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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1997 Commission File Number 0-22278
QUEENS COUNTY BANCORP INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1377322
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
38-25 Main Street, Flushing, New York 11354
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (718) 359-6400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not considered herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of the Form 10-K of any amendment to this Form 10-K. /X/
As of March 17, 1998, the aggregate market value of the shares of common stock
of the registrant outstanding was $541,592,113, excluding 1,620,337 shares held
by all directors and executive officers of the registrant. This figure is based
on the closing price by the NASDAQ National Market for a share of the
registrant's common stock on March 17, 1998, which was $40.75 as reported in The
Wall Street Journal on March 18, 1998. The number of shares of the registrant's
common stock outstanding as of March 17, 1998 was 14,910,941 shares.
Documents Incorporated by Reference
Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 22, 1998 and the 1997 Annual Report to
Shareholders are incorporated herein by reference - Parts I, II and III.
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CROSS REFERENCE INDEX
PART I
Page
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Item 1. Business
Description of Business ........................................ 1
Statistical Data:
Lending Activities ........................................... 19
Loan Maturity and Repricing .................................. 20
Summary of Allowance for Loan Losses ......................... 21
Composition of Mortgage and Other Loan Portfolio ............. 21
Securities and Mortgage-Backed Securities Portfolio .......... 22
Item 2. Properties ....................................................... 23
Item 3. Legal Proceedings ................................................ 24
Item 4. Submission of Matters to a Vote of Security Holders .............. 24
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ........................................................ 24
Item 6. Selected Financial Data .......................................... 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation ....................................... 24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ....... 24
Item 8. Financial Statements and Supplementary Data ...................... 24
Queens County Bancorp, Inc. and Subsidiary: .................... 24
Independent Auditors' Report ................................. 24
Consolidated Statements of Financial Condition ............... 24
Consolidated Statements of Income ............................ 24
Consolidated Statements of Stockholders' Equity .............. 24
Consolidated Statement of Cash Flows ......................... 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................ 25
PART III
Item 10. Directors and Executive Officers of the Registrant ............... 25
Item 11. Executive Compensation ........................................... 25
Item 12. Security Ownership of Certain Beneficial Owners and Management ... 25
Item 13. Certain Relationships and Related Transactions ................... 25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . 25
Signatures ................................................................ 28
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PART I
ITEM 1. BUSINESS
Queens County Bancorp, Inc. (the "Company") was incorporated in the State
of Delaware on July 20, 1993 to serve as the holding company for Queens County
Savings Bank (the "Bank"). The Company acquired all of the stock of the Bank
upon its conversion from a New York State-chartered mutual savings bank to a New
York State-chartered stock savings bank on November 23, 1993. The information
and consolidated financial statements in this Form 10-K report relate
principally to the Company's wholly-owned subsidiary, Queens County Savings
Bank, through which the Company conducts its principal business activity.
Queens County Savings Bank was organized in April 14, 1859 as a New York
State-chartered mutual savings bank and was the first savings bank chartered in
the Borough of Queens, City of New York. The Bank is subject to regulation by
the New York State Banking Department ("Banking Department") and its deposits
are insured by the Bank Insurance Fund ("BIF"), as administered by the Federal
Deposit Insurance Corporation ("FDIC").
GENERAL
The Bank's principal business is attracting retail deposits from the
general public and investing those deposits, together with funds generated from
operations, into the origination of mortgage loans on multi-family properties
and one-to-four family homes. To a lesser extent, the Bank also originates loans
on commercial real estate, construction loans, home equity loans, and other
consumer loans. In addition, the Bank invests in U.S. Treasury and Government
agency securities. The Bank's revenues are derived primarily from interest on
its mortgages and other loans, its mortgage-backed securities portfolio, and the
interest and dividends earned on its securities. The Bank's primary sources of
funds are deposits, amortization and prepayments of loans, and amortization,
prepayments, and maturities of mortgage-backed and investment securities. In
addition, the Company draws on its $481 million line of credit with the Federal
Home Loan Bank of New York ("FHLB-NY") in times of above-average loan demand.
The Company's objective of enhancing the value of its shares has been
accomplished through the implementation of stock repurchase programs, four stock
splits, and the payment of quarterly cash dividends to stockholders, and by
maintaining a high level of asset quality and a strong capital position through
the generation of stable earnings. Since October 1994, the Company has announced
six stock repurchase authorizations and increased its Treasury stock, net of
options exercised, to 5,734,442, or 27.77% of the shares issued at its initial
public offering on November 23, 1993. At March 17, 1998, the total number of
shares outstanding was 14,910,941, as compared to 14,912,791 at December 31,
1997.
MARKET AREA AND COMPETITION
The Bank is a community-oriented financial institution offering a wide
variety of financial products and services to meet the needs of the communities
it serves. Headquartered in the heart of Flushing, New York, in the Borough of
Queens, the Bank currently operates nine branch offices and three customer
service centers in Queens and a tenth branch office in Nassau County. The Bank's
deposit gathering base is concentrated in the communities surrounding its
offices, while its primary lending area extends throughout the greater New York
metropolitan area. Most of the Bank's mortgage loans are secured by properties
located in the New York City Boroughs of Queens, Brooklyn, and Manhattan, and in
Nassau County.
The metropolitan area has historically been home to a significant number
of corporations, including those within the manufacturing and financial services
industries. Despite the ongoing trend toward corporate downsizing and bank
consolidation, and the slow path of economic growth within the region as
compared to the rest of the country, the Bank has managed to maintain a
consistently high level of asset quality.
The Bank faces significant competition both in making loans and in
attracting deposits. Its market area has a high density of financial
institutions, many of which have greater financial resources than the Bank, and
all of which are competitors of the Bank to varying degrees. The Bank's
competition for loans comes principally from commercial banks, savings banks,
credit unions, savings and loan associations, mortgage banking companies and
insurance companies. The Bank has recently faced increased competition for the
origination of multi-family loans, which comprised 78.78% of the Bank's loan
portfolio at year-end 1997. Management anticipates that competition for both
multi-family and one-to-four family loans will continue to increase in the
future. Thus, no assurances can be made that the Bank will be able to maintain
its current level of such loans.
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The Bank's most direct competition for deposits has historically come from
savings and loan associations, savings banks, commercial banks, and credit
unions. The Bank faces additional competition for deposits from short-term money
market funds and other corporate and government securities funds and from other
financial institutions such as brokerage firms and insurance companies.
Competition may also increase as a result of the lifting of restrictions on the
interstate operations of financial institutions.
LENDING ACTIVITIES
Loan and Mortgage-Backed Securities Portfolio Composition. The Bank's loan
portfolio consists primarily of multi-family loans on both rental and
cooperative apartment buildings, and conventional first mortgage loans secured
by one-to-four family homes. To a lesser extent, the Bank also originates
commercial real estate loans, construction loans, and home equity and other
consumer loans. At December 31, 1997, the Bank's gross loan portfolio totaled
$1,405.7 million, of which $1,107.4 million, or 78.78%, were multi-family
mortgage loans, and $224.3 million, or 15.96%, were one-to-four family first
mortgage loans. Of the total mortgage loan portfolio at year-end 1997, 92.80%
were adjustable rate loans and 7.20% were fixed rate loans. The Bank's loan
portfolio also included $61.7 million in commercial real estate loans, $1.5
million in construction loans, $5.0 million in cooperative apartment loans, $2.4
million in home equity loans generally secured by second liens on real property,
and $3.4 million in other consumer loans.
The types of loans originated by the Bank are subject to Federal and State
laws and regulations. Interest rates charged by the Bank on loans are affected
principally by the demand for such loans, the supply of money available for
lending purposes, and the rates offered by its competitors. These factors are,
in turn, affected by general economic conditions, the monetary policy of the
Board of Governors of the Federal Reserve System ("Federal Reserve Board"),
legislative tax policies, and governmental budgetary matters.
The Bank has invested in a variety of mortgage-backed securities,
substantially all of which are directly or indirectly insured or guaranteed by
the Federal Home Loan Mortgage Corporation ("FHLMC") or the Government National
Mortgage Association ("GNMA"). At December 31,1997, mortgage-backed securities
totaled $49.8 million, or 3.10% of total assets. The market value of such
securities was approximately $50.6 million at December 31, 1997. At December 31,
1997, all of the Bank's $49.8 million in mortgage-backed securities were held to
maturity.
Loan Originations, Purchases, Sales, and Servicing. The Bank originates
both adjustable rate mortgage ("ARM") loans and fixed rate loans, the amounts of
which are dependent upon customer demand and market rates of interest.
Generally, the Bank does not purchase whole mortgage loans or loan
participations. It is the Bank's current policy to sell all newly originated
fixed rate one-to-four family mortgage loans into the secondary market to
Savings Bank Life Insurance ("SBLI"), the Federal National Mortgage Association
("FNMA"), the State of New York Mortgage Agency ("SONYMA"), and other secondary
market purchasers. ARM loans are retained for the Bank's portfolio. For the
fiscal years December 31, 1997 and 1996, originations of new ARM loans totaled
$388.7 million and $295.3 million, respectively, or 95.53% and 99.83%, of all
mortgage loan originations. Originations of fixed rate loans totaled $6.8
million and $7.9 million, respectively, for the same periods, while sales of ARM
loans of $12.9 million and fixed rate loans totaled $3.2 million and $350,000,
respectively, for those periods. The Bank generally sells all loans without
recourse and retains the servicing rights of such loans. As of December 31,
1997, the Bank was servicing $30.8 million in loans for others. The Bank is
generally paid a fee of 0.25% for servicing loans sold.
Multi-Family Lending. The Bank originates multi-family loans (defined as
loans on properties with five or more units) which are secured by rental or
cooperative apartment buildings located primarily in the greater New York
metropolitan area. At December 31, 1997, the Bank's portfolio of multi-family
mortgage loans totaled $1,107.4 million, representing 78.78% of the total loan
portfolio. Of these, $631.6 million, or 44.93%, were secured by rental apartment
buildings and $475.8 million, or 33.85%, were secured by underlying mortgages on
cooperative apartment buildings.
Such loans are typically originated for terms of 10 years at a rate that
adjusts to the prime rate of interest, as reported in The New York Times, plus a
margin of 100 basis points, in each of years six through ten. In 1997, the
majority of the Bank's multi-family mortgage loan originations featured a fixed
rate for the first five years of the credit; prepayment penalties range from
five points to one over the first five years of the loan. At year-end 1997,
96.2% of the Bank's multi-family mortgage loans were adjustable rate credits,
including $369.1 million that are due to step upward in 1998. Properties
securing multi-family mortgage loans are appraised either by appraisers employed
by the Bank or by independent appraisers approved by the Bank.
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In originating such loans, the Bank bases its underwriting decisions
primarily on the net operating income generated by the property in relation to
the debt service. The Bank also considers the financial resources of the
borrower, the borrower's experience in owning or managing similar property, the
market value of the property, and the Bank's lending experience with the
borrower. The Bank generally requires minimum debt service ratios of 120% on
multi-family properties. In addition, the Bank requires a security interest in
the personal property at the premises, and an assignment of rents.
