FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
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 0-17494
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Dime Financial Corporation
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(Exact name of registrant as specified in its charter)
Connecticut 06-1237470
- ---------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
95 Barnes Road, Wallingford, Connecticut 06492
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 269-8881
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ---------------------------------------------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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.
Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant was $67,189,112 on March 11, 1996. On that
date, 5,023,485 shares of Common Stock, par value $1.00 per share, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in
this Annual Report on Form 10-K as indicated herein.
<TABLE>
<CAPTION>
Part of 10-K into which
Document incorporated
- ----------------------------------------------------------------------------
<S> <S>
Annual Report to Shareholders for the fiscal I, II and IV
year ended December 31, 1995 (the "Annual
Report")
Proxy Statement to Shareholders dated III
March 8, 1996 (filed pursuant to
Regulation 14A) (the "Proxy Statement")
</TABLE>
TABLE OF CONTENTS
Page
PART I
Item 1 - Business 1
Item 2 - Properties 10
Item 3 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Executive Officers of the Registrant 12
PART II
Item 5 - Market for Registrant's Common Equity and Related
Shareholders Matters 13
Item 6 - Selected Financial Data 13
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 8 - Financial Statements and Supplementary Data 13
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 13
PART III
Item 10 - Directors and Executive Officers of the Registrant 14
Item 11 - Executive Compensation 14
Item 12 - Security Ownership of Certain Beneficial Owners and
Management 14
Item 13 - Certain Relationships and Related Transactions 14
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 14
PART I
Item 1 - Business
The principal executive offices of Dime Financial Corporation (the
"Company") and its wholly-owned subsidiary, The Dime Savings Bank of
Wallingford ("Dime") are located at 95 Barnes Road, Wallingford,
Connecticut 06492. The telephone number of the Company and Dime is (203)
269-8881.
Other information required by this item appears on pages 2 through 3
of the Company's 1995 Annual Report to Shareholders (the "1995 Annual
Report") under the caption "To Our Shareholders"; on page 1 under the
caption "Corporate Profile"; on the inside front cover under the caption
"Financial Highlights" and on pages 6 through 17 under the caption
"Management's Discussion and Analysis of Operations." Such information is
incorporated herein by reference and made a part hereof. In addition,
certain other information required by this item is set out below.
Interest Rates and Interest Differentials
The information required by this item appears in the 1995 Annual
Report on page 10 under the caption "Average Balances and Interest Rates."
Such information is incorporated herein by reference and made a part
hereof.
Rate / Volume Analysis
The information required by this item appears in the 1995 Annual
Report on page 11 under the caption, "Rate / Volume Analysis." Such
information is incorporated herein by reference and made a part hereof.
Non-performing Assets
The information required by this item appears in the 1995 Annual
Report on pages 6 through 8 under the caption, "Asset Quality." Such
information is incorporated herein by reference and made a part hereof.
Problem Loans and Allowance for Loan Losses
Additional information required by this item appears in the 1995
Annual Report on page 8 under the caption, "Allowance for Loan Losses &
Provisions to the Allowance for Loan Losses." Such information is
incorporated herein by reference and made a part hereof.
At December 31, 1995, loans which were non-accruing because of doubt
as to the ultimate collection of principal and interest are included on
page 7 in the table under the caption, "Asset Quality," of the 1995 Annual
Report. In addition to the disclosure on pages 6-8 of the 1995 Annual
Report, at December 31, 1995, management classified an additional $10.5
million of loans as substandard for internal purposes. These loans are
still performing. Management does not have serious doubt as to their
collectibility and believes that the amounts allocated to these loans in
the allowance for loan losses are adequate.
Under Federal Deposit Insurance Corporation ("FDIC") guidelines,
special mention loans do not presently expose the bank to a sufficient
degree of risk to warrant adverse classification but do possess credit
deficiencies deserving management's close attention. Substandard loans are
inadequately protected by the current sound worth and paying capacity of
the obligor or of the collateral pledged, if any, and must have a well-
defined weakness or weaknesses that jeopardize the liquidation of the
debt. Doubtful loans have all the weaknesses inherent in those classified
substandard with the added characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently known facts,
conditions and values, highly questionable and improbable.
The provision to the allowance for loan losses totalled $7.6 million
for the year ended December 31, 1995 compared with a provision of $4.5
million for the year ended December 31, 1994. The increased provision
during 1995 was primarily due to the Company's assessment that there was
increased potential exposure in the residential loan portfolio. In the
first quarter of 1995, recent trends in collateral values were analyzed by
the receipt of over 200 new appraisals of certain segments of the
performing 1 - 4 family residential loan portfolio. This process indicated
a substantial decline in the value of the collateral securing many of
these loans since the original funding date and resulted in additions to
the allowance for loan losses.
The Company's allowance for loan losses as allocated between loan
types for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are
set forth in the following table.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
Loans in Loans in Loans in
Category as Category as Category as
Amount of Percentage of Amount of Percentage of Amount of Percentage of
(Dollars in Thousands) Reserve Total Loans Reserve Total Loans Reserve Total Loans
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserve allocated to:
Mortgage loans:
Residential real estate $ 3,323 78.3% $ 2,198 77.2% $ 1,969 72.3%
Commercial real estate 6,693 9.6 5,237 11.2 7,594 14.9
Builders' & land 84 0.3 195 0.8 281 1.0
Commercial loans 754 1.0 1,136 1.4 3,234 2.6
Consumer loans 870 10.8 560 9.4 984 9.2
Unallocated allowance 1,055 - -
---------------------------------------------------------------------------
Total $12,779 100.0% $ 9,326 100.0% $14,062 100.0%
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1992 1991
------------------------- -------------------------
Loans in Loans in
Category as Category as
Amount of Percentage of Amount of Percentage of
(Dollars in Thousands) Reserve Total Loans Reserve Total Loans
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve allocated to:
Mortgage loans:
Residential real estate $ 1,718 66.9% $ 3,650 63.8%
Commercial real estate 9,643 16.0 15,063 17.3
Builders' & land 427 1.2 1,344 1.9
Commercial loans 8,714 7.4 5,304 7.6
Consumer loans 778 8.5 1,010 9.4
----------------------------------------------
Total $21,280 100.0% $26,371 100.0%
===============================================
Investment Securities
Additional information required by this item appears in the 1995
Annual Report on pages 24 through 25 under the caption "Note 4:
Investment and Mortgage-backed Securities". Such information is
incorporated herein by reference and made a part hereof. The carrying
values of investment securities were as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994 1993
-----------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Available for Sale:
U.S. treasury securities $ 4,029 $ - $ -
U.S. government agency obligations - 3,957 -
Other bonds and notes 4,097 - -
Equity securities - 625 -
-----------------------------
Total Available for Sale $ 8,126 $ 4,582 $ -
=============================
Mortgage-backed Securities Available for Sale:
Mortgage-backed securities $47,912 $ - $ -
REMIC's/CMO's 47,278 - -
-----------------------------
Total Mortgage-backed Securities Available for Sale $95,190 $ - $ -
=============================
Held to Maturity:
U.S. treasury securities $ 1,013 $19,688 $ -
U.S. government agency obligations 46,885 18,045 -
Other bonds and notes - 14,136 -
-----------------------------
Total Held to Maturity $47,898 $51,869 $ -
=============================
Held for Investment:
U.S. treasury securities $ - $ - $47,362
U.S. government agency obligations - - 83
Other bonds and notes - - 31,747
Equity securities - - 426
-----------------------------
Total Held for Investment $ - $ - $79,618
=============================
</TABLE>
Loans
Additional information required by this item appears in the 1995
Annual Report on page 12 under the caption "Lending Activities" and on
pages 25 through 26 under the caption "Note 5: Loans Receivable". This
information is incorporated herein by reference and made a part hereof.
The following table sets forth the contractual maturities of the loan
portfolio at December 31, 1995:
<TABLE>
<CAPTION>
Due after
Due in one one before Due after
year or less five years five years
--------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Adjustable rate loans:
Mortgage Loans:
Residential real estate - owner occupied $ 4 $ 571 $130,248
Residential real estate - non-owner occupied 11 116 26,522
Commercial real estate 422 4,997 30,036
Builders and Land 438 1,063 -
Consumer loans 551 10,749 9,568
Commercial loans 700 2,228 1,154
------------------------------------
Total adjustable rate loans 2,126 19,724 197,528
------------------------------------
Fixed rate loans:
Mortgage Loans:
Residential real estate - owner occupied 182 3,464 195,387
Residential real estate - non-owner occupied 10 167 873
Commercial real estate 1,863 4,109 2,232
Consumer loans 318 13,593 14,509
Commercial loans 5 191 249
------------------------------------
Total fixed rate loans 2,378 21,524 213,250
------------------------------------
Total loans $4,504 $41,248 $410,778
====================================
</TABLE>
Deposits
The information required by this item appears in the 1995 Annual
Report on page 13 under the caption "Deposits and Other Borrowings" and on
page 28 under the caption, "Note 9: Deposits." Such information is
incorporated herein by reference and made a part hereof.
Competition
In attracting deposits, Dime faces strong competition from savings
banks, savings and loan associations, commercial banks, credit unions,
insurance companies and investment firms located in its primary market
area. The banking business in Connecticut is highly competitive. In March
1990 the Connecticut General Assembly adopted legislation that permits
full interstate banking in Connecticut by allowing business combinations
among commercial banks, bank holding companies and thrift institutions
located in Connecticut and other states with reciprocal interstate banking
laws. This legislation also permits bank holding companies from other
states to establish non banking offices, including loan production
offices, in Connecticut on a limited basis.
In recent years, market demands, economic pressures, fluctuating
interest rates and increased customer awareness of product and service
differences among financial institutions have forced such institutions to
diversify their services to become more cost effective. Such actions may
increase the cost of funds to Dime in the future. Dime faces strong
competition in attracting deposits and in making real estate and other
loans. Dime's most direct competition for deposits comes from other thrift
institutions, commercial banks, credit unions and money market funds.
Dime competes for deposits with the financial industry principally
by offering depositors a wide variety of deposit programs, convenient
branch locations and hours, tax-deferred retirement programs and other
services. Dime does not rely upon any individual, group or entity for a
material portion of its deposits, nor has Dime obtained any deposits
through deposit brokers. At the present time, it is the general practice
of Dime to limit the majority of its lending activities to within the
State of Connecticut. While Dime is not engaged in interstate banking,
Dime owns mortgages secured by real property located outside of
Connecticut.
The competition faced by Dime for real estate loans comes
principally from mortgage brokers and mortgage banking companies, other
savings banks, savings and loan associations, commercial banks, finance
companies, insurance companies and other institutional lenders. Dime
competes for loan originations primarily through the interest rates and
loan fees it charges and the efficiency and quality of service it provides
borrowers, real estate brokers and builders. Factors which affect
competition and lending include, among others, the general availability of
lendable funds and credit, general and local economic conditions, current
interest rate levels, volatility in the mortgage markets and other
factors.
Employees
As of March 6, 1996, Dime employed 152 full-time and 34 part-time
employees, including 35 officers. During 1995, the Company instituted a
restructuring program resulting in the lay-off or notification of lay-off
of approximately 73 employees or 28% of the workforce. Additional
information regarding this item is located on pages 28 through 29 of the
1995 Annual Report under the caption "Note 11: Restructure Expense, net".
Such information is incorporated herein by reference and made a part
hereof.
The principal officers of Dime also serve as officers of the Company
but receive no additional compensation from the Company. The Company has
no other employees.
REGULATION AND SUPERVISION
As a Connecticut-chartered capital stock savings bank whose deposits
are insured by the FDIC, Dime is subject to extensive regulation and
supervision by both the Connecticut Banking Commissioner (the
"Commissioner") and the FDIC. Dime further is subject to various
regulatory requirements of the Federal Reserve Board applicable to FDIC-
insured financial institutions. The Company also is subject to certain
regulations of the Federal Reserve Board and the Commissioner. This
governmental regulation is primarily intended to protect depositors, not
shareholders.
Connecticut Regulation
The Commissioner regulates Dime's internal organization as well as
its deposit, lending and investment activities. The approval of the
Commissioner is required, among other things, for the establishment of
branch offices and business combination transactions. The Commissioner
conducts periodic examinations of Dime. Many of the areas regulated by the
Commissioner are subject to similar regulation by the FDIC.
The Connecticut Interstate Banking Act, as amended, permits
Connecticut banks to engage in stock acquisitions of, and mergers with,
depository institutions in other states with reciprocal legislation. All
of the other New England states, and a majority of the other states, have
enacted reciprocal legislation. Several interstate mergers and
acquisitions involving Connecticut bank holding companies or banks with
offices in the service areas of Dime and bank holding companies or banks
headquartered in other states have been completed. Although the effect of
this legislation has not been significant, any future effect on the
Company and Dime cannot be predicted.
Connecticut banking laws grant banks broad lending authority.
Subject to certain limited exceptions, however, total secured and
unsecured loans made to any one obligor pursuant to this statutory
authority may not exceed 25 percent of a bank's capital, surplus,
undivided profits and loss reserves.
Dime is prohibited by Connecticut banking law from paying dividends
except from its net profits, which is defined as the remainder of all
earnings from current operations. The total of all dividends declared by
Dime in any calendar year may not, unless specifically approved by the
Commissioner, exceed the total of its net profits of that year combined
with its retained net profits of the preceding two years. In addition, on
February 22, 1993 Dime began operating under a Consent Agreement with the
FDIC and the Commissioner wherein Dime agreed to the issuance of a Cease
and Desist Order (the "Order") by the FDIC pursuant to the provisions of
applicable federal banking law. Under the Order, Dime agreed not to pay or
declare any dividends without the prior written consent of the FDIC and
the Commissioner. On January 31, 1995, the Order under which the Bank
operated since February of 1993, was lifted by the FDIC and the
Commissioner. The Board of Directors of Dime has adopted resolutions
committing Dime to continue certain actions designed to maintain and
improve the financial and operating condition of the institution. Among
these is a resolution that continues the requirement that Dime will
maintain a Tier 1 leverage capital ratio at or in excess of 6% and provide
advance notice to the FDIC and the Banking Commissioner of any action of
the Board to declare or pay dividends.
On January 18, 1996, the Company's Board of Directors declared,
after consent of the appropriate regulatory authorities, the resumption of
the quarterly dividend with an initial payment of $0.07 per share to be
paid on February 22, 1996 to shareholders of record on February 1, 1996.
Dividend payments had been suspended by the Board in June of 1991 prior to
the issuance of a regulatory memorandum in September of 1991 which has
since been lifted.
Under Connecticut banking law, no person may acquire the beneficial
ownership of more than 10 percent, or after acquiring 10 percent, increase
ownership to 25 percent or more, of any class of voting securities of a
bank chartered by the State of Connecticut or having its principal office
in Connecticut or a bank holding company thereof without the prior
notification and approval by the Commissioner.
Any state-chartered bank meeting statutory requirements may, with
the approval of the Commissioner, establish and operate branches in any
town or towns within the state.
FDIC Regulation
Dime's deposit accounts are insured by the FDIC to a maximum of
$100,000 for each insured depositor. As a state chartered FDIC-insured
bank, Dime is subject to extensive supervision and examination by the FDIC
and also is subject to FDIC regulations regarding many aspects of its
business, including types of deposit instruments offered and permissible
methods for acquisition of funds. The FDIC periodically makes its own
examination of insured institutions. Pursuant to the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), the FDIC has
implemented a system of risk-related deposit insurance assessments.
Beginning on January 1, 1993, insurance premiums of all banks vary
depending upon the capital level and supervisory rating of the
institution.
FDIC risk-based capital requirements became fully effective at the
end of 1992. Under these requirements, FDIC-insured institutions are
required to maintain minimum levels of "capital" based upon an
institution's total "risk-weighted assets." For purposes of these
requirements, "capital" is comprised of both Tier 1 capital and Tier 2
capital. Tier 1 capital consists primarily of common stock, additional
paid in capital, retained earnings and limited amounts of perpetual
preferred stock. Tier 2 capital consists primarily of loan loss reserves
and certain preferred stock, subordinated debt, and convertible
securities. In determining total capital, the amount of Tier 2 capital may
not exceed the amount of Tier 1 capital. A bank's total "risk-weighted
assets" are determined by assigning the bank's assets and off balance
sheet items (e.g., letters of credit) to one of four risk categories based
upon their relative credit risk. Under the regulations, the greater the
risk associated with an asset, the greater the amount of such asset that
will be subject to the capital requirements. An FDIC-insured bank is
required to maintain minimum ratios of Tier 1 and total risk-based capital
to risk-weighted assets of 4.0% and 8.0%, respectively. At December 31,
1995, the Tier 1 and total risk-based capital ratios for Dime were 14.97%
and 16.26%, respectively. Management believes that Dime will remain in
full compliance with applicable risk-based capital requirements.
A leverage capital ratio requirement adopted by the FDIC became
effective in 1991. Under this requirement, FDIC insured institutions are
required to maintain a ratio of common equity minus intangible assets to
total assets of at least 3% for the most highly rated institutions and 4%
to 5% for most institutions. At December 31, 1995 the leverage capital
ratio of Dime was 7.43%. Refer to pages 15-16 of the Annual Report under
the caption "Liquidity, Sources and Uses of Funds and Capital Resources."
In addition, FDICIA categorizes banks based on capital levels and
triggers certain mandatory and discretionary federal banking agency
responses for institutions that fall below certain capital levels. These
categories are "well-capitalized," "adequately capitalized," "under-
capitalized," "significantly undercapitalized," and "critically
undercapitalized." A bank is categorized as "well capitalized" if it
maintains a leverage ratio of at least 5%, a total risk-based capital
ratio of at least 10%, and a Tier 1 risk-based capital ratio of at least
6%. Based on its regulatory capital ratios at December 31, 1995, Dime is
well capitalized as defined in FDIC regulations.
FDICIA also restricts the ability of FDIC-insured state banks, such
as Dime, to acquire and retain equity investments. Generally, state banks
only may hold equity securities to the extent permitted for national
banks. However, FDICIA also permits certain state banks to acquire or
retain equity investments in an amount up to 100 percent of Tier 1 capital
in either (1) common or preferred stock listed on a national securities
exchange, or (2) shares of a registered investment company. To be eligible
for this exception, Dime was required to file, and has filed, a one-time
notice of its intention to acquire and retain such securities. In March of
1993, Dime received conditional approval from the FDIC to continue to hold
or acquire listed and/or registered equity securities up to the fullest
extent permitted by FDICIA.
Pursuant to FDICIA, in December 1993, the FDIC issued a final rule
concerning activities of FDIC-insured state banks. Under the final rule,
an insured state bank must obtain the FDIC's prior consent before
directly, or indirectly through a majority-owned subsidiary, engaging "as
principal" in any activity that is not permissible for a national bank
unless one of the exceptions contained in the regulation applies. The
final rule sets out application procedures for requesting the FDIC's
consent; provides a phase-out period for activities which are not approved
by the FDIC; and sets out conditions that may be imposed in the FDIC's
discretion when approving applications. To date, the final rule has not
had a material impact on the business of Dime.
FDIC insurance of deposits may be terminated by the FDIC, after
notice and hearing, upon a finding by the FDIC that the insured
institution has engaged in unsafe or unsound practices, or is in an unsafe
or unsound condition to continue operations, or has violated any
applicable law, regulation, rule or order of, or conditions imposed by,
the FDIC. Dime does not know of any practice, condition or violation that
might lead to termination of its deposit insurance.
Federal Reserve System Regulation
Under the regulations of the Federal Reserve Board, depository
institutions such as Dime are required to maintain reserves against their
transaction accounts and non-personal time deposits. These regulations
generally require the maintenance of reserves of 3 percent against
transaction accounts totaling $47.7 million or less and 10 percent of the
amount of such accounts in excess of such amount.
The Federal Reserve Board has established capital adequacy
guidelines for bank holding companies that are similar to the FDIC capital
requirements described above. As of December 31, 1995, the Company's Tier
1 and total risk-based capital ratios were 15.15% and 16.44%,
respectively, and the Company's leverage capital ratio was 7.50%.
Management believes that the Company will remain in full compliance with
applicable Federal Reserve Board capital requirements. Refer to pages 15-
16 of the Annual Report under the caption, "Liquidity Sources and Uses of
Funds and Capital Resources."
