UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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, JANUARY 31, 1998
$.01 Par Value 12,438,113
<PAGE>
-2-
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Statements of Condition at December 31, 1997
(Unaudited) and June 30, 1997 3
Consolidated Statements of Operations for the Three and Six-
month Periods Ended December 31, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months Ended December 31, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six months
Ended December 31, 1997 and 1996 (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 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23-24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
Exhibits 27
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>
AT DECEMBER 31,
1997 AT JUNE 30,
(UNAUDITED) 1997
------------ -----------
<S> <C> <C>
ASSETS:
Cash and due from banks $13,655 $19,198
Investment securities held to maturity (estimated market value of $104,623
and $102,024 at December 31, 1997 and June 30, 1997, respectively) 104,045 101,587
Investment securities available for sale:
Bonds and notes (amortized cost of $60,613 and $52,426 at December 31,
1997 and June 30, 1997, respectively) 61,004 52,798
Marketable equity securities (historical cost of $6,101 and $4,912 at
December 31, 1997 and June 30, 1997, respectively) 7,801 5,889
Mortgage backed securities held to maturity (estimated market value of
$70,122 and $79,075 at December 31, 1997 and June 30, 1997, respectively) 69,082 78,388
Mortgage backed securities available for sale (amortized cost of $283,897
and $227,776 at December 31, 1997 and June 30, 1997, respectively) 287,490 230,137
Federal funds sold 37,543 18,902
Loans:
Real estate 843,899 744,246
Other loans 5,729 6,076
Less: Allowance for loan losses (11,515) (10,726)
------------ -----------
Total loans, net 838,113 739,596
------------ -----------
Loans held for sale 161 262
Premises and fixed assets 13,594 13,995
Federal Home Loan Bank of New York Capital Stock 9,475 8,322
Other real estate owned, net 965 1,697
Goodwill 25,230 26,433
Other assets 19,916 17,822
------------ -----------
TOTAL ASSETS $1,488,074 $1,315,026
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $1,027,246 $963,395
Escrow and other deposits 26,315 14,974
Securities sold under agreements to repurchase 154,218 76,333
Federal Home Loan Bank of New York advances 86,005 63,210
Accrued postretirement benefit obligation 2,635 2,546
Other liabilities 5,453 3,679
------------ -----------
TOTAL LIABILITIES 1,301,872 1,124,137
------------ -----------
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par, 9,000,000 shares authorized,
none outstanding at December 31, 1997 and June 30, 1997) - -
Common stock ($0.01 par, 45,000,000 shares authorized, 12,438,113 and
13,092,750 shares outstanding at December 31, 1997 and June 30, 1997,
respectively) 145 145
Additional paid-in capital 142,495 141,716
Unallocated common stock of Employee Stock Ownership Plan (9,624) (10,324)
Unwarned common stock of Recognition and Retention Plan (8,616) (9,671)
Treasury stock, at cost (2,109,387 shares and 1,454,750 shares at
December 31, 1997 AND June 30, 1997, respectively) (41,022) (27,703)
Retained earnings (substantially restricted) 99,724 94,695
Unrealized gain on securities available for sale, net of deferred taxes 3,100 2,031
------------ ---------
TOTAL STOCKHOLDERS' EQUITY 186,202 190,889
------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,488,074 $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 SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1997 1996 1997 1996
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans secured by real estate $17,059 $13,417 $33,328 $26,064
Other loans 122 103 251 235
Investment securities 2,866 3,885 5,550 7,803
Mortgage-backed securities 5,713 4,315 10,906 8,013
Federal funds sold 591 517 1,044 1,334
-------- --------- -------- ----------
TOTAL INTEREST INCOME 26,351 22,237 51,079 43,449
-------- --------- -------- ----------
INTEREST EXPENSE:
Deposits and escrow 10,940 9,646 21,272 19,335
Borrowed funds 3,132 622 5,502 980
-------- --------- -------- ----------
TOTAL INTEREST EXPENSE 14,072 10,268 26,774 20,315
NET INTEREST INCOME 12,279 11,969 24,305 23,134
PROVISION FOR LOAN LOSSES 525 1,050 1,050 2,100
-------- --------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,754 10,919 23,255 21,034
-------- --------- -------- ----------
NON-INTEREST INCOME:
Service charges and other fees 596 514 1,230 940
Net gain (loss) on sales and redemptions of
securities and other assets 163 135 178 171
Net gain on sales of loans 6 71 24 94
Other 267 332 581 604
-------- --------- -------- ----------
TOTAL NON-INTEREST INCOME 1,032 1,052 2,013 1,809
-------- --------- -------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,658 2,322 5,245 4,668
ESOP and RRP compensation expense 1,327 361 2,533 824
Occupancy and equipment 753 840 1,495 1,568
SAIF special assessment - - - 2,032
Federal deposit insurance premiums 85 - 171 251
Data processing costs 279 212 559 459
Provision for losses on Other real estate owned 24 74 79 267
Goodwill amortization 601 606 1,202 1,200
Other 1,133 1,189 2,322 2,467
-------- --------- -------- ----------
TOTAL NON-INTEREST EXPENSE 6,860 5,604 13,606 13,736
-------- --------- -------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 5,926 6,367 11,662 9,107
INCOME TAX EXPENSE 3,039 1,428 5,937 2,944
-------- --------- -------- ----------
NET INCOME $2,887 $4,939 $5,725 $6,163
======== ========= ======== ==========
EARNINGS PER SHARE:
BASIC $0.25 $0.37 $0.49 $0.46
======== ========= ======= ========
DILUTED $0.24 $0.37 $0.47 $0.46
======== ========= ======= ========
</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>
FOR THE SIX
MONTHS ENDED
DECEMBER 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 141,716
Amortization of excess fair value over cost - ESOP stock 779
----------------
Balance at end of period 142,495
----------------
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (10,324)
Amortization of earned portion of ESOP stock 700
----------------
Balance at end of period (9,624)
----------------
RECOGNITION AND RETENTION PLAN:
Balance at beginning of period (9,671)
Amortization of earned portion of RRP stock 1,055
----------------
Balance at end of period (8,616)
----------------
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)
----------------
RETAINED EARNINGS:
Balance at beginning of period 94,695
Net income for the period 5,725
Cash dividends declared and paid (696)
----------------
Balance at end of period 99,724
----------------
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 1,069
----------------
Balance at end of period 3,100
----------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
-6-
DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
1997 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
<S> <C> <C>
NET INCOME $5,725 $6,163
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net gain on investment and mortgage backed securities sold (117) (99)
Net gain on investment and mortgage backed securities called (9) -
Net gain on sale of other assets - (19)
Net gain on sale of loans held for sale (24) (94)
Net depreciation and amortization (accretion) 371 (1,133)
ESOP and RRP compensation expense 2,533 824
Provision for Loan losses 1,050 2,100
Goodwill amortization 1,202 1,200
Decrease in loans held for sale 125 218
Increase in other assets and other real estate owned (2,274) (2,092)
Increase in accrued postretirement benefit obligation 89 81
Decrease in payable for securities purchased - (33,994)
Increase (Decrease) in other liabilities 1,774 (501)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 10,445 (27,346)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold (18,641) 82,178
Proceeds from maturities of investment securities held to maturity 2,250 12,035
Proceeds from maturities of investment securities available for sale 20,500 273,460
Proceeds from calls of investment securities held to maturity 24,500 -
Proceeds from calls of investment securities available for sale 6,000 20,000
Proceeds from sale of investment securities available for sale 11,300 15,051
Proceeds from sales and calls of mortgage backed securities available for sale 49,882 -
Purchases of investment securities held to maturity (29,082) (54,789)
Purchases of investment securities available for sale (46,924) (90,283)
Purchases of mortgage backed securities held to maturity - (38,842)
Purchases of mortgage backed securities available for sale (124,231) (42,050)
Principal collected on mortgage backed securities held to maturity 9,209 6,159
Principal collected on mortgage backed securities available for sale 18,204 13,060
Net increase in loans (99,567) (59,468)
Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired - (328)
Purchases of fixed assets (92) (189)
(Purchase) sale of Federal Home Loan Bank stock (1,153) 6
--------- --------
Net Cash (used in) provided by Investing Activities (177,845) 136,000
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Due to depositors 63,851 (1,765)
Net increase (decrease) in escrow and other deposits 11,341 (133,249)
Proceeds from Federal Home Loan Bank of New York Advances 22,795 -
Increase in securities sold under agreements to repurchase 77,885 21,148
Cash disbursed for expenses related to issuance of common stock - (190)
Cash dividends paid to stockholders (696) -
Purchase of treasury stock (13,319) -
--------- --------
Net Cash provided by (used in) Financing Activities 161,857 (114,056)
--------- --------
DECREASE IN CASH AND DUE FROM BANKS (5,543) (5,402)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 19,198 17,055
--------- --------
CASH AND DUE FROM BANKS, END OF PERIOD $13,655 $11,653
========= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $5,774 $2,527
========= =======
Cash paid for interest $25,785 $20,306
========= =======
Transfer of loans to Other real estate owned $582 $1,097
========= =======
Change in unrealized gain on available for sale securities, net of deferred taxes $1,069 $1,695
========= =======
</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, 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 has been, and intends to continue to be, a community-oriented
financial institution providing financial services and loans for housing within
its market areas. The Bank and the Company maintain their headquarters in the
Williamsburgh section of the borough of Brooklyn. Fourteen additional offices
of the Bank are located in the boroughs of Brooklyn, Queens, and the Bronx, and
in Nassau County.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of the
Company's financial condition as of December 31, 1997, the results of
operations for the three-month and six-month periods ended December 31, 1997
and 1996, cash flows for the six months ended December 31, 1997 and 1996, and
changes in stockholders' equity for the six months ended December 31, 1997. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information contained
herein have been made. The results of operations for the three-month and six-
month periods ended December 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 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 six months ended December 31, 1997, 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.
<PAGE>
-8-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. EARNINGS PER SHARE
During the quarter ended December 31, 1997, the Company 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 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 six-month periods ended December 31,
1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
------------------------------- ------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NUMERATOR:
Net Income $2,887 $4,939 $5,725 $6,163
========== ========== ========== ==========
DENOMINATOR:
Average shares outstanding
utilized in the calculation
of basic earnings per share 11,509,496 13,393,398 11,671,200 13,393,398
---------- ---------- ---------- ----------
Common stock equivalents due to
the dilutive effect of stock
options 509,659 - 436,584 -
---------- ---------- ---------- ----------
Average shares outstanding
utilized in the calculation
of diluted earnings per share 12,019,155 13,393,398 12,107,784 13,393,398
========== ========== ========== ==========
</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.