The Bank's largest concentration of loans to one borrower at December 31,
1997 consisted of 15 loans secured by 15 multi-family properties located in the
Bank's primary market area. These loans were made to several borrowers who are
deemed to be related for regulatory purposes. As of December 31, 1997, the
outstanding balance of these loans totaled $16.1 million and, as of such date,
all such loans were performing in accordance with their terms. The Bank's
concentration of such loans did not exceed its "loans-to-one-borrower"
limitation. See "Loans to One Borrower Limitations."
Loans secured by multi-family properties are generally larger and involve
a greater degree of risk than one-to-four family residential mortgage loans.
Because payments on loans secured by multi-family buildings are often dependent
on the successful operation or management of the properties, repayment of such
loans may be subject to a greater extent to adverse conditions in the real
estate market or the local economy. The Bank seeks to minimize these risks
through its underwriting policies, which restrict new originations of such loans
to the Bank's primary lending area and require such loans to be qualified on the
basis of the property's net income and debt service ratio. Since 1988, one loan
on a multi-family property outside of the primary lending area was foreclosed
upon and subsequently sold.
One-to-Four Family Mortgage Lending. The Bank offers first mortgage loans
secured primarily by owner-occupied, one-to-four family residences, including
condominium loans, located in its primary lending area. The Bank offers both
fixed rate and ARM loans with maturities of up to 30 years, to a maximum amount
of $500,000. The Bank's one-to-four family mortgage loan originations are
generally made to existing or past customers and members of the local community,
and through referrals from local attorneys, realtors, and independent mortgage
brokers. With the exception of limited documentation loans, one-to-four family
residential mortgage loans are generally underwritten to FNMA and other agency
guidelines. At December 31, 1997, $224.3 million, or 15.96% of the Bank's loan
portfolio, consisted of one-to-four family mortgage loans.
Since 1985, full documentation mortgage loans are offered in amounts up to
75% of the lower of the appraised value or sales price of the property, or up to
85% with private mortgage insurance. The Bank has originated one-to-four family
loans without verification of the borrower's level of income and, in many
instances, without verification of financial assets, basing approval on a credit
report and property appraisal alone. The Bank originates such limited
documentation loans with full asset verification on properties located within
its Community Reinvestment Act ("CRA") market area with loan-to-value ratios of
up to 75% of the lower of the appraised value or the sales price of the
property. All other limited documentation loans are originated with
loan-to-value ratios of up to 70% of the lower of the appraised value or sales
price of the property. A majority of the Bank's one-to-four family loan
originations during 1997 and 1996 were limited documentation loans. These loans
involve a higher degree of risk of default as compared to full documentation
one-to-four family mortgage loans. In recognition of this risk, the Bank is
stringent in its review and verification of the borrower's credit. In addition,
it primarily utilizes staff appraisers to perform real estate appraisals and
charges a higher rate of interest on such loans. The Bank's $7.7 million in
non-performing loans at December 31, 1997, was comprised of one-to-four family
loans. Since 1990, the Bank has foreclosed on 45 one-to-four family residential
properties; three of these properties remained in foreclosed real estate as of
December 31, 1997, with a carrying value of $435,000. The Bank also has one
commercial property in foreclosed real estate with a carrying value of $595,000.
The Bank currently offers ARM loans secured by one-to-four family
residential properties that adjust every one, two, or three years. The interest
rate on ARM loans fluctuates based upon a spread above either the Federal
Housing Finance Board rate or the average yield on U. S. Treasury securities,
adjusted to a constant maturity which corresponds to the adjustment period of
the loan (the "U. S. Treasury constant maturity index") as published weekly by
the Federal Reserve Board. Rates on ARM loans are generally subject to
limitations on interest rate increases of a 2% to 3% adjustment per period
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and an aggregate adjustment of 6% over the life of the loan. Accordingly,
increases in interest rates and the resulting cost of funds in a rapidly rising
interest rate environment could exceed the cap levels on these loans and
negatively impact net interest income. In the year ended December 31, 1997 and
1996, the Bank originated $2.6 million and $8.5 million, respectively, in
one-to-four family residential ARM loans.
The volume and types of ARM loans originated by the Bank have been
affected by such market factors as the level of interest rates, competition,
consumer preferences, and availability of funds. During 1997, demand for ARM
loans was impacted by the low interest rate environment and consumer preference
for fixed rate loans. Accordingly, although the Bank will continue to offer ARM
loans, there can be no assurance that the Bank will be able to originate a
sufficient volume of ARM loans to increase or maintain the proportion that these
loans bear to total loans in the future.
The retention of ARM loans in the Bank's loan portfolio, as opposed to
fixed rate residential mortgage loans, helps reduce the Bank's exposure to
increases in interest rates. However, ARM loans generally pose credit risks
different from the risks inherent in fixed rate loans, primarily because, as
interest rates rise, the underlying payments of the borrower rise, thereby
increasing the potential for default. At the same time, the marketability of the
underlying property may be adversely affected. In order to minimize risk,
borrowers of ARM loans are qualified at the Bank's current offering rate for
fixed rate loans, but not less than 7.0%. The Bank has not originated in the
past, nor does it currently originate, ARM loans that provide for negative
amortization.
The Bank currently offers fixed rate mortgage loans with terms of 15 to 30
years secured by one-to-four family residences. Interest rates charged on fixed
rate loans are competitively priced, based on market conditions. The Bank
originates fixed rate loans for sale in amounts of up to 75% of the lower of the
appraised value or the sales price of the property, with private mortgage
insurance required for loans in excess of 80%. Fixed rate loans are made in
amounts up to the maximum amount permitted by FNMA, FHLMC, and SONYMA
guidelines. For the years ended December 31, 1997 and 1996, the Bank originated
$1.5 million and $1.6 million, respectively, in fixed rate one-to-four family
residential mortgage loans.
An origination fee of up to 2% may be charged on one-to-four family
mortgage loans. Mortgage loans in the Bank's portfolio generally include
due-on-sale clauses which provide the Bank with the contractual right to deem
the loan immediately due and payable in the event that the borrower transfers
ownership of the property without the Bank's consent. It is the Bank's policy to
enforce due-on-sale provisions within the applicable regulations and guidelines
imposed by New York law and secondary market purchasers.
The Bank generally sells its newly originated conforming fixed rate
mortgage loans in the secondary market to such Federal and State agencies as
FNMA, SONYMA, and other secondary market purchasers, while retaining the
servicing rights on all such loans sold. For the twelve months ended December
31, 1997, the Bank sold loans totaling $3.2 million. As of December 31, 1997,
the Bank's portfolio of loans serviced for others totaled $30.8 million. The
Bank intends to continue to sell all of its newly originated fixed rate
one-to-four family mortgage loans as a means of managing its interest rate risk.
No assurances can be made, however, that the Bank will be able to do so in the
future.
Commercial Real Estate Lending. The Bank offers commercial real estate
loans that are typically secured by office buildings, retail stores, medical
offices, warehouses, and other non-residential buildings. At December 31, 1997,
the Bank had loans secured by commercial real estate of $61.7 million,
comprising 4.39% of the Bank's total loan portfolio. Commercial real estate
loans may be originated in amounts of up to 65% of the appraised value of the
mortgaged property. Such loans are typically made for terms of ten years with
interest rates charged in the same manner as the Company's loans. To originate
commercial real estate loans, the Bank requires one or more of the following:
personal guarantees of the principals, a security interest in the personal
property, and an assignment of rents and/or leases. Properties securing the loan
are appraised either by appraisers employed by the Bank or by independent
appraisers approved by the Bank. In recent years, the Bank has de-emphasized its
origination of commercial real estate loans. At December 31, 1997 and 1996, such
loans totaled $61.7 million and $63.5 million, respectively.
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Loans secured by commercial real estate properties, like multi-family
loans, are generally larger and involve a greater degree of risk than
one-to-four family residential mortgage loans. Because payments on loans secured
by commercial real estate properties are often dependent on the successful
operation and management of the properties, repayment of such loans may be
subject to a greater extent to adverse conditions in the real estate market or
the economy. The Bank seeks to minimize these risks through its lending policies
and underwriting standards, which restrict new originations of such loans to the
Bank's primary lending area and qualify such loans on the basis of the
property's net income and debt service ratio.
Construction Lending. The Bank's construction loans primarily have been
made to finance the construction of one-to-four family residential properties
and, to a lesser extent, multi-family properties. The Bank's policies provide
that construction loans may be made in amounts of up to 70% of the appraised
value of the project. The maximum loan amount is $3.0 million. The Bank
generally has provided construction loans only as an accommodation to existing
customers and does not actively solicit such loans. The Bank generally requires
personal guarantees and a permanent loan commitment. Construction loans are made
with adjustable rate terms of up to 18 months. Loan proceeds are disbursed in
increments as construction progresses and as inspections warrant. Construction
loans are structured to be converted to permanent end loans originated by the
Bank at the end of the construction period or upon the borrower receiving
permanent financing from another financial institution. As of December 31, 1996,
the Bank had $1.5 million, or 0.10%, of its total loan portfolio invested in
construction loans. The Bank does not currently intend to increase the level or
ratio of its construction loans to total loans.
Other Lending. The Bank also offers other full documentation loans,
primarily cooperative apartment, home equity, student, and passbook loans. Other
loans outstanding at December 31, 1997 totaled $10.8 million, or 0.77% of the
Bank's loan portfolio and included cooperative apartment loans of $5.0 million,
or 46.30%. The Bank's home equity loan extends a line of credit ranging from a
minimum of $10,000 to a maximum of $400,000. The credit line, when combined with
the balance of the first mortgage lien, may not exceed 70% of the appraised
value of the property at the time of the loan commitment. Home equity loans
outstanding at December 31, 1997 totaled $2.4 million, against total available
credit lines of $3.8 million.
Loan Approval Authority and Underwriting. The Board of Directors
establishes lending authority for individual officers for its various loan
products. For one-to-four family mortgage loans, including cooperative apartment
and condominium loans, the Senior Vice President, Mortgages has the authority to
approve loans in amounts of up to $300,000. Any two executive officers have the
authority to issue commitments on one-to-four family loans in amounts up to
$400,000. Any one-to-four family loan in excess of $400,000 must be approved by
the Mortgage and Real Estate Committee. For multi-family and commercial real
estate loans, the Mortgage and Real Estate Committee must approve all loans. A
loan in excess of $3.0 million must be approved by the Executive Committee; as
of December 31, 1997, the Bank had twenty-six loans in excess of $3.0 million,
with the highest amount being $7.5 million.
For one-to-four family mortgage loans originated by the Bank, upon receipt
of a completed loan application from a prospective borrower, a credit report is
requested, and the borrower's income, assets, and certain other information are
verified for full documentation loans; if necessary, additional financial
information is requested. An appraisal of the real estate intended to secure the
proposed loan is required, and currently is performed by staff or independent
certified appraisers designated and approved by the Board of Directors. It is
the Bank's policy to obtain appropriate insurance protection, including title
insurance, on all real estate mortgage loans. Borrowers must also obtain hazard
insurance prior to closing. Borrowers generally are required to advance funds
for certain items such as real estate taxes, flood insurance, and private
mortgage insurance, when applicable. Limited documentation loans are
underwritten according to the same guidelines, except that no income and, in
many instances, no financial asset verification is performed. The Bank has
originated limited documentation loans in response to the characteristics and
demands of its primary market area. The majority of such loans have been
originated within the primary market area served by the Bank.