The Company is subject to regulation by the Federal Reserve Board as
a registered bank holding company. The Federal Bank Holding Company Act of
1956, as amended (the "BHCA"), under which the Company is registered,
limits the types of companies which the Company and its subsidiaries may
acquire or organize and the activities in which they may engage. In
general, a bank holding company and its subsidiaries are prohibited from
engaging in or acquiring direct control of any company engaged in non-
banking activities unless such activities are so closely related to
banking or managing or controlling banks as to be a proper incident
thereto. The Company has not determined which, if any, of these or other
permissible non-banking activities it might seek to engage in.
Under the BHCA, a bank holding company is required to obtain the
prior approval of the Board of Governors of the Federal Reserve System to
acquire, with certain exceptions, more than 5% of the outstanding voting
stock of any bank or bank holding company, to acquire all or substantially
all of the assets of a bank or to merge or consolidate with another bank
holding company.
As described above, the Connecticut Interstate Banking Act
specifically permits Connecticut bank holding companies and banks to
acquire or be acquired by banks or bank holding companies in other states
with reciprocal merger and acquisition laws. Federal antitrust laws place
limitations on the acquisition of banks and other businesses.
Under the BHCA, the Company and Dime are prohibited from engaging in
certain tying arrangements in connection with any extension of credit or
provision of any property or services. Dime is subject to certain
restrictions imposed by the Federal Reserve Act and FDICIA on making any
investments in the stock or other securities of the Company and the taking
of such stock or securities as collateral for loans to any borrower.
Dime also is subject to certain restrictions imposed by the Federal
Reserve Act on the amount of loans it can make to the Company. Such loans
must be collateralized as provided by the Federal Reserve Act. The amount
of such loans may not exceed (when aggregated with certain other
transactions between Dime and the Company) 10 percent of the capital stock
and surplus of such bank.
The Company is required under the BHCA to file annually with the
Federal Reserve Board reports of operations, and it and Dime are subject
to examination by the Federal Reserve Board. In addition, the Company, as
a bank holding company, is registered with the Connecticut Banking
Commissioner under the Connecticut Bank Holding Company Act.
Effect of Government Policy
Banking is a business that depends on interest rate differentials.
One of the most significant factors affecting the earnings of Dime is the
difference between the interest rate paid by Dime on its deposits and
other borrowings, on the one hand, and, the interest rates received by
Dime on loans extended to its customers and securities held in its
portfolio on the other hand. The value and yields of its assets and the
rate paid on its liabilities are sensitive to changes in prevailing market
rates of interest. Thus, the earnings and growth of Dime will be
influenced by general economic conditions, the monetary and fiscal
policies of the federal government, and policies of regulatory agencies,
particularly the Federal Reserve Board, which implements national monetary
policy. The nature and impact of any future changes in monetary policies
cannot be predicted.
The present bank regulatory scheme is undergoing significant change,
both as it affects the banking industry itself and as it affects
competition between banks and non-banking financial institutions. There
has been significant regulatory change in the regulation and operation of
savings associations, in the bank merger and acquisition area, in the
products and services banks can offer, and in the non-banking activities
in which bank holding companies can engage. In part as a result of these
changes, banks are now actively competing with other types of depository
institutions and with non-bank financial institutions, such as money
market funds, brokerage firms, insurance companies and other financial
service enterprises. It is not possible at this time to assess what impact
these changes in the regulatory scheme will ultimately have on the Company
and Dime.
Moreover, certain legislative and regulatory proposals that could
affect the Company, Dime and the banking business in general are pending,
or may be introduced, before the United States Congress, the Connecticut
General Assembly and various governmental agencies. These proposals
include measures that may further alter the structure, regulation and
competitive relationship of financial institutions and that may subject
the Company and Dime to increased regulation, disclosure and reporting
requirements. In addition, the various banking regulatory agencies
frequently propose rules and regulations to implement and enforce already
existing legislation. It cannot be predicted whether or in what form any
legislation or regulations will be enacted or the extent to which the
business of the Company and Dime will be affected thereby.
Item 2 - Properties
Including its administrative office located at 95 Barnes Road,
Wallingford, Connecticut, Dime has eleven banking branches and a data
processing center located throughout New Haven County. The following table
sets forth certain information regarding Dime's banking offices and data
processing center.
<TABLE>
<CAPTION>
Date Owned or Lease
Office Location Opened Leased Expiration Date
- ---------------------------------------------------------------------------------
<S> <S> <C> <S> <S>
Barnes Park 95 Barnes Road 1986 Owned Not Applicable
Wallingford, CT
Cheshire 595 Highland Ave. 1979 Owned Not Applicable
Cheshire, CT
Data Center 180 Research Parkway 1990 Leased (a) 4/30/96
Meriden, CT
Eastside 841 East Center St. 1975 Owned Not Applicable
Wallingford, CT
Main Street 2 North Main St. 1871 Owned (b) Not Applicable
Wallingford, CT
Montowese 47 Middletown Ave. 1966 Owned Not Applicable
North Haven, CT
Northford 859 Forest Road 1986 Leased (c) 12/31/00
Northford, CT
Turnpike 7 North Turnpike Road 1973 Owned Not Applicable
Wallingford, CT
Washington Ave. 90 Washington Ave. 1981 Owned Not Applicable
North Haven, CT
Mount Carmel 3300 Whitney Ave. 1987 Leased (d) 10/31/00
Mt. Carmel, CT
West Main (e) 14 West Main St. 1964 Owned Not Applicable
Meriden, CT
Harbor Brook 100 Hanover St. 1975 Leased (f) 7/31/99
Meriden, CT
East Side 733 East Main Street 1983 Owned Not Applicable
Meriden, CT
<FN>
- -------------------
<F1> (a) Dime's lease payment is currently $4,200 per month.
<F2> (b) The Main Street branch is located in this building as well as the
Mortgage and Loan departments, excluding Mortgage Servicing.
Mortgage Servicing is located in an area attached to the Main Street
office building (premises known as 28 North Main Street,
Wallingford, CT). This area is leased by Dime for $910 per month.
The lease will expire January 31, 1998 at which time Dime has the
option to renew the lease for two additional five year terms.
<F3> (c) Dime's lease payment is currently $1,700 per month.
<F4> (d) Dime's lease payment is currently $5,000 per month.
<F5> (e) The West Main branch was closed on October 28, 1994.
<F6> (f) Dime's lease payment is currently $2,174 per month, plus applicable
taxes and insurance, utilities and maintenance charges.
</FN>
</TABLE>
Item 3 - Legal Proceedings
There are no pending legal proceedings to which the Company or Dime
is a party, other than ordinary routine litigation in the normal course of
business. None of the proceedings is material to the Company or Dime.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's stockholders
during the period between October 1, 1995 and December 31, 1995.
Executive Officers of the Registrant
The following table presents information regarding all executive
officers of the Company, including his or her positions with the Company
and such person's length of service.
<TABLE>
<CAPTION>
Length of
Executive Officer Age Positions with the Company Service (a)
- --------------------------------------------------------------------------
<S> <C> <S> <C>
Richard H. Dionne 51 President, Chief Executive 1/30/95
Officer and Director of the
Company
Albert E. Fiacre, Jr. 46 Senior Vice President and 3/6/95
Chief Financial Officer
Timothy R. Stanton 39 Senior Vice President of 4/3/95
Retail Operations
Frank P. LaMonaca 38 Senior Vice President and 7/31/95
Senior Lending and Credit
Officer
<FN>
- -------------------
<F1> (a) Length of service indicates date hired. All executive officers have
been executive officers of the Company since their respective dates
of hire. Prior to joining the Company, Mr. Fiacre was Executive Vice
President and Treasurer of Society for Savings, Hartford,
Connecticut, Mr. Stanton was Vice President at Shawmut Bank,
Hartford, Connecticut and, Mr. LaMonaca was Senior Vice President at
Lafayette American Bank and Trust Company, Hamden, Connecticut
</FN>
</TABLE>
All executive officers of the Company are elected annually by the
Company's Board of Directors and serve at the pleasure of the Board of
Directors.
PART II
Item 5 - Market for Registrant's Common Equity and Related Shareholders
Matters
A portion of the information required by this item appears on page
36 of the Annual Report under the caption "Corporate Information"; on page
30 of the Annual Report under the caption "Notes to Consolidated Financial
Statements, Note 13 - Shareholders' Equity"; and in Item 1 of this report
under the subheadings "Connecticut Regulation", "FDIC Regulation", and
"Federal Reserve System Regulation." Such information is incorporated
herein by reference and made a part hereof.
In addition to the above, the following is noted:
Under Connecticut law, dividends may generally be declared by the
board of directors of a corporation and paid in cash, property or in
shares of such corporation, to the extent of its unreserved and
unrestricted earned surplus and capital surplus. For the foreseeable
future, the sole source of amounts available to the Company for the
declaration of dividends will be dividends declared and paid by Dime on
Dime common stock. Any amounts received by the Company will be used to pay
the operating expenses of the Company and for other activities in which it
may engage before any dividends can be paid on Company Common Stock. It is
anticipated that the only operating expenses of the Company will be
administrative expenses, which in large part will be allocated to and
reimbursed by Dime. Under the Certificate of Incorporation of the Company,
the Company has the authority to issue preferred stock with dividend
rights superior to Common Stock that may adversely affect the amount or
frequency of Company Common Stock dividends, although the Company has no
plans at this time to issue such preferred stock.
Item 6 - Selected Financial Data
The information required by this item, appears on page 4 of the
Annual Report under the captions "Selected Financial Data." Such
information is incorporated herein by reference and made a part hereof.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item appears on pages 6 through 17
of the Annual Report under the caption "Management's Discussion and
Analysis of Operations." Such information is incorporated herein by
reference and made a part hereof.
Item 8 - Financial Statements and Supplementary Data
The Company's financial statements, and notes thereto, and
supplementary data are included in the Annual Report on pages 18 through
34 and on page 5 under the caption "Selected Quarterly Financial Data."
Such information is incorporated herein by reference and made a part
hereof.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements between the Company and its
independent public accountants on accounting and financial disclosure
matters during the fiscal year ended December 31, 1995 for which a Form 8-
K was required to be filed.
PART III
Item 10 - Directors and Executive Officers of the Registrant
The information required by this item appears in the Proxy Statement
under caption "Proposal 1 - Election of a Class of Directors," and in Part
I of this Report under the caption "Executive Officers of the Registrant,"
and is incorporated herein by reference and made a part hereof.
Item 11 - Executive Compensation
The information required by this item appears in the Proxy Statement
on pages 7 and 8 under the caption "Compensation and Related Matters."
Such information is incorporated herein by reference and made a part
hereof.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The information required by this item appears in the Proxy Statement
on page 2 under the caption "Principal Shareholders of the Company," and
on pages 3 through 6 under the caption "Proposal 1 - Election of a Class
of Directors." The information is furnished as of February 1, 1996, on
which date 5,023,485 shares were outstanding. Such information is
incorporated herein by reference and made a part hereof.
Item 13 - Certain Relationships and Related Transactions
The information required by this item appears in the Proxy Statement
on pages 15 and 16 under the caption "Transactions With Management and
Others." Such information is incorporated herein by reference and made a
part hereof.
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report and appear
on the pages indicated. Those items preceded by *** are included in
the Annual Report and are incorporated herein by reference:
(1) Financial Statements: Page in
Annual
Report
*** Independent Auditors' Report 35
*** Consolidated Statements of Condition as of
December 31, 1995 and 1994 18
*** Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 19
*** Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended December 31, 1995, 1994 and 1993 20
*** Consolidated Statements of Cash Flow for the Years
Ended December 31, 1995, 1994 and 1993 21
*** Notes to Consolidated Financial Statements 22-34
(2) Financial Statement Schedules:
All Schedules to the Consolidated Financial Statements required by
Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable and therefore have been omitted.
(3) Exhibits:
Exhibit No. Description
3.1 Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 33-23054)
filed on July 8, 1988); Amendment to Certificate
of Incorporation (Incorporated by reference to Exhibit
3.1 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1990).
3.2 Bylaws of the Company (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-4 (No. 33-23054) filed on July 8, 1988)
4 Instruments Defining Rights of Security Holders Included
In Exhibits 3.1 and 3.2
10.1* The Dime Savings Bank of Wallingford 1986 Stock Option
and Incentive Plan, as amended (Incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-4 (No. 33-23054) filed on July 8, 1988)
10.2* The Dime Savings Bank of Wallingford 1986 Stock Option
Plan for Outside Directors (Incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on
Form S-4 (No. 33-23054) filed on July 8, 1988)
10.3* The Dime Savings Bank of Wallingford 1986 Stock Option
and Incentive Plan Incentive Stock Option Agreement
(Incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4
(No. 33-23054) filed on July 8, 1988)
10.4* The Dime Savings Bank of Wallingford 1986 Stock Option
Plan for Outside Directors Stock Option Agreement
(Incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-4
(No. 33-23054) filed on July 8, 1988)
10.5* Non-Qualified Stock Option Agreement dated June 20, 1988
between Dime and William J. Farrell (Incorporated by
reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1988)
10.6* Non-Qualified Stock Option Agreement dated June 20, 1988
between Dime and M. Joseph Canavan (Incorporated by
reference to Exhibit 10.12 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1988)
13 1995 Annual Report to Shareholders. Except for those
portions of the Annual Report which have been
specifically incorporated by reference in this Form 10-K,
such Annual Report shall not be deemed filed.
21 Subsidiaries of the Registrant (Incorporated by
reference to Exhibit 2 to the Company's Registration
Statement on Form S-4 (No. 33-23054) filed on July 8, 1988)
23 Consent of Independent Auditors
* Compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(c) of
this report.
A COPY OF ANY EXHIBIT LISTED ABOVE WILL BE PROVIDED BY THE COMPANY
TO ANY SHAREHOLDER UPON THE WRITTEN REQUEST OF SUCH SHAREHOLDER AND UPON
THE PAYMENT OF A REASONABLE FEE LIMITED TO THE COMPANY'S EXPENSES IN
FURNISHING SUCH EXHIBIT. REQUESTS SHOULD BE ADDRESSED TO ELEANOR M. TOLLA,
SECRETARY, DIME FINANCIAL CORPORATION, 95 BARNES ROAD, WALLINGFORD,
CONNECTICUT 06492.
(b) The Company filed no reports on Form 8-K during the period from
October 1, 1995 to December 31, 1995. A report on Form 8-K dated
January 18, 1996, was filed by the registrant with the Securities
and Exchange Commission on January 29, 1996 containing a disclosure
under item 5 of such form.
(c) The exhibits required by Item 601 of Regulation S-K are filed as a
separate part of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 FINANCIAL CORPORATION
DATED: March 28, 1996 By /s/ Richard H. Dionne
Richard H. Dionne
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- -----------------------------------------------------------------------------
<S> <S> <C>
_________________________ Chairman of the Board of __________
Ralph D. Lukens Directors
/s/ Richard H. Dionne President, Chief Executive 3/28/96
Richard H. Dionne Officer and Director
/s/ Albert E. Fiacre, Jr. Senior Vice President 3/27/96
Albert E. Fiacre, Jr. and Chief Financial Officer
/s/ Robert P. Simon Vice President and Comptroller 3/27/96
Robert P. Simon
/s/ Gary O. Olson Director 3/28/96
Gary O. Olson
/s/ Fred A. Valenti Director 3/28/96
Fred A. Valenti
/s/ Rosalind F. Gallagher Director 3/28/96
Rosalind F. Gallagher
/s/ Robert Nicoletti Director 3/27/96
Robert Nicoletti
/s/ M. Joseph Canavan Director 3/28/96
M. Joseph Canavan
/s/ William J. Farrell Director 3/28/96
William J. Farrell
_________________________ Director __________
Richard D. Stapleton
_________________________ Director __________
Theodore H. Horwitz
</TABLE>
DIME FINANCIAL CORPORATION
Exhibits
to
Annual Report on Form 10-K
For the Year Ended December 31, 1995
EXHIBIT INDEX
Exhibit No. Description Page
- -------------------------------------------------------------------------
13 1995 Annual Report to Shareholders
23 Consent of Independent Auditors
DIME
Financial Corporation
1995 Annual Report
Financial Highlights
<TABLE>
<CAPTION>
As of or for the years ended December 31,
- -----------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income $ 25,397 $ 25,948 $ 27,454
Provision for loan losses 7,550 4,516 20,900
-------- -------- --------
Net interest income after provision 17,847 21,432 6,554
Investment securities gains, net 298 6 630
Gain on sale of assets held for sale -- 1,266 --
Other operating income 2,080 2,207 2,050
-------- -------- --------
Income before operating expenses, income taxes,
extraordinary item and cumulative effect of changes in
accounting methods 20,225 24,911 9,234
Other operating expenses (a) 16,997 20,123 31,856
-------- -------- --------
Income (loss) before income taxes, extraordinary item,
and cumulative effect of changes in accounting methods 3,228 4,788 (22,622)
Income tax expense (benefit) (2,813) 60 --
-------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of changes in accounting methods 6,041 4,728 (22,622)
Extraordinary item -- prepayment penalty on long-term debt -- -- (874)
Cumulative effect of changes in accounting methods:
Postretirement benefits other than pensions, net of tax -- -- (477)
Income taxes -- -- 563
-------- -------- --------
Net income (loss) $ 6,041 $ 4,728 $(23,410)
======== ======== ========
Assets $658,373 $637,729 $672,114
Investment securities $151,214 $ 56,451 $ 79,618
Loans receivable, net $443,664 $501,052 $494,019
Deposits $543,344 $527,786 $566,845
Shareholders' equity $ 51,668 $ 45,196 $ 40,358
Book value per share $ 10.29 $ 9.05 $ 8.08
Net interest rate spread 3.65% 4.00% 3.95%
Net yield on interest-earning assets 4.12% 4.22% 4.18%
Return on average assets 0.95% 0.71% (3.26)%
Return on average equity 12.82% 11.06% (36.40)%
- -------------------
<Fa> A net non-recurring restructure charge of $1.9 million was charged to
operations during 1995.
Corporate Profile
Dime Financial Corporation (the "Company") is the parent company of one
wholly-owned subsidiary, The Dime Savings Bank of Wallingford ("Dime" or the
"Bank"), which was founded in 1871. Consolidated company assets at December
31, 1995 totalled $658.4 million compared with total assets of $637.7 million
at December 31, 1994.
Dime operated as a mutual savings institution until July of 1986 when
the Bank converted to a stock form of ownership through an initial public
offering of approximately five million common shares. In December 1988, a
Connecticut bank holding company, Dime Financial Corporation, was established
and acquired all of the outstanding shares of Dime in exchange for shares of
common stock of the newly-formed holding company. Concurrently, the Company
acquired all of the outstanding common stock of City Savings Bank of Meriden
("City"), a $163 million savings bank which operated three banking offices in
the contiguous community of Meriden. In August of 1992, City was merged with
and into Dime.
Dime is a state-chartered, FDIC-insured savings bank currently operating
eleven retail banking offices in a central corridor of Connecticut.
Branch offices in the local communities of Wallingford and North Haven, where
Dime has the largest share of deposits, and in Meriden, Cheshire, North
Branford and Hamden position Dime as the distinctive community savings bank in
the local market.
The common stock of Dime Financial Corporation is traded on the NASDAQ
National Market System (the "NMS") under the symbol "DIBK". It is found in
newspaper stock tables as "Dime Fin'l Corp-Connecticut" or an abbreviation
thereof, alphabetized in the "D's".
To Our Shareholders
Dime Financial Corporation earned $6.0 million or $1.21 per share for
the year ended December 31, 1995 compared with net income of $4.7 million or
$0.94 per share for the year ended December 31, 1994. The change in net income
was primarily due to decreased operating expenses and the recognition of $2.8
million of the Company's deferred tax asset as the result of improved earnings
projections. The Company hired new senior management and a significant
restructuring program was implemented during 1995. Over 25% of the Company's
workforce was laid-off in order to bring operating expenses to more efficient
levels.
The landscape within which the Bank operates has changed considerably
over the past five years. Many once-strong financial institutions have
succumbed to the troubled economy of the Northeastern United States and of
Connecticut, in particular. Throughout 1995, the Company re-examined many
policies and processes under which the Bank had operated and implemented a
more conservative evaluation of risk management, including the quality of the
loan portfolio. The once relied upon value of the residential mortgage loan is
no longer secure. Once assumed residential real estate values have
consistently failed to recover. In the first quarter of 1995 the Company
posted a loss of $791,000 as a result of reserve strengthening to reflect
these conditions.
