SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transaction period from to
Commission file Number 0-27782
Dime Community Bancorp, Inc.
(Exact Name of registrant as specified in its charter)
Delaware 11-3297463
(State or other jurisdiction of (I.R.S. employer
incorporation or identification number)
organization)
209 Havemeyer Street, Brooklyn, 11211
NY (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (718) 782-6200
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Company (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 twelve
months (or for such shorter period that the Registrant was
required to file reports) and (2) has been subject to such
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 is not contained herein,
and will not be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this
Form 10-K. [ X]
As of September 23, 1996, there were issued and outstanding
14,547,500 shares of the Company's Common Stock. The aggregate
market value of the voting stock held by non-affiliates of the
Company as of September 23, 1996 was $ 177,877,005. This figure
is based upon the closing price on the NASDAQ National Market for
a share of the Company's Common Stock, $0.01 par value, on
September 23, 1996, which was $13.625 as reported in the Wall
Street Journal on September 24, 1996.
<PAGE>
TABLE OF CONTENTS
Page
PART 1
Item 1. Business
General.............................................................. 3
Acquisition of Conestoga Bancorp,Inc........................... 4
Market Area and Competition.................................... 6
Lending Activities............................................. 7
Asset Quality.................................................. 15
Allowance for Loan Losses...................................... 17
Investment Activities.......................................... 20
Sources of Funds............................................... 24
Subsidiary Activities.......................................... 27
Personnel...................................................... 27
Federal , State and Local Taxation
Federal Taxation............................................ 27
State and Local Taxation.................................... 28
Regulation
General..................................................... 29
Regulation of Federal Savings Associations............... 30
Regulation of Holding Company............................ 38
Federal Securities Laws.................................. 39
Item 2. Properties................................................... 40
Item 3. Legal Proceedings............................................ 41
Item 4. Submission of Matters to a Vote of Security Holders.......... 41
PART II
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters.......................................... 41
Item 6. Selected Financial Data...................................... 43
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations
Management's Strategy.......................................... 45
Analysis of Net Interest Income................................ 49
Rate/Volume Analysis........................................... 50
Comparison of Financial Condition.............................. 50
Comparison of Operating Results................................ 52
Liquidity and Capital Resources................................ 55
Impact of Inflation and Changing Prices........................ 56
Impact of Accounting Standards................................. 56
Item 8. Financial Statements and Supplementary Data.................. 59
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 89
PART III
Item 10. Directors and Executive Officers of the Company............. 89
Item 11. Executive Compensation...................................... 89
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 89
Item 13. Certain Relationships and Related Transactions.............. 89
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-k .................................... 90
Signatures........................................................... 92
<PAGE>
Statements contained in this Annual Report on Form 10-K
relating to plans, strategies, economic performance and trends,
and other statements that are not descriptions of historical
facts may be forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward looking information is
inherently subject to risks and uncertainties, and actual results
could differ materially from those currently anticipated due to a
number of factors, which include, but are not limited to, factors
discussed under the captions "Item 1 -Business and Item 7 -
Management's Discussion and Analysis" below, and elsewhere in
this Form 10-K. The Company has no obligation to update these
forward looking statements.
PART I
Item 1. Business
General
Dime Community Bancorp, Inc. (the "Company") is a Delaware
corporation organized in December, 1995 at the direction of the
Board of Directors of the Dime Savings Bank of Williamsburgh (the
"Bank") for the purpose of acquiring all of the capital stock of
the Bank issued in the conversion of the Bank from a federal
mutual savings bank to a federal stock savings bank (the
"Conversion"). In connection with the Conversion, the Company
issued 14,547,500 shares (par value $0.01) of common stock at a
price of $10.00 per share to the Bank's eligible depositors who
subscribed for shares and to an Employee Stock Ownership Plan
("ESOP") established by the Company. The Company realized net
proceeds of $141.4 million from the sale of its common stock and
utilized approximately $76.4 million of the proceeds to purchase
100% of the Bank's common stock and $11.6 million to fund a loan
to the ESOP for its purchase of 1,163,800 shares, or 8%, of the
Company's common stock. The remaining proceeds of $53.4 million
were retained by the Company.
The primary business of the Company is the operation of its
wholly-owned subsidiary, the Bank. In addition to directing,
planning and coordinating the business activities of the Bank,
the Company retained proceeds of $53.4 million in connection with
the Conversion, which are invested in federal funds, short-term,
investment grade marketable securities and mortgage-backed
securities. The Company also holds a note evidencing the loan
that it made to the ESOP to purchase 8% of its common stock
issued in the Conversion. See - "-Regulation - Regulation of the
Holding Company."
The Company is a unitary savings and loan holding company,
which, under existing law, is generally not restricted as to the
types of business activities in which it may engage, provided
that the Bank continues to be a qualified thrift lender. Under
regulations of the Office of Thrift Supervision ("OTS") the Bank
is a qualified thrift lender if its ratio of qualified thrift
investments to portfolio assets ("QTL Ratio") is 65% or more, on
a monthly average basis in nine of every twelve months. At June
30, 1996, the Bank's QTL Ratio was 76%, and the Bank has
maintained more that 65% of its portfolio assets in qualified
thrift investments in at least nine of the preceding twelve
months.
In the future, the Company may organize or acquire, through
merger or otherwise, other subsidiaries, including other
financial institutions, or branches thereof, or other financial
services related companies, although there are no current
arrangements, understandings or agreements regarding any such
acquisition or expansion.
The Company neither owns nor leases any property but instead
uses the premises and equipment of the Bank. At the present
time, the Company does not employ any persons other than certain
officers of the Bank who do not receive any extra compensation as
officers of the Company. The Company utilizes the support staff
of the Bank from time to time, as needed. Additional employees
may be hired as deemed appropriate by the management of the
Company.
Unless otherwise disclosed, the information presented in this
Form 10-K reflect the financial condition and results of
operations of the Company and the Bank on a consolidated basis.
At June 30, 1996, the Company had total consolidated assets of
$1.37 billion, which included $131.1 million of excess proceeds
resulting from the oversubscription to the Company's initial
public offering, which was refunded on July 1, 1996. Certain
information which discloses percentages of total assets will
include parenthetical disclosure for "Adjusted Assets," which
represents total assets adjusted for the refund of excess
proceeds on July 1, 1996.
The Bank's principal business has been, and continues to be,
gathering deposits from customers within its market area, and
investing those deposits, primarily in multi-family and one- to
four-family residential mortgage loans, mortgage-backed
securities, and obligations of the U.S. Government and Government
Sponsored Entities ("GSEs"). The Bank's revenues are derived
principally from interest on its loan and securities portfolios.
The Bank's primary sources of funds are: deposits; loan
amortization, prepayments and maturities; amortization,
prepayments and maturities of mortgage-backed and investment
securities; and, to a lesser extent, the sale of fixed-rate
mortgage loans to the secondary market. The Bank is also a
member of the Federal Home Loan Bank of New York ("FHLBNY") and
is eligible to utilize the FHLBNY as a source of borrowed funds.
Acquisition of Conestoga Bancorp, Inc.
On June 26, 1996 (the "Effective Time"), the Bank completed
the acquisition of Conestoga Bancorp, Inc. ("Conestoga") pursuant
to the Agreement and Plan of Merger dated as of November 2, 1995
(the "Merger Agreement"). The acquisition (the "Acquisition") of
Conestoga by the Bank resulted in the merger of Conestoga's
wholly-owned subsidiary, Pioneer Savings Bank, F.S.B. ("Pioneer")
with and into the Bank, with the Bank as the resulting financial
institution. The Board of Directors of the Bank, as the
surviving entity of the merger, consists solely of all of the
Directors of the Bank immediately prior to the Acquisition.
Each share of Conestoga's common stock, par value $0.01 per
share, issued and outstanding as of the Effective Time (other
than shares held as treasury stock of Conestoga and unallocated
shares held in Conestoga's Recognition and Retention Plans and
Trust) was canceled and converted automatically into the right to
receive $21.31 per share in cash pursuant to the terms and
conditions of the Merger Agreement. As a result of the
Acquisition, shareholders of Conestoga were paid approximately
$101.3 million in cash (the "Merger Consideration"). In
addition, the Bank paid to each holder of an outstanding option
which had been granted by Conestoga to purchase shares of
Conestoga's common stock an amount in cash computed by
multiplying (i) any positive difference obtained by subtracting
from (x) the per share amount of the Merger Consideration from
(y) the per share exercise price applicable to such option, by
(ii) the number of shares of Conestoga common stock subject to
such option. These payments totaled approximately $4.1 million.
The Acquisition of Conestoga occurred immediately after the
Conversion. A portion of the proceeds received from the
Conversion, along with cash generated in the Bank's ordinary
course of business, were utilized by the Bank to pay the Merger
Consideration.
Set forth below is the Pro Forma Statement of Operations for
the year ended June 30, 1996. The historical portion has been
derived from the audited statement of operations of the Company
for the year ended June 30, 1996 and the audited statement of
operations of Conestoga for the year ended March 31, 1996. Pro
forma adjustments have been prepared assuming that the
Acquisition was consummated as of July 1, 1995.
The Acquisition has been accounted for in the financial
statements using the purchase method of accounting. Under
purchase accounting, the acquired assets and liabilities of
Conestoga are recognized at their fair value as of the date of
the Acquisition.
The Pro Forma Combined Statement of Operations for the year
ended June 30, 1996 does not purport to be indicative of the
financial position or operating results which would have been
achieved had the Acquisition been consummated as of July 1, 1995
and should not be construed as representative of future operating
results. The pro forma adjustments are based upon available
information and assumptions the Company believes are reasonable
under the circumstances.
<TABLE>
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended June 30, 1996
<CAPTION>
Dime
Community Conestoga Purchase Pro Forma Note
Bancorp, Inc. Bancorp, Inc. Adjustments Combined Reference
------------- ------------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans............................. $39,654 $9,069 $ 58 $48,781 (1)
Investment securities............. 5,738 8,761 49 14,548 (1)
Mortgage backed securities........ 5,927 12,383 (22) 18,288 (1)
Federal funds sold................ 1,300 2,189 - 3,489
------------- ------------- ----------- -----------
Total interest income............. 52,619 32,402 85 85,106
Interest expense:
Deposits and escrow............... 22,508 17,084 168 39,760 (1)
Borrowed funds.................... 1,008 1,209 - 2,217
------------- ------------- ----------- -----------
Total interest expense............ 23,516 18,293 168 41,977
Net interest income............... 29,103 14,109 (83) 43,129
Provision for loan losses 2,979 104 - 3,083
------------- ------------- ----------- -----------
Net interest income after
provision for loan losses......... 26,124 14,005 (83) 40,046
------------- ------------- ----------- -----------
Non-interest income:
Service charges and other fees.... 911 568 - 1,479
Gain (loss) on sales of securities
and other assets.................. (30) 1,771 - 1,741
Net gain (loss) on sales of loans. 12 - - 12
Other............................. 482 251 - 733
------------- ------------- ----------- -----------
Total non-interest income......... 1,375 2,590 - 3,965
------------- ------------- ----------- -----------
Non-interest expense:
Salaries and employee benefits.... 7,359 3,792 (1,497) 9,654 (2)
ESOP and RRP benefits............. 114 1,045 (1,045) 114 (3)
Occupancy and equipment........... 1,775 1,454 (107) 3,122 (1)
Federal deposit insurance
premiums.......................... 109 938 - 1,047
Data Processing................... 557 460 - 1,017
Amortization of goodwill.......... 25 - 2,325 2,350 (4)
Merger related expenses............ - 842 (842) - (6)
Provision for losses on Other
real estate owned................. 586 - - 586
Other............................. 3,496 1,735 (231) 5,000 (5)
------------- ------------- ----------- -----------
Total non-interest expense........ 14,021 10,266 (1,397) 22,890
------------- ------------- ----------- -----------
Income before income tax expense
and cumulative effect of
changes in accounting
principles........................ 13,478 6,329 1,314 21,121
Income tax expense................ 6,181 3,119 1,674 10,974 (7)
------------- ------------- ----------- -----------
Income before cumulative effect of
changes in accounting
principles........................ $7,297 $3,210 $(360) $10,147
============= ======================== ===========
<FN>
(Notes on following page)
</FN>
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined Statement of Operations
Amounts in Thousands
(1) Purchase adjustments column represents one year of
amortization of the following total purchase accounting
adjustments to Conestoga's loan, investment securities,
mortgage-backed securities, deposits, and premises and
equipment to new cost basis.
Total Purchase
Accounting Annual
Item Adjustment Amortization
------------------------------ ------------- -----------------
Loans......................... $ 463 $ 58
Investment securities......... 249 49
Mortgage-backed securities.... (112) (22)
Deposits...................... 839 168
Premises and equipment........ (4,288) (107)
(2) To record reductions in employee salaries and benefits expense
resulting from reductions in Conestoga staffing levels.
(3) To reflect the decrease in ESOP and RRP expense resulting
from the termination of Conestoga plans.
(4) Purchase adjustments column represents one year of
amortization of Goodwill totaling $28,438 acquired in the
Acquisition, amortized over a period of 12 years.
(5) To record the reduction in certain Other operating expenses
of Conestoga, as itemized below:
Directors' fees.............. $204
Automobile Expense....... 27
-----
$231
=====
(6) To reflect the elimination of attorney, consulting and
accounting expenses incurred by Conestoga in connection with
the Acquisition.
(7) To reflect the income tax effect of the adjustments described
in Notes (1) through (6).
Market Area and Competition
The Bank has been, and intends to continue to be, a community-
oriented financial institution providing financial services and
loans for housing within its market areas. The Bank maintains its
headquarters in the Williamsburgh section of the borough of
Brooklyn. Fourteen additional offices are located in the boroughs
of Brooklyn, Queens, and the Bronx, and in Nassau County. The
Bank gathers deposits primarily from the communities and
neighborhoods in close proximity to its branches. The Bank's
primary lending area is larger, and includes much of New York
City and Nassau County. Most of the Bank's mortgage loans are
secured by properties located in its primary lending area.
The New York City metropolitan area has historically benefited
from having a large number of corporate headquarters and a
diversity of financial services industries. However, due to (1)
the lingering effects of the decline of the stock market in 1987,
(2) the resulting decline in the regional economy and (3) layoffs
and corporate relocations in the financial services industry, the
New York City metropolitan area experienced reduced levels of
employment and an overall decline in the underlying values of
local properties from 1987 to 1993.
Since then, the local economy has begun to show signs of
improvement in recent periods. Perhaps the most important of
these signs has been the gradual decrease in the area
unemployment rate from a 1992 peak. Improvement can also be seen
in the local real estate market, as reflected in the increase in
existing home sales during the past four years and the
stabilization of local real estate values. The rise and decline
of the Bank's non-performing asset portfolio closely parallels
the trend of the local economy during this period. See "- Asset
Quality."
Despite these encouraging trends, the outlook for the local
economy remains uncertain. Total New York City employment, for
example, remains significantly below the high reached in 1988.
Other troubling signs include a stubbornly high commercial
property (non-residential) vacancy rate and continued weakness in
local manufacturing and construction activity.
The Bank faces significant competition both in making loans and
in attracting deposits. The Bank's 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, 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 50.6% of
the Bank's loan portfolio at June 30, 1996. 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. The Bank's most direct
competition for deposits has historically come from savings and
loan associations, savings banks, commercial banks and direct
purchases of government securities. 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 Portfolio Composition. The Bank's loan portfolio
consists primarily of multi-family loans secured by apartment
buildings (including loans underlying apartment buildings
organized under cooperative form of ownership, "underlying
cooperatives"), conventional first mortgage loans secured
primarily by one- to four-family residences, including
condominiums and cooperative apartment share loans, and non-
residential (commercial) property loans. At June 30, 1996, the
Bank's loan portfolio totaled $585.9 million. Within the loan
portfolio, $296.6 million or 50.6% were multi-family loans,
$229.3 million or 39.1% were loans to finance the purchase of one-
to four-family properties and cooperative apartment share loans,
$37.7 million or 6.4% were loans to finance the purchase of
commercial properties, primarily small shopping centers,
warehouses and nursing homes, and $16.7 million or 2.9% were
loans to finance multi-family and residential properties with
either full or partial credit guarantees provided by either the
Federal Housing Administration (''FHA'') or the Veterans'
Administration (''VA''). Of the total mortgage loan portfolio
outstanding at that date, 20.1% were fixed-rate loans and 79.1%
were adjustable-rate loans (''ARMs''), of which 72.9% are multi-
family and non-residential property loans which carry a maturity
of 10 years, and an amortization period of no longer than 25
years. These loans have a fixed interest rate that adjusts after
the fifth year indexed to the 5-year FHLBNY advance rate, but may
not adjust below the initial interest rate of the loan. At June
30, 1996, the Bank's loan portfolio also included $3.0 million in
passbook loans, $1.3 million in student loans, and $1.2 million
in other consumer loans.
The types of loans that the Bank may originate 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 and economic conditions, and the fiscal and
monetary policy of the federal government.
<PAGE>
<TABLE>
The following table sets forth the composition of the Bank's
mortgage and other loan portfolios in dollar amounts and percentages
at the dates indicated.
<CAPTION>
At June 30,
----------------------------------------------------------------------------------------
1996 <F2> 1995 1994 1993 1992
----------------- ----------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:<F1>
One- to four-family...................... $170,182 29.05% $ 58,291 13.52% $ 59,461 13.74% $ 75,248 16.26% $ 86,175 17.91%
Multi-family and underlying cooperative.. 296,630 50.63 252,436 58.56 242,088 55.92 243,803 52.67 238,018 49.48
Non-residential........................... 37,708 6.44 26,972 6.26 26,896 6.21 25,873 5.59 26,988 5.61
FHA/VA insured........................... 16,686 2.85 22,061 5.12 27,264 6.30 33,421 7.22 37,334 7.76
Cooperative apartment.................... 59,083 10.08 67,524 15.67 73,250 16.92 80,469 17.39 88,438 18.38
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total mortgage loans..................... 580,289 99.05 427,284 99.13 428,959 99.09 458,814 99.13 476,953 99.14
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Other loans:
Student loans............................ 1,307 0.22 1,431 0.33 1,506 0.35 1,696 0.37 1,879 0.39
Passbook savings (secured by savings
and time deposits)................... 3,044 0.52 1,510 0.35 1,516 0.35 1,375 0.30 1,194 0.25
Consumer installment loans............... 323 0.06 336 0.08 362 0.08 302 0.06 284 0.06
Home improvement loans................... 891 0.15 475 0.11 550 0.13 665 0.14 747 0.16
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total other loans........................ 5,565 0.95 3,752 0.87 3,934 0.91 4,038 0.87 4,104 0.86
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross loans.............................. 585,854 100.00% 431,036 100.00% 432,893 100.00% 462,852 100.00% 481,057 100.00%
-------- ======== -------- ======== -------- ======== -------- ======== -------- ========
Less:
Unearned discounts and net deferred
loan fees........................... 2,168 1,182 1,300 1,434 1,447
Allowance for loan losses................. 7,812 5,174 3,633 2,996 2,094
-------- -------- -------- -------- --------
Loans, net................................ $575,874 $424,680 $427,960 $458,422 $477,516
======== ======== ======== ======== ========
Loans serviced for others:
One- to four-family and
cooperative apartment................ $63,360 $ 63,192 $ 65,063 $59,403 $30,578
Multi-family and underlying cooperative... 27,690 30,264 34,396 44,079 49,644
-------- -------- -------- -------- --------
Total loans serviced for others........... $91,050 $ 93,456 $ 99,459 $103,482 $80,222
======== ======== ======== ======== ========
<FN>
<F1> Includes loans held for sale.
<F2> Includes acquisition of loans from Conestoga, substantially all of which were
one-to-four family loans.
</FN>
</TABLE>
<PAGE>
Loan Originations, Purchases, Sales and Servicing. The Bank
originates both ARMs and fixed-rate loans, which activity is
dependent upon customer demand and market rates of interest, and
generally does not purchase whole mortgage loans or loan
participations. Generally, the Bank sells all originated one- to
four-family fixed-rate mortgage loans in the secondary market to
the Federal National Mortgage Association (''FNMA''), the Federal
Home Loan Mortgage Corporation (''FHLMC''), the State of New York
Mortgage Agency (''SONYMA'') and other private secondary market
purchasers. ARMs, including adjustable-rate multi-family loans,
and fixed-rate multi-family and non-residential mortgage loans
with maturities up to 15 years, are retained for the Bank's
portfolio. For the fiscal year ended June 30, 1996 origination of
ARMs totaled $95.4 million or 83.0% of all loan originations.
Originations of fixed-rate mortgage loans totaled $5.1 million,
while sales of fixed-rate loans totaled $5.7 million. The Bank
generally sells all fixed-rate loans without recourse and retains
the servicing rights. As of June 30, 1996, the Bank was servicing
$91.1 million of loans for others. The Bank generally receives a
loan servicing fee equal to 0.25% of the outstanding principal
balance for servicing loans sold.
On April 9, 1996, the Bank entered into a Community
Reinvestment Banking Agreement (the ''CRB Agreement'') with a
local, Bronx-based community group. In the CRB Agreement, the
Bank has agreed to use its best efforts, consistent with safe and
sound banking practices, to increase its dollar volume of lending
in certain low and moderate income neighborhoods to at least
$46.8 million and a maximum of $86.0 million over the three-year
period ending December 31, 1998. Pursuant to the CRB Agreement,
the Bank also has agreed to use its best efforts to open three
automated teller machines (''ATMs'') in the neighborhoods of East
Brooklyn, Upper Manhattan and the South Bronx in New York City.
Consistent with the CRB Agreement, the Bank has expanded its
Community Reinvestment Act service territory to include the
entirety of Brooklyn, Manhattan and the Bronx. The Bank is in
compliance with all currently applicable provisions of the CRB
Agreement.
<PAGE>
The following table sets forth the Bank's loan originations,
loan sales and principal repayments for the periods indicated.
For the Years Ended June 30,
------------------- ---------
1996 1995 1994
--------- --------- ---------
(In thousands)
Loans (gross):
At beginning of period......................... $431,036 $432,893 $462,852
--------- --------- ---------
Mortgage loans originated:
One- to four-family............................ 6,087 5,509 17,111
Multi-family and underlying cooperative........ 94,379 36,326 41,595
Non-residential................................ 11,764 2,563 3,584
Cooperative apartment.......................... 568 888 679
--------- --------- ---------
Total mortgage loans originated................ 112,798 45,286 62,969
Other loans originated:
Other loans.................................... 2,122 2,115 1,691
--------- --------- ---------
Total loans originated......................... 114,920 47,401 64,660
--------- --------- ---------
Loans acquired from Conestoga (2) ............. 113,140 - -
Principal repayments........................... 67,308 45,988 72,831
Loans sold(1).................................. 5,740 2,791 19,866
Loans transferred from real estate pending
foreclosure.................................... (875) (2,316) (1,949)
Mortgage loans transferred to OREO............. 1,069 2,795 3,871
--------- --------- ---------
Unpaid principal balances at end of period..... $585,854 $431,036 $432,893
========= ========= =========
(1) Includes fixed-rate mortgage loans and student loans.
(2) Substantially all of these mortgage loans are one-to-four
family mortgage loans.
<PAGE>
Loan Maturity and Repricing. The following table shows the
earlier of maturity or repricing period of the Bank's loan
portfolio at June 30, 1996. 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 the Bank's loan portfolio
totaled $67.3 million for the year ended June 30, 1996.
<TABLE>
<CAPTION>
At June 30, 1996
----------------------------------------------------
Mortgage Loans
---------------------------------------------------
Multi-
One- to family and
Four- Underlying Non- Cooperative Other Total
Family Cooperative residential FHA/VA Apartment Loans Loans
------- ----------- ----------- ------- ----------- ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Amount due:
One year or less........................ $63,027 $43,939 $ 5,395 $ - $ 54,809 $ 974 $168,144
------- ----------- ----------- ------- ----------- ------ --------
After one year:
One to three years...................... 12,433 78,569 9,033 - 4,008 2,825 106,868
More than three years to five years..... 7,446 143,404 14,012 9,229 231 1,271 175,593
More than five years to ten years....... 18,720 30,104 7,481 192 19 495 57,011
More than ten years to twenty years..... 37,567 614 1,253 5,554 16 - 45,004
Over twenty years....................... 30,989 - 534 1,711 - - 33,234
------- ----------- ----------- ------- ----------- ------ --------
Total due or repricing after one year... 107,155 252,691 32,313 16,686 4,274 4,591 417,710
------- ----------- ----------- ------- ----------- ------ --------
Total amounts due or repricing, gross...$170,182 $296,630 $37,708 $16,686 $59,083 $5,565 $585,854
======= =========== =========== ======= =========== ====== ========
</TABLE>
<PAGE>
The following table sets forth the dollar amounts in each loan
category at June 30, 1996 that are due after June 30, 1997, and
whether such loans have fixed- or adjustable-interest rates.
Due after June 30,1997
---------------------------
Fixed Adjustable Total
------- ---------- --------
(In thousands)
Mortgage loans:
One- to four-family....................... $87,747 $19,408 $107,155
Multi-family and underlying cooperative... 8,104 244,587 252,691
Non-residential........................... 6,729 25,584 32,313
FHA/VA.................................... 16,686 - 16,686
Cooperative apartment..................... 209 4,065 4,274
Other loans............................... 4,591 - 4,591
------- ---------- --------
Total loans...............................$124,066 $293,644 $417,710
======= ========== ========
Multi-family and Non-residential Lending. The Bank originates
adjustable-rate and fixed-rate multi-family (five or more units)
and non-residential loans which are secured primarily by
apartment buildings, underlying cooperatives, mixed-use
(residential combined with commercial) and other non-residential
properties, generally located in the Bank's primary lending area.
The main competitors for loans in this market tend to be other
small- to medium-sized local savings institutions. Multi-family
and non-residential loans in the Bank's portfolio generally range
in amount from $100,000 to $3.6 million, and have an average loan
size of approximately $572,000. Residential multi-family loans in
this range generally have between 5 and 100 apartments per
building. The Bank had a total of $226.2 million of multi-family
loans in its portfolio on buildings with under 100 units as of
June 30, 1996. Mostly as a result of rent control and rent
stabilization, the associated rent rolls for buildings of this
type indicate a rent range that would be considered affordable
for low- to moderate-income households. In addition, at June 30,
1996, the Bank had a total of $59.1 million in loans secured by
mortgages on underlying cooperative apartment buildings.
The Bank originated multi-family loans totaling $94.4 million
during the fiscal year ended June 30, 1996, versus $36.3 million
June 30, 1995. At June 30, 1996, the Bank had $81.2 million of
commitments outstanding to originate mortgage loans, which
included $11.0 million of commitments to refinance existing
mortgage loans. This compares to $26.2 million of commitments
outstanding at June 30, 1995. All the mortgage commitments
outstanding at June 30, 1996 were issued to borrowers within the
Bank's service area, $80.3 million of which are secured by multi-
family and underlying cooperative apartment buildings.
The Bank's current lending policy requires loans in excess of
$500,000 to be approved by the Board of Directors. The Bank's
lending policy provides for a maximum loan amount of $5.0
million. The Bank also considers the financial resources and
income level of the borrower, the borrower's experience in owning
or managing similar properties, the market value of the property
and the Bank's lending experience with the borrower. The typical
adjustable-rate multi-family loan carries a maturity of 10 years,
and an amortization period of no longer than 25 years. These
loans have a fixed interest rate that adjusts after the fifth
year indexed to the 5-year FHLBNY advance rate, but may not
adjust below the initial interest rate of the loan. Prepayment
penalties are assessed throughout the life of the loans. The
Bank also offers fixed-rate, self-amortizing, multi-family and
non-residential loans with maturities of up to 15 years.
At June 30, 1996, the Bank had multi-family loans totaling
$296.6 million in its portfolio, comprising 50.6% of the gross
loan portfolio. The underwriting standards for new loans
generally require (1) a maximum loan-to-value ratio of 75% based
on an appraisal performed by an independent, state-certified
appraiser, and (2) sufficient cash flow from the underlying
property to adequately service the debt, represented by a debt
service ratio not below 1.15. Of the Bank's multi-family loans,
$235.2 million, or 79.3%, were secured by apartment buildings,
and $59.1 million, or 20.7%, were secured by underlying
cooperatives at June 30, 1996. Multi-family loans are generally
viewed as exposing the Bank to a greater risk of loss than one-
to four-family residential loans and typically involve higher
loan principal amounts. At June 30, 1996, the Bank had 80 multi-
family and non-residential loans with principal balances of $1.0
million or more, totaling $138.7 million. These loans, while
underwritten to the same standards as all other multi-family and
non-residential loans, tend to expose the Bank to a higher degree
of risk due to the potential impact of losses from any one loan
relative to the size of the Bank's capital position. As of June
30, 1996, one of the 80 loans was in process of foreclosure, with
an outstanding balance of $2.1 million. See ''- Asset Quality.''
Three other loans totaling $6.4 million were on the Bank's
''watch list,'' none of which were in arrears at that date. In
addition, the Bank has identified 107 large real estate loans or
commitments, totaling $90.4 million, derived in connection with
34 principal parties, each of which has certain financial
interests in more than one real estate loan held by the Bank. The
principal parties identified may, for example, be officers of
corporations, or sponsors of cooperative corporations, which own
the real estate on which the Bank holds a mortgage. No
combination of these loans are in violation of the OTS
limitations on loans to one borrower. See ''- Regulation -
Regulation of Federal Savings Associations - Loans to One
Borrower.''
Repayment of multi-family loans is dependent, in large part, on
sufficient cash flow from the property to cover operating
expenses and debt service. Economic events and government
regulations, such as rent control and rent stabilization laws,
which are outside the control of the borrower or the Bank, could
impair the value of the security for the loan or the future cash
flow of such properties. As a result, rental income might not
rise sufficiently over time to meet increases in the loan rate at
repricing, or increases in overhead expenses (i.e., utilities,
taxes). During the last five fiscal years, the Bank's charge-offs
related to its multi-family loan portfolio totaled $5.3 million.
As of June 30, 1996, the Bank had $4.7 million of non-performing
multi-family loans. See "- Asset Quality and - Allowance for Loan
Losses" for discussions of the Bank's underwriting procedures
utilized in originating multi-family loans.
The Bank's loan portfolio also includes $37.7 million in non-
residential real estate mortgage loans which represented 6.4% of
gross loans at June 30, 1996. This portfolio is comprised of
commercial and industrial properties, and shopping centers. The
Bank utilizes, where appropriate, rent or lease income, business
receipts, the borrowers' credit history and business experience,
and comparable appraisal values when underwriting non-residential
applications. As of June 30, 1996, there were no non-performing
non-residential loans in the Bank's portfolio.
The Bank's three largest loans at June 30, 1996, consisted of a
$3.6 million loan secured by a first mortgage on a twelve story
apartment building located in midtown Manhattan originated in
February, 1996; a $3.5 million first mortgage loan, originated in
November, 1995, secured by a three-story catering hall located in
the Howard Beach section of Queens; and a $3.5 million first
mortgage loan, originated in October, 1995, secured by mortgages
on three contiguous mixed-use properties in lower Manhattan
combining both residential and commercial space. As of June 30,
1996, all of these loans were performing in accordance with their
terms. Additionally, as of June 30, 1996, the Bank had an
outstanding commitment to originate a loan for portfolio in the
amount of $3.5 million, to a 23-store shopping center located in
Hewlett, New York. The loan, which had a debt service ratio in
excess of 4.0 and a loan-to-value ratio of 31.8%, closed in
August, 1996. See ''- Regulation - Regulation of Federal Savings
Associations - Loans to One Borrower.''
The Bank also currently services a total of $27.7 million in
multi-family loans for various private investors. These loans
were sold in the late 1980s, without recourse.
One- to Four-Family Mortgage and Cooperative Apartment Lending.
The Bank offers residential first mortgage loans secured
primarily by owner-occupied, one- to four-family residences,
including condominiums, and cooperative apartment share loans.
Lending is primarily confined to an area covered by a 50-mile
radius from the Bank's Main Office in Brooklyn. The Bank offers
conforming and non-conforming fixed-rate mortgage loans and
adjustable-rate mortgage loans with maturities of up to 30 years
and a maximum loan amount of $500,000. The Bank's residential
mortgage loan originations are generally obtained from existing
or past loan customers, depositors of the Bank, members of the
local community and referrals from attorneys, realtors and
independent mortgage brokers who refer members of the communities
located in the Bank's primary lending area. The Bank is a
participating seller/servicer with several government-sponsored
mortgage agencies: FNMA, FHLMC, and SONYMA, and generally
underwrites its one- to four-family residential mortgage loans to
conform with standards required by these agencies. At June 30,
1996, $229.3 million, or 39.1%, of the Bank's loans consisted of
one- to four-family and cooperative apartment mortgage loans.
ARMs represented 61.6% of total one- to four-family and
cooperative apartment loans, while fixed-rate mortgages comprised
38.4% of the total. Of the total fixed-rate one-to four-family
and cooperative apartment loans 90.5% were acquired from
Conestoga. See "- Acquisition of Conestoga."
From 1985 to 1988, the Bank was an active lender in the
cooperative apartment share loan market. Although the collateral
for cooperative apartment loans is comprised of shares in a
cooperative corporation (a corporation whose primary asset is the
underlying real estate), cooperative apartment loans generally
are treated as one- to four-family loans. From 1985 to 1988, the
Bank originated for portfolio over $117 million of cooperative
apartment loans, or 26.8% of total loans as of December 31, 1988.
These were exclusively one- and three-year adjustable-rate loans
and were well-suited to the Bank's asset/liability strategy. By
the end of 1988, in response to the steep decline in the market
value of cooperative apartments, the Bank enacted more stringent
underwriting guidelines for cooperative apartment loans. Of
particular importance was the requirement that the number of
units sold to owner-occupants of the subject building be greater
than 65% of total units available in the building in order for a
loan application to be considered. Since 1988, originations of
cooperative apartment loans have significantly declined. Thus, as
a result of prepayments and amortization, the Bank's portfolio of
such loans has declined to $59.1 million, or 10.1% of total loans
as of June 30, 1996. The recent market for cooperative apartment
loan financing has improved with the support of certain
government agencies, particularly SONYMA and FNMA, who are
insuring and purchasing, respectively, cooperative apartment
share loans in qualifying buildings. The Bank adheres to
underwriting guidelines established by SONYMA and FNMA for all
fixed-rate cooperative apartment loans which are originated for
sale. Adjustable-rate cooperative apartment loans continue to be
originated both for portfolio and for sale.
The Bank currently offers one- to four-family ARMs secured by
residential properties with rates that adjust every one or three
years. One- to four-family ARMs are offered with terms of up to
30 years. The interest rate at repricing on one- to four-family
ARMs currently offered fluctuates based upon a spread above the
average yield on United States 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. Additionally, one-
and three-year one- to four-family ARMs are generally subject to
limitations on interest rate increases of 2% and 3%,
respectively, per adjustment period, and an aggregate adjustment
of 6% over the life of the loan. For the year ended June 30,
1996, the Bank originated $1.0 million of one- to four-family
ARMs.
The volume and types of ARMs 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 fiscal 1996 , demand for one- to four-family ARMs was
relatively weak due to the prevailing low interest rate
environment and consumer preference for fixed-rate loans.
Accordingly, although the Bank will continue to offer one- to
four-family ARMs, there can be no assurance that in the future
the Bank will be able to originate a sufficient volume of one- to
four-family ARMs to increase or maintain the proportion that
these loans bear to total loans.
The retention of one- to four-family ARMs, as opposed to fixed-
rate residential mortgage loans, in the Bank's loan portfolio
helps reduce the Bank's exposure to increases in interest rates.
However, one- to four-family ARMs 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 risks, applicants for
one- to four-family ARMs are qualified at the highest rate which
would be in effect after the first interest rate adjustment, if
rates were to rise. The Bank did not in the past, nor does it
currently, originate one- to four-family ARMs which provide for
negative amortization.
The Bank currently offers fixed-rate mortgage loans with terms
of 10 to 30 years secured by one- to four-family residences and
cooperative apartments. Interest rates charged on fixed-rates
loans are competitively priced based on market conditions. The
Bank generally originates fixed-rate loans for sale in amounts up
to the maximum allowed by FNMA, FHLMC and SONYMA, with private
mortgage insurance required for loans with loan-to-value ratios
in excess of 80%. For the year ended June 30, 1996, the Bank
originated $5.7 million of fixed-rate, one- to four-family
residential mortgage and cooperative apartment loans.
The Bank generally sells its newly originated conforming fixed-
rate mortgage loans in the secondary market to federal and state
agencies such as FNMA, FHLMC and SONYMA, and its non-conforming
fixed-rate mortgage loans to various private sector secondary
market purchasers. With few exceptions, such as SONYMA, the Bank
retains the servicing rights on all such loans sold. For the year
ended June 30, 1996, the Bank sold mortgage loans totaling $5.1
million. As of June 30, 1996, the Bank's portfolio of one-to four-
family fixed-rate mortgage loans serviced for others totaled
$63.4 million. The Bank intends to continue to sell all of its
newly-originated fixed-rate mortgage loans to conform to its
interest-rate risk policy. No assurances can be made, however,
that the Bank will be able to do so.
Originated mortgage loans in the Bank's one-to-four family
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.
Home equity loans currently are originated to a maximum of
$250,000. When combined with the balance of the first mortgage
lien, the home equity loan may not exceed 75% of the appraised
value of the property at the time of the loan commitment. The
Bank's home equity loans outstanding at June 30, 1996, totaled
$760,000 against total available credit lines of $1.2 million.
Other Lending. The Bank also originates other loans,
primarily student and passbook loans. Total other loans
outstanding at June 30, 1996, amounted to $5.6 million, or 0.95%,
of the Bank's loan portfolio. Passbook loans, totaling $3.0
million, and student loans, totaling $1.3 million, comprise the
majority of the Bank's other loan portfolio.
Loan Approval Authority and Underwriting. The Board of
Directors establishes lending authorities for individual officers
as to its various types of loan products. For multi-family and
one- to four-family mortgage loans, including cooperative
apartment and condominium loans, the Loan Operating Committee,
which is comprised of the Chief Executive Officer, Executive Vice
President and Senior Vice President, and the heads of both the
residential loan and multi-family loan origination departments,
has the authority to approve loans in amounts up to $500,000. Any
loan in excess of $500,000, however, must be approved by the
Board of Directors. In addition, regulatory restrictions imposed
on the Bank's lending activities limit the amount of credit that
can be extended to any one borrower to 15% of total capital. See
''- Regulation - Regulation of Federal Savings Associations -
Loans to One Borrower.''
For all one- to four-family loans originated by the Bank, upon
receipt of a completed loan application from a prospective
borrower, a credit report is ordered, income, assets and certain
other information are verified by an independent credit agency,
and if necessary, additional financial information is required to
be submitted by the borrower. An appraisal of the real estate
intended to secure the proposed loan is required, which currently
is performed by an independent appraiser designated and approved
by the Board of Directors. In certain cases, the Bank may also
require certain environmental hazard reports on multi-family
properties. It is the Bank's policy to require appropriate
insurance protection, including title and hazard insurance, on
all real estate mortgage loans 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.
<PAGE>
Asset Quality
Delinquent Loans and Foreclosed Assets. Management does not
expect to incur significant losses on its current portfolio of
delinquent mortgage loans. Loans in the process of foreclosure
and other non-accrual loans, 27 loans in all, totaled $6.6
million at June 30, 1996 versus $5.1 million at June 30, 1995.
The largest loan in this group is a $2.1 million foreclosure on
an underlying cooperative apartment building located in Brooklyn,
New York. The Bank has received a preliminary offer to purchase
the mortgage for $1.5 million. No assurance can be given that the
mortgage will be sold, or as to the ultimate terms of any such
sale. The Bank believes that its allowance for loan losses as of
June 30, 1996 is adequate after taking into consideration the
proposed sale of the loan and expected charge to the allowance
for loan losses. The Bank had twelve loans totaling $1.7 million
delinquent 60-89 days at June 30, 1996, as compared to seven such
delinquent loans totaling $479,000 at June 30, 1995.
The Bank's real estate loan servicing policies and procedures
require that the Bank initiate contact with a delinquent borrower
as soon after the tenth day of delinquency as possible.
Generally, the policy calls for a late notice to be sent 10 days
after the due date of the late payment. If payment has not been
received within 30 days of the due date, a letter is sent to the
borrower. Thereafter, periodic letters and phone calls are placed
to the borrower until payment is received. In addition, Bank
policy calls for the cessation of interest accruals on loans
delinquent 60 days or more. When contact is made with the
borrower at any time prior to foreclosure, the Bank will attempt
to obtain the full payment due, or work out a repayment schedule
with the borrower to avoid foreclosure. Generally, foreclosure
proceedings are initiated by the Bank when a loan is 90 days past
due. If a foreclosure action is instituted and the loan is not
brought current, paid in full, or refinanced before the
foreclosure sale, the real property securing the loan is
generally sold at foreclosure or by the Bank as soon thereafter
as practicable.
Management reviews delinquent loans on a continuous basis and
reports monthly to the Board of Directors regarding the status of
all delinquent and non-accrual loans in the Bank's portfolio. The
Bank retains outside counsel experienced in foreclosure and
bankruptcy procedures to institute foreclosure and other actions
on the Bank's delinquent loans. It is the policy of the Bank to
initiate foreclosure proceedings after a loan becomes 90 days
past due. As soon as practicable after initiating foreclosure
proceedings on a loan, the Bank prepares an estimate of the fair
value of the underlying collateral. In the event the carrying
balance of the loan, including all accrued interest, exceeds the
estimate of fair value, the loan is considered to be impaired and
a reserve is established pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 114. At June 30, 1996, $7.4
million of loans were deemed impaired under SFAS 114. It is the
Bank's general policy to dispose of properties acquired through
foreclosure or deeds in lieu thereof as quickly and as prudently
as possible in consideration of market conditions, the physical
condition of the property, and any other mitigating conditions.
Under Generally Accepted Accounting Principles ("GAAP"), the
Bank is required to account for certain loan modifications or
restructurings as ''troubled-debt restructurings.'' In general,
the modification or restructuring of a debt constitutes a
troubled-debt restructuring if the Bank, for economic or legal
reasons related to the borrower's financial difficulties, grants
a concession to the borrower that the Bank would not otherwise
consider. Debt restructurings or loan modifications for a
borrower do not necessarily always constitute troubled-debt
restructurings, however, and troubled-debt restructurings do not
necessarily result in non-accrual loans. The Bank had four loans
classified as troubled-debt restructurings at June 30, 1996,
totaling $4.7 million, and all are currently performing according
to their restructured terms. The largest restructured debt, a
$2.7 million loan secured by a mortgage on an underlying
cooperative apartment building located in Forest Hills, New York,
was originated in 1987. The loan was first restructured in 1988,
and again in 1994.
<PAGE>
Non-performing Assets and Troubled-Debt Restructurings. The
following table sets forth information regarding the Bank's non-
performing assets and troubled-debt restructurings at the dates
indicated.
<TABLE>
<CAPTION>
At Year Ended June 30,
--------------------------------------------
1996 1995 1994 1993 1992
------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans:
One- to four-family...................... $ 1,149 $572 $ 1,276 $ 3,449 $ 4,184
Multi-family and underlying cooperative.. 4,734 3,978 4,363 7,265 11,528
Non-residential.......................... - - - - -
Cooperative apartment.................... 668 523 609 918 1,001
Non-accrual other loans.................. - - - - -
--------------- -------- -------- -------- --------
Total non-performing loans.................. 6,551 5,073 6,248 11,632 16,713
--------------- -------- -------- -------- --------
Total OREO.................................. 1,946 4,466 8,200 7,981 7,367
Total non-performing assets................. $8,497 $9,539 $ 14,448 $19,613 $24,080
=============== ======== ======== ======== ========
Troubled-debt restructurings................ $4,671 $7,651 $ 7,421 $5,219 $-
Total non-performing assets and troubled-
debt restructurings...................... $13,168 $17,190 $21,869 $24,832 $24,080
Total non-performing loans to total loans... 1.12% 1.18% 1.45% 2.52% 3.48%
Total non-performing assets to total assets<F1> 0.62 1.44 2.23 3.04 3.74
Total non-performing assets and troubled-
debt restructurings to total assets<F2>. 0.96 2.59 3.38 3.84 3.74
<FN>
<F1> Total non-performing assets to total Adjusted Assets were
0.68% at June 30, 1996.
<F2> Total non-performing assets and troubled-debt restructurings
to total Adjusted Assets were 1.06% at June 30, 1996.
</FN>
</TABLE>
The Bank recorded $47,000 and $344,000 of interest income on
non-performing loans and troubled-debt restructurings,
respectively, for the year ended June 30, 1996, and $104,000 and
$587,000, respectively, for the fiscal year ended June 30, 1995.
If the Bank's non-performing loans and troubled-debt
restructurings had been performing in accordance with their
terms, the Bank would have recorded additional interest income of
$410,000 and $127,000, respectively, for the year ended June 30,
1996, and $325,000 and $210,000, respectively, for the fiscal
year ended June 30, 1995.
Other Real Estate Owned ("OREO"). Property acquired by the Bank
as a result of a foreclosure on a mortgage loan is classified as
OREO and is recorded at the lower of the recorded investment in
the related loan or the fair value of the property at the date of
acquisition, with any resulting write down charged to the
allowance for loan losses. The Bank obtains an appraisal on a
real estate owned property as soon as practicable after it takes
possession of the real property. The Bank will generally reassess
the value of OREO at least annually thereafter.
Classified Assets. The Bank's Loan Loss Reserve Committee meets
every other month to review all problem loans in the portfolio to
determine whether any loans require reclassification in
accordance with applicable regulatory guidelines. Recommendations
are reported by the Loan Loss Reserve Committee to the Board of
Directors on a quarterly basis. The Loan Loss Reserve Committee,
subject to Board approval, establishes policy relating to the
internal classification of loans and believes that its
classification policies are consistent with regulatory policies.
All non-performing loans and OREO are considered to be classified
assets. In addition, the Bank maintains a "watch list" comprised
of loans totaling $8.1 million at June 30, 1996 which, while
performing, are characterized by weaknesses which require special
attention from management and are considered to be potential
problem loans. All loans on the watch list are considered to be
classified assets or are otherwise categorized as "Special
Mention" as discussed below. As a result of its bi-monthly review
of the loan portfolio, the Loan Loss Reserve Committee may decide
to reclassify one or more of the loans on the watch list.
Federal regulations and Bank policy require that loans and
other assets considered to be of lesser quality be classified as
''Substandard,'' ''Doubtful'' or ''Loss'' assets. An asset is
considered ''Substandard'' if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the
collateral pledged, if any. ''Substandard'' assets have a well-
defined weakness or weaknesses and are characterized by the
distinct possibility that the Bank will sustain ''some loss'' if
deficiencies are not corrected. Assets classified as ''Doubtful''
have all of the weaknesses inherent in those classified
''Substandard'' with the added characteristic that the weaknesses
present make ''collection or liquidation in full,'' on the basis
of current existing facts, conditions, and values, ''highly
questionable and improbable.'' Assets classified as ''Loss'' are
those considered ''uncollectible'' and of such little value that
their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets which do not
expose the Bank to sufficient risk to warrant classification in
one of the aforementioned categories but possess potential
weaknesses that deserve management's attention are designated
''Special Mention'' by management. At June 30, 1996 the Bank had
$9.4 million of loans designated Special Mention.
When an insured institution classifies one or more assets, or
portion thereof, as Substandard or Doubtful, it is required to
establish a general valuation allowance for loan losses in an
amount deemed prudent by management. Generally, federally-insured
institutions must maintain an allowance for loan losses at a
level that is ''adequate to absorb estimated credit losses
associated with the loan portfolio.'' The general valuation
allowance, which is a regulatory term, represents a loss
allowance which has been established to recognize the inherent
risk associated with lending activities, but which, unlike the
specific allowance, has not been allocated to particular problem
assets. When an insured institution classifies one or more
assets, or proportions thereof, as ''Loss,'' it is required to
establish a specific allowance for losses equal to 100% of the
amount of the asset so classified or to charge-off such amount.
At June 30, 1996, the Bank had $7.3 million of assets
classified Substandard, consisting of 42 loans, no assets
classified as Doubtful, and $5,000 of assets classified as Loss,
consisting of 1 loan.
<PAGE>
The following table sets forth at June 30, 1996 the Bank's
aggregate carrying value of the assets classified as Substandard,
Doubtful or Loss or designated as Special Mention.
<TABLE>
<CAPTION>
Special Mention Substandard<F1> Doubtful Loss
---------------- -------------- ------------- -------------
Number Amount Number Amount Number Amount Number Amount
------ ------ ------ ------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
One- to four-family....................... 4 $704 3 $ 690 - $ - - $ -
Multi-family and underlying cooperative... 11 8,347 7 4,090 - - 1 5
Non-residential........................... - - - - - - - -
Cooperative apartment..................... 6 339 9 604 - - - -
------ ------ ------ ------ ------ ------ ------ ------
Total Mortgage Loans...................... 21 9,390 19 5,384 - - 1 5
------ ------ ------ ------ ------ ------ ------ ------
Real Estate Owned:
One- to four-family....................... - - 5 1,388 - - - -
Multi-family and underlying cooperative... - - - - - - - -
Non-residential........................... - - - - - - - -
Cooperative apartment..................... - - 18 558 - - - -
------ ------ ------ ------ ------ ------ ------ ------
Total Real Estate Owned................... - - 23 1,946 - - - -
------ ------ ------ ------ ------ ------ ------ ------
Total..................................... 21 $9,390 42 $7,330 - $- 1 $ 5
====== ====== ====== ====== ====== ====== ====== ======
<FN>
<F1> The Bank had $215,777 of receivables from Nationar, a
failed check-clearing and trust company, which are included in
Other Assets. These receivables are fully reserved at June
30, 1996. See "Notes to Consolidated Financial Statements."
</FN>
</TABLE>
Allowance for Loan Losses
The Bank has established a Loan Loss Reserve Committee and has
charged it with, among other things, specific responsibility for
monitoring the adequacy of the loan loss reserve. The Loan Loss
Reserve Committee's findings, along with recommendations for
additional loan loss reserve provisions, if any, are reported
directly to senior management of the Bank, and to the Board of
Directors. The Allowance for Loan Losses is supplemented through
a periodic provision for loan losses based on the Loan Loss
Reserve Committee's evaluation of several variables, including
the level of non-performing loans, the ratio of reserves to total
performing loans, the level and composition of new loan activity,
and an estimate of future losses determinable at the date the
portfolio is evaluated. 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, its valuation of OREO, and both the level of loans
in foreclosure and pending foreclosure. Based on their judgments
about information available to them at the time of their
examination, the regulators may require the Bank to recognize
additions to the allowance.
Loan loss reserves are established based upon a review of the
two components of the Bank's loan portfolio, performing loans and
non-performing loans. Performing loans are reviewed based upon
the premise that, over time, the loan portfolio will generate
losses and that some portion of the loan portfolio which is
currently performing will default. The evaluation process is thus
based upon the Bank's historical loss experience.
Non-performing loans are reviewed individually to determine if
the liquidation value of the underlying collateral is sufficient
to pay off the existing debt. Should the bank determine that a
non-performing loan is likely to result in a principal loss, the
loan is then placed into one of four classifications. The
particular classification assigned to any one loan, or proportion
thereof, (loss, doubtful, substandard or special mention) is
based upon the actual level of loss attributable to that loan, as
determined by the Loan Loss Reserve Committee. The Bank will then
increase its general valuation allowance in an amount established
by the Loan Loss Reserve Committee to appropriately reflect the
anticipated loss from each loss classification category.
Specific reserves are established against loans classified as
''loss.'' Rather than an estimation of potential loss, the
establishment of a specific reserve represents the identification
of an actual loss which will result in a charge-off. This loss
amount will be set aside on the Bank's balance sheet as a
specific reserve and will serve to reduce the carrying value of
the associated loan. The Bank's determination as to the
classification of its assets and the amount of its valuation
allowances is subject to review by various regulatory agencies
which can order the establishment of additional general or
specific loss allowances.
The Bank has increased its allowance for loan losses to a level
which management believes is adequate to absorb possible losses
that may be incurred within the Bank's loan portfolio. The Bank
provided $3.0 million to its allowance for loan losses for the
fiscal year ended June 30, 1996 and acquired reserves of $668,000
from Conestoga. At June 30, 1996, the total allowance was $7.8
million, which amounted to 119.3% of non-performing loans and
1.34% of total loans. The increase in the allowance reflects
management's assessment of the risks inherent in its loan
portfolio, including those risks associated with the Bank's
emphasis on multi-family mortgage loans, which are considered to
be at greater risk of loss than one- to four-family loans. 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 to provide for loan
losses. For the fiscal year ended June 30, 1996, the Bank had
charge-offs, net of recoveries, of $1.0 million against the
allowance. Since 1985, total principal losses attributable to the
Bank's loan portfolio have averaged 0.42% of the average
outstanding loan balance.
<PAGE>
The following table sets forth activity in the Bank's allowance
for loan losses at or for the dates indicated.
<TABLE>
<CAPTION>
At or For the Year Ended June 30,
------------------- -----------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total loans outstanding at end of period(1)............... $583,686 $429,854 $431,593 $461,418 $479,610
========= ========= ========= ========= =========
Average total loans outstanding(1)........................ $449,063 $430,845 $455,705 $474,362 $468,594
========= ========= ========= ========= =========
Balance at beginning of period............................ $5,174 $3,633 $2,996 $2,094 $1,340
Provision for loan losses................................. 2,979 2,950 4,105 3,395 1,409
Charge-offs:
One- to four-family....................................... (21) (146) (224) (272) (40)
Multi-family and underlying cooperative................... (553) (1,081) (2,203) (1,355) (114)
Non-residential........................................... (274) (92) - (19) -
F.H.A./V.A................................................ - (9) - (13) -
Cooperative apartment..................................... (170) (328) (1,109) (876) (557)
Other..................................................... (5) - - - (1)
--------- --------- --------- --------- --------- -
Total charge-offs......................................... (1,023) (1,656) (3,536) (2,535) (712)
--------- --------- --------- --------- --------- -
Recoveries................................................ 14 247 68 42 57
--------- --------- --------- --------- ---------
Reserve acquired in purchase of Conestoga.................. 668 - - - -
--------- --------- --------- --------- ---------
Balance at end of period.................................. $7,812 $5,174 $3,633 $2,996 $2,094
========= ========= ========= ========= =========
Allowance for loan losses to total loans at end of period. 1.34% 1.20% 0.84% 0.65% 0.44%
Allowance for loan losses to total non-performing loans at
end of period(2).......................................... 119.25 101.99 58.15 25.76 12.53
Allowance for losses on OREO:
Balance at beginning of period............................ $- $- $- $- $-
Provision charged to operations........................... 586 - - - -
Charge-offs, net of recoveries............................ (472) - - - -
--------- --------- --------- --------- ---------
Balance at end of period.................................. $114 $- $- $- $-
========= ========= ========= ========= =========
<FN>
<F1> Total loans represents loans, net, plus the allowance for loan
losses. Total loans at June 30, 1996 includes $113.1 million
of loans acquired from Conestoga.
<F2> The Bank adopted SFAS No. 114 on July 1, 1995. See
''Management's Discussion and Analysis of Financial Condition
and Results of Operations-Impact of Accounting Standards.''
</FN>
</TABLE>
<PAGE>
The following table sets forth the Bank's allowance for loan
losses allocated by loan category and the percent of loans in
each category to total loans at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Each Each Each
Category Category Category
Allowance to Total Allowance to Total Allowance to Total
Amount Loans<F1> Amount Loans<F1> Amount Loans<F1>
--------- ---------- --------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family........ $1,171 29.90% $556 14.25% $398 14.66%
Multi-family and underlying
cooperative................ 4,763 52.11 3,372 61.72 2,267 59.68
Non-residential............ 605 6.63 103 6.60 72 6.63
Cooperative apartment...... 1,085 10.38 1,031 16.51 784 18.06
Other...................... 188 0.98 112 0.92 112 0.97
--------- ---------- --------- ---------- --------- ----------
Total...................... $7,812 100.00% $5,174 100.00% $3,633 100.00%
========= ========== ========= ========== ========= ==========
<FN>
<F1> Total loans represent gross loans less FHA and VA loans,
which are government guaranteed loans.
</FN>
</TABLE>
Investment Activities
Investment Strategies of the Company - After using $76.4
million of the proceeds raised in the initial public offering to
purchase the 100% of the Bank's Common Stock, the Company
retained approximately $65. 0 million in cash, of which $11.6
million was loaned to the Company's ESOP.
The remaining $53.4 million is to be utilized for general
business activities which may include, but are not limited to:
(1) repurchases of Common Stock, (2) acquisition of other
companies, (3) subject to applicable limitations, the payment of
dividends, and/or (4) investments in the equity securities of
other financial institutions and other investments not permitted
for federally-insured institutions. There can be no assurance
that the Company will engage in any of these activities in the
future. See "Item 5 - Market for the Company's Common Stock and
Related Stockholder Matters."
Otherwise, the investment policy of the Company calls for
investments in relatively short-term, liquid securities similar
to such securities defined in the securities investment policy of
the Bank.
Investment Policy of the Bank. The securities investment
policy of the Bank, which is established by the Board of
Directors, is designed to help the Bank achieve its overall
asset/liability management objectives. Generally, the policy
calls for management to emphasize principal preservation,
liquidity, diversification, short maturities and/or repricing
terms, and a favorable return on investment when selecting new
investments for the Bank's portfolio. The Bank's current
securities investment policy permits investments in various types
of liquid assets including obligations of the U.S. Treasury and
federal agencies, investment grade corporate obligations, various
types of mortgage-backed securities, commercial paper,
certificates of deposit, and federal funds sold to select
financial institutions periodically approved by the Board of
Directors.
Investment strategies are implemented by the Asset and
Liability Management Committee ("ALCO") comprised of the Chief
Executive Officer, the Executive Vice President and other senior
management officers. The strategies take into account the Bank's
overall balance sheet, including loans and deposits, and are
intended to protect and enhance the Company's earnings and market
value. The strategies are reviewed monthly by the ALCO and
reported regularly to the Board of Directors.
The Bank converted to a federally chartered mutual savings bank
on November 1, 1995. Prior to that date, the Bank operated as a
New York State chartered mutual savings Bank. While operating
under its New York State charter, the Bank was permitted to make
certain investments in equity securities and stock mutual funds.
At June 30, 1996, these equity investments totaled $3.2 million,
comprised primarily of a $2.1 million investment in a common
stock mutual fund designed specifically for New York State
Savings Banks, and a $1.1 million investment divided among two
additional common stock mutual funds and one fixed income mutual
fund. Pursuant to current law, the Bank is required to divest or
transfer such securities. The Bank expects that it will either
dispose of such securities to a third-party or sell or transfer
such securities to the Company.
The Bank currently does not participate in hedging programs,
interest rate swaps, or other activities involving the use of off-
balance sheet derivative financial instruments. These activities
are prohibited by the Bank's securities investment policy.
Similarly, the Bank has not and does not invest in mortgage-
backed securities which are deemed to be ''high risk,'' or
purchase bonds which are not rated investment grade.
Mortgage-Backed Securities. In its securities investment
activities over the past few years the Bank has increased its
purchases of mortgage-backed securities, which provide the
portfolio with investments consisting of desirable repricing,
cash flow and credit quality characteristics. Mortgage-backed
securities generally yield less than the loans that underlie the
securities because of the cost of payment guarantees and credit
enhancements that reduce credit risk to the investor. However,
mortgage-backed securities are more liquid than individual
mortgage loans and may be used to collateralize borrowings of the
Bank. Virtually all (99.9%) of the Company's $209.9 million
mortgage-backed securities portfolio, which represented 15.3% of
the Company's total assets (or 16.9% of Adjusted Assets) at
June 30, 1996, was comprised of securities backed by either the
Governmental National Mortgage Association (''GNMA''), FHLMC, or
FNMA. In addition to the superior credit quality provided by the
agency backing, the mortgage-backed securities portfolio also
provides the Company with important interest rate risk management
features. One year adjustable-rate mortgage-backed securities,
which total $111.3 million, are the single largest component of
the Bank's mortgage-backed securities portfolio. These securities
are structured so that the interest rate received by the Company
adjusts annually in tandem with changes in other short-term
market interest rates, a feature which reduces the Bank's
exposure to interest rate risk. The Company also has a $50.9
million investment in fixed-rate balloon mortgage-backed
securities which provide a return of principal and interest on a
monthly basis, and have original maturities of between five to
seven years, at which point the entire remaining principal
balance is repaid (the ''balloon'' payment). The remainder of
the Company's mortgage-backed securities portfolio is split
between a $39.1 million investment in seasoned pass-through
certificates backed by GNMA, FNMA or FHLMC, with an average
remaining maturity of 7 years, and an $8.6 million investment in
Collateralized Mortgage Obligations ("CMOs") comprised entirely of
fixed rate, short-term classes with relatively little cash flow
volatility or floating rate classes which reprice periodically.
While mortgage-backed securities backed by federally sponsored
agencies carry a reduced credit risk as compared to whole loans,
such securities remain subject to the risk that fluctuating
interest rates, along with other factors such as the geographic
distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect both the
prepayment speed, and value, of such securities.
The Bank adopted SFAS 115 effective July 1, 1994. SFAS 115
requires that investments in equity securities that have readily
determinable fair values and all investments in debt securities
be classified in one of the following three categories and
accounted for accordingly: trading securities, securities
available for sale, or securities held to maturity. The
Company had no securities classified as trading securities
during the year ended June 30, 1996, and does not intend to trade
securities. Unrealized gains and losses on available for sale
securities are excluded from earnings and are reported as a
separate component of stockholders' equity, net of deferred
taxes. At June 30, 1996, the Company had $498.7 million of
securities classified as available for sale which represented
36.3% of total assets (or 39.93% of Adjusted Assets) at June 30,
1996. Given the size of the available for sale portfolio, future
fluctuations in market values of these securities could result in
fluctuations in the Company's stockholders' equity. As a
mitigating factor, approximately $360.4 million, or 72%, of the
total available for sale portfolio at June 30, 1996 either
matures or reprices within one year.
The maturities on the Bank's fixed-term mortgage-backed
securities (balloons, seasoned GNMAs and FHLMCs) are relatively
short as compared to the final maturities on its ARMs and CMO
portfolios. Except for fixed rate mortgage backed securities
acquired from Conestoga, which were generally classified as
available for sale, the Company typically classifies purchased
fixed rate mortgage-backed securities as held-to-maturity, and
carries the securities at amortized cost. The Company is
confident of its ability to hold these securities to final
maturity. The Company typically classifies purchased ARMs and
CMOs as available for sale, in recognition of the greater
prepayment uncertainty associated with these securities, and
carries these securities at fair market value.
<TABLE>
The following table sets forth activity in the Company's mortgage-
backed securities portfolio for the periods indicated.
<CAPTION>
For the Year Ended June 30,
----------------------------------
1996 1995 1994
----------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Amortized cost at beginning of period.......... $ 90,543 $94,356 $82,077
Purchases/Sales (net).......................... 20,743 10,067 29,753
Principal repayments........................... (25,871) (13,595) (16,906)
Premium and discount amortization, net......... (283) (285) (568)
Securities acquired in purchase of Conestoga<F1> 124,409 - -
----------- ---------- ---------
Amortized cost at end of period................ $ 209,541 $90,543 $94,356
=========== ========== =========
<FN>
<F1> Amount comprised of $9.9 million of FHLMC securities, $38.4
million of FNMA securities, $70.1 of GNMA securities, and $6.0
million of CMOs.
</FN>
</TABLE>
<TABLE>
The following table sets forth the amortized cost and fair value
of the Company's securities at the dates indicated.
<CAPTION>
At June 30,
----------------------------------------------------------
1996<F1> 1995 1994
-------------------- ------------------ ------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---------- --------- --------- -------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
GNMA.......................... $88,133 $88,563 $24,402 $24,960 $29,764 $29,224
FNMA.......................... 56,720 56,654 7,417 7,599 5,941 5,965
FHLMC......................... 56,122 56,151 54,888 55,382 53,950 53,010
CMOs.......................... 8,566 8,589 3,836 3,964 4,701 4,738
---------- --------- --------- -------- --------- --------
Total mortgage-backed
securities.................... 209,541 209,957 90,543 91,905 94,356 92,937
---------- --------- --------- -------- --------- --------
Investment securities:
U.S. Treasury and Agency...... 297,994 297,906 25,834 25,694 18,989 18,684
Other<F2>..................... 83,700 83,610 67,991 67,909 61,352 60,379
---------- --------- --------- -------- --------- --------
Total investment securities... 381,694 381,516 93,825 93,603 80,341 79,063
Equity securities............. 2,977 3,205 3,304 3,070 1,356 1,359
Net unrealized gain<F2>....... 575 - 770 - - -
---------- --------- --------- -------- --------- --------
Total securities, net......... $594,787 $594,678 $188,442 $188,578 $176,053 $173,359
========== ========= ========= ======== ========= ========
<FN>
<F1> Includes $9.9 million of FHLMC securities, $38.4
million of FNMA securities, $70.1 million in GNMA securities,
$6.0 million in CMOs, $119.1 million in agency obligations,
and $51.7 million in corporate obligations acquired from
Conestoga.
<F2> The net unrealized gain at June 30, 1996 and 1995
relates to available for sale securities in accordance with
SFAS No. 115. The net unrealized gain is presented in order to
reconcile the ''Amortized Cost'' of the Company's securities
portfolio to the recorded value reflected in the Consolidated
Statements of Condition.
</FN>
</TABLE>
Corporate Debt Obligations. The Company invests in the short-
term investment grade debt obligations of various corporations.
Corporate debt obligations generally carry both a higher rate of
return and a higher degree of credit risk than U.S. Treasury
securities with comparable maturities. In addition, corporate
securities are generally less liquid than comparable U.S.
Treasury securities. In recognition of the additional risks
associated with investing in these securities, the Company's
investment policy limits new investments in corporate obligations
to those companies which are rated single ''A'' or better by one
of the nationally recognized rating agencies, and limits
investments in any one corporate entity to the lesser of 1% of
total assets or 15% of the Company's equity. At June 30, 1996,
the Company's portfolio of corporate debt obligations totaled
$79.2 million, or 5.8% of total assets.
<TABLE>
The following table sets forth the amortized cost and fair value
of the Company's securities, by accounting classification and by
type of security, at the dates indicated.
<CAPTION>
At June 30,
----------------------------------------------------------
1996<F1> 1995 1994
-------------------- ------------------ ------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---------- --------- --------- -------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity:
Mortgage-backed securities:
Pass-through securities........ $52,580 $52,596 $53,815 $54,172 $89,655 $88,199
CMOs........................... - - - - 4,701 4,738
---------- --------- --------- -------- --------- --------
Total mortgage-backed
securities.................... 52,580 52,596 53,815 54,172 94,356 92,937
Investment securities <F2> 43,552 43,428 51,475 51,254 80,341 79,063
Equity securities............. - - - - 1,356 1,359
---------- --------- --------- -------- --------- --------
Total Held-to-Maturity........ $ 96,132 $ 96,024 $105,290 $105,426 $176,053 $173,359
========== ========= ========= ======== ========= ========
Available-for-Sale:
Mortgage-backed securities:
Pass-through securities........ $148,396 $148,772 $32,892 $33,769 - -
CMOs........................... 8,566 8,589 3,836 3,964 - -
---------- --------- --------- -------- --------- --------
Total mortgage-backed
securities.................... 156,962 157,361 36,728 37,733 - -
Investment securities<F2><F4>. 338,141 338,089 42,350 42,349 - -
Equity securities............. 2,977 3,205 3,304 3,070 - -
Net unrealized gain<F3>....... 575 - 770 - - -
---------- --------- --------- -------- --------- --------
Total available-for-sale...... $498,655 $498,655 $83,152 83,152 - -
========== ========= ========= ======== ========= ========
Total securities, net......... $594,787 $594,679 $188,442 $188,578 $176,053 $173,359
========== ========= ========= ======== ========= ========
<FN>
<F1> Includes $118.4 million of mortgage-backed pass-through
securities, $6.0 million in CMOs, and $170.8 million in
investment securities acquired from Conestoga. Except, for
$10.7 million of investment securities which were classified
as held-to-maturity, all securities acquired were classified
as available for sale.
<F2> Includes corporate debt obligations.
<F3> The net unrealized gain at June 30, 1996 and 1995 relates to
available for sale securities in accordance with SFAS No. 115.
The net unrealized gain is presented in order to reconcile the
''Amortized Cost'' of the Company's securities portfolio to
the recorded value reflected in the Consolidated Statements
of Condition.
<F4> Amount includes $125.0 million of investment securities
(short-term agency obligations) which matured on July 1, 1996
in order to coincide with the refund of excess subscription
proceeds received in the Company's initial public offering.