Non-performing Loans and Foreclosed Assets. The Bank had $7.7 million in
loans delinquent 90 days or more at December 31, 1997, consisting of 68
one-to-four family mortgage loans with an average principal balance of
approximately $113,200. Management does not expect to incur significant losses
on its non-performing mortgage loans.
Management reviews non-performing loans on a regular basis and reports
monthly to both the Mortgage and Real Estate Committee and the Executive
Committee regarding delinquent loans. The Bank hires outside counsel experienced
in foreclosure and bankruptcy to institute foreclosure and other proceedings on
the Bank's delinquent loans.
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With respect to one-to-four family mortgage loans, the Bank's collection
procedures include sending a past due notice when the regular monthly payment is
17 days past due. In the event that payment is not received following
notification, another notice is sent after the loan becomes 30 days delinquent.
If payment is not received after the second notice is sent, personal contact
with the borrower is attempted through additional letters and telephone calls.
If a loan becomes 90 days delinquent, the Bank then issues a demand note and
sends an inspector to the property. When contact is made with the borrower at
any time prior to foreclosure, the Bank attempts to obtain full payment or to
work out a repayment schedule with the borrower to avoid foreclosure. If a
satisfactory repayment schedule is not worked out with the borrower, foreclosure
actions are generally initiated prior to the loan becoming 120 days past due.
With respect to multi-family and commercial real estate loans, any loans
that become 20 days delinquent are reported to the Senior Vice President,
Mortgages. The Bank then attempts to contact such borrowers by telephone. Before
a loan becomes 30 days past due, the Bank conducts a physical inspection of the
property. Once contact is made with the borrower, the Bank attempts to obtain
full payment or to work out a repayment schedule. If the Bank determines that
successful repayment is unlikely, the Bank initiates foreclosure proceedings,
typically before the loan becomes 60 days delinquent.
The Bank's policies provide that management reports monthly to the
Mortgage and Real Estate Committee and Executive Committee regarding classified
assets. The Bank reviews the problem loans in its portfolio on a monthly basis
to determine whether any loans require classification in accordance with
applicable regulatory guidelines and believes its classification policies are
consistent with regulatory policies. All classified assets of the Bank are
included in non-performing loans delinquent 90 days or more or foreclosed real
estate.
Loans are designated as "in foreclosure", and beginning in 1997, the
accrual of interest and amortization of origination fees continues up to net
realizable value less transaction cost of disposition. During the years ended
December 31, 1997, 1996, and 1995, the amounts of additional interest income
that would have been recorded on mortgage loans in foreclosure, had they been
current, totaled $161,000, $891,000, and $822,000 respectively. These amounts
were not included in the Bank's interest income for the respective periods.
The following table sets forth information regarding all mortgage loans in
foreclosure, loans which are 90 days or more delinquent, commercial real estate
pending foreclosure, and foreclosed real estate at the dates indicated. At
December 31, 1997, the Bank had no restructured loans within the meaning of
Statement of Financial Accounting Standards ("SFAS") No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings" as amended by SFAS No.
114.
At December 31,
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1997 1996 1995 1994 1993
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(dollars in thousands)
Mortgage loans in foreclosure .. $6,121 $ 6,861 $4,929 $5,437 $ 7,417
Loans 90 days or more delinquent
and still accruing interest .. 1,571 2,798 2,864 1,674 2,329
Commercial real estate loans
pending foreclosure ......... -- -- -- -- 2,009
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Total non-performing loans ..... 7,692 9,659 7,793 7,111 11,755
------ ------- ------ ------ -------
Foreclosed real estate ....... 1,030 627 774 975 884
------ ------- ------ ------ -------
Total non-performing assets .... $8,722 $10,286 $8,567 $8,086 $12,639
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Total non-performing loans to
loans, net ................... 0.55% 0.84% 0.78% 0.76% 1.51%
Total non-performing assets to
total assets ................ 0.54 0.76 0.69 0.69 1.16
Non-performing loans totaled $7.7 million as of December 31, 1997.
Management monitors such loans and, when deemed appropriate, writes down such
loans to their current appraised values, less transaction costs. There can be no
assurances that further write-downs will not occur with respect to such loans.
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At December 31, 1997, foreclosed real estate was comprised of three
residential properties and one commercial real estate parcel located within the
Bank's primary lending area, with an aggregate carrying value of $1 million. The
Bank generally conducts appraisals on all properties securing non-accrual
mortgage loans, commercial real estate loans pending foreclosure, and foreclosed
real estate as deemed appropriate and, if necessary, charges off any declines in
value at such times. Based upon management's estimates as to the timing of, and
expected proceeds from, the disposition of these loans, no material loss is
currently expected to be incurred.
Once a loan is placed into foreclosure, the Bank performs an appraisal of
the property. In the event that the carrying balance of the loan exceeds the
appraisal amount less transaction costs, a charge-off is recognized. It is the
Bank's general policy to dispose of properties acquired through foreclosure or
by deed in lieu thereof as quickly and as prudently as possible, in
consideration of market conditions and the condition of such property.
Foreclosed real estate is titled in the name of the Bank's wholly-owned
subsidiary, Main Omni Realty Corp., which manages the property while it is
offered for sale.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risks inherent in its loan
portfolio and the regional and national economies. Such evaluation, which
includes a review of all loans on which full collectibility may not be
reasonably assured, considers, among other matters, the fair value of the
underlying collateral, economic conditions, historical loan loss experience, and
other factors that warrant recognition in providing for an adequate loan loss
allowance. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses and the valuation of foreclosed real estate. In recent periods,
regulatory authorities have applied a greater level of scrutiny to the loan
portfolios of financial institutions and more conservative criteria in
evaluating real estate market values, which the Bank believes has resulted in
significantly increased provisions for loan losses for financial institutions
generally. While the Bank considers this conservative approach when evaluating
the adequacy of its loan loss allowance, such authorities may require the Bank
to recognize additions to the allowance based on their judgment about
information available to them at the time of their examinations.
When the Bank determines that an asset should be classified, it generally
does not establish a specific allowance for such asset unless it determines that
such asset may result in a loss. The Bank may, however, increase its general
valuation allowance in an amount deemed prudent. General valuation allowances
represent loss allowances which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. The Bank's determination
as to the classification of its assets and the amount of its valuation
allowances are subject to review by the FDIC and the Banking Department, which
can order the establishment of additional general or specific loss allowances.
At December 31, 1997, the total allowance was $9.4 million, which amounted
to 122.61% of non-performing loans and 108.13% of non-performing assets. For the
years ended December 31, 1997 and 1996, the Bank had no net charge-offs against
this allowance. The level of the allowance reflects management's assessment of
the risks inherent in its loan portfolio, including those risks associated with
the Bank's increased emphasis on multi-family mortgage loans on rental and
cooperative apartment buildings, which are considered to be at greater risk of
default than one-to-four family loans. In determining the provision for loan
losses, the Bank also considers the greater risks associated with its sizeable
portfolio of limited documentation loans, and local and national economic
conditions. The Bank will continue to monitor and modify the level of its
allowance for loan losses in order to maintain such allowance at a level which
management considers adequate. See Statistical Data-A, B, C, and D for
components of the Bank's mortgage loan portfolio, maturity and repricing, and
for a summary of the allowance for loan losses.
MORTGAGE-BACKED SECURITIES
All of the Bank's mortgage-backed securities are directly or indirectly
insured or guaranteed by the FHLMC or GNMA. At December 31, 1997,
mortgage-backed securities totaled $49.8 million, or 3.10% of total assets, and
were classified by the Bank as held to maturity. Because a majority of the
Bank's mortgage-backed securities are either adjustable rate or are FHLMC
five-year term securities, the Bank anticipates that all of its mortgage-backed
securities will prepay or reprice within five years. At December 31, 1997, the
mortgage-backed securities portfolio had a weighted average interest rate of
6.14% and a market value of approximately $50.6 million. See Statistical Data-E
for components of the mortgage-backed securities portfolio.
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INVESTMENT ACTIVITIES
General. The investment policy of the Bank, which is established by the
Board of Directors and implemented by the Real Estate and Mortgage Committee and
the Investment Committee and certain executive officers of the Bank, is designed
primarily to provide and maintain liquidity, to generate a favorable return on
investments without incurring undue interest rate and credit risk, and to
complement the Bank's lending activities. The Bank's current securities
investment policy permits investments in various types of liquid assets,
including U.S. Treasury securities, obligations of various Federal agencies,
bankers' acceptances of other Board approved financial institutions, investment
grade corporate securities, commercial paper, certificates of deposit, and
Federal funds. The Bank currently does not participate in hedging programs or
interest rate swaps and does not invest in non-investment grade bonds or high
risk mortgage derivatives.
To improve the quality of the Bank's securities portfolio and the Bank's
liquidity and regulatory capital position, management has restructured the
securities portfolio in recent years by shifting its investments primarily to
medium-term Government agency securities from U.S. Treasury securities as the
latter securities matured or were redeemed. As a result, at December 31, 1997,
Government agency securities totaled $84.9 million and U.S. Treasury securities
totaled $14.0 million, as compared to $10.4 million and $76.1 million at
December 31, 1996, respectively. The Bank's aggregate securities portfolio
totaled $94.9 million at December 31, 1997. See Statistical Data-E, "Securities,
Money Market Investments, and Mortgage-Backed Securities."
SOURCES OF FUNDS
General. Deposits, repayments of loans and mortgage-backed securities, and
maturities and redemptions of investment securities are the Bank's primary
sources of funds for lending, investing, and other general purposes. Borrowings
from the FHLB in times of heavy loan demand complement these sources of funds.
Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. The Bank's deposits principally consist of
certificates of deposit ("CDs") and savings accounts, together with money market
accounts, demand deposits, and NOW accounts. The flow of deposits is influenced
significantly by general economic conditions, the restructuring of the banking
industry, changes in money market and prevailing interest rates, and competition
with other financial institutions. The Bank's deposits are typically obtained
from the area in which its offices are located. The Bank relies primarily on
long-standing relationships with customers to retain these deposits. At December
31, 1997, $139.7 million, or 13.07% of the Bank's gross deposit balance,
consisted of CDs with a balance of $100,000 or more.
Borrowings. The Bank is a member of the FHLB-NY, and had a $481.0 million
line of credit at December 31, 1997. To supplement its funding source in a year
of increased lending, the Company drew on its line of credit with the FHLB in
1997. Borrowings, which are used to finance loan production, totaled $309.7
million at December 31, 1997. A $10.0 million line of credit with a
correspondent financial institution is also available to the Bank. At December
31, 1997, the Bank also had an outstanding loan in the amount of $13.3 million
from the Company to fund the Employee Stock Ownership Plan ("ESOP") and $9.5
million in inter-company demand loans at a fixed rate of 6%.
