase of $186.3 million in loans, net
and an increase of $152.7 million in securities available for sale. These
increases were partially offset by a $189.2 million decrease in loans held for
sale, net. The increase in loans, net was due to the originations of $224.5
million of primarily residential loans by the Bank during the first quarter of
2002. The level of originations reflects the Bank's continued business
development efforts to originate both residential and commercial loans in its
primary market area. The increase in loans, net was also due to the retention of
$189.5 million of higher yielding, primarily adjustable rate residential
mortgage loans originated by the Mortgage Company. The increase in securities,
available for sale was due to management's plan to invest excess cash flows in
the securities portfolio. Securities purchases for the quarter totaled $366.4
million of which $39.8 million were US Government agencies and $303.0 million
were agency backed CMOs and mortgage-backed securities. Loans held for sale,
net, decreased due to loan sales of $1.5 billion by the Mortgage Company
compared to originations of $1.3 billion by the Mortgage Company for the first
quarter of 2002. It is anticipated that in the current rate environment,
originations by the Mortgage Company will remain at approximately $1.3 billion
for the second quarter of 2002.
Deposits increased $194.7 million or 6.7% during the first three months
of 2002 and totalled $3.1 billion at March 31, 2002. This increase was primarily
due to a $99.2 million increase in money market accounts and a $70.1 million
increase in savings accounts. The increase in money market accounts is primarily
due to the introduction of a new deposit account known as the "Edge" account,
which is a higher yielding money market account which also requires the opening
of a non-interest bearing DDA account and is promoted primarily in the Bank's
New Jersey markets. The growth in savings accounts, which was primarily in the
Bank's Staten Island market, was due to the current rate environment making this
product attractive to depositors and the level of service provided by the Bank.
Core deposits, which consist of savings, money market, NOW and DDA accounts,
represented 64.8% of deposits at March 31, 2002. The Company believes that it
can maintain this level of core deposits primarily due to the quality customer
service offered by the Bank and the current rate environment.
The Company's borrowings at both March 31, 2002 and December 31, 2001
were $2.5 billion. Borrowings as a percentage of assets at March 31, 2002 and
December 31, 2001 were 39.7% and 40.9%, respectively. The Company intends to
reduce borrowings as a percentage of assets in 2002 and continue to emphasize
more traditional funding sources such as deposit growth in all markets.
Stockholders' equity amounted to $549.4 million at March 31, 2002 and
$552.2 million at December 31, 2001 or 8.9% and 9.2% of total assets at such
dates, respectively. The decrease of $2.7 million was due to the repurchase of
1.1 million shares of the Company's common stock at a cost of $20.3 million,
aggregate cash dividend payments of $6.2 million and a $7.6 million increase in
the unrealized depreciation on securities available for sale, net of taxes.
These decreases were partially offset by net income of $22.0 million, an
allocation of Employee Stock Ownership Plan "ESOP" shares and Recognition and
14
Retention Plan "RRP" shares resulting in an increase of $2.3 million and the
exercise of 448,842 stock options resulting in an increase of $7.1 million. The
tangible book value per share of the Company's common stock was $7.93 at March
31, 2002 compared to $7.89 at December 31, 2001.
Results of Operations
The Company reported net income of $22.0 million or $0.38 per fully
diluted share for the three months ended March 31, 2002 compared to net income
of $14.0 million or $0.22 per fully diluted share for the comparable time period
last year. Cash earnings for the first quarter of 2002 were $24.0 million or
$0.41 per fully diluted share compared to cash earnings of $16.9 million or
$0.27 per fully diluted share for the first quarter of 2001. The increase of
$0.16 in fully diluted earnings per share represents a 72.7% increase and the
$0.14 increase in cash earnings per share represents a 51.9% increase. 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 plans and the
amortization of goodwill. Core earnings which represent the Company's earnings
excluding securities gains and losses, net of taxes, were $0.38 per fully
diluted share for the current first quarter compared to $0.22 per fully diluted
share, an increase of 72.7% over the first quarter of 2001.
The return on average equity and average assets for the three months
ended Mach 31, 2002 was 16.06% and 1.46%, respectively, compared to 9.77% and
1.06%, respectively, for the comparable time period last year.
The increase in net income for the quarter ended March 31, 2002
compared to the same quarter one year ago was due to an increase of $29.8
million in other income and a $12.1 million increase in net interest income.
These increases were partially offset by a $28.0 million increase in total other
expenses, a $5.0 million increase in the provision for income taxes and a
$900,000 increase in the provision for loan losses.