</FN>
</TABLE>
<PAGE>
<TABLE>
The following table sets forth certain information regarding
the amortized cost, fair value and weighted average yield of the
Company's debt securities at June 30, 1996, by remaining period
to contractual maturity. With respect to mortgage-backed
securities, the entire amount is reflected in the maturity period
that includes the final security payment date and, accordingly,
no effect has been given to periodic repayments or possible
prepayments. Other than obligations of federal agencies and GSEs,
the Company has no investments in securities issued by any one
entity in excess of 10% of stockholders' equity at June 30, 1996.
<CAPTION>
At June 30, 1996
------------------------------------------------------
Held-to-Maturity Available-for-Sale
--------------------------- --------------------------
Weighted Weighted
Amortized Fair Average Amortized Fair Average
Cost Value Yield Cost Value Yield
--------- -------- -------- --------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
Due within 1 year....................... $ - $ - - % $2,075 $2,075 6.00%
Due after 1 year but within 5 years..... 32,300 31,962 6.20 12,930 12,930 6.04
Due after 5 years but within 10 years... 2,817 2,740 6.10 5,945 5,968 6.83
Due after 10 years...................... 17,463 17,894 7.01 136,012 136,388 6.72
--------- -------- --------- --------
Total................................... 52,580 52,596 6.46 156,962 157,361 6.65
--------- -------- --------- --------
U.S. Treasury and Agency:
Due within 1 year <F1>.................. 6,000 5,982 4.87 230,934 230,934 5.35
Due after 1 year but within 5 years..... 5,340 5,314 5.62 46,307 46,247 6.12
Due after 5 years but within 10 years... 8,093 8,111 6.86 - - -
Due after 10 years...................... 1,320 1,320 7.41 - - -
--------- -------- --------- --------
Total................................... 20,753 20,727 6.00 277,241 277,181 5.48
--------- -------- --------- --------
Corporate & Other:
Due within 1 year....................... 13,039 13,043 5.55 42,417 42,420 5.37
Due after 1 year but within 5 years..... 9,760 9,658 6.10 14,109 14,132 6.62
Due after 5 years but within 10 years... - - - 3,376 3,348 7.99
Due after 10 years...................... - - - 3,975 4,213 8.15
--------- -------- --------- --------
Total................................... 22,799 22,701 5.79 63,877 64,113 5.96
--------- -------- --------- --------
Total:
Due within 1 year....................... 19,039 19,025 5.33 275,426 275,429 5.36
Due after 1 year but within 5 years..... 47,400 46,934 6.11 73,346 73,309 6.20
Due after 5 years but within 10 years... 10,910 10,851 6.67 9,321 9,316 7.24
Due after 10 years...................... 18,783 19,214 7.03 139,987 140,601 6.76
--------- -------- --------- --------
Total................................... $ 96,132 $ 96,024 6.20% $498,080 $498,655 5.91%
========= ======== ========= ========
<FN>
<F1> Amount includes $125.0 million of investment securities
(short-term agency GSE notes) which matured on July 1,1996
in order to coincide with the refund of excess
subscription proceeds received in the Company's initial public
offering.
</FN>
</TABLE>
Sources of Funds
General. Deposits, repayments of loans and mortgage-backed
securities, investment security maturities and redemptions, and
short- to medium-term borrowings from the FHLBNY are the Bank's
primary sources of funding for its lending and investment
activities. The Bank is also active in the secondary mortgage
market, selling substantially all of its new long-term, fixed-
rate residential mortgage product to either FNMA, FHLMC, or
SONYMA.
Deposits. The Bank offers a variety of deposit accounts
having a range of interest rates and terms. The Bank presently
offers savings accounts, money market accounts, checking
accounts, NOW and Super NOW accounts, and certificates of
deposit. The flow of deposits is influenced significantly by
general economic conditions, changes in prevailing interest
rates, and competition from other financial institutions and
investment products. The Bank has not used brokers to attract and
retain deposits, relying instead on customer service, convenience
and long-standing relationships with customers. Consequently, the
communities in which the bank maintains branch offices have
historically provided the Bank with nearly all of its deposits.
At June 30, 1996, the Bank had deposit liabilities of $950.1
million, up $395.3 million from June 30, 1995. The increase was
due primarily to $394.3 of deposits acquired in the purchase of
Conestoga. Within total deposits, $40.1 million, or 4.2%,
consisted of certificates of deposit with balances of $100,000 or
greater. Individual Retirement Accounts (''IRA's'') totaled $98.0
million, or 10.3% of total deposits.
<TABLE>
The following table presents the deposit activity of the Bank for
the periods indicated.
<CAPTION>
For the Year Ended June 30,
------------------------------
1996 1995 1994
--------- ---------- ---------
(In thousands)
<S> <C> <C> <C>
Deposits............................................... $696,881 $699,479 $646,338
Withdrawals............................................ 718,534 709,317 680,325
--------- --------- ----------
(Withdrawals) in excess of deposits.................... (21,653) (9,838) (33,987)
Deposits acquired in purchase of Conestoga <F1>........ 394,250 - -
Interest credited...................................... 22,676 17,918 16,638
--------- --------- ----------
Total increase (decrease) in deposits.................. $395,273 $8,080 $(17,349)
========= ========= ==========
<FN>
<F1> Amount comprised of $216.3 million in certificate of
deposits, $129.2 in savings accounts, $16.9 million in checking
accounts, $30.8 million in money market accounts, and $954,000 in
NOW and Super NOW accounts.
</FN>
</TABLE>
At June 30, 1996 the Bank had $40.1 million in certificate of
deposit accounts over $100,000 maturing as follows:
Weighted
Amount Average Rate
-------- -------------
(Dollars in thousands)
Maturity Period
Within three months................. $11,005 5.24%
After three but within six months... 7,584 5.43
After six but within 12 months...... 11,721 5.56
After 12 months..................... 9,755 6.23
--------
Total............................... $40,065 5.61%
========
<TABLE>
The following table sets forth the distribution of the Bank's
deposit accounts and the related weighted average interest rates
at the dates indicated.
<CAPTION>
At June 30,
--------------------------------------------------------------------------------------
1996 1995 1994
----------------------------- ---------------------------- -----------------------------
Percent of Weighted Percent of Weighted Percent of Weighted
Total Average Total Average Total Average
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
---------- --------- --------- ---------- -------- -------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Checking accounts............. $27,684 2.91% -% $10,219 1.85% - % $9,865 1.80% -%
NOW accounts.................. 15,029 1.58% 1.50 13,877 2.50 1.50 13,596 2.49 1.50
Super NOW..................... 552 0.06 1.50 674 0.12 1.50 416 0.08 1.50
Money market accounts......... 45,948 4.84 3.04 16,698 3.01 2.65 22,145 4.05 2.66
Savings accounts.............. 365,146 38.43 2.50 238,217 42.93 2.50 294,387 53.84 2.50
Certificates of deposit ...... 495,755 52.18 5.50 275,156 49.59 5.72 206,352 37.74 3.78
---------- -------- ---------- -------- --------- --------
Totals........................ $950,114 100.00% $554,841 100.00% $546,761 100.00%
========== ======== ========== ======== ========= ========
</TABLE>
<TABLE>
The following table presents, by interest rate ranges, the
amount of certificate accounts outstanding at the dates indicated
and the period to maturity of the certificate accounts
outstanding at June 30, 1996.
<CAPTION>
Period to Maturity at June 30, 1996
--------------------------------------- ------------------------------
Total at June 30,
Less than One to Four to ------------------------------
Interest Rate Range One Year Three Years Five Years 1996 1995 1994
- ------------------- ----------- ------------- ------------ ------------ -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
4.00% and below.... $3,257 $42 $1 $3,300 $20,646 $146,755
4.01% to 5.00%..... 192,562 12,261 3 204,826 45,135 18,331
5.01% to 6.00%..... 65,720 71,613 6,998 144,331 86,389 29,049
6.01% to 7.00%..... 86,597 11,558 18,390 116,545 112,929 7,774
7.01% and above.... 11,220 4,865 10,668 26,753 10,057 4,443
----------- ------------- ------------ ------------ -------- --------
Total.............. $359,356 $100,339 $36,060 $495,755 $275,156 $206,352
=========== ============= ============ ============ ======== ========
</TABLE>
Borrowings. The Bank has been a member and shareholder of the
FHLBNY since February 14, 1980. One of the privileges accorded
FHLBNY shareholders is the ability to borrow money under various
lending (''advance'') programs at competitive interest rates. The
Bank's total borrowing capacity at the FHLBNY at June 30, 1996 is
in excess of $152 million. Included as part of the total
borrowing capacity at the FHLBNY, the Bank has been approved for
an ''Overnight Line of Credit'' of $32.1 million, and a $32.1
million ''One-Month Overnight Line of Credit,'' both priced at
0.125% over the prevailing federal funds rate. At June 30, 1996,
the Bank had a total of $15.7 million in fixed-rate advances
outstanding with the FHLBNY with remaining maturities of between
two and three years, at an average rate of 5.40%.
Securities sold with agreement to repurchase totaled $12.0
million at June 30, 1996. Of this total, $10.0 million were
acquired in the acquisition of Conestoga. The U.S. Government,
agency and mortgage-backed securities sold with agreement to
repurchase all mature beyond ten years as of June 30, 1996..
Borrowings under such reverse repurchase agreements involve the
delivery of securities to broker-dealers who arrange the
transactions. The securities remain registered in the name of the
Bank, and are returned upon the maturities of the agreements.
Funds to repay the Bank's securities sold with agreement to
repurchase at maturity will be provided primarily by cash
received from the maturing securities.
<TABLE>
Presented below is information concerning securities sold with
agreement to repurchase for the years ended June 30, 1996, 1995
and 1994:
<CAPTION>
At of for the Years Ended June 30,
----------------------------------------
1996 1995 1994
------------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Average amounts outstanding............................. $2,148 $2,212 $2,196
Total interest cost..................................... 153 160 164
Average interest rate paid.............................. 7.13% 7.25% 7.48%
Maximum amount outstanding at any month end............. $11,998 $2,164 $2,277
Ending balance.......................................... 11,998 2,110 2,161
Weighted average interest rate on balance outstanding... 6.00% 7.50% 7.56%
</TABLE>
Subsidiary Activities
The Company's only subsidiary is the Bank. The Bank was
originally founded in 1864 as a New York State-chartered mutual
savings bank. On November 1, 1995, the Bank converted to a
federal mutual savings bank. On June 26, 1996, the Bank
converted from the mutual to the stock form of ownership, and
100% of its outstanding shares were acquired by the Company. The
operation of the Bank is the primary business of the Company.
The Bank has three wholly-owned subsidiary corporations.
Havemeyer Brokerage Corporation (''HBC'') is currently engaged in
the sale of insurance and annuity products primarily to the
Bank's customers and members of the local community. As of June
30, 1996. HBC had $597,690 in consolidated assets, and for the
year ended June 30, 1996, had pre-tax income of $47,889.
Havemeyer Equities Corporation (''HEC'') and Boulevard Funding
Corporation (''BFC'') are currently inactive. As of June 30,
1996, HEC had $7,688 and BFC had $1,868 of consolidated assets.
Personnel
As of June 30, 1996, the Company had 208 full-time employees
and 73 part-time employees. The employees are not represented by
a collective bargaining unit, and the Company considers its
relationship with its employees to be good.
Federal, State and Local Taxation
Federal Taxation
General. The following is a discussion of material tax
matters and does not purport to be a comprehensive description of
the tax rules applicable to the Bank or the Company. The Bank was
last audited for its taxable year ended December 31, 1988 For
federal income tax purposes, the Company and the Bank will file
separate income tax returns and report their income on a June 30
fiscal year basis using the accrual method of accounting and will
be subject to federal income taxation in the same manner as other
corporations with some exceptions, including particularly the
Bank's tax reserve for bad debts, discussed below.
Tax 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 an institution to recapture (i.e.,
take into income) certain portions of its 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, was permitted to be computed using an amount based on a
six-year moving average of the Bank's charge-offs for actual
losses (the "Experience Method"), or an amount 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. Use of the PTI Method had the effect of reducing the
marginal rate of federal tax on the Bank's income to 32.2%,
exclusive of any minimum or environmental tax, as compared to the
generally applicable maximum corporate federal income tax rate of
35%. The Bank's deduction with respect to non-qualifying loans
was required to be computed under the Experience Method. Each
year the Bank reviewed the most favorable way to calculate the
deduction attributable to an addition to the tax bad debt
reserves.
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. The Bank will be allowed to deduct
bad debts as incurred. 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 the
first taxable year beginning after December 31, 1995 (other than
its supplemental reserve for losses on loans) over the balance of
such reserves as of December 31, 1987. As a result of such
recapture, the Bank will pay additional federal tax of
approximately $1.1 million. Since the Bank has already provided
a deferred income tax liability of this amount for financial
reporting purposes, the enactment of the 1996 Act will not
adversely impact the Bank's financial condition or results of
operations. Moreover, such recapture will be suspended for each
of the two successive taxable years, beginning with the Bank's
current taxable year, in which the Bank originates a minimum of
certain residential loans based upon the average of the principal
amounts of such loans made by the Bank during its six taxable
years preceding its current taxable year.
Distributions. Under the 1996 Act, if the Bank makes "non-
dividend distributions" to the Company, such distributions will
be considered to have been made from the Bank's unrecaptured tax
bad debt reserve balance as of December 31, 1987, to the extent
thereof, and then from the Bank's supplemental reserve for losses
on loans, to the extent thereof, and an amount based on the
amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income. Non-dividend
distributions include distributions in excess of the Bank's
current and accumulated earnings and profits, as calculated for
federal income tax purposes, distributions in redemption of
stock, and distributions in partial or complete liquidation.
Dividends paid out of the Bank's current or accumulated earnings
and profits will not be so included in the Bank's income.
The amount of additional taxable income created from a non-
dividend distribution is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the
distribution. Thus, if, after the Conversion, the Bank makes a
non-dividend distribution to the Company, approximately one and
one-half times the amount of such distribution (but not in excess
of the amount of such reserves) would be includable in income for
federal income tax purposes, assuming a 35% federal corporate
income tax rate. See "Regulation" and "Dividend Policy" 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 tax bad debt reserves.
Corporate Alternative Minimum Tax. The Code imposes a tax
("AMT") on alternative minimum taxable income ("AMTI") at a rate
of 20%. AMTI is also adjusted by determining the tax treatment of
certain items in a manner that negates the deferral of income
resulting from the regular tax treatment of those items. Thus,
the Bank's AMTI is increased by an amount equal to 75% of the
amount by which the Bank's adjusted current earnings exceeds its
AMTI (determined without regard to this adjustment 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 million is imposed on
corporations, including the Bank, whether or not an AMT is paid..
State and Local Taxation
State of New York. The Bank and the Company are subject to
New York State franchise tax on one of several alternative bases,
whichever results in the highest tax, and will file combined
returns for purposes of this tax. The basic tax is measured by
"entire net income," which is federal taxable income with
adjustments. For New York State tax purposes, so long as the Bank
continues to meet certain definitional tests relating to its
assets and the nature of its business, it will be permitted
deductions, within specified formula limits, for additions to its
bad debt reserves for purposes of computing its entire net
income. The Bank's deduction with respect to "qualifying loans,"
which are generally loans secured by certain interests in real
property, may be computed using an amount based on the Bank's
actual loss experience (the "Experience Method") or an amount
equal to 32% of the Bank's entire net income (the "PTI Method"),
computed without regard to this deduction and reduced by the
amount of any permitted addition to the Bank's reserve for non-
qualifying loans. Because of a recent amendment to the New York
State tax law, the Bank is not required to recapture any portion
of its New York bad debt reserves because of the automatic
recapture of its federal bad debt reserves pursuant to the 1996
Act (see Federal Taxation, Tax Bad Debt Reserves). However, the
New York bad debt reserves are subject to recapture for "non-
dividend distributions" in a manner similar to the recapture of
the federal bad debt reserves for such distributions (see Federal
Taxation, Distributions). Also, the New York bad debt reserve is
subject to recapture in the event that the Bank fails to satisfy
the definitional tests. The Bank's deduction with respect to
non-qualifying loans must be computed under the Experience Method
which is based on the Bank's actual charge-offs. Each year the
Bank will review the most favorable way to calculate the
deduction attributable to an addition to the tax bad debt
reserves.
The New York State tax rate for the 1996 calendar year is
10.755% (including commuter transportation and other surcharges)
of net income. In general, the Company will not be required to
pay New York State tax on dividends and interest received from
the Bank.
City of New York. The Bank and the Company are also subject
to a similarly calculated New York City banking corporation tax
of 9% on income allocated to New York City. Unless the New York
City tax law is amended to conform with the New York State law,
the Bank will be required to include in its New York City income
for its current taxable year the excess of its post-1987 New York
City reserves for losses on qualifying real property loans over
its reserve for losses on such loans maintained for federal
income tax purposes (the "Excess Reserves"). If the Bank's Excess
Reserve of $29.6 million as of the first taxable year beginning
after December 31, 1995 were so included, the Bank would pay an
additional city tax liability of approximately $1.2 million.
Since the Bank has already provided a deferred income tax
liability of this amount for financial reporting purposes, this
will not adversely impact the Bank's financial condition or
results of operations.
State of Delaware. As a Delaware holding company not earning
income in Delaware, the Company is exempted from Delaware
corporate income tax, but is required to file an annual report
and pay an annual franchise tax to the State of Delaware.
Regulation
General
The Bank is subject to extensive regulation, examination, and
supervision by the OTS, as its chartering agency, and the FDIC,
as its deposit insurer. The Bank's deposit accounts are insured
up to applicable limits by the Bank Insurance Fund ("BIF") and
Savings Association Insurance Fund ("SAIF") administered by the
FDIC, and it is a member of the FHLBNY. The Bank must file
reports with the OTS and the FDIC concerning its activities and
financial condition, and it must obtain regulatory approvals
prior to entering into certain transactions, such as mergers
with, or acquisitions of, other depository institutions. The OTS
and the FDIC conduct periodic examinations to assess the Bank's
compliance with various regulatory requirements. This regulation
and supervision establishes a comprehensive framework of
activities in which a savings association can engage and is
intended primarily for the protection of the insurance fund and
depositors. The Company, as a unitary savings and loan holding
company, is required to file certain reports with, and otherwise
comply with, the rules and regulations of the OTS and of the
Securities and Exchange Commission (the ''SEC'') under the
federal securities laws.
The OTS and the FDIC have significant 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 reserves
for regulatory purposes. Any change in such policies, whether by
the OTS, the FDIC or the Congress, could have a material adverse
impact on the Company, the Bank, and the operations of both.
The following discussion is intended to be a summary of the
material statutes and regulations applicable to savings
associations, and it does not purport to be a comprehensive
description of all such statutes and regulations.
Regulation of Federal Savings Associations
Business Activities. The Bank derives its lending and
investment powers from the Home Owner's Loan Act, as amended
(''HOLA''), and the regulations of the OTS thereunder. Under
these laws and regulations, the Bank may invest in mortgage loans
secured by residential and commercial real estate, commercial and
consumer loans, certain types of debt securities, and certain
other assets. The Bank may also establish service corporations
that may engage in activities not otherwise permissible for the
Bank, including certain real estate equity investments and
securities and insurance brokerage. These investment powers are
subject to various limitations, including (a) a prohibition
against the acquisition of any corporate debt security that is
not rated in one of the four highest rating categories; (b) a
limit of 400% of an association's capital on the aggregate amount
of loans secured by non-residential real estate property; (c) a
limit of 10% of an association's assets on commercial loans; (d)
a limit of 35% of an association's assets on the aggregate amount
of consumer loans and acquisitions of certain debt securities;
(e) a limit of 5% of assets on non-conforming loans (loans in
excess of the specific limitations of HOLA); and (f) a limit of
the greater of 5% of assets or an association's capital on
certain construction loans made for the purpose of financing what
is or is expected to become residential property.
Loans to One Borrower. Under HOLA, savings associations are
generally subject to the same limits on loans to one borrower as
are imposed on national banks. Generally, under these limits, a
savings association may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of the
association's unimpaired capital and surplus. Additional amounts
may be lent, not in excess of 10% of unimpaired capital and
surplus, if such loans or extensions of credit are fully secured
by readily-marketable collateral. Such collateral is defined to
include certain debt and equity securities and bullion, but
generally does not include real estate. At June 30, 1996, the
Bank's limit on loans to one borrower was $12.4 million. At June
30, 1996, the Bank's largest aggregate amount of loans to one
borrower was $8.2 million and the second largest borrower had an
aggregate balance of $4.9 million.
QTL Test. HOLA requires a savings association to meet a QTL
test. Under the QTL test, a savings association is required to
maintain at least 65% of its ''portfolio assets'' in certain
''qualified thrift investments'' in at least nine months of the
most recent twelve-month period. ''Portfolio assets'' means, in
general, an association's total assets less the sum of (a)
specified liquid assets up to 20% of total assets, (b) certain
intangibles, including goodwill and credit card and purchased
mortgage servicing rights, and (c) the value of property used to
conduct the association's business. ''Qualified thrift
investments'' includes various types of loans made for
residential and housing purposes, investments related to such
purposes, including certain mortgage-backed and related
securities, and consumer loans up to 10% of the association's
portfolio assets. At June 30, 1996, the Bank maintained 76.0% of
its portfolio assets in qualified thrift investments. The Bank
had also met the QTL test in each of the prior 12 months and,
therefore, was a qualified thrift lender.
A savings association that fails the QTL test must either
operate under certain restrictions on its activities or convert
to a bank charter. The initial restrictions include prohibitions
against (a) engaging in any new activity not permissible for a
national bank, (b) paying dividends not permissible under
national bank regulations, (c) obtaining new advances from any
FHLB, and (d) establishing any new branch office in a location
not permissible for a national bank in the association's home
state. In addition, within one year of the date a savings
association ceases to meet the QTL test, any company controlling
the association would have to register under, and become subject
to the requirements of, the Bank Holding Company Act of 1956, as
amended. If the savings association does not requalify under the
QTL test within the three-year period after it failed the QTL
test, it would be required to terminate any activity and to
dispose of any investment not permissible for a national bank and
would have to repay as promptly as possible any outstanding
advances from an FHLB. A savings association that has failed the
QTL test may requalify under the QTL test and be free of such
limitations, but it may do so only once.
Capital Requirements. The OTS regulations require savings
associations to meet three minimum capital standards: a tangible
capital ratio requirement of 1.5% of total assets as adjusted
under the OTS regulations, a leverage ratio requirement of 3% of
core capital to such adjusted total assets, and a risk-based
capital ratio requirement of 8% of core and supplementary capital
to total risk-based assets. In determining the amount of risk-
weighted assets for purposes of the risk-based capital
requirement, a savings association must compute its risk-based
assets by multiplying its assets and certain off-balance sheet
items by risk-weights, which range from 0% for cash and
obligations issued by the United States Government or its
agencies, to 100% for consumer and commercial loans, as assigned
by the OTS capital regulation based on the risks OTS believes are
inherent in the type of asset.
Tangible capital is defined, generally, as common stockholders'
equity (including retained earnings), certain noncumulative
perpetual preferred stock and related earnings, minority
interests in equity accounts of fully consolidated subsidiaries,
less intangibles other than certain purchased mortgage servicing
rights and investments in and loans to subsidiaries engaged in
activities not permissible for a national bank. Core capital is
defined similarly to tangible capital, but core capital also
includes certain qualifying supervisory goodwill and certain
purchased credit card relationships. Supplementary capital
currently includes cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock, and the
allowance for possible loan losses. The allowance for loan and
lease losses includable in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital
cannot exceed the amount of core capital.
The OTS regulations require a savings association with ''above
normal'' interest rate risk is required to deduct a portion of
such capital from its total capital to account for the ''above
normal'' interest rate risk. A savings association's interest
rate risk is measured by the decline in the net portfolio value
of its assets (i.e., the difference between incoming and outgoing
discounted cash flows from assets, liabilities and off-balance
sheet contracts) resulting from a hypothetical 2% increase or
decrease in market rates of interest, divided by the estimated
economic value of the association's assets, as calculated in
accordance with guidelines set forth by the OTS. At the times
when the 3-month Treasury bond equivalent yield falls below 4%,
an association may compute its interest rate risk on the basis of
a decrease equal to one-half of that Treasury rate rather than on
the basis of 2%. A savings association whose measured interest
rate risk exposure exceeds 2% would be considered to have ''above
normal'' risk. The interest rate risk component is an amount
equal to one-half of the difference between the association's
measured interest rate risk and 2%, multiplied by the estimated
economic value of the association's assets. That dollar amount is
deducted from an association's total capital in calculating
compliance with its risk-based capital requirement. Any required
deduction for interest rate risk becomes effective on the last
day of the third quarter following the reporting date of the
association's financial data on which the interest rate risk was
computed. Pending other regulatory developments, the OTS has
deferred enforcing the general requirement to deduct capital on
account of "above normal" interest rate risk.
<TABLE>
The table below presents the Bank's regulatory capital as
compared to the OTS regulatory capital requirements at June 30,
1996:
<CAPTION>
Minimum
Actual Capital Requirement
------------------- ---------------------
Amount Ratio Amount Ratio
--------- --------- ----------- ---------
As of June 30, 1996:
<S> <C> <C> <C> <C>
Tangible.............................. $ 119,125 9.49% >= $18,828 >= 1.5%
Core Capital.......................... $ 119,259 9.50% >= $37,659 >= 3.0%
Risk-based capital.................... $ 126,715 21.24% >= $47,718 >= 8.0%
</TABLE>
The Bank received approximately $131.1 million of excess proceeds
resulting from the oversubscription of the Company's initial public
offering. The Bank's tangible, core, and risk-based capital ratios
were 10.60%, 10.61%, and 23.86% respectively, excluding the effects
of the excess proceeds on the balance sheet, at June 30, 1996.
The following is a reconciliation of generally accepted accounting
principles (GAAP) capital to regulatory capital for the Bank:
June 30, 1996
-----------------------------
Tangible Core Risk-Based
Capital Capital Capital
-------- --------- ----------
GAAP capital........................$148,008 $148,008 $148,008
--------- --------- ---------
Non-allowable assets:
Core deposit intangible............. (134) - -
Unrealized gain on AFS securities... (311) (311) (311)
Goodwill............................ (28,438) (28,438) (28,438)
General valuation allowance......... - - 7,456
--------- --------- ----------
Regulatory capital.................. 119,125 119,259 126,715
Minimum capital requirement......... 18,828 37,659 47,718
--------- --------- ----------
Regulatory capital-excess...........$100,297 $ 81,600 $78,997
========= ========= ==========
Limitation on Capital Distributions. OTS regulations
currently impose limitations upon capital distributions by
savings associations, such as cash dividends, payments to
repurchase or otherwise acquire its shares, payments to
shareholders of another institution in a cash-out merger, and
other distributions charged against capital. At least 30-days
written notice must be given to the OTS of a proposed capital
distribution by a savings association, and capital distributions
in excess of specified earnings or by certain institutions are
subject to approval by the OTS. An association that has capital
in excess of all fully phased-in regulatory capital requirements
before and after a proposed capital distribution and that is not
otherwise restricted in making capital distributions, could,
after prior notice but without the approval of the OTS, make
capital distributions during a calendar year equal to the greater
of (a) 100% of its net earnings to date during the calendar year
plus the amount that would reduce by one-half its ''surplus
capital ratio'' (the excess capital over its fully phased-in
capital requirements) at the beginning of the calendar year, or
(b) 75% of its net earnings for the previous four quarters. Any
additional capital distributions would require prior OTS
approval. In addition, the OTS can prohibit a proposed capital
distribution, otherwise permissible under the regulation, if the
OTS has determined that the association is in need of more than
normal supervision or if it determines that a proposed
distribution by an association would constitute an unsafe or
unsound practice. Furthermore, under the OTS prompt corrective
action regulations, the Bank would be prohibited from making any
capital distribution if, after the distribution, the Bank failed
to meet its minimum capital requirements, as described above. See
'' - Prompt Corrective Regulatory Action.''
The OTS has proposed regulations that would simplify the
existing procedures governing capital distributions by savings
associations. Under the proposed regulations, the approval of the
OTS would be required only for an association that is deemed to
be in troubled condition or that is undercapitalized or would be
undercapitalized after the capital distribution. A savings
association would be able to make a capital distribution without
notice to or approval of the OTS if it is not held by a savings
association holding company, is not deemed to be in troubled
condition, has received either of the two highest composite
supervisory ratings, and would continue to be adequately
capitalized after such distribution. Notice would have to be
given to the OTS by any association that is held by a savings
association holding company or that had received a composite
supervisory rating below the highest two composite supervisory
ratings. An association's capital rating would be determined
under the prompt corrective action regulations. See '' Prompt
Corrective Regulatory Action.''
The Company however, is subject to the terms of a certification
requested by and delivered to the OTS in connection with the
Bank's application to the OTS for approval of the Conversion,
which certification prohibits the Company from taking any actions
to further any payments to its shareholders through a return of
excess capital until June 26, 1997. The certification expressly
does not apply to taxable dividend payments made by the Company
or to dividend payments made by the Bank to the Company.
Liquidity. The Bank is required to maintain an average daily
balance of liquid assets (cash, certain time deposits, bankers'
acceptances, specified United States Government, state or federal
agency obligations, shares of certain mutual funds and certain
corporate debt securities and commercial paper) equal to a
monthly average of not less than a specified percentage of its
net withdrawable deposit accounts plus short-term borrowings.
This liquidity requirement may be changed from time to time by
the OTS to any amount within the range of 4% to 10% depending
upon economic conditions and the savings flows of member
institutions, and is currently 5%. OTS regulations also require
each savings association to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently 1%)
of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less. Monetary penalties may be
imposed for failure to meet these liquidity requirements. The
Bank's average liquidity ratio for the month ended June 30, 1996
was 43.0%, which exceeded the applicable requirements. The Bank
has never been subject to monetary penalties for failure to meet
its liquidity requirements.
Assessments. Savings associations are required by OTS
regulation to pay assessments to the OTS to fund the operations
of the OTS. The general assessment, paid on a semi-annual basis,
is computed upon the savings association's total assets,
including consolidated subsidiaries, as reported in the
association's latest quarterly Thrift Financial Report. During
January 1996, the Bank paid its first assessment as a federal
savings bank of $72,493 for the period January 1, 1996 through
June 30, 1996. Prior to that date, the Bank had not paid any OTS
assessments as it converted to a federal charter on November 1,
1995.
Branching. Subject to certain limitations, HOLA and the OTS
regulations permit federally chartered savings associations to
establish branches in any state of the United States. The
authority to establish such a branch is available (a) in states
that expressly authorize branches of savings associations located
in another state and (b) to an association that qualifies as a
''domestic building and loan association'' under the Internal
Revenue Code of 1986, which imposes qualification requirements
similar to those for a ''qualified thrift lender'' under HOLA.
See '' QTL Test.'' The authority for a federal savings
association to establish an interstate branch network would
facilitate a geographic diversification of the association's
activities. This authority under HOLA and the OTS regulations
preempts any state law purporting to regulate branching by
federal savings associations.
Community Reinvestment. Under the CRA, as implemented by OTS
regulations, a savings association 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. The 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 the CRA.
The CRA requires the OTS, in connection with its examination of a
savings association, to assess the association'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
association. The CRA also requires all institutions to make
public disclosure of their CRA ratings. The Bank received a
''Satisfactory'' CRA rating in its most recent examination.
In April 1995, the OTS and the other federal banking agencies
adopted amendments revising their CRA regulations. Among other
things, the amended CRA regulations substitute for the prior
process-based assessment factors a new evaluation system that
would rate an institution based on its actual performance in
meeting community needs. In particular, the proposed system would
focus on three tests: (a) a lending test, to evaluate the
institution's record of making loans in its service areas; (b) an
investment test, to evaluate the institution's record of
investing in community development projects, affordable housing,
and programs benefiting low or moderate income individuals and
businesses; and (c) a service test, to evaluate the institution's
delivery of services through its branches, ATMs, and other
offices. The amended CRA regulations also clarify how an
institution's CRA performance would be considered in the
application process.
Transactions with Related Parties. The Bank's authority to
engage in transactions with its ''affiliates'' is limited by the
OTS regulations and by Sections 23A and 23B of the Federal
Reserve Act (''FRA''). In general, an affiliate of the Bank is
any company that controls the Bank or any other company that is
controlled by a company that controls the Bank, excluding the
Bank's subsidiaries other than those that are insured depository
institutions. The OTS regulations prohibit a savings association
(a) from lending to any of its affiliates that is engaged in
activities that are not permissible for bank holding companies
under Section 4(c) of the Bank Holding Company Act (''BHC Act'')
and (b) from purchasing the securities of any affiliate other
than a subsidiary. Section 23A limits the aggregate amount of
transactions with any individual affiliate to 10% of the capital
and surplus of the savings association and also limits the
aggregate amount of transactions with all affiliates to 20% of
the savings association's capital and surplus. Extensions of
credit to affiliates are required to be secured by collateral in
an amount and of a type described in Section 23A, and the
purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with
affiliates, including loans and asset purchases, must be on terms
and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the
association as those prevailing at the time for comparable
transactions with nonaffiliated companies. In the absence of
comparable transactions, such transactions may only occur under
terms and circumstances, including credit standards, that in good
faith would be offered to or would apply to nonaffiliated
companies.
The Bank's authority to extend credit to its directors,
executive officers, and 10% shareholders, as well as to entities
controlled by such persons, is currently governed by the
requirements of Sections 22(g) and 22(h) of the FRA and
Regulation O of the Federal Reserve Board (''FRB'') thereunder.
Among other things, these provisions require that extensions of
credit to insiders (a) be made on terms that are substantially
the same as, and follow credit underwriting procedures that are
not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve
more than the normal risk of repayment or present other
unfavorable features and (b) not exceed certain limitations on
the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount
of the association's capital. In addition, extensions of credit
in excess of certain limits must be approved by the association's
board of directors.
Enforcement. Under the Federal Deposit Insurance Act (''FDI
Act''), the OTS has primary enforcement responsibility over
savings associations and has the authority to bring enforcement
action against all ''institution-affiliated parties,'' including
any controlling stockholder or any shareholder, attorney,
appraiser and accountant who knowingly or recklessly participates
in any violation of applicable law or regulation or breach of
fiduciary duty or certain other wrongful actions that causes or
is likely to cause a more than a minimal loss or other
significant adverse effect on an insured savings association.
Civil penalties cover a wide range of violations and actions and
range from $5,000 for each day during which violations of law,
regulations, orders, and certain written agreements and
conditions continue, up to $1 million per day for such violations
if the person obtained a substantial pecuniary gain as a result
of such violation or knowingly or recklessly caused a substantial
loss to the institution. Criminal penalties for certain financial
institution crimes include fines of up to $1 million and
imprisonment for up to 30 years. In addition, regulators have
substantial discretion to take enforcement action against an
institution that fails to comply with its regulatory
requirements, particularly with respect to its capital
requirements. Possible enforcement actions range from the
imposition of a capital plan and capital directive to
receivership, conservatorship, or the termination of deposit
insurance. Under the FDI Act, the FDIC has the authority to
recommend to the Director of OTS that enforcement action be taken
with respect to a particular savings association. If action is
not taken by the Director of the OTS, the FDIC has authority to
take such action under certain circumstances.
Standards for Safety and Soundness. The FDI Act, as amended
by FDICIA and the Riegle Community Development and Regulatory
Improvement Act of 1994 (''Community Development Act''), requires
the OTS, together with the other federal bank regulatory
agencies, to prescribe standards, by regulations or guidelines,
relating to internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest
rate risk exposure, asset growth, asset quality, earnings, stock
valuation, and compensation, fees and benefits and such other
operational and managerial standards as the agencies deem
appropriate. The OTS and the federal bank regulatory agencies
have adopted, effective August 9, 1995, a set of guidelines
prescribing safety and soundness standards pursuant to FDICIA, as
amended. The guidelines establish general standards relating to
internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. In
general, the guidelines require, among other things, appropriate
systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are
unreasonable or disproportionate to the services performed by an
executive officer, employee, director or principal shareholder.
The OTS and the other agencies determined that the adoption of
stock valuation standards was not appropriate. In addition, the
OTS adopted regulations pursuant that authorize, but do not
require, the OTS to order an institution that has been given
notice by the OTS that it is not satisfying any of such safety
and soundness standards to submit a compliance plan. If, after
being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an
accepted compliance plan, the OTS must issue an order directing
action to correct the deficiency and may issue an order directing
other actions of the types to which an undercapitalized
association is subject under the ''prompt corrective action''
provisions of FDICIA. If an institution fails to comply with such
an order, the OTS may seek to enforce such order in judicial
proceedings and to impose civil money penalties. Effective
October 1, 1996, the OTS and the federal bank regulatory agencies
adopted guidelines for identifying and monitoring asset quality
and earnings standards.
Real Estate Lending Standards. The OTS and the other federal
banking agencies adopted regulations to prescribe standards for
extensions of credit that (a) are secured by real estate or (b)
are made for the purpose of financing the construction of
improvements on real estate. The OTS 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 OTS guidelines, which include loan-to-value ratios
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 standards are justified.
Prompt Corrective Regulatory Action. Under the OTS prompt
corrective action regulations, the OTS is required to take
certain, and is authorized to take other, supervisory actions
against undercapitalized savings associations. For this purpose,
a savings association would be placed in one of five categories
based on the association's capital. Generally, a savings
association is treated as ''well capitalized'' if its ratio of
total capital to risk-weighted assets is at least 10.0%, its
ratio of core capital to risk-weighted assets is at least 6.0%,
its ratio of core capital to total assets is at least 5.0%, and
it is not subject to any order or directive by the OTS to meet a
specific capital level. A savings association will be treated as
''adequately capitalized'' if its ratio of total capital to risk-
weighted assets is at least 8.0%, its ratio of core capital to
risk-weighted assets is at least 4.0%, and its ratio of core
capital to total assets is at least 4.0% (3.0% if the association
receives the highest rating on the CAMEL financial institutions
rating system). A savings association that has a total risk-based
capital of less than 8.0% or a leverage ratio or a Tier 1 capital
ratio that is less than 4.0% (3.0% leverage ratio if the
association receives the highest rating on the CAMEL financial
institutions rating system) is considered to be
''undercapitalized.'' A savings association that has a total risk-
based capital of less than 6.0% or a Tier 1 risk-based capital
ratio or a leverage ratio of less than 3.0% is considered to be
''significantly undercapitalized.'' A savings association that
has a tangible capital to assets ratio equal to or less than 2%
is deemed to be ''critically undercapitalized.'' The elements of
an association's capital for purposes of the prompt corrective
action regulations are defined generally as they are under the
regulations for minimum capital requirements. As of the most
recent notification from the Office of Thrift Supervision
categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions
or events since that notification that management believes have
changed the institution's category. See ''- Capital
Requirements.''
The severity of the action authorized or required to be taken
under the prompt corrective action regulations increases as an
association's capital deteriorates within the three
undercapitalized categories. All associations are prohibited from
paying dividends or other capital distributions or paying
management fees to any controlling person if, following such
distribution, the association would be undercapitalized. An
undercapitalized association is required to file a capital
restoration plan within 45 days of the date the association
receives notice that it is within any of the three
undercapitalized categories. The OTS is required to monitor
closely the condition of an undercapitalized association and to
restrict the asset growth, acquisitions, branching, and new lines
of business of such an association. Significantly
undercapitalized associations are subject to restrictions on
compensation of senior executive officers; such an association
may not, without OTS consent, pay any bonus or provide
compensation to any senior executive officer at a rate exceeding
the officer's average rate of compensation (excluding bonuses,
stock options and profit-sharing) during the 12 months preceding
the month when the association became undercapitalized. A
significantly undercapitalized association may also be subject,
among other things, to forced changes in the composition of its
board of directors or senior management, additional restrictions
on transactions with affiliates, restrictions on acceptance of
deposits from correspondent associations, further restrictions on
asset growth, restrictions on rates paid on deposits, forced
termination or reduction of activities deemed risky, and any
further operational restrictions deemed necessary by the OTS.
If one or more grounds exist for appointing a conservator or
receiver for an association, the OTS may require the association
to issue additional debt or stock, sell assets, be acquired by a
depository association holding company or combine with another
depository association. The OTS and the FDIC have a broad range
of grounds under which they may appoint a receiver or conservator
for an insured depository association. Under FDICIA, the OTS is
required to appoint a receiver (or with the concurrence of the
FDIC, a conservator) for a critically undercapitalized
association within 90 days after the association becomes
critically undercapitalized or, with the concurrence of the FDIC,
to take such other action that would better achieve the purposes
of the prompt corrective action provisions. Such alternative
action can be renewed for successive 90-day periods. However, if
the association continues to be critically undercapitalized on
average during the quarter that begins 270 days after it first
became critically undercapitalized, a receiver must be appointed,
unless the OTS makes certain findings with which the FDIC concurs
and the Director of the OTS and the Chairman of the FDIC certify
that the association is viable. In addition, an association that
is critically undercapitalized is subject to more severe
restrictions on its activities, and is prohibited, without prior
approval of the FDIC from, among other things, entering into
certain material transactions or paying interest on new or
renewed liabilities at a rate that would significantly increase
the association's weighted average cost of funds.
When appropriate, the OTS can require corrective action by a
savings association holding company under the ''prompt corrective
action'' provisions of FDICIA.
Insurance of Deposit Accounts. Pursuant to FDICIA, the FDIC
established a new risk-based assessment system for determining
the deposit insurance assessments to be paid by insured
depository institutions. Under the new assessment system, which
began in 1993, 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. The three capital categories consist of
(a) well capitalized, (b) adequately capitalized, or (c)
undercapitalized. The FDIC also assigns an institution to one of
three supervisory subcategories within each capital group. The
supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information that 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. Under the
regulation, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to
which different assessment rates are applied.
The FDI Act requires that the BIF and the SAIF funds each be
recapitalized until reserves are at least 1.25% of the deposits
insured by that fund. After a fund reached the 1.25% reserve
ratio, the assessment rates for that fund could be reduced. The
FDIC reported that the BIF reached the required reserve ratio
during May 1995. As a result of the recapitalization of the BIF,
the FDIC reduced BIF-assessment rates. Beginning in 1993, the
assessment rates for the BIF and the SAIF had ranged from 0.23%
of deposits for an institution in the highest category (i.e.,
well-capitalized and financially sound, with no more than a few
minor weaknesses) to 0.31% of deposits for an institution in the
lowest category (i.e., undercapitalized and substantial
supervisory concern). Effective June 1, 1995, the FDIC reduced
the BIF assessment rates to a range of 0.04% to 0.27% of deposits
for such institutions. The Bank's assessment rates for 1995 were
0.23% of deposits through May 31, 1995 and were 0.04% of deposits
beginning on June 1, 1995.
On November 14, 1995, the FDIC again decided to reduce the BIF
assessments. Having determined that the BIF had sufficient
reserves in excess of the required 1.25% ratio, the FDIC decided
that ''well capitalized'' institutions without any significant
supervisory concerns should begin paying assessments at the
statutory minimum of $2,000 annually, beginning with the first
quarter of 1996, and the BIF-assessment rates for other
institutions range from 0.03% to 0.27% of deposits.
The FDIC has reported that, under current law and appropriate
financial projections, the SAIF is not expected to be
recapitalized until 2001. Accordingly, the FDIC has determined
that SAIF-insured institutions should continue to pay assessments
at the current SAIF assessment rates, which range from 0.23% of
deposits to 0.31% of deposits. The assessment rates on the Oakar
Deposits were not subject to the decrease in assessment rates and
continue to be assessed at a rate of 0.23%.
The resulting disparity in deposit insurance assessments rates
between the SAIF members and the BIF members is likely to provide
institutions paying only the BIF assessments with certain
competitive advantages in the pricing of loans and deposits, and
in lowered operating costs, pending any legislative action to
remedy the disparity. Congress considered proposed legislation to
address these issues.
The proposed Balanced Budget Act of 1995 (the "Budget Act"),
which was approved by the Congress but vetoed by the President,
included provisions that focused on a recapitalization of the
SAIF. Under the provisions of the Budget Act, all SAIF-member
institutions would have paid a special assessment to recapitalize
the SAIF, and the assessment base for the payments on the FICO
bonds (as herein defined) would have been expanded to include the
deposits of both BIF- and SAIF-insured institutions. The amount
of the special assessment required to recapitalize the SAIF was
then estimated to be approximately 80 basis points of the SAIF-
assessable deposits. The special assessment would have been
imposed as of the first business day of January 1996 or on such
other date prescribed by the FDIC not later than 60 days after
enactment of the Budget Act, based on the amount of SAIF deposits
on March 31, 1995. If an 80-basis-point assessment were assessed
against the Bank's deposits as of March 31, 1995, the Bank's
special assessment would be approximately $2.8 million, or $1.5
million on an after-tax basis.
The Budget Act also provided for the merger of the BIF and
SAIF on January 1, 1998, with such merger being conditioned upon
the prior elimination of the thrift charter. Congressional
leaders had also agreed that Congress should consider and act
upon separate legislation to eliminate the thrift charter as
early as possible in 1996. If adopted, such legislation would
require that the Bank, as a federal savings bank, convert to a
bank charter. See "- Financial Institution Regulation and
Possible Legislation."
The veto of the Budget Act by the President was not based on
the above described provisions of the Budget Act, and the federal
banking regulators continue to seek a legislative solution for
the recapitalization of the SAIF. In February 1996,
representatives of the FDIC, the OTS and the Treasury Department
stated to Congress that, unless Congress adopts legislation to
strengthen the SAIF, the SAIF's current problems could result in
an erosion of the SAIF deposit base, could cause a default on the
FICO bonds that are paid from SAIF assessments, and could leave
the SAIF unable to meet its obligations to insured depositors.
If enacted by Congress, legislation to recapitalize the SAIF
as proposed in the Budget Act would have the effect of reducing
the capital of SAIF member institutions by the after-tax cost of
the special SAIF assessment, plus any related additional tax
liabilities. The legislation would also have the effect of
reducing any differential that may otherwise be required in the
assessment rates for the BIF and SAIF.
Management cannot predict whether the above legislation or
any other legislative proposal will be enacted as described above
or, if enacted, the amount of any special SAIF assessment or
whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums. It also cannot be predicted whether some
other legislative action will be taken to address the BIF/SAIF
disparity and what consequences such action could have for SAIF
members. A significant increase in SAIF insurance premiums,
either absolutely or relative to BIF premiums, or a significant
one-time fee to recapitalize the SAIF could have an adverse
effect on the operating expenses and results of operations of the
Bank.
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 or the
OTS. The management of the Bank does not know of any practice,
condition or violation that might lead to termination of deposit
insurance.
Federal Home Loan Bank System. The Bank is a member of the
FHLBNY, which is one of the regional FHLBs composing the FHLB
System. Each FHLB provides a central credit facility primarily
for its member institutions. The Bank, as a member of the FHLBNY,
is required to acquire and hold shares of capital stock in the
FHLB in an amount at least equal to the greater of 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 FHLBNY. The Bank was
in compliance with this requirement with an investment in FHLB
stock at June 30, 1996, of $7.6 million. Any advances from a FHLB
must be secured by specified types of collateral, and all long-
term advances may be obtained only for the purpose of providing
funds for residential housing finance.
The FHLBs are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing
programs. These requirements could reduce the amount of earnings
that the FHLBs can pay as dividends to their members and could
also result in the FHLBs imposing a higher rate of interest on
advances to their members. The FHLBNY paid dividends on the
capital stock of $332,964, $367,131, and $422,943 and during the
years ended June 30, 1996, 1995 and 1994, respectively. If
dividends were reduced, or interest on future FHLB advances
increased, the Bank's net interest income would likely also be
reduced. Further, there can be no assurance that the impact of
FDICIA and the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (''FIRREA'') on the FHLBs will not also
cause a decrease in the value of the FHLB stock held by the Bank.
Federal Reserve System. The Bank is subject to provisions of
the FRA and the FRB's regulations pursuant to which depository
institutions may be required to maintain non-interest-earning
reserves against their deposit accounts and certain other
liabilities. Currently, reserves must be maintained against
transaction accounts (primarily NOW and regular checking
accounts). The FRB regulations generally require that reserves be
maintained in the amount of 3% of the aggregate of transaction
accounts up to $52.0 million. The amount of aggregate transaction
accounts in excess of $52.0 million are currently subject to a
reserve ratio of 10%, which ratio the FRB may adjust between 8%
and 12%. The FRB regulations currently exempt $4.3 million of
otherwise reservable balances from the reserve requirements,
which exemption is adjusted by the FRB at the end of each year.
The Bank is in compliance with the foregoing reserve
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
FRB, the effect of this reserve requirement is to reduce the
Bank's interest-earning assets. The balances maintained to meet
the reserve requirements imposed by the FRB may be used to
satisfy liquidity requirements imposed by the OTS. FHLB System
members are also authorized to borrow from the Federal Reserve
''discount window,'' but FRB regulations require such
institutions to exhaust all FHLB sources before borrowing from a
Federal Reserve Bank.
Regulation of Holding Company
The Company is a non-diversified unitary savings association
holding company within the meaning of HOLA, as amended. As such,
the Company is required to register with the OTS and is subject
to OTS regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority over
the Company and its non-savings association subsidiaries, if any.
Among other things, this authority permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to
the financial safety, soundness, or stability of a subsidiary
savings association.
HOLA prohibits a savings association holding company, directly
or indirectly, or through one or more subsidiaries, from
acquiring another savings association or holding company thereof,
without prior written approval of the OTS; acquiring or
retaining, with certain exceptions, more than 5% of a non-
subsidiary savings association, a non-subsidiary holding company,
or a non-subsidiary company engaged in activities other than
those permitted by HOLA; or acquiring or retaining control of a
depository institution that is not insured by the FDIC. In
evaluating an application by a holding company to acquire a
savings association, the OTS must consider the financial and
managerial resources and future prospects of the company and
savings association involved, the effect of the acquisition on
the risk to the insurance funds, the convenience and needs of the
community, and competitive factors.
As a unitary savings and loan holding company, the Company
generally is restricted under existing laws as to the types of
business activities in which it may engage, provided that the
Bank continues to satisfy the QTL test. See ''- Regulation of
Federal Savings Associations QTL Test'' for a discussion of the
QTL requirements. Upon any non-supervisory acquisition by the
Company of another savings association or savings bank that meets
the QTL test and is deemed to be a savings association by the OTS
and that will be held as a separate subsidiary, the Company will
become a multiple savings association holding company and will be
subject to limitations on the types of business activities in
which it can engage. HOLA limits the activities of a multiple
savings association holding company and its non-insured
association subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the BHC Act,
subject to the prior approval of the OTS, and to other activities
authorized by OTS regulation.
The OTS is prohibited from approving any acquisition that would
result in a multiple savings association holding company
controlling savings associations in more than one state, subject
to two exceptions: an acquisition of a savings association in
another state (a) in a supervisory transaction, and (b) pursuant
to authority under the laws of the state of the association to be
acquired that specifically permit such acquisitions. The
conditions imposed upon interstate acquisitions by those states
that have enacted authorizing legislation vary. Some states
impose conditions of reciprocity, which have the effect of
requiring that the laws of both the state in which the acquiring
holding company is located (as determined by the location of its
subsidiary savings association) and the state in which the
association to be acquired is located, have each enacted
legislation allowing its savings associations to be acquired by
out-of-state holding companies on the condition that the laws of
the other state authorize such transactions on terms no more
restrictive than those imposed on the acquiror by the state of
the target association. Some of these states also impose regional
limitations, which restrict such acquisitions to states within a
defined geographic region. Other states allow full nationwide
banking without any condition of reciprocity. Some states do not
authorize interstate acquisitions of savings associations.
Transactions between the Company and the Bank, including any of
its subsidiaries, and any of its affiliates are subject to
various conditions and limitations. See '' Regulation of Federal
Savings Associations Transactions with Related Parties.'' The
Bank must give 30-days written notice to the OTS prior to any
declaration of the payment of any dividends or other capital
distributions to the Company. See ''- Regulation of Federal
Savings Associations - Limitation on Capital Distributions.''
Federal Securities Laws
. The Company's Common stock is registered with the SEC under
Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Company is subject to the information,
proxy solicitation, insider trading restrictions and other
requirements under the Exchange Act.
<PAGE>
Item 2 - Properties
The Bank conducts its business through fifteen full-service
offices, including eight offices acquired from Conestoga.. The
Bank's Main Office and headquarters is located at 209 Havemeyer
Street, Brooklyn, 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.
<TABLE>
<CAPTION>
Date
Leased or Leased or Lease Expiration Net Book Value at
Owned Acquired Date June 30, 1996
--------- --------- ---------------- -----------------
<S> <C> <C> <C> <C>
Main Office ..................................... Owned 1906 - $398,031
209 Havemeyer Street
Brooklyn, New York 11211
Avenue M Branch ................................. Owned 1993 - 491,546
1600 Avenue M at E. 16th Street
Brooklyn, New York 11230
Bayside Branch .................................. Leased 1974 May, 2004 66,310
61-38 Springfield Boulevard
Bayside, New York 11364
Merrick Branch .................................. Owned 1960 - 252,426
1775 Merrick Avenue
Merrick, New York 11566
Hillcrest Branch ................................ Leased 1971 May, 2001 67,737
176-47 Union Turnpike
Flushing, New York 11366
Bellmore Branch ................................. Owned 1973 - 522,697
2412 Jerusalem Avenue
Bellmore, New York 11710
Bronx Branch <F1>................................ Leased 1965 October, 1996 48,905
1931 Turnbull Avenue
Bronx, New York 10473
Roslyn Branch.................................... Owned 1990 - 3,084,876
1075 Northern Boulevard
Roslyn, New York 11576
Gates Avenue Branch.............................. Owned 1905 - 282,020
1012 Gates Avenue
Brooklyn, New York 11221
Marine Park Branch<F2>............................ Owned 1993 - 821,135
2172 Coyle Street
Brooklyn, New York 11229
Kings Highway Branch............................. Owned 1976 - 845,493
1902-1904 Kings Highway
Brooklyn, New York 11229
Port Washington Branch........................... Owned 1971 - 496,215
1000 Port Washington Boulevard
Port Washington, New York 11050
Bensonhurst Branch............................... Owned 1978 - 1,367,523
1545 86th Street
Brooklyn, New York 11228
Whitestone Branch................................ Owned 1979 - 827,194
24-44 Francis Lewis Boulevard
Whitestone, New York 11357
Westbury Branch <F3>............................. <F4> 1994 - 599,281
622 Old Country Road
Westbury, New York 11590
Administrative Office ........................... Owned 1989 - 4,226,772
275 South 5th Street (Corner of Havemeyer Street)
Brooklyn, New York 11211
<FN>
<F1> The Bank has an option to extend this lease for an
additional ten year term at fair market rent, as determined by
the agreement of the parties or, if the parties cannot agree,
by arbitration.
<F2> Prior to October 2, 1993, this branch office was located at
2161 Coyle Street, Brooklyn, New York.
<F3> This branch office opened April 29, 1995.
<F4> Building owned, land leased. Lease expires in October, 2003.
</FN>
</TABLE>
Item 3 - Legal Proceedings
The Company is involved in various legal actions arising in the
ordinary course of its business which, in the aggregate, involve
amounts which are believed to be immaterial to the financial
condition and results of operations of the Bank.
On December 4, 1995, a purported class action complaint was filed
in the Delaware Chancery Court, New Castle County, on behalf of
the stockholders of Conestoga by Jeffrey Simon (''Plaintiff'')
against Conestoga, each of the members of the Conestoga Board,
and the Bank. The Plaintiff alleges that each of the members of
Conestoga's Board breached his fiduciary duties to Conestoga
stockholders by, among other things, agreeing to accept the
Acquisition consideration, which Plaintiff alleges is inadequate.
The Bank is alleged to have aided and abetted this breach.
Plaintiff seeks various remedies, including compensatory damages
in an unspecified amount.
On February 9, 1996, Conestoga and the director defendants filed
an answer in which they denied the allegations of liability
raised in the complaint and raised affirmative defenses. In
addition, they moved to dismiss the complaint. On February 12,
1996, the Bank filed its own motion to dismiss the complaint. On
or about
March 12, 1996, Plaintiff served a motion for leave to file an
amended complaint. In his proposed amended complaint, Plaintiff
asserts, among other things, that the proxy statement distributed
to Conestoga's stockholders did not provide sufficient
disclosure, that the Acquisition is unfair to Conestoga's
stockholders and disproportionately benefits Conestoga's Board
and the Bank.
The Court has not yet ruled on the Plaintiff's motion to amend
the complaint. The Bank intends to vigorously defend against the
claims made against it.
Item 4 - Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5- Market for the Company's Common Stock and Related
Stockholder Matters
Dime Community Bancorp, Inc. common stock is traded on the
Nasdaq National Market and quoted under the symbol "DIME."
The following table shows the high and low sales price during
the period indicated. The Company's Common stock began trading
on June 26, 1996, the date of the initial public offering.
1996 High Low
- ----------------- ------- --------
June 26 - June 28 $11.75 $11.6875
At June 28, 1996, the last trading date in the fiscal year, the
Company's stock closed at $11.6875. At September 23, 1996 the
Company had approximately 1,613 shareholders of record
respectively, not including the number of persons or entities
holding stock in nominee or street name through various brokers
and banks. There were 14,547,500 shares of common stock
outstanding at June 30, 1996.
The Board of Directors of the Company did not declare any
dividends on Common Stock during the year ended June 30, 1996.
The Board of Directors may consider a policy of paying cash
dividends on the Common Stock in the future subject to statutory
and regulatory requirements. However, no decision has been made
as to the amount or timing of such dividends. Declarations of
dividends by the Board of Directors, if any, will depend upon a
number of factors, including, investment opportunities available
to the Company or the Bank, capital requirements, regulatory
limitations, the Company's and the Bank's financial condition,
results of operations, tax considerations and general economic
conditions. No assurances can be given, however, that any
dividends will be paid or, if commenced, will continue to be
paid.
As the principal asset of the Company, the Bank will provide
the principal source of funds for payment of dividends by the
Company. The Bank will not be permitted to pay dividends on its
capital stock if its stockholders' equity would be reduced below
the amount required for the liquidation account. See ''Item 1 -
Business - Regulation.'' For information concerning federal
regulations which apply to the Bank in determining the amount of
proceeds which may be retained by the Company and regarding a
savings institution's ability to make capital distributions
including payment of dividends to its holding company, see ''Item
1 - Business - Regulation - Regulation of Federal Savings
Associations - Limitation on Capital Distributions'' and ''Item 1
- - Business - Federal and State Taxation - Federal Taxation -
Distributions.''
Unlike the Bank, the Company is not subject to OTS regulatory
restrictions on the payment of dividends to its shareholders,
although the source of such dividends will be dependent on the
net proceeds retained by the Company and earnings thereon and may
be dependent, in part, upon dividends from the Bank. The Company
is subject, however, to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the
net assets of the Company (the amount by which total assets exceed
total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately
preceding fiscal year. At June 30, 1996, the Company has
approximately $53.4 million available for the payment of dividends.
The Company however, is subject to the terms of a certification
requested by and delivered to the OTS in connection with the
Bank's application to the OTS for approval of the Conversion,
which certification prohibits the Company from taking any actions
to further any payments to its shareholders through a return of
excess capital until June 26, 1997. The certification expressly
does not apply to taxable dividend payments made by the Company
or to dividend payments made by the Bank to the Company.
Item 6. - Selected Financial Data
The selected consolidated financial and other data of the Company
set below is derived in part from and should be read in conjunction
with, the Consolidated Financial Statements of the Company and
Notes thereto presented under Item 8 of this document. No cash
dividends were declared or paid during the year ended June 30,
1996. As a result, dividends per share information is not
presented. Since the sale of the Company's stock occurred
substantially at year-end (June 26, 1996) earnings per share
information for the Company for the year ended June 30, 1996 is not
meaningful.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------
1996 1995 1994 1993 1992
--------------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
Total assets (1).................. $1,371,821 $662,739 $646,458 $645,899 $643,120
Loans, net(2)..................... 575,874 424,680 427,960 458,422 477,516
Mortgage-backed securities(3)..... 209,941 91,548 94,356 82,077 58,404
Investment securities (1)(3)...... 392,450 101,695 86,686 56,724 72,055
Federal funds sold (1)............ 115,130 17,809 7,029 21,037 9,348
Deposits.......................... 950,114 554,841 546,761 564,110 564,520
Stockholders' Equity (4).......... 213,071 77,067 67,919 58,920 49,648
<FN>
(Notes on following page)
</FN>
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended June 30,
----------------------------------------
1996(5) 1995 1994 1993 1992
------- -------- -------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Selected Operating Data:
Interest income..................................$52,619 $49,223 $49,821 $51,393 $55,230
Interest expense on deposits and borrowings...... 23,516 18,946 17,594 21,251 32,391
------- ------- -------- ------- -------
Net interest income.............................. 29,103 30,277 32,227 30,142 22,839
Provision for loan losses........................ 2,979 2,950 4,105 3,395 1,409
------- ------- -------- ------- -------
Net interest income after provision for loan
losses........................................... 26,124 27,327 28,122 26,747 21,430
Non-interest income.............................. 1,375 1,773 2,267 3,195 2,107
Non-interest expense............................. 14,021 14,053 12,714 12,214 11,768
------- ------- -------- ------- -------
Income before income tax expense and
cumulative effect of changes in accounting
principles....................................... 13,478 15,047 17,675 17,728 11,769
Income tax expense............................... 6,181 6,621 8,211 8,530 5,227
------- ------- -------- ------- -------
Income before cumulative effect of changes in
accounting principles............................ 7,297 8,426 9,464 9,198 6,542
Cumulative effect on prior years of changing to a
different method of accounting for:
Income taxes(6).................................. - - (383) - -
Post-retirement benefits other than
pensions(7)...................................... (1,032) - - - -
------- ------- -------- ------- -------
Net income....................................... $6,265 $8,426 $9,081 $9,198 $6,542
======= ======= ======== ======= =======
<FN>
(Notes on following page)
</FN>
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30,
-----------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Ratios and Other Data(8):
Performance Ratios:
Return on average assets(9)....................... 1.07% 1.33% 1.46% 1.47% 1.03%
Return on average equity(9)....................... 9.07 11.50 14.66 16.83 14.16
Average equity to average assets.................. 11.84 11.53 9.98 8.72 7.30
Equity to total assets at end of period........... 15.53 11.63 10.51 9.12 7.72
Average interest rate spread(10).................. 3.85 4.51 4.80 4.61 3.44
Net interest margin(11)........................... 4.41 4.91 5.12 4.95 3.72
Average interest-earning assets to average
interest-bearing liabilities.................... 115.68 113.15 111.50 109.66 105.26
Non-interest expense to average assets............ 2.06 2.21 1.97 1.95 1.86
Efficiency Ratio(12).............................. 45.98 44.11 37.63 38.18 48.29
Regulatory Capital Ratios(13):
Tangible capital.................................. 9.49% 11.53% 10.47% 9.07% 7.72%
Core capital...................................... 9.50 11.56 10.51 9.12 7.72
Total risk-based capital.......................... 21.24 22.18 19.83 14.13 11.59
Asset Quality Ratios and Other Data:
Total non-performing loans(14)....................$6,551 $5,073 $6,248 $11,632 $16,713
Other real estate owned, net......................$1,946 $4,466 $8,200 $7,981 $7,367
Ratios(15)(16):
Non-performing loans to total loans............... 1.12% 1.18% 1.45% 2.52% 3.48%
Non-performing loans and real estate owned
to total assets................................. 0.62 1.44 2.23 3.04 3.74
Allowance for loan losses to:
Non-performing loans................................. 19.25 101.99 58.15 25.76 12.53
Total loans.......................................... 1.34 1.20 0.84 0.65 0.44
Full service branches................................ 15 7 7 7 7
<FN>
(Notes follow)
</FN>
</TABLE>
(1) June 30, 1996, Investment securities include $125.0 million
and Federal funds sold include $6.1 million of excess proceeds
resulting from the oversubscription to the Company's initial
public offering, which was refunded on July 1, 1996.
(2) Loans, net, represents gross loans less net deferred
loan fees and allowance for loan losses.
(3) The Company has classified its securities as ''held-to-
maturity'' or ''available-for-sale'' since July 1, 1994, when
it adopted SFAS No. 115.
(4) Stockholders' Equity increased from June
30, 1995 to June 30, 1996 primarily due to the initial public
offering.
(5) Since the merger with Conestoga was completed at June 26, 1996,
its contribution to the Company's earnings and the effect
upon average balance computation for fiscal year ended
June 30, 1996 were not material.
(6) Pursuant to SFAS No. 109, on July 1, 1993, the Bank
changed prospectively to the deferred method of
accounting for income taxes. The effect of the adoption
of this standard is reflected in the financial statements
as the cumulative effect of adopting a change in
accounting principles.
(7) The Bank adopted SFAS No. 106 effective July 1, 1995.
The Bank elected to record the full accumulated post
retirement benefit obligation upon adoption. This resulted in
a cumulative effect adjustment of $1,032,000 (after reduction
for income taxes of $879,000) to apply retroactively to
previous years the new method of accounting, which is shown in
the consolidated statement of income for the year ended
June 30, 1996.
(8) With the exception of end of period ratios, all ratios
are based on average daily balances during the indicated
periods. Asset Quality Ratios and Regulatory Capital Ratios
are end of period ratios.
(9) Income before cumulative effect of changes in accounting
principles is used to calculate return on average assets and
return on average equity ratios.
(10) The interest rate spread represents the difference
between the weighted-average yield on interest-earning assets
and the weighted-average cost of interest-bearing liabilities.
(11) The net interest margin represents net interest income as
a percentage of average interest-earning assets.
(12) The efficiency ratio represents non-interest expense as a
percentage of the sum of net interest income and non-interest
income excluding any gains or losses on sales of assets.
(13) All ratios calculated for the Bank only. For
definitions and further information relating to the Bank's
regulatory capital requirements. See "Item 1- Business-
Regulation-Regulation of Federal Savings Associations."
(14) Non-performing loans consists of non-accrual loans; the
Bank did not have any loans that were 90 days or more past due
and still accruing at any of the dates presented. Non-
performing loans do not include troubled-debt restructurings
(''TDRs''). See "Item 1 -Business - Asset Quality - Non-
performing Assets and Troubled-Debt Restructurings.''
(15) Total loans represents loans, net, plus the allowance
for loan losses.
(16) The Bank adopted SFAS No. 114 on July 1, 1995.
<PAGE>
Item 7. -Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company began operations substantially at year end (June 26,
1996). Substantially all of the Company's earnings for the fiscal
year ended June 30, 1996 represented earnings of the Bank prior
to its acquisition of Conestoga Bancorp, Inc. The Bank's results
of operations are dependent primarily on net interest income,
which is the difference between the interest income earned on its
interest-earning assets, such as loans and securities, and the
interest expense on its interest-bearing liabilities, such as
deposits. The Bank also generates non-interest income such as
service charges and other fees. The Bank's non-interest expenses
primarily consist of employee compensation and benefits,
occupancy expenses, federal deposit insurance premiums, net costs
of other real estate owned, data processing fees and other
operating expenses. The Bank's results of operations are also
significantly affected by general economic and competitive
conditions (particularly changes in market interest rates),
government policies, changes in accounting standards and actions
of regulatory agencies.
Management Strategy
The Bank's primary management strategy is to increase its
household and deposit market shares in the communities it serves,
either through acquisitions or purchases of deposits, or by
direct marketing, and to increase its origination of, and
investment in, mortgage loans, with an emphasis on multi-family
loans. Multi-family lending is a significant business of the Bank
and reflects the fact that much of the housing in the Bank's
primary lending area is multi-family housing. The Bank's
secondary, or supplemental, strategy, is to provide a stable
source of liquidity and earnings through the purchase of short-to
medium-term, investment grade securities; seek to maintain the
Bank's asset quality for loans and other investments; and use
appropriate portfolio and asset/liability management techniques
in an effort to reduce the effects of interest rate volatility on
the Bank's profitability and capital.
Franchise Expansion. The Bank completed its merger of
Conestoga into the Bank on June 26, 1996, providing eight
additional full service branches with deposits totaling $394.3
million at June 26, 1996. The Bank will continue to evaluate
acquisition and other growth opportunities as they become
available. See "Item 1 - Business - Acquisition of Conestoga
Bancorp, Inc." Additionally, management plans to supplement this
strategy with direct marketing efforts designed to increase
household balances and the number of the Bank's services used per
household among its existing customers.
Loan Originations with an emphasis on Multi-family Lending.