<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
organized in December, 1995 at the direction of the Board of Directors of the
Dime Savings Bank of Williamsburgh (the "Bank") for the purpose of acquiring
all of the capital stock of the Bank issued in the conversion of the Bank from
a federal mutual savings bank to a federal stock savings bank (the
"Conversion"). In connection with the Conversion, the Company issued
14,547,500 shares (par value $0.01) of common stock at a price of $10.00 per
share to the Bank's eligible depositors who subscribed for shares and to an
Employee Stock Ownership Plan ("ESOP") established by the Company. The Company
realized net proceeds of $141.4 million from the sale of its common stock and
utilized approximately $76.4 million of the proceeds to purchase 100% of the
Bank's common stock and $11.6 million to fund a loan to the ESOP for its
purchase of 1,163,800 shares, or 8%, of the Company's common stock.
The 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 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 $394.3 million at June 30, 1996. The Bank pays SAIF assessments
with respect to the Pioneer deposits. In addition, the Bank pays SAIF
assessments on deposits the Bank acquired in a prior branch acquisition. All
SAIF-insured deposits acquired by the Bank qualified as "Oakar deposits," and
were the basis for the one-time assessment, which was recorded in non-interest
expense during the quarter ended September 30, 1996.
<PAGE>
-11-
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or For the At or For The
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
--------- ------- -------- -------
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets <F1> 0.81% 1.61% 0.83% 1.02%
Cash basis return on average assets <F2> 1.23 1.89 1.25 1.31
Return on average stockholders' equity <F1> 6.27 9.19 6.15 5.75
Return on average tangible stockholders'
equity <F1> 7.40 10.48 7.25 6.58
Cash basis return on average stockholders'
equity <F2> 9.58 10.77 9.29 7.38
Cash Basis Return on average tangible
stockholders' equity <F2> 11.31 12.29 10.96 8.44
Average stockholders' equity to average
assets 12.88 17.55 13.42 17.69
Stockholders' equity to total assets at
end of period 12.51 17.98 12.51 17.98
Tangible equity to tangible assets at end
of period 10.81 15.96 10.81 15.96
Average interest rate spread 3.01 3.41 3.11 3.33
Net interest margin 3.59 4.13 3.67 4.04
Average interest-earning assets to
average interest-bearing liabilities 114.93 120.36 114.97 120.15
Non-interest expense to average assets <F1> 1.92 1.83 1.96 2.27
Efficiency ratio <F1> 52.20 43.73 52.10 55.66
PER SHARE DATA:
Basic earnings per share <F1> $0.25 $0.37 $0.49 $0.46
Basic cash basis earnings per share <F2> 0.38 0.43 0.74 0.59
Book value per share 14.97 15.23 14.97 15.23
Tangible book value per share 12.69 13.19 12.69 13.19
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans $2,268 $2,917 $2,268 $2,917
Other real estate owned, net 965 2,270 965 2,270
RATIOS:
Non-performing loans to total loans 0.27% 0.45% 0.27% 0.45%
Non-performing loans and other real estate
owned to total assets 0.22 0.42 0.22 0.42
Allowance for loan losses to:
Non-performing loans 507.72 304.80 507.72 304.80
Total loans 1.36 1.38 1.36 1.38
REGULATORY CAPITAL RATIOS: (BANK ONLY)
Tangible capital 9.22% 10.98% 9.22% 10.98%
Core capital 9.22 10.99 9.22 10.99
Risk-based capital 18.68 23.25 18.68 23.25
<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 1.01%, 5.75%, 6.56%, 1.83%, 43.73% and $0.23, respectively, for the three
months ended December 31, 1996 and 0.89%, 5.05%, 5.78%, 1.93%, 47.43%, and
$0.40 for the six months ended December 31, 1996.
<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 1.29%, 7.34%, 8.37%, and $.29,
respectively, for the three months ended December 31, 1996, and 1.18%, 6.67%,
7.64%, and $0.53, respectively for the six months ended December 31, 1996.
</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 six months ended
December 31, 1997, the Bank's loan originations totaled $145.5 million
compared to $119.5 million for the six months ended December 31, 1996.
Purchases of mortgage-backed and other securities totaled $200.2 million
for the six months ended December 31, 1997, compared to $226.0 million
for the six months ended December 31, 1996. 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 $72.1 million during the six months ended December
31, 1997, compared to $76.8 million for the six months ended December
31, 1996. Maturities and calls of investment securities totaled $53.3
million and $305.4 million, respectively, during the six months ended
December 31, 1997 and 1996. Loan and security sales, which totaled
$62.6 million and $17.8 million, respectively, during the six months
ended December 31, 1997 and 1996, provided some additional cash flows.
Deposits increased $63.9 million during the six months ended
December 31, 1997, compared to a net decrease in total deposits of $1.8
million during the six months ended December 31, 1996. 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 December 31, 1997, totaled $347.1 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 $133.2 million during the
six months ended December 31, 1996. Net borrowings increased $100.7
million during the six months ended December 31, 1997, comprised of
growth of $77.9 million and $22.8 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 December 31,
1997, the Bank's liquidity ratio was 18.8%. 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 borrowing
privileges at the FHLBNY. At December 31, 1997, the Bank had fully
utilized its borrowing capacity with the FHLBNY of $189.5 million.
Additional borrowing capacity can be obtained through the purchase by
the Bank of additional FHLBNY capital stock.
At December 31, 1997, the Bank was in compliance with all applicable
regulatory capital requirements. Tangible capital totaled $133.1
million, or 9.22% of total tangible assets, compared to a 1.50%
regulatory requirement; core capital, at 9.22%, exceeded the required
3.0% regulatory minimum, and total risk-based capital, at 18.68% of risk
weighted assets, exceeded the 8.0% regulatory requirement.
<PAGE>
-13-
During the six months ended December 31, 1997, 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 declared and paid cash dividends totaling $696,000 during
the six months ended December 31, 1997. The Company did not declare or
pay any dividends during the six months ended December 31, 1996. On
January 15, 1998, the Company declared a cash dividend of $0.08 per
share to all shareholders of record as of the close of business on
January 30, 1998. The dividends will be paid on February 13, 1998.
ASSET QUALITY
Non-performing loans (loans past due 90 days or more as to principal or
interest) totaled $2.3 million at December 31, 1997, as compared to $3.2
million at June 30, 1997. In addition, the Bank had 31 loans totaling
$486,000 delinquent 60-89 days at December 31, 1997, 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. The
Bank had four loans classified as troubled-debt restructurings at
December 31, 1997, totaling $4.7 million, and all are currently
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 $4.2 million as of December 31, 1997,
compared to $4.3 million at June 30, 1997. The average balance of
impaired loans was $4.2 million for the six months ended December 31,
1997. The impaired portion of these loans is represented by specific
reserves totaling $46,000 allocated within the allowance for loan losses
at December 31, 1997. At December 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 December
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 December 31, 1997. At December 31, 1997,
approximately $783,000 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 $203,000, and are
considered a homogeneous loan pool not covered by SFAS 114.
<PAGE>
-14-
The following table sets forth information regarding the Bank's non-
performing loans, non-performing assets, impaired loans and troubled-
debt restructurings at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
1997 1997
------------------- ----------------
($ In Thousands)
<S> <C> <C>
NON-PERFORMING LOANS:
One- to four-family $731 $1,123
Multi-family and underlying cooperative 1,266 1,613
Non-residential - -
Cooperative apartment 227 415
Other loans 44 39
------------------ ---------------
TOTAL NON-PERFORMING LOANS 2,268 3,190
TOTAL OREO 965 1,697
------------------ ---------------
TOTAL NON-PERFORMING ASSETS $3,233 $4,887
================= ===============
TROUBLED-DEBT RESTRUCTURINGS $4,671 $4,671
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS 7,904 9,558
IMPAIRED LOANS 4,166 4,294
TOTAL NON-PERFORMING LOANS TO TOTAL LOANS 0.27% 0.43%
TOTAL IMPAIRED LOANS TO TOTAL LOANS 0.49 0.57
TOTAL NON-PERFORMING ASSETS TO TOTAL ASSETS 0.22 0.37
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS TO TOTAL ASSETS 0.53 0.73
</TABLE>
Comparison of Financial Condition at December 31, 1997 and
June 30, 1997
ASSETS. The Company's assets totaled $1.49 billion at
December 31, 1997, an increase of $173.0 million from total
assets of $1.32 billion at June 30, 1997. The growth in
assets was experienced primarily in real estate loans,
mortgage-backed securities available for sale and federal
funds sold, which increased $99.6 million, $57.4 million,
and $18.6 million, respectively.
The increase in real estate loans resulted primarily from
originations of $145.5 million during the six months ended
December 31, 1997, of which $142.5 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 six months. The increase
in mortgage backed securities available for sale resulted
from purchases of $124.2 million during the six months
ended December 31, 1997, primarily attributable to the
capital leverage program. These purchases were offset by
sales and calls of $49.9 million and principal repayments
of $18.2 million on these securities. The increase in
federal funds sold resulted primarily from the flattened
yield curve, which reduced the attractiveness of
investments possessing longer terms to maturity.
LIABILITIES. Funding for the growth in real estate loans
and federal funds sold was obtained primarily from
increased deposits of $63.9 million and increased FHLBNY of
$22.8 million during the six month period.
<PAGE>
-15-
Funding for the increase in mortgage-backed securities available for sale
was obtained primarily from increased securities sold under
agreement to repurchase transactions of $77.9 million,
resulting from the capital leverage program.
STOCKHOLDERS' EQUITY. Stockholders' equity declined $4.7
million during the six months ended December 31, 1997.
During the six months ended December 31, 1997, 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 net income of $5.7 million,
amortization of the Company's Stock Plans of $2.5 million,
and an increase of $1.1 million 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 $170.1 million, on a net
basis, at December 31, 1997, compared to $96.3 million at
June 30, 1997.
