SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________________
to ____________________.
Commission File Number 0-17494
DIME FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Connecticut 06-1237470
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
95 Barnes Road, Wallingford, Connecticut 06492
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (203) 269-8881
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $1.00 par value; 5,135,887 shares were outstanding as of
March 31, 1997.
The total number of pages in this report is 26
Exhibit Index is on page 22
DIME FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition March 31, 1997
and 1996 (unaudited) and December 31, 1996. 3.
Consolidated Statements of Operations Three months
ended March 31, 1997 and 1996 (unaudited) 3.
Selected Financial Highlights 3.
Consolidated Statement of Changes in Shareholders'
Equity (unaudited) 4.
Consolidated Statements of Cash Flows Three months
ended March 31, 1997 and 1996 (unaudited) 5.
Notes to Consolidated Financial Statements (unaudited) 6-10.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-19.
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 20.
Signatures 21.
Exhibit Index 22.
</TABLE>
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The registrant incorporates herein by reference the following
information from its Quarterly Report to Shareholders for the
quarters ended March 31, 1997 and 1996, filed as Exhibit 19 hereto:
Consolidated Statements of Condition (unaudited)
Consolidated Statements of Operations (unaudited)
Selected Financial Highlights
Dime Financial Corporation and Subisdiary
Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Net Unrealized
Gain on
Additional Retained Available
Common Paid-in Earnings for Sale Treasury
(dollars in thousands) Stock Capital (Deficit) Securities Stock Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $5,481 $52,209 $ 8,788 $ (969) $(2,898) $62,611
Net Income 3,774 3,774
Options Exercised 6 73 79
Dividends Paid (462) (462)
Change in net unrealized gain on
securities available for sale (2,248) (2,248)
-------------------------------------------------------------------------
Balance at March 31, 1997 $5,487 $52,282 $12,100 $(3,217) $(2,898) $63,754
=========================================================================
</TABLE>
Item 1 (cont'd)
DIME FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996 (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,774 $ 2,859
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 50 700
Depreciation and amortization 207 271
Amortization/Accretion investments, net (237) (75)
Amortization of intangible assets 87 88
Amortization of net deferred loan fees (37) (9)
Gain on investment securities (11) (159)
Gains on sale of other real estate owned (12) (255)
Increase in accrued income receivable (1,139) (560)
(Increase) decrease in other assets (759) 1,342
Increase (decrease) in other liabilities 960 (49)
--------------------
Net cash provided by operating activities 2,883 4,153
--------------------
Cash flows from investing activities:
Available for sale investment securities:
Proceeds from sale of investment securities -- 4,076
Proceeds from principal payments 1,061 --
Available for sale mortgage-backed securities:
Mortgage-backed securities purchased (61,191) (54,190)
Proceeds from principal payments 4,397 2,544
Proceeds from sale of mortgage-backed securities 3,336 25,057
Held to maturity investment securities:
Investment securities purchased (24,999) (24,951)
Proceeds from maturity of investment securities 12,000 8,000
Net decrease in loans 6,879 12,744
Proceeds from sale of loans 289 124
Purchase of premises and equipment (28) (291)
Proceeds from sale of other real estate owned 357 1,195
--------------------
Net cash used by investing activities (57,899) (25,692)
--------------------
Cash flows from financing activities:
Net increase in deposits 61,051 11,371
Proceeds from exercise of DFC stock options 54 17
Payments of cash dividends (462) (351)
--------------------
Net cash provided by financing activities 60,643 11,037
--------------------
Net increase (decrease) in cash and cash equivalents 5,627 (10,502)
Cash and cash equivalents at beginning of period 31,875 35,489
--------------------
Cash and cash equivalents at end of period $ 37,502 $ 24,987
====================
</TABLE>
DIME FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1997 (unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
Dime Financial Corporation's 1996 Annual Report and Proxy Statement dated March
12, 1997. In the opinion of management, the accompanying consolidated financial
statements reflect all necessary adjustments, consisting of normal recurring
accruals for a fair presentation of results as of the dates and for the periods
covered by the consolidated financial statements. The results of operations of
the interim period may not be indicative of results for the entire 1997 fiscal
year.