Management believes that multi-family loans provide advantages as
portfolio investments. First, they provide a higher yield than
single family loans or investment securities of comparable
maturities or terms to repricing. Second, the Bank's market area
generally has provided a stable flow of new and refinanced multi-
family loan originations. In addition to its emphasis on multi-
family lending, the Bank will continue to market and originate
residential first mortgage loans secured primarily by owner-
occupied, one- to four-family residences, including condominiums
and cooperative apartments. See "Item 1 - Business - Lending."
Third, origination and processing costs for the Bank's multi-
family loans are lower per thousand than comparable single family
costs. In addition, to address the higher credit risk associated
with multi-family lending, management has developed what it
believes are reliable underwriting standards for loan
applications in order to maintain a consistent credit quality for
new loans.
Stable Source of Liquidity and Earnings. The Bank purchases
short- to medium-term investment grade securities combining what
management believes to be appropriate yield, liquidity, and
credit quality, in its efforts to achieve (1) a managed and
predictable source of liquidity to meet loan demand, (2) a stable
source of interest income and (3) diversification in the Bank's
portfolio of earning assets. This portfolio is comprised of fixed-
and adjustable-rate obligations of various corporate and federal
agency issuers $594.8 million at June 30, 1996. In accordance
with the Bank's policies, new investments in this category must
be rated at least ''investment grade'' upon purchase and have a
final maturity or repricing term no greater than ten years,
although no security purchased since 1990 has had a term to
maturity or repricing greater than five years. See "Item 1 -
Business - Investment Activities."
Asset Quality. The Bank has sought to maintain high asset
quality by utilizing comprehensive loan underwriting standards
and collection efforts and by generally limiting its origination
of mortgage loans to its market area. In addition, the Bank has
established a loan workout group whose responsibility is to
manage the Bank's Other Real Estate Owned (''OREO'') properties
and foreclosures. Total non-performing assets have decreased
steadily since 1992, due in part to the efforts of this group and
also to the general improvement in the area economy. See "Item 1
- - Business - Asset Quality." The Bank's ratio of non-performing
loans to total loans at year end ranged from 1.12% to 3.48%
during the five-year period ended June 30, 1996. Non-performing
assets to total assets averaged 2.21% during the last five years,
and was 0.62% at June 30, 1996. The Bank's allowance for loan
losses to non-performing loans averaged 63.5% over the five years
ended June 30, 1996, and was 119.25% at June 30, 1996.
Interest Rate Volatility. The Bank's profitability, like that
of most financial institutions, is dependent to a large extent
upon its net interest income, which is the difference between its
interest income on interest-earning assets, such as loans and
securities, and its interest expense on interest-bearing
liabilities, such as deposits and borrowings. The Bank's
balance sheet is primarily comprised of assets which mature or
reprice within five years, with a significant portion maturing or
repricing within one year. In addition, the Bank's deposit base
is comprised primarily of savings accounts, and certificates of
deposit with maturities of three years or less, representing
38.4% and 48.4%, respectively, of total deposits at June 30,
1996. As a result, at June 30, 1996, the Bank's interest-bearing
liabilities maturing or repricing within one year totaled $599.6
million, while interest earning assets maturing or repricing
within one year totaled $758.1 million, resulting in a positive
one-year interest sensitivity gap of $159.1 million, or 11.6% of
total assets. The Bank's estimate of repricing liabilities for
selected deposit types which do not carry contractual maturities,
such as savings accounts, is based upon the decay rate tables
published by the OTS.
Under interest rate scenarios other than that which existed on
June 30, 1996, the gap ratio for the Bank's assets and
liabilities could differ substantially based upon different
assumptions about how core deposit decay rates and loan
prepayments would change. For example, the Bank's interest rate
risk management model assumes that in a rising rate scenario, by
paying competitive rates on non-core deposits, a large share of
core deposits will transfer to certificates of deposit and be
retained, although at higher cost to the Bank. Also, loan and
mortgage-backed security prepayment rates would be expected to
slow, as borrowers postpone property sales or loan refinancings
until rates again decline. As a result, while a positive one-year
gap ratio indicates that the Bank's net interest income would
grow in a period of rising rates (that is, more assets reprice
upwards as rates rise than do liabilities), historically, the
opposite has been true. In every rising rate scenario since the
early 1980s, the Bank's net income has declined. Conversely, when
rates declined the Bank's net interest income has risen.
Increases in the level of interest rates also may adversely
affect the fair value of the Bank's and the Company's securities
and other earning assets. Generally, the fair value of fixed-rate
instruments fluctuates inversely with changes in interest rates.
As a result, increases in interest rates could result in
decreases in the fair value of the Bank's and the Company's
interest earning assets, which could adversely affect the
Company's results of operations if sold, or, in the case of
interest earning assets classified as available for sale, the
Company's stockholders' equity if retained. Under SFAS No. 115,
which was adopted by the Bank on July 1, 1994, changes in the
unrealized gains and losses, net of taxes, on securities
classified as available for sale will be reflected in the
Company's stockholders' equity. As of June 30, 1996, the
Company's securities portfolio included $498.7 million in
securities classified as available for sale. Accordingly, as a
result of adoption of SFAS No. 115 and the magnitude of the
Company's holdings of securities available for sale, changes in
interest rates could produce significant changes in the value of
such securities and could produce significant fluctuations in the
stockholders' equity of the Company.
The Company relies primarily on an income-simulation model to
measure its risk exposure to changes in interest rates. Income-
simulation analysis attempts to capture not only the potential of
assets and liabilities to mature or reprice but also the
potential magnitude of these changes based upon various sets of
assumptions used in the model. The interest rate risk management
strategy of the Company is designed to stabilize net interest
income and preserve capital over a broad range of interest rate
movements and has three primary components:
Assets. To aid in the implementation of this strategy, in
addition to the origination of multi-family loans, management has
sought to include various types of adjustable-rate single family
(including cooperative apartment) whole loans and adjustable-rate
investment securities in its portfolio. These categories of
adjustable-rate assets generally have repricing terms of 3 years
or less. Adjustable-rate whole loans (single family and
cooperative apartments) totaled $141.3 million as of June 30,
1996, and adjustable-rate investment securities (mortgage-backed
securities issued by GSEs) totaled $131.3 million at the same
date.
Deposit Liabilities. The Bank, a traditional community-based
savings bank, is largely dependent upon its base of competitively
priced core deposits to provide stability on the liability side
of the balance sheet. The Bank has retained many loyal customers
over the years through a combination of service quality,
convenience, and a stable and experienced staff. Core deposits at
June 30, 1996 were $454.4 million, or 47.8% of total deposits.
The balance of certificates of deposit as of June 30, 1996 was
$495.8 million, or 52.2% of total deposits. Depending on market
conditions, management prices its certificates of deposit in an
effort to encourage the extension of the average maturities of
deposit liabilities beyond one year. Over the twelve-month period
ending June 30, 1996, the Bank had an 80.4% retention rate on
maturing certificates of deposit.
Wholesale Funds. The Bank does not accept brokered deposits
as a source of funds and has no plans to do so in the future.
However, the Bank is a member of the FHLBNY which provides it
with a borrowing line equal to $152.0 million. From time to time,
the Bank will borrow ("Advances") from the FHLBNY for various
purposes. At June 30, 1996, the Bank had $15.7 million in
medium-term advances outstanding.
The following table sets forth the amounts of interest-earning
assets and interest-bearing liabilities outstanding at June 30,
1996, which are anticipated by the Bank, based upon certain
assumptions, to reprice or mature in each of the future time
periods shown. Except as stated below, the amount of assets and
liabilities shown which reprice or mature during a particular
period were determined based on the earlier of term to repricing
or the term to repayment of the asset or liability. The table is
intended to provide an approximation of the projected repricing
of assets and liabilities at June 30, 1996 on the basis of
contractual maturities, anticipated prepayments, and scheduled
rate adjustments within a three-month period and subsequent
selected time intervals. For purposes of presentation in the
following table, the Bank utilized the national deposit decay
rate assumptions published by the OTS as of December 31, 1992
(the latest available), which for savings accounts, NOW and Super
NOW accounts and money market accounts in the one year or less
category, were 17%, 37% and 79%, respectively. The loan amounts
in the table reflect principal balances expected to be redeployed
and/or repriced as a result of contractual amortization and
anticipated early payoffs of adjustable-and fixed-rate loans, and
as a result of contractual rate adjustments on adjustable-rate
loans. The amounts attributable to mortgage-backed securities
reflect principal balances expected to be redeployed and/or
repriced as a result of anticipated principal repayments, and as
a result of contractual rate adjustments on adjustable-rate
mortgage-backed securities.
<TABLE>
<CAPTION>
At June 30, 1996
-----------------------------------------------------------------------------------------
More than More than More than More than
3 Months 3 Months 6 Months 1 Year 3 Years More than Non-interest
or Less to 6 Months to 1Year to 3 Years to 5 Years 5 Years Bearing Total
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets<F1>:
Mortgages and other loans (total)..... $48,559 $48,289 $96,579 $100,904 $206,163 $83,192 $- $583,686
Investment securities................. 237,474 19,717 50,224 52,227 8,312 16,892 - 384,846
Mortgage-backed securities<F2>........ 44,465 35,879 54,736 40,964 19,386 14,511 - 209,941
Federal funds sold.................... 115,130 - - - - - - 115,130
FHLB capital stock.................... 7,604 - - - - - - 7,604
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
Total interest-earning assets......... 453,252 103,885 201,539 194,095 233,861 114,595 - 1,301,207
Less:
Loan loss reserves.................... - - - - - - (7,812) (7,812)
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
Net interest-earning assets........... 453,252 103,885 201,539 194,095 233,861 114,595 (7,812) 1,293,395
Non-interest-earning assets........... - - - - - - 78,426 78,426
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
Total assets.......................... $453,252 $103,885 $201,539 $194,095 $233,861 $114,595 $70,614 $1,371,821
========= =========== ========= ========== ========== ========== ============ ===========
Interest-bearing liabilities:
Savings accounts...................... $15,519 $15,519 $31,037 $94,285 $61,467 $147,319 $- $365,146
NOW and Super NOW accounts............ 1,441 1,441 2,882 5,277 1,412 3,128 - 15,581
Money market accounts................. 9,075 9,075 18,149 5,055 2,407 2,187 - 45,948
Certificates of deposit............... 124,903 96,316 138,137 100,339 36,060 - - 495,755
Borrowed funds........................ 5,000 - - 20,710 - 1,998 - 27,708
Interest-bearing escrow............... 131,052 - - - - 2,898 - 133,950
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
Total interest-bearing liabilities.... 286,990 122,351 190,205 225,666 101,346 157,530 - 1,084,088
Checking accounts..................... - - - - - - 27,684 27,684
Other non-interest-bearing
liabilities........................... - - - - - - 46,978 46,978
Equity................................ - - - - - - 213,071 213,071
--------- ----------- --------- ---------- ---------- ---------- ------------ -----------
Total liabilities and
Stockholders' Equity.................. $286,990 $122,351 $190,205 $225,666 $101,346 $157,530 $287,733 $1,371,821
========= =========== ========= ========== ========== ========== ============ ===========
Interest sensitivity gap per period... $166,242 $(18,466) $11,334 $(31,571) $132,515 $(42,935) -
========= =========== ========= ========== ========== ==========
Cumulative interest sensitivity gap... $166,242 $147,766 $159,110 $127,539 $260,054 $217,119 -
========= =========== ========= ========== ========== ==========
Cumulative interest sensitivity gap as
a percent of total assets............. 12.12% 10.77% 11.60% 9.30% 18.96% 15.83% -
Cumulative total interest-earning
assets as a percent of cumulative
total interest-bearing liabilities.... 157.93% 136.10% 126.54% 115.46% 128.07% 120.03% -
<FN>
<F1> Interest-earning assets are included in the period in which
the balances are expected to be redeployed and/or repriced as
result of anticipated pre-payments, scheduled rate
adjustments, and contractual maturities.
<F2> Based upon historical repayment experience.
</FN>
</TABLE>
Certain shortcomings are inherent in the method of analysis
presented in the foregoing table. For example, although certain
assets and liabilities may have similar maturities or periods to
repricing, they may not react correspondingly to changes in
market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate with changes in market
interest rates, while interest rates on other types of assets may
lag behind changes in market rates. Additionally, certain assets,
such as adjustable-rate loans, have features, like annual and
lifetime rate caps, which restrict changes in interest rates both
on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates, prepayment and early
withdrawal levels would likely deviate from those assumed in the
table. Finally, the ability of certain borrowers to make
scheduled payments on their adjustable-rate loans may decrease in
the event of an interest rate increase.
Analysis of Net Interest Income
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing
liabilities. Net interest income depends upon the relative
amounts of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on them.
The following table sets forth certain information relating to
the Company's consolidated statements of operations for the years
ended June 30, 1996, 1995 and 1994, and reflects the average
yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing income
or expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived
from average daily balances. The yields and costs include fees
which are considered adjustments to yields.
<TABLE>
<CAPTION>
For the Years Ended June 30,
--------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
---------- -------- --------- -------- --------- --------- --------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Real estate loans<F1>.................... $435,948 $39,314 9.02% $427,042 $38,375 8.99% $451,699 $40,596 8.99%
Other loans.............................. 3,497 340 9.72 3,803 307 8.07 4,006 337 8.41
Mortgage-backed securities<F2>........... 89,001 5,927 6.66 89,232 5,464 6.12 86,040 4,858 5.65
Investment securities<F2><F3>............ 107,206 5,738 5.35 84,188 4,402 5.23 69,975 3,454 4.94
Federal funds sold....................... 23,904 1,300 5.44 12,179 675 5.54 18,000 576 3.20
--------- ------- ---------- -------- ---------- --------
Total interest-earning assets............ 659,556 $52,619 7.98 616,444 $49,223 7.99% 629,720 $49,821 7.91%
========= ======= ========== ======== ========== ========
Allowance for loan losses................ (4,797) (4,404) (3,278)
Non-interest-earning assets.............. 25,221 23,662 20,476
--------- ---------- ----------
Total assets............................. $679,980 $635,702 $646,918
========= ========== ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW, Super NOW and Money
market accounts.......................... $30,759 $634 2.06% $33,583 $716 2.13% $37,334 $840 2.25%
Savings accounts......................... 232,631 5,789 2.49 264,247 6,575 2.49 294,348 7,511 2.55
Certificates of deposit.................. 285,524 16,013 5.61 225,785 10,571 4.68 213,092 8,219 3.86
Mortgagors' escrow....................... 3,371 72 2.14 3,253 71 2.18 3,183 67 2.10
Borrowed funds........................... 17,854 1,008 5.65 17,922 1,013 5.65 16,819 957 5.69
--------- -------- ---------- -------- ---------- --------
Total interest bearing liabilities....... 570,139 23,516 4.12 544,790 $18,946 3.48% 564,776 $17,594 3.11%
--------- ======== ---------- ======== ---------- ========
Checking accounts........................ 11,646 10,950 10,926
Other non-interest bearing liabilities... 17,718 6,678 6,647
--------- ---------- ----------
Total liabilities........................ 599,503 562,418 582,349
Stockholders' equity..................... 80,477 73,284 64,569
---------- ---------- ----------
Total liabilities and equity............. $ 679,880 $ 635,702 $646,918
========== ========== ==========
Net interest income/interest rate
spread<F4>............................... $29,103 3.85% $30,277 4.51% $32,227 4.80%
======== ======== ========
Net interest-earning assets/net interest
margin<F5>............................... $ 89,417 4.41% $71,654 4.91% $64,944 5.12%
========= ========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities............. 115.68% 113.15% 111.50%
<FN>
<F1> In computing the average balance of loans, non-accrual loans
have been included.
<F2> Includes securities classified ''available for sale.''
<F3> Includes interest bearing deposits in other banks and FHLB
stock.
<F4> Net interest rate spread represents the difference between the
average rate on interest-earning assets and the average cost
of interest-bearing liabilities.
<F5> Net interest margin represents net interest income as a
percentage of average interest-earning assets.
</FN>
</TABLE>
Rate/Volume Analysis
Net interest income can also be analyzed in terms of the impact
of changing interest rates on interest-earning assets and
interest-bearing liabilities and changing the volume or amount of
these assets and liabilities. The following table represents the
extent to which changes in interest rates and changes in the
volume of interest-earning assets and interest-bearing
liabilities have affected the Bank's interest income and interest
expense during the periods indicated. Information is provided in
each category with respect to (i) changes attributable to changes
in volume (change in volume multiplied by prior rate), (ii)
changes attributable to rate (changes in rate multiplied by prior
volume), and (iii) the net change. Changes attributable to the
combined impact of volume and rate have been allocated
proportionately to the changes due to the volume and the changes
due to rate.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
Compared to Compared to Compared to
Year Ended Year Ended Year Ended
June 30, 1995 June 30, 1994 June 30, 1993
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
Due to Due to Due to
--------------------------- --------------------------- -------------------------
Volume Rate Net Volume Rate Net Volume Rate Net
------- --------- --------- --------- ------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Real estate loans........... $802 $137 $939 $(2,216) $(5) $(2,221) $(1,691) $(375) $(2,066)
Other loans................. (28) 61 33 (17) (13) (30) 6 (38) (32)
Mortgage-backed securities.. (24) 487 463 188 418 606 1,735 (1,076) 659
Investment securities....... 1,431 (95) 1,336 722 226 948 328 (682) (354)
Federal funds sold.......... 1,036 (411) 625 (254) 353 99 195 26 221
------- --------- --------- --------- ------- --------- --------- --------- ---------
Total....................... $3,217 $179 $3,396 $(1,577) $979 $(598) $573 $(2,145) $(1,572)
======= ========= ========= ========= ======= ========= ========= ========= =========
Interest-bearing liabilities:
NOW, Super NOW and
money market accounts..... $(76) $ (6) $(82) $(82) $(42) $(124) $(9) $(190) $(199)
Savings accounts............ (976) 190 (786) (759) (177) (936) 725 (1,667) (942)
Certificate of deposit and
other..................... 3,846 1,596 5,442 542 1,810 2,352 (572) (1,283) (1,855)
Mortgagors' escrow.......... 8 (7) 1 2 2 4 9 1 10
Borrowed funds.............. (6) 1 (5) 63 (7) 56 (160) (511) (671)
------- --------- --------- --------- ------- --------- --------- --------- ---------
Total....................... 2,796 1,774 4,570 (234) 1,586 1,352 (7) (3,650) (3,657)
------- --------- --------- --------- ------- --------- --------- --------- ---------
Net change in net
interest income........... $ 421 $(1,595) $ (1,174) $(1,343) $(607) $(1,950) $580 $1,505 $2,085
======= ========= ========= ========= ======= ========= ========= ========= =========
</TABLE>
Comparison of Financial Condition at June 30,1996 and June 30,1995
The Company's assets grew $709.1 million during the fiscal
year ended June 30, 1996, increasing to $1.37 billion at June 30,
1996 from $662.7 million at June 30, 1995. The growth resulted
primarily from increases of $406.3 million and $151.2 million in
investment and mortgage-backed securities and loans respectively.
Both investment and loan growth were enhanced by the acquisition
of Conestoga, which provided $295.2 million and $113.1 million of
investments and mortgage-backed securities and loans
respectively.
In addition, the Company's investment in federal funds sold
increased by $97.3 million, due primarily to net proceeds of
$141.4 raised in the Company's initial public offering, as well
as excess proceeds of $131.1 million resulting from the
oversubscription to the Company's initial public offering, which
were refunded to subscribers on July 1, 1996.
The Company continued its strategy of emphasizing multi-
family lending with multi-family loan originations of $94.4
during the fiscal year ended June 30, 1996. As a result, multi-
family loans grew to $296.6 million or 21.6% of assets (23.9% of
Adjusted assets) at June 30, 1996 from $252.4 million at June 30,
1995. In addition, the Company increased its non-residential
loans by $10.7 million. Growth in both of these segments were
attributable to more competitive loan pricing during the period.
Offsetting this growth were declines of $2.4 million and $14.2
million in one-to-four family residential loans (excluding loans
acquired from Conestoga) and cooperative apartment loans, as the
Company originated only $6.6 million of one-to-four family and
cooperative apartment loans, the majority of which were fixed
rate loans sold in the secondary market.
The acquisition of Conestoga provided $124.4 million of
mortgage-backed securities, of which $70.0 million were GNMAs,
and $170.8 of investment securities, of which $119.1 million and
$51.7 million was comprised of agency obligations and corporate
obligations, respectively. The growth in securities portfolio
also reflected the proceeds from the initial public offering and
the excess subscription proceeds.
The growth in assets was funded primarily through increased
stockholders' equity of $136.0 million and the excess
subscription proceeds of $131.1 million included in escrow and
other deposits at June 30, 1996. The growth in stockholders'
equity was due primarily to $141.4 million in net proceeds
received from the Company's initial public offering and $6.3
million in net income for the year. Offsetting these increases
to equity was purchases of the Company's Common Stock by the ESOP
totaling $11.6 million. Total stockholders' equity was $213.1
million or 15.53% of total assets (17.17% of Adjusted Assets) at
June 30, 1996.
The Company acquired deposits totaling $394.3 million from
Conestoga. Removing this effect, deposits increased only $1.0
million during the year ended June 30, 1996, as net outflows of
$21.6 million offset interest credits of $22.7 million.
Liabilities at June 30, 1996 reflect a purchase by the Company of
$34.0 million of investment securities available for sale dated
June 28, 1996 for which the proceeds were not disbursed until
after July 1, 1996.
The Company utilized the proceeds raised in the initial
public offering to fund the Merger Consideration of $101.3
million for the Bank's acquisition of Conestoga. The Acquisition
resulted in goodwill of $28.4 million, which is currently being
amortized over a twelve year period.
Comparison of Financial Condition at June 30, 1995 and June 30,
1994
Total assets increased to $662.7 million at June 30, 1995, from
$646.5 million at June 30, 1994, an increase of $16.2 million.
The annual growth that occurred in fiscal year 1995 was funded by
a combination of net income, which was $8.4 million, and deposit
growth, which totaled $8.1 million for the year.
Asset growth was concentrated in the Bank's securities
portfolio, as weak demand for new residential mortgages at the
rates offered, and strong prepayment activity in the existing
mortgage loan portfolio, combined to lower the Bank's loan
holdings. Total loans fell $1.7 million to $429.9 million at June
30, 1995. A portion of the liquidity created by the combination
of the increase in deposits (which was due to interest credited)
and the reduction in the size of the loan portfolio is reflected
in the $10.8 million increase in the size of the Bank's
investment in federal funds sold, which was $17.8 million at June
30, 1995. The remaining liquidity was used for new security
purchases. Growth in the securities portfolio totaled $12.2
million, primarily attributable to new purchases of short-term,
fixed-rate securities backed by GSEs, consistent with the Bank's
supplemental strategy of seeking investments that provide a
stable source of liquidity and earnings. See ''Management
Strategy Stable Source of Liquidity and Earnings.'' At June 30,
1995, the Bank's investment in mortgage-backed and investment
securities had increased to $193.2 million, as compared to $181.0
million at June 30, 1994.
Total equity of the Bank was $77.1 million at June 30, 1995, or
11.63% of total assets. This compares with total equity of $67.9
million and an equity to total assets ratio of 10.51% at June 30,
1994. Included in the equity calculation is a component
recognizing the net unrealized gain or loss on the Bank's
available for sale securities portfolio, as required by SFAS No.
115, which the Bank adopted effective July 1, 1994. The net
addition to equity resulting from this requirement totaled
$416,000, net of deferred taxes, at June 30, 1995. Whether the
application of SFAS No. 115 will result in an addition to or a
deduction from equity in the future is subject to change with
changes in market conditions and interest rates. See '' Impact of
Accounting Standards.''
Comparison of Operating Results for the Fiscal Years Ended June
30, 1996 and 1995
General. Net income for the fiscal year ended June 30, 1996
was $6.3 million as compared to $8.4 million for the fiscal year
ended June 30, 1995. Income before cumulative effect of change in
accounting principles for the year ended June 30, 1996 was $7.3
million, a decrease of $1.1 million from $8.4 million for prior
year. Decreases of $1.2 million and $398,000 in net interest
income and non-interest income, respectively, were offset by a
$440,000 decrease in income tax expense.
Interest Income. Interest income amounted to $52.6 million
for the year ended June 30, 1996, representing an increase of
$3.4 million from the prior year. The increase was the result of
the effect of a $43.1 million increase in average interest-
earning assets, as the average yield on interest-earning assets
decreased by 1 basis point. The largest components of the
increase in interest income were interest income on real estate
loans, investment securities and federal funds sold, of $939,000,
$1.3 million and $625,000, respectively. All of these increases
were driven primarily by the increases in average interest-
earning assets of $8.9 million, $23.0 million and $11.7 million,
in real estate loans, investment securities and federal funds
sold, respectively. Average yields on real estate loans, and
investment securities increased by 3 basis points and 12 basis
points respectively, while the average yield on federal funds
sold declined by 10 basis points. The small increase in yields
on these assets resulted from general increase in interest rates
during the year ended June 30, 1996 offset by a shift of funds
to shorter-term, lower yielding investments and competitive loan
pricing, which reduced rates slightly on loan originations. The
increase in average interest-earning assets is consistent with
the Bank's supplemental strategy of seeking loan growth and
investments that provide a stable source of earnings. See "-
Management Strategy." Since much of the real estate loan
originations occurred during the fourth quarter, its effect upon
average balance and interest income for the year ended June 30,
1996 was minor.
Interest Expense. Interest expense was $23.5 million for the
fiscal year 1996, an increase of $4.6 million from fiscal year
1995. Interest-bearing liabilities averaged $570.1 million for
the year ended June 30, 1996, representing an increase of $25.3
million, or 4.65%, over the prior year. The average rate paid on
interest-bearing liabilities increased 64 basis points, from
3.48% to 4.12%. The increase in the average rate paid on interest-
bearing liabilities resulted from the higher interest rate
environment and from a steady shift of deposits out of savings
accounts and into higher costing certificates of deposit.
Management's strategy of paying competitive interest rates on
certificates of deposit with maturities in excess of one year,
which management believes should help to stabilize the Bank's
cost of funds over the longer term, contributed to a higher cost
of funds in the current period. Average savings account balances
decreased by $31.6 million from $264.2 million for the year ended
June 30, 1995 to $232.6 million for the year ended June 30, 1996,
at the same time the average certificates of deposit balance
increased by $59.7 million from $225.8 million for the year ended
June 30, 1995 to $285.5 million for the year ended June 30, 1996.
The average rate paid on certificates of deposit increased by 93
basis points over the same period.
Provision for loan losses. The provision for loan losses
increased slightly to $2.97 million for the year ended June 30,
1996 from $2.95 million for the year ended June 30, 1995. The
allowance for loan losses increased from $5.2 million at June 30,
1995 to $7.8 million at June 30, 1996, reflecting net charge-offs
of $1.0 million during the fiscal year ended June 30, 1996
compared to $1.4 million for the fiscal year ended June 30, 1995,
the provision for loan losses, and the addition for Conestoga
allowance for loan losses of $668,000. In management's judgment,
it was prudent to continue to increase the loan loss allowance
based upon an evaluation of the adequacy of the reserve in the
context of the Bank's historical loan loss experience and to
reflect the growing volume of multi-family loan originations
during 1996. Although charge-offs declined during fiscal 1996 to
fiscal 1995, the Bank experienced an increase in non-performing
loans of $1.5 million, from $5.1 million at June 30, 1995 to $6.6
million at June 30, 1996. See "Item 1 -Business - Asset Quality."
Non-interest income. Non-interest income declined $398,000 to
$1.4 million for the year ended June 30, 1996 from $1.8 million
for the year ended June 30, 1995. This decrease reflects a $53,000
reduction in net gain on the sale of OREO, a decrease of $258,000
on net gains on sales of stock, and a decline of $136,000 in
income provided from service charges. The decrease in net gain on
sale of stocks was attributable primarily to a loss of $195,000 on
the sale of preferred stocks in December, 1995. The decrease in
income provided by service charges resulted primarily from a
change in the manner in which the Bank accounts for income from
the rental of safe deposit boxes. In addition, declines of
$34,000 and $39,000 occurred in dividends on FHLBNY stock and
annuity fees, respectively. Offsetting these declines, was an
increase of $106,000 in net gains on sale of bonds.
Non-interest expense. Non-interest expense declined $32,000 from
$14.1 million for the year ended June 30, 1995 to $14.0 million
for the year ended June 30, 1996, attributable primarily to a
decrease of $1.1 million in insurance premiums paid to the Federal
Deposit Insurance Corporation ("FDIC"). This decrease resulted
from a reduction in the rate paid by the Bank to the FDIC for
deposit insurance premiums, combined with a refund from the FDIC
for premiums previously paid in the amount of $319,000. The Bank
acquired $394.3 million of deposits insured by SAIF, from
Conestoga, on which the annual insurance premium is expected to be
$0.23 per $100 of deposit balance. As a result, future FDIC
insurance premium expense is expected to increase from the amount
recorded during the fiscal year ended June 30, 1996. See "Item 1 -
Business - Regulation - Regulation of Federal Savings Associations."
The decrease in deposit insurance expense was partially offset by
a $594,000 increase in compensation and benefits expense, which
was attributable to an increase in employee bonuses and normal
salary increases, and a $586,000 provision for losses attributable
to the Bank's holding of OREO. Beginning with the fiscal year
ended June 30, 1996, periodic provisions to the OREO valuation
reserve are recorded as non-interest expense.
Income tax expense. Income tax expense totaled $6.2 million for
the year ended June 30, 1996 compared to $6.6 million for the year
ended June 30, 1995, a decline of $440,000. The decline was
attributable primarily to a decrease of $1.6 million in pre-tax
income, offset by an increase in the effective tax rate from 44.0%
for the year ended June 30, 1995 to 45.9% for the year ended June
30, 1996. The reduced effective tax rate during the year ended
June 30, 1995 resulted substantially from the utilization of
capital gains tax loss carryforwards totaling $183,000 during the
fiscal year.
Cumulative Effect of Changes in Accounting Principles. On July
1, 1995, the Bank adopted SFAS No. 106, which requires accrual of
post-retirement benefits, such as health care benefits, during
the years an employee provides services. The cumulative effect of
the adoption of SFAS No. 106 on prior years was $1,032,000, after
a reduction for income taxes of $879,000. As permitted by the
Standard, the Bank elected to record this liability at the time
of adoption. See '' - Impact of Accounting Standards.''
Comparison of Operating Results for the Fiscal Years Ended June
30, 1995 and 1994
General. Net income for fiscal year 1995 was $8.4 million, as
compared to $9.1 million during fiscal year 1994. Interest rates
rose sharply beginning in February, 1994, and then gradually
declined after January, 1995. The result was a higher yield on
earning assets and a higher cost of interest-bearing liabilities
in 1995 than in fiscal year 1994. The effect on the Bank's
liabilities was greater, however, as more interest-bearing
liabilities than interest earning assets repriced during the
year. The result was a decline in both net interest income and
net income for the Bank in fiscal year 1995. Net income fell to
$8.4 million, a decrease of $655,000 from the previous fiscal
year, due to (1) the decline in net interest income, which fell
by $2.0 million, (2) a $494,000 decrease in non-interest income,
and (3) a $1.3 million increase in non-interest expense. These
were partially offset by a $1.2 million decrease in the provision
for loan losses and adoption of Statement of Financial Accounting
Standards No. 109, ''Accounting for Income Taxes,'' effective
July 1, 1993, whereby the Bank changed prospectively from the
deferred method to the liability method of accounting for income
taxes, which resulted in a charge of $383,000 during the fiscal
year ended June 30, 1994.
Interest Income. Total interest income was $49.2 million in
fiscal year 1995, a decrease of $598,000 from fiscal year 1994.
Despite an increase in the average yield on earning assets during
the year, interest income fell, primarily because of a $13.3
million decrease in the amount of average interest-earning
assets. The Bank's average investment in real estate loans was
$427.0 million in fiscal year 1995 versus $451.7 million during
the prior year, as principal repayments exceeded new loan
originations for the Bank's portfolio. The result was a drop of
$2.2 million in interest income from the real estate loan
portfolio during 1995. Interest income from mortgage-backed
securities increased by $606,000 to $5.5 million, due to the $3.2
million growth in the Bank's average investment in these
securities and to a 47 basis point increase in the average yield
on the mortgage-backed securities portfolio. Similarly, interest
income provided by the Bank's portfolio of other securities
increased by $948,000 from fiscal year 1994 to fiscal year 1995.
A $14.2 million increase in the average balance invested in this
portfolio combined with an increase in yield to 5.23% in 1995
from 4.94% in fiscal year 1994 accounted for the increase.
Federal funds sold, despite averaging $5.8 million less in fiscal
year 1995, provided $99,000 more in interest income during the
year due to a 234 basis point increase in the average yield on
federal funds.
Interest Expense. Average interest-bearing liabilities
decreased by $20.0 million in fiscal year 1995, reflecting net
deposit outflows during the year. Total interest expense rose
during the period, however, as rising funding costs offset the
drop in average interest-bearing liabilities. Throughout the
first half of the 1995 fiscal year, the Bank's depositors
responded to higher interest rates by extending their deposit
maturities. Savings account deposits, which had previously grown
during a period of low rates existing in 1993 and 1992, began to
shift into higher yielding certificates of deposit. During fiscal
year 1995, average savings account balances decreased by $30.1
million from year earlier average balances. Meanwhile average
balances of certificates of deposit grew from $213.1 million
during the 1994 fiscal year, to $225.8 million during the 1995
fiscal year, an increase of $12.7 million. The net result was an
increase in deposit expense of $1.3 million. Interest expense
attributable to borrowed funds increased by $56,000 on a $1.1
million increase in average borrowings.
Net Interest Income. Net interest income for the 1995 fiscal
year was $30.3 million, a decline of $1.95 million, or 6.1%, from
1994's results. A lower average interest rate spread and a $11.2
million reduction in the average assets of the Bank combined to
reduce net interest income. The interest rate spread and net
interest margin were 4.51% and 4.91%, respectively, in 1995, as
compared with 4.80% and 5.12% in 1994. Generally, the Bank's
assets repriced less quickly than the Bank's liabilities during
the year, a result due in large part to the high volume of
deposit flows out of savings accounts and into higher cost
certificates of deposit.
Provision for Loan Losses. The provision for loan losses was
$2.95 million in 1995 as compared to $4.11 million in the 1994
fiscal year. The change in the level of loan loss provisions
reflected the general improvement in the overall credit quality
of the Bank's balance sheet during fiscal year 1995. By June 30,
1995, both non-performing loans and non-performing assets had
declined significantly from year earlier levels. During the
period, total non-performing loans declined by $1.2 million, or
18.8%. Non-performing assets showed similar improvement, falling
from $14.4 million at June 30, 1994, to $9.5 million a year
later. In addition, net charge-offs for the fiscal year 1995 were
$1.4 million, representing a decline of $2.1 million from fiscal
year 1994. At June 30, 1995, the allowance for loan losses
totaled 101.99% of non-performing loans and 1.20% of total loans,
up from 58.15% and 0.84%, respectively, at June 30, 1994. See
"Item 1 - Business - Asset Quality Non-performing Assets and
Troubled-Debt Restructurings.''
Non-Interest Income. Non-interest income for the 1995 fiscal
year decreased to $1.8 million from $2.3 million in 1994, a
reduction of $494,000. Bonds called in the low interest rate
environment of the 1994 fiscal year provided $342,000 in non-
interest income, as compared to the $52,000 generated in fiscal
year 1995 by the sale of securities, a decline of $290,000.
Additionally, net gains on the sale of fixed-rate loans to the
secondary mortgage market fell by $184,000 in fiscal year 1995 as
compared with fiscal year 1994, due to the change in direction of
interest rates during each respective period.
Non-Interest Expense. Total non-interest expense increased
$1.3 million, or 10.5%, in the 1995 fiscal year to $14.1 million,
as compared to $12.7 million in fiscal year 1994. The primary
factor behind this increase was a $565,000 charge taken during
1995 for possible losses from the Bank's investment in the
capital stock and debentures of Nationar, which was one of the
Bank's primary correspondent banks. Additionally, the Bank
established a $75,000 reserve against the possibility of losses
relating to its federal funds held by Nationar at February 6,
1995. (See Item 8 - Financial Statements and Supplemental Data -
Note 16 - Commitments and Contingencies)
Other factors contributing to the increase in total non-
interest expense in the 1995 fiscal year were a $418,000 increase
in compensation and benefits and a $112,000 increase in expenses
associated with managing the Bank's portfolio of OREO. The
increase in OREO expenses in fiscal year 1995 was due to the
payment of maintenance arrears on four cooperative apartments on
which the Bank foreclosed during 1995. The increase in
compensation and benefits expenses reflects, in part, the Bank's
establishment of a Supplemental Executive Retirement Plan
(''SERP'') in February of 1994 in the middle of the Bank's 1994
fiscal year. Thus, fiscal 1995 was the first full year for SERP
expense accruals. Expenses attributable to the SERP were $64,000
higher in fiscal year 1995 than in fiscal year 1994 as a result.
In addition, there was a $312,000 increase in employee salaries
and benefits expense in fiscal year 1995 due to normal salary
increases.
Income Tax Expense. Income tax expense declined by $1.6
million in fiscal year 1995 as compared to fiscal year 1994 due
to a decrease in pre-tax income. The Bank's effective income tax
rates for the fiscal year 1995 and fiscal year 1994 were 44.0%
and 46.5%, respectively. The effective rate was higher in fiscal
year 1994 due to several factors, the most important of which
were the application of accrued tax loss carryforwards to a
capital gain on one of the Bank's mutual fund investments, and
the impact of a graduated federal tax rate schedule, which
increased the Bank's marginal tax rate in fiscal year 1994 due to
higher pre-tax earnings.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, proceeds
from principal and interest payments on loans, mortgage-backed
securities and investments, and, to a lesser extent, proceeds
from the sale of fixed-rate mortgage loans to the secondary
mortgage market. While maturities and scheduled amortization of
loans and investments are a predictable source of funds, deposit
flows, mortgage prepayments and mortgage loan sales are
influenced by general interest rates, economic conditions and
competition.
The Company completed the sale of 14,547,500 shares of common
stock at $10.00 per share on June 26, 1996, realizing net
proceeds of $141.4 million and utilized approximately $88.0
million of the proceeds to purchase 100% of the Bank's common
stock. The Bank used these proceeds, along with cash generated in
the Bank's ordinary course of business, to fund the Merger
Consideration of $101.3 million paid to Conestoga shareholders
for the Acquisition.
The Bank is required to maintain an average daily balance of
liquid assets and short-term liquid assets as a percentage of net
withdrawable deposit accounts plus short-term borrowings as
defined by OTS regulations. The minimum required liquidity and
short-term liquidity ratios are currently 5.0% and 1.0%,
respectively. At June 30, 1996, the Bank's liquidity ratio and
short-term liquid asset ratios were 43.0% and 37.0%,
respectively. The levels of the Bank's short-term liquid assets
are dependent on the Bank's operating, financing and investing
activities during any given period.
The primary investing activities of the Bank are the
origination of multi-family and single-family mortgage loans, and
the purchase of mortgage-backed and other securities. During the
fiscal years ended June 30, 1996, 1995 and 1994, the Bank's loan
originations totaled $114.9 million, $47.4 million and $64.7
million, respectively. Purchases of mortgage-backed and other
securities totaled $574.5 million, $55.4 million and $101.3
million for the fiscal years ended June 30, 1996, 1995, and 1994,
respectively. These activities were funded primarily by principal
repayments on loans, mortgage-backed securities and other
securities. Loan sales provided additional liquidity to the Bank,
totaling $5.1 million, $2.8 million and $19.9 million for the
fiscal years ended June 30, 1996, 1995, and 1994 respectively.
The Bank experienced a net increase in total deposits of $395.3
million and $8.1 million respectively in the fiscal years ended
June 30, 1996 and 1995, respectively, while the fiscal year
ended June 30, 1994 produced a decrease in total deposits of
$17.3 million. As discussed previously, the increase in deposits
during the year ended June 30, 1996 was attributable primarily to
the acquisition of $394.3 million in deposits from Conestoga.
Deposit flows are affected by the level of interest rates, the
interest rates and products offered by local competitors, and
other factors.
The Bank closely monitors its liquidity position on a daily
basis. Excess short-term liquidity is invested in overnight
federal funds sales and various money market investments. In the
event that the Bank should require funds beyond its ability to
generate them internally, additional sources of funds are
available through the use of the Bank's $152.0 million borrowing
limit at the FHLBNY. At June 30, 1996, the Bank had $15.7 million
in medium term borrowings outstanding at the FHLBNY and
additional overall borrowing capacity from the FHLBNY of $136.3
million.
Loan commitments totaled $81.2 million at June 30, 1996,
comprised of $80.2 million in multi-family commitments and
residential mortgage loan commitments totaling $971,000.
Management of the Company anticipates that it will have
sufficient funds available to meet its current loan commitments.
Certificates of deposit which are scheduled to mature in one year
or less from June 30, 1996 totaled $359.4 million. From October
1, 1994 to June 30, 1996, the Company experienced an 80.4%
retention rate of funds from maturing certificates of deposit.
Based upon this experience and the Company's current pricing
strategy, management believes that a significant portion of such
deposits will remain with the Company.
At June 30, 1996, the Bank was in compliance with all
applicable regulatory capital requirements. Tangible capital
totaled $119.1 million, or 9.49% of total tangible assets,
compared to a 1.50% regulatory requirement; core capital, at
9.50%, exceeded the required 3.0% regulatory minimum, and total
risk-based capital, at 21.24% of risk weighted assets, exceeded
the 8.0% regulatory requirement.
Impact of Inflation and Changing Prices
The Financial Statements and Notes thereto presented herein
have been prepared in accordance with GAAP, which require the
measurement of financial position and operating results in terms
of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of the
Bank's operations. Unlike industrial companies, nearly all of the
assets and liabilities of the Bank are monetary in nature. As a
result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or
to the same extent as the price of goods and services.
Impact of Accounting Standards
In December, 1990 the FASB issued SFAS No. 106, which
significantly changed the prevailing practice of accounting for
post-retirement benefits (such as health care benefits) on a cash
basis to requiring an accrual, during the years that the employee
renders the necessary service, of the expected cost of providing
those benefits to an employee and the employee's beneficiaries
and covered dependents. The Bank adopted SFAS No. 106 effective
July 1, 1995, electing to record the entire accumulated benefit
obligations immediately. The net cumulative effect of the
adjustment of $1.0 million (after reduction for income taxes of
$879,000) to apply retroactively to prior years was included as a
charge to net income for the year ended June 30, 1996.
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 114, ''Accounting by Creditors for Impairment of a
Loan'' (''SFAS No. 114''). Under the provisions of SFAS No. 114,
a loan is considered impaired when, based on current information
and events, it is probable that the lender will be unable to
collect all principal and interest due according to the
contractual terms of the loan agreement. SFAS No. 114 requires
lenders to measure impairment of a loan based on (i) the present
value of expected future cash flows discounted at the loan's
effective interest rate, (ii) the loan's observable market price
or (iii) the fair value of the collateral if the loan is
collateral-dependent. SFAS No. 114 also applies to restructured
loans and eliminates the requirement to classify loans that are
in-substance foreclosures as foreclosed assets except for loans
where the creditor has physical possession of the underlying
collateral, but not legal title. As amended by SFAS No. 118, SFAS
No. 114 allows a creditor to use existing methods for recognizing
interest income on impaired loans. The Bank adopted SFAS No. 114
effective July 1, 1995. Adoption of this standard did not have a
material effect upon the Bank's financial condition or results
from operations.
In March 1995, the FASB issued SFAS No. 121, ''Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of'' which requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity
be reviewed for impairment and reported at the lower of carrying
amount or fair value, less cost to sell, whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. SFAS No. 121 is effective for
fiscal years beginning after December 15, 1995. Management
anticipates that the adoption of SFAS No. 121 will not have a
material impact on the financial condition or results of
operations of the Bank.
In May 1995, the FASB issued Statement of Financial Accounting
Standards No. 122, ''Accounting for Mortgage Servicing Rights''
(''SFAS 122''). SFAS No. 122 amends Statement of Financial
Accounting Standards No. 65, ''Accounting for Certain Mortgage
Banking Activities,'' requiring separate capitalization of the
costs of rights to service mortgage loans for others regardless
of whether these rights are acquired through a purchase or loan
origination activity. SFAS No. 122 is effective for fiscal years
beginning after December 15, 1995, and applies only to servicing
rights on loans sold subsequent to adoption. Management
anticipates that the adoption of SFAS No. 122 will not have a
material impact upon the financial condition or results of
operations of the Bank.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, ''Accounting for Stock-Based
Compensation'' (''SFAS No. 123''). SFAS No. 123 encourages a fair
value based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt
this method for all employee stock compensation plans. Under the
fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over
the service period, which is usually the vesting period. SFAS No.
123 is effective for fiscal years beginning after December 15,
1995.
On November 15, 1995, the FASB issued a special report
entitled: ''A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities,
Questions and Answers'' (''The Guide''). The Guide permitted a
one-time reassessment and related reclassifications from the held
to maturity category (no later than December 31, 1995) that will
not call into question the intent of the enterprise to hold other
debt securities at maturity in the future. In December, 1995, the
Bank performed a reassessment of its investment and mortgage-
backed securities portfolios which resulted in a reclassification
of approximately $3.3 million of investment securities from held-
to-maturity into available for sale. The impact upon the Bank's
financial condition resulting from this transfer was not
material. There was no impact on the Bank's results from
operations resulting from this transfer.
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 125 ''Accounting
for Transfers of Financial Assets and Extinguishments of
Liabilities.'' The statement provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are borrowings. This statement also requires that
liabilities and derivatives incurred or obtained as part of a
transfer be measured initially at fair value. This statement also
provides guidance on measurement of servicing rights on assets
transferred and derecognition of liabilities transferred. The
statement is effective for all transfers, servicing, or
extinguishments occurring after December 31, 1996. Adoption of
this standard is not expected to have a material effect upon the
Company's financial condition or results of operations.
In November 1993, the American Institute of Certified Public
Accountants (''AICPA'') issued Statement of Position No. 93-6,
''Employers' Accounting for Employee Stock Ownership Plans''
(''SOP 93-6'') which is effective for fiscal years beginning
after December 15, 1993. SOP 93-6 will apply to the Bank's ESOP
and requires the recognition of compensation expense by employers
based on the fair value of ESOP shares. Under SOP 93-6, the Bank
will recognize compensation expense equal to the fair value of
the ESOP shares that become committed to be released to
participant accounts. To the extent that the fair value of the
Bank's ESOP shares at the time they become committed to be
released differs from the original cost of such shares, the
difference will be charged or credited to shareholders' equity.
The cost of the stock acquired by the ESOP which has not yet been
committed to be released to participant accounts will be
reflected as a reduction of shareholders' equity.
In December 1994, the AICPA issued Statement of Position No. 94-
6, ''Disclosure of Certain Significant Risks and Uncertainties''
(''SOP 94-6'') which is effective for fiscal years ending after
December 15, 1995. SOP 94-6 requires disclosure in the financial
statements about certain risks and uncertainties that could
significantly affect the amounts reported in the financial
statements in the near term and relate to: (i) the nature of
operations; (ii) the necessary use of estimates in the
preparation of financial statements, and; (iii) significant
concentrations in certain aspects of operations. The adoption of
SOP 94-6 did not have a material impact upon the financial
condition or results of operations of the Bank.
Item 8. - Financial Statements and Supplementary Data
Financial Statements begin on following page.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of
the Dime Community Bancorp, Inc. and Subsidiary
We have audited the accompanying consolidated statements of
condition of the Dime Community Bancorp, Inc. and Subsidiary (the
''Company'') as of June 30, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period
ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of the Dime Community Bancorp, Inc. and Subsidiary as of
June 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 15, effective July 1, 1995, the Company
changed its method of accounting for postretirement benefits other
than pensions to comply with Statement of Financial Accounting
Standards No. 106. As discussed in Notes 1 and 14, effective July
1, 1993 the Company changed its method of accounting for income
taxes to comply with Statement of Financial Accounting Standards
No. 109.
/s/ Deloitte & Touche llp
________________________________
New York, New York
August 30, 1996
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30, 1996 AND 1995
(In Thousands)
1996 1995
----------- ----------
<S> <C> <C>
ASSETS:
Cash and due from banks................................................... $17,055 $6,807
Investment securities held to maturity (estimated market value of
$43,428 and $51,254 at June 30, 1996 and June 30, 1995
respectively) (Notes 2, 4 and 12)....................................... 43,552 51,475
Investment securities available for sale (Notes 2,4, and 12):
Bonds and notes (amortized cost of $338,141 and $42,350 at
June 30, 1996 and June 30, 1995, respectively).......................... 338,089 42,349
Marketable equity securities (historical cost of $2,977 and
$3,304 at June 30, 1996 and June 30, 1995, respectively)................ 3,205 3,070
Mortgage-backed securities held to maturity (estimated market value
of $52,596 and $54,172 at June 30, 1996 and June 30, 1995
respectively) (Notes 5 and 12)........................................... 52,580 53,815
Mortgage-backed securities available for sale (amortized cost of
$156,962 and $36,728 at June 30, 1996 and June 30, 1995,
respectively) (Notes 5 and 12)........................................... 157,361 37,733
Federal funds sold (Note 2)............................................... 115,130 17,809
Loans (Note 6):
Real estate............................................................. 577,663 425,965
Other loans............................................................. 5,564 3,751
Less allowance for loan losses.......................................... (7,812) (5,174)
----------- ----------
Total loans, net.......................................................... 575,415 424,542
----------- ----------
Loans held for sale....................................................... 459 138
Premises and fixed assets (Note 9)........................................ 14,399 5,921
Federal Home Loan Bank of New York capital stock (Note 10)................ 7,604 4,801
Other real estate owned, net(Note 7)...................................... 1,946 4,466
Goodwill (Note 3)......................................................... 28,438 -
Other assets (Notes 14 and 15)............................................ 16,588 9,813
------------ ---------
TOTAL ASSETS.............................................................. $1,371,821 $662,739
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors (Note 11)............................................... $950,114 $554,841
Escrow and other deposits (Note 2)........................................ 141,732 12,109
Securities sold under agreements to repurchase (Note 12).................. 11,998 2,110
Federal Home Loan Bank of New York advances (Note 13)..................... 15,710 15,710
Payable for securities purchased.......................................... 33,994 -
Accrued postretirement benefit obligation (Note 15)....................... 2,381 -
Other liabilities (Notes 1 and 15)........................................ 2,821 902
------------ ---------
TOTAL LIABILITIES......................................................... 1,158,750 585,672
------------ ---------
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS' EQUITY:
Preferred Stock ($0.01 par, 9,000,000 shares authorized, none outstanding
at June 30, 1996 and 1995).............................................. - -
Common Stock ($0.01 par, 45,000,000 shares authorized, 14,547,500 shares
outstanding at June 30, 1996, none outstanding at June 30,1995)........ 145 -
Additional paid-incapital................................................ 141,240 -
Employee Stock Ownership Plan (Note 15)................................... (11,541) -
Retained earnings (Notes 2 and 14)........................................ 82,916 76,651
Unrealized gain on securities available for sale, net of deferred taxes... 311 416
------------ ---------
TOTAL STOCKHOLDERS' EQUITY................................................ 213,071 77,067
------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $1,371,821 $662,739
============ =========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands)
For the Years
Ended June 30,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Loans secured by real estate.............................................. $39,314 $38,375 $40,596
Other loans............................................................... 340 307 337
Investment securities..................................................... 5,738 4,402 3,454
Mortgage-backed securities................................................ 5,927 5,464 4,858
Federal funds sold........................................................ 1,300 675 576
-------- -------- --------
Total interest income..................................................... 52,619 49,223 49,821
-------- -------- --------
Interest expense:
Deposits and escrow....................................................... 22,508 17,933 16,637
Borrowed funds............................................................ 1,008 1,013 957
-------- -------- --------
Total interest expense.................................................... 23,516 18,946 17,594
Net interest income....................................................... 29,103 30,277 32,227
Provision for loan losses (Note 6)........................................ 2,979 2,950 4,105
-------- -------- --------
Net interest income after provision for loan losses....................... 26,124 27,327 28,122
-------- -------- --------
Non-interest income:
Service charges and other fees............................................ 911 1,047 995
Net gain (loss) on sales and redemptions of securities and other assets... (30) 159 495
Net gain on sales of loans................................................ 12 33 217
Other..................................................................... 482 534 560
-------- -------- --------
Total non-interest income................................................. 1,375 1,773 2,267
-------- -------- --------
Non-interest expense:
Salaries and employee benefits............................................ 7,359 6,879 6,461
ESOP benefit expense...................................................... 114 - -
Occupancy and equipment................................................... 1,775 1,610 1,613
Federal deposit insurance premiums........................................ 109 1,245 1,268
Data processing costs..................................................... 557 481 477
Provision for losses on Other real estate owned (Note 7).................. 586 - -
Other..................................................................... 3,521 3,838 2,895
-------- -------- --------
Total non-interest expense................................................ 14,021 14,053 12,714
-------- -------- --------
Income before income taxes and cumulative effect of changes in
accounting
principles..................................................... 13,478 15,047 17,675
Income tax expense (Note 14).............................................. 6,181 6,621 8,211
-------- -------- --------
Income before cumulative effect of changes in accounting
principles................................................................ 7,297 8,426 9,464
Cumulative effect on prior years of changing to a different method of
accounting for:
Income taxes (Notes 1 and 14)............................................. - - (383)
Post-retirement benefits other than pensions (Notes 1 and 15)............. (1,032) - -
-------- -------- --------
Net income................................................................ $6,265 $8,426 $9,081
======== ======== ========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
For the Years
Ended June 30,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Common Stock (Par value $0.01):
Balance at beginning of period............................................ $ - $ - $ -
Issuance of common stock in initial public offering (14,547,500 shares)... 145 - -
-------- -------- --------
Balance at end of period.................................................. 145 - -
-------- -------- --------
Additional paid-in capital:
Balance at beginning of period............................................ - - -
Issuance of common stock in initial public offering....................... 145,330 - -
Cost of issuance of common stock.......................................... (4,107)
Allocation of ESOP stock.................................................. 17 - -
-------- -------- --------
Balance at end of period.................................................. 141,240 - -
-------- -------- --------
Employee Stock Ownership Plan:
Balance at beginning of period............................................ - - -
Common stock acquired by ESOP............................................. (11,638) - -
Allocation of ESOP stock.................................................. 97 - -
-------- -------- --------
Balance at end of period.................................................. (11,541) - -
-------- -------- --------
Retained earnings:
Balance at beginning of period............................................ 76,651 68,225 59,144
Net income for the period................................................. 6,265 8,426 9,081
-------- -------- --------
Balance at end of period.................................................. 82,916 76,651 68,225
-------- -------- --------
Marketable equity securities valuation reserve:
Balance at beginning of period............................................ - (306) (225)
Change in marketable equity valuation reserve............................. - - (81)
Effect of adoption of SFAS 115............................................ - 306 -
-------- -------- --------
Balance at end of period.................................................. - - (306)
-------- -------- --------
Unrealized gain(loss) on securities available for sale, net:
Balance at beginning of period............................................ 416 - -
Effect of adoption of SFAS 115, net of deferred taxes..................... - (146) -
Change in unrealized gain (loss) on securities available for sale during
the year, net of deferred taxes......................................... (105) 562 -
-------- -------- --------
Balance at end of period.................................................. $ 311 $ 416 $ -
-------- -------- --------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands) For the Years Ended June 30,
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $6,265 $8,426 $9,081
Adjustments to reconcile net income to net cash provided by operating
activities:
Net gain on investment and mortgage-backed securities called................... (79) - (342)
Net loss on investment and mortgage-backed securities sold..................... 164 11 -
Net gain on sale of loans held for sale........................................ (12) (33) (217)
Depreciation and amortization.................................................. 127 1,509 1,662
ESOP plan compensation expense................................................. 114 - -
Provision for loan losses...................................................... 2,979 2,950 4,105
Decrease (increase) in loans held for sale..................................... (310) 580 902
Decrease (increase) in other assets and other real estate owned................ 3,040 3,762 (1,260)
Increase in accrued postretirement benefit obligation.......................... 2,115 - -
Increase in payable for securities purchased................................... 33,994 - -
Increase in other liabilities.................................................. 1,677 291 53
--------- -------- --------
Net cash provided by operating activities...................................... 50,074 17,496 13,984
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold.................................... (52,253) (10,780) 14,008
Proceeds from maturities of investment securities held to maturity............... 13,065 2,060 29,800
Proceeds from maturities of investment securities available for sale............. 399,135 26,300 -
Proceeds from calls of investment securities held to maturity.................... 11,056 - 11,420
Proceeds from calls of investment securities available for sale.................. 11,323 - -
Proceeds from sale of investment securities available for sale................... 501 - -
Proceeds from sale of mortgage-backed securities held to maturity................ 2,555 1,067 -
Purchases of investment securities held to maturity.............................. (9,292) (1,000) (71,542)
Purchases of investment securities available for sale.......................... (541,951) (43,251) -
Purchases of mortgage-backed securities held to maturity......................... (11,714) (6,093) (29,753)
Purchases of mortgage-backed securities available for sale....................... (11,554) (5,053) -
Principal collected on mortgage-backed securities held to maturity............... 9,995 7,905 16,906
Principal collected on mortgage-backed securities available for sale............. 15,877 5,690 -
Net (increase) decrease in loans................................................. (41,856) (215) 25,670
Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired (93,074) - -
Purchases of fixed assets........................................................ (779) (125) (226)
Sale (purchase) of Federal Home Loan Bank capital stock.......................... (123) 188 (6)
--------- -------- --------
Net cash used in investing activities............................................ (299,089) (23,307) (3,723)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in due to depositors..................................... 1,019 8,080 (17,350)
Net (decrease) increase in escrow and other deposits............................. 128,625 (1,187) 2,967
Net proceeds from issuance of common stock....................................... 129,730 - -
Proceeds from FHLB advances...................................................... - - 6,005
Decrease in repurchase agreements................................................ (111) (51) (115)
--------- -------- --------
Net cash (used in) provided by financing activities............................. 259,263 6,842 (8,493)
--------- -------- --------
INCREASE IN CASH AND DUE FROM BANKS.............................................. 10,248 1,031 1,768
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD..................................... 6,807 5,776 4,008
--------- -------- --------
CASH AND DUE FROM BANKS, END OF PERIOD........................................... $17,055 $6,807 $5,776
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes....................................................... $ 6,993 $ 5,996 $9,689
========= ======== ========
Cash paid for interest........................................................... $ 23,744 $18,932 $17,575
========= ======== ========
Transfer of investment and mortgage-backed securities held-to- maturity to
available for sale............................................................... $ 3,300 $70,000 $ -
========= ======== =========
<FN>
On June 26, 1996, the Bank acquired all of the outstanding common
stock of Conestoga Bancorp, Inc. for cash.
In connection with this acquisition, the following assets were
acquired and liabilities assumed:
Fair Value of Investments, Loans and Other Assets Acquired, net $ 507,023
Cash paid for Common Stock (101,272)
-----------
Deposits and Other Liabilities Assumed $ 405,751
===========
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations - Dime Community Bancorp, Inc. (the "Company")
is a Delaware corporation organized by the Bank for the purpose of
acquiring all of the capital stock of The Dime Savings Bank of
Williamsburgh (the "Bank") issued in the Conversion on June 26, 1996.
Presently, the only significant assets of the Company are the capital
stock of the Bank, the Company's loan to the Bank's ESOP, and
investments of the net conversion proceeds retained by the Company.
The Company is subject to the financial reporting requirements of the
Securities Exchange Act of 1934, as amended.
The Bank was originally founded in 1864 as a New York State-chartered
mutual savings bank. On November 1, 1995, the Bank converted to a
federal mutual savings bank. The Bank has been, and intends to
continue to be, a community-oriented financial institution providing
financial services and loans for housing within its market areas.
The Bank maintains its headquarters in the Williamsburgh section of
the borough of Brooklyn. Fourteen additional offices are located in
the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau
County.
The sale of the Company's stock and the merger of Conestoga Bancorp,
Inc. into the Bank occurred substantially at year-end
(June 26, 1996). Accordingly, the Company's results of operations
for the year ended June 30, 1996 are substantially comprised of the
results of operations of the Bank, and earnings per share information
for the Company for the year ended June 30, 1996 is not meaningful.
Summary of Significant Accounting Policies - The accounting and
reporting policies of the Company conform to generally accepted
accounting principles. The following is a description of the
significant policies:
Principles of Consolidation - The accompanying 1996 consolidated
financial statements include the accounts of the Company, and its
wholly-owned subsidiary, the Bank. All financial statements
presented include the accounts of the Bank's three wholly-owned
subsidiaries, Havemeyer Equities Corp. (''HEC''), Boulevard Funding
Corp. (''BFC'') and Havemeyer Brokerage Corp. (''HBC''). HBC is
currently engaged in the sale of insurance and annuity products
primarily to the Bank's customers and members of the local community.
BFC and HEC were established in order to invest in real estate joint
ventures and other real estate assets. BFC and HEC had no investments
in real estate at June 30, 1996 and are currently inactive. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
Investment Securities and Mortgage-backed Securities - Purchases and
sales of Investments and Mortgage-backed securities are recorded on
trade date. Gains and losses on sales of Investment and Mortgage-
backed securities are recorded on the specific identification basis.
On July 1, 1994, the Bank adopted SFAS No. 115, ''Accounting for
Investments in Debt and Equity Securities'' (''SFAS 115''). The
Statement requires that debt and equity securities that have readily
determinable fair values be carried at fair value unless they are
held to maturity. Debt securities are classified as held to maturity
and carried at amortized cost only if the reporting entity has a
positive intent and ability to hold these securities to maturity. If
not classified as held to maturity, such securities are classified as
securities available for sale or as trading securities. Unrealized
holding gains or losses on securities available for sale are excluded
from earnings and reported net of income taxes as a separate
component of stockholders' equity. The effect of adopting this
statement was not material. At June 30, 1996 and 1995, all equity
securities are classified as available for sale. At June 30, 1994,
all debt securities were carried at amortized cost and all equity
securities were carried at lower of cost or market.
Loans Held for Sale - Mortgage loans originated and intended for sale
in the secondary market are carried at the lower of aggregate cost or
estimated market value.
Allowance for Loan Losses - It is the policy of the Bank to provide a
valuation allowance for estimated losses on loans based on the Bank's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations which may affect the borrower's ability to repay,
estimated value of underlying collateral and current economic
conditions in the Bank's lending area. The allowance is increased by
provisions for loan losses charged to operations and is reduced by
charge-offs, net of recoveries. Management's periodic evaluation of
the adequacy of the allowance is based on the Bank's
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, and current
economic conditions. While management
uses available information to estimate losses on loans, future
additions to the allowance may be necessary based on changes in
economic conditions beyond management's control. In addition, various
regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the
allowance based on judgments different from those of management.
Management believes, based upon all relevant and available
information, that the allowance for loan losses is adequate to absorb
losses inherent in the portfolio.
On July 1, 1995, the Bank adopted Statement of Financial Accounting
Standards No. 114, ''Accounting by Creditors for Impairment of a
Loan'' (''SFAS 114''). The Statement requires all creditors to
account for impaired loans, except those loans that are accounted for
at fair value or at the lower of cost or fair value, at the present
value of expected future cash flows discounted at the loan's
effective interest rate. As an expedient, creditors may account for
impaired loans at the fair value of the collateral or at the
observable market price of the loan if one exists. The adoption of
SFAS No. 114, as amended by SFAS No. 118, did not have a material
effect on the Bank's financial condition or results of operations.
Loan Fees - Loan origination fees and certain direct loan origination
costs are deferred and amortized as a yield adjustment over the
contractual loan terms.
Other Real Estate Owned, net - Properties acquired as a result of
foreclosure on a mortgage loan are classified as Other real estate
owned and are recorded at the lower of the recorded investment in the
related loan or the fair value of the property at the date of
acquisition, with any resulting write down charged to the allowance
for loan losses. Subsequent write downs are charged to the valuation
allowance for possible losses on Other real estate owned.
Prior to July 1, 1995, the Bank was required to include in Other real
estate owned loans which have been in substance foreclosed. Effective
July 1, 1995, the Bank adopted SFAS 114. The provisions of this
Statement eliminated the Bank's requirement to include in substance
foreclosed loans in other real estate, except where the Bank has
completed foreclosure proceedings. In substance foreclosed real
estate is not material to the financial condition or results of
operations of the Bank.
Premises and Fixed Assets - Land is stated at original cost.
Buildings and furniture and equipment are stated at cost less
accumulated depreciation. Depreciation is computed by the straight-
line method over the estimated useful lives of the properties as
follows:
Buildings 2.22% to 2.50% per year
Furniture and equipment 10% per year
Leasehold improvements are amortized over the remaining non-
cancelable terms of the related leases.
Income Taxes - Pursuant to Statement of Financial Accounting
Standards No. 109, ''Accounting for Income Taxes'' (''SFAS 109''), on
July 1, 1993, the Bank changed prospectively from the deferred method
to the liability method of accounting for income taxes. The effect of
the adoption of this standard is reflected in the financial
statements as the cumulative effect of adopting a change in
accounting principle.
Cash Flows - For purposes of the Consolidated Statement of Cash
Flows, the Bank considers cash and due from banks to be cash
equivalents.
Recently Issued Accounting Standards - On July 1, 1995, the Bank
adopted Statement of Financial Accounting Standards No. 106,
''Employers' Accounting for Postretirement Benefits Other Than
Pensions.'' This Statement requires accrual of postretirement
benefits (such as health care benefits) during the years an employee
provides services. The cumulative effect of the adoption of this
standard on prior years was approximately $1,032 (after reduction for
income taxes of $879). As permitted by the Statement, the Bank
elected to record the full liability at the time of adoption.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
In March 1995, the FASB issued SFAS No. 121, ''Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of'' which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be
reviewed for impairment and reported at the lower of carrying
amount or fair value, less cost to sell, whenever events or changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. SFAS No. 121 is effective for fiscal years
beginning after December 15, 1995. Management anticipates that the
adoption of SFAS No. 121 will not have a material impact on the
financial condition or results of operations of the Bank.
In May 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 122, ''Accounting for
Mortgage Servicing Rights.'' The Statement which amends Statement of
Financial Accounting Standards
No. 65, ''Accounting for Certain Mortgage Banking Activities,''
requires separate capitalization of the costs of rights to service
mortgage loans for others regardless of whether these rights are
acquired through a purchase or loan origination activity. Adoption of
this Statement is required for fiscal years beginning after December
15, 1995. Given the current level of the Bank's mortgage banking
activities, adoption of this Standard is not expected to have a
material effect upon the Bank's financial condition or results of
operations.
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 125 ''Accounting for
Transfers of Financial Assets and Extinguishments of Liabilities.''
The statement provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
borrowings. This statement also requires that liabilities and
derivatives incurred or obtained as part of a transfer be measured
initially at fair value. This statement also provides guidance on
measurement of servicing rights on assets transferred and
derecognition of liabilities transferred. The statement is effective
for all transfers, servicing, or extinguishments occurring after
December 31, 1996. Adoption of this standard is not expected to have
a material effect upon the Company's financial condition or results
of operations.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. Areas in the accompanying
financial statements where estimates are significant include the
allowance for loans losses and the carrying value of other real
estate.
Reclassification - Certain June 30, 1995, and 1994 amounts have been
reclassified to conform to the June 30, 1996 presentation.
2. CONVERSION TO STOCK FORM OF OWNERSHIP:
On November 2, 1995, the Board of Directors of the Bank adopted a
Plan of Conversion to convert from mutual to stock form. As part of
the conversion, the Company was incorporated under Delaware law for
the purpose of acquiring and holding all of the outstanding stock of
the Bank. On June 26, 1996, the Company completed its initial public
offering and issued 14,547,500 shares of common stock (par value $.01
per share) at a price of $10.00 per share, resulting in net proceeds
of approximately $141,368 prior to the acquisition of stock by the
Employee Stock Ownership Plan. The Company retained approximately
$53,397 of the net proceeds and used the remaining net proceeds to
purchase all of the outstanding stock of the Bank. Costs related to
the conversion were charged against the Company's proceeds from the
sale of the stock.
The Company received approximately $131,078 of excess proceeds
resulting from the oversubscription of the Company's initial public
offering. In accordance with the terms of the offering, these funds
were refunded on July 1, 1996 inclusive of interest earned at the
Bank's existing passbook rate for the period held. The excess
proceeds were recorded in Escrow and other deposits, and were
invested in short-term Investment securities and Federal funds sold
at June 30, 1996.
At the time of conversion, the Bank established a liquidation account
in an amount equal to the retained earnings of the Bank as of the
date of the most recent financial statements contained in the final
conversion prospectus. The liquidation
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
account will be reduced annually to the extent that eligible account
holders have reduced their qualifying deposits as of each anniversary
date. Subsequent increases will not restore an eligible account
holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible account holder will be entitled
to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for
accounts then held.
