UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13094
DIME BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3197414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
589 FIFTH AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
(212) 326-6170
(Registrant's telephone number, including area code)
|
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.
As of April 28, 2000, the registrant had 111,718,928 shares of common stock, $0.01 par value, outstanding.
DIME BANCORP, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of March 31, 2000 and 3
December 31, 1999
Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended
March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 6
and 1999
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES 29
|
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIME BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
-------------- --------------
ASSETS
Cash and due from banks $ 331,776 $ 414,289
Money market investments 14,579 18,166
Securities available for sale 3,928,419 3,849,676
Federal Home Loan Bank of New York stock 328,732 328,732
Loans held for sale 1,504,564 1,733,667
Loans receivable, net:
Residential real estate loans 8,231,525 8,200,120
Commercial real estate loans 3,648,372 3,482,857
Consumer loans 2,608,209 2,495,321
Business loans 1,091,004 1,028,756
Allowance for loan losses (142,485) (140,296)
-------------- --------------
Total loans receivable, net 15,436,625 15,066,758
-------------- --------------
Premises and equipment, net 208,247 207,373
Mortgage servicing assets 943,400 980,934
Goodwill 525,548 531,415
Other assets 958,040 790,315
-------------- --------------
Total assets $24,179,930 $23,921,325
============== ==============
LIABILITIES
Deposits $14,405,595 $14,261,449
Federal funds purchased and securities sold under agreements to repurchase 3,603,841 1,106,067
Other short-term borrowings 2,767,461 5,321,838
Long-term debt 1,155,825 1,165,868
Guaranteed preferred beneficial interests in Dime Bancorp, Inc.'s junior
subordinated deferrable interest debentures 152,225 152,219
Other liabilities 521,577 397,779
-------------- --------------
Total liabilities 22,606,524 22,405,220
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share (350,000,000 shares authorized and
120,252,459 shares issued at March 31, 2000 and December 31, 1999) 1,203 1,203
Additional paid-in capital 1,166,543 1,166,530
Retained earnings 726,015 670,343
Treasury stock, at cost (8,564,698 shares at March 31, 2000 and 9,357,589
shares at December 31, 1999) (216,002) (230,035)
Accumulated other comprehensive loss (89,866) (87,257)
Unearned compensation (14,487) (4,679)
-------------- --------------
Total stockholders' equity 1,573,406 1,516,105
-------------- --------------
Total liabilities and stockholders' equity $24,179,930 $23,921,325
============== ==============
|
See accompanying notes to consolidated financial statements.
DIME BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
---------- ----------
INTEREST INCOME
Residential real estate loans $172,462 $ 202,816
Commercial real estate loans 69,161 49,754
Consumer loans 53,059 19,654
Business loans 22,862 5,764
Mortgage-backed securities 63,678 48,898
Other securities 12,538 12,221
Money market investments 247 506
---------- ----------
Total interest income 394,007 339,613
---------- ----------
INTEREST EXPENSE
Deposits 130,476 119,842
Borrowed funds 108,863 84,273
---------- ----------
Total interest expense 239,339 204,115
---------- ----------
Net interest income 154,668 135,498
Provision for loan losses 7,000 8,000
---------- ----------
Net interest income after provision for loan losses 147,668 127,498
---------- ----------
NON-INTEREST INCOME
Loan servicing and production fees 66,844 61,928
Banking service fees 15,521 11,267
Securities and insurance brokerage fees 10,533 8,604
Net gains on sales activities 36,639 64,307
Other 3,644 3,124
---------- ----------
Total non-interest income 133,181 149,230
---------- ----------
NON-INTEREST EXPENSE
General and administrative expense:
Compensation and employee benefits 75,617 76,473
Occupancy and equipment 28,114 24,786
Other 37,553 48,337
---------- ----------
Total general and administrative expense 141,284 149,596
Amortization of mortgage servicing assets 29,232 30,657
Amortization of goodwill 8,346 2,876
---------- ----------
Total non-interest expense 178,862 183,129
---------- ----------
Income before income tax expense and extraordinary items 101,987 93,599
Income tax expense 36,714 34,631
---------- ----------
Income before extraordinary items 65,273 58,968
Extraordinary items -- losses on early extinguishment of
debt, net of tax benefits of $3,044 -- (4,127)
---------- ----------
Net income $ 65,273 $ 54,841
========== ==========
PER COMMON SHARE
Basic earnings:
Income before extraordinary items $ 0.59 $ 0.53
Extraordinary items -- (0.04)
---------- ----------
Net income $ 0.59 $ 0.49
========== ==========
Diluted earnings:
Income before extraordinary items $ 0.59 $ 0.52
Extraordinary items -- (0.03)
---------- ----------
Net income $ 0.59 $ 0.49
========== ==========
Dividends declared $ 0.06 $ 0.05
|
See accompanying notes to consolidated financial statements.