15
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Three Months Ended March 31,
-----------------------------------------------------------------------
2002 2001
--------------------------------- -----------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1):
Real estate loans ....................... $3,857,163 $ 67,652 7.11% $2,982,436 $ 56,619 7.70%
Other loans ............................. 106,137 2,231 8.52% 118,923 2,830 9.65%
---------- ---------- ---------- ----------
Total loans ........................... 3,963,300 69,883 7.15% 3,101,359 59,449 7.77%
Securities .............................. 1,584,271 23,825 6.10% 1,878,220 30,850 6.66%
Other interest-earning assets (2) ....... 131,419 509 1.57% 33,990 379 4.53%
---------- ---------- ---------- ----------
Total interest-earning assets ......... 5,678,990 94,217 6.73% 5,013,569 90,678 7.34%
---------- ----------
Noninterest-earning assets ................... 428,754 333,643
---------- ----------
Total assets ............................ $6,107,744 $5,347,212
========== ==========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits ........... $ 520,441 $ 3,357 2.62% $ 242,022 $ 1,747 2.93%
Savings and escrow accounts ............. 915,964 4,483 1.98% 784,874 4,361 2.25%
Certificates of deposit ................. 1,079,803 10,346 3.89% 979,737 13,930 5.77%
--------- ------ ------- ------
Total deposits ........................ 2,516,208 18,186 2.93% 2,006,633 20,038 4.05%
Total Other Borrowings ..................... 2,475,947 28,140 4.61% 2,296,831 34,801 6.14%
--------- ------ --------- ------
Total interest-bearing liabilities .... 4,992,155 46,326 3.76% 4,303,464 54,839 5.17%
------ ------
Noninterest-bearing liabilities (3) .......... 560,400 462,513
Total liabilities .......................... 5,552,555 4,765,977
Stockholders' equity ......................... 555,189 581,235
---------- ----------
Total liabilities and stockholders' equity.. $6,107,744 $5,347,212
========== ==========
Net interest-earning assets .................. $ 686,835 47,891 $ 710,105 35,839
========== ====== ========== ======
Net interest income/interest rate spread ..... 2.96% 2.17%
==== ====
Net interest margin .......................... 3.42% 2.90%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities .... 113.76% 116.50%
====== ======
- -----------------
(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
16
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,
2002 compared to 2001
----------------------------------------------------------
Increase (decrease) due to Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
-------- -------- -------- --------
(000's omitted)
Interest-earning assets:
Loans receivable:
Real estate loans ................. $ (4,309) $ 16,606 $ (1,264) $ 11,033
Other loans ....................... (331) (304) 36 (599)
-------- -------- -------- --------
Total loans receivable ............ (4,640) 16,302 (1,228) 10,434
Securities ............................ (2,603) (4,828) 407 (7,024)
Other interest-earning assets ......... (248) 1,087 (710) 129
-------- -------- -------- --------
Total net change in income on interest-
earning assets .................... (7,491) 12,561 (1,531) 3,539
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits ..... (186) 2,010 (214) 1,610
Savings and escrow accounts ....... (520) 728 (86) 122
Certificates of deposit ........... (4,543) 1,423 (464) (3,584)
Total deposits .................. (5,249) 4,161 (764) (1,852)
Other Borrowings ...................... (8,697) 2,714 (678) (6,661)
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ...... (13,946) 6,875 (1,442) (8,513)
-------- -------- -------- --------
Net change in net interest income ..... $ 6,455 $ 5,686 $ (89) $ 12,052
======== ======== ======== ========
17
Interest Income
The Company's total interest income was $94.2 million for the first quarter
of 2002 compared to $90.7 million for the first quarter of 2001. The increase of
$3.5 million was due to a $10.4 million increase in the interest income from
loans partially offset by a $7.0 million decrease in interest income from
securities. The increase in interest income from loans was due to a $861.9
million increase in the average balance of the loan portfolio partially offset
by a decline in the average yield on loans to 7.15% for the first quarter of
2002 compared to 7.77% for the first quarter of 2001. The increase in the
average balance of the loan portfolio was due to the increase in loans held for
sale at the Mortgage Company, the retention of higher yielding loans originated
by the Mortgage Company for the Bank's portfolio and increased loan originations
by the Bank. The decrease in the average yield on the loan portfolio was due to
the generally lower interest rate environment over the past twelve months. The
decrease in interest income on securities was due to a $293.9 million decrease
in the average balance of the securities portfolio and, to a lesser extent, the
56 basis point decrease in the average yield on securities to 6.10% for the
first quarter of 2002. The decrease in the average balance of the securities
portfolio was due to the use of cash flows generated by the securities portfolio
to fund higher yielding loan originations during the year 2001. The decline in
the average yield on the securities portfolio is primarily due to the lower rate
environment and the accelerated paydown of higher yielding mortgage-backed
securities in this interest rate environment.