SUBSIDIARY ACTIVITIES
Under its New York State leeway authority, the Bank has formed three
wholly-owned subsidiary corporations. M.F.O. Holding Corp. ("MFO") holds title
to banking premises, while Main Omni Realty Corp's purpose is to hold, operate,
and maintain real estate acquired by the Bank as a result of foreclosure or by
deed in lieu, and Queens Realty Trust, Inc. holds a pool of qualifying mortgage
loans for investment purposes.
SAVINGS BANK LIFE INSURANCE
As an issuing bank, the Bank offers Savings Bank Life Insurance ("SBLI")
to its customers up to the legal maximum of $50,000 per insured individual and,
as a trustee bank, offers an additional $350,000 in group coverage per insured
under SBLI's Financial Institution Group Life Insurance policy. The SBLI
Department's activities are separate from the Bank's and, while they do not
materially affect the Bank's earnings, management believes that offering SBLI is
beneficial to the Bank's relationship with its depositors and the general
public. The SBLI Department pays its own expenses and reimburses the Bank for
expenses incurred on its behalf.
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PERSONNEL
At December 31, 1997, the number of full-time equivalent employees was
275. The Bank's employees are not represented by a collective bargaining unit,
and the Bank considers its relationship with its employees to be good.
FEDERAL, STATE, AND LOCAL TAXATION
FEDERAL TAXATION
General. The Company and the Bank report their income on a consolidated
basis using a calendar year on the accrual method of accounting, and are subject
to Federal income taxation in the same manner as other corporations with some
exceptions, including, particularly, the Bank's addition to its reserve for bad
debts, as discussed below. The following discussion of tax matters is intended
only as a summary and does not purport to be a comprehensive description of the
tax rules applicable to the Bank or the Company.
Bad Debt Reserves. The Small Business Job Protection Act of 1996 (the
"1996 Act"), which was enacted on August 20, 1996, made significant changes to
provisions of the Internal Revenue Code of 1986 (the "Code") relating to a
savings institution's use of bad debt reserves for Federal income tax purposes
and requires such institutions to recapture (i.e. take into income) certain
portions of their accumulated bad debt reserves. The effect of the 1996 Act on
the Bank is discussed below. Prior to the enactment of the 1996 Act, the Bank
was permitted to establish tax reserves for bad debts and to make annual
additions thereto, which additions, within specified formula limits, were
deducted in arriving at the Bank's taxable income. The Bank's deduction with
respect to "qualifying loans," which are generally loans secured by certain
interests in real property could be computed using an amount based on a six-year
moving average of the Bank's actual loss experience (the "Experience Method"),
or a percentage equal to 8% of the Bank's taxable income (the "PTI Method"),
computed without regard to this deduction and with additional modifications, and
reduced by the amount of any permitted addition to the non-qualifying reserve.
The 1996 Act. Under the 1996 Act, for its current and future taxable
years, the Bank is not permitted to make additions to its tax bad debt reserves.
In addition, the Bank is required to recapture (i.e. take into income) over a
six-year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 over the balance of such reserves as of December 31, 1987. The
amount subject to recapture is approximately $7.4 million.
Distributions. To the extent that the Bank makes "non-dividend
distributions" to stockholders that are considered to result in distributions
from the excess bad debt reserve, i.e., that portion, if any, of the balance of
the reserve for qualifying real property loans attributable to certain
deductions under the percentage of taxable income method, or the supplemental
reserve for losses on loans ("Excess Distributions"), then an amount based on
the distribution will be included in the Bank's taxable income. Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, distributions in redemption of stock, and
distributions in partial or complete liquidation. However, dividends paid out of
the Bank's current or accumulated earnings and profits, as calculated for
Federal income tax purposes, will not be considered to result in a distribution
from the Bank's bad debt reserves. Thus, any dividends to the Company that would
reduce amounts appropriated to the Bank's bad debt reserves and deducted for
Federal income tax purposes would create a tax liability for the Bank.
The amount of additional taxable income created from an Excess
Distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, the additional taxable
income would be an amount equal to approximately one and one-half times the
amount of the Excess Distribution, assuming a 35% corporate income tax rate
(exclusive of state taxes). See "Regulation and Supervision" for limits on the
payment of dividends by the Bank. The Bank does not intend to pay dividends that
would result in a recapture of any portion of its bad debt reserves.
Corporate Alternative Minimum Tax. The Code imposes a tax on Alternative
Minimum Taxable Income ("AMTI") at a rate of 20%. Only 90% of AMTI can be offset
by net operating loss carryovers. The adjustment to AMTI based on adjusted
current earnings is an amount equal to 75% of the amount by which a
corporation's adjusted current earnings exceeds its AMTI (determined without
regard to this preference and prior to reduction for net operating losses). In
addition, for taxable years beginning after December 31, 1986, and before
January 1, 1996, an environmental tax of 0.12% of the excess of AMTI (with
certain modifications) over $2.0 million is imposed on corporations, including
the Bank, whether or not an Alternative
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Minimum Tax ("AMT") is paid. The Bank does not expect to be subject to the AMT.
The Bank was subject to an environmental tax liability for the year ended
December 31, 1995 which was not material.
Dividends Received Deduction and Other Matters. The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company and the Bank own more than 20% of the stock of the
corporation distributing a dividend, then 80% of any dividends received may be
deducted.
STATE AND LOCAL TAXATION
The Bank is subject to the New York State Franchise Tax on Banking
Corporations in an annual amount equal to the greater of (i) 9% of the Bank's
"entire net income" allocable to New York State during the taxable year, or (ii)
the applicable alternative minimum tax. The alternative minimum tax is generally
the greatest of (a) 0.01% of the value of the Bank's assets allocable to New
York State with certain modifications, (b) 3% of the Bank's "alternative entire
net income" allocable to New York State, or (c) $250. Entire net income is
similar to Federal taxable income, subject to certain modifications (including
the fact that net operating losses cannot be carried back or carried forward)
and alternative entire net income is equal to entire net income without certain
deductions. The Bank is also subject to a similarly calculated New York City tax
of 9% on income allocated to New York City and similar alternative taxes.
A temporary Metropolitan Transportation Business Tax Surcharge on banking
corporations doing business in the metropolitan district has been applied since
1982. The Bank does all of its business within this District and is subject to
this surcharge rate of 17.00%.
Delaware State Taxation. As a Delaware business corporation, the Company
is required to file annual returns and pay annual fees and an annual franchise
tax to the State of Delaware. These taxes and fees were not material in 1996.
REGULATION AND SUPERVISION
GENERAL
The Bank is a New York State-chartered stock form savings bank and its
deposit accounts are insured under the BIF up to applicable limits by the FDIC.
The Bank is subject to extensive regulation and supervision by the New York
State Banking Department ("Banking Department"), as its chartering agency, and
by the FDIC, as the deposit insurer. The Bank must file reports with the Banking
Department and the FDIC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with, or acquisitions of, other depository
institutions. There are periodic examinations by the Banking Department and the
FDIC to assess the Bank's compliance with various regulatory requirements. This
regulation and supervision establishes a comprehensive framework of activities
in which a savings bank can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss allowances for regulatory purposes. Any change in such regulation, whether
by the Banking Department, the FDIC, or through legislation, could have a
material adverse impact on the Company and the Bank and their operations, and
the Company's stockholders. The Company is required to file certain reports, and
otherwise comply with the rules and regulations of the Federal Reserve Board and
the Banking Department and of the Securities and Exchange Commission ("SEC")
under Federal securities laws. Certain of the regulatory requirements applicable
to the Bank and to the Company are referred to below or elsewhere herein.
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NEW YORK LAW
The Bank derives its lending, investment, and other authority primarily
from the applicable provisions of Banking Law and the regulations of the Banking
Department, as limited by FDIC regulations. See "Restrictions on Certain
Activities." Under these laws and regulations, savings banks, including the
Bank, may invest in real estate mortgages, consumer and commercial loans,
certain types of debt securities (including certain corporate debt securities
and obligations of Federal, state, and local governments and agencies), certain
types of corporate equity securities and certain other assets. Under the
statutory authority for investing in equity securities, a savings bank may
directly invest up to 7.5% of its assets in certain corporate stock, and may
also invest up to 7.5% of its assets in certain mutual fund securities.
Investment in the stock of a single corporation is limited to the lesser of 2%
of the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below. Such equity securities must meet certain earnings
ratios and other tests of financial performance. A savings bank's lending powers
are not subject to percentage of asset limitations, although there are limits
applicable to single borrowers. A savings bank may also, pursuant to the
"leeway" power, make investments not otherwise permitted under the New York
State Banking Law. This power permits investments in otherwise impermissible
investments of up to 1% of assets in any single investment, subject to certain
restrictions and to an aggregate limit for all such investments of up to 5% of
assets. Additionally, savings banks are authorized to elect to invest under a
"prudent person" standard in a wide range of debt and equity securities in lieu
of investing in such securities in accordance with and reliance upon the
specific investment authority set forth in the New York State Banking Law.
Although the "prudent person" standard may expand a savings bank's authority, in
the event a savings bank elects to utilize the "prudent person" standard, it
will be unable to avail itself of the other provisions of the New York State
Banking law and regulations which set forth specific investment authority. A
savings bank may also exercise trust powers upon approval of the Banking
Department.
New York savings banks may also invest in subsidiaries under a service
corporation power. A savings bank may use this power to invest in corporations
that engage in various activities authorized for savings banks, plus any
additional activities which may be authorized by the Banking Department.
Investment by a savings bank in the stock, capital notes, and debentures of its
service corporations is limited to 3% of the savings bank's assets, and such
investments, together with the savings bank's loans to its service corporations,
may not exceed 10% of the savings bank's assets.
The exercise by an FDIC-insured savings bank of the lending and investment
powers of a savings bank under the New York Banking Law is limited by FDIC
regulations and other Federal law and regulations. In particular, the applicable
provisions of New York State Banking law and regulations governing the
investment authority and activities of an FDIC-insured state-chartered savings
bank have been effectively limited by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant
thereto. See "Restrictions on Certain Activities."
With certain limited exceptions, a New York State chartered savings bank
may not make loans or extend credit for commercial, corporate, or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth. The Bank currently
complies with all applicable loans-to-one-borrower limitations.
Under New York State Banking Law, a New York State chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Superintendent is required if the
total of all dividends declared in a calendar year would exceed the total of its
net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.
Under New York State Banking Law, the Superintendent of Banks may issue an
order to a New York State-chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices, and
to keep prescribed books and accounts. Upon a finding by the Banking Department
that any director, trustee, or officer of any banking organization has violated
any law, or has continued unauthorized or unsafe practices in conducting the
business of the banking organization after having been notified by the
Superintendent to discontinue such practices, such director, trustee, or officer
may be removed from office after notice and an opportunity to be heard. The Bank
does not know of any past or current practice, condition, or violation that
might lead to any proceeding by the Superintendent or the Banking Department
against the Bank or any of its Directors or officers.
