UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-27782
DIME COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3297463
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
209 HAVEMEYER STREET, BROOKLYN, NEW YORK 11211
(Address of principal executive offices) (Zip Code)
(718) 782-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) YES X NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING, OCTOBER 31, 2000
$.01 Par Value 11,530,916
-2-
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Statements of Condition at September 30, 2000
(Unaudited) and June 30, 2000 3
Consolidated Statements of Operations for the Three Months
Ended September 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months Ended September 30, 2000 and
Comprehensive Income for the Three Months Ended September
30, 2000 and 1999 (Unaudited) 5
Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 2000 and 1999 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
Financial Condition and Results of Operations 8-17
Item 3 Quantitative and Qualitative Disclosure About
Market Risk 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibits
EXPLANATORY NOTE: This Form 10-Q contains certain "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
may be identified by the use of such words as "believe," "expect," anticipate,"
"should," "planned," "estimated" and "potential". Examples of forward looking
statements include, but are not limited to, estimates with respect to the
financial condition, results of operations and business of the Company that are
subject to various factors which could cause actual results to differ
materially from these estimates. These factors include: changes in general,
economic and market conditions, and legislative and regulatory conditions, or
the development of an adverse interest rate environment that adversely affects
the interest rate spread or other income anticipated from the Company's
operations and investments.
As used in this Form 10-Q, "we" and "us" and "our" refer to Dime Community
Bancshares, Inc. and/or its consolidated subsidiaries, depending on the
context.
-3-
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
AT SEPTEMBER 30,
2000 AT JUNE 30,
(UNAUDITED) 2000
--------------- ------------
ASSETS:
Cash and due from banks $17,839 $15,371
Investment securities held to maturity (estimated market value of $17,502
and $17,351 at September 30, 2000 and June 30, 2000, respectively) 17,553 17,489
Investment securities available for sale:
Bonds and notes (amortized cost of $107,809 and $109,057 at September
30, 2000 and June 30, 2000, respectively) 105,454 105,316
Marketable equity securities (historical cost of $14,963 and $14,948 at
September 30, 2000 and June 30, 2000, respectively) 16,562 15,805
Mortgage backed securities held to maturity (estimated market value of
$11,745 and $13,263 at September 30, 2000 and June 30, 2000,
respectively) 11,739 13,329
Mortgage backed securities available for sale (amortized cost of $421,305
and $438,160 at September 30, 2000 and June 30, 2000, respectively) 416,468 429,361
Federal funds sold 18,340 9,449
Loans:
Real estate 1,758,759 1,713,552
Other loans 7,651 7,648
Less: Allowance for loan losses (14,839) (14,785)
Total loans, net 1,751,571 1,706,415
Loans held for sale - 100
Premises and fixed assets, net of accumulated depreciation 14,773 14,771
Federal Home Loan Bank of New York Capital Stock 42,650 42,423
Other real estate owned, net 381 381
Goodwill 59,100 60,254
Other assets 70,170 71,675
--------------- ------------
TOTAL ASSETS $2,542,600 $2,502,139
=============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $1,242,781 $1,219,148
Escrow and other deposits 45,357 35,161
Securities sold under agreements to repurchase 428,416 434,027
Federal Home Loan Bank of New York advances 557,500 555,000
Subordinated notes payable 25,000 25,000
Other liabilities 31,967 26,634
--------------- ------------
TOTAL LIABILITIES 2,331,021 2,294,970
--------------- ------------
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par, 9,000,000 shares authorized,
none outstanding at September 30, 2000 and June 30, 2000) - -
Common stock ($0.01 par, 45,000,000 shares authorized, 14,583,765 shares
issued at September 30, 2000 and June 30, 2000, respectively, and
11,544,174 shares and 11,664,174 shares outstanding at
September 30, 2000 and June 30, 2000, respectively) 145 145
ADDITIONAL PAID-IN CAPITAL 150,127 150,034
RETAINED EARNINGS 137,127 133,769
ACCUMULATED OTHER COMPREHENSIVE LOSS (3,084) (6,309)
UNALLOCATED COMMON STOCK OF EMPLOYEE STOCK OWNERSHIP PLAN (6,727) (6,853)
UNEARNED COMMON STOCK OF RECOGNITION AND RETENTION PLAN (3,842) (4,324)
COMMON STOCK HELD BY BENEFIT MAINTENANCE PLAN (2,449) (1,790)
TREASURY STOCK, AT COST (3,039,591 SHARES AND 2,919,591 SHARES AT
SEPTEMBER 30, 2000 AND JUNE 30, 2000, RESPECTIVELY) (59,718) (57,503)
--------------- ------------
TOTAL STOCKHOLDERS' EQUITY 211,579 207,169
--------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,542,600 $2,502,139
=============== ============
See notes to consolidated financial statements
-4-
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
2000 1999
--------- --------
INTEREST INCOME:
Loans secured by real estate $33,321 $27,003
OTHER LOANS 178 149
INVESTMENT SECURITIES 2,175 2,585
MORTGAGE-BACKED SECURITIES 7,388 8,099
OTHER 980 773
--------- --------
TOTAL INTEREST INCOME 44,042 38,609
--------- --------
INTEREST EXPENSE:
Deposits and escrow 12,015 11,224
Borrowed funds 16,180 10,825
--------- --------
TOTAL INTEREST EXPENSE 28,195 22,049
NET INTEREST INCOME 15,847 16,560
PROVISION FOR LOAN LOSSES 60 60
--------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 15,787 16,500
--------- --------
NON-INTEREST INCOME:
Service charges and other fees 965 976
Net gain on sales and redemptions of securities
and other assets 35 132
Net gain (loss) on sales of loans 2 (9)
Other 800 1,004
--------- --------
TOTAL NON-INTEREST INCOME 1,802 2,103
--------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 3,296 3,424
ESOP and RRP compensation expense 692 1,129
Occupancy and equipment 972 937
Federal deposit insurance premiums 63 115
Data processing costs 424 432
Goodwill amortization 1,154 1,154
Other 1,766 1,695