During the remaining quarters of 1995, however, the Company posted
increased earnings while continuing to provide to the allowance for loan
losses at substantial levels in order to augment reserves and recognize the
continued decline of underlying collateral values of residential mortgage
assets. One to four family residential mortgage loans equalled 54% of assets
and represented 78% of total loans at year end 1995. The allowance for loan
losses at December 31, 1995 totalled 166% of non-performing loans and
represented 2.80% of total loans compared with coverage of 117% of non-
performing loans and 1.83% of total loans at December 31, 1994. Total non-
performing assets were $9.1 million or 1.38% of total assets at December 31,
1995 compared with $11.7 million or 1.83% of total assets at December 31,
1994.
The Board of Directors announced the resumption of the quarterly
dividend with an initial payment of $0.07 per share payable on February 22,
1996 to shareholders of record on February 1, 1996. The regular quarterly
dividend had been suspended by the Board in June of 1991 prior to the issuance
of a regulatory memorandum in September of 1991 which has since been lifted.
In December of 1995, Francis P. Feeney retired from the Board of
Directors after 36 years of service as a Director. In addition, Mr. Feeney
previously served as the President and Chief Executive Officer of The Dime
Savings Bank of Wallingford from 1977 until his retirement in 1988. The
contribution that Frank made to the organization is immeasurable. His counsel
and experience will be greatly missed.
The Dime Savings Bank of Wallingford first operated under public
ownership in July of 1986. Many changes have occurred since that initial
public offering and the Company has survived under very difficult conditions.
We are confident that the struggle of the past has better prepared us to face
the future. As we enter our 125th year of operation as a savings bank and our
tenth year of public ownership, the Board of Directors and Management
acknowledge the support our shareholders have shown. We look forward to
continued success as we enthusiastically welcome the challenges ahead.
/s/ Ralph D. Lukens /s/ Richard H. Dionne
Ralph D. Lukens Richard H. Dionne
Chairman of the Board President &
Chief Executive Officer
Selected Financial Data
</TABLE>
<TABLE>
<CAPTION>
As of or for the years ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Condition and Other Data:
Total assets $658,373 $637,729 $672,114 $748,337 $794,028
Loans receivable $456,443 $510,378 $508,081 $592,096 $673,303
Allowance for loan losses $(12,779) $ (9,326) $(14,062) $(21,280) $(26,371)
Loans receivable, net $443,664 $501,052 $494,019 $570,816 $646,932
Investments (a) $182,723 $103,900 $105,645 $113,116 $ 78,928
Deposits $543,344 $527,786 $566,845 $593,062 $603,678
FHLBB advances $ 58,000 $ 60,000 $ 61,000 $ 88,000 $124,000
Shareholders' equity $ 51,668 $ 45,196 $ 40,358 $ 63,768 $ 61,980
Non-performing loans $ 7,682 $ 7,959 $ 12,849(b) $ 36,730 $ 34,442
Non-performing assets $ 9,097 $ 11,670 $ 19,402(b) $ 69,925 $ 60,884
- ----------------------------------------------------------------------------------------------------------------------------
Operating Data:
Interest income $ 47,476 $ 44,703 $ 49,973 $ 62,235 $ 72,651
Interest expense $ 22,079 $ 18,755 $ 22,519 $ 32,254 $ 44,947
Net interest income $ 25,397 $ 25,948 $ 27,454 $ 29,981 $ 27,704
Provision for loan losses $ 7,550 $ 4,516 $ 20,900 $ 8,300 $ 35,700
Investment securities gains (losses), net $ 298 $ 6 $ 630 $ 1,293 $ (993)
Gain on assets held for sale -- $ 1,266 -- -- --
Other operating income $ 2,080 $ 2,207 $ 2,050 $ 1,984 $ 1,894
Other operating expenses (f) $ 16,997 $ 20,123 $ 31,856 $ 22,215 $ 23,332
Income (loss) before income taxes, extraordinary items and
cumulative effect of changes in accounting methods $ 3,228 $ 4,788 $(22,622) $ 2,743 $(30,427)
Income tax expense (benefit) $ (2,813) $ 60 -- $ 1,348 $ (5,800)
Income (loss) before extraordinary items and
cumulative effect of changes in accounting methods $ 6,041 $ 4,728 $(22,622) $ 1,395 $(24,627)
Extraordinary item -- tax loss carry forward -- -- -- $ 393 --
Extraordinary item -- prepayment penalty on long-term debt -- -- $ (874) -- --
Cumulative effect of changes in accounting methods:
Postretirement benefits other than pensions, net of tax -- -- $ (477) -- --
Income taxes -- -- $ 563 -- --
Net income (loss) $ 6,041 $ 4,728 $(23,410) $ 1,788 $(24,627)
- ----------------------------------------------------------------------------------------------------------------------------
Per Share Data:
Income (loss) before extraordinary items and
accounting changes $ 1.21 $ 0.94 $ (4.53) $ 0.28 $ (4.93)
Net income (loss) $ 1.21 $ 0.94 $ (4.68) $ 0.36 $ (4.93)
Book value $ 10.29 $ 9.05 $ 8.08 $ 12.77 $ 12.41
Dividends declared -- -- -- -- $ 0.10
- ----------------------------------------------------------------------------------------------------------------------------
Selected Statistical Data:
Return on average assets 0.95% 0.71% (3.26)% 0.23% (3.06)%
Return on average equity 12.82% 11.06% (36.40)% 2.82% (31.72)%
Average equity to average assets 7.43% 6.46% 8.95% 8.12% 9.64%
Net interest rate spread (c) 3.65% 4.00% 3.95% 3.98% 3.09%
Net yield on interest earning assets (d) 4.12% 4.22% 4.18% 4.20% 3.65%
Tier 1 leverage capital ratio 7.50% 6.45% 5.14% 7.69% 7.18%
Dividend payout ratio -- -- -- -- n/m(e)
Non-performing loans to total loans 1.68% 1.56% 2.53%(b) 6.20% 5.12%
Non-performing assets to total assets 1.38% 1.83% 2.89%(b) 9.34% 7.67%
- ----------------------------------------------------------------------------------------------------------------------------
<Fa> Including interest-bearing deposits with other banks, Federal funds sold,
investments, and Federal Home Loan Bank of Boston stock.
<Fb> Does not include $28.4 million of loans and other real estate owned held
for sale.
<Fc> Return on average interest earning assets less cost of average interest
bearing liabilities.
<Fd> Net interest income divided by average interest earning assets.
<Fe> The Company suspended the quarterly dividend following the April 26, 1991
dividend of $0.10 per share.
<Ff> A net non-recurring restructure charge of $1.9 million was charged to
operations during 1995.
</TABLE>
Selected Quarterly Financial Data
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 1995 1994 1995 1994 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income $11,474 $11,024 $11,797 $11,219 $12,030 $11,108 $12,175 $11,352
Total interest expense 4,871 4,642 5,446 4,652 5,741 4,695 6,021 4,766
------- ------- ------- ------- ------- ------- ------- -------
Net interest income 6,603 6,382 6,351 6,567 6,289 6,413 6,154 6,586
Provision for loan losses 3,500(a) 375 1,800 1,000 1,400 1,000 850 2,141(b)
Investment securities gains, net 234 -- -- -- 64 6 -- --
Gain on sale of assets held for sale -- -- -- -- -- -- -- 1,266
Other operating income 552 607 506 488 528 509 494 603
Other operating expenses (c)(d) 4,669 5,363 5,008 4,743 3,349 4,833 3,971 5,184
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes (780) 1,251 49 1,312 2,132 1,095 1,827 1,130
Income tax expense (benefit) 11 15 (1,987) 15 12 15 (849) 15
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) $ (791) $ 1,236 $ 2,036 $ 1,297 $ 2,120 $ 1,080 $ 2,676 $ 1,115
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share $ (0.16) $ 0.25 $ 0.41 $ 0.26 $ 0.42 $ 0.21 $ 0.53 $ 0.22
- -------------------
<Fa> The increase in the provision for loan losses in the first quarter of 1995
resulted primarily from strengthening reserves related to potential
risk in the 1-4 family residential mortgage loan portfolio which
comprised approximately 77% of the total loan portfolio. See
management's discussion and analysis for further discussion.
<Fb> The increase in the provision for loan losses in the fourth quarter of
1994 resulted primarily from a charge-off taken on a restructured
loan.
<Fc> Net restructure charges of $947,000 and $940,000 were charged to expense
in the second and fourth quarters of 1995, respectively.
<Fd> The decrease in operating expenses during 1995 primarily reflects
significantly decreased costs associated with the operation of OREO
and the restructuring program implemented during 1995.
</TABLE>
Management's Discussion and Analysis of Operations
1995 Overview
The year ended December 31, 1995 showed many areas of improvement with
many barometers of improvement: Non-performing assets equalled a six year low
and totalled $9.1 million or 1.38% of total assets; the level of the allowance
for loan losses exceeded 166% of non-performing loans; reduced staff, and
operating efficiencies translated into decreased operating expenses of $17.0
million for 1995 compared with expenses of $20.1 million for the year ended
1994, a decline of $3.1 million or 15.5%. In addition, total assets at
December 31, 1995 were $658.4 million, an increase of $20.6 million or 3.24%
from year end 1994, thus reversing a five year decline in assets. Deposits
posted modest growth during 1995, also interrupting an extended period of
decline spanning four years, and totalled $543.3 million at December 31, 1995
compared with total deposits of $527.8 million at December 31, 1994, an
increase of $15.5 million or 2.95%.
Net income for 1995 totalled $6.0 million or $1.21 per share compared
with net income of $4.7 million or $0.94 per share for the year ended December
31, 1994. The results of 1995 were influenced mainly by the following:
1. The provision to the allowance for loan losses totalled
$7.6 million for the year ended December 31, 1995 compared with a
provision of $4.5 million for the year ended December 31, 1994. The
increased provision during 1995 was primarily due to the Company's
assessment that there was increased potential exposure in the
residential loan portfolio. In the first quarter of 1995, recent
trends in collateral values were analyzed by the receipt of over 200
new appraisals of certain segments of the performing 1-4 family
residential loan portfolio. This process indicated a substantial
decline in the value of the collateral securing many of these loans
since the original funding date.
2. Total operating expenses for 1995 were $17.0 million
compared with $20.1 million for 1994. Operating expenses, excluding
writedowns of assets held for sale, the net cost of the operation of
other real estate owned, and restructure charges declined $2.9
million or 15% from year end 1994 to total $16.1 million for the
year ended December 31, 1995. Total operating expenses, excluding
OREO operations and writedowns on assets held for sale, were $19.0
million for the year ended December 31, 1994.
3. The Company recognized $2.8 million of its deferred tax
asset as the result of improved earnings projections due to reduced
operating expenses. No recognition of the Company's deferred tax
asset was recorded during 1994.
4. The net cost of the operation of OREO declined
substantially as gains from the sales of OREO more than offset the
expenses of their operation. The net cost of the operation of OREO
for the year ended December 31, 1995 equalled a net gain of $1.0
million compared with a net charge of $867,000 for the year ended
December 31, 1994.
5. A net restructuring charge of $1.9 million was recorded
primarily representing the severance charges associated with the
elimination of approximately seventy positions and the writedown to
estimated salvage value of fixed assets associated with data
processing as the decision to outsource these operations was made.
These charges were partially offset by curtailment gains recognized
in the Company's defined benefit plans as the result of a reduction
in the workforce. No restructuring charges were recorded during the
year ended December 31, 1994.
Asset Quality
Asset quality improved during 1995 with non-performing assets down 22%
from year end 1994. At December 31, 1995, non-performing assets, which are
comprised of loans in non-accrual status and OREO, totalled $9.1 million or
1.38% of total assets compared with non-performing assets of $11.7 million or
1.83% of total assets at December 31, 1994 and compared with non-performing
assets of $19.4 million or 2.89% of total assets at December 31, 1993,
exclusive of $28.4 million of assets classified as held for sale at December
31, 1993.
OREO is real estate acquired by the Company through foreclosure or in
settlement of loans. The collections and OREO areas of the Bank are designed
to monitor and review real estate acquired by the Bank through foreclosure.
The results of their reviews are based on property re-appraisals, current and
prospective economic conditions and other relevant factors. Management in this
area is responsible for ensuring that specific properties are carried at a
value that does not exceed fair value, less selling costs. During 1995, the
Company transferred $878,000 of loans to OREO compared with $1.4 million
during 1994.
Loans are classified as non-performing when they become ninety days past
due as to interest or principal payments, or when the ability of the borrower
to meet the contractual payment terms is in doubt. Loans classified as non-
performing are placed in non-accrual status and previously accrued, but unpaid
interest is reversed by charging interest income. Interest payments received
on non-accrual residential mortgage loans and consumer loans are generally
recognized as income on a cash basis. Interest payments received on non-
accrual loans which are commercial in nature generally are used to further
reduce the carrying value of the loan. The Company does not accrue income for
loans past due 90 days or more.
Loans categorized as troubled debt restructures ("TDR") totalled
$885,000 at December 31, 1995 compared with TDR's totalling $10.8 million and
$4.3 million at December 31, 1994 and December 31, 1993, respectively. There
were no loans categorized as TDR's at December 31, 1992 and December 31, 1991.
A loan is categorized as a TDR if the original interest rate on such loan,
repayment terms, or both were restructured due to a deterioration in the
financial condition of the borrower. Loans classified as TDR at December 31,
1995 were restructured at market rates and are performing in accordance with
their restructured terms. Included in TDR's at December 31, 1994 was a loan
with a principal balance of $6.4 million which was sold in December, 1995. The
remaining TDR's at December 31, 1994 were at market rates at the time of
restructure, have performed in accordance with the restructured terms and
are no longer categorized as TDR's at December 31, 1995.
The Company instituted policies during 1995 to ensure that lending and
investment activities are evaluated in the context of an acceptable level of
risk which produces a profit consistent with the exposure to risk. These
policies are reviewed constantly by the Company's senior management. The
lending and credit administration staffs are charged with monitoring the loan
portfolio and identifying changes in the economy or in a borrower's
circumstances which may affect the ability to repay debt or the value of
pledged collateral. In addition, the Company engaged an outside firm during
1995 to perform ongoing independent loan review of the loan portfolio. The
results of such reviews have been consistent with the actions management has
taken.
The following table is an analysis of the Company's non-performing
assets at the dates indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
December 31,
----------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993(a) 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
Mortgage loans:
Residential real estate -- owner occupied $ 2,729 $ 4,194 $ 4,757 $ 7,524 $ 9,708
Residential real estate -- non-owner occupied 1,235 --(b) --(b) --(b) --(b)
Commercial real estate 2,580 1,501 4,906 19,862 15,614
Builders' & land -- 103 -- 2,299 3,632
Commercial loans 690 1,858 2,708 6,140 4,000
Consumer loans 448 303 478 905 1,488
-------- -------- -------- -------- --------
Total non-accruing loans 7,682 7,959 12,849 36,730 34,442
-------- -------- -------- -------- --------
Other real estate owned:
Mortgage loans:
Residential real estate 1,072 2,093 3,004 7,527 9,802
Commercial real estate -- 390 1,063 13,830 10,570
Builders' & land 793 1,969 3,008 8,919 6,070
Commercial loans -- -- -- 2,522 --
Consumer loans -- -- 397 397 --
-------- -------- -------- -------- --------
Total other real estate owned 1,865 4,452 7,472 33,195 26,442
-------- -------- -------- -------- --------
Allowance for losses on other real estate owned (450) (741) (919) -- --
-------- -------- -------- -------- --------
Total other real estate owned, net 1,415 3,711 6,553 33,195 26,442
-------- -------- -------- -------- --------
Total non-performing assets $ 9,097 $ 11,670 $ 19,402 $ 69,925 $ 60,884
======== ======== ======== ======== ========
Total non-accruing loans to total loans 1.68% 1.56% 2.53% 6.20% 5.12%
Total non-performing assets to total loans 1.99% 2.29% 3.81% 11.79% 9.03%
Total allowance for loan losses to non-accruing loans 166.36% 117.17% 109.44% 57.94% 76.56%
Total allowances for loan and OREO losses to
non-performing assets 138.57% 81.11% 73.72% 30.43% 43.31%
- -------------------
<Fa> 1993 non-performing assets exclude $28.4 million of assets classified as
held for sale.
<Fb> Information for this period is not available, it is included within
"Residential real estate - owner occupied" for prior periods.
</TABLE>
In the fourth quarter of 1995, the Company executed a bulk sale of two
packages of non-performing assets totalling $2.8 million which required a
charge-off on those assets prior to their sale of approximately $1.4 million.
The Company believes that residential property values in its market area
continued a multi-year decline during 1995, further decreasing the value of
the collateral securing many of the Company's residential mortgage loans. If
such a trend continues, further charge-offs may continue and necessitate loan
loss provisions which may adversely affect overall financial performance.
Allowance for Loan Losses &
Provisions to the Allowance for Loan Losses
The allowance for loan losses is a reserve established through
provisions for loan losses charged to expense on a periodic basis and is
reduced by charge-offs in the loan portfolio. The allowance is maintained at a
level that management believes is adequate to absorb potential losses in the
loan portfolio at a given point in time. Management's methodology in
determining the adequacy of the allowance considers specific credit reviews,
past loan-loss experience, current economic conditions and trends, borrowers'
financial condition, concentrations of credit, estimated valuation of loan
collateral, and the growth and composition of the loan portfolio, among other
factors.
At December 31, 1995, the Company maintained an allowance for loan
losses of $12.8 million or 166.36% of non-performing loans and 2.80% of total
loans. The allowance for loan losses at December 31, 1994 totalled $9.3
million or 117.17% of non-performing loans and 1.83% of total loans. Net
charge-offs for the year ended December 31, 1995 totalled $4.1 million or
0.83% of average loans compared with net charge-offs of $9.3 million or 1.79%
of average loans for the year ended December 31, 1994.
Provisions to the allowance for loan losses for the year ended December
31, 1995 totalled $7.6 million compared with provisions to the allowance for
loan losses for the year ended December 31, 1994 of $4.5 million, an increase
of $3.0 million or 67.2%. The increase in both the size of the allowance for
loan losses and the ratios to non-performing loans and total loans was
primarily the result of the collateral valuation analysis performed in the
first quarter with regard to the increased risk associated with one to four
family residential mortgage loans.
A comparative analysis of the allowance for loan losses is shown in the
following table. At December 31, 1995, management believes that the allowance
for loan losses was adequate given the quality of the loan portfolio at that
date. Management may make additional provisions to the allowance for loan
losses as necessary in the coming year if economic conditions cause
deterioration in the loan portfolio beyond the potential loss exposures
identified as of December 31, 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
December 31,
--------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 9,326 $ 14,062 $ 21,280 $ 26,371 $ 6,067
Provision charged to expense 7,550 4,516 20,900 8,300 35,700
Charge-offs:
Mortgage loans
Residential real estate (3,193) (2,826) (4,735) (1,957) (1,046)
Commercial real estate (1,308) (4,467) (14,194) (3,409) (2,517)
Builders' & land -- -- (2,277) (737) (5,456)
Commercial loans (93) (2,706) (7,103) (8,132) (5,745)
Consumer loans (252) (246) (226) (521) (994)
Recoveries:
Mortgage loans
Residential real estate 187 88 107 24 --
Commercial real estate 21 369 19 104 --
Builders' & land -- -- -- 337 --
Commercial loans 506 487 237 867 316
Consumer loans 35 49 54 33 46
-------- -------- -------- -------- --------
Net charge-offs (4,097) (9,252) (28,118) (13,391) (15,396)
-------- -------- -------- -------- --------
Balance at end of the year $ 12,779 $ 9,326 $ 14,062 $ 21,280 $ 26,371
======== ======== ======== ======== ========
Average loans for the year 492,028 515,640 546,134 612,902 692,833
Net charge-offs as a percentage of average loans 0.83% 1.79% 5.15% 2.18% 2.22%
Allowances for loan losses as a percentage
of non-performing loans 166.36% 117.17% 109.44% 57.94% 76.56%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Asset / Liability Management
The primary function of asset / liability management is to maximize net
interest income while ensuring adequate liquidity, monitoring proper credit
risk and maintaining an appropriate balance between interest rate sensitive
assets and interest rate sensitive liabilities. Liquidity management involves
the ability to meet the cash flow requirements of the Company's loan and
deposit customers. Interest rate sensitivity management seeks to minimize
fluctuating net interest margins and to enhance consistent growth of net
interest income through periods of changing interest rates.