DIME BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
FOR THE THREE MONTHS
ENDED
MARCH 31,
--------------------------
2000 1999
------------ ------------
COMMON STOCK
Balance at beginning of period $ 1,203 $ 1,203
------------ ------------
Balance at end of period 1,203 1,203
------------ ------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period 1,166,530 1,165,251
Tax benefit on stock options exercised 13 213
------------ ------------
Balance at end of period 1,166,543 1,165,464
------------ ------------
RETAINED EARNINGS
Balance at beginning of period 670,343 463,907
Net income 65,273 54,841
Cash dividends declared on common stock (6,654) (5,567)
Treasury stock issued under employee stock plans, net (2,947) (659)
------------ ------------
Balance at end of period 726,015 512,522
------------ ------------
TREASURY STOCK, AT COST
Balance at beginning of period (230,035) (233,965)
Treasury stock purchased -- (6,154)
Treasury stock issued under employee stock plans, net 14,033 881
------------ ------------
Balance at end of period (216,002) (239,238)
------------ ------------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of period (87,257) (3,285)
Other comprehensive loss (2,609) (13,697)
------------ ------------
Balance at end of period (89,866) (16,982)
------------ ------------
UNEARNED COMPENSATION
Balance at beginning of period (4,679) (7,446)
Restricted stock activity, net (11,007) 292
Amortization of unearned compensation 1,199 906
------------ ------------
Balance at end of period (14,487) (6,248)
------------ ------------
Total stockholders' equity $1,573,406 $1,416,721
============ ============
See accompanying notes to consolidated financial statements.
|
DIME BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,273 $ 54,841
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 7,000 8,000
Depreciation, amortization and accretion, net 50,705 50,674
Provision for deferred income tax expense 16,589 27,388
Net securities (gains) losses (284) 230
Losses on early extinguishment of debt -- 7,171
Net decrease in loans held for sale 229,103 801,673
Other, net (111,223) (207,427)
------------- --------------
Net cash provided by operating activities 257,163 742,550
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale (318,918) (767,253)
Proceeds from sales of securities available for sale 161,086 379,676
Proceeds from maturities of securities available for sale 155,129 305,738
Loans receivable originated and purchased, net of principal payments (423,536) (30,281)
Proceeds from sales of loans 14,649 45,285
Proceeds from sales of other real estate owned 6,804 5,962
Net cash paid in acquisitions -- (4,858)
Net purchases of premises and equipment (9,225) (12,777)
------------- --------------
Net cash used by investing activities (414,011) (78,508)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 144,179 (485,541)
Net decrease in borrowings with original maturities of
three months or less (6,603) (217,441)
Proceeds from other borrowings -- 198,645
Repayments of other borrowings (60,253) (224,824)
Proceeds from issuances of common and treasury stock 79 514
Purchases of treasury stock -- (6,154)
Cash dividends paid on common stock (6,654) (5,567)
------------- --------------
Net cash provided (used) by financing activities 70,748 (740,368)
------------- --------------
Net decrease in cash and cash equivalents (86,100) (76,326)
Cash and cash equivalents at beginning of period 432,455 357,777
------------- --------------
Cash and cash equivalents at end of period $ 346,355 $ 281,451
============= ==============
Supplemental cash flow information:
Interest payments on deposits and borrowed funds $ 244,331 $ 209,357
Income tax payments, net 6,273 522
Supplemental non-cash investing information:
Securitization of loans receivable 35,954 173,305
|
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated financial statements of Dime Bancorp, Inc. (the "Holding Company") and subsidiaries (collectively, the "Company") included herein reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of such financial statements as of the dates, or for the periods, indicated. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Holding Company's Annual Report on Form 10-K for the year ended December 31, 1999, as amended, (the "1999 10-K"). The results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000.