As discussed in Note 3, the Company acquired Conestoga Bancorp, Inc.
on June 26, 1996. The liquidation account previously established by
Conestoga's subsidiary, Pioneer Savings Bank, F.S.A. during its
initial public offering in March, 1993, was assumed by the Company in
the acquisition.
The Company may not declare or pay cash dividends on or repurchase
any of its shares of common stock if the effect thereof would cause
stockholders' equity to be reduced below applicable regulatory
capital maintenance requirements, the
amount required for the liquidation account, or if such declaration
and payment would otherwise violate regulatory requirements.
3. BUSINESS ACQUISITIONS
On June 26, 1996, the Bank completed the acquisition of Conestoga
Bancorp, Inc., the holding company for the Pioneer Savings Bank,
F.S.B. The Bank received approximately $170,836, $124,411 and
$111,991 of investment securities, mortgage-backed securities and
loans, respectively, at fair value and assumed approximately $394,250
of customer deposit liabilities. Approximately $10,000 of investment
securities acquired were classified as held-to-maturity at June 30,
1996. All other securities acquired were classified as available for
sale. Total cash paid for the acquisition was $101,272. The
goodwill generated in the transaction of $28,438 is being amortized
on a straight line basis over 12 years for financial reporting
purposes.
This acquisition was recorded using the purchase method of
accounting; accordingly, the purchase price is allocated to the
respective assets acquired and liabilities assumed based on their
estimated fair values.
A pro forma consolidated statement of condition is not presented
since the assets and liabilities were merged on June 26, 1996. The
information below presents, on an unaudited pro forma basis, the
consolidated statement of operations for the Company for the years
ended June 30, 1996 and 1995. All information below is adjusted for
the acquisition of Conestoga, as if the transaction had been
consummated on July 1, 1995 and 1994 respectively for the years ended
June 30, 1996 and 1995.
Pro Forma for
Year Ended June 30,
1996 1995
---------- ----------
Net interest income....................... $43,129 $44,658
Provision for possible loan losses........ 3,083 2,914
Non-interest income....................... 3,965 3,603
Non-interest expense:
Goodwill amortization................... 2,350 2,347
Other non-interest expense.............. 20,540 19,833
----------- ----------
Total non-interest expense 22,890 22,180
----------- ----------
Income before income taxes $21,121 $23,167
=========== ==========
On December 4, 1995, a purported class action complaint was filed
in the Delaware Chancery Court, New Castle County, on behalf of the
stockholders of Conestoga by Jeffrey Simon (''Plaintiff'') against
Conestoga, each of the members of the Conestoga Board, and the
Company. The Plaintiff alleges that each of the members of
Conestoga's Board breached his fiduciary duties to Conestoga
stockholders by, among other things, agreeing to accept the
Acquisition consideration, which Plaintiff alleges is inadequate.
The Company is alleged to have aided and abetted this breach.
Plaintiff seeks various remedies, including compensatory damages in
an unspecified amount. The Company intends to pursue vigorously
their defenses in this action.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
4. INVESTMENT SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE
<TABLE>
The amortized cost, gross unrealized gains and losses and estimated
market value of investment securities held to maturity at June 30,
1996 were as follows:
<CAPTION>
Investment Securities Held to Maturity
----------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $18,705 $ - $(58) $18,647
Obligations of state and political subdivisions............ 2,048 31 - 2,079
Corporate securities....................................... 20,531 34 (117) 20,448
Public utilities........................................... 2,268 - (14) 2,254
-------- ---------- ---------- ---------
$43,552 $65 $(189) $43,428
======== ========== ========== =========
</TABLE>
The amortized cost and estimated market value of investment
securities held to maturity at June 30, 1996, by contractual
maturity, are shown below. Expected maturities may differ from
contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
--------- ---------
Due in one year or less.................. $19,039 $19,025
Due after one year through five years.... 15,100 14,972
Due after five years through ten years... 8,093 8,111
Due after ten years...................... 1,320 1,320
--------- ---------
$43,552 $43,428
========= =========
During the year ended June 30, 1996, proceeds from the calls of
investment securities held to maturity totaled $11,056. A gain of $56
was realized on these calls. There were no sales of investment
securities held to maturity during the year ended June 30, 1996.
<TABLE>
The amortized/historical cost, gross unrealized gains and losses and
estimated market value of investment securities available for sale at
June 30, 1996 were as follows:
<CAPTION>
Investment Securities Available for Sale
-----------------------------------------
Amortized/ Gross Gross Estimated
Historical Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $277,240 $20 $(80) $277,180
Corporate securities....................................... 58,652 27 - 58,679
Public utilities........................................... 2,249 9 (28) 2,230
--------- ---------- ---------- ---------
338,141 56 (108) 338,089
Equity securities:
Mutual funds............................................... 2,977 229 (1) 3,205
--------- ---------- ---------- ---------
$341,118 $285 $(109) $341,294
========= ========== ========== =========
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
During the year ended June 30, 1996, proceeds from the sales and
calls of investment securities available for sale totaled $501 and
$11,323, respectively. A loss of $195 and gain of $24 resulted from
the sales and calls respectively.
The amortized/historical cost and estimated market value of
investment securities available for sale at June 30, 1996, by
contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
Amortized/ Estimated
Historical Market
Cost Value
---------- ---------
Due in one year or less.................. $273,351 $273,354
Due after one year through five years.... 60,416 60,379
Due after five years through ten years... 3,376 3,348
Due after ten years...................... 3,975 4,213
--------- ---------
$341,118 $341,294
========= =========
<TABLE>
The amortized cost, gross unrealized gains and losses and estimated
market value of investment securities held to maturity at June 30,
1995 were as follows:
<CAPTION>
Investment Securities Held to Maturity
----------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $15,000 $2 $(170) $14,832
Obligations of state and political subdivisions............ 2,168 44 - 2,212
Corporate securities....................................... 23,712 47 (150) 23,609
Public utilities........................................... 10,595 82 (76) 10,601
-------- ---------- ---------- ---------
$51,475 $175 $(396) $51,254
======== ========== ========== =========
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
<TABLE>
The amortized/historical cost, gross unrealized gains and losses and
estimated market value of investment securities available for sale at
June 30, 1995 were as follows:
<CAPTION>
Investment Securities Available for Sale
-----------------------------------------
Amortized/ Gross Gross Estimated
Historical Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................. $15,821 $50 $(10) $15,861
Corporate securities....................................... 25,516 10 (47) 25,479
Public utilities........................................... 1,013 - (4) 1,009
--------- ---------- ---------- ---------
42,350 60 (61) 42,349
--------- ---------- ---------- ---------
Equity securities:
Preferred stock............................................ 694 - (265) 429
Mutual funds............................................... 2,610 99 (68) 2,641
--------- ---------- ---------- ---------
3,304 99 (333) 3,070
--------- ---------- ---------- ---------
$45,654 $159 $(394) $45,419
========= ========== ========== =========
<FN>
There were no calls or sales of investment securities held to
maturity or available for sale during the year ended June 30, 1995.
</FN>
</TABLE>
5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY AND AVAILABLE FOR
SALE
The amortized cost, gross unrealized gains and losses and the
estimated market value of mortgage-backed securities held to maturity
at June 30, 1996 were as follows:
Mortgage-Backed Securities Held to Maturity
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ----------- ---------
GNMA pass-through certificates... $17,997 $437 $(8) $18,426
FHLMC pass-through certificates.. 27,296 15 (274) 27,037
FNMA pass-through certificates... 7,287 2 (156) 7,133
--------- ----------- ----------- ---------
$52,580 $454 $(438) $52,596
========= =========== =========== =========
Proceeds from the sale of mortgage-backed securities held to maturity
were approximately $2,555 for the year ended June 30, 1996 and a
gross gain of approximately $31 was realized on these sales. The
securities sold met the de minimus exemption in SFAS No. 115, as the
unpaid principal at the date of sale was less than 15% of their
acquired par value.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
The amortized cost, gross unrealized gains and losses and the
estimated market value of mortgage-backed securities available for
sale at June 30, 1996 were as follows:
Mortgage-Backed Securities Available for Sale
---------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ----------- ----------
Collateralized mortgage obligations $8,566 $23 $- $8,589
GNMA pass-through certificates..... 70,136 - - 70,136
FHLMC pass-through certificates.... 28,826 344 (54) 29,116
FNMA pass-through certificates..... 49,434 118 (32) 49,520
--------- ----------- ----------- ----------
$156,962 $485 $(86) $157,361
========= =========== =========== ==========
There were no sales of mortgage-backed securities available for sale
during the year ended June 30, 1996.
The amortized cost, gross unrealized gains and losses and the
estimated market value of mortgage-backed securities held to maturity
at June 30, 1995 were as follows:
Mortgage-Backed Securities Held to Maturity
-------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ----------- ---------
GNMA pass-through certificates.... $24,402 $562 $(4) $24,960
FHLMC pass-through certificates... 28,429 28 (244) 28,213
FNMA pass-through certificates.... 984 15 - 999
--------- ----------- ----------- ---------
$53,815 $605 $(248) $54,172
========= =========== =========== =========
Proceeds from the sale of mortgage-backed securities held to maturity
were approximately $1,067 for the year ended June 30, 1995 and a
gross loss of approximately $11 was realized on these sales. The
securities sold met the de minimus exemption in SFAS No. 115, as the
unpaid principal at the date of sale was less than 15% of their
acquired par value.
The amortized cost, gross unrealized gains and losses and estimated
market value of mortgage-backed securities available for sale at June
30, 1995 were as follows:
Mortgage-Backed Securities Available for Sale
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ----------- ---------
Collateralized mortgage obligations $3,836 $128 $ - $3,964
FHLMC pass-through certificates.... 26,458 710 - 27,168
FNMA pass-through certificates..... 6,434 167 - 6,601
--------- ----------- ----------- ---------
$36,728 $1,005 $- $37,733
========== ========== =========== =========
There were no sales of mortgage-backed securities available for sale
during the year ended June 30, 1995.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
6. LOANS
Real estate loans at June 30, 1996 and 1995 consisted of the
following:
1996 1995
--------- ---------
One-to-four family........................ $ 169,723 $ 58,153
Multi-family and underlying cooperative... 296,630 252,436
Nonresidential............................ 37,708 26,972
F.H.A. insured mortgage loans............. 14,132 18,890
V.A. guaranteed mortgage loans............ 2,554 3,171
Co-op loans............................... 59,083 67,524
--------- ---------
579,830 427,146
Net unearned fees......................... (2,167) (1,181)
--------- ---------
$577,663 $425,965
========= =========
Other loans at June 30, 1996 and 1995 consisted of the following:
1996 1995
------- -------
Student loans........................................... $1,307 $1,431
Passbook loans (secured by savings and time deposits)... 3,044 1,510
Consumer installment loans.............................. 323 336
Home improvement loans.................................. 891 475
------- -------
5,565 3,752
Unearned discount....................................... (1) (1)
------- -------
$5,564 $3,751
======= =======
A concentration of credit risk exists within the Bank's loan
portfolio, as the majority of real estate loans are collateralized by
properties located in New York City and Long Island.
The Bank originates both adjustable and fixed interest rate real
estate loans. At June 30, 1996, the approximate composition of these
loans was as follows:
Fixed Rate Adjustable Rate
- ------------------------------ -----------------------------
Term to Maturity Book Value Term of Adjustment Book Value
- ------------------- ---------- ------------------ ----------
1 month-1 year..... $ 4,556 1 month-1 year..... $167,168
1 year-3 years..... 809 1 year-3 years..... 100,479
3 years-5 years.... 12,261 3 years-5 years.... 161,822
5 years-10 years... 24,617 5 years-10 years... 28,514
Over 10 years...... 79,128 Over 10 years...... 476
---------- ----------
$121,371 $458,459
========== ==========
The adjustable rate loans have interest rate adjustment limitations
and are generally indexed to the Federal Home Loan Bank of New York
five-year borrowing funds rate, the one-year constant maturity
Treasury index, or the Federal Home Loan Bank national mortgage
contract rate.
Loans on which the accrual of interest has been discontinued
amounted to approximately $6,551 and $5,073 at June 30, 1996 and
1995, respectively. If interest on those loans had been accrued,
interest income would have been increased by approximately $410 and
$325 for the years ended June 30, 1996 and 1995, respectively.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
The Bank had outstanding loans considered troubled-debt
restructurings of $4,671, and $7,651 at June 30, 1996 and 1995,
respectively. Income recognized on these loans was approximately
$344 and $587 for the years ended June 30, 1996 and 1995,
respectively, compared to interest income of $471 and $797
calculated under the original terms of the loans, for the years
ended June 30, 1996 and 1995, respectively.
At June 30, 1996, the recorded investment in loans for which
impairment has been recognized under the guidance of SFAS No. 114
was approximately $7,419. The average balance of impaired loans was
approximately $6,696 for the year ended June 30, 1996. The impaired
portion of these loans is represented by specific reserves totaling
$955 allocated within the allowance for loan losses at June 30,
1996. Net principal received and interest income recognized on
impaired loans during the year ended June 30, 1996 was not
material. At June 30, 1996, one loan totaling $2,681, was deemed
impaired for which no reserves have been provided. This loan,
which is included in troubled-debt restructurings at June 30, 1996,
has performed in accordance with the provisions of the
restructuring agreement signed in October, 1995.
The loan has been retained on accrual status at June 30, 1996.
The following assumptions were utilized in evaluating the loan
portfolio pursuant to the provisions of SFAS No. 114:
Homogenous Loans - One-to-four family residential mortgage loans
and loans on cooperative apartments having a balance of less than
$203 and consumer loans are considered to be small balance
homogenous loan pools and, accordingly, are not covered by SFAS No.
114.
Loans Evaluated for Impairment - All non-homogeneous loans greater
than $1,000 are individually evaluated for potential impairment.
Additionally, residential mortgage loans exceeding $203 and
delinquent in excess of 60 days are evaluated for impairment. A
loan is considered impaired when it is probable that all
contractual amounts due will not be collected in accordance with
the terms of the loan. A loan is not deemed to be impaired if a
delay in receipt of payment is expected to be less than 30 days or
if, during a longer period of delay, the Bank expects to collect
all amounts due, including interest accrued at the contractual rate
during the period of the delay. Factors considered by management
include the property location, economic conditions, and any unique
circumstances affecting the loan. Except as noted above, at June
30, 1996, all impaired loans were on nonaccrual status. In
addition, at June 30, 1996, approximately $1,817 of one to four
family residential mortgage loans and loans on cooperative
apartments with a balance of less than $203 were on nonaccrual
status. These loans are considered as a homogeneous loan pool not
covered by SFAS No. 114.
Reserves and Charge-Offs - The Bank allocates a portion of its
total allowance for loan losses to loans deemed impaired under SFAS
No. 114. All charge-offs on impaired loans are recorded as a
reduction in both loan principal and the allowance for loan losses.
Management evaluates the adequacy of its allowance for loan losses
on a regular basis. At June 30, 1996, management believes that its
allowance is adequate to provide for losses inherent in the total
loan portfolio, including impaired loans.
Measurement of Impairment - Since all impaired loans are
collateralized by real estate properties, the fair value of the
collateral is utilized to measure impairment.
Income Recognition - Accrual of interest is discontinued on loans
identified as impaired and past due ninety days. Subsequent cash
receipts are applied initially to the outstanding loan principal
balance. Additional receipts beyond the recorded outstanding
balance at the time interest is discontinued are recorded as
recoveries in the Bank's allowance for loan losses.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
Changes in the allowance for loan losses for the years ended June
30, 1996, 1995 and 1994 were as follows:
1996 1995 1994
-------- -------- --------
Balance, beginning of period............... $ 5,174 $ 3,633 $ 2,996
Provision charged to operations............ 2,979 2,950 4,105
Loans charged off.......................... (1,023) (1,656) (3,535)
Recoveries................................. 14 247 67
Reserve acquired in purchase of Conestoga.. 668 - -
-------- -------- --------
Balance, end of period..................... $7,812 $ 5,174 $3,633
======== ======== ========
7. VALUATION ALLOWANCE FOR POSSIBLE LOSSES ON OTHER REAL ESTATE
OWNED
Changes in the valuation allowance for possible losses on Other
real estate owned for the year ended June 30, 1996 is summarized as
follows:
Balance, beginning of period........... $-
Provision charged to operations........ 586
Charge-offs net of recoveries (472)
-----
Balance, end of period................. $114
=====
Prior to July 1, 1995, no valuation allowance for possible losses
on Other real estate owned was maintained by the Bank.
8. MORTGAGE SERVICING ACTIVITIES
At June 30, 1996 and 1995, the Bank was servicing loans for others
having principal amounts outstanding of approximately $91,050 and
$93,456 respectively. Servicing loans for others generally
consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure
processing. In connection with these loans serviced for others, the
Bank held borrowers' escrow balances of approximately $1,055,
$1,440 and $1,452 at June 30, 1996, 1995 and 1994, respectively.
9. PREMISES AND FIXED ASSETS
The following is a summary of premises and fixed assets at June 30,
1996 and 1995:
1996 1995
--------- --------
Land............................................. $ 3,964 $ 990
Buildings........................................ 12,527 6,033
Leasehold improvements........................... 1,190 1,200
Furniture and equipment.......................... 6,673 2,881
--------- --------
24,354 11,104
Less accumulated depreciation and amortization... (9,955) (5,183)
--------- --------
$14,399 $5,921
========= ========
Depreciation and amortization expense amounted to approximately
$501, $459, and $465 for the years ended June 30, 1996, 1995 and
1994, respectively.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
10. FEDERAL HOME LOAN BANK OF NEW YORK CAPITAL STOCK
The Bank is a Savings Bank Member of the Federal Home Loan Bank of
New York (FHLBNY). Membership requires the purchase of shares of
FHLBNY capital stock at $100 per share. The Bank owned 76,043 and
48,006 shares at June 30, 1996 and 1995, respectively. The FHLBNY
paid dividends on the capital stock of 6.9% , 7.5%, and 8.5% during
the years ended June 30, 1996, 1995 and 1994, respectively.
11. DUE TO DEPOSITORS
The deposit accounts of each depositor are insured up to $100 by
either the Bank Insurance Fund or the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation ("FDIC").
Deposits are summarized as follows:
June 30, 1996 June 30, 1995
------------------- -------------------
Effective Effective
Cost Liability Cost Liability
--------- --------- --------- ---------
Savings accounts...................... 2.50% 365,146 2.53% 238,217
Certificates of deposit............... 5.50 495,755 5.89 275,156
Money market accounts................. 2.65 45,948 2.69 16,698
NOW accounts.......................... 1.51 15,029 1.51 13,877
Super NOW accounts.................... 1.51 552 1.51 674
Non-interest bearing checking accounts - 27,684 - 10,219
---------- ---------
4.09% $ 950,114 4.12% $ 554,841
========= ========== ======= =========
The remaining maturity distribution of Certificates of deposits at
June 30, 1996 and 1995 was as follows:
1996 1995
-------- --------
Maturity in three months or less.... $124,903 $ 58,063
Over 3 through 6 months............. 96,316 58,093
Over 6 through 12 months............ 138,137 68,459
Over 12 months...................... 136,399 90,541
-------- --------
Total time deposits................. $495,755 $275,156
======== ========
The aggregate amount of Certificates of deposits with a minimum
denomination of $100 was approximately $40,065 and $21,659 at June
30, 1996 and 1995, respectively.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
12. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Bank has sold certain securities under agreements to repurchase
with a weighted average cost of 6.0%. The transactions were
accounted for as borrowings since the securities can be put back to
the Bank under certain conditions. The amounts outstanding at June
30, 1996 and 1995 were $11,998 and $2,110, respectively. The
transactions were further collateralized by GNMA/FNMA certificates
with a carrying value of $13,433, and $2,767, and an approximate
market value of $13,660 and $2,843, at June 30, 1996 and 1995,
respectively.
13. FEDERAL HOME LOAN BANK OF NEW YORK ADVANCES
The Bank had borrowings (''Advances'') from the Federal Home Loan
Bank of New York totaling $15,710 at June 30, 1996 and 1995,
respectively. The advances mature within five years and bear
interest at an average rate of 5.40%. At June 30, 1996, in
accordance with the Advances, Collateral Pledge and Security
Agreement, the Bank
maintained in excess of $15,710 of qualifying collateral
(principally bonds and mortgage-backed securities), as defined, to
secure such advances.
14. INCOME TAXES
<TABLE>
Federal, State and City income tax provisions for the years ended
June 30, 1996, 1995 and 1994 are comprised of the following:
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
---------------------------- ---------------------------- --------------------------
State State State
Federal and City Total Federal and City Total Federal and City Total
------- -------- ------- ------- -------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current.... $4,218 $ 2,563 $ 6,781 $4,328 $2,416 $6,744 $5,758 $3,183 $8,941
Deferred... (332) (268) (600) (314) 191 (123) (537) (193) (730)
------- --------- -------- ------- -------- -------- --------- -------- ------
$3,886 $ 2,295 $ 6,181 $4,014 $2,607 $6,621 $5,221 $2,990 $8,211
======= ========= ======== ======= ======== ======== ======= ======= =======
</TABLE>
Effective July 1, 1993, the Bank adopted SFAS 109. Pursuant to SFAS
109, deferred income taxes are provided for temporary differences
in the bases of certain assets and liabilities for income tax and
financial reporting purposes. The cumulative effect on prior years
of the adoption of SFAS 109 was an increase in the deferred tax
liability of $383 and a corresponding decrease to income.
A deferred asset of $879 was recorded as a result of the adoption
of SFAS 106. The deferred asset is netted against the cumulative
effect of the adoption of this standard. Additionally, deferred
tax assets include $1,908 related to the tax effect of purchase
accounting fair value adjustments resulting from the acquisition of
Conestoga Bancorp, Inc. Deferred tax liabilities include $2,029
which were originally recorded on Conestoga's books. Deferred tax
liabilities also include a decrease of $91 resulting from
adjustments pursuant to SFAS 115.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
<TABLE>
The components of Federal and net State and City deferred income
taxes as of June 30, 1996 and 1995, respectively, were as follows:
<CAPTION>
June 30, 1996 June 30, 1995
---------------------- ----------------------
Federal State and City Federal State and City
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Deferred tax assets
Deferred loan fees............................ $ 47 $ 30 $ 100 $ 63
Excess book bad debt over tax bad debt reserve 2,300 - 2,639 -
Reserve for loss on investments............... 61 38 163 104
Accumulated postretirement benefit obligation. 598 374 - -
Tax effect of purchase accounting fair value
adjustments................................. 1,173 735 - -
Other......................................... 9 18 47 27
------- -------------- ------- --------------
Total deferred tax assets..................... 4,188 1,195 2,949 194
Less: Valuation allowance on deferred tax assets - - - -
------- -------------- ------- --------------
Deferred tax assets after valuation allowance. $4,188 $ 1,195 $2,949 $ 194
======= ============== ======= ==============
Deferred tax liabilities:
Excess tax bad debt over book bad debt reserve $ - $ 2,083 $ - $ 1,706
Excess tax depreciation to book depreciation.. 309 196 - -
Tax effect of unrealized gain on securities
available for sale............................ 160 104 216 139
------- -------------- ------- --------------
Total deferred tax liabilities................ $ 469 $ 2,383 $ 216 $ 1,845
======= ============== ======= ==============
Net deferred tax asset (liability)............ $3,719 $(1,188) $2,733 $ (1,651)
======= ============== ======= ==============
</TABLE>
The provision for income taxes for the years ended June 30, 1996,
1995 and 1994 differs from that computed at the Federal statutory
rate as follows:
1996 1995 1994
------- ------- -------
Tax at Federal statutory rate...................... $4,717 $5,266 $6,186
State and local taxes, net of
Federal income tax benefit......................... 1,492 1,694 1,944
Reserve for loss on sale of loans.................. - (185) -
Utilization of capital loss on sale of securities.. - (86) -
Other, net......................................... (28) (68) 81
------- ------- -------
$6,181 $6,621 $8,211
======= ======= =======
Effective rate..................................... 45.9% 44.0% 46.5%
======= ======= =======
Savings banks that meet certain definitions, tests, and other
conditions prescribed by the Internal Revenue Code are allowed to
deduct, with limitations, a bad debt deduction. This deduction can
be computed as a percentage of taxable income before such deduction
or based upon actual loss experience.
Pursuant to SFAS 109, the Bank is not required to provide deferred
taxes on its tax loan loss reserve as of December 31, 1987 ("base
year reserve"). The amount of this reserve on which no deferred
taxes have been provided is approximately $12,153. This reserve
could be recognized as taxable income and create a current tax
liability using the income tax rates then in effect if one of the
following occur: 1) the Bank's retained earnings represented by the
reserve
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
is used for purposes other than to absorb losses from bad debts,
including dividends or distributions in liquidation; 2) the Bank
fails to qualify as a Bank as provided by the Internal Revenue
Code, or 3) there is a change in federal tax law.
On August 20, 1996, legislation was signed into law which repealed
the percentage of taxable income method tax bad debt deduction
available for thrift institutions. This repeal is effective for
the Bank's taxable year beginning January 1, 1996. In addition,
the legislation requires the Bank to include in taxable income its
bad debt reserves in excess of its base year reserve over a 6-8
year period depending upon the maintenance of certain loan
origination levels. Since the percentage of taxable income method
tax bad debt deduction and the corresponding increase in the tax
bad debt reserve in excess of the base year have been treated as
temporary differences pursuant to SFAS 109, this change in tax law
will have no effect on the Company's future consolidated statement
of operations. Since the Bank's bad debt reserve as of exceeds its
base year reserve by $3,100, approximately $176 will be currently
payable as a result of the legislation.
On July 30, 1996, New York State enacted legislation, effective
January 1, 1996, which generally retains the percentage of taxable
income method tax bad debt deduction and does not require the Bank
to recapture into income its excess tax bad debt reserves over its
base year reserve for New York State tax purposes.
15. EMPLOYEE BENEFIT PLANS
Employee Retirement Plan - The Bank is a participant in a
noncontributory defined benefit retirement plan with the Savings
Bank Retirement System. Substantially all full-time employees are
eligible for participation after one year of service. In addition,
a participant must be at least 21 years of age at the date of
enrollment.
The retirement cost (benefit) for the pension plan includes the
following components:
Year Ended June 30,
1996 1995 1994
------- ------- -------
Service cost.................... $ 206 $ 216 $ 231
Interest cost................... 488 455 428
Actual return on plan assets.... (546) (227) (339)
Net amortization and deferral... ( 82) (325) (177)
------- ------ ------
Net periodic pension cost....... $ 66 $ 119 $ 143
======= ====== ======
<TABLE>
The funded status of the plan as of June 30, 1996 and 1995 was as
follows:
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
$8,613,and $5,037 respectively............................................. $ 8,848 $5,304
======== ========
Projected benefit obligation............................................... $ 9,960 $6,180
Plan assets at fair value (investments in trust funds managed by RSI)...... 10,594 6,284
-------- --------
Excess of plan assets over projected benefit obligation.................... 634 104
Unrecognized loss from experience different from that assumed.............. 967 747
Unrecognized net transition asset.......................................... (167) (261)
Unrecognized net past service liability.................................... (271) (284)
-------- --------
Prepaid retirement expense included in Other assets........................ $1,163 $306
======== ========
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
Major assumptions utilized at June 30, 1996 and 1995 are as
follows:
1996 1995
------ ------
Discount rate.................................... 7.50% 8.25%
Rate of increase in compensation levels.......... 5.50 6.00
Expected long-term rate on plan assets........... 9.00 9.00
Directors' Retirement Plan - Effective July 1, 1996, the Company
adopted a non-qualified Retirement plan for all of its Outside
Directors, which will provide benefits to each eligible Outside
Director commencing upon his termination of Board service or at age
65. Each Outside Director who serves or has agreed to serve as an
outside director will automatically become a participant in the
plan. The plan is not expected to have a material effect upon the
Company's results of operations.
Supplemental Executive Retirement Plan (''SERP'') - The Bank
established a Supplemental Executive Retirement Plan (''SERP'') for
its executive officers. The SERP was established to compensate the
executive officers for any curtailments in benefits due to the
statutory limitations on benefit plans. The SERP exists as a
nonqualified plan which supplements the existing qualified plans.
Defined benefit and defined contribution costs are incurred
annually related to the SERP.
The defined benefit cost for the SERP plan for the years ended June
30, 1996 and 1995 includes the following components:
Years Ended
June 30,
----------------
1996 1995
-------- -------
Service cost.................... $ 56 $ 51
Interest cost................... 88 75
Net amortization and deferral... 49 54
-------- -------
Net periodic pension cost....... $ 193 $180
======== =======
The defined contribution costs incurred by the Bank related to the
SERP plan for the years ended June 30, 1996 and 1995 were $25 and
$20, respectively.
<TABLE>
The funded status of the defined benefit portion of the plan as of
June 30, 1996 and 1995 was as follows:
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated benefit obligation, fully vested at June 30, 1996
and 1995, respectively........................................................ $ 450 $ 165
======== ========
Projected benefit obligation.................................................... $1,690 $ 870
Plan assets at fair value....................................................... - -
-------- --------
Deficiency of plan assets over projected benefit obligation..................... (1,690) (870)
Unrecognized loss from experience different from that assumed................... 884 230
Unrecognized net past service liability......................................... 317 343
-------- --------
Accrued retirement expense included in Other liabilities........................ $(489) $(297)
======== ========
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
Major assumptions utilized at June 30, 1996 and 1995 are as
follows:
1996 1995
------- -------
Discount rate............................. 7.50% 8.25%
Rate of increase in compensation levels... 5.50 6.00
401(k) Plan - The Bank also has a 401(k) plan which covers
substantially all employees. Prior to May 31, 1996, under such plan
the Bank matched 50% of each participant's contribution up to 6% of
the participant's annual compensation for the first four years of
participation and thereafter 100% of the participant's contribution
up to a maximum of 6%. Effective May 31, 1996, the plan was
amended whereby the Bank ceased all matching contributions.
Participation in the 401(k) plan is voluntary. A salaried employee
becomes eligible for the plan after completion of one year of
service. The Bank contributed approximately $181, $190, and $170
for the years ended June 30, 1996, 1995 and 1994, respectively, to
the plan. At June 30, 1996, the 401(k) plan owns participant
investments totaling $2,092 in the Company's common stock.
Postretirement Benefits other than Pensions - The Bank offers
additional postretirement benefits to its retired employees who
have provided at least five (5) consecutive years of credited
service and were active employees prior to April 1, 1991, as
follows:
(1) Employees who retired prior to April 1, 1991 receive full
medical coverage in effect until their death at no cost to such
retirees;
(2) Eligible employees retiring after April 1, 1991 will be
eligible for continuation of their medical coverage in effect at
the time of such employees' retirement until their death.
Throughout an employee's retirement, the Bank will
continue to pay the premiums for this coverage up to the premium
amount paid for the first year of retirement coverage. Should the
premiums increase, the employee will have to pay the differential
to maintain full medical coverage.
Postretirement medical benefits are only available to those full-
time employees who, upon termination of service, start collecting
retirement benefits immediately from the Bank. The Bank reserves
the right at any time, and to the extent permitted by law, to
change, terminate or discontinue any of the group benefits, and can
exercise the maximum discretion permitted by law, in administering,
interpreting, modifying or taking any other action with respect to
the plan or benefits.
The Bank accrues the cost of such benefits during the years an
employee renders the necessary service. The Bank adopted Statement
of Financial Accounting Standards No. 106, ''Accounting for
Postretirement Benefits Other than Pensions,'' effective July 1,
1995. The Bank elected to record the full accumulated
postretirement benefit obligation upon adoption. This resulted in a
cumulative effect adjustment of $1,032 (after reduction for income
taxes of $879), which is shown in the consolidated statement of
income for the year ended June 30, 1996.
The postretirement cost for the plan for the year ended June 30,
1996 includes the following components:
Service cost....................... $ 62
Interest cost...................... 167
----
Net periodic postretirement cost... $229
====
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
The funded status of the plan as of June 30, 1996 was as follows:
Accumulated postretirement benefit obligation:
Retirees.......................................... $ 1,364
Fully eligible active participants................ 173
Other active participants......................... 1,005
-------
Total............................................. 2,542
Plan assets at fair value........................ -
-------
Deficiency of plan assets over accumulated
benefit obligation (funded status)........... 2,542
Unrecognized loss................................. (161)
--------
Accrued postretirement benefit obligation......... $2,381
========
The assumed medical cost trend rates used in computing the
accumulated postretirement benefit obligation was 10% in 1995 and
was assumed to decrease gradually to 5.5% in 2005 and to remain at
that level thereafter. Increasing the assumed medical care cost
trend rates by 1% in each year would increase the accumulated
postretirement benefit obligation by approximately $175.
The assumed discount rate and rate of compensation increase used to
measure the accumulated postretirement benefit obligation at June
30, 1996 were 7.5% and 5.5%, respectively.
Employee Stock Ownership Plan - In connection with the conversion,
the Board of Directors of the Company adopted the Dime Community
Bancorp Employee Stock Ownership Plan (the "ESOP"). The ESOP
borrowed $11,638 from the Company and used the funds to purchase
1,163,800 shares of the Company's common stock. The loan will be
repaid principally from the Bank's discretionary contributions to
the ESOP over a period of time not to exceed 10 years. The Bank's
obligation to make such contributions is reduced by any investment
earnings realized on such contributions or any dividends paid by
the Company on stock held in the unallocated account. At June 30,
1996, the loan had an outstanding balance of $11,541 and a fixed
rate of 8.0%.
Shares purchased with the loan proceeds are held in a suspense
account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense
account are allocated among participants on the basis of
compensation, as described in the plan, in the year of
allocation. The ESOP vests at a rate of 25% per
year of service beginning after two years with full vesting after
five years, or upon attainment of age 65, death, disability,
retirement or change of control. ESOP benefit expense totaled
$114 for the year ended June 30, 1996. Shares of common stock
allocated to participating employees totaled 9,698 at June 30,
1996.
16. COMMITMENTS AND CONTINGENCIES
Mortgage Loan Commitments and Lines of Credit - At June 30, 1996
and 1995, the Bank had outstanding commitments to make mortgage
loans aggregating approximately $81,252 and $26,163, respectively.
At June 30, 1996, commitments to originate fixed rate and
adjustable rate mortgage loans were $455 and $80,797, respectively.
Interest rates on fixed rate commitments ranged between 7.25% to
9.0%. Substantially all of the Bank's commitments will expire
within two months.
The Bank had available at June 30, 1996 unused lines of credit with
the Federal Home Loan Bank of New York totaling $64,165, expiring
on August 8, 1996. These credit lines were renewed on August 8,
1996 for one year.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
Lease Commitments - At June 30, 1996, aggregate net minimum annual
rental commitments on leases are as follows:
Calendar Year Ending: Amount
- --------------------- ------
1996................. $ 273
1997................. 229
1998................. 237
1999................. 257
2000................. 259
Thereafter........... 1,475
------
$2,730
======
Net rental expense for the years ended June 30, 1996, 1995 and 1994
approximated $278, $267, and $206, respectively.
Litigation - The Company and its subsidiary are subject to certain
pending and threatened legal actions which arise out of the normal
course of business. Management believes that the resolution of any
pending or threatened litigation will not have a material adverse
effect on the financial condition or results of operations.
Outstanding Claims with Nationar - On February 8, 1995 the New York
State Banking Department took possession of Nationar, a check
clearing and trust company. At that time, the Bank had $2,500
invested in Nationar, comprised of approximately $1,900 in cash
demand accounts and Federal funds sold and approximately $567 in
debenture bonds and stock. During the year ended June 30, 1995,
the Bank established reserves for possible losses related to
investments in Nationar. The following is a summary of activity in
the reserve account:
Year ended
June 30,
1996 1995
------- -------
Beginning balance ..................................... 640 -
Provision for losses, net of recoveries received....... 143 640
Charge-off of investments deemed uncollectible......... (567) -
------- -------
Ending balance ........................................ 216 640
======= =======
During the year ended June 30, 1996, management of the Bank deemed
the investments in debentures worthless, and accordingly charged-
off all outstanding amounts against the established reserve. The
Bank received approximately $1,700 in refunds from the New York
State Banking Department which was related primarily to its cash
demand accounts. At June 30, 1996, the Bank has outstanding claims
totaling $216 which are fully reserved.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107, ''Disclosures About Fair Value of Financial Instruments.'' The
estimated fair value amounts have been determined by the Bank using
available market information and appropriate valuation
methodologies. However, considerable judgment is required to
interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Bank could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
Investment Securities and Mortgage-Backed Securities - The fair
value of these securities is based on quoted market prices obtained
from an independent pricing service.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
Federal Funds Sold - The fair value of these assets, principally
overnight deposits, is assumed to be equal to their carrying value
due to their short maturity.
Federal Home Loan Bank of New York (FHLBNY) Stock - The fair value
of FHLBNY stock is assumed to be equal to the carrying value as the
stock is carried at par value and redeemable at par value by the
FHLBNY.
Loans and Loans Held for Sale - The fair value of approximately
4.0% of loans receivable is determined by utilizing secondary
market prices. The fair value of the remainder of the portfolio is
determined by discounting the future cash flows, net of prepayments
of the loans using a rate for which similar loans would be
originated to new borrowers with similar terms.
Deposits - The fair value of savings, money market, NOW, Super NOW
and checking accounts is assumed to be their carrying amount. The
fair value of certificates of deposit is based upon the current
rates for instruments of the same remaining maturity.
Escrow, Other Deposits and Borrowed Funds - The estimated fair
value of escrow, other deposits and borrowed funds is assumed to be
their carrying amount.
Other Liabilities - The estimated fair value of other liabilities,
which primarily include trade accounts payable, is assumed to be
their carrying amount.
Commitments to Extend Credit - The fair value of commitments is
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties.
For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the
committed rates.
The estimated fair values of the Bank's financial instruments at
June 30, 1996 and 1995 were as follows:
June 30, 1996
------------------
Carrying Fair
Amount Value
-------- ---------
Assets:
Investment securities held to maturity..................... $ 43,552 $ 43,428
Investment securities available for sale................... 341,294 341,294
Mortgage-backed securities held to maturity................ 52,580 52,596
Mortgage-backed securities available for sale.............. 157,361 157,361
Loans and loans held for sale.............................. 583,686 579,754
Federal funds sold......................................... 115,130 115,130
FHLB stock................................................. 7,604 7,604
Liabilities:
Savings, money market, NOW, Super NOW and checking accounts 454,359 454,359
Certificates of deposit.................................... 495,755 494,975
Escrow, other deposits and borrowed funds.................. 169,440 169,440
Other liabilities.......................................... 36,816 36,816
Off-balance-sheet liability-commitments to extend credit... - (664)
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
June 30, 1995
-----------------
Carrying Fair
Amount Value
-------- --------
Assets:
Investment securities held to maturity..................... $ 51,475 $ 51,254
Investment securities available for sale................... 45,419 45,419
Mortgage-backed securities held to maturity................ 53,815 54,172
Mortgage-backed securities available for sale.............. 37,733 37,733
Loans and loans held for sale.............................. 429,854 427,895
Federal funds sold......................................... 17,809 17,809
FHLB stock................................................. 4,801 4,801
Liabilities:
Savings, money market, NOW, Super NOW and checking accounts 279,685 279,685
Certificates of deposit.................................... 275,156 274,020
Escrow, other deposits and borrowed funds.................. 29,929 29,929
Other liabilities.......................................... 902 902
Off-balance-sheet liability-commitments to extend credit... - (56)
18. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory--and
possibly additional discretionary-- actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative measures
of the Bank's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Effective November 1, 1995, the Bank converted from a state-
chartered mutual savings bank to a Federally chartered mutual
savings bank. Prior to the conversion, the Bank was required under
FDIC capital regulations to have minimum Tier 1, total capital, and
minimum leverage ratios of 4%, 8% and 3% respectively. At June 30,
1995, the Bank's Tier 1, total capital and leverage ratios were
20.89%, 22.31%, and 11.63% respectively. Deposits assumed by the
Bank in the acquisitions of its Avenue M branch in 1993 and
Conestoga Bancorp, Inc. in 1996 are insured by the Savings
Association Insurance Fund of the FDIC, to the extent applicable by
law. All other deposits, including future deposit accounts of the
Bank, are insured by the Bank Insurance Fund of the FDIC to the
extent applicable by law.
At June 30, 1996, the Bank's primary regulator is the Office of
Thrift Supervision (''OTS''). Under OTS capital regulations, the
Bank is required to maintain minimum tangible capital, core capital
and total risk-based capital to risk-adjusted assets ratios of
1.5%, 3% and 8%, respectively.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
The Company and Bank's actual capital amounts and ratios at June
30, 1996 are presented in the following table. There was no
deduction from capital for interest-rate risk.
Minimum
Actual Capital Requirement
------------------- --------------------
Amount Ratio Amount Ratio
--------- --------- --------- ----------
As of June 30, 1996:
Tangible Capital:
Consolidated Company...........$ 184,188 12.66% N/A N/A
Bank...........................$ 119,125 9.49% >= $18,828 >= 1.5%
Core Capital:
Consolidated Company...........$ 184,322 13.72% N/A N/A
Bank...........................$ 119,259 9.50% >= $37,659 >= 3.0%
Risk-based capital:
Consolidated Company...........$ 191,778 31.23% N/A N/A
Bank...........................$ 126,715 21.24% >= $47,718 >= 8.0%
As discussed in Note 2, the Bank received approximately $131,078 of
excess proceeds resulting from the oversubscription of the
Company's initial public offering. The Bank's tangible, core, and
risk-based capital ratios were 10.60%, 10.61%, and 23.86%
respectively, excluding the effects of the excess proceeds on the
balance sheet, at June 30, 1996.
The following is a reconciliation of generally accepted accounting
principles (GAAP) capital to regulatory capital for the Bank:
June 30, 1996
-----------------------------
Tangible Core Risk-Based
Capital Capital Capital
-------- --------- ----------
GAAP capital........................$148,008 $148,008 $148,008
--------- --------- ---------
Non-allowable assets:
Core deposit intangible............. (134) - -
Unrealized gain on AFS securities... (311) (311) (311)
Goodwill............................ (28,438) (28,438) (28,438)
General valuation allowance......... - - 7,456
--------- --------- ----------
Regulatory capital.................. 119,125 119,259 126,715
Minimum capital requirement......... 18,828 37,659 47,718
--------- --------- ----------
Regulatory capital-excess...........$100,297 $ 81,600 $78,997
========= ========= ==========
Under its prompt corrective action regulations, the OTS is required
to take certain supervisory actions with respect to
undercapitalized institutions. These regulations establish a
framework for the classification of depository institutions into
five capital categories: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Generally, an institution is considered well
capitalized if it has a leverage ratio of core capital of at least
5.0%, a Tier I risk-based capital ratio of at least 6.0% and a
total risk-based capital ratio of at least
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
10.0%. As The most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There are no
conditions or events since that notification that management
believes have changed the institution's category.
19. QUARTERLY FINANCIAL INFORMATION
The following represents the unaudited results of operations for
each of the quarters during the fiscal years ended
June 30, 1996 and 1995:
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, December 31, March 31, June 30,
1995 1995 1996 1996
------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Net interest income....................... $ 6,913 $ 7,379 $ 7,171 $ 7,640
Provision for possible loan losses........ 600 351 900 1,128
Net interest income after provision
for possible loan losses................ 6,313 $ 7,028 6,271 6,512
Non-interest income....................... 414 186 379 396
Non-interest expense...................... 2,922 3,478 3,901 3,720
Income before income taxes and cumulative
effect of change in accounting principle 3,805 3,736 2,749 3,188
Income tax expense........................ 1,741 1,705 1,266 1,469
Income before cumulative effect of change
in accounting principle................. 2,064 2,031 1,483 1,719
Cumulative effect of change in accounting
principle............................... (1,032) - - -
------------- ---------- --------- ---------
Net income $ 1,032 $ 2,031 $ 1,483 $ 1,719
============= ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, December 31, March 31, June 30,
1994 1994 1995 1995
------------- ---------- --------- --------
<S> <C> <C> <C> <C>
Net interest income....................... $ 7,863 $ 7,936 $ 7,401 $ 7,077
Provision for possible loan losses........ 737 738 738 737
Net interest income after provision
for possible loan losses................ 7,126 $ 7,198 6,663 6,340
Non-interest income....................... 428 378 465 502
Non-interest expense...................... 3,250 3,292 3,591 3,920
Income before income taxes................ 4,304 4,284 3,537 2,922
Income tax expense........................ 1,783 2,010 1,638 1,190
------------- ---------- --------- ---------
Net income $ 2,521 $ 2,274 $ 1,899 $ 1,732
============= ========== ========= =========
</TABLE>
20. DIME COMMUNITY BANCORP, INC. PARENT COMPANY ONLY FINANCIAL
STATEMENTS:
The Company began operations on June 26, 1996. Since operations
began substantially at year-end, substantially all of the Company's
results from operations represent the earnings of its wholly-owned
subsidiary. As a result, a separate statement of operations for
the Company for the year ended June 30, 1996 is not presented .
The following statement of condition as of June 30, 1996, and the
related statement of cash flows for the year ended June 30, 1996,
reflect the Company's investment in its wholly-owned subsidiary,
the Bank, using the equity method of accounting.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
<TABLE>
DIME COMMUNITY BANCORP, INC.
STATEMENT OF CONDITION
(In thousands except share and per share amounts)
<CAPTION>
June 30,
1996
----------
<S> <C>
ASSETS:
Cash and due from banks.......................................................... $ 117
Investment securities available for sale......................................... 33,994
Federal funds sold............................................................... 53,623
ESOP loan to subsidiary.......................................................... 11,541
Investment in subsidiary......................................................... 148,008
Other assets..................................................................... 23
----------
TOTAL ASSETS..................................................................... $ 247,306
==========
LIABILITIES:
Payable for securities purchased................................................. 33,994
Other liabilities................................................................ 241
----------
TOTAL LIABILITIES................................................................ 34,235
----------
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 par, 9,000,000 shares authorized,
none outstanding at June 30,1996)................................................. -
Common Stock ($.01 par, 45,000,000 shares authorized, 14,547,500 shares
outstanding at June 30,1996)..................................................... 145
Additional paid-in capital........................................................ 141,240
Employee Stock Ownership Plan..................................................... (11,541)
Retained earnings................................................................. 82,916
Unrealized gain on securities available for sale, net of deferred taxes........... 311
----------
TOTAL STOCKHOLDERS' EQUITY........................................................ 213,071
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ $ 247,306
==========
</TABLE>
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(In Thousands Except Per Share Amounts)
<TABLE>
DIME COMMUNITY BANCORP, INC.
STATEMENT OF CASH FLOWS
(In thousands except share and per share amounts)
<CAPTION>
Year Ended
June 30, 1996
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 6,265
Adjustments to reconcile net income to net cash provided by
operating activities:
Undistributed earnings of subsidiary bank....................................... (6,238)
Increase in otherassets........................................................ (23)
Increase in payable for securities purchased.................................... 33,994
ESOP compensation expense ...................................................... 114
Increase in other liabilities................................................... 241
--------------
Net cash provided by operating activities....................................... 34,353
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in federal funds sold.................................................. (53,623)
Equity in undistributed earnings of subsidiary.................................. (76,349)
Purchases of investment securities available for sale........................... (33,994)
--------------
Net cash provided by (used in) investing activities............................. (163,966)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from issuance of common stock...................................... 129,730
--------------
Net cash provided by (used in) financing activities............................. 129,730
--------------
Net increase in cash and cash equivalents....................................... 117
CASH AND CASH EQUIVALENTS, beginning of period.................................. -
--------------
CASH AND CASH EQUIVALENTS, end of period........................................ $ 117
==============
</TABLE>
* * * * * *
Item 9. - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. - Directors and Executive Officers of the Company
Information regarding directors and executive officers of the
Company is presented under the headings "Election of Directors -
Nominees for Election as Director," "- Continuing Directors," "-
Meetings and Committees of the Board of Directors," "-Directors'
Compensation," "-Executive Officers," and "-Executive
Compensation" in the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on December 17, 1996
(the "Proxy Statement") which will be filed with the SEC within
120 days of June 30, 1996, and is incorporated herein by
reference.
Item 11. - Executive Compensation
Information regarding executive and director compensation is
presented under the headings "Election of Directors - Directors'
Compensation," "-Executive Compensation," "-Summary Compensation
Table," "Employment Agreements," "- Employee Retention
Agreements," "-Employee Severance Compensation Plan," and "-
Benefits," in the Proxy Statement and is incorporated herein by
reference.
Item 12. - Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain beneficial
owners and management is included under the heading "Security
Ownership of Certain Beneficial Owners" and "Security Ownership
of Management" in the Proxy Statement and is incorporated herein
by reference.
Item 13. - Certain Relationships and Related Transactions.
Information regarding certain relationships and related
transactions is included under the heading "Transactions with
Certain Related Persons" in the Proxy Statement and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements and
schedules of the Company, and the independent
auditors' report thereon are included in this
Form 10-K at Item 8.
Independent Auditors' Report
Consolidated Statements of Financial Condition at June 30,1996 and 1995
Consolidated Statements of Operations for each of the years
in the three year period ended June 30, 1996
Consolidated Statements of Stockholders' Equity for each of
the years in the three year period ended June 30, 1996
Consolidated Statements of Cash Flows for each of the years
in the three year period ended June 30,1996
Notes to Consolidated Financial Statements
Quarterly Results of Operations (Unaudited) for each of the
years in the two year period ended June 30, 1996
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) Exhibits Required by Item 601 of Securities and Exchange
Commission Regulation S-K:
Exhibit
Number
- ------------
3.1 Certificate of Incorporation of Dime Community Bancorp,
Inc. (Incorporated by reference to Exhibit 31 to the
Registration Statement on Form S-1, No. 33-80735 filed on
December 22, 1995, as amended (the "Registration
Statement"))
3.2 Bylaws of Dime Community Bancorp, Inc. (Incorporated by
reference to Exhibit 3.2 to the Registration Statement)
4.1 Certificate of Incorporation of Dime Community Bancorp,
Inc. (See Exhibit 3.1 hereto)
4.2 Bylaws of Dime Community Bancorp, Inc. (See Exhibit 3.2
hereto)
4.3 Draft Stock Certificate of Dime Community Bancorp, Inc.
(Incorporated by reference to Exhibit 4.3 to the
Registration Statement)
10.1 Agency Agreement, by and among Dime Community Bancorp,
Inc., The Dime Savings Bank of Williamsburgh and Sandler
O'Neill & Partners, L.P. (Incorporated by reference to
Exhibit 1.1 to the Registration Statement)
10.2 Agreement and Plan of Merger dated as of the 2nd day of
November, 1995 by and between The Dime Savings Bank of
Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by
reference to the Schedule 13D of The Dime Savings Bank of
Williamsburgh, filed with the Commission on November 23,
1995)
10.3 Stock Option Agreement dated as of the 2nd day of
November, 1995 by and between The Dime Savings Bank of
Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by
reference to the Schedule 13D of The Dime Savings Bank of
Williamsburgh, filed with the Commission on November 23,
1995)
10.4 Engagement Letter, dated September 11, 1995 between The
Dime Savings Bank of Williamsburgh and Ryan Beck & Co., Inc.
(Incorporated by referenced to Exhibit 10.3 to the
Registration Statement)
10.5 Amended and Restated Employment Agreement between The Dime
Savings Bank of Williamsburgh and Vincent F. Palagiano
10.6 Amended and Restated Employment Agreement between The Dime
Savings Bank of Williamsburgh and Michael P. Devine
Exhibit
Number
- ------------
10.7 Amended and Restated Employment Agreement between The Dime
Savings Bank of Williamsburgh and Kenneth J. Mahon
10.8 Employment Agreement between Dime Community Bancorp, Inc.
and Vincent F. Palagiano
10.9 Employment Agreement between Dime Community Bancorp, Inc.
and Michael P. Devine
10.10 Employment Agreement between Dime Community Bancorp, Inc.
and Kenneth J. Mahon
10.11 Form of Employee Retention Agreements by and among The
Dime Savings Bank of Williamsburgh, Dime Community Bancorp,
Inc. and certain executive officers
10.12 Employee Stock Ownership Plan of Dime Community Bancorp,
Inc. and certain affiliates (Incorporated by reference to
Exhibit 10.14 to the Registration Statement)
10.13 First Amendment to Employee Stock Ownership Plan of Dime
Community Bancorp, Inc. and Certain Affiliates
10.14 ESOP Loan Commitment Letter and ESOP Loan Documents
10.15 The Dime Savings Bank of Williamsburgh 401(k) Savings Plan
in RSI Retirement Trust (Incorporated by reference to
Exhibit 10.14 to the Registration Statement)
10.16 Seventh, Eighth and Ninth Amendments to The Dime Savings
Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement
Trust
10.17 The Dime Savings Bank of Williamsburgh Supplemental
Executive Retirement Plan (Incorporated by reference to
Exhibit 10.16 to the Registration Statement)
10.18 Severance Pay Plan of The Dime Savings Bank of Williamsburgh
10.19 Retirement Plan for Board Members of Dime Community
Bancorp, Inc.
21.1 Subsidiaries of the Registrant (Incorporated by reference
to Exhibit 21.1 to the Registration Statement)
27.1 Financial Data Schedule (EDGAR filing only)
SIGNATURES
Pursuant to the requirements of Section 13 or 15 of the
Securities Exchange Act of 1934, as amended, the Registrant
certifies that it has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on September 24, 1996.
Dime Community Bancorp, Inc.
By: /s/ Vincent F. Palagiano
Vincent F. Palagiano
Chairman of the Board
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
Name Title Date
/s/ Vincent F. Chairman of the September 24, 1996
Palagiano Board,
Vincent F. Palagiano President and Chief
Executive Officer
(Principal
executive officer)
/s/ Michael P. Executive Vice September 24, 1996
Devine President, Chief
Michael P. Devine Operating Officer
and Secretary and
Director
/s/ Kenneth J. Senior Vice September 24, 1996
Mahon President and Chief
Kenneth J. Mahon Financial Officer
(Principal
financial officer)
/s/ Anthony Bergamo Director September 24, 1996
Anthony Bergamo
/s/ George L. Director September 24, 1996
Clark, Jr.
George L. Clark, Jr.
/s/ Steven D. Cohn Director September 24, 1996
Steven D. Cohn
/s/ Patrick E. Director September 24, 1996
Curtin
Patrick E. Curtin
/s/ Joseph H. Director September 24, 1996
Farrell
Joseph H. Farrell
/s/ Fred P. Director September 24, 1996
Fehrenbach
Fred P. Fehrenbach
/s/ John J. Flynn Director September 24, 1996
John J. Flynn
/s/ Malcolm T. Director September 24, 1996
Kitson
Malcolm T. Kitson
/s/ Stanley Meisels Director September 24, 1996
Stanley Meisels
/s/ Louis V. Varone Director September 24, 1996
Louis V. Varone
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
EXHIBITS
to
FORM 10-K
SEC File No. 0-27782
__________________________
DIME COMMUNITY BANCORP, INC.
Brooklyn, New York
<PAGE>
DESIGNATION DESCRIPTION PAGE
3.1 Certificate of Incorporation of Dime Community
Bancorp, Inc. (Incorporated by reference to Exhibit
31 to the Registration Statement on Form S-1, No.
33-80735 filed on December 22, 1995, as amended
(the "Registration Statement"))
3.2 Bylaws of Dime Community Bancorp, Inc.
(Incorporated by reference to Exhibit 3.2 to the
Registration Statement)
4.1 Certificate of Incorporation of Dime Community
Bancorp, Inc. (See Exhibit 3.1 hereto)
4.2 Bylaws of Dime Community Bancorp, Inc. (See
Exhibit 3.2 hereto)
4.3 Draft Stock Certificate of Dime Community
Bancorp, Inc. (Incorporated by reference to Exhibit
4.3 to the Registration Statement)
10.1 Agency Agreement, by and among Dime
Community Bancorp, Inc., The Dime Savings Bank
of Williamsburgh and Sandler O'Neill & Partners,
L.P. (Incorporated by reference to Exhibit 1.1 to the
Registration Statement)
10.2 Agreement and Plan of Merger dated as of the 2nd
day of November, 1995 by and between The Dime
Savings Bank of Williamsburgh and Conestoga
Bancorp, Inc. (Incorporated by reference to the
Schedule 13D of The Dime Savings Bank of
Williamsburgh, filed with the Commission on
November 23, 1995)
10.3 Stock Option Agreement dated as of the 2nd day of
November, 1995 by and between The Dime Savings
Bank of Williamsburgh and Conestoga Bancorp,
Inc. (Incorporated by reference to the Schedule 13D
of The Dime Savings Bank of Williamsburgh, filed
with the Commission on November 23, 1995)
10.4 Engagement Letter, dated September 11, 1995
between The Dime Savings Bank of Williamsburgh
and Ryan Beck & Co., Inc. (Incorporated by
referenced to Exhibit 10.3 to the Registration
Statement)
10.5 Amended and Restated Employment Agreement
between The Dime Savings Bank of Williamsburgh
and Vincent F. Palagiano
10.6 Amended and Restated Employment Agreement
between The Dime Savings Bank of Williamsburgh
and Michael P. Devine
10.7 Amended and Restated Employment Agreement
between The Dime Savings Bank of Williamsburgh
and Kenneth J. Mahon
10.8 Employment Agreement between Dime Community
Bancorp, Inc. and Vincent F. Palagiano
10.9 Employment Agreement between Dime Community
Bancorp, Inc. and Michael P. Devine
10.10 Employment Agreement between Dime Community
Bancorp, Inc. and Kenneth J. Mahon
10.11 Form of Employee Retention Agreements by and
among The Dime Savings Bank of Williamsburgh,
Dime Community Bancorp, Inc. and certain
executive officers
10.12 Employee Stock Ownership Plan of Dime
Community Bancorp, Inc. and certain affiliates
(Incorporated by reference to Exhibit 10.14 to the
Registration Statement)
10.13 First Amendment to Employee Stock Ownership
Plan of Dime Community Bancorp, Inc. and Certain
Affiliates
10.14 ESOP Loan Commitment Letter and ESOP Loan
Documents
10.15 The Dime Savings Bank of Williamsburgh 401(k)
Savings Plan in RSI Retirement Trust (Incorporated
by reference to Exhibit 10.14 to the Registration
Statement)
10.16 Seventh, Eighth and Ninth Amendments to The
Dime Savings Bank of Williamsburgh 401(k)
Savings Plan in RSI Retirement Trust
10.17 The Dime Savings Bank of Williamsburgh
Supplemental Executive Retirement Plan
(Incorporated by reference to Exhibit 10.16 to the
Registration Statement)
10.18 Severance Pay Plan of The Dime Savings Bank of
Williamsburgh
10.19 Retirement Plan for Board Members of Dime
Community Bancorp, Inc.
21.1 Subsidiaries of the Registrant (Incorporated by
reference to Exhibit 21.1 to the Registration
Statement)
27.1 Financial Data Schedule (EDGAR filing only)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between The
Dime Savings Bank of Williamsburgh, a mutual savings bank
organized and operating under the federal laws of the United
States and having an office at 209 Havemeyer Street, Brooklyn,
New York 11211 ("Bank") and Vincent F. Palagiano, residing at
[home address deleted] and amends and restates the Amended and
Restated Employment Agreement made as of October 1, 1995 between
the Bank and Mr. Palagiano.
W I T N E S S E T H :
WHEREAS, Mr. Palagiano currently serves the Bank in the
capacity of Chairman of the Board, President and Chief Executive
Officer; and
WHEREAS, the Bank and Mr. Palagiano are parties to an
Employment Agreement made and entered into as of the 1st day of
January, 1992 and amended and restated as of the 1st day of
October, 1995 ("Prior Agreement"); and
WHEREAS, the Bank and Mr. Palagiano desire to amend and
restate the Prior Agreement in its entirety as set forth herein;
and
WHEREAS, for purposes of securing for the Bank Mr.
Palagiano's continued services, the Board of Directors of the
Bank ("Board") has approved and authorized the execution of this
Agreement with Mr. Palagiano; and
WHEREAS, Mr. Palagiano is willing to continue to make
his services available to the Bank on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Bank and Mr. Palagiano hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Bank hereby represents and warrants to Mr.
Palagiano that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Bank; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Bank is a party
or by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any order
of any order of any court or administrative agency, applicable to
the Bank or its business.
(b) Mr. Palagiano hereby represents and warrants to
the Bank that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Bank hereby continues the
employment of Mr. Palagiano, and Mr. Palagiano hereby accepts
such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Prior to the first anniversary of the date of this
Agreement and each anniversary date thereafter (each, an
"Anniversary Date"), the Board shall review the terms of this
Agreement and Mr. Palagiano's performance of services hereunder
and may, in the absence of objection from Mr. Palagiano, approve
an extension of the Employment Period. In such event, the
Employment Period shall be extended to the third anniversary of
the relevant Anniversary Date.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs and the Bank is not subject to rules and
regulations of the Office of Thrift Supervision, then the
Employment Period shall be extended through and including the
third anniversary of the earliest date after the effective date
of such Change of Control on which either the Bank or Mr.
Palagiano elects, by written notice pursuant to section 3(d) of
this Agreement to the non-electing party, to discontinue the
Employment Period; provided, however, that this section shall not
apply in the event that, prior to the Change of Control (as
defined in section 13 of this Agreement), Mr. Palagiano has
provided written notice to the Bank of his intent to discontinue
the Employment Period.
(d) The Bank or Mr. Palagiano may, at any time by
written notice given to the other, elect to terminate this
Agreement. Any such notice given by the Bank shall be
accompanied by a certified copy of a resolution, adopted by the
affirmative vote of a majority of the entire membership of the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Palagiano's employment with the Bank may be
terminated during the Employment Period, in accordance with the
terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of Mr.
Palagiano's employment following the expiration of the Employment
Period upon such terms and conditions as the Bank and Mr.
Palagiano may mutually agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr.
Palagiano shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Bank and use his best efforts to
advance the Bank's interests;
(b) serve as Chairman of the Board, President and
Chief Executive Officer if duly appointed and/or elected to serve
in such position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board, in accordance with
organization Certificate, By-laws, Applicable Laws, Statutes and
Regulations, custom and practice of the Bank as in effect on the
date first above written.
Mr. Palagiano shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Palagiano shall
report to and be subject to direction and supervision by the
Board.
(d) none of the functions, duties and responsibilities
to be performed by Mr. Palagiano pursuant to this Agreement shall
be deemed to include those functions, duties and responsibilities
performed by Mr. Palagiano in his capacity as director of the
Bank.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Palagiano under this Agreement, the
Bank shall pay to Mr. Palagiano a salary at an annual rate equal
to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $450,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Palagiano's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Bank (other than Mr.
Palagiano) who are assistant vice presidents
or more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Bank
(other than Mr. Palagiano) who are assistant
vice presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Bank's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Palagiano of a salary
in excess of that prescribed under this section 5 or of
additional cash or non-cash compensation in a form other than
salary, to the extent that such payment is duly authorized by or
under the authority of the Board.
(d) no portion of the compensation paid to Mr.
Palagiano pursuant to this Agreement shall be deemed to be
compensation received by Mr. Palagiano in his capacity as
director of the Bank.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Palagiano shall be treated as an employee of the Bank and be
entitled to participate in and receive benefits under the Bank's
Retirement Plan, Incentive Savings Plan, group life and health
(including medical and major medical) and disability insurance
plans, and such other employee benefit plans and programs,
including but not limited to any long-term or short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and
programs and with the Bank's customary practices. Following a
Change in Control, all such benefits to Mr. Palagiano shall be
continued on terms and conditions substantially identical to, and
in no event less favorable than, those in effect prior to the
Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Bank will provide, or cause to be provided,
to Mr. Palagiano in connection with such Conversion, stock-based
compensation and benefits, including, without limitation, stock
options, restricted stock awards, and participation in
tax-qualified stock bonus plans which, in the aggregate, are
either (A) accepted by Mr. Palagiano in writing as being
satisfactory for purposes of this Agreement or (B) in the
written, good faith opinion of a nationally recognized executive
compensation consulting firm selected by the Bank and
satisfactory to Mr. Palagiano, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions.
7. Board Memberships and Personal Activities. Mr.
Palagiano may serve as a member of the board of directors of such
business, community and charitable organizations as he may
disclose to the Board from time to time, and he may engage in
personal business and investment activities for his own account;
provided, however, that such service and personal business and
investment activities shall not materially interfere with the
performance of his duties under this Agreement. Mr. Palagiano
may also serve as an officer or director of any parent of the
Bank on such terms and conditions as the Bank and its parent may
mutually agree upon, and such service shall not be deemed to
materially interfere with Mr. Palagiano's performance of his
duties hereunder or otherwise result in a material breach of this
Agreement.
8. Working Facilities and Expenses. Mr. Palagiano's
principal place of employment shall be at the Bank's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Bank shall provide Mr. Palagiano, at his principal
place of employment, with a private office, stenographic services
and other support services and facilities suitable to his
position with the Bank and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement.
The Bank shall provide Mr. Palagiano with an automobile suitable
to his position with the Bank in accordance with its prior
practices, and such automobile shall be used by Mr. Palagiano in
carrying out his duties under this Agreement, including commuting
between his residence and his principal place of employment. The
Bank shall reimburse Mr. Palagiano for his ordinary and necessary
business expenses, including, without limitation, all expenses
associated with his business use of the aforementioned
automobile, fees for memberships in such clubs and organizations
as Mr. Palagiano and the Bank shall mutually agree are necessary
and appropriate for business purposes and travel and
entertainment expenses incurred in connection with the
performance of his duties under this Agreement, upon presentation
to the Bank of an itemized account of such expenses in such form
as the Bank may reasonably require. Mr. Palagiano shall be
entitled to no less than four (4) weeks of paid vacation during
each year in the Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Palagiano's employment with
the Bank shall terminate during the Employment Period on account
of the termination of Mr. Palagiano's employment with the Bank
other than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Palagiano other
than a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement);
(iii) a termination on account of Mr. Palagiano's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Palagiano has been absent from the
full-time service of the Bank on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Palagiano shall have failed to
return to work in the full-time service of the Bank within thirty
(30) days after written notice requesting such return is given to
Mr. Palagiano by the Bank; then the Bank shall provide to Mr.
Palagiano the benefits and pay to Mr. Palagiano the amounts
provided under section 9(b) of this Agreement.
(b) In the event that Mr. Palagiano's employment with
the Bank shall terminate under circumstances described in section
9(a) of this Agreement or if the Bank terminates this Agreement
pursuant to section 3(d), the following benefits and amounts
shall be paid or provided to Mr. Palagiano (or, in the event of
his death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;
(ii) (A) the benefits, if any, to which Mr. Palagiano
and his family and dependents are entitled as a former employee,
or family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on the date of his termination of employment, or if his
termination of employment occurs after a Change in Control, on
the date of his termination of employment or on the date of such
Change in Control, whichever results in more favorable benefits
as determined by Mr. Palagiano, where credit is given for three
additional years of service and age in determining eligibility
and benefits for any plan and program where age and service are
relevant factors, and (B) payment for all unused vacation days
and floating holidays in the year in which his employment is
terminated, at his highest annual rate of salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Palagiano
and his family and dependents for the Remaining Unexpired
Employment Period, coverage identical to and in any event no less
favorable than the coverage to which they would have been
entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment
occurs after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such Change in Control, whichever results in more favorable
benefits as determined by Mr. Palagiano) if he had continued
working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Palagiano would have earned if he had worked for the Bank during
the Remaining Unexpired Employment Period at the highest annual
rate of salary (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided for
under this Agreement, where such present value is to be
determined using a discount rate of six percent (6%) per annum,
compounded, in the case of salary, with the frequency
corresponding to the Bank's regular payroll periods with respect
to its officers, and, in the case of bonus, annually;
(v) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Bank
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Bank during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Bank as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Bank's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Bank (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Palagiano's
termination of employment with the Bank, and been fully vested in
such plan or plans, over (B) the present value of the benefits
attributable to the Bank's contributions to which he is actually
entitled under such plans as of the date of his termination of
employment with the Bank, where such present values are to be
determined using a discount rate of six percent (6%) per annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;
(vii) the payments that would have been made to Mr.