2. EARNINGS PER SHARE
The calculation of earnings per share is based on the weighted average number
of common shares outstanding during the periods presented as follows:
<TABLE>
<CAPTION>
(dollars in thousands, except share data) Three Months Ended
3/31/97 3/31/96
------- -------
<S> <C> <C>
Net income $ 3,774 $ 2,859
=====================================================================
Weighted Average Common Shares and Common
Stock Equivalents Outstanding 5,309 5,097
Primary earnings per share $ 0.71 $ 0.56
=====================================================================
Weighted Average Common Shares and Common
Stock Equivalents Outstanding 5,309 5,101
Fully diluted earnings per share $ 0.71 $ 0.56
=====================================================================
</TABLE>
3. INVESTMENT SECURITIES
The amortized cost, approximate market values, and maturity groupings of
investment securities are as follows:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
---------------------- ----------------------
Amortized Market Amortized Market
(Dollars in Thousands) Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE:
U.S. treasury securities:
Within 1 year $ -- $ -- $ 4,011 $ 4,006
U.S. Government-sponsered agency obligations:
After 1 but within 5 years 4,000 3,907 -- --
After 5 but within 10 years 8,000 7,746 -- --
Asset-backed securities:
After 10 years 13,254 13,141 -- --
Equity Securities 12 12 12 12
-------------------------------------------------
Total Investment Securities Available for Sale $ 25,266 $ 24,806 $ 4,023 $ 4,018
=================================================
INVESTMENT SECURITIES HELD TO MATURITY:
U.S. treasury securities:
After 1 but within 5 years 3,458 3,467 -- --
After 5 but within 10 years -- -- 1,012 1,061
U.S Government-sponsored agency obligations:
After 1 but within 5 years 56,370 55,665 27,897 27,817
After 5 but within 10 years 73,451 71,688 35,952 35,309
After 10 years -- -- -- --
-------------------------------------------------
Total Investment Securities Held to Maturity $ 133,279 $ 130,820 $ 64,861 $ 64,187
=================================================
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE:
Mortgage-backed securities:
GNMA $ 51,397 $ 50,688 $ 39,137 $ 38,826
FNMA -- -- 1,959 1,962
FHLMC 35 35 758 746
REMIC / CMO's 162,352 158,647 79,822 79,309
-------------------------------------------------
Total Mortgage-backed Sec. Available for Sale $ 213,784 $ 209,370 $ 121,676 $ 120,843
=================================================
</TABLE>
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
INVESTMENT SECURITIES AVAILABLE FOR SALE:
Gross unrealized gains $ 4 --
Gross unrealized losses $ 464 $ 5
INVESTMENT SECURITIES HELD TO MATURITY:
Gross unrealized gains $ 28 $ 103
Gross unrealized losses $ 2,487 $ 777
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE:
Gross unrealized gains $ 2 $ 98
Gross unrealized losses $ 4,416 $ 931
</TABLE>
4. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
--------- ---------
(In Thousands)
<S> <C> <C>
Balance at January 1, $ 12,929 $ 12,779
Provision for loan losses 50 700
Charge-offs (389) (875)
Recoveries 103 600
-----------------------
Balance at March 31, $ 12,693 $ 13,204
=======================
Average loans $ 396,407 $ 450,462
Net quarterly charge-offs as a percentage of average loans 0.07% 0.06%
Non-performing loans $ 2,697 $ 6,010
Allowance for loan losses as a percentage of non-performing loans 470.72% 219.71%
Allowance for loan losses as a percentage of total loans 3.23% 2.98%
</TABLE>
5. NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
March 31,
-------------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Mortgage loans on real estate $ 2,296 $ 5,228
Commercial loans 229 373
Consumer loans 172 409
-------------------
Total non-performing loans 2,697 6,010
Other real estate owned, net 916 608
-------------------
Total non-performing assets $ 3,613 $ 6,618
===================
Non-performing loans as a percentage of total loans 0.69% 1.36%
Non-performing assets as a percentage of total assets 0.44% 0.99%
</TABLE>
6. IMPAIRED LOANS
Impaired loans are commercial, commercial real estate, non-owner occupied
residential mortgage loans, and individually significant owner-occupied
residential 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. Owner occupied residential mortgage
and consumer loans which are not individually significant are measured for
impairment collectively.
The definition of "impaired loans" is not the same as the definition of
"non-accrual loans". Non-accrual 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 does not accrue income on loans
that are past due 90 days or more except in the case of education loans which
are conditionally guaranteed. Education loans which were 90 days or more past
due at March 31, 1997 and in accrual status totalled $147,000. The Company may
choose to place a loan on non-accrual 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. Loans that experience insignificant payment delays
and insignificant shortfalls 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 delay, reasons
for delay, the borrower's prior payment record, and the amount of the shortfall
in relation to the total debt owed. The amount of impairment is generally
determined by the difference between the fair value of underlying collateral
securing the loan and the recorded amount of the loan.
Interest payments received from commercial mortgage loans, commercial business
loans, and non-owner occupied residential investment mortgage loans which have
been classified as impaired are generally applied to the carrying value of such
loans. Interest payments received from all other loans which are classified as
impaired are recognized on a cash basis.
At March 31, 1997 impaired loans totalled $2.1 million with a related allowance
of $357,000 compared with impaired loans at March 31, 1996 of $4.4 million with
a related allowance of $797,000. Management believes that the valuation
allowance for impaired loans at March 31, 1997 is adequate.
7. FHLBB ADVANCES
Federal Home Loan Bank of Boston advances consisted of the following:
<TABLE>
<CAPTION>
March 31,
----------------------
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
7.07% due 1996 $ -- $ 33,000
7.16% due 1997 25,000 25,000
6.05% due 1998 15,000 --
6.29% due 1999 10,000 --
6.51% due 2000 8,000 --
----------------------
Total FHLBB advances $ 58,000 $ 58,000
</TABLE>
Item 2:
DIME FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Dime Financial Corporation of Wallingford, Connecticut (the "Company"),
organized in 1988, is the parent company of one wholly-owned subsidiary, The
Dime Savings Bank of Wallingford ("Dime") which was organized in 1871.
