UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 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 organization) Identification Number)
209 HAVEMEYER STREET, BROOKLYN, NEW YORK 11211
(Address of principal executive offices) (Zip Code)
(718) 782-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) YES X NO ___
(2) YES X NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING, JANUARY 31, 1997
$.01 Par Value 14,547,500
<PAGE>
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Statements of Condition at December 31, 1996
(Unaudited) and June 30, 1996 3
Consolidated Statements of Operations for the Three and Six
Months Ended December 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months Ended December 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 1996 and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-28
PART 11 - OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28-29
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 31
Exhibits 32
EXPLANATORY NOTE: This Form 10-Q contains certain forward looking statements
consisting of estimates with respect to the financial condition, results of
operations and business of the Company that are subject to various factors
which could cause actual results to differ materially from these estimates.
These factors include: changes in general, economic and market conditions, and
legislative and regulatory conditions, or the development of an adverse
interest rate environment that adversely affects the interest rate spread or
other income anticipated from the Company's operations and investments.
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 JUNE 30,
(UNAUDITED) 1996
------------------- ----------------
<S> <C> <C>
ASSETS:
Cash and due from banks $11,653 $17,055
Investment securities held to maturity
(estimated market value of $87,138 and $43,428
at December 31, 1996 and June 30, 1996, respectively) 86,320 43,552
Investment securities available for sale:
Bonds and notes (amortized cost of $121,750 and
$338,141 at December 31, 1996 and June 30, 1996, respectively) 122,290 338,089
Marketable equity securities (historical cost of
$3,034 and $2,982 at December 31, 1996 and June 30, 1996, respectively) 3,399 3,205
Mortgage backed securities held to maturity
(estimated market value of $85,882 and $52,596 at
December 31, 1996 and June 30, 1996, respectively) 85,199 52,580
Mortgage backed securities available for sale
(amortized cost of $185,898 and $156,962 at December 31, 1996
and June 30, 1996, respectively) 188,707 157,361
Federal funds sold 32,952 115,130
Loans:
Real estate 635,803 577,663
Other loans 5,871 5,564
Less: Allowance for loan losses (8,891) (7,812)
-------------------- ----------------
Total loans, net 632,783 575,415
-------------------- ----------------
Loans held for sale 335 459
Premises and fixed assets 14,048 14,399
Federal Home Loan Bank of New York Capital Stock 7,598 7,604
Other real estate owned, net 2,270 1,946
Goodwill 27,566 28,438
Other assets 16,913 16,588
-------------------- ----------------
TOTAL ASSETS $1,232,033 $1,371,821
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $948,349 $950,114
Escrow and other deposits 8,483 141,732
Securities sold under agreements to repurchase 33,146 11,998
Federal Home Loan Bank of New York advances 15,710 15,710
Payable for securities purchased - 33,994
Accrued postretirement benefit obligation 2,462 2,381
Other liabilities 2,320 2,821
-------------------- ----------------
TOTAL LIABILITIES $1,010,470 $1,158,750
-------------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock ($0.01 par, 9,000,000 shares authorized,
none outstanding at December 31, 1996 and June 30, 1996) - -
Common stock ($0.01 par, 45,000,000 shares authorized, 14,547,500
outstanding at December 31, 1996 and June 30, 1996, respectively) 145 145
ADDITIONAL PAID-IN CAPITAL 141,259 141,240
EMPLOYEE STOCK OWNERSHIP PLAN (10,926) (11,541)
RETAINED EARNINGS, SUBSTANTIALLY RESTRICTED 89,079 82,916
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET OF DEFERRED TAXES 2,006 311
-------------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 221,563 213,071
-------------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,232,033 $1,371,821
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS. FOR THE SIX MONTHS.
ENDED DECEMBER 31, ENDED DECEMBER 31,
1996 1995 1996 1995
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans secured by real estate $13,417 $9,867 $26,064 $19,532
Other loans 103 81 235 164
Investment securities 3,885 1,597 7,803 2,908
Mortgage-backed securities 4,315 1,496 8,013 3,007
Federal funds sold 517 344 1,334 665
------------ ----------- ------------ -----------
TOTAL INTEREST INCOME 22,237 13,385 43,449 26,276
------------ ----------- ------------ -----------
INTEREST EXPENSE:
Deposits and escrow 9,646 5,757 19,335 11,481
Borrowed funds 622 251 980 505
------------ ----------- ------------ -----------
TOTAL INTEREST EXPENSE 10,268 6,008 20,315 11,986
NET INTEREST INCOME 11,969 7,377 23,134 14,290
PROVISION FOR LOAN LOSSES 1,050 350 2,100 950
------------ ----------- ------------ -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,919 7,027 21,034 13,340
------------ ----------- ------------ -----------
NON-INTEREST INCOME:
Service charges and other fees 514 216 940 418
Net gain (loss) on sales and redemptions of
securities and other assets 135 (164) 171 (81)
Net gain on sales of loans 71 28 94 22
Other 332 107 604 242
------------ ----------- ------------ -----------
TOTAL NON-INTEREST INCOME 1,052 187 1,809 601
------------ ----------- ------------ -----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,322 1,825 4,668 3,541
ESOP benefit expense 361 - 824 -
Occupancy and equipment 840 397 1,568 800
SAIF special assessment - - 2,032 -
Federal deposit insurance premiums - 74 251 63
Data processing costs 212 127 459 246
Provision for losses on Other real estate owned 74 250 267 250
Goodwill amortization 606 - 1,200 -
Other 1,189 805 2,467 1,500
------------ ----------- ------------ -----------
TOTAL NON-INTEREST EXPENSE 5,604 3,478 13,736 6,400
------------ ----------- ------------ -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 6,367 3,736 9,107 7,541
INCOME TAX EXPENSE 1,428 1,706 2,944 3,447
------------ ----------- ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 4,939 2,030 6,163 4,094
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGING TO A
DIFFERENT METHOD OF ACCOUNTING FOR:
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - - - (1,032)
------------ ----------- ------------ -----------
NET INCOME $4,939 $2,030 $6,163 $3,062
======= ====== ======= ======
EARNINGS PER SHARE:
PRIMARY $0.37 N/A $0.46 N/A
======= ====== ======= ======
FULLY DILUTED $0.37 N/A $0.46 N/A
======= ======= ======= ======
</TABLE>
See notes to consolidated financial statements
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
[CAPTION]
FOR THE SIX
MONTHS ENDED
DECEMBER 31, 1996
-------------------
COMMON STOCK (PAR VALUE $0.01):
Balance at beginning of period $ 145
-------------------
Balance at end of period 145
-------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period 141,240
Cost of issuance of common stock (190)
Amortization of excess fair value
over cost - ESOP stock 209
-------------------
Balance at end of period $141,259
-------------------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (11,541)
Amortization of earned portion of
ESOP stock 615
-------------------
Balance at end of period (10,926)
-------------------
RETAINED EARNINGS:
Balance at beginning of period 82,916
Net income for the period 6,163
-------------------
Balance at end of period 89,079
-------------------
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET:
Balance at beginning of period 311
Change in unrealized gain on
securities available for sale
during the period, net of deferred taxes 1,695
-------------------
Balance at end of period $ 2,006
-------------------
See notes to consolidated financial statements
<PAGE>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 6,163 3,062
Adjustments to reconcile net income to net cash provided by operating activities
Net (gain) loss on investment and mortgage backed securities sold (99) 195
Net gain on investment and mortgage backed securities called - (56)
Net gain on sale of other assets (19) -
Net gain on sale of loans held for sale (94) (22)
Net Depreciation and amortization (accretion) (1,133) 406
ESOP plan compensation expense 824 -
Provision for loan losses 2,100 950
Goodwill amortization 1,200 -
Decrease (increase) in loans held for sale 218 (265)
(Increase) decrease in other assets and other real estate owned (2,092) 681
Increase in accrued postretirement benefit obligation 81 2,042
Decrease in payable for securities purchased (33,994) -
(Decrease) increase in other liabilities (501) 234
---------- ----------
Net cash (used in) provided by Operating Activities (27,346) 7,227
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in Federal funds sold 82,178 5,007
Proceeds from maturities of investment securities held to maturity 12,035 35
Proceeds from maturities of investment securities available for sale 273,460 33,100
Proceeds from calls of investment securities held to maturity - 5,056
Proceeds from calls of investment securities available for sale 20,000 4,500
Proceeds from sale of investment securities available for sale 15,051 500
Purchases of investment securities held to maturity (54,789) (12,417)
Purchases of investment securities available for sale (90,283) (27,148)
Purchases of mortgage backed securities held to maturity (38,842) (5,695)
Purchases of mortgage backed securities available for sale (42,050) (7,482)
Principal collected on mortgage backed securities held to maturity 6,159 4,879
Principal collected on mortgage backed securities available for sale 13,060 7,024
Net increase in loans (59,468) (11,302)
Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired (328) -
Purchases of fixed assets (189) (69)
Sale of Federal Home Loan Bank stock 6 -
---------- ----------
Net Cash provided by (used in) Investing Activities 136,000 (4,012)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Due to depositors (1,765) 2,243
Net decrease in escrow and other deposits (133,249) (5,176)
Cash disbursed for expenses related to issuance of common stock (190) -
Increase (decrease) in securities sold under agreements to repurchase 21,148 (85)
---------- ----------
Net Cash used in Financing Activities (114,056) (3,018)
---------- ----------
(DECREASE) INCREASE IN CASH AND DUE FROM BANKS (5,402) 197
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 17,055 6,807
---------- ----------
CASH AND DUE FROM BANKS, END OF PERIOD $ 11,653 $ 7,004
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes 2,527 3,417
========== ==========
Cash paid for interest 20,306 12,031
========== ==========
Transfer of loans to Other real estate owned - 223
========== ==========
Transfer of investment and mortgage backed securities held-to-maturity
available for sale - 3,300
========== ==========
Change in unrealized gain on available for sale securities, net of
deferred taxes 1,695 129
========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In Thousands Except Per Share Amounts)
1. NATURE OF OPERATIONS
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 Bank's conversion from
mutual to stock form (the "Conversion") on June 26, 1996, in exchange for $76.4
million (54%) of the net proceeds of the offering of 14,547,500 shares of the
Company's common stock (the "Offering"). Presently, the only significant
assets of the Company are the capital stock of the Bank, the Company's loan to
the ESOP, and investments of the net 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 and the Company maintain their
headquarters in the Williamsburgh section of the borough of Brooklyn. Fourteen
additional offices of the Bank are located in the boroughs of Brooklyn, Queens,
and the Bronx, and in Nassau County.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of the
Company's financial condition as of December 31, 1996, the results of
operations for the three and six months ended December 31, 1996 and 1995, cash
flows for the six months ended December 31, 1996 and 1995, and changes in
stockholders' equity for the six months ended December 31, 1996. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the information contained
herein have been made. The results of operations for the three months ended
December 31, 1996 are not necessarily indicative of the results of operations
to be expected for the remainder of the year. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting standards ("GAAP") have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements dated August 30, 1996 and notes
thereto of the Company.
3. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
requires that deferred taxes be provided for temporary differences between the
book and tax bases of assets and liabilities.
On August 20, 1996, Federal legislation was signed into law which repealed the
percentage of taxable income method for computing allowable bad debt deductions
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 to 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
On July 30, 1996, New York State (the "State") enacted legislation, effective
January 1, 1996, which generally retains the percentage of taxable income
method for computing allowable bad debt deductions and does not require the
Bank to recapture into income State tax bad debt reserves unless one of the
following events occur: 1) the Bank's retained earnings represented by the
reserve is used for purposes other than to absorb losses from bad debts,
including dividends in excess of the Bank's earnings and profits or
distributions in liquidation or in redemption of stock; 2) the Bank fails to
qualify as a thrift as provided by the State tax law, or 3) there is a change
in state tax law. Upon adoption of this legislation, the Bank had a deferred
tax liability of approximately $1,848 recorded for the excess of State tax bad
debt reserves over its reserve at December 31, 1987 in accordance with SFAS
109. In December, 1996 after evaluating the State tax legislation, as well as
relevant accounting literature and industry practices, management of the Bank
concluded that this liability was no longer required to be recorded, and
recovered the full liability. This recovery resulted in a reduction of income
tax expense during the three and six-month periods ended December 31, 1996,
for the full amount of the recovered deferred tax liability. Although New York
City is presently addressing conforming its tax law regarding bad debts to New
York State's tax law, it has not, to date, enacted similar legislation. At
December 31, 1996, the Bank has a deferred tax liability o f approximately
$1,100 recorded for the excess of New York City tax bad debt reserves over
its base year reserve at December 31, 1987. Should New York City elect to
conform their tax law regarding bad debts to New York State, the Bank will,
consistent with New York State income taxes, recover this deferred tax liability
and reduce income tax expense accordingly.
4. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In accordance with Statement of Position 93-6 "Employers' Accounting for
Employee Stock Ownership Plans," issued by the American Institute of Certified
Public Accountants, the Company recognizes compensation expense related to the
ESOP during the period in which the shares become committed to be released to
participants. The compensation expense is measured based upon the fair market
value of the stock during the period, and, to the extent that the fair value of
the shares committed to be released differs from the original cost of such
shares, the difference is recorded as an adjustment to Additional paid-in
capital.
