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 March 31, 1997
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 ___
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, APRIL 30, 1997
$.01 Par Value 13,125,900
PAGE 1
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C> <C>
PAGE
Item 1. Financial Statements
Consolidated Statements of Condition at March 31, 1997
(Unaudited) and June 30, 1996 3
Consolidated Statements of Operations for the Three and Nine
months Ended March 31, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine months Ended March 31, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the Nine months
Ended March 31, 1997 and 1996 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-26
Item 3. Quantitative and Qualitative Disclosure About Market Risk 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities 26
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
Exhibits 29
</TABLE>
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 2
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DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31,
1997 JUNE 30,
(UNAUDITED) 1996
------------------- ---------------
<S> <C> <C>
ASSETS:
Cash and due from banks $14,053 $17,055
Investment securities held to maturity (estimated market value of $97,679
and $43,428 at March 31, 1997 and June 30, 1996, respectively) 97,814 43,552
Investment securities available for sale:
Bonds and notes (amortized cost of $66,883 and $338,141 at March 31,
1997 and June 30, 1996, respectively) 66,971 338,089
Marketable equity securities (historical cost of $3,044 and $2,982 at
March 31, 1997 and June 30, 1996, respectively) 3,452 3,205
Mortgage backed securities held to maturity (estimated market value of
$82,493 and $52,596 at March 31, 1997 and June 30, 1996, respectively) 82,219 52,580
Mortgage backed securities available for sale (amortized cost of $198,826
and $156,962 at March 31, 1997 and June 30, 1996, respectively) 200,330 157,361
Federal funds sold 30,818 115,130
Loans:
Real estate 676,850 577,663
Other loans 5,801 5,564
Less: Allowance for loan losses (9,885) (7,812)
------------------- ---------------
Total loans, net 672,766 575,415
------------------- ---------------
Loans held for sale 167 459
Premises and fixed assets 14,033 14,399
Federal Home Loan Bank of New York Capital Stock 8,322 7,604
Other real estate owned, net 1,883 1,946
Goodwill 26,977 28,438
Other assets 17,469 16,588
------------------- ---------------
TOTAL ASSETS $1,237,274 $1,371,821
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $962,270 $950,114
Escrow and other deposits 20,050 141,732
Securities sold under agreements to repurchase 32,851 11,998
Federal Home Loan Bank of New York advances 20,710 15,710
Payable for securities purchased - 33,994
Accrued postretirement benefit obligation 2,498 2,381
Other liabilities 8,145 2,821
------------------- ---------------
TOTAL LIABILITIES 1,046,524 1,158,750
------------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par, 9,000,000 shares authorized,
none outstanding at March 31, 1997 and June 30, 1996) - -
Common stock ($0.01 par, 45,000,000 shares authorized, 13,125,900 and 14,547,500
shares outstanding at March 31, 1997 and June 30, 1996, respectively) 145 145
ADDITIONAL PAID-IN CAPITAL 141,482 141,240
UNALLOCATED COMMON STOCK OF EMPLOYEE STOCK OWNERSHIP PLAN (10,618) (11,541)
UNEARNED COMMON STOCK OF RECOGNITION AND RETENTION PLAN (6,792) -
TREASURY STOCK, AT COST (1,421,600 SHARES AT MARCH 31, 1997, NONE AT JUNE (27,125) -
30, 1996)
RETAINED EARNINGS (SUBSTANTIALLY RESTRICTED) 92,577 82,916
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET OF DEFERRED TAXES 1,081 311
------------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 190,750 213,071
------------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,237,274 $1,371,821
=========== =========
</TABLE>
See notes to consolidated financial statements
PAGE 3
<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 NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans secured by real estate $13,860 $9,862 $39,924 $29,394
Other loans 111 85 346 249
Investment securities 3,115 1,246 10,918 4,154
Mortgage-backed securities 4,652 1,484 12,665 4,491
Federal funds sold 587 297 1,921 962
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME 22,325 12,974 65,774 39,250
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits and escrow 9,493 5,554 28,828 17,035
Borrowed funds 716 249 1,696 754
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE 10,209 5,803 30,524 17,789
NET INTEREST INCOME 12,116 7,171 35,250 21,461
PROVISION FOR LOAN LOSSES 1,050 900 3,150 1,850
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,066 6,271 32,100 19,611
------------ ------------ ------------ ------------
NON-INTEREST INCOME:
Service charges and other fees 479 245 1,419 662
Net gain (loss) on sales and redemptions of
securities and other assets 18 27 189 (54)
Net gain (loss) on sales of loans 14 (5) 108 17
Other 270 112 874 355
------------ ------------ ------------ ------------
TOTAL NON-INTEREST INCOME 781 379 2,590 980
------------ ------------ ------------ ------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,427 1,993 7,095 5,534
ESOP and RRP compensation expense 892 - 1,716 -
Occupancy and equipment 766 469 2,334 1,269
SAIF special assessment - - 2,032 -
Federal deposit insurance premiums 86 23 337 86
Data processing costs 305 146 764 392
Provision for losses on other real estate owned 97 178 364 428
Goodwill amortization 600 - 1,800 -
Other 1,568 1,092 4,035 2,592
------------ ------------ ------------ ------------
TOTAL NON-INTEREST EXPENSE 6,741 3,901 20,477 10,301
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 5,106 2,749 14,213 10,290
INCOME TAX EXPENSE 1,608 1,266 4,552 4,713
------------ ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,498 1,483 9,661 5,577
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGING TO A
DIFFERENT METHOD OF ACCOUNTING FOR:
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - - - (1,032)
------------ ------------ ------------ ------------
NET INCOME $3,498 $1,483 $9,661 $4,545
======= ======= ======= =======
EARNINGS PER SHARE:
PRIMARY $0.26 N/A $0.73 N/A
======= ======= ======= =======
FULLY DILUTED $0.26 N/A $0.72 N/A
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
PAGE 4
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DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
MARCH 31, 1997
-------------------
<S> <C>
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 432
-------------------
Balance at end of period 141,482
-------------------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (11,541)
Amortization of earned portion of ESOP stock 923
-------------------
Balance at end of period (10,618)
-------------------
RECOGNITION AND RETENTION PLAN:
Balance at beginning of period -
Common stock acquired by RRP (7,154)
Amortization of earned portion of RRP stock 362
-------------------
Balance at end of period (6,792)
-------------------
TREASURY STOCK:
Balance at beginning of period -
Purchase of 1,421,600 shares, at cost (27,125)
-------------------
Balance at end of period (27,125)
-------------------
RETAINED EARNINGS:
Balance at beginning of period 82,916
Net income for the period 9,661
-------------------
Balance at end of period 92,577
-------------------
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 770
-------------------
Balance at end of period $1,081
-------------------
</TABLE>
See notes to consolidated financial statements
PAGE 5
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DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED MARCH 31,
1997 1996
-------------------- -----------------
($ In THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 9,661 $ 4,545
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net (gain) loss on investment and mortgage backed securities sold (110) 164
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 (108) (17)
Net depreciation and amortization (accretion) (1,112) 563
ESOP and RRP compensation expense 1,716 -
Provision for loan losses 3,150 1,850
Goodwill amortization 1,800 -
Decrease (increase) in loans held for sale 400 (314)
(Increase) decrease in other assets and other real estate owned (1,476) 898
Increase in accrued postretirement benefit obligation 117 2,080
Decrease in payable for securities purchased (33,994) -
Increase in other liabilities 5,324 1,279
-------------------- -----------------
Net cash (used in) provided by Operating Activities (14,651) 10,992
-------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in Federal funds sold 84,312 (6,438)
Proceeds from maturities of investment securities held to maturity 17,035 3,035
Proceeds from maturities of investment securities available for sale 342,460 64,490
Proceeds from calls of investment securities held to maturity - 9,056
Proceeds from calls of investment securities available for sale 25,000 8,300
Proceeds from sale of investment securities available for sale 25,051 500
Proceeds from sales of mortgage backed securities available for sale - 2,555
Purchases of investment securities held to maturity (71,244) (14,525)
Purchases of investment securities available for sale (119,127) (63,543)
Purchases of mortgage backed securities held to maturity (38,842) (11,714)
Purchases of mortgage backed securities available for sale (62,185) (11,554)
Principal collected on mortgage backed securities held to maturity 9,039 7,202
Principal collected on mortgage backed securities available for sale 20,286 11,315
Net increase in loans (100,501) (14,373)
Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired (339) -
Purchases of fixed assets (436) (576)
Purchase of Federal Home Loan Bank stock (718) (123)
-------------------- -----------------
Net Cash provided by (used in) Investing Activities 129,791 (16,393)
-------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Due to depositors 12,156 6,185
Net decrease in escrow and other deposits (121,682) (594)
Proceeds from Federal Home Loan Bank of New York Advances 5,000 -
Increase (decrease) in securities sold under agreements to repurchase 20,853 (84)
Cash disbursed for expenses related to issuance of common stock (190) -
Purchase of common stock by the Recognition and Retention Plan (7,154) -
Purchase of treasury stock (27,125) -
-------------------- -----------------
Net Cash (used in) provided by Financing Activities (118,142) 5,507
-------------------- -----------------
(DECREASE) INCREASE IN CASH AND DUE FROM BANKS (3,002) 106
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 17,055 6,807
-------------------- -----------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 14,053 $ 6,913
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes 5,317 4,165
========== =========
Cash paid for interest 30,490 17,822
========== =========
Transfer of loans to Other real estate owned 1,357 436
========== =========
Transfer of investment and mortgage backed securities held-to-maturity to available - 3,300
for sale
========== =========
Change in unrealized gain on available for sale securities, net of deferred taxes 770 24
========== =========
</TABLE>
See Notes to consolidated financial statements
PAGE 6
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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. A
portion of the net proceeds retained by the Company were utilized to fund the
repurchase of common stock into treasury. 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 March 31, 1997, the results of operations
for the three and nine months ended March 31, 1997 and 1996, cash flows for the
nine months ended March 31, 1997 and 1996, and changes in stockholders' equity
for the nine months ended March 31, 1997. 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 March 31, 1997 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.
