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, 1998
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, 1998
------------------------ --------------------------------------------
$.01 Par Value 12,439,713
<PAGE>
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<TABLE>
<CAPTION>
<S> <C> <C>
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Condition at March 31, 1998
(Unaudited) and June 30, 1997 3
Consolidated Statements of Operations for the Three and Nine-
month Periods Ended March 31, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended March 31, 1998 (Unaudited) 5
Consolidated Statements of Cash Flows for the Nine months
Ended March 31, 1998 and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-23
Item 3 Quantitative and Qualitative Disclosure About Market Risk 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
Exhibits 27
</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>
-3-
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
AT MARCH 31, 1998 AT JUNE 30,
(UNAUDITED) 1997
------------ ---------
ASSETS:
Cash and due from banks $11,888 $19,198
Investment securities held to maturity (estimated market value of $88,686
and $102,024 at March 31, 1998 and June 30, 1997, respectively) 88,128 101,587
Investment securities available for sale:
Bonds and notes (amortized cost of $74,902 and $52,426 at March 31,
1998 and June 30, 1997, respectively) 75,203 52,798
Marketable equity securities (historical cost of $6,635 and $4,912 at
March 31, 1998 and June 30, 1997, respectively) 8,952 5,889
Mortgage backed securities held to maturity (estimated market value of
$60,628 and $79,075 at March 31, 1998 and June 30, 1997, respectively) 59,800 78,388
Mortgage backed securities available for sale (amortized cost of $362,898
and $227,776 at March 31, 1998 and June 30, 1997, respectively) 365,454 230,137
Federal funds sold 24,608 18,902
Loans:
Real estate 878,711 744,246
Other loans 5,367 6,076
Less: Allowance for loan losses (12,018) (10,726)
------------ ---------
Total loans, net 872,060 739,596
------------ ---------
Loans held for sale 478 262
Premises and fixed assets 13,546 13,995
Federal Home Loan Bank of New York Capital Stock 10,293 8,322
Other real estate owned, net 1,111 1,697
Goodwill 24,629 26,433
Other assets 20,991 17,822
------------ ---------
TOTAL ASSETS $1,577,141 $1,315,026
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $1,033,614 $963,395
Escrow and other deposits 19,071 14,974
Securities sold under agreements to repurchase 180,906 76,333
Federal Home Loan Bank of New York advances 93,505 63,210
Payable for securities purchased 50,751 -
Accrued postretirement benefit obligation 2,675 2,546
Other liabilities 7,314 3,679
------------ ---------
TOTAL LIABILITIES 1,387,836 1,124,137
------------ ---------
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par, 9,000,000 shares authorized,
none outstanding at March 31, 1998 and June 30, 1997) - -
Common stock ($0.01 par, 45,000,000 shares authorized, 14,549,100 shares and
14,547,500 shares issued at March 31, 1998 and June 30, 1997, respectively,
and 12,439,713 and 13,092,750 shares outstanding at March 31, 1998 and
June 30, 1997,respectively) 145 145
Additional paid-in capital 142,757 141,716
Retained earnings (substantially restricted) 102,150 94,695
Unallocated common stock of Employee Stock Ownership Plan (9,451) (10,324)
Unearned common stock of Recognition and Retention Plan (8,088) (9,671)
Treasury stock, at cost (2,109,387 shares and 1,454,750 shares at March 31,
1998 and June 30, 1997, respectively) (41,022) (27,703)
Unrealized gain on securities available for sale, net of deferred taxes 2,814 2,031
------------ ---------
TOTAL STOCKHOLDERS' EQUITY 189,305 190,889
------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,577,141 $1,315,026
============ =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
-4-
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,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------- --------- -------- ----------
INTEREST INCOME:
Loans secured by real estate $17,858 $13,860 $51,186 $39,924
Other loans 122 111 373 346
Investment securities 2,595 3,115 8,145 10,918
Mortgage-backed securities 6,005 4,652 16,911 12,665
Federal funds sold 480 587 1,524 1,921
-------- -------- -------- --------
TOTAL INTEREST INCOME 27,060 22,325 78,139 65,774
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits and escrow 10,847 9,493 32,119 28,828
Borrowed funds 3,754 716 9,256 1,696
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 14,601 10,209 41,375 30,524
NET INTEREST INCOME 12,459 12,116 36,764 35,250
PROVISION FOR LOAN LOSSES 525 1,050 1,575 3,150
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,934 11,066 35,189 32,100
-------- -------- -------- --------
NON-INTEREST INCOME:
Service charges and other fees 492 479 1,722 1,419
Net gain on sales and redemptions of securities and
other assets 221 18 399 189
Net gain on sales of loans 16 14 40 108
Other 532 270 1,113 874
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 1,261 781 3,274 2,590
-------- -------- -------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 3,064 2,427 8,309 7,095
ESOP and RRP compensation expense 940 892 3,473 1,716
Occupancy and equipment 773 766 2,268 2,334
SAIF special assessment - - - 2,032
Federal deposit insurance premiums 88 86 259 337
Data processing costs 299 305 858 764
Provision for losses on Other real estate owned 15 97 94 364
Goodwill amortization 602 600 1,804 1,800
Other 1,282 1,568 3,604 4,035
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 7,063 6,741 20,669 20,477
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 6,132 5,106 17,794 14,213
INCOME TAX EXPENSE 2,794 1,608 8,731 4,552
-------- -------- -------- --------
NET INCOME $3,338 $3,498 $9,063 $9,661
====== ======= ======= ========
EARNINGS PER SHARE:
BASIC $0.31 $0.27 $0.82 $0.73
====== ======= ======= ========
DILUTED $0.28 $0.26 $0.75 $0.73
====== ======= ======= ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
-5-
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C>
FOR THE NINE
MONTHS ENDED
MARCH 31, 1998
----------------
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 141,716
Amortization of excess fair value over cost - ESOP stock 1,018
Stock options exercised 23
----------------
Balance at end of period 142,757
----------------
RETAINED EARNINGS:
Balance at beginning of period 94,695
Net income for the period 9,063
Cash dividends declared and paid (1,608)
----------------
Balance at end of period 102,150
----------------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (10,324)
Amortization of earned portion of ESOP stock 873
----------------
Balance at end of period (9,451)
----------------
RECOGNITION AND RETENTION PLAN:
Balance at beginning of period (9,671)
Amortization of earned portion of RRP stock 1,583
----------------
Balance at end of period (8,088)
----------------
TREASURY STOCK:
Balance at beginning of period (27,703)
Purchase of 468,000 shares, at cost (13,319)
----------------
Balance at end of period (41,022)
----------------
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET:
Balance at beginning of period 2,031
Change in unrealized gain on securities available for sale
during the period, net of deferred taxes 783
----------------
Balance at end of period 2,814
----------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
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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,
<S> <C> <C>
1998 1997
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
Net income $9,063 $9,661
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net gain on investment and mortgage backed securities sold and called (631) (110)
Net gain on sale of other assets - (19)
Net gain on sale of loans jeld for sale (40) (108)
Net depreciation and amortization (accretion) 550 (1,112)
ESOP and RRP compensation expense 3,473 1,716
Provision for loan losses 1,575 3,150
Goodwill amortization 1,804 1,800
(Increase) decrease in loans held for sale (176) 400
Increase in other assets and other real estate owned (3,261) (1,476)
Increase in accrued postretirement benefit obligation and other liabilities 3,764 5,441
Increase (decrease) in payable for securities purchased 50,751 (33,994)
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 66,872 (14,651)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold (5,706) 84,312
Proceeds from maturities of investment securities held to maturity 5,250 17,035