5. EARNINGS PER SHARE
Primary and fully-diluted earnings per share for the three and six-month
periods ended December 31, 1996 are computed by dividing net income by the
average number of common shares outstanding during the period, which includes
all allocated shares of the ESOP. The average number of common shares utilized
to calculate both primary and fully diluted earnings per share during the three
and six-month periods ended December 31, 1996 were 13,393,398. Earnings per
share are not presented for the three and six-month periods ended December 31,
1995 as the initial public offering of the Company's stock did not occur until
June, 1996.
6. RECENTLY ADOPTED ACCOUNTING STANDARDS
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, ''Accounting for Stock-Based Compensation'' (''SFAS 123''). SFAS 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.
During the quarter ended December 31, 1996, the Company adopted a stock option
plan for employees and outside directors (the "Stock Option Plan") which is
subject to SFAS 123. As of December 31, 1996, no options have been granted
under the Stock Option Plan. As of December 31, 1996, the Company has no other
plans adopted involving equity instruments subject to SFAS 123.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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'' ("SFAS 125"). SFAS 125 provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are borrowings. SFAS 125 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. SFAS 125 is effective for all transfers, servicing, or
extinguishments occurring after December 31, 1996, except for certain
provisions relating to the accounting for secured borrowings and collateral and
the accounting for transfers and servicing of repurchase agreements, dollar
rolls, securities lending and similar transactions, for which the effective
date was deferred until January 1, 1998, in accordance with Statement of
Financial Accounting Standards No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125" ("SFAS 127"). The Company adopted
SFAS 125 and SFAS 127 effective January 1, 1997. Adoption of these standards
is not expected to have a material impact on the financial condition or results
of operations of the Bank.
7. 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.
8. SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") SPECIAL ASSESSMENT
During the quarter ended September 30, 1996, the Bank was assessed a one-time
special assessment of $2,032 by the Federal Deposit Insurance Corporation
("FDIC") in order to recapitalize the SAIF. As a member of the Bank Insurance
Fund ("BIF"), the Bank pays most of its deposit insurance assessments to the
BIF. The SAIF primarily insures the deposits of savings and loan associations,
but also insures the deposits acquired by a BIF-insured institution from a
SAIF-insured institution. With the consummation of the acquisition (the
"Acquisition") of Conestoga Bancorp, Inc. ("Conestoga"), the Bank acquired the
deposits of Conestoga's wholly-owned subsidiary, Pioneer Savings Bank, FSB
("Pioneer"), a SAIF-insured thrift, which deposits totaled approximately $394.3
million at June 30, 1996. The Bank pays SAIF assessments with respect to the
Pioneer deposits. In addition, the Bank pays SAIF assessments on deposits the
Bank acquired in a prior branch acquisition. All SAIF-insured deposits
acquired by the Bank qualified as "Oakar deposits," and were the basis for the
one-time assessment, which was recorded in non-interest expense during the
quarter ended September 30, 1996.
9. CONTINGENCIES
LITIGATION - 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. By stipulation
dated January 16, 1997, the Plaintiff voluntary dismissed the case without pre-
judice.
On December 5, 1996, Dime Bancorp, Inc. and its wholly-owned subsidiary, Dime
Savings Bank of New York, FSB (together "Dime of New York,") filed a complaint
in the United States District Court, Southern District of New York against the
Company and the Bank. Dime of New York alleges violations of New York State
and federal trademark law and unfair competition law. Dime of New York seeks
injunctive relief in the form of an order requiring the Bank to use its full
name with identical type-size and type-style in marketing and advertising
materials, or in the alternative requiring the Bank to change its name, due to
alleged inequitable conduct. The complaint also seeks an order requiring the
Company to change its corporate name and change its Nasdaq Stock Market trading
symbol "DIME." Dime of New York does not seek monetary damages.
The Company and the Bank have answered the complaint and filed counterclaims in
which they seek to enjoin the Dime of New York from employing service marks
that are confusingly similar to the Company's and the Bank's service marks.
The action is in the preliminary stages of discovery. The Company and the Bank
intend to defend vigorously these claims made against them and pursue their
counterclaims.
The Bank is involved in various legal actions in the ordinary course of its
business which, in the aggregate, involve amounts which are believed to be
material to the financial condition and results of operations of the Bank.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of
Operations
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
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. 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 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.
IMPACT OF RECENT LEGISLATION
DEPOSIT INSURANCE - SAIF RECAPITALIZATION. As a member of the BIF, the Bank
pays most of its deposit insurance assessments to the BIF. The FDIC also
maintains another insurance fund, the SAIF, which primarily insures the
deposits of savings and loan associations, but also insures the deposits
acquired by a BIF-insured institution from a SAIF-insured institution. With
the consummation of the acquisition of Conestoga, the Bank acquired the
deposits of Pioneer (the "Pioneer Deposits"), a member of the SAIF, which
deposits totaled approximately $394.3 million at June 26, 1996. The Bank is
now required to pay SAIF assessments with respect to the Pioneer Deposits. In
addition, the Bank is required to pay SAIF assessments on all other Oakar
Deposits.
Under law and regulation in effect at June 30, 1996, BIF-assessable deposits
were assessed at a rate of $2,000 per year while SAIF-assessable deposits were
assessed at rates ranging from $0.23 to $0.31 per $100 of SAIF- assessable
deposits. This disparity resulted from the BIF's achievement of the required
1.25% reserve ratio while the SAIF had not reached the required 1.25% reserve,
due primarily to the fact that a significant portion of SAIF assessments have
been and are currently being used to make payments on bonds ("FICO bonds")
issued in the late 1980s by the Financing Corporation.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the "Funds
Act") was enacted into law, and it amended the Federal Deposit Insurance Act in
several ways to recapitalize the SAIF and reduce the disparity in the
assessment rates for the BIF and the SAIF. The Funds Act authorized the FDIC
to impose a special assessment on all institutions with SAIF-assessable
deposits in the amount necessary to recapitalize the SAIF. As implemented by
the FDIC, the special assessment was $0.657 per $100 of an institution's SAIF-
assessable deposits as of March 31, 1995. As applied to the Bank, the special
assessment was imposed with respect to the Pioneer deposits, because Pioneer no
longer exists as a corporate entity, as well as the Oakar deposits. However,
under the Funds Act, the Bank was entitled to reduce the amount of such
deposits by 20% in computing the special assessment. Accordingly, the SAIF
special assessment, which totaled $2.0 million, was paid by the Bank in
November, 1996. The SAIF special assessment, although paid in November, 1996,
was recorded as an expense during the three months ended September 30, 1996.
In view of the recapitalization of the SAIF and consistent with certain
requirements of the Funds Act, the FDIC announced, in December, 1996, a
reduction in the rates for the semiannual assessment on SAIF-assessable
deposits for periods beginning on October 1, 1996. The stated assessment rates
effective for the SAIF-assessable deposits of BIF members, such as the Bank,
ranged from 4 to 31 basis points, with a rate of 4 basis points applied to
well-capitalized institutions in the top supervisory group, such as the Bank.
The rule which established these rates provided the FDIC Board the flexibility
to adjust these rates by as much as five basis points without further ruling
required. The FDIC Board utilized this authority immediately to reduce the
stated range to 0 to 27 basis points for the semiannual period beginning
October 1, 1996. This rate range was identical to the rates previously
approved for BIF members. As a result of this ruling, the Bank, as a well-
capitalized institution in the top supervisory group, incurred no assessment
expense during the three months ended December 31, 1996.
Based upon the above, as long as the Bank maintains its current regulatory
status, the Bank will either not have to pay, or will pay substantially lower,
regular SAIF assessments compared to those paid by the Bank prior to and
including the three months ended September 30, 1996, assuming that the
designated reserve ratio of 1.25% is maintained by the SAIF after collection of
the special assessment.
In addition, the Funds Act expanded the assessment base for the payments on the
FICO bonds to include, beginning January 1, 1997, the deposits of both BIF
members and SAIF members. Until December 31, 1999, or such earlier date on
which the last savings association ceases to exist, the rate of assessment for
the FICO bonds on BIF-assessable deposits shall be one-fifth of the rate
imposed on SAIF-assessable deposits. The rate of assessments for the FICO bonds
beginning on January 1, 1997, will be $0.013 per $100 of BIF-assessable
deposits and $0.0648 per $100 of SAIF-assessable deposits.
The Funds Act also provides for the merger of the BIF and SAIF on January 1,
1999, with such merger being conditioned upon the prior elimination of the
thrift charter. The Secretary of the Treasury is required to conduct a study
of relevant factors with respect to the development of a common charter for all
insured depository institutions and abolition of separate charters for banks
and thrifts and to report the Secretary's conclusions and findings to the
Congress on or before March 31, 1997. Two bills have been introduced in
Congress to eliminate the federal thrift charter, with one requiring the
federal thrift to convert to a bank charter and the other giving the federal
thrift the option to convert to a national or state chartered bank or to a
state savings and loan association, but no determination has been made as
to the enactment of either such bill.
RECAPTURE OF BAD DEBT RESERVES. Prior to the enactment, on August 20, 1996, of
the Small Business Job Protection Act of 1996 (the "1996 Act"), for federal
income tax purposes, thrift institutions such as the Bank, which met certain
definitional tests primarily relating to their assets and the nature of their
business, were permitted to establish tax reserves for bad debts and to make
annual additions thereto, which additions could, within specified limitations,
be deducted in arriving at their taxable income. The Bank's deduction with
respect to "qualifying loans," which are generally loans secured by certain
interests in real property, could be computed using an amount based on a six-
year moving average of the Bank's actual loss experience (the "Experience
Method"), or a percentage equal to 8.0% 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. Similar deductions for additions to the Bank's bad debt
reserve were permitted under the New York State Bank Franchise Tax and the New
York City Banking Corporation Tax; however, for purposes of these taxes, the
effective allowable percentage under the PTI method was 32% rather than 8%.
Under the 1996 Act, the PTI Method was repealed and the Bank, as a "large bank"
(one with assets having an adjusted basis of more than $500 million), will be
unable to make additions to its tax bad debt reserve, will be permitted to
deduct bad debts only as they occur and will be required to recapture (I.E.,
take into income) over a six-year period, beginning with the Bank's taxable
year beginning January 1, 1996, the excess of the balance of its bad debt
reserves (other than the supplemental reserve) as of December 31, 1995 over the
greater of the balance of such reserves as of December 31, 1987 (or over a
lesser amount if the Bank's loan portfolio decreased since December 31, 1987).
However, under the 1996 Act, such recapture requirements will be suspended for
each of the two successive taxable years beginning January 1, 1996 in which the
Bank originates a minimum amount of certain residential loans during such years
that is not less than the average of the principal amounts of such loans made
by the Bank during its six taxable years preceding January 1, 1996. Since the
Bank has already provided a deferred income tax liability for this tax for
financial reporting purposes, there was no adverse impact to the Bank's
financial condition or results of operations from the enactment of this
legislation.
On July 30, 1996, New York State (the "State") enacted legislation, effective
January 1, 1996, which generally retains the percentage of taxable income
method for computing allowable bad debt deductions and does not require the
Bank to recapture into income State tax bad debt reserves unless one of the
following events occur: 1) the Bank's retained earnings represented by the
reserve is used for purposes other than to absorb losses from bad debts,
including dividends in excess of the Bank's earnings and profits or
distributions in liquidation or in redemption of stock; 2) the Bank fails to
qualify as a thrift as provided by the State tax law, or 3) there is a change
in state tax law. Prior to adoption of this legislation, the Bank had a
deferred tax liability of approximately $1,848 recorded for the excess of State
tax bad debt reserves over its reserve at December 31, 1987 in accordance with
SFAS 109. In December, 1996 after evaluating the State tax legislation, as well
as relevant accounting literature and industry practices, management of the
Bank concluded that this liability was no longer required to be recorded, and
recovered the full deferred tax liability. This recovery resulted in a
reduction in income tax expense during the three and six-month periods ended
December 31, 1996, for the full amount of the recovered deferred tax liability.
Although New York City is presently addressing conforming its tax law
regarding bad debts to New York State's tax law, has not, to date, enacted
similar legislation. At December 31, 1996, the Bank has a deferred tax
liability of approximately $1,100 recorded for the excess of New York City tax
bad debt reserves over its base year reserve at December 31, 1987.
Should New York City elect to conform their tax law regarding bad debts to
New York State, the Bank will, consistent with New York State income taxes,
recover this deferred tax liability and reduce income tax expense accordingly.