NOTE 2 -- EARNINGS PER COMMON SHARE
The following table sets forth the computations of basic and diluted earnings per common share for the periods indicated (in thousands, except per share data):
FOR THE
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
----------- -----------
Basic earnings per common share:
Numerators:
Income before extraordinary items $ 65,273 $ 58,968
Extraordinary items -- (4,127)
----------- -----------
Net income $ 65,273 $ 54,841
=========== ===========
Denominator:
Weighted average number of common shares outstanding 110,537 110,976
Basic earnings per common share:
Income before extraordinary items $ 0.59 $ 0.53
Extraordinary items -- (0.04)
----------- -----------
Net income $ 0.59 $ 0.49
=========== ===========
Diluted earnings per common share:
Numerators:
Income before extraordinary items $ 65,273 $ 58,968
Extraordinary items -- (4,127)
----------- -----------
Net income $ 65,273 $ 54,841
=========== ===========
Denominator:
Weighted average number of common shares outstanding 110,537 110,976
Common equivalent shares due to stock options and restricted stock 692 1,463
----------- -----------
Weighted average number of diluted shares outstanding 111,229 112,439
=========== ===========
Diluted earnings per common share:
Income before extraordinary items $ 0.59 $ 0.52
Extraordinary items -- (0.03)
----------- -----------
Net income $ 0.59 $ 0.49
=========== ===========
|
NOTE 3 -- COMPREHENSIVE INCOME
The following table sets forth the Company's comprehensive income for the periods indicated (in thousands):
FOR THE
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
----------- -----------
Net income $ 65,273 $ 54,841
Other comprehensive loss (2,609) (13,697)
----------- -----------
Comprehensive income $ 62,664 $ 41,144
=========== ===========
|
NOTE 4 -- RECENT EVENTS
On September 15, 1999, the Holding Company had entered into a definitive agreement and plan of merger (as subsequently amended, the "Merger Agreement") with Hudson United Bancorp ("Hudson"), a New Jersey corporation headquartered in Mahwah, New Jersey, and the holding company for Hudson United Bank, a New Jersey state-chartered commercial bank. The Merger Agreement, among other things, provided that Hudson was to merge with and into the Holding Company (the "Merger").
On February 10, 2000, the Holding Company and Hudson mailed a joint proxy statement/prospectus, dated February 9, 2000, to their respective stockholders. This document notified stockholders that each of the Holding Company and Hudson intended to hold special stockholders meetings (the "Special Meetings") on March 15, 2000 to consider approval of the Merger.
On March 5, 2000, North Fork Bancorporation, Inc. ("North Fork") announced its intention to make a hostile offer to acquire all of the outstanding shares of the Holding Company's common stock ("Common Stock") and to terminate the Merger Agreement. On March 6, 2000, North Fork filed preliminary proxy materials with the Securities and Exchange Commission (the "Commission") with which it proposed to solicit proxies to vote against the Merger.
On March 8, 2000, the Holding Company mailed to its stockholders ("Dime Stockholders") a supplement to the February 9, 2000 joint proxy statement/prospectus stating, among other things, its recommendation that Dime Stockholders not tender shares of Common Stock to North Fork, if and when North Fork commenced its offer. On March 9, 2000, the Holding Company and Hudson announced that they were both voluntarily postponing their respective Special Meetings until March 24, 2000 in order to allow information to be disseminated.
On March 13, 2000, North Fork mailed definitive proxy solicitation materials to Dime Stockholders in order to solicit proxies against the Merger. On March 15, 2000, North Fork formally commenced its hostile tender offer regarding the Common Stock (the "Hostile Tender Offer"). Pursuant to the terms of the Hostile Tender Offer, Dime Stockholders would receive 0.9302 shares of North Fork's common stock and $2.00 in cash for each share of Common Stock tendered to North Fork. The Hostile Tender Offer is conditioned on the satisfaction of a number of factors, including, but not limited to: (i) the Holding Company entering into a merger agreement with North Fork; (ii) receipt of required regulatory approvals; and (iii) the rights under the Stockholder Protection Rights Plan, dated as of October 20, 1995, between the Holding Company and The First National Bank of Boston, as rights agent, not being applicable. On March 20, 2000, the Holding Company's Board of Directors (the "Board") formally recommended that Dime Stockholders reject the Hostile Tender Offer by not tendering their Common Stock to North Fork. On that date, the Holding Company and Hudson postponed their Special Meetings to May 17, 2000 and May 18, 2000, respectively. On March 23, 2000, North Fork extended the expiration date of the Hostile Tender Offer from April 14, 2000 to midnight on May 31, 2000.
On April 28, 2000, the Holding Company and Hudson announced that they had mutually agreed to terminate the Merger Agreement. As a result, the Special Meetings have been canceled. In addition, the Holding Company and Hudson agreed to cancel the stock options granted to each other in connection with the Merger Agreement and to release each other from any claims related to these arrangements. In light of the fact that the
Hostile Tender Offer was an "initial triggering event" under the stock option the Holding Company originally issued to Hudson in connection with the Merger Agreement (the "Stock Option"), the Holding Company has agreed that Hudson would be entitled to receive from $50 million to $92 million if the Holding Company is acquired by, merges with, or sells a substantial amount of its assets to another company before October 28, 2001. The circumstances are parallel to those that would have allowed Hudson to exercise the Stock Option and the amounts owed are generally less than or equal to the amounts that would have been due under the Stock Option, which had no upper limit. The Holding Company has also agreed to a lesser payment to Hudson if the Holding Company sells a significant subsidiary before the same date. If none of these circumstances occurs before October 28, 2001, the Holding Company has agreed to pay Hudson $15 million.