COMPARISON OF THE OPERATING RESULTS FOR THE THREE MONTHS
ENDED DECEMBER 31, 1997 AND 1996
GENERAL. Net income for the three months ended December 31,
1997, totaled $2.9 million compared to $4.9 million during
the three months ended December 31, 1996. Net income for
the three months ended December 31, 1996, was affected by
the one-time recovery of previously recorded income tax
expense of $1.8 million. Net income for the three months
ended December 31, 1996, excluding this non-recurring item,
was $3.1 million.
The discussion of interest income and expense for the three
months ended December 31, 1997 and 1996, presented below,
should be read in conjunction with the following table,
which sets forth certain information relating to the
Company's consolidated statements of operations for the
three months ended December 31, 1997 and 1996, and reflects
the average yield on assets and average cost of liabilities
for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average
daily balances. The yields and costs include fees which are
considered adjustments to yields.
<PAGE>
-16-
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996
-----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------------ ---------- ---------- ----------- --------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST-EARNING ASSETS:
Real Estate Loans <F1> $814,442 $17,059 8.38% $624,498 $13,417 8.59%
Other loans 5,431 122 8.99 5,312 103 7.76
Mortgage-backed securities <F2> 332,763 5,713 6.87 259,097 4,315 6.66
Investment securities <F2> <F3> 171,990 2,866 6.43 234,022 3,885 6.37
Federal funds sold 43,984 591 5.37 36,854 517 5.61
----------- ---------- ----------- ---------
TOTAL INTEREST-EARNING ASSETS 1,368,610 $26,351 7.70% 1,159,783 $22,237 7.67%
----------- ========== ----------- =========
NON-INTEREST EARNING ASSETS 61,374 64,873
----------- -----------
TOTAL ASSETS $1,429,984 $1,224,656
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, Super NOW and
Money Market Accounts $48,746 $287 2.34% $56,745 $370 2.61%
Savings Accounts 336,129 1,913 2.26 349,036 2,083 2.39
Certificates of Deposit 597,359 8,706 5.78 509,688 7,174 5.63
Mortgagors' Escrow 4,586 34 2.94 3,999 19 1.90
Borrowed Funds 203,967 3,132 6.09 44,132 622 5.64
----------- ---------- ----------- ---------
TOTAL INTEREST-BEARING
LIABILITIES 1,190,787 $14,072 4.69% 963,600 $10,268 4.26%
----------- ========== ----------- =========
CHECKING ACCOUNTS 28,396 26,760
OTHER NON-INTEREST-BEARING
LIABILITIES 26,553 19,331
----------- -----------
TOTAL LIABILITIES 1,245,736 1,009,691
STOCKHOLDERS' EQUITY 184,248 214,965
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,429,984 $1,224,656
=========== ===========
NET INTEREST INCOME/ INTEREST RATE
SPREAD <F4> $12,279 3.01% $11,969 3.41%
========== =========
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F5> $177,823 3.59% $196,183 4.13%
=========== ===========
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 114.93% 120.36%
<FN>
<F1> In computing the average balance of loans, non-accrual loans
have been included.
<F2> Includes securities classified "available for sale."
<F3> The average yield on investment securities during the three
months ended December 31, 1997 and 1996 have been adjusted
to reflect capital gains distributions of $134 and $208 in
December 31, 1997 and December 31, 1996, respectively, which
are non-recurring and therefore were not annualized.
<F4> Net interest rate spread represents the difference between
the average rate on interest-earning assets and the average cost
of interest-bearing liabilities.
<F5> Net interest margin represents net interest income as a
percentage of average interest-earning assets.
</TABLE>
-17-
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, 1997
COMPARED TO
THREE MONTHS ENDED
DECEMBER 31, 1996
INCREASE/(DECREASE)
DUE TO
VOLUME RATE TOTAL
------------- ------------ ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Real Estate Loans $4,026 $(384) $3,642
Other loans 3 16 19
Mortgage-backed securities 1,244 154 1,398
Investment securities (1,021) 2 (1,019)
Federal funds sold 98 (24) 74
------------- ------------ ------------
TOTAL $4,350 $(236) $4,114
============= ============ ============
INTEREST-BEARING LIABILITIES:
NOW, Super Now and money market accounts $(48) $(35) $(83)
Savings accounts (67) (103) (170)
Certificates of deposit 1,291 241 1,532
Mortgagors' escrow 4 11 15
Borrowed funds 2,365 145 2,510
------------- ------------ ------------
TOTAL 3,545 259 3,804
------------- ------------ ------------
NET CHANGE IN NET INTEREST INCOME $805 $(495) $310
============= ============ ============
</TABLE>
NET INTEREST INCOME. Net interest income for the three
months ended December 31, 1997 increased $310,000 to
$12.3 million from $12.0 million during the three
months ended December 31, 1996. The increase was
attributable primarily to an increase of $208.8
million in interest earning assets, offset by a
decline in the net interest rate spread of 40 basis
points during the three months ended December 31,
1997. The net interest margin declined 54 basis
points from 4.13% for the three months ended December
31, 1996 to 3.59% for the three months ended December
31, 1997.
INTEREST INCOME. Interest income for the three months
ended December 31, 1997, was $26.3 million, an
increase of $4.1 million from $22.2 million during the
three months ended December 31, 1996. The increase in
interest income was attributable primarily to
increased interest income on real estate loans and
mortgage-backed securities of $3.6 million and $1.4
million, respectively. The increase in interest
income on real-estate loans was attributable primarily
to an increase of $189.9 million in the average
balance of real estate loans during the three months
ended December 31, 1997, resulting primarily from
$289.6 million of real estate loans originated during
the period January 1, 1997 through December 31, 1997.
The increases in interest income on mortgage-backed
securities was also attributable primarily to an
increase in average balances of $73.7 million during
the three months ended December 31, 1997, resulting
from $170.1 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 $1.0 million, resulting from a decline in average
balance of investment securities of $62.0 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 3 basis
points from 7.67% during the three months ended
December 31, 1996 to 7.70% during the three months
ended December 31, 1997, due primarily to the movement
of funds from matured investment securities into
higher yielding real
<PAGE>
-18-
estate loans. The average yield on real estate loans declined 21 basis
points due to increased interest rate competition on loan
originations, while the yield on mortgage-backed
securities increased 21 basis points reflecting
purchases of higher-yielding securities under the
capital leverage strategy, which possess longer
average terms-to-maturity.
INTEREST EXPENSE. Interest expense increased $3.8
million, to $14.1 million during the three months
ended December 31, 1997, from $10.3 million during the
three months ended December 31, 1996. This increase
resulted primarily from increased interest expense of
$1.5 million and $2.5 million, respectively, on
certificate of deposit accounts and borrowed funds,
which resulted from increased average balances of
$87.7 million and $159.8 million, respectively during
the three months ended December 31, 1997, compared to
the three months ended December 31, 1996. 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 during 1997. The increase in
average balance of borrowed funds resulted primarily
from $169.5 million of borrowed funds added during the
period October 1, 1996 to December 31, 1997, under the
capital leverage program. In addition to the growth
in average balances, the average cost of interest
bearing liabilities increased 43 basis points to 4.69%
during the quarter ended December 31, 1997, from 4.26%
during the quarter ended December 31, 1996. The
increase in average cost resulted from an increase of
$87.7 million in the average balance of certificate of
deposit accounts, which generally have a higher
average cost than other deposits, the increase of 15
basis points in average cost on certificate of deposit
accounts resulting from a rate promotion instituted
during the previous quarter, and an increase of 45
basis points in average cost on borrowed funds,
resulting from higher-rate, longer-term borrowings
undertaken during 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 December 31, 1997, from $1.05 million for
the three months ended December 31, 1996. The decline
in the provision for loan losses reflects the
improvement in non-performing loans. Non-performing
loans decreased to $2.3 million during the three
months ended December 31, 1997, from $3.2 million at
June 30, 1997. See "Asset Quality" The Allowance for
loan losses increased to $11.5 million at December 31,
1997, from $11.2 million at September 30, 1997, as the
loan loss provision of $525,000 was offset by net
charge-offs of $160,000. 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. See "Asset Quality."
NON-INTEREST INCOME. Non-interest income remained
relatively constant during the three months ended
December 31, 1997 compared to the three months ended
December 31, 1996. An decrease in other income
resulting from decreased rental income on properties
previously owned by Conestoga was offset by an
increase in service charges and other fees, resulting
from increased loan commitment fee income from loan
origination activity. In addition, an increase in
gain on sale of securities and other assets was offset
by a decrease in gain on sale of loans.
NON-INTEREST EXPENSE. Non-interest expense increased
$1.3 million to $6.9 million during the three months
ended December 31, 1997, from $5.6 million during the
three months ended December 31, 1996. This increase
resulted primarily from increased expense related to
the Company's ESOP and RRP plans of $966,000. A
portion of this increased expense resulted from the
RRP, for which no expense was recorded during the
three months ended December 31, 1996 since the plan
was approved by the shareholders in December, 1996.
The remaining increase in the ESOP and RRP expense
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 $336,000 due to
general salary increases, the federal deposit
insurance premium expense increased $85,000 as the
Company incurred no insurance cost during the three
months ended December 31, 1996, due to legislation
resulting from the SAIF Recapitalization charge paid
in September, 1996, and the data processing costs
increased as a result of increased loan and deposit
activity. Offsetting these increases were declines of
$87,000, $50,000 and $56,000 respectively, in
occupancy and equipment expense, provision for losses
on other real estate owned, and other expenses during
the three months ended December 31, 1997, compared to
1996. The reduction
<PAGE>
-19-
in occupancy and equipment expense resulted primarily
from decreased rental expense, and the reduced provision for
losses on other real estate owned resulted primarily from a
reduction in other real estate owned balance from $2.0 million
at Decembr 31, 1996, to $965,000 at December 31,
1997. The decrease in other expenses resulted
primarily from reductions of $67,000 and $27,000,
respectively, in legal expenses and accounting
expenses, both of 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 quarter
ended December 31, 1997, was $3.0 million, resulting
in an effective tax rate of 51.28%. Excluding the
effect of the New York State income tax recovery, the
Company's effective tax rate would have been 51.45%
during the quarter ended December 31, 1996. The
decline in the effective tax rate was primarily
attributable to reduced income tax expenses on
securities interest income resulting from operational
changes made by the Company in April, 1997. The
Company's generally higher effective tax rate is
caused by certain non-deductible recurring expenses
such as goodwill. Excluding these non-deductible
items, the Company's effective tax rate for the three
months ended December 31, 1997, would have been
43.56%.