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.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements as of and for the year ended June 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.
PAGE 7
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
On August 20, 1996, Federal legislation was signed into law which repealed the
reserve method of accounting for bad debts, including the percentage of taxable
income method used by the Bank. 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.
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. The Bank had a deferred tax liability of approximately $1.8
million 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 of income tax expense during
the nine month period ended March 31, 1997 for the full amount of the recovered
deferred tax liability.
On March 11, 1997, New York City enacted legislation, effective January 1,
1996, which conformed its tax law regarding bad debt deductions to New York
State's tax law. As a result of this legislation, the Bank, in March, 1997,
recovered a deferred tax liability of approximately $1.0 million previously
recorded for the excess of New York City tax bad debt reserves over its base
year reserve at December 31, 1987. This recovery resulted in a reduction of
income tax expense during the three and nine month periods ended March 31, 1997
for the full amount of the recovered deferred tax liability.
4. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In accordance with Statement of Position 93-6 "Employers' Accounting for
Employee Stock Ownership Plans," ("SOP 93-6") 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. TREASURY STOCK
During the three months ended March 31, 1997, the Company repurchased 1,421,600
shares of its common stock into treasury. The average price of the treasury
shares acquired was $19.08 per share, and all shares have been recorded at the
acquisition cost.
PAGE 8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
6. EARNINGS PER SHARE
Primary and fully diluted earnings per share for the three and nine-month
periods ended March 31, 1997 are computed by dividing net income by the average
number of common shares outstanding during the period, adjusted for common
stock equivalents related to stock options granted. In accordance with SOP 93-
6, unallocated ESOP shares are not included in average shares outstanding when
calculating earnings per share. The average shares utilized for primary and
fully diluted earnings per share were 13,227,232 and 13,315,563, respectively,
for the three months ended March 31, 1997 and 13,265,740 and 13,373,849,
respectively, for the nine months ended March 31, 1997. Earnings per share are
not presented for the three and nine-month periods ended March 31, 1996 as they
are not considered meaningful since the initial public offering of the
Company's stock did not occur until June, 1996. See "Recently Adopted
Accounting Standards" for a discussion of new standards for computing and
presenting earnings per share.
7. 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
applies to all transactions in which an entity acquires goods or services by
issuing equity instruments or by incurring liabilities where the payment
amounts are based on the entity's common stock price, except for employee stock
ownership plans. SFAS 123 establishes a fair value based method of accounting
for stock-based compensation arrangements with employees, as an alternative to
the intrinsic value based method that is contained in Accounting Principles
Board ("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
SFAS 123 encourages, but does not require, entities to adopt the new fair value
method for purposes of preparing its basic financial statements. Entities that
continue to use the APB 25 method for preparing basic financial statements are
required to present pro forma net income and earnings per share information, in
the notes to the financial statements, as if the fair value based method had
been adopted.
The accounting requirements of SFAS 123 are effective for transactions entered
into during fiscal years beginning after December 15, 1995. Prior to December
26, 1996, the Company had no equity instruments subject to the requirements of
SFAS 123. On December 26, 1996, the Company granted 1,454,750 stock options to
employees and outside directors. The Company has elected to continue to use
the APB 25 method for preparing its financial statements, and will therefore
include pro forma information in its audited financial statements for the
fiscal year ended June 30, 1997. Therefore, the implementation of SFAS 123
will have no impact on the Company's reported financial condition or results of
operations for the year ended June 30, 1997.
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
PAGE 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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.
In February, 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share'' ("SFAS 128").
SFAS 128 establishes new standards for computing and presenting earnings per
share. SFAS 128 is applicable to all U.S. entities with publicly held common
stock or potential common stock, and requires disclosure of basic earnings per
share and diluted earnings per share, for entities with complex capital
structures, on the face of the income statement, along with a reconciliation of
the numerator and denominator of basic and diluted earnings per share. SFAS
128 replaces APB Opinion No. 15, issued by the American Institute of Certified
Public Accountants in 1971, as the authoritative guidance for calculation and
disclosure of earnings per share, but does not amend the provisions of SOP 93-6
related to the inclusion of allocated and unallocated ESOP shares when
calculating average shares outstanding. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Early adoption is not permitted, and restatement of prior
periods is required. Basic and diluted earnings per share, if computed under
the standards of SFAS 128, would have been $0.27 and $0.26, respectively, for
the three months ended March 31, 1997 and $0.73 and $0.73, respectively, for
the nine months ended March 31, 1997.
9. SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") SPECIAL ASSESSMENT
During the quarter ended September 30, 1996, the Bank was assessed a one-time
special assessment of $2.0 million 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.
PAGE 10
<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. A portion of these proceeds were utilized to
fund the repurchase of common stock into treasury. The remaining proceeds
retained 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 Bank Insurance
Fund ("BIF"), the Bank pays most of its deposit insurance assessments to the
BIF. The Federal Deposit Insurance Corporation ("FDIC") also maintains another
insurance fund, the Savings Association Insurance Fund ("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.
PAGE 11
<PAGE>
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 to 0 to 27 basis points for
the quarterly period beginning October 1, 1996, with the rate of 0 basis points
applied to well-capitalized institutions in the top supervisory group, such as
the Bank. 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 for
deposit insurance 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 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. During the three months ended December 31, 1996 and March 31,
1997, respectively, the Bank incurred no regular SAIF assessment expense.
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. During the three
months ended March 31, 1997, the Bank incurred $86,000 of expense related to
the FICO bond assessments, which has been included in Federal deposit insurance
premium expense in the consolidated statement of operations.
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. The Secretary's report was to be delivered on or before March 31,
1997, but has yet to be completed. Several bills have been introduced in
Congress to eliminate the federal thrift charter, but no determination has been
made as to the enactment of legislation with respect to the thrift charter.
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%.
PAGE 12
<PAGE>
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. The Bank had a deferred tax liability of approximately $1.8
million 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 of income tax expense during
the nine month period ended March 31, 1997 for the full amount of the recovered
deferred tax liability.
On March 11, 1997, New York City enacted legislation, effective January 1,
1996, which conformed its tax law regarding bad debt deductions to New York
State's tax law. As a result of this legislation, the Bank, in March, 1997,
recovered a deferred tax liability of approximately $1.0 million previously
recorded for the excess of New York City tax bad debt reserves over its base
year reserve at December 31, 1987. This recovery resulted in a reduction of
income tax expense during the three and nine month periods ended March 31, 1997
for the full amount of the recovered deferred tax liability.
PAGE 13
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION> AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, March 31,
1997 1996 1997 1996
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets <F1> <F2> 1.13% 0.89% 1.06% 1.11%
Cash basis return on average assets <F2> <F3> 1.51 0.89 1.38 1.11
Return on average stockholders' equity <F1> <F2> 6.52 7.30 6.01 9.33
Return on average tangible stockholders' equity 7.59 7.30 6.94 9.33
<F1> <F2>
Cash basis return on average stockholders' 8.72 7.30 7.83 9.33
equity <F2> <F3>
Cash Basis Return on average tangible
stockholders' equity <F2> <F3> 10.16 7.30 9.04 9.33
Average stockholders' equity to average assets 17.36 12.15 17.58 11.94
Stockholders' equity to total assets at end of 15.42 12.07 15.42 12.07
period
Tangible equity to tangible assets at end of 13.45 11.97 13.45 11.97
period
Average interest rate spread 3.49 3.88 3.36 3.88
Net interest margin 4.19 4.41 4.07 4.41
Average interest-earning assets to average
interest-bearing liabilities 119.84 114.71 120.04 114.39
Non-interest expense to average assets <F1> 2.18 2.33 2.24 2.06
Efficiency ratio <F1> 52.40 51.82 54.54 45.83
PER SHARE DATA:
Primary earnings per share <F1> $0.26 N/A $0.73 N/A
Primary cash basis earnings per share <F3> 0.35 N/A 0.95 N/A
Book value per share 14.53 N/A 14.53 N/A
Tangible book value per share 12.39 N/A 12.39 N/A
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans $3,555 $5,614 $3,555 $5,614
Other real estate owned, net $1,883 $1,814 $1,883 $1,814
RATIOS:
Non-performing loans to total loans 0.52% 1.27% 0.52% 1.27%
Non-performing loans and other real estate
owned to total assets 0.44 1.10 0.44 1.10
Allowance for loan losses to:
Non-performing loans 278.06 109.48 278.06 109.48
Total loans 1.45 1.38 1.45 1.38
REGULATORY CAPITAL RATIOS: (BANK ONLY)
Tangible capital 10.45% 12.01% 10.45% 12.01%
Core capital 10.45 12.03 10.45 12.03
Risk-based capital 21.55 22.22 21.55 22.22
<FN>
<F1> CORE EARNINGS AND RATIOS. Excluding the effects of the SAIF Special
Assessment, and the recapture of income taxes previously provided, return on
average assets, return on average stockholders' equity, return on average
stockholders' equity, non-interest expense to average assets, the efficiency
ratio and primary earnings per share would have been 0.80%, 4.59%, 5.34%,
2.18%, 52.40% and $0.19, respectively, for the three months ended March 31,
1997 and 0.86%, 4.90%, 5.66%, 2.02%, 49.13%, and $0.59, respectively, for the
nine months ended March 31, 1997.