Interest Expense
The Company's total interest expense for the first quarter of 2002 was
$46.3 million compared to $54.8 million for the first quarter of 2001. The
decrease of $8.5 million or 15.5% is primarily due to a $3.6 million decrease in
interest expense on certificates of deposit and a $6.7 million decrease in
interest expense on borrowed funds partially offset by a $1.6 million increase
in interest expense on NOW and money market accounts. The decrease in interest
expense on certificates of deposit was due to a 188 basis point decline in the
average cost to 3.89% for the first quarter of 2002 partially offset by a $100.1
million increase in the average balance of certificates of deposit. The decline
in the average cost of certificates of deposit was due to the rollover of
maturing certificates of deposit to lower rates reflective of the current rate
environment. The increase in the average balance of certificates of deposit was
due to managements' plan to increase retail deposits and the opening of two new
branches in the first quarter of 2002. The Bank also expects to open two
branches in the second quarter of 2002 as it continues its expansion in the
State of New Jersey. The decrease in interest expense on borrowed funds was due
to a 153 basis point decline in the average cost of borrowed funds to 4.61% for
the three months ended March 31, 2002 partially offset by a $179.1 million
increase in the average balance of borrowings. The decrease in the average cost
of borrowed funds was due to the current interest rate environment. In this
current lower interest rate environment, the Company continues to extend the
maturities on certain borrowings in an effort to protect itself in a rising rate
environment. The increase in the average balance of borrowings was due to the
use of borrowed funds to fund originations of higher yielding loans during 2001.
The increase in interest expense for NOW and money market accounts was due to a
$278.4 million increase in the average balance of NOW and money market accounts
partially offset by a 31 basis point decrease in the average cost to 2.62% for
the first quarter of 2002. The increase in the average balance of NOW and money
market accounts was due to the current promotion of money market accounts in the
Bank's New Jersey markets in our continued efforts to increase the number of our
banking relationships.
Net Interest Income
Net interest income for the three months ending March 31, 2002 was $47.9
million compared to $35.8 million for the three months ending March 31, 2001.
The increase of $12.1 million was due to a $3.5 million increase in interest
18
income and an $8.5 million decrease in interest expense. The increase in
interest income was due to a $665.4 million increase in the average balance of
interest earning assets partially offset by a 61 basis point decrease in the
average yield on interest earning assets to 6.73% for the first quarter of 2002.
The decrease in interest expense was due to a 141 basis points decline in the
average cost of interest bearing liabilities to 3.76% partially offset by a
$688.7 million increase in the average balance of interest bearing liabilities.
The Company's net interest rate spread and margin were 2.96% and 3.42%,
respectively, for the first quarter of 2002 compared to 2.17% and 2.90%,
respectively, for the first quarter of 2001 and 2.81% and 3.31%, respectively,
for the fourth quarter of 2001. The improvement in the Company's net interest
rate spread and margin was primarily due to lower funding costs and growth of
the Company's earning asset base. During 2002, the Company intends to continue
to retain certain higher yielding loan originations by the Mortgage Company for
the Company's portfolio as a primary part of its efforts to maintain the yield
on interest earning assets. In the current rate environment, the Company will
continue to closely monitor its repricing of interest bearing liabilities and,
when the opportunity exists, extend the maturities of certificates of deposit
and borrowings.
19
Provision for Loan Losses
The provision for loan losses for the first quarter of 2002 was $1.5
million compared to $600,000 for the first quarter of 2001. As a result of the
current economic conditions, increased loan originations and the changing mix of
the loan portfolio, management deemed it prudent to add $1.5 million to the
allowance for loan losses in the first quarter of 2002. Net charge-offs for the
quarter ended March 31, 2002 were $373,000.
Total non-accruing loans and real estate owned increased by an aggregate of
$12.6 million during the first quarter of 2002 resulting in total non-accruing
loans and real estate owned of $29.0 million at March 31, 2002, compared to
$16.3 million at December 31, 2001. The primary reason for the increase was the
placement of three loan relationships on non-accrual status during the first
quarter of 2002. These relationships consist of two land development and
construction projects for single-family homes in the State of California, with a
total principal balance of $8.9 million, a single-family residential loan in the
State of California originated for sale with a principal balance of $1.8
million, and a land development and construction project for single family homes
in the State of Florida with a principal balance of $2.6 million. Management is
aggressively pursuing the recovery of these loans and foreclosure sales have
been scheduled during the second quarter of this year for the properties located
in California. While no assurances can be given, based on management's overall
evaluation of these three credit relationships including current appraisals of
the collateral by independent third parties, management believes it is unlikely
that the Company will incur any material loss related to these credits. In
addition, the Company's non-performing real estate assets included $1.7 million
of other real estate owned at March 31, 2002 compared to $1.2 million at
December 31, 2001.