COMPARISON OF THE OPERATING RESULTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 1997 AND 1996
GENERAL. Net income for the six months ended December
31, 1997, totaled $5.7 million compared to $6.2
million during the six months ended December 31, 1996.
Net income for the six months ended December 31, 1996,
was affected by the one-time recovery of previously
recorded income tax expense of $1.8 million recorded
in December, 1996, and the non-recurring special
assessment of $1.1 million, after taxes, for the
recapitalization of the SAIF. Net income for the six
months ended December 31, 1996, excluding these non-
recurring items, was $5.4 million.
The discussion of interest income and expense for the
six months ended December 31, 1997 and 1996, presented
below, should be read in conjunction with the
following table, which sets forth certain information
relating to the Company's consolidated statements of
operations for the six months ended December 31, 1997
and 1996, and reflects the average yield on assets and
average cost of liabilities for the periods indicated.
Such yields and costs are derived by dividing income
or expense by the average balance of assets or
liabilities, respectively, for the periods shown.
Average balances are derived from average daily
balances. The yields and costs include fees which are
considered adjustments to yields.
<PAGE>
-20-
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996
-----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------------ ---------- ---------- ----------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS: ($ InThousands)
INTEREST-EARNING ASSETS:
Real Estate Loans <F1> $793,640 $33,328 8.40% $608,032 $26,064 8.57%
Other loans 5,463 251 9.19 5,413 235 8.68
Mortgage-backed securities <F2> 318,317 10,906 6.85 234,210 8,013 6.84
Investment securities <F2> <F3> 167,296 5,550 6.55 250,135 7,803 6.16
Federal funds sold 38,491 1,044 5.42 47,415 1,334 5.63
------------ ---------- ----------- --------
TOTAL INTEREST-EARNING ASSETS 1,323,207 $51,079 7.72% 1,145,205 $43,449 7.59%
NON-INTEREST EARNING ASSETS 64,503 ========== 65,608 ========
------------ -----------
TOTAL ASSETS $1,387,710 $1,210,813
============ ===========
LIABILITIES AND EQUITY:
INTEREST BEARING LIABILITIES:
NOW, Super Now and money
market accounts $48,942 $579 2.35% $58,377 $785 2.69%
Savings accounts 338,367 3,849 2.26 352,698 4,320 2.45
Certificates of deposit 579,225 16,792 5.75 503,798 14,192 5.63
Mortgagors' escrow 4,125 52 2.50 3,716 38 2.05
Borrowed Funds 180,268 5,502 6.05 34,592 980 5.67
------------ ---------- ----------- --------
TOTAL INTEREST-BEARING
LIABILITIES 1,150,927 $26,774 4.61% 953,181 $20,315 4.26%
------------ ========== ----------- ========
CHECKING ACCOUNTS 27,966 27,027
OTHER NON-INTEREST BEARING
LIABILITIES 22,565 16,407
------------ -----------
TOTAL LIABILITIES 1,201,458 996,615
STOCKHOLDERS' EQUITY 186,252 214,198
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,387,710 $1,210,813
============ ===========
NET INTEREST INCOME/INTEREST
RATE SPREAD <F4> $24,305 3.11% $23,134 3.33%
========== ========
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F5> $172,280 3.67% $192,024 4.04%
============ ===========
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 114.97% 120.15%
<FN>
<F1> In computing the average balance of loans, non-accrual loans
have been included.
<F2> Includes securities classified "available for sale."
<F3> The average yield on investment securities during the
six months ended December 31, 1996 and 1995 have been adjusted to
reflect capital gains distributions of $134 and $208 in December 31, 1997
and December 31, 1996 respectively, which are non-recurring and therefore
were not annualized.
<F4> Net interest rate spread represents the difference between the average
rate on interest-earning assets and the average cost of interest-bearing
liabilities.
<F5> Net interest margin represents net interest income as a percentage of
average interest-earning assets.
</TABLE>
<PAGE>
-21-
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1997
COMPARED TO
SIX MONTHS ENDED
DECEMBER 31, 1996
INCREASE/(DECREASE)
DUE TO
VOLUME RATE TOTAL
------------- ------------ ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Real Estate Loans $7,869 $(605) $7,264
Other loans 2 14 16
Mortgage-backed securities 2,879 14 2,893
Investment securities (2,646) 393 (2,253)
Federal funds sold (245) (45) (290)
------------- ------------ ------------
TOTAL $7,859 $(229) $7,630
============= ============ ============
INTEREST-BEARING LIABILITIES:
NOW, Super Now and money market accounts $(117) $(89) $(206)
Savings accounts (155) (316) (471)
Certificates of deposit 2,218 382 2,600
Mortgagors' escrow 5 9 14
Borrowed funds 4,308 214 4,522
------------- ------------ ------------
TOTAL 6,259 200 6,469
------------- ------------ ------------
NET CHANGE IN NET INTEREST INCOME $1,600 $(429) $1,171
============= ============ ============
</TABLE>
NET INTEREST INCOME. Net interest income for the
six months ended December 31, 1997 increased
$1.2 million to $24.3 million from $23.1 million
during the six months ended December 31, 1996.
The increase was attributable primarily to an
increase of $178.0 million in interest earning
assets, offset by a decline in the net interest
rate spread of 22 basis points. The net
interest margin declined 37 basis points from
4.04% for the six months ended December 31, 1996
to 3.67% for the six months ended December 31,
1997.
INTEREST INCOME. Interest income for the six
months ended December 31, 1997, was $51.1
million, an increase of $7.7 million from $43.4
million during the six months ended December 31,
1996. The increase in interest income was
attributable to increased interest income on
real estate loans and mortgage-backed securities
of $7.3 million and $2.9 million, respectively.
The increase in interest income on real-estate
loans was attributable primarily to an increase
of $185.6 million in the average balance of real
estate loans, resulting primarily from $289.6
million of real estate loans originated during
the period January 1, 1997 through December 31,
1997. The increases in interest income on
mortgage-backed securities was also attributable
primarily to an increase in the average balance
of $84.1 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 $2.3 million,
resulting from a decline in the average balance
of investment securities of $82.8 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 increased
13 basis points from 7.59% during the six months
ended December 31, 1996 to 7.72% during the six
months ended December 31, 1997, due primarily to
the movement of funds from matured investment
securities into higher yielding real estate
loans. The average
<PAGE>
-22-
yield on real estate loans
declined 21 basis points due to increased
interest rate competition on loan originations,
while the yield on investment securities
increased 39 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
$6.5 million, to $26.8 million during the six
months ended December 31, 1997, from $20.3
million during the six months ended December 31,
1996. This increase resulted primarily from
increased interest expense of $2.6 million and
$4.5 million, respectively, on certificate of
deposit accounts and borrowed funds, which
resulted from increased average balances of
$75.4 million and $145.7 million, respectively
during the six months ended December 31, 1997,
compared to the six months ended December 31,
1996. 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 during
1997. The increase in the average balance of
borrowed funds resulted primarily from $169.5
million of borrowed funds added during the
period October 1, 1996 to December 31, 1997,
under the capital leverage program. In addition
to the growth in the average balances, the
average cost of interest bearing liabilities
increased 35 basis points to 4.61% during the
six months ended December 31, 1997, from 4.26%
during the six months ended December 31, 1996.
The increase in average cost resulted from an
increase of $75.4 million in the average balance
of certificate of deposit accounts, which
generally have a higher average cost than other
deposits, the increase of 12 basis points in
average cost on certificate of deposit accounts
resulting from a t rate promotion instituted
during the first quarter of the fiscal year, and
an increase of 38 basis points in average cost
on borrowed funds, resulting from higher-rate,
longer-term borrowings undertaken during the
past two quarters in order to fund loan
originations.
PROVISION FOR LOAN LOSSES. The provision for
loan losses decreased $1.05 million to $1.05
million for the six months ended December 31,
1997, from $2.1 million for the six months ended
December 31, 1996. The decline in the provision
for loan losses reflects the improvement in non-
performing loans. Non-performing loans
decreased to $2.3 million during the six months
ended December 31, 1997, from $3.2 million at
June 30, 1997. See "Asset Quality" The
allowance for loan losses increased to $11.5
million at December 31, 1997, from $10.7 million
at June 30, 1997, as the loan loss provision of
$1.05 million was offset by net charge-offs of
$261,000. 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. See "Asset Quality."
NON-INTEREST INCOME. Non-interest income
increased $204,000 to $2.0 million during the
six months ended December 31, 1997, compared to
$1.8 million during the six months ended
December 31, 1996. This increase was
attributable primarily to an increase of
$290,000 in service charges and other fees,
which resulted from an increase of $263,000 in
loan commitment fee income from increased
origination activity, offset by a decrease of
$70,000 on net gains on the sale of loans.
NON-INTEREST EXPENSE. Non-interest expense
decreased $130,000 to $13.6 million during the
six months ended December 31, 1997, from $13.7
million during the six months ended December 31,
1996. This decrease resulted from the SAIF
Special Assessment of $2.0 million incurred
during the six months ended December 31, 1996.
Excluding the SAIF Special Assessment, non-
interest expense increased $1.9 million,
primarily as a result of increased expense
related to the Company's ESOP and RRP plans of
$1.7 million. A portion of this increased ESOP
and RRP expense resulted from the RRP, which was
not recorded during the six months ended
December 31, 1996, since the plan was not
approved by the shareholders until December,
1996. The remaining increase in the ESOP and
RRP expense 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 $577,000 due
to general salary increases, the data processing
costs increased $100,000 as a result of
increased loan and deposit activity. Offsetting
these increases were declines of $73,000,
$188,000 and $145,000, respectively, in
occupancy and equipment expense, provision for
losses on other real estate owned, and other
expenses during the three months ended December
31, 1997, compared to 1996. The reduction in
occupancy and equipment expense
<PAGE>
-23-
resulted primarily from decreased depreciation expense,
and the reduced provision for losses on other
real estate owned resulted primarily from a
reduction in other real estate owned balance
from $2.0 million at December 31, 1996, to
$965,000 at December 31, 1997. The decrease in
other expenses resulted primarily from
reductions of $176,000 and $36,000,
respectively, in legal expenses and accounting
expenses, both of 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
six months ended December 31, 1997, was $5.9
million, resulting in an effective tax rate of
50.91%. Excluding the effects of both the New
York State income tax recovery and the SAIF
recapitalization charge, the Company's effective
tax rate would have been 51.41% for the six
months ended December 31, 1996. The decline in
the effective tax rate was primarily
attributable to reduced income tax expenses on
securities interest income operational resulting
from operational changes made by the Company in
April, 1997. The Company's generally higher
effective tax rate is caused by certain non-
deductible recurring expenses such as goodwill.