Palagiano under any incentive compensation plan maintained by, or
covering employees of, the Bank (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Bank during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Palagiano under such incentive compensation
plan, multiplied by (B) the compensation that would have been
paid to Mr. Palagiano during each calendar year at the highest
annual rate of compensation (assuming, if a Change in Control has
occurred, that the annual increases under section 5(c) would
apply) under the Agreement, such payments to be made at the same
time and in the same manner as payments are made to other
officers of the Bank pursuant to the terms of such incentive
compensation plan; provided, however, that payments under this
section 9(b)(vii) shall not be made to Mr. Palagiano for any year
on account of which no payments are made to any of the Bank's
officers under any such incentive compensation plan; and
(viii) the benefits to which Mr. Palagiano is
entitled under the Bank's Supplemental Executive Retirement Plan
(or other excess benefits plan with the meaning of section 3(36)
of ERISA or other special or supplemental plan) shall be paid to
him in a lump sum, where such lump sum is computed using the
mortality tables under the Bank's tax-qualified pension plan and
a discount rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Palagiano's
election, and if the amount may be increased by a subsequent
Change in Control, any additional payment shall be made within
thirty (30) days of such Change in Control.
(c) Mr. Palagiano shall not be required to mitigate
the amount of any payment provided for in this section 9 by
seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this section 9 be reduced
by any compensation earned by Mr. Palagiano as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by Mr. Palagiano to the
Bank, or otherwise except as specifically provided in section
9(b) (iii) of this Agreement. The Bank and Mr. Palagiano hereby
stipulate that the damages which may be incurred by Mr. Palagiano
as a consequence of any such termination of employment are not
capable of accurate measurement as of the date first above
written and that the benefits and payments provided for in this
Agreement constitute a reasonable estimate under the
circumstances of all damages sustained as a consequence of any
such termination of employment, other than damages arising under
or out of any stock option, restricted stock or other non-
qualified stock acquisition or investment plan or program, it
being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or
program in respect of any termination of employment.
10. Termination Without Severance Benefits. In the
event that Mr. Palagiano's employment with the Bank shall
terminate during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Palagiano other than
a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement); or
(c) Mr. Palagiano's death;
then the Bank shall have no further obligations under this
Agreement, other than the payment to Mr. Palagiano (or, in the
event of his death, to his estate) of his earned but unpaid
salary as of the date of the termination of his employment, and
the provision of such other benefits, if any, to which he is
entitled as a former employee under the Bank's employee benefit
plans and programs and compensation plans and programs and
payment for all unused vacation days and floating holidays in the
year in which his employment is terminated, at his highest annual
salary for such year.
11. Death and Disability.
(a) Death. If Mr. Palagiano's employment is termi
nated by reason of Mr. Palagiano's death during the Employment
Period, this Agreement shall terminate without further
obligations to Mr. Palagiano's legal representatives under this
Agreement, other than for payment of amounts and provision of
benefits under sections 9(b) (i) and (ii); provided, however,
that if Mr. Palagiano dies while in the employment of the Bank,
his designated beneficiary(ies) shall receive a death benefit,
payable through life insurance or otherwise, which is the
equivalent on a net after-tax basis of the death benefit payable
under a term life insurance policy, with a stated death benefit
of three times Mr. Palagiano's then Annual Base Salary.
(b) Disability. If Mr. Palagiano's employment is
terminated by reason of Mr. Palagiano's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Palagiano, other
than for payment of amounts and provision of benefits under
section 9(b) (i) and (ii); provided, however, that in the event
of Mr. Palagiano's Disability while in the employment of the
Bank, the Bank will pay to him a lump sum amount equal to three
times his then Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Bank's long term
disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Palagiano's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Palagiano's termination of employment with the
Bank shall be deemed a "Termination for Cause" if such
termination occurs for "cause," which, for purposes of this
Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any
material breach of this Agreement, in each case as measured
against standards generally prevailing at the relevant time in
the savings and community banking industry; provided, however,
that Mr. Palagiano shall not be deemed to have been discharged
for cause unless and until he shall have received a written
notice of termination from the Board, accompanied by a resolution
duly adopted by affirmative vote of a majority of the entire
Board at a meeting called and held for such purpose (after
reasonable notice to Mr. Palagiano and a reasonable opportunity
for Mr. Palagiano to make oral and written presentations to the
members of the Board, on his own behalf, or through a repre
sentative, who may be his legal counsel, to refute the grounds
for the proposed determination) finding that in the good faith
opinion of the Board grounds exist for discharging Mr. Palagiano
for cause.
(b) Mr. Palagiano's termination of employment with the
Bank shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Palagiano of any duties
inconsistent with Mr. Palagiano's status as Chairman of the
Board, President and Chief Executive Officer of the Bank or (B) a
substantial adverse alteration in the nature or status of Mr.
Palagiano's responsibilities from those in effect immediately
prior to the alteration; or (C) any Change in Control described
in section 13(b);
(ii) a reduction by the Bank in Mr. Palagiano's annual
base salary as in effect on the date first above written or as
the same may be increased from time to time, unless such
reduction was mandated at the initiation of any regulatory
authority having jurisdiction over the Bank;
(iii) the relocation of the Bank's principal
executive offices to a location outside the New York metropolitan
area or the Bank's requiring Mr. Palagiano to be based anywhere
other than the Bank's principal executive offices except for
required travel on the Bank's business to an extent substantially
consistent with Mr. Palagiano's business travel obligations at
the date first above written;
(iv) the failure by the Bank, without Mr. Palagiano's
consent, to pay to Mr. Palagiano, within seven (7) days of the
date when due, (A) any portion of his compensation, or (B) any
portion of an installment of deferred compensation under any
deferred compensation program of the Bank, which failure is not
inadvertent and immaterial and which is not promptly cured by the
Bank after notice of such failure is given to the Bank by the
Executive;
(v) the failure by the Bank to continue in effect any
compensation plan in which Mr. Palagiano participates which is
material to his total compensation, including but not limited to
the Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Bank to continue his
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of his participation
relative to other participants, unless such failure is the result
of action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;
(vi) the failure by the Bank to continue to provide Mr.
Palagiano with benefits substantially similar to those enjoyed by
Mr. Palagiano under the Retirement Plan and the Bank's Incentive
Savings Plan or under any of the Bank's life, health (including
hospitalization, medical and major medical), dental, accident,
and long-term disability insurance benefits, in which Mr.
Palagiano is participating, or the taking of any action by the
Bank which would directly or indirectly materially reduce any of
such benefits or deprive Mr. Palagiano of the number of paid
vacation days to which he is entitled, on the basis of years of
service with the Bank, rank or otherwise, in accordance with the
Bank's normal vacation policy, unless such failure is the result
of action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;
(vii) the failure of the Bank to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Bank which is not effected pursuant the provisions of section
12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the Bank,
which the Bank fails to cure within thirty (30) days following
written notice thereof from Mr. Palagiano;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Bank to
provide, or cause to be provided, to Mr. Palagiano in connection
with such Change in Control, stock-based compensation and
benefits, including, without limitation, stock options,
restricted stock awards, and participation in tax-qualified stock
bonus plans which, in the aggregate, are either (A) accepted by
Mr. Palagiano in writing as being satisfactory for purposes of
this Agreement or (B) in the written, good faith opinion of a
nationally recognized executive compensation consulting firm
selected by the Bank and satisfactory to Mr. Palagiano, whose
agreement shall not be unreasonably withheld, are no less
favorable than the stock-based compensation and benefits usually
and customarily provided to similarly situated executives of
similar financial institutions in connection with similar
transactions; or
(xi) a requirement that Mr. Palagiano report to any
person or group other than the Board;
(xii) in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Bank shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Bank; (B) a corporation owned, directly or
indirectly, by the stockholders of the Bank in substantially the
same proportions as their ownership of stock of the Bank; or (C)
Mr. Palagiano, or any group otherwise constituting a person in
which Mr. Palagiano is a member, becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by the Bank
representing 25% or more of the combined voting power of all of
the Bank's then outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank to effect a transaction described in section 13(a) or 13(c)
of this Agreement) whose election by the Board or nomination for
election by the Bank's stockholders was approved by the
affirmative vote of at least two-thirds of the members of Board
then in office who were either members of the Board on the date
first above written or whose nomination or election was
previously so approved cease for any reason to constitute a
majority of the members of the Board, but excluding, for this
purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of directors of the Bank (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (A) the members of the
Board of the Bank immediately prior to such merger
or consolidation constitute at least a majority of
the members of the governing body of the
institution resulting from such merger or
consolidation; or (B) the shareholders of the Bank
own securities of the institution resulting from
such merger or consolidation representing 80% or
more of the combined voting power of all such
securities then outstanding in substantially the
same proportions as their ownership of voting
securities of the Bank before such merger or
consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Bank's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Bank or
an agreement for the sale or disposition by the Bank of all or
substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Company" were substituted for the
term "Bank" therein. Such an event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Palagiano's employment during the Employment Period or
thereafter, whether by the Bank or by Mr. Palagiano, shall have
no effect on the rights and obligations of the parties hereto
under the Bank's the Retirement Plan and the Bank's Incentive
Savings Plan, group life, health (including hospitalization,
medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans
or programs, or compensation plans or programs (whether or not
employee benefit plans or programs) and, following the conversion
of the Bank to stock form, any stock option and appreciation
rights plan, employee stock ownership plan and restricted stock
plan, as may be maintained by, or cover employees of, the Bank
from time to time.
15. Successors and Assigns.
(a) The Bank shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Bank to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Bank
would be required to perform it if no such succession had taken
place. Failure of the Bank to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Bank's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Palagiano, his legal representatives and testate
or intestate distributees, and the Bank, their respective
successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm
or corporation to which all or substantially all of the
respective assets and business of the Bank may be sold or
otherwise transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Palagiano:
[Home address deleted].
If to the Bank:
The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
With a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright
17. Indemnification and Attorneys' Fees. The Bank
shall pay to or on behalf of Mr. Palagiano all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that Mr. Palagiano shall have substantially
prevailed on the merits pursuant to a judgment, decree or order
of a court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or in a settlement; provided, further,
that this section 17 shall not obligate the Bank to pay costs and
legal fees on behalf of Mr. Palagiano under this Agreement in
excess of $50,000. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in
settlement of the Bank's obligations hereunder shall be
conclusive evidence of Mr. Palagiano's entitlement to
indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such
settlement agreement, unless such settlement agreement expressly
provides otherwise.
18. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
19. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
20. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
21. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
22. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated. Any reference to the term
"Board" shall mean the Board of Trustees of the Bank while the
Bank is a mutual savings bank and the Board of Directors of the
Bank while the Bank is a stock savings bank. Any reference to
the term "Bank" shall mean the Bank in its mutual form prior to
the conversion and in its stock form on and after the conversion.
If the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.
23. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Palagiano. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
24. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Bank.
25. Required Regulatory Provisions. The following
provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the
Association:
(a) Notwithstanding anything herein contained to the
contrary, in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive of
amounts described in section 9(b)(i) and (viii)) exceed the three
times the Executive's average annual total compensation for the
last five consecutive calendar years to end prior to his
termination of employment with the Association (or for his entire
period of employment with the Association if less than five
calendar years).
(b) Notwithstanding anything herein contained to the
contrary, any payments to the Executive by the Association,
whether pursuant to this Agreement or otherwise, are subject to
and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the
contrary, if the Executive is suspended from office and/or
temporarily prohibited from participating in the conduct of the
affairs of the Association pursuant to a notice served under
section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Association's obligations under this
Agreement shall be suspended as of the date of service of such
notice, unless stayed by appropriate proceedings. If the charges
in such notice are dismissed, the Association, in its discretion,
may (i) pay to the Executive all or part of the compensation
withheld while the Association's obligations hereunder were susp-
ended and (ii) reinstate, in whole or in part, any of the obli-
gations which were suspended.
(d) Notwithstanding anything herein contained to the
contrary, if the Executive is removed and/or permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under section 8(e)(4) or 8(g)(1) of
the FDI Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all
prospective obligations of the Association under this
Agreement shall terminate as of the effective date of the
order, but vested rights and obligations of the Association and
the Executive shall not be affected.
(e) Notwithstanding anything herein contained to the
contrary, if the Association is in default (within the meaning of
section 3(x)(1) of the FDI Act, 12 U.S.C. Section 1813(x)(1),
all prospective obligations of the Association under this
Agreement shall terminate as of the date of default, but vested
rights and obligations of the Association and the Executive shall
not be affected.
(f) Notwithstanding anything herein contained to the
contrary, all prospective obligations of the Association
hereunder shall be terminated, except to the extent that a
continuation of this Agreement is necessary for the continued
operation of the Association: (i) by the Director of the OTS or
his designee or the Federal Deposit Insurance Corporation
("FDIC"), at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Association under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C.
Section 1823(c); (ii) by the Director of the OTS or his designee
at the time such Director or designee approves a supervisory
merger to resolve problems related to the operation of the
Association or when the Association is determined by such
Director to be in an unsafe or unsound condition. The vested
rights and obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall
cease to be required or by applicable law, rule or regulation,
the same shall become inoperative as though eliminated by formal
amendment of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement
to be executed and Mr. Palagiano has hereto set his hand, all as
of the day and year first above written.
/s/ Vincent F. Palagiano
VINCENT F. PALAGIANO
ATTEST THE DIME SAVINGS BANK
OF WILLIAMSBURGH
By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between The
Dime Savings Bank of Williamsburgh, a mutual savings bank
organized and operating under the federal laws of the United
States and having an office at 209 Havemeyer Street, Brooklyn,
New York 11211 ("Bank") and Michael P. Devine, residing at [home
address deleted] and amends and restates the Amended and Restated
Employment Agreement made as of October 1, 1995 between the Bank
and Mr. Devine.
W I T N E S S E T H :
WHEREAS, Mr. Devine currently serves the Bank in the
capacity of Executive Vice President, Secretary and Chief
Operating Officer; and
WHEREAS, the Bank and Mr. Devine are parties to an
Employment Agreement made and entered into as of the 1st day of
January, 1992 and amended and restated as of the 1st day of
October, 1995 ("Prior Agreement"); and
WHEREAS, the Bank and Mr. Devine desire to amend and
restate the Prior Agreement in its entirety as set forth herein;
and
WHEREAS, for purposes of securing for the Bank Mr.
Devine's continued services, the Board of Directors of the Bank
("Board") has approved and authorized the execution of this
Agreement with Mr. Devine; and
WHEREAS, Mr. Devine is willing to continue to make his
services available to the Bank on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Bank and Mr. Devine hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Bank hereby represents and warrants to Mr.
Devine that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Bank; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Bank is a party
or by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any order
of any order of any court or administrative agency, applicable to
the Bank or its business.
(b) Mr. Devine hereby represents and warrants to the
Bank that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Bank hereby continues the
employment of Mr. Devine, and Mr. Devine hereby accepts such
continued employment, during the period and upon the terms and
conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Prior to the first anniversary of the date of this
Agreement and each anniversary date thereafter (each, an
"Anniversary Date"), the Board shall review the terms of this
Agreement and Mr. Devine's performance of services hereunder and
may, in the absence of objection from Mr. Devine, approve an
extension of the Employment Period. In such event, the
Employment Period shall be extended to the third anniversary of
the relevant Anniversary Date.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs and the Bank is not subject to rules and
regulations of the Office of Thrift Supervision, then the
Employment Period shall be extended through and including the
third anniversary of the earliest date after the effective date
of such Change of Control on which either the Bank or Mr. Devine
elects, by written notice pursuant to section 3(d) of this
Agreement to the non-electing party, to discontinue the
Employment Period; provided, however, that this section shall not
apply in the event that, prior to the Change of Control (as
defined in section 13 of this Agreement), Mr. Devine has provided
written notice to the Bank of his intent to discontinue the
Employment Period.
(d) The Bank or Mr. Devine may, at any time by written
notice given to the other, elect to terminate this Agreement.
Any such notice given by the Bank shall be accompanied by a
certified copy of a resolution, adopted by the affirmative vote
of a majority of the entire membership of the Board at a meeting
of the Board duly called and held, authorizing the giving of such
notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Devine's employment with the Bank may be
terminated during the Employment Period, in accordance with the
terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of Mr.
Devine's employment following the expiration of the Employment
Period upon such terms and conditions as the Bank and Mr. Devine
may mutually agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr. Devine
shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Bank and use his best efforts to
advance the Bank's interests;
(b) serve as Executive Vice President, Secretary and
Chief Operating Officer if duly appointed and/or elected to serve
in such position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board, in accordance with
organization Certificate, By-laws, Applicable Laws, Statutes and
Regulations, custom and practice of the Bank as in effect on the
date first above written.
Mr. Devine shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Devine shall
report to and be subject to direction and supervision by the
Board.
(d) none of the functions, duties and responsibilities
to be performed by Mr. Devine pursuant to this Agreement shall be
deemed to include those functions, duties and responsibilities
performed by Mr. Devine in his capacity as director of the Bank.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Devine under this Agreement, the
Bank shall pay to Mr. Devine a salary at an annual rate equal to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $340,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Devine's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Bank (other than Mr.
Devine) who are assistant vice presidents or
more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Bank
(other than Mr. Devine) who are assistant
vice presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Bank's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Devine of a salary in
excess of that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent that such payment is duly authorized by or under the
authority of the Board.
(d) no portion of the compensation paid to Mr. Devine
pursuant to this Agreement shall be deemed to be compensation
received by Mr. Devine in his capacity as director of the Bank.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Devine shall be treated as an employee of the Bank and be
entitled to participate in and receive benefits under the Bank's
Retirement Plan, Incentive Savings Plan, group life and health
(including medical and major medical) and disability insurance
plans, and such other employee benefit plans and programs,
including but not limited to any long-term or short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and
programs and with the Bank's customary practices. Following a
Change in Control, all such benefits to Mr. Devine shall be
continued on terms and conditions substantially identical to, and
in no event less favorable than, those in effect prior to the
Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Bank will provide, or cause to be provided,
to Mr. Devine in connection with such Conversion, stock-based
compensation and benefits, including, without limitation, stock
options, restricted stock awards, and participation in
tax-qualified stock bonus plans which, in the aggregate, are
either (A) accepted by Mr. Devine in writing as being
satisfactory for purposes of this Agreement or (B) in the
written, good faith opinion of a nationally recognized executive
compensation consulting firm selected by the Bank and
satisfactory to Mr. Devine, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions.
7. Board Memberships and Personal Activities. Mr.
Devine may serve as a member of the board of directors of such
business, community and charitable organizations as he may
disclose to the Board from time to time, and he may engage in
personal business and investment activities for his own account;
provided, however, that such service and personal business and
investment activities shall not materially interfere with the
performance of his duties under this Agreement. Mr. Devine may
also serve as an officer or director of any parent of the Bank on
such terms and conditions as the Bank and its parent may mutually
agree upon, and such service shall not be deemed to materially
interfere with Mr. Devine's performance of his duties hereunder
or otherwise result in a material breach of this Agreement.
8. Working Facilities and Expenses. Mr. Devine's
principal place of employment shall be at the Bank's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Bank shall provide Mr. Devine, at his principal place
of employment, with a private office, stenographic services and
other support services and facilities suitable to his position
with the Bank and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The
Bank shall provide Mr. Devine with an automobile suitable to his
position with the Bank in accordance with its prior practices,
and such automobile shall be used by Mr. Devine in carrying out
his duties under this Agreement, including commuting between his
residence and his principal place of employment. The Bank shall
reimburse Mr. Devine for his ordinary and necessary business
expenses, including, without limitation, all expenses associated
with his business use of the aforementioned automobile, fees for
memberships in such clubs and organizations as Mr. Devine and the
Bank shall mutually agree are necessary and appropriate for
business purposes and travel and entertainment expenses incurred
in connection with the performance of his duties under this
Agreement, upon presentation to the Bank of an itemized account
of such expenses in such form as the Bank may reasonably require.
Mr. Devine shall be entitled to no less than four (4) weeks of
paid vacation during each year in the Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Devine's employment with the
Bank shall terminate during the Employment Period on account of
the termination of Mr. Devine's employment with the Bank other
than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement);
(iii) a termination on account of Mr. Devine's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Devine has been absent from the
full-time service of the Bank on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Devine shall have failed to
return to work in the full-time service of the Bank within thirty
(30) days after written notice requesting such return is given to
Mr. Devine by the Bank; then the Bank shall provide to Mr. Devine
the benefits and pay to Mr. Devine the amounts provided under
section 9(b) of this Agreement.
(b) In the event that Mr. Devine's employment with the
Bank shall terminate under circumstances described in section
9(a) of this Agreement or if the Bank terminates this Agreement
pursuant to section 3(d), the following benefits and amounts
shall be paid or provided to Mr. Devine (or, in the event of his
death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;
(ii) (A) the benefits, if any, to which Mr. Devine and
his family and dependents are entitled as a former employee, or
family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on the date of his termination of employment, or if his
termination of employment occurs after a Change in Control, on
the date of his termination of employment or on the date of such
Change in Control, whichever results in more favorable benefits
as determined by Mr. Devine, where credit is given for three
additional years of service and age in determining eligibility
and benefits for any plan and program where age and service are
relevant factors, and (B) payment for all unused vacation days
and floating holidays in the year in which his employment is
terminated, at his highest annual rate of salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Devine
and his family and dependents for the Remaining Unexpired
Employment Period, coverage identical to and in any event no less
favorable than the coverage to which they would have been
entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment
occurs after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such Change in Control, whichever results in more favorable
benefits as determined by Mr. Devine) if he had continued working
for the Bank during the Remaining Unexpired Employment Period at
the highest annual rate of compensation (assuming, if a Change in
Control has occurred, that the annual increases under section
5(c) would apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Devine would have earned if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate
of salary (assuming, if a Change in Control has occurred, that
the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided for
under this Agreement, where such present value is to be
determined using a discount rate of six percent (6%) per annum,
compounded, in the case of salary, with the frequency
corresponding to the Bank's regular payroll periods with respect
to its officers, and, in the case of bonus, annually;
(v) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Bank
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Bank during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Bank as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Bank's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Bank (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Devine's
termination of employment with the Bank, and been fully vested in
such plan or plans, over (B) the present value of the benefits
attributable to the Bank's contributions to which he is actually
entitled under such plans as of the date of his termination of
employment with the Bank, where such present values are to be
determined using a discount rate of six percent (6%) per annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;
(vii) the payments that would have been made to Mr.
Devine under any incentive compensation plan maintained by, or
covering employees of, the Bank (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Bank during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Devine under such incentive compensation plan,
multiplied by (B) the compensation that would have been paid to
Mr. Devine during each calendar year at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, such payments to be made at the same time and in
the same manner as payments are made to other officers of the
Bank pursuant to the terms of such incentive compensation plan;
provided, however, that payments under this section 9(b)(vii)
shall not be made to Mr. Devine for any year on account of which
no payments are made to any of the Bank's officers under any such
incentive compensation plan; and
(viii) the benefits to which Mr. Devine is entitled
under the Bank's Supplemental Executive Retirement Plan (or other
excess benefits plan with the meaning of section 3(36) of ERISA
or other special or supplemental plan) shall be paid to him in a
lump sum, where such lump sum is computed using the mortality
tables under the Bank's tax-qualified pension plan and a discount
rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Devine's election,
and if the amount may be increased by a subsequent Change in
Control, any additional payment shall be made within thirty (30)
days of such Change in Control.
(c) Mr. Devine shall not be required to mitigate the
amount of any payment provided for in this section 9 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this section 9 be reduced by
any compensation earned by Mr. Devine as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by Mr. Devine to the Bank, or
otherwise except as specifically provided in section 9(b) (iii)
of this Agreement. The Bank and Mr. Devine hereby stipulate that
the damages which may be incurred by Mr. Devine as a consequence
of any such termination of employment are not capable of accurate
measurement as of the date first above written and that the
benefits and payments provided for in this Agreement constitute a
reasonable estimate under the circumstances of all damages
sustained as a consequence of any such termination of employment,
other than damages arising under or out of any stock option,
restricted stock or other non-qualified stock acquisition or
investment plan or program, it being understood and agreed that
this Agreement shall not determine the measurement of damages
under any such plan or program in respect of any termination of
employment.
10. Termination Without Severance Benefits. In the
event that Mr. Devine's employment with the Bank shall terminate
during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement); or
(c) Mr. Devine's death;
then the Bank shall have no further obligations under this
Agreement, other than the payment to Mr. Devine (or, in the event
of his death, to his estate) of his earned but unpaid salary as
of the date of the termination of his employment, and the
provision of such other benefits, if any, to which he is entitled
as a former employee under the Bank's employee benefit plans and
programs and compensation plans and programs and payment for all
unused vacation days and floating holidays in the year in which
his employment is terminated, at his highest annual salary for
such year.
11. Death and Disability.
(a) Death. If Mr. Devine's employment is terminated
by reason of Mr. Devine's death during the Employment Period,
this Agreement shall terminate without further obligations to Mr.
Devine's legal representatives under this Agreement, other than
for payment of amounts and provision of benefits under sections
9(b) (i) and (ii); provided, however, that if Mr. Devine dies
while in the employment of the Bank, his designated
beneficiary(ies) shall receive a death benefit, payable through
life insurance or otherwise, which is the equivalent on a net
after-tax basis of the death benefit payable under a term life
insurance policy, with a stated death benefit of three times Mr.
Devine's then Annual Base Salary.
(b) Disability. If Mr. Devine's employment is
terminated by reason of Mr. Devine's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Devine, other than
for payment of amounts and provision of benefits under section
9(b) (i) and (ii); provided, however, that in the event of Mr.
Devine's Disability while in the employment of the Bank, the Bank
will pay to him a lump sum amount equal to three times his then
Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Bank's long term
disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Devine's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Devine's termination of employment with the
Bank shall be deemed a "Termination for Cause" if such
termination occurs for "cause," which, for purposes of this
Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any
material breach of this Agreement, in each case as measured
against standards generally prevailing at the relevant time in
the savings and community banking industry; provided, however,
that Mr. Devine shall not be deemed to have been discharged for
cause unless and until he shall have received a written notice of
termination from the Board, accompanied by a resolution duly
adopted by affirmative vote of a majority of the entire Board at
a meeting called and held for such purpose (after reasonable
notice to Mr. Devine and a reasonable opportunity for Mr. Devine
to make oral and written presentations to the members of the
Board, on his own behalf, or through a representative, who may be
his legal counsel, to refute the grounds for the proposed
determination) finding that in the good faith opinion of the
Board grounds exist for discharging Mr. Devine for cause.
(b) Mr. Devine's termination of employment with the
Bank shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Devine of any duties
inconsistent with Mr. Devine's status as Executive Vice
President, Secretary and Chief Operating Officer of the Bank or
(B) a substantial adverse alteration in the nature or status of
Mr. Devine's responsibilities from those in effect immediately
prior to the alteration; or (C) any Change in Control described
in section 13(b);
(ii) a reduction by the Bank in Mr. Devine's annual
base salary as in effect on the date first above written or as
the same may be increased from time to time, unless such
reduction was mandated at the initiation of any regulatory
authority having jurisdiction over the Bank;
(iii) the relocation of the Bank's principal
executive offices to a location outside the New York metropolitan
area or the Bank's requiring Mr. Devine to be based anywhere
other than the Bank's principal executive offices except for
required travel on the Bank's business to an extent substantially
consistent with Mr. Devine's business travel obligations at the
date first above written;
(iv) the failure by the Bank, without Mr. Devine's
consent, to pay to Mr. Devine, within seven (7) days of the date
when due, (A) any portion of his compensation, or (B) any portion
of an installment of deferred compensation under any deferred
compensation program of the Bank, which failure is not
inadvertent and immaterial and which is not promptly cured by the
Bank after notice of such failure is given to the Bank by the
Executive;
(v) the failure by the Bank to continue in effect any
compensation plan in which Mr. Devine participates which is
material to his total compensation, including but not limited to
the Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Bank to continue his
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of his participation
relative to other participants, unless such failure is the result
of action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;
(vi) the failure by the Bank to continue to provide Mr.
Devine with benefits substantially similar to those enjoyed by
Mr. Devine under the Retirement Plan and the Bank's Incentive
Savings Plan or under any of the Bank's life, health (including
hospitalization, medical and major medical), dental, accident,
and long-term disability insurance benefits, in which Mr. Devine
is participating, or the taking of any action by the Bank which
would directly or indirectly materially reduce any of such
benefits or deprive Mr. Devine of the number of paid vacation
days to which he is entitled, on the basis of years of service
with the Bank, rank or otherwise, in accordance with the Bank's
normal vacation policy, unless such failure is the result of
action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;
(vii) the failure of the Bank to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Bank which is not effected pursuant the provisions of section
12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the Bank,
which the Bank fails to cure within thirty (30) days following
written notice thereof from Mr. Devine;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Bank to
provide, or cause to be provided, to Mr. Devine in connection
with such Change in Control, stock-based compensation and
benefits, including, without limitation, stock options,
restricted stock awards, and participation in tax-qualified stock
bonus plans which, in the aggregate, are either (A) accepted by
Mr. Devine in writing as being satisfactory for purposes of this
Agreement or (B) in the written, good faith opinion of a
nationally recognized executive compensation consulting firm
selected by the Bank and satisfactory to Mr. Devine, whose
agreement shall not be unreasonably withheld, are no less
favorable than the stock-based compensation and benefits usually
and customarily provided to similarly situated executives of
similar financial institutions in connection with similar
transactions; or
(xi) a change in the position to which Mr. Devine
reports;
(xii) in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Bank shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Bank; (B) a corporation owned, directly or
indirectly, by the stockholders of the Bank in substantially the
same proportions as their ownership of stock of the Bank; or (C)
Mr. Devine, or any group otherwise constituting a person in which
Mr. Devine is a member, becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by the Bank
representing 25% or more of the combined voting power of all of
the Bank's then outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank to effect a transaction described in section 13(a) or 13(c)
of this Agreement) whose election by the Board or nomination for
election by the Bank's stockholders was approved by the
affirmative vote of at least two-thirds of the members of Board
then in office who were either members of the Board on the date
first above written or whose nomination or election was
previously so approved cease for any reason to constitute a
majority of the members of the Board, but excluding, for this
purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of directors of the Bank (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (A) the members of the
Board of the Bank immediately prior to such merger
or consolidation constitute at least a majority of
the members of the governing body of the
institution resulting from such merger or
consolidation; or (B) the shareholders of the Bank
own securities of the institution resulting from
such merger or consolidation representing 80% or
more of the combined voting power of all such
securities then outstanding in substantially the
same proportions as their ownership of voting
securities of the Bank before such merger or
consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Bank's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Bank or
an agreement for the sale or disposition by the Bank of all or
substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Company" were substituted for the
term "Bank" therein. Such an event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Devine's employment during the Employment Period or
thereafter, whether by the Bank or by Mr. Devine, shall have no
effect on the rights and obligations of the parties hereto under
the Bank's the Retirement Plan and the Bank's Incentive Savings
Plan, group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability
insurance plans or such other employee benefit plans or programs,
or compensation plans or programs (whether or not employee
benefit plans or programs) and, following the conversion of the
Bank to stock form, any stock option and appreciation rights
plan, employee stock ownership plan and restricted stock plan, as
may be maintained by, or cover employees of, the Bank from time
to time.
15. Successors and Assigns.
(a) The Bank shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Bank to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Bank
would be required to perform it if no such succession had taken
place. Failure of the Bank to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Bank's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Devine, his legal representatives and testate or
intestate distributees, and the Bank, their respective successors
and assigns, including any successor by merger or consolidation
or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the respective
assets and business of the Bank may be sold or otherwise
transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Devine:
[Home address deleted].
If to the Bank:
The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
With a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright
17. Indemnification and Attorneys' Fees. The Bank
shall pay to or on behalf of Mr. Devine all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that Mr. Devine shall have substantially
prevailed on the merits pursuant to a judgment, decree or order
of a court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or in a settlement; provided, further,
that this section 17 shall not obligate the Bank to pay costs and
legal fees on behalf of Mr. Devine under this Agreement in excess
of $50,000. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement
of the Bank's obligations hereunder shall be conclusive evidence
of Mr. Devine's entitlement to indemnification hereunder, and any
such indemnification payments shall be in addition to amounts
payable pursuant to such settlement agreement, unless such
settlement agreement expressly provides otherwise.
18. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
19. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
20. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
21. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
22. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated. Any reference to the term
"Board" shall mean the Board of Trustees of the Bank while the
Bank is a mutual savings bank and the Board of Directors of the
Bank while the Bank is a stock savings bank. Any reference to
the term "Bank" shall mean the Bank in its mutual form prior to
the conversion and in its stock form on and after the conversion.
If the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.
23. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Devine. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
24. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Bank.
25. Required Regulatory Provisions. The following
provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the
Association:
(a) Notwithstanding anything herein contained to the
contrary, in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive of
amounts described in section 9(b)(i) and (viii)) exceed the three
times the Executive's average annual total compensation for the
last five consecutive calendar years to end prior to his
termination of employment with the Association (or for his entire
period of employment with the Association if less than five
calendar years).
(b) Notwithstanding anything herein contained to the
contrary, any payments to the Executive by the Association,
whether pursuant to this Agreement or otherwise, are subject to
and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the
contrary, if the Executive is suspended from office and/or
temporarily prohibited from participating in the conduct of the
affairs of the Association pursuant to a notice served under
section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818
(e)(3) or 1818(g)(1), the Association's obligations under this
Agreement shall be suspended as of the date of service of such
notice, unless stayed by appropriate proceedings. If the charges
in such notice are dismissed, the Association, in its discretion,
may (i) pay to the Executive all or part of the compensation
withheld while the Association's obligations hereunder were
suspended and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.
(d) Notwithstanding anything herein contained to the
contrary, if the Executive is removed and/or permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under section 8(e)(4) or 8(g)(1) of
the FDI Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all
prospective obligations of the Association under this Agreement
shall terminate as of the effective date of the order, but vested
rights and obligations of the Association and the Executive shall
not be affected.
(e) Notwithstanding anything herein contained to the
contrary, if the Association is in default (within the meaning of
section 3(x)(1) of the FDI Act, 12 U.S.C. Section 1813(x)(1),
all prospective obligations of the Association under this Agreement
shall terminate as of the date of default, but vested rights and
obligations of the Association and the Executive shall not be
affected.
(f) Notwithstanding anything herein contained to the
contrary, all prospective obligations of the Association
hereunder shall be terminated, except to the extent that a
continuation of this Agreement is necessary for the continued
operation of the Association: (i) by the Director of the OTS or
his designee or the Federal Deposit Insurance Corporation
("FDIC"), at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Association under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C.
Section 1823(c); (ii) by the Director of the OTS or his designee
at the time such Director or designee approves a supervisory merger
to resolve problems related to the operation of the Association or
when the Association is determined by such Director to be in an
unsafe or unsound condition. The vested rights and obligations
of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall
cease to be required or by applicable law, rule or regulation,
the same shall become inoperative as though eliminated by formal
amendment of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement
to be executed and Mr. Devine has hereto set his hand, all as of
the day and year first above written.
/s/ Michael P. Devine
MICHAEL P. DEVINE
ATTEST THE DIME SAVINGS BANK
OF WILLIAMSBURGH
By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between The
Dime Savings Bank of Williamsburgh, a mutual savings bank
organized and operating under the federal laws of the United
States and having an office at 209 Havemeyer Street, Brooklyn,
New York 11211 ("Bank") and Kenneth J. Mahon, residing at [home
address deleted] and amends and restates the Amended and Restated
Employment Agreement made as of October 1, 1995 between the Bank
and Mr. Mahon.
W I T N E S S E T H :
WHEREAS, Mr. Mahon currently serves the Bank in the
capacity of Senior Vice President and Chief Financial Officer;
and
WHEREAS, the Bank and Mr. Mahon are parties to an
Employment Agreement made and entered into as of the 1st day of
January, 1992 and amended and restated as of the 1st day of
October, 1995 ("Prior Agreement"); and
WHEREAS, the Bank and Mr. Mahon desire to amend and
restate the Prior Agreement in its entirety as set forth herein;
and
WHEREAS, for purposes of securing for the Bank Mr.
Mahon's continued services, the Board of Directors of the Bank
("Board") has approved and authorized the execution of this
Agreement with Mr. Mahon; and
WHEREAS, Mr. Mahon is willing to continue to make his
services available to the Bank on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Bank and Mr. Mahon hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Bank hereby represents and warrants to Mr.
Mahon that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Bank; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Bank is a party
or by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any order
of any order of any court or administrative agency, applicable to
the Bank or its business.
(b) Mr. Mahon hereby represents and warrants to the
Bank that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Bank hereby continues the
employment of Mr. Mahon, and Mr. Mahon hereby accepts such
continued employment, during the period and upon the terms and
conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Prior to the first anniversary of the date of this
Agreement and each anniversary date thereafter (each, an
"Anniversary Date"), the Board shall review the terms of this
Agreement and Mr. Mahon's performance of services hereunder and
may, in the absence of objection from Mr. Mahon, approve an
extension of the Employment Period. In such event, the
Employment Period shall be extended to the third anniversary of
the relevant Anniversary Date.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs and the Bank is not subject to rules and
regulations of the Office of Thrift Supervision, then the
Employment Period shall be extended through and including the
third anniversary of the earliest date after the effective date
of such Change of Control on which either the Bank or Mr. Mahon
elects, by written notice pursuant to section 3(d) of this
Agreement to the non-electing party, to discontinue the
Employment Period; provided, however, that this section shall not
apply in the event that, prior to the Change of Control (as
defined in section 13 of this Agreement), Mr. Mahon has provided
written notice to the Bank of his intent to discontinue the
Employment Period.
(d) The Bank or Mr. Mahon may, at any time by written
notice given to the other, elect to terminate this Agreement.
Any such notice given by the Bank shall be accompanied by a
certified copy of a resolution, adopted by the affirmative vote
of a majority of the entire membership of the Board at a meeting
of the Board duly called and held, authorizing the giving of such
notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Mahon's employment with the Bank may be
terminated during the Employment Period, in accordance with the
terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of Mr. Mahon's
employment following the expiration of the Employment Period upon
such terms and conditions as the Bank and Mr. Mahon may mutually
agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr. Mahon
shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Bank and use his best efforts to
advance the Bank's interests;
(b) serve as Senior Vice President and Chief Financial
Officer if duly appointed and/or elected to serve in such
position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board, in accordance with
organization Certificate, By-laws, Applicable Laws, Statutes and
Regulations, custom and practice of the Bank as in effect on the
date first above written.
Mr. Mahon shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Mahon shall
report to and be subject to direction and supervision by the
Board.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Mahon under this Agreement, the Bank
shall pay to Mr. Mahon a salary at an annual rate equal to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $178,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Mahon's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Bank (other than Mr.
Mahon) who are assistant vice presidents or
more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Bank
(other than Mr. Mahon) who are assistant vice
presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Bank's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Mahon of a salary in
excess of that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent that such payment is duly authorized by or under the
authority of the Board.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Mahon shall be treated as an employee of the Bank and be
entitled to participate in and receive benefits under the Bank's
Retirement Plan, Incentive Savings Plan, group life and health
(including medical and major medical) and disability insurance
plans, and such other employee benefit plans and programs,
including but not limited to any long-term or short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and
programs and with the Bank's customary practices. Following a
Change in Control, all such benefits to Mr. Mahon shall be
continued on terms and conditions substantially identical to, and
in no event less favorable than, those in effect prior to the
Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Bank will provide, or cause to be provided,
to Mr. Mahon in connection with such Conversion, stock-based
compensation and benefits, including, without limitation, stock
options, restricted stock awards, and participation in
tax-qualified stock bonus plans which, in the aggregate, are
either (A) accepted by Mr. Mahon in writing as being satisfactory
for purposes of this Agreement or (B) in the written, good faith
opinion of a nationally recognized executive compensation
consulting firm selected by the Bank and satisfactory to Mr.
Mahon, whose agreement shall not be unreasonably withheld, are no
less favorable than the stock-based compensation and benefits
usually and customarily provided to similarly situated executives
of similar financial institutions in connection with similar
transactions.
7. Board Memberships and Personal Activities. Mr.
Mahon may serve as a member of the board of directors of such
business, community and charitable organizations as he may
disclose to the Board from time to time, and he may engage in
personal business and investment activities for his own account;
provided, however, that such service and personal business and
investment activities shall not materially interfere with the
performance of his duties under this Agreement. Mr. Mahon may
also serve as an officer or director of any parent of the Bank on
such terms and conditions as the Bank and its parent may mutually
agree upon, and such service shall not be deemed to materially
interfere with Mr. Mahon's performance of his duties hereunder or
otherwise result in a material breach of this Agreement.
8. Working Facilities and Expenses. Mr. Mahon's
principal place of employment shall be at the Bank's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Bank shall provide Mr. Mahon, at his principal place
of employment, with a private office, stenographic services and
other support services and facilities suitable to his position
with the Bank and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The
Bank shall reimburse Mr. Mahon for his ordinary and necessary
business expenses, including, without limitation, fees for
memberships in such clubs and organizations as Mr. Mahon and the
Bank shall mutually agree are necessary and appropriate for
business purposes and travel and entertainment expenses incurred
in connection with the performance of his duties under this
Agreement, upon presentation to the Bank of an itemized account
of such expenses in such form as the Bank may reasonably require.
Mr. Mahon shall be entitled to no less than four (4) weeks of
paid vacation during each year in the Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Mahon's employment with the
Bank shall terminate during the Employment Period on account of
the termination of Mr. Mahon's employment with the Bank other
than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement);
(iii) a termination on account of Mr. Mahon's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Mahon has been absent from the
full-time service of the Bank on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Mahon shall have failed to return
to work in the full-time service of the Bank within thirty (30)
days after written notice requesting such return is given to Mr.
Mahon by the Bank; then the Bank shall provide to Mr. Mahon the
benefits and pay to Mr. Mahon the amounts provided under section
9(b) of this Agreement.
(b) In the event that Mr. Mahon's employment with the
Bank shall terminate under circumstances described in section
9(a) of this Agreement or if the Bank terminates this Agreement
pursuant to section 3(d), the following benefits and amounts
shall be paid or provided to Mr. Mahon (or, in the event of his
death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;
(ii) (A) the benefits, if any, to which Mr. Mahon and
his family and dependents are entitled as a former employee, or
family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on the date of his termination of employment, or if his
termination of employment occurs after a Change in Control, on
the date of his termination of employment or on the date of such
Change in Control, whichever results in more favorable benefits
as determined by Mr. Mahon, where credit is given for three
additional years of service and age in determining eligibility
and benefits for any plan and program where age and service are
relevant factors, and (B) payment for all unused vacation days
and floating holidays in the year in which his employment is
terminated, at his highest annual rate of salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Mahon and
his family and dependents for the Remaining Unexpired Employment
Period, coverage identical to and in any event no less favorable
than the coverage to which they would have been entitled under
such plans (as in effect on the date of his termination of
employment, or, if his termination of employment occurs after a
Change in Control, on the date of his termination of employment
or during the one-year period ending on the date of such Change
in Control, whichever results in more favorable benefits as
determined by Mr. Mahon) if he had continued working for the Bank
during the Remaining Unexpired Employment Period at the highest
annual rate of compensation (assuming, if a Change in Control has
occurred, that the annual increases under section 5(c) would
apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Mahon would have earned if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate
of salary (assuming, if a Change in Control has occurred, that
the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided for
under this Agreement, where such present value is to be
determined using a discount rate of six percent (6%) per annum,
compounded, in the case of salary, with the frequency
corresponding to the Bank's regular payroll periods with respect
to its officers, and, in the case of bonus, annually;
(v) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Bank
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Bank during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Bank as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Bank, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Bank's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Bank (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Mahon's
termination of employment with the Bank, and been fully vested in
such plan or plans, over (B) the present value of the benefits
attributable to the Bank's contributions to which he is actually
entitled under such plans as of the date of his termination of
employment with the Bank, where such present values are to be
determined using a discount rate of six percent (6%) per annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;
(vii) the payments that would have been made to Mr.
Mahon under any incentive compensation plan maintained by, or
covering employees of, the Bank (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Bank during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Mahon under such incentive compensation plan,
multiplied by (B) the compensation that would have been paid to
Mr. Mahon during each calendar year at the highest annual rate of
compensation (assuming, if a Change in Control has occurred, that
the annual increases under section 5(c) would apply) under the
Agreement, such payments to be made at the same time and in the
same manner as payments are made to other officers of the Bank
pursuant to the terms of such incentive compensation plan;
provided, however, that payments under this section 9(b)(vii)
shall not be made to Mr. Mahon for any year on account of which
no payments are made to any of the Bank's officers under any such
incentive compensation plan; and
(viii) the benefits to which Mr. Mahon is entitled
under the Bank's Supplemental Executive Retirement Plan (or other
excess benefits plan with the meaning of section 3(36) of ERISA
or other special or supplemental plan) shall be paid to him in a
lump sum, where such lump sum is computed using the mortality
tables under the Bank's tax-qualified pension plan and a discount
rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Mahon's election,
and if the amount may be increased by a subsequent Change in
Control, any additional payment shall be made within thirty (30)
days of such Change in Control.
(c) Mr. Mahon shall not be required to mitigate the
amount of any payment provided for in this section 9 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this section 9 be reduced by
any compensation earned by Mr. Mahon as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by Mr. Mahon to the Bank, or
otherwise except as specifically provided in section 9(b) (iii)
of this Agreement. The Bank and Mr. Mahon hereby stipulate that
the damages which may be incurred by Mr. Mahon as a consequence
of any such termination of employment are not capable of accurate
measurement as of the date first above written and that the
benefits and payments provided for in this Agreement constitute a
reasonable estimate under the circumstances of all damages
sustained as a consequence of any such termination of employment,
other than damages arising under or out of any stock option,
restricted stock or other non-qualified stock acquisition or
investment plan or program, it being understood and agreed that
this Agreement shall not determine the measurement of damages
under any such plan or program in respect of any termination of
employment.
10. Termination Without Severance Benefits. In the
event that Mr. Mahon's employment with the Bank shall terminate
during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement); or
(c) Mr. Mahon's death;
then the Bank shall have no further obligations under this
Agreement, other than the payment to Mr. Mahon (or, in the event
of his death, to his estate) of his earned but unpaid salary as
of the date of the termination of his employment, and the
provision of such other benefits, if any, to which he is entitled
as a former employee under the Bank's employee benefit plans and
programs and compensation plans and programs and payment for all
unused vacation days and floating holidays in the year in which
his employment is terminated, at his highest annual salary for
such year.
11. Death and Disability.
(a) Death. If Mr. Mahon's employment is terminated by
reason of Mr. Mahon's death during the Employment Period, this
Agreement shall terminate without further obligations to Mr.
Mahon's legal representatives under this Agreement, other than
for payment of amounts and provision of benefits under sections
9(b) (i) and (ii); provided, however, that if Mr. Mahon dies
while in the employment of the Bank, his designated
beneficiary(ies) shall receive a death benefit, payable through
life insurance or otherwise, which is the equivalent on a net
after-tax basis of the death benefit payable under a term life
insurance policy, with a stated death benefit of three times Mr.
Mahon's then Annual Base Salary.
(b) Disability. If Mr. Mahon's employment is
terminated by reason of Mr. Mahon's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Mahon, other than
for payment of amounts and provision of benefits under section
9(b) (i) and (ii); provided, however, that in the event of Mr.
Mahon's Disability while in the employment of the Bank, the Bank
will pay to him a lump sum amount equal to three times his then
Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Bank's long term
disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Mahon's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Mahon's termination of employment with the
Bank shall be deemed a "Termination for Cause" if such
termination occurs for "cause," which, for purposes of this
Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any
material breach of this Agreement, in each case as measured
against standards generally prevailing at the relevant time in
the savings and community banking industry; provided, however,
that Mr. Mahon shall not be deemed to have been discharged for
cause unless and until he shall have received a written notice of
termination from the Board, accompanied by a resolution duly
adopted by affirmative vote of a majority of the entire Board at
a meeting called and held for such purpose (after reasonable
notice to Mr. Mahon and a reasonable opportunity for Mr. Mahon to
make oral and written presentations to the members of the Board,
on his own behalf, or through a representative, who may be his
legal counsel, to refute the grounds for the proposed
determination) finding that in the good faith opinion of the
Board grounds exist for discharging Mr. Mahon for cause.
(b) Mr. Mahon's termination of employment with the
Bank shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Mahon of any duties
inconsistent with Mr. Mahon's status as Senior Vice President and
Chief Financial Officer of the Bank or (B) a substantial adverse
alteration in the nature or status of Mr. Mahon's
responsibilities from those in effect immediately prior to the
alteration; or (C) any Change in Control described in section
13(b);
(ii) a reduction by the Bank in Mr. Mahon's annual base
salary as in effect on the date first above written or as the
same may be increased from time to time, unless such reduction
was mandated at the initiation of any regulatory authority having
jurisdiction over the Bank;
(iii) the relocation of the Bank's principal
executive offices to a location outside the New York metropolitan
area or the Bank's requiring Mr. Mahon to be based anywhere other
than the Bank's principal executive offices except for required
travel on the Bank's business to an extent substantially
consistent with Mr. Mahon's business travel obligations at the
date first above written;
(iv) the failure by the Bank, without Mr. Mahon's
consent, to pay to Mr. Mahon, within seven (7) days of the date
when due, (A) any portion of his compensation, or (B) any portion
of an installment of deferred compensation under any deferred
compensation program of the Bank, which failure is not
inadvertent and immaterial and which is not promptly cured by the
Bank after notice of such failure is given to the Bank by the
Executive;
(v) the failure by the Bank to continue in effect any
compensation plan in which Mr. Mahon participates which is
material to his total compensation, including but not limited to
the Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Bank to continue his
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of his participation
relative to other participants, unless such failure is the result
of action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;
(vi) the failure by the Bank to continue to provide Mr.
Mahon with benefits substantially similar to those enjoyed by Mr.
Mahon under the Retirement Plan and the Bank's Incentive Savings
Plan or under any of the Bank's life, health (including
hospitalization, medical and major medical), dental, accident,
and long-term disability insurance benefits, in which Mr. Mahon
is participating, or the taking of any action by the Bank which
would directly or indirectly materially reduce any of such
benefits or deprive Mr. Mahon of the number of paid vacation days
to which he is entitled, on the basis of years of service with
the Bank, rank or otherwise, in accordance with the Bank's normal
vacation policy, unless such failure is the result of action
mandated at the initiation of any regulatory authority having
jurisdiction over the Bank;
(vii) the failure of the Bank to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Bank which is not effected pursuant the provisions of section
12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the Bank,
which the Bank fails to cure within thirty (30) days following
written notice thereof from Mr. Mahon;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Bank to
provide, or cause to be provided, to Mr. Mahon in connection with
such Change in Control, stock-based compensation and benefits,
including, without limitation, stock options, restricted stock
awards, and participation in tax-qualified stock bonus plans
which, in the aggregate, are either (A) accepted by Mr. Mahon in
writing as being satisfactory for purposes of this Agreement or
(B) in the written, good faith opinion of a nationally recognized
executive compensation consulting firm selected by the Bank and
satisfactory to Mr. Mahon, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions; or
(xi) a change in the position to which Mr. Mahon
reports;
(xii) in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Bank shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Bank; (B) a corporation owned, directly or
indirectly, by the stockholders of the Bank in substantially the
same proportions as their ownership of stock of the Bank; or (C)
Mr. Mahon, or any group otherwise constituting a person in which
Mr. Mahon is a member, becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities issued by the Bank representing 25% or
more of the combined voting power of all of the Bank's then
outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank to effect a transaction described in section 13(a) or 13(c)
of this Agreement) whose election by the Board or nomination for
election by the Bank's stockholders was approved by the
affirmative vote of at least two-thirds of the members of Board
then in office who were either members of the Board on the date
first above written or whose nomination or election was
previously so approved cease for any reason to constitute a
majority of the members of the Board, but excluding, for this
purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of directors of the Bank (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(c) the shareholders of the Bank approve either:
(i) a merger or consolidation of the Bank with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (A) the members of the
Board of the Bank immediately prior to such merger
or consolidation constitute at least a majority of
the members of the governing body of the
institution resulting from such merger or
consolidation; or (B) the shareholders of the Bank
own securities of the institution resulting from
such merger or consolidation representing 80% or
more of the combined voting power of all such
securities then outstanding in substantially the
same proportions as their ownership of voting
securities of the Bank before such merger or
consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Bank's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Bank or
an agreement for the sale or disposition by the Bank of all or
substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Company" were substituted for the
term "Bank" therein. Such an event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Mahon's employment during the Employment Period or
thereafter, whether by the Bank or by Mr. Mahon, shall have no
effect on the rights and obligations of the parties hereto under
the Bank's the Retirement Plan and the Bank's Incentive Savings
Plan, group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability
insurance plans or such other employee benefit plans or programs,
or compensation plans or programs (whether or not employee
benefit plans or programs) and, following the conversion of the
Bank to stock form, any stock option and appreciation rights
plan, employee stock ownership plan and restricted stock plan, as
may be maintained by, or cover employees of, the Bank from time
to time.
15. Successors and Assigns.
(a) The Bank shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Bank to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Bank
would be required to perform it if no such succession had taken
place. Failure of the Bank to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Bank's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Mahon, his legal representatives and testate or
intestate distributees, and the Bank, their respective successors
and assigns, including any successor by merger or consolidation
or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the respective
assets and business of the Bank may be sold or otherwise
transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Mahon:
[Home address deleted].
If to the Bank:
The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
With a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
17. Indemnification and Attorneys' Fees. The Bank
shall pay to or on behalf of Mr. Mahon all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that Mr. Mahon shall have substantially
prevailed on the merits pursuant to a judgment, decree or order
of a court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or in a settlement; provided, further,
that this section 17 shall not obligate the Bank to pay costs and
legal fees on behalf of Mr. Mahon under this Agreement in excess
of $50,000. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement
of the Bank's obligations hereunder shall be conclusive evidence
of Mr. Mahon's entitlement to indemnification hereunder, and any
such indemnification payments shall be in addition to amounts
payable pursuant to such settlement agreement, unless such
settlement agreement expressly provides otherwise.
18. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
19. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
20. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
21. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
22. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated. Any reference to the term
"Board" shall mean the Board of Trustees of the Bank while the
Bank is a mutual savings bank and the Board of Directors of the
Bank while the Bank is a stock savings bank. Any reference to
the term "Bank" shall mean the Bank in its mutual form prior to
the conversion and in its stock form on and after the conversion.
If the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.
23. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Mahon. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
24. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Bank.
25. Required Regulatory Provisions. The following
provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the
Association:
(a) Notwithstanding anything herein contained to the
contrary, in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive of
amounts described in section 9(b)(i) and (viii)) exceed the three
times the Executive's average annual total compensation for the
last five consecutive calendar years to end prior to his
termination of employment with the Association (or for his entire
period of employment with the Association if less than five
calendar years).
(b) Notwithstanding anything herein contained to the
contrary, any payments to the Executive by the Association,
whether pursuant to this Agreement or otherwise, are subject to
and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the
contrary, if the Executive is suspended from office and/or
temporarily prohibited from participating in the conduct of the
affairs of the Association pursuant to a notice served under
section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818
(e)(3)or 1818(g)(1), the Association's obligations under this
Agreement shall be suspended as of the date of service of such
notice, unless stayed by appropriate proceedings. If the charges
in such notice are dismissed, the Association, in its discretion,
may (i)pay to the Executive all or part of the compensation
withheld while the Association's obligations hereunder were sus-
pended and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.
(d) Notwithstanding anything herein contained to the
contrary, if the Executive is removed and/or permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under section 8(e)(4) or 8(g)(1) of the
FDI Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all prospective
obligations of the Association under this Agreement shall
terminate as of the effective date of the order, but vested
rights and obligations of the Association and the Executive shall
not be affected.
(e) Notwithstanding anything herein contained to the
contrary, if the Association is in default (within the meaning of
section 3(x)(1) of the FDI Act, 12 U.S.C. Section 1813(x)(1),
all prospective obligations of the Association under this Agreement
shall terminate as of the date of default, but vested rights and
obligations of the Association and the Executive shall not be
affected.
(f) Notwithstanding anything herein contained to the
contrary, all prospective obligations of the Association
hereunder shall be terminated, except to the extent that a
continuation of this Agreement is necessary for the continued
operation of the Association: (i) by the Director of the OTS or
his designee or the Federal Deposit Insurance Corporation
("FDIC"), at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Association under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C.
Section 1823(c); (ii) by the Director of the OTS or his designee
at the time such Director or designee approves a supervisory
merger to resolve problems related to the operation of the
Association or when the Association is determined by such
Director to be in an unsafe or unsound condition. The vested
rights and obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall
cease to be required or by applicable law, rule or regulation,
the same shall become inoperative as though eliminated by formal
amendment of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Agreement
to be executed and Mr. Mahon has hereto set his hand, all as of
the day and year first above written.
/s/ Kenneth J. Mahon
KENNETH J. MAHON
ATTEST THE DIME SAVINGS BANK OF WILLIAMSBURGH
By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between
Dime Community Bancorp, Inc., a savings and loan holding company
organized and operating under the laws of the State of Delaware
and having an office at 209 Havemeyer Street, Brooklyn, New York
11211 ("Company") and Vincent F. Palagiano, residing at [home
address deleted].
W I T N E S S E T H :
WHEREAS, Mr. Palagiano currently serves the Company in
the capacity of Chairman of the Board, President and Chief
Executive Officer of its wholly owned subsidiary, The Dime
Savings Bank of Williamsburgh ("Bank"); and
WHEREAS, the Company desires to assure for itself the
continued availability of Mr. Palagiano's services and the
ability of Mr. Palagiano to perform such services with a minimum
of personal distraction in the event of a pending or threatened
Change in Control (as hereinafter defined); and
WHEREAS, Mr. Palagiano is willing to continue to serve
the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Company and Mr. Palagiano hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Company hereby represents and warrants to Mr.
Palagiano that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Company; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Company is a
party or by which it is bound, or (B) any provision of law,
including, without limitation, any statute, rule or regulation or
any order of any order of any court or administrative agency,
applicable to the Company or its business.
(b) Mr. Palagiano hereby represents and warrants to
the Company that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Company hereby continues the
employment of Mr. Palagiano, and Mr. Palagiano hereby accepts
such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Except as provided in section 3(c), beginning on
the date of this Agreement, the Employment Period shall
automatically be extended for one (1) additional day each day,
unless either the Company or Mr. Palagiano elects not to extend
the Agreement further by giving written notice to the other
party, in which case the Employment Period shall end on the third
anniversary of the date on which such written notice is given.
Upon termination of Mr. Palagiano's employment with the Company
for any reason whatsoever, any daily extensions provided pursuant
to this section 3(b), if not therefore discontinued, shall
automatically cease.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs, then the Employment Period shall be extended
through and including the third anniversary of the earliest date
after the effective date of such Change in Control on which
either the Company or Mr. Palagiano elects, by written notice
pursuant to section 3(d) of this Agreement to the non-electing
party, to discontinue the Employment Period; provided, however,
that this section shall not apply in the event that, prior to the
Change in Control (as defined in section 13 of this Agreement),
Mr. Palagiano has provided written notice to the Company of his
intent to discontinue the Employment Period.
(d) The Company or Mr. Palagiano may, at any time by
written notice given to the other, elect to terminate this
Agreement. Any such notice given by the Company shall be
accompanied by a certified copy of a resolution, adopted by the
affirmative vote of a majority of the entire membership of the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Palagiano's employment with the Company may
be terminated during the Employment Period, in accordance with
the terms and conditions of this Agreement; and (ii) nothing in
this Agreement shall mandate or prohibit a continuation of Mr.
Palagiano's employment following the expiration of the Employment
Period upon such terms and conditions as the Company and Mr.
Palagiano may mutually agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr.
Palagiano shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Company and use his best efforts
to advance the Company's interests;
(b) serve as Chairman of the Board, President and
Chief Executive Officer if duly appointed and/or elected to serve
in such position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board of Directors of the
Company ("Board"), in accordance with organization Certificate,
By-laws, Applicable Laws, Statutes and Regulations, custom and
practice of the Company as in effect on the date first above
written.
Mr. Palagiano shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Palagiano shall
report to and be subject to direction and supervision by the
Board.
(d) none of the functions, duties and responsibilities
to be performed by Mr. Palagiano pursuant to this Agreement shall
be deemed to include those functions, duties and responsibilities
performed by Mr. Palagiano in his capacity as director of the
Company.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Palagiano under this Agreement, the
Company shall pay to Mr. Palagiano a salary at an annual rate
equal to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $450,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Palagiano's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Company (other than Mr.
Palagiano) who are assistant vice presidents
or more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Company
(other than Mr. Palagiano) who are assistant
vice presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Company's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Palagiano of a salary
in excess of that prescribed under this section 5 or of
additional cash or non-cash compensation in a form other than
salary, to the extent that such payment is duly authorized by or
under the authority of the Board.
(d) No portion of the compensation paid to Mr.
Palagiano pursuant to this Agreement shall be deemed to be
compensation received by Mr. Palagiano in his capacity as
director of the Company.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Palagiano shall be treated as an employee of the Company and
be entitled to participate in and receive benefits under the
Company's Retirement Plan, Incentive Savings Plan, group life and
health (including medical and major medical) and disability
insurance plans, and such other employee benefit plans and
programs, including but not limited to any long-term or
short-term incentive compensation plans or programs (whether or
not employee benefit plans or programs), as the Company may
maintain from time to time, in accordance with the terms and
conditions of such employee benefit plans and programs and
compensation plans and programs and with the Company's customary
practices. Following a Change in Control, all such benefits to
Mr. Palagiano shall be continued on terms and conditions
substantially identical to, and in no event less favorable than,
those in effect prior to the Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Company will provide, or cause to be
provided, to Mr. Palagiano in connection with such Conversion,
stock-based compensation and benefits, including, without
limitation, stock options, restricted stock awards, and
participation in tax-qualified stock bonus plans which, in the
aggregate, are either (A) accepted by Mr. Palagiano in writing as
being satisfactory for purposes of this Agreement or (B) in the
written, good faith opinion of a nationally recognized executive
compensation consulting firm selected by the Company and
satisfactory to Mr. Palagiano, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions.
7. Board Memberships and Personal Activities.
(a) Mr. Palagiano may serve as a member of the board
of directors of such business, community and charitable
organizations as he may disclose to the Board from time to time,
and he may engage in personal business and investment activities
for his own account; provided, however, that such service and
personal business and investment activities shall not materially
interfere with the performance of his duties under this
Agreement.
(b) Mr. Palagiano may also serve as an officer or
director of the Bank on such terms and conditions as the Company
and the Bank may mutually agree upon, and such service shall not
be deemed to materially interfere with Mr. Palagiano's
performance of his duties hereunder or otherwise result in a
material breach of this Agreement. If Mr. Palagiano is
discharged or suspended, or is subject to any regulatory
prohibition or restriction with respect to participation in the
affairs of the Bank, he shall (subject to the Company's powers of
termination hereunder) continue to perform services for the
Company in accordance with this Agreement but shall not directly
or indirectly provide services to or participate in the affairs
of the Bank in a manner inconsistent with the terms of such
discharge or suspension or any applicable regulatory order.
8. Working Facilities and Expenses. Mr. Palagiano's
principal place of employment shall be at the Company's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Company shall provide Mr. Palagiano, at his principal
place of employment, with a private office, stenographic services
and other support services and facilities suitable to his
position with the Company and necessary or appropriate in
connection with the performance of his assigned duties under this
Agreement. The Company shall provide Mr. Palagiano with an
automobile suitable to his position with the Company in
accordance with its prior practices, and such automobile shall be
used by Mr. Palagiano in carrying out his duties under this
Agreement, including commuting between his residence and his
principal place of employment. The Company shall reimburse Mr.
Palagiano for his ordinary and necessary business expenses,
including, without limitation, all expenses associated with his
business use of the aforementioned automobile, fees for
memberships in such clubs and organizations as Mr. Palagiano and
the Company shall mutually agree are necessary and appropriate
for business purposes and travel and entertainment expenses
incurred in connection with the performance of his duties under
this Agreement, upon presentation to the Company of an itemized
account of such expenses in such form as the Company may
reasonably require. Mr. Palagiano shall be entitled to no less
than four (4) weeks of paid vacation during each year in the
Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Palagiano's employment with
the Company shall terminate during the Employment Period on
account of the termination of Mr. Palagiano's employment with the
Company other than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Palagiano other
than a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement);
(iii) a termination on account of Mr. Palagiano's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Palagiano has been absent from the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Palagiano shall have failed to
return to work in the full-time service of the Company within
thirty (30) days after written notice requesting such return is
given to Mr. Palagiano by the Company; then the Company shall
provide to Mr. Palagiano the benefits and pay to Mr. Palagiano
the amounts provided under section 9(b) of this Agreement.
(b) In the event that Mr. Palagiano's employment with
the Company shall terminate under circumstances described in
section 9(a) of this Agreement or if the Company terminates this
Agreement pursuant to section 3(d), the following benefits and
amounts shall be paid or provided to Mr. Palagiano (or, in the
event of his death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when due
but in no event later than thirty (30) days following his
termination of employment with the Company;
(ii) (A) the benefits, if any, to which Mr. Palagiano
and his family and dependents are entitled as a former employee,
or family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Company's officers and
employees, in accordance with the terms of such plans and
programs in effect on the date of his termination of employment,
or if his termination of employment occurs after a Change in
Control, on the date of his termination of employment or on the
date of such Change in Control, whichever results in more
favorable benefits as determined by Mr. Palagiano, where credit
is given for three additional years of service and age in
determining eligibility and benefits for any plan and program
where age and service are relevant factors, and (B) payment for
all unused vacation days and floating holidays in the year in
which his employment is terminated, at his highest annual rate of
salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Palagiano
and his family and dependents for the Remaining Unexpired
Employment Period, coverage identical to and in any event no less
favorable than the coverage to which they would have been
entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment
occurs after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such Change in Control, whichever results in more favorable
benefits as determined by Mr. Palagiano) if he had continued
working for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Palagiano would have earned if he had worked for the Company
during the Remaining Unexpired Employment Period at the highest
annual rate of salary (assuming, if a Change in Control has
occurred, that the annual increases under section 5(c) would
apply) and the highest bonus as a percentage of the rate of
salary provided for under this Agreement, where such present
value is to be determined using a discount rate of six percent
(6%) per annum, compounded, in the case of salary, with the
frequency corresponding to the Company's regular payroll periods
with respect to its officers, and, in the case of bonus,
annually;
(v) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Company
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Company during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Company's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Company (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Company during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Palagiano's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable to the Company's contributions to which he is
actually entitled under such plans as of the date of his
termination of employment with the Company, where such present
values are to be determined using a discount rate of six percent
(6%) per annum, compounded with the frequency corresponding to
the Company's regular payroll periods with respect to its
officers;
(vii) the payments that would have been made to Mr.
Palagiano under any incentive compensation plan maintained by, or
covering employees of, the Company (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Company during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Palagiano under such incentive compensation
plan, multiplied by (B) the compensation that would have been
paid to Mr. Palagiano during each calendar year at the highest
annual rate of compensation (assuming, if a Change in Control has
occurred, that the annual increases under section 5(c) would
apply) under the Agreement, such payments to be made at the same
time and in the same manner as payments are made to other
officers of the Company pursuant to the terms of such incentive
compensation plan; provided, however, that payments under this
section 9(b)(vii) shall not be made to Mr. Palagiano for any year
on account of which no payments are made to any of the Company's
officers under any such incentive compensation plan; and
(viii) the benefits to which Mr. Palagiano is
entitled under the Company's Supplemental Executive Retirement
Plan (or other excess benefits plan with the meaning of section
3(36) of ERISA or other special or supplemental plan) shall be
paid to him in a lump sum, where such lump sum is computed using
the mortality tables under the Company's tax-qualified pension
plan and a discount rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Palagiano's
election, and if the amount may be increased by a subsequent
Change in Control, any additional payment shall be made within
thirty (30) days of such Change in Control.
(c) Mr. Palagiano shall not be required to mitigate
the amount of any payment provided for in this section 9 by
seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this section 9 be reduced
by any compensation earned by Mr. Palagiano as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by Mr. Palagiano to the
Company, or otherwise except as specifically provided in section
9(b) (iii) of this Agreement or except as provided in section 28
to avoid duplication of payments. The Company and Mr. Palagiano
hereby stipulate that the damages which may be incurred by Mr.
Palagiano as a consequence of any such termination of employment
are not capable of accurate measurement as of the date first
above written and that the benefits and payments provided for in
this Agreement constitute a reasonable estimate under the
circumstances of all damages sustained as a consequence of any
such termination of employment, other than damages arising under
or out of any stock option, restricted stock or other non-
qualified stock acquisition or investment plan or program, it
being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or
program in respect of any termination of employment.
10. Termination Without Severance Benefits. In the
event that Mr. Palagiano's employment with the Company shall
terminate during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Palagiano other than
a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement); or
(c) Mr. Palagiano's death;
then the Company shall have no further obligations under this
Agreement, other than the payment to Mr. Palagiano (or, in the
event of his death, to his estate) of his earned but unpaid
salary as of the date of the termination of his employment, and
the provision of such other benefits, if any, to which he is
entitled as a former employee under the Company's employee
benefit plans and programs and compensation plans and programs
and payment for all unused vacation days and floating holidays in
the year in which his employment is terminated, at his highest
annual salary for such year.