Consolidated assets as of March 31, 1997 were $814.4 million.
The Company provides a full range of banking services to individual and
corporate customers through its subsidiary, The Dime Savings Bank of
Wallingford, which operates eleven retail banking offices in six contiguous
communities within New Haven County, Connecticut. Products and services offered
include a variety of savings, time, and checking products, as well as numerous
mortgage loans, consumer loans, and commercial loans. Deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC") up to certain limits under
the law.
FINANCIAL CONDITION
The Company's earnings primarily depend upon the difference between the
interest and dividend income earned on loans and investments and the interest
expense paid on deposits and borrowed money ("net interest income"). The
difference between the average interest rate earned on loans and investments
and the average interest rate paid on deposits and borrowings is affected by
economic factors influencing general interest rates, loan demand, the level of
non-performing loans, and savings flows as well as the effects of competition
for loans and deposits. Net income is also affected by gains and losses on
investment securities transactions and other operating income such as service
charges and fees offset by additions to the provision for loan losses, other
operating expenses and income tax expense.
In the first quarter of 1997, the Company reported net income of $3.8 million
or $0.71 per share compared with net income of $2.9 million or $0.56 per share
for the quarter ended March 31, 1996. The improvement in net income from the
first quarter of 1996 was affected primarily by a lower provision to the
allowance for loan losses, improvement in net interest income and a reduction
in operating expenses.
The provision to the allowance for loan losses totalled $50,000 for the quarter
ended March 31, 1997 compared with a provision in the first quarter of 1996 of
$700,000. The change in the provision from 1996 reflects a reduction in
non-performing loans and total loans outstanding as well as improvement in the
coverage ratios of the allowance for loan losses to outstanding loans and to
non-performing loans.
Net interest income totalled $6.7 million for the quarter ended March 31, 1997
representing a net interest rate spread ("spread") of 2.92% and a net interest
margin ("margin") of 3.46% compared with net interest income of $6.4 million
for the quarter ended March 31, 1996 representing a spread of 3.41% and a
margin of 3.95%. The increase in net interest income was primarily caused by a
larger volume of interest-earning assets partially offset by a decrease in the
spread and margin. The decrease in the spread and margin was due primarily to
the combination of a higher cost of deposits, a lower loan yield, and a greater
volume of interest-earning cash, on average, as a percentage of assets.
Operating expenses, excluding the net cost of operations of other real estate
owned ("OREO operations") equalled $3.3 million for the quarter ended March 31,
1997 compared with $3.7 million for the first quarter of 1996. The reduction in
operating expenses was primarily the result of a reduction in salary and
employee benefit costs due to reduced staffing levels and a reduction in
equipment related expenses due to the outsourcing of data processing
operations. Salaries and employee benefits decreased to $1.6 million for the
quarter ended March 31, 1997 compared with $1.8 million for the first quarter
of 1996. Bank occupancy and equipment expense decreased to $465,000 for the
quarter ended March 31, 1997 compared with $674,000 for the first quarter of
1996.
OREO operations may include gains or losses on the sale of OREO, writedowns of
OREO, and expenses to operate and maintain OREO. The net cost of operation of
OREO equalled a net cost of $51,000 for the first quarter of 1997 compared with
a net gain of $154,000 for the first quarter of 1996. The increase in costs
during 1997 was primarily due to a reduction in gains realized on the sales of
OREO compared with the first quarter of 1996.
At March 31, 1997, the Company's allowance for loan losses was $12.7 million or
470.72% of non-performing loans, 351.35% of non-performing assets, and 3.23% of
total loans. At December 31, 1996, the allowance for loan losses was $12.9
million, or 503.07% of non-performing loans, 342.02% of non-performing assets,
and 3.23% of total loans. At March 31, 1996, the allowance for loan losses was
$13.2 million, or 219.71% of non-performing loans, 199.52% of non-performing
assets, and 2.98% of total loans.
At March 31, 1997, non-performing loans totalled $2.7 million, or 0.69% of
total loans, compared with $2.6 million, or 0.64% of total loans at December
31, 1996, and compared with $6.0 million, or 1.36% of total loans at March 31,
1996. Other real estate owned totalled $916,000 at March 31, 1997, compared
with $1.2 million at December 31, 1996 and $608,000 at March 31, 1996. Total
non-performing assets, were $3.6 million, or 0.44% of total assets at March 31,
1997, compared with $3.8 million or 0.50% of total assets at December 31, 1996,
and compared with $6.6 million or 0.99% of total assets at March 31, 1996.
Gross loans decreased by $7.5 million, or 1.87% from $400.2 million at December
31, 1996 to $392.8 million at March 31, 1997 and decreased $50.4 million or
11.38% from $443.2 million at March 31, 1996.
Deposits increased $61.1 million or 9.75% from $626.1 million at December 31,
1996 to $687.1 million at March 31, 1997 and increased by $132.4 million or
23.87% from $554.7 million at March 31, 1996.