Proceeds from maturities of investment securities available for sale 40,145 342,460
Proceeds from calls of investment securities held to maturity 37,500 -
Proceeds from calls of investment securities available for sale 11,500 25,000
Proceeds from sale of investment securities available for sale 11,531 25,051
Proceeds from sales of mortgage backed securities held to maturity 3,756 -
Proceeds from sales and calls of mortgage backed securities available for sale 65,542 -
Purchases of investment securities held to maturity (29,082) (71,244)
Purchases of investment securities available for sale (87,003) (119,127)
Purchases of mortgage backed securities held to maturity - (38,842)
Purchases of mortgage backed securities available for sale (237,518) (62,185)
Principal collected on mortgage backed securities held to maturity 14,692 9,039
Principal collected on mortgage backed securities available for sale 37,234 20,286
Net increase in loans (134,040) (100,501)
Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired - (339)
Purchases of fixed assets (292) (436)
Purchase of Federal Home Loan Bank stock (1,971) (718)
--------- --------
Net Cash (used in) provided by Investing Activities (268,462) 129,791
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in Due to depositors 70,219 12,156
Net increase (decrease) in escrow and other deposits 4,097 (121,682)
Proceeds from Federal Home Loan Bank of New York Advances 42,795 5,000
Repayments of Federal Home Loan Bank of New York Advances (12,500) -
Increase in securities sold under agreements to repurchase 104,573 20,853
Stock issued for exercise of stock options 23 -
Cash disbursed for expenses related to issuance of common stock - (190)
Purchase of common stock by the Recognition and Retention Plan - (7,154)
Cash dividends paid to stockholders (1,608) -
Purchase of treasury stock (13,319) (27,125)
--------- --------
Net Cash provided by (used in) Financing Activities 194,280 (118,142)
--------- --------
DECREASE IN CASH AND DUE FROM BANKS (7,310) (3,002)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 19,198 17,055
--------- --------
CASH AND DUE FROM BANKS, END OF PERIOD $11,888 $14,053
========= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $8,857 $5,317
========= =======
Cash paid for interest $39,880 $30,490
========= =======
Transfer of loans to Other real estate owned $198 $1,357
========= =======
Change in unrealized gain on available for sale securities, net of deferred taxes $783 $770
========= =======
</TABLE>
See Notes to consolidated financial statements
<PAGE>
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND 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"), a federally chartered state
savings 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 and the Company's loan to the ESOP.
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 (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
condition as of March 31, 1998, the results of operations for the three-month
and nine-month periods ended March 31, 1998 and 1997, cash flows for the nine
months ended March 31, 1998 and 1997, and changes in stockholders' equity for
the nine months ended March 31, 1998. The results of operations for the three-
month and nine-month periods ended March 31, 1998, 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 principles
("GAAP") have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
The preparation of financial statements in conformity with GAAP 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,
1997 and notes thereto of the Company.
3. TREASURY STOCK
During the nine months ended March 31, 1998, the Company repurchased 654,637
shares of its common stock into treasury. The average price of the treasury
shares acquired was $20.34 per share, and all shares have been recorded at the
acquisition cost.
1. EARNINGS PER SHARE
The Company recently adopted 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
-8-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
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
("APB 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 Employee Stock Ownership Plan ("ESOP")
shares when calculating average shares outstanding. As a result, consistent
with the calculations of average shares outstanding performed under APB 15,
unallocated ESOP shares are not included in average shares outstanding under
SFAS 128. Restatement of prior periods is required under SFAS 128.
The following is a reconciliation of the numerator and denominator of basic
earnings per share for the three-month and nine-month periods ended March 31,
1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
<S> <C> <C> <C> <C>
---------- ---------- ---------- ----------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
NUMERATOR:
Net Income $3,338 $3,498 $9,063 $9,661
========== ========== ========== ==========
DENOMINATOR:
Average shares outstanding
utilized in the calculation
of basic earnings per share 10,914,927 12,979,355 11,042,681 13,257,398
---------- ---------- ---------- ----------
Unvested shares of Recognition
and Retention Plan 491,835 6,465 541,660 2,124
Common stock equivalents due to
the dilutive effect of stock
options 507,061 241,412 460,215 6,218
---------- ---------- ---------- ----------
Average shares outstanding
utilized in the calculation
of diluted earnings per share 11,913,823 13,227,232 12,044,556 13,265,740
========== ========== ========== ==========
</TABLE>
5. 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
(the "FDIC") in order to recapitalize the SAIF. The special assessment was
recorded in non-interest expense during the quarter ended September 30, 1996.
<PAGE>
-9-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
6. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
requires that deferred taxes be provided for temporary differences between the
book and tax bases of assets and liabilities.
On July 30, 1996, New York State (the "State") enacted legislation, effective
January 1, 1996, which generally retains the percentage of taxable income
method for computing allowable bad debt deductions and does not require the
Bank to recapture into income State tax bad debt reserves unless one of the
following events occur: 1) the Bank's retained earnings represented by the
reserve is used for purposes other than to absorb losses from bad debts,
including dividends in excess of the Bank's earnings and profits or
distributions in liquidation or in redemption of stock; 2) the Bank fails to
qualify as a thrift as provided by the State tax law, or 3) there is a change
in state tax law. Upon adoption of this legislation, the Bank had a deferred
tax liability of approximately $1,848 recorded for the excess of State tax bad
debt reserves over its reserve at December 31, 1987 in accordance with SFAS
109. In December, 1996 after evaluating the State tax legislation, as well as
relevant accounting literature and industry practices, management of the Bank
concluded that this liability was no longer required to be recorded, and
recovered the full deferred tax liability. This recovery resulted in a
reduction of income tax expense during the three and six-month periods ended
December 31, 1996 for the full amount of the recovered deferred tax liability.
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 $1,034 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>
-10-
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 and
parent corporation of The Dime Savings Bank of Williamsburgh (the "Bank"), a
federally chartered stock savings bank.
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 of the Bank from a federal mutual savings
bank to a federal stock savings bank. A portion of these proceeds have been
utilized to fund the repurchase of common stock into treasury. All 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.
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") in June, 1996, the Bank
acquired the deposits of Conestoga's wholly-owned subsidiary, Pioneer Savings
Bank, FSB ("Pioneer"), a SAIF-insured thrift, which deposits totaled
approximately $394.3 million at June 30, 1996. The Bank pays SAIF assessments
with respect to the Pioneer deposits. In addition, the Bank pays SAIF
assessments on deposits the Bank acquired in a prior branch acquisition. All
SAIF-insured deposits acquired by the Bank qualified as "Oakar deposits," and
were the basis for the one-time assessment, which was recorded in non-interest
expense during the quarter ended September 30, 1996.