<F2> Income before cumulative effect of change in accounting principle is used
to calculate return on average assets and return on average equity ratios.
<F3> CASH EARNINGS. Excluding the effects of the SAIF Special Assessment, and
the recapture of income taxes previously provided, cash basis return on
average assets, cash basis return on average stockholders' equity, cash basis
return on average tangible stockholders' equity, and cash basis primary
earnings per share would have been 1.18%, 6.80%, 7.91%, and $.28, respectively,
for the three months ended March 31, 1997 and 1.18%, 6.72%, 7.76% and $0.81,
respectively, for the nine months ended March 31, 1997.
</TABLE>
PAGE 14
<PAGE>
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 March 31, 1997, the Bank's
liquidity ratio and short-term liquid asset ratios were
16.7% and 5.1%, 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 nine months ended March 31, 1997,
the Bank's loan originations totaled $176.3 million
compared to $68.5 million for the nine months ended
March 31, 1996. Purchases of mortgage-backed and other
securities totaled $291.4 million for the nine months
ended March 31, 1997 compared to $101.3 million for the
nine months ended March 31, 1996. 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 $3.3 million for the nine months
ended March 31, 1997.
Deposits increased $12.2 million during the nine months
ended March 31, 1997. 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 March 31, 1997 totaled $337.7 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.
On February 10, 1997, the Company received approval from
the OTS to repurchase, at the discretion of management,
up to 1,454,750 shares of the Company's common stock
(the "Repurchase Program"). The Repurchase Program
commenced on February 13, 1997 and is scheduled to
expire on June 26, 1997, the one-year anniversary of the
Bank's conversion to stock form. During the three
months ended March 31, 1997, the Company repurchased
1,421,600 shares under the Repurchase Program at an
aggregate cost of $27.1 million.
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 $166.4 million borrowing limit at the
Federal Home Loan Bank of New York ("FHLBNY") . At March
31, 1997, the Bank had $46.6 million in short and medium
term borrowings outstanding at the FHLBNY, comprised of
outstanding advances of $20.7 million and securities
sold under agreement to repurchase agreements of $25.9
million, and an additional overall borrowing capacity
from the FHLBNY of $119.8 million.
At March 31, 1997, the Bank was in compliance with all
applicable regulatory capital requirements. Tangible
capital totaled $123.4 million, or 10.45% of total
tangible assets, compared to a 1.50% regulatory
requirement; core capital, at 10.45%, exceeded the
required 3.0% regulatory minimum, and total risk-based
capital, at 21.55% of risk weighted assets, exceeded the
8.0% regulatory requirement.
PAGE 15
<PAGE>
ASSET QUALITY
Non-performing loans totaled $3.6 million at March 31,
1997 as compared to $2.9 million at December 31, 1996
and $6.6 million at June 30, 1996. The Bank had 20 loans
totaling $1.0 million delinquent 60-89 days at March 31,
1997, as compared to 33 such delinquent loans totaling
$2.3 million at June 30, 1996. This decline was
attributable to a decline of $1.2 million in real estate
loans delinquent 60-89 days, as these loans improved to
either current status or 30 days or less delinquent.
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 March 31, 1997,
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 1995.
The recorded investment in loans for which impairment
has been recognized under the guidance of Statement of
Financial Accounting Standards No. 114 "Accounting for a
Creditor for Impairment of a Loan," ("SFAS 114") was
approximately $4.3 million as of March 31, 1997,
compared to $7.4 million at June 30, 1996. The average
balance of impaired loans was $4.9 million for the nine
months ended March 31, 1997. The impaired portion of
these loans is represented by specific reserves totaling
$78,000 allocated within the allowance for loan losses
at March 31, 1997. At March 31, 1997, one loan totaling
$2.7 million, was deemed impaired for which no reserves
have been provided. This loan, which is included in
troubled-debt restructurings at March 31, 1997, has
performed in accordance with the provisions of the
restructuring agreement signed in October, 1995. The
loan has been retained on accrual status at March 31,
1997. At March 31, 1997, approximately $1.8 million of
one-to-four family and cooperative apartment loans on
nonaccrual status are not deemed impaired under SFAS
114. All of these loans have outstanding balances less
than $203,000, and are considered a homogeneous loan
pool not covered by SFAS 114.
PAGE 16
<PAGE>
The following table sets forth information regarding the
Bank's non-performing loans, non-performing assets,
impaired loans and troubled-debt restructurings at the
dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
1997 1996
($ In Thousands)
<S> <C> <C>
NON-PERFORMING LOANS: ------------------- ----------------
One- to four-family $1,735 $1,149
Multi-family and underlying cooperative 1,196 4,734
Non-residential - -
Cooperative apartment 592 668
Other loans 32 -
------------------ ---------------
TOTAL NON-PERFORMING LOANS 3,555 6,551
TOTAL OREO 1,883 1,946
----------------- --------------
TOTAL NON-PERFORMING ASSETS $5,438 $8,497
========== ========
TROUBLED-DEBT RESTRUCTURINGS $4,671 $4,671
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT 10,109 13,168
RESTRUCTURINGS
IMPAIRED LOANS 4,347 7,419
TOTAL NON-PERFORMING LOANS TO TOTAL LOANS 0.52% 1.12%
TOTAL IMPAIRED LOANS TO TOTAL LOANS 0.64 1.27
TOTAL NON-PERFORMING ASSETS TO TOTAL ASSETS <F1> 0.44 0.62
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS TO TOTAL ASSETS <F1> 0.82 0.96
<FN>
<F1> 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 .
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31,
1997 AND JUNE 30, 1996
The Company's assets totaled $1.24 billion at
March 31, 1997, a decrease of $134.5 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, investment
securities available for sale declined $145.9
million during the nine months ended March 31,
1997. A portion of this decline resulted from
the utilization of matured short-term
securities to fund the repurchase of common
stock into treasury and the purchase of common
stock in connection with the Recognition and
Retention Plan. The remainder of the decline
resulted from the replacement of matured
investment securities with either higher
yielding mortgage-backed securities or real
estate loan originations.
Real estate loans and loans held for sale
increased $98.9 million to $677.0 million at
March 31, 1997 compared to $578.1 million at
June 30, 1996. This increase resulted
primarily from loan originations of $176.3
PAGE 17
<PAGE>
million during the nine months ended March 31,
1997, of which $169.3 million were multi-
family and underlying cooperative and non-
residential loans. The increase in
originations resulted primarily from active
local real estate sales during the nine months
ended March 31, 1997.
Federal funds sold declined $84.3 million to
$30.8 million at March 31, 1997 from $115.1
million at June 30, 1996. 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 loan
originations or security purchases.
The decline in total liabilities of $112.2
million during the nine months ended March 31,
1997 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 deposits of $12.2
million and increased borrowings, as the
Company undertook, on a net basis, $20.9
million and $5.0 million, respectively, in
additional Securities sold under agreement to
repurchase transactions and FHLBNY advances
during the nine months ended March 31, 1997.
The Company's Stockholders' equity totaled
$190.8 million at March 31, 1997, a reduction
0f $22.3 million from $213.1 million at June
30, 1996. The reduction resulted primarily
from the repurchase of common stock into
treasury and the purchase of common stock in
connection with the Recognition and Retention
Plan of $27.1 million and $6.8 million,
respectively during the three months ended
March 31, 1997, which were offset by net
income of $9.7 million recorded during the
nine months ended March 31, 1997.
COMPARISON OF THE OPERATING RESULTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
GENERAL. Net income for the three months ended
March 31, 1997 was $3.5 million compared with
$1.5 million for the three months ended March
31, 1996, an increase of $2.0 million. During
the three months ended March 31, 1997, the
Company recorded a one-time recovery of
previously recorded New York City income tax
expense of $1.0 million, which resulted in
significantly lower income tax expense for the
three months ended March 31, 1997. Net income
for the three months ended March 31, 1997,
excluding this one-time recovery was $2.5
million, an increase of $981,000 above the
comparable three months of the previous year.