ASSET QUALITY
The composition of the Company's balance sheet has changed dramatically over
the past year. Fierce competition and highly competitive pricing tempered loan
production as management believed that the pricing necessary to sustain the
loan portfolio was inconsistent with the risk presented. As a result, the
Company directed its focus to the investment securities portfolio. The
Company's investment securities portfolio equalled $367 million or
approximately 45% of total assets at March 31, 1997 compared with $190 million
or approximately 28% of total assets at March 31, 1996, representing an
increase of $178 million or 94%. While the portfolio increased substantially,
the quality of the investments continue to be of the highest caliber. The
portfolio consists entirely of U.S. Treasury securities, U.S. Government Agency
securities, U.S. Government-Sponsored Agency securities and AAA rated
non-Agency securities.
Total loans equalled $393 million at March 31, 1997 compared with $443 million
at March 31, 1996 representing a decrease of 11%. Ongoing loan review
procedures assess loan quality in addition to providing the Board and
management with analysis to determine that the allowance for loan losses is
sufficient given the risks inherent in the loan portfolio at a point in time.
During the first quarter of 1997 the Company added $50,000 to the allowance for
loan losses compared with a provision of $700,000 in the first quarter of 1996.
The decreased provision in 1997 reflects a reduction in non-performing loans
and total loans outstanding as well as improvement in the coverage ratios of
the allowance for loan losses to outstanding loans and to non-performing loans.
In addition to non-performing loans, management has classified performing loans
totalling $4.9 million as substandard for internal purposes, at March 31, 1997
compared with $8.1 million at March 31, 1996 and compared with $3.3 million at
December 31, 1996. 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. These loans are still performing and management does
not have serious doubt as to their collectibility.
LIQUIDITY AND ASSET / LIABILITY MANAGEMENT
The primary objective 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. 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. Liquidity
management involves the ability to meet the cash flow requirements of the
Company's loan and deposit customers.
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.
Cash on hand, deposits at other financial institutions, interest-bearing
deposits with an original maturity of three months or less, and Federal funds
sold are the principal sources of liquidity. Cash and cash equivalents amounted
to $37.5 million at March 31, 1997, compared with $25.0 million at March 31,
1996. Cash and cash equivalents represented 4.60% of total assets at March 31,
1997 compared with 3.72% of total assets at March 31, 1996. The Company
believes that liquidity is sufficient to meet currently known demands and
commitments.
Principal sources of funds include cash receipts from deposits, loan principal
and interest payments, earnings on investments, and proceeds from amortizing
and maturing investments. The current principal uses of funds include
disbursements to fund investment purchases, loan originations, payments of
interest on deposits, and payments to meet operating expenses.
During the first three months of 1997, deposits increased by $61.1 million from
$626.1 million at December 31, 1996 to $687.1 million at March 31, 1997. During
1996, Dime introduced and sold $3.0 million in retail brokered certificates of
deposit. During the first quarter of 1997, Dime sold an additional $5.0 million
in retail brokered certificates of deposit, bringing the total to $8.0 million
at March 31, 1997.
Dime is a member of the Federal Home Loan Bank of Boston ("FHLBB") and as a
member may borrow from the FHLBB to secure additional funds. At March 31, 1997,
FHLBB borrowings equalled $58.0 million, unchanged from year-end 1996 and March
31, 1996. When deposit growth cannot meet increased loan demand or liquidity
requirements, funds may be derived from the FHLBB or from alternative funding
sources. In April of 1997 a $25.0 million borrowing will mature with the FHLBB.
The Company intends to replace this borrowing through a combination of retail
brokered certificates and borrowings from the FHLBB with terms of two to four
years.
The Company's primary source of funds is in the form of dividends received from
its subsidiary bank, Dime. Therefore, the liquidity and the capital resources
of the Company are largely dependent upon the liquidity, profitability, and
capital position of its subsidiary, and the ability of the subsidiary to
declare and pay dividends under applicable laws and regulations. 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. At March 31, 1997 the Tier 1 leverage capital
ratio of Dime was 8.31%. The following table presents the Company's risk-based
and leverage capital ratios:
<TABLE>
<CAPTION>
March 31,
----------------
Required 1997 1996
-------- ------ ------
<S> <C> <C> <C>
Tier I risk-based capital 4.0% 18.67% 16.01%
Total risk-based capital 8.0% 19.95% 17.30%
Leverage capital 4.0% 8.33% 7.72%
</TABLE>
On April 23, 1997 the Board of Directors declared an increase in the regular
quarterly dividend payment from $0.09 per share to $0.10 per share payable on
May 23, 1997 to shareholders of record on May 9, 1997.
COMPARATIVE ANALYSIS
The following table sets forth the dollar increases (decreases) in the
components of the Company's consolidated statements of operations during the
periods indicated and is followed by management's discussion of the various
changes.
<TABLE>
<CAPTION>
Three months ended
March 31, 1997
compared to
March 31, 1996
------------------
<S> <C>
Interest income $ 1,611
Interest expense 1,339
-------
Net interest income 272
Provision for loan losses (650)
Investment securities gains, net (148)
Other operating income 9
Other operating expenses (140)
-------
Income before income taxes 923
Income tax expense 8
-------
Net income $ 915
=======
</TABLE>
----------------------------------------------------------------------------
| Quarter Ended March 31, 1997 |
| Compared with |
| Quarter Ended March 31, 1996 |
----------------------------------------------------------------------------
General. Net income for the quarter ended March 31, 1997, was $3.8 million or
$0.71 per share, compared with net income of $2.9 million or $0.56 per share
for the same period in 1996. The change in net income was influenced primarily
by a decrease in the provision for loan losses improved net interest income and
a decrease in operating expenses.