<PAGE>
-11-
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or For the At or For The
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS: ($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Return on average assets <F1> 0.90% 1.13% 0.85% 1.06%
Cash basis return on average assets <F2> 1.21 1.51 1.24 1.38
Return on average stockholders' equity <F1> 7.24 6.52 6.51 6.01
Return on average tangible stockholders'
equity <F1> 8.57 7.59 7.68 6.94
Cash basis return on average stockholders'
equity <F2> 9.78 8.72 9.49 7.83
Cash Basis Return on average tangible
stockholders' equity <F2> 11.57 10.16 11.20 9.04
Average stockholders' equity to average
assets 12.37 17.36 13.06 17.58
Stockholders' equity to total assets at
end of period 12.00 15.42 12.00 15.42
Tangible equity to tangible assets at end
of period 10.44 13.45 10.44 13.45
Average interest rate spread 2.91 3.49 3.05 3.36
Net interest margin 3.51 4.19 3.62 4.07
Average interest-earning assets to
average interest-bearing liabilities 113.03 119.84 114.08 120.04
Non-interest expense to average assets <F1> 1.90 2.18 1.94 2.24
Efficiency ratio <F1> 52.38 52.40 52.20 54.54
PER SHARE DATA:
Basic earnings per share <F1> $0.31 $0.27 $0.82 $0.73
Basic cash basis earnings per share <F2> 0.41 0.36 1.20 0.95
Book value per share 15.22 14.53 15.22 14.53
Tangible book value per share 13.01 12.39 13.01 12.39
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans $1,775 $3,555 $1,775 $3,555
Other real estate owned, net 1,111 $1,883 1,111 $1,883
RATIOS:
Non-performing loans to total loans 0.20% 0.52% 0.20% 0.52%
Non-performing loans and other real estate
owned to total assets 0.18 0.44 0.18 0.44
Allowance for loan losses to:
Non-performing loans 677.07 278.06 677.07 278.06
Total loans 1.36 1.45 1.36 1.45
REGULATORY CAPITAL RATIOS: (BANK ONLY)
Tangible capital 8.21% 10.45% 8.21% 10.45%
Core capital 8.21 10.45 8.21 10.45
Risk-based capital 16.91 21.55 16.91 21.55
<FN>
<F1> Adjusted EARNINGS AND RATIOS. Excluding the effects of the SAIF Special
Assessment, and the recovery of New York State deferred income taxes previously
provided, return on average assets, return on average stockholders' equity,
return on average tangible stockholders' equity, non-interest expense to
average assets, the efficiency ratio and basic 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
for the nine months ended March 31, 1997.
<F2> CASH EARNINGS. Excluding the effects of the SAIF Special Assessment, and
the recovery of New York State deferred 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 basic
cash basis earnings per share would have been 1.18%, 6.90%, 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>
-12-
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, borrowings, 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 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, 1998, the Bank's loan originations totaled $215.1 million
compared to $176.3 million for the nine months ended March 31, 1997.
Purchases of mortgage-backed and other securities totaled $353.6
million for the nine months ended March 31, 1998, compared to $291.4
million for the nine months ended March 31, 1997. These activities
were funded primarily by principal repayments on loans and mortgage-
backed securities, maturities of investment securities, and borrowings
by means of repurchase agreements and Federal Home Loan Bank of New
York ("FHLBNY") advances. Principal repayments on loans and mortgage-
backed securities totaled $129.0 million during the nine months ended
March 31, 1998, compared to $101.9 million for the nine months ended
March 31, 1997. Maturities and calls of investment securities totaled
$94.4 million and $384.5 million, respectively, during the nine months
ended March 31, 1998 and 1997. Loan and security sales, which totaled
$83.0 million and $28.3 million, respectively, during the nine months
ended March 31, 1998 and 1997, provided some additional cash flows.
Deposits increased $70.2 million and $12.2 million, respectively,
during the nine months ended March 31, 1998 and 1997. Deposit flows
are affected by, among other things, 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, 1998, totaled $379.2 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 July 1, 1996, the Company
refunded $141.1 million in excess subscription proceeds related to its
conversion to a stock company in June, 1996. This refund was the
primary component of the decline in escrow and other deposits of $121.7
million during the nine months ended March 31, 1997. Net borrowings
increased $134.9 million during the nine months ended March 31, 1998,
comprised of growth of $104.6 million and $30.3 million, respectively,
in securities sold under agreements to repurchase ("Repo") transactions
and FHLBNY advances.
The Bank is required to maintain a minimum average daily balance of
liquid assets as defined by Office of Thrift Supervision regulations.
The minimum required liquidity ratio is currently 4.0%. At March 31,
1998, the Bank's liquidity ratio was 14.94%. 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 Bank 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
$205.9 million borrowing limit at the Federal Home Loan Bank of New
York ("FHLBNY") . At March 31, 1998, the Bank had $177.7 million in
short and medium term borrowings outstanding at the FHLBNY, comprised
of outstanding advances of $93.5 million and securities sold under
agreement to repurchase of $84.2 million, and a remaining unused
borrowing capacity from the FHLBNY of $28.2 million.
At March 31, 1998, the Bank was in compliance with all applicable
regulatory capital requirements. Tangible capital totaled $124.9
million, or 8.21% of total tangible assets, compared to a 1.50%
regulatory requirement; core capital, at 8.21%, exceeded the required
3.0% regulatory minimum, and total risk-based capital, at 16.91% of
risk weighted assets, exceeded the 8.0% regulatory requirement.
<PAGE>
-13-
During the nine months ended March 31, 1998, the Company repurchased
654,637 shares of its common stock into treasury. The aggregate cost
of such repurchase was $13.3 million, for an average price of $20.34
per share. The Company has received permission from the Office of
Thrift Supervision, by letter dated April 6, 1998, to repurchase up to
621,905 shares of common stock, under a repurchase program authorized
by the Board of Directors on March 12, 1998.
The Company declared and paid cash dividends totaling $1.6 million
during the nine months ended March 31, 1998. The Company did not
declare or pay any dividends during the nine months ended March 31,
1997. On April 9, 1998, the Company declared a cash dividend of $0.09
per share to all shareholders of record as of the close of business on
April 24, 1998. The dividends were paid on May 7, 1998.
During the three months ended March 31, 1998, the Bank created two
new operating subsidiaries, DSBW Preferred Funding Corporation ("DPFC")
and DSBW Residential Preferred Funding Corporation ("DRPFC"), both of
which are real estate investment trusts, which may, among other things,
be utilized by the Bank to raise capital in the future. Both DPFC and
DRPFC provide certain current financial benefits to the Bank. As of
March 31, 1998, the Bank has transferred approximately $225.0 million
of multi-family mortgage loans to DPFC and $10.0 million of one-to-four
family residential mortgage loans to DRPFC.