--------- --------
TOTAL NON-INTEREST EXPENSE 8,367 8,886
--------- --------
INCOME BEFORE INCOME TAXES 9,222 9,717
INCOME TAX EXPENSE 3,649 4,157
--------- --------
NET INCOME $5,573 $5,560
========= ========
EARNINGS PER SHARE:
BASIC $0.52 $0.48
========= ========
DILUTED $0.50 $0.45
========= ========
See notes to consolidated financial statements
-5-
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (UNAUDITED) (IN THOUSANDS)
FOR THE THREE
MONTHS ENDED
SEPTEMBER 30, 2000
-----------------------
COMMON STOCK (PAR VALUE $0.01):
Balance at beginning of period $145
-----------------------
Balance at end of period 145
-----------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period 150,034
Stock options exercised 9
Amortization of excess fair value over cost - ESOP stock 84
-----------------------
Balance at end of period 150,127
-----------------------
RETAINED EARNINGS:
Balance at beginning of period 133,769
Net income for the period 5,573
Cash dividends declared and paid (2,215)
-----------------------
Balance at end of period 137,127
-----------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET:
Balance at beginning of period (6,309)
Change in unrealized loss on securities available for sale
during the period, net of deferred taxes 3,225
Balance at end of period (3,084)
EMPLOYEE STOCK OWNERSHIP PLAN:
Balance at beginning of period (6,853)
Amortization of earned portion of ESOP stock 126
-----------------------
Balance at end of period (6,727)
-----------------------
RECOGNITION AND RETENTION PLAN:
Balance at beginning of period (4,324)
Amortization of earned portion of RRP stock 482
-----------------------
Balance at end of period (3,842)
-----------------------
BENEFIT MAINTENANCE PLAN:
Balance at beginning of period (1,790)
Common stock acquired by BMP (659)
-----------------------
Balance at end of period (2,449)
-----------------------
TREASURY STOCK:
Balance at beginning of period (57,503)
Purchase of 120,000 shares, at cost (2,215)
-----------------------
Balance at end of period (59,718)
-----------------------
STATEMENTS OF COMPREHENSIVE INCOME:
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------- -------------------
Net Income $5,573 $5,560
Reclassification adjustment for securities sold, net of taxes
of $54 during the three months ended September 30, 1999. - (63)
Net unrealized securities gains (losses) arising during the
period, net of deferred taxes of $2,747 and $(74) during the
three months ended September 30, 2000 and 1999, respectively 3,225 (87)
------------------- -------------------
Total comprehensive income $8,798 $5,410
=================== ===================
See notes to consolidated financial statements
-6-
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
2000 1999
-------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES: (In THOUSANDS)
Net Income $5,573 $5,560
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net gain on investment and mortgage backed securities sold - (117)
Net loss (gain) on sale of loans held for sale (2) 9
Net gain on sale of other assets (35) (15)
Net depreciation and amortization 168 495
ESOP and RRP compensation expense 692 1,129
Provision for loan losses 60 60
Goodwill amortization 1,154 1,154
(Increase) decrease in loans held for sale 102 (178)
Increase in other assets and other real estate owned (1,207) (1,818)
Increase in other liabilities 5,333 3,060
-------------------- ----------------
Net cash provided by operating activities 11,838 9,339
-------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in Federal funds sold (8,891) (1,974)
Proceeds from maturities of investment securities available for sale 1,220 7,527
Proceeds from calls of investment securities held to maturity - 10,000
Proceeds from calls of investment securities available for sale - 2,400
Proceeds from sales of investment securities available for sale - 341
Purchases of investment securities available for sale (10) (17,443)
Purchases of mortgage backed securities available for sale - (9,799)
Principal collected on mortgage backed securities held to maturity 1,590 2,624
Principal collected on mortgage backed securities available for sale 16,773 25,357
Net increase in loans (45,216) (102,800)
Purchases of fixed assets (247) (350)
Purchase of Federal Home Loan Bank stock (227) (7,110)
-------------------- ----------------
Net cash used in investing activities (35,008) (91,227)
-------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in due to depositors 23,633 (32,960)
Net (decrease) increase in escrow and other deposits 10,196 (4,534)
Proceeds from Federal Home Loan Bank of New York Advances 2,500 120,000
(Decrease) Increase in securities sold under agreements to repurchase (5,611) 679
Cash dividends paid (2,215) (1,800)
Stock options exercised and tax benefits of RRP 9 164
Purchase of common stock by Benefit Maintenance Plan and RRP (659) (959)
Purchase of treasury stock (2,215) (1,093)
-------------------- ----------------
Net cash provided by financing activities 25,638 79,497
-------------------- ----------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 2,468 (2,391)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 15,371 17,801
-------------------- ----------------
CASH AND DUE FROM BANKS, END OF PERIOD $17,839 $15,410
==================== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes - 3,054
==================== ================
Cash paid for interest 26,631 22,496
==================== ================
Transfer of loans to Other real estate owned - 315
==================== ================
Change in unrealized gain (loss) on available for sale securities,
net of deferred taxes 3,225 (150)
==================== ================
See notes to consolidated financial statements
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. NATURE OF OPERATIONS
Dime Community Bancshares, Inc. is a Delaware corporation organized in
December, 1995 at the direction of the Board of Directors of The Dime Savings
Bank of Williamsburgh (referred to as the Bank), a federally chartered savings
bank, for the purpose of acquiring all of the capital stock of the Bank issued
in the Bank's conversion from a federal mutual savings bank to a federal stock
savings bank on June 26, 1996.