The Company has an asset / liability committee ("ALCO") which meets
weekly to discuss loan and deposit pricing and trends, current liquidity and
interest rate risk positions, interest rate and economic trends and other
relevant information. To aid in the measurement of interest rate risk, the
Company utilizes an asset / liability model which, given many key assumptions,
projects estimated results within the constraints of those assumptions. The
model is also used to estimate movement within the balance sheet, given
certain scenarios, and to measure the effects of that movement on net interest
income.
The following table summarizes assets and liabilities at December 31,
1995 that are sensitive to changes in interest rates within six months,
between six months and one year, one year to three years, three years to five
years, and over five years. A positive "GAP" exists when rate sensitive assets
exceed rate sensitive liabilities and indicates that a greater volume of
assets than liabilities will reprice in a given period. This will generally
enhance earnings in a rising rate environment and inhibit earnings in a
declining rate environment. Conversely, when rate sensitive liabilities exceed
rate sensitive assets, the "GAP" is referred to as negative and indicates that
a greater volume of liabilities than assets will reprice during a given
period. In this case, a rising rate environment generally will inhibit
earnings and declining rates will enhance earnings.
The Company's policy is to keep the ratio of net rate sensitive assets
or liabilities on a one year time horizon to less than 10% of total assets. At
December 31, 1995, this rate sensitive position was 9.18%.
Interest Rate Sensitivity Management
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1995
------------------------------------------------------------------------------------
After After After
six months one year three years
Within but within but within but within After Non-Interest
(Dollars in thousands) six months one year three years five years five years Bearing (c) Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate sensitive assets:
Interest bearing deposits $ 2,983 $ -- $ -- $ -- $ -- $ -- $ 2,983
Mortgage-backed securities (a) 49,277 19,655 23,484 2,497 277 -- 95,190
Debt securities 35,122 11,000 8,889 -- 1,013 -- 56,024
Other investments 28,526 -- -- -- -- -- 28,526
Loans (a) 124,353 107,747 90,648 43,830 82,270 7,682 456,530
Non-interest bearing -- -- -- -- -- 19,120 19,120
-------- -------- -------- -------- -------- -------- --------
Total Assets 240,261 138,402 123,021 46,327 83,560 26,802 658,373
-------- -------- -------- -------- -------- -------- --------
Interest rate sensitive liabilities:
Regular savings and money market,
club and escrow accounts (b) 17,762 9,678 38,696 38,680 98,552 -- 203,368
Interest bearing checking (b) 7,271 2,844 4,272 4,272 4,271 -- 22,930
Certificates of deposit 178,164 69,517 29,168 1,061 -- -- 277,910
Borrowings from FHLB of Boston 33,000 -- 25,000 -- -- -- 58,000
Non-interest bearing -- -- -- -- -- 96,165 96,165
-------- -------- -------- -------- -------- -------- --------
Total Liabilities and Capital 236,197 82,039 97,136 44,013 102,823 96,165 658,373
-------- -------- -------- -------- -------- -------- --------
Interest rate sensitivity gap $ 4,064 $ 56,363 $ 25,885 $ 2,314 $(19,263) $(69,363) $ --
======== ======== ======== ======== ======== ======== ========
Cumulative interest rate sensitivity gap $ 4,064 $ 60,427 $ 86,312 $ 88,626 $ 69,363 $ -- $ --
======== ======== ======== ======== ======== ======== ========
Percentage of interest rate sensitivity gap
to total assets
Period 0.62% 8.56% 3.93% 0.35% (2.93)% (10.54)%
Cumulative 0.62% 9.18% 13.11% 13.46% 10.54% --
Cumulative rate sensitive assets as a
percentage of cumulative rate sensitive
liabilities 101.72% 118.99% 120.78% 119.29% 112.34% 100.00%
- -------------------
<Fa> The categories within which loans and mortgage-backed securities have been
included reflect certain prepayment assumptions by management given
certain weighted average maturities and projected interest rate
assumptions.
<Fb> A substantial portion of regular savings deposits and interest-bearing
checking deposits are considered core deposits by management and
therefore less sensitive to changes in interest rates.
<Fc> Non-accrual loans are included in non-interest bearing.
</TABLE>
Net Interest Rate Spread & Net Interest Income
The net interest rate spread (the "spread") is the difference between
the average interest rates received on interest-earning assets and the average
interest rates paid for interest-bearing liabilities. For the year ended
December 31, 1995 average interest-earning assets totalled $616.4 million and
generated an average yield of 7.70%. This compares with average interest-
earning assets of $614.9 million generating an average yield of 7.27% for the
year ended December 31, 1994. Average interest bearing liabilities totalled
$545.2 million with an average cost of 4.05% for the year ended December 31,
1995 compared with average interest-bearing liabilities of $575.9 million with
an average cost of 3.27% for the year ended December 31, 1994. The spread for
the year ended December 31, 1995 equalled 3.65% compared with a spread of
4.00% for the year ended December 31, 1994. The net interest margin for the
year ended December 31, 1995 was 4.12% versus a net interest margin of 4.22%
for the year ended December 31, 1994.
The improvement in yield on interest earning assets came partially from
a 32 basis point increase in the yield on loans to 8.09% as adjustable rate
assets repriced upwards, but more so from the improvement in yield in most
categories of investment securities. The comparative table shows the average
balances and average interest rates of interest-earning assets and interest-
bearing liabilities:
Average Balances and Interest Rates
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------------------------------------------------------
Average Average Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans receivable(a) $492,028 $39,781 8.09% $515,640 $40,041 7.77% $546,134 $44,735 8.19%
Interest-bearing deposits 3,556 126 3.54% 9,782 106 1.08% 8,690 59 0.68%
Federal funds sold 20,171 1,174 5.74% 12,382 557 4.44% 21,208 623 2.90%
U.S. treasury securities 13,553 649 4.79% 32,372 1,358 4.19% 36,147 1,543 4.27%
U.S. agency obligations 34,931 2,315 6.63% 12,185 610 5.01% 1,519 100 6.58%
REMIC's/CMO's 19,929 1,380 6.92% -- -- --% -- -- --
Mortgage-backed securities 15,893 1,069 6.73% -- -- --% -- -- --
Other bonds and notes 9,079 475 5.23% 24,927 1,427 5.72% 32,733 2,116 6.46%
Federal Home Loan Bank of
Boston stock 7,192 504 7.01% 7,192 554 7.70% 9,681 732 7.56%
Equity securities 65 3 4.62% 424 50 11.79% 501 65 12.97%
-------- ------- -------- ------- -------- -------
$616,397 $47,476 7.70% $614,904 $44,703 7.27% $656,613 $49,973 7.61%
======== ======= ==== ======== ======= ===== ======== ======= =====
Non-Interest Earning Assets:
Cash & due from banks 8,876 8,364 7,915
Premises and equipment 7,485 8,748 8,981
Accrued interest receivable 4,108 4,227 4,856
Other assets(a) (2,928) 25,328 39,840
-------- -------- --------
17,541 46,667 61,592
-------- -------- --------
Total $633,938 $661,571 $718,205
======== ======== ========
Interest-Bearing Liabilities:
Now accounts $ 21,569 $ 340 1.58% $ 22,919 $ 336 1.47% $ 22,245 $ 399 1.79%
Savings, money market, club
and escrow deposits 221,050 5,136 2.32% 273,391 6,240 2.28% 284,460 8,225 2.89%
Certificates of deposit 244,518 12,417 5.08% 217,550 7,737 3.56% 236,457 8,538 3.61%
FHLBB advances 58,060 4,186 7.11% 62,081 4,442 7.06% 74,422 5,357 7.10%
-------- ------- -------- ------- -------- -------
$545,197 $22,079 4.05% $575,941 $18,755 3.27% $617,584 $22,519 3.66%
======== ======= ==== ======== ======= ===== ======== ======= =====
Noninterest-Bearing Liabilities
and capital accounts:
Demand deposits 35,897 36,250 33,007
Other liabilities 5,714 6,644 3,309
Shareholders' equity 47,130 42,736 64,305
-------- -------- --------
88,741 85,630 100,621
-------- -------- --------
Total $633,938 $661,571 $718,205
======== ======== ========
Net Interest Income $25,397 $25,948 $27,454
======= ======= =======
Net Interest Rate Spread 3.65% 4.00% 3.95%
==== ===== =====
Net Yield on Interest
Earning assets 4.12% 4.22% 4.18%
==== ===== =====
- -------------------
<Fa> Average loans receivable are shown gross and the related allowance is
included in other assets. In 1995 the average daily balance for the
allowance exceeded that of the remaining other assets, creating a
negative balance.
</TABLE>
The change in the net interest rate spread from 1994 to 1995 was
primarily due to the increased cost of deposits during 1995 compared with 1994
as the composition of deposits changed and time deposits were priced more
competitively. Lower costing regular savings deposits decreased by $45.6
million during 1995 while higher costing time certificates of deposits
increased by $64.2 million from year end 1994 and by 152 basis points to
5.08%. This increase in the cost of interest bearing deposits and its impact
on net interest income was partially offset by the reduction of non-performing
assets from $11.7 million at December 31, 1994 to $9.1 million at December 31,
1995. In addition, the ratio of average interest-earning assets to average
total assets increased from 92.9% during 1994 to 97.2% during 1995 in response
to the reduction in non-performing assets and as additional initiatives in the
management of cash positively influenced earnings. The following rate/volume
analysis reflects the impact of rate and volume changes in earning-asset and
interest-bearing liability categories on annual net interest income.
Net interest income for the year ended December 31, 1995 totalled $25.4
million compared with net interest income of $25.9 million for the year ended
December 31, 1994. While net interest income was reduced by $1.3 million from
the effect of rate changes, due to the cost of funds increasing faster than
the yield on earning assets, the growth in earning assets combined with a
decrease in interest bearing liabilities offset the adverse rate variance by
$755,000, resulting in a net reduction in net interest income of $551,000 for
the year ended December 31, 1995 compared with prior year ended December
31,1994.
Rate / Volume Analysis
The following table presents, for the periods indicated, the changes in
interest and dividend income and the changes in interest expense attributable
to changes in interest rates and changes in the volume of interest earning
assets and interest bearing liabilities. A change attributable to both volume
and rate has been allocated proportionally to the change due to volume and the
change due to rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1995 Compared to 1994 1994 Compared to 1993
Increase (Decrease) Increase (Decrease)
--------------------------------------------------------------
Due to Due to Due to Due to
(Dollars in thousands) Volume Rate Total Volume Rate Total
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans receivable $(1,873) $ 1,613 $ (260) $(2,431) $(2,263) $(4,694)
Federal funds sold 421 196 617 (316) 250 (66)
U.S. treasury securities (879) 170 (709) (159) (26) (185)
U.S. government agency obligations 1,453 252 1,705 540 (30) 510
REMIC's / CMO's 1,380 -- 1,380 -- -- --
Mortgage-backed securities 1,069 -- 1,069 -- -- --
Other investments (1,206) 224 (982) (485) (335) (820)
Equity securities (27) (20) (47) (9) (6) (15)
------- ------- ------- ------- ------- -------
Total Interest Income 338 2,435 2,773 (2,860) (2,410) (5,270)
------- ------- ------- ------- ------- -------
Interest Expense:
Deposits (183) 3,763 3,580 (972) (1,877) (2,849)
FHLBB advances (234) (22) (256) (883) (32) (915)
------- ------- ------- ------- ------- -------
Total Interest Expense (417) 3,741 3,324 (1,855) (1,909) (3,764)
------- ------- ------- ------- ------- -------
Net Interest Income $ 755 $(1,306) $ (551) $(1,005) $ (501) $(1,506)
======= ======= ======= ======= ======= =======
</TABLE>
Lending Activities
Total loans at December 31, 1995 equalled $456.4 million and represented
69.3% of total assets compared with total loans of $510.4 million or 80.0% of
total assets at December 31, 1994. The decrease in loans from year end 1994
was caused primarily by the restructure of the lending functions, the
increased competition for loans during 1995 and a shift from loans receivable
to investment securities. New management was hired during 1995 in every area
of the lending function. Among the new personnel retained were a senior
lending and credit officer, an origination and collections officer, and a
credit policy officer. Fierce competition and highly competitive pricing
tempered loan growth during the year as management believed that the pricing
necessary to sustain the loan portfolio during much of 1995 was inconsistent
with the risk presented. In reaction to these events, the Company shifted its
focus from lending to investment securities.
Traditionally, lending activities have consisted primarily of the
origination of conventional mortgage loans on residential real estate, the
origination of secured consumer loans and, to a lesser degree, the origination
of commercial mortgage and other commercial and industrial loans. The Company
generally limits the term of fixed rate mortgage loans it will accept for its
own portfolio to 15 years. To aid in asset / liability management, the Company
offers adjustable rate mortgage loans that reprice every one to three years
and offers adjustable rate hybrid products which offer a fixed rate at the
beginning of the loan term, from three to seven years, which reprices yearly
after the initial period. Consumer loans offered include home equity term
loans, home equity lines of credit, automobile loans and education loans. In
addition, Dime provides builders' construction loans, commercial mortgage
loans and other commercial and industrial loans. Adjustable rate loans
accounted for 48.1% of total loans at December 31, 1995 compared with
adjustable rate loans representing approximately 49.7% of total loans at
December 31, 1994. During 1995, $6.7 million of one to four family mortgages,
$8.9 million of home equity loans and $5.8 million of commercial loans and
commercial real estate loans were originated.
The following table sets forth the composition of the Company's loan
portfolio at the dates indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
December 31,
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------------- ----------------- ------------------ ------------------ -----------------
(Dollars in thousands) Amount % Amount % Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustable rate loans:
Mortgage loans:
Residential real estate:
owner occupied $130,823 28.7% $177,193 34.7% $194,626 38.2% $213,576 36.0% $241,555 35.8%
non-owner occupied 26,649 5.8% --(a) -- --(a) -- --(a) -- --(a) --
Commercial real estate 35,455 7.8% 46,860 9.2% 65,135 12.8% 70,407 11.9% 86,230 12.8%
Builders' & land 1,501 0.3% 4,276 0.8% 4,864 1.0% 5,389 0.9% 9,760 1.4%
Consumer loans 20,868 4.6% 19,067 3.8% 20,821 4.1% 23,049 3.9% 28,667 4.3%
Commercial loans 4,082 0.9% 6,292 1.2% 11,505 2.3% 41,580 7.0% 46,680 6.9%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total adjustable rate 219,378 48.1% 253,688 49.7% 296,951 58.4% 354,001 59.7% 412,892 61.2%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Fixed Rate loans:
Mortgage loans:
Residential real estate:
owner occupied 199,033 43.6% 217,004 42.5% 173,278 34.0% 182,847 30.8% 188,747 28.0%
non-owner occupied 1,050 0.2% --(a) -- --(a) -- --(a) -- --(a) --
Commercial real estate 8,204 1.8% 10,076 2.0% 10,508 2.1% 24,637 4.2% 30,562 4.5%
Builders' & land -- -- -- -- -- -- 1,851 0.3% 3,119 0.5%
Consumer loans 28,420 6.2% 28,965 5.7% 26,151 5.1% 27,405 4.6% 34,567 5.1%
Commercial loans 445 0.1% 751 0.1% 1,917 0.4% 2,209 0.4% 4,315 0.7%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total fixed rate 237,152 51.9% 256,796 50.3% 211,854 41.6% 238,949 40.3% 261,310 38.8%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans 456,530 100.0% 510,484 100.0% 508,805 100.0% 592,950 100.0% 674,202 100.0%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Less:
Allowance for loan losses 12,779 9,326 14,062 21,280 26,371
Unearned income -- -- -- 1 6
Deferred loan
origination fees, net 87 106 724 853 893
-------- -------- -------- -------- --------
Loans receivable, net $443,664 $501,052 $494,019 $570,816 $646,932
======== ======== ======== ======== ========
- -------------------
<Fa> Information for this period is not available, it is included within
"Residential real estate - owner occupied" for prior periods.
</TABLE>
Residential real estate loans decreased $36.6 million or 9.3% during
1995 and totalled $357.6 million or 78.3% of total loans outstanding at
December 31, 1995. Residential real estate loans at December 31, 1994 totalled
$394.2 million and represented 77.2% of total loans outstanding.
Commercial real estate and builders loans decreased $16.1 million or
26.2% from year end 1994 and totalled $45.2 million or 9.9% of total loans
outstanding at December 31, 1995. Commercial real estate and builders loans at
December 31, 1994 totalled $61.2 million and represented 12.0% of total loans
outstanding.
Consumer loans increased $1.3 million or 2.6% during 1995 and totalled
$49.3 million or 10.8% of total loans outstanding at December 31, 1995.
Consumer loans at December 31, 1994 totalled $48.0 million and represented
9.4% of total loans outstanding.
Commercial loans decreased $2.5 million or 35.7% from year end 1994 and
totalled $4.5 million or 1.0% of total loans outstanding at December 31, 1995.
Commercial loans at December 31, 1994 totalled $7.0 million and represented
1.4% of total loans outstanding.
Investment Activities
Investment securities, net of the investment in the Federal Home Loan
Bank of Boston, increased substantially during 1995 and totalled $151.2
million or 23.0% of total assets at December 31, 1995 compared with $56.5
million or 8.9% of total assets at December 31, 1994, an increase of $94.8
million or 167.9%. The increase in securities during 1995 was primarily the
result of an objective to increase the ratio of investment securities to total
assets and new expertise in the investment area. A Chief Financial Officer was
hired in March of 1995 and brought a new dimension to the Company. In addition
to the substantial increase in the level of investment securities, the
composition of the portfolio changed as well. The introduction of select
mortgage backed securities ("MBSs") and select collateralized mortgage
obligations ("CMOs") brought investment options to the Company which mirrored,
in many ways, the reactions to market conditions which the Company's
historically dominant mortgage portfolio had done, but without the same level
of credit risk.
In addition, as the competition for quality loans spawned rate offerings
that management believed, in many cases, to be subpar for the risk, the
Company allowed a net run-off in the loan portfolio and chose securities as an
alternative investment for available funds. The following table illustrates
the changes in the composition of the investment security portfolio during
1995.
Investment securities classified as available for sale and held to
maturity under FAS #115 are combined in the presentation below, at carrying
value. For a complete presentation of securities and their appropriate
classifications under FAS #115 please refer to Note #4 to the Company's
consolidated financial statements.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Years Ended December 31,
------------------------------
(Dollars in thousands) 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
U. S. treasury securities $ 5,041 $19,688 $47,362
U.S. government-sponsored
agency obligations 46,886 22,002 83
Other bonds and notes 4,097 14,136 31,747
REMIC's/CMO's 47,278 -- --
Mortgage-backed securities 47,912 -- --
Equity Securities -- 625 426
-------- ------- -------
Total investment securities $151,214 $56,451 $79,618
======== ======= =======
</TABLE>
Deposits and Other Borrowings
Total deposits at December 31, 1995 totalled $543.3 million, an increase
of $15.6 million or 3.0% from December 31, 1994. The composition of deposits
changed substantially during 1995 as lower costing regular savings type
accounts declined by $45.6 million while higher costing time certificates of
deposit increased by $64.2 million for the year.
Deposits have traditionally been the major source of funding for
investments and loan demand, and should continue to be in the foreseeable
future. A wide variety of consumer savings, time and demand deposit products
designed to attract both short term and long term funds are offered. In
addition, Dime offers commercial deposit products in order to meet the needs
of our business customers. In determining the rate of interest to pay for
deposits, the Bank considers treasury rates, cash flow requirements, rates
paid by competitors, cost of alternative funding sources and income
objectives.
Dime is a member of the Federal Home Loan Bank of Boston (the "FHLBB")
and as a member may borrow from the FHLBB to secure additional funds. During
1995, FHLBB borrowings decreased $2.0 million and totalled $58.0 million at
December 31, 1995 compared with borrowings of $60.0 million at December 31,
1994. When deposit growth cannot meet increased loan demand or liquidity
requirements, funds may be derived from borrowings from the FHLBB or other
alternative funding sources.