11. Death and Disability.
(a) Death. If Mr. Palagiano's employment is termi
nated by reason of Mr. Palagiano's death during the Employment
Period, this Agreement shall terminate without further
obligations to Mr. Palagiano's legal representatives under this
Agreement, other than for payment of amounts and provision of
benefits under sections 9(b) (i) and (ii); provided, however,
that if Mr. Palagiano dies while in the employment of the
Company, his designated beneficiary(ies) shall receive a death
benefit, payable through life insurance or otherwise, which is
the equivalent on a net after-tax basis of the death benefit
payable under a term life insurance policy, with a stated death
benefit of three times Mr. Palagiano's then Annual Base Salary.
(b) Disability. If Mr. Palagiano's employment is
terminated by reason of Mr. Palagiano's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Palagiano, other
than for payment of amounts and provision of benefits under
section 9(b) (i) and (ii); provided, however, that in the event
of Mr. Palagiano's Disability while in the employment of the
Company, the Company will pay to him a lump sum amount equal to
three times his then Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Company's long
term disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Palagiano's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Palagiano's termination of employment with the
Company shall be deemed a "Termination for Cause" if such
termination occurs upon:
(i) Mr. Palagiano's willful and continued failure to
substantially perform his duties with the Company (other than any
failure resulting from incapacity due to physical or mental
illness or any actual or anticipated failure following notice by
Mr. Palagiano of an intended Resignation for Good Reason) after a
written demand for substantial performance is delivered to him by
the Board, which demand specifically identifies the manner in
which the Board believes Mr. Palagiano has not substantially
performed his duties, and the failure to cure such breach within
sixty (60) days following written notice thereof from the
Company; or (ii) the intentional and willful engaging in
dishonest conduct in connection with his performance of services
for the Company resulting in his conviction of a felony, fraud,
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, willful violation of
any law, rule or regulation (other than traffic violations or
similar offenses), or final cease-and-desist order.
No act, or failure to act, on Mr. Palagiano's part shall be
deemed willful unless done, or omitted to be done, not in good
faith and without reasonable belief that such action or omission
was in the best interest of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel
for the Company shall be conclusively presumed to be done, or
omitted to be done, by Mr. Palagiano in good faith and in the
best interests of the Company. Notwithstanding the foregoing, no
termination of Mr. Palagiano's employment shall be a Termination
for Cause unless there shall have been delivered to Mr. Palagiano
a copy of a resolution duly adopted by the affirmative vote of a
majority of the Board of Directors (or, following a Change in
Control, an affirmative vote of three-quarters of the Board of
Directors) at a meeting of the Board called and held for such
purpose (after reasonable notice to Mr. Palagiano and an
opportunity for Mr. Palagiano, together with his counsel, to be
heard before the Board) finding that in good faith opinion of the
Board circumstances described in section 12(a) (i) or (ii) exist
and specifying the particulars thereof in detail.
(b) Mr. Palagiano's termination of employment with the
Company shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Palagiano of any duties
inconsistent with Mr. Palagiano's status as Chairman of the
Board, President and Chief Executive Officer of the Company or
(B) a substantial adverse alteration in the nature or status of
Mr. Palagiano's responsibilities from those in effect immediately
prior to the alteration; or (C) any Change in Control described
in section 13(b);
(ii) a reduction by the Company in Mr. Palagiano's
annual base salary as in effect on the date first above written
or as the same may be increased from time to time, unless such
reduction was mandated at the initiation of any regulatory
authority having jurisdiction over the Company;
(iii) the relocation of the Company's principal
executive offices to a location outside the New York metropolitan
area or the Company's requiring Mr. Palagiano to be based
anywhere other than the Company's principal executive offices
except for required travel on the Company's business to an extent
substantially consistent with Mr. Palagiano's business travel
obligations at the date first above written;
(iv) the failure by the Company, without Mr.
Palagiano's consent, to pay to Mr. Palagiano, within seven (7)
days of the date when due, (A) any portion of his compensation,
or (B) any portion of an installment of deferred compensation
under any deferred compensation program of the Company;
(v) the failure by the Company to continue in effect
any compensation plan in which Mr. Palagiano participates which
is material to his total compensation, including but not limited
to the Retirement Plan and the Company's Incentive Savings Plan
or any substitute plans unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
his participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of his
participation relative to other participants, unless such failure
is the result of action mandated at the initiation of any
regulatory authority having jurisdiction over the Company;
(vi) the failure by the Company to continue to provide
Mr. Palagiano with benefits substantially similar to those
enjoyed by Mr. Palagiano under the Retirement Plan and the
Company's Incentive Savings Plan or under any of the Company's
life, health (including hospitalization, medical and major
medical), dental, accident, and long-term disability insurance
benefits, in which Mr. Palagiano is participating, or the taking
of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive Mr. Palagiano
of the number of paid vacation days to which he is entitled, on
the basis of years of service with the Company, rank or
otherwise, in accordance with the Company's normal vacation
policy, unless such failure is the result of action mandated at
the initiation of any regulatory authority having jurisdiction
over the Company;
(vii) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Company which is not effected pursuant the provisions of
section 12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the
Company, which the Company fails to cure within thirty (30) days
following written notice thereof from Mr. Palagiano;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Company to
provide, or cause to be provided, to Mr. Palagiano in connection
with such Change in Control, stock-based compensation and
benefits, including, without limitation, stock options,
restricted stock awards, and participation in tax-qualified stock
bonus plans which, in the aggregate, are either (A) accepted by
Mr. Palagiano in writing as being satisfactory for purposes of
this Agreement or (B) in the written, good faith opinion of a
nationally recognized executive compensation consulting firm
selected by the Company and satisfactory to Mr. Palagiano, whose
agreement shall not be unreasonably withheld, are no less
favorable than the stock-based compensation and benefits usually
and customarily provided to similarly situated executives of
similar financial institutions in connection with similar
transactions; or
(xi) a requirement that Mr. Palagiano report to any
person or group other than the Board;
(xii) in the event of a Change in Control described
in section 13 of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Company shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Company; (B) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company;
or (C) Mr. Palagiano, or any group otherwise constituting a
person in which Mr. Palagiano is a member, becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities issued
by the Company representing 25% or more of the combined voting
power of all of the Company's then outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company to effect a transaction described in section 13(a) or
13(c) of this Agreement) whose election by the Board or
nomination for election by the Company's stockholders was
approved by the affirmative vote of at least two-thirds of the
members of Board then in office who were either members of the
Board on the date first above written or whose nomination or
election was previously so approved cease for any reason to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(c) the shareholders of the Company approve either:
(i) a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (1) the members of the
Board of the Company immediately prior to such
merger or consolidation constitute at least a
majority of the members of the governing body of
the institution resulting from such merger or
consolidation; or (2) the shareholders of the
Company own securities of the institution
resulting from such merger or consolidation
representing 80% or more of the combined voting
power of all such securities then outstanding in
substantially the same proportions as their
ownership of voting securities of the Company
before such merger or consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Company's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Bank" were substituted for the
term "Company" therein. Such event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Palagiano's employment during the Employment Period or
thereafter, whether by the Company or by Mr. Palagiano, shall
have no effect on the rights and obligations of the parties
hereto under the Company's or the Bank's Retirement Plan and the
Company's Incentive Savings Plan, group life, health (including
hospitalization, medical and major medical), dental, accident and
long term disability insurance plans or such other employee
benefit plans or programs, or compensation plans or programs
(whether or not employee benefit plans or programs) and,
following the conversion of the Company to stock form, any stock
option and appreciation rights plan, employee stock ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.
15. Successors and Assigns.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Company's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Palagiano, his legal representatives and testate
or intestate distributees, and the Company, their respective
successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm
or corporation to which all or substantially all of the
respective assets and business of the Company may be sold or
otherwise transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Palagiano:
[Home address deleted].
If to the Company:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
17. Indemnification and Attorneys' Fees. The Company
shall pay to or on behalf of Mr. Palagiano all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that this section 17 shall not obligate the
Company to pay costs and legal fees on behalf of Mr. Palagiano
under this Agreement in excess of $50,000.
18. Excise Tax Indemnification.
(a) This section 18 shall apply if Mr. Palagiano's
employment is terminated in circumstances giving rise to
liability for excise taxes under section 4999 of the Code. If
this Section 18 applies, then, if for any taxable year, Mr.
Palagiano shall be liable for the payment of an excise tax under
section 4999 of the Code with respect to any payment in the
nature of compensation made by the Company or any direct or
indirect subsidiary or affiliate of the Company to (or for the
benefit of) Mr. Palagiano, the Company shall pay to Mr. Palagiano
an amount equal to X determined under the following formula:
E x P
X = ____________________________________
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax
is assessed under section 4999 of the Code;
P = the amount with respect to which
such excise tax is assessed, determined
without regard to this section 18;
FI = the highest marginal rate of
income tax applicable to Mr. Palagiano under
the Code for the taxable year in question;
SLI = the sum of the highest
marginal rates of income tax applicable to
Mr. Palagiano under all applicable state and
local laws for the taxable year in question;
and
M = the highest marginal rate of
Medicare tax applicable to Mr. Palagiano
under the Code for the taxable year in
question.
With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Mr. Palagiano under the terms of
this Agreement, or otherwise, and on which an excise tax under
section 4999 of the Code will be assessed, the payment determined
under this section 18(a) shall be made to Mr. Palagiano on the
earlier of (i) the date the Company or any direct or indirect
subsidiary or affiliate of the Company is required to withhold
such tax, or (ii) the date the tax is required to be paid by Mr.
Palagiano.
(b) Notwithstanding anything in this section 18 to the
contrary, in the event that Mr. Palagiano's liability for the
excise tax under section 4999 of the Code for a taxable year is
subsequently determined to be different than the amount deter-
mined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 18(a), Mr. Palagiano or the Company,
as the case may be, shall pay to the other party at the time that
the amount of such excise tax is finally determined, an
appropriate amount, plus interest, such that the payment made
under section 18(a), when increased by the amount of the payment
made to Mr. Palagiano under this section 18(b) by the Company, or
when reduced by the amount of the payment made to the Company
under this section 18(b) by Mr. Palagiano, equals the amount that
should have properly been paid to Mr. Palagiano under section
18(a). The interest paid under this section 18(b) shall be
determined at the rate provided under section 1274(b)(2)(B) of
the Code. To confirm that the proper amount, if any, was paid to
Mr. Palagiano under this section 18, Mr. Palagiano shall furnish
to the Company a copy of each tax return which reflects a
liability for an excise tax payment made by the Company, at least
20 days before the date on which such return is required to be
filed with the Internal Revenue Service.
(c) The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement. If, after the date
hereof, there shall be any change in any such laws, this section
18 shall be modified in such manner as Mr. Palagiano and the
Company may mutually agree upon if and to the extent necessary to
assure that Mr. Palagiano is fully indemnified against the
economic effects of the tax imposed under section 4999 of the
Code or any similar federal, state or local tax.
19. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
20. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
21. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
22. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
23. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
24. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Palagiano. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
25. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Company.
26. Provisions of Law. Notwithstanding anything
herein contained to the contrary, any payments to Mr. Palagiano
by the Company, whether pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.
27. Guarantee. The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the Executive is or may be entitled to under the terms and
conditions of the employment agreement dated as of the 26th day
of June, 1996 between the Bank and Mr. Palagiano, a copy of which
is attached hereto as Exhibit A.
28. Non-duplication. In the event that Mr. Palagiano
shall perform services for the Bank or any other direct or
indirect subsidiary of the Company, any compensation or benefits
provided to Mr. Palagiano by such other employer shall be applied
to offset the obligations of the Company hereunder, it being
intended that this Agreement set forth the aggregate compensation
and benefits payable to Mr. Palagiano for all services to the
Company and all of its direct or indirect subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed and Mr. Palagiano has hereto set his
hand, all as of the day and year first above written.
/s/ Vincent F. Palagiano
VINCENT F. PALAGIANO
ATTEST DIME COMMUNITY BANCORP, INC.
By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between
Dime Community Bancorp, Inc., a savings and loan holding company
organized and operating under the laws of the State of Delaware
and having an office at 209 Havemeyer Street, Brooklyn, New York
11211 ("Company") and Michael P. Devine, residing at [home
address deleted].
W I T N E S S E T H :
WHEREAS, Mr. Devine currently serves the Company in the
capacity of Executive Vice President, Secretary and Chief
Operating Officer of its wholly owned subsidiary, The Dime
Savings Bank of Williamsburgh ("Bank"); and
WHEREAS, the Company desires to assure for itself the
continued availability of Mr. Devine's services and the ability
of Mr. Devine to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change in
Control (as hereinafter defined); and
WHEREAS, Mr. Devine is willing to continue to serve the
Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Company and Mr. Devine hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Company hereby represents and warrants to Mr.
Devine that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Company; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Company is a
party or by which it is bound, or (B) any provision of law,
including, without limitation, any statute, rule or regulation or
any order of any order of any court or administrative agency,
applicable to the Company or its business.
(b) Mr. Devine hereby represents and warrants to the
Company that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Company hereby continues the
employment of Mr. Devine, and Mr. Devine hereby accepts such
continued employment, during the period and upon the terms and
conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Except as provided in section 3(c), beginning on
the date of this Agreement, the Employment Period shall
automatically be extended for one (1) additional day each day,
unless either the Company or Mr. Devine elects not to extend the
Agreement further by giving written notice to the other party, in
which case the Employment Period shall end on the third
anniversary of the date on which such written notice is given.
Upon termination of Mr. Devine's employment with the Company for
any reason whatsoever, any daily extensions provided pursuant to
this section 3(b), if not therefore discontinued, shall
automatically cease.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs, then the Employment Period shall be extended
through and including the third anniversary of the earliest date
after the effective date of such Change in Control on which
either the Company or Mr. Devine elects, by written notice
pursuant to section 3(d) of this Agreement to the non-electing
party, to discontinue the Employment Period; provided, however,
that this section shall not apply in the event that, prior to the
Change in Control (as defined in section 13 of this Agreement),
Mr. Devine has provided written notice to the Company of his
intent to discontinue the Employment Period.
(d) The Company or Mr. Devine may, at any time by
written notice given to the other, elect to terminate this
Agreement. Any such notice given by the Company shall be
accompanied by a certified copy of a resolution, adopted by the
affirmative vote of a majority of the entire membership of the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Devine's employment with the Company may be
terminated during the Employment Period, in accordance with the
terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of Mr.
Devine's employment following the expiration of the Employment
Period upon such terms and conditions as the Company and Mr.
Devine may mutually agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr. Devine
shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Company and use his best efforts
to advance the Company's interests;
(b) serve as Executive Vice President, Secretary and
Chief Operating Officer if duly appointed and/or elected to serve
in such position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board of Directors of the
Company ("Board"), in accordance with organization Certificate,
By-laws, Applicable Laws, Statutes and Regulations, custom and
practice of the Company as in effect on the date first above
written.
Mr. Devine shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Devine shall
report to and be subject to direction and supervision by the
Board.
(d) none of the functions, duties and responsibilities
to be performed by Mr. Devine pursuant to this Agreement shall be
deemed to include those functions, duties and responsibilities
performed by Mr. Devine in his capacity as director of the
Company.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Devine under this Agreement, the
Company shall pay to Mr. Devine a salary at an annual rate equal
to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $340,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Devine's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Company (other than Mr.
Devine) who are assistant vice presidents or
more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Company
(other than Mr. Devine) who are assistant
vice presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Company's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Devine of a salary in
excess of that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent that such payment is duly authorized by or under the
authority of the Board.
(d) No portion of the compensation paid to Mr. Devine
pursuant to this Agreement shall be deemed to be compensation
received by Mr. Devine in his capacity as director of the
Company.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Devine shall be treated as an employee of the Company and be
entitled to participate in and receive benefits under the
Company's Retirement Plan, Incentive Savings Plan, group life and
health (including medical and major medical) and disability
insurance plans, and such other employee benefit plans and
programs, including but not limited to any long-term or
short-term incentive compensation plans or programs (whether or
not employee benefit plans or programs), as the Company may
maintain from time to time, in accordance with the terms and
conditions of such employee benefit plans and programs and
compensation plans and programs and with the Company's customary
practices. Following a Change in Control, all such benefits to
Mr. Devine shall be continued on terms and conditions
substantially identical to, and in no event less favorable than,
those in effect prior to the Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Company will provide, or cause to be
provided, to Mr. Devine in connection with such Conversion,
stock-based compensation and benefits, including, without
limitation, stock options, restricted stock awards, and
participation in tax-qualified stock bonus plans which, in the
aggregate, are either (A) accepted by Mr. Devine in writing as
being satisfactory for purposes of this Agreement or (B) in the
written, good faith opinion of a nationally recognized executive
compensation consulting firm selected by the Company and
satisfactory to Mr. Devine, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions.
7. Board Memberships and Personal Activities.
(a) Mr. Devine may serve as a member of the board of
directors of such business, community and charitable
organizations as he may disclose to the Board from time to time,
and he may engage in personal business and investment activities
for his own account; provided, however, that such service and
personal business and investment activities shall not materially
interfere with the performance of his duties under this
Agreement.
(b) Mr. Devine may also serve as an officer or
director of the Bank on such terms and conditions as the Company
and the Bank may mutually agree upon, and such service shall not
be deemed to materially interfere with Mr. Devine's performance
of his duties hereunder or otherwise result in a material breach
of this Agreement. If Mr. Devine is discharged or suspended, or
is subject to any regulatory prohibition or restriction with
respect to participation in the affairs of the Bank, he shall
(subject to the Company's powers of termination hereunder)
continue to perform services for the Company in accordance with
this Agreement but shall not directly or indirectly provide
services to or participate in the affairs of the Bank in a manner
inconsistent with the terms of such discharge or suspension or
any applicable regulatory order.
8. Working Facilities and Expenses. Mr. Devine's
principal place of employment shall be at the Company's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Company shall provide Mr. Devine, at his principal
place of employment, with a private office, stenographic services
and other support services and facilities suitable to his
position with the Company and necessary or appropriate in
connection with the performance of his assigned duties under this
Agreement. The Company shall provide Mr. Devine with an
automobile suitable to his position with the Company in
accordance with its prior practices, and such automobile shall be
used by Mr. Devine in carrying out his duties under this
Agreement, including commuting between his residence and his
principal place of employment. The Company shall reimburse Mr.
Devine for his ordinary and necessary business expenses,
including, without limitation, all expenses associated with his
business use of the aforementioned automobile, fees for
memberships in such clubs and organizations as Mr. Devine and the
Company shall mutually agree are necessary and appropriate for
business purposes and travel and entertainment expenses incurred
in connection with the performance of his duties under this
Agreement, upon presentation to the Company of an itemized
account of such expenses in such form as the Company may
reasonably require. Mr. Devine shall be entitled to no less than
four (4) weeks of paid vacation during each year in the
Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Devine's employment with the
Company shall terminate during the Employment Period on account
of the termination of Mr. Devine's employment with the Company
other than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement);
(iii) a termination on account of Mr. Devine's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Devine has been absent from the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Devine shall have failed to
return to work in the full-time service of the Company within
thirty (30) days after written notice requesting such return is
given to Mr. Devine by the Company; then the Company shall
provide to Mr. Devine the benefits and pay to Mr. Devine the
amounts provided under section 9(b) of this Agreement.
(b) In the event that Mr. Devine's employment with the
Company shall terminate under circumstances described in section
9(a) of this Agreement or if the Company terminates this
Agreement pursuant to section 3(d), the following benefits and
amounts shall be paid or provided to Mr. Devine (or, in the event
of his death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when due
but in no event later than thirty (30) days following his
termination of employment with the Company;
(ii) (A) the benefits, if any, to which Mr. Devine and
his family and dependents are entitled as a former employee, or
family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Company's officers and
employees, in accordance with the terms of such plans and
programs in effect on the date of his termination of employment,
or if his termination of employment occurs after a Change in
Control, on the date of his termination of employment or on the
date of such Change in Control, whichever results in more
favorable benefits as determined by Mr. Devine, where credit is
given for three additional years of service and age in
determining eligibility and benefits for any plan and program
where age and service are relevant factors, and (B) payment for
all unused vacation days and floating holidays in the year in
which his employment is terminated, at his highest annual rate of
salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Devine
and his family and dependents for the Remaining Unexpired
Employment Period, coverage identical to and in any event no less
favorable than the coverage to which they would have been
entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment
occurs after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such Change in Control, whichever results in more favorable
benefits as determined by Mr. Devine) if he had continued working
for the Company during the Remaining Unexpired Employment Period
at the highest annual rate of compensation (assuming, if a Change
in Control has occurred, that the annual increases under section
5(c) would apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Devine would have earned if he had worked for the Company during
the Remaining Unexpired Employment Period at the highest annual
rate of salary (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided for
under this Agreement, where such present value is to be
determined using a discount rate of six percent (6%) per annum,
compounded, in the case of salary, with the frequency
corresponding to the Company's regular payroll periods with
respect to its officers, and, in the case of bonus, annually;
(v) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Company
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Company during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Company's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Company (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Company during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Devine's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable to the Company's contributions to which he is
actually entitled under such plans as of the date of his
termination of employment with the Company, where such present
values are to be determined using a discount rate of six percent
(6%) per annum, compounded with the frequency corresponding to
the Company's regular payroll periods with respect to its
officers;
(vii) the payments that would have been made to Mr.
Devine under any incentive compensation plan maintained by, or
covering employees of, the Company (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Company during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Devine under such incentive compensation plan,
multiplied by (B) the compensation that would have been paid to
Mr. Devine during each calendar year at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, such payments to be made at the same time and in
the same manner as payments are made to other officers of the
Company pursuant to the terms of such incentive compensation
plan; provided, however, that payments under this section
9(b)(vii) shall not be made to Mr. Devine for any year on account
of which no payments are made to any of the Company's officers
under any such incentive compensation plan; and
(viii) the benefits to which Mr. Devine is entitled
under the Company's Supplemental Executive Retirement Plan (or
other excess benefits plan with the meaning of section 3(36) of
ERISA or other special or supplemental plan) shall be paid to him
in a lump sum, where such lump sum is computed using the
mortality tables under the Company's tax-qualified pension plan
and a discount rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Devine's election,
and if the amount may be increased by a subsequent Change in
Control, any additional payment shall be made within thirty (30)
days of such Change in Control.
(c) Mr. Devine shall not be required to mitigate the
amount of any payment provided for in this section 9 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this section 9 be reduced by
any compensation earned by Mr. Devine as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by Mr. Devine to the Company, or
otherwise except as specifically provided in section 9(b) (iii)
of this Agreement or except as provided in section 28 to avoid
duplication of payments. The Company and Mr. Devine hereby
stipulate that the damages which may be incurred by Mr. Devine as
a consequence of any such termination of employment are not
capable of accurate measurement as of the date first above
written and that the benefits and payments provided for in this
Agreement constitute a reasonable estimate under the
circumstances of all damages sustained as a consequence of any
such termination of employment, other than damages arising under
or out of any stock option, restricted stock or other non-
qualified stock acquisition or investment plan or program, it
being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or
program in respect of any termination of employment.
10. Termination Without Severance Benefits. In the
event that Mr. Devine's employment with the Company shall
terminate during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement); or
(c) Mr. Devine's death;
then the Company shall have no further obligations under this
Agreement, other than the payment to Mr. Devine (or, in the event
of his death, to his estate) of his earned but unpaid salary as
of the date of the termination of his employment, and the
provision of such other benefits, if any, to which he is entitled
as a former employee under the Company's employee benefit plans
and programs and compensation plans and programs and payment for
all unused vacation days and floating holidays in the year in
which his employment is terminated, at his highest annual salary
for such year.
11. Death and Disability.
(a) Death. If Mr. Devine's employment is terminated
by reason of Mr. Devine's death during the Employment Period,
this Agreement shall terminate without further obligations to Mr.
Devine's legal representatives under this Agreement, other than
for payment of amounts and provision of benefits under sections
9(b) (i) and (ii); provided, however, that if Mr. Devine dies
while in the employment of the Company, his designated
beneficiary(ies) shall receive a death benefit, payable through
life insurance or otherwise, which is the equivalent on a net
after-tax basis of the death benefit payable under a term life
insurance policy, with a stated death benefit of three times Mr.
Devine's then Annual Base Salary.
(b) Disability. If Mr. Devine's employment is
terminated by reason of Mr. Devine's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Devine, other than
for payment of amounts and provision of benefits under section
9(b) (i) and (ii); provided, however, that in the event of Mr.
Devine's Disability while in the employment of the Company, the
Company will pay to him a lump sum amount equal to three times
his then Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Company's long
term disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Devine's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Devine's termination of employment with the
Company shall be deemed a "Termination for Cause" if such
termination occurs upon:
(i) Mr. Devine's willful and continued failure to
substantially perform his duties with the Company (other than any
failure resulting from incapacity due to physical or mental
illness or any actual or anticipated failure following notice by
Mr. Devine of an intended Resignation for Good Reason) after a
written demand for substantial performance is delivered to him by
the Board, which demand specifically identifies the manner in
which the Board believes Mr. Devine has not substantially
performed his duties, and the failure to cure such breach within
sixty (60) days following written notice thereof from the
Company; or (ii) the intentional and willful engaging in
dishonest conduct in connection with his performance of services
for the Company resulting in his conviction of a felony, fraud,
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, willful violation of
any law, rule or regulation (other than traffic violations or
similar offenses), or final cease-and-desist order.
No act, or failure to act, on Mr. Devine's part shall be deemed
willful unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Company. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the
Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by Mr. Devine in good faith and in the best interests of the
Company. Notwithstanding the foregoing, no termination of Mr.
Devine's employment shall be a Termination for Cause unless there
shall have been delivered to Mr. Devine a copy of a resolution
duly adopted by the affirmative vote of a majority of the Board
of Directors (or, following a Change in Control, an affirmative
vote of three-quarters of the Board of Directors) at a meeting of
the Board called and held for such purpose (after reasonable
notice to Mr. Devine and an opportunity for Mr. Devine, together
with his counsel, to be heard before the Board) finding that in
good faith opinion of the Board circumstances described in
section 12(a) (i) or (ii) exist and specifying the particulars
thereof in detail.
(b) Mr. Devine's termination of employment with the
Company shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Devine of any duties
inconsistent with Mr. Devine's status as Executive Vice
President, Secretary and Chief Operating Officer of the Company
or (B) a substantial adverse alteration in the nature or status
of Mr. Devine's responsibilities from those in effect immediately
prior to the alteration; or (C) any Change in Control described
in section 13(b);
(ii) a reduction by the Company in Mr. Devine's annual
base salary as in effect on the date first above written or as
the same may be increased from time to time, unless such
reduction was mandated at the initiation of any regulatory
authority having jurisdiction over the Company;
(iii) the relocation of the Company's principal
executive offices to a location outside the New York metropolitan
area or the Company's requiring Mr. Devine to be based anywhere
other than the Company's principal executive offices except for
required travel on the Company's business to an extent
substantially consistent with Mr. Devine's business travel
obligations at the date first above written;
(iv) the failure by the Company, without Mr. Devine's
consent, to pay to Mr. Devine, within seven (7) days of the date
when due, (A) any portion of his compensation, or (B) any portion
of an installment of deferred compensation under any deferred
compensation program of the Company;
(v) the failure by the Company to continue in effect
any compensation plan in which Mr. Devine participates which is
material to his total compensation, including but not limited to
the Retirement Plan and the Company's Incentive Savings Plan or
any substitute plans unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
his participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of his
participation relative to other participants, unless such failure
is the result of action mandated at the initiation of any
regulatory authority having jurisdiction over the Company;
(vi) the failure by the Company to continue to provide
Mr. Devine with benefits substantially similar to those enjoyed
by Mr. Devine under the Retirement Plan and the Company's
Incentive Savings Plan or under any of the Company's life, health
(including hospitalization, medical and major medical), dental,
accident, and long-term disability insurance benefits, in which
Mr. Devine is participating, or the taking of any action by the
Company which would directly or indirectly materially reduce any
of such benefits or deprive Mr. Devine of the number of paid
vacation days to which he is entitled, on the basis of years of
service with the Company, rank or otherwise, in accordance with
the Company's normal vacation policy, unless such failure is the
result of action mandated at the initiation of any regulatory
authority having jurisdiction over the Company;
(vii) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Company which is not effected pursuant the provisions of
section 12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the
Company, which the Company fails to cure within thirty (30) days
following written notice thereof from Mr. Devine;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Company to
provide, or cause to be provided, to Mr. Devine in connection
with such Change in Control, stock-based compensation and
benefits, including, without limitation, stock options,
restricted stock awards, and participation in tax-qualified stock
bonus plans which, in the aggregate, are either (A) accepted by
Mr. Devine in writing as being satisfactory for purposes of this
Agreement or (B) in the written, good faith opinion of a
nationally recognized executive compensation consulting firm
selected by the Company and satisfactory to Mr. Devine, whose
agreement shall not be unreasonably withheld, are no less
favorable than the stock-based compensation and benefits usually
and customarily provided to similarly situated executives of
similar financial institutions in connection with similar
transactions; or
(xi) a change in the position to which Mr. Devine
reports;
(xii) in the event of a Change in Control described
in section 13 of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Company shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Company; (B) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company;
or (C) Mr. Devine, or any group otherwise constituting a person
in which Mr. Devine is a member, becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by the Company
representing 25% or more of the combined voting power of all of
the Company's then outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company to effect a transaction described in section 13(a) or
13(c) of this Agreement) whose election by the Board or
nomination for election by the Company's stockholders was
approved by the affirmative vote of at least two-thirds of the
members of Board then in office who were either members of the
Board on the date first above written or whose nomination or
election was previously so approved cease for any reason to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(c) the shareholders of the Company approve either:
(i) a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (1) the members of the
Board of the Company immediately prior to such
merger or consolidation constitute at least a
majority of the members of the governing body of
the institution resulting from such merger or
consolidation; or (2) the shareholders of the
Company own securities of the institution
resulting from such merger or consolidation
representing 80% or more of the combined voting
power of all such securities then outstanding in
substantially the same proportions as their
ownership of voting securities of the Company
before such merger or consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Company's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Bank" were substituted for the
term "Company" therein. Such event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Devine's employment during the Employment Period or
thereafter, whether by the Company or by Mr. Devine, shall have
no effect on the rights and obligations of the parties hereto
under the Company's or the Bank's Retirement Plan and the
Company's Incentive Savings Plan, group life, health (including
hospitalization, medical and major medical), dental, accident and
long term disability insurance plans or such other employee
benefit plans or programs, or compensation plans or programs
(whether or not employee benefit plans or programs) and,
following the conversion of the Company to stock form, any stock
option and appreciation rights plan, employee stock ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.
15. Successors and Assigns.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Company's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Devine, his legal representatives and testate or
intestate distributees, and the Company, their respective
successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm
or corporation to which all or substantially all of the
respective assets and business of the Company may be sold or
otherwise transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Devine:
[Home address deleted].
If to the Company:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
17. Indemnification and Attorneys' Fees. The Company
shall pay to or on behalf of Mr. Devine all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that this section 17 shall not obligate the
Company to pay costs and legal fees on behalf of Mr. Devine under
this Agreement in excess of $50,000.
18. Excise Tax Indemnification.
(a) This section 18 shall apply if Mr. Devine's
employment is terminated in circumstances giving rise to
liability for excise taxes under section 4999 of the Code. If
this Section 18 applies, then, if for any taxable year, Mr.
Devine shall be liable for the payment of an excise tax under
section 4999 of the Code with respect to any payment in the
nature of compensation made by the Company or any direct or
indirect subsidiary or affiliate of the Company to (or for the
benefit of) Mr. Devine, the Company shall pay to Mr. Devine an
amount equal to X determined under the following formula:
E x P
X = ____________________________________
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax
is assessed under section 4999 of the Code;
P = the amount with respect to which
such excise tax is assessed, determined
without regard to this section 18;
FI = the highest marginal rate of
income tax applicable to Mr. Devine under
the Code for the taxable year in question;
SLI = the sum of the highest
marginal rates of income tax applicable to
Mr. Devine under all applicable state and
local laws for the taxable year in question;
and
M = the highest marginal rate of
Medicare tax applicable to Mr. Devine under
the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Mr. Devine under the terms of
this Agreement, or otherwise, and on which an excise tax under
section 4999 of the Code will be assessed, the payment determined
under this section 18(a) shall be made to Mr. Devine on the
earlier of (i) the date the Company or any direct or indirect
subsidiary or affiliate of the Company is required to withhold
such tax, or (ii) the date the tax is required to be paid by Mr.
Devine.
(b) Notwithstanding anything in this section 18 to the
contrary, in the event that Mr. Devine's liability for the excise
tax under section 4999 of the Code for a taxable year is subse
quently determined to be different than the amount determined by
the formula (X + P) x E, where X, P and E have the meanings
provided in section 18(a), Mr. Devine or the Company, as the case
may be, shall pay to the other party at the time that the amount
of such excise tax is finally determined, an appropriate amount,
plus interest, such that the payment made under section 18(a),
when increased by the amount of the payment made to Mr. Devine
under this section 18(b) by the Company, or when reduced by the
amount of the payment made to the Company under this section
18(b) by Mr. Devine, equals the amount that should have properly
been paid to Mr. Devine under section 18(a). The interest paid
under this section 18(b) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code. To confirm that the
proper amount, if any, was paid to Mr. Devine under this section
18, Mr. Devine shall furnish to the Company a copy of each tax
return which reflects a liability for an excise tax payment made
by the Company, at least 20 days before the date on which such
return is required to be filed with the Internal Revenue Service.
(c) The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement. If, after the date
hereof, there shall be any change in any such laws, this section
18 shall be modified in such manner as Mr. Devine and the Company
may mutually agree upon if and to the extent necessary to assure
that Mr. Devine is fully indemnified against the economic effects
of the tax imposed under section 4999 of the Code or any similar
federal, state or local tax.
19. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
20. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
21. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
22. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
23. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
24. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Devine. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
25. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Company.
26. Provisions of Law. Notwithstanding anything
herein contained to the contrary, any payments to Mr. Devine by
the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with section 18(k)
of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k),
and any regulations promulgated thereunder.
27. Guarantee. The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the Executive is or may be entitled to under the terms and
conditions of the employment agreement dated as of the 26th day
of June, 1996 between the Bank and Mr. Devine, a copy of which is
attached hereto as Exhibit A.
28. Non-duplication. In the event that Mr. Devine
shall perform services for the Bank or any other direct or
indirect subsidiary of the Company, any compensation or benefits
provided to Mr. Devine by such other employer shall be applied to
offset the obligations of the Company hereunder, it being
intended that this Agreement set forth the aggregate compensation
and benefits payable to Mr. Devine for all services to the
Company and all of its direct or indirect subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed and Mr. Devine has hereto set his hand,
all as of the day and year first above written.
/s/ Michael P. Devine
MICHAEL P. DEVINE
ATTEST DIME COMMUNITY BANCORP, INC.
By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of the 26th day of June, 1996, by and between
Dime Community Bancorp, Inc., a savings and loan holding company
organized and operating under the laws of the State of Delaware
and having an office at 209 Havemeyer Street, Brooklyn, New York
11211 ("Company") and Kenneth J. Mahon, [home address deleted].
W I T N E S S E T H :
WHEREAS, Mr. Mahon currently serves the Company in the
capacity of Senior Vice President and Chief Financial Officer of
its wholly owned subsidiary, The Dime Savings Bank of
Williamsburgh ("Bank"); and
WHEREAS, the Company desires to assure for itself the
continued availability of Mr. Mahon's services and the ability of
Mr. Mahon to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change in
Control (as hereinafter defined); and
WHEREAS, Mr. Mahon is willing to continue to serve the
Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Company and Mr. Mahon hereby agree as follows:
1. Representations and Warranties of the Parties.
(a) The Company hereby represents and warrants to Mr.
Mahon that:
(i) it has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of its obligations hereunder; and
(ii) the execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate
action on the part of the Company; and
(iii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which the Company is a
party or by which it is bound, or (B) any provision of law,
including, without limitation, any statute, rule or regulation or
any order of any order of any court or administrative agency,
applicable to the Company or its business.
(b) Mr. Mahon hereby represents and warrants to the
Company that:
(i) he has all requisite power and authority to
execute, enter into and deliver this Agreement and to perform
each and every one of his obligations hereunder; and
(ii) neither the execution or delivery of this
Agreement, nor the performance of or compliance with any of the
terms and conditions hereof, is prevented or in any way limited
by (A) any agreement or instrument to which he is a party or by
which he is bound, or (B) including, without limitation, any
statute, rule or regulation or any order of any court or
administrative agency, applicable to him.
2. Employment. The Company hereby continues the
employment of Mr. Mahon, and Mr. Mahon hereby accepts such
continued employment, during the period and upon the terms and
conditions set forth in this Agreement.
3. Employment Period.
(a) The terms and conditions of this Agreement shall
be and remain in effect during the period of employment
established under this section 3 ("Employment Period"). The
Employment Period shall be for an initial term of three years
beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).
(b) Except as provided in section 3(c), beginning on
the date of this Agreement, the Employment Period shall
automatically be extended for one (1) additional day each day,
unless either the Company or Mr. Mahon elects not to extend the
Agreement further by giving written notice to the other party, in
which case the Employment Period shall end on the third
anniversary of the date on which such written notice is given.
Upon termination of Mr. Mahon's employment with the Company for
any reason whatsoever, any daily extensions provided pursuant to
this section 3(b), if not therefore discontinued, shall
automatically cease.
(c) If, prior to the date on which the Employment
Period would end pursuant to section 3(a) or (b) of this
Agreement, a Change in Control (as defined in section 13 of this
Agreement) occurs, then the Employment Period shall be extended
through and including the third anniversary of the earliest date
after the effective date of such Change in Control on which
either the Company or Mr. Mahon elects, by written notice
pursuant to section 3(d) of this Agreement to the non-electing
party, to discontinue the Employment Period; provided, however,
that this section shall not apply in the event that, prior to the
Change in Control (as defined in section 13 of this Agreement),
Mr. Mahon has provided written notice to the Company of his
intent to discontinue the Employment Period.
(d) The Company or Mr. Mahon may, at any time by
written notice given to the other, elect to terminate this
Agreement. Any such notice given by the Company shall be
accompanied by a certified copy of a resolution, adopted by the
affirmative vote of a majority of the entire membership of the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.
(e) Notwithstanding anything herein contained to the
contrary: (i) Mr. Mahon's employment with the Company may be
terminated during the Employment Period, in accordance with the
terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of Mr. Mahon's
employment following the expiration of the Employment Period upon
such terms and conditions as the Company and Mr. Mahon may
mutually agree upon.
(f) For all purposes of this Agreement, any reference
to the "Remaining Unexpired Employment Period" as of any
specified date shall mean a period commencing on the date
specified and ending on the last day of the third (3rd) year from
the date specified, or, if neither party has given notice
electing a discontinuance of the Employment Period, on the third
(3rd) anniversary of the date specified.
4. Duties. During the Employment Period, Mr. Mahon
shall:
(a) except to the extent allowed under section 7 of
this Agreement, devote his full business time and attention to
the business and affairs of the Company and use his best efforts
to advance the Company's interests;
(b) serve as Senior Vice President and Chief Financial
Officer if duly appointed and/or elected to serve in such
position; and
(c) have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned to
him by or under the authority of the Board of Directors of the
Company ("Board"), in accordance with organization Certificate,
By-laws, Applicable Laws, Statutes and Regulations, custom and
practice of the Company as in effect on the date first above
written.
Mr. Mahon shall have such authority as is necessary or
appropriate to carry out his assigned duties. Mr. Mahon shall
report to and be subject to direction and supervision by the
Board.
5. Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Mahon under this Agreement, the
Company shall pay to Mr. Mahon a salary at an annual rate equal
to:
(a) during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $178,000;
(b) during each calendar year that begins after
December 31, 1996, such amount as the Board may, in its
discretion, determine, but in no event less than the rate in
effect on December 31, 1996; or
(c) for each calendar year that begins on or after a
Change in Control, the product of Mr. Mahon's annual rate of
salary in effect immediately prior to such calendar year,
multiplied by the greatest of:
(i) 1.06;
(ii) the quotient of (A) the U.S.
City Average All Items Consumer Price Index
for All Urban Consumers (or, if such index
shall cease to be published, such other
measure of general consumer price levels as
the Board may, in good faith, prescribe) for
October of the immediately preceding calendar
year, divided by (B) the U.S. City Average
All Items Consumer Price Index for All Urban
Consumers (or, if such index shall cease to
be published, such other measure of general
consumer price levels as the Board may, in
good faith, prescribe) for October of the
second preceding calendar year; and
(iii) the quotient of (A) the
average annual rate of salary, determined as
of the first day of such calendar year, of
the officers of the Company (other than Mr.
Mahon) who are assistant vice presidents or
more senior officers, divided by (B) the
average annual rate of salary, determined as
of the first day of the immediately preceding
calendar year, of the officers of the Company
(other than Mr. Mahon) who are assistant vice
presidents or more senior officers;
The salary payable under this section 5 shall be paid in
approximately equal installments in accordance with the Company's
customary payroll practices. Nothing in this section 5 shall be
construed as prohibiting the payment to Mr. Mahon of a salary in
excess of that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent that such payment is duly authorized by or under the
authority of the Board.
6. Employee Benefits Plans and Programs; Other
Compensation. Except as otherwise provided in this Agreement,
Mr. Mahon shall be treated as an employee of the Company and be
entitled to participate in and receive benefits under the
Company's Retirement Plan, Incentive Savings Plan, group life and
health (including medical and major medical) and disability
insurance plans, and such other employee benefit plans and
programs, including but not limited to any long-term or
short-term incentive compensation plans or programs (whether or
not employee benefit plans or programs), as the Company may
maintain from time to time, in accordance with the terms and
conditions of such employee benefit plans and programs and
compensation plans and programs and with the Company's customary
practices. Following a Change in Control, all such benefits to
Mr. Mahon shall be continued on terms and conditions
substantially identical to, and in no event less favorable than,
those in effect prior to the Change in Control.
In the event of a conversion of the Bank from a mutual
savings bank to a form of organization owned by stockholders
("Conversion"), the Company will provide, or cause to be
provided, to Mr. Mahon in connection with such Conversion,
stock-based compensation and benefits, including, without
limitation, stock options, restricted stock awards, and
participation in tax-qualified stock bonus plans which, in the
aggregate, are either (A) accepted by Mr. Mahon in writing as
being satisfactory for purposes of this Agreement or (B) in the
written, good faith opinion of a nationally recognized executive
compensation consulting firm selected by the Company and
satisfactory to Mr. Mahon, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions.
7. Board Memberships and Personal Activities.
(a) Mr. Mahon may serve as a member of the board of
directors of such business, community and charitable
organizations as he may disclose to the Board from time to time,
and he may engage in personal business and investment activities
for his own account; provided, however, that such service and
personal business and investment activities shall not materially
interfere with the performance of his duties under this
Agreement.
(b) Mr. Mahon may also serve as an officer or director
of the Bank on such terms and conditions as the Company and the
Bank may mutually agree upon, and such service shall not be
deemed to materially interfere with Mr. Mahon's performance of
his duties hereunder or otherwise result in a material breach of
this Agreement. If Mr. Mahon is discharged or suspended, or is
subject to any regulatory prohibition or restriction with respect
to participation in the affairs of the Bank, he shall (subject to
the Company's powers of termination hereunder) continue to
perform services for the Company in accordance with this
Agreement but shall not directly or indirectly provide services
to or participate in the affairs of the Bank in a manner
inconsistent with the terms of such discharge or suspension or
any applicable regulatory order.
8. Working Facilities and Expenses. Mr. Mahon's
principal place of employment shall be at the Company's executive
offices at the address first above written, or at such other
location in the New York metropolitan area as determined by the
Board. The Company shall provide Mr. Mahon, at his principal
place of employment, with a private office, stenographic services
and other support services and facilities suitable to his
position with the Company and necessary or appropriate in
connection with the performance of his assigned duties under this
Agreement. The Company shall reimburse Mr. Mahon for his
ordinary and necessary business expenses, including, without
limitation, fees for memberships in such clubs and organizations
as Mr. Mahon and the Company shall mutually agree are necessary
and appropriate for business purposes and travel and
entertainment expenses incurred in connection with the
performance of his duties under this Agreement, upon presentation
to the Company of an itemized account of such expenses in such
form as the Company may reasonably require. Mr. Mahon shall be
entitled to no less than four (4) weeks of paid vacation during
each year in the Employment Period.
9. Termination Giving Rise to Severance Benefits.
(a) In the event that Mr. Mahon's employment with the
Company shall terminate during the Employment Period on account
of the termination of Mr. Mahon's employment with the Company
other than:
(i) a Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(ii) a voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement);
(iii) a termination on account of Mr. Mahon's
death; or
(iv) a termination after both of the following
conditions exist: (A) Mr. Mahon has been absent from the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six (6)
consecutive months; and (B) Mr. Mahon shall have failed to return
to work in the full-time service of the Company within thirty
(30) days after written notice requesting such return is given to
Mr. Mahon by the Company; then the Company shall provide to Mr.
Mahon the benefits and pay to Mr. Mahon the amounts provided
under section 9(b) of this Agreement.
(b) In the event that Mr. Mahon's employment with the
Company shall terminate under circumstances described in section
9(a) of this Agreement or if the Company terminates this
Agreement pursuant to section 3(d), the following benefits and
amounts shall be paid or provided to Mr. Mahon (or, in the event
of his death, to his estate):
(i) his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when due
but in no event later than thirty (30) days following his
termination of employment with the Company;
(ii) (A) the benefits, if any, to which Mr. Mahon and
his family and dependents are entitled as a former employee, or
family or dependents of a former employee, under the employee
benefit plans and programs and compensation plans and programs
maintained for the benefit of the Company's officers and
employees, in accordance with the terms of such plans and
programs in effect on the date of his termination of employment,
or if his termination of employment occurs after a Change in
Control, on the date of his termination of employment or on the
date of such Change in Control, whichever results in more
favorable benefits as determined by Mr. Mahon, where credit is
given for three additional years of service and age in
determining eligibility and benefits for any plan and program
where age and service are relevant factors, and (B) payment for
all unused vacation days and floating holidays in the year in
which his employment is terminated, at his highest annual rate of
salary for such year;
(iii) continued group life, health (including
hospitalization, medical and major medical, dental, accident and
long-term disability insurance benefits), in addition to that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking into account the coverage provided by any subsequent
employer, if and to the extent necessary to provide Mr. Mahon and
his family and dependents for the Remaining Unexpired Employment
Period, coverage identical to and in any event no less favorable
than the coverage to which they would have been entitled under
such plans (as in effect on the date of his termination of
employment, or, if his termination of employment occurs after a
Change in Control, on the date of his termination of employment
or during the one-year period ending on the date of such Change
in Control, whichever results in more favorable benefits as
determined by Mr. Mahon) if he had continued working for the
Company during the Remaining Unexpired Employment Period at the
highest annual rate of compensation (assuming, if a Change in
Control has occurred, that the annual increases under section
5(c) would apply) under the Agreement;
(iv) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the present value of the salary and the bonus that Mr.
Mahon would have earned if he had worked for the Company during
the Remaining Unexpired Employment Period at the highest annual
rate of salary (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided for
under this Agreement, where such present value is to be
determined using a discount rate of six percent (6%) per annum,
compounded, in the case of salary, with the frequency
corresponding to the Company's regular payroll periods with
respect to its officers, and, in the case of bonus, annually;
(v) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of: (A) the present value of the
benefits to which he would be entitled under any defined benefit
plans maintained by, or covering employees of, the Company
(including any "excess benefit plan" within the meaning of
section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or other special or supplemental
plan) as in effect on the date of his termination, if he had
worked for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change in Control has occurred, that the annual increases under
section 5(c) would apply) under the Agreement and been fully
vested in such plan or plans and had continued working for the
Company during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of
employment by adding to the service actually recognized under
such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized
under such plans for the year in which termination of employment
occurs all amounts payable under sections 9(b)(i), (iv) and
(vii), over (B) the present value of the benefits to which he is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables prescribed under section 72 of the Internal Revenue Code
of 1986 ("Code");
(vi) within thirty (30) days following his termination
of employment with the Company, a lump sum payment in an amount
equal to the excess, if any, of (A) the present value of the
benefits attributable to the Company's contribution to which he
would be entitled under any defined contribution plans maintained
by, or covering employees of, the Company (including any "excess
benefit plan" within the meaning of section 3(36) of ERISA, or
other special or supplemental plan) as in effect on the date of
his termination, if he had worked for the Company during the
Remaining Unexpired Employment Period at the highest annual rate
of compensation (assuming, if a Change in Control has occurred,
that the annual increases under section 5(c) would apply) under
the Agreement, and made the maximum amount of employee
contributions, if any, required or permitted under such plan or
plans, and been eligible for the highest rate in matching
contributions under such plan or plans during the Remaining
Unexpired Employment Period which is prior to Mr. Mahon's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable to the Company's contributions to which he is
actually entitled under such plans as of the date of his
termination of employment with the Company, where such present
values are to be determined using a discount rate of six percent
(6%) per annum, compounded with the frequency corresponding to
the Company's regular payroll periods with respect to its
officers;
(vii) the payments that would have been made to Mr.
Mahon under any incentive compensation plan maintained by, or
covering employees of, the Company (other than bonus payments to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued working for the Company during the Remaining Unexpired
Employment Period and had earned an incentive award in each
calendar year that ends during the Remaining Unexpired Employment
Period in an amount equal to the product of (A) the maximum
percentage rate of compensation at which an award was ever
available to Mr. Mahon under such incentive compensation plan,
multiplied by (B) the compensation that would have been paid to
Mr. Mahon during each calendar year at the highest annual rate of
compensation (assuming, if a Change in Control has occurred, that
the annual increases under section 5(c) would apply) under the
Agreement, such payments to be made at the same time and in the
same manner as payments are made to other officers of the Company
pursuant to the terms of such incentive compensation plan;
provided, however, that payments under this section 9(b)(vii)
shall not be made to Mr. Mahon for any year on account of which
no payments are made to any of the Company's officers under any
such incentive compensation plan; and
(viii) the benefits to which Mr. Mahon is entitled
under the Company's Supplemental Executive Retirement Plan (or
other excess benefits plan with the meaning of section 3(36) of
ERISA or other special or supplemental plan) shall be paid to him
in a lump sum, where such lump sum is computed using the
mortality tables under the Company's tax-qualified pension plan
and a discount rate of 6% per annum.
The payments specified in section 9(b) (viii) shall be made
within thirty (30) days after the date of Mr. Mahon's election,
and if the amount may be increased by a subsequent Change in
Control, any additional payment shall be made within thirty (30)
days of such Change in Control.
(c) Mr. Mahon shall not be required to mitigate the
amount of any payment provided for in this section 9 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this section 9 be reduced by
any compensation earned by Mr. Mahon as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by Mr. Mahon to the Company, or
otherwise except as specifically provided in section 9(b) (iii)
of this Agreement or except as provided in section 28 to avoid
duplication of payments. The Company and Mr. Mahon hereby
stipulate that the damages which may be incurred by Mr. Mahon as
a consequence of any such termination of employment are not
capable of accurate measurement as of the date first above
written and that the benefits and payments provided for in this
Agreement constitute a reasonable estimate under the
circumstances of all damages sustained as a consequence of any
such termination of employment, other than damages arising under
or out of any stock option, restricted stock or other non-
qualified stock acquisition or investment plan or program, it
being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or
program in respect of any termination of employment.
10. Termination Without Severance Benefits. In the
event that Mr. Mahon's employment with the Company shall
terminate during the Employment Period on account of:
(a) Termination for Cause (within the meaning of
section 12(a) of this Agreement);
(b) voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section 12(b)
of this Agreement); or
(c) Mr. Mahon's death;
then the Company shall have no further obligations under this
Agreement, other than the payment to Mr. Mahon (or, in the event
of his death, to his estate) of his earned but unpaid salary as
of the date of the termination of his employment, and the
provision of such other benefits, if any, to which he is entitled
as a former employee under the Company's employee benefit plans
and programs and compensation plans and programs and payment for
all unused vacation days and floating holidays in the year in
which his employment is terminated, at his highest annual salary
for such year.
11. Death and Disability.
(a) Death. If Mr. Mahon's employment is terminated by
reason of Mr. Mahon's death during the Employment Period, this
Agreement shall terminate without further obligations to Mr.
Mahon's legal representatives under this Agreement, other than
for payment of amounts and provision of benefits under sections
9(b) (i) and (ii); provided, however, that if Mr. Mahon dies
while in the employment of the Company, his designated
beneficiary(ies) shall receive a death benefit, payable through
life insurance or otherwise, which is the equivalent on a net
after-tax basis of the death benefit payable under a term life
insurance policy, with a stated death benefit of three times Mr.
Mahon's then Annual Base Salary.
(b) Disability. If Mr. Mahon's employment is
terminated by reason of Mr. Mahon's Disability as defined in
section 11(c) during the Employment Period, this Agreement shall
terminate without further obligations to Mr. Mahon, other than
for payment of amounts and provision of benefits under section
9(b) (i) and (ii); provided, however, that in the event of Mr.
Mahon's Disability while in the employment of the Company, the
Company will pay to him a lump sum amount equal to three times
his then Annual Base Salary.
(c) For purposes of this Agreement, "Disability" shall
be defined in accordance with the terms of the Company's long
term disability policy.
(d) Payments under this section 11 shall be made
within 30 days after Mr. Mahon's death or disability.
12. Definition of Termination for Cause and
Resignation for Good Reason.
(a) Mr. Mahon's termination of employment with the
Company shall be deemed a "Termination for Cause" if such
termination occurs upon:
(i) Mr. Mahon's willful and continued failure to
substantially perform his duties with the Company (other than any
failure resulting from incapacity due to physical or mental
illness or any actual or anticipated failure following notice by
Mr. Mahon of an intended Resignation for Good Reason) after a
written demand for substantial performance is delivered to him by
the Board, which demand specifically identifies the manner in
which the Board believes Mr. Mahon has not substantially
performed his duties, and the failure to cure such breach within
sixty (60) days following written notice thereof from the
Company; or (ii) the intentional and willful engaging in
dishonest conduct in connection with his performance of services
for the Company resulting in his conviction of a felony, fraud,
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, willful violation of
any law, rule or regulation (other than traffic violations or
similar offenses), or final cease-and-desist order.
No act, or failure to act, on Mr. Mahon's part shall be deemed
willful unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best interest of the Company. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the
Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by Mr. Mahon in good faith and in the best interests of the
Company. Notwithstanding the foregoing, no termination of Mr.
Mahon's employment shall be a Termination for Cause unless there
shall have been delivered to Mr. Mahon a copy of a resolution
duly adopted by the affirmative vote of a majority of the Board
of Directors (or, following a Change in Control, an affirmative
vote of three-quarters of the Board of Directors) at a meeting of
the Board called and held for such purpose (after reasonable
notice to Mr. Mahon and an opportunity for Mr. Mahon, together
with his counsel, to be heard before the Board) finding that in
good faith opinion of the Board circumstances described in
section 12(a) (i) or (ii) exist and specifying the particulars
thereof in detail.
(b) Mr. Mahon's termination of employment with the
Company shall be deemed a Resignation for Good Reason if such
termination occurs following any one or more of the following
events:
(i) (A) the assignment to Mr. Mahon of any duties
inconsistent with Mr. Mahon's status as Senior Vice President and
Chief Financial Officer of the Company or (B) a substantial
adverse alteration in the nature or status of Mr. Mahon's
responsibilities from those in effect immediately prior to the
alteration; or (C) any Change in Control described in section
13(b);
(ii) a reduction by the Company in Mr. Mahon's annual
base salary as in effect on the date first above written or as
the same may be increased from time to time, unless such
reduction was mandated at the initiation of any regulatory
authority having jurisdiction over the Company;
(iii) the relocation of the Company's principal
executive offices to a location outside the New York metropolitan
area or the Company's requiring Mr. Mahon to be based anywhere
other than the Company's principal executive offices except for
required travel on the Company's business to an extent
substantially consistent with Mr. Mahon's business travel
obligations at the date first above written;
(iv) the failure by the Company, without Mr. Mahon's
consent, to pay to Mr. Mahon, within seven (7) days of the date
when due, (A) any portion of his compensation, or (B) any portion
of an installment of deferred compensation under any deferred
compensation program of the Company;
(v) the failure by the Company to continue in effect
any compensation plan in which Mr. Mahon participates which is
material to his total compensation, including but not limited to
the Retirement Plan and the Company's Incentive Savings Plan or
any substitute plans unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
his participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of his
participation relative to other participants, unless such failure
is the result of action mandated at the initiation of any
regulatory authority having jurisdiction over the Company;
(vi) the failure by the Company to continue to provide
Mr. Mahon with benefits substantially similar to those enjoyed by
Mr. Mahon under the Retirement Plan and the Company's Incentive
Savings Plan or under any of the Company's life, health
(including hospitalization, medical and major medical), dental,
accident, and long-term disability insurance benefits, in which
Mr. Mahon is participating, or the taking of any action by the
Company which would directly or indirectly materially reduce any
of such benefits or deprive Mr. Mahon of the number of paid
vacation days to which he is entitled, on the basis of years of
service with the Company, rank or otherwise, in accordance with
the Company's normal vacation policy, unless such failure is the
result of action mandated at the initiation of any regulatory
authority having jurisdiction over the Company;
(vii) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in section 15(a) of this
Agreement;
(viii) any purported termination of employment by
the Company which is not effected pursuant the provisions of
section 12(a) regarding Termination for Cause or on account of
Disability;
(ix) a material breach of this Agreement by the
Company, which the Company fails to cure within thirty (30) days
following written notice thereof from Mr. Mahon;
(x) in the event of a Change in Control described in
section 13(b) of this Agreement, a failure of the Company to
provide, or cause to be provided, to Mr. Mahon in connection with
such Change in Control, stock-based compensation and benefits,
including, without limitation, stock options, restricted stock
awards, and participation in tax-qualified stock bonus plans
which, in the aggregate, are either (A) accepted by Mr. Mahon in
writing as being satisfactory for purposes of this Agreement or
(B) in the written, good faith opinion of a nationally recognized
executive compensation consulting firm selected by the Company
and satisfactory to Mr. Mahon, whose agreement shall not be
unreasonably withheld, are no less favorable than the stock-based
compensation and benefits usually and customarily provided to
similarly situated executives of similar financial institutions
in connection with similar transactions; or
(xi) a change in the position to which Mr. Mahon
reports;
(xii) in the event of a Change in Control described
in section 13 of this Agreement, termination of employment for
any or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of such
Change in Control.
13. Definition of Change in Control. For purposes of
this Agreement, a Change in Control of the Company shall mean:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")),
other than (A) a trustee or other fiduciary holding securities
under an employee benefit plan maintained for the benefit of
employees of the Company; (B) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company;
or (C) Mr. Mahon, or any group otherwise constituting a person in
which Mr. Mahon is a member, becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by the Company
representing 25% or more of the combined voting power of all of
the Company's then outstanding securities; or
(b) the occurrence of any event upon which the
individuals who on the date first above written are members of
the Board, together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company to effect a transaction described in section 13(a) or
13(c) of this Agreement) whose election by the Board or
nomination for election by the Company's stockholders was
approved by the affirmative vote of at least two-thirds of the
members of Board then in office who were either members of the
Board on the date first above written or whose nomination or
election was previously so approved cease for any reason to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(c) the shareholders of the Company approve either:
(i) a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
following which both of the following conditions are satisfied:
(A) either (1) the members of the
Board of the Company immediately prior to such
merger or consolidation constitute at least a
majority of the members of the governing body of
the institution resulting from such merger or
consolidation; or (2) the shareholders of the
Company own securities of the institution
resulting from such merger or consolidation
representing 80% or more of the combined voting
power of all such securities then outstanding in
substantially the same proportions as their
ownership of voting securities of the Company
before such merger or consolidation; and
(B) the entity which results from
such merger or consolidation expressly agrees in
writing to assume and perform the Company's
obligations under this Agreement; or
(ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and
(d) any event which would be described in section
13(a), (b) or (c) if the term "Bank" were substituted for the
term "Company" therein. Such event shall be deemed to be a
Change in Control under the relevant provision of section 13(a),
(b) or (c).
It is understood and agreed that more than one Change in Control
may occur at the same or different times during the Employment
Period and that the provisions of this Agreement shall apply with
equal force and effect with respect to each such Change in
Control.
14. No Effect on Employee Benefit Plans or Programs.
Except as expressly provided in this Agreement, the termination
of Mr. Mahon's employment during the Employment Period or
thereafter, whether by the Company or by Mr. Mahon, shall have no
effect on the rights and obligations of the parties hereto under
the Company's or the Bank's Retirement Plan and the Company's
Incentive Savings Plan, group life, health (including
hospitalization, medical and major medical), dental, accident and
long term disability insurance plans or such other employee
benefit plans or programs, or compensation plans or programs
(whether or not employee benefit plans or programs) and,
following the conversion of the Company to stock form, any stock
option and appreciation rights plan, employee stock ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.
15. Successors and Assigns.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be deemed to constitute a material breach of the Company's
obligations under this Agreement.
(b) This Agreement will inure to the benefit of and be
binding upon Mr. Mahon, his legal representatives and testate or
intestate distributees, and the Company, their respective
successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm
or corporation to which all or substantially all of the
respective assets and business of the Company may be sold or
otherwise transferred.
16. Notices. Any communication required or permitted
to be given under this Agreement, including any notice,
direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been
given at such time as it is delivered personally, or five (5)
days after mailing if mailed, postage prepaid, by registered or
certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such
party may by written notice specify to the other party:
If to Mr. Mahon:
[Home address deleted].
If to the Company:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright
17. Indemnification and Attorneys' Fees. The Company
shall pay to or on behalf of Mr. Mahon all reasonable costs,
including legal fees, incurred by him in connection with or
arising out of his consultation with legal counsel or in
connection with or arising out of any action, suit or proceeding
in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement;
provided, however, that this section 17 shall not obligate the
Company to pay costs and legal fees on behalf of Mr. Mahon under
this Agreement in excess of $50,000.
18. Excise Tax Indemnification.
(a) This section 18 shall apply if Mr. Mahon's
employment is terminated in circumstances giving rise to
liability for excise taxes under section 4999 of the Code. If
this Section 18 applies, then, if for any taxable year, Mr. Mahon
shall be liable for the payment of an excise tax under section
4999 of the Code with respect to any payment in the nature of
compensation made by the Company or any direct or indirect
subsidiary or affiliate of the Company to (or for the benefit of)
Mr. Mahon, the Company shall pay to Mr. Mahon an amount equal to
X determined under the following formula:
E x P
X = ____________________________________
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax
is assessed under section 4999 of the Code;
P = the amount with respect to which
such excise tax is assessed, determined
without regard to this section 18;
FI = the highest marginal rate of
income tax applicable to Mr. Mahon under the
Code for the taxable year in question;
SLI = the sum of the highest
marginal rates of income tax applicable to
Mr. Mahon under all applicable state and
local laws for the taxable year in question;
and
M = the highest marginal rate of
Medicare tax applicable to Mr. Mahon under
the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Mr. Mahon under the terms of this
Agreement, or otherwise, and on which an excise tax under section
4999 of the Code will be assessed, the payment determined under
this section 18(a) shall be made to Mr. Mahon on the earlier of
(i) the date the Company or any direct or indirect subsidiary or
affiliate of the Company is required to withhold such tax, or
(ii) the date the tax is required to be paid by Mr. Mahon.
(b) Notwithstanding anything in this section 18 to the
contrary, in the event that Mr. Mahon's liability for the excise
tax under section 4999 of the Code for a taxable year is subse
quently determined to be different than the amount determined by
the formula (X + P) x E, where X, P and E have the meanings
provided in section 18(a), Mr. Mahon or the Company, as the case
may be, shall pay to the other party at the time that the amount
of such excise tax is finally determined, an appropriate amount,
plus interest, such that the payment made under section 18(a),
when increased by the amount of the payment made to Mr. Mahon
under this section 18(b) by the Company, or when reduced by the
amount of the payment made to the Company under this section
18(b) by Mr. Mahon, equals the amount that should have properly
been paid to Mr. Mahon under section 18(a). The interest paid
under this section 18(b) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code. To confirm that the
proper amount, if any, was paid to Mr. Mahon under this section
18, Mr. Mahon shall furnish to the Company a copy of each tax
return which reflects a liability for an excise tax payment made
by the Company, at least 20 days before the date on which such
return is required to be filed with the Internal Revenue Service.
(c) The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement. If, after the date
hereof, there shall be any change in any such laws, this section
18 shall be modified in such manner as Mr. Mahon and the Company
may mutually agree upon if and to the extent necessary to assure
that Mr. Mahon is fully indemnified against the economic effects
of the tax imposed under section 4999 of the Code or any similar
federal, state or local tax.
19. Severability. A determination that any provision
of this Agreement is invalid or unenforceable shall not affect
the validity or enforceability of any other provision hereof.
20. Waiver. Failure to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition. A waiver
of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against who its
enforcement is sought. Any waiver or relinquishment of such
right or power at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time
or times.
21. Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
22. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
State of New York, without reference to conflicts of law
principles.
23. Headings and Construction. The headings of
sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
24. Entire Agreement; Modifications. This instrument
contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all
prior agreements, understandings or representations relating to
the subject matter hereof, including the Amended and Restated
Employment Agreement dated October 1, 1995 between the Bank and
Mr. Mahon. No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
25. Arbitration Clause. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three arbitrators in New York, New York, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction; the expense of such arbitration shall be
borne by the Company.
26. Provisions of Law. Notwithstanding anything
herein contained to the contrary, any payments to Mr. Mahon by
the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.
27. Guarantee. The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the Executive is or may be entitled to under the terms and
conditions of the employment agreement dated as of the 26th day
of June, 1996 between the Bank and Mr. Mahon, a copy of which is
attached hereto as Exhibit A.
28. Non-duplication. In the event that Mr. Mahon
shall perform services for the Bank or any other direct or
indirect subsidiary of the Company, any compensation or benefits
provided to Mr. Mahon by such other employer shall be applied to
offset the obligations of the Company hereunder, it being
intended that this Agreement set forth the aggregate compensation
and benefits payable to Mr. Mahon for all services to the Company
and all of its direct or indirect subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed and Mr. Mahon has hereto set his hand,
all as of the day and year first above written.
/s/ Kenneth J. Mahon
KENNETH J. MAHON
ATTEST DIME COMMUNITY BANCORP, INC.
By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo
Assistant Secretary for the Board of Directors
[Seal]
[Witnessed and attested to by Notary Public].
EMPLOYEE RETENTION AGREEMENT
This Employee Retention Agreement ("Agreement") is made
and entered into as of _______________ by and among The Dime
Savings Bank of Williamsburgh, a savings bank organized and
operating under the federal laws of the United States and having
its executive offices at 209 Havemeyer Street, Brooklyn, New York
11211 ("Bank"); Dime Community Bancorp, Inc., a business
corporation organized and existing under the laws of the State of
Delaware and having its executive offices at 209 Havemeyer
Street, Brooklyn, New York 11211 ("Holding Company"); and
,_________ an individual residing at ___________________________
__________________ ("Officer").
W I T N E S S E T H :
Whereas, effective as of the date of this Agreement,
the Bank has converted from a federal mutual savings bank to a
federal stock savings bank and has become a wholly-owned
subsidiary of the Holding Company; and
Whereas, the Bank desires to secure for itself the
continued availability of the Officer's services; and
Whereas, the Bank recognizes that a third party may at
some time in the future pursue a Change of Control of the Bank or
the Holding Company and that this possibility may result in the
departure or distraction of the Bank's officers; and
Whereas, the Bank has determined that appropriate steps
should be taken to encourage the continued attention and dedica
tion of the Bank's officers, including the Officer, to their
duties for the Bank without the distraction that may arise from
the possibility of a Change of Control of the Bank or the Holding
Company; and
Whereas, the Bank believes that, by assuring certain
officers, including the Officer, of reasonable financial security
in the event of a Change of Control of the Bank or the Holding
Company, such officers will be in a position to perform their
duties free from financial self interest and in the best
interests of the Bank and its shareholders; and
Whereas, for purposes of securing the Officer's
services for the Bank, the Board of Directors of the Bank
("Board") has authorized the proper officers of the Bank to enter
into an employee retention agreement with the Officer on the
terms and conditions set forth herein; and
Whereas, the Board of Directors of the Holding Company
has authorized the Holding Company to guarantee the Bank's
obligations under such an employee retention agreement; and
Whereas, the Officer is willing to make the Officer's
services available to the Bank on the terms and conditions set
forth herein;
Now, Therefore, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the
Bank, the Holding Company and the Officer hereby agree as
follows:
Section 1. Effective Date.