Interest Income. Interest income for the quarter ended March 31, 1997 totalled
$14.2 million representing an average yield on interest earning assets of
7.47%. Interest income for the quarter ended March 31, 1996 totalled $12.6
million and represented an average yield on interest earning assets of 7.79%.
The increase in interest income was caused primarily by an increase in the
volume of interest-earning assets. The decrease in yield was caused primarily
by a decrease in the volume of higher yielding loans and an increase in the
volume of lower yielding investment securities.
Interest Expense. Interest expense totalled $7.5 million for the quarter ended
March 31, 1997 representing an average cost of funds of 4.55%. Total interest
expense for the quarter ended March 31, 1996 was $6.2 million which represented
an average cost of funds of 4.38%. The increase in interest expense was caused
primarily by an increase in the volume of interest-bearing deposits. The
increase in the cost of funds was caused by an increase in the volume of
higher-costing certificates of deposit.
Net Interest Income. Net interest income totalled $6.7 million for the quarter
ended March 31, 1997 compared with $6.4 million for the quarter ended March 31,
1996. The net interest rate spread for the quarter ended March 31, 1997 was
2.92% compared with 3.41% for the quarter ended March 31, 1996. The net
interest margin was 3.46% for the first quarter of 1997 compared with a net
interest margin of 3.95% for the first quarter of 1996. The following table
summarizes the yields for the major components of net interest income for the
periods presented:
Comparative Interest Spread Table
For the quarters ended
<TABLE>
<CAPTION>
3/31/97 3/31/96
------- -------
<S> <C> <C>
Interest Earning Assets:
Loans 8.13% 8.44%
Investment Securities 6.86% 6.37%
Federal Funds Sold 5.27% 5.27%
Yield on Interest Earning Assets 7.47% 7.79%
Interest Bearing Liabilities:
Deposits 4.35% 4.05%
Borrowings 6.63% 7.11%
Cost of Interest Bearing Liabilities 4.55% 4.38%
Net Interest Rate Spread 2.92% 3.41%
Net Interest Margin 3.46% 3.95%
</TABLE>
Provision for Loan Losses. The provision to the allowance for loan losses for
the quarter ended March 31, 1997 totalled $50,000 compared with a provision of
$700,000 for the first quarter of 1996.
Investment Securities Gains (Losses), Net. The Company recorded $11,000 of net
realized investment security gains during the quarter ended March 31, 1997
compared with net realized security gains of $159,000 booked during the year
earlier period.
Other Operating Income. Other operating income totalled $515,000 for the first
quarter of 1997 compared with $506,000 in the first quarter of 1996. The
following table comparatively summarizes the categories of other operating
income:
<TABLE>
<CAPTION>
OTHER OPERATING INCOME: March 31,
(Dollars in thousands) 1997 1996
----- -----
<S> <C> <C>
Deposit account fees $ 398 $ 392
Customer service fees 34 32
Fees from savings bank life insurance sales 72 65
Loan and loan servicing fees 9 12
Other fees 2 5
---------------
Total Other Operating Income $ 515 $ 506
===============
</TABLE>
Other Operating Expenses. Total operating expenses, including OREO operations,
equalled $3.4 million for the first quarter of 1997 compared with total
operating expenses of $3.5 million for the first quarter of 1996. The following
table comparatively illustrates the categories of operating expenses:
<TABLE>
<CAPTION>
OPERATING EXPENSES:
(Dollars in thousands) 3/31/97 3/31/96
------- -------
<S> <C> <C>
Salaries and Benefits $ 1,649 $ 1,765
Professional Services 583 516
Occupancy and Equipment 465 674
FDIC Assessment 18 38
Net Cost (Gain) of OREO operations 51 (154)
Restructure Expense, net -- 158
Other Operating Expenses 622 531
-------------------
Total Operating Expenses $ 3,388 $ 3,528
===================
</TABLE>
DIME FINANCIAL CORPORATION AND SUBSIDIARY
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
a. The following exhibits are included in this report:
Exhibit No. Description
- ----------- -----------
11. Statement of Computation of Per Share Earnings
Incorporated by reference to note 2 to Consolidated Financial
Statements for the quarters ended March 31, 1997 and 1996. (See
pages 6-10 for notes to Consolidated Financial Statements.)
19. Report furnished to the Company's shareholders for the quarter ended
March 31, 1997.
b. No report on form 8-K has been filed by the registrant with the
Securities and Exchange Commission during the quarter ended
March 31, 1997.
27. Financial Data Schedule
DIME FINANCIAL CORPORATION AND SUBSIDIARY
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIME FINANCIAL CORPORATION
Date: May 9, 1997 /s/ Richard H. Dionne
-------------------------------------------------
Richard H. Dionne
President & Chief Executive Officer
Date: May 9, 1997 /s/ Albert E. Fiacre, Jr.