Deposit flows during the periods indicated are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years Ended December 31,
----------------------------------
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net decrease in deposits
before interest $ (2,335) $(53,372) $(43,379)
Interest credited 17,893 14,313 17,162
-------- -------- --------
Net increase (decrease)
in deposits $ 15,558 $(39,059) $(26,217)
======== ======== ========
- ------------------------------------------------------------------
</TABLE>
The net change in deposit accounts of various types, for the periods
indicated was:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years Ended December 31,
----------------------------------
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Regular savings and clubs $(45,636) $(31,976) $ 4,453
NOW accounts 362 (972) 2,319
Demand deposits 28 4,717 (695)
Money market accounts (3,255) (3,913) (1,062)
Certificates of deposit 64,176 (7,407) (31,782)
Escrow deposits (117) 492 550
-------- -------- --------
Total $ 15,558 $(39,059) $(26,217)
======== ======== ========
- ------------------------------------------------------------------
</TABLE>
Other Operating Income
Other income is primarily generated through service charges and other
fee based income derived from deposit and lending activities. Other operating
income for the year ended December 31, 1995 totalled $2.1 million compared
with other operating income of $2.2 million for the year ended December 31,
1994. The following table summarizes the categories of other income:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years Ended December 31,
----------------------------------
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Deposit account fees $ 1,578 $ 1,617 $ 1,432
Customer service fees 140 147 156
Fees from savings bank life
insurance sales 140 121 136
Loan and loan servicing fees 49 81 63
Other fees 173 241 263
-------- -------- --------
Total other income $ 2,080 $ 2,207 $ 2,050
======== ======== ========
- ------------------------------------------------------------------
</TABLE>
Operating Expenses
Operating expenses include salaries and employee benefit costs,
professional and other services, and occupancy and equipment costs among other
charges. Total operating expenses were $17.0 million for the year ended
December 31, 1995 compared with operating expenses of $20.1 million for the
year ended December 31, 1994 representing a decrease of $3.1 million or 15.5%.
The decrease in expenses during 1995 was primarily the result of significantly
reduced costs associated with the operation of other real estate owned and a
general reduction in expenses due in part to the implementation of a major
restructuring program as well as other initiatives.
The net cost of the operation of other real estate owned includes
expenses related to the maintenance of OREO, including real estate taxes and
property insurance. These expenses are reduced by gains recognized on the
sales of OREO. The net cost of the operation of OREO equalled a net gain of
$1.0 million for the year ended December 31, 1995 as gains recognized from the
sales of OREO more than offset the costs associated with their operation. In
contrast, the net cost of the operation of OREO totalled a net cost of
$867,000 for the year ended December 31, 1994.
In addition, the cost of FDIC insurance dropped by 45% from year end
1994 and totalled $898,000 for the year ended December 31, 1995 compared with
$1.6 million for the year ended December 31, 1994 as the assessment rate
charged on deposits declined significantly.
The Company began a restructuring program in the second quarter of 1995
which significantly reduced the Company's workforce. Additional restructuring
plans authorized by the Board of Directors took effect in the fourth quarter
with regard to the outsourcing of the Bank's data processing operations and
other staff reductions bringing total staff reductions to approximately 28%.
Gross restructure costs totalling $2.8 million were charged to operations
resulting primarily from the combination of severance charges and the
writedown to estimated salvage value of fixed assets associated with data
processing. Total restructure charges were partially offset by the recognition
of curtailment gains totalling $949,000 in the non-contributory defined
benefit plan and the defined benefit postretirement plan. Net charges from
both phases of the restructure totalled $1.9 million.
The restructure contributed to the overall reduction in operating
expenses as salary and benefit costs declined $1.4 million or 14.8% from year
end 1994 and totalled $7.8 million for the year ended December 31, 1995
compared with $9.1 million for the year ended December 31, 1994.
Income Taxes
The Company changed its method of accounting for income taxes in 1993 to
adopt the provisions of Statement of Financial Accounting Standards No. 109.
The Company recognized $2.8 million of its deferred tax asset during
1995 as the result of improved earnings projections.
The net deferred tax asset at December 31, 1995 totalled $4.0 million as
compared with $1.2 million at December 31, 1994. At December 31, 1995, the
Company had gross deferred tax assets of $17.6 million, a valuation allowance
against the deferred tax assets of $12.4 million and gross deferred tax
liabilities of $1.2 million.
In assessing the realizability of the deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax asset will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management
believes that it is more likely than not that the Company will realize the
deductible differences, net of the valuation allowance, at December 31, 1995.
During 1996, management will continue to reassess the level of the
valuation allowance for the deferred tax assets to determine if it should be
adjusted.
Liquidity, Sources and Uses of Funds,
and Capital Resources
Liquidity involves the ability to meet cash flow requirements of
depositors wanting to withdraw funds or of borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Cash on hand,
deposits at other financial institutions and federal funds sold are the
principal sources of liquidity. Cash and cash equivalents totalled $35.5
million at December 31, 1995 compared with $50.0 million at December 31, 1994
and compared with $29.0 million at December 31, 1993. Cash and cash
equivalents were 5.39% of total assets at December 31, 1995 compared with
7.83% of total assets at December 31, 1994 and compared with 4.31% of total
assets at December 31, 1993.
The primary sources of funds for Dime include cash receipts from
deposits, loan principal and interest payments, earnings from investments, and
proceeds from amortizing and maturing investments. The principal uses of funds
include disbursements to fund investment purchases, loan originations, payment
of interest on deposits, and payments to meet operating expenses.
Net cash used by investing activities totalled $40.3 million during the
year ended December 31, 1995 as the Company reinvested funds provided by the
decrease in the loan portfolio, deposit growth and maturing investments to
fund the purchase of mortgage backed securities and other investment
securities. The net decrease in the loan portfolio totalled $41.1 million
while deposits increased by $15.6 million and funds provided by maturing and
amortizing investments totalled $71.6 million. In addition, the sales of
selected loans during the year provided funds totalling $8.0 million.
At December 31, 1995, FHLBB borrowings totalled $58.0 million, compared
with $60.0 million at December 31, 1994 and compared with $61.0 million at
December 31, 1993. The Company believes that liquidity is sufficient to meet
currently known demands and commitments and may use FHLBB borrowings as a
source of new funds, if needed. The maximum amount that Dime may borrow is at
the discretion of the FHLBB. Based on the level of qualifying collateral
available to secure advances at December 31, 1995, Dime's estimated borrowing
limit was $422.7 million.
At December 31, 1995, there were $242.9 million of time certificates of
deposit maturing within one year compared with $195.0 million at December 31,
1994 and compared with $204.6 million at December 31, 1993. The Company
expects that substantially all of these certificates will be renewed or
replaced with new deposits.
The primary source of funds for the Company is the dividends received
from Dime. The liquidity and the capital resources of the Company are largely
dependent upon the liquidity, profitability and capital position of Dime. At
December 31, 1995, the Company's equity to assets ratio was 7.85% compared
with an equity to assets ratio of 7.09% at December 31, 1994 and compared with
an equity to assets ratio of 6.00% at December 31, 1993. The Company must
comply with the capital ratio requirements set by the Board of Governors of
the Federal Reserve while Dime must comply with the capital ratio requirements
set by the FDIC. The following table presents the Company's risk-based capital
and leverage capital ratios:
<TABLE>
<CAPTION>
- --------------------------------------------------------
December 31,
---------------------------
(Dollars in thousands) Required* 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Tier 1 risk-based capital 6.00% 15.15% 11.54%
Total risk-based capital 10.00% 16.44% 12.81%
Leverage capital 5.00% 7.50% 6.45%
- --------------------------------------------------------
<F*> For an institution to be considered "well capitalized" a capital ratio in
excess of those shown is required.
</TABLE>
On January 31, 1995, the Cease and Desist Order that had been in effect
with respect to Dime since February 22, 1993 was lifted by the FDIC and the
Connecticut Banking Commissioner. At that time, the Board of Directors of Dime
adopted resolutions committing Dime to continue certain actions designed to
maintain and improve the financial and operating condition of the institution.
Among these was a resolution that continued the requirement that Dime maintain
a Tier 1 leverage capital ratio at or in excess of 6% and provide advance
notice to the FDIC and the Commissioner of any action of the Board to declare
or pay dividends.
On January 18, 1996, The Board of Directors declared, after consent of
the appropriate regulatory authorities, the resumption of the quarterly
dividend with an initial payment of $0.07 per share to be paid on February 22,
1996 to shareholders of record on February 1, 1996. Dividend payments had been
suspended by the Board in June of 1991.
Recent Accounting Pronouncements
Mortgage Servicing Rights. In May 1995, SFAS No. 122, "Accounting for
Mortgage Servicing Rights" was issued. SFAS No. 122 requires an enterprise
which acquires mortgage servicing rights through either the purchase or
origination of mortgage loans and sells or securitizes those loans with
servicing retained, to allocate the total cost of the mortgage loans to the
mortgage servicing rights and the loans based on their relative fair values if
it is practical to estimate those fair values. These mortgage servicing rights
are to be amortized in proportion to and over the period of estimated net
servicing income and should be evaluated for impairment based on their fair
values. SFAS No. 122 is effective for fiscal years beginning after December
15, 1995. The Company does not believe that this Statement will have a
material impact on the financial statements.
Stock Option Plans. In October 1995, SFAS No. 123 "Accounting for
Stock-Based Compensation" was issued and is effective beginning in 1996. This
Statement establishes accounting and reporting standards for stock-based
employee/director compensation plans. This includes all arrangements by which
employees and directors receive shares of stock or other equity instruments of
the employer or the employer incurs liabilities to employees and directors in
amounts based on the price of the employer's stock. This Statement defines a
fair value based method of accounting for an employee/director stock option or
similar equity instrument and encourages all entities to adopt that method of
accounting for all of their employee/director stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting in Opinion 25 must
make pro forma disclosures of net income and earnings per share as if the fair
value method of accounting defined in this Statement had been applied. In
1996, the Company will continue to follow Opinion 25 and will disclose the
information required by SFAS No. 123.
Year Ended December 31, 1994, Compared to Year Ended December 31, 1993.
Overview. Net Income for the year ended December 31, 1994 totalled $4.7
million or $0.94 per share compared with a net loss of $23.4 million or $4.68
per share for the year ended December 31, 1993. The change in results was
primarily caused by a significantly reduced provision for loan losses from
$20.9 million during 1993 to $4.5 million for the year ended December 31,
1994. The large provision during 1993 was primarily the result of the
implementation of a new strategy with regard to the accelerated disposition of
certain performing and non-performing assets. These assets were classified as
held for sale and were written down to values which management believed would
allow for their sale within a twelve month period. There were no assets
classified as held for sale at December 31, 1994.
In addition, operating expenses declined to total $20.1 million for the
year ended December 31, 1994 from $31.9 million for the year ended 1993. The
large decline in operating expenses was primarily caused by a reduction in the
net cost of the operation of other real estate owned which totalled $13.6
million for the year ended 1993 compared with $867,000 for the year ended
1994.
Interest Income. Interest income for the year ended December 31, 1994
totalled $44.7 million compared with interest income of $50.0 million for the
year ended December 31, 1993. This decrease of $5.3 million or 10.5% was due
principally to a decrease in the weighted average yield on interest earning
assets from 7.61% for the year ended 1993 to 7.27% for the year ended 1994.
Interest Expense. Interest Expense totalled $18.8 million for the year
ended December 31, 1994 compared with interest expense of $22.5 million for
the year ended December 31, 1993. This decline was primarily caused by a
reduction in the levels of interest-bearing liabilities and a general
reduction in the rates paid on deposits, the principal source of funding for
the Bank.
Provision for Loan Losses. The provision to the allowance for loan
losses for the year ended December 31, 1994 totalled $4.5 million compared
with a provision for the year ended December 31, 1993 of $20.9 million. The
large provision during 1993 was primarily caused by the classification of
approximately $60 million of certain performing and non-performing assets as
held for sale. These assets were written down to approximately $28 million
representing the expected sales price utilizing an accelerated disposition
strategy.
Investment Securities Gains. The Company recognized gains of $6,000 on
the sale of investment securities during the year ended December 31, 1994
compared with net gains of $630,000 for the year ended December 31, 1993. The
net gain recognized during 1993 was primarily the result of the sale of equity
securities.
Gain on Sale of Assets Held for Sale. The Company recorded a gain, in
1994, of $1.3 million on the sale of assets which had been classified as held
for sale. All assets classified as held for sale were sold with the exception
of approximately $1.5 million which were reclassified within non-performing
assets at December 31, 1994.
No income was recognized from assets classified as held for sale during
1994. Any payments received were used to reduce the carrying value of the
assets. There were no assets classified as held for sale at December 31, 1994.
Other Operating Income. Other operating income for 1994 increased by
$157,000 or 7.66%, and totalled $2.2 million for the year ended December 31,
1994 compared with operating income of $2.1 million for the year ended
December 31, 1993. Other operating income consists primarily of service
charges and other fees generated from deposit and lending activities.
Other Operating Expenses. Operating expenses, including the net cost of
OREO, decreased $11.7 million or 36.83% from year end 1993 and totalled $20.1
million for the year ended December 31, 1994 compared with operating expenses
of $31.9 million for the year ended December 31, 1993. The decrease in 1994 is
primarily attributable to a decrease in the net cost of the operation of OREO
which totalled $867,000 for the year ended December 31, 1994 compared with
$13.6 million for the year ended December 31, 1993. The reduction in the cost
of OREO operations is primarily the result of a decrease in writedowns on OREO
and a reduction in the provision for OREO losses.
The provision for OREO losses for the year ended December 31, 1994
totalled $125,000 compared with a provision for the year ended December 31,
1993 of $919,000. In addition, OREO writedowns charged to operations totalled
$11.5 million for the year ended 1993 compared with no writedowns charged to
operations during 1994. The provision and writedowns during 1993 reflected the
reduction in carrying value of OREO and in-substance OREO to values which
allowed for their sale during 1994.
Income Taxes. The Company provided only for the minimum State tax
during 1994 because of tax loss carry forwards available to offset regular
Federal and State income tax provisions. No income tax expense was provided
for during 1993 due to the loss recorded for the year.
Consolidated Statements of Condition
<TABLE>
<CAPTION>
December 31,
------------------
(Dollars in thousands, except share data) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and amounts due from banks -- Note 2 $ 11,172 $ 9,703
Interest bearing deposits 2,983 13,695
Federal funds sold 21,334 26,562
Investment securities available or held for sale
(amortized cost: $8,142 in 1995; amortized cost:
$4,416 in 1994) -- Note 4 8,126 4,582
Investment securities held to maturity (market value:
$48,245 in 1995; market value: $51,046 in 1994)
-- Note 4 47,898 51,869
Mortgage-backed securities available for sale
(amortized cost: $94,809 in 1995)) -- Note 4 95,190 --
Investment in Federal Home Loan Bank of Boston stock
-- Note 10 7,192 7,192
Loans receivable -- Notes 5 and 10 456,443 510,378
Allowance for loan losses (12,779) (9,326)
-------- --------
Loans receivable, net 443,664 501,052
Premises and equipment, net -- Note 7 5,926 8,285
Accrued income receivable 4,451 3,998
Other real estate owned -- Note 8 1,415 3,711
Deferred income taxes -- Note 12 4,012 1,249
Other assets 2,242 2,714
Excess of cost over fair value of net assets acquired 2,768 3,117
-------- --------
$658,373 $637,729
======== ========
Liabilities and Shareholders' Equity
Liabilities
Deposits -- Note 9 $543,344 $527,786
Federal Home Loan Bank of Boston advances -- Note 10 58,000 60,000
Other liabilities 5,361 4,747
-------- --------
606,705 592,533
-------- --------
Shareholders' Equity -- Notes 13 and 17
Preferred stock; no par; 1,000,000 shares authorized;
none issued and outstanding -- --
Common stock; $1.00 par value; authorized 9,000,000
shares; issued 5,373,992 and 5,345,390 in 1995 and
1994, respectively 5,374 5,345
Additional paid-in capital 51,117 50,846
Retained deficit (2,166) (8,207)
Net unrealized gain on available for sale securities,
net of taxes 241 110
Treasury stock -- 351,607 shares at cost (2,898) (2,898)
-------- --------
51,668 45,196
-------- --------
$658,373 $637,729
======== ========
Commitments and contingencies -- Notes 7, 13, 14 and 20
See accompanying notes to consolidated financial statements
</TABLE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
(Dollars in thousands, except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 39,781 $ 40,041 $ 44,735
Interest-bearing deposits 126 106 59
Federal funds sold 1,174 557 623
Interest and dividends on investment securities:
U. S. treasury securities 649 1,358 1,543
U. S. government agency obligations 2,315 610 100
REMIC / CMO's 1,380 -- --
Mortgage-backed securities 1,069 -- --
Other bonds and notes 475 1,427 2,116
Equity securities 3 50 65
Dividends on Federal Home Loan Bank of Boston stock 504 554 732
-------- -------- --------
Total Interest Income 47,476 44,703 49,973
-------- -------- --------
Interest Expense
Interest to depositors 17,893 14,313 17,162
Interest on FHLBB advances 4,186 4,442 5,357
-------- -------- --------
Total Interest Expense 22,079 18,755 22,519
-------- -------- --------
Net Interest Income 25,397 25,948 27,454
Provision for loan losses -- Note 5 7,550 4,516 20,900
-------- -------- --------
Net Interest Income after Provision for Loan Losses 17,847 21,432 6,554
Investment securities gains, net -- Note 4 298 6 630
Gain on sale of assets held for sale -- 1,266 --
Deposit account fees 1,578 1,617 1,432
Other operating income 502 590 618
-------- -------- --------
Income before other operating expenses 20,225 24,911 9,234
-------- -------- --------
Other Operating Expenses
Salaries and employee benefits 7,763 9,114 8,516
Professional and other services 2,389 2,704 2,718
Bank occupancy and equipment expense 3,032 3,138 2,937
FDIC assessment 898 1,633 1,583
Write downs on assets held for sale -- 235 --
Net cost (earnings) of operation of other real
estate owned -- Note 8 (1,029) 867 13,648
Other operating expenses 2,057 2,432 2,454
Restructure expense, net -- Note 11 1,887 -- --
-------- -------- --------
Total Other Operating Expenses 16,997 20,123 31,856
-------- -------- --------
Income (loss) Before Income Taxes, Extraordinary Item,
and Cumulative Effect of Changes in Accounting Methods 3,228 4,788 (22,622)
Income taxes (benefit) -- Note 12 (2,813) 60 --
-------- -------- --------
Income (loss) Before Extraordinary Item,
and Cumulative Effect of Changes in Accounting Methods 6,041 4,728 (22,622)
Extraordinary item:
-- Prepayment penalty on long-term debt -- Note 10 -- -- (874)
Cumulative Effect of Changes in Accounting Methods:
-- Postretirement benefits other than pensions,
net of tax -- Note 16 -- -- (477)
-- Income taxes -- Note 12 -- -- 563
-------- -------- --------
Net Income (loss) $ 6,041 $ 4,728 $(23,410)
======== ======== ========
Earnings (loss) per share before extraordinary item
and cumulative effect of changes in accounting methods $ 1.21 $ 0.94 $ (4.53)
Extraordinary item:
-- Prepayment penalty on long-term debt -- -- (0.17)
Cumulative effect of changes in accounting methods:
-- Postretirement benefits other than pensions,
net of tax -- -- (0.09)
-- Income taxes -- -- 0.11
-------- -------- --------
Earnings (loss) per share -- Note 3 $ 1.21 $ 0.94 $ (4.68)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
---------------------------------------------------------------------------------
Net Unrealized
Additional Retained Gain on
Common Paid-In Earnings Available for Sale Treasury
(Dollars in thousands) Stock Capital (Deficit) Securities Stock Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 5,345 $ 50,846 $ 10,475 $ -- $ (2,898) $ 63,768
Year ended December 31, 1993:
Net loss -- -- (23,410) -- -- (23,410)
------- -------- -------- ----- -------- -------
Balance at December 31, 1993 5,345 50,846 (12,935) -- (2,898) 40,358
Year ended December 31, 1994:
Net unrealized gain on securities
available for sale, upon
implementation of change in
accounting for debt and equity
securities -- -- -- 218 -- 218
Net income -- -- 4,728 -- -- 4,728
Change in net unrealized gain on
securities available for sale -- -- -- (108) -- (108)
------- -------- -------- ----- -------- -------
Balance at December 31, 1994 5,345 50,846 (8,207) 110 (2,898) 45,196
Year ended December 31, 1995:
Options exercised 29 271 -- -- -- 300
Net income -- -- 6,041 -- -- 6,041
Change in net unrealized gain on
securities available for sale -- -- -- 131 -- 131
------- -------- -------- ----- -------- -------
Balance at December 31, 1995 $ 5,374 $ 51,117 $ (2,166) $ 241 $ (2,898) $51,668
======= ======== ======== ===== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,041 $ 4,728 $ (23,410)
Adjustments to reconcile net income (loss) to
net cash from operations:
Provision for loan losses 7,550 4,516 20,900
Provision for OREO losses -- 125 919
Depreciation and amortization 1,483 1,446 1,302
Premises and equipment restructuring charges 1,107 -- --
Amortization / accretion of investment
securities, net 147 1,059 1,244
Amortization of intangible assets 349 350 349
Amortization of net deferred loan fees (166) (864) (606)
Deferred income tax expense (benefit) (2,831) (555) 3,369
Gain on sale of available for sale securities (298) (6) (630)
Gain on sale of assets held for sale -- (1,266) --
Writedowns on assets held for sale -- 235 --
Other real estate owned (gains) losses, net (2,057) (824) 11,366
(Increase) decrease in accrued interest
receivable (453) 928 522
(Increase) decrease in current income tax
receivable -- 8,396 (7,685)
(Increase) decrease in other assets 473 (1,721) 237
Increase in other liabilities 688 836 404
-------- -------- --------
Net cash provided by operating activities 12,033 17,383 8,281
-------- -------- --------
Cash flows from investing activities:
Available for sale investment securities:
Investment securities purchased -- (3,988) --
Proceeds from sales of investment securities 4,660 11 --
Proceeds from maturity of investment
securities 4,000 -- --
Available for sale mortgage-backed securities:
Mortgage-backed securities purchased (98,791) -- --
Proceeds from principal payments on
mortgage-backed securities 4,265 -- --
Held to maturity investment securities:
Investment securities purchased (71,846) (36,250) --
Proceeds from maturity of investment
securities 63,299 62,512 --
Held for investment:
Investment securities purchased -- -- (50,893)
Proceeds from maturity of investment securities -- -- 29,400
Proceeds from sale of investment securities -- -- 9,581
Proceeds from redemption of FHLBB stock -- -- 2,783
Net (increase) decrease in loans 41,104 (16,785) 41,753
Proceeds from sale of loans 8,022 -- --
Loans purchased -- (13,846) (7,651)
Purchase of premises & equipment (231) (878) (1,031)
Net increase in interest bearing deposits -- -- 25
Proceeds from sale of assets held for sale -- 46,960 --
Proceeds from sale of other real estate owned 5,230 5,945 8,371
-------- -------- --------
Net cash provided (used) by investing
activities (40,288) 43,681 32,338
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 15,558 (39,059) (26,217)
Proceeds from exercise of stock options 226 -- --
Payments of FHLB of Boston advances (2,000) (1,000) (27,000)
-------- -------- --------
Net cash provided (used) by financing
activities 13,784 (40,059) (53,217)
-------- -------- --------
Net increase (decrease) in cash & equivalents (14,471) 21,005 (12,598)
Cash & cash equivalents at beginning of period 49,960 28,955 41,553
-------- -------- --------
Cash & cash equivalents at end of period (a) $ 35,489 $ 49,960 $ 28,955
======== ======== ========
Supplemental disclosures of cash flow information:
Non-cash investing activities:
Transfer of investment securities from held
to maturity to available for sale $ 75,688 $ -- $ --
Transfer of loans to other real estate
owned, net $ 878 $ 1,360 $ 2,024
Transfer of loans to assets held for sale $ -- $ 19,038 $ 20,377
Transfer of other real estate owned to assets
held for sale $ -- $ 76 $ 8,010
Cash paid during the year for:
Interest to depositors $ 17,875 $ 14,332 $ 17,157
Interest on FHLBB advances $ 4,198 $ 4,450 $ 5,520
Income taxes $ 103 $ 40 $ 3,835
<Fa> $2,983,000, $13,695,000 and $8,780,000 of cash equivalents for the
years ended December 31, 1995, 1994 and 1993, respectively, are classified
as interest bearing deposits in the Consolidated Statements of Condition.