For a discussion of various litigation by and against the Company in connection with the Hostile Tender Offer and the Merger, see Part II, Item 1, "Legal Proceedings."
NOTE 5 -- RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize all derivative instruments as either assets or liabilities in statements of financial position and measure those instruments at fair value. SFAS No. 133, as amended in July 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133," is effective for fiscal years beginning after June 15, 2000. The Company intends to adopt SFAS No. 133 on January 1, 2001. The Company has not completed its evaluation of the effect that the adoption of SFAS No. 133 will have upon its financial condition and results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained in this quarterly report on Form 10-Q are forward-looking and may be identified by the use of words such as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." These forward-looking statements are based on the current expectations of the Company. A variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include interest rate movements, competition from both financial and non-financial institutions, changes in applicable laws and regulations, the timing and occurrence (or non-occurrence) of transactions and events that may be subject to circumstances beyond the Company's control and general economic conditions.
RESULTS OF OPERATIONS
General
The Company reported net income of $65.3 million for the quarter ended March 31, 2000, up 19.0% from $54.8 million for the first quarter of 1999. Diluted earnings per common share were $0.59 for the first quarter of 2000, an increase of 20.4% from $0.49 for the same quarter one year ago. Net income and diluted earnings per common share for the first quarter of 1999 were reduced by $4.1 million and $0.03, respectively, as a result of after-tax extraordinary losses on the early extinguishment of debt. The Company's annualized returns on average stockholders' equity and average assets for the first three months of 2000 were 17.04% and 1.11%, respectively, as compared with 15.66% and 1.01%, respectively, for the first three months of 1999.
The Company achieved growth of $6.3 million in net income before extraordinary losses for the first quarter of 2000, as compared with the first quarter of 1999, despite a slowing of residential real estate loan production and sales activities. This growth was due primarily to higher levels of net interest income and fee income, coupled with
a reduction in non-interest expense. The overall improvement in net income before extraordinary losses reflects both internal factors and the impact of purchase accounting acquisitions consummated during 1999 (the "1999 Acquisitions"), the most significant of which were the acquisition in October 1999 of KeyBank National Association's Long Island banking franchise, which included 28 branches, the acquisition in August 1999 of Citibank N.A.'s indirect automobile finance business and the acquisition in May 1999 of Lakeview Financial Corp., the then holding company for Lakeview Savings Bank, which operated 11 branches in northern New Jersey.
Operating earnings, which represent net income adjusted for the effects of certain non-recurring or unusual items, amounted to $65.3 million for the three-month period ended March 31, 2000 (which was the same as reported net income, as there were no such adjustments during the period), up 10.7% from $59.0 million for the comparable prior year period (which excludes the impact of the $4.1 million after-tax losses on the early extinguishment of debt during that period.). Diluted operating earnings per common share amounted to $0.59 for the first three months of 2000, up 13.5% from $0.52 for the same period of 1999. On an operating earnings basis, the annualized returns on average stockholders' equity and average assets rose to 17.04% and 1.11%, respectively, for the first quarter of 2000 from 16.84% and 1.09%, respectively, for the first quarter of 1999.
Cash operating earnings, which represent operating earnings excluding the after-tax impact of amortization of goodwill, were $71.7 million, or $0.64 per diluted common share, for the first quarter of 2000. In comparison, cash operating earnings were $61.7 million, or $0.55 per diluted common share, for the first quarter of 1999. On a cash operating earnings basis, the annualized returns on average tangible stockholders' equity and average tangible assets increased to 28.59% and 1.25%, respectively, for the first quarter of 2000 from 21.00% and 1.15%, respectively, for the comparable period of 1999.
The Company believes that operating earnings and cash operating earnings basis information, when taken in conjunction with reported results, provide useful information in evaluating performance on a comparable basis, although neither operating earnings nor cash operating earnings is currently a required basis for reporting financial results under generally accepted accounting principles.
Net Interest Income
Net interest income amounted to $154.7 million for the quarter ended March 31, 2000, up $19.2 million, or 14.1%, from the comparable quarter of 1999. This increase reflects an expansion of the net interest margin to 2.96% for the first quarter of 2000 from 2.75% in the comparable prior year quarter, coupled with an increase in average interest-earning assets of $1.4 billion, or 7.2%. The improvement in the net interest margin was driven by an increase in the yield on average interest-earning assets, which outpaced a higher cost of average interest-bearing liabilities.