-------------------------------------------------
Albert E. Fiacre, Jr.
Senior Vice President and Chief Financial Officer
Date: May 9, 1997 /s/ Robert P. Simon
-------------------------------------------------
Robert P. Simon
Vice President & Comptroller
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11. Statement of Computation of Per Share Earnings
Incorporated by reference to note 2 to Consolidated
Financial Statements for the quarters ended March 31,
1997 and 1996. (See pages 6-10 for Notes to Consolidated
Financial Statements.)
19. Report furnished to the Company's shareholders for the
quarter ended March 31, 1997.
27. Financial Data Schedule
Dime Financial P.O. Box 700
Corporation Wallingford, CT 06492
(203) 269-8881
Dime Financial Corporation - First Quarter Results
Dime Financial Corporation ("DFC") (NASDAQ: DIBK) announced net income of
$3.8 million or $0.71 per share on a fully diluted basis for the quarter ended
March 31, 1997 compared with net income of $2.9 million or $0.56 per share on a
fully diluted basis for the quarter ended March 31, 1996. In addition, the
Board of Directors announced an increase in the quarterly dividend payment from
$0.09 per share to $0.10 per share payable on May 23, 1997 to shareholders of
record on May 9, 1997. The change in net income from the prior year was
primarily the result of a reduced provision to the allowance for loan losses,
improvement in net interest income and reduced operating expenses, partially
offset by a decrease in gains recognized on the sale of investment securities.
The provision to the allowance for loan losses totalled $50,000 for the quarter
ended March 31, 1997 compared with a provision of $700,000 for the quarter
ended March 31, 1996. The change in the provision from 1996 reflects a
reduction in non-performing loans and total loans outstanding as well as
improvement in the coverage ratios of the allowance for loan losses to
outstanding loans and to non-performing loans.
Net interest income, the key component of the Company's earnings,
totalled $6.7 million for the quarter ended March 31, 1997 representing a net
interest spread of 2.92% and a net interest margin of 3.46% compared with net
interest income of $6.4 million for the quarter ended March 31, 1996
representing a net interest spread of 3.41% and a net interest margin of 3.95%.
The increase in net interest income was primarily the result of a larger volume
of interest-earning assets partially offset by a decrease in the net interest
rate spread and net interest margin. The decrease in the net interest rate
spread and net interest margin was due primarily to the combination of a higher
cost of deposits, a lower loan yield, and a greater volume of interest-earning
cash, on average, as a percentage of assets.
Total operating expenses, excluding the net cost of operations of other
real estate owned ("OREO operations"), equalled $3.3 million for the quarter
ended March 31, 1997 compared with operating expenses of $3.7 million for the
quarter ended March 31, 1996. OREO operations equalled a net expense of $51,000
for the first quarter of 1997 compared with a net gain of $154,000 for the
first quarter of 1996. The reduction in operating expenses from the prior year
quarter was primarily the result of a reduction in salary and employee benefit
costs due to reduced staffing levels and a reduction in occupancy and equipment
expenses due to the outsourcing of data processing operations.
Total assets were $814.4 million at March 31, 1997 compared with total
assets of $671.4 million at March 31, 1996, representing an increase of $143.0
million or 21%. In addition to the increase in total assets, the composition of
the Company's balance sheet continued to change with an increase in the
investment securities portfolio and a decrease in total loans outstanding. At
March 31, 1997, investment securities rose 94% to $367.5 million compared with
$189.7 million at March 31, 1996. The investment securities portfolio at March
31, 1997 consisted entirely of instruments issued by the U.S. Treasury, U.S.
government agencies, U.S. government-sponsored agencies, or AAA rated
non-agencies. Total loans, net of the allowance for loan losses, equalled
$380.1 million at March 31, 1997 compared with $430.0 million at March 31,
1996, a decrease of nearly 12%. The reduction in loans was primarily the result
of continued low loan demand.
The first quarter of 1997 was marked by continued significant growth in
the Company's deposit base. Increased marketing efforts were undertaken in
order to maximize deposit flows during the Individual Retirement Account
("IRA") season in addition to offering competitive rates on non-IRA deposit
accounts. Total deposits rose during the first quarter of 1997 to $687.1
million at March 31, 1997 an increase of $61.1 million or 10% over December 31,
1996 and an increase of $132.4 million or 24% over March 31, 1996.
Non-performing loans equalled $2.7 million at March 31, 1997 representing a
decrease of $3.3 million or 55% from March 31, 1996. Other real estate owned
("OREO") increased and totalled $916,000 at March 31, 1997 compared with OREO
of $608,000 at March 31, 1996. Total non-performing assets were $3.6 million at
March 31, 1997 compared with $6.6 million at March 31, 1996. Non-performing
assets equalled 0.44% of total assets at March 31, 1997 compared with 0.99% of
total assets at March 31, 1996. The allowance for loan losses at March 31, 1997
totalled $12.7 million and equalled 3.23% of total loans outstanding compared
with $13.2 million at March 31, 1996 representing 2.98% of total loans
outstanding.
Earnings per share is reported on a primary and fully diluted basis.