</TABLE>
See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
The significant accounting policies followed by Dime Financial
Corporation and subsidiary and the method of applying those policies which
materially affect the determination of financial position, presentation of
results of operations and cash flows are summarized as follows:
Basis of Financial Statement Presentation: The consolidated
financial statements include the accounts of Dime Financial Corporation
(the "Company") and its wholly-owned subsidiary, The Dime Savings Bank of
Wallingford ("Dime"). The Company became the holding company of Dime on
December 2, 1988. Prior to August 15, 1992, the Company had another
wholly-owned subsidiary, City Savings Bank of Meriden ("City"). City
merged with and into Dime at the close of business on August 14, 1992. All
significant intercompany balances and transactions have been eliminated in
the consolidated financial statements.
The Company provides a full range of banking services to individual
and corporate customers through its subsidiary in the New Haven County of
Connecticut including savings and checking products, mortgage loans, and
consumer installment loans. Deposits are insured by the FDIC up to certain
limits under the law. The Company is subject to competition from other
financial institutions. The Company is subject to the regulations of
certain state and federal agencies and undergoes periodic examinations by
those regulatory authorities.
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statement of condition and income and
expenses for the period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to change
relate to the determination of the allowance for loan losses, the
valuation of other real estate owned acquired in connection with
foreclosures or in satisfaction of loans, and net deferred tax asset
valuation allowance. In connection with the determination of the allowance
for loan losses, and the valuation of other real estate owned, management
obtains independent appraisals for significant properties and uses
independent market information.
The vast majority of the Company's loans are secured by real estate
in Connecticut. In addition, almost all of the other real estate owned is
located in those same markets. Accordingly, the ultimate collectibility of
a substantial portion of the Company's loans and the recovery of a
substantial portion of the carrying amount of other real estate owned are
susceptible to changes in market conditions in Connecticut.
Management believes that the allowance for loan losses is adequate,
and other real estate owned is properly valued. While management uses
available information to recognize losses on loans, and other real estate
owned, future additions to the allowance for loan losses or valuation
adjustments for other real estate owned may be necessary based on changes
in economic conditions, particularly in Connecticut. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for losses on loans and
valuation of other real estate owned. Such agencies may require the
Company to recognize additions to the allowance or additional write downs
on other real estate owned based on their judgments about information
available to them at the time of their examination.
Loans: Interest on loans is accrued and credited to operations based
upon principal amounts outstanding. The accrual of interest income and the
amortization of loan origination fees is discontinued when a loan becomes
90 days past due, or earlier if there is doubt as to the ultimate
collection of principal or interest. When the accrual of interest is
ceased, previously recognized and uncollected interest is reversed against
interest income. Interest income on non-accrual loans residential and
consumer in nature is recognized to the extent payments are received.
Interest income on non-accrual loans commercial in nature is applied as a
reduction of the carrying value to the extent payments are received.
In May 1993, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No.114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114") which was amended in
October 1994 by SFAS 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosure" which is effective for fiscal
years beginning after December 15, 1994. The Company adopted SFAS No. 114
and SFAS No. 118 on January 1, 1995. These Statements apply to all loans
except large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment, or loans otherwise carried at fair
value or the lower of cost or fair value. SFAS No. 114 and SFAS No. 118
specifically exclude leases and debt securities from its valuation
standards. These Statements require that loans that are impaired (due to
the inability to collect all contractual amounts due) be measured and
valued based on (1) the present value of expected future cash flows
discounted at the loan's effective rate of interest, (2) the loan's
observable market price, or (3) the fair value of supporting collateral if
the loan is collateral dependent. Because of the similarities between
measurement requirements of SFAS No. 114 and SFAS No. 118 and methods
previously used by the Company to evaluate impaired loans, SFAS No. 114
and SFAS No. 118 did not have a material impact on the Company's financial
statements when adopted. Interest income on impaired loans is generally
recognized in accordance with the Company's existing income recognition
policy. Management believes that the valuation allowance for impaired
loans is adequate.
Loan origination and commitment fees and certain direct loan
origination costs are deferred and the net amount is amortized as an
adjustment of the related loan's yield over the life of the loan using a
method which approximates the interest method.
Investment and Mortgage-backed Securities: The Company's securities
portfolio consists of debt and equity securities. The Company adopted
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," ("SFAS No. 115") on
January 1, 1994. In accordance with SFAS No. 115, the Company classifies
individual securities into one of three categories, held to maturity,
available for sale or trading. Securities held to maturity are limited to
debt securities for which the Company has the positive intent and ability
to hold to maturity. Trading securities, if any, consist of securities
bought principally for the purpose of selling them in the near term. All
other securities held by the Company are classified as available for sale.
Under SFAS No. 115, held to maturity securities are carried at amortized
cost; trading securities are carried at fair value, with unrealized gains
and losses reported in earnings; and available for sale securities are
carried at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of shareholders' equity (net
of taxes). The adjustments to shareholders' equity will fluctuate in
future periods reflecting changes in the unrealized gains and losses on
securities classified as available for sale.
The amortization of premiums and accretion of discounts is recorded
over the life of the security using the interest method.
The specific identification method is used in determining the cost
of investment securities sold. Investment securities transactions are
recorded based on the settlement date which does not differ materially
from the trade date. A decline in the value of a security below cost that
is deemed other than temporary is charged to earnings, resulting in the
establishment of a new cost basis for the security.
Assets Held for Sale: Loans and other real estate owned that are
classified as held for sale are carried at the lower of cost or fair
value, less estimated selling costs. Charge offs and write downs to reduce
the carrying value of loans and other real estate owned to fair value less
estimated selling costs are recorded against the allowance for loan
losses, the allowance for OREO losses or as other real estate owned
expenses. Subsequent to the transfer of loans to held for sale, payments
received are applied to the carrying value of the asset.
Investment in Federal Home Loan Bank of Boston Stock: The investment
in Federal Home Loan Bank of Boston stock is stated at cost.
Premises and Equipment: Premises and equipment are stated at cost,
less accumulated depreciation and amortization. The provision for
depreciation and amortization is computed by the straight-line method for
financial reporting and under accelerated methods for income tax purposes.
Gains or losses on dispositions are reflected in current income. Major
improvements are capitalized and recurring maintenance and repairs are
charged to income as incurred. Asset lives for bank premises are from 15
to 30 years and for furniture and equipment from 3 to 7 years.
Other Real Estate Owned: Properties acquired through foreclosure or
deed in-lieu of foreclosure (known collectively as OREO), are transferred
to other real estate owned at the lower of cost or fair market value, less
selling costs, at the transfer date. Subsequent valuation adjustments and
writedowns are made if the fair value of the property, less selling costs,
falls below the carrying value. Gains on the sale of OREO are recognized,
to the extent allowable, upon disposition of the property. Losses on the
sale in excess of amounts previously provided are charged to the allowance
for OREO losses.
Allowance for Loan Losses: The provision for losses on loans charged
to operations is the amount which, in the opinion of management, is
adequate to maintain the allowance for loan losses at a level sufficient
to absorb losses in the loan portfolio. Management's determination is
based upon an evaluation of current economic conditions, analysis of the
loan portfolio and other pertinent indicators.
Excess of Cost Over Fair Value of Net Assets Acquired: The excess of
cost over fair value of net assets acquired is being amortized on the
straight-line method over a fifteen year period. Accumulated amortization
was $2,476,000 and $2,127,000 in 1995 and 1994, respectively.
Income Taxes: SFAS No. 109, "Accounting for Income Taxes", was
issued by the Financial Accounting Standards Board ("FASB") in February
1992. SFAS 109 required a change from the deferred method under APB
Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred income
taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on
deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
Upon adoption in 1993, the Company applied the provisions of SFAS
109 without restating prior years' financial statements. The adoption of
SFAS 109 resulted in the recognition of a tax benefit which is reported
separately as the cumulative effect of the change in the method of
accounting for income taxes in the consolidated statement of operations
for the year ended December 31, 1993.
Pension Plan: Dime has a non-contributory pension plan which covers
substantially all employees who meet certain age, service and minimum
hours per year requirements. Dime's policy is to fund pension costs
sufficient to meet the funding requirements set forth in the Employee
Retirement Income Security Act of 1974.
Postretirement Benefits: In December 1990, FASB issued Statement No.
106 "Employers Accounting for Postretirement Benefits Other Than
Pensions." This Statement requires employers to accrue the cost and
recognize the liability for benefits to be provided to retired employees
over each employee's service period. The Company adopted the Statement on
January 1, 1993 by recognizing the transition obligation, net of tax, as
the cumulative effect of a change in accounting method in the consolidated
statement of operations.
Cash Flows: For purposes of the statements of cash flows, the
Company considers cash on hand, demand deposits at other financial
institutions, interest-bearing deposits with an original maturity of three
months or less and Federal funds sold to be cash and cash equivalents.
Reclassifications: Certain reclassifications have been made to the
prior years' amounts to conform with the 1995 presentation.
Note 2: Cash and Due From Banks
Dime is subject to requirements of the Federal Reserve Bank of
Boston to maintain certain average cash reserve balances. At December 31,
1995, and 1994, these reserves were $1.4 million and $1.5 million,
respectively.
Note 3: Per Share Data
Net income per share was calculated by dividing net income by the
weighted average number of common shares. Stock options did not have a
significant dilutive effect.
Note 4: Investment and Mortgage-backed Securities
The Company adopted Statement of Financial Accounting Standard No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115") as of January 1, 1994, and reclassified all equity securities
from held for sale to available for sale. The net unrealized gain on the
securities available for sale on January 1, 1994, of $330,000 less income
tax expense of $112,000 increased shareholders' equity.
The amortized costs, approximate market values, and maturity
groupings of investment and mortgage-backed securities are
as follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------------------
Yield on
Amortized Unrealized Unrealized Market Debt
(Dollars in thousands) Cost Gains Losses Value Securities
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment securities available for sale:
U.S. treasury securities:
Within 1 year $ 4,043 $ -- $ 14 $ 4,029 4.18%
Other bonds and notes:
Within 1 year 4,099 1 3 4,097 4.62%
------- ---- ---- ------- ----
Total investment securities available
for sale $ 8,142 $ 1 $ 17 $ 8,126 4.40%
======= ==== ==== ======= ====
Mortgage-backed securities available for sale:
Mortgage-backed securities:
GNMA $43,617 $352 $ 15 $43,954 6.55%
FNMA 3,156 9 -- 3,165 6.60%
FHLMC 793 -- -- 793 7.06%
REMIC's / CMO's 47,243 138 103 47,278 6.71%
------- ---- ---- ------- ----
Total mortgage-backed securities available
for sale $94,809 $499 $118 $95,190 6.64%
======= ==== ==== ======= ====
Investment securities held to maturity:
U.S. treasury securities:
After 5 years but within 10 years $ 1,013 $ 89 $ -- $ 1,102 7.20%
U.S. government-sponsored agency obligations:
Within 1 year 4,000 -- -- 4,000 7.00%
After 1 years but within 5 years 20,888 108 -- 20,996 6.93%
After 5 years but within 10 years 21,997 150 -- 22,147 7.01%
------- ---- ---- ------- ----
Total U.S. government-sponsored
agency obligations 46,885 258 -- 47,143 6.98%
Total investment securities held to maturity: $47,898 $347 $ -- $48,245 6.98%
======= ==== ==== ======= ====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------------------------------------------------
Yield on
Amortized Unrealized Unrealized Market Debt
(Dollars in thousands) Cost Gains Losses Value Securities
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment securities available for sale:
U.S. government-sponsored agency obligations:
Within 1 year $ 3,991 $ -- $ 34 $ 3,957 6.11%
Equity securities 425 200 -- 625
------- ---- ---- -------
Total investment securities available for sale $ 4,416 $200 $ 34 $ 4,582
======= ==== ==== =======
Investment securities held to maturity:
U.S. treasury securities:
Within 1 year $14,500 $ -- $185 $14,315 4.91%
After 1 years but within 5 years 4,173 -- 169 4,004 4.18%
After 5 years but within 10 years 1,015 -- 33 982 7.20%
------- ---- ---- ------- ----
Total U.S. treasury securities 19,688 -- 387 19,301 4.87%
U.S. government-sponsored agency obligations:
Within 1 year 17,993 -- 86 17,907 4.99%
After 10 years 52 -- -- 52 9.25%
------- ---- ---- ------- ----
Total U.S. government sponsored
agency obligations 18,045 -- 86 17,959 5.00%
Other bonds and notes:
Within 1 year 8,844 12 182 8,674 6.02%
After 1 years but within 5 years 4,297 -- 185 4,112 4.62%
After 5 years but within 10 years 995 5 -- 1,000 8.64%
------- ---- ---- ------- ----
Total other bonds and notes 14,136 17 367 13,786 5.78%
------- ---- ---- ------- ----
Total investment securities held to maturity: $51,869 $ 17 $840 $51,046 5.16%
======= ==== ==== ======= ====
</TABLE>
Under the provisions of the FASB's Special Report "A Guide to
Implementation of Statement No. 115 Accounting for Certain Investments in
Debt and Equity Securities - Questions and Answers", the Company
reclassified certain investment securities with an amortized cost of $71.1
million from Held to Maturity to Available for Sale. The net unrealized
gain on the securities reclassified from Held to Maturity to Available for
Sale of $194,000 less an income tax effect of $66,000 increased
shareholders' equity.
Proceeds from the sale of available for sale securities were $4.7
million in 1995, with gross gains of $334,000 partially offset by gross
losses of $36,000 realized on those sales. By comparison, proceeds from
the sale of investments in equity securities were $11,000 and $834,000 in
1994 and 1993, respectively. Net gains realized on the sales of equity
securities were $6,000 and $508,000 in 1994 and 1993, respectively.
Proceeds from the sale of investments in debt securities in 1993 were $8.7
million. Gross gains of $122,000 were realized on those sales in 1993.
There were no sales of debt securities in 1994.
At December 31, 1995, Dime had $1.0 million in U.S. treasury
securities pledged as collateral for public fund deposits. An additional
$4.0 million in U.S. treasury securities were pledged as collateral for
treasury, tax and loan deposits.
Note 5: Loans Receivable
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Mortgage loans:
Residential:
real estate owner occupied $329,856 $394,197
real estate non-owner occupied 27,699 --(a)
Commercial real estate 43,659 56,936
Builders' & land 1,501 4,276
Consumer loans 49,288 48,032
Commercial loans 4,527 7,043
Allowance for loan losses (12,779) (9,326)
Deferred loan origination fees, net (87) (106)
-------- --------
Total loans, net $443,664 $501,052
======== ========
<Fa> Information for prior periods is not available, included within
"Residential real estate owner occupied" for prior periods.
</TABLE>
At December 31, 1995, 1994 and 1993, the total unpaid principal
balances of non-accrual loans were approximately $7.7 million, $8.0 million
and $12.8 million, respectively. In the fourth quarter of 1995, the Company
completed a bulk sale of two packages of non-performing assets, non-performing
loans totalling $2.5 million and OREO totalling $334,000, prior to writedowns.
These assets were written down by $1.4 million.
If the non-accrual loans at December 31, 1995, 1994 and 1993 had
remained current in accordance with their contractual payment terms,
interest income of $787,000, $533,000 and $934,000, respectively would
have been recognized compared to interest income of $383,000, $211,000 and
$591,000 actually recognized.
A loan is categorized as a Troubled Debt Restructure ("TDR") if the
original interest rate on such loan, repayment terms, or both were
restructured due to a deterioration in the financial condition of the
borrower. TDR's totalled $885,000 at December 31, 1995 as compared to
$10.8 million at December 31, 1994 and $4.3 million at December 31, 1993.
If the restructured loans at December 31, 1995, 1994 and 1993 had remained
current in accordance with their contractual payment terms, $181,000,
$1,554,000 and $908,000, respectively of interest income would have been
recognized compared with interest income of $42,000, $1,415,000 and
$111,000 actually recognized. Included in TDR's at December 31, 1994 was a
loan with a principal balance of $6.4 million which was sold in December,
1995. The remaining TDR's at December 31, 1994 were at market rates at the
time of restructure, have performed in accordance with the restructured
terms and are no longer categorized as TDR at December 31, 1995.