The Bank has been, and intends to continue to be, a community-oriented
financial institution providing financial services and loans for housing within
its market areas. We maintain our headquarters in the Williamsburgh section of
the borough of Brooklyn. As of September 30, 2000, the Bank has seventeen
additional offices located in the boroughs of Brooklyn, Queens, and the Bronx,
and in Nassau County.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In our opinion, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of our financial condition as of September
30, 2000, the results of operations for the three-month periods ended September
30, 2000 and 1999, cash flows for the three months ended September 30, 2000 and
1999, changes in stockholders' equity for the three months ended September 30,
2000 and comprehensive income for the three months ended September 30, 2000 and
1999. The results of operations for the three-month period ended September 30,
2000, are not necessarily indicative of the results of operations for the
remainder of the year. Certain information and note disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (referred to as
U.S. GAAP) have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Areas in the accompanying financial statements where
estimates are significant include the allowance for loans losses and the
carrying value of other real estate.
These consolidated financial statements should be read in conjunction with
our audited consolidated financial statements as of and for the year ended June
30, 2000 and notes thereto.
3. TREASURY STOCK
During the three months ended September 30, 2000, we repurchased 120,000
shares of our common stock into treasury. The average price of the treasury
shares acquired was $18.45 per share, and all shares have been recorded at the
acquisition cost.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES - In September 2000, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," ("SFAS 140") replacing Financial Accounting Standards Board
Statement No. 125.
-8-
SFAS 140 revises the standard for accounting and reporting
for transfers and servicing of financial assets and extinguishments of
liabilities. The new standard is based on consistent application of a
financial-components approach that recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered and derecognizes liabilities when
extinguished. SFAS 140 provides consistent guidelines for distinguishing
transfers of financial assets from transfers that are secured borrowings. The
Company is required to adopt SFAS 140 by March 31, 2001. SFAS 140 is not
expected to have a material impact upon the Company's consolidated financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Dime Community Bancshares, Inc. is a Delaware corporation and parent
corporation of The Dime Savings Bank of Williamsburgh (referred to as DSBW or
the Bank), a federally chartered stock savings bank. We were organized in
December, 1995 at the direction of the Board of Directors of the Bank for the
purpose of acquiring all of the capital stock of the Bank issued in the
conversion of the Bank from a federal mutual savings bank to a federal stock
savings bank.
SELECTED FINANCIAL HIGHLIGHTS AND OTHER DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
AT OR FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
----------------------------------------
2000 1999
------------- ------------
PERFORMANCE AND OTHER SELECTED RATIOS:
Return on Average Assets 0.89% 0.98%
Return on Average Stockholders' Equity 10.69 10.51
Core Return on Average Stockholders' Equity <F1> 10.63 9.72
Stockholders Equity to Total Assets 8.32 9.18
Tangible Equity to Total Tangible Assets 6.12 6.60
Loans to Deposits at End of Period 142.13 122.42
Loans to Earning Assets at End of Period 73.75 67.05
Average Interest Rate Spread 2.33 2.67
Net Interest Margin 2.68 3.07
Average Interest Earning Assets to average interest 108.20 110.39
bearing liabilities
Core Non-interest Expense to Average Assets <F2> 1.11 1.33
Core Efficiency Ratio <F2> 39.79 40.59
Effective Tax Rate 39.57 42.78
Dividend payout ratio 38.00 33.33
Average Tangible Equity $152,113 $146,428
PER SHARE DATA:
Reported EPS (Diluted) 0.50 0.45
Core EPS (Diluted) <F1> 0.50 0.42
Cash dividends per share 0.19 0.15
Stated Book Value 18.33 16.86
Tangible Book Value 13.17 11.78
CASH EARNINGS DATA <F3>:
Cash Earnings 7,625 8,049
Cash EPS (Diluted) 0.68 0.66
Core Cash EPS (Diluted) <F1> 0.68 0.62
Cash Return on Average Assets 1.21% 1.42%
(TABLE CONTINUED ON NEXT PAGE)
-9-
AT OR FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
----------------------------------------
2000 1999
------------- ------------
Cash Return on Average Stockholders' Equity 14.63 15.21
Core Cash Return on Average Stockholders' Equity <F1> 14.57 14.42
Cash Non-interest Expense to Average Assets <F4> 1.00 1.13
Cash Efficiency Ratio <F4> 35.86 34.50
ASSET QUALITY SUMMARY:
Net charge-offs $6 $48
Non-performing Loans 4,418 3,201
Other real estate owned 381 1,083
Non-performing Loans/Total Loans 0.25% 0.22%
Non-performing Assets/Total Assets 0.19 0.18
Allowance for Loan Loss/Total Loans 0.84 1.02
Allowance for Loan Loss/Non-performing Loans 335.88 471.51
REGULATORY CAPITAL RATIOS: (BANK ONLY)
Tangible capital 5.95% 5.82%
Leverage capital 5.95 5.82
Total risk-based capital 11.51 11.15
EARNINGS TO FIXED CHARGES RATIOS
Including interest on deposits 1.33x 1.44x
Excluding interest on deposits 1.57 1.90
<FN>
<F1> Amounts exclude gains and losses on sales of assets, and other significant non-
recurring income or expense items.
<F2> In calculating these ratios, amortization expense related to goodwill and
core deposit intangibles are excluded from non-interest expense. The actual
efficiency ratio and ratio of non-interest expense to average assets were
47.51% and 1.33%, respectively, for the three months ended September 30,
2000, and 47.93% and 1.57%, respectively, for the three months ended
September 30, 1999.
<F3> Amounts exclude non-cash expenses related to goodwill and core deposit
intangible amortization and compensation expense related to stock benefit
plans.
<F4> In calculating these ratios, non-interest expense excludes non-cash
expenses related to goodwill and core deposit intangible amortization and
compensation expense related to stock benefit plans.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of funds are deposits, proceeds from principal and
interest payments on loans, mortgage-backed securities and investments,
borrowings, and, to a lesser extent, proceeds from the sale of fixed-rate
mortgage loans to the secondary mortgage market. While maturities and scheduled
amortization of loans and investments are a predictable source of funds,
deposit flows, mortgage prepayments and mortgage loan sales are influenced by
interest rates, economic conditions and competition.