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
PERFORMANCE RATIOS:
Return on average assets (1) (2) 1.61% 1.22% 1.02% 1.23%
RETURN ON AVERAGE STOCKHOLDERS' EQUITY (1) (2) 9.19 10.94 5.75 10.38
AVERAGE STOCKHOLDERS' EQUITY TO AVERAGE ASSETS 17.55 11.14 17.69 11.84
STOCKHOLDERS' EQUITY TO TOTAL ASSETS AT
END OF PERIOD 17.98 12.07 17.98 12.07
TANGIBLE EQUITY TO TANGIBLE ASSETS AT END 15.96 11.97 15.96 11.97
OF PERIOD
AVERAGE INTEREST RATE SPREAD 3.41 4.03 3.33 3.88
NET INTEREST MARGIN 4.13 4.55 4.04 4.41
AVERAGE INTEREST-EARNING ASSETS TO AVERAGE
INTEREST-BEARING LIABILITIES 120.36 114.06 120.15 114.23
NON-INTEREST EXPENSE TO AVERAGE ASSETS 1.83 2.09 2.27 1.92
(1)
EFFICIENCY RATIO (1) 43.73 45.17 55.66 42.81
PER SHARE DATA:
Earnings per share (1) $0.37 N/A $0.46 N/A
Book value per share 15.23 N/A 15.23 N/A
Tangible book value per share 13.19 N/A 13.19 N/A
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans 2,917 $7,626 2,917 $7,626
Other real estate owned, net 2,270 1,907 2,270 1,907
RATIOS:
Non-performing loans to total loans 0.45% 1.73% 0.45% 1.73%
Non-performing loans and other real estate
owned to total assets 0.42 1.43 0.42 1.43%
Allowance for loan losses to:
Non-performing loans 304.80 74.88 304.80 74.88
Total loans 1.38 1.29 1.38 1.29
Full service branches 15 7 15 7
REGULATORY CAPITAL RATIOS: (BANK ONLY)
Tangible capital 10.98% 11.97% 10.98% 11.97%
Core capital 10.99 11.99 10.99 11.99
Risk-based capital 23.25 22.31 23.25 22.31
</TABLE>
(1) Excluding the effects of the SAIF Special Assessment, the reduction in
income tax expense due to the recapture of income taxes previously provided,
and the non-recurring refunds received on Nationar claims, return on average
assets, return on average equity, non-interest expense to average assets, the
efficiency ratio and earnings per share would have been 0.96%, 5.45%, 1.93%,
46.04% and $0.22 respectively for the three months ended December 31, 1996 and
0.87%, 4.90%, 1.98%, 48.63%, and $0.39 for the six months ended
December 31, 1996.
(2) Income before cumulative effect of change in accounting principle is used
to calculate return on average assets and return on average equity ratios.
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 interest rates,
economic conditions and competition.
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 Office of Thrift Supervision
regulations. The minimum required liquidity and short-term liquidity ratios are
currently 5.0% and 1.0%, respectively. At December 31, 1996, the Bank's
liquidity ratio and short-term liquid asset ratios were 19.0% and 8.9%,
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 six months ended December 31, 1996, the Bank's
loan originations totaled $116.1 million compared to $46.6 million for the six
months ended December 31, 1995. Purchases of mortgage-backed and other
securities totaled $226.0 million for the six months ended December 31, 1996
compared to $52.7 million for the six months ended December 31, 1995. These
activities were funded primarily by principal repayments on loans and mortgage-
backed securities and maturities of investment securities. Loan sales provided
additional liquidity to the Bank, totaling $2.8 million for the six months
ended December 31, 1996.
Deposits decreased $1.8 million during the six months ended December 31, 1996.
The Bank experienced a net increase in total deposits of $395.3 million during
the fiscal year ended June 30, 1996, 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. Certificates of deposit which are scheduled to
mature in one year or less from December 31, 1996 totaled $349.6 million.
Based upon the Company's current pricing strategy and deposit retention
experience, management believes that a significant portion of such deposits
will remain with the Company.
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
Federal Home Loan Bank of New York ("FHLBNY") . At December 31, 1996, the Bank
had $41.9 million in short and medium term borrowings outstanding at the
FHLBNY, comprised of outstanding advances of $15.7 million and securities sold
under agreement to repurchase agreements of $26.2 million, and an additional
overall borrowing capacity from the FHLBNY of $110.1 million.
At December 31, 1996, the Bank was in compliance with all applicable regulatory
capital requirements. Tangible capital totaled $126.0 million, or 10.98% of
total tangible assets, compared to a 1.50% regulatory requirement; core
capital, at 10.99%, exceeded the required 3.0% regulatory minimum, and total
risk-based capital, at 23.25% of risk weighted assets, exceeded the 8.0%
regulatory requirement.
<PAGE>
ASSET QUALITY
Non-performing loans, consisting of 60 loans, totaled $2.9 million at December
31, 1996 versus 27 loans totaling $6.6 million at June 30, 1996. The Bank had
30 loans totaling $750,000 delinquent 60-89 days at December 31, 1996, as
compared to 33 such delinquent loans totaling $2.3 million at June 30, 1996.
This decline was attributable to a decline of $1.6 miilion in real estate loans
delinquent 60-89 days, as these loans improved to either current status or 30
days or less delinquent.
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 No. 114, "Accounting by a Creditor for
Impairment of a Loan" ("SFAS 114"). At December 31, 1996, $3.8 million of
loans were deemed impaired under SFAS 114.
Under 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 December 31, 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>
The following table sets forth information regarding the Bank's non-performing
assets and troubled-debt restructurings at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
1996 1996
(Dollars In Thousands)
_______________ ______________
<S> <C> <C>
NON-PERFORMING LOANS:
One- to four-family $1,496 $1,149
Multi-family and underlying cooperative 919 4,734
Non-residential - -
Cooperative apartment 494 668
Non-accrual other loans - -
--------------- --------------
TOTAL NON-PERFORMING LOANS 2,917 6,551
Total OREO 2,270 1,946
--------------- --------------
TOTAL NON-PERFORMING ASSETS $5,187 $8,497
=============== ==============
TROUBLED-DEBT RESTRUCTURINGS $4,671 $4,671
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT $9,858 $13,168
RESTRUCTURINGS
TOTAL NON-PERFORMING LOANS TO TOTAL LOANS 0.45% 1.12%
TOTAL NON-PERFORMING ASSETS TO TOTAL ASSETS (1) 0.42 0.62
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS TO TOTAL ASSETS (1) 0.80 0.96
</TABLE>
(1) Total non-performing assets to total assets and total non-performing
assets and troubled-debt restructurings to total assets were 0.68% and 1.06% at
June 30, 1996 exclusive of the effects on the balance sheet at June 30, 1996 of
the excess proceeds related to the oversubscription to the Company's initial
public offering .
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND JUNE 30, 1996
The Company's assets totaled $1.23 billion at December 31, 1996, a decrease of
$139.8 million from total assets of $1.37 billion at June 30, 1996. The
decrease resulted primarily from the refund, on July 1, 1996, of $131.1 million
in excess proceeds related to the oversubscription to the Company's initial
public offering (the "oversubscription refund"), which were included in Escrow
and other deposits at June 30, 1996. The oversubscription refund was paid
through the maturity of investment securities available for sale of $125.0
million and reduction of $6.1 million in federal funds sold. Excluding the
oversubscription refund, the Company's total investment and mortgage-backed
securities portfolios increased by $16.1 million, with growth of $42.8 million,
$32.6 million and $31.3 million in investment securities held to maturity,
mortgage-backed securities held to maturity, and mortgage backed securities
available for sale, respectively, offset by a decrease of $90.8 million in
investment securities available for sale. The movement of funds into mortgage
backed securities resulted from more attractive rates offered on these
securities during the six-month period ended December 31, 1996. In addition,
real estate loans and loans held for sale increased $58.0 million to $636.1
million at December 31, 1996 compared to $578.1 million at June 30, 1996. This
increase resulted primarily from originations of $116.1 million during the six
months ended December 31, 1996, of which $113.7 million were multi-family and
underlying cooperative and non-residential loans. The increase in originations
resulted primarily from a particularly active local real estate market during
1996.
Offsetting the increases in loans and investment and mortgage backed
securities, excluding the effects of the oversubscription refund, was a
decrease in federal funds sold of $82.2 million. Of the total decline in
federal funds sold, $6.1 million was utilized in the oversubscription refund
and $34.0 million was utilized to fund the payment of the payable for
securities purchased on July 1, 1996. The remainder of the decrease was
utilized to fund the increases in loans and securities.
The decline in total liabilities of $148.3 million during the six months ended
December 31, 1996 resulted primarily from the payment of the $131.1 million
oversubscription refund, which reduced Escrow and other deposits and the
payment of the payable for securities purchased of $34.0 million. Offsetting
these declines, were increased borrowings, as the Company undertook, on a net
basis, $21.1 million in additional Securities sold under agreement to
repurchase transactions during the six months ended December 31, 1996.
The Company's Stockholders' equity totaled $221.6 million, or 17.98% of total
assets, as compared to $213.1 million, or 15.53% at June 30, 1996. At December
31, 1996 the Company's stated book value was $15.23 per share, up from $14.65
per share at June 30, 1996. Tangible Stockholders' equity totaled $191.9
million, representing 15.96% of tangible assets and a $13.19 per share
tangible book value, up from 13.72% and $12.66, respectively, at June 30, 1996.
COMPARISON OF THE OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31,
1996 AND 1995
GENERAL. Net income for the three months ended December 31, 1996 was $4,939,000
or $0.37 per share, compared with $2,030,000 for the three months ended
December 31, 1995, an increase of $2,909,000 or 143.3%. During the three
months ended December 31, 1996, the Company recorded a one-time recovery of
previously recorded New York State income tax expense of $1,848,000, which
resulted in significantly lower income tax expense for the three months ended
December 31, 1996. Net income for the three months ended December 31, 1996,
excluding this one-time recovery was $3,091,000, or $0.23 per share, an
increase of $1,061,000 or 52.3% above the comparable three months of the
previous year.
The discussion of interest income and expense for the three months ended
December 31, 1996 and 1995, presented below, should be read in conjunction with
the following table, which sets forth certain information relating to the
Company's consolidated statements of operations for the three months ended
December 31, 1996 and 1995 and reflects the average yield on assets and average
cost of liabilities for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from average daily balances. The yields and costs include fees which are
considered adjustments to yields.
<PAGE>
<TABLE>
CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1996 1995
-----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
--------------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets: ($ IN THOUSANDS)
Interest-earning assets:
Real Estate Loans (1) $624,498 $13,417 8.59% $436,776 $9,867 9.04%
Other loans 5,312 103 7.76 3,689 81 8.78
MORTGAGE-BACKED SECURITIES (2) 259,097 4,315 6.66 90,582 1,496 6.61
INVESTMENT SECURITIES (2) (3) 234,022 3,885 6.37 93,352 1,597 5.97
FEDERAL FUNDS SOLD 36,854 517 5.61 24,105 344 5.71
--------------- ------------- ------------- -----------
TOTAL INTEREST-EARNING ASSETS 1,159,783 $22,237 7.67% 648,504 $13,385 8.26%
--------------- ======= ------------- ======
NON-INTEREST EARNING ASSETS 64,873 16,741
--------------- -------------
TOTAL ASSETS $1,224,656 $665,245
========= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, SUPER NOW AND
MONEY MARKET ACCOUNTS $56,745 $370 2.61% $30,917 $160 2.07%
SAVINGS ACCOUNTS 349,036 2,083 2.39 229,583 1,423 2.48
CERTIFICATES OF DEPOSIT 509,688 7,174 5.63 286,680 4,156 5.80
MORTGAGORS' ESCROW 3,999 19 1.90 3,617 18 1.99
BORROWED FUNDS 44,132 622 5.64 17,770 251 5.65
--------------- ------------- ------------- -----------
TOTAL INTEREST-BEARING 963,600 $10,268 4.26% 568,567 $6,008 4.23%
LIABILITIES --------------- ======= ------------- ======
CHECKING ACCOUNTS 26,760 10,925
OTHER NON-INTEREST-BEARING 19,331 11,510
LIABILITIES
--------------- -------------
TOTAL LIABILITIES 1,009,691 591,002
STOCKHOLDERS' EQUITY 214,965 74,243
--------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' $1,224,656 $665,245
EQUITY ========= =======
NET INTEREST INCOME/ INTEREST RATE $11,969 3.41% $7,377 4.03%
SPREAD(4) ======= ======
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN (5) $196,183 4.13% $79,937 4.55%
========= =======
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 120.36% 114.06%
</TABLE>
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Includes securities classified "available for sale."
(3) The average yield on investment securities during the three months ended
December 31, 1996 and 1995 have been adjusted to reflect capital gains
distributions of $208 and $272 in December 31, 1996 and December 31, 1995
respectively, which are non-recurring and therefore were not annualized.