The yield on average interest-earning assets was 7.51% for the first quarter of 2000, up from 6.95% in the first quarter of 1999. The yield for the first quarter of 2000 benefited from the continuation of the Company's strategy to increase the aggregate percentage of its commercial real estate, consumer and business loans (which generally have higher yields than the Company's residential real estate loans) to total loans receivable and the relatively higher interest rate environment during the first three months of 2000. The aggregate average balance of commercial real estate, consumer and business loans rose $3.2 billion, or 81.7%, for the first quarter of 2000, as compared with the same period one year ago, reflecting internal growth and the effects of the 1999 Acquisitions. Such loans represented 46.5% of total average loans receivable for the first quarter of 2000, up from 30.6% for the first quarter of 1999.
The cost of average interest-bearing liabilities rose to 4.44% for the first quarter of 2000 from 4.15% for the same period of 1999, primarily reflective of higher borrowing costs, the effects of which were somewhat offset by the Company's strategy to grow its core deposits. The Company's core deposits consist of demand, savings and money market deposits and are generally less costly than the Company's time deposits and borrowed funds. For the first quarter of 2000, the cost of average borrowed funds was 5.90%, up from 5.23% in the respective prior year period. The cost of average deposits, which was 3.69% for the first quarter of 2000, rose 6 basis points as compared with the first quarter of 1999. Average core deposits for the first quarter of 2000 were $7.7 billion, or 53.8% of average total deposits, up from $6.8 billion, or 51.0%, for the first quarter of 1999.
The following table sets forth, for the periods indicated, the Company's consolidated average statement of financial condition, net interest income, interest rate spread and net interest margin. Average balances are computed on a daily basis. Non-accrual loans are included in average balances in the table below.
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
--------- ---------- -------- ------------- --------- --------
(DOLLARS IN THOUSANDS)
ASSETS
INTEREST-EARNING ASSETS:
Loans:
Loans held for sale $1,324,593 $26,957 8.17 % $3,128,975 $52,192 6.74 %
Loans receivable:
Residential real estate 8,196,136 145,505 7.10 8,882,943 150,624 6.78
Commercial real estate 3,516,274 69,161 7.87 2,623,270 49,754 7.59
Consumer 2,536,935 53,059 8.39 1,004,238 19,654 7.89
Business 1,065,954 22,862 8.60 291,365 5,764 8.02
------------- --------- ------------- ---------
Total loans receivable 15,315,299 290,587 7.60 12,801,816 225,796 7.06
------------- --------- ------------- ---------
Total loans 16,639,892 317,544 7.64 15,930,791 277,988 7.00
------------- --------- ------------- ---------
Securities:
Mortgage-backed securities ("MBS") 3,635,089 63,678 7.01 2,937,414 48,898 6.66
Other 720,406 12,538 6.98 689,449 12,221 7.13
------------- --------- ------------- ---------
Total securities 4,355,495 76,216 7.00 3,626,863 61,119 6.75
------------- --------- ------------- ---------
Money market investments 18,213 247 5.44 38,645 506 5.30
------------- --------- ------------- ---------
Total interest-earning assets 21,013,600 394,007 7.51 19,596,299 339,613 6.95
--------- ---------
Other assets 2,462,560 2,023,137
------------- -------------
Total assets $23,476,160 $21,619,436
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
Core:
Demand $ 2,024,915 1,768 0.35 $ 1,831,802 1,647 0.36
Savings 2,371,125 12,916 2.19 2,279,426 12,186 2.17
Money market 3,254,423 32,940 4.07 2,710,909 25,182 3.77
------------- --------- ------------- ---------
Total core 7,650,463 47,624 2.50 6,822,137 39,015 2.32
------------- --------- ------------- ---------
Time 6,580,779 82,852 5.06 6,548,795 80,827 5.01
------------- --------- ------------- ---------
Total deposits 14,231,242 130,476 3.69 13,370,932 119,842 3.63
------------- --------- ------------- ---------
Borrowed funds:
Federal funds purchased and securities
sold under agreements to repurchase 3,355,987 48,881 5.76 3,066,662 37,336 4.87
Other short-term borrowings 2,633,645 37,565 5.64 2,549,800 32,700 5.13
Other 1,315,485 22,417 6.78 826,490 14,237 6.89
------------- --------- ------------- ---------
Total borrowed funds 7,305,117 108,863 5.90 6,442,952 84,273 5.23
------------- --------- ------------- ---------
Total interest-bearing
liabilities 21,536,359 239,339 4.44 19,813,884 204,115 4.15
---------- ---------
Other liabilities 407,368 404,989
Stockholders' equity 1,532,433 1,400,563
------------- -------------
Total liabilities and stockholders' equity $23,476,160 $21,619,436
============= =============
Net interest income $154,668 $135,498
========== =========
Interest rate spread 3.07 2.80
Net interest margin 2.96 2.75
|
The following table sets forth, for the periods indicated, the changes in interest income and interest expense and the amounts attributable to changes in average balances (volume) and average interest rates (rate). The changes in interest income and interest expense attributable to changes in both volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 VERSUS 1999