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FDIC REGULATIONS
Capital Requirements. The FDIC has adopted risk-based capital guidelines
to which the Bank is subject. The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations. The Bank is required
to maintain certain levels of regulatory capital in relation to regulatory
risk-weighted assets. The ratio of such regulatory capital to regulatory
risk-weighted assets is referred to as the Bank's "risk-based capital ratio."
Risk-based capital ratios are determined by allocating assets and specified
off-balance sheet items to four risk-weighted categories ranging from 0% to
100%, with higher levels of capital being required for the categories perceived
as representing greater risk.
These guidelines divide a savings bank's capital into two tiers. The first
tier ("Tier I") includes common equity, retained earnings, certain
non-cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage capital ratio (Tier I capital to adjusted total assets as
specified in the regulations). These regulations provide for a minimum Tier I
leverage capital ratio of 3% for banks that meet certain specified criteria,
including that they have the highest examination rating and are not experiencing
or anticipating significant growth. All other banks are required to maintain a
Tier I leverage capital ratio of 3% plus an additional cushion of at least 100
to 200 basis points. The FDIC may, however, set higher leverage and risk-based
capital requirements on individual institutions when particular circumstances
warrant. Savings banks experiencing or anticipating significant growth are
expected to maintain capital ratios, including tangible capital positions, well
above the minimum levels.
The following is a summary of the Bank's regulatory capital at December
31, 1997:
GAAP Capital to Total Leverage Assets ........... 9.30%
Total Capital to Risk-Weighted Assets ........... 15.26%
Tier I Capital to Risk-Weighted Assets .......... 14.32%
In August 1995, the FDIC, along with the other Federal banking agencies,
adopted a regulation providing that the agencies will take account of the
exposure of a bank's capital and economic value to changes in interest rate risk
in assessing a bank's capital adequacy. According to the agencies, applicable
considerations include the quality of the bank's interest rate risk management
process, the overall financial condition of the bank and the level of other
risks at the bank for which capital is needed. Institutions with significant
interest rate risk may be required to hold additional capital. The agencies
recently issued a joint policy statement providing guidance on interest rate
risk management, including a discussion of the critical factors affecting the
agencies' evaluation of interest rate risk in connection with capital adequacy.
The agencies have determined not to proceed with a previously issued proposal to
develop a supervisory framework for measuring interest rate risk and an explicit
capital component for interest rate risk.
Standards for Safety and Soundness. Federal law requires each Federal
banking agency to prescribe for depository institutions under its jurisdiction
standards relating to, among other things, internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; asset growth; compensation; fees and benefits; and such
other operational and managerial standards as the agency deems appropriate. The
Federal banking agencies adopted final regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness (the "Guidelines") to implement
these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the Federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. The Guidelines address internal controls and information systems;
internal audit system; credit underwriting; loan documentation; interest rate
risk exposure; asset growth; asset quality; earnings and compensation; fees and
benefits. If the appropriate Federal
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banking agency determines that an institution fails to meet any standard
prescribed by the Guidelines, the agency may require the institutions to submit
to the agency an acceptable plan to achieve compliance with the standard, as
required by the Federal Deposit Insurance Act, as amended, ("FDI Act"). The
final regulation establishes deadlines for the submission and review of such
safety and soundness compliance plans.
Real Estate Lending Standards. The FDIC and the other Federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction or improvements on real estate. The FDIC regulations
require each savings association to establish and maintain written internal real
estate lending standards that are consistent with safe and sound banking
practices and appropriate to the size of the association and the nature and
scope of its real estate lending activities. The standards also must be
consistent with accompanying FDIC Guidelines, which include loan-to-value
limitations for the different types of real estate loans. Associations are also
permitted to make a limited amount of loans that do not conform to the proposed
loan-to-value limitations so long as such exceptions are reviewed and justified
appropriately. The guidelines also list a number of lending situations in which
exceptions to the loan-to-value standard are justified.
Dividend Limitations. The FDIC has authority to use its enforcement powers
to prohibit a savings bank from paying dividends, if in its opinion, the payment
of dividends would constitute an unsafe or unsound practice. Federal law
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable capital requirements on a pro forma basis. The Bank
is also subject to dividend declaration restrictions imposed by New York law.
INVESTMENTS AND ACTIVITIES
Since the enactment of FDICIA, all state-chartered financial institutions,
including savings banks and their subsidiaries, have generally been limited to
activities as principal and equity investments of the type and in the amount
authorized for national banks, notwithstanding state law, FDICIA and the FDIC
regulations thereunder permit certain exceptions to these limitations. For
example, certain state chartered banks, such as the Bank, may, with FDIC
approval, continue to exercise state authority to invest in common or preferred
stocks listed on a national securities exchange or the National Market System of
NASDAQ and in the shares of an investment company registered under the
Investment Company Act of 1940, as amended. Such banks may also continue to sell
savings bank life insurance. In addition, the FDIC is authorized to permit such
institutions to engage in state authorized activities or investments that do not
meet this standard (other than non-subsidiary equity investments) for
institutions that meet all applicable capital requirements if it is determined
that such activities or investments do not pose a significant risk to the BIF.
The FDIC has recently proposed revisions to its regulations governing the
procedures for institutions seeking approval to engage in such activities or
investments. These proposed revisions would, among other things, streamline
certain application procedures for healthy banks and impose certain quantitative
and qualitative restrictions on a bank's dealing with its subsidiaries engaged
in activities not permitted for national bank subsidiaries. All non-subsidiary
equity investments, unless otherwise authorized or approved by the FDIC, must
have been divested by December 19, 1996, pursuant to a FDIC-approved divestiture
plan unless such investments were grandfathered by the FDIC. The Bank received
grandfathering authority from the FDIC in February 1993 to invest in listed
stock and/or registered shares subject to the maximum permissible investments of
100% of Tier 1 Capital, as specified by the FDIC's regulations, or the maximum
amount permitted by New York State Banking Law, whichever is less. Such
grandfathering authority is subject to termination upon the FDIC's determination
that such investments pose a safety and soundness risk to the Bank or in the
event the Bank converts its charter or undergoes a change in control. As of
December 31, 1997, the Bank had $2.7 million of such investments.
PROMPT CORRECTIVE REGULATORY ACTION
Federal law requires, among other things, that Federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements. For these purposes, the law establishes five
capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
The FDIC has adopted regulations to implement the prompt corrective action
legislation. Among other things, the regulations define the relevant capital
measures for the five capital categories. An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier 1 risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and is not subject to a regulatory order, agreement, or directive to
meet and maintain a specific capital level for any capital measure. An
institution is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of
4% or greater, and generally a leverage ratio of 4% or greater. An institution
is deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier 1 risk-based capital ratio of
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less than 4%, or generally a leverage capital ratio of less than 4%. An
institution is deemed to be "significantly undercapitalized" if it has a total
risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3%. An institution is deemed to
be "critically undercapitalized" if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institution in an
amount equal to the lesser of 5.0% of the bank's total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately
capitalized. If an "undercapitalized" bank fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized." "Significantly
undercapitalized" banks are subject to one or more of a number of additional
restrictions, including but not limited to an order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cease receipt of deposits from correspondent banks or dismiss
directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers and capital distributions by the parent
holding company. "Critically undercapitalized" institutions also may not,
beginning 60 days after becoming "critically undercapitalized," make any payment
of principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any material transaction outside the
ordinary course of business. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator. Generally,
subject to a narrow exception, the appointment of a receiver or conservator is
required for a "critically undercapitalized" institutions within 270 days after
it obtains such status.
TRANSACTIONS WITH AFFILIATES
Under current Federal law, transactions between depository institutions
and their affiliates are governed by Section 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies which are controlled by such parent
holding company are affiliates of the savings bank. The Federal Reserve Board
("FRB") has proposed regulations that would treat as an affiliate any subsidiary
of a savings bank that engages in activities not permissible for the parent
savings bank to engage in directly. Generally, Section 23A limits the extent to
which the savings bank or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such savings bank's capital
stock and surplus, and contains an aggregate limit on all such transaction with
all affiliates to an amount equal to 20% of such capital stock and surplus. The
term "covered transaction" includes the making of loans or other extensions of
credit to an affiliate; the purchase of assets from an affiliate, the purchase
of, or an investment in, the securities of an affiliate; the acceptance of
securities of an affiliate as collateral for a loan or extension of credit to
any person; or issuance of a guarantee, acceptance, or letter of credit on
behalf of an affiliate. Section 23A also establishes specific collateral
requirements for loans or extensions of credit to, or guarantees, acceptances on
letters of credit issued on behalf of an affiliate. Section 23B requires that
covered transactions and a broad list of other specified transactions be on term
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
Federal banking agency to directors, executive officers, and shareholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers, and principal shareholders must be made on terms
substantially the same as offered in comparable transactions to other persons.
Recent legislation created an exception for loans made pursuant to a benefit or
compensation program that is widely available to all employees of the
institution and does not give preference to executive officers over other
employees. Section 22(g) of the Federal Reserve Act places additional
limitations on loans to executive officers.
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ENFORCEMENT
The FDIC has extensive enforcement authority over insured savings banks,
including the Bank. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease and desist orders, and
to remove directors and officers. In general, these enforcement actions may be
initiated in response to violations of laws and regulations and to unsafe or
unsound practices.
The FDIC has authority under Federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances. The FDIC is
required, with certain exceptions, to appoint a receiver or conservator for an
insured state savings bank if that savings bank was "critically
undercapitalized" on average during the calendar quarter beginning 270 days
after the date on which the savings bank became "critically undercapitalized."
For this purpose, "critically undercapitalized" means having a ratio of tangible
capital to total assets of less than 2%. See "Prompt Corrective Regulatory
Action." The FDIC may also appoint a conservator or receiver for a state savings
bank on the basis of the institution's financial condition or upon the
occurrence of certain events, including: (i) insolvency (whereby the assets of
the savings bank are less than its liabilities to depositors and others); (ii)
substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices; (iii) existence of an unsafe or unsound condition
to transact business; (iv) likelihood that the savings bank will be unable to
meet the demands of its depositors or to pay its obligations in the normal
course of business; and (v) insufficient capital, or the incurring or likely
incurring of losses that will deplete substantially all of the institution's
capital with no reasonable prospect of replenishment of capital without Federal
assistance.
INSURANCE OF DEPOSIT ACCOUNTS
The FDIC has adopted a risk-based insurance assessment system. The FDIC
assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period, consisting of (1) well capitalized, (2)
adequately capitalized, or (3) undercapitalized, and one of three supervisory
subcategories within each capital group. The supervisory subgroup to which an
institution is assigned is based on the supervisory evaluation provided to the
FDIC by the institution's primary Federal regulator, and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. Assessment rates for BIF deposits currently range from 0 basis points
to 27 basis points, and the FDIC has determined to retain such range of
assessment rates for the first half of 1998. The FDIC is authorized to raise the
assessment rates in certain circumstances, including to maintain or achieve the
designated reserve ratio of 1.25%, which requirement the BIF currently meets.