ASSET QUALITY
Non-performing loans (loans past due 90 days or more as to principal or
interest) totaled $1.8 million at March 31, 1998, as compared to $3.2
million at June 30, 1997. In addition, the Bank had 37 loans totaling
$408,000 delinquent 60-89 days at March 31, 1998, as compared to 33
such delinquent loans totaling $603,000 at June 30, 1997.
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. At
both March 31, 1998 and June 30, 1997, the Bank had four loans
totalling $4.7 million classified as troubled-debt restructurings,
all of which were performing according to their restructured terms.
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 $3.8 million as of March 31, 1998,
compared to $4.3 million at June 30, 1997. The average balance of
impaired loans was $4.1 million for the nine months ended March 31,
1998. The impaired portion of these loans is represented by specific
reserves totaling $46,000 allocated within the allowance for loan
losses at March 31, 1998. At March 31, 1998, 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, 1998, 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, 1998. At March 31, 1998,
approximately $675,000 of one-to-four family and cooperative apartment
loans on nonaccrual status were not deemed impaired under SFAS 114.
Each of these loans have outstanding balances less than $203,000, and
are considered a homogeneous loan pool not covered by SFAS 114.
<PAGE>
<PAGE>
-14-
The following table sets forth information regarding the Bank's non-
performing loans, non-performing assets, impaired loans and troubled-
debt restructurings at the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
AT MARCH 31, AT JUNE 30,
1998 1997
($ In Thousands)
NON-PERFORMING LOANS: ---------------- -------------
One- to four-family $667 $1,123
Multi-family and underlying cooperative 881 1,613
Non-residential - -
Cooperative apartment 184 415
Other loans 43 39
---------------- -------------
TOTAL NON-PERFORMING LOANS 1,775 3,190
TOTAL OREO 1,111 1,697
---------------- --------------
TOTAL NON-PERFORMING ASSETS $2,886 $4,887
================ ==============
TROUBLED-DEBT RESTRUCTURINGS $4,671 $4,671
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS 7,557 9,558
IMPAIRED LOANS 3,781 4,294
TOTAL NON-PERFORMING LOANS TO TOTAL LOANS 0.20% 0.43%
TOTAL IMPAIRED LOANS TO TOTAL LOANS 0.43 0.57
TOTAL NON-PERFORMING ASSETS TO TOTAL ASSETS 0.18 0.37
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS TO TOTAL ASSETS 0.48 0.73
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND JUNE 30, 1997
ASSETS. The Company's assets totaled $1.58 billion at
March 31, 1998, an increase of $262.1 million from total
assets of $1.32 billion at June 30, 1997. The growth in
assets was experienced primarily in real estate loans and
mortgage-backed securities available for sale, which
increased $134.7 million, $135.3 million, respectively.
The increase in real estate loans resulted primarily from
originations of $215.1 million during the nine months
ended March 31, 1998, of which $206.8 million were multi-
family and underlying cooperative and non-residential
loans. The increased loan originations resulted from both
an active local real estate market and a favorable
interest rate environment during the past nine months.
The increase in mortgage backed securities available for
sale resulted from purchases of $237.5 million during the
nine months ended March 31, 1998, primarily attributable
to the capital leverage program, discussed below. These
purchases were partially offset by sales and calls of
$65.5 million and principal repayments of $37.2 million on
these securities.
LIABILITIES. Funding for the growth in real estate loans
was obtained primarily from increased deposits of $70.2
million and increased FHLBNY advances of $30.3 million
during the nine month period. Funding for the increase in
mortgage-backed securities available for sale was obtained
primarily from increased
<PAGE>
-15-
securities sold under agreement to repurchase transactions of
$104.6 million, resulting from the capital leverage program.
In addition, as of March 31, 1998, the Company had a net payable
of $50.8 million related to unsettled securities transactions.
STOCKHOLDERS' EQUITY. Stockholders' equity declined $1.6
million to $189.3 million at March 31, 1998, from $190.9
million at June 30, 1997. During the nine months ended
March 31, 1998, the Company purchased 654,637 shares of
its common stock into treasury at an aggregate cost of
$13.3 million. Offsetting the share repurchases was
retained net income of $7.5 million, amortization of the
Company's Stock Plans of $3.5 million, and an increase of
$783,000 of the unrealized gain on investment and
mortgage-backed securities available for sale.
CAPITAL LEVERAGE STRATEGY. As a result of the initial
public offering in June, 1996, the Bank's capital level
significantly exceeded all regulatory requirements. A
portion of the "excess" capital generated by the initial
public offering has been deployed through the use of a
capital leverage strategy whereby the Bank invests in high
quality mortgage-backed securities ("leverage assets")
funded by short term borrowings from various third party
lenders under securities sold under agreement to
repurchase transactions. The capital leverage strategy
generates additional earnings for the Company by virtue of
a positive interest rate spread between the yield on the
leverage assets and the cost of the borrowings. Since the
average term to maturity of the leverage assets exceeds
that of the borrowings used to fund their purchase, the
net interest income earned on the leverage strategy would
be expected to decline in a rising interest rate
environment. See "Market Risk." To date, the capital
leverage strategy has been undertaken in accordance with
limits established by the Board of Directors, aimed at
enhancing profitability under moderate levels of interest
rate exposure. Assets under the capital leverage strategy
were $198.0 million at March 31, 1998, compared to $96.3
million at June 30, 1997.
COMPARISON OF THE OPERATING RESULTS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997
GENERAL. Net income for the three months ended March 31,
1998, totaled $3.3 million compared to $3.5 million during
the three months ended March 31, 1997. Net income for the
three months ended March 31, 1997, was affected by the
one-time recovery of previously recorded income tax
expense of $1.0 million. Net income for the three months
ended March 31, 1997, excluding this non-recurring item,
was $2.5 million.
The discussion of interest income and expense for the
three months ended March 31, 1998 and 1997, presented
below, should be read in conjunction with the following
table, which sets forth certain information relating to
the Company's consolidated statements of operations for
the three months ended March 31, 1998 and 1997, and
reflects the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and
costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively,
for the periods shown. Average balances are derived from
average daily balances. The yields and costs include fees
which are considered adjustments to yields.