-------------------------------------
INCREASE (DECREASE)
-------------------------------------
DUE TO DUE TO
VOLUME RATE TOTAL
------------ ----------- -----------
(IN THOUSANDS)
Interest income:
Total loans $ 12,747 $ 26,809 $ 39,556
Total securities 12,675 2,422 15,097
Money market investments (276) 17 (259)
----------- ------------ ------------
Total interest income 25,146 29,248 54,394
----------- ------------ ------------
Interest expense:
Total deposits 7,841 2,793 10,634
Total borrowed funds 12,047 12,543 24,590
----------- ------------ ------------
Total interest expense 19,888 15,336 35,224
----------- ------------ ------------
Net interest income $ 5,258 $ 13,912 $ 19,170
=========== ============ ============
|
Provision for Loan Losses
The provision for loan losses, which is predicated upon the Company's assessment of the adequacy of its allowance for loan losses (see "Management of Credit Risk -- Allowance for Loan Losses"), amounted to $7.0 million for the first quarter of 2000, down from $8.0 million in the comparable prior year quarter. Net loan charge-offs for the quarter ended March 31, 2000 were $4.8 million, as compared with $0.7 million for the first quarter of 1999. The level of net loan charge-offs for the first quarter of 1999 benefited from the effect of a bulk sale in December 1998 of approximately $53 million of non-performing loans, substantially all of which were residential real estate loans.
Non-Interest Income
General. The Company's non-interest income was $133.2 million for the quarter ended March 31, 2000, down 10.8% from $149.2 million for the comparable quarter of 1999. This decrease resulted from a decline in net gains on sales activities, the effect of which was partially offset by growth in fee income. For the first quarter of 2000, non-interest income represented 46.3% of total revenue (net interest income plus non-interest income), as compared with 52.4% for the first quarter of 1999.
Loan Servicing and Production Fees. Loan servicing and production fees amounted to $66.8 million for the three-month period ended March 31, 2000, an increase of $4.9 million from the same period one year ago. The higher level of such fees was attributable to an increase of $13.3 million, or 32.9%, in loan servicing fees, largely as a result of growth in the loan servicing portfolio. Partially offsetting the increase in loan servicing fees was a reduction in loan production fees of $8.4 million, or 39.1%, reflective of a decline in residential real estate loan production to $3.3 billion for the first quarter of 2000 from $7.1 billion for the first quarter of 1999.
At March 31, 2000, the Company's portfolio of mortgage loans serviced for others (excluding loans being subserviced by the Company) amounted to $38.5 billion, up $1.4 billion, or 3.9%, from December 31, 1999 and $6.1 billion, or 18.8%, from one year earlier. This portfolio consists substantially of residential real estate loans, the underlying weighted average coupon rates of which were 7.27%, 7.25% and 7.24% at March 31, 2000, December 31, 1999 and March 31, 1999, respectively. In connection with sales of mortgage loan servicing rights, the Company was subservicing $1.4 billion of loans at March 31, 2000, as compared with $1.3 billion and $0.5 billion at December 31, 1999 and March 31, 1999, respectively. The Company receives fees for subservicing loans until the transfer of the servicing responsibility to the purchasers of the servicing rights.
In March 2000, the Company entered into an amendment to its existing agreement with PNC Mortgage Corp. of America ("PNC Mortgage"). As a result of this amendment, the Company will sell to PNC Mortgage the servicing rights to substantially all conforming conventional fixed-rate residential real estate loans sold into the secondary market by the Company through July 31, 2001. Under the revised agreement, the maximum unpaid principal balances of the loans related to the servicing rights to be sold to PNC Mortgage was increased to $3.5 billion per quarter, unless otherwise agreed to by the Company and PNC Mortgage. Included under the caption "Other assets" in the consolidated statement of financial condition at March 31, 2000 was approximately $51 million associated with loan servicing rights to be sold to PNC Mortgage.
Banking Service Fees. Banking service fees for the first quarter of 2000 amounted to $15.5 million, as compared with $11.3 million for the first quarter of 1999. The 37.8% increase principally reflects the impact of certain of the 1999 Acquisitions, as well as changes in the Company's fee structure.
Securities and Insurance Brokerage Fees. Securities and insurance brokerage fees totaled $10.5 million for the quarter ended March 31, 2000, up $1.9 million from the comparable prior year quarter. This increase was attributable to growth in fees from securities brokerage activities of $2.4 million, the effect of which was partially offset by lower fees from insurance activities.