The allowance for loan losses was $21.2 million or 77.7% of non-accruing
loans at March 31, 2002 compared to $20.0 million or 132.8% of non-accruing
loans at December 31, 2001 and $14.7 million or 134.8% of non-accruing loans at
March 31, 2001. While no assurance can be given that future charge-offs or
additional provisions over the current level will not be necessary, management
believes that based on its current review and the level of non-accruing loans
and delinquencies, the current allowance for loan losses is adequate.
Total Other Income
Other income, exclusive of net securities gains and losses was $46.7
million for the first quarter of 2002 compared to $16.5 million for the same
time period last year. The increase of $30.2 million was due to a $25.3 million
increase in net gains on loan sales and a $4.7 million increase in loan fees.
These increases were due to the increased volumes at the Mortgage Company.
Net securities losses for the quarter ending March 31, 2002 were $333,000
compared to $6,000 for the quarter ending March 31, 2001. Included in this loss
was a $500,000 impairment charge to current earnings on a $5.0 million bond that
was placed in a non-accrual status during the first quarter of 2002.
The Company's investment portfolio includes two asset-backed securities
with an aggregate par value of $10.0 million that had a $1.3 million estimated
aggregate market value at March 31, 2002. As previously mentioned during the
quarter, the Company took a $500,000 impairment charge on one of these bonds and
placed the balance of $4.5 million on non-accrual status for non-payment of
current interest due. In addition $4.4 million of the $5.7 million accumulated
other comprehensive loss adjustment to stockholders' equity at March 31, 2002
was the result of adjustments to reflect the change in the aggregate estimated
market value of these two bonds. It is anticipated that the second bond will be
placed on non-accrual status during the second quarter of 2002 and management
will continue to monitor the status of these two issues, including the
20
collateral value supporting them. In the event the Company determines that any
additional permanent impairment has occurred, the Company would recognize
additional charges to current earnings.
Total Other Expenses
Total other expenses for the first quarter of 2002 were $57.6 million
compared to $29.6 million for the first quarter of 2001. The increase of $28.0
million was primarily due to a $6.6 million increase in personnel expenses, a
$15.7 million increase in commission expense, a $2.1 million increase in
professional fees and a $3.9 million increase in other expenses. The increase in
personnel expense was due to a $4.8 million increase at the Mortgage Company
resulting from expansion and growth, a $639,000 increase in the non-cash charge
for the ESOP expense reflecting the Company's higher stock price and branch
expansion, incentives and normal merit pay increases at the Bank. The increase
in commissions and other expenses primarily reflect the growth of the Mortgage
Company. The increase in professional fees is primarily due to the hiring of
contract workers at the Mortgage Company as a response to the increased
origination volumes.
In accordance with Statement of Financial Accounting Standard No. 142, the
Company is no longer required to amortize goodwill resulting from acquisitions
effective January 1, 2002. The amortization expense of $145,000 for the first
quarter of 2002 was due to the amortization of core deposit premiums.
Amortization expense for the first quarter of 2001 was $1.4 million consisting
primarily of the amortization of goodwill.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2002 was $13.2
million compared to $8.2 million for the first quarter of 2001. This resulted in
an effective tax rate of 37.5% for the first quarter of 2002 compared to 37% for
the first quarter of 2001. The increase in the effective tax rate was due to the
Company's increased net income, primarily to increased profitability of
operations of the Mortgage Company in various states.
Segment Reporting
The Company manages its operations in a manner to focus on two strategic
goals: fulfilling its role as a banking institution for both individuals and
businesses and as a national provider of single-family residential mortgage loan
products. Accordingly, the Company aligns its various business objectives in
support of these goals and manages the Company through two segments: Community
Banking and Mortgage Banking.
Community Banking
The Company's Community Banking segment provides traditional banking
services to commercial and retail customers. The services include deposit
accounts and related services, residential and commercial real estate lending,
consumer lending, commercial lending, loan servicing, trust services and life
insurance products. Products and services offered by this business segment are
delivered through a multi-channel distribution network, including on-line
banking. The Community Banking segment is the primary warehouse lender for the
Mortgage Banking segment.