At December 31, 1995 impaired loans totalled $5.2 million with a
related allowance of $668,000. Included in impaired loans are $3.3 million
of commercial real estate loans, $713,000 of commercial loans and $1.2
million of residential real estate non-owner occupied loans. Approximately
$1.4 million of impaired loans do not have a related allowance. The
average balance of impaired loans during 1995 totalled approximately $6.1
million. Income recognized during 1995 on these loans totalled
approximately $173,000, which also approximated cash collected.
Impaired loans are commercial, commercial real estate, non-owner
occupied residential mortgage loans, and individually significant mortgage
and consumer loans for which it is probable that the Company will not be
able to collect all amounts due according to the contractual terms of the
loan agreement. The definition of "impaired loans" is not the same as the
definition of "nonaccrual loans". Nonaccrual loans include impaired loans
and are those on which the accrual of interest is discontinued when
collectibility of principal or interest is uncertain or payments of
principal or interest have become contractually past due 90 days. The
Company may choose to place a loan on nonaccrual status while not
classifying the loan as impaired if it is probable that the Company will
collect all amounts due in accordance with the contractual terms of the
loan. Factors considered by management in determining impairment include
payment status and collateral value. The amount of impairment for impaired
loans is determined by the difference between the fair value of underlying
collateral securing the loan and the recorded amount of the loans.
Mortgage and consumer loans which are not individually significant
are measured for impairment collectively. Loans that experience
insignificant payment delays and insignificant shortfalls in payments
generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the
loan and the borrower, including the length of the delay, reasons for
delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the total debt owed.
Accruing TDR's entered into prior to the adoption of SFAS 114 and
SFAS 118 are not required to be reported as impaired unless such loans are
not performing according to the restructured terms at adoption of these
statements. TDR's entered into after adoption of SFAS 114 and SFAS 118 are
reported as impaired and measured for impairment.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
(Dollars in thousands) 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 9,326 $ 14,062 $ 21,280
Provision charged to expense 7,550 4,516 20,900
Charge offs (4,846) (10,245) (28,535)
Recoveries 749 993 417
------- -------- --------
Balance at end of year $12,779 $ 9,326 $ 14,062
======= ======== ========
</TABLE>
The Company's loans receivable consist primarily of residential and
commercial real estate loans located within its primary market area in
Connecticut. The Company had $14.5 million of loans outstanding
concentrated in two borrowers at December 31, 1995, as compared to $28.9
million at December 31, 1994. The Company's policy for collateral requires
that, at the time of origination, the amount of the loan may not exceed
80% of the appraisal value of the property. In cases where the loan
exceeds this percentage, private mortgage insurance is generally required
for that portion of the loan in excess of 80% of the appraised value of
the property.
Note 6: Loans and Other Real Estate Owned
Held for Sale
In 1993, after a detailed review of the loan and other real estate
owned portfolios by management in connection with consultation by
independent parties, the carrying values of a portion of these portfolios
totalling $60.4 million were reduced through charge-offs and writedowns
totalling $32.0 million to values which management believed would allow
for the sale of these assets within 12 months. The plan to sell these
assets within 12 months represented an acceleration of the timetable for
disposition that had been previously used by management. Assets subject to
the accelerated disposition strategy were classified as "held for sale."
During 1994, additional performing and non-performing assets totalling
$19.0 million, net of writedowns totalling $4.3 million were added to the
held for sale portfolio. Throughout 1994, progress was made in the
disposition of assets classified as held for sale through individual
disposition and in the fourth quarter of the year a bulk sale of assets
was completed totalling $39.6 million at prices consistent with
management's expectations. Assets classified as held for sale, but unsold
at December 31, 1994, totalled $1.5 million and were reclassified within
non-performing assets. There were no assets classified as held for sale at
December 1994 or at December 31, 1995.
<TABLE>
<CAPTION>
(Dollars in thousands)
- ---------------------------------------------------------------------
<S> <C>
Total loans and other real estate held for sale
at December 31, 1993 $ 28,387
Less additional writedowns (235)
Plus additional performing and non-performing assets
classified as held for sale in 1994 23,312
Less writedowns on additions (4,298)
Less proceeds received from customer payments (5,944)
Less net proceeds from sale (41,016)
Gain on sale of assets held for sale 1,266
Less remaining held for sale reclassified with
non-performing assets (1,472)
--------
Total loans and other real estate owned held for
sale at December 31, 1994 $ --
========
</TABLE>
Note 7: Premises and Equipment
The details of premises and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
----------------
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------
<S> <C> <C>
Bank premises, including land of $1,225 $ 8,183 $ 9,197
Furniture and equipment 8,783 8,826
-------- --------
16,966 18,023
Accumulated depreciation and amortization (11,040) (9,738)
-------- --------
Total premises and equipment, net $ 5,926 $ 8,285
======== ========
</TABLE>
Total rental expense under leases for 1995, 1994 and 1993 was
$159,000, $154,000 and $148,000, respectively. Future minimum payments at
December 31, 1995, under non-cancelable operating leases (initial or
remaining term greater than one year), are shown in the following table.
Renewal options are available for the majority of leased properties for
five year periods which have not been included in the table.
<TABLE>
<CAPTION>
(Dollars in thousands)
- ---------------------------------------
<S> <C>
1996 $139
1997 117
1998 108
1999 100
2000 76
----
$540
====
</TABLE>
Note 8: Other Real Estate Owned
Other real estate owned was comprised of the following at December
31,
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- -------------------------------------------------------
<S> <C> <C>
Foreclosed real estate $1,865 $4,452
Allowance for losses
on other real estate owned (450) (741)
------ ------
Total other real estate owned, net $1,415 $3,711
====== ======
</TABLE>
The net cost of operation of other real estate owned was as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Writedowns of property $ -- $ -- $11,453
Net gain on sales of property (2,057) (824) (87)
Provision for losses on OREO -- 125 919
Net holding costs 1,028 1,566 1,363
------- ------ -------
$(1,029) $ 867 $13,648
======= ====== =======
</TABLE>
Changes in the allowance for losses on other real estate owned are
as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 741 $ 919 $ --
Provision charged to expense -- 125 919
Charge offs (291) (303) --
----- ----- ----
Balance at end of year $ 450 $ 741 $919
===== ===== ====
</TABLE>
Note 9: Deposits
Deposits are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
Weighted Weighted
Average Average
(Dollars in thousands) 1995 Rate 1994 Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Regular savings and clubs $188,868 2.35% $234,504 2.35%
Negotiable orders of withdrawal (NOW) 22,930 1.74% 22,568 1.69%
Non-interest bearing demand deposits 39,136 -- 39,108 --
Money market accounts 8,084 2.00% 11,339 1.50%
Certificates of deposit 277,910 5.45% 213,734 4.05%
Escrow deposits 6,416 2.80% 6,533 2.80%
-------- --------
Total deposits $543,344 3.74% $527,786 2.82%
======== ==== ======== ====
</TABLE>
Individual interest bearing accounts, including certificates of
deposit, with balances of $100,000 and greater totalled approximately
$39,015,000 and $28,985,000 at December 31, 1995 and 1994, respectively.
Interest expense on certificates of deposit with balances
of $100,000 and greater totalled approximately $674,000, $345,000 and
$383,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Certificate maturities with balances of $100,000 and greater are
summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Within 3 months $ 5,787 $ 3,759
After 3 but within 6 months 6,170 3,931
After 6 but within 12 months 3,566 2,564
Over 12 months 1,927 912
------- -------
Total certificates with balances
of $100,000 and greater $17,450 $11,166
======= =======
</TABLE>
The maturities of certificates of deposit at December 31, 1995
follow:
<TABLE>
<CAPTION>
(Dollars in thousands)
- ----------------------------------------------
<S> <C>
Maturity in:
1996 $242,919
1997 28,526
1998 5,404
1999 471
2000 590
--------
$277,910
========
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Regular savings and clubs $ 4,886 $ 5,953 $ 7,743
Now accounts 340 336 399
Money market accounts 146 202 375
Certificates of deposits 12,417 7,737 8,538
Escrow deposits 104 85 107
------- ------- -------
Total $17,893 $14,313 $17,162
======= ======= =======
</TABLE>
Note 10: Federal Home Loan Bank of Boston
Advances
Federal Home Loan Bank of Boston ("FHLBB") advances consisted of the
following:
<TABLE>
<CAPTION>
December 31,
---------------
(Dollars in thousands) 1995 1994
- ----------------------------------------------
<C> <C> <C>
Long-term:
7.07% due 1996 $33,000 $35,000
7.16% due 1997 25,000 25,000
------- -------
Total long-term advances $58,000 $60,000
======= =======
</TABLE>
All stock in the FHLBB and first mortgage loans on residential
property are pledged as collateral to secure the FHLBB advances.
At December 31, 1995, the Company had available for its use a credit line
of $10.2 million with the Federal Home Loan Bank of Boston. At December
31, 1995, the Company had no borrowings outstanding on the credit line.
In 1993, the Company prepaid $26.0 million of its long term advances, and
incurred a prepayment penalty of $874,000. Management's decision to prepay
was based on the high cost of these funds in comparison to current rates.
Note 11: Restructure Expense, net
During the second quarter of 1995, the Company recognized a net non-
recurring restructuring charge of $947,000 as part of a comprehensive
restructuring program. During the fourth quarter of 1995, the Company
recognized additional non-recurring restructuring charges of $940,000. The
restructuring costs resulted from severance and benefit charges associated
with the reduction in the Company's workforce by approximately 28%, costs
associated with the anticipated disposition of data processing equipment
based on a decision to outsource the Company's data processing operations,
disposition of bank premises, and professional fees incurred to effect the
restructure. These charges were partially offset by the recognition of
curtailment gains in the Company's non-contributory defined benefit plan
and defined benefit postretirement plan as a result of a decrease in
projected benefit obligations due to a reduction in the workforce. All
employees affected by the restructure have been notified of their loss of
employment.
The following table illustrates the components of the net
restructuring charges for the year ended December 31, 1995. There were no
restructure charges recorded in 1994 or 1993.
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1995
- ----------------------------------------------------------
<S> <C>
Severance & benefit charges $1,624
Writedown of data processing equipment
to estimated salvage value 588
Other 624
------
Gross restructuring charges 2,836
Less: curtailment gains 949
------
Restructuring charges, net $1,887
======
</TABLE>
Note 12: Income Taxes
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
(Dollars in thousands) 1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit)
attributable to income (loss)
before extraordinary items and
cumulative effect of changes in
accounting methods:
Current:
Federal $ -- $ 555 $ (4,250)
State 18 60 --
------- ------- --------
18 615 (4,250)
------- ------- --------
Deferred:
Federal 871 998 (3,224)
State 1,108 551 (2,851)
Change in valuation (4,810) (2,104) 10,325
-------- ------- --------
(2,831) (555) 4,250
-------- ------- --------
Income tax expense attributable
to income (loss) before
cumulative effect of changes
in accounting methods (2,813) 60 --
Income tax benefit on change
in accounting method for post-
retirement benefits other than
pensions -- -- (318)
Income tax benefit on change in
accounting method for income
taxes -- -- (563)
-------- ------- --------
Total $(2,813) $ 60 $ (881)
======= ======= ========
</TABLE>
The principal reasons for the income tax expense (benefit) differing
from the amount of such tax computed by applying a Federal Statutory tax
rate of approximately 34% to reported income (loss) before income taxes,
extraordinary items, and cumulative effect of changes in accounting
methods are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
(Dollars in thousands) 1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected federal
income taxes (benefit)
based upon statutory rates $ 1,098 $ 1,628 $ (7,692)
State income taxes
(net of federal tax effect) 742 403 (2,550)
Effect of dividends received
deduction (1) (12) (16)
Change in the valuation allowance
for deferred tax assets (4,810) (2,104) 10,325
Other, net 158 145 (67)
------- ------- --------
Total income tax
expense (benefit) $(2,813) $ 60 $ --
======= ======= ========
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995 and December 31, 1994 are presented
below:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses
and related items $ 7,392 $10,364
Accrued compensation and pension 537 769
Accrued post-retirement expense 360 412
Deferred loan origination fees 105 116
Net operating loss carryforward 7,961 7,099
Alternative minimum tax credit
carryforward 287 287
Premises and equipment 593 12
Other 350 199
------- -------
Total gross deferred tax assets 17,585 19,258
Less: valuation allowance 12,374 17,184
------- -------
Net deferred tax asset 5,211 2,074
------- -------
Deferred tax liabilities:
Net unrealized gain on investments
available for sale 124 56
Excess of tax bad debt reserve over
base year reserve 806 513
Accrued dividend income -- 64
Basis in FHLBB stock 58 59
Other deferred income 72 93
Other 139 40
------- -------
Total gross deferred tax liabilities 1,199 825
------- -------
Net deferred tax asset $ 4,012 $ 1,249
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1,
1995 was $17.2 million. The net change in the total valuation allowance
for the year ended December 31, 1995, was a decrease of $4.8 million.
The Company recognized $2.8 million of its deferred tax asset during
1995 as the result of improved earnings projections.
At December 31, 1995, the Company had net operating loss
carryforwards for federal income tax purposes of $1.1 million, $14.2
million and $620,000 expiring in 2008, 2009, and 2010, respectively, which
are available to offset future federal taxable income. The Company had net
operating loss carryforwards to offset future state taxable income of $6.1
million, $1.0 million, $15.0 million, $14.6 million and $890,000 expiring
in 1996, 1997, 1998, 1999, and 2000 respectively. The Company also had
alternative minimum tax credit carryforwards for federal income tax
purposes of approximately $287,000 which are available to reduce future
federal income taxes, if any, over an indefinite period.
The Company has not provided deferred income taxes for Dime's tax
reserve for bad debts that arose in tax years beginning before December
31, 1987, because it is not expected that this difference will reverse in
the foreseeable future. The cumulative net amount of income tax temporary
difference related to the reserve for bad debts for which deferred taxes
have not been provided was approximately $12.7 million at December 31,
1995. If Dime does not meet the income tax requirements necessary to
permit it to claim a percentage of taxable income loan loss deduction in
the future, Dime, under certain circumstances, could incur a tax liability
for the previously deducted tax return loan losses in the year in which
such requirements are not met. This potential liability for which no
deferred income taxes have been provided was approximately $5.2 million as
of December 31, 1995.
Based on the Company's projected pre-tax earnings and estimated
reversal of taxable temporary differences, management believes it is more
likely than not that the Company will realize the benefit of the deferred
tax assets, net of the valuation allowance, and that the existing net
deductible temporary differences will reverse during periods in which the
Company generates net taxable income. The Company would need to generate
approximately $10 million of future taxable income to realize such
deferred tax assets. There can be no assurance that the Company will
generate any earnings or any specific level of continuing earnings.
Note 13: Shareholders' Equity
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became
effective on December 19, 1992. In addition to the prompt corrective
action requirements, FDICIA includes significant changes to the legal and
regulatory environment for insured depository institutions, including
reductions in insurance coverage for certain kinds of deposits, increased
supervision by the federal regulatory agencies, increased reporting
requirements for insured institutions, and new regulations concerning
internal controls, accounting, and operations.
The prompt corrective action regulations define specific categories
based on an institution's capital ratios. The capital categories, in
declining order are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." Institutions categorized as undercapitalized or worse
are subject to certain restrictions, including the requirement to file a
capital plan with its primary federal regulator, prohibitions on the
payment of dividends and management fees, restrictions on executive
compensation, and increased supervisory monitoring, among other things.
Other restrictions may be imposed on the institution either by its primary
regulator or by the Federal Deposit Insurance Corporation ("FDIC,")
including requirements to raise additional capital, sell assets, or sell
the entire institution. Once an institution becomes critically
undercapitalized it must generally be placed in receivership or
conservatorship within 90 days.
Under FDIC guidelines, an institution is considered well
capitalized, if its capital ratios exceed the minimum regulatory
requirement of 5% for the leverage ratio, 6% for Tier I risk based capital
and 10% for total risk based capital. At December 31, 1995, Dime met the
capital requirements defined for a well capitalized institution.
During 1993, Dime began operating under a Consent Agreement with the
FDIC and the Connecticut Banking Commissioner (the "Commissioner") wherein
Dime agreed to the issuance of a Cease and Desist Order (the "Order") by
the FDIC pursuant to the provisions of applicable banking law. Under the
Order, Dime agreed to continue to address certain areas of its operations,
and to develop a plan of action designed to reduce the level of non-
performing assets and other assets classified as substandard by the FDIC.
The Order also required Dime to maintain its leverage capital ratio at, or
in excess of 6% of Dime's total assets, and to maintain its risk-based
capital ratios in accordance with applicable federal law. At December 31,
1995 Dime's leverage capital ratio exceeded the requirement.
The Company's ability to pay dividends to shareholders is
substantially dependent on funds received from Dime, subject to regulatory
and State of Connecticut statutory requirements. On January 31,1995, the
Order, under which the Bank operated since February of 1993, was lifted by
the FDIC and the Commissioner. The Board of Directors of Dime has adopted
resolutions committing Dime to continue certain actions designed to
maintain and improve the financial and operating condition of the
institution. Among these is a resolution that continues the requirement
that Dime will maintain a Tier 1 leverage capital ratio at or in excess of
6% and provide advance notice to the FDIC and the Banking Commissioner of
any action of the Board to declare or pay dividends.
Note 14: Financial Instruments With
Off-Balance Sheet Risk
Dime is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheet.
The following table summarizes these financial instruments and other
commitments at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Financial instruments whose
credit risk is represented
by contract amounts:
Commitments to extend credit:
Future loan commitments $ 446 $ 2,699
Unadvanced equity lines of credit 11,166 12,362
Unadvanced commercial lines of credit 1,782 1,581
Amounts due to mortgagors 1,102 2,392
Standby letters of credit 399 1,445
------- -------
Total off-balance sheet
financial instruments $14,895 $20,479
======= =======
</TABLE>
At December 31, 1995 and 1994, Dime had no outstanding commitments
to purchase mortgages.
Dime uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since commitments
may be expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. Dime
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by Dime upon extension
of credit is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment and income-producing commercial properties.
Standby letters of credit are written conditional commitments issued by
Dime to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to customers.
Note 15: Employee Benefit Plan
Dime's pension plan (the "Plan") is a noncontributory defined
benefit plan, which is qualified under the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"). The plan covers employees who
have in one year completed at least 1,000 hours of service with the
Company or Dime and have attained the age of 21 years. The benefits are
based on years of service and the employee's compensation during the last
five years of employment. The Company uses the services of enrolled
actuaries to calculate the amount of pension expense and contributions to
trustees of the Plan. Assets of the Plan are maintained in separate
accounts with a CIGNA Company.
The following table sets forth the pension plan's funded status at
December 31, based on September 30 information:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of $5,093
in 1995 and $4,659 in 1994 $5,133 $4,851
Projected benefit obligation for
service rendered to date 6,414 7,073
Plan assets at fair value 7,714 7,083
------ ------
Projected benefit obligation
compared to plan assets 1,300 10
Unrecognized net (gain) loss (763) 15
Prior service cost not yet recognized
in net periodic pension cost 27 (114)
Unrecognized net asset (361) (395)
------ ------
Prepaid (accrued) pension cost $ 203 $ (484)
====== ======
</TABLE>
Assumptions used in the accounting for pension cost are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.0%
Average wage increase 4.5% 5.0% 5.0%
Expected long-term rate of return 8.8% 8.8% 9.0%
</TABLE>
Net periodic pension cost included the following components as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 308 $ 435 $ 381
Interest cost on projected benefit obligation 490 473 449
Actual return on plan assets (839) (348) (727)
Net amortization and deferral 193 (247) 240
----- ----- -----
Net periodic pension cost $ 152 $ 313 $ 343
===== ===== =====
</TABLE>
During 1995, the Company implemented a restructuring program which
reduced the total workforce by approximately 28%. This program resulted in
significant changes to the projected benefit obligation due to a reduction
in the size of the workforce. In the second quarter of 1995, the Company
recorded a curtailment gain totalling $839,000 as the result of these
changes. The curtailment gain was recorded as a reduction of restructuring
charges.