Net Gains on Sales Activities. Net gains on sales activities amounted to $36.6 million for the three months ended March 31, 2000, down $27.7 million from $64.3 million for the first quarter of 1999. The decline in net gains on sales activities was largely associated with the Company's mortgage banking activities.
Net gains associated with loans held for sale decreased to $29.8 million for the first quarter of 2000 from $64.0 million for the first quarter of 1999, due substantially to a lower level of loan sales. For the first three months of 2000, sales of loans held for sale amounted to $3.0 billion, down from $7.3 billion for the comparable period of 1999, primarily due to the effect on loan production of changes in the interest rate environment.
Net gains on sales of mortgage servicing rights amounted to $3.8 million for the first quarter of 2000, up from $0.5 million during the comparable quarter of 1999.
Other. Other non-interest income was $3.6 million for the quarter ended March 31, 2000, an increase of $0.5 million from the corresponding quarter of 1999. This increase was substantially associated with higher revenue from the Company's bank-owned life insurance program.
Non-Interest Expense
General. Non-interest expense amounted to $178.9 million for the quarter ended March 31, 2000, down $4.3 million, or 2.3%, from the comparable quarter of 1999. This decline was attributable to reductions in both general and administrative ("G&A") expense and amortization of mortgage servicing assets, the effects of which were partially offset by an increase in amortization of goodwill.
G&A Expense. G&A expense declined 5.6% to $141.3 million for the first quarter of 2000 from $149.6 million during the same quarter one year ago. The lower expense level primarily reflected a reduction in mortgage banking-related expenses, efficiencies and productivity improvements in retail and commercial banking and the elimination of expenses associated with the Company's plan to prepare its computer systems for the year 2000 (the "Year 2000 Plan"), the effects of which more than offset additional expenses related to the 1999 Acquisitions.
Compensation and employee benefits expense totaled $75.6 million for the first quarter of 2000, down $0.9 million from the same period of 1999. This decrease was principally associated with a reduction in the level of employees in the Company's mortgage banking operations in response to the slowing of residential real estate loan production. The impact of these reductions was partially offset by staff additions associated with the 1999 Acquisitions. At March 31, 2000, the Company's full-time equivalent employee complement was 6,580, down from 6,928 at December 31, 1999 and 7,241 at March 31, 1999. The Company's mortgage banking full-time equivalent employee complement declined by approximately 330, or 8%, during the first three months of 2000 and by approximately 1,120, or 22%, since March 31, 1999.
Occupancy and equipment expense amounted to $28.1 million for the first quarter of 2000, an increase of $3.3 million from the comparable prior year quarter. Contributing significantly to the higher expense level were the 1999 Acquisitions.
Other G&A expense amounted to $37.6 million for the first quarter of 2000, down from $48.3 million for the same period one year ago. This decline was due to a variety of factors, including a reduction in residential real estate loan production expenses, as well as the fact that the Company incurred $3.5 million of Year 2000 Plan expense in the first quarter of 1999 while no such expense was incurred during the first quarter of 2000.
Amortization of Mortgage Servicing Assets. Amortization of mortgage servicing assets amounted to $29.2 million for the first quarter of 2000, as compared with $30.7 million for the first quarter of 1999. This decrease occurred, despite growth in the average balance of mortgage servicing assets, due largely to a slowing of prepayment activity of the loans underlying the mortgage servicing assets portfolio in response to the comparatively higher long-term interest rate environment during the first quarter of 2000.
At March 31, 2000, the Company's mortgage servicing assets (including related derivative financial instruments hedging such assets) had a carrying value of $943.4 million and an estimated fair value of approximately $991 million. At December 31, 1999 and March 31, 1999, the carrying value of mortgage servicing assets amounted to $980.9 million and $891.2 million, respectively.
Amortization of Goodwill. Amortization of goodwill amounted to $8.3 million for the three-month period ended March 31, 2000, up $5.5 million from the comparable prior year period. This increase was associated with the 1999 Acquisitions.
Income Tax Expense
Income tax expense increased to $36.7 million for the first quarter of 2000 from $34.6 million for the first quarter of 1999. This increase was due to growth in pre-tax income, the effect of which was partially offset by a reduction in the Company's effective income tax rate to 36.0% for the three-month period ended March 31, 2000 from 37.0% for the year-earlier period.
Extraordinary Items
During the first quarter of 1999, the Company recognized after-tax extraordinary losses of $4.1 million on the early extinguishment of $110.0 million of debt. On a pre-tax basis, these losses totaled $7.2 million.