<PAGE>
-16-
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------------
1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------- ---------- ----------- ---------- -------- -------
ASSETS: ($ IN THOUSANDS)
INTEREST-EARNING ASSETS:
Real Estate Loans <F1> $859,910 $17,858 8.31% $649,021 $13,860 8.66%
Other loans 5,429 122 8.99 5,460 111 8.24
Mortgage-backed securities <F2> 355,764 6,005 6.75 279,780 4,652 6.74
Investment securities <F2> 161,691 2,595 6.17 194,477 3,115 6.50
Federal funds sold 36,679 480 5.23 43,883 587 5.42
----------- ---------- ----------- ---------- -------- -------
TOTAL INTEREST-EARNING ASSETS 1,419,473 $27,060 7.63% 1,172,621 $22,325 7.72%
NON-INTEREST EARNING ASSETS 70,886 63,959
----------- ----------
TOTAL ASSETS $1,490,359 $1,236,580
=========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, Super NOW and
money market accounts $47,725 $271 2.30% $53,591 $319 2.41%
Savings accounts 335,745 1,870 2.26 347,471 1,929 2.25
Certificates of deposit 610,854 8,671 5.76 522,929 7,226 5.60
Mortgagors' escrow 7,105 35 2.00 3,395 19 2.27
Borrowed funds 254,459 3,754 5.98 51,142 716 5.68
----------- ---------- ----------- ---------- -------- -------
TOTAL INTEREST-BEARING
LIABILITIES 1,255,888 $14,601 4.72% 978,528 $10,209 4.23%
----------- ========== ---------- ========
Checking accounts 29,631 27,098
Other non-interest bearing
liabilities 20,521 16,249
----------- ----------
TOTAL LIABILITIES 1,306,040 1,021,875
STOCKHOLDERS' EQUITY 184,319 214,705
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,490,359 $1,236,580
=========== =========
NET INTEREST INCOME/ INTEREST RATE
SPREAD <F3> $12,459 2.91% $12,116 3.49%
======= =======
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F4> $163,585 3.51% $194,093 4.19%
=========== =========
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 113.03% 119.84%
<FN>
<F1> In computing the average balance of loans, non-accrual loans have been included.
<F2> Includes securities classified "held to maturity" and "available for sale."
<F3> Net interest rate spread represents the difference between the average rate on interest-earning assets and
the average cost of interest-bearing liabilities.
<F4> Net interest margin represents net interest income as a percentage of average interest-earning assets.
</TABLE>
<PAGE>
-17-
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
COMPARED TO
THREE MONTHS ENDED
MARCH 31, 1997
INCREASE/(DECREASE)
DUE TO
<S> <C> <C> <C>
VOLUME RATE TOTAL
------------- ------------ ------------
Interest-earning assets: ($ IN THOUSANDS)
Real Estate Loans $4,566 $(568) $3,998
Other loans - 11 11
Mortgage-backed securities 1,313 40 1,353
Investment securities (446) (74) (520)
Federal funds sold (92) (15) (107)
------------- ------------ ------------
Total $5,341 $(606) $4,735
============= ============ ============
Interest-bearing liabilities:
NOW, Super Now and money market accounts $(34) $(14) $(48)
Savings accounts (67) 8 (59)
Certificates of deposit 1,227 218 1,445
Mortgagors' escrow 20 (4) 16
Borrowed funds 2,923 115 3,038
-------------- ------------ ------------
Total 4,069 323 4,392
-------------- ------------ ------------
Net change in net interest income $1,272 $(929) $343
============== ============ ============
</TABLE>
NET INTEREST INCOME. Net interest income for the
three months ended March 31, 1998 increased $343,000
to $12.5 million from $12.1 million for the three
months ended March 31, 1997. The increase was
attributable primarily to an increase of $246.9
million in interest earning assets, offset by a
decline in the net interest rate spread of 58 basis
points for the three months ended March 31, 1998
compared to the three months ended March 31, 1997.
The net interest margin declined 68 basis points from
4.19% for the three months ended March 31, 1997 to
3.51% for the three months ended March 31, 1998.
INTEREST INCOME. Interest income for the three months
ended March 31, 1998, was $27.1 million, an increase
of $4.8 million from $22.3 million for the three
months ended March 31, 1997. The increase in
interest income was attributable primarily to
increased interest income on real estate loans and
mortgage-backed securities of $4.0 million and $1.4
million, respectively. The increase in interest
income on real-estate loans was attributable
primarily to an increase of $210.9 million in the
average balance of real estate loans for the three
months ended March 31, 1998, compared to the three
months ended March 31, 1997, resulting primarily from
$299.7 million of real estate loans originated for
the period April 1, 1997 through March 31, 1998. The
increases in interest income on mortgage-backed
securities was also attributable primarily to an
increase in average balances of $76.0 million for the
three months ended March 31, 1998, resulting from
$198.0 million in mortgage-backed securities
purchased through the Bank's capital leverage
program. Offsetting these increases to interest
income was a decrease in interest income on
investment securities of $520,000, primarily
resulting from a decline in average balance of
investment securities of $32.8 million. The decline
in the average balance resulted from the Bank
utilizing funds from matured investment securities to
fund loan originations. Overall, the yield on
interest earning assets declined 9 basis points from
7.72% for the three months ended
<PAGE>
-18-
March 31, 1997 to 7.63% for the three months ended March 31, 1998.
The decline was attributable primarily to the decrease of
35 basis points in average yield on real estate
loans, resulting from increased competition in
the real estate lending market, and was partially
offset by movement of funds from matured investment
securities into higher yielding real estate loans.
INTEREST EXPENSE. Interest expense increased $4.4
million, to $14.6 million for the three months ended
March 31, 1998, from $10.2 million for the three
months ended March 31, 1997. This increase resulted
primarily from increased interest expense of $1.4
million and $3.0 million, respectively, on
certificate of deposit accounts and borrowed funds,
which resulted from increased average balances of
$87.9 million and $203.3 million, respectively for
the three months ended March 31, 1998, compared to
the three months ended March 31, 1997. The increase
in the average balance on certificates of deposit
resulted primarily from increased deposit flows due
to higher rates offered on selected certificate
accounts for the past twelve months. The increase in
average balance of borrowed funds resulted primarily
from approximately $150.0 million of borrowed funds
added for the period April 1, 1997 to March 31, 1998,
under the capital leverage program. In addition to
the growth in average balances, the average cost of
interest bearing liabilities increased 49 basis
points to 4.72% for the quarter ended March 31, 1998,
from 4.23% for the quarter ended March 31, 1997. The
increase in average cost resulted from an increase of
$87.9 million in the average balance of certificate
of deposit accounts, which generally have a higher
average cost than other deposits, the increase of 16
basis points in average cost on certificate of
deposit accounts resulting from a rate promotion
instituted for the past twelve months, and an
increase of 30 basis points in average cost on
borrowed funds, resulting from higher-rate, longer-
term borrowings undertaken for the past two quarters
in order to fund loan originations.
PROVISION FOR LOAN LOSSES. The provision for loan
losses decreased $525,000 to $525,000 for the three
months ended March 31, 1998, from $1.05 million for
the three months ended March 31, 1997. The decline
in the provision for loan losses reflects the
improvement in non-performing loans. Non-performing
loans decreased to $1.8 million at March 31, 1998,
from $3.2 million at June 30, 1997. See "Asset
Quality" The Allowance for loan losses increased to
$12.0 million at March 31, 1998, from $11.5 million
at December 31, 1997, as the loan loss provision of
$525,000 was offset by net charge-offs of $22,000.
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 and the composition of
its loan portfolio.
NON-INTEREST INCOME. Non-interest income increased
$480,000 to $1.3 million for the three months ended
March 31, 1998 compared to $781,000 for the three
months ended March 31, 1997. This increase resulted
primarily from increased gain on sale of securities
of $203,000 and increased other income of $262,000,
which resulted primarily from increased prepayment
penalty income and FHLBNY capital stock income.