Our primary investing activities are the origination of multi-family and
single-family mortgage loans, and the purchase of mortgage-backed and other
securities. Recent increases in interest rates have resulted in a decline in
our loan origination activity. During the three months ended September 30,
2000, our loan originations totaled $68.1 million compared to $166.2 million
for the three months ended September 30, 1999. Purchases of mortgage-backed
and other securities totaled $10,000 for the three months ended September 30,
2000 compared to $27.2 million for the three months ended September 30, 1999.
Our purchases and sales of scurities have historically been and continue to be
discretionary in nature.
Funding for loan originations during the most recent quarter was obtained
primarily from principal repayments on loans and mortgage-backed securities,
deposit growth and maturities of investment securities. Principal repayments on
real estate loans and mortgage-backed securities totaled $43.5 million
-10-
during the three months ended September 30, 2000, considerably lower than the
$91.1 million of principal repayments received during the three months ended
September 30, 1999. This reduction resulted from recent interest rate
increases which have significantly slowed principal repayments on both real
estate loans and mortgage-backed securities, particularly loan prepayments.
Maturities and calls of investment securities totaled $1.2 million during the
three months ended September 30, 2000, and $19.9 million during the nine months
ended September 30, 1999.
Deposits increased $23.6 million during the three months ended September 30,
2000, compared to a decrease of $33.0 million during the three months ended
September 30, 1999. The increase in deposits during the three months ended
September 30, 2000, primarily reflects the growth of money market accounts
during this period as a result of an ongoing money market promotion. The
decrease in deposits during the three months ended September 30, 1999,
reflected the runoff of higher-cost certificate of deposit accounts which were
gathered from rate promotions during the fiscal year ended June 30, 1997.
Deposit flows are affected by the level of interest rates, the interest rates
and products offered by local competitors, and other factors. Certificates of
deposit which are scheduled to mature in one year or less from September 30,
2000 totaled $430.8 million. Based upon our current pricing strategy and
deposit retention experience, we believe that we will retain a significant
portion of such deposits.
Stockholders' equity increased $4.4 million during the three months ended
September 30, 2000. This increase resulted from net income of $5.6 million,
amortization of stock benefit plans of $692,000 and a decline in the
accumulated other comprehensive loss of $3.2 million related to an increase in
the market value of investment and mortgage backed securities available for
sale. Offsetting these increases, was treasury stock repurchases of $2.2
million and cash dividends of $2.2 million.
As of September 30, 2000, we had 13,858 shares remaining to be repurchased
under our Sixth Stock Repurchase Program authorized in April, 2000. In July,
2000, we authorized a Seventh Stock Repurchase Program which permits the
repurchase of up to 576,516 shares of our common stock into treasury. No
deadline has been established for the completion of the Sixth or Seventh Stock
Repurchase Programs. Based upon the closing market price of $24.75 per share
for our common stock as of September 30, 2000, we would utilize approximately
$14.6 million in funds in order to repurchase all of the remaining authorized
shares under the Sixth and Seventh Stock Repurchase Programs.
On October 19, 2000, we declared a cash dividend of $0.19 per common share
to all shareholders of record on October 31, 2000. This dividend was paid on
November 8, 2000.
The Bank is required to maintain a minimum average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings by the Office of Thrift Supervision (referred to as the OTS)
regulations. The minimum required liquidity ratio is currently 4.0%. At
September 30, 2000, the Bank's liquidity ratio was 11.4%. The levels of the
Bank's short-term liquid assets are dependent on the Bank's operating,
financing and investing activities during any given period. The Bank's
liquidity ratio fluctuates on a daily basis due primarily to deposit flows.
We monitor our liquidity position on a daily basis. Excess short-term
liquidity is invested in overnight federal funds sales and various money market
investments. In the event that we should require funds beyond our ability to
generate them internally, additional sources of funds are available through the
use of the Bank's $742.7 million borrowing limit at the FHLBNY. At September
30, 2000, the Bank had $575.0 million in short- and medium-term advances
outstanding at the FHLBNY, and a remaining borrowing limit of $167.7 million.
The Bank is subject to minimum capital regulatory requirements imposed by
the OTS, which requirements are, as a general matter, based on the amount and
composition of an institution's assets. Tangible capital must be at least 1.50%
of total tangible assets and total risk-based capital must be at
-11-
least 8.0% of risk-weighted assets. In addition, insured institutions in
the strongest financial management condition are required to maintain Tier 1
capital of not less than 3.0% of total assets (the "leverage capital ratio").
For all other banks, the minimum leverage capital requirement is 4.0%,
unless a higher leverage capital ratio is warranted by the particular
circumstances or risk profile of the institution. At September 30, 2000,
the Bank was in compliance with all applicable regulatory capital
requirements. Tangible capital totaled $143.9 million, or 5.95% of total
tangible assets, leverage capital was 5.95% of adjusted assets, and total
risk-based capital was 11.51% of risk weighted assets. In addition,
at September 30, 2000, the Bank was considered "well-capitalized" for all
regulatory purposes.
ASSET QUALITY
Non-performing loans (loans past due 90 days or more as to principal or
interest) totaled $4.4 million at both September 30, 2000 and June 30, 2000.
However, the Bank had 24 loans totaling $4.0 million delinquent 60-89 days at
September 30, 2000, as compared to 25 such delinquent loans totaling $754,000
at June 30, 2000. This increase resulted primarily from the addition of one
non-residential real estate loan totaling approximately $3.0 million to this
category during this period. The majority of the non-performing loans and
loans delinquent 60-89 are represented by FHA/VA mortgage and consumer loans
which possess small outstanding balances.
Under Accounting Priciples Generally Accepted in the United States of
America (referred to as U.S. GAAP), we are required to account for certain loan
modifications or restructurings as ''troubled-debt restructurings.'' In
general, the modification or restructuring of a debt constitutes a troubled-
debt restructuring if we, for economic or legal reasons related to the
borrower's financial difficulties, grant a concession to the borrower that we
would not otherwise consider. We had one loan classified as troubled-debt
restructuring at both September 30, 2000 and June 30, 2000, totaling $700,000,
which is on accrual status as it has been performing in accordance with the
restructuring terms for over one year. The current regulations of the Office of
Thrift Supervision require that troubled-debt restructurings remain classified
as such until either the loan is repaid or returns to its original terms.