21
Mortgage Banking
The Company's Mortgage Banking segment activities, which are conducted
through SIB Mortgage Corp., d/b/a "Ivy Mortgage" include primarily the
origination of residential real estate loans either for the sale into the
secondary market or, to a lesser extent, for retention in the Bank's portfolio.
The loans are originated through a network of branches in 42 states. Loans not
retained for the Company's portfolio are sold to investors, including certain
government sponsored agencies. Loans originated during the first quarter of 2002
were $1.3 billion, consisting primarily of fixed-rate and adjustable-rate
residential loans, and loans sold were $1.5 billion, of which $189.5 million
were sold to the Bank.
The segment operating revenue and operating earnings in the table below
incorporate certain intersegment transactions that the Company views as
appropriate for purposes of reflecting the contribution of certain segments,
which are eliminated in preparation of the Company's consolidated financial
statements in accordance with generally accepted accounting principals.
Segment Reporting Table
For Three Months ended March 31, 2002
(1) Elimination of
Mortgage Community Intersegment
Banking Banking Items Total
------- ------- ----- -----
Operating revenue $ 67,935 $ 91,973 $ (19,337) $ 140,571
Operating expenses 54,011 64,363 (14,461) 103,913
Operating earnings 7,736 17,319 (3,072) 21,983
Assets at year end $ 1,251,484 $ 6,022,728 $ (1,103,662) $ 6,170,550
For Three Months ended March 31, 2001
Operating revenue $ 20,318 $ 93,945 $ (7,054) $ 107,204
Operating expenses 18,730 72,653 (6,984) 84,399
Operating earnings 870 13,176 (50) 13,996
Assets at year end $ 657,878 $ 5,477,025 $ (655,535) $ 5,479,368
(1) The intersegment eliminations consist of interest income on the Community
Banking Segment results and interest expense on the Mortgage Banking results due
to the Community Banking Segment providing the warehouse line of credit to the
Mortgage Banking Segment. The intersegment elimination also includes $4.9
million in premiums paid by the Community Banking Segment to the Mortgage
Banking Segment for the purchase of loans during the quarter.
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.
22
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, 2002,
the total approved loan origination commitments outstanding amounted to $776.1
million and the Mortgage Company had commitments of $562.3 million to sell loans
to third party investors. At the same date, the unadvanced portion of
construction loans totaled $45.3 million. Certificates of deposit scheduled to
mature in one year or less at March 31, 2002 totaled $818.3 million. Investment
securities scheduled to mature in one year or less at March 31, 2002 totaled
$1.0 million and amortization from investments and loans is projected at $1.2
billion over the next 12 months. Based on historical experience, the current
pricing strategy and the Bank's 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. In the event the
funds required exceed the funds generated by the Bank, additional sources of
funds such as reverse repurchase agreements, FHLB advances, overnight lines of
credit and brokered CD's are available to the Bank.
Capital
At March 31, 2002, 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 $ 91,034 1.50% $ 413,800 6.82% $ 322,766 5.32%
Core capital $ 242,850 4.00% $ 416,074 6.85% $ 173,224 2.85%
Risk-based capital $ 261,187 8.00% $ 434,346 13.30% $ 173,159 5.30%
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 Company monitors its interest rate risk on a
quarterly basis, and due to the current interest rate environment, the Company's
net interest rate spreads and margins have improved. 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. Since December 31,
2001 non-accrual loans have increased primarily due to three credit
relationships being placed in non-accrual status during the first quarter of
2002. Management anticipates that this will not have a material effect on future
earnings. 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 2001 Annual Report to Stockholders.
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 April 1, 2002, the Company's proxy statement was mailed for the
annual meeting of stockholders which was held on May 2, 2002.
b. Not applicable
c. There were 61,874,439 shares of Common Stock of the Company eligible
to be voted on at the annual meeting and 45,423,195 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 2005
FOR % WITHHELD %
Denis P. Kelleher 44,659,551 98.3 763,644 1.7
Julius Mehrberg 44,626,033 98.2 797,162 1.8
Lenore F. Puleo 44,667,200 98.3 755,995 1.7
2. PROPOSAL to ratify the appointment of Arthur Andersen L.L.P. as the
Company's independent auditors for the year ending December 31, 2002.
FOR % AGAINST % ABSTAIN %
39,740,417 87.4 5,224,017 11.50 458,761 1.01
d. Not applicable
Item 5 Other Information
-----------------
Not applicable
Item 6 Exhibits and Reports on Form 8K
-------------------------------
None
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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, 2002 By: /s/ Harry P. Doherty
---------------------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: May 15, 2002 By: /s/ Edward Klingele
---------------------------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
25