The discussion of interest income and expense
for the three months ended March 31, 1997 and
1996, 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 March
31, 1997 and 1996 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 18
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
--------------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Real Estate Loans <F1> $649,021 $13,860 8.66% $438,561 $9,862 8.99%
Other loans 5,460 111 8.24 2,923 85 11.63
MORTGAGE-BACKED SECURITIES <F2> 279,780 4,652 6.74 90,735 1,484 6.54
INVESTMENT SECURITIES <F2> 194,477 3,115 6.50 96,271 1,246 5.18
FEDERAL FUNDS SOLD 43,883 587 5.42 22,562 297 5.27
--------------- ------------- ------------- -----------
TOTAL INTEREST-EARNING ASSETS 1,172,621 $22,325 7.72% 651,052 $12,974 7.97%
--------------- ======= ------------- ======
NON-INTEREST EARNING ASSETS 63,959 17,767
--------------- -------------
TOTAL ASSETS $1,236,580 $668,819
========= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, SUPER NOW AND
MONEY MARKET ACCOUNTS $53,591 $319 2.41% $30,531 $156 2.04%
SAVINGS ACCOUNTS 347,471 1,929 2.25 230,474 1,429 2.48
CERTIFICATES OF DEPOSIT 522,929 7,226 5.60 285,491 3,951 5.54
MORTGAGORS' ESCROW 3,395 19 2.27 3,344 18 2.15
BORROWED FUNDS 51,142 716 5.68 17,735 249 5.62
--------------- ------------- ------------- -----------
TOTAL INTEREST-BEARING LIABILITIES 978,528 $10,209 4.23% 567,575 $5,803 4.09%
--------------- ======= ------------- ======
CHECKING ACCOUNTS 27,098 11,716
OTHER NON-INTEREST-BEARING 16,249 8,251
LIABILITIES
--------------- -------------
TOTAL LIABILITIES 1,021,875 587,542
STOCKHOLDERS' EQUITY 214,705 81,277
--------------- -------------
TOTAL LIABILITIES AND $1,236,580 $668,819
STOCKHOLDERS' EQUITY ========= =======
NET INTEREST INCOME/ INTEREST RATE $12,116 3.49% $7,171 3.88%
SPREAD<F3> ======= ======
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F4> $194,093 4.19% $83,477 4.41%
========= =======
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 119.84% 114.71%
<FN>
<F1> In computing the average balance of loans,non-accrual loans have been
included.
<F2> Includes securities classified "available for sale."
<F3> Net interest rate spread represents the difference between the average
rate on interest-earning assets and the average cost of interest-bearing
liabilities.
<F4> Net interest margin represents net interest income as a percentage of
average interest-earning assets.
</TABLE>
PAGE 19
<PAGE>
RATE/VOLUME ANALYSIS
THREE MONTHS ENDED
MARCH 31, 1997
COMPARED TO
THREE MONTHS ENDED
MARCH 31, 1996
INCREASE/ (DECREASE)
DUE TO
<TABLE>
<CAPTION>
VOLUME RATE TOTAL
-------------- ------------ -------------
( $ IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Real Estate Loans $4,512 $(514) $3,998
Other loans 62 (36) 26
Mortgage-backed securities 3,086 82 3,168
Investment securities 1,405 464 1,869
Federal funds sold 279 11 290
-------------- ------------ ------------
Total $9,344 $7 $9,351
======== ======= =======
Interest-bearing liabilities:
NOW, Super Now and money market accounts $126 $37 $163
Savings accounts 673 (173) 500
Certificates of deposit 3,237 38 3,275
Mortgagors' escrow - 1 1
Borrowed funds 463 4 467
-------------- ------------ ------------
Total 4,499 (93) 4,406
-------------- ------------ ------------
Net change in net interest income $4,845 $100 $4,945
======== ======= =======
</TABLE>
INTEREST INCOME. Interest income for the three months ended March
31, 1997 was $22.3 million, an increase of $9.4 million from
$12.9 million during the three months ended March 31, 1996.
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 $4.0 million, $1.9 million, and $3.2 million,
respectively. The increase in interest income on real-estate
loans was attributable primarily to an increase of $210.5 million
in the average balance of real estate loans, resulting from the
acquisition of $113.1 million of loans from Conestoga on June 26,
1996, and loan originations of $176.3 million during the nine
months ended March 31, 1997. The increases in interest income
on investment securities and mortgage-backed securities were
also attributable primarily to increases in average balances of
$98.2 million and $189.0 million, respectively, during
the three months ended March 31, 1997 compared to the three
months ended March 31, 1996 . The acquisition of $170.8
million and $124.4 million of investment securities and
mortgage-backed securities, respectively, from Conestoga,
contributed significantly to these average balance increases.
In addition, the average yield on investment securities and
mortgage-backed securities increased by 132 basis points
and 20 basis points, respectively, during the three
months ended March 31, 1997 compared to the three months
ended March 31, 1996, contributing significantly to
the increase in interest income. This increase in yields resulted
primarily from higher yields on securities acquired or repricing
during the nine months ended March 31, 1997, and the
acquisition of higher yielding investment and mortgage-backed
securities from Conestoga.
INTEREST EXPENSE. Interest expense increased $4.4 million,
to $10.2 million during the three months ended March 31,
1997 from $5.8 million during the three months ended March 31,
1996. This increase resulted primarily from increases of $3.3
million, $500,000 and $467,000 in interest expense on
PAGE 20
<PAGE>
Certificate of Deposit accounts, Savings accounts and borrowed
funds, respectively, which resulted from increased average
balances of $237.4 million, $117.0 million and $33.4
million, respectively during the three months ended March 31,
1997 compared to the three months ended March 31, 1996.
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. Also contributing to the
increase in interest expense was an increase of 14 basis points
in the average cost of interest- bearing liabilities from 4.09%
during the three months ended March 31, 1996 to 4.23% during
the three months ended March 31, 1997.
PROVISION FOR LOAN LOSSES. The Provision for Loan Losses
increased $150,000 to $1,050,000 for the three months ended March
31, 1997 from $900,000 for the three months ended March 31,
1996. The Allowance for loan losses increased to $9.9 million
at March 31, 1997 from $8.9 million at December 31, 1996, as
the loan loss provision of $1,050,000 was offset by net
charge-offs of $56,000. Non- performing loans increased to
$3.6 million during the three months ended March 31, 1997,
from $2.9 million at 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 the recent
increase in non-performing loans. See "Asset Quality."
NON-INTEREST INCOME. Non- interest income increased
$402,000 to $781,000 during the three months ended March 31,
1997 compared to $379,000 during the three months ended March 31,
1996. This increase was attributable primarily to
increases of $234,000 and $158,000 in service charges and
other fees, and other income, respectively. The increase in
service charges and other fees resulted primarily from
increases in safe deposit box fee income and income related to
deposit accounts attributable to the growth in deposits from the
acquisition of Conestoga. The increase in other income was
attributable primarily to increased rental income of
$64,000 received from retail and other commercial premises
acquired from Conestoga and increased dividend income of
$45,000 on FHLBNY capital stock from the Bank's increased
investment in FHLBNY capital stock, much of which was
acquired from Conestoga.
NON-INTEREST EXPENSE. Non-interest expense increased $2.8
million to $6.7 million during the three months ended March 31,
1997 from $3.9 million during the three months ended March 31,
1996. This increase resulted from increased salary and
employee benefits, occupancy and equipment, data processing, and
other operating expenses of $434,000, $297,000, $159,000,
and $476,000, respectively, resulting from both the recent
acquisition of Conestoga and operations as a public company.
In addition, during the three months ended March 31, 1997, the
Bank incurred compensation expense of $892,000 related to
Employee Stock Ownership Plan ("ESOP") and Recognition and
Retention Plan ("RRP") and goodwill amortization expense of
$600,000 resulting from its acquisition of Conestoga. These
expenses were not recorded during the three months ended
March 31, 1996, since, as of March 31, 1996, the Bank had not
completed its initial public offering (from which the ESOP
and RRP were generated) nor its acquisition of Conestoga (from
which goodwill was generated). Partially offsetting these
increased expenses was a decrease of $81,000 related to
losses on other real estate owned, resulting from
management's periodic review of reserves established for losses
on other real estate owned. Overall, non-interest expense
was 2.18% of average assets for the three months ended March 31,
1997, compared to 2.33% for the three months ended March, 31,
1996.
INCOME TAX EXPENSE. Income tax expense, exclusive of the
$1,034,000 recovery of New York City deferred liability pre-
viously recorded, totaled $2.6 million during the three months
ended March 31, 1997, compared to $1.2 million during the three
months ended March 31, 1996, an increase of $1.4 million. This
increase was attributable to both an increase of $2.4 million
in pre-tax income and an increase in the effective tax
rate from 46.1% for the three months ended March 31, 1996 to
51.7% for the three months ended March 31, 1997. The increased
effective tax rate during the three months ended March 31,
1997 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 $223,000 of
ESOP compensation expense related to the excess of the average
fair market value of the Company's stock during the three months
ended March 31, 1997 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 March 31, 1997 was
PAGE 21
<PAGE>
44.6%. For a description of the $1,034,000 income tax recovery,
See "Impact of Recent Legislation."
COMPARISON OF THE OPERATING RESULTS FOR THE NINE MONTHS
ENDED MARCH 31, 1997 AND 1996
GENERAL. Net income for the nine months ended March 31, 1997
totaled $9.7 million compared to $4.5 million during the nine
months ended March 31, 1996. Net income for the nine months
ended March 31, 1997 was affected by the New York State
and New York City income tax recoveries of $1.8 million and
$1.0 million, respectively, and the one-time special assessment
of $1.1 million, 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 nine
months ended March 31, 1997, excluding these non-recurring
items, was $7.9 million.
Also affecting the comparison of the nine months ended March 31,
1997 and 1996 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 nine months ended March 31, 1996. Income before cumulative
effect of change in accounting principles for the nine months
ended March 31, 1996 was $5.6 million.
The discussion of interest income and expense for the nine
months ended March 31, 1997 and 1996, presented below, should be
read in conjunction with the following table, which sets
forth certain information relating to the Company's
consolidated statements of operations for the nine months
ended March 31, 1997 and 1996 and reflects the average yield
on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing income
or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average
balances are derived from average daily balances. The
yields and costs include fees which are considered adjustments
to yields.