SFAS 114 provides guidelines for determining and measuring impairment in
loans. For each loan that we determine to be impaired, impairment is measured
by the amount the carrying balance of the loan, including all accrued interest,
exceeds the estimate of fair value. A specific reserve is established within
the allowance for loan losses. Generally, we consider non-performing loans to
be impaired loans. The recorded investment in loans deemed impaired was
approximately $2.6 million as of September 30, 2000 and June 30, 2000,
consisting of three loans. The average balance of impaired loans was $2.6
million for the three months ended September 30, 2000 compared to $1.4 million
for the three months ended September 30, 1999. The increase resulted primarily
from the addition of one impaired multi-family and underlying cooperative loan
totaling $1.6 million during the quarter ended June 30, 2000. At September 30,
2000, reserves totaling $130,000 have been allocated within the allowance for
loan losses for impaired loans. At September 30, 2000, non-performing loans
and impaired loans are separated by $1.8 million of one-to-four family,
cooperative apartment and consumer loans, which, while on non-accrual status,
are not deemed impaired. They are not deemed impaired since they have
outstanding balances less than $227,000, and are considered a homogeneous loan
pool which are not required to be evaluated for impairment.
The balance of other real estate owned ("OREO") was $381,000, consisting
of 7 properties, at both September 30, 2000 and June 30, 2000. There was no
activity related to other real estate owned
other than payments of $35,000 received in settlement on two properties
previously written-off. This amount was recorded as a gain on sale of assets
during the quarter ended September 30, 2000.
The following table sets forth information regarding our non-performing
loans, non-performing assets, impaired loans and troubled-debt restructurings
at the dates indicated.
-12-
AT SEPTEMBER 30, 2000 AT JUNE 30, 2000
-------------------------- ----------------------
(Dollars In Thousands)
NON-PERFORMING LOANS:
One- to four-family $1,412 $1,769
MULTI-FAMILY AND UNDERLYING COOPERATIVE 2,588 2,591
COOPERATIVE APARTMENT 313 54
OTHER LOANS 105 7
-------------------------- ----------------------
TOTAL NON-PERFORMING LOANS 4,418 4,421
TOTAL OREO 381 381
-------------------------- ----------------------
Total non-performing assets $4,799 $4,802
========================== ======================
TROUBLED-DEBT RESTRUCTURINGS $700 $700
TOTAL NON-PERFORMING ASSETS AND TROUBLED-DEBT
RESTRUCTURINGS 5,499 5,502
IMPAIRED LOANS 2,588 2,591
TOTAL NON-PERFORMING LOANS TO TOTAL LOANS 0.25% 0.26%
TOTAL IMPAIRED LOANS TO TOTAL LOANS 0.15 0.30
TOTAL NON-PERFORMING ASSETS TO TOTAL ASSETS 0.19 0.19
Total non-performing assets and troubled-debt
RESTRUCTURINGS TO TOTAL ASSETS 0.22 0.22
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND JUNE 30, 2000
ASSETS. Our assets totaled $2.54 billion at September 30, 2000, an increase
of $40.5 million from total assets of $2.50 billion at June 30, 2000. The
growth in assets was experienced primarily in real estate loans, which
increased $45.2 million since June 30, 2000. The increase in real estate loans
resulted primarily from real estate loan originations of $68.1 million during
the three months ended September 30, 2000, of which $62.5 million were multi-
family and underlying cooperative loans. While real estate loan origination
levels have recently declined, their balances have still increased
substantially as a result of a corresponding decline in prepayment levels.
Both the decline in origination and prepayment levels have resulted from the
recent interest rate increases.
Offsetting the increase in real estate loans was an aggregate decline of
$14.5 million in mortgage-backed securities held to maturity and available for
sale, resulting from principal repayments on these securities during the
period. Securities purchase activities were minimal during the three months
ended September 30, 2000, as asset growth has been focused primarily upon real
estate loans.
LIABILITIES. Total liabilities increased $36.1 million during the three
months ended September 30, 2000, due primarily to an increase of $23.6 million
in deposits, primarily money market deposit accounts. The growth in money
market accounts resulted from interest rate promotions offered to new and
existing deposit customers on newly established money market accounts. This
promotion was instituted during the quarter ended March 31, 2000, and has been
ongoing continuously through September 30, 2000. In addition, escrow and other
deposits increased $10.2 million during this period as a result of growth
in mortgage escrow funds. Since the growth in deposits and escrow funding
was adequate to fund asset growth during the quarter ended September 30,
2000, borrowings remained relatively constant during the quarter ended
September 30, 2000.
-13-
STOCKHOLDERS' EQUITY. Stockholders' equity increased $4.4 million during the
three months ended September 30, 2000. This increase resulted from net income
of $5.6 million, amortization of stock benefit plans of $692,000 and a decline
in the accumulated other comprehensive loss of $3.2 million related to an
increase in the market value of investment and mortgage backed securities
available for sale. The increase in market value of these securities resulted
from recent interest rate increases. Offsetting these increases, was treasury
stock repurchases of $2.2 million and cash dividends of $2.2 million.
CAPITAL LEVERAGE STRATEGY. As a result of the initial public offering in
June, 1996, our capital level significantly exceeded all regulatory
requirements. A portion of the "excess" capital generated by the initial
public offering has been deployed through the use of a capital leverage
strategy whereby we invest in high quality mortgage-backed securities (referred
to as leverage assets) funded by short term borrowings from various third party
lenders under securities sold under agreement to repurchase transactions. The
capital leverage strategy generates additional earnings for us by virtue of a
positive interest rate spread between the yield on the leverage assets and the
cost of the borrowings. Since the average term to maturity of the leverage
assets exceeds that of the borrowings used to fund their purchase, the net
interest income earned on the leverage strategy would be expected to decline in
a rising interest rate environment. To date, the capital leverage strategy has
been undertaken in accordance with limits established by our Board of
Directors, aimed at enhancing profitability under moderate levels of interest
rate exposure. Due to recent increases in interest rates, which have resulted
in less favorable interest rate spreads on capital leverage transactions,
we have reduced our planned activity in these transactions.