BUSINESS SEGMENTS
For purposes of its disclosures in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," the Company has four reportable segments: Retail Banking; Commercial Banking; Mortgage Banking; and Investment Portfolio. The Company measures the performance of each business segment on an operating earnings basis utilizing an internal profitability reporting system.
The performance of the Company's segments will vary from period to period for a variety of factors. The primary factors are the amount of revenue earned and direct expenses incurred by each segment. However, other factors may also play an important role in segment performance. Among the most significant of these other factors are interest rate movements and general economic conditions, which influence the Company's transfer pricing, and the level of internal support expenses, which are fully allocated in the Company's internal profitability reporting process.
The following table sets forth certain information regarding the Company's business segments (dollars in thousands):
TOTAL TOTAL
RETAIL COMMERCIAL MORTGAGE INVESTMENT REPORTABLE INTERSEGMENT OPERATING
BANKING BANKING BANKING PORTFOLIO SEGMENTS ELIMINATIONS EARNINGS
----------- ----------- ---------- ----------- ------------ ------------ ----------
For the three months ended
March 31, 2000:
Segment revenue (1) $ 127,682 $ 35,736 $ 107,690 $ 13,259 $ 284,367 $ (3,518) $280,849
Segment profit 38,720 15,344 6,269 7,953 68,286 (3,013) 65,273
Percentage of segment profit to
total profit of reportable
segments 56.7% 22.5% 9.2% 11.6% 100.0%
For the three months ended
March 31, 1999:
Segment revenue (1) $ 102,760 $ 23,765 $ 152,509 $ 8,559 $ 287,593 $(10,865) $276,728
Segment profit 31,024 10,499 19,645 4,425 65,593 (6,625) 58,968
Percentage of segment profit to
total profit of reportable
segments 47.3% 16.0% 30.0% 6.7% 100.0%
Segment assets at:
March 31, 2000 $10,967,373 $4,778,005 $3,298,007 $4,451,618 $23,495,003
March 31, 1999 9,586,192 3,014,243 4,584,618 3,989,413 21,174,466
|
The Retail Banking segment, which focuses on individuals, includes deposit accounts and related services, securities brokerage services, insurance products, consumer lending activities and maintenance of a portfolio of residential real estate loans receivable. Retail Banking's profit for the first quarter of 2000 was $38.7 million, an increase of $7.7 million from the same period in 1999. The increased profit for this segment primarily reflects growth in consumer loans receivable and core deposits and higher levels of banking service fees and securities brokerage fees. This growth principally reflects the impact of the 1999 Acquisitions and selective internal growth. Partially offsetting this growth was a decline in the level of residential real estate loans consistent with the Company's strategy to reduce the percentage of such loans to total loans receivable.
The Commercial Banking segment, which includes commercial real estate lending and business banking activities, provides both lending and deposit products and services to business customers. Commercial Banking's profit was $15.3 million in the first quarter of 2000, $4.8 million greater than in the comparable prior year quarter. This increase reflects internal growth of commercial real estate lending and business lending, coupled with the benefits from the 1999 Acquisitions.
The Mortgage Banking segment's activities include the production of residential real estate loans either for the Company's portfolio or for sale into the secondary market and servicing loans for the Company and others. Mortgage Banking generated profit of $6.3 million in the first quarter of 2000, a decline of $13.4 million from the first quarter of 1999. This decline mainly reflects the impact of lower residential real estate loan originations and sales into the secondary market, the effects of which were partially offset by higher loan servicing income and lower non-interest expense.
The Investment Portfolio segment invests in certain debt and equity securities and money market investments in conjunction with the Company's overall liquidity, interest rate risk and credit risk management processes. For the first quarter of 2000, the Investment Portfolio segment had profit of $8.0 million, an increase of $3.5 million from the same period in 1999. This increase mainly reflects a higher level of MBS.
ASSET/LIABILITY MANAGEMENT
General
The Company's asset/liability management is governed by policies that are reviewed and approved annually by the Boards of Directors of the Holding Company and its savings bank subsidiary, The Dime Savings Bank of New York, FSB ("Dime FSB"), which oversee the development and execution of risk management strategies in
furtherance of these policies. The Asset/Liability Management Committee, which is comprised of members of the Company's senior management, monitors the Company's interest rate risk position and related strategies.
Market Risk
In general, market risk is the sensitivity of income to variations in interest rates, foreign currency exchange rates, commodity prices, and other relevant market rates or prices, such as prices of equities. The Company's market rate sensitive instruments include interest-earning assets, interest-bearing liabilities and derivative financial instruments.
The Company enters into market rate sensitive instruments in connection with its various business operations, particularly its mortgage banking activities. Loans originated, and the related commitments to originate loans that will be sold, represent market risk that is realized in a short period of time, generally two to three months.
The Company's primary source of market risk exposure arises from changes in United