(4) Net interest rate spread represents the difference between the average rate
on interest-earning assets and the average cost
of interest-bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
RATE/VOLUME ANALYSIS
THREE MONTHS ENDED
DECEMBER 31, 1996
COMPARED TO
THREE MONTHS ENDED
DECEMBER 31, 1995
INCREASE/(DECREASE)
<TABLE>
<CAPTION>
DUE TO
VOLUME RATE TOTAL
-------------- ------------ ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Real Estate Loans $4,137 $(587) $3,550
Other loans 34 (12) 22
Mortgage-backed securities 2,794 25 2,819
Investment securities 2,146 142 2,288
Federal funds sold 181 (8) 173
-------------- ------------ ------------
Total $9,292 $(440) $8,852
======== ======= =======
Interest-bearing liabilities:
NOW, Super Now and money market
accounts $152 $58 $210
Savings accounts 727 (67) 660
Certificates of deposit 3,186 (168) 3,018
Mortgagors' escrow 2 (1) 1
Borrowed funds 372 (1) 371
-------------- ------------ ------------
Total 4,439 (179) 4,260
-------------- ------------ ------------
Net change in net interest income $4,853 $(261) $4,592
======== ======= =======
</TABLE>
INTEREST INCOME. Interest income for the three months ended December 31, 1996
was $22.2 million, an increase of $8.9 million, or 66.1%, from $13.4 million
during the three months ended December 31, 1995. The largest components
contributing to this increase in interest income were interest income on real
estate loans, investment securities, and mortgage-backed securities, which
increased by $3.6 million, $2.3 million, and $2.8 million, respectively. The
increase in interest income on real-estate loans was attributable to an
increase in the average balance resulting from the acquisition of $113.1
million of loans from Conestoga on June 26, 1996, and an additional increase in
loans of $87.9 during the twelve months ended December 31, 1996 resulting from
originations net of amortization and satisfactions. Offsetting the effects of
this increase was a decline of 44 basis points in the average yield on real-
estate loans during the three months ended December 31, 1996 compared to the
comparable three months in 1995, resulting primarily from the yield on real
estate loans acquired from Conestoga, whose average yield upon acquisition was
approximately 120 basis points below the average yield on the Bank's existing
portfolio, and, to a lesser degree, from lower yields on newly originated
multi-family and non-residential loans compared to the yield on loans satisfied
during the three months. The increases in interest income on investment
securities and mortgage-backed securities were attributable primarily to
increases in average balances during the three months ended December 31, 1996
compared to the three months ended December 31, 1995. These increases were
attributable to the acquisition of $170.8 million and $124.4 million of
investment securities and mortgage-backed securities, respectively, from
Conestoga. In addition, the average yield on investment and mortgage-backed
securities increased by 40 basis points and 5 basis points, respectively,
during the three months ended December 31, 1996 compared to the three months
ended December 31, 1995. The increases in yields resulted primarily from
higher yields on securities acquired or repricing during the twelve months
ended December 31, 1996. During the three months ended December 31, 1996 and
1995, the Company received annual capital gains distributions totaling $208,000
and $272,000 respectively on its investments in marketable equity securities.
These capital gain distributions, recorded as interest income, increase the
overall yield on investments during the three months ended December 31, 1996
and 1995. In calculating the Company's net interest spread and net interest
margin during the quarters ended December 31, 1996 and 1995, these
distributions have been treated as non-recurring and have been excluded from
annualized income.
INTEREST EXPENSE. Interest expense increased $4.3 million, or 70.9%, to $10.3
million during the three months ended December 31, 1996 from $6.0 million
during the three months ended December 31, 1995. This increase resulted
primarily from increases of $3.0 million, $660,000 and $210,000 in interest
expense on Certificate of Deposit accounts, Savings accounts and NOW, SuperNOW
and Money Market accounts, respectively. The increases in interest expense on
Certificate of Deposit accounts and Savings accounts resulted from increased
average balances during the three months ended December 31, 1996 compared to
the three months ended December 31, 1995. The acquisition of $216.3 million
and $129.2 million of Certificate of Deposit accounts and Savings accounts,
respectively, from Conestoga contributed significantly to these average
balance increases. Offsetting the increase in interest expense created from
the growth in average balances, was the decrease in average cost on Certificate
of Deposit accounts and passbook accounts of 17 basis points and 9 basis
points, respectively. During the six months ended December 31, 1996,
management's overall deposit pricing strategy resulted in a decrease in passbook
rates which produced a lower overall cost on these deposits. Certificate of
deposit costs declined due to reduced rates offered on Certificate of Deposit
accounts renewed or originated during 1996 compared to existing accounts
maturing. The increase in interest expense on NOW, SuperNOW and Money
Market accounts resulted from increases of $25.8 million and 54 basis points in
average balance and average cost, respectively, during the three months ended
December 31, 1996 compared to the three months ended December 31, 1995. The
increase in average balance and average cost on NOW, SuperNOW and Money
Market accounts resulted primarily from $31.8 million of such accounts
acquired from Conestoga and increased rates offered on money market
accounts, the largest component of these accounts, of approximately 60 basis
points during the three months ended December 31, 1996, compared to the three
months ended December 31, 1995.
In addition, interest expense on borrowed funds increased $371,000 during the
three months ended December 31, 1996 compared to the three months ended
December 31, 1995. This increase resulted from an increase in average balance
on borrowings of $26.4 million as the Company utilized these borrowings to
leverage capital and provide additional earnings.
PROVISION FOR LOAN LOSSES. The Provision for Loan Losses increased $700,000, or
200%, to $1,050,000 for the three months ended December 31, 1996 from $350,000
for the three months ended December 31, 1995. Net charge-offs during the three
months ended December 31, 1996 were $820,000, which, together with the
provision, resulted in an increase in the allowance for loan losses to $8.9
million at December 31, 1996 from $8.7 million at September 30, 1996. Although
total non-performing loans have declined significantly during the three months
ended December 31, 1996, in management's judgment, it was prudent to continue
the loan loss provision to supplement the loan loss allowance, based upon the
Bank's growing volume of multi-family loan originations, the composition of its
loan portfolio and its recent charge-off history. See "Asset Quality."
NON-INTEREST INCOME. Non-interest income increased $865,000 to $1,052,000
during the three months ended December 31, 1996 compared to $187,000 during the
three months ended December 31, 1995. This increase was attributable primarily
to increases of $298,000 and $225,000 in service charges and other fees, and
other income, respectively. Contributing to the increase in service charge and
other fee income were increases of $112,000 related to safe deposit boxes,
$86,000 related to the Bank's funding of official checks and customer money
orders, and $96,000 related to deposit account activities. The increase in
other income was attributable primarily to rental income of $63,000 received
from retail and other commercial premises acquired from Conestoga. Also
contributing to the increase in other income were increases of $43,000, $29,000
and $30,000 on Federal Home Loan Bank of New York capital stock dividend
income, late charges on mortgage loans, and loan prepayment penalty income,
respectively.
In addition, the Bank recorded net gains on sales and calls of securities and
other assets of $135,000 during the three months ended December 31, 1996
compared to a net loss of $164,000 on this activity during the three months
ended December 31, 1995, an aggregate increase of $299,000. The largest
component of this change were sale and call activity related to investment
securities, which produced a net gain of $99,000 during the three months ended
December 31, 1996 compared to a net loss of $139,000 during the three months
ended December 31, 1995. Neither the Company nor the Bank engage in securities
trading activity. Security sales are periodic events which are made in response
to management's ongoing review of the investment securities portfolio in
relation to other investment alternatives.
NON-INTEREST EXPENSE. Non-interest expense increased $2.1 million to $5.6
million during the three months ended December 31, 1996 from $3.5 million
during the three months ended December 31, 1995. This increase resulted from
increased salary and employee benefits, occupancy and equipment, data
processing, and other operating expenses of $497,000, $443,000, $85,000, and
$384,000, respectively, resulting from both the recent acquisition of Conestoga
and operations as a public company. The increase in other operating expenses
would otherwise have been larger except for non-recurring refunds totaling
$296,000 received during the three months ended December 31, 1996 related to
outstanding asset claims of the Bank in connection with Nationar, a failed
check-clearing and trust company. These four expense items, exclusive of the
effects of the refunds received on Nationar claims, declined, in the aggregate,
by 16.3% as a percentage of average assets during the three months ended
December 31, 1996 compared to the three months ended December 31, 1995.
In addition, during the three months ended December 31, 1996, the Bank incurred
expenses of $361,000 related to Employee Stock Ownership Plan ("ESOP") benefits
and $606,000 related to goodwill amortization resulting from its acquisition of
Conestoga. These expenses were not recorded during the three months ended
December 31, 1995, since, as of December 31, 1995, the Bank had not completed
its initial public offering (whereby the ESOP began operations) nor its
acquisition of Conestoga (whereby goodwill was generated).
Partially offsetting these increased expenses were decreases of $74,000 and
$176,000 related to federal deposit insurance premiums and provision for losses
on other real estate owned, respectively. In response to the special
assessment charged to the Bank during the three months ended September 30,
1996, the FDIC issued a refund to the Bank for its premium paid during the
three months ended December 31, 1996. As a result the Bank did not incur
federal deposit insurance expense during the three months ended December 31,
1996. The reduction in the provision for losses on other real estate owned
resulted from management's periodic review of reserves established for losses
on other real estate owned. Overall, non-interest expense as a percentage of
average assets, excluding the effects of the refunds of claims with Nationar,
decreased to 1.93% for the three months ended December 31, 1996 from 2.09% for
the three months ended December 31, 1995.
INCOME TAX EXPENSE. Income tax expense, exclusive of the $1,848,000 recovery
of New York State income taxes previously recorded, totaled $3.3 million during
the three months ended December 31, 1996 compared to $1.7 million during the
three months ended December 31, 1995, an increase of $1.6 million. This
increase was attributable to both an increase of $2.6 million in pre-tax income
and an increase in the effective tax rate from 45.7% for the three months
ended December 31, 1995 to 51.5% for the three months ended December 31, 1996.
The increased effective tax rate during the three months ended December 31,
1996 resulted primarily from the acquisition of Conestoga being accounted for
as a tax-free transaction, resulting in the Company receiving no tax benefit
for goodwill expense. In addition, the Company received no tax deduction for
$110,000 of ESOP benefit expense related to the excess of the average fair
market value of the Company's stock during the three months ended December 31,
1996 over the original purchase price of the stock by the ESOP. Excluding the
effects of these items, the effective tax rate for the three months ended
December 31, 1996 was 46.3%. For a description of the $1,848,000 recovery, See
Note 3 of the Notes to the Consolidated Financial Statements.
COMPARISON OF THE OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
AND 1995
GENERAL. Net income for the six months ended December 31, 1996 totaled $6.2
million compared to $3.1 million during the six months ended December 31, 1995.
Net income for the six months ended December 31, 1996 was affected by both the
New York State income tax recovery of $1,848,000 and the one-time special
assessment of $1,097,000, after taxes, for the recapitalization of the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC") recorded during the quarter ended September 30, 1996. Net
income for the six months ended December 31, 1996, excluding certain non-
recurring items, which include the one-time SAIF assessment and one-time
recovery of previously recorded New York State income tax expense, was
$5,252,000, or $0.39 per share.
Also affecting the comparison of the six months ended December 31, 1996 and
1995 was the Bank's adoption, on July 1, 1995 of Statement of Financial
Accounting Standards No. 106, "Accounting for Post-Retirement Benefits Other
than Pensions," whereby the Bank elected to record the full accumulated post-
retirement medical benefit obligation upon adoption. Adoption of this standard
resulted in a cumulative effect reduction of net income of approximately $1.0
million for the six months ended December 31, 1995. Income before cumulative
effect of change in accounting principles for the six months ended December
31, 1995 was $4,094,000.
The discussion of interest income and expense for the six months ended December
31, 1996 and 1995, presented below, should be read in conjunction with the
following table, which sets forth certain information relating to the Company's
consolidated statements of operations for the six months ended December 31,
1996 and 1995 and reflects the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived from average
daily balances. The yields and costs include fees which are considered
adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-------------- ------------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets: ($ In Thousands)
Interest-earning assets:
Real Estate Loans (1) $608,032 $26,064 8.57% $432,137 $19,532 9.04%
Other loans 5,413 235 8.68 3,691 164 8.89
Mortgage-backed securities (2) 234,210 8,013 6.84 90,096 3,007 6.68
Investment securities (2) (3) 250,135 7,803 6.16 99,164 2,908 5.87
Federal funds sold 47,415 1,334 5.63 23,358 665 5.69
-------------- ------------- -------------- -----------
Total interest-earning 1,145,205 $43,449 7.59% $648,446 $26,276 8.10
assets
Non-interest earning assets 65,608 ======= 18,150 ======
-------------- --------------
Total assets $1,210,813 666,596
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW, Super Now and money
market accounts $58,377 $785 2.69% $30,844 $321 2.08%
Savings accounts 352,698 4,320 2.45 231,539 2,905 2.51
Certificates of deposit 503,798 14,192 5.63 284,049 8,220 5.79
Mortgagors' escrow 3,716 38 2.05 3,428 35 2.04
Borrowed Funds 34,592 980 5.67 17,795 505 5.68
-------------- ------------- -------------- -----------
Total interest-bearing 953,181 $20,315 4.26% $567,655 $11,986 4.22%
liabilities -------------- ======= -------------- ======
Checking accounts 27,027 11,288
Other non-interest-bearing 16,407 8,744
liabilities
-------------- --------------
Total liabilities 996,615 587,687
Stockholders' equity 214,198 78,909
-------------- --------------
Total liabilities and
stockholders' $1,210,813 $666,596
equity
======== ========
Net interest income/interest
rate spread (4) $23,234 3.33% $14,290 3.88%
======= =======
Net interest-earning assets/net
interest margin (5) $192,024 4.04% $80,791 4.41%
======== ========
Ratio of interest-earning assets
to interest-bearing liabilities 120.15% 114.23%
</TABLE>
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Includes securities classified "available for sale."