Additionally, as our capital ratios decline, our emphasis on increasing these
transactions is expected to accordingly decline.
COMPARISON OF THE OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2000 AND 1999
GENERAL. Net income was $5.6 million during both the three months ended
September 30, 2000 and 1999. Declines of $713,000 and $301,000 in net interest
income and non-interest income were offset by declines of $519,000 and $508,000
in non-interest expense and income tax expense during this period.
NET INTEREST INCOME. The discussion of net interest income for the three
months ended September 30, 2000 and 1999, presented below, should be read in
conjunction with the following table, which sets forth certain information
relating to our consolidated statements of operations for the three months
ended September 30, 2000 and 1999, and reflects the average yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs
are derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from average daily balances. The yields and costs include fees which are
considered adjustments to yields.
-14-
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ----------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
--------------- ------------- ------------- ------------- ----------- ------------
Assets: (DOLLARS IN THOUSANDS)
Interest-earning assets:
Real Estate Loans <F1> $1,732,748 $33,321 7.69% $1,415,416 $27,003 7.63%
Other loans 7,296 178 9.76 7,595 149 7.85
MORTGAGE-BACKED SECURITIES <F2> 429,437 7,388 6.88 515,380 8,099 6.29
INVESTMENT SECURITIES <F2> 138,736 2,175 6.27 172,254 2,585 6.00
FEDERAL FUNDS SOLD 58,401 980 6.71 48,801 773 6.34
--------------- ------------- ------------- -----------
TOTAL INTEREST-EARNING ASSETS 2,366,618 $44,042 7.44% 2,159,446 $38,609 7.15%
--------------- ============= ------------- ===========
NON-INTEREST EARNING ASSETS 148,508 111,546
--------------- -------------
TOTAL ASSETS $2,515,126 $2,263,703
=============== =============
LIABILITIES AND STOCKHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW, SUPER NOW ACCOUNTS $26,207 $77 1.17% $26,373 $73 1.10%
MONEY MARKET ACCOUNTS 157,557 1,711 4.31 57,067 517 3.58
SAVINGS ACCOUNTS 370,699 1,906 2.04 408,335 2,098 2.04
CERTIFICATES OF DEPOSIT 620,069 8,321 5.32 675,906 8,536 5.02
BORROWED FUNDS 1,012,826 16,180 6.34 788,579 10,825 5.46
--------------- ------------- ------------- -----------
TOTAL INTEREST-BEARING
LIABILITIES 2,187,358 $28,195 5.11% 1,956,260 $22,049 4.48%
--------------- ============= ------------- ===========
CHECKING ACCOUNTS 57,096 53,658
OTHER NON-INTEREST-BEARING
LIABILITIES 62,181 34,864
--------------- -------------
TOTAL LIABILITIES 2,306,635 2,052,071
STOCKHOLDERS' EQUITY 208,491 211,632
--------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS'EQUITY $2,515,126 $2,263,703
=============== =============
NET INTEREST INCOME/ INTEREST RATE
SPREAD<F3> $15,847 2.33% $16,560 2.67%
============= ===========
NET INTEREST-EARNING ASSETS/NET
INTEREST MARGIN <F4> $179,260 2.68% $203,186 3.07%
=============== =============
RATIO OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES 108.20% 110.39%
<FN>
<F1> In computing the average balance of loans, non-accrual loans have been
included.
<F2> Includes securities classified "available for sale.
<F3> Net interest rate spread represents the difference between the average rate
on interest-earning assets and the average cost of
interest-bearing liabilities.
<F4> Net interest margin represents net interest income as a percentage of
average interest-earning assets.
-15-
RATE/VOLUME ANALYSIS
THREE MONTHS ENDED
SEPTEMBER 30, 2000
COMPARED TO
THREE MONTHS ENDED
SEPTEMBER 30, 1999
INCREASE/ (DECREASE)
DUE TO
VOLUME RATE TOTAL
-------------- ------------ ----------
Interest-earning assets: (DOLLARS IN THOUSANDS)
Real Estate Loans $6,080 $238 $6,318
Other loans (7) 36 29
Mortgage-backed securities (1,411) 700 (711)
Investment securities (515) 105 (410)
Federal funds sold 157 50 207
-------------- ------------ ----------
Total $4,304 $1,129 $5,433
============== ============ ==========
Interest-bearing liabilities:
NOW and Super Now accounts $(1) $5 $4
Money market accounts 1,002 192 1,194
Savings accounts (193) 1 (192)
Certificates of deposit (717) 502 (215)
Borrowed funds 3,346 2,009 5,355
-------------- ------------ ----------
Total 3,437 2,709 6,146
-------------- ------------ ----------
Net change in net interest income $867 $(1,580) $(713)
============== ============ ==========
Net interest income for the three months ended September 30, 2000
decreased $713,000 to $15.8 million from $16.6 million during the three
months ended September 30, 1999. This decrease was attributable primarily to
an increase of $6.1 million in interest expense, which exceeded the increase
of $5.4 million in interest income. The net interest rate spread declined
34 basis points from 2.68% for the three months ended September 30, 1999 to
2.33% for the three months ended September 30, 2000, and the net interest
margin declined 39 basis points from 3.07% to 2.68% during the same period.
The decline in interest rate spread and net interest margin both reflect
a 63 basis point increase in the average cost of interest bearing
liabilities, resulting primarily from an increase in the average cost of
borrowed funds of 88 basis points. The narrowing of the interest rate
spread and net interest margin also reflects the $224.2 million increase in
average borrowed funds, which possess the highest average cost of interest
bearing liabilities. Our issuance, on April 12, 2000, of $25.0 million in
subordinated notes with a stated annual coupon of 9.25% also contributed to
the growth in interest expense on borrowed funds.