The FDIC has exercised its authority to raise rates in the past and may raise
insurance premiums in the future. If such action is taken by the FDIC, it could
have an adverse effect on the earnings of the Bank. On September 30, 1996, the
President signed into law the Deposit Insurance Funds Act of 1996 (the "Funds
Act") which, among other things, imposed a special one-time assessment of
Savings Association Insurance Fund member institutions to recapitalize SAIF. The
Funds Act also spreads the obligations for payment of the Financing Corporation
("FICO") bonds across all SAIF and BIF members. As of January 1, 1997, BIF
deposits are assessed for FICO payments at a rate of 20% of the rate assessed on
SAIF deposits. Based on current estimates by the FDIC, BIF deposits will be
assessed a FICO payment of 1.3 basis points, while SAIF deposits will pay an
estimated 6.4 basis points on the FICO bonds. Full pro rata sharing of the FICO
payments between BIF and SAIF members will occur on the earlier of January 1,
2000 or the date BIF and SAIF are merged. The Funds Act specifies that BIF and
SAIF will be merged on January 1, 1999 provided that no savings associations
remain at that time.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC. The
management of the Bank does not know of any practice, condition, or violation
that might lead to the termination of deposit insurance.
LOANS-TO-ONE-BORROWER LIMITATIONS
With certain limited exceptions, a New York State chartered savings bank
may not make loans or extend credit for commercial, corporate, or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's capital. The Bank currently
complies with all applicable loans-to-one-borrower limitations.
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COMMUNITY REINVESTMENT ACT
Federal Regulation. Under the Community Reinvestment Act ("CRA"), as
implemented by FDIC regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. CRA does not establish specific lending requirements or programs
for financial institutions nor does it limit an institution's discretion to
develop the types of products and services that it believes are best suited to
its particular community, consistent with CRA. CRA requires the FDIC, in
connection with its examination of a savings institution, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. CRA requires public disclosure of an institution's CRA rating and
to require the FDIC to provide a written evaluation of an institution's CRA
performance utilizing a four-tiered descriptive rating system. The Bank's latest
CRA rating, received from the FDIC in July 1997, was "satisfactory."
New York Regulation. The Bank is also subject to provisions of the New
York Banking Law which impose continuing and affirmative obligations upon
banking institutions organized in New York to serve the credit needs of its
local community ("NYCRA"), which are substantially similar to those imposed by
the CRA. Pursuant to the NYCRA, a bank must file an annual NYCRA report and
copies of all Federal CRA reports with the Banking Department. The NYCRA
requires the Banking Department to make an annual written assessment of a bank's
compliance with the NYCRA, utilizing a four-tiered rating system, and make such
assessment available to the public. The NYCRA also requires the Superintendent
to consider a bank's NYCRA rating when reviewing a bank's application to engage
in certain transactions, including mergers, asset purchases, and the
establishment of branch offices or ATMs, and provides that such assessment may
serve as a basis for the denial of any such application. The NYBD has adopted,
effective December 3, 1997, new regulations to implement the NYCRA. The NYBD
replaced its process-focused regulations with performance-focused regulations
that are intended to parallel current CRA regulations of federal banking
agencies and to promote consistency in CRA evaluations by considering more
objective criteria. The new regulations require a biennial assessment of a
bank's compliance with the NYCRA, utilizing a four-tiered rating system, and
require the NYBD to make available to the public such rating and a written
summary of the results. The Bank's latest NYCRA rating, received from the
Banking Department in May 1997, was a "2" or "satisfactory."
FEDERAL RESERVE SYSTEM
Under Federal Reserve Board ("FRB") regulations, the Bank is required to
maintain non-interest-earning reserves against its transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for that portion of transaction accounts
aggregating $49.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts greater than $49.3
million, the reserve requirements is $1.5 million plus 10% (subject to
adjustment by the Federal Reserve Board between 8% and 14% against that portion
of total transaction accounts in excess of $49.3 million. Effective December 16,
1997, the Federal Reserve Board has reduced the amount of transaction accounts
subject to the 3% ratio from $49.3 million to $47.8 million and increased from
$4.4 million to $4.7 million the amount of reserve liabilities that is exempted
from reserve requirements. The Bank is in compliance with the foregoing
requirements. Because required reserves must be maintained in the form of either
vault cash, a non-interest-bearing account at a Federal Reserve Bank or a
pass-through account as defined by the Federal Reserve Board, the effect of this
reserve requirement is to reduce the Bank's interest-earning assets. FHLB System
members are also authorized to borrow from the Federal Reserve "discount
window," but Federal Reserve Board regulations require institutions to exhaust
all FHLB sources before borrowing from a Federal Reserve Bank.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB-NY, is required to acquire and
hold shares of capital stock in that FHLB in an amount at least equal to 1% of
the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB-NY, whichever is greater. The Bank was in compliance
with this requirement, with an investment in FHLB-NY stock at December 31, 1997
of $16.6 million. FHLB advances must be secured by specified types of collateral
and may be obtained primarily for the purpose of providing funds for residential
housing finance.
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The FHLBs are required to provide funds to cover certain obligations on
bonds issued to fund the resolution of insolvent thrifts and to contribute funds
for affordable housing programs. These requirements could reduce the amount of
dividends that the FHLBs pay to their members and could also result in the FHLBs
imposing a higher rate of interest on advances to their members. For the fiscal
years ended December 31, 1997, 1996, and 1995, dividends from the FHLB-NY to the
Bank amounted to $822,000, $665,000 and $740,000, respectively. If dividends
were reduced, or interest on future FHLB advances increased, the Bank's net
interest income might also be reduced.
HOLDING COMPANY REGULATION
Federal Regulation. The Company currently is subject to examination,
regulation, and periodic reporting under the Bank Holding Company Act ("BHCA"),
as administered by the FRB. The FRB has adopted capital adequacy guidelines for
bank holding companies (on a consolidated basis) substantially similar to those
maintained by the FDIC for the Bank.
The Company is required to obtain the prior approval of the FRB to acquire
all, or substantially all, of the assets of any bank or bank holding company.
Prior FRB approval will be required for the Company to acquire direct or
indirect ownership or control of any voting securities of any bank or bank
holding company if, after giving effect to such acquisition, it would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company. In addition to the approval of the FRB, before any
bank acquisition can be completed, prior approval thereof may also be required
to be obtained from other agencies having supervisory jurisdiction over the bank
to be acquired, including the Banking Department.
A bank holding company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting securities of
any company engaged in non-banking activities. One of the principal exceptions
to this prohibition is for activities found by the FRB to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
Some of the principal activities that the FRB has determined by regulation to be
so closely related to banking are: (i) making or servicing loans; (ii)
performing certain data processing services; (iii) providing discount brokerage
services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing
personal or real property; (vi) making investments in corporations or projects
designed primarily to promote community welfare; and (vii) acquiring a savings
and loan association.
The FRB has adopted capital adequacy guidelines for bank holding companies
(on a consolidated basis) substantially similar to those of the FDIC for the
Bank. See "Capital Maintenance." The Company's total and Tier 1 capital exceed
these requirements.
Bank holding companies are generally required to give the FRB prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of the Company's
consolidated net worth. The FRB may disapprove such a purchase or redemption if
it determines that the proposal would constitute an unsafe and unsound practice,
or would violate any law, regulation, FRB order or directive, or any condition
imposed by, or written agreement with, the FRB. The FRB has now adopted an
exception to this approval requirement for well-capitalized bank holding
companies that meet certain other conditions.
The FRB has issued a policy statement regarding the payment of dividends
by bank holding companies. In general, the FRB's policies provide that dividends
should be paid only out of current earnings and only if the prospective rate of
earnings retention by the bank holding company appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
The FRB's policies also require that a bank holding company serve as a source of
financial strength to its subsidiary banks by standing ready to use available
resources to provide adequate capital funds to those banks during periods of
financial stress or adversity and by maintaining the financial flexibility and
capital-raising capacity to obtain additional resources for assisting its
subsidiary banks where necessary. These regulatory policies could affect the
ability of the Company to pay dividends or otherwise engage in capital
distribution.
The status of the Company as a registered bank holding company under the
BHCA does not exempt it from certain Federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the Federal securities laws.
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Under the FDI Act, depository institutions are liable to the FDIC for
losses suffered or anticipated by the FDIC in connection with the default of a
commonly controlled depository institution or any assistance provided by the
FDIC to such an institution in danger of default. This law would have potential
applicability if the Company ever acquired as a separate subsidiary a depository
institution in addition to the Bank.
Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act on
any extension of credit to, or purchase of assets from, or issuance of letters
of credit on behalf of, the bank holding company or its subsidiaries, and on the
investment in or acceptance of stocks or securities of such holding company or
its subsidiaries as collateral for loans. In addition, provisions of the Federal
Reserve Act and FRB regulations limit the amounts of, and establish required
procedures and credit standards with respect to, loans and other extensions of
credit to officers, directors, and principal shareholders of the Bank, the
Company, any subsidiary of the Company, and related interests of such persons.
Moreover, subsidiaries of bank holding companies are prohibited from engaging in
certain tie-in arrangements (with the Holding Company or any of its
subsidiaries) in connection with any extension of credit, lease, or sale of
property or furnishing of services.
The Company and its subsidiary, the Bank, will be affected by the monetary
and fiscal policies of various agencies of the United States Government,
including the Federal Reserve System. In view of changing conditions in the
national economy and in the money markets, it is impossible for the management
of the Company to accurately predict future changes in monetary policy or the
effect of such changes on the business or financial condition of the Company or
the Bank.
ACQUISITION OF THE HOLDING COMPANY
Federal Restrictions. Under the Federal Change in Bank Control Act
("CIBCA"), a notice must be submitted to the FRB if any person (including a
company), or group acting in concert, seeks to acquire 10% or more of the
Company's shares of Common Stock outstanding, unless the FRB has found that the
acquisition will not result in a change in control of the Company. Under the
CIBCA, the FRB has 60 days within which to act on such notices, taking into
consideration certain factors, including the financial and managerial resources
of the acquirer, the convenience and needs of the communities served by the
Company and the Bank, and the anti-trust effects of the acquisition. Under the
BHCA, any company would be required to obtain prior approval from the FRB before
it may obtain "control" of the Company within the meaning of the BHCA. Control
generally is defined to mean the ownership or power to vote 25 percent or more
of any class of voting securities of the Company or the ability to control in
any manner the election of a majority of the Company's directors. An existing
bank holding company would be required to obtain the FRB's prior approval under
the BHCA before acquiring more than 5% of the Company's voting stock. See
"Holding Company Regulation." Approval of the Banking Department may also be
required for acquisition of the Company.
New York Change in Control Restrictions. In addition to the CIBCA and the
BHCA, the New York Banking Law generally requires prior approval of the New York
Banking Board before any action is taken that causes any company to acquire
direct or indirect control of a banking institution which is organized in New
York.
FEDERAL SECURITIES LAWS
The Company's common stock is registered with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company is subject to
the information and proxy solicitation requirements, insider trading
restrictions, and other requirements under the Exchange Act.