(2) The average yield on investment securities during the six months ended
December 31, 1996 and 1995 have been adjusted to reflect capital gains
distributions of $208 and $272 in December 31, 1996 and December 31, 1995
respectively, which are non-recurring and therefore were not annualized.
(4) Net interest rate spread represents the difference between the average rate
on interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
<PAGE>
RATE/VOLUME ANALYSIS
THREE MONTHS ENDED
DECEMBER 31, 1996
COMPARED TO
THREE MONTHS ENDED
DECEMBER 31, 1995
INCREASE/(DECREASE)
DUE TO
<TABLE>
<CAPTION>
VOLUME RATE TOTAL
_______________ _____________ ___________
<S> <C> <C> <C>
Interest-earning assets:
Real Estate Loans $7,745 $(1,213) $6,532
Other loans 76 (5) 71
Mortgage-backed securities 4,870 136 5,006
Investment securities 4,589 306 4,895
Federal funds sold 681 (12) 669
--------------- ------------- -----------
Total $17,961 $(788) $17,173
======== ======= ======
Interest-bearing liabilities:
NOW, Super Now and money market $329 135 $464
accounts
Savings accounts 1,502 (87) 1,415
Certificates of deposit 6,275 (303) 5,972
Mortgagors' escrow 3 - 3
Borrowed Funds 477 (2) 475
------------- ------------- -----------
Total 8,586 (257) 8,329
======== ======= ======
Net change in net interest income $9,375 $(531) $8,844
======== ======= ======
</TABLE>
INTEREST INCOME. Interest income for the six months ended December 31, 1996
was $43.4 million, an increase of $17.1 million, or 65.4%, from $26.3
million during the six months ended December 31, 1995. The largest
components contributing to this increase in interest income were interest
income on real estate loans, investment securities, and mortgage-backed
securities, which increased by $6.5 million, $4.9 million, and $5.0
million, respectively. The increase in interest income on real-estate
loans was attributable to an increase in the average balance resulting from
the acquisition of $113.1 million of loans from Conestoga on June 26, 1996,
and an additional increase in loans of $87.9 during the twelve months ended
December 31, 1996 resulting from originations net of amortization and
satisfactions. Offsetting the effects of this increase was a decline of 47
basis points in the average yield on real-estate loans during the six
months ended December 31, 1996 compared to the comparable six months in
1995, resulting primarily from the yield on real estate loans acquired from
Conestoga, whose average yield upon acquisition was approximately 120 basis
points below the average yield on the Bank's existing portfolio, and, to a
lesser degree, from lower yields on newly originated multi-family and non-
residential loans compared to the yield on loans satisfied during the six
months. The increases in interest income on investment securities and
mortgage-backed securities were attributable primarily to increases in
average balances during the six months ended December 31, 1996 compared to
the six months ended December 31, 1995. These increases were attributable
to the acquisition of $170.8 million and $124.4 million of investment
securities and mortgage-backed securities, respectively, from Conestoga.
In addition, the average yield on investment and mortgage-backed securities
increased by 29 basis points and 16 basis points, respectively, during the
six months ended December 31, 1996 compared to the six months ended
December 31, 1995. The increases in yields resulted primarily from higher
yields on securities acquired or repricing during the twelve months ended
December 31, 1996. During the six months ended December 31, 1996 and 1995,
the Company received annual capital gains distributions totaling $208,000
and $272,000 respectively on its investments in marketable equity
securities. These capital gain distributions, recorded as interest income,
increase the overall yield on investments during the six months ended
December 31, 1996 and 1995. In calculating the Company's net interest
spread and net interest margin during the six months ended December 31,
1996 and 1995, these distributions have been treated as non-recurring and
have been excluded from annualized income.
INTEREST EXPENSE. Interest expense increased $8.3 million, or 69.5%, to
$20.3 million during the six months ended December 31, 1996 from $12.0
million during the six months ended December 31, 1995. This increase
resulted primarily from increases of $6.0 million, $1.4 million and
$464,000 in interest expense on Certificate of Deposit accounts, Savings
accounts and NOW, SuperNOW and Money Market accounts, respectively. The
increases in interest expense on Certificate of Deposit accounts and
Savings accounts resulted from increased average balances during the six
months ended December 31, 1996 compared to the six months ended December
31, 1995. The acquisition of $216.3 million and $129.2 million of
Certificate of Deposit accounts and Savings accounts, respectively, from
Conestoga contributed significantly to these average balance increases.
Offsetting the increase in interest expense created from the growth in
average balances, was the decrease in average cost on Certificate of
Deposit accounts and passbook accounts of 16 basis points and 6 basis
points, respectively. During the six months ended December 31, 1996,
management's overall deposit pricing strategy resulted in a decrease in
passbook rates which produced a lower overall cost on these deposits.
Certificate of deposits costs declined due to reduced rates offered on
Certificate of deposit accounts renewed or originated during 1996 compared
to existing accounts maturing. The increase in interest expense on NOW,
SuperNOW and Money Market accounts resulted from increases of $27.5 million
and 61 basis points in average balance and average cost, respectively,
during the six months ended December 31, 1996 compared to the six
months ended December 31, 1995. The increase in average balance and
average cost on NOW, SuperNOW and Money Market accounts resulted
primarily from $31.8 million of such accounts acquired from Conestoga
and increased rates offered on money market accounts, the largest component
of these accounts, of approximately 60 basis points during the six months
ended December 31, 1996 compared to the six months ended December 31, 1995.
In addition, interest expense on borrowed funds increased $475,000 during
the six months ended December 31, 1996 compared to the six months ended
December 31, 1995. This increase resulted from an increase in average
balance on borrowings of $16.8 million as the Company utilized these
borrowings to leverage capital and provide additional earnings.
PROVISION FOR LOAN LOSSES. The Provision for Loan Losses increased
$1,150,000, or 121%, to $2,100,000 for the six months ended December 31,
1996 from $950,000 for the six months ended December 31, 1995. The
Allowance for loan losses increased by $1,079,000 during the six months
ended December 31, 1996 as the loan loss provision of $2,100,000 was offset
by net charge-offs of $1,021,000. While the allowance for loan losses
increased, non-performing loans declined from $6.6 million at June 30, 1996
to $2.9 million at December 31, 1996. The allowance for loan losses as a
percentage of non-performing loans and total loans was 303.14% and 1.39%
respectively at December 31, 1996, compared to 119.25% and 1.34%,
respectively, at June 30, 1996. In management's judgment, it was prudent
to continue the loan loss provision, to supplement the loan loss allowance,
based upon the Bank's growing volume of multi-family loan originations, the
composition of its loan portfolio and the Bank's recent charge-off
experience. See "Asset Quality."
NON-INTEREST INCOME. Non-interest income increased $1.2 million to $1.8
million during the six months ended December 31, 1996 compared to $601,000
during the six months ended December 31, 1995. This increase was
attributable primarily to increases of $522,000 and $362,000 in service
charges and other fees, and other income, respectively. Contributing to
the increase in service charge and other fee income were increases of
$181,000 related to safe deposit boxes, $117,000 related to the Bank's
funding of official checks and customer money orders and $147,000 related
to deposit account activities. The increase in other income was
attributable primarily to rental income of $126,000 received from retail
and other commercial premises acquired from Conestoga. Also contributing to
the increase in other income were increases of $72,000, $74,000 and
$110,000 on Federal Home Loan Bank of New York capital stock dividend
income, late charges on mortgage loans, and loan prepayment penalty income,
respectively.
In addition, the Bank recorded net gains on sales and calls of securities
and other assets of $171,000 during the six months ended December 31, 1996
compared to a net loss of $81,000 on this activity during the six months
ended December 31, 1995, an aggregate increase of $252,000. The largest
component of this change were sales and call activity related to investment
securities which produced a net gain of $99,000 during the six months ended
December 31, 1996 compared to a net loss of $139,000 during the six months
ended December 31, 1995. Neither the Company nor the Bank engage in
securities trading activity. Security sales are periodic events which are
made in response to management's ongoing review of the investment
securities portfolio in relation to other investment alternatives.
NON-INTEREST EXPENSE. Non-interest expense increased $7.3 million to $13.7
million during the six months ended December 31, 1996 from $6.4 million
during the six months ended December 31, 1995. The largest component of
this increase was a total increase of $2.2 million in federal deposit
insurance premiums. During the six months ended December 31, 1995, the Bank
received a refund of $319,000 related to its insurance expense on deposits
which were insured by the the FDIC, which reduced its federal deposit
insurance premium expense for the period to $63,000. During the six months
ended December 31, 1995, virtually all of the Bank's deposits were insured
by the BIF. As a result of the Acquisition of Pioneer the Bank acquired
$394.3 million in deposits which were insured by the SAIF. The Bank paid
higher assessment rates on these deposits during the three months ended
September 30, 1996. In addition, the Bank was required to pay $2.0
million, before taxes, related to the SAIF Special Assessment during the
three months ended September 30, 1996 on all of its SAIF deposits, which
was primarily comprised of the deposits obtained from Pioneer. As a result
of the recapitalization of SAIF, the Bank, which currently has a BIF/SAIF
deposit ratio of 54/46, expects to save, through reduced FDIC premium
rates, approximately $165,000 per quarter beginning January 1, 1997, based
upon current deposit levels.
The Company also incurred increased salary and employee benefits expense,
occupancy and equipment expense, data processing costs, and other operating
expenses of $1.1 million, $768,000, $213,000, and $967,000, respectively,
resulting from both the recent acquisition of Conestoga and operations as a
public company. The increase in other operating expenses would otherwise
have been larger except for non-recurring refunds totaling $296,000
received during the six months ended December 31, 1996 related to
outstanding asset claims of the Bank in connection with Nationar, a failed
check-clearing and trust company. These four expense items, exclusive of
the effects of the refunds received on Nationar claims, declined, in the
aggregate, by 14.5% as a percentage of average assets during the six months
ended December 31, 1996 compared to the six months ended December 31, 1995.
Overall, non-interest expense as a percentage of average assets, exclusive
of the effects of the SAIF special assessment and refund of claims with
Nationar, increased slightly to 1.98% for the six months ended December 31,
1996 from 1.92% for the six months ended December 31, 1995.
In addition, during the six months ended December 31, 1996, the Bank
incurred expenses of $824,000 related to ESOP benefits and $1.2 million
related to goodwill amortization resulting from its acquisition of
Conestoga. These expenses were not recorded during the six months ended
December 31, 1995, since, as of December 31, 1995, the Bank had not
completed its initial public offering (whereby the ESOP began operations)
nor its acquisition of Conestoga (whereby goodwill was generated).
INCOME TAX EXPENSE. Income tax expense, exclusive of the recovery of
income taxes previously recorded, totaled $4.8 million during the six
months ended December 31, 1996 compared to $3.4 million during the six
months ended December 31, 1995, an increase of $1.4 million. This increase
was attributable to both an increase of $1.6 million in pre-tax income and
an increase in the effective tax rate from 45.7% for the six months ended
December 31, 1995 to 52.6% for the six months ended December 31, 1996. The
increased effective tax rate during the six months ended December 31, 1996
resulted primarily from the acquisition of Conestoga being accounted for as
a tax-free transaction, resulting in the Company receiving no tax benefit
for goodwill expense. In addition, the Company received no tax deduction
for $209,000 of ESOP benefit expense related to the excess of the average
fair market value of the Company's stock during the quarter ended December
31, 1996 over the original purchase price of the stock by the ESOP.
Excluding the effects of these items, the effective tax rate for the six
months ended December 31, 1996 was 45.6%.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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. By stipulation dated
January 16, 1997, the Plaintiff voluntary dismissed the case without
prejudice.
On December 5, 1996, Dime Bancorp, Inc. and its wholly-owned subsidiary,
Dime Savings Bank of New York, FSB (together "Dime of New York,") filed a
complaint in the United States District Court, Southern District of New
York against the Company and the Bank. Dime of New York alleges
violations of New York State and federal trademark law and unfair
competition law. Dime of New York seeks injunctive relief in the form of an
order requiring the Bank to use its full name with identical type-size and
type-style in marketing and advertising materials, or in the alternative
requiring the Bank to change its name, due to alleged inequitable conduct.
The complaint also seeks an order requiring the Company to change its
corporate name and change its Nasdaq Stock Market trading symbol "DIME."
Dime of New York does not seek monetary damages.
The Company and the Bank have answered the complaint and filed
counterclaims in which they seek to enjoin the Dime of New York from
employing service marks that are confusingly similar to the Company's and
the Bank's service marks. The action is in the preliminary stages of
discovery. The Company and the Bank intend to defend vigorously these
claims made against them and pursue their counterclaims.
The Bank is involved in various legal actions arising in the ordinary course
its business which, in the aggregate, involve amounts which are believed to
be immaterial to the financial condiditon and results of operations of the
Bank.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(c) The Company's Annual Meeting of Shareholders was held on December
17, 1996.
(b) Not applicable.