Excluding these non-deductible items, the
Company's effective tax rate for the six months
ended December 31, 1997, would have been 43.52%.
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 December 31, 1997
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 December 31, 1997,
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 six months ended December 31,
1997, the Company has added $73.8 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
December 31, 1997. There have been no other
material changes in the composition of assets,
deposit liabilities or wholesale funds from June
30, 1997 to December 31, 1997.
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
December 31, 1997 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
<PAGE>
-24-
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.
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
(a) The Company's Annual Meeting of Shareholders was held on
November 13, 1997.
(b) Not applicable.
(c) The following is a summary of the matters voted upon at
the meeting and the votes obtained:
<PAGE>
-25-
<TABLE>
<CAPTION>
VOTES VOTES BROKER
DESCRIPTION VOTES FOR AGAINST ABSTENTIONS WITHHELD NON-VOTES
<S> <C> <C> <C> <C> <C>
1) Election of the following
individuals as Director for a
term of three years:
Anthony Bergamo 10,909,739 -0- -0- 96,820 -0-
Michael P. Devine 10,909,839 -0- -0- 96,720 -0-
Joseph H. Farrell 10,880,703 -0- -0- 125,856 -0-
Louis V. Varone 10,907,908 -0- -0- 98,651 -0-
2) Ratification of Amendments
to the Dime Community Bancorp,
Inc. 1996 Stock Option Plan
for Outside Directors,
Officers and Employees 10,330,931 383,417 56,048 -0- 236,163
3) Ratification of Amendments
to the Recognition and
Retention Plan for
Outside Directors, Officers
and Employees of Dime
Community Bancorp, Inc. 10,477,980 450,323 78,256 -0- -0-
4) Ratification of the
appointment of Deloitte &
Touche LLP to act as
independent auditors for the
Company for the fiscal year
ended June 30, 1998 10,938,140 39,741 28,678 -0- -0-
</TABLE>
(d) Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
-----------
Exhibit 3(ii) Amended and Restated Bylaws of Dime Community
Bancorp, Inc.
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: February 13, 1998 By: /S/ VINCENT F. PALAGIANO
-------------------------
Vincent F.Palagiano
Chairman of the Board and
Chief Executive Officer
Dated: February 13, 1998 By: /S/ KENNETH J. MAHON
-------------------------
Kenneth J. Mahon
Executive Vice President and
Chief Financial Officer
<PAGE>
-27-
EXHIBITS
========
Exhibit 3(ii) Amended and Restated Bylaws of Dime Community Bancorp, Inc.
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 SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
--------------------- ---------------------
($In Thousands)
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- -------- ------- -------
Net income $2,887 $4,939 $5,725 $6,163
Weighted average common shares
outstanding 11,509 13,393 11,671 13,393
Basic earnings per common shares $0.25 $0.37 $0.49 $0.46
========= ======== ======= =======
Total weighted average common shares
outstanding 11,509 13,393 11,671 13,393
Common stock equivalents due to dilutive
effect of stock options 510 - 437 -
--------- -------- ------- -------
Total weighted average common shares and
common share equivalents utilized for
diluted earnings per share 12,019 13,393 12,108 13,393
========= ======== ======= =======
Diluted earnings per common share and
common share equivalents $0.24 $0.37 $0.47 $0.46
========= ======== ======= =======
</TABLE>
EXHIBIT 3(ii)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
AMENDED AND RESTATED BYLAWS
OF
DIME COMMUNITY BANCORP, INC.
Adopted on December 14, 1995
Amended and Restated on January 15, 1998
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
------
ARTICLE I
OFFICES
Section 1. Registered Office 1
Section 2. Additional Offices 1
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 1
Section 4. Notice of Meetings 1
Section 5. Waiver of Notice 2
Section 6. Fixing of Record Date 2
Section 7. Quorum 2
Section 8. Conduct of Meetings 2
Section 9. Voting; Proxies 3
Section 10. Inspectors of Election 3
Section 11. Procedure for Nominations 4
Section 12. Substitution of Nominees 5
Section 13. New Business 5
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock 6
Section 2. Transfer Agent and Registrar 6
Section 3. Registration and Transfer of Shares 6
Section 4. Lost, Destroyed and Mutilated Certificates 7
Section 5. Holder of Record 7
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors 7
Section 2. Qualifications 7
Section 3. Mandatory Retirement 7
Section 4. Regular and Annual Meetings 7
Section 5. Special Meetings 7
Section 6. Notice of Meetings; Waiver of Notice 8
<PAGE>
Page
------
Section 7. Conduct of Meetings 8
Section 8. Quorum and Voting Requirements 8
Section 9. Informal Action by Directors 8
Section 10. Resignation 9
Section 11. Vacancies 9
Section 12. Compensation 9
Section 13. Amendments Concerning the Board 9
ARTICLE V
COMMITTEES
Section 1. Standing Committees 9
Section 2. Executive Committee 9
Section 3. Audit Committee 10
Section 4. Compensation Committee 10
Section 5. Nominating Committee 11
Section 6. Other Committees 11
ARTICLE VI
OFFICERS
Section 1. Number 11
Section 2. Term of Office and Removal 12
Section 3. Chairman of the Board 12
Section 4. President 12
Section 5. Vice Presidents 12
Section 6. Secretary 12
Section 7. Chief Financial Officer 13
Section 8. Comptroller 13
Section 9. Treasurer 13
Section 10. Other Officers and Employees 13
Section 11. Compensation of Officers and Others 13
ARTICLE VII
DIVIDENDS
13
ARTICLE VIII
AMENDMENTS
14
-ii-
<PAGE>
BYLAWS
OF
DIME COMMUNITY BANCORP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Dime
Community Bancorp, Inc. (the "Corporation") in the State of Delaware
shall be in the City of Wilmington, County of New Castle.
SECTION 2. ADDITIONAL OFFICES. The Corporation may also have
offices and places of business at such other places, within or without
the State of Delaware, as the Board of Directors (the "Board") may from
time to time designate or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as may be fixed by the Board and designated in the notice of
meeting. If no place is so fixed, they shall be held at the principal
administrative office of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders
of the Corporation for the election of directors and the transaction of
any other business which may properly come before such meeting shall be
held each year on a date and at a time to be designated by the Board.
SECTION 3. SPECIAL MEETINGS. Special meetings of shareholders,
for any purpose, may be called at any time only by the Chairman of the
Board or by resolution of at least three-fourths of the entire Board.
Special meetings shall be held on the date and at the time and place as
may be designated by the Board. At a special meeting, no business shall
be transacted and no corporate action shall be taken other than that
stated in the notice of meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by
law, written notice stating the place, date and hour of any meeting of
shareholders and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered to each
shareholder of record entitled to vote at such meeting, either personally
or by mail not less than ten (10) nor more than sixty (60) days before
the date of such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the U.S. mail, with postage thereon prepaid,
addressed to the shareholder at his or her address as it appears on the
stock transfer books or records of the Corporation as of the record date
prescribed in Section 6 of this Article II, or at such other address as
the shareholder shall have furnished in writing to the Secretary. Notice
of any special meeting shall indicate that the notice is being issued by
or at the
<PAGE>
direction of the person or persons calling such meeting. When
any meeting of shareholders, either annual or special, is adjourned to
another time or place, no notice of the adjourned meeting need be given,
other than an announcement at the meeting at which such adjournment is
taken giving the time and place to which the meeting is adjourned;
provided, however, that if the adjournment is for more than thirty (30)
days, or if after adjournment, the Board fixes a new record date for the
adjourned meeting, notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
SECTION 5. WAIVER OF NOTICE. Notice of any annual or special
meeting need not be given to any shareholder who submits a signed waiver
of notice of any meeting, in person or by proxy or by his or her duly
authorized attorney-in-fact, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy, shall
constitute a waiver of notice by such shareholder, except where a
shareholder attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend or other distribution or the allotment of
any rights, or in order to make a determination of shareholders for any
other purpose, the Board shall fix a date as the record date for any such
determination of shareholders, which date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board.
Such date in any case shall be not more than sixty (60) days and, in the
case of a meeting of shareholders, not less than ten (10) days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided
in this Section 6, such determination shall, unless otherwise provided by
the Board, also apply to any adjournment thereof. If no record date is
fixed, (a) the record date for determining shareholders entitled to
notice of or vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which the notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and (b) the record date
for determining shareholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 7. QUORUM. The holders of record of a majority of the
total number of votes eligible to be cast in the election of directors
generally by the holders of the outstanding shares of the capital stock
of the Corporation entitled to vote thereat, represented in person or by
proxy, shall constitute a quorum for the transaction of business at a
meeting of shareholders, except as otherwise provided by law, these
Bylaws or the Certificate of Incorporation. If less than a majority of
such total number of votes are represented at a meeting, a majority of
the number of votes so represented may adjourn the meeting from time to
time without further notice, PROVIDED, that if such adjournment is for
more than thirty days, a notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally
called. When a quorum is once present to organize a meeting of
shareholders, such quorum is not broken by the subsequent withdrawal of
any shareholders.
SECTION 8. CONDUCT OF MEETINGS. The Chairman of the Board shall
serve as chairman at all meetings of the shareholders or, if the Chairman
of the Board is absent or otherwise unable to so serve, the President
shall serve as chairman at any meeting of shareholders held in such
absence. If both the Chairman of the Board and the President are absent
or otherwise unable to so serve, such other person as shall be appointed
by a majority of the entire Board of Directors shall serve as chairman at
-2-
<PAGE>
any meeting of shareholders held in such absence. The Secretary or, in
his or her absence, such other person as the chairman of the meeting
shall appoint, shall serve as secretary of the meeting. The chairman of
the meeting shall conduct all meetings of the shareholders in accordance
with the best interests of the Corporation and shall have the authority
and discretion to establish reasonable procedural rules for the conduct
of such meetings, including such regulation of the manner of voting and
the conduct of discussion as he or she shall deem appropriate.