NON-INTEREST EXPENSE. Non-interest expense increased
$322,000 to $7.1 million for the three months ended
March 31, 1998, from $6.7 million for the three
months ended March 31, 1997. This increase resulted
primarily from increased salaries and end employee
benefits of $637,000, due primarily to general salary
and staffing increases, and an increase of $48,000 in
ESOP and RRP compensation expense. The increase in
salary and employee benefits was partially offset by
a decline of $286,000 in other expenses, which
resulted primarily from a decline in legal expenses,
which were higher in the prior year due to the
Company being in its initial stages as a public
company, and a decrease of $82,000 in provision for
losses on other real estate owned ("ORE"), reflecting
the overall decline in ORE.
INCOME TAX EXPENSE. Income tax expense for the
quarter ended March 31, 1998, was $2.8 million,
resulting in an effective tax rate of 45.56%,
compared to $1.6 million for the quarter ended March
31, 1997. Excluding the effect of the New York City
income tax recovery, the Company's income tax would
have been $2.6 million and the effective tax rate
would have been 51.74% for the quarter ended March
31, 1997. The decline in the effective tax rate was
primarily attributable to reduced income tax expenses
on securities and real estate loan interest income,
resulting from recent operational changes made by the
Company. The Company's effective tax rate is
adversely effected by certain non-deductible
recurring
<PAGE>
-19-
expenses such as goodwill. Excluding these non-deductible
items, the Company's effective tax rate for the three months
ended March 31, 1998, would have been 40.75%.
COMPARISON OF THE OPERATING RESULTS FOR THE NINE
MONTHS ENDED MARCH 31, 1998 AND 1997
GENERAL. Net income for the nine months ended March
31, 1998, totaled $9.1 million compared to $9.7
million during the nine months ended March 31, 1997.
Net income for the nine months ended March 31, 1997
was affected by one-time recoveries of previously
recorded New York State and New York City income tax
expense totaling $2.9 million, and the non-recurring
special assessment of $1.1 million, after taxes, for
the recapitalization of the SAIF. Net income for the
nine months ended March 31, 1997, excluding these
non-recurring items, was $7.9 million.
The discussion of interest income and expense for the
nine months ended March 31, 1998 and 1997, presented
below, should be read in conjunction with the
following table, which sets forth certain information
relating to the Company's consolidated statements of
operations for the nine months ended March 31, 1998
and 1997, and reflects the average yield on assets
and average cost of liabilities for the periods
indicated. Such yields and costs are derived by
dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods
shown. Average balances are derived from average
daily balances. The yields and costs include fees
which are considered adjustments to yields.
<PAGE>
-20-
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------------
1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------- ---------- ----------- ---------- -------- -------
ASSETS: ($In Thousands)
INTEREST-EARNING ASSETS:
Real Estate Loans <F1> $815,408 $51,186 8.37% $621,504 $39,924 8.56%
Other loans 5,452 373 9.12 5,428 346 8.49
Mortgage-backed securities <F2> 330,603 16,911 6.82 249,179 12,665 6.77
Investment securities <F2> 163,711 8,145 6.63 231,832 10,918 6.27
Federal funds sold 37,896 1,524 5.36 46,261 1,921 5.53
----------- ---------- ----------- ---------- -------- -------
TOTAL INTEREST-EARNING
ASSETS 1,353,070 $78,139 7.70% 1,154,204 $65,774 7.59%
Non-interest earning assets 68,361 ========== 64,996 ========
----------- ----------
TOTAL ASSETS $1,421,431 $1,219,200
=========== ==========
LIABILITIES AND EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, Super Now and money
market accounts $48,542 $850 2.33% $56,807 $1,104 2.59%
Savings accounts 337,505 5,718 2.26 350,984 6,249 2.37
Certificates of deposit 589,614 25,463 5.75 510,090 21,418 5.59
Mortgagors' escrow 5,817 87 1.99 3,612 57 2.10
Borrowed Funds 204,637 9,256 6.03 40,029 1,696 5.64
----------- ---------- ----------- ---------- -------- -------
TOTAL INTEREST-BEARING
LIABILITIES 1,186,115 $41,374 4.65% 961,522 $30,524 4.23%
----------- ========== ---------- ========
Checking accounts 28,513 27,050
Other non-interest-bearing
liabilities 21,183 16,352
----------- ----------
TOTAL LIABILITIES 1,235,811 1,004,924
STOCKHOLDERS' EQUITY 185,620 214,276
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,421,431 $1,219,200
=========== ==========
NET INTEREST INCOME/ INTEREST
RATE SPREAD <F3> $36,765 3.05% $35,250 3.36%
========== ========
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F4> $166,955 3.62% $192,682 4.07%
========== ========
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 114.08% 120.04%
<FN>
<F1> In computing the average balance of loans, non-accrual loans have been included.
<F2> Includes securities classified "held to maturity" and "available for sale."
<F3> Net interest rate spread represents the difference between the average rate on interest-earning assets and
the average cost of interest-bearing liabilities.
<F4> Net interest margin represents net interest income as a percentage of average interest-earning assets.
</TABLE>
<PAGE>
-21-
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, 1998
COMPARED TO
NINE MONTHS ENDED
MARCH 31, 1997
INCREASE/(DECREASE)
DUE TO
<S> <C> <C> <C>
VOLUME RATE TOTAL
------------- ------------ ------------
Interest-earning assets: ($ IN THOUSANDS)
Real Estate Loans $12,297 $(1,035) $11,262
Other loans 2 25 27
Mortgage-backed securities 4,144 102 4,246
Investment securities (3,302) 529 (2,773)
Federal funds sold (342) (55) (397)
------------- ------------ ------------
Total $12,799 $(434) $12,365
============= ============ ============
Interest-bearing liabilities:
NOW, Super Now and money market accounts $(152) $(102) $(254)
Savings accounts (241) (290) (531)
Certificates of deposit 3,385 660 4,045
Mortgagors' escrow 34 (4) 30
Borrowed funds 7,208 352 7,560
------------- ------------ ------------
Total 10,234 616 10,850
------------- ------------ ------------
Net change in net interest income $2,565 $(1,050) $1,515
============= ============ ============
</TABLE>
NET INTEREST INCOME. Net interest income for
the nine months ended March 31, 1998 increased
$1.5 million to $36.8 million from $35.3
million for the nine months ended March 31,
1997. The increase was attributable primarily
to an increase of $198.9 million in interest
earning assets, offset by a decline in the net
interest rate spread of 31 basis points. The
net interest margin declined 45 basis points
from 4.07% for the nine months ended March 31,
1997 to 3.62 % for the nine months ended March
31, 1998.