INTEREST INCOME. Interest income for the three months ended September
30, 2000, was $44.0 million, an increase of $5.4 million from $38.6 million
during the three months ended September 30, 1999. The increase in interest
income was primarily attributable to increased interest income on real
estate loans of $6.3 million and other interest income (comprised of
interest income on commercial paper, federal funds sold and FHLBNY stock) of
$207,000. The increase in interest income on real estate loans was
attributable primarily to an increase of $317.3 million in the average
balance of real estate loans, resulting from $388.3 million of real estate
loans originated during the twelve-month period ended
-16-
September 30, 2000. The increase in other interest income was also
attributable primarily to an increase in the average balance of $9.6
million, resulting primarily from growth in the FHLBNY capital stock.
Overall, the yield on interest-earning assets increased 29 basis points
from 7.15% during the three months ended September 30, 1999 to 7.44% during
the three months ended September 30, 2000. The increase was attributable
primarily to increases in the average yield of 6 basis points on real
estate loans, 59 basis points on mortgage-backed securities and 27 basis
points on investment securities, resulting primarily from general market
interest rate increases during the past twelve months. The average interest
rate on real estate loan originations during the quarter ended September 30,
2000, increased in excess of 100 basis points from the quarter
ended September 30, 1999, reflecting similar increases in general market
interest rates during this period. Offsetting these increases was a
decline of $711,000 in interest income on mortgage backed securities and
a decline of $410,000 in interest income from investment securities.
The average balance of mortgage backed securities has declined $85.9
million during the past twelve months and the average balance of
investment securities has declined $33.5 million during the same period.
Both of these declines reflect our ongoing shift of interest earning
assets from securities into real estate loans, which typical possess a higher
average yield than securities.
INTEREST EXPENSE. Interest expense increased $6.1 million, to $28.2
million during the three months ended September 30, 2000, from $22.1 million
during the three months ended September 30, 1999. This increase resulted
primarily from increased interest expense of $5.4 million on borrowed funds,
which resulted from an increase in the average balance of $224.2 million
during the three months ended September 30, 2000 compared to the three
months ended September 30, 1999. The increase in the average balance of
borrowed funds resulted primarily from growth of $187.5 million in FHLBNY
advances during the period October 1, 1999 to September 30, 2000. The
FHLBNY advances are generally medium-term interest-bearing liabilities,
which are utilized to fund loan originations. In addition, the average cost
of borrowings increased 88 basis points during this period, reflecting
recent increases in general market interest rates, and a shift in borrowings
towards FHLBNY advances, which have longer average terms and higher average
costs than Securities Sold Under Agreement to Repurchase borrowings. In
addition, our issuance of $25.0 million in subordinated debt on April 12,
2000, at a stated annual coupon of 9.25%, added $599,000 in interest expense
during the quarter ended September 30, 2000. Further, interest expense on
money market accounts increased $1.2 million, resulting from an increase of
$100.5 million in the average balance and 73 basis points in the average
cost. The growth in average balance resulted primarily from ongoing
promotions on these accounts. Offsetting these increases, was a decline in
interest expense on certificates of deposits of $215,000, which resulted
primarily from a reduction of $55.8 million in average balance, which
resulted from the loss of certificate of deposit accounts upon maturity,
pre-existing promotion rates offered from July 1997 to June 1998.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $60,000
during both the three months ended September 30, 2000 and 1999, reflecting
the continued stability of non-performing loans and charge-offs. See "Asset
Quality." The allowance for loan losses increased $54,000 during the three
months ended September 30, 2000, as the loan loss provision of $60,000
exceeded net charge-offs of $6,000 during the period. We have continued our
loan loss provisions and resultant increase in the allowance for loan losses
in response to our continued growth in real estate loans and our recognition
of slight increases in delinquent and impaired loans.
NON-INTEREST INCOME. Non-interest income declined $301,000 to $1.8
million during the three months ended September 30, 2000, from $2.1 million
during the three months ended September 30, 1999. The decrease resulted
primarily from a decline of $730,000 in prepayment penalty income resulting
from recent interest rate increases, which was partially offset by the
addition of $521,000 in income associated with the Bank's purchase of Bank
Owned Life Insurance. Both of these items are components of other non-
interest income.
-17-
Gains and losses on sales and redemptions of securities and other assets
declined $86,000 from the comparable quarter of last year. During the
quarter ended September 30, 1999, we recorded a net gain of $123,000 on the
sales and calls of securities and other assets, comprised primarily of gains
of $117,000 on the sale of equity security investments. During the quarter
ended September 30, 2000, we recorded a net gain of $37,000 on the sales and
calls of securities and other assets, comprised primarily of a cash receipt
of $35,000 as settlement on two Other Real Estate Owned properties, which
were previously written off as a loss.
NON-INTEREST EXPENSE. Non-interest expense decreased $519,000, from $8.9
million during the three months ended September 30, 1999, to $8.4 million
during the three months ended September 30, 2000.
Salary and employee benefits declined $128,000 during this period. The
reduction in salary and employee benefits expense resulted from an aggregate
decline of $394,000 in our Employee Retirement Plan and Executive Benefit
Maintenance Plan expenses due to curtailments of these benefits instituted
during the fourth fiscal quarter of 2000. Partially offsetting these
declines were increases in salaries and 401(k) plan expenses, as 401(k) plan
contributions were reinstated during the fourth fiscal quarter of 2000.
In addition, our ESOP benefit expense declined $437,000. Effective July
1, 2000, the ESOP benefit cost is being spread over a period of up to a
maximum of 30 years from the date of inception, with the option of
prepayment. This extension in amortization period caused the majority of
the decline in ESOP cost during this period. Additionally, a reduction in
the average market value of our common stock (which directly impacts the
recorded ESOP compensation expense) also contributed to the decline in ESOP
cost.