SECTION 9. VOTING; PROXIES. Each shareholder entitled to vote
at any meeting may vote either in person or by proxy. Unless otherwise
specified in the Certificate of Incorporation or in a resolution, or
resolutions, of the Board providing for the issuance of preferred stock,
each shareholder entitled to vote shall be entitled to one vote for each
share of capital stock registered in his or her name on the transfer
books or records of the Corporation. Each shareholder entitled to vote
may authorize another person or persons to act for him or her by proxy.
All proxies shall be in writing, signed by the shareholder or by his or
her duly authorized attorney-in-fact, and shall be filed with the
Secretary before being voted. No proxy shall be valid after three (3)
years from the date of its execution unless otherwise provided in the
proxy. The attendance at any meeting by a shareholder who shall have
previously given a proxy applicable thereto shall not, as such, have the
effect of revoking the proxy. The Corporation may treat any duly
executed proxy as not revoked and in full force and effect until it
receives a duly executed instrument revoking it, or a duly executed proxy
bearing a later date. If ownership of a share of voting stock of the
Corporation stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, any one or more of
such shareholders may cast all votes to which such ownership is entitled.
If an attempt is made to cast conflicting votes by the several persons in
whose names shares of stock stand, the vote or votes to which those
persons are entitled shall be cast as directed by a majority of those
holding such stock and present at such meeting. If such conflicting
votes are evenly split on any particular matter, each faction may vote
the securities in question proportionally, or any person voting the
shares, or a beneficiary, if any, may apply to the Court of Chancery or
such other court as may have jurisdiction to appoint an additional person
to act with the persons so voting the shares, which shall then be voted
as determined by a majority of such persons and the person appointed by
the Court. Except for the election of directors or as otherwise provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings
of shareholders, all matters shall be determined by a vote of the holders
of a majority of the number of votes eligible to be cast by the holders
of the outstanding shares of capital stock of the Corporation present and
entitled to vote thereat. Directors shall, except as otherwise required
by law, these Bylaws or the Certificate of Incorporation, be elected by a
plurality of the votes cast by each class of shares entitled to vote at a
meeting of shareholders, present and entitled to vote in the election.
SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting
of shareholders, the Board shall appoint one or more persons, other than
officers, directors or nominees for office, as inspectors of election to
act at such meeting or any adjournment thereof. Such appointment shall
not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the meeting shall make such appointment at the
meeting. If any person appointed as inspector fails to appear or fails
or refuses to act at the meeting, the vacancy so created may be filled by
appointment by the Board in advance of the meeting or at the meeting by
the chairman of the meeting. The duties of the inspectors of election
shall include determining the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, receiving votes, ballots or
consents, hearing and deciding all challenges and questions arising in
connection with the right to vote, counting and tabulating all votes,
ballots or consents, determining the results, and doing such acts as are
proper to the conduct of the election or the vote with fairness to all
shareholders. Any report or certificate made by them shall be PRIMA
FACIE evidence of the facts stated and of the vote as certified by them.
Each
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inspector shall be entitled to a reasonable compensation for his or
her services, to be paid by the Corporation.
SECTION 11. PROCEDURE FOR NOMINATIONS. Subject to the
provisions hereof, the Nominating Committee of the Board shall select
nominees for election as directors. Except in the case of a nominee
substituted as a result of the death, incapacity, withdrawal or other
inability to serve of a nominee, the Nominating Committee shall deliver
written nominations to the Secretary at least sixty (60) days prior to
the date of the annual meeting. Provided the Nominating Committee makes
such nominations, no nominations for directors except those made by the
Nominating Committee shall be voted upon at the annual meeting of
shareholders unless other nominations by shareholders are made in
accordance with the provisions of this Section 11. Nominations of
individuals for election to the Board at an annual meeting of
shareholders may be made by any shareholder of record of the Corporation
entitled to vote for the election of directors at such meeting who
provides timely notice in writing to the Secretary as set forth in this
Section 11. To be timely, a shareholder's notice must be delivered to or
received by the Secretary not later than the following dates: (i) with
respect to an election of directors to be held at an annual meeting of
shareholders, sixty (60) days in advance of such meeting if such meeting
is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect
to an election to be held at an annual meeting of shareholders held at a
time other than within the time periods set forth in the immediately
preceding clause (i), or at a special meeting of shareholders for the
election of directors, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
shareholders. For purposes of this Section 11, notice shall be deemed to
first be given to shareholders when disclosure of such date of the
meeting of shareholders is first made in a press release reported to Dow
Jones News Services, Associated Press or comparable national news
service, or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Securities Exchange Act of 1934, as amended. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director, (i) the
name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) such
person's written consent to serve as a director, if elected, and (iv)
such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission (whether or not the Corporation is then subject to such
rules); and (b) as to the shareholder giving the notice (i) the name and
address of such shareholder, (ii) the class and number of shares of the
Corporation which are owned of record by such shareholder and the dates
upon which he or she acquired such shares, (iii) a description of all
arrangements or understandings between the shareholder and nominee and
any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the shareholder, and (iv) the
identification of any person employed, retained, or to be compensated by
the shareholder submitting the nomination or by the person nominated, or
any person acting on his or her behalf to make solicitations or
recommendations to shareholders for the purpose of assisting in the
election of such director, and a brief description of the terms of such
employment, retainer or arrangement for compensation. At the request of
the Board, any person nominated by the Board for election as a director
shall furnish to the Secretary that information required to be set forth
in a shareholder's notice of nomination which pertains to the nominee
together with the required written consent. No person shall be elected
as a director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 11.
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The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not properly
brought before the meeting in accordance with the provisions hereof and,
if he should so determine, he shall declare to the meeting that such
nomination was not properly brought before the meeting and shall not be
considered.
SECTION 12. SUBSTITUTION OF NOMINEES. In the event that a
person is validly designated as a nominee in accordance with Section 11
of this Article II and shall thereafter become unwilling or unable to
stand for election to the Board, the Nominating Committee may designate a
substitute nominee upon delivery, not fewer than five (5) days prior to
the date of the meeting for the election of such nominee, of a written
notice to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the
Secretary pursuant to Section 11 of this Article II had such substitute
nominee been initially proposed as a nominee. Such notice shall include
a signed consent to serve as a director of the Corporation, if elected,
of each such substituted nominee.
SECTION 13. NEW BUSINESS. Any new business to be taken up at
the annual meeting at the request of the Chairman of the Board, the
President or by resolution of at least three-fourths of the entire Board
shall be stated in writing and filed with the Secretary at least fifteen
(15) days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting,
but, except as provided in this Section 13, no other proposal shall be
acted upon at the annual meeting. Any proposal offered by any
shareholder may be made at the annual meeting and the same may be
discussed and considered, but unless properly brought before the meeting
such proposal shall not be acted upon at the meeting. For a proposal to
be properly brought before an annual meeting by a shareholder, the
shareholder must be a shareholder of record and have given timely notice
thereof in writing to the Secretary. To be timely, a shareholder's
notice must be delivered to or received by the Secretary not later than
the following dates: (i) with respect to an annual meeting of
shareholders, sixty (60) days in advance of such meeting if such meeting
is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect
to an annual meeting of shareholders held at a time other than within the
time periods set forth in the immediately preceding clause (i), the close
of business on the tenth (10th) day following the date on which notice of
such meeting is first given to shareholders. For purposes of this
Section 13, notice shall be deemed to first be given to shareholders when
disclosure of such date of the meeting of shareholders is first made in a
press release reported to Dow Jones News Services, Associated Press or
comparable national news service, or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. A shareholder's notice to the Secretary shall set forth as to
the matter the shareholder proposes to bring before the annual meeting
(a) a brief description of the proposal desired to be brought before the
annual meeting; (b) the name and address of the shareholder proposing
such business; (c) the class and number of shares of the Corporation
which are owned of record by the shareholder and the dates upon which he
or she acquired such shares; (d) the identification of any person
employed, retained, or to be compensated by the shareholder submitting
the proposal, or any person acting on his or her behalf, to make
solicitations or recommendations to shareholders for the purpose of
assisting in the passage of such proposal, and a brief description of the
terms of such employment, retainer or arrangement for compensation; and
(e) such other information regarding such proposal as would be required
to be included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission or required to be delivered to the
Corporation pursuant to the proxy rules of the Securities and Exchange
Commission (whether or not the Corporation is then subject to such
rules). This provision shall not prevent the consideration and approval
or disapproval at an annual meeting of reports of officers, directors and
committees of the Board or the management of the
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Corporation, but in
connection with such reports, no new business shall be acted upon at such
annual meeting unless stated and filed as herein provided. This
provision shall not constitute a waiver of any right of the Corporation
under the proxy rules of the Securities and Exchange Commission or any
other rule or regulation to omit a shareholder's proposal from the
Corporation's proxy materials.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that any new business was not
properly brought before the meeting in accordance with the provisions
hereof and, if he should so determine, he shall declare to the meeting
that such new business was not properly brought before the meeting and
shall not be considered.
ARTICLE III
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates representing
shares of stock shall be in such form as shall be determined by the
Board. Each certificate shall state that the Corporation will furnish to
any shareholder upon request and without charge a statement of the
powers, designations, preferences and relative, participating, optional
or other special rights of the shares of each class or series of stock
and the qualifications or restrictions of such preferences and/or rights,
or shall set forth such statement on the certificate itself. The
certificates shall be numbered in the order of their issue and entered in
the books of the Corporation or its transfer agent or agents as they are
issued. Each certificate shall state the registered holder's name and
the number and class of shares, and shall be signed by the Chairman of
the Board or the President, and the Secretary or any Assistant Secretary,
and may, but need not, bear the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on the certificates may be
facsimiles. In case any officer who shall have signed any such
certificate shall cease to be such officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate shall
have been delivered by the Corporation, such certificate may nevertheless
be adopted by the Corporation and be issued and delivered as though the
person or persons who signed such certificate or certificates had not
ceased to be such officer or officers of the Corporation.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board shall have
the power to appoint one or more Transfer Agents and Registrars for the
transfer and registration of certificates of stock of any class, and may
require that stock certificates be countersigned and registered by one or
more of such Transfer Agents and Registrars.