INTEREST INCOME. Interest income for the nine
months ended March 31, 1998, was $78.1 million,
an increase of $12.3 million from $65.8
million for the nine months ended March 31,
1997. The increase in interest income was
primarily attributable to increased interest
income on real estate loans and mortgage-backed
securities of $11.3 million and $4.2 million,
respectively. The increase in interest income
on real-estate loans was attributable primarily
to an increase of $193.9 million in the average
balance of real estate loans, resulting
primarily from $299.7 million of real estate
loans originated for the period April 1, 1997
through March 31, 1998. The increase in
interest income on mortgage-backed securities
was also attributable primarily to an increase
in the average balance of $81.4 million,
resulting from mortgage-backed securities
purchased through the Bank's capital leverage
program. Offsetting these increases to
interest income was a decrease in interest
income on investment securities of $2.8
million, resulting from a decline in the
average balance of investment securities of
$68.1 million. The decline in the average
balance resulted from the Bank utilizing funds
from matured investment securities to fund loan
originations. Overall, the yield on interest
earning assets increased 11 basis points from
7.59% for the nine months ended March 31, 1997
to 7.70 % for the nine months ended March 31,
1998, due primarily to the movement of funds
from matured investment securities into higher
yielding real estate loans. The average yield
on real estate loans declined 19 basis points
due to increased interest rate competition on
loan originations, while the yield on
investment
<PAGE>
-22-
securities increased 36 basis points reflecting the runoff of
lower-yielding, short-term securities, for which the proceeds
were utilized to fund new loan originations.
INTEREST EXPENSE. Interest expense increased
$10.9 million, to $41.4 million for the nine
months ended March 31, 1998, from $30.5 million
for the nine months ended March 31, 1997. This
increase resulted primarily from increased
interest expense of $4.0 million and $7.6
million, respectively, on certificate of
deposit accounts and borrowed funds, which
resulted from increased average balances of
$79.5 million and $164.6 million, respectively
for the nine months ended March 31, 1998,
compared to the nine months ended March 31,
1997, respectively . The increase in the
average balance on certificates of deposit
resulted primarily from increased deposit flows
due to higher rates offered on selected
certificate accounts for the past 12 months.
The increase in the average balance of borrowed
funds resulted primarily from $150.0 million of
borrowed funds added for the period April 1,
1997 to March 31, 1998, under the capital
leverage program. In addition to the growth in
the average balances, the average cost of
interest bearing liabilities increased 42 basis
points to 4.65% for the nine months ended March
31, 1998, from 4.23% for the nine months ended
March 31, 1997. The increase in average cost
resulted from an increase of $79.5 million in
the average balance of certificate of deposit
accounts, which generally have a higher average
cost than other deposits, the increase of 16
basis points in average cost on certificate of
deposit accounts resulting from a rate
promotion instituted for the first quarter of
the fiscal year, and an increase of 39 basis
points in average cost on borrowed funds,
resulting from higher-rate, longer-term
borrowings undertaken for the past two quarters
in order to fund loan originations.
PROVISION FOR LOAN LOSSES. The provision for
loan losses decreased $1.6 million to $1.6
million for the nine months ended March 31,
1998, from $3.2 million for the nine months
ended March 31, 1997. The decline in the
provision for loan losses reflects the
improvement in non-performing loans. Non-
performing loans decreased to $1.8 million for
the nine months ended March 31, 1998, from $3.2
million at June 30, 1997. The allowance for
loan losses increased to $12.0 million at March
31, 1998, from $10.7 million at June 30, 1997,
as the loan loss provision of $1.6 million was
offset by net charge-offs of $283,000. 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 and the composition of its loan
portfolio.
NON-INTEREST INCOME. Non-interest income
increased $684,000 to $3.3 million for the nine
months ended March 31, 1998, compared to $2.6
million for the nine months ended March 31,
1997. This increase was attributable primarily
to an increase of $303,000 in service charges
and other fees, which resulted from an increase
of $285,000 in loan commitment fee income from
increased origination activity, an increase of
$210,000 on net gains on the sale of
securities, and an increase of $239,000 in
other income, resulting primarily from
increased prepayment penalty income, which
increases were partially offset by the decline
in net gain on sales of loans held for sale of
$68,000 from $108,000 for the nine months ended
March 31, 1997 to $40,000 for the nine months
ended March 31, 1998.
NON-INTEREST EXPENSE. Non-interest expense
increased $192,000 to $20.7 million for the
nine months ended March 31, 1998, from $20.5
million for the nine months ended March 31,
1997. Excluding the SAIF Special Assessment of
$2.0 million incurred for the nine months ended
March 31, 1997. non-interest expense increased
$2.2 million, primarily as a result of
increased expense related to the Company's ESOP
and RRP plans of $1.8 million. A portion of
this increase resulted from the RRP, for which
monthly expense accruals began in February,
1997, resulting in nine months of accruals
recorded in the current year compared to two
months in the previous year. The remaining
increase in the ESOP resulted from the
increased ESOP expense attributable to the
increase in the Company's stock price, as
expense related to the ESOP is recorded based
upon the market value of the Company's stock.
In addition to the increased ESOP and RRP
expense, salaries and employee benefits expense
increased $1.2 million due to general salary
increases, and data processing costs increased
$94,000 as a result of increased loan and
deposit activity. Offsetting these increases
were declines of $270,000 and $431,000,
respectively, in provision for losses on other
real estate owned, and other expenses for the
nine months ended March 31, 1998, compared to
1997. The reduced provision for losses on
other real estate owned resulted primarily from
a reduction in other real estate owned balance
from $1.9 million at March 31, 1997, to $1.1
million at March 31, 1998. The
<PAGE>
-23-
decrease in other expenses resulted primarily
from a reduction in legal expenses, which were higher
in the prior year due to the Company being in
its initial stages as a public company.
INCOME TAX EXPENSE. Income tax expense for the
nine months ended March 31, 1998, was $8.7
million, resulting in an effective tax rate of
49.07%, compared to $4.6 million for the nine
months ended March 31, 1997. Excluding the
effects of both the New York State income tax
recovery and the SAIF recapitalization charge,
the Company's income tax expense would have
been $7.4 million, and the effective tax rate
would have been 51.52% for the nine months
ended March 31, 1997. The decline in the
effective tax rate was primarily attributable
to reduced income tax expenses on securities
and real estate loan interest income
operational resulting from recent operational
changes made by the Company. The Company's
effective tax rate is adversely effected by
certain non-deductible recurring expenses such
as goodwill. Excluding these non-deductible
items, the Company's effective tax rate for the
nine months ended March 31, 1998, would have
been 42.35%.
THE YEAR 2000 PROBLEM
The Year 2000 Problem centers upon the
inability of computer systems to recognize the
year 2000. Many existing computer programs and
systems were originally programmed with six
digit dates that provided only two digits to
identify the calendar year in the date field,
without considering the upcoming change in the
century. With the impending millennium, these
programs and computers will recognize "00" as
the year 1900 rather than the year 2000. Like
most financial providers, the Company and its
operations may be significantly affected by the
Year 2000 Problem due to the nature of
financial information. Software, hardware, and
equipment both within and outside the Company's
direct control and with whom the Company
electronically or operationally interfaces
(e.g. third party vendors providing data
processing, information system management,
maintenance of computer systems, and credit
bureau information) are likely to be affected.
