Staten Island Bancorp, Inc. Issues Third Quarter Report of Earnings and Announces Stock Repurchase Program.

STATEN ISLAND, N.Y.--(BUSINESS WIRE)--Oct. 14, 1998--Staten Island Bancorp, Inc. (NYSE:SIB), the holding company for Staten Island Savings Bank, reported net earnings of $10.9 million or $.26 per share for the quarter ended September 30, 1998.

This compares to net income of $6.0 million for the quarter ended September 30, 1997. For the nine months ended September 30, 1998, the Company reported earnings of $32.5 million, equivalent to earnings per share of $.78. By comparison, the Company earned $17.0 million in the nine months ended September 30, 1997. Per share amounts are not applicable for the three or nine-month periods ended September 30, 1997 since the Company's conversion to a public company occurred on December 19, 1997.

"Earnings remain on target despite the contraction of net interest spreads and margins," stated Harry P. Doherty, Chairman and CEO, "generally due to our ability to continue to grow assets with acceptable spreads through our leveraging program." Doherty added, "Although declining, our interest margins remain strong with respect to our peer group. A contributing factor is the continued growth in our already sizable balance of non-interest bearing deposits." Doherty also commented on the steady reduction of non-performing assets. "Total non-performing assets have been reduced by 19.4%, or $4.3 million, since December 31,1997. At the same time, reserve coverage has increased to 97.6% of non-performing loans." He continued, "Asset quality remains high as we continue to employ relatively conservative investment standards and loan underwriting policies."

Interest Income

The Company recorded interest income of $54.1 million in the third quarter of 1998, an increase of $18.8 million, or 53.5% from $35.2 million in the third quarter of 1997. The increase resulted from an increase of $1.2 billion in the average balance of interest earning assets to $3.1 billion. The average yield of 7.00%, on interest earning assets is down from 7.37% for the comparable period in 1997. The increase in average interest earning assets was due to the investment of proceeds from the Company's initial public offering as well as the leveraging program utilizing borrowed funds to fund asset growth at spreads deemed acceptable by management.

Interest Expense

Interest expense rose $9.1 million to $24.1 million in the current third quarter, reflecting a $618.3 million increase in average interest bearing liabilities to $2.2 billion. The average cost of 4.32% on interest bearing liabilities is up from 3.75% in the third quarter of 1997. The higher average balance primarily reflects a $646.8 million increase in the average balance of borrowed funds to $772.1 million with an average cost of 5.67%. The average balance of interest bearing deposits decreased $28.6 million to $1.4 billion with an average cost of 3.61% compared to 3.56% for the third quarter of 1997. The average balance of non-interest bearing liabilities, which consists mainly of non-interest bearing deposits, increased by $53.6 million over the third quarter of 1997.

Net Interest Income

Net interest income increased $9.8 million to $29.9 million for the quarter ended September 30, 1998, compared to $20.1 million for the third quarter of 1997. In the third quarter of 1998, the Company's interest rate spread was 2.68%, as compared to 3.62% in the year ago quarter. Similarly, the net interest margin was 3.87% in the current quarter as compared to 4.21% for the same time period last year. These decreases were the result of the current declining interest rate environment as well as increased interest costs related to borrowed funds.

Provision for Loan Losses

The provision for loan losses for the third quarter of 1998 was $0.5 million which was the same as the quarter ended September 30, 1997. The current provision was based on management's assessment of the overall credit quality of the loan portfolio. Total non-performing assets were $17.7 million at September 30, 1998 compared to $21.9 million at December 31, 1997 and $24.7 million at September 30, 1997. Non-performing assets consist of $16.9 million of non-performing loans and $0.8 million of other real estate owned (OREO) at September 30, 1998. Non-performing assets as a percentage of total assets was .53% on September 30, 1998, compared to .83% December 31, 1997 and 1.15% September 30, 1997.

The allowance for loan losses was $16.5 million as of September 30, 1998, an increase of $0.8 million since December 31, 1997. The increase was the net result of provisions of $1.5 million, recoveries of $1.1 million and charge-offs of $1.8 million during the period. For the first nine months of 1997 these amounts were $5.5 million, $0.7 million and $1.7 million, respectively.

The allowance for loan losses as a percentage of non-performing loans was 97.6% as of September 30, 1998 compared to 73.7% at December 31, 1997 and 60.7% at September 30, 1997. While no assurance can be given that future charge-offs and or additional provisions will not be necessary, management believes that the current allowance for loan losses is adequate.