(a) This Agreement shall be effective as of the date
first above written and shall remain in effect during the term of
this Agreement which shall be for a period of three (3) years
commencing on the date of this Agreement, plus such extensions as
are provided pursuant to section 1(b); provided, however, that if
the term of this Agreement has not otherwise terminated, the term
of this Agreement will terminate on the date of the Officer's
termination of employment with the Bank; and provided, further,
that the obligations under section 8 of this Agreement shall
survive the term of this Agreement if payments become due here
under.
(b) Prior to each anniversary date of this Agreement,
the Board shall consider the advisability of an extension of the
term in light of the circumstances then prevailing and may, in
its discretion, approve an extension to take effect as of the
upcoming anniversary date. If an extension is approved, the term
of this Agreement shall be extended so that it will expire three
(3) years after such anniversary date.
(c) Notwithstanding anything herein contained to the
contrary: (i) the Officer's employment with the Bank may be
terminated at any time, subject to the terms and conditions of
this Agreement; and (ii) nothing in this Agreement shall mandate
or prohibit a continuation of the Officer's employment following
the expiration of the Assurance Period upon such terms and
conditions as the Bank and the Officer may mutually agree upon.
Section 2. Assurance Period.
(a) The assurance period ("Assurance Period") shall be
for a period commencing on the date of a Change of Control, as
defined in section 10 of this Agreement, and ending on the
anniversary of the date on which the Assurance Period commences,
plus such extensions as are provided pursuant to the following
sentence. The Assurance Period shall be automatically extended
for one (1) additional day each day, unless either the Bank or
the Officer elects not to extend the Assurance Period further by
giving written notice to the other party, in which case the
Assurance Period shall become fixed and shall end on the
anniversary of the date on which such written notice is given;
provided, however, that if following a Change of Control, the
Office of Thrift Supervision (or its successor) is the Bank's
primary federal regulator, the Agreement shall be subject to
extension not more frequently than annually and only upon review
and approval of the Board.
(b) Upon termination of the Officer's employment with
the Bank, any daily extensions provided pursuant to the preceding
sentence, if not theretofore discontinued, shall cease and the
remaining unexpired Assurance Period under this Agreement shall
be a fixed period ending on the later of the anniversary
of the date of the Change of Control, as defined in section 10 of
this Agreement, or the anniversary of the date on which
the daily extensions were discontinued.
Section 3. Duties.
During the period of the Officer's employment that
falls within the Assurance Period, the Officer shall: (a) except
to the extent allowed under section 6 of this Agreement, devote
his full business time and attention (other than during weekends,
holidays, vacation periods, and periods of illness, disability or
approved leave of absence) to the business and affairs of the
Bank and use his best efforts to advance the Bank's interests;
(b) serve in the position to which the Officer is appointed by
the Bank, which, during the Assurance Period, shall be the
position that the Officer held on the day before the Assurance
Period commenced or any higher office at the Bank to which he may
subsequently be appointed; and (c) subject to the direction of
the Board and the By-laws of the Bank, have such functions,
duties, responsibilities and authority commonly associated with
such position.
Section 4. Compensation.
In consideration for the services rendered by the
Officer during the Assurance Period, the Bank shall pay to the
Officer during the Assurance Period a salary at an annual rate
equal to the greater of:
(a) the annual rate of salary in effect for the
Officer on the day before the Assurance Period
commenced; or
(b) such higher annual rate as may be prescribed
by or under the authority of the Board;
provided, however, that in no event shall the Officer's annual
rate of salary under this Agreement in effect at a particular
time during the Assurance Period be reduced without the Officer's
prior written consent. The annual salary payable under this
section 4 shall be subject to review at least once annually and
shall be paid in approximately equal installments in accordance
with the Bank's customary payroll practices. Nothing in this
section 4 shall be deemed to prevent the Officer from receiving
additional compensation other than salary for his services to the
Bank, or additional compensation for his services to the Holding
Company, upon such terms and conditions as may be prescribed by
or under the authority of the Board or the Board of Directors of
the Holding Company.
Section 5. Employee Benefit Plans and Programs.
Except as otherwise provided in this Agreement, the
Officer shall, during the Assurance Period, be treated as an
employee of the Bank and be eligible to participate in and re
ceive benefits under any qualified or non-qualified defined
benefit or defined contribution retirement plan, group life, hea
lth (including hospitalization, medical and major medical),
dental, accident and long term disability insurance plans, and
such other employee benefit plans and programs, including, but
not limited to, any incentive compensation plans or programs
(whether or not employee benefit plans or programs), any stock
option and appreciation rights plan, employee stock ownership
plan and restricted stock plan, as may from time to time be
maintained by, or cover employees of, the Bank, in accordance
with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and with the Bank's
customary practices.
Section 6. Board Memberships.
The Officer may serve as a member of the boards of
directors of such business, community and charitable organiza
tions as he may disclose to and as may be approved by the Board
(which approval shall not be unreasonably withheld), and he may
engage in personal business and investment activities for his own
account; provided, however, that such service and personal
business and investment activities shall not materially interfere
with the performance of his duties under this Agreement.
Section 7. Working Facilities and Expenses.
During the Assurance Period, the Officer's principal
place of employment shall be at the Bank's executive offices at
the address first above written, or at such other location within
the City of New York at which the Bank shall maintain its
principal executive offices, or at such other location as the
Bank and the Officer may mutually agree upon. The Bank shall
provide the Officer, at his principal place of employment, with a
private office and support services and facilities suitable to
his position with the Bank and necessary or appropriate in
connection with the performance of his assigned duties under this
Agreement. The Bank shall reimburse the Officer for his ordinary
and necessary business expenses, including, without limitation,
the Officer's travel and entertainment expenses, incurred in
connection with the performance of the Officer's duties under
this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably
require.
Section 8. Termination of Employment with Severance
Benefits.
(a) In the event that the Officer's employment with
the Bank shall terminate during the Assurance Period, or prior to
the commencement of the Assurance Period but within three (3)
months of and in connection with a Change of Control as defined
in section 10 of this Agreement on account of:
(i) The Officer's voluntary resignation from
employment with the Bank within ninety (90) days
following:
(A) the failure of the Bank's Board to
appoint or re-appoint or elect or re-elect the
Officer to serve in the same position in which the
Officer was serving, on the day before the
Assurance Period commenced or a more senior
office;
(B) the failure of the stockholders of
the Holding Company to elect or re-elect the
Officer as a member of the Board, if he was a
member of the Board on the day before the
Assurance Period commenced;
(C) the expiration of a thirty (30) day
period following the date on which the Officer
gives written notice to the Bank of its material
failure, whether by amendment of the Bank's
Organization Certificate or By-laws, action of the
Board or the Holding Company's stockholders or
otherwise, to vest in the Officer the functions,
duties, or responsibilities vested in the Officer
on the day before the Assurance Period commenced
(or the functions, duties and responsibilities of
a more senior office to which the Officer may be
appointed), unless during such thirty (30) day
period, the Bank fully cures such failure;
(D) the failure of the Bank to cure a
material breach of this Agreement by the Bank,
within thirty (30) days following written notice
from the Officer of such material breach;
(E) a reduction in the compensation
provided to the Officer, or a material reduction
in the benefits provided to the Officer under the
Bank's program of employee benefits, compared with
the compensation and benefits that were provided
to the Officer on the day before the Assurance
Period commenced;
(F) a change in the Officer's principal
place of employment that would result in a one-way
commuting time in excess of the greater of (I) 30
minutes or (II) the Officer's commuting time
immediately prior to such change; or
(ii) the discharge of the Officer by the Bank for
any reason other than for "cause" as provided in sec
tion 9(a);
then, subject to section 21, the Bank shall provide the benefits
and pay to the Officer the amounts provided for under section
8(b) of this Agreement; provided, however, that if benefits or
payments become due hereunder as a result of the Officer's
termination of employment prior to the commencement of the
Assurance Period, the benefits and payments provided for under
section 8(b) of this Agreement shall be determined as though the
Officer had remained in the service of the Bank (upon the terms
and conditions in effect at the time of his actual termination of
service) and had not terminated employment with the Bank until
the date on which the Officer's Assurance Period would have
commenced.
(b) Upon the termination of the Officer's employment
with the Bank under circumstances described in section 8(a) of
this Agreement, the Bank shall pay and provide to the Officer
(or, in the event of the Officer's death, to the Officer's
estate):
(i) the Officer's earned but unpaid compensation
(including, without limitation, all items which
constitute wages under section 190.1 of the New York
Labor Law and the payment of which is not otherwise
provided for under this section 8(b)) as of the date of
the termination of the Officer's employment with the
Bank, such payment to be made at the time and in the
manner prescribed by law applicable to the payment of
wages but in no event later than thirty (30) days after
termination of employment;
(ii) the benefits, if any, to which the Officer is
entitled as a former employee under the employee
benefit plans and programs and compensation plans and
programs maintained for the benefit of the Bank's
officers and employees;
(iii) continued group life, health (including
hospitalization, medical and major medical), accident
and long term disability insurance benefits, in addi
tion to that provided pursuant to section 8(b)(ii) and
after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to
provide for the Officer, for the remaining unexpired
Assurance Period, coverage equivalent to the coverage
to which the Officer would have been entitled under
such plans (as in effect on the date of his termination
of employment, or, if his termination of employment
occurs after a Change of Control, on the date of such
Change of Control, whichever benefits are greater) if
the Officer had continued working for the Bank during
the remaining unexpired Assurance Period at the highest
annual rate of compensation achieved during the
Officer's period of actual employment with the Bank;
(iv) within thirty (30) days following the
Officer's termination of employment with the Bank, a
lump sum payment, in an amount equal to the present
value of the salary that the Officer would have earned
if the Officer had continued working for the Bank
during the remaining unexpired Assurance Period at the
highest annual rate of salary achieved during the
Officer's period of actual employment with the Bank,
where such present value is to be determined using a
discount rate equal to the applicable short-term
federal rate prescribed under section 1274(d) of the
Internal Revenue Code of 1986 ("Code"), compounded
using the compounding periods corresponding to the
Bank's regular payroll periods for its officers, such
lump sum to be paid in lieu of all other payments of
salary provided for under this Agreement in respect of
the period following any such termination;
(v) within thirty (30) days following the
Officer's termination of employment with the Bank, a
lump sum payment in an amount equal to the excess, if
any, of:
(A) the present value of the aggregate
benefits to which the Officer would be entitled
under any and all qualified and non-qualified
defined benefit pension plans maintained by, or
covering employees of, the Bank if the Officer
were 100% vested thereunder and had continued
working for the Bank during the remaining
unexpired Assurance Period such benefits to be
determined as of the date of termination of
employment by adding to the service actually
recognized under such plans an additional period
equal to the remaining unexpired Assurance Period
and by adding to the compensation recognized under
such plans for the year in which termination of
employment occurs all amounts payable under
sections 8(b)(i), (iv) and (vii);
(B) the present value of the benefits
to which the Officer is actually entitled under
such defined benefit pension plans as of the date
of his termination;
where such present values are to be determined using
the mortality tables prescribed under section
415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty
Corporation for the valuation of immediate annuities
payable under terminating single-employer defined
benefit plans for the month in which the Officer's
termination of employment occurs ("Applicable PBGC
Rate").
(vi) within thirty (30) days following the
Officer's termination of employment with the Bank, a
lump sum payment in an amount equal to the present
value of the additional employer contributions (or if
greater in the case of a leveraged employee stock
ownership plan or similar arrangement, the additional
assets allocable to him through debt service, based on
the fair market value of such assets at termination of
employment) to which he would have been entitled under
any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees
of, the Bank, if he were 100% vested thereunder and had
continued working for the Bank during the remaining
unexpired Assurance Period at the highest annual rate
of compensation achieved during the Officer's period of
actual employment with the Bank, and making the maximum
amount of employee contributions, if any, required
under such plan or plans, such present value to be
determined on the basis of the discount rate,
compounded using the compounding period that
corresponds to the frequency with which employer
contributions are made to the relevant plan, equal to
the Applicable PBGC Rate;
(vii) the payments that would have been made
to the Officer under any cash bonus or long-term or
short-term cash incentive compensation plan maintained
by, or covering employees of, the Bank, if he had
continued working for the Bank during the remaining
unexpired Assurance Period and had earned the maximum
bonus or incentive award in each calendar year that
ends during the remaining unexpired Assurance Period,
such payments to be equal to the product of:
(A) the maximum percentage rate at
which an award was ever available to the Officer
under such incentive compensation plan; multiplied
by
(B) the salary that would have been
paid to the Officer during each such calendar year
at the highest annual rate of salary achieved
during the remaining unexpired Assurance Period,
such payments to be made (without discounting for
early payment) within thirty (30) days following
the Officer's termination of employment; and
The Bank and the Officer hereby stipulate that the damages which
may be incurred by the Officer following any such termination of
employment are not capable of accurate measurement as of the date
first above written and that the payments and benefits con
templated by this section 8(b) constitute a reasonable estimate
under the circumstances of all damages sustained as a consequence
of any such termination of employment, other than damages arising
under or out of any stock option, restricted stock or other non-
qualified stock acquisition or investment plan or program, it
being understood and agreed that this Agreement shall not
determine the measurement of damages under any such plan or
program in respect of any termination of employment. Such
damages shall be payable without any requirement of proof of
actual damage and without regard to the Officer's efforts, if
any, to mitigate damages. The Bank and the Officer further agree
that the Bank may condition the payments and benefits (if any)
due under sections 8(b)(iii), (iv), (v), (vi) and (vii) on the
receipt of the Officer's resignation from any and all positions
which he holds as an officer, director or committee member with
respect to the Bank, the Company or any subsidiary or affiliate
of either of them.
Section 9. Termination without Severance Benefits.
In the event that the Officer's employment with the
Bank shall terminate during the Assurance Period on account of:
(a) the discharge of the Officer for "cause,"
which, for purposes of this Agreement shall mean
personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease
and desist order, or any material breach of this
Agreement, in each case as measured against standards
generally prevailing at the relevant time in the
savings and community banking industry; provided,
however, that the Officer shall not be deemed to have
been discharged for cause unless and until he shall
have received a written notice of termination from the
Board, accompanied by a resolution duly adopted by
affirmative vote of a majority of the entire Board at a
meeting called and held for such purpose (after
reasonable notice to the Officer and a reasonable oppor
tunity for the Officer to make oral and written
presentations to the members of the Board, on his own
behalf, or through a representative, who may be his
legal counsel, to refute the grounds for the proposed
determination) finding that in the good faith opinion
of the Board grounds exist for discharging the Officer
for cause; or
(b) the Officer's voluntary resignation from
employment with the Bank for reasons other than those
specified in section 8(a)(i); or
(c) the Officer's death; or
(d) a determination that the Officer is eligible
for long-term disability benefits under the Bank's long-
term disability insurance program or, if there is no
such program, under the federal Social Security Act;
then the Bank shall have no further obligations under this Agree
ment, other than the payment to the Officer (or, in the event of
his death, to his estate) of his earned but unpaid salary as of
the date of the termination of his employment, and the provision
of such other benefits, if any, to which the Officer is entitled
as a former employee under the employee benefit plans and pro
grams and compensation plans and programs maintained by, or
covering employees of, the Bank.
Section 10. Change of Control.
(a) A Change of Control of the Bank ("Change of
Control") shall be deemed to have occurred upon the happening of
any of the following events:
(i) approval by the stockholders of the Bank of a
transaction that would result in the reorganization,
merger or consolidation of the Bank, respectively, with
one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity
ownership interests of the entity resulting from
such transaction are beneficially owned (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to
such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding
equity ownership interests in the Bank; and
(B) at least 51% of the securities
entitled to vote generally in the election of
directors of the entity resulting from such
transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to
such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the securities
entitled to vote generally in the election of
directors of the Bank;
(ii) the acquisition of substantially all of the
assets of the Bank or beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the outstanding securities of
the Bank entitled to vote generally in the election of
directors by any person or by any persons acting in
concert, or approval by the stockholders of the Bank of
any transaction which would result in an acquisition;
or
(iii) a complete liquidation or dissolution of
the Bank, or approval by the stockholders of the Bank
of a plan for such liquidation or dissolution;
(iv) the occurrence of any event if, immediately
following such event, at least fifty percent (50%) of
the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the
Board on the date of this Agreement; or
(B) individuals who first became
members of the Board after the date of this
Agreement either:
(1) upon election to serve as
a member of the Board by affirmative vote of
three-quarters (3/4) of the members of such
Board, or a nominating committee thereof, in
office at the time of such first election; or
(2) upon election by the
stockholders of the Board to serve as a
member of the Board, but only if nominated
for election by affirmative vote of three-
quarters (3/4) of the members of the Board,
or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the Board of the Bank;
(v) any event which would be described in section
10(a)(i), (ii), (iii) or (iv) if the term "Holding
Company" were substituted for the term "Bank" therein.
(b) In no event, however, shall a Change of Control be
deemed to have occurred as a result of any acquisition of
securities or assets of the Holding Company, the Bank or any
subsidiary of either of them, by the Holding Company, the Bank or
any subsidiary of either of them, or by any employee benefit plan
maintained by any of them.
Section 11. No Effect on Employee Benefit Plans or
Programs.
The termination of the Officer's employment during the
Assurance Period or thereafter, whether by the Bank or by the
Officer, shall have no effect on the rights and obligations of
the parties hereto under the Bank's qualified and non-qualified
defined benefit or defined contribution retirement plans, group
life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance
plans or such other employee benefit plans or programs, or
compensation plans or programs (whether or not employee benefit
plans or programs) and any defined contribution plan, employee
stock ownership plan, stock option and appreciation rights plan,
and restricted stock plan, as may be maintained by, or cover
employees of, the Bank from time to time; provided, however, that
nothing in this Agreement shall be deemed to duplicate any
compensation or benefits provided under any agreement, plan or
program covering the Officer to which the Bank or the Holding
Company is a party and any duplicative amount payable under any
such agreement, plan or program shall be applied as an offset to
reduce the amounts otherwise payable hereunder.
Section 12. Successors and Assigns.
This Agreement will inure to the benefit of and be bind
ing upon the Officer, his legal representatives and testate or
intestate distributees, and the Bank and the Holding Company,
their respective successors and assigns, including any successor
by merger or consolidation or a statutory receiver or any other
person or firm or corporation to which all or substantially all
of the respective assets and business of the Bank or the Holding
Company may be sold or otherwise transferred.
Section 13. Notices.
Any communication required or permitted to be given un
der this Agreement, including any notice, direction, designation,
consent, instruction, objection or waiver, shall be in writing
and shall be deemed to have been given at such time as it is de
livered personally, or five (5) days after mailing if mailed,
postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice
specify to the other party:
If to the Officer:
________________
________________
________________
If to the Bank:
The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
If to the Holding Company:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
Section 14. Indemnification and Attorneys' Fees.
The Bank shall indemnify, hold harmless and defend the
Officer against reasonable costs, including legal fees, incurred
by the Officer in connection with or arising out of any action,
suit or proceeding in which the Officer may be involved, as a re
sult of the Officer's efforts, in good faith, to defend or
enforce the terms of this Agreement; provided, however, that the
Officer shall have substantially prevailed on the merits pursuant
to a judgment, decree or order of a court of competent
jurisdiction or of an arbitrator in an arbitration proceeding, or
in a settlement; provided, further, that this section 14 shall
not obligate the Bank to pay costs and legal fees on behalf of
the Officer under this Agreement in excess of $20,000. For
purposes of this Agreement, any settlement agreement which
provides for payment of any amounts in settlement of the Bank's
obligations hereunder shall be conclusive evidence of the
Officer's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable
pursuant to such settlement agreement, unless such settlement
agreement expressly provides otherwise.
Section 15. Severability.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforce
ability of any other provision hereof.
Section 16. Waiver.
Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition. A waiver of any
provision of this Agreement must be made in writing, designated
as a waiver, and signed by the party against whom its enforcement
is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver
or relinquishment of such right or power at any other time or
times.
Section 17. Counterparts.
This Agreement may be executed in two (2) or more coun
terparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.
Section 18. Governing Law.
This Agreement shall be governed by and construed and
enforced in accordance with the federal laws of the United
States, and in the absence of controlling federal law, the laws
of the State of New York, without reference to conflicts of law
principles.
Section 19. Headings and Construction.
The headings of sections in this Agreement are for con
venience of reference only and are not intended to qualify the
meaning of any section. Any reference to a section number shall
refer to a section of this Agreement, unless otherwise stated.
Section 20. Entire Agreement; Modifications.
This instrument contains the entire agreement of the
parties relating to the subject matter hereof, and supersedes in
its entirety any and all prior agreements, understandings or rep
resentations relating to the subject matter hereof. No modifi
cations of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
Section 21. Required Regulatory Provisions.
The following provisions are included for the purposes
of complying with various laws, rules and regulations applicable
to the Bank:
(a) Notwithstanding anything herein contained to
the contrary, in no event shall the aggregate amount of
compensation payable to the Officer under section 8(b)
hereof (exclusive of amounts described in section
8(b)(i)) exceed the three times the Officer's average
annual total compensation for the last five consecutive
calendar years to end prior to his termination of
employment with the Bank (or for his entire period of
employment with the Bank if less than five calendar
years).
(b) Notwithstanding anything herein contained to
the contrary, any payments to the Officer by the Bank,
whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with
section 18(k) of the Federal Deposit Insurance Act
("FDI Act"), 12 U.S.C. Section 1828(k), and any
regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to
the contrary, if the Officer is suspended from office
and/or temporarily prohibited from participating in the
conduct of the affairs of the Bank pursuant to a notice
served under section 8(e)(3) or 8(g)(1) of the FDI Act,
12 U.S.C. Section 1818(e)(3) or 1818(g)(1), the Bank's
obligations under this Agreement shall be suspended as
of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in such notice
are dismissed, the Bank, in its discretion, may (i) pay
to the Officer all or part of the compensation withheld
while the Bank's obligations hereunder were suspended
and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.
(d) Notwithstanding anything herein contained to
the contrary, if the Officer is removed and/or
permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C.
Section 1818(e)(4) or (g)(1), all prospective obligations
of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights and
obligations of the Bank and the Officer shall not be
affected.
(e) Notwithstanding anything herein contained to
the contrary, if the Bank is in default (within the
meaning of section 3(x)(1) of the FDI Act, 12 U.S.C.
Section 1813(x)(1), all prospective obligations of the
Bank under this Agreement shall terminate as of the date
of default, but vested rights and obligations of the Bank
and the Officer shall not be affected.
(f) Notwithstanding anything herein contained to
the contrary, all prospective obligations of the Bank
hereunder shall be terminated, except to the extent
that a continuation of this Agreement is necessary for
the continued operation of the Bank: (i) by the
Director of the Office of Thrift Supervision ("OTS") or
his designee or the Federal Deposit Insurance
Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of
the Bank under the authority contained in section 13(c)
of the FDI Act, 12 U.S.C. Section 1823(c); (ii) by the
Director of the OTS or his designee at the time such
Director or designee approves a supervisory merger to
resolve problems related to the operation of the Bank
or when the Bank is determined by such Director to be
in an unsafe or unsound condition. The vested rights
and obligations of the parties shall not be affected.
If and to the extent any of the foregoing provisions shall cease
to be required by applicable law, rule or regulation, the same
shall become inoperative as though eliminated by formal amendment
of this Agreement.
Section 22. Guaranty.
The Holding Company hereby irrevocably and uncondition
ally guarantees to the Officer the payment of all amounts, and
the performance of all other obligations, due from the Bank in
accordance with the terms of this Agreement as and when due
without any requirement of presentment, demand of payment,
protest or notice of dishonor or nonpayment. For purposes of
this section 22, the application of sections 21(a), (c), (d), (e)
or (f) to the Bank shall have no effect on the Holding Company's
obligations hereunder.
Section 23. Maximum Limitations on Severance
Benefits.
Notwithstanding anything in this Agreement to the
contrary, in the event that the payments provided to the Officer
(or in the event of his death, to his estate) under this
Agreement constitute an "excess parachute payment" under section
280G of the Code, such payments shall be limited to the lesser of
(a) 2.99 times his average compensation (including
salary, bonuses, amounts contributed on behalf of the Officer to
any employee benefit plans and programs and compensation plans
and programs maintained for the benefit of the Holding Company's
officers and employees and any other cash or non-cash
compensation paid to the Officer) for the period of five taxable
years ending immediately prior to his termination of employment;
or
(b) whichever of the following amounts yields the
larger net payment to the Officer, after provision for the tax
(if any) imposed under section 4999 of the Code:
(i) the amount determined under section 23(a); or
(ii) the maximum amount (if any) which may be
paid to the Officer hereunder without giving rise
to any tax under section 4999 of the Code;
as determined by the Officer in his sole discretion.
<PAGE>
In Witness Whereof, the Bank and the Holding Company
have caused this Agreement to be executed and the Officer has
hereunto set his hand, all as of the day and year first above
written.
_________________________________
_______________
ATTEST: The Dime Savings Bank of Williamsburgh
By ___________________
Secretary By _____________________________
Name:
[Seal] Title:
ATTEST: Dime Community Bancorp, Inc.
By____________________
Secretary By _____________________________
Name:
[Seal] Title:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF KINGS )
On this _____ day of ____________ , 19__, before me
personally came ________________________________ , to me known,
and known to me to be the individual described in the foregoing
instrument, who, being by me duly sworn, did depose and say that
he resides at the address set forth in said instrument, and that
he signed his name to the foregoing instrument.
________________________
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF KINGS )
On this _____ day of __________________ , 19__, before
me personally came ________________________________, to me known,
who, being by me duly sworn, did depose and say that he resides
at _____________________________________________________ , that he
is a member of the Board of Directors of The Dime Savings Bank of
Williamsburgh, the savings bank described in and which executed
the foregoing instrument; that he knows the seal of said mutual
savings bank; that the seal affixed to said instrument is such
seal; that it was so affixed by authority of the Board of
Directors of said savings bank; and that he signed his name
thereto by like authority.
__________________________
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF KINGS )
On this ____ day of ________________ , 19__, before me
personally came _________________________________________________
, to me known, who, being by me duly sworn, did depose and say
that he resides at ______________________________________________
, that he is a member of the Board of Directors of Dime Community
Bancorp, Inc., the corporation described in and which executed
the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such
seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like
order.
__________________________
Notary Public
Employee Stock Ownership Plan of
Dime Community Bancorp, Inc.
and Certain Affiliates
Adopted on February 8, 1996
Effective July 1, 1995
AMENDMENT
Effective as of July 1, 1995, the Employee Stock Ownership Plan of
Dime Community Bancorp, Inc. and Certain Affiliates ("Plan") is hereby
amended as follows:
1. The effective date on the cover page is deleted and the following
is substituted therefor:
"Effective July 1, 1995"
2. Section 1.14 is deleted in its entirety and the following is
substituted therefor:
"Effective Date means July 1, 1995."
3. Section 1.44 is amended in its entirety to read as follows:
Section 1.44 Plan Year means the period
commencing on the Effective Date and ending on
June 30, 1996 and each fiscal year beginning July
1 and ending June 30 thereafter.
4. Section 7.2 is amended in its entirety to read as follows:
Section 7.2 Allocation of Released Shares or Other
Property.
Subject to the limitations of
Article VIII, in the event that Financed Shares or
other property are released from the Loan
Repayment Account for a Plan Year in accordance
with section 6.4, such released Shares or other
property shall be allocated among the Accounts of
the Eligible Participants for the Plan Year in the
proportion that each such Eligible Participant's
Allocation Compensation for the portion of the
immediately preceding calendar year during which
he was a Participant bears to the aggregate
Allocation Compensation of all Eligible
Participants for the portion of the immediately
preceding calendar year during which they were Par
ticipants.
5. Section 8.2(c)(v) is amended in its entirety to read as follows:
"(v) Limitation Year means the calendar year."
Page 1 of 2
<PAGE>
In Witness Whereof, the undersigned has hereunto set his
hand this _____ day of ________, 1996 pursuant to authority granted by
the Board of Directors on _______, 1996.
Dime Community Bancorp, Inc.
Name:
Title:
Page 2 of 2
June 12, 1996
Employee Stock Ownership Plan Trust of
Dime Community Bancorp, Inc. and Certain Affiliates
c/o The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, NY 11211
Attention: Mr. Vincent F. Palagiano,
Chief Executive Officer
Dear Mr. Palagiano:
This letter confirms Dime Community Bancorp, Inc.'s
commitment to fund a leveraged ESOP in an amount up to
$11,638,000. The commitment is subject to the following terms
and conditions:
1. Lender: Dime Community Bancorp, Inc. (the "Company").
2. Borrower: Employee Stock Ownership Plan Trust of
Dime Community Bancorp, Inc. and Certain Affiliates
("Borrower").
3. Trustee: Marine Midland Bank.
4. Security: Unreleased shares of stock of the
Company held in the Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc. and Certain Affiliates.
5. Maturity: Generally, up to 10 years from
takedown.
6. Amortization: Equal principal payments on annual
basis, with pro-rated principal payments for partial
years. Certain principal payments may be deferred to
the extent that such payments would be nondeductible
for federal income tax purposes or our consolidated
annual return on average assets or annual return on
average equity (after provision for the payment) would
be less than 0.5% or 4%, respectively, for the fiscal
year in which the payment would otherwise be due.
Employee Stock Ownership Plan Trust of
Dime Community Bancorp, Inc. and Certain Affiliates
June 12, 1996 Page 2
7. Pricing: Eight percent (8%) per annum.
8. Interest Payments: Annually, 365 day basis.
9. Funding: In full by June 26, 1996, unless such
date is waived by the Company.
10. Prepayment: Voluntary prepayments are permitted
at any time provided advance notice is given by the
Borrower to the Company.
11. Conditions Precedent to Closing: Receipt by the
Company of all supporting loan documents in a form and
with terms and conditions satisfactory to the Company
and its counsel.
12. Closing Date: Not later than June 26, 1996,
unless such date is waived by the Company.
13. Other: Loan to be structured to comply in all
respects with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
If the terms and conditions are agreeable to you, please
indicate your acceptance by signing the enclosed copy and
returning it to my attention.
Sincerely,
Dime Community Bancorp, Inc.
By: /s/ Michael P. Devine
Michael P. Devine
Executive Vice President and Secretary
Accepted on Behalf of
Employee Stock Ownership Plan Trust of
Dime Community Bancorp, Inc. and Certain Affiliates
By: Marine Midland Bank, as Trustee Date: June 14, 1996
Name: /s/ Richard A. Glover
Title: Vice President
<PAGE>
LOAN AGREEMENT
by and between
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
of
DIME COMMUNITY BANCORP, INC.
AND CERTAIN AFFILIATES
and
DIME COMMUNITY BANCORP, INC.
Made and Entered Into as of
June 26, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Business Day .......................................... 1
Section 1.2 Code .................................................. 1
Section 1.3 Default ............................................... 2
Section 1.4 ERISA ................................................. 2
Section 1.5 Event of Default ...................................... 2
Section 1.6 Fiscal Year ........................................... 2
Section 1.7 Independent Counsel ................................... 2
Section 1.8 Loan .................................................. 2
Section 1.9 Loan Documents ........................................ 2
Section 1.10 Pledge Agreement ...................................... 2
Section 1.11 Principal Amount ...................................... 2
Section 1.12 Promissory Note ....................................... 2
Section 1.13 Register .............................................. 2
ARTICLE II
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
Section 2.1 The Loan; Principal Amount. ........................... 2
Section 2.2 Interest. ............................................. 3
Section 2.3 Promissory Note. ..................................... 4
Section 2.4 Payment of Trust Loan. ................................ 4
Section 2.5 Prepayment. ........................................... 5
Section 2.6 Method of Payments. ................................... 5
Section 2.7 Use of Proceeds of Loan. .............................. 6
Section 2.9 Registration of the Promissory Note. .................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 3.1 Power, Authority, Consents. ........................... 7
Section 3.2 Due Execution, Validity, Enforceability. .............. 7
Section 3.3 Properties, Priority of Liens. ........................ 7
Section 3.4 No Defaults, Compliance with Laws. .................... 7
Section 3.5 Purchases of Common Stock. ............................ 8
(i)
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDER
Section 4.1 Power, Authority, Consents. ........................... 8
Section 4.2 Due Execution, Validity, Enforceability. .............. 8
Section 4.3 ESOP; Contributions. .................................. 9
Section 4.4 Trustee; Committee. ................................... 9
Section 4.5 Compliance with Laws; Actions. ........................ 9
ARTICLE V
EVENTS OF DEFAULT
Section 5.1 Events of Default under Loan Agreement. ............... 9
Section 5.2 Lender's Rights upon Event of Default. ................ 10
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Payments Due to the Lender. ........................... 10
Section 6.2 Payments. ............................................. 11
Section 6.3 Survival. ............................................. 11
Section 6.4 Modifications, Consents and Waivers; Entire Agreement.. 11
Section 6.5 Remedies Cumulative. .................................. 11
Section 6.6 Further Assurances; Compliance with Covenants. ........ 11
Section 6.7 Notices. .............................................. 12
Section 6.8 Counterparts. ......................................... 13
Section 6.9 Construction; Governing Law. .......................... 13
Section 6.10 Severability. ......................................... 13
Section 6.11 Binding Effect; No Assignment or Delegation. .......... 14
EXHIBIT A Form of Promissory Note ................................. A-1
EXHIBIT B Form of Pledge Agreement ................................ B-1
EXHIBIT C Form of Assignment ...................................... C-1
EXHIBIT D Form of Irrevocable Proxy ............................... D-1
(ii)
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT ("Loan Agreement") is made and
entered into as of the 26th day of June, 1996, by and between the
EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP,
INC. AND CERTAIN AFFILIATES ("Borrower"), a trust forming part of
the Employee Stock Ownership Plan of Dime Community Bancorp, Inc.
and Certain Affiliates ("ESOP"), acting through and by its
Trustee, MARINE MIDLAND BANK ("Trustee"), a banking corporation
organized under the laws of the State of New York and having an
office at 250 Park Avenue, New York, New York 10177; and Dime
Community Bancorp, Inc. ("Lender"), a corporation organized and
existing under the laws of the state of Delaware, having an
office at 209 Havemeyer Street, Brooklyn, New York 11211.
W I T N E S S E T H :
Whereas, the Compensation Committee of the Lender
("Committee") has authorized the Borrower to purchase shares of
common stock of Dime Community Bancorp, Inc. ("Common Stock"),
either directly from Dime Community Bancorp, Inc. or in open
market purchases in an amount not to exceed 1,163,800 shares of
Common Stock or, if less, shares of Common Stock having an
aggregate purchase price of Eleven Million, Six Hundred and
Thirty Eight Thousand Dollars ($11,638,000.00); and
Whereas, the Committee has further authorized the
Borrower to borrow funds from the Lender for the purpose of
financing authorized purchases of Common Stock; and
Whereas, the Lender is willing to make a loan to the
Borrower for such purpose;
Now, Therefore, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following definitions shall apply for purposes of
this Loan Agreement, except to the extent that a different
meaning is plainly indicated by the context:
Section 1.1 Business Day means any day other than a
Saturday, Sunday or other day on which banks are authorized or
required to close under federal law or the laws of the State of
New York.
Section 1.2 Code means the Internal Revenue Code of
1986 (including the corresponding provisions of any succeeding
law).
Section 1.3 Default means an event or condition
which would constitute an Event of Default. The determination as
to whether an event or condition would constitute an Event of
Default shall be determined without regard to any applicable
requirement of notice or lapse of time.
Section 1.4 ERISA means the Employee Retirement
Income Security Act of 1974, as amended (including the cor
responding provisions of any succeeding law).
Section 1.5 Event of Default means an event or
condition described in Article 5.
Section 1.6 Fiscal Year means the fiscal year of
Dime Community Bancorp.
Section 1.7 Independent Counsel means Thacher
Proffitt & Wood or other counsel mutually satisfactory to both
the Lender and the Borrower.
Section 1.8 Loan means the loan described in section
2.1.
Section 1.9 Loan Documents means, collectively, this
Loan Agreement, the Promissory Note and the Pledge Agreement and
all other documents now or hereafter executed and delivered in
connection with such documents, including all amendments,
modifications and supplements of or to all such documents.
Section 1.10 Pledge Agreement means the agreement
described in section 2.8(a).
Section 1.11 Principal Amount means the face amount
of the Promissory Note, determined as set forth in section
2.1(c).
Section 1.12 Promissory Note means the promissory
note described in section 2.3.
Section 1.13 Register means the register described in
section 2.9.
ARTICLE II
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
Section 2.1 The Loan; Principal Amount.
(a) The Lender hereby agrees to lend to the Borrower
such amounts, and at such times, as shall be determined under
this section 2.1; provided, however, that in no event shall the
aggregate amount lent under this Loan Agreement from time to time
exceed the lesser of (i) Eleven Million, Six Hundred and Thirty
Eight Thousand Dollars ($11,638,000.00) or (ii) the aggregate
amount paid by the Borrower, exclusive of commissions, fees and
other charges, to purchase 1,163,800 shares of Common Stock.
(b) Subject to the limitations of section 2.1(a), the
Borrower shall determine the amounts borrowed under this Agree
ment, and the times at which such borrowings are effected. Each
such determination shall be evidenced in a writing which shall
set forth the amount to be borrowed and the date on which the
Lender shall disburse such amount, and such writing shall be
furnished to the Lender by notice from the Borrower. The Lender
shall disburse to the Borrower the amount specified in each such
notice on the date specified therein or, if later, as promptly as
practicable following the Lender's receipt of such notice;
provided, however, that the Lender shall have no obligation to
disburse funds pursuant to this Agreement following the occur
rence of a Default or an Event of Default until such time as such
Default or Event of Default shall have been cured.
(c) For all purposes of this Loan Agreement, the
Principal Amount on any date shall be equal to the excess, if
any, of:
(i) the aggregate amount disbursed by the Lender
pursuant to section 2.1(b) on or before such date; over
(ii) the aggregate amount of any repayments of
such amounts made before such date.
The Lender shall maintain on the Register a record of, and shall
record on the Promissory Note, the Principal Amount, any changes
in the Principal Amount and the effective date of any changes in
the Principal Amount.
Section 2.2 Interest.
(a) The Borrower shall pay to the Lender interest on
the Principal Amount, for the period commencing on the date of
this Loan Agreement and continuing until the Principal Amount
shall be paid in full, the rate of eight percent (8%) per annum.
Interest payable under this Agreement shall be computed on the
basis of a year of 365 days and actual days elapsed (including
the first day but excluding the last) occurring in the period to
which the computation relates.
(b) Except as otherwise provided in this section
2.2(b), accrued interest on the Principal Amount shall be payable
by the Borrower quarterly in arrears commencing on the last
Business Day of the first calendar quarter to end following the
date of this Agreement and continuing on the last Business Day of
each calendar quarter thereafter and upon the payment or prepay
ment of such Loan. All interest on the Principal Amount shall be
paid by the Borrower in immediately available funds. The Lender
shall remit to the Borrower, at least three (3) Business Days
before the end of each calendar quarter, a statement of the
interest payment due under section 2.2(a) for such quarter;
provided, however, that a delay or failure by the Lender in
providing the Borrower with such statement shall not alter the
Borrower's obligation to make such payment.
(c) Anything in this Loan Agreement or the Promissory
Note to the contrary notwithstanding, the obligation of the
Borrower to make payments of interest shall be subject to the
limitation that payments of interest shall not be required to be
made to the Lender to the extent that the Lender's receipt
thereof would not be permissible under the law or laws applicable
to the Lender limiting rates of interest which may be charged or
collected by the Lender. Any such payment referred to in the
preceding sentence shall be made by the Borrower to the Lender on
the earliest interest payment date or dates on which the receipt
thereof would be permissible under the laws applicable to the
Lender limiting rates of interest which may be charged or
collected by the Lender. Such deferred interest shall not bear
interest.
Section 2.3 Promissory Note.
The Loan shall be evidenced by a Promissory Note of the
Borrower in substantially the form of Exhibit A attached hereto,
dated the date hereof, payable to the order of the Lender in the
Principal Amount and otherwise duly completed.
Section 2.4 Payment of Trust Loan.
(a) The Principal Amount of the Loan shall be repaid
in annual installments payable on the last Business Day of each
Fiscal Year ending after the date of this Agreement. The amount
of each such annual installment shall be equal to a fraction of
the Principal Amount on the due date of such installment,
determined in accordance with the following schedule:
Installment Due on Fraction of Outstanding
Last Business Day of Principal Amount
Fiscal Year Ending
in
1996 1/120
1997 1/10
1998 1/10
1999 1/10
2000 1/10
2001 1/10
2002 1/10
2003 1/10
2004 1/10
2005 1/10
10th anniversary of loan entire outstanding
Principal Amount
; provided, however, that the Borrower shall not be required to
make any payment of principal due to be made in any Fiscal Year
to the extent that (i) following such payment, the consolidated
return on average assets of Dime Community Bancorp. Inc. for such
Fiscal Year would be less than one-half of one percent (0.5%) or
the consolidated return on average equity for such Fiscal Year
would be less than four percent (4%) or (ii) such payment would
not be deductible for federal income tax purposes for such Fiscal
Year under section 404 of the Code.
(b) Any payment not required to made pursuant to the clause
(i) of the proviso in section 2.4(a) shall be deferred to and be
payable on the earlier of the tenth (10th) anniversary of the
loan origination date or the last day of the first Fiscal Year in
which such proviso would not apply to alleviate a requirement of
payment; and payment not required to be made pursuant to clause
(ii) of section 2.4(a) shall be deferred to and be payable on the
last day of the first Fiscal Year in which such payment may be
made on a tax deductible basis.
Section 2.5 Prepayment.
The Borrower shall be entitled to prepay the Loan in
whole or in part, at any time and from time to time; provided,
however, that the Borrower shall give notice to the Lender of any
such prepayment; and provided, further, that any partial prepay
ment of the Loan shall be in an amount not less than TEN THOUSAND
DOLLARS ($10,000.00). Any such prepayment shall be: (a) per
manent and irrevocable: (b) accompanied by all accrued interest
through the date of such prepayment; (c) made without premium or
penalty; and (d) applied in the inverse order of the maturity of
the installments thereof unless the Lender and the Borrower agree
to apply such prepayments in some other order.
Section 2.6 Method of Payments.
(a) All payments of principal, interest, other charges
(including indemnities) and other amounts payable by the Borrower
hereunder shall be made in lawful money of the United States, in
immediately available funds, to the Lender at the address
specified in or pursuant to this Loan Agreement for notices to
the Lender, not later than 3:00 P.M., New York time, on the date
on which such payment shall become due. Any such payment made on
such date but after such time shall, if the amount paid bears
interest, and except as expressly provided to the contrary
herein, be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest
becomes due on a day other than a Business Day, such payment may
be made on the next succeeding Business Day, and when paid, such
payment shall include interest to the day on which such payment
is in fact made.
(b) Notwithstanding anything to the contrary contained
in this Loan Agreement or the Promissory Note, neither the
Borrower nor the Trustee shall be obligated to make any payment,
repayment or prepayment on the Promissory Note or take or refrain
from taking any other action hereunder or under the Promissory
Note if doing so would cause the ESOP to cease to be an employee
stock ownership plan within the meaning of section 4975(e)(7) of
the Code or qualified under section 401(a) of the Code or cause
the Borrower to cease to be a tax exempt trust under section
501(a) of the Code or if such act or failure to act would cause
the Borrower or the Trustee to engage in any "prohibited
transaction" as such term is defined in section 4975(c) of the
Code and the regulations promulgated thereunder which is not
exempted by section 4975(c)(2) or (d) of the Code and the
regulations promulgated thereunder or in section 406 of ERISA and
the regulations promulgated thereunder which is not exempted by
section 408(b) of ERISA and the regulations promulgated there
under; provided, however, that in each case, the Borrower or the
Trustee or both, as the case may be, may act or refrain from
acting pursuant to this section 2.6(b) on the basis of an opinion
of Independent Counsel. The Borrower and the Trustee may consult
with Independent Counsel, and any opinion of such Independent
Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such opinion of
Independent Counsel. Nothing contained in this section 2.6(b)
shall be construed as imposing a duty on either the Borrower or
the Trustee to consult with Independent Counsel. Any obligation
of the Borrower or the Trustee to make any payment, repayment or
prepayment on the Promissory Note or to take or refrain from
taking any other act hereunder or under the Promissory Note which
is excused pursuant to this section 2.6(b) shall be considered a
binding obligation of the Borrower or the Trustee, or both, as
the case may be, for the purposes of determining whether a
Default or Event of Default has occurred hereunder or under the
Promissory Note and nothing in this section 2.6(b) shall be
construed as providing a defense to any remedies otherwise
available upon a Default or an Event of Default hereunder (other
than the remedy of specific performance).
Section 2.7 Use of Proceeds of Loan.
The entire proceeds of the Loan shall be used solely
for acquiring shares of Common Stock, and for no other purpose
whatsoever.
Section 2.8 Security.
(a) In order to secure the due payment and performance
by the Borrower of all of its obligations under this Loan
Agreement, simultaneously with the execution and delivery of this
Loan Agreement by the Borrower, the Borrower shall:
(i) pledge to the Lender as Collateral (as
defined in the Pledge Agreement), and grant to the
Lender a first priority lien on and security interest
in, the Common Stock purchased with the Principal
Amount, by the execution and delivery to the Lender of
a Pledge Agreement in the form attached hereto as
Exhibit B; and
(ii) execute and deliver, or cause to be executed
and delivered, such other agreements, instruments and
documents as the Lender may reasonably require in order
to effect the purposes of the Pledge Agreement and this
Loan Agreement.
(b) The Lender shall release from encumbrance under
the Pledge Agreement and transfer to the Borrower, as of the date
on which any payment or prepayment of the Principal Amount is
made, a number of shares of Common Stock held as Collateral
pursuant to section 6.4 of the ESOP.
Section 2.9 Registration of the Promissory Note.
(a) The Lender shall maintain a Register providing for
the registration of the Principal Amount and any stated interest
and of transfer and exchange of the Promissory Note. Transfer of
the Promissory Note may be effected only by the surrender of the
old instrument and either the reissuance by the Borrower of the
old instrument to the new holder or the issuance by the Borrower
of a new instrument to the new holder. The old Promissory Note
so surrendered shall be cancelled by the Lender and returned to
the Borrower after such cancellation.
(b) Any new Promissory Note issued pursuant to section
2.9(a) shall carry the same rights to interest (unpaid and to
accrue) carried by the Promissory Note so transferred or ex
changed so that there will not be any loss or gain of interest on
the note surrendered. Such new Promissory Note shall be subject
to all of the provisions and entitled to all of the benefits of
this Agreement. Prior to due presentment for registration or
transfer, the Borrower may deem and treat the registered holder
of any Promissory Note as the holder thereof for purposes of
payment and all other purposes. A notation shall be made on each
new Promissory Note of the amount of all payments of principal
and interest theretofore paid.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the
Lender as follows:
Section 3.1 Power, Authority, Consents.
The Borrower has the power to execute, deliver and
perform this Loan Agreement, the Promissory Note and the Pledge
Agreement, all of which have been duly authorized by all neces
sary and proper corporate or other action.
Section 3.2 Due Execution, Validity, Enforceability.
Each of the Loan Documents, including, without limita
tion, this Loan Agreement, the Promissory Note and the Pledge
Agreement, have been duly executed and delivered by the Borrower;
and each constitutes the valid and legally binding obligation of
the Borrower, enforceable in accordance with its terms.
Section 3.3 Properties, Priority of Liens.
The liens which have been created and granted by the
Pledge Agreement constitute valid, first liens on the properties
and assets covered by the Pledge Agreement, subject to no prior
or equal lien.
Section 3.4 No Defaults, Compliance with Laws.
The Borrower is not in default in any material respect
under any agreement, ordinance, resolution, decree, bond, note,
indenture, order or judgment to which it is a party or by which
it is bound, or any other agreement or other instrument by which
any of the properties or assets owned by it is materially
affected.
Section 3.5 Purchases of Common Stock.
Upon consummation of any purchase of Common Stock by
the Borrower with the proceeds of the Loan, the Borrower shall
acquire valid, legal and marketable title to all of the Common
Stock so purchased, free and clear of any liens, other than a
pledge to the Lender of the Common Stock so purchased pursuant to
the Pledge Agreement. Neither the execution and delivery of the
Loan Documents nor the performance of any obligation thereunder
violates any provision of law or conflicts with or results in a
breach of or creates (with or without the giving of notice or
lapse of time, or both) a default under any agreement to which
the Borrower is a party or by which it is bound or any of its
properties is affected. No consent of any federal, state or
local governmental authority, agency or other regulatory body,
the absence of which could have a materially adverse effect on
the Borrower or the Trustee, is or was required to be obtained in
connection with the execution, delivery or performance of the
Loan Documents and the transactions contemplated therein or in
connection therewith, including, without limitation, with respect
to the transfer of the shares of Common Stock purchased with the
proceeds of the Loan pursuant thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender hereby represents and warrants to the
Borrower as follows:
Section 4.1 Power, Authority, Consents.
The Lender has the power to execute, deliver and
perform this Loan Agreement, the Pledge Agreement and all
documents executed by the Lender in connection with the Loan, all
of which have been duly authorized by all necessary and proper
corporate or other action. No consent, authorization or approval
or other action by any governmental authority or regulatory body,
and no notice by the Lender to, or filing by the Lender with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance of this Loan Agreement.
Section 4.2 Due Execution, Validity, Enforceability.
This Loan Agreement and the Pledge Agreement have been
duly executed and delivered by the Lender; and each constitutes a
valid and legally binding obligation of the Lender, enforceable
in accordance with its terms.
Section 4.3 ESOP; Contributions.
The ESOP and the Borrower have been duly created,
organized and maintained by the Lender in compliance with all
applicable laws, regulations and rulings. The ESOP qualifies as
an "employee stock ownership plan" as defined in section 4975(e)
(7) the Code. The ESOP provides that the Lender may make con
tributions to the ESOP in an amount necessary to enable the
Trustee to amortize the Loan in accordance with the terms of the
Promissory Note and this Loan Agreement, and the Lender will make
such contributions; provided, however, that no such contributions
shall be required if they would adversely affect the qualifi
cation of the ESOP under section 401(a) of the Code.
Section 4.4 Trustee; Committee.
The Lender has taken such action as is required to be
taken by it to duly appoint the Trustee and the members of the
Committee. The Lender expressly acknowledges and agrees that
this Loan Agreement, the Promissory Note and the Pledge Agreement
are being executed by the Trustee not in its individual capacity
but solely as trustee of and on behalf of the Borrower.
Section 4.5 Compliance with Laws; Actions.
Neither the execution and delivery by the Lender of
this Loan Agreement or any instruments required thereby, nor
compliance with the terms and provisions of any such documents by
the Lender, constitutes a violation of any provision of any law
or any regulation, order, writ, injunction or decree or any court
or governmental instrumentality, or an event of default under any
agreement, to which the Lender is a party or by which the Lender
is bound or to which the Lender is subject, which violation or
event of default would have a material adverse effect on the
Lender. There is no action or proceeding pending or threatened
against either of the ESOP or the Borrower before any court or
administrative agency.
ARTICLE V
EVENTS OF DEFAULT
Section 5.1 Events of Default under Loan Agreement.
Each of the following events shall constitute an "Event
of Default" hereunder:
(a) Failure to make any payment or mandatory prepay
ment of principal of the Promissory Note when due, or failure to
make any payment of interest on the Promissory Note not later
than five (5) Business Days after the date when due.
(b) Failure by the Borrower to perform or observe any
term, condition or covenant of this Loan Agreement or of any of
the other Loan Documents, including, without limitation, the
Promissory Note and the Pledge Agreement.
(c) Any representation or warranty made in writing to
the Lender in any of the Loan Documents or any certificate,
statement or report made or delivered in compliance with this
Loan Agreement, shall have been false or misleading in any
material respect when made or delivered.
Section 5.2 Lender's Rights upon Event of Default.
If an Event of Default under this Loan Agreement shall
occur and be continuing, the Lender shall have no rights to
assets of the Borrower other than: (a) contributions (other than
contributions of Common Stock) that are made by the Lender to
enable the Borrower to meet its obligations pursuant to this Loan
Agreement and earnings attributable to the investment of such
contributions and (b) "Eligible Collateral" (as defined in the
Pledge Agreement); provided, however, that: (i) the value of the
Borrower's assets transferred to the Lender following an Event of
Default in satisfaction of the due and unpaid amount of the Loan
shall not exceed the amount in default (without regard to amounts
owing solely as a result of any acceleration of the Loan); (ii)
the Borrower's assets shall be transferred to the Lender follow
ing an Event of Default only to the extent of the failure of the
Borrower to meet the payment schedule of the Loan; and (iii) all
rights of the Lender to the Common Stock purchased with the
proceeds of the Loan covered by the Pledge Agreement following an
Event of Default shall be governed by the terms of the Pledge
Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Payments Due to the Lender.
If any amount is payable by the Borrower to the Lender
pursuant to any indemnity obligation contained herein, then the
Borrower shall pay, at the time or times provided therefor, any
such amount and shall indemnify the Lender against and hold it
harmless from any loss or damage resulting from or arising out of
the nonpayment or delay in payment of any such amount. If any
amounts as to which the Borrower has so indemnified the Lender
hereunder shall be assessed or levied against the Lender, the
Lender may notify the Borrower and make immediate payment
thereof, together with interest or penalties in connection
therewith, and shall thereupon be entitled to and shall receive
immediate reimbursement therefor from the Borrower, together with
interest on each such amount as provided in section 2.2(c). Not
withstanding any other provision contained in this Loan Agree
ment, the covenants and agreements of the Borrower contained in
this section 6.1 shall survive: (a) payment of the Promissory
Note and (b) termination of this Loan Agreement.
Section 6.2 Payments.
All payments hereunder and under the Promissory Note
shall be made without set-off or counterclaim and in such amounts
as may be necessary in order that all such payments shall not be
less than the amounts otherwise specified to be paid under this
Loan Agreement and the Promissory Note, subject to any applicable
tax withholding requirements. Upon payment in full of the
Promissory Note, the Lender shall mark such Promissory Note
"Paid" and return it to the Borrower.
Section 6.3 Survival.
All agreements, representations and warranties made
herein shall survive the delivery of this Loan Agreement and the
Promissory Note.
Section 6.4 Modifications, Consents and Waivers;
Entire Agreement.
No modification, amendment or waiver of or with respect
to any provision of this Loan Agreement, the Promissory Note, the
Pledge Agreement, or any of the other Loan Documents, nor consent
to any departure from any of the terms or conditions thereof,
shall in any event be effective unless it shall be in writing and
signed by the party against whom enforcement thereof is sought.
Any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No
consent to or demand on a party in any case shall, of itself,
entitle it to any other or further notice or demand in similar or
other circumstances. This Loan Agreement embodies the entire
agreement and understanding between the Lender and the Borrower
and supersedes all prior agreements and understandings relating
to the subject matter hereof.
Section 6.5 Remedies Cumulative.
Each and every right granted to the Lender hereunder or
under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and
may be exercised from time to time. No failure on the part of
the Lender or the holder of the Promissory Note to exercise, and
no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise of any right
preclude any other or future exercise thereof or the exercise of
any other right. The due payment and performance of the obliga
tions under the Loan Documents shall be without regard to any
counterclaim, right of offset or any other claim whatsoever which
the Borrower may have against the Lender and without regard to
any other obligation of any nature whatsoever which the Lender
may have to the Borrower, and no such counterclaim or offset
shall be asserted by the Borrower in any action, suit or proceed
ing instituted by the Lender for payment or performance of such
obligations.
Section 6.6 Further Assurances; Compliance with
Covenants.
At any time and from time to time, upon the request of
the Lender, the Borrower shall execute, deliver and acknowledge
or cause to be executed, delivered and acknowledged, such further
documents and instruments and do such other acts and things as
the Lender may reasonably request in order to fully effect the
terms of this Loan Agreement, the Promissory Note, the Pledge
Agreement, the other Loan Documents and any other agreements,
instruments and documents delivered pursuant hereto or in
connection with the Loan.
Section 6.7 Notices.
Except as otherwise specifically provided for herein,
all notices, requests, reports and other communications pursuant
to this Loan Agreement shall be in writing, either by letter
(delivered by hand or commercial messenger service or sent by
registered or certified mail, return receipt requested, except
for routine reports delivered in compliance with Article VI
hereof which may be sent by ordinary first-class mail) or telex
or facsimile, addressed as follows:
(a) If to the Borrower:
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
c/o The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Mr. Vincent F. Palagiano
Chief Executive Officer
with copies to:
Marine Midland Bank
250 Park Avenue
New York, New York 10177
Attention: Mr. Richard A. Glover
Vice President
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York New York 10048
Attention: W. Edward Bright, Esq.
Helm, Shapiro, Anito & McCale, P.C.
20 Corporate Woods Boulevard
Albany, New York 12211-2350
Attention: Brian P. Goldstein, Esq.
(b) If to the Lender:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Mr. Vincent F. Palagiano
Chief Executive Officer
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York New York 10048
Attention: W. Edward Bright, Esq.
Any notice, request or communication hereunder shall be deemed to
have been given on the day on which it is delivered by hand or by
commercial messenger service, or sent by telex or facsimile, to
such party at its address specified above, or, if sent by mail,
on the third Business Day after the day deposited in the mail,
postage prepaid, addressed as aforesaid. Any party may change
the person or address to whom or which notices are to be given
hereunder, by notice duly given hereunder; provided, however,
that any such notice shall be deemed to have been given only when
actually received by the party to whom it is addressed.
Section 6.8 Counterparts.
This Loan Agreement may be signed in any number of
counterparts which, when taken together, shall constitute one and
the same document.
Section 6.9 Construction; Governing Law.
The headings used in the table of contents and in this
Loan Agreement are for convenience only and shall not be deemed
to constitute a part hereof. All uses herein of any gender or of
singular or plural terms shall be deemed to include uses of the
other genders or plural or singular terms, as the context may
require. All references in this Loan Agreement to an Article or
section shall be to an Article or section of this Loan Agreement,
unless otherwise specified. This Loan Agreement, the Promissory
Note, the Pledge Agreement and the other Loan Documents shall be
governed by, and construed and interpreted in accordance with,
the laws of the State of New York.
Section 6.10 Severability.
Wherever possible, each provision of this Loan
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law; however, the provisions of this
Loan Agreement are severable, and if any clause or provision
hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause
or provision in any other jurisdiction, or any other clause or
provision in this Loan Agreement in any jurisdiction. Each of
the covenants, agreements and conditions contained in this Loan
Agreement is independent, and compliance by a party with any of
them shall not excuse non-compliance by such party with any
other. The Borrower shall not take any action the effect of
which shall constitute a breach or violation of any provision of
this Loan Agreement.
Section 6.11 Binding Effect; No Assignment or
Delegation.
This Loan Agreement shall be binding upon and inure to
the benefit of the Borrower and its successors and the Lender and
its successors and assigns. The rights and obligations of the
Borrower under this Agreement shall not be assigned or delegated
without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be
void.
In Witness Whereof, the parties hereto have caused this
Loan Agreement to be duly executed as of the date first above
written.
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
By Marine Midland Bank, as Trustee
By: /s/ Richard A. Glover
Title: Vice President
Dime Community Bancorp, Inc.
By: /s/ Michael P. Devine
Title: Executive Vice President
EXHIBIT A
TO LOAN AGREEMENT
BY AND BETWEEN
EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF
DIME COMMUNITY BANCORP, INC.
AND CERTAIN AFFILIATES
AND
DIME COMMUNITY BANCORP, INC.
FORM OF PROMISSORY NOTE
$11,638,000 Brooklyn, New York
PRINCIPAL AMOUNT June 26, 1996
FOR VALUE RECEIVED, the undersigned, Employee Stock
Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain
Affiliates ("Borrower"), acting by and through its Trustee,
Marine Midland Bank ("Trustee"), hereby promises to pay to the
order of Dime Community Bancorp, Inc. ("Lender") ELEVEN MILLION,
SIX HUNDRED THIRTY-EIGHT THOUSAND DOLLARS ($11,638,000.00)
payable in accordance with the Loan Agreement made and entered
into between the Borrower and the Lender as of June 26, 1996
("Loan Agreement") pursuant to which this Promissory Note is
issued, in one annual installment of $96,983.33, payable on June
28, 1996 and nine annual installments of ONE MILLION, ONE HUNDRED
SIXTY-THREE THOUSAND, EIGHT HUNDRED DOLLARS ($1,163,800)
commencing on the last Business Day of June, 1997 and continuing
on the last Business Day of June of each calendar year until the
last Business Day of June, 2005, and one annual installment
payable on June 26, 2006, at which time the entire Principal
Amount then outstanding and all accrued interest shall become due
and payable; provided, however, that the Borrower shall not be
required to make any payment of principal due to be made in any
Fiscal Year to the extent that (i) following such payment, the
consolidated return on average assets of Dime Community Bancorp
Inc. for such Fiscal Year would be less than one-half of one
percent (0.5%) or the consolidated return on average equity for
such Fiscal Year would be less than four percent (4%) or (ii)
such payment would not be deductible for federal income tax
purposes for such Fiscal Year under section 404 of the Code. Any
payment not required to made pursuant to the clause (i) of the
above proviso shall be deferred to and be payable on the earlier
of the tenth (10th) anniversary of the loan origination date or
the last day of the first Fiscal Year in which such proviso would
not apply to alleviate a requirement of payment; and payment not
required to be made pursuant to clause (ii) of the above proviso
shall be deferred to and be payable on the last day of the first
Fiscal Year in which such payment may be made on a tax deductible
basis.
This Promissory Note shall bear interest at the rate
per annum set forth or established under the Loan Agreement, such
interest to be payable quarterly in arrears, commencing on June
28, 1996 and thereafter on the last Business Day of each calendar
quarter and upon payment or prepayment of this Promissory Note.
Anything herein to the contrary notwithstanding, the
obligation of the Borrower to make payments of interest shall be
subject to the limitation that payments of interest shall not be
required to be made to the Lender to the extent that the Lender's
receipt thereof would not be permissible under the law or laws
applicable to the Lender limiting rates of interest which may be
charged or collected by the Lender. Any such payments of
interest which are not made as a result of the limitation
referred to in the preceding sentence shall be made by the
Borrower to the Lender on the earliest interest payment date or
dates on which the receipt thereof would be permissible under the
laws applicable to the Lender limiting rates of interest which
may be charged or collected by the Lender. Such deferred
interest shall not bear interest.
Payments of both principal and interest on this
Promissory Note are to be made at the principal office of the
Lender at 209 Havemeyer Street, Brooklyn, New York 11211, or such
other place as the holder hereof shall designate to the Borrower
in writing, in lawful money of the United States of America in
immediately available funds.
Failure to make any payment of principal on this
Promissory Note when due, or failure to make any payment of
interest on this Promissory Note not later than five (5) Business
Days after the date when due, shall constitute a default here
under, whereupon the principal amount of and accrued interest on
this Promissory Note shall immediately become due and payable in
accordance with the terms of the Loan Agreement.
This Promissory Note is secured by a Pledge Agreement
between the Borrower and the Lender of even date herewith and is
entitled to the benefits thereof.
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
By Marine Midland Bank, as Trustee
By: /s/ Richard A. Glover
Title: Vice President
<PAGE>
EXHIBIT B
TO LOAN AGREEMENT
BY AND BETWEEN
EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF
DIME COMMUNITY BANCORP, INC.
AND CERTAIN AFFILIATES
AND
DIME COMMUNITY BANCORP, INC.
FORM OF PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Pledge Agreement") is made as
of the 26th day of June, 1996, by and between the EMPLOYEE STOCK
OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN
AFFILIATES, acting by and through its Trustee, MARINE MIDLAND
BANK, a banking corporation organized under the laws of the State
of New York and having office at 250 Park Avenue, New York, New
York 10177 ("Pledgor"), and Dime Community Bancorp, Inc.,
corporation organized and existing under the laws of the State of
New York, having an office at 209 Havemeyer Street, Brooklyn, New
York 11211 ("Pledgee").
W I T N E S S E T H :
Whereas, this Pledge Agreement is being executed and
delivered to the Pledgee pursuant to the terms of a Loan Agree
ment of even date herewith ("Loan Agreement"), by and between the
Pledgor and the Pledgee;
Now, Therefore, in consideration of the mutual agree
ments contained herein and in the Loan Agreement, the parties
hereto do hereby covenant and agree as follows:
Section 1. Definitions. The following definitions
shall apply for purposes of this Pledge Agreement, except to the
extent that a different meaning is plainly indicated by the
context; all capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Loan
Agreement:
(a) Collateral shall mean the Pledged Shares and,
subject to section 5 hereof, and to the extent permitted by
applicable law, all rights with respect thereto, and all
proceeds of such Pledged Shares and rights.
(b) Event of Default shall mean an event so defined in
the Loan Agreement.
(c) Liabilities shall mean all the obligations of the
Pledgor to the Pledgee, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contin-
gent, now or hereafter existing, or due or to become due,
under the Loan Agreement and the Promissory Note.
(d) Pledged Shares shall mean all the shares of Common
Stock of Dime Community Bancorp, Inc. purchased by the
Pledgor with the proceeds of the loan made by the Pledgee to
the Pledgor pursuant to the Loan Agreement, but excluding
any such shares previously released pursuant to section 4.
Section 2. Pledge. To secure the payment of and
performance of all the Liabilities, the Pledgor hereby pledges to
the Pledgee, and grants to the Pledgee a security interest in and
lien upon, the Collateral.
Section 3. Representations and Warranties of the
Pledgor. The Pledgor represents, warrants, and covenants to the
Pledgee as follows:
(a) the execution, delivery and performance of this
Pledge Agreement and the pledging of the Collateral here
under do not and will not conflict with, result in a
violation of, or constitute a default under any agreement
binding upon the Pledgor;
(b) the Pledged Shares are and will continue to be
owned by the Pledgor free and clear of any liens or rights
of any other person except the lien hereunder and under the
Loan Agreement in favor of the Pledgee, and the security
interest of the Pledgee in the Pledged Shares and the
proceeds thereof is and will continue to be prior to and
senior to the rights of all others;
(c) this Pledge Agreement is the legal, valid, binding
and enforceable obligation of the Pledgor in accordance with
its terms;
(d) the Pledgor shall, from time to time, upon request
of the Pledgee, promptly deliver to the Pledgee such stock
powers, proxies, and similar documents, satisfactory in form
and substance to the Pledgee, with respect to the Collateral
as the Pledgee may reasonably request; and
(e) subject to the first sentence of section 4(b), the
Pledgor shall not, so long as any Liabilities are outstand
ing, sell, assign, exchange, pledge or otherwise transfer or
encumber any of its rights in and to any of the Collateral.
Section 4. Eligible Collateral.
(a) As used herein the term "Eligible Collateral"
shall mean that amount of Collateral which has an aggregate fair
market value equal to the amount by which the Pledgor is in
default (without regard to any amounts owing solely as the result
of an acceleration of the Loan Agreement) or such lesser amount
of Collateral as may be required pursuant to section 13 of this
Pledge Agreement.
(b) The Pledged Shares shall be released from this
Pledge Agreement in a manner conforming to the requirements of
Treasury Regulations Section 54.4975-7(b)(8), as the same may be
from time to time amended or supplemented, and section 6.4(b) of
the ESOP. Subject to such Regulations, the Pledgee may from time
to time, after any Default or Event of Default, and without prior
notice to the Pledgor, transfer all or any part of the Eligible
Collateral into the name of the Pledgee or its nominee, with or
without disclosing that such Eligible Collateral is subject to
any rights of the Pledgor and may from time to time, whether
before or after any of the Liabilities shall become due and
payable, without notice to the Pledgor, take all or any of the
following actions: (i) notify the parties obligated on any of
the Eligible Collateral to make payment to the Pledgee of any
amounts due or to become due thereunder, (ii) release or exchange
all or any part of the Eligible Collateral, or compromise or
extend or renew for any period (whether or not longer than the
original period) any obligations of any nature of any party with
respect thereto, and (iii) take control of any proceeds of the
Eligible Collateral.
Section 5. Delivery.
(a) The Pledgor shall deliver to the Pledgee upon
execution of this Pledge Agreement (i) an assignment by the
Pledgor of all the Pledgor's rights to and interest in the
Pledged Shares and (ii) an irrevocable proxy, in form and
substance satisfactory to the Pledgee, signed by the Pledgor with
respect to the Pledged Shares.
(b) So long as no Default or Event of Default shall
have occurred and be continuing, (i) the Pledgor shall be
entitled to exercise any and all voting and other rights pertain
ing to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement, and (ii)
the Pledgor shall be entitled to receive any and all cash
dividends or other distributions paid in respect of the Col
lateral.