SECTION 3. REGISTRATION AND TRANSFER OF SHARES. Subject to the
provisions of the Certificate of Incorporation of the Corporation, the
name of each person owning a share of the capital stock of the
Corporation shall be entered on the books of the Corporation together
with the number of shares held by him or her, the numbers of the
certificates covering such shares and the dates of issue of such
certificates. Subject to the provisions of the Certificate of
Incorporation of the Corporation, the shares of stock of the Corporation
shall be transferable on the books of the Corporation by the holders
thereof in person, or by their duly authorized attorneys or legal
representatives, on surrender and cancellation of certificates for a like
number of shares, accompanied by an assignment or power of transfer
endorsed thereon or attached thereto, duly executed, with such guarantee
or proof of the authenticity of the signature as the Corporation or its
agents may reasonably require and with proper evidence of payment of any
applicable transfer taxes. Subject to the provisions of the Certificate
of Incorporation of the Corporation, a record shall be made of each
transfer.
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SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The
holder of any shares of stock of the Corporation shall immediately notify
the Corporation of any loss, theft, destruction or mutilation of the
certificates therefor. The Corporation may issue, or cause to be issued,
a new certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost, stolen or destroyed upon evidence
satisfactory to the Corporation of the loss, theft or destruction of the
certificate, and in the case of mutilation, the surrender of the
mutilated certificate. The Corporation may, in its discretion, require
the owner of the lost, stolen or destroyed certificate, or his or her
legal representatives, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of
the alleged loss, theft, destruction or mutilation of any such
certificate and the issuance of such new certificate, or may refer such
owner to such remedy or remedies as he or she may have under the laws of
the State of Delaware.
SECTION 5. HOLDER OF RECORD. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Corporation shall be
entitled to treat the holder of record of any share or shares of stock as
the holder thereof in fact and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. RESPONSIBILITIES; NUMBER OF DIRECTORS. The business
and affairs of the Corporation shall be under the direction of the Board.
The Board shall consist of not less than five (5) nor more than fifteen
(15) directors. Within the foregoing limits, the number of directors
shall be determined only by resolution of the Board. A minimum of three
(3) directors shall be persons other than officers or employees of the
Corporation or its subsidiaries and shall not have a relationship which,
in the opinion of the Board (exclusive of such persons), could interfere
with the exercise of independent judgment in carrying out the
responsibilities of a director. No more than two directors shall be
officers or employees of the Corporation or its subsidiaries.
SECTION 2. QUALIFICATIONS. Each director shall be at least
eighteen (18) years of age.
SECTION 3. MANDATORY RETIREMENT. No director shall serve
beyond the end of the annual meeting of the Corporation coincident with
or immediately following the date on which his or her seventy-fifth
(75th) birthday occurs.
SECTION 4. REGULAR AND ANNUAL MEETINGS. An annual meeting of
the Board for the election of officers shall be held, without notice
other than these Bylaws, immediately after, and at the same place as, the
annual meeting of the shareholders, or, with notice, at such other time
or place as the Board may fix by resolution. The Board may provide, by
resolution, the time and place, within or without the State of Delaware,
for the holding of regular meetings of the Board without notice other
than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may
be called for any purpose at any time by or at the request of the
Chairman of the Board or the President. Special meetings of the Board
shall also be called by the Secretary upon the written request, stating
the purpose or purposes of the meeting, of at least sixty percent (60%)
of the directors then in office, but in any event not less than five (5)
directors. The persons authorized to call special meetings of the Board
shall give notice of such meetings in the manner prescribed by these
Bylaws and may fix any place, within or without the
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Corporation's regular
business area, as the place for holding any special meeting of the Board
called by such persons. No business shall be conducted at a special
meeting other than that specified in the notice of meeting.
SECTION 6. NOTICE OF MEETINGS; WAIVER OF NOTICE. Except as
otherwise provided in Section 4 of this Article IV, at least twenty-four
(24) hours notice of meetings shall be given to each director if given in
person or by telephone, telegraph, telex, facsimile or other electronic
transmission and at least five (5) days notice of meetings shall be given
if given in writing and delivered by courier or by postage prepaid mail.
The purpose of any special meeting shall be stated in the notice. Such
notice shall be deemed given when sent or given to any mail or courier
service or company providing electronic transmission service. Any
director may waive notice of any meeting by submitting a signed waiver of
notice with the Secretary, whether before or after the meeting. The
attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the
express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 7. CONDUCT OF MEETINGS. Meetings of the Board shall be
presided over by the Chairman of the Board or such other director or
officer as the Chairman of the Board shall designate, and in the absence
or incapacity of the Chairman of the Board, the presiding officer shall
be the then senior member of the Board in terms of length of service on
the Board (which length of service shall include length of service on the
Board of Directors of The Dime Savings Bank of Williamsburgh and any
predecessors thereto). The Secretary or, in his absence, a person
appointed by the Chairman of the Board (or other presiding person), shall
act as secretary of the meeting. The Chairman of the Board (or other
person presiding) shall conduct all meetings of the Board in accordance
with the best interests of the Corporation and shall have the authority
and discretion to establish reasonable procedural rules for the conduct
of Board meetings. At the discretion of the Chairman of the Board, any
one or more directors may participate in a meeting of the Board or a
committee of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at any such meeting.
SECTION 8. QUORUM AND VOTING REQUIREMENTS. A quorum at any
meeting of the Board shall consist of not less than a majority of the
directors then in office or such greater number as shall be required by
law, these Bylaws or the Certificate of Incorporation, but not less than
one-third (1/3) of the total number. If less than a required quorum is
present, the majority of those directors present shall adjourn the
meeting to another time and place without further notice. At such
adjourned meeting at which a quorum shall be represented, any business
may be transacted that might have been transacted at the meeting as
originally noticed. Except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws, a majority vote of the directors
present at a meeting, if a quorum is present, shall constitute an act of
the Board.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if
all members of the Board of Directors or such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or such
committee.
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SECTION 10. RESIGNATION. Any director may resign at any time
by sending a written notice of such resignation to the principal office
of the Corporation addressed to the Chairman of the Board or the
President. Unless otherwise specified therein, such resignation shall
take effect upon receipt thereof.
SECTION 11. VACANCIES. To the extent not inconsistent with the
Certificate of Incorporation and subject to the limitations prescribed by
law and the rights of holders of Preferred Stock, vacancies in the office
of director, including vacancies created by newly created directorships
resulting from an increase in the number of directors, shall be filled
only by a vote of a majority of the directors then holding office,
whether or not a quorum, at any regular or special meeting of the Board
called for that purpose. Subject to the rights of holders of Preferred
Stock, no person shall be so elected a director unless nominated by the
Nominating Committee. Subject to the rights of holders of Preferred
Stock, any director so elected shall serve for the remainder of the full
term of the class of directors in which the new directorship was created
or the vacancy occurred and until his or her successor shall be elected
and qualified.
SECTION 12. COMPENSATION. From time to time, as the Board
deems necessary, the Board shall fix the compensation of directors, and
officers of the Corporation in such one or more forms as the Board may
determine.
SECTION 13. AMENDMENTS CONCERNING THE BOARD. The number,
retirement age, and other restrictions and qualifications for directors
of the Corporation as set forth in these Bylaws may be altered only by a
vote, in addition to any vote required by law, of two-thirds of the
entire Board or by the affirmative vote of the holders of record of not
less than eighty percent (80%) of the total votes eligible to be cast by
holders of all outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors at a meeting of
the shareholders called for that purpose.
ARTICLE V
COMMITTEES
SECTION 1. STANDING COMMITTEES. At each annual meeting of the
Board, the directors shall designate from their own number, by resolution
adopted by a majority of the entire Board, the following committees:
(a) Executive Committee
(b) Audit Committee
(c) Compensation Committee
(d) Nominating Committee
which shall be standing committees of the Board. The Board shall appoint
a director to fill any vacancy on any committee of the Board. The
members of the committees shall serve at the pleasure of the Board.
SECTION 2. EXECUTIVE COMMITTEE. There shall be an Executive
Committee of the Board consisting of at least six (6) members, as shall
be appointed by Board resolution or these Bylaws. The Chief Executive
Officer and the President shall be ex-officio members of the Executive
Committee, with power to vote on all matters so long as they are also
directors of the Corporation. Four (4) members
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of the Executive
Committee, at least three (3) of whom must be non-officer directors, or
such other number of members as the Board of Directors may establish by
resolution, shall constitute a quorum for the transaction of business.
The vote of a majority of members present at any meeting including the
presiding member, who shall be eligible to vote, shall constitute the
action of the Executive Committee.
The Chairman of the Board or such other director or officer as
the Chairman of the Board shall designate shall serve as chairman of the
Executive Committee or, if the office of the Chairman of the Board is
vacant, the President shall serve as chairman of the Executive Committee.
In the absence of the chairman of the Executive Committee, the committee
shall designate, from among its membership present, a person to preside
at any meeting held in such absence. The Executive Committee shall
designate, from its membership or otherwise, a secretary who shall report
to the Board at its next regular meeting all proceedings and actions
taken by the Executive Committee. The Executive Committee shall meet as
necessary at the call of the Chairman of the Board, the President or at
the call of a majority of the members of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent
with law, these Bylaws or the Certificate of Incorporation, exercise all
the powers and authority of the Board in the management of the business
and affairs of the Corporation in the intervals between the meetings of
the Board.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist
of at least three (3) members whose background and experience are
financial and/or business management related, none of whom shall be an
officer or salaried employee of the Corporation or its subsidiaries, an
attorney who receives a fee or other compensation for legal services
rendered to the Corporation or any other individual having a relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
At any regular meeting of the Board, any director who is otherwise
eligible to serve on the Audit Committee may be elected to fill a vacancy
that has occurred on the Audit Committee. The Board shall designate one
member of the committee to serve as chairman of the committee. The Audit
Committee shall meet annually, at the call of the chairman of the
committee and may hold such additional meetings as the chairman of the
committee may deem necessary, to examine, or cause to be examined, the
records and affairs of the Corporation to determine its true financial
condition, and shall present a report of examination to the Board at the
Board's next regular meeting following the meeting of the Audit
Committee. The committee shall appoint, from its membership or
otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee. The Audit Committee shall make, or cause to
be made, such other examinations as it may deem advisable or whenever so
directed by the Board and shall report thereon in writing at a regular
meeting of the Board. The Audit Committee shall make recommendations to
the Board in relation to the employment of accountants and independent
auditors and arrange for such other assistance as it may deem necessary
or desirable. The Audit Committee shall review and evaluate the
procedures and performance of the Corporation's internal auditing staff.