<PAGE>
( c ) The following is a summary of the matters voted upon at the
meeting and the votes obtained:
<TABLE>
<CAPTION>
VOTES VOTES BROKER
DESCRIPTION VOTES FOR AGAINST ABSTENTIONS WITHHELD NON-VOTES
<S> <C> <C> <C> <C> <C>
1) Election of the following
individuals as Director for a
term of three years:
Vincent F. Palagiano 12,491,254 -0- -0- 97,426 -0-
George L. Clark, Jr. 12,492,701 -0- -0- 95,979 -0-
Steven D. Cohn 12,460,801 -0- -0- 127,879 -0-
Joseph H. Farrell 12,474,454 -0- -0- 114,226 -0-
John J. Flynn 12,468,954 -0- -0- 119,726 -0-
2) Ratification of the Dime
Community Bancorp, Inc. 1996
Stock Option Plan for Outside
Directors, Officers and
Employees 8,626,738 799,652 89,435 -0- 2,972,855
3) Ratification of the
Recognition and Retention
Plan for Outside Directors,
Officers and Employees of
Dime Community Bancorp, Inc. 8,046,387 1,388,099 181,344 -0- 2,972,850
4) Ratification of the
appointment of Deloitte &
Touche LLP to act as
independent auditors for the
Company for the fiscal year
ended June 30, 1997 12,449,195 67,524 71,961 -0- -0-
</TABLE>
(d) Not applicable.
ITEM 5. OTHER INFORMATION
On February 10, 1997, the Company received approval from the Office of
Thrift Supervision ("OTS") to repurchase, into treasury stock, up to
1,454,750 shares, or 10%, of its outstanding common stock (the "Repurchase
Program"). The Repurchase Program is expected to commence on, or after,
February 13, 1997 and is scheduled to expire on June 26, 1997, the one-year
anniversary of the Bank's conversion to stock form. All shares acquired
for the Repurchase Program will be purchased in open market transactions.
The Repurchase Program will be executed in addition to the purchase of
581,900 shares, or 4%, of the Company's common stock by the Recognition and
Retention Plan ("RRP"), which was approved by the shareholders at the
Company's recent Annual meeting. See "Item 4 - Submission of Matters to a
Vote of Security Holders." On February 10, 1997, the Company filed notice
with the OTS of the RRP's intention to purchase shares of the Company's
common stock, which purchases are permitted to commence on February 20, 1997.
Shares acquired for the RRP will be purchased by an independent trustee
in either open market or privately negotiated transactions.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 3(ii). Amended and Restated bylaws of Dime Community
Bancorp, Inc.
Exhibit 27. Financial Data Schedule (included only with EDGAR filing).
(B) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunder duly authorized.
Dime Community Bancorp, Inc.
Dated: February 14, 1997 By: /s/ Vincent F. Palagiano
-------------------------------------
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Vincent F. Palagiano
Chairman of the Board and
Chief Executive Officer
Dated: February 14, 1997 By: /s/ Kenneth J. Mahon
-------------------------------------
- ----------------------
Kenneth J. Mahon
Executive Vice President and
Chief Financial Officer
EXHIBIT 3(II)
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- -------------------------------------------------------------------------
AMENDED AND RESTATED BYLAWS
OF
DIME COMMUNITY BANCORP, INC.
Adopted on December 14, 1995
Amended and Restated on January 9, 1997
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<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
OFFICES
Section 1. Registered Office 1
Section 2. Additional Offices 1
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 1
Section 4. Notice of Meetings 1
Section 5. Waiver of Notice 2
Section 6. Fixing of Record Date 2
Section 7. Quorum 2
Section 8. Conduct of Meetings 2
Section 9. Voting; Proxies 3
Section 10. Inspectors of Election 3
Section 11. Procedure for Nominations 4
Section 12. Substitution of Nominees 5
Section 13. New Business 5
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock 6
Section 2. Transfer Agent and Registrar 6
Section 3. Registration and Transfer of Shares 6
Section 4. Lost, Destroyed and Mutilated Certificates 7
Section 5. Holder of Record 7
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors 7
Section 2. Qualifications 7
Section 3. Mandatory Retirement 7
Section 4. Regular and Annual Meetings 7
Section 5. Special Meetings 8
Section 6. Notice of Meetings; Waiver of Notice 8
Page
------
Section 7. Conduct of Meetings 8
Section 8. Quorum and Voting Requirements 8
Section 9. Informal Action by Directors 8
Section 10. Resignation 9
Section 11. Vacancies 9
Section 12. Compensation 9
Section 13. Amendments Concerning the Board 9
ARTICLE V
COMMITTEES
Section 1. Standing Committees 9
Section 2. Executive Committee 10
Section 3. Audit Committee 10
Section 4. Compensation Committee 11
Section 5. Nominating Committee 11
Section 6. Other Committees 11
ARTICLE VI
OFFICERS
Section 1. Number 12
Section 2. Term of Office and Removal 12
Section 3. Chairman of the Board 12
Section 4. President 13
Section 5. Vice Presidents 13
Section 6. Secretary 13
Section 7. Comptroller 13
Section 8. Treasurer 13
Section 9. Other Officers and Employees 13
Section 10. Compensation of Officers and Others 13
ARTICLE VII
DIVIDENDS
14
ARTICLE VIII
AMENDMENTS
14
<PAGE>
BYLAWS
OF
DIME COMMUNITY BANCORP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Dime
Community Bancorp, Inc. (the "Corporation") in the State of Delaware
shall be in the City of Wilmington, County of New Castle.
SECTION 2. ADDITIONAL OFFICES. The Corporation may also have
offices and places of business at such other places, within or without
the State of Delaware, as the Board of Directors (the "Board") may from
time to time designate or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as may be fixed by the Board and designated in the notice of
meeting. If no place is so fixed, they shall be held at the principal
administrative office of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders
of the Corporation for the election of directors and the transaction of
any other business which may properly come before such meeting shall be
held each year on a date and at a time to be designated by the Board.
SECTION 3. SPECIAL MEETINGS. Special meetings of shareholders,
for any purpose, may be called at any time only by the Chairman of the
Board or by resolution of at least three-fourths of the entire Board.
Special meetings shall be held on the date and at the time and place as
may be designated by the Board. At a special meeting, no business shall
be transacted and no corporate action shall be taken other than that
stated in the notice of meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by
law, written notice stating the place, date and hour of any meeting of
shareholders and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered to each
shareholder of record entitled to vote at such meeting, either personally
or by mail not less than ten (10) nor more than sixty (60) days before
the date of such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the U.S. mail, with postage thereon prepaid,
addressed to the shareholder at his or her address as it appears on the
stock transfer books or records of the Corporation as of the record date
prescribed in Section 6 of this Article II, or at such other address as
the shareholder shall have furnished in writing to the Secretary. Notice
of any special meeting shall indicate that the notice is being issued by
or at the direction of the person or persons calling such meeting. When
any meeting of shareholders, either annual or special, is adjourned to
another time or place, no notice of the adjourned meeting need be given,
other than an announcement at the meeting at which such adjournment is
taken giving the time and place to which the meeting is adjourned;
provided, however, that if the adjournment is for more than thirty (30)
days, or if after adjournment, the Board fixes a new record date for the
adjourned meeting, notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
SECTION 5. WAIVER OF NOTICE. Notice of any annual or special
meeting need not be given to any shareholder who submits a signed waiver
of notice of any meeting, in person or by proxy or by his or her duly
authorized attorney-in-fact, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy, shall
constitute a waiver of notice by such shareholder, except where a
shareholder attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend or other distribution or the allotment of
any rights, or in order to make a determination of shareholders for any
other purpose, the Board shall fix a date as the record date for any such
determination of shareholders, which date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board.
Such date in any case shall be not more than sixty (60) days and, in the
case of a meeting of shareholders, not less than ten (10) days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided
in this Section 6, such determination shall, unless otherwise provided by
the Board, also apply to any adjournment thereof. If no record date is
fixed, (a) the record date for determining shareholders entitled to
notice of or vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which the notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and (b) the record date
for determining shareholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 7. QUORUM. The holders of record of a majority of the
total number of votes eligible to be cast in the election of directors
generally by the holders of the outstanding shares of the capital stock
of the Corporation entitled to vote thereat, represented in person or by
proxy, shall constitute a quorum for the transaction of business at a
meeting of shareholders, except as otherwise provided by law, these
Bylaws or the Certificate of Incorporation. If less than a majority of
such total number of votes are represented at a meeting, a majority of
the number of votes so represented may adjourn the meeting from time to
time without further notice, PROVIDED, that if such adjournment is for
more than thirty days, a notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally
called. When a quorum is once present to organize a meeting of
shareholders, such quorum is not broken by the subsequent withdrawal of
any shareholders.
SECTION 8. CONDUCT OF MEETINGS. The Chairman of the Board shall
serve as chairman at all meetings of the shareholders or, if the Chairman
of the Board is absent or otherwise unable to so serve, the President
shall serve as chairman at any meeting of shareholders held in such
absence. If both the Chairman of the Board and the President are absent
or otherwise unable to so serve, such other person as shall be appointed
by a majority of the entire Board of Directors shall serve as chairman at
any meeting of shareholders held in such absence. The Secretary or, in
his or her absence, such other person as the chairman of the meeting
shall appoint, shall serve as secretary of the meeting. The chairman of
the meeting shall conduct all meetings of the shareholders in accordance
with the best interests of the Corporation and shall have the authority
and discretion to establish reasonable procedural rules for the conduct
of such meetings, including such regulation of the manner of voting and
the conduct of discussion as he or she shall deem appropriate.
SECTION 9. VOTING; PROXIES. Each shareholder entitled to vote
at any meeting may vote either in person or by proxy. Unless otherwise
specified in the Certificate of Incorporation or in a resolution, or
resolutions, of the Board providing for the issuance of preferred stock,
each shareholder entitled to vote shall be entitled to one vote for each
share of capital stock registered in his or her name on the transfer
books or records of the Corporation. Each shareholder entitled to vote
may authorize another person or persons to act for him or her by proxy.
All proxies shall be in writing, signed by the shareholder or by his or
her duly authorized attorney-in-fact, and shall be filed with the
Secretary before being voted. No proxy shall be valid after three (3)
years from the date of its execution unless otherwise provided in the
proxy. The attendance at any meeting by a shareholder who shall have
previously given a proxy applicable thereto shall not, as such, have the
effect of revoking the proxy. The Corporation may treat any duly
executed proxy as not revoked and in full force and effect until it
receives a duly executed instrument revoking it, or a duly executed proxy
bearing a later date. If ownership of a share of voting stock of the
Corporation stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, any one or more of
such shareholders may cast all votes to which such ownership is entitled.
If an attempt is made to cast conflicting votes by the several persons in
whose names shares of stock stand, the vote or votes to which those
persons are entitled shall be cast as directed by a majority of those
holding such stock and present at such meeting. If such conflicting
votes are evenly split on any particular matter, each faction may vote
the securities in question proportionally, or any person voting the
shares, or a beneficiary, if any, may apply to the Court of Chancery or
such other court as may have jurisdiction to appoint an additional person
to act with the persons so voting the shares, which shall then be voted
as determined by a majority of such persons and the person appointed by
the Court. Except for the election of directors or as otherwise provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings
of shareholders, all matters shall be determined by a vote of the holders
of a majority of the number of votes eligible to be cast by the holders
of the outstanding shares of capital stock of the Corporation present and
entitled to vote thereat. Directors shall, except as otherwise required
by law, these Bylaws or the Certificate of Incorporation, be elected by a
plurality of the votes cast by each class of shares entitled to vote at a
meeting of shareholders, present and entitled to vote in the election.
SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting
of shareholders, the Board shall appoint one or more persons, other than
officers, directors or nominees for office, as inspectors of election to
act at such meeting or any adjournment thereof. Such appointment shall
not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the meeting shall make such appointment at the
meeting. If any person appointed as inspector fails to appear or fails
or refuses to act at the meeting, the vacancy so created may be filled by
appointment by the Board in advance of the meeting or at the meeting by
the chairman of the meeting. The duties of the inspectors of election
shall include determining the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, receiving votes, ballots or
consents, hearing and deciding all challenges and questions arising in
connection with the right to vote, counting and tabulating all votes,
ballots or consents, determining the results, and doing such acts as are
proper to the conduct of the election or the vote with fairness to all
shareholders. Any report or certificate made by them shall be PRIMA
FACIE evidence of the facts stated and of the vote as certified by them.
Each inspector shall be entitled to a reasonable compensation for his or
her services, to be paid by the Corporation.