Note 16: Postretirement Benefits other than Pensions
Dime sponsors one defined benefit postretirement plan that covers
all employees. The plan provides health (medical and dental) benefits, and
life insurance benefits. The cost of the plan is shared by the Company and
employees retiring after January 1, 1993. Dime contributions for eligible
retired employees over age 50 on December 31, 1991, equal 75% of the
medical and dental premium and 100% of the life insurance premium up to a
combined maximum of $5,500 per year. Dime contributions (premiums) for all
other eligible retired employees will be the same as provided for active
employees up to a maximum of $3,000 per year. Employees who retired as of
December 31, 1991, are grandfathered under the prior plan provisions.
There are no Dime contributions during retirement prior to age 65. Dime
does not advance fund its postretirement health care and life insurance
plans.
The Company adopted Statement of Financial Accounting Standards No.
106 "Employers Accounting for Postretirement Benefits Other than Pensions"
as of January 1, 1993. The effect of adopting Statement 106 and the net
periodic postretirement benefit cost for the year ended December 31, 1993,
was a charge to earnings of $477,000 which is net of an income tax benefit
of $318,000, and an increase of $64,000, respectively.
The following table sets forth the plan's combined funded status
reconciled with the amount shown in the statement of financial position
at:
<TABLE>
<CAPTION>
December 31,
----------------
(Dollars in thousands) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(396) $(384)
Fully eligible active plan participants (124) (178)
Other active plan participants (223) (343)
----- -----
Accumulated postretirement benefit
obligation in excess of plan assets (743) (905)
Unrecognized net gain from
past experience different from that
assumed and from changes in assumptions (141) (30)
Adjustment for contributions between
Measurement Date and Fiscal Year End -- 7
----- -----
Accrued postretirement benefit cost $(884) $(928)
===== =====
Net periodic postretirement benefit cost
included the following components:
Service cost $ 26 $ 35
Interest cost 61 68
----- -----
Net periodic postretirement benefit cost $ 87 $ 103
===== =====
</TABLE>
For measurement purposes an average 8% annual rate of increase in
the per capita cost of covered health care benefits was assumed. Due to
the dollar cap on Company contributions, the health care cost trend rate
has a minimal effect on the amounts reported. To illustrate, increasing
the assumed health care cost trend rates by 1 percentage point in each
year would increase the accumulated postretirement benefit obligation as
of December 31, 1995, by $11,046 (approximately 1%).
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% for December 31,
1995 and 1994.
During 1995, the Company implemented a restructuring program which
reduced the total workforce by approximately 28%. This program resulted in
significant changes to the projected benefit obligation due to a reduction
in the size of the workforce. In the second quarter of 1995, the Company
recorded a curtailment gain totalling $110,000 as the result of these
changes. The curtailment gain was recorded as a reduction of restructuring
charges.
Note 17: Stock Option and Incentive Plan
In connection with the conversion to a stock institution in July of
1986, Dime's Board of Directors adopted a Stock Option and Incentive Plan
(the "Stock Plan"), which provides for incentive stock options and non-
qualified stock options ("Stock Options"), and stock appreciation rights
("SARs"). The maximum number of shares which may be issued pursuant to the
Stock Plan is 360,000 shares.
The seven outside directors serving on Dime's Board of Directors at
the time of the conversion each received options to purchase 10,000 shares
of Dime Common Stock. These options have been granted under a separate
1986 Stock Option Plan for Outside Directors under which 100,000 shares
have been reserved for issuance upon the exercise of options.
In 1988, shareholders approved Non-Qualified Stock Option
Agreements, pursuant to which two outside directors of the Company each
received the option to purchase 5,000 shares of Company common stock at a
price of $13.50 per share.
In connection with the acquisition of City in 1988, all options
outstanding at the time of the acquisition under the City Savings Bank of
Meriden 1986 Stock Option Plan were converted into options to purchase
shares of Company common stock in accordance with the provisions of the
Internal Revenue Code.
Under the Plans, the option price is equal to the fair value of the
common stock on the date the options are granted.
The following is a summary of data involving outstanding options and
SARs:
<TABLE>
<CAPTION>
Options Options
without with Option price
SARs SARs per share
- -------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1992 289,404 26,400 $5.375 -- $13.50
Granted 4,000 -- $6.375
------- ------ ----------------
December 31, l993 293,404 26,400 $5.375 -- $13.50
Granted 2,000 -- $8.875
Expired (900) (1,000) $11.00
------- ------ ----------------
December 31, 1994 294,504 25,400 $5.375 -- $13.50
Granted 101,500 -- $9.25 -- $13.50
Exercised (28,602) (1,000) $6.44 -- $11.50
Expired (51,180) (5,270) $11.00
------- ------ ----------------
December 31, 1995 316,222 19,130 $5.375 -- $13.50
======= ====== ================
</TABLE>
All options and SARs outstanding at December 31, l995 were
exercisable at that date with the exception of 76,500 options granted
during 1995 which become exercisable between January 1996 and December
1997.
Note 18: Disclosures of Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale, at one time, the Company's entire
holdings of a particular financial instrument.
Fair value estimates were based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. In addition, the tax
ramifications relating to the realization of the unrealized gains and
losses may have a significant effect on fair value estimates and have not
been considered in the estimates. Fair value methods and assumptions are
set forth below for the Company's financial instruments.
The fair value of marketable equity securities, marketable debt
securities, long term investments, mortgage-backed securities, and other
marketable securities were estimated using bid prices published in
financial newspapers or bid quotations received from securities dealers.
The fair value of certain municipal securities is not readily available
through market sources other than dealer quotations, so fair value
estimates were based on quoted market prices of similar instruments,
adjusted for differences between the quoted instruments and the
instruments being valued. The fair value of the Federal Home Loan Bank of
Boston stock is estimated to equal the carrying value, due to the
historical experience that these stocks are redeemed at par.
The estimated fair value of loans was calculated by segregating
loans with similar financial characteristics. Loans were segregated by
type including residential mortgage, commercial loan, and consumer loan.
Each loan category was further segmented into fixed and adjustable rate
interest terms and by performing and non-performing categories. The
estimated fair value of residential mortgage loans was calculated by
discounting contractual cash flows, adjusting for prepayment assumptions
using industry averages and applying discount rates based on similar
secondary market products. Variable rate loans were valued using the same
method however, cash flows were discounted using the repricing period
rather than the remaining term. The fair value of loans, except
residential mortgage loans, was calculated by discounting scheduled cash
flows through their estimated maturity using estimated market discount
rates which reflect the credit and interest rate risks inherent in the
loan. Estimates of maturity were based on Dime's historical experience
with repayments as well as industry averages for each loan classification,
other than residential mortgage loans, modified, as required, by an
estimate of the effect of current economic and lending conditions.
The fair value of deposits with no stated maturity, such as non-
interest bearing demand deposits, savings deposits, negotiable orders of
withdrawal (NOW accounts), and the money market deposits is equal to the
amount payable on demand. The fair value of certificates of deposit and
other borrowings is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered or
that would be paid for deposits or borrowings of similar remaining
maturities.
The fair values of commitments to extend credit were estimated using
the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed rate loan commitments,
fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of letters of
credit is based on fees currently charged for similar agreements or on the
estimated cost to terminate or otherwise settle the obligations with the
counterparties. The fair value of items with off-balance sheet risk was
approximately $2,000 at December 31, 1995 and approximately $33,000 at
December 31, 1994.
The carrying values and estimated fair values of financial
instruments at December 31 were:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------
Carrying Estimated Carrying Estimated
(Dollars in thousands) Value Fair Value Value Fair Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and amounts due from banks $ 11,172 $ 11,172 $ 9,703 $ 9,703
Interest bearing deposits $ 2,983 $ 2,983 $ 13,695 $ 13,695
Federal funds sold $ 21,334 $ 21,334 $ 26,562 $ 26,562
Investment in Federal Home Loan Bank of Boston stock $ 7,192 $ 7,192 $ 7,192 $ 7,192
Investment securities available for sale $ 8,126 $ 8,126 $ 4,582 $ 4,582
Mortgage-backed securities available for sale $ 95,190 $ 95,190 $ -- $ --
Investment securities held to maturity $ 47,898 $ 48,245 $ 51,869 $ 51,046
Loans receivable, net $443,664 $444,418 $501,052 $496,865
Accrued income receivable $ 4,451 $ 4,451 $ 3,998 $ 3,998
Liabilities
Regular savings and clubs $188,868 $188,868 $234,504 $234,504
Negotiable orders of withdrawal (NOW) 22,930 22,930 22,568 22,568
Non-interest bearing demand deposits 39,136 39,136 39,108 39,108
Money market accounts 8,084 8,084 11,339 11,339
Certificate of deposits 277,910 278,616 213,734 212,852
Escrow deposits 6,416 6,416 6,533 6,533
-------- -------- -------- --------
Total Deposits $543,344 $544,050 $527,786 $526,904
FHLBB Long Term Borrowings $ 58,000 $ 58,650 $ 60,000 $ 59,526
</TABLE>
Note 19: Dime Financial Corporation Condensed Parent Company Only
Financial Information
Condensed Statements of Condition
<TABLE>
<CAPTION>
December 31,
-----------------
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 409 $ 65
Investment in Dime 51,392 45,258
Other assets 2 120
------- -------
Total assets $51,803 $45,443
======= =======
Liabilities and Shareholders' Equity
Liabilities
Other liabilities $ 135 $ 247
------- -------
Total liabilities 135 247
------- -------
Shareholders' equity
Preferred stock; no par value;
1,000,000 shares authorized;
none issued and outstanding -- --
Common stock; $1.00 par value;
authorized 9,000,000 shares;
issued 5,373,992 and 5,345,390 in
1995 and 1994, respectively 5,374 5,345
Additional paid-in capital 51,117 50,846
Retained deficit (2,166) (8,207)
Net unrealized gain on available for
sale securities, net of taxes 241 110
Treasury stock;
-- 351,607 shares at cost (2,898) (2,898)
------- -------
Total Shareholders' Equity 51,668 45,196
------- -------
Total liabilities and
shareholders' equity $51,803 $45,443
======= =======
</TABLE>
Condensed Statements of Operations
<TABLE>
<CAPTION>
December 31,
-------------------------------
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from subsidiary $ -- $ -- $ --
Other expenses, net (38) (2) 6
------ ------ --------
Income before taxes and equity
in earnings (loss) of subsidiary 38 2 (6)
Income tax (benefit) expenses 1 3 (34)
------ ------ --------
Income before equity in
earnings (loss) of subsidiary 37 (1) 28
Equity in earnings (loss) of subsidiary 6,004 4,729 (23,438)
------ ------ --------
Net income (loss) $6,041 $4,728 $(23,410)
====== ====== ========
</TABLE>
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
December 31,
-------------------------------
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $6,041 $4,728 $(23,410)
Adjustments to reconcile
net income to cash provided
by operating activities:
Equity in earnings (loss) of subsidiary (6,004) (4,729) 23,438
Other, net 81 32 (28)
------ ------ --------
Cash provided by operating activities 118 31 0
------ ------ --------
Proceeds from exercise of stock options 226 -- --
Cash flows from financing activities:
Return of cash dividends from subsidiary -- (550) --
------ ------ --------
Cash used by financing activities 226 (550) --
------ ------ --------
Net increase (decrease) in cash
and due from banks 344 (519) --
Cash and cash equivalents
at beginning of year 65 584 584
------ ------ --------
Cash and cash equivalents
at end of year $ 409 $ 65 $ 584
====== ====== ========
</TABLE>
Note 20: Legal Proceedings
The Company is party to various legal proceedings normally incident
to the kind of business conducted. After reviewing such proceedings with
counsel, management believes that no material liability will result from
such proceedings.
Independent Auditors' Report
The Board of Directors and Shareholders
Dime Financial Corporation:
We have audited the accompanying consolidated statements of
condition of Dime Financial Corporation and subsidiary (the "Company") as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Dime Financial Corporation and subsidiary as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1995 in conformity
with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements,
the Company changed its methods of accounting for investment securities in
1994 and postretirement benefits other than pensions and income taxes in
1993.
/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
January 18, 1996
Corporate Information as of February 20, 1996
Directors of Dime Financial Corporation
Judge Ralph D. Lukens
Chairman of the Board,
Dime Financial Corporation
Retired Probate Court Administrator,
State of Connecticut
Richard H. Dionne
President and
Chief Executive Officer
Dime Financial Corporation
Fred A. Valenti
President, Valenti Auto Sales, Inc.
Rosalind F. Gallagher
President and Co-Owner,
Gallagher Travel Shoppe
Robert Nicoletti, Ph.D.
Superintendent of Schools,
Shepaug Valley Regional
School District 12
M. Joseph Canavan
President and Chief Executive Officer,
Diagnostic Medical Laboratory, Inc.
William J. Farrell
President, William J. Farrell, CPA,
A Professional Corp.
Richard D. Stapleton
Executive Vice President,
Secretary and General Counsel,
The Lane Construction Corporation
Gary O. Olson
Of Counsel to the law firm of Luby, Olson,
Mango, Gaffney and De Frances
Theodore H. Horwitz
President and Chief Executive Officer,
Veterans Memorial Medical Center
Officers of Dime Financial Corporation
Richard H. Dionne
President and
Chief Executive Officer
Albert E. Fiacre, Jr.
Senior Vice President and
Chief Financial Officer
Timothy R. Stanton
Senior Vice President of
Retail Operations
Frank P. LaMonaca
Senior Vice President
and Senior Lending
and Credit Officer
Robert L. Carmody
Senior Vice President
of Lending
Walter A. Galas
Vice President of Operations
Robert P. Simon
Vice President
and Comptroller
Kathleen V. Shivers
Vice President of Lending
Robert P. Wuchert, Jr.
Vice President
Peter F. Lenkoski
Vice President of Internal
Loan Review
James T. Masters
Vice President of Retail
Lending
Corporate Headquarters
95 Barnes Road
P.O. Box 700
Wallingford, Connecticut 06492
General Counsel
Day, Berry & Howard
CityPlace
Hartford, Connecticut 06103-3499
Transfer Agent
Dime Financial Corporation
c/o The First National
Bank of Boston
Customer Service
Mail Stop: 45-02-09
P.O. Box 644
Boston, Massachusetts 02102-0644
Shareholder Inquiries:
In MA (617) 575-3400
Out of MA (800) 733-5001
Independent Certified
Public Accountants
KPMG Peat Marwick, LLP
CityPlace II
Hartford, Connecticut 06103-4103
Shareholder Relations
Eleanor M. Tolla
Corporate Secretary
Dime Financial Corporation
P.O. Box 700
Wallingford, Connecticut 06492
Phone: (203) 269 - 8881
Stock Listing
Dime Financial Corporation is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol "DIBK." It is
found in newspaper stock tables as "Dime Fin'l Corp. -- Connecticut" or an
abbreviation thereof, alphabetized in the "D's."
Annual Meeting
May 19, 1995, 10 a.m.
Cabin Restaurant
103 Colony Street
Meriden, Connecticut 06450
Form 10--K and Annual Report
The Company's Form 10--K is filed with the Securities and Exchange
Commission, a copy of which is available without charge from:
Shareholder Relations
Dime Financial Corporation
95 Barnes Road
P.O. Box 700
Wallingford, Connecticut 06492
Common Stock Information
The stock is traded on the NASDAQ National Market System (the "NMS") under
the symbol "DIBK."
On December 31, 1994, there were 2,094 shareholders of record.
The Company Has Paid Quarterly Dividends as follows:
The Company's Board of Directors suspended the regular quarterly dividend
in 1991. The reinstatement of the dividend may not occur without prior
written consent of the FDIC and the Commissioner.
Quarterly Trading Data
<TABLE>
<CAPTION>
Price (Quote) Range*
-----------------------
1995 High Low
- -----------------------------------------------------
<S> <C> <C>
Quarter ended March 31, 1995 $ 10 1/8 $ 8 1/2
Quarter ended June 30, 1995 10 1/2 8 1/2
Quarter ended September 30, 1995 12 3/8 9 3/4
Quarter ended December 31, 1995 13 1/2 11 1/2
</TABLE>
<TABLE>
<CAPTION>
1994 High Low
- -----------------------------------------------------
<S> <C> <C>
Quarter ended March 31, 1994 $ 8 $ 6 1/4
Quarter ended June 30, 1994 11 7 1/8
Quarter ended September 30, 1994 11 1/2 9 7/8
Quarter ended December 31, 1994 11 7 5/8
</TABLE>
Corporate Headquarters
Dime Financial Corporation
95 Barnes Road
Wallingford, Ct. 06492
(203) 269 8881
Branch Offices
Barnes Park Office
95 Barnes Road
Wallingford, Ct. 06492
(203) 269 8881
Manager: Marcel Desjardins,
Assistant Treasurer
Main Street Office
2 North Main Street
Wallingford, Ct. 06492
(203) 265 2871
Manager: Mary Lee Haynes,
Assistant Treasurer
Montowese Office
47 Middletown Avenue
North Haven, Ct. 06473
(203) 865 1133
Manager: Thomas Flynn,
Assistant Treasurer
Turnpike Office
7 North Turnpike Road
Wallingford, Ct. 06492
(203) 265 5654
Manager: Patricia Hatje,
Assistant Vice President
East Side Office
841 East Center Street
Wallingford, Ct. 06492
(203) 265 5689
Manager: Gail Benigni,
Assistant Treasurer
Cheshire Office
595 Highland Avenue
Cheshire, Ct. 06410
(203) 272 1601
Manager: Leila Graber,
Assistant Treasurer
Mt. Carmel/Hamden Office
3300 Whitney Avenue
Mt. Carmel, Ct. 06518
(203) 287 8115
Manager: Elaine Sheahan
Washington Avenue Office
90 Washington Avenue
North Haven, Ct. 06473
(203) 239 6497
Manager: Kim Jones
Assistant Treasurer
Northford Office
859 Forest Road
Northford, Ct. 06472
(203) 484 0414
Manager: Rita Mae Dion
Harbor Brook Office
100 Hanover Street
Meriden, Ct. 06451
(203) 639 5005
Manager: Kathleen Valente,
Assistant Treasurer
East Main Street Office
733 East Main Street
Meriden, Ct. 06450
(203) 639 5007
Manager: Linda Blakeslee,
Assistant Treasurer
Consent of Independent Auditors
The Board of Directors
Dime Financial Corporation:
We consent to incorporation by reference in the Registration Statement
(No. 33-23054) on Form S-8 of Dime Financial Corporation of our report
dated January 18, 1996 relating to the consolidated statements of
condition of Dime Financial Corporation and subsidiary as of December 31,
1995 and 1994 and the related consolidated statements of operations,
changes in shareholders equity and cash flows for each of the years in
the three-year period ended December 31, 1995, which report appears in
the December 31, 1995 annual report on Form 10-K of Dime Financial
Corporation.
Our report refers to changes in the methods of accounting for investment
securities in 1994 and postretirement benefits other than pensions and
income taxes in 1993.
/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,172
<INT-BEARING-DEPOSITS> 2,983
<FED-FUNDS-SOLD> 21,334
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 103,316
<INVESTMENTS-CARRYING> 47,898
<INVESTMENTS-MARKET> 48,245
<LOANS> 456,443
<ALLOWANCE> 12,779
<TOTAL-ASSETS> 658,373
<DEPOSITS> 543,344
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,361
<LONG-TERM> 58,000
0
0
<COMMON> 5,374
<OTHER-SE> 46,294
<TOTAL-LIABILITIES-AND-EQUITY> 658,373
<INTEREST-LOAN> 39,781
<INTEREST-INVEST> 5,891
<INTEREST-OTHER> 1,804
<INTEREST-TOTAL> 47,476
<INTEREST-DEPOSIT> 17,893
<INTEREST-EXPENSE> 22,079
<INTEREST-INCOME-NET> 25,397
<LOAN-LOSSES> 7,550
<SECURITIES-GAINS> 298
<EXPENSE-OTHER> 16,997
<INCOME-PRETAX> 3,228
<INCOME-PRE-EXTRAORDINARY> 6,041
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,041
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 4.12
<LOANS-NON> 7,682
<LOANS-PAST> 0
<LOANS-TROUBLED> 885
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,326
<CHARGE-OFFS> 4,846
<RECOVERIES> 749
<ALLOWANCE-CLOSE> 12,779
<ALLOWANCE-DOMESTIC> 11,724
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,055
</TABLE>