Federal deposit insurance premiums also declined $52,000 during the
quarter ended September 30, 2000 compared to September 30, 1999, as a result
of a reduction in our insurance rate which was instituted in January, 2000.
Other expenses increased $71,000 due primarily to increases in
advertising expenses.
INCOME TAX EXPENSE. Income tax expense decreased $508,000, or 12%, during
the quarter ended September 30, 2000 compared to the quarter ended September
30, 1999. Our effective tax rate declined from 42.8% to 39.6% during this
period, due to additional tax benefits associated with activities of
subsidiary companies as well as the favorable tax status on income
associated with our recent Bank Owned Life Insurance investment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented
at June 30, 2000 in Exhibit 13.1 to our Annual Report on Form 10-K, filed
with the Securities and Exchange Commission on September 28, 2000. There
have been no material changes in our market risk at September 30, 2000
compared to June 30, 2000. The following is an update of the discussion
provided therein:
GENERAL. Our largest component of market risk continues to be interest
rate risk. Virtually all of this risk continues to reside at the Bank
level. The Bank still is not subject to foreign currency exchange or
commodity price risk. At September 30, 2000, we owned no trading assets,
nor did we utilize hedging transactions such as interest rate swaps and
caps.
ASSETS, DEPOSIT LIABILITIES AND WHOLESALE FUNDS. There has been no
material change in the composition of assets, deposit liabilities or
wholesale funds from June 30, 2000 to September 30, 2000.
-18-
GAP ANALYSIS. Dime of Williamsburgh's primary source of income is its
net interest income, which is the difference between the interest income
earned on its interest earning assets and the interest expense incurred on
its interest bearing liabilities. At September 30, 2000, our one year
interest rate sensitivity gap (the difference between our interest rate
sensitive assets maturing or repricing within one year and our interest rate
sensitive liabilities maturing or repricing within one year, expressed as a
percentage of total assets) was negative 25%, compared to negative 23% at
June 30, 2000. In a rising interest rate environment, an institution with a
negative gap would generally be expected, absent the effects of other
factors, to experience a greater increase in its cost of liabilities
relative to its yield on assets, and thus decrease an institution's net
interest income. Due to competitive conditions in the market for multi-
family lending, we have increased our origination of fixed interest rate
multi-family loans with maturities up to 15 years compared to our historical
practice of originating multi-family loans with fixed interest rates for the
first five years of the loan and that adjust at the conclusion of the
initial five year term to a market index for the remainder of the term of
the loan, typically another five years. At September 30, 2000, we had
approximately $67.2 million of fixed-rate multi-family loans, or 4% of our
total loan portfolio, with maturities of 15 years. We have also experienced
an increase in the proportion of certificates of deposit and borrowings
maturing within one year or less. If these trends continue, our one year
interest rate sensitivity gap may continue to widen.
INTEREST RATE RISK COMPLIANCE. We continue to monitor the impact of
interest rate volatility upon net interest income and net portfolio value in
the same manner as at June 30, 2000. There have been no changes in our
board approved limits of acceptable variance in net interest income and net
portfolio value at September 30, 2000 compared to June 30, 2000, and the
projected changes continue to fall within the board approved limits at all
levels of potential interest rate volatility.
As a federal savings bank, Dime of Williamsburgh is required to monitor
changes in the net present value of the expected future cash flows of its
assets and liabilities, which is referred to as net portfolio value or NPV.
In addition, we monitor our NPV ratio, which is our NPV divided by the
estimated market value of total assets. The NPV ratio can be viewed as a
corollary to our capital ratios. To monitor our overall sensitivity to
changes in interest rates, we simulate the effect of instantaneous changes
in interest rates of up to 200 basis points on our assets and liabilities.
As of June 30, 2000, an increase in interest rates of 200 basis points would
have reduced our NPV by approximately 28.7%, resulting in an NPV ratio of
6.82%. There can be no assurance that future changes in our mix of assets
and liabilities will not result in more extensive declines in our NPV and
NPV ratio. Our focus on multi-family lending may subject us to greater risk
of an adverse impact on our operations from a downturn in the economy.
While we are currently reviewing the NPV calculation as of September 30,
2000, we anticipate that the NPV ratio, under an increase in interest rates
of 200 basis points, will remain above 6.00%
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various legal actions arising in the ordinary course of
its business which, in the aggregate, involve amounts which are believed to
be immaterial to our financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
-19-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
ANY SHAREHOLDER PROPOSAL INTENDED FOR INCLUSION IN OUR PROXY
STATEMENT AND PROXY CARD RELATING TO OUR 2001 ANNUAL MEETING OF SHAREHOLDERS
MUST BE RECEIVED BY US BY JUNE 7, 2001, PURSUANT TO THE PROXY SOLICITATION
REGULATIONS OF THE SEC. NOTHING IN THIS PARAGRAPH SHALL BE DEEMED TO
REQUIRE US TO INCLUDE IN OUR PROXY STATEMENT AND PROXY CARD FOR SUCH MEETING
ANY SHAREHOLDER PROPOSAL WHICH DOES NOT MEET THE REQUIREMENTS OF THE SEC IN
EFFECT AT THE TIME. ANY SUCH PROPOSAL WILL BE SUBJECT TO 17 C.F.R.
<section>240.14A-8 OF THE RULES AND REGULATIONS PROMULGATED BY THE SEC UNDER
THE EXCHANGE ACT.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(d) EXHIBITS
Exhibit 11. Statement Re: Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule (included only with EDGAR
filing).
(B) REPORTS ON FORM 8-K
None.
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dime Community Bancshares, Inc.
Dated: November 14, 2000 By: /s/ VINCENT F. PALAGIANO
-------------------------------------
Vincent F. Palagiano
Chairman of the Board and Chief
Executive Officer
Dated: November 14, 2000 By: /s/ KENNETH J. MAHON
-------------------------------------
Kenneth J. Mahon
Executive Vice President and Chief
Financial Officer