Furthermore, if computer systems are not
adequately changed to identify the Year 2000,
many computer applications could fail or create
erroneous results. As a result, many
calculations which rely upon the date field
information, such as interest, payment or due
dates and other operating functions, will
generate results which could be significantly
misstated, and the Company could experience a
temporary inability to process transactions,
send invoices or engage in similar normal
business activities. In addition, under
certain circumstances, failure to adequately
address the Year 2000 Problem could adversely
affect the viability of the Company's suppliers
and creditors and the creditworthiness of its
borrowers. Thus, if not adequately addressed,
the Year 2000 Problem could result in a
significant adverse impact upon the Company's
products, services and competitive condition.
The Company recently received a "Satisfactory" rating
in a review of its Year 2000 Problem compliance by the
OTS, which represents the highest possible rating eligible
to be received. The Company is currently scheduled
to begin testing on its loan and deposit systems beginning in
July, 1998, and is currently in the process of obtaining
software modifications deemed necessary for compliance in all
other systems. The Company presently believes that with
modifications to existing software and conversions to new
software, the Year 2000 Problem will be mitigated without
causing a material adverse effect upon the operations of
the Company. However, if such modifications and conversions
are not made, or are not completed timely, the Year 2000
Problem could have an impact upon the Company's
operations. At this time, management believes that
any such impact and any resulting costs will not be material.
Monitoring and managing the Year 2000 project
will result in additional direct and indirect
costs to the Company. Direct costs include
potential charges by third party software
vendors for product enhancements, costs
involved in testing software products for year
2000 compliance, and any resulting costs for
developing and implementing contingency plans
for critical software products which are not
enhanced. Indirect costs will principally
consist of the time devoted by existing
employees in monitoring software vendor
progress, testing enhanced software products
and implementing any necessary contingency
plans. Such costs have not been material to date.
The Company believes that any such costs to be incurred
in the future will not have a material effect upon
its results of operations. Both direct and indirect
costs of addressing the Year 2000 Problem will be charged
to earnings as incurred.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about
market risk is presented at June 30, 1997 in
Exhibit 13.1 to the Company's Annual Report on
Form 10-K, filed with the Securities and
Exchange Commission on September 26, 1997.
There have been no material changes in the
Company's market risk at March 31, 1998
compared to June 30, 1997. The following is an
update of the discussion provided therein:
GENERAL. The Company's largest component of
market risk continues to be interest rate risk.
Virtually all of this risk continues to reside
at the Bank level. The Bank still is not
subject to foreign currency exchange or
commodity price risk. At March 31, 1998,
neither the Company nor the Bank owned any
trading assets, nor did they utilize hedging
transactions such as interest rate swaps and
caps.
ASSETS, DEPOSIT LIABILITIES AND WHOLESALE
FUNDS. During the nine months ended March 31,
1998, the Company has added $196.5 million in
capital leverage transactions, under which
high-quality mortgage-backed securities are
purchased utilizing funding from short term
borrowings. While these transactions have
served to increase the Company's interest rate
risk, particularly under a rising interest rate
environment, the Company's overall level of
interest rate risk, inclusive of the effects of
these transactions, has not changed materially
from June 30, 1997 to March 31, 1998. There
have been no other material changes in the
composition of assets, deposit liabilities or
wholesale funds from June 30, 1997 to March 31,
1998.
GAP ANALYSIS. The one-year and five-year
cumulative interest sensitivity gap as a
percentage of total assets still fall within 2%
of their levels at June 30, 1997 utilizing the
same assumptions as at June 30, 1997.
INTEREST RATE RISK COMPLIANCE. The Bank
continues to monitor the impact of interest
rate volatility upon net interest income and
net portfolio value in the same manner as at
June 30, 1997. There have been no changes in
the board approved limits of acceptable
variance in net interest income and net
portfolio value at March 31, 1998 compared to
June 30, 1997, and the projected changes
continue to fall within the board approved
limits at all levels of potential interest rate
volatility.
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
alleged violations of New York State and
federal trademark law and unfair competition
law. Dime of New York sought 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 sought
an order requiring the Company to change its
corporate name and change its Nasdaq Stock
Market trading symbol "DIME."
In January, 1998, The Company signed an
agreement settling the suit on terms acceptable
to all parties. As part of the settlement
agreement, the Company has committed to change
its corporate name and ticker symbol on or
before September 1, 1998.
<PAGE>
-25-
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 AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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).
(B) REPORTS ON FORM 8-K
----------------------------
None.
<PAGE>
-26-
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 thereunto duly
authorized.
Dime Community Bancorp, Inc.
Dated: May 14, 1998 By: /s/ VINCENT F. PALAGIANO
--------------------------
Vincent F. Palagiano
Chairman of the Board and
Chief Executive Officer
Dated: May 14, 1998 By: /s/ KENNETH J. MAHON
--------------------------
Kenneth J. Mahon
Executive Vice President
and Chief Financial Officer
EXHIBITS
========
Reference Number 11
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
--------------------- --------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1998 1997
------- ------- ------- -------
Net income $3,338 $3,498 $9,063 $9,661
Weighted average common shares
outstanding 10,915 12,979 11,043 13,258
Basic earnings per common shares $0.31 $0.27 $0.82 $0.73
======= ======= ======= =======
Total weighted average common shares
outstanding 10,915 12,979 11,043 13,258
Unvested shares of Recognition and
Retention Plan 492 7 542 2
Common stock equivalents due to dilutive
effect of stock options 507 241 460 6
------- ------- ------- -------
Total weighted average common shares and
common share equivalents utilized for
diluted earnings per share 11,914 13,227 12,045 13,266
======= ======= ======= =======
Diluted earnings per common share and
common share equivalents $0.28 $0.26 $0.75 $0.73
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 11888
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 24608
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 449609
<INVESTMENTS-CARRYING> 147928
<INVESTMENTS-MARKET> 149314
<LOANS> 884556
<ALLOWANCE> 12018
<TOTAL-ASSETS> 1577141
<DEPOSITS> 1033614
<SHORT-TERM> 126621
<LIABILITIES-OTHER> 79811
<LONG-TERM> 123605
0
0
<COMMON> 145
<OTHER-SE> 189160
<TOTAL-LIABILITIES-AND-EQUITY> 1577141
<INTEREST-LOAN> 51559
<INTEREST-INVEST> 25056
<INTEREST-OTHER> 1524
<INTEREST-TOTAL> 78139
<INTEREST-DEPOSIT> 32119
<INTEREST-EXPENSE> 41375
<INTEREST-INCOME-NET> 36764
<LOAN-LOSSES> 1575
<SECURITIES-GAINS> 631
<EXPENSE-OTHER> 20669
<INCOME-PRETAX> 17794
<INCOME-PRE-EXTRAORDINARY> 8731
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9063
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 7.70
<LOANS-NON> 1775
<LOANS-PAST> 0
<LOANS-TROUBLED> 4671
<LOANS-PROBLEM> 3920
<ALLOWANCE-OPEN> 10726
<CHARGE-OFFS> 312
<RECOVERIES> 29
<ALLOWANCE-CLOSE> 12018
<ALLOWANCE-DOMESTIC> 12018
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