Registration of the shares of the Common Stock that were issued in the
Bank's conversion from mutual to stock form under the Securities Act of 1933, as
amended (the "Securities Act"), does not cover the resale of such shares. Shares
of the common stock purchased by persons who are not affiliates of the Company
may be resold without registration. Shares purchased by an affiliate of the
Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information requirements
of Rule 144 under the Securities Act, each affiliate of the Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed in any three-month period the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made in the
future by the Company to permit affiliates to have their shares registered for
sale under the Securities Act under certain circumstances.
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STATISTICAL DATA
The detailed statistical data that follows is being presented in accordance with
Guide 3, prescribed by the Securities and Exchange Commission. This data should
be read in conjunction with the financial statements and related notes and the
discussion included in the Management's Discussion and Analysis of Financial
Condition and Results of Operations that are indexed on the Form 10-K Cross
Reference Index.
A. MORTGAGE AND OTHER LENDING ACTIVITIES
The following table sets forth the Bank's loan originations and mortgage-backed
securities, including purchases, sales, and principal repayments, for the
periods indicated:
For the
Years Ended December 31,
------------------------
(dollars in thousands) .... 1997 1996 1995
---------- ---------- ----------
Mortgage loans (gross):
At beginning of period ...... $1,144,317 $ 993,242 $ 936,716
Mortgage loans originated:
One-to-four family .......... 22,914 11,150 14,754
Multi-family ................ 418,869 273,421 124,289
Commercial real estate ...... 10,248 17,438 5,796
Construction ................ 1,089 1,214 915
---------- ---------- ----------
Total mortgage loans originated 453,120 303,223 145,754
Principal repayments .......... 185,033 151,391 87,974
Mortgage loans sold ........... 16,060 350 508
Mortgage loans transferred to
foreclosed real estate ...... 1,405 406 746
---------- ---------- ----------
At end of period .............. 1,394,939 1,144,318 993,242
---------- ---------- ----------
Other loans (gross):
At beginning of period ........ 12,275 13,861 13,693
Other loans originated ........ 1,375 1,471 3,069
Principal repayments* ......... 2,843 2,975 2,703
Student loans sold ............ 12 82 198
---------- ---------- ----------
At end of period .............. 10,795 12,275 13,861
---------- ---------- ----------
Total loans ................... $1,405,734 $1,156,593 $1,007,103
========== ========== ==========
Mortgage-backed securities:
At beginning of period ...... $ 73,732 $ 92,868 $ 107,451
Principal repayments ........ 23,951 19,136 14,583
---------- ---------- ----------
At end of period ............ $ 49,781 $ 73,732 $ 92,868
========== ========== ==========
*Includes a loan on a co-operative apartment in the amount of $64,000
transferred to foreclosed real estate in 1995.
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B: LOAN MATURITY AND REPRICING
The following table shows the maturity or period to repricing of the Bank's loan
portfolio at December 31, 1997. Loans that have adjustable rates are shown as
being due in the period during which the interest rates are next subject to
change. The table does not include prepayments or scheduled principal
amortization. Prepayments and scheduled principal amortization on mortgage loans
totaled $88.0 million for the twelve months ended December 31, 1997.
Mortgage and Other Loans
At December 31, 1997
1 - 4 Multi- Commercial Home Total
(dollars in thousands) Family Family Real Estate Construction Equity Other Loans
- ---------------------- ------ ------ ----------- ------------ ------ ----- -----
Amounts due:
Within one year ....... $148,534 $ 405,638 $30,427 $1,538 $2,386 $ 4,850 $ 593,373
After one year:
One to three years ... 41,858 115,962 13,502 -- -- 1,937 173,259
Three to five years .. 8,718 463,036 15,794 -- -- 730 488,278
Five to ten years .... 18,691 117,895 1,760 -- -- 836 139,182
Ten to twenty years .. 5,157 4,843 257 -- 31 10,288
Over twenty years .... 1,329 -- -- -- -- 25 1,354
-------- ---------- ------- ------ ------ ------- ----------
Total due or repricing
after one year ..... 75,753 701,736 31,313 -- -- 3,559 812,361
-------- ---------- ------- ------ ------ ------- ----------
Total amounts due or
repricing, gross .. $224,287 $1,107,374 $61,740 $1,538 $2,386 $ 8,409 $1,405,734
======== ========== ======= ====== ====== ======= ==========
The following table sets forth, at December 31, 1997, the dollar amount of all
loans due after December 31, 1998, and indicates whether such loans have fixed
or adjustable interest rates.
Due after December 31, 1998
---------------------------
(dollars in thousands) Fixed Adjustable Total
------- -------- --------
Mortgage loans:
One-to-four family ... $39,386 $ 36,367 $ 75,753
Multi-family ......... 38,935 662,801 701,736
Commercial real estate 13,624 17,689 31,313
------- -------- --------
Total mortgage loans . $91,945 $716,857 $808,802
Other loans ............ 2,558 1,001 3,559
------- -------- --------
Total loans .......... $94,503 $717,858 $812,361
======= ======== ========
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C: SUMMARY OF THE ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at December 31, 1997, 1996, and 1995 was allocated
as follows:
At December 31,
---------------
1997 1996 1995
---- ---- ----
Percent Percent Percent
of of of
Loans in Loans in Loans in
Category Category Category
to Total to Total to Total
(dollars in thousands) Amount Loans Amount Loans Amount Loans
------ ------ ------- ------ ------- ------
Mortgage loans:
One-to-four family ..... $1,592 16.88% $ 1,812 19.36% $ 2,914 28.64%
Multi-family ........... 6,521 69.14 6,168 65.90 6,519 63.70
Construction ........... 23 0.24 24 0.26 30 0.12
Commercial real estate . 1,080 11.45 1,110 11.86 1,550 6.16
Other loans ............ 215 2.29 245 2.62 346 1.38
------ ------ ------- ------ ------- ------
Total loans .......... $9,431 100.00% $ 9,359 100.00% $11,359 100.00%
====== ====== ======= ====== ======= ======
The allocation above is based upon an estimate at a given point in time, based
on various factors, including local economic conditions. A different allocation
methodology may be deemed to be more appropriate in the future.
D: COMPOSITION OF MORTGAGE AND OTHER LOAN PORTFOLIO
The following table sets forth the composition of the Bank's portfolio of
mortgage and other loans in dollar amounts and in percentages at the dates
indicated.
At December 31,
---------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Percent Percent Percent Percent Percent
of of of of of
(dollars in thousands) Amount Total Amount Total Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Mortgage loans:
One-to-four family ..... $ 224,287 15.96% $ 256,904 22.21% $ 288,470 28.64% $ 306,028 32.20% $276,442 34.96%
Multi-family ........... 1,107,343 78.78 822,364 71.10 641,564 63.70 561,589 59.09 428,746 54.23
Commercial real estate . 61,740 4.39 63,452 5.49 62,003 6.16 66,609 7.01 67,467 8.53
Construction ........... 1,538 0.11 1,598 0.14 1,205 0.12 2,490 0.26 1,750 0.22
---------- ------ ---------- ------ ---------- ------ ---------- ------ -------- ------
Total mortgage loans . 1,394,939 99.23 1,144,318 98.94 993,242 98.62 936,716 98.56 774,405 97.95
---------- ------ ---------- ------ ---------- ------ ---------- ------ -------- ------
Other loans:
Cooperative apartment .. 5,041 0.36 5,764 0.50 6,684 0.66 7,238 0.76 7,429 0.94
Home equity ............ 2,386 0.17 2,819 0.24 3,069 0.31 3,352 0.35 3,338 0.42
Student ................ 8 0.00 24 0.00 116 0.01 241 0.03 3,011 0.38
Passbook savings ....... 312 0.02 375 0.03 470 0.05 691 0.07 989 0.13
Other .................. 3,048 0.22 3,293 0.29 3,522 0.35 2,171 0.23 1,474 0.19
---------- ------ ---------- ------ ---------- ------ ---------- ------ -------- ------
Total other loans ..... 10,795 0.77 12,275 1.06 13,861 1.38 13,693 1.44 16,241 2.05
---------- ------ ---------- ------ ---------- ------ ---------- ------ -------- ------
Total loans ........... 1,405,734 100.00% 1,156,593 100.00% 1,007,103 100.00% 950,409 100.00% 790,646 100.00%
========== ====== ========== ====== ========== ====== ========== ====== ======== ======
Less:
Unearned discounts ...... 19 24 29 42 63
Net deferred loan
origination fees ....... 1,281 1,058 912 1,549 1,249
Allowance for loan losses 9,431 9,359 11,359 11,268 10,320
---------- ---------- ---------- ---------- --------
Loans, net .............. $1,395,003 $1,146,152 $ 994,803 $937,550 $779,014
========== ========== ========== ========== ========
21
24
E: SECURITIES, MONEY MARKET INVESTMENTS, AND MORTGAGE-BACKED SECURITIES
The following table sets forth certain information regarding the carrying and
market values of the Bank's securities, money market investments, and
mortgage-backed securities portfolios at the dates indicated:
At December 31,
---------------
1997 1996 1995
---- ---- ----
Carrying Market Carrying Market Carrying Market
(dollars in thousands) Value Value Value Value Value Value
------- ------- ------- ------- ------- -------
Securities:
U.S.Government and
agency obligations ...... $78,279 $78,345 $76,121 $76,064 $68,126 $68,226
Equity securities ........ 19,274 19,339 10,374 10,419 9,890 9,925
------- ------- ------- ------- ------- -------
Total securities ......... $97,553 $97,684 $86,495 $86,483 $78,016 $78,151
======= ======= ======= ======= ======= =======
Money market investments:
Federal funds sold ....... $ 6,000 $ 6,000 $ 7,000 $ 7,000 $13,650 $13,650
------- ------- ------- ------- ------- -------
Total money market
investments ............ $ 6,000 $ 6,000 $ 7,000 $ 7,000 $13,650 $13,650
======= ======= ======= ======= ======= =======
Mortgage-backed securities:
GNMA ..................... $20,069 $20,789 $23,569 $23,962 $27,914 $28,562
FHLMC .................... 29,712 29,830 50,163 50,230 64,954 64,912
------- ------- ------- ------- ------- -------
Total mortgage-backed
securities .............. $49,781 $50,619 $73,732 $74,192 $92,868 $93,474
======= ======= ======= ======= ======= =======
22
25
ITEM 2. PROPERTIES
The Bank conducts its business through ten full-service offices, and two
customer service centers and one mortgage service center. The Bank's main office
is located at 38-25 Main Street, Flushing, New York. The Bank believes that its
current facilities are adequate to meet the present and immediately foreseeable
needs of the Bank and the Company.
Date Lease
Leased or Leased or Expiration Net Book Value at
Owned Acquired Date December 31, 1997
----- -------- ---- -----------------
Main Office(1)................................ Owned 1911 -- $1,820,675
38-25 Main Street
Flushing, NY 11354
Corona Branch................................. Owned 1923 -- 163,722
37-97 103rd Street
Corona, NY 11368
Little Neck Branch............................ Owned 1946 -- 53,108
251-31 Northern Blvd.