A quorum shall consist of at least one-third of the members of the
committee, and in no event less than two (2) members of the committee.
SECTION 4. COMPENSATION COMMITTEE. The Compensation Committee
shall consist of at least three (3) members, none of whom shall be an
officer or salaried employee of the Corporation or its subsidiaries as
shall be appointed by Board resolution or these Bylaws. In addition, the
Chief Executive Officer and the President shall be ex-officio members of
the Compensation Committee without any power to vote. The Board shall
designate one member of the committee to serve as chairman of the
Compensation Committee, who shall have the authority to adopt and
establish procedural rules for the conduct of all meetings of the
committee.
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The committee shall meet annually at the call of the chairman
of the committee, and may hold such additional meetings as the Chairman
of the Board may deem necessary. A quorum shall consist of at least one-
third of the voting members of the Committee, and in no event less than
two (2) voting members of the committee. The vote of a majority of the
voting members present at any meeting, including the chairman of the
committee who shall be eligible to vote, shall constitute the action of
the Compensation Committee. The committee shall appoint, from its
membership or otherwise, a secretary who shall cause to be kept written
minutes of all meetings of the committee.
The Compensation Committee shall be responsible for overseeing
the development, implementation and conduct of the Corporation's
employment and personnel policies, notices and procedures, including the
administration of the Corporation's compensation and benefit programs.
SECTION 5. NOMINATING COMMITTEE. The Nominating Committee
shall consist of at least three (3) members, none of whom shall be an
officer or a salaried employee of the Corporation or its subsidiaries.
In addition, the Chief Executive Officer and the President shall be ex-
officio members of the Nominating Committee, with power to vote on all
matters so long as they are also directors of the Corporation.
Notwithstanding the foregoing, no director shall serve on the Nominating
Committee in any capacity in any year during which such director's term
as a director is scheduled to expire. The Nominating Committee shall
review qualifications of and interview candidates for the Board and shall
make nominations for election of board members in accordance with the
provisions of these Bylaws in relation to those suggestions to the Board.
A quorum shall consist of at least one-third of the members of the
Committee, and in no event less than two (2) members of the committee.
SECTION 6. OTHER COMMITTEES. The Board may by resolution
adopted by a majority of the entire Board at any meeting authorize such
other committees as from time to time it may deem necessary or
appropriate for the conduct of the business of the Corporation. The
members of each committee so authorized shall be appointed by the Board
from members of the Board and/or employees of the Corporation. In
addition, the Chief Executive Officer and the President shall be ex-
officio members of each such committee. Each such committee shall
exercise such powers as may be assigned by the Board to the extent not
inconsistent with law, these Bylaws or the Certificate of Incorporation.
ARTICLE VI
OFFICERS
SECTION 1. NUMBER. The Board shall, at each annual meeting,
elect a Chairman of the Board, a Chief Executive Officer, a President, a
Secretary and such other officers as the Board from time to time may deem
necessary or the business of the Corporation may require. Any number of
offices may be held by the same person except that no person may
simultaneously hold the offices of President and Secretary.
The election of all officers shall be by a majority of the
Board. If such election is not held at the meeting held annually for the
election of officers, such officers may be so elected at any subsequent
regular meeting or at a special meeting called for that purpose, in the
same manner above provided. Each person elected shall have such
authority, bear such title and perform such duties as provided in these
Bylaws and as the Board may prescribe from time to time. All officers
elected or appointed by the Board shall assume their duties immediately
upon their election and shall hold office at the pleasure of the Board.
Whenever a vacancy occurs among the officers, it may be filled at any
regular or special meeting called for that purpose, in the same manner as
above provided.
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SECTION 2. TERM OF OFFICE AND REMOVAL. Each officer shall
serve until his or her successor is elected and duly qualified, the
office is abolished, or he or she is removed. Except for the Chairman of
the Board, the Chief Executive Officer or the President, any officer may
be removed at any regular meeting of the Board with or without cause by
an affirmative vote of a majority of the entire Board. The Board may
remove the Chairman of the Board, the Chief Executive Officer or the
President at any time, with or without cause, only by a vote of two-
thirds of the non-officer directors then holding office at any regular or
special meeting of the Board called for that purpose.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman shall be the
Chief Executive Officer of the Corporation and shall, subject to the
direction of the Board, oversee all of the major activities of the
Corporation and its subsidiaries and be responsible for assuring that the
policy decisions of the Board are implemented as formulated. He shall be
responsible, in consultation with such Officers and members of the Board
as he deems appropriate, for planning the growth of the Corporation. The
Chairman shall be responsible for shareholder relations, relations with
investments bankers, other similar financial institutions and financial
advisors and shall be empowered to designate Officers of the Corporation
and its subsidiaries to assist in such activities. The Chairman shall be
principally responsible for exploring opportunities for mergers,
acquisitions and new business. The Chairman shall preside at all
meetings of the shareholders; preside at all meetings of the Board and
the Executive Committee; make recommendations to the Board regarding
appointments to all committees; and sign instruments in the name of the
Corporation. The Chairman will be a member ex-officio, with power to
vote on all matters, of all committees of the Board except the Audit
Committee; in his capacity as an ex-officio member of the Compensation
Committee, he will be without any power to vote.
In the absence or disability of the Chairman of the Board, the
President or such other person who the Board shall designate, shall
exercise the powers and perform the duties, which otherwise would fall
upon the Chairman of the Board.
<PAGE>
SECTION 4. PRESIDENT. The President shall, subject to the
direction of the Board and the Chief Executive Officer, be the Chief
Operating Officer of the Corporation and shall assist the Chief Executive
Officer in planning the growth of the Corporation, relations with
investment bankers, other similar financial institutions and financial
advisors. The President, shall under authority given to him, sign
instruments in the name of the Corporation. The President shall have the
general supervision and direction of all of the Corporation's officers
and personnel, subject to and consistent with policies enunciated by the
Board. The President shall have such other powers as may be assigned to
him by the Board, its committees or the Chief Executive Officer. The
President will be a member ex-officio, with power to vote on all matters,
of all Committees of the Board, except the Audit Committee; in his
capacity as ex-officio member of the Compensation Committee he will be
without any power to vote.
SECTION 5. VICE PRESIDENTS. Executive Vice Presidents, Senior
Vice Presidents and Vice Presidents may be appointed by the Board of
Directors to perform such duties as may be prescribed by these Bylaws,
the Board, the Chief Executive Officer or the President as permitted by
the Board.
SECTION 6. SECRETARY. The Secretary shall attend all meetings
of the Board and of the shareholders, and shall record, or cause to be
recorded, all votes and minutes of all proceedings of the Board and of
the shareholders in a book or books to be kept for that purpose. The
Secretary shall perform such executive and administrative duties as may
be assigned by the Board, the Chairman of the Board or the President.
The Secretary shall have charge of the seal of the Corporation, shall
submit such reports and statements as may be required by law or by the
Board, shall conduct all correspondence
-12-
<PAGE>
relating to the Board and its
proceedings and shall have such other powers and duties as are generally
incident to the office of Secretary and as may be assigned to him or her
by the Board, the Chairman of the Board or the President.
SECTION 7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
of the Company shall have the responsibility for supervising the Comptroller
and the Treasurer in maintaining the financial records of the Corporation.
He or she shall also supervise the budgeting and forecasting process. He or
she shall make such disbursement of the funds of the Corporation as are
authorized and monitor the accounts of all transactions and of the financial
condition of the Corporation. The Chief Financial Officer shall also perform
such other duties as may be prescribed by these bylaws, the Board, or the
Chief Executive Officer or the President as permitted by the Board.
SECTION 8. COMPTROLLER. The Comptroller shall be the chief
accounting officer of the Corporation and shall be responsible for the
maintenance of adequate systems and records. The Comptroller shall keep
a record of all assets, liabilities, receipts, disbursements, and other
financial transactions, and shall see that all expenditures are made in
accordance with procedures duly established from time to time by the
Board. The Comptroller shall make such reports as may be required by the
Board or as are required by law.
SECTION 9. TREASURER. The Treasurer shall be responsible for
all of the money management and investment functions of the Corporation.
Maintenance of relationships with correspondent banks, securities brokers
and safekeeping agents shall be the responsibility of the Treasurer. The
Treasurer shall make such reports as may be required by the Board or as
are required by law.
SECTION 10. OTHER OFFICERS AND EMPLOYEES. Other officers and
employees appointed by the Board shall have such authority and shall
perform such duties as may be assigned to them, from time to time, by the
Board or the Chief Executive Officer or the President.
SECTION 11. COMPENSATION OF OFFICERS AND OTHERS. The
compensation of all officers and employees shall be fixed from time to
time by the Board, or by any committee or officer authorized by the Board
to do so, upon the recommendation and report by the Compensation
Committee. The compensation of agents shall be fixed by the Board, or by
any committee or officer authorized by the Board to do so, upon the
recommendation and report of the Compensation Committee.
ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of
law and the requirements of the Certificate of Incorporation, to declare
and pay dividends out of surplus (or, if no surplus exists, out of net
profits of the Corporation, for the fiscal year in which the dividend is
declared and/or the preceding fiscal year, except where there is an
impairment of capital stock), to pay such dividends to the shareholders
in cash, in property, or in shares of the capital stock of the
Corporation, and to fix the date or dates for the payment of such
dividends.
-13-
<PAGE>
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the
Certificate of Incorporation, or as otherwise set forth in these Bylaws,
may be amended or repealed at any regular meeting of the entire Board by
the vote of two-thirds of the Board; provided, however, that (a) a notice
specifying the change or amendment shall have been given at a previous
regular meeting and entered in the minutes of the Board; (b) a written
statement describing the change or amendment shall be made in the notice
mailed to the directors of the meeting at which the change or amendment
shall be acted upon; and (c) any Bylaw made by the Board may be altered,
amended, rescinded, or repealed by the holders of shares of capital stock
entitled to vote thereon at any annual meeting or at any special meeting
called for that purpose in accordance with the percentage requirements
set forth in the Certificate of Incorporation and/or these Bylaws.
Notwithstanding the foregoing, any provision of these Bylaws that
contains a supermajority voting requirement shall only be altered,
amended, rescinded, or repealed by a vote of the Board or holders of
capital stock entitled to vote thereon that is not less than the
supermajority specified in such provision.
-14-
<PAGE>
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