These calculations include the effects of common stock equivalents. Potential
dilution from unexercised stock options exceeded the 3% materiality test at
March 31, 1997. Accordingly, unexercised stock options are considered common
stock equivalents. The prior year comparison has been restated to reflect this
calculation. Average common shares outstanding during the quarter ended March
31, 1997 totalled 5,134,714 compared with 5,023,206 for the quarter ended March
31, 1996. Average common shares including common stock equivalents during the
first quarter of 1997 equalled 5,308,807 compared with 5,100,913 during the
first quarter of 1996.
Total shareholders' equity was $63.8 million at March 31, 1997 compared with
shareholders' equity of $53.4 million at March 31, 1996. The Tier 1 regulatory
capital ratio at March 31, 1997 for Dime was 8.31% compared with a Tier 1
regulatory capital ratio of 7.71% at March 31, 1996. The risk-based capital
ratio of Dime at March 31, 1997 equalled 19.92% compared with a risk-based
capital ratio of 17.22% at March 31, 1996. These ratios are in excess of the
regulatory minimums. Book value per share equalled $12.41 at March 31, 1997
compared with $10.63 at March 31, 1996.
Dime Financial Corporation and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Condition
- -----------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(In thousands, except share data) 1997 1996 1996
--------- ------------ ---------
<S> <C> <C> <C>
Assets
Cash and amounts due from banks $ 9,824 $ 10,430 $ 12,148
Interest bearing deposits 63 149 293
Federal funds sold 27,615 21,296 12,546
Investment securities available for sale (a) 24,806 26,233 4,018
Investment securities held to maturity (b) 133,279 120,257 64,861
Mortgage-backed securities available for sale (c) 209,370 158,728 120,843
Investment in Federal Home Loan Bank of Boston stock 7,192 7,192 7,192
Loans receivable:
Mortgage Loans:
Residential real estate - owner occupied 281,902 287,654 320,387
Residential real estate - non-owner occupied 30,665 31,365 26,359
Commercial real estate 32,897 33,448 42,356
Builders' and Land 578 447 1,684
Commercial loans 3,414 3,075 4,223
Consumer loans 43,298 44,233 48,166
Allowance for loan losses (12,693) (12,929) (13,204)
---------------------------------------
Loans receivable, net 380,061 387,293 429,971
Premises and equipment, net 4,916 5,095 5,946
Accrued income receivable 6,353 5,214 5,011
Other real estate owned, net 916 1,210 608
Other assets 7,705 5,788 5,309
Excess of cost over fair value of net assets acquired 2,331 2,418 2,680
---------------------------------------
Total assets $ 814,431 $ 751,303 $ 671,426
=======================================
Liabilities and Shareholders' equity
Liabilities:
Deposits $ 687,149 $ 626,098 $ 554,715
Federal Home Loan Bank of Boston advances 58,000 58,000 58,000
Other liabilities 5,528 4,594 5,312
---------------------------------------
Total liabilities 750,677 688,692 618,027
---------------------------------------
Shareholders' equity:
Preferred stock; no par value; authorized 1,000,000
shares; none issued and outstanding -- -- --
Common stock; $1.00 par value; authorized 9,000,000
shares; issued 5,487,494 shares, 5,480,896 and
5,375,592, respectively; outstanding 5,138,887 shares,
5,129,289 and 5,023,985, respectively 5,487 5,481 5,375
Additional paid-in capital 52,283 52,209 51,133
Retained earnings 12,099 8,788 342
Net unrealized loss on available for sale securities (3,217) (969) (553)
Treasury stock --351,607 shares at cost (2,898) (2,898) (2,898)
---------------------------------------
Total shareholders' equity 63,754 62,611 53,399
---------------------------------------
Total liabilities and shareholders' equity $ 814,431 $ 751,303 $ 671,426
=======================================
<FN>
<F1> (a) amortized cost: $25,266 at March 31, 1997; $26,304 at December 31, 1996;
and $4,023 at March 31, 1996.
<F2> (b) market value: $130,820 at March 31, 1997; $119,238 at December 31, 1996;
and $64,187 at March 31, 1996.
<F3> (c) amortized cost: $213,784 at March 31, 1997; $160,124 at December 31, 1996;
and $121,676 at March 31, 1996.