Other Income

Total other income amounted to $1.9 million for the current quarter of 1998 compared to $2.1 million for the same time period last year. Other income for the current quarter consisted of service and fee income of $1.8 million and net gain on security transactions of $0.1 million. These amounts in the third quarter of 1997 were $1.9 million and $0.2 million, respectively.

Other Expenses

Total other expenses for the third quarter of 1998 were $13.3 million compared with $11.5 million for the third quarter of 1997. The increase of $1.9 million was due to an increase of $1.5 million in personnel expense primarily reflecting the costs related to the Employee Stock Ownership Plan (ESOP) and the Management Recognition and Retention Plan (MRRP). Professional fees increased $0.2 million due to the increased audit and legal fees related to operation as a public company.

Earnings Summary for the Nine Months Ended September 30, 1998

During the nine months ended September 30, 1998 the Company recorded net interest income of $87.5 million compared with $59.4 million for the first nine months of 1997. Interest income increased to $146.6 million from $100.3 million primarily due to an increase of $971.5 million in the average balance of interest earning assets which was partially offset by a decrease of 38 basis points to 7.08% in the average yield on interest earning assets. Interest expense was $59.1 million for the nine months ended September 30, 1998 compared with $40.9 million for the same time period last year. An increase of $436.0 million in the average balance of borrowed funds was the primary reason for the increase, along with an increase in the rate on total interest bearing liabilities from 3.61% to 4.11%. The Company's interest rate spread and interest rate margin for the first nine months of 1998 were 2.97% and 4.22%, respectively. These ratios for the same time period in 1997 were 3.85% and 4.42%, respectively. These decreases were the result of the current declining interest rate environment as well as increased interest costs related to borrowed funds.

The provision for loan losses year-to-date was $1.5 million compared with $5.5 million for the respective period last year. The 1997 provision reflected a non-recurring amount of $4.0 million.

Along with the increase in net interest income, earnings growth was also driven by an increase of $1.5 million in other income. This was primarily due to a net security gain of $0.7 million in 1998 compared to a net security loss of $0.4 million in 1997 due to restructuring the Company's investment portfolio. Service and fee income increased $0.4 million due to higher fees collected on an expanding checking account deposit base.

Other expenses for the first nine months of 1998 increased $4.9 million to $37.8 million. This was primarily due to an increase in personnel costs of $3.8 million and professional fees of $1.0 million, offset by a decrease in other expenses of $0.2 million. The increase in personnel costs was due to the costs related to the ESOP and the MRRP along with staff additions to the Bank's lending operations to meet current loan demand and to enhance loan administration. The increase in professional fees was due primarily to costs related to organizing a Real Estate Investment Trust (REIT) and increased audit and legal fees related to operation as a public company. The decrease in other expenses was primarily due to decreased costs related to non-performing assets.

Financial Condition

Total assets at September 30, 1998 were $3.4 billion, an increase of $700.3 million or 26.4% from December 31, 1997. Loans receivable net increased by $271.6 million or 25.1% and securities available for sale increased by $515.5 million or 38.2%. These increases were primarily funded by a $703.5 million increase in borrowed funds and a $54.8 million increase in deposits.

Stockholders' equity totaled $691.7 million or 20.6% of total assets at September 30, 1998 compared to $685.9 million or 25.9% of total assets at December 31, 1997. The $5.8 million increase was primarily due to net income of $32.5 million, an increase of $5.6 million in unrealized appreciation on securities available for sale net of taxes, and an allocation of ESOP shares, resulting in an increase of $3.7 million. These increases were offset by aggregate cash dividend payments of $6.8 million and the repurchase of 1.6 million shares for the MRRP during the third quarter of 1998 at an average price of $18.31 totaling $29.2 million. The MRRP was approved at a special meeting of the shareholders in July 1998. In connection with the MRRP, the aggregate repurchase of 1.7 million shares or 4% of the shares issued in connection with the Conversion was completed in the fourth quarter of 1998.

Tangible book value per share was $14.95 and the tangible equity to asset ratio was 19.57% as of September 30,1998. The Bank's capital ratios are well in excess of all regulatory requirements as of September 30, 1998.

The Company also announced today that its Board of Directors authorized the repurchase of up to 2,256,516 shares, or approximately 5 percent, of the Company's outstanding common stock.