Little Neck, NY 11363
Kew Gardens Hills Branch...................... Owned 1948 -- 125,425
75-44 Main Street
Kew Gardens Hills, NY 11367
Jackson Heights Branch........................ Leased 1974 2023 480,202
76-02 Northern Blvd.
Jackson Heights, NY 11372
Astoria Branch(2)............................. Leased 1993 2018 134,854
31-42 Steinway Street
Astoria, NY 11103
Fresh Meadows Branch.......................... Leased 1995 2010 84,894
61-49 188th Street
Fresh Meadows, NY 11365
College Point Branch.......................... Leased 1996 2021 6,501
15-01 College Point Blvd.
College Point, NY 11356
Murray Hill Branch............................ Leased 1997 2007 31,590
156-18 Northern Blvd.
Flushing, NY 11354
Plainview Branch.............................. Owned 1974 -- 306,603
1092 Old Country Road
Plainview, NY 11803
Mortgage Service Center(3).................... Owned 1991 -- 4,636,475
158-14 Northern Blvd.
Flushing, NY 11354
Auburndale Customer Service Center............ Leased 1996 2006 7,463
193-01 Northern Blvd.
Flushing, NY 11358
Ditmars Service Center........................ Leased 1996 2005 15,943
31-09 Ditmars Blvd.
Astoria, NY 11105
---------------
23
26
(1) The Bank commenced operations in 1859 at a location near its current
headquarters which it has occupied since approximately 1911. The Bank owns
additional office space adjacent to its Main Office which is used for
administrative operations, the net book value of which is included in the
amount shown.
(2) This branch office replaced another branch office, formerly located at
31-02 Steinway Street, Astoria, which was closed as of June 28, 1993. The
vacated space, which is owned by the Bank, has a net book value of $1.3
million and has subsequently been leased.
(3) The Bank currently leases to unrelated tenants a majority of the office
space at this location.
ITEM 3. LEGAL PROCEEDINGS
The Bank is involved in various legal actions arising in the ordinary
course of its business. All such actions, in the aggregate, involve amounts
which are believed by management to be immaterial to the financial condition and
results of operations of the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on The Nasdaq Stock Market and quoted
under the symbol "QCSB".
Information regarding the Company's common stock and its price for the
1997 fiscal year appears on page 24 of the 1997 Annual Report under the caption
"Market Price of Common Stock and Dividends Declared per Common Share" and is
incorporated herein by this reference.
As of March 6, 1998 the Company had approximately 700 shareholders of
record, not including the number of persons or entities holding stock in nominee
or street name through various brokers and banks.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding selected financial data appears on page 1 of the
1997 Annual Report under the caption "Financial Highlights" and is incorporated
herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information regarding management's discussion and analysis of financial
condition and results of operations appears on pages 7 through 23 of the 1997
Annual Report under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and is incorporated herein by
this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about
market risk appears on pages 12 through 13 of the 1997 Annual Report under the
caption "Interest Rate Sensitivity" and is incorporated herein by this
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information regarding the financial statements and the Independent
Auditors' Report appears on pages 25 through 48 of the 1997 Annual Report and is
incorporated herein by this reference.
24
27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors and executive officers of the Registrant
appears on pages 4 through 7 of the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held April 22, 1998, under the caption
"Information with Respect to Nominees and Continuing Directors" and is
incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears on page 16 of the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held April 22,
1998, and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners appears on
page 3 of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held April 22, 1998, under the caption "Security Ownership of Certain
Beneficial Owners" and is incorporated herein by this reference.
Information regarding security ownership of management appears on pages 5
through 8 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held April 22, 1998, under the caption "Information with
Respect to the Nominees, Continuing Directors, and Executive Officers" and is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions appears on
page 20 of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on April 22, 1998 under the caption "Transactions with Certain
Related Persons" and is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following financial statements are included in the Company's Annual
Report to Shareholders for the year ended December 31, 1997 and are incorporated
by this reference:
- Consolidated Statements of Condition at December 31,1997 and 1996;
- Consolidated Statements of Income for each of the years in the
three-year period ended December 31, 1997;
- Consolidated Statements of Changes in Stockholders' Equity for each
of the years in the three-year period ended December 31, 1997;
- Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1997;
- Notes to Consolidated Financial Statements
- Management's Responsibility for Financial Reporting
- Independent Auditors' Report
25
28
The remaining information appearing in the Annual Report to Stockholders
is not deemed to be filed as a part of this report, except as expressly provided
herein.
2. FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules have been omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto.
(b) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF 1997
On November 20, 1997, the Company filed a Current Report on Form 8-K
regarding the date of the Company's 1998 Annual Meeting of Shareholders and the
related date of record.
(c) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K
Exhibit
Number
------
3.1 Certificate of Incorporation of Queens County Bancorp, Inc.(1)
3.2 Bylaws of Queens County Bancorp, Inc.(1)
10.1 Form of Employment Agreement between Queens County Savings Bank and
Certain Officers (1)
10.2 Form of Employment Agreement between Queens County Bancorp, Inc. and
Certain Officers (1)
10.3 Form of Change in Control Agreements among the Company, the Bank,
and Certain Officers (1)
10.4 Form of Queens County Savings Bank Recognition and Retention Plan
for Outside Directors (1)
10.5 Form of Queens County Savings Bank Recognition and Retention Plan
for Officers (1)
10.6 Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan
(2)
10.7 Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan
for Outside Directors (2)
10.8 Form of Queens County Savings Bank Employee Severance Compensation
Plan (1)
10.9 Form of Queens County Savings Bank Outside Directors' Consultation
and Retirement Plan (1)
10.10 Form of Queens County Bancorp, Inc. Employee Stock Ownership Plan
and Trust (1)
10.11 ESOP Loan Documents (1)
10.12 Incentive Savings Plan of Queens County Savings Bank (3)
10.13 Retirement Plan of Queens County Savings Bank (1)
10.14 Supplemental Benefits Plan of Queens County Savings Bank (4)
10.15 Excess Retirement Benefits Plan of Queens County Savings Bank (1)
10.16 Queens County Savings Bank Directors' Deferred Fee Stock Unit Plan
10.17 Queens County Bancorp, Inc. 1997 Stock Option Plan (5)
11.0 Statement Re: Computation of Per Share Earnings
13.0 1997 Annual Report to Shareholders
21.0 Subsidiaries information incorporated herein by reference to Part I,
"Subsidiaries"
23.0 Consent of KPMG Peat Marwick, LLP, dated March 17, 1998
99.0 Proxy Statement for the Annual Meeting of Shareholders to be held on
April 22, 1998
(1) Incorporated by reference to Exhibits filed with the Registration
Statement on Form S-1, Registration No. 33-66852
(2) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement, filed on October 27, 1994, Registration
No. 33-85684.
(3) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement, filed on October 27, 1994, Registration
No. 33-85682.
(4) Incorporated by reference to Exhibits filed with the 1995 Proxy Statement
for the Annual Meeting of Shareholders to be held April 19, 1995.
(5) Incorporated by reference to Exhibit filed with the 1997 Proxy Statement
for the Annual Meeting of Shareholders held April 16, 1997.
26
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Queens County Bancorp, Inc.
---------------------------
(Registrant)
/s/Joseph R. Ficalora 03/17/98
---------------------------- --------
Joseph R. Ficalora
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Joseph R. Ficalora 03/17/98 /s/ Robert Wann 03/17/98
- ----------------------------------- -------- -------------------------------------------- --------
Joseph R. Ficalora Robert Wann
Chairman, President, and Senior Vice President, Comptroller, and
Chief Executive Officer Chief Financial Officer (Principal
(Principal Executive Officer) Financial and Accounting Officer)
/s/ Harold E. Johnson 03/17/98 /s/ Donald M. Blake 03/17/98
- ----------------------------------- -------- -------------------------------------------- --------
Harold E. Johnson Donald M. Blake
Director Director
/s/ Luke D. Lynch 03/17/98 /s/ Max L. Kupferberg 03/17/98
- ----------------------------------- -------- -------------------------------------------- --------
Luke D. Lynch Max L. Kupferberg
Director Director
/s/ Henry E. Froebel 03/17/98 /s/ Howard C. Miller 03/17/98
- ----------------------------------- -------- -------------------------------------------- --------
Henry E. Froebel Howard C. Miller
Director Director
/s/ Joseph G. Chisholm 03/17/98 /s/ Dominick Ciampa 03/17/98
- ----------------------------------- -------- -------------------------------------------- --------
Joseph G. Chisholm Dominick Ciampa
Director Director
/s/ Richard H O'Neill 03/17/98
- ----------------------------------- --------
Richard H. O'Neill
Director
27
30
EXHIBIT INEDX
--------------
Exhibit
Number
------
3.1 Certificate of Incorporation of Queens County Bancorp, Inc.(1)
3.2 Bylaws of Queens County Bancorp, Inc.(1)
10.1 Form of Employment Agreement between Queens County Savings Bank and
Certain Officers (1)
10.2 Form of Employment Agreement between Queens County Bancorp, Inc. and
Certain Officers (1)
10.3 Form of Change in Control Agreements among the Company, the Bank,
and Certain Officers (1)
10.4 Form of Queens County Savings Bank Recognition and Retention Plan
for Outside Directors (1)
10.5 Form of Queens County Savings Bank Recognition and Retention Plan
for Officers (1)
10.6 Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan
(2)
10.7 Form of Queens County Bancorp, Inc. 1993 Incentive Stock Option Plan
for Outside Directors (2)
10.8 Form of Queens County Savings Bank Employee Severance Compensation
Plan (1)
10.9 Form of Queens County Savings Bank Outside Directors' Consultation
and Retirement Plan (1)
10.10 Form of Queens County Bancorp, Inc. Employee Stock Ownership Plan
and Trust (1)
10.11 ESOP Loan Documents (1)
10.12 Incentive Savings Plan of Queens County Savings Bank (3)
10.13 Retirement Plan of Queens County Savings Bank (1)
10.14 Supplemental Benefits Plan of Queens County Savings Bank (4)
10.15 Excess Retirement Benefits Plan of Queens County Savings Bank (1)
10.16 Queens County Savings Bank Directors' Deferred Fee Stock Unit Plan
10.17 Queens County Bancorp, Inc. 1997 Stock Option Plan (5)
11.0 Statement Re: Computation of Per Share Earnings
13.0 1997 Annual Report to Shareholders
21.0 Subsidiaries information incorporated herein by reference to Part I,
"Subsidiaries"
23.0 Consent of KPMG Peat Marwick, LLP, dated March 17, 1998
99.0 Proxy Statement for the Annual Meeting of Shareholders to be held on
April 22, 1998
(1) Incorporated by reference to Exhibits filed with the Registration
Statement on Form S-1, Registration No. 33-66852
(2) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement, filed on October 27, 1994, Registration
No. 33-85684.
(3) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement, filed on October 27, 1994, Registration
No. 33-85682.
(4) Incorporated by reference to Exhibits filed with the 1995 Proxy Statement
for the Annual Meeting of Shareholders to be held April 19, 1995.
(5) Incorporated by reference to Exhibit filed with the 1997 Proxy Statement
for the Annual Meeting of Shareholders held April 16, 1997.