PAGE 22
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------------------
1997 1996
----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-------------- ------------- ----------- -------------- ----------- -----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Real Estate Loans <F1> $621,504 $39,924 8.56% $434,278 $29,394 9.02%
Other loans 5,428 346 8.49 3,435 249 9.67
Mortgage-backed securities <F2> 249,179 12,665 6.77 90,309 4,491 6.63
Investment securities <F2> <F3> 231,832 10,918 6.24 98,200 4,154 5.55
Federal funds sold 46,261 1,921 5.53 23,092 962 5.55
------------- ------------ ------------- ----------
Total interest-earning assets 1,154,204 $65,774 7.59% $649,314 $39,250 8.06%
Non-interest earning assets 64,996 ======= 18,024 =======
------------- -------------
Total assets $1,219,200 667,338
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW, Super Now and money
market accounts $56,807 $1,104 2.59% $30,740 $477 2.07%
Savings accounts 350,984 6,249 2.37 231,184 4,333 2.50
Certificates of deposit 510,090 21,418 5.59 284,530 12,170 5.70
Mortgagors' escrow 3,612 57 2.10 3,400 55 2.16
Borrowed Funds 40,029 1,696 5.64 17,775 754 5.66
-------------- ------------- -------------- -----------
Total interest-bearing 961,522 $30,524 4.23% $567,629 $17,789 4.18%
liabilities -------------- ======= -------------- ======
Checking accounts 27,050 11,430
Other non-interest-bearing 16,352 8,580
liabilities -------------- --------------
Total liabilities 1,004,924 587,639
Stockholders' equity 214,276 79,699
-------------- --------------
Total liabilities and
Stockholders' equity $1,219,200 $667,338
======== ========
Net interest income/interest
rate spread <F4> $35,250 3.36% $21,461 3.88%
======= ======
Net interest-earning assets/net
interest margin <F5> $192,682 4.07% $81,685 4.41%
======== ========
Ratio of interest-earning assets
to interest-bearing liabilities 120.04% 114.39%
<FN>
<F1> In computing the average balance of loans, non-accrual loanshave been
included.
<F2> Includes securities classified "available for sale."
<F3> The average yield on investment securities during the nine months
ended March 31, 1997 and 1996 have been adjusted to reflect capital
gains distributions of $208 and $272 in December, 1996 and
December 31, 1995 respectively, which are non-recurring andtherefore
were not annualized.
<F4> Net interest rate spread represents the difference between the average
rate on interest-earning assets and the average cost of interest-bearing
liabilities.
<F5> Net interest margin represents net interest income as a percentage
of average interest-earning assets.
</TABLE>
PAGE 23
<PAGE>
RATE/VOLUME ANALYSIS
NINE MONTHS ENDED
MARCH 31, 1997
COMPARED TO
NINE MONTHS ENDED
MARCH 31, 1996
INCREASE/ (DECREASE)
DUE TO
<TABLE>
<CAPTION>
VOLUME RATE TOTAL
--------------- ------------- -----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Real Estate Loans $12,357 $(1,827) $10,530
Other loans 136 (39) 97
Mortgage-backed securities 7,993 181 8,174
Investment securities 5,806 958 6,764
Federal funds sold 964 (5) 959
--------------- ------------- -----------
Total $27,256 $(732) $26,524
======== ======= ======
Interest-bearing liabilities:
NOW, Super Now and money market accounts $457 170 $627
Savings accounts 2,195 (279) 1,916
Certificates of deposit 9,570 (322) 9,248
Mortgagors' escrow 4 (2) 2
Borrowed Funds 945 (3) 942
--------------- ------------- -----------
Total 13,171 (436) 12,735
======== ======= ======
Net change in net interest income $14,085 $(296) $13,789
======== ======= ======
</TABLE>
Interest Income. Interest income for the nine
months ended March 31, 1997 was $65.8 million,
an increase of $26.5 million from $39.3
million during the nine months ended March 31,
1996. 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 $10.5 million, $6.8 million,
and $8.2 million, respectively. The
increase in interest income on real-estate
loans was attributable primarily to an increase
of $187.2 million in the average balance of real
estate loans, resulting from both the acquisition
of $113.1 million of loans from Conestoga on
June 26, 1996, and originations of $176.3
million during the nine months ended March 31,
1997. The increases in interest income on
investment securities and mortgage-backed
securities were also attributable primarily to
increases in average balances of $133.6
million and $158.9 million, respectively,
during the nine months ended March 31, 1997
compared to the nine months ended March 31,
1996 . The acquisition of $170.8 million and $124.4
million of investment securities and mortgage-
backed securities, respectively, from
Conestoga, contributed significantly to these
average balance increases. In addition,
the average yield on investment securities and
mortgage-backed increased by 69 basis points and 14
basis points, repectively, during the
nine months ended March 31, 1997 compared to the
nine months ended March 31, 1996, contributing
significantly to the increase in interest
income. This increase in yields resulted primarily
from higher yields on securities acquired or
repricing during the nine months ended March 31,
1997, the acquisition of higher yielding
investment and mortgage- backed securities from
Conestoga, and the increased volume of
higher yielding loans.
INTEREST EXPENSE. Interest expense
increased $12.7 million, to $30.5 million during
the nine months ended March 31, 1997 from $17.8
million during the nine months ended March 31,
1996. This increase resulted primarily from
increases of $9.2 million, $1.9 million and
$942,000 in interest expense on Certificate of
Deposit accounts, Savings accounts and borrowed
funds, respectively, which resulted from
increased average balances of $225.6
million, $119.8 million and $22.3 million,
respectively during the nine months ended March
31, 1997 compared to the nine months ended March
31, 1996. The acquisition of $216.3
PAGE 24
<PAGE>
million and $129.2 million of Certificate of
Deposit accounts and Savings accounts,
respectively, from Conestoga contributed
significantly to these average balance
increases. The increase in borrowing resulted
from a capital leverage strategy instituted
during the current fiscal year. Overall, the
average cost of interest bearing liabilities
increased 5 basis points from 4.18% during the
nine months ended March 31, 1996 to 4.23% during
the nine months ended March 31, 1997, due
primarily to an increase of 52 basis points in
average cost on NOW, Super Now and money
market accounts, which resulted from increased
rates offered on these deposits under
management's deposit pricing strategy.
PROVISION FOR LOAN LOSSES. The Provision for
Loan Losses increased $1,300,000 to $3,150,000
for the nine months ended March 31, 1997 from
$1,850,000 for the nine months ended March 31,
1996. The Allowance for loan losses increased by
$2,073,000 during the nine months ended March
31, 1997 as the loan loss provision of $3,150,000
was offset by net charge-offs of $1,077,000.
While the allowance for loan losses increased,
non-performing loans declined from $6.6
million at June 30, 1996 to $3.6 million at March
31, 1997. The allowance for loan losses as a
percentage of non-performing loans and
total loans was 278.06% and 1.45% respectively at
March 31, 1997, 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 $1.6 million to $2.6 million during the
nine months ended March 31, 1997 compared to
$980,000 during the nine months ended March 31,
1996. This increase was attributable primarily to
increases of $757,000 and $519,000 in service
charges and other fees, and other income,
respectively. Contributing to the
increase in service charges and other fees
were increased income of $304,000 related to
deposit accounts attributable to the
growth in deposits from the acquisition of
Conestoga, and increases of $218,000 and $138,000
respectively, related to safe deposit boxes and
the Bank's funding of official checks. The
increase in other income was attributable
primarily to increased rental income of $190,000
received from retail and other commercial premises
acquired from Conestoga. Also contributing to the
increase in other income were increases of
$117,000, $113,000 and $137,000 on Federal Home
Loan Bank of New York capital stock dividend
income, late charges on mortgage loans, and loan
prepayment penalty income, respectively.
NON-INTEREST EXPENSE. Non-interest expense
increased $10.2 million to $20.5 million during
the nine months ended March 31, 1997 from $10.3
million during the nine months ended March 31,
1996. The largest component of this
increase was a total increase of $2.3 million
in federal deposit insurance premium
expense. During the nine months ended March 31,
1996, the Bank received a refund from the FDIC of
$319,000 related to the Bank's insurance expense,
which reduced its federal deposit insurance premium
expense for the period to $86,000. During the nine
months ended March 31, 1996, 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, experienced $165,000 less
in FDIC insurance expense during the three months
ended March 31, 1997 compared to the three
months ended September 30, 1996. Should the
Bank maintain its status as a well-capitalized
institution, given the current FDIC assessment
rates, this reduction in quarterly FDIC insurance
expense is expected to continue.
Salary and employee benefits, occupancy and
equipment, data processing, and other
operating expenses increased $1.6 million,
$1.1 million, $372,000, and $1.4 million,
respectively, resulting from both the recent
acquisition of Conestoga and operations as a
public company. In addition, during the nine
months ended March 31, 1997, the Bank incurred
expenses of $1.7 million related to Employee Stock
Ownership Plan ("ESOP") and Recognition and
Retention Plan ("RRP") benefits and $1.8 million
related to goodwill amortization resulting
from its acquisition of Conestoga. These
expenses were not recorded during the nine
PAGE 25
<PAGE>
months ended March 31, 1996, since, as of March
31, 1996, the Bank had not completed its initial
public offering (from which the ESOP and RRP
were generated) nor its acquisition of Conestoga
(from which goodwill was generated). Partially
offsetting these increased expenses was a
decreases of $64,000 related to losses on
other real estate owned, resulting from
management's periodic review of reserves
established for losses on other real estate owned.