Section 6. Events of Default.
(a) If a Default or an Event of Default shall be
existing, in addition to the rights it may have under the Loan
Agreement, the Promissory Note, and this Pledge Agreement, or by
virtue of any other instrument, (i) the Pledgee may exercise,
with respect to the Eligible Collateral, from time to time any
rights and remedies available to it under the Uniform Commercial
Code as in effect from time to time in the State of New York or
otherwise available to it and (ii) the Pledgee shall have the
right, for and in the name, place and stead of the Pledgor, to
execute endorsements, assignments, stock powers and other instru
ments of conveyance or transfer with respect to all or any of the
Eligible Collateral. Written notification of intended disposi
tion of any of the Eligible Collateral shall be given by the
Pledgee to the Pledgor at least three (3) Business Days before
such disposition. Subject to section 13 below, any proceeds of
any disposition of Eligible Collateral may be applied by the
Pledgee to the payment of expenses in connection with the
Eligible Collateral, including, without limitation, reasonable
attorneys' fees and legal expenses, and any balance of such
proceeds may be applied by the Pledgee toward the payment of such
of the Liabilities as are in Default, and in such order of
application, as the Pledgee may from time to time elect. No
action of the Pledgee permitted hereunder shall impair or affect
its rights in and to the Eligible Collateral. All rights and
remedies of the Pledgee expressed hereunder are in addition to
all other rights and remedies possessed by it, including, without
limitation, those contained in the documents referred to in the
definition of Liabilities in section 1 hereof.
(b) In any sale of any of the Eligible Collateral
after a Default or an Event of Default shall have occurred, the
Pledgee is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of ap
plicable law (including, without limitation, compliance with such
procedures as may restrict the number of prospective bidders and
purchasers or further restrict such prospective bidders or
purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a
view to the distribution or resale of such Eligible Collateral),
or in order to obtain such required approval of the sale or of
the purchase by any governmental regulatory authority or offi
cial, and the Pledgor further agrees that such compliance shall
not result in such sale's being considered or deemed not to have
been made in a commercially reasonable manner, nor shall the
Pledgee be liable or accountable to the Pledgor for any discount
allowed by reason of the fact that such Eligible Collateral is
sold in compliance with any such limitation or restriction.
Section 7. Payment in Full. Upon the payment in full
of all outstanding Liabilities, this Pledge Agreement shall
terminate and the Pledgee shall forthwith assign, transfer and
deliver to the Pledgor, against receipt and without recourse to
the Pledgee, all Collateral then held by the Pledgee pursuant to
this Pledge Agreement.
Section 8. No Waiver. No failure or delay on the part
of the Pledgee in exercising any right or remedy hereunder or
under any other document which confers or grants any rights in
the Pledgee in respect of the Liabilities shall operate as a
waiver thereof nor shall any single or partial exercise of any
such right or remedy preclude any other or further exercise
thereof or the exercise of any other right or remedy of the
Pledgee.
Section 9. Binding Effect; No Assignment or Delegation.
This Pledge Agreement shall be binding upon and inure to the
benefit of the Pledgor, the Pledgee and their respective suc
cessors and assigns, except that the Pledgor may not assign or
transfer its rights hereunder without the prior written consent
of the Pledgee (which consent shall not unreasonably be with
held). Each duty or obligation of the Pledgor to the Pledgee
pursuant to the provisions of this Pledge Agreement shall be
performed in favor of any person or entity designated by the
Pledgee, and any duty or obligation of the Pledgee to the Pledgor
may be performed by any other person or entity designated by the
Pledgee.
Section 10. Governing Law. This Pledge Agreement
shall be governed by and construed in accordance with the laws of
the State of New York applicable to agreements to be performed
wholly within the State of New York.
Section 11. Notices. All notices, requests, instruc
tions or documents hereunder shall be in writing and delivered
personally or sent by United States mail, registered or cer
tified, return receipt requested, with proper postage prepaid, as
follows:
(a) If to the Pledgee:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Mr. Vincent F. Palagiano
Chief Executive Officer
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
(b) If to the Pledgor:
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
c/o The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Mr. Vincent F. Palagiano
Chief Executive Officer
with copies to:
Marine Midland Bank
250 Park Avenue
New York, New York 10177
Attention: Mr. Richard A. Glover
Vice President
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
or at such other address as either of the parties may designate
by written notice to the other party. If delivered personally,
the date on which a notice, request, instruction or document is
delivered shall be the date on which such delivery is made, and,
if delivered by mail, the date on which such notice, request,
instruction or document is deposited in the mail shall be the
date of delivery. Each notice, request, instruction or document
shall bear the date on which it is delivered.
Section 12. Interpretation. Wherever possible each
provision of this Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision hereof shall be prohibited by or invalid under such
law, such provisions shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions hereof.
Section 13. Construction. All provisions hereof shall
be construed so as to maintain (a) the ESOP as a qualified
leveraged employee stock ownership plan under section 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986 (the "Code"), (b)
the Trust as exempt from taxation under section 501(a) of the
Code and (c) the Trust Loan as an exempt loan under section
54.4975-7(b) of the Treasury Regulations and as described in
Department of Labor Regulation section 2550.408b-3.
In Witness Whereof, this Pledge Agreement has been duly
executed by the parties hereto as of the day and year first above
written.
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
By Marine Midland Bank, as Trustee
and not in any other capacity
By: /s/ Richard A. Glover
Title: Vice President
Dime Community Bancorp, Inc.
By: /s/ Michael P. Devine
Title: Executive Vice President
<PAGE>
EXHIBIT C
TO LOAN AGREEMENT
BY AND BETWEEN
EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF
DIME COMMUNITY BANCORP, INC.
AND CERTAIN AFFILIATES
AND
DIME COMMUNITY BANCORP, INC.
FORM OF ASSIGNMENT
In consideration of the loan made by Dime Community
Bancorp, Inc. ("Lender") to the Employee Stock Ownership Plan
Trust of Dime Community Bancorp, Inc. and Certain Affiliates
("Borrower") pursuant to the Loan Agreement of even date herewith
between the Lender and the Borrower ("Loan Agreement") and
pursuant to the Pledge Agreement between the Lender and the
Borrower of even date herewith pertaining thereto, the
undersigned Borrower hereby transfers, assigns and conveys to
Lender all its right, title and interest in and to those certain
shares of common stock of the Lender which it shall purchase with
the proceeds of the loan made pursuant to the Loan Agreement, and
agrees to transfer and endorse to Lender the certificates
representing such shares as and when required pursuant to the
Loan Agreement or Pledge Agreement.
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
By Marine Midland Bank, as Trustee
and not in any other capacity
By: /s/ Richard A. Glover
Title: Vice President
June 26, 1996
<PAGE>
EXHIBIT D
TO LOAN AGREEMENT
BY AND BETWEEN
EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF
DIME COMMUNITY BANCORP, INC.
AND CERTAIN AFFILIATES
AND
DIME COMMUNITY BANCORP, INC.
FORM OF IRREVOCABLE PROXY
In consideration of the loan made by Dime Community Bancorp,
Inc. ("Lender") to the Employee Stock Ownership Plan Trust of
Dime Community Bancorp, Inc. and Certain Affiliates ("Borrower")
pursuant to the Loan Agreement of even date herewith between the
Lender and the Borrower ("Loan Agreement") and the Pledge
Agreement between the Lender and the Borrower of even date
herewith pertaining thereto, the undersigned Borrower hereby
appoints the Lender as its proxy, with power of substitution, to
represent and to vote those certain shares of common stock of the
Lender which it shall purchase with the proceeds of the loan made
pursuant to the Loan Agreement. This proxy, when properly
executed, shall be irrevocable and shall give the Lender full
power and authority to vote on any and all matters for which
other holders of shares of common stock of the Lender are
entitled to vote.
Employee Stock Ownership Plan Trust
of Dime Community Bancorp, Inc.
and Certain Affiliates
By: Marine Midland Bank, as Trustee
and not in any other capacity
By: /s/ Richard A. Glover
Title: Vice President
June 26, 1996
AMENDMENT NUMBER SEVEN
TO
THE DIME SAVINGS BANK OF WILLIAMSBURGH
401(k) SAVINGS PLAN
IN RSI RETIREMENT TRUST
Pursuant to Section 11.1 of The Dime Savings Bank of
Williamsburgh 401(k) Savings Plan in RSI Retirement Trust
("Plan"), the Plan is amended as follows, effective as of May 31,
1996:
1. INTRODUCTION - A new paragraph shall be added immediately
prior to the last paragraph, and the last paragraph shall be
amended, to read in their entirety as follows:
Effective as of May 31, 1996, the Employer adopted
resolutions ceasing matching Bank Contributions under
section 3.4 of the Plan.
2. ARTICLE III - Section 3.4 of the Plan shall be amended to
read in its entirety as follows:
3.4 Bank Contributions
Effective as of May 31, 1996, the Employer shall not
make any contributions to the Plan to match Participant's
Basic Contributions.
3. ARTICLE IV - The first paragraph of section 4.2 of the Plan
shall be amended to read as follows:
If a Participant who is not fully vested in the Net Value of
his Accounts terminates employment on or subsequent to the
Restatement Date, the Units representing the nonvested
portion of his Accounts shall constitute Forfeitures.
Forfeitures shall be treated as employer contributions and
shall be applied to reduce the amount of subsequent employer
contributions (including Basic Contributions) at the end of
the Plan Year or any other subsequent Plan Year until the
amounts are completely utilized.
<PAGE>
AMENDMENT NUMBER EIGHT
TO
THE DIME SAVINGS BANK OF WILLIAMSBURGH
401(k) SAVINGS PLAN
IN RSI RETIREMENT TRUST
Pursuant to Section 11.1 of The Dime Savings Bank of
Williamsburgh 401(k) Savings Plan in RSI Retirement Trust
("Plan"), the Plan is amended as follows, effective as of June
26, 1996:
1. INTRODUCTION - A new paragraph shall be added immediately
prior to the last paragraph to read in its entirety as follows:
Effective as of June 26, 1996, Pioneer Savings Bank, F.S.B.
and its parent Conestoga Bancorp, Inc. were acquired by the
Employer. In connection with this acquisition, the Employer
amended the Plan to give credit to employees of specified
"acquired companies" for purposes of vesting and eligibility
to participate, and to permit immediate participation as of
the date of such acquisition for eligible employees with
respect to compensation for the full payroll period that
includes the date of such acquisition.
2. ARTICLE I - The following new Section 1.4, the definition of
Acquired Company, is added to the Plan to read as follows, and
all references and cross-references are renumbered:
1.4 Acquired Company means any of the following
companies which is acquired by, or merged or
consolidated with, the Bank or its holding company:
1. Pioneer Savings Bank, F.S.B.
2. Conestoga Bancorp, Inc.
3. ARTICLE I - The following paragraph is added to the end of
the definition of Compensation, Section 1.18:
For purposes of determining Basic Contributions,
Compensation of an Employee of an Acquired Company shall
include amounts received from the Acquired Company during
the payroll period in which the date of the transaction by
which such company became an Acquired Company occurs, if
such amounts would otherwise be considered to be
Compensation under this Section 1.18.
4. ARTICLE I - The following new subsection (c) is added to
section 1.47, Period of Service, as follows:
(c) For purposes of determining eligibility to
participate and vesting of contributions under the
Plan, the Period of Service of any individual who was
employed by an Acquired Company on the date of the
transaction by which such company became an Acquired
Company, shall include service recognized for purposes
of vesting and eligibility to participate under the
Merged Plan of such Acquired Company.
5. ARTICLE I - The following new Section 1.37 is added to the
Plan, and all references and cross-references are renumbered:
Merged Plan means a defined contribution plan permitting
salary reduction contributions or, if none, other defined
contribution plan of an Acquired Company.
6. ARTICLE II - The following sentence is added to the end of
Section 2.3:
Employees of an Acquired Company who are eligible to
participate on the date of the transaction by which such
company became an Acquired Company, may also elect to
participate as of the first day of the payroll period in
which such transaction occurs.
<PAGE>
AMENDMENT NUMBER NINE
TO
THE DIME SAVINGS BANK OF WILLIAMSBURGH
401(k) SAVINGS PLAN
IN RSI RETIREMENT TRUST
Pursuant to Section 11.1 of The Dime Savings Bank of
Williamsburgh 401(k) Savings Plan in RSI Retirement Trust
("Plan"), the Plan is amended as follows, effective as of June
26, 1996:
1. INTRODUCTION - A new paragraph shall be added immediately
prior to the last paragraph to read in its entirety as follows:
Effective June 26, 1996, the Pioneer Savings Bank, FSB Tax
Deferral Savings Plan in RSI Retirement Trust ("Pioneer
Plan") was merged with and into the Plan. Except and to the
extent specifically required to the contrary under the terms
of this Plan, the rights and benefits, if any, of a former
employee of Pioneer Savings Bank, F.S.B. or Conestoga
Bancorp, Inc. whose employment terminated prior to June 26,
1996, shall be determined in accordance with the provisions
of the Pioneer Plan in effect prior to June 26, 1996.
2. ARTICLE I - The following new sentence is added to the end
of Section 1.11 Bank Contributions:
Bank Contributions shall include bank contributions made
prior to June 26, 1996 on behalf of an Employee in
accordance with the provisions of the Pioneer Plan.
3. ARTICLE I - The following new sentence is added to the end
of Section 1.13 Basic Contributions:
Basic Contributions shall include basic contributions made
prior to June 26, 1996 on behalf of the Employee in
accordance with the provisions of the Pioneer Plan.
4. ARTICLE I - The following new sentence is added to the end
of Section 1.57, Rollover Contributions:
Rollover Contributions shall include rollover contributions
made prior to June 26, 1996 on behalf of the Employee in
accordance with the provisions of the Pioneer Plan.
5. ARTICLE VIII - The following new subsection (g) is added to
section 8.4, Operational Provisions:
(g) A loan made in accordance with the provisions of
the Pioneer Plan prior to June 26, 1996, shall be
deemed to be a loan made in accordance with Article
VIII of this Plan.
Severance Pay Plan
of
The Dime Savings Bank of Williamsburgh
Adopted on February 8, 1996
Effective on November 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSE
Section 1 Statement of Purpose ............................ 1
ARTICLE II
DEFINITIONS
Section 2.1 Acquired Company ............................. 1
Section 2.2 Acquired Employee ............................ 1
Section 2.3 Bank ......................................... 1
Section 2.4 Board ........................................ 2
Section 2.5 Cause ........................................ 2
Section 2.6 Change of Control ............................ 2
Section 2.7 Employee ..................................... 4
Section 2.8 FDI Act ...................................... 4
Section 2.9 Involuntary Severance ........................ 4
Section 2.10 Officer ...................................... 4
Section 2.11 OTS .......................................... 4
Section 2.12 Plan ......................................... 4
Section 2.13 Plan Administrator ........................... 4
Section 2.14 Plan Year .................................... 4
Section 2.15 Salary ....................................... 4
Section 2.16 Service ...................................... 5
ARTICLE III
BENEFITS
Section 3.1 Severance Benefits for Employees ............. 5
Section 3.2 Severance Benefits for Acquired Employees..... 6
Section 3.3 Vesting ...................................... 7
Section 3.4 Indemnification .............................. 7
(i)
<PAGE>
Page
ARTICLE IV
ADMINISTRATION
Section 4.1 Named Fiduciaries ............................ 8
Section 4.2 Plan Administrator ........................... 8
Section 4.3 Claims Procedure ............................. 9
Section 4.4 Claims Review Procedure ...................... 10
Section 4.5 Allocation of Fiduciary Responsibilities and
Employment of Advisors ....................... 10
Section 4.6 Other Administrative Provisions .............. 11
ARTICLE V
MISCELLANEOUS
Section 5.1 Rights of Employees ......................... 11
Section 5.2 Non-alienation of Benefits .................. 12
Section 5.3 Non-Duplication of Benefits ................. 12
Section 5.4 Construction ................................ 12
Section 5.5 Headings .................................... 12
Section 5.6 Governing Law ............................... 12
Section 5.7 Severability ................................ 12
Section 5.8 Termination or Amendment .................... 13
Section 5.9 Required Regulatory Provisions .............. 13
Section 5.10 Withholding ................................. 14
Section 5.11 Status as Welfare Benefit Plan Under ERISA .. 14
(ii)
<PAGE>
SEVERANCE PAY PLAN OF THE DIME SAVINGS BANK OF WILLIAMSBURGH
ARTICLE I
PURPOSE
Section 1 Statement of Purpose.
The Dime Savings Bank of Williamsburgh adopts this
Severance Pay Plan for the benefit of its eligible Employees.
The Bank recognizes that, as a public company, it will be subject
to the possibility of a negotiated or unsolicited change of
control which may result in a loss of employment for some of its
Employees and that it may acquire other companies in transactions
which may result in a loss of employment for the employees of the
Acquired Companies. The purpose of the Plan is to encourage the
Bank's Employees and those of Acquired Companies to continue
working for their employers with their full time and attention
devoted to their employer's affairs by providing prescribed
income security and job placement assistance in the event of an
Involuntary Severance following a Change of Control.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall
have the meanings assigned to them below, unless a different
meaning is plainly indicated by the context:
Section 2.1 Acquired Company means any of the
following companies which is acquired by, or merged or
consolidated with, the Bank:
1. Pioneer Savings Bank, F.S.B.
2. Conestoga Bancorp, Inc.
Section 2.2 Acquired Employee means a person who is
employed by an Acquired Company at the time when such company
becomes an Acquired Company and who becomes an employee of the
Bank immediately thereafter. An Acquired Employee whose
employment by the Bank terminates for any reason and who is
subsequently re-employed by the Bank shall not be considered an
Acquired Employee following such re-employment.
Section 2.3 Bank means The Dime Savings Bank of
Williamsburgh (or its successors or assigns, whether by merger,
consolidation, sale of assets, statutory receivership, operation
of law or otherwise) and any affiliate of The Dime Savings Bank
of Williamsburgh which, with the approval of the Board of
Directors of The Dime Savings Bank of Williamsburgh, and subject
to such conditions as may be imposed by such Board, adopts this
Plan.
Section 2.4 Board means the Board of Directors of
The Dime Savings Bank of Williamsburgh.
Section 2.5 Cause means, with respect to the conduct
of an Employee in connection with his employment with the Bank,
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or
final cease and desist order in each case as measured against
standards generally prevailing at the relevant time in the
savings and community banking industry; provided, however, that
following a Change of Control of the Bank or a company which owns
100% of the outstanding common stock of the Bank, an Employee
shall not be deemed to have been discharged for Cause unless and
until he shall have received a written notice of termination from
the Board, accompanied by a resolution duly adopted by
affirmative vote of a majority of the entire Board at a meeting
called and held for such purpose (after reasonable notice to the
Employee and a reasonable opportunity for the Employee to make
oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds for the proposed determination)
finding that in the good faith opinion of the Board grounds exist
for discharging the Employee for "Cause".
Section 2.6 Change of Control means:
(a) with respect to The Dime Savings Bank of
Williamsburgh:
(i) the occurrence of any event upon
which any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended ("Exchange
Act")), other than (A) a trustee or other
fiduciary holding securities under an employee
benefit plan maintained for the benefit of
employees of The Dime Savings Bank of
Williamsburgh; (B) a corporation owned, directly
or indirectly, by the stockholders of The Dime
Savings Bank of Williamsburgh in substantially the
same proportions as their ownership of stock of
The Dime Savings Bank of Williamsburgh; or (C) any
group constituting a person in which employees of
The Dime Savings Bank of Williamsburgh are
substantial members, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of
securities issued by The Dime Savings Bank of
Williamsburgh representing 25% or more of the
combined voting power of all of The Dime Savings
Bank of Williamsburgh's then outstanding
securities; or
(ii) the occurrence of any event upon
which the individuals who on the date the Plan is
adopted are members of the Board, together with
individuals whose election by the Board or
nomination for election by The Dime Savings Bank
of Williamsburgh's stockholders was approved by
the affirmative vote of at least two-thirds of the
members of the Board then in office who were
either members of the Board on the date this Plan
is adopted or whose nomination or election was
previously so approved, cease for any reason to
constitute a majority of the members of the Board,
but excluding, for this purpose, any such
individual whose initial assumption of office is
in connection with an actual or threatened
election contest relating to the election of
directors of The Dime Savings Bank of
Williamsburgh (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) the shareholders of The Dime
Savings Bank of Williamsburgh (or, if The Dime
Savings Bank of Williamsburgh is not then a stock
form institution, the Board of The Dime Savings
Bank of Williamsburgh) approve either:
(A) a merger or consolidation
of The Dime Savings Bank of Williamsburgh
with any other corporation, other than a
merger or consolidation following which both
of the following conditions are satisfied:
(I) either (1) the
members of the Board of The Dime Savings
Bank of Williamsburgh immediately prior
to such merger or consolidation
constitute at least a majority of the
members of the governing body of the
institution resulting from such merger
or consolidation; or (2) the
shareholders of The Dime Savings Bank of
Williamsburgh own securities of the
institution resulting from such merger
or consolidation representing 80% or
more of the combined voting power of all
such securities then outstanding in
substantially the same proportions as
their ownership of voting securities of
The Dime Savings Bank of Williamsburgh
before such merger or consolidation; and
(II) the entity
which results from such merger or
consolidation expressly agrees in
writing to assume and perform The Dime
Savings Bank of Williamsburgh's
obligations under the Plan; or
(B) a plan of complete
liquidation of The Dime Savings Bank of
Williamsburgh or an agreement for the sale or
disposition by The Dime Savings Bank of
Williamsburgh of all or substantially all of
its assets; and
(b) with respect to any company which owns 100%
of the outstanding common stock The Dime Savings Bank
of Williamsburgh, any event that would be described in
section 2.6(a) if the name of such company were
substituted for "The Dime Savings Bank of
Williamsburgh" therein; and
(c) with respect to an Acquired Company, the
transaction by which such company becomes an Acquired
Company.
In no event, however, shall the transaction by which The Dime
Savings Bank of Williamsburgh converts from a mutual savings bank
to a stock savings bank, or any transaction by which a company
wholly owned by The Dime Savings Bank of Williamsburgh becomes
the parent company of The Dime Savings Bank of Williamsburgh be
deemed a Change of Control.
Section 2.7 Employee means any person, including an
Officer, who is employed by the Bank, other than: (a) a person
who is compensated on an hourly rate basis; (b) a person who
works for the Bank on a part-time or temporary basis; (c) an
Employee receiving long-term disability benefits; or (d) a person
who has an employment contract, change of control agreement or
other agreement with the Bank or who is covered by other programs
which provide severance benefits or by their terms exclude such
person from participation in this Plan.
Section 2.8 FDI Act means the Federal Deposit
Insurance Act, as the same may be amended from time to time, and
the corresponding provisions of any successor statute.
Section 2.9 Involuntary Severance means (a) the
discharge or dismissal of an Employee by the Bank other than for
Cause, or the resignation by the Employee from his position with
the Bank, which resignation the Employee is asked or compelled by
the Bank to tender other than for Cause; or (b) termination of
employment at an Employee's election within sixty (60) days after
any action following a Change of Control which, either alone or
together with other actions, results in: (i) the reduction in the
Employee's Salary by more than 20%; (ii) the assignment of the
Employee to a job requiring relocation of his residence in order
to be able to commute without unreasonable difficulty, expense or
inconvenience; (iii) the assignment of the Employee to duties or
to an office or working space which involves unreasonable
personal embarrassment; or (iv) a material adverse change in the
Employee's title, position or responsibilities at the Bank.
Section 2.10 Officer means, in the case of an
Employee, an officer of the Bank and in the case of an Acquired
Employee, a person who is an officer of the Acquired Company
immediately prior to the closing of the transaction pursuant to
which such company becomes an Acquired Company.
Section 2.11 OTS means the Office of Thrift
Supervision of the United States Department of the Treasury, and
its successors.
Section 2.12 Plan means this Severance Pay Plan of
The Dime Savings Bank of Williamsburgh, as the same may be
amended from time to time.
Section 2.13 Plan Administrator means the
Compensation Committee of the Board of Directors of The Dime
Savings Bank of Williamsburgh.
Section 2.14 Plan Year means the calendar year.
Section 2.15 Salary means (a) in the case of an
Employee, the highest basic annual rate of salary of the Employee
for his services to the Bank (excluding overtime, bonuses and
other forms of additional compensation) attained by the Employee
during his employment with the Bank, and (b) in the case of an
Acquired Employee, the highest basic annual rate of salary of an
the Acquired Employee for his services to the Acquired Company
(excluding overtime, bonuses and other forms of additional
compensation) attained by the Employee during his employment with
the Acquired Company.
Section 2.16 Service means service rendered by an
Employee that is, or would be, recognized under the Retirement
Plan of The Dime Savings Bank of Williamsburgh in RSI Retirement
Trust for vesting purposes as of the date of the Employee's
Involuntary Severance.
ARTICLE III
BENEFITS
Section 3.1 Severance Benefits for Employees.
(a) An Employee with at least one (1) year of Service
whose employment with the Bank is terminated under circumstances
constituting an Involuntary Severance, other than for Cause, as a
result of, within twelve months following or within three (3)
months prior to, a Change of Control with respect to the Bank or
any company which owns 100% of the outstanding common stock of
the Bank shall be entitled to the following benefits:
(i) if the Employee is or has, at any time after
November 1, 1995, been an Officer of the Bank, he shall
be entitled, as severance pay, to a weekly payment in
an amount equal to one week's Salary, commencing with
the first week following the date of the Employee's
Involuntary Severance and continuing for twice the
number of weeks as the Employee has whole years of
Service, or, if less, for thirty-nine (39) weeks; or
(ii) if the Employee is not an Employee described
in section 3.1(a)(i), he shall be entitled, as
severance pay, to a weekly payment in an amount equal
to one week's Salary, commencing with the first week
following the date of the Employee's Involuntary
Severance and continuing for the same number of weeks
as the Employee has whole years of Service, or, if
less, for twenty-six (26) weeks;
provided, however, that in no event shall any Employee described
in section 3.1(a)(i) or (ii) receive, as severance pay under this
Plan, less than four weeks' Salary.
(b) Each Employee who is entitled to payments under
section 3.1(a)(i) or (ii) shall, for the duration of such
payments, continue to be eligible for all of the benefits
provided under the Bank's employee benefit plans and programs
(excluding tax-qualified plans and other plans which by law must
restrict participation to active employees) as if he were still
an Employee and working at the Bank, except that he shall cease
to accrue vacation and shall be paid a lump sum payment at the
date of his Involuntary Severance in lieu of any unused accrued
vacation.
(c) Each Employee who is entitled to benefits under
section 3.1(a)(i) or (ii) shall also be entitled to outplacement
services as follows:
(i) an Employee described in section 3.1(a)(i)
shall be entitled to utilize the services of an
outplacement counseling firm at the Bank's expense for
assistance in preparing a resume, developing
interviewing skills, identifying career opportunities
and evaluating job offers and for access to office and
secretarial facilities, provided that the fee for such
services shall not exceed 12% of the Employee's Salary;
and
(ii) if the Employee is not an Employee described
in section 3.1(a)(i), he shall be entitled to utilize
the services of an outplacement counseling firm at the
Bank's expense, for assistance in preparing a resume,
developing interviewing skills, identifying career
opportunities and evaluating job offers, provided that
the fee for such services shall not exceed 6% of the
Employee's Salary or $1,000, whichever is higher.
The outplacement firm utilized by any Employee or group of
Employees shall be selected by the Plan Administrator or, if
permitted by the Plan Administrator selected by the Employee or
Employees subject to the Plan Administrator's approval.
Section 3.2 Severance Benefits for Acquired
Employees.
(a) An Acquired Employee with at least one (1) year of
Service whose employment with the Bank is terminated under
circumstances constituting an Involuntary Severance, other than
for Cause within twelve months following a Change of Control with
respect to the relevant Acquired Company shall be entitled to the
following benefits:
(i) if the Employee was an Officer of the
Acquired Company, he shall be entitled, as severance
pay, to a weekly payment in an amount equal to one
week's Salary, commencing with the first week following
the date of the Employee's Involuntary Severance and
continuing for twice the number of weeks as the
Employee has whole years of Service, or, if less, for
thirty-nine (39) weeks; or
(ii) if the Employee is not an Employee described
in section 3.1(a)(i), he shall be entitled, as
severance pay, to a weekly payment in an amount equal
to one week's Salary, commencing with the first week
following the date of the Employee's Involuntary
Severance and continuing for the same number of weeks
as the Employee has whole years of Service, or, if
less, for twenty-six (26) weeks;
provided, however, that in no event shall any Employee described
in section 3.1(a)(i) or (ii) receive, as severance pay under this
Plan, less than four weeks' Salary.
(b) Each Employee who is entitled to payments under
section 3.1(a)(i) or (ii) shall, for the duration of such
payments, continue to be eligible for all of the benefits
provided under the Bank's employee benefit plans and programs
(excluding tax-qualified plans and other plans which by law must
restrict participation to active employees) as if he were still
an Employee and working at the Bank, except that he shall cease
to accrue vacation and shall be paid a lump sum payment at the
date of his Involuntary Severance in lieu of any unused accrued
vacation.
(c) Each Employee who is entitled to benefits under
section 3.1(a)(i) or (ii) shall also be entitled to outplacement
services as follows:
(i) an Employee described in section 3.1(a)(i)
shall be entitled to utilize the services of an
outplacement counseling firm at the Bank's expense for
assistance in preparing a resume, developing
interviewing skills, identifying career opportunities
and evaluating job offers and for access to office and
secretarial facilities, provided that the fee for such
services shall not exceed 12% of the Employee's Salary;
and
(ii) if the Employee is not an Employee described
in section 3.1(a)(i), he shall be entitled to utilize
the services of an outplacement counseling firm at the
Bank's expense, for assistance in preparing a resume,
developing interviewing skills, identifying career
opportunities and evaluating job offers, provided that
the fee for such services shall not exceed 6% of the
Employee's Salary or $1,000, whichever is higher.
The outplacement firm utilized by any Employee or group of
Employees shall be selected by the Plan Administrator or, if
permitted by the Plan Administrator selected by the Employee or
Employees subject to the Plan Administrator's approval.
Section 3.3 Vesting.
The benefits to be provided under this Article III of
the Plan to an Employee shall be completely vested and
nonforfeitable upon the occurrence of a Change of Control with
respect to the Bank or any company which owns 100% of the
outstanding common stock of the Bank.
Section 3.4 Indemnification.
The Bank shall indemnify, hold harmless and defend each
Employee against costs or expenses, including reasonable
attorneys' fees, incurred by him or arising out of any action,
suit or proceeding in which he may be involved, as a result of
his efforts, in good faith, to defend or enforce his rights under
this Plan; provided, however, that the Employee shall have
substantially prevailed on the merits pursuant to a judgment,
decree or order of a court of competent jurisdiction or of an
arbitrator in an arbitration proceeding, or in a settlement. For
purposes of this Agreement, any settlement agreement which
provides for payment of any amounts in settlement of the Bank's
obligations hereunder shall be conclusive evidence of the
Employee's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable
pursuant to such settlement agreement, unless such settlement
agreement expressly provides otherwise.
ARTICLE IV
ADMINISTRATION
Section 4.1 Named Fiduciaries.
The term "Named Fiduciary" shall mean (but only to the
extent of the responsibilities of each of them) the Plan Adminis
trator and the Board. This Article V is intended to allocate to
each Named Fiduciary the responsibility for the prudent execution
of the functions assigned to him or it, and none of such responsi
bilities or any other responsibility shall be shared by two or
more of such Named Fiduciaries. Whenever one Named Fiduciary is
required by the Plan to follow the directions of another Named
Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of
the Named Fiduciary giving the directions shall be deemed his
sole responsibility, and the responsibility of the Named Fidu
ciary receiving those directions shall be to follow them insofar
as such instructions are on their face proper under applicable
law.
Section 4.2 Plan Administrator.
The Plan Administrator shall subject to the respon
sibilities of the Board, have the responsibility for the day-to-
day control, management, operation and administration of the
Plan. The Plan Administrator shall have the following
responsibilities:
(a) To maintain records necessary or appropriate
for the administration of the Plan;
(b) To give and receive such instructions, notices,
information, materials, reports and certifications as
may be necessary or appropriate in the administration of
the Plan;
(c) To prescribe forms and make rules and regulations
consistent with the terms of the Plan and with the inter-
pretations and other actions of the Committee;
(d) To require such proof or evidence of any
matter from any person as may be necessary or appropriate
in the administration of the Plan;
(e) To prepare and file, distribute or furnish
all reports, plan descriptions, and other information
concerning the Plan, including, without limitation,
filings with the Secretary of Labor and employee
communications as shall be required of the Plan Admin
istrator under ERISA;
(f) To determine any question arising in connec
tion with the Plan, including any question of Plan
interpretation, and the Plan Administrator's decision
or action in respect thereof shall be final and
conclusive and binding upon all persons having an
interest under the Plan;
(g) To review and dispose of claims under the
Plan filed pursuant to section 4.3 and appeals of
claims decisions pursuant to section 4.4;
(h) If the Plan Administrator shall determine
that by reason of illness, senility, insanity, or for
any other reason, it is undesirable to make any payment
to the person entitled thereto, to direct the
application of any amount so payable to the use or
benefit of such person in any manner that the Plan
Administrator may deem advisable or to direct in the
Plan Administrator's discretion the withholding of any
payment under the Plan due to any person under legal
disability until a representative competent to receive
such payment in his behalf shall be appointed pursuant
to law;
(i) To discharge such other responsibilities or
follow such directions as may be assigned or given by
the Board; and
(j) To perform any duty or take any action which
is allocated to the Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority neces
sary or appropriate to carry out his responsibilities.
Section 4.3 Claims Procedure.
Any claim relating to benefits under the Plan shall be
filed with the Plan Administrator on a form prescribed by it. If
a claim is denied in whole or in part, the Plan Administrator
shall give the claimant written notice of such denial, which
notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial
was based;
(c) Any additional material or information necessary
for the claimant to perfect his claim and an
explanation of why such material or information
is needed; and
(d) An explanation of the Plan's procedure for
review of the denial of the claim.
In the event that the claim is not granted and notice of denial
of a claim is not furnished by the 30th day after such claim was
filed, the claim shall be deemed to have been denied on that day
for the purpose of permitting the claimant to request review of
the claim.
Section 4.4 Claims Review Procedure.
Any person whose claim filed pursuant to section 4.3
has been denied in whole or in part by the Plan Administrator may
request review of the claim by the Plan Administrator, upon a
form prescribed by the Plan Administrator. The claimant shall
file such form (including a statement of his position) with the
Plan Administrator no later than 60 days after the mailing or
delivery of the written notice of denial provided for in section
4.3, or, if such notice is not provided, within 60 days after
such claim is deemed denied pursuant to section 4.3. The
claimant shall be permitted to review pertinent documents. A
decision shall be rendered by the Plan Administrator and
communicated to the claimant not later than 30 days after receipt
of the claimant's written request for review. However, if the
Plan Administrator finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to
extend this period and so notifies the claimant in writing, the
decision shall be rendered as soon as practicable, but in no
event later than 120 days after the claimant's request for
review. The Plan Administrator's decision shall be in writing
and shall specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the
decision is based.
Any such decision of the Plan Administrator shall be binding upon
the claimant and the Bank, and the Plan Administrator shall take
appropriate action to carry out such decision.
Section 4.5 Allocation of Fiduciary Responsibilities
and Employment of Advisors.
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities
(other than trustee responsibilities) under the Plan to
such other person or persons as he or it may designate,
provided that such allocation and designation shall be
in writing and filed with the Plan Administrator;
(b) Employ one or more persons to render advice
to him or it with regard to any of his or its respons-
ibilities under the Plan; and
(c) Consult with counsel, who may be counsel to
the Bank.
Section 4.6 Other Administrative Provisions.
(a) Any person whose claim has been denied in whole or
in part must exhaust the administrative review procedures
provided in section 4.4 prior to initiating any claim for
judicial review.
(b) No bond or other security shall be required of the
Plan Administrator, or any officer or Employee of the Bank to
whom fiduciary responsibilities are allocated by a Named
Fiduciary, except as may be required by ERISA.
(c) Subject to any limitation on the application of
this section 4.6(c) pursuant to ERISA, neither the Plan Adminis
trator, nor any officer or Employee of the Bank to whom fiduciary
responsibilities are allocated by a Named Fiduciary, shall be
liable for any act of omission or commission by himself or by
another person, except for his own individual willful and
intentional malfeasance.
(d) The Plan Administrator may, except with respect to
actions under section 4.4, shorten, extend or waive the time (but
not beyond 60 days) required by the Plan for filing any notice or
other form with the Plan Administrator, or taking any other
action under the Plan.
(e) Any person, group of persons, committee, corpo
ration or organization may serve in more than one fiduciary
capacity with respect to the Plan.
(f) Any action taken or omitted by any fiduciary with
respect to the Plan, including any decision, interpretation,
claim denial or review on appeal, shall be conclusive and binding
on the Bank and all interested parties and shall be subject to
judicial modification or reversal only to the extent it is
determined by a court of competent jurisdiction that such action
or omission was arbitrary and capricious and contrary to the
terms of the Plan.
ARTICLE V
MISCELLANEOUS
Section 5.1 Rights of Employees.
No Employee shall have any right or claim to any
benefit under the Plan except in accordance with the provisions
of the Plan. The establishment of the Plan shall not be construed
as conferring upon any Employee or other person any legal right
to a continuation of employment or to any terms or conditions of
employment, nor as limiting or qualifying the right of the Bank
to discharge any Employee.
Section 5.2 Non-alienation of Benefits.
The right to receive a benefit under the Plan shall not
be subject in any manner to anticipation, alienation, or
assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities, or torts.
Section 5.3 Non-Duplication of Benefits.
No provisions in this Plan shall be deemed to duplicate
any compensation or benefits provided under any agreement, plan
or program covering the Employee to which the Bank is a party and
any duplicative amount payable under any such agreement, plan or
program shall be applied as an offset to reduce the amounts
otherwise payable hereunder.
Section 5.4 Construction.
Whenever appropriate in the Plan, words used in the
singular may be read in the plural; words used in the plural may
be read in the singular; and the masculine gender shall be deemed
equally to refer to the feminine gender or the neuter. Any
reference to a section number shall refer to a section of this
Plan, unless otherwise stated.
Section 5.5 Headings.
The headings of sections are included solely for con
venience of reference, and if there is any conflict between such
headings and the text of the Plan, the text shall control.
Section 5.6 Governing Law.
Except to the extent preempted by federal law, the Plan
shall be construed, administered and enforced according to the
laws of the State of New York applicable to contracts between
citizens and residents of the State of New York entered into and
to be performed entirely within such jurisdiction.
Section 5.7 Severability.
The invalidity or unenforceability, in whole or in
part, of any provision of this Plan shall in no way affect the
validity or enforceability of the remainder of such provision or
of any other provision of this Plan, and any provision, or part
thereof, deemed to be invalid or unenforceable shall be reformed
as necessary to render it valid and enforceable to the maximum
possible extent.
Section 5.8 Termination or Amendment.
The Bank intends to keep this Plan in effect, but,
subject to the provisions of section 4 hereunder, the Bank
expressly reserves the right to terminate or amend the Plan, in
whole or in part, at any time by action of the Board; provided,
however, that no such amendment or termination which adversely
affects the current or prospective rights of any Employee shall
be effective earlier than six (6) months after written notice
thereof is given to such Employee.
Section 5.9 Required Regulatory Provisions.
The following provisions are included for the purposes
of complying with various laws, rules and regulations applicable
to the Bank:
(a) Notwithstanding anything herein contained to
the contrary, in no event shall the aggregate amount of
compensation payable to any person under Article III of
this Plan exceed the three times such person's average
annual total compensation for the last five consecutive
calendar years to end prior to his termination of
employment with the Bank (or for his entire period of
employment with the Bank and its predecessors, if less
than five calendar years).
(b) Notwithstanding anything herein contained to
the contrary, any payments to the Employee by the Bank,
whether pursuant to this Plan or otherwise, are subject
to and conditioned upon their compliance with section
18(k) of the FDI Act and any regulations promulgated
thereunder.
(c) Notwithstanding anything herein contained to
the contrary, if the Employee is suspended from office
and/or temporarily prohibited from participating in the
conduct of the affairs of the Bank pursuant to a notice
served under section 8(e)(3) or 8(g)(1) of the FDI Act,
the Bank's obligations under this Plan shall be
suspended as of the date of service of such notice,
unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Bank, in its
discretion, may (i) pay to the Employee all or part of
the compensation withheld while the Bank's obligations
hereunder were suspended and (ii) reinstate, in whole
or in part, any of the obligations which were
suspended.
(d) Notwithstanding anything herein contained to
the contrary, if the Employee is removed and/or
permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, all
prospective obligations of the Bank under this Plan
shall terminate as of the effective date of the order,
but vested rights and obligations of the Bank and the
Employee shall not be affected.
(e) Notwithstanding anything herein contained to
the contrary, if the Bank is in default (within the
meaning of section 3(x)(1) of the FDI Act, all
prospective obligations of the Bank under this Plan
shall terminate as of the date of default, but vested
rights and obligations of the Bank and the Employee
shall not be affected.
(f) Notwithstanding anything herein contained to
the contrary, all prospective obligations of the Bank
hereunder shall be terminated, except to the extent
that a continuation of this Plan is necessary for the
continued operation of the Bank: (i) by the Director
of the OTS or his designee or the FDIC, at the time the
FDIC enters into an agreement to provide assistance to
or on behalf of the Bank under the authority contained
in section 13(c) of the FDI Act; (ii) by the Director
of the OTS or his designee at the time such Director or
designee approves a supervisory merger to resolve
problems related to the operation of the Bank or when
the Bank is determined by such Director to be in an
unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall
cease to be required by applicable law, rule or regulation, the
same shall become inoperative automatically as though eliminated
by formal amendment of the Plan.
Section 5.10 Withholding.
Payments from this Plan shall be subject to all
applicable federal, state and local income withholding taxes.
Section 5.11 Status as Welfare Benefit Plan Under
ERISA.
This Plan is an "employee welfare benefit plan" within
the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and shall be
construed, administered and enforced according to the provisions
of ERISA.
Retirement Plan for Board Members
of
Dime Community Bancorp, Inc.
Adopted on February 8, 1996
Effective on June 26, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
x
Section 1.1 Annual Compensation ................................... 1
Section 1.2 Bank .................................................. 1
Section 1.3 Beneficiary ........................................... 1
Section 1.4 Board ................................................. 1
Section 1.5 Board Member .......................................... 1
Section 1.6 Change of Control of the Bank ......................... 1
Section 1.7 Code .................................................. 3
Section 1.8 Committee ............................................. 3
Section 1.9 Company ............................................... 3
Section 1.10 Participant ........................................... 3
Section 1.11 Participating Company ................................. 3
Section 1.12 Person ................................................ 3
Section 1.13 Predecessor Board ..................................... 3
Section 1.14 Plan .................................................. 3
Section 1.15 Reorganization Date ................................... 3
Section 1.16 Retired Participant ................................... 4
Section 1.17 Spouse ................................................ 4
Section 1.18 Years of Service ...................................... 4
ARTICLE II
ELIGIBILITY
Section 2.1 Participation ......................................... 4
Section 2.2 Termination of Participation .......................... 4
ARTICLE III
RETIREMENT BENEFITS
Section 3.1 Normal Benefits ....................................... 5
Section 3.2 Payments .............................................. 5
Section 3.3 Optional Forms of Retirement Allowance ................ 5
Section 3.4 Payments of Small Amounts ............................. 6
Section 3.5 Automatic Death Benefit for Spouse .................... 7
Section 3.6 Beneficiaries ........................................ 7
Section 3.7 Payment upon Change in Control ........................ 8
(i)
<PAGE>
Page
ARTICLE IV
ADMINISTRATION
Section 4.1 Duties of the Committee ............................... 8
Section 4.2 Liabilities of the Committee .......................... 8
Section 4.3 Expenses .............................................. 9
ARTICLE V
AMENDMENT AND TERMINATION
Section 5.1 Amendment and Termination ............................. 9
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Plan Documents ......................................... 9
Section 6.2 Construction of Language ............................... 9
Section 6.3 Non-Alienation of Benefits ............................. 10
Section 6.4 Indemnification ........................................ 10
Section 6.5 Severability ........................................... 10
Section 6.6 Waiver ................................................. 10
Section 6.7 Notices ................................................ 10
Section 6.8 Operation as an Unfunded Plan .......................... 11
Section 6.9 Required Regulatory Provisions ......................... 11
Section 6.10 Governing Law .......................................... 11
(ii)
<PAGE>
RETIREMENT PLAN FOR BOARD MEMBERS
OF
DIME COMMUNITY BANCORP, INC.
ARTICLE I
DEFINITIONS
The following definitions shall apply for the purposes
of this Plan unless a different meaning is plainly indicated by
the context:
Section 1.1 Annual Compensation means, on any date
for any Board Member, the amount of compensation paid to such
Board Member for service as a Board Member during the twelve (12)
month period ending on such date, including retainer payments,
fees paid solely on the basis of attendance at meetings as a
Board Member and any amounts thereof deferred at the request of
the Board Member, but excluding compensation in the form of stock
options, appreciation rights or restricted property, or other
special forms of remuneration. In the case of a Board Member who
is a non-employee director and who later becomes an employee-
director, "Annual Compensation" means the amount of such
compensation during the twelve (12) month period immediately
preceding service as a employee-director.
Section 1.2 Bank means The Dime Savings Bank of
Williamsburgh, a federal stock savings bank, and any successor
thereto.
Section 1.3 Beneficiary means the Person or Persons
designated by the Participant or Retired Participant to receive a
survivor benefit under one of the optional forms of retirement
allowance provided under section 3.3. If more than one Person is
designated, each shall have an equal share unless the Participant
or Retired Participant directed otherwise.
Section 1.4 Board means the Board of Directors of
the Company.
Section 1.5 Board Member means any individual who is
a voting member of the Board or a voting member of the Board of
Directors of the Bank or a voting member of the board of
directors of a Participating Company.
Section 1.6 Change of Control of the Bank means any
of the following events:
(a) the occurrence of any event upon which any
"person" (as such term is used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended ("Exchange Act")), other than (A) a trustee or
other fiduciary holding securities under an employee
benefit plan maintained for the benefit of employees of
the Bank; (B) a corporation owned, directly or
indirectly, by the stockholders of the Bank in
substantially the same proportions as their ownership
of stock of the Bank; or (C) any group constituting a
person in which employees of the Bank are substantial
members, becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by the
Bank representing 25% or more of the combined voting
power of all of the Bank's then outstanding securities;
or
(b) the occurrence of any event upon which the
individuals who on the date the Plan is adopted are
members of the Board, together with individuals whose
election by the Board or nomination for election by the
Bank's stockholders was approved by the affirmative
vote of at least two-thirds of the members of the Board
then in office who were either members of the Board on
the date this Plan is adopted or whose nomination or
election was previously so approved, cease for any
reason to constitute a majority of the members of the
Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of directors of the
Bank (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of the Bank (or, if the Bank
is not then a stock form institution, the Board of the
Bank) approve either:
(i) a merger or consolidation of the
Bank with any other corporation, other than a
merger or consolidation following which both of
the following conditions are satisfied:
(A) either (1) the members of
the Board of the Bank immediately prior to
such merger or consolidation constitute at
least a majority of the members of the
governing body of the institution resulting
from such merger or consolidation; or (2) the
shareholders of the Bank own securities of
the institution resulting from such merger or
consolidation representing 80% or more of the
combined voting power of all such securities
then outstanding in substantially the same
proportions as their ownership of voting
securities of the Bank before such merger or
consolidation; and
(B) the entity which results
from such merger or consolidation expressly
agrees in writing to assume and perform the
Bank's obligations under the Plan; or
(ii) a plan of complete liquidation of
the Bank or an agreement for the sale or
disposition by the Bank of all or substantially
all of its assets; and
(d) with respect to any company which owns 100%
of the outstanding common stock the Bank, any event
that would be described in section 1.6(a), (b) or (c)
if the name of such company were substituted for "the
Bank" therein.
In no event, however, shall the transaction by which the Bank
converts from a mutual savings bank to a stock savings bank, or
any transaction by which a company wholly owned by the Bank
becomes the parent company of the Bank be deemed a Change of
Control of the Bank.
Section 1.7 Code means the Internal Revenue Code of
1986 (including the corresponding provisions of any succeeding
law).
Section 1.8 Committee means the Compensation
Committee of the Board and any successor thereto.
Section 1.9 Company means Dime Community Bancorp,
Inc. and any successor thereto.
Section 1.10 Participant means a Board Member who
satisfies the eligibility requirements set forth in section 2.1
and whose participation in the Plan has not terminated pursuant
to section 2.2.
Section 1.11 Participating Company means any savings
bank, savings and loan association, bank, corporation, financial
institution or other business organization or institution which,
with the prior approval of the Board, and subject to such terms
and conditions as may be imposed by the Board, shall adopt this
Plan for the benefit of members of its board of directors.
Section 1.12 Person means an individual, a corpora
tion, a bank, a savings bank, a savings and loan association, a
financial institution, a partnership, an association, a joint-
stock company, a trust, an estate, any unincorporated organiza
tion and any other business organization or institution.
Section 1.13 Predecessor Board means, with the prior
approval of the Board and subject to such terms and conditions as
may be imposed by the Board, the board of trustees or the board
of directors of a Participating Company, prior to the date such a
company became a Participating Company.
Section 1.14 Plan means the Retirement Plan for Board
Members, as amended from time to time. The Plan may be referred
to as the "Retirement Plan for Board Members of Dime Community
Bancorp, Inc."
Section 1.15 Reorganization Date means the effective
date of the transaction pursuant to which The Dime Savings Bank
of Williamsburgh becomes a wholly-owned subsidiary of the
Company.
Section 1.16 Retired Participant means a former
Participant who is receiving a retirement allowance under this
Plan or who is entitled to receive a retirement allowance under
this Plan at a future date.
Section 1.17 Spouse means an individual who is
legally married to a Participant or Retired Participant.
Section 1.18 Years of Service means the period
beginning on the first day of the month in which an individual
becomes a Board Member and ending on the last day of the month in
which such individual ceases to be a Board Member, but excluding
(a) any period during which the individual was a salaried officer
of the Company or any Participating Company, and (b) any period
during which the individual was a salaried officer of any other
institution whose board of directors or board of trustees is
considered a Predecessor Board. The Years of Service of an
individual with two or more non-consecutive periods of service as
a Board Member shall be equal to the sum of such non-consecutive
periods. For purposes of determining an individual's Years of
Service, service as a member of a Predecessor Board shall be
deemed service as a Board Member. The maximum number of Years of
Service of any Board Member for purposes of the Plan shall be 10.
ARTICLE II
ELIGIBILITY
Section 2.1 Participation.
A person who is a Board Member on the Reorganization
Date shall become a Participant in the Plan on the Reorganization
Date. A person who becomes a Board Member after the
Reorganization Date shall become a Participant in the Plan
immediately upon becoming a Board Member. Any person who was a
Board Member prior to the Reorganization Date, but who ceased to
be a Board Member prior to the Reorganization Date, shall not be
eligible for benefits under this Plan unless he again becomes a
Board Member after the Reorganization Date.
Section 2.2 Termination of Participation.
Participation in the Plan shall cease on the date a
Participant ceases to be a Board Member for whatever reason.
ARTICLE III
RETIREMENT BENEFITS
Section 3.1 Normal Benefits.
(a) Any Participant who terminates service as a Board
Member after attaining age 65 shall be entitled to a normal
retirement allowance from the Bank, commencing as of the first
day of the month following the month in which he ceases to be a
Board Member, in an annual amount equal to his Annual
Compensation as of the date on which he ceases to be a Board
Member multiplied by a fraction, the numerator of which is his
Years of Service and the denominator of which is 10.
(b) A Participant who ceases to be a Board Member
prior to attaining age 65 but after completing 10 Years of
Service shall be entitled to a deferred retirement allowance
beginning on the first day of the month following the date he
attains age 65, in an annual amount equal to his Annual
Compensation as of the date on which he ceases to be a Board
Member. In lieu thereof, such person may elect to have a
retirement allowance commence as of the first day of any month
after the later of (i) the month in which he attains age 55 or
(ii) the month in which he ceases to be a Board Member, and the
amount of the retirement allowance shall be equal to the amount
payable at age 65 multiplied by a factor specified in Appendix A.
Any such election shall be made at least 30 days prior to
termination of service as a Board Member.
Section 3.2 Payments.
Retirement allowances under section 3.1 shall be paid
in monthly installments, each installment being one-twelfth of
the annual retirement allowance. The first payment shall be made
in accordance with section 3.1 and installments shall continue
until the Retired Participant's death.
Section 3.3 Optional Forms of Retirement Allowance.
(a) With the approval of the Committee and on such
terms and conditions as the Committee may prescribe, a Par
ticipant or Retired Participant entitled to a retirement al
lowance under section 3.1 may elect, at any time prior to
termination of service as a Board Member, to convert the allow
ance otherwise payable on his account into any one of the follow
ing optional forms of retirement allowance:
(i) Option 1 (100% Survivor Option). A reduced
retirement allowance payable during his life, with the
provision that after his death an amount equal to his
reduced retirement allowance shall continue during the
life of, and shall be paid to, such person, if then
living, as he shall have named as his Beneficiary in
his written election of the option.
(ii) Option 2 (50% Survivor Option). A reduced
retirement allowance payable during his life, with the
provision that after his death an amount equal to one-
half of his reduced retirement allowance shall continue
during the life of, and shall be paid to, such person,
if then living, as he shall have named as his Benefic
iary in his written election of the option.
(iii) Option 3 (5, 10 or 15 Year Term
Certain). A reduced retirement allowance payable
during his life, with the provision that an amount
equal to his reduced retirement allowance shall
continue to be paid for a term certain elected by the
Participant or Retired Participant of 5, 10 or 15 years
from the commencement of such retirement allowance,
and, in the event of his death before the end of such
term, the same amount shall continue to be paid for the
remainder of such term to the person (or persons) whom
he shall have named as his Beneficiary (or
Beneficiaries) in his written election of the option or
any change thereof.
(b) Where Option 1 or Option 2 has been elected, if
payments begin during the Retired Participant's lifetime and if
the Beneficiary is living at the date of the Retired
Participant's death, then the payments to the Beneficiary shall
commence as of the first day of the month after the month in
which the Retired Participant died and shall continue during the
lifetime of the Beneficiary, the last installment being payable
on the first day of the month during which the Beneficiary dies.
Where Option 3 has been elected, if payments begin during the
Retired Participant's lifetime, and if the Participant or Retired
Participant dies prior to the expiration of the term elected,
then the payments to the Beneficiary shall commence as of the
first day of the month after the month in which the Participant
or Retired Participant died, and payments shall continue for the
remainder of such term.
(c) If Option 1 or Option 2 has been elected and the
designated Beneficiary dies after the retirement allowance has
commenced to be paid to the Retired Participant who designated
him but before the death of such Retired Participant, the amount
of the reduced retirement allowance to which such Retired Partici
pant is then entitled shall remain unchanged and all payments
shall cease upon the death of the Retired Participant.
(d) The retirement allowance payable to a Participant
or Retired Participant electing one of the optional forms of
retirement allowance set forth in section 3.3(a) shall be
determined by multiplying the retirement allowance otherwise
payable under section 3.1 by the appropriate adjustment factor
set forth in Appendix B.
(e) Any election under this section 3.3 shall be made
in writing in the form and manner prescribed by the Committee,
shall be revocable until termination of service as a Board Member
and shall thereafter be irrevocable.
Section 3.4 Payments of Small Amounts.
Notwithstanding any other provision of the Plan, if the
present value of the retirement allowance payable to a Par
ticipant or Retired Participant and his Beneficiary shall at any
time after termination of service as a Board Member and prior to
the commencement of payment thereof be less than $10,000, then
the Committee may direct that it be paid in such lump sum in lieu
of all other benefits under the Plan. For purposes of this
section 3.4, present values shall be determined using the
interest rate and mortality assumptions then in use under section
415 of the Code for purposes of valuing lump sum payments under
tax-qualified defined benefit plans, assuming payment would begin
at the later of age 65 or the date of termination of service.
Section 3.5 Automatic Death Benefit for Spouse.
If (a) a Participant or Retired Participant who is
entitled to a retirement allowance under section 3.1 should die
prior to the commencement of such retirement allowance and prior
to electing an optional form of retirement allowance under
section 3.3 or (b) a Participant who is not entitled to a retire
ment allowance under section 3.1 should die while a Board Member,
and if such Participant or Retired Participant is survived by a
Spouse, there shall be paid to such surviving Spouse, until such
Spouse dies, a monthly survivor's allowance in an amount equal to
that amount which would have been provided to such Spouse had the
Participant or Retired Participant retired immediately prior to
his death (whether or not he would have been eligible for
retirement) and had he effectively elected to take Option 2 under
section 3.3 with his Spouse as his Beneficiary and with payments
commencing on the first day of the month following his death.
Section 3.6 Beneficiaries.
(a) A Participant or Retired Participant may designate
a Beneficiary or Beneficiaries to receive any survivor benefits
payable upon his death under an optional form of benefit elected
pursuant to section 3.3.
(b) If the Participant or Retired Participant elects
Option 1 or Option 2 under section 3.3, he may only designate one
Beneficiary and such Beneficiary must be a natural person. Any
designation shall be made in writing in the form and manner
prescribed by the Committee, shall be revocable until the
retirement allowance commences to be paid, and shall thereafter
be irrevocable.
(c) If the Participant or Retired Participant elects
Option 3 under section 3.3, he may designate one or more Benefi
ciaries who may be, but need not be, natural persons. Any such
election shall be made in writing in the form and manner
prescribed by the Committee, shall be revocable until the
retirement allowance commences to be paid, and shall thereafter
be irrevocable; provided, however, that the Participant or
Retired Participant may change or revoke the Beneficiary or
Beneficiaries designated at any time or from time to time, but
such changes or revocations shall be effective only if received
by the Committee prior to the Participant's or Retired Par
ticipant's death.
(d) A Beneficiary designated by a Participant or
Retired Participant to receive a survivor benefit, other than a
benefit payable for such Beneficiary's life, may designate a
Beneficiary of his own to receive such survivor benefit in the
event the Beneficiary designated by the Participant or Retired
Participant dies prior to receiving complete payment of such
survivor benefit. If a Participant or Retired Participant who
has elected Option 3 dies without a Beneficiary, then the present
value of any unpaid installments shall be paid to the estate of
such Participant or Retired Participant in lieu of all other
payments. If a Beneficiary of a deceased Retired Participant
entitled to payments under Option 3 dies without a Beneficiary,
then the present value of any unpaid installments shall be paid
to the estate of such Beneficiary in lieu of all other payments.
In determining such present values, the interest rate and life
expectancy tables prescribed under section 415 of the Code for
purposes of valuing lump sum payments under tax-qualified defined
benefit plans shall be used.
Section 3.7 Payment upon Change in Control.
Upon a Change of Control of the Bank, each Board Member
shall be entitled to an immediate lump sum payment of the present
value of a single life annuity, commencing upon a Change of
Control of the Bank and continuing for life in an annual amount
equal to his Annual Compensation multiplied by a fraction (not
greater than one) the numerator of which is his Years of Service
and the denominator of which is 10. In determining such present
values, the interest rate and life expectancy tables prescribed
under section 415 of the Code for purposes of valuing lump sum
payments under tax-qualified defined benefit plans shall be used.
ARTICLE IV
ADMINISTRATION
Section 4.1 Duties of the Committee.
The Committee shall have full responsibility for the
management, operation, interpretation and administration of the
Plan in accordance with its terms, and shall have such authority
as is necessary or appropriate in carrying out its responsibili
ties. Actions taken by the Committee pursuant to this section
4.1 shall be conclusive and binding upon the Bank, the Company,
the Participating Companies, Participants, Retired Participants
and other interested parties.
Section 4.2 Liabilities of the Committee.
Neither the Committee nor its individual members shall
be deemed to be a fiduciary with respect to this Plan; nor shall
any of the foregoing individuals or entities be liable to any
Participant or Retired Participant in connection with the
management, operation, interpretation or administration of the
Plan, any such liability being solely that of the Company.
Section 4.3 Expenses.
Any expenses incurred in the management, operation,
interpretation or administration of the Plan shall be paid by the
Company. In no event shall the benefits otherwise payable under
this Plan be reduced to offset the expenses incurred in managing,
operating, interpreting or administering the Plan.
ARTICLE V
AMENDMENT AND TERMINATION
Section 5.1 Amendment and Termination.
The Board shall have the right to amend the Plan, from
time to time and at any time, in whole or in part, and to termin
ate the Plan; provided, however, that no such amendment or
termination shall reduce the accrued benefits of, or impose more
stringent vesting requirements on any benefits accrued by, any
Participant, Retired Participant or Beneficiary through the date
of the amendment or termination of the Plan.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Plan Documents.
The Secretary of the Board shall provide a copy of this
Plan to each Board Member who becomes a Participant in the Plan.
Section 6.2 Construction of Language.
Wherever appropriate in the Plan, words used in the
singular may be read in the plural, words in the plural may be
read in the singular, and words importing the masculine gender
shall be deemed equally to refer to the feminine or the neuter.
Any reference to an article or section shall be to an article or
section of the Plan, unless otherwise indicated.
Section 6.3 Non-Alienation of Benefits.
The right to receive a benefit under the Plan shall not
be subject in any manner to anticipation, alienation or assign
ment, nor shall such rights be liable for or subject to debts,
contracts, liabilities or torts.
Section 6.4 Indemnification.
The Company shall indemnify, hold harmless and defend
each Board Member, Participant, Retired Participant and the
Beneficiaries of each, against their reasonable costs, including
legal fees, incurred by them, or arising out of any action, suit
or proceeding in which they may be involved, as a result of their
efforts, in good faith, to defend or enforce the terms of the
Plan.
Section 6.5 Severability.
A determination that any provision of the Plan is
invalid or unenforceable shall not affect the validity or enfor
ceability of any other provision hereof.
Section 6.6 Waiver.
Failure to insist upon strict compliance with any of
the terms, covenants or conditions of the Plan shall not be
deemed a waiver of such term, covenant or condition. A waiver of
any provision of the Plan must be made in writing, designated as
a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver
or relinquishment of such right or power at any other time or
times.
Section 6.7 Notices.
Any communication required or permitted to be given
under the Plan, including any notice, direction, designation,
comment, instruction, objection or waiver, shall be in writing
and shall be deemed to have been given at such time as it is
delivered personally or 5 days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt re
quested, addressed to such party at the address listed below, or
at such other address as one such party may by written notice
specify to the other party:
(a) if to the Company:
Dime Community Bancorp, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
Attention: Corporate Secretary
(b) if to any party other than the Company,
to such party at the address last furnished
by such party by written notice to the Company.
Section 6.8 Operation as an Unfunded Plan.
The Plan is intended to be (a) a contractual obligation
of the Company to pay the benefits as and when due in accordance
with its terms, (b) an unfunded and non-qualified plan such that
the benefits payable shall not be taxable to the recipients until
such benefits are paid and (c) a plan covering persons who are
independent contractors of the Company. The Plan is not intended
to be subject to or comply with the requirements of the Employee
Retirement Income Security Act of 1974, as amended, or of section
401(a) of the Code. The Company may establish a trust to which
assets may be transferred by the Company in order to provide a
portion or all of the benefits otherwise payable by the Company
under the Plan; provided, however, that the assets of such trust
shall be subject to the claims of the creditors of the Company in
the event that it is determined that the Company is insolvent or
that grounds exist for the appointment of a conservator or
receiver. The Plan shall be administered and construed so as to
effectuate these intentions.
Section 6.9 Required Regulatory Provisions.
Notwithstanding anything herein contained to the
contrary, any benefits paid by the Company, whether pursuant to
this Plan or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance
Act ("FDI Act"), 12 U.S.C. Section 1828(k), and any
regulations promulgated thereunder.
Section 6.10 Governing Law.
The Plan shall be construed, administered and enforced
according to the laws of the State of New York applicable to
contracts between citizens and residents of the State of New York
entered into and to be performed entirely within such
jurisdiction, except to the extent that such laws are preempted
by federal law.
<PAGE>
Appendix A
Early Commencement Factors
Number of Years Factor
Payments Commence
Prior to Age 65
0 1.0000
1 .9205
2 .8496
3 .7860
4 .7289
5 .6774
6 .6308
7 .5885
8 .5500
9 .5149
10 .4829
<PAGE>
Appendix B
<TABLE>
Factors for Determining Optional Benefit Forms under Section 3.3
<CAPTION>
Age Option 1 Option 2 Option 3
5 Year 10 Year 15 Year
Certain Certain Certain
<S> <C> <C> <C> <C> <C>
50 90.0% 94.7% 99.6% 98.4% 97.1%
51 89.4 94.4 99.6 98.3 96.6
52 88.8 94.1 99.6 98.2 96.2
53 88.2 93.7 99.5 98.1 95.8
54 87.6 93.4 99.5 98.0 95.4
55 87.0 93.0 99.4 97.9 95.0
56 86.4 92.7 99.3 97.5 94.2
57 85.8 92.4 99.2 97.1 93.4
58 85.2 92.0 99.1 96.7 92.6
59 84.6 91.7 98.9 96.3 91.8
60 84.0 91.3 98.8 95.9 91.0
61 83.2 90.8 98.6 95.2 90.0
62 82.4 90.4 98.4 94.5 89.0
63 81.6 89.9 98.2 93.8 88.0
64 80.8 89.4 98.0 93.1 87.0
65 80.0 88.9 97.8 92.4 86.0
66 79.3 88.5 97.4 91.4 84.4
67 78.6 88.0 97.1 90.4 82.8
68 77.9 87.6 96.7 89.4 81.2
69 77.2 87.1 96.4 88.4 79.6
70 76.5 86.7 96.0 87.4 78.0
71 75.9 86.3 95.4 85.8 76.0
72 75.3 85.9 94.8 84.2 74.0
73 74.7 85.5 94.2 82.6 72.0
74 74.1 85.1 93.6 81.0 70.0
75 73.5 84.7 93.0 79.4 68.0
<FN>
For Options 1 and 2, the survivorship factors shown
above assume that the Participant (or Retired Participant) and
the Beneficiary are the same age. For each whole year that the
Beneficiary is older than the Participant (or Retired
Participant), add Factor B in the case of Option 2, to the
percentage shown above (but never go above 99.0%). For each
whole year that the Beneficiary is younger than the Participant
(or Retired Participant), subtract Factor B in the case of Option
2, from the percentages shown above. Factor B for all members
for Option 1 is .7% for the first 10 years, .5% for the next 10
years and .3% for over 20 years, and Factor B for Option 2 is .4%
for the first 10 years, .3% for the next 10 years and .2% for
over 20 years.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,055
<INT-BEARING-DEPOSITS> 1,056,380<F1>
<FED-FUNDS-SOLD> 115,130
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 498,655
<INVESTMENTS-CARRYING> 96,132
<INVESTMENTS-MARKET> 96,024
<LOANS> 583,227
<ALLOWANCE> 7,812<F2>
<TOTAL-ASSETS> 1,371,821
<DEPOSITS> 950,114
<SHORT-TERM> 5,000
<LIABILITIES-OTHER> 39,196
<LONG-TERM> 22,708
0
0
<COMMON> 145
<OTHER-SE> 212,926
<TOTAL-LIABILITIES-AND-EQUITY> 1,371,821
<INTEREST-LOAN> 39,654
<INTEREST-INVEST> 11,665
<INTEREST-OTHER> 1,300
<INTEREST-TOTAL> 52,619
<INTEREST-DEPOSIT> 22,508
<INTEREST-EXPENSE> 23,516
<INTEREST-INCOME-NET> 29,103
<LOAN-LOSSES> 2,979
<SECURITIES-GAINS> 164
<EXPENSE-OTHER> 3,521
<INCOME-PRETAX> 13,478
<INCOME-PRE-EXTRAORDINARY> 7,297
<EXTRAORDINARY> 0
<CHANGES> (1,032)
<NET-INCOME> 6,265
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.98
<LOANS-NON> 6,551
<LOANS-PAST> 0
<LOANS-TROUBLED> 4,671
<LOANS-PROBLEM> 8,109
<ALLOWANCE-OPEN> 5,174
<CHARGE-OFFS> 1,023
<RECOVERIES> 14
<ALLOWANCE-CLOSE> 7,812
<ALLOWANCE-DOMESTIC> 7,812
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes interest bearing escrow accounts of $133,950 at June 30, 1996
<F2>Includes reserve of $668 acquired from Conestoga Bancorp, Inc.
</FN>
</TABLE>