SECTION 11. PROCEDURE FOR NOMINATIONS. Subject to the
provisions hereof, the Nominating Committee of the Board shall select
nominees for election as directors. Except in the case of a nominee
substituted as a result of the death, incapacity, withdrawal or other
inability to serve of a nominee, the Nominating Committee shall deliver
written nominations to the Secretary at least sixty (60) days prior to
the date of the annual meeting. Provided the Nominating Committee makes
such nominations, no nominations for directors except those made by the
Nominating Committee shall be voted upon at the annual meeting of
shareholders unless other nominations by shareholders are made in
accordance with the provisions of this Section 11. Nominations of
individuals for election to the Board at an annual meeting of
shareholders may be made by any shareholder of record of the Corporation
entitled to vote for the election of directors at such meeting who
provides timely notice in writing to the Secretary as set forth in this
Section 11. To be timely, a shareholder's notice must be delivered to or
received by the Secretary not later than the following dates: (i) with
respect to an election of directors to be held at an annual meeting of
shareholders, sixty (60) days in advance of such meeting if such meeting
is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect
to an election to be held at an annual meeting of shareholders held at a
time other than within the time periods set forth in the immediately
preceding clause (i), or at a special meeting of shareholders for the
election of directors, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
shareholders. For purposes of this Section 11, notice shall be deemed to
first be given to shareholders when disclosure of such date of the
meeting of shareholders is first made in a press release reported to Dow
Jones News Services, Associated Press or comparable national news
service, or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Securities Exchange Act of 1934, as amended. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director, (i) the
name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) such
person's written consent to serve as a director, if elected, and (iv)
such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission (whether or not the Corporation is then subject to such
rules); and (b) as to the shareholder giving the notice (i) the name and
address of such shareholder, (ii) the class and number of shares of the
Corporation which are owned of record by such shareholder and the dates
upon which he or she acquired such shares, (iii) a description of all
arrangements or understandings between the shareholder and nominee and
any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the shareholder, and (iv) the
identification of any person employed, retained, or to be compensated by
the shareholder submitting the nomination or by the person nominated, or
any person acting on his or her behalf to make solicitations or
recommendations to shareholders for the purpose of assisting in the
election of such director, and a brief description of the terms of such
employment, retainer or arrangement for compensation. At the request of
the Board, any person nominated by the Board for election as a director
shall furnish to the Secretary that information required to be set forth
in a shareholder's notice of nomination which pertains to the nominee
together with the required written consent. No person shall be elected
as a director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 11.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not properly
brought before the meeting in accordance with the provisions hereof and,
if he should so determine, he shall declare to the meeting that such
nomination was not properly brought before the meeting and shall not be
considered.
SECTION 12. SUBSTITUTION OF NOMINEES. In the event that a
person is validly designated as a nominee in accordance with Section 11
of this Article II and shall thereafter become unwilling or unable to
stand for election to the Board, the Nominating Committee may designate a
substitute nominee upon delivery, not fewer than five (5) days prior to
the date of the meeting for the election of such nominee, of a written
notice to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the
Secretary pursuant to Section 11 of this Article II had such substitute
nominee been initially proposed as a nominee. Such notice shall include
a signed consent to serve as a director of the Corporation, if elected,
of each such substituted nominee.
SECTION 13. NEW BUSINESS. Any new business to be taken up at
the annual meeting at the request of the Chairman of the Board, the
President or by resolution of at least three-fourths of the entire Board
shall be stated in writing and filed with the Secretary at least fifteen
(15) days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting,
but, except as provided in this Section 13, no other proposal shall be
acted upon at the annual meeting. Any proposal offered by any
shareholder may be made at the annual meeting and the same may be
discussed and considered, but unless properly brought before the meeting
such proposal shall not be acted upon at the meeting. For a proposal to
be properly brought before an annual meeting by a shareholder, the
shareholder must be a shareholder of record and have given timely notice
thereof in writing to the Secretary. To be timely, a shareholder's
notice must be delivered to or received by the Secretary not later than
the following dates: (i) with respect to an annual meeting of
shareholders, sixty (60) days in advance of such meeting if such meeting
is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect
to an annual meeting of shareholders held at a time other than within the
time periods set forth in the immediately preceding clause (i), the close
of business on the tenth (10th) day following the date on which notice of
such meeting is first given to shareholders. For purposes of this
Section 13, notice shall be deemed to first be given to shareholders when
disclosure of such date of the meeting of shareholders is first made in a
press release reported to Dow Jones News Services, Associated Press or
comparable national news service, or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. A shareholder's notice to the Secretary shall set forth as to
the matter the shareholder proposes to bring before the annual meeting
(a) a brief description of the proposal desired to be brought before the
annual meeting; (b) the name and address of the shareholder proposing
such business; (c) the class and number of shares of the Corporation
which are owned of record by the shareholder and the dates upon which he
or she acquired such shares; (d) the identification of any person
employed, retained, or to be compensated by the shareholder submitting
the proposal, or any person acting on his or her behalf, to make
solicitations or recommendations to shareholders for the purpose of
assisting in the passage of such proposal, and a brief description of the
terms of such employment, retainer or arrangement for compensation; and
(e) such other information regarding such proposal as would be required
to be included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission or required to be delivered to the
Corporation pursuant to the proxy rules of the Securities and Exchange
Commission (whether or not the Corporation is then subject to such
rules). This provision shall not prevent the consideration and approval
or disapproval at an annual meeting of reports of officers, directors and
committees of the Board or the management of the Corporation, but in
connection with such reports, no new business shall be acted upon at such
annual meeting unless stated and filed as herein provided. This
provision shall not constitute a waiver of any right of the Corporation
under the proxy rules of the Securities and Exchange Commission or any
other rule or regulation to omit a shareholder's proposal from the
Corporation's proxy materials.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that any new business was not
properly brought before the meeting in accordance with the provisions
hereof and, if he should so determine, he shall declare to the meeting
that such new business was not properly brought before the meeting and
shall not be considered.
ARTICLE III
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates representing
shares of stock shall be in such form as shall be determined by the
Board. Each certificate shall state that the Corporation will furnish to
any shareholder upon request and without charge a statement of the
powers, designations, preferences and relative, participating, optional
or other special rights of the shares of each class or series of stock
and the qualifications or restrictions of such preferences and/or rights,
or shall set forth such statement on the certificate itself. The
certificates shall be numbered in the order of their issue and entered in
the books of the Corporation or its transfer agent or agents as they are
issued. Each certificate shall state the registered holder's name and
the number and class of shares, and shall be signed by the Chairman of
the Board or the President, and the Secretary or any Assistant Secretary,
and may, but need not, bear the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on the certificates may be
facsimiles. In case any officer who shall have signed any such
certificate shall cease to be such officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate shall
have been delivered by the Corporation, such certificate may nevertheless
be adopted by the Corporation and be issued and delivered as though the
person or persons who signed such certificate or certificates had not
ceased to be such officer or officers of the Corporation.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board shall have
the power to appoint one or more Transfer Agents and Registrars for the
transfer and registration of certificates of stock of any class, and may
require that stock certificates be countersigned and registered by one or
more of such Transfer Agents and Registrars.
SECTION 3. REGISTRATION AND TRANSFER OF SHARES. Subject to the
provisions of the Certificate of Incorporation of the Corporation, the
name of each person owning a share of the capital stock of the
Corporation shall be entered on the books of the Corporation together
with the number of shares held by him or her, the numbers of the
certificates covering such shares and the dates of issue of such
certificates. Subject to the provisions of the Certificate of
Incorporation of the Corporation, the shares of stock of the Corporation
shall be transferable on the books of the Corporation by the holders
thereof in person, or by their duly authorized attorneys or legal
representatives, on surrender and cancellation of certificates for a like
number of shares, accompanied by an assignment or power of transfer
endorsed thereon or attached thereto, duly executed, with such guarantee
or proof of the authenticity of the signature as the Corporation or its
agents may reasonably require and with proper evidence of payment of any
applicable transfer taxes. Subject to the provisions of the Certificate
of Incorporation of the Corporation, a record shall be made of each
transfer.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The
holder of any shares of stock of the Corporation shall immediately notify
the Corporation of any loss, theft, destruction or mutilation of the
certificates therefor. The Corporation may issue, or cause to be issued,
a new certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost, stolen or destroyed upon evidence
satisfactory to the Corporation of the loss, theft or destruction of the
certificate, and in the case of mutilation, the surrender of the
mutilated certificate. The Corporation may, in its discretion, require
the owner of the lost, stolen or destroyed certificate, or his or her
legal representatives, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of
the alleged loss, theft, destruction or mutilation of any such
certificate and the issuance of such new certificate, or may refer such
owner to such remedy or remedies as he or she may have under the laws of
the State of Delaware.
SECTION 5. HOLDER OF RECORD. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Corporation shall be
entitled to treat the holder of record of any share or shares of stock as
the holder thereof in fact and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. RESPONSIBILITIES; NUMBER OF DIRECTORS. The business
and affairs of the Corporation shall be under the direction of the Board.
The Board shall consist of not less than five (5) nor more than fifteen
(15) directors. Within the foregoing limits, the number of directors
shall be determined only by resolution of the Board. A minimum of three
(3) directors shall be persons other than officers or employees of the
Corporation or its subsidiaries and shall not have a relationship which,
in the opinion of the Board (exclusive of such persons), could interfere
with the exercise of independent judgment in carrying out the
responsibilities of a director. No more than two directors shall be
officers or employees of the Corporation or its subsidiaries.
SECTION 2. QUALIFICATIONS. Each director shall be at least
eighteen (18) years of age.
SECTION 3. MANDATORY RETIREMENT. No director shall serve
beyond the end of the annual meeting of the Corporation coincident with
or immediately following the date on which his or her seventy-fifth
(75th) birthday occurs.
SECTION 4. REGULAR AND ANNUAL MEETINGS. An annual meeting of
the Board for the election of officers shall be held, without notice
other than these Bylaws, immediately after, and at the same place as, the
annual meeting of the shareholders, or, with notice, at such other time
or place as the Board may fix by resolution. The Board may provide, by
resolution, the time and place, within or without the State of Delaware,
for the holding of regular meetings of the Board without notice other
than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may
be called for any purpose at any time by or at the request of the
Chairman of the Board or the President. Special meetings of the Board
shall also be called by the Secretary upon the written request, stating
the purpose or purposes of the meeting, of at least sixty percent (60%)
of the directors then in office, but in any event not less than five (5)
directors. The persons authorized to call special meetings of the Board
shall give notice of such meetings in the manner prescribed by these
Bylaws and may fix any place, within or without the Corporation's regular
business area, as the place for holding any special meeting of the Board
called by such persons. No business shall be conducted at a special
meeting other than that specified in the notice of meeting.
SECTION 6. NOTICE OF MEETINGS; WAIVER OF NOTICE. Except as
otherwise provided in Section 4 of this Article IV, at least twenty-four
(24) hours notice of meetings shall be given to each director if given in
person or by telephone, telegraph, telex, facsimile or other electronic
transmission and at least five (5) days notice of meetings shall be given
if given in writing and delivered by courier or by postage prepaid mail.
The purpose of any special meeting shall be stated in the notice. Such
notice shall be deemed given when sent or given to any mail or courier
service or company providing electronic transmission service. Any
director may waive notice of any meeting by submitting a signed waiver of
notice with the Secretary, whether before or after the meeting. The
attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the
express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 7. CONDUCT OF MEETINGS. Meetings of the Board shall be
presided over by the Chairman of the Board or such other director or
officer as the Chairman of the Board shall designate, and in the absence
or incapacity of the Chairman of the Board, the presiding officer shall
be the then senior member of the Board in terms of length of service on
the Board (which length of service shall include length of service on the
Board of Directors of The Dime Savings Bank of Williamsburgh and any
predecessors thereto). The Secretary or, in his absence, a person
appointed by the Chairman of the Board (or other presiding person), shall
act as secretary of the meeting. The Chairman of the Board (or other
person presiding) shall conduct all meetings of the Board in accordance
with the best interests of the Corporation and shall have the authority
and discretion to establish reasonable procedural rules for the conduct
of Board meetings. At the discretion of the Chairman of the Board, any
one or more directors may participate in a meeting of the Board or a
committee of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at any such meeting.
SECTION 8. QUORUM AND VOTING REQUIREMENTS. A quorum at any
meeting of the Board shall consist of not less than a majority of the
directors then in office or such greater number as shall be required by
law, these Bylaws or the Certificate of Incorporation, but not less than
one-third (1/3) of the total number. If less than a required quorum is
present, the majority of those directors present shall adjourn the
meeting to another time and place without further notice. At such
adjourned meeting at which a quorum shall be represented, any business
may be transacted that might have been transacted at the meeting as
originally noticed. Except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws, a majority vote of the directors
present at a meeting, if a quorum is present, shall constitute an act of
the Board.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if
all members of the Board of Directors or such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or such
committee.
SECTION 10. RESIGNATION. Any director may resign at any time
by sending a written notice of such resignation to the principal office
of the Corporation addressed to the Chairman of the Board or the
President. Unless otherwise specified therein, such resignation shall
take effect upon receipt thereof.
SECTION 11. VACANCIES. To the extent not inconsistent with the
Certificate of Incorporation and subject to the limitations prescribed by
law and the rights of holders of Preferred Stock, vacancies in the office
of director, including vacancies created by newly created directorships
resulting from an increase in the number of directors, shall be filled
only by a vote of a majority of the directors then holding office,
whether or not a quorum, at any regular or special meeting of the Board
called for that purpose. Subject to the rights of holders of Preferred
Stock, no person shall be so elected a director unless nominated by the
Nominating Committee. Subject to the rights of holders of Preferred
Stock, any director so elected shall serve for the remainder of the full
term of the class of directors in which the new directorship was created
or the vacancy occurred and until his or her successor shall be elected
and qualified.
SECTION 12. COMPENSATION. From time to time, as the Board
deems necessary, the Board shall fix the compensation of directors, and
officers of the Corporation in such one or more forms as the Board may
determine.