Overall, non-interest expense was 2.24% of
average assets for the nine months ended March
31, 1997 compared to 2.06% for the nine months
ended March, 31, 1996.
INCOME TAX EXPENSE. Income tax expense,
exclusive of recoveries of $1,848,000 and
$1,034,000, respectively, of New York State and New
York City income taxes previously recorded,
totaled $7.4 million during the nine months
ended March 31, 1997 compared to $4.7 million
during the nine months ended March 31, 1996, an
increase of $2.7 million. This increase was
attributable to both an increase of $3.9 million
in pre-tax income and an increase in the effective
tax rate from 45.8% for the nine months ended
March 31, 1996 to 52.3% for the nine months ended
March 31, 1997. The increased effective tax
rate during the nine months ended March 31,
1997 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 $432,000 of
ESOP compensation benefit expense related to the
excess of the average fair market value of the
Company's stock during the nine months ended
March 31, 1997 over the original purchase price of
the stock by the ESOP. Excluding the effects of
these items, the effective tax rate for
the nine months ended March 31, 1997 was 45.2%.
For a description of the New York State and New
York City income tax recoveries, See "Impact
of Recent Legislation."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Not Applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 other legal
actions arising in the ordinary course of its
business which, in the aggregate, involve
amounts which are believed to be immaterial
to the financial condition and results of
operations of the Bank.
ITEM 2. CHANGES IN SECURITIES
None.
PAGE 26
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 11. Statement Re: Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule (included only
with EDGAR filing).
Exhibit 99. Earnings Press Release dated April 24, 1997.
(b) REPORTS ON FORM 8-K
None.
PAGE 27
<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: May 14, 1997 By: /S/ VINCENT F. PALAGIANO
Vincent F. Palagiano
Chairman of the Board and
Chief Executive Officer
Dated: May 14, 1997 By: /S/ KENNETH J. MAHON
Kenneth J. Mahon
Executive Vice President and
Chief Financial Officer
PAGE 28
<PAGE>
EXHIBITS
========
<TABLE>
<CAPTION>
REFERENCE NUMBER 11
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS <F1>
<S> <C> <C>
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1997
------------------------------------
Net income $3,498 $9,661
Weighted average common shares outstanding 12,986 13,260
Common stock equivalents due to dilutive effect
of stock options 241 6
------------ -----------
Total weighted average common shares and
common share equivalents 13,227 13,266
======= =======
Earnings per common share and common share
equivalents $0.26 $0.73
======= =======
Total weighted average common shares and
common share equivalents 13,227 13,266
Additional dilutive shares using ending period
market value versus average market value for
the period when utilizing the treasury stock
method regarding stock options 88 108
------------ ------------
Total shares for fully diluted earnings per share 13,315 13,374
======= =======
Fully diluted earnings per common share and
common share equivalents $0.26 $0.72
======= =======
<FN>
<F1> Earnings per share are not presented for the three and nine-month periods
ended March 31, 1996 as these amounts are not considered meaningful since the
initial public offering of the Company's stock did not occur until June, 1996.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,053
<INT-BEARING-DEPOSITS> 935,626
<FED-FUNDS-SOLD> 30,818
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 270,753
<INVESTMENTS-CARRYING> 180,033
<INVESTMENTS-MARKET> 180,172
<LOANS> 682,818
<ALLOWANCE> 9,885
<TOTAL-ASSETS> 1,237,274
<DEPOSITS> 962,270
<SHORT-TERM> 40,586
<LIABILITIES-OTHER> 30,693
<LONG-TERM> 12,975
0
0
<COMMON> 145
<OTHER-SE> 190,605
<TOTAL-LIABILITIES-AND-EQUITY> 1,237,274
<INTEREST-LOAN> 40,270
<INTEREST-INVEST> 23,583
<INTEREST-OTHER> 1,921
<INTEREST-TOTAL> 65,774
<INTEREST-DEPOSIT> 28,828
<INTEREST-EXPENSE> 30,524
<INTEREST-INCOME-NET> 35,250
<LOAN-LOSSES> 3,150
<SECURITIES-GAINS> 110
<EXPENSE-OTHER> 20,477
<INCOME-PRETAX> 14,213
<INCOME-PRE-EXTRAORDINARY> 9,661
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,661
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.72
<YIELD-ACTUAL> 7.72
<LOANS-NON> 3,555
<LOANS-PAST> 0
<LOANS-TROUBLED> 4,671
<LOANS-PROBLEM> 3,066
<ALLOWANCE-OPEN> 7,812
<CHARGE-OFFS> 1,164
<RECOVERIES> 87
<ALLOWANCE-CLOSE> 9,885
<ALLOWANCE-DOMESTIC> 9,885
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
NEWS RELEASE
DIME COMMUNITY BANCORP, INC., REPORTS THIRD FISCAL QUARTER EARNINGS
2nd CONSECUTIVE TAX RECOVERY BOOSTS EARNINGS PER SHARE, 10% SHARE REPURCHASE
PROGRAM COMPLETED
Brooklyn, NY, April 24, 1997. Dime Community Bancorp, Inc. (the
"Company") ( NASDAQ: DIME), the holding company for the Dime Savings Bank of
Williamsburgh (the "Bank"), today reported earnings per share for the third
fiscal quarter ended March 31, 1997 of $0.26, and $0.73 for the first nine
months of the fiscal year. For the second consecutive quarter, the Company has
benefited from the recovery of deferred taxes previously taken against the
Bank's pre-conversion mutual savings bank earnings. A recovery of New York
City deferred tax liability in the amount of $1,034,000, or $0.07 per share,
was recorded in the current quarter after a similar recovery of New York State
deferred tax liability in the amount of $1,848,000, or $0.14 per share was
recorded in the quarter ended December 31, 1996. These deferred tax
liabilities were accumulated prior to the conversion of the Bank to stock form
and the recoveries are nonrecurring. Absent the recovery, adjusted earnings
per share were $0.19, down $0.04 from the prior quarter end, as the Company
commenced accruals for compensation expense associated with the implementation
of the Recognition and Retention Plan for Directors, Officers and Employees
("RRP") approved by the shareholders at the Annual Meeting on December 17,
1996.
Also during March, 1997, the Company substantially completed its 10% share
repurchase program. The favorable impact of this share repurchase program on
earnings per share will be fully realized in subsequent quarters.
CASH EARNINGS ENHANCE THE EARNINGS PER SHARE PERFORMANCE OF THE COMPANY. In
June, 1996, the Company completed a significant acquisition using the purchase
method of accounting and creating goodwill in the amount of $28.4 million. As
a result, cash earnings will deviate substantially above reported earnings
until goodwill is fully amortized, and will serve to accelerate the increase in
tangible
Page 1 of 8
<PAGE>
book value to shareholders. Non-cash expenses associated with the amortization
of goodwill, as well as non-cash charges stemming from the Company stock plans,
are directly accretive to book value. Cash earnings for the quarter ended March
31, 1997 were $0.35 per share, and $0.95 per share for the first nine months of
the fiscal year. Cash earnings as a percentage of average assets was 1.51% and
1.38% for the quarter and nine months ended March 31, 1997, respectively. Cash
earnings as a percentage of average tangible equity was 10.16% and 9.04% for
the quarter and nine months ended March 31, 1997, respectively.
ADJUSTED QUARTER-OVER-QUARTER RESULTS. Comparative results are discussed for
March 31, 1997 versus December 31, 1996 rather than March 31, 1996. The Bank
was not publicly held prior to June 26, 1996 and also acquired Conestoga
Bancorp, Inc. on June 26, 1996, increasing total assets from $690 million to
$1.2 billion. March 31, 1996 results, however, are presented in the tables.
Adjusted Net Income for the quarter ended March 31, 1997 was $2.5 million,
versus $3.1 million for the quarter ended December 31, 1996. This resulted in
adjusted cash earnings as a percentage of average assets of 1.18% for the
quarter ended March 31, 1997, and 1.29% for the quarter ended December 31,
1996. Adjusted cash earnings as percentage of average tangible equity was
7.91% for the quarter ended March 31, 1997, and 8.37% for the quarter ended
December 31, 1996. The tangible equity to asset ratio declined to 13.14% from
15.58% at the prior quarter end due to the repurchase of common stock into
treasury and the purchase of the Company's common stock for the RRP. Another
strong quarter of loan production resulted in $56.8 million of total loans
originated for the quarter, of which $55.6 million were multi-family loans,
just below the previous quarter's total loan originations of $64.8 million.
Net interest margin increased from 4.13% to 4.19% during the quarter, and the
ratio of nonperforming assets to total assets remained flat for the quarter at
a marginal 0.44%. The core efficiency ratio (excluding expenses accretive to
book value) was 40.80% and 36.18%, for the quarters ended March 31, 1997 and
December 31, 1996, respectively.