</FN>
</TABLE>
Dime Financial Corporation and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Operations
- --------------------------------------------------------------------------------------
Three months ended March 31,
(In thousands, except share data) 1997 1996
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 8,055 $ 9,508
Interest-bearing deposits 1 12
Federal funds sold 309 210
Interest and dividends on investments:
U.S. treasury securities 57 62
U.S. government agency obligations 2,325 992
REMIC/CMO's 1,321 833
Non-agency REMIC/CMO's 1,134 68
Mortgage-backed securities 635 751
Asset-backed securities 248 --
Other bonds and notes -- 39
Dividends on Federal Home Loan Bank of Boston Stock 114 113
----------------------
Total Interest Income 14,199 12,588
----------------------
Interest Expense
Interest to depositors 6,551 5,132
Interest on Federal Home Loan Bank of Boston advances 962 1,042
----------------------
Total Interest Expense 7,513 6,174
----------------------
Net Interest Income 6,686 6,414
Provision for loan losses 50 700
----------------------
Net interest income after provision 6,636 5,714
Investment securities gains, net 11 159
Other operating income 515 506
----------------------
Income before other operating expenses 7,162 6,379
----------------------
Other Operating Expenses:
Salaries and employee benefits 1,649 1,765
Professional and other services 583 516
Bank occupancy and equipment expense 465 674
FDIC Assessment 18 38
Net (benefit) cost of operation of other real estate 51 (154)
Restructure expense, net -- 158
Other operating expenses 622 531
----------------------
Total Other Operating Expenses 3,388 3,528
----------------------
Income before income taxes 3,774 2,851
Income tax expense (benefit) -- (8)
----------------------
Net income $ 3,774 $ 2,859
======================
Primary Earnings per Share $ 0.71 $ 0.56
Weighted Average Common Shares and Common Stock
Equivalents outstanding 5,309 5,097
Fully Diluted Earnings per Share $ 0.71 $ 0.56
Weighted Average Common Shares and Common Stock
Equivalents outstanding 5,309 5,101
</TABLE>
<TABLE>
<CAPTION>
Selected Financial Highlights
- ----------------------------------------------------------------------------
Three months ended March 31,
(Dollars in thousands) 1997 1996
-------- --------
<S> <C> <C>
Average yield on interest-earning assets 7.47% 7.79%
Average cost of funds 4.55% 4.38%
Net interest rate spread 2.92% 3.41%
Net interest margin 3.46% 3.95%
Net income $ 3,776 $ 2,859
Return on average assets 1.94% 1.73%
Return on average equity 23.84% 21.80%
Leverage capital ratio 8.33% 7.72%
Fully diluted earnings per share $ 0.71 $ 0.56
Book value per share $ 12.41 $ 10.63
</TABLE>
Dime Financial Corporation and Subsidiary
<TABLE>
<CAPTION>
Selected Financial Data
- ----------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(in thousands) 1997 1996 1996
--------- ------------ ---------
<S> <C> <C> <C>
Non-Performing Asset Information:
Non-Performing Loans:
Residential Real Estate - owner occupied $ 955 $ 862 $ 2,316
Residential Real Estate - non-owner occupied 476 510 1,376
Commercial Real Estate 865 788 1,536
--------------------------------------
Total Mortgage Loans 2,296 2,160 5,228
Commercial Loans 229 303 373
Consumer Loans 172 107 409
--------------------------------------
Total Non-Performing Loans 2,697 2,570 6,010
Other Real Estate Owned 916 1,210 868
Less: Reserve for OREO Losses -- -- 260
--------------------------------------
Total OREO, net 916 1,210 608
Total Non-Performing Assets $ 3,613 $ 3,780 $ 6,618
======================================
<CAPTION>
- ----------------------------------------------------------------------------------------------
March 31, December 31, March 31,
(in thousands) 1997 1996 1996
--------- ------------ ---------
<S> <C> <C> <C>
Average Balance Information For the quarters ended:
Interest earning assets:
Gross loans $ 396,407 $ 407,780 $ 450,462
Investment securities 339,921 271,856 179,356
Federal funds sold / interest bearing deposits 23,566 22,982 16,348
--------------------------------------
Total interest earning assets 759,894 702,618 646,166
Total Assets $ 776,981 $ 716,892 $ 662,414
======================================
Interest bearing liabilities:
Interest bearing deposits $ 610,510 $ 552,925 $ 509,063
Borrowings 58,000 58,000 58,000
--------------------------------------
Total interest bearing liabilities 668,510 610,925 567,063
Total Liabilities 713,677 655,992 609,961
Shareholders' Equity 63,304 60,900 52,453
Total Liabilities & Shareholders' Equity $ 776,981 $ 716,892 $ 662,414
======================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,824
<INT-BEARING-DEPOSITS> 63
<FED-FUNDS-SOLD> 27,615
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 234,176
<INVESTMENTS-CARRYING> 133,279
<INVESTMENTS-MARKET> 130,820
<LOANS> 392,754
<ALLOWANCE> 12,693
<TOTAL-ASSETS> 814,431
<DEPOSITS> 687,149
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,528
<LONG-TERM> 58,000
0
0
<COMMON> 5,487
<OTHER-SE> 58,267
<TOTAL-LIABILITIES-AND-EQUITY> 814,431
<INTEREST-LOAN> 8,055
<INTEREST-INVEST> 5,720
<INTEREST-OTHER> 424
<INTEREST-TOTAL> 14,199
<INTEREST-DEPOSIT> 6,551
<INTEREST-EXPENSE> 7,513
<INTEREST-INCOME-NET> 6,686
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 3,388
<INCOME-PRETAX> 3,774
<INCOME-PRE-EXTRAORDINARY> 3,774
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,774
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
<YIELD-ACTUAL> 3.46
<LOANS-NON> 2,697
<LOANS-PAST> 147
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,929
<CHARGE-OFFS> 389
<RECOVERIES> 103
<ALLOWANCE-CLOSE> 12,693
<ALLOWANCE-DOMESTIC> 12,693
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