SECTION 13. AMENDMENTS CONCERNING THE BOARD. The number,
retirement age, and other restrictions and qualifications for directors
of the Corporation as set forth in these Bylaws may be altered only by a
vote, in addition to any vote required by law, of two-thirds of the
entire Board or by the affirmative vote of the holders of record of not
less than eighty percent (80%) of the total votes eligible to be cast by
holders of all outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors at a meeting of
the shareholders called for that purpose.
ARTICLE V
COMMITTEES
SECTION 1. STANDING COMMITTEES. At each annual meeting of the
Board, the directors shall designate from their own number, by resolution
adopted by a majority of the entire Board, the following committees:
(a) Executive Committee
(b) Audit Committee
(c) Compensation Committee
(d) Nominating Committee
which shall be standing committees of the Board. The Board shall appoint
a director to fill any vacancy on any committee of the Board. The
members of the committees shall serve at the pleasure of the Board.
SECTION 2. EXECUTIVE COMMITTEE. There shall be an Executive
Committee of the Board consisting of at least six (6) members, as shall
be appointed by Board resolution or these Bylaws. The Chief Executive
Officer and the President shall be ex-officio members of the Executive
Committee, with power to vote on all matters so long as they are also
directors of the Corporation. Four (4) members of the Executive
Committee, at least three (3) of whom must be non-officer directors, or
such other number of members as the Board of Directors may establish by
resolution, shall constitute a quorum for the transaction of business.
The vote of a majority of members present at any meeting including the
presiding member, who shall be eligible to vote, shall constitute the
action of the Executive Committee.
The Chairman of the Board or such other director or officer as
the Chairman of the Board shall designate shall serve as chairman of the
Executive Committee or, if the office of the Chairman of the Board is
vacant, the President shall serve as chairman of the Executive Committee.
In the absence of the chairman of the Executive Committee, the committee
shall designate, from among its membership present, a person to preside
at any meeting held in such absence. The Executive Committee shall
designate, from its membership or otherwise, a secretary who shall report
to the Board at its next regular meeting all proceedings and actions
taken by the Executive Committee. The Executive Committee shall meet as
necessary at the call of the Chairman of the Board, the President or at
the call of a majority of the members of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent
with law, these Bylaws or the Certificate of Incorporation, exercise all
the powers and authority of the Board in the management of the business
and affairs of the Corporation in the intervals between the meetings of
the Board.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist
of at least three (3) members whose background and experience are
financial and/or business management related, none of whom shall be an
officer or salaried employee of the Corporation or its subsidiaries, an
attorney who receives a fee or other compensation for legal services
rendered to the Corporation or any other individual having a relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
At any regular meeting of the Board, any director who is otherwise
eligible to serve on the Audit Committee may be elected to fill a vacancy
that has occurred on the Audit Committee. The Board shall designate one
member of the committee to serve as chairman of the committee. The Audit
Committee shall meet annually, at the call of the chairman of the
committee and may hold such additional meetings as the chairman of the
committee may deem necessary, to examine, or cause to be examined, the
records and affairs of the Corporation to determine its true financial
condition, and shall present a report of examination to the Board at the
Board's next regular meeting following the meeting of the Audit
Committee. The committee shall appoint, from its membership or
otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee. The Audit Committee shall make, or cause to
be made, such other examinations as it may deem advisable or whenever so
directed by the Board and shall report thereon in writing at a regular
meeting of the Board. The Audit Committee shall make recommendations to
the Board in relation to the employment of accountants and independent
auditors and arrange for such other assistance as it may deem necessary
or desirable. The Audit Committee shall review and evaluate the
procedures and performance of the Corporation's internal auditing staff.
A quorum shall consist of at least one-third of the members of the
committee, and in no event less than two (2) members of the committee.
SECTION 4. COMPENSATION COMMITTEE. The Compensation Committee
shall consist of at least three (3) members, none of whom shall be an
officer or salaried employee of the Corporation or its subsidiaries as
shall be appointed by Board resolution or these Bylaws. In addition, the
Chief Executive Officer and the President shall be ex-officio members of
the Compensation Committee without any power to vote. The Board shall
designate one member of the committee to serve as chairman of the
Compensation Committee, who shall have the authority to adopt and
establish procedural rules for the conduct of all meetings of the
committee.
The committee shall meet annually at the call of the chairman
of the committee, and may hold such additional meetings as the Chairman
of the Board may deem necessary. A quorum shall consist of at least one-
third of the voting members of the Committee, and in no event less than
two (2) voting members of the committee. The vote of a majority of the
voting members present at any meeting, including the chairman of the
committee who shall be eligible to vote, shall constitute the action of
the Compensation Committee. The committee shall appoint, from its
membership or otherwise, a secretary who shall cause to be kept written
minutes of all meetings of the committee.
The Compensation Committee shall be responsible for overseeing
the development, implementation and conduct of the Corporation's
employment and personnel policies, notices and procedures, including the
administration of the Corporation's compensation and benefit programs.
SECTION 5. NOMINATING COMMITTEE. The Nominating Committee
shall consist of at least three (3) members, none of whom shall be an
officer or a salaried employee of the Corporation or its subsidiaries.
In addition, the Chief Executive Officer and the President shall be ex-
officio members of the Nominating Committee, with power to vote on all
matters so long as they are also directors of the Corporation.
Notwithstanding the foregoing, no director shall serve on the Nominating
Committee in any capacity in any year during which such director's term
as a director is scheduled to expire. The Nominating Committee shall
review qualifications of and interview candidates for the Board and shall
make nominations for election of board members in accordance with the
provisions of these Bylaws in relation to those suggestions to the Board.
A quorum shall consist of at least one-third of the members of the
Committee, and in no event less than two (2) members of the committee.
SECTION 6. OTHER COMMITTEES. The Board may by resolution
adopted by a majority of the entire Board at any meeting authorize such
other committees as from time to time it may deem necessary or
appropriate for the conduct of the business of the Corporation. The
members of each committee so authorized shall be appointed by the Board
from members of the Board and/or employees of the Corporation. In
addition, the Chief Executive Officer and the President shall be ex-
officio members of each such committee. Each such committee shall
exercise such powers as may be assigned by the Board to the extent not
inconsistent with law, these Bylaws or the Certificate of Incorporation.
ARTICLE VI
OFFICERS
SECTION 1. NUMBER. The Board shall, at each annual meeting,
elect a Chairman of the Board, a Chief Executive Officer, a President, a
Secretary and such other officers as the Board from time to time may deem
necessary or the business of the Corporation may require. Any number of
offices may be held by the same person except that no person may
simultaneously hold the offices of President and Secretary.
The election of all officers shall be by a majority of the
Board. If such election is not held at the meeting held annually for the
election of officers, such officers may be so elected at any subsequent
regular meeting or at a special meeting called for that purpose, in the
same manner above provided. Each person elected shall have such
authority, bear such title and perform such duties as provided in these
Bylaws and as the Board may prescribe from time to time. All officers
elected or appointed by the Board shall assume their duties immediately
upon their election and shall hold office at the pleasure of the Board.
Whenever a vacancy occurs among the officers, it may be filled at any
regular or special meeting called for that purpose, in the same manner as
above provided.
SECTION 2. TERM OF OFFICE AND REMOVAL. Each officer shall
serve until his or her successor is elected and duly qualified, the
office is abolished, or he or she is removed. Except for the Chairman of
the Board, the Chief Executive Officer or the President, any officer may
be removed at any regular meeting of the Board with or without cause by
an affirmative vote of a majority of the entire Board. The Board may
remove the Chairman of the Board, the Chief Executive Officer or the
President at any time, with or without cause, only by a vote of two-
thirds of the non-officer directors then holding office at any regular or
special meeting of the Board called for that purpose.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman shall be the
Chief Executive Officer of the Corporation and shall, subject to the
direction of the Board, oversee all of the major activities of the
Corporation and its subsidiaries and be responsible for assuring that the
policy decisions of the Board are implemented as formulated. He shall be
responsible, in consultation with such Officers and members of the Board
as he deems appropriate, for planning the growth of the Corporation. The
Chairman shall be responsible for shareholder relations, relations with
investments bankers, other similar financial institutions and financial
advisors and shall be empowered to designate Officers of the Corporation
and its subsidiaries to assist in such activities. The Chairman shall be
principally responsible for exploring opportunities for mergers,
acquisitions and new business. The Chairman shall preside at all
meetings of the shareholders; preside at all meetings of the Board and
the Executive Committee; make recommendations to the Board regarding
appointments to all committees; and sign instruments in the name of the
Corporation. The Chairman will be a member ex-officio, with power to
vote on all matters, of all committees of the Board except the Audit
Committee; in his capacity as an ex-officio member of the Compensation
Committee, he will be without any power to vote.
In the absence or disability of the Chairman of the Board, the
President or such other person who the Board shall designate, shall
exercise the powers and perform the duties, which otherwise would fall
upon the Chairman of the Board.
<PAGE>
SECTION 4. PRESIDENT. The President shall, subject to the
direction of the Board and the Chief Executive Officer, be the Chief
Operating Officer of the Corporation and shall assist the Chief Executive
Officer in planning the growth of the Corporation, relations with
investment bankers, other similar financial institutions and financial
advisors. The President, shall under authority given to him, sign
instruments in the name of the Corporation. The President shall have the
general supervision and direction of all of the Corporation's officers
and personnel, subject to and consistent with policies enunciated by the
Board. The President shall have such other powers as may be assigned to
him by the Board, its committees or the Chief Executive Officer. The
President will be a member ex-officio, with power to vote on all matters,
of all Committees of the Board, except the Audit Committee; in his
capacity as ex-officio member of the Compensation Committee he will be
without any power to vote.
SECTION 5. VICE PRESIDENTS. Executive Vice Presidents, Senior
Vice Presidents and Vice Presidents may be appointed by the Board of
Directors to perform such duties as may be prescribed by these Bylaws,
the Board, the Chief Executive Officer or the President as permitted by
the Board.
SECTION 6. SECRETARY. The Secretary shall attend all meetings
of the Board and of the shareholders, and shall record, or cause to be
recorded, all votes and minutes of all proceedings of the Board and of
the shareholders in a book or books to be kept for that purpose. The
Secretary shall perform such executive and administrative duties as may
be assigned by the Board, the Chairman of the Board or the President.
The Secretary shall have charge of the seal of the Corporation, shall
submit such reports and statements as may be required by law or by the
Board, shall conduct all correspondence relating to the Board and its
proceedings and shall have such other powers and duties as are generally
incident to the office of Secretary and as may be assigned to him or her
by the Board, the Chairman of the Board or the President.
SECTION 7. COMPTROLLER. The Comptroller shall be the chief
accounting officer of the Corporation and shall be responsible for the
maintenance of adequate systems and records. The Comptroller shall keep
a record of all assets, liabilities, receipts, disbursements, and other
financial transactions, and shall see that all expenditures are made in
accordance with procedures duly established from time to time by the
Board. The Comptroller shall make such reports as may be required by the
Board or as are required by law.
SECTION 8. TREASURER. The Treasurer shall be responsible for
all of the money management and investment functions of the Corporation.
Maintenance of relationships with correspondent banks, securities brokers
and safekeeping agents shall be the responsibility of the Treasurer. The
Treasurer shall make such reports as may be required by the Board or as
are required by law.
SECTION 9. OTHER OFFICERS AND EMPLOYEES. Other officers and
employees appointed by the Board shall have such authority and shall
perform such duties as may be assigned to them, from time to time, by the
Board or the Chief Executive Officer or the President.
SECTION 10. COMPENSATION OF OFFICERS AND OTHERS. The
compensation of all officers and employees shall be fixed from time to
time by the Board, or by any committee or officer authorized by the Board
to do so, upon the recommendation and report by the Compensation
Committee. The compensation of agents shall be fixed by the Board, or by
any committee or officer authorized by the Board to do so, upon the
recommendation and report of the Compensation Committee.
ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of
law and the requirements of the Certificate of Incorporation, to declare
and pay dividends out of surplus (or, if no surplus exists, out of net
profits of the Corporation, for the fiscal year in which the dividend is
declared and/or the preceding fiscal year, except where there is an
impairment of capital stock), to pay such dividends to the shareholders
in cash, in property, or in shares of the capital stock of the
Corporation, and to fix the date or dates for the payment of such
dividends.
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the
Certificate of Incorporation, or as otherwise set forth in these Bylaws,
may be amended or repealed at any regular meeting of the entire Board by
the vote of two-thirds of the Board; provided, however, that (a) a notice
specifying the change or amendment shall have been given at a previous
regular meeting and entered in the minutes of the Board; (b) a written
statement describing the change or amendment shall be made in the notice
mailed to the directors of the meeting at which the change or amendment
shall be acted upon; and (c) any Bylaw made by the Board may be altered,
amended, rescinded, or repealed by the holders of shares of capital stock
entitled to vote thereon at any annual meeting or at any special meeting
called for that purpose in accordance with the percentage requirements
set forth in the Certificate of Incorporation and/or these Bylaws.
Notwithstanding the foregoing, any provision of these Bylaws that
contains a supermajority voting requirement shall only be altered,
amended, rescinded, or repealed by a vote of the Board or holders of
capital stock entitled to vote thereon that is not less than the
supermajority specified in such provision.
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