HIGHLIGHTS OF THE THREE MONTHS ENDED MARCH 31, 1997
ONE-TIME RECOVERY OF NEW YORK CITY INCOME TAX. On March 11, 1997, New York
City adopted legislation effective January 1, 196, which, unlike the Federal
income tax legislation adopted in August 1996, generally retains the percentage
of taxable income method for computing allowable bad debt deductions and only
requires the Bank to recapture into income New York City tax bad debt reserves
under certain limited circumstances. Prior to adoption of this legislation,
the Bank had established a deferred tax liability of approximately $1,034,000
recorded for the excess of City tax bad debt reserves over its reserve at
December 31, 1987 in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." After evaluating the City
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. A recovery of a
portion of New York State deferred tax liability was recorded in the prior
quarter based upon similar State legislation.
Page 2 of 8
<PAGE>
REPURCHASE OF COMMON STOCK. During the month of March, the Company
substantially completed its repurchase of 1,454,750 shares, or 10%, of its
common stock into treasury. Since quarterly earnings per share is calculated
on the average number of shares outstanding throughout the quarter, had these
shares been repurchased at the beginning of the quarter, reported earnings per
share would have risen by $0.03 to $0.29 per share. The favorable impact of
this share repurchase program on earnings per share will be fully realized in
subsequent quarters.
Also during March, the purchase of 4% of the common stock outstanding to fund
the RRP approved by shareholders at the Annual Meeting held on December 17,
1996 was substantially completed. All shares were acquired in the open market,
requiring no additional shares to be issued.
CONTINUED GROWTH IN MULTI-FAMILY LOAN ORIGINATIONS. Loan originations for the
three months ended March 31, 1997, were $56.8 million, of which $55.6 million
were multi-family loans. As a result, total loans as a percentage of earning
assets increased from 55.46% to 58.75% by the end of March, 1997. Since June
26, 1996, the date of the Company's initial public offering, the total loans-
to-earning assets ratio has increased by over 30%, from 45.13% to 58.75%, with
more than $169.3 million of multi-family loans having been originated. The
loan commitment pipeline currently stands in excess of $100 million.
The Company continues to see aggressive competition for loans in the multi-
family marketplace which has resulted in more favorable rates for borrowers,
and generally lower loan-to-value ratios for the Bank. The Company believes it
is prudent to continue to allocate a portion of current earnings as a provision
against possible future loan losses, especially in view of the growth of this
loan category on the Company's balance sheet. As of March 31, 1997, the
Allowance for Loan Losses was $9.9 million, or 1.45% of total loans. More
importantly, this Allowance represents 2.34% of total multi-family loans in
portfolio. Management will continue to evaluate the risk profile of the loan
portfolio, especially that of new loans, and thus the appropriateness of
maintaining the current level of loan loss provisions.
REVIEW OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
NET INTEREST INCOME. Net interest income totaled $12.1 million for the three
months ended March 31, 1997, an increase of $147,000 from the three months
ended December 31, 1996, primarily because the volume of interest-earning
assets rose slightly and the yield on interest-earning assets increased. As a
result, the net interest margin increased to 4.19% from 4.13%.
The average balance of interest-earning assets increased by $12.8 million
(after the $33.9 million reduction in investments used to fund the share
repurchase program and the purchase of the shares for the Company's RRP). The
yield on average earning assets increased 5 basis points to 7.72%, driven
primarily by the movement of funds from matured investment securities into
higher yielding real estate loans and mortgage backed securities.
Page 3 of 8
<PAGE>
The average balance of interest-bearing liabilities rose by $14.9 million,
nearly all of which can be accounted for by the gain in the volume of
certificates of deposit, whose average cost declined by 10 basis points to
5.53%. The average cost of all interest-bearing liabilities declined by 9
basis points to 4.17% at March 31, 1997 from December 31, 1996.
PROVISION FOR LOAN LOSSES AND NET CHARGE-OFFS. There was no change in the loan
loss provision charged to earnings in the current quarter over the prior
quarter. For each of the first three quarters of the current fiscal year,
management has booked a provision in the amount of $1.1 million. Net loans
charged-off to the loan loss reserve during the quarter ended March 31, 1997
amounted to $56,000, versus $820,000 charged-off during the quarter ended
December 31, 1996.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE. Non-interest income declined by
$271,000, from $1.1 million for the quarter ended December 31, 1996, to
$781,000 for the quarter ended March 31, 1997, primarily the result of fewer
gains from sales and calls of securities.
Non-interest expense increased by $841,000 during the period, from $5.9 million
at December 31, 1996 (adjusted for a nonrecurring recovery of $296,000 received
during December, 1996, related to the Bank's claim against Nationar), to $6.7
million at March 31, 1997. The primary reason was the compensation expense
associated with the implementation of the Company's stock plans, which rose
from $361,000 last quarter to $892,000 for the current quarter. This
represents an increase of $531,000, due in part to two months expense accruals
for the RRP, and also due to the rise in the Employee Stock Ownership Plan
expenses resulting from the rise in the Company's stock price. Note that these
expenses, and the tax benefits associated with them, are non-cash expenses
which increase the book value of the Company. Excluding these non-cash expenses
and goodwill (also a non-cash expense), the core efficiency ratio for the
period ended March 31, 1997 was 40.80%, and operating expenses as a percent of
average assets were 1.70%.
INCOME TAXES. Income taxes, before adjustment, for the three months ended
March 31, 1997 were $2.6 million, versus $3.3 million for the three months
ended December 31, 1996, for an effective tax rate of 51.74% and 51.45%,
respectively. The Company's high effective tax rate is mainly a result of the
non-deductibility of goodwill amortization associated with the acquisition
completed on June 26, 1996.
As previously mentioned, the Company has recovered deferred tax liabilities in
two consecutive periods as a result of legislation adopted by each of New York
State and New York City that generally retains the percentage of taxable income
method for computing allowable bad debt deductions available for thrift
institutions, and does not require the Bank to recapture into income State or
City tax bad debt reserves except for certain limited occurrences. After
evaluating the State and City tax legislation, as well as relevant accounting
literature and industry practices, management of the Bank concluded that these
liabilities were no longer required to be recorded, and recovered the full
liabilities of $1.8 million from the
Page 4 of 8
<PAGE>
New York State deferred liability in December, 1996, and $1.0 million from the
New York City deferred liability in March, 1997.
REVIEW OF FINANCIAL CONDITION AT MARCH 31, 1997
The Company's assets totaled $1.24 billion at March 31, 1997, a decrease of
$134.5 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.
Real estate loans and loans held for sale increased $98.9 million, resulting
primarily from originations of $176.3 million during the nine months ended
March 31, 1997, of which $169.3 million were multi-family and underlying
cooperative and non-residential loans. Funding for these loans was obtained
from various sources, including maturing investment securities and federal
funds sold, and increased deposits and borrowings of $12.2 million and $25.9
million, respectively.
The Company's Stockholders' equity totaled $190.8 million, or 15.42% of total
assets at March 31, 1997, a decrease of $22.3 million from June 30, 1996. The
decrease resulted from repurchases of the Company's common stock of $27.1
million and $6.8 million, respectively, into treasury stock and by the RRP,
which occurred during the three months ended March 31, 1997. At March 31,
1997, the Company's stated book value and tangible book value were $14.53 and
$12.39 on a per share basis, respectively.
At March 31, 1997, the Bank was in compliance with all regulatory capital
requirements with Tangible, Core and Risk-based capital ratios of 10.45%,
10.45% and 21.55%, respectively.
Dime Community Bancorp, Inc., is the holding company for the Dime Savings Bank
of Williamsburgh, a community-oriented financial institution providing
financial services and loans for housing within its market areas. The Bank
maintains its headquarters in the Williamsburgh section of the borough of
Brooklyn. Fourteen additional offices are located in the boroughs of Brooklyn,
Queens, and the Bronx, and in Nassau County. The Bank gathers deposits
primarily from the communities and neighborhoods in close proximity to its
branches. The Bank's deposits are insured up to the maximum allowable amount by
the Bank Insurance Fund or the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation.
CONTACT: KENNETH A. CEONZO
VICE PRESIDENT AND DIRECTOR OF INVESTOR RELATIONS
(718) 782-6200 extension 279
This earnings release 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, or the
development of an interest rate environment that adversely affects the interest
rate spread or other income anticipated from the Company's operations and
investments.