Repurchases are authorized to be made by the Company from time to time in open-market transactions during the next twelve months as, in the opinion of management, market conditions warrant. The repurchased shares will be held as treasury stock and will be available for exercises of options under the Company's Stock Option Plan and for general corporate purposes.

Mr. Doherty stated: "The repurchase program reflects management's commitment to shareholders and its desire to enhance long-term shareholder value. The use of our cash must continue to be balanced with other internal and external investment opportunities while maximizing the use of existing assets and resources to generate shareholder value. Our strong capital base affords us the opportunity to initiate a repurchase program and such action demonstrates our commitment to and confidence in our future prospects."

Statements contained in this news release which are not historical facts are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.

Staten Island Bancorp, Inc. is the holding company for Staten Island Savings Bank. The Bank was chartered in 1864 and now operates sixteen full service branches and three limited service branches on Staten Island, and one full service branch in Brooklyn. The Bank also provides Trust services and Savings Bank Life Insurance. -0-

                      STATEN ISLAND BANCORP, INC.

                             SELECTED DATA

                                    September 30,        December 31,
                                         1998               1997

                                             000'S omitted
                                              (unaudited)
Selected Financial Condition Data:
Total assets                         $ 3,351,470        $ 2,651,170
Cash and cash due from banks              52,602             58,435
Federal funds                             13,435             90,500
Securities available for sale          1,865,941          1,350,467
Loans receivable, net                  1,354,489          1,082,918
Intangible assets                         17,182             18,414
Deposit accounts                       1,678,409          1,623,652
Borrowings                               953,547            250,042
Stockholders' equity                     691,716            685,886
Non-performing assets                     17,681             21,934
Allowance for loan losses                 16,496             15,709

Common shares outstanding             45,130,312 (1)     45,130,312 (2)


                         Three Months Ended       Nine Months Ended
                            September 30,            September 30,
                           1998       1997         1998       1997

                            000's omitted           000's omitted
                             (unaudited)             (unaudited)
Selected Operating Data:
Interest income           $ 54,068    $ 35,231    $146,584    $100,317
Interest expense            24,142      15,082      59,116      40,870
Net interest income         29,926      20,149      87,468      59,447
Provision for loan losses      500         501       1,502       5,502
Net interest income after
 provision for loan losses  29,426      19,648      85,966      53,945
Other income                 1,916       2,118       6,717       5,169
Other expenses              13,328      11,468      37,776      32,904
Income before provision
 for income taxes           18,014      10,298      54,907      26,210
Provision for income taxes   7,065       4,261      22,419       9,212
Net income                $ 10,949    $  6,037    $ 32,488    $ 16,998


     (1) Includes 3,438,500 shares held by the Company's ESOP of which
3,261,883 are unallocated.

     (2) Includes 3,438,500 shares held by the Company's ESOP of which
3,438,500 are unallocated


                       STATEN ISLAND BANCORP, INC.

                             At or For the            At or For the
                              Three Months             Nine Months
                           Ended September 30       Ended September 30

                              1998       1997         1998      1997

                                (unaudited)             (unaudited)

Performance Ratios:
Return on average assets      1.36%      1.19%        1.51%     1.20%
Return on average equity      6.19%     12.71%        6.22%    12.66%
Earnings per share          $ 0.26         na       $ 0.78        na
Average interest-earning
 assets to average
 interest-bearing
 liabilities                138.34%    118.82%      143.97%   118.82%
Interest rate spread          2.68%      3.62%        2.97%     3.85%
Net interest margin           3.87%      4.21%        4.22%     4.42%
Noninterest expenses,
 exclusive of
 amortization of
 intangible assets, to
 average assets               1.59%      2.16%        1.68%     2.21%
Efficiency Ratio             40.23%     49.17%       38.46%    48.51%

Asset Quality Ratios:
Non-performing assets
 to total assets
 at end of the period          .53%      1.15%         .53%     1.15%
Allowance for loan
 losses to non-performing
 loans at end of period      97.55%     60.66%       97.55%    60.66%
Allowance for loan
 losses to total
 loans at end of
 the period                   1.20%      1.38%        1.20%     1.38%

Capital and Other Ratios:
Average equity to
 average assets              22.00%      9.39%       24.24%     9.47%
Tangible equity to
 assets at end of
 period                      19.57%      7.79%       19.57%     7.79%
Total capital to
 risk-weighted assets        43.58%     18.87%       43.58%    18.87%
Tangible book value
 per share                 $ 14.95         na      $ 14.95        na


The above financial information is annualized where appropriate.