{TABLES FOLLOWING}
PAGE 5 OF 8
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 JUNE 30, 1996
ASSETS: (UNAUDITED) (UNAUDITED) 1996 (UNAUDITED)
-------------- -------------- ----------- -------------
Cash and due from banks $14,053 $11,653 $17,055 $ 6,913
Investment securities held to maturity 97,814 86,320 43,552 40,996
INVESTMENT SECURITIES AVAILABLE FOR SALE:
Bonds and notes 66,971 122,290 338,089 45,701
Marketable equity securities 3,452 3,399 3,205 3,108
Mortgage backed securities held to maturity 82,219 85,199 52,580 55,397
Mortgage backed securities available for sale 200,330 188,707 157,361 37,856
Federal funds sold 30,818 32,952 115,130 24,247
REAL ESTATE LOANS:
One-to-four family and cooperative apartment 213,110 219,465 238,227 136,215
Multi-family and underlying cooperative 422,741 374,371 303,895 272,057
Non-residential 44,499 45,313 37,708 32,157
Less: Unearned discounts and net deferred loan (3,500) (3,346) (2,167) (1,206)
fees
-------------- ---------------- ----------- --------------
Total real estate loans 676,850 635,803 577,663 439,223
Other loans 5,801 5,871 5,564 3,988
Allowance for loan losses (9,885) (8,891) (7,812) (6,146)
--------------- ---------------- ------------ -------------
TOTAL LOANS, NET 672,766 632,783 575,415 437,065
--------------- ---------------- ------------ -------------
Loans held for sale 167 335 459 468
Premises and fixed assets 14,033 14,048 14,399 6,138
Federal Home Loan Bank of New York capital stock 8,322 7,598 7,604 4,923
Other real estate owned, net 1,883 2,270 1,946 1,814
Goodwill 26,977 27,566 28,438 -
Other assets 17,469 16,913 16,588 11,549
--------------- ---------------- ------------ -------------
TOTAL ASSETS $1,237,274 $1,232,033 $1,371,821 $676,175
======== ======== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
NOW, Super Now and Money Market $52,250 $55,523 $61,529 $ 30,413
Savings 348,941 349,654 365,146 231,146
Certificates of deposit 534,434 515,907 495,755 288,393
Non-interest bearing checking 26,645 27,265 27,684 11,074
--------------- ---------------- ------------ -------------
Total Due to depositors 962,270 948,349 950,114 561,026
--------------- ---------------- ------------ -------------
Escrow and other deposits 20,050 8,483 141,732 11,515
Securities sold under agreements to repurchase 32,851 33,146 11,998 2,026
Federal Home Loan Bank of New York advances 20,710 15,710 15,710 15,710
Payable for securities purchased - - 33,994 -
Other liabilities 10,643 4,782 5,202 4,262
--------------- ---------------- ------------ -------------
TOTAL LIABILITIES 1,046,524 1,010,470 1,158,750 594,539
--------------- ---------------- ------------ -------------
STOCKHOLDERS' EQUITY
Common stock ($0.01 par, 45,000,000 shares authorized,
13,125,900 outstanding at March 31, 1997, and 14,547,500
shares outstanding at December 31, 1996 and June 30, 1996
No shares outstanding at March 31, 1996) 145 145 145 -
Additional paid-in capital 141,482 141,259 141,240 -
Unallocated common stock of Employee Stock Ownership Plan (10,618) (11,541)
(10,926) -
Unearned common stock of Recognition and Retention Plan (6,792) - - -
Retained earnings (substantially restricted) 92,577 89,079 82,916 81,196
Treasury stock (1,421,600 shares at March 31, 1997) (27,125) - - -
Unrealized gain on securities available for sale, net of
deferred taxes 1,081 2,006 311 440
--------------- ---------------- ------------ -------------
TOTAL STOCKHOLDERS' EQUITY 190,750 221,563 213,071 81,636
--------------- ---------------- ------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,237,274 $1,232,033 $1,371,821 $676,175
======== ======== ====== =======
</TABLE>
Page 6 of 8
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, DECEMBER 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1996 <F1> 1997 1996 <F1>
------------- -------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans secured by real estate $13,860 $13,417 $ 9,862 $39,924 $ 29,394
Other loans 111 103 85 346 249
Investment securities 3,115 3,885 1,246 10,918 4,154
Mortgage-backed securities 4,652 4,315 1,484 12,665 4,491
Federal funds sold 587 517 297 1,921 962
------------- -------------- ------------- ----------- --------------
TOTAL INTEREST INCOME 22,325 22,237 12,974 65,774 39,250
INTEREST EXPENSE:
Deposits and escrow 9,493 9,646 5,554 28,828 17,035
Borrowed funds 716 622 249 1,696 754
------------- -------------- ------------- ----------- --------------
TOTAL INTEREST EXPENSE 10,209 10,268 5,803 30,524 17,789
NET INTEREST INCOME 12,116 11,969 7,171 35,250 21,461
PROVISION FOR LOAN LOSSES 1,050 1,050 900 3,150 1,850
NET INTEREST INCOME AFTER PROVISION FOR 11,066 10,919 6,271 32,100 19,611
LOAN LOSSES
NON-INTEREST INCOME:
Service charges and other fees 479 514 245 1,419 662
Net gain on sales and redemptions of assets 32 206 22 297 (37)
Other 270 332 112 874 355
------------- -------------- ------------- ----------- --------------
TOTAL NON-INTEREST INCOME 781 1,052 379 2,590 980
NON-INTEREST EXPENSE: ------------- -------------- ------------- ----------- --------------
Compensation and benefits 3,319 2,683 1,993 8,811 5,534
Occupancy and equipment 766 840 469 2,334 1,269
SAIF special assessment - - - 2,032 -
Goodwill amortization 600 606 - 1,800 -
Other 2,056 1,475 1,439 5,500 3,498
------------- -------------- ------------- ----------- --------------
TOTAL NON-INTEREST EXPENSE 6,741 5,604 3,901 20,477 10,301
INCOME BEFORE INCOME TAXES 5,106 6,367 2,749 14,213 10,290
INCOME TAX EXPENSE 1,608 1,428 1,266 4,552 4,713
------------- -------------- ------------- ----------- --------------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,498 4,939 1,483 9,661 5,577
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGING TO A DIFFERENT METHOD OF
ACCOUNTING FOR:
POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS - - - - (1,032)
------------- -------------- ------------- ----------- --------------
NET INCOME 3,498 4,939 1,483 9,661 4,545
======= ======== ======= ====== ========
EARNINGS PER SHARE:
PRIMARY $0.26 $0.37 N/A (1) $0.73 N/A (1)
======= ======== ======= ====== ========
FULLY DILUTED $0.26 $0.37 N/A (1) $0.72 N/A (1)
======= ======== ======= ====== ========
CASH BASIS $0.35 $0.43 N/A (1) $0.95 N/A (1)
======= ======== ======= ====== ========
<FN>
<F1>Amounts represent operations of the Bank prior to its conversion to public
company and acquisition of Conestoga Bancorp, Inc. on June 26, 1996.
</TABLE>
PAGE 7 OF 8
<PAGE>
<TABLE>
<CAPTION>
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997 MARCH 31, 1996
<F1> <F1> <F3>
----------- ------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net Income $ 3,498 $ 4,939 $ 1,483 $ 9,661 $5,577
Net Income (adjusted) 2,464 3,091 1,483 7,876 5,577
Cash Earnings 4,683 5,791 1,483 12,587 5,577
Cash Earnings (adjusted) 3,649 3,943 1,483 10,802 5,577
Average Assets 1,236,580 1,224,659 668,819 1,219,200 649,314
Average Deposits 951,089 942,229 558,212 944,931 557,884
Return on Average Assets 1.13% 1.61% 0.89% 1.06% 1.11%
Return on Average Assets (adjusted)
0.80% 1.01% 0.89% 0.86% 1.11%
Return on Average Tangible
Stockholders' Equity 7.59% 10.48% 7.30% 6.94% 9.33%
Return on Avg Tangible
Stockholders' Equity (adjusted) 5.34% 6.56% 7.30% 5.66% 9.33%
Cash Return on Average Tangible Equity 10.16% 12.29% 7.30% 9.04% 9.33%
Tangible Equity to Total Assets 13.14% 15.58% 12.01% 13.43% <F2> 12.01%
Interest Rate Spread 3.49% 3.41% 3.88% 3.36% 3.88%
Net Interest Margin 4.19% 4.13% 4.41% 4.07% 4.41%
Operating expenses to average assets 2.18% 1.83% 2.33% 2.24% 2.06%
Core Efficiency Ratio 40.80% 36.18% 51.82% 45.18% 45.83%
Loans/Earning Assets 58.75% 55.46% 67.52% 46.21% <F2> 67.52%
Loans/Deposits 70.96% 67.70% 79.08% 61.43% <F2> 79.08%
Effective Tax Rate 51.74% 51.45% 46.05% 52.30% 45.80%
PER SHARE DATA
Earnings per share - reported $ 0.26 $ 0.37 N/A $ 0.73 N/A
Earnings per share - cash basis 0.35 0.43 N/A 0.95 N/A
Book value per share (tangible) 12.39 13.19 N/A 12.66 <F2> N/A
Shares used for EPS computation 13,227,232 13,393,398 N/A 13,265,740 N/A
Shares used for book value computation 13,125,900 14,547,500 N/A 14,547,500 <F2> N/A
CREDIT QUALITY SUMMARY
Net charge-offs $ 56 $ 820 $ 464 $ 1,077 $878
Nonperforming loans 3,555 2,917 5,614 6,551 <F2> 5,614
Other real estate owned 1,883 2,270 1,814 1,946 <F2> 1,814
Allowance for loan
loss/Nonperforming loans 278.06% 304.80% 109.48% 119.25% <F2> 109.48%
Allowance for loan loss/Total loans 1.45% 1.38% 1.39% 1.34% <F2> 1.39%
Allowance for loan loss/Multi-family loans 2.34% 2.37% 2.26% 2.57% <F2> 2.26%
Nonperforming assets/Total assets 0.44% 0.42% 1.10% 0.62% <F2> 1.10%
REGULATORY CAPITAL RATIOS
Tangible Capital 10.45% 10.98% 12.01% 9.49% <F2> 12.01%
Core Capital 10.45% 10.99% 12.03% 9.50% <F2> 12.03%
Risk-based capital 21.55% 23.25% 22.22% 21.24% <F2> 22.22%
<FN>
<F1>Amounts represent operations of the Bank prior to its conversion
to public company and acquisition of Conestoga Bancorp, Inc.
on June 26, 1996.
<F2>Amounts presented are as of June 30, 1996.
<F3>Net income represents income before cumulative effect of
change in accounting principles.
</TABLE>
PAGE 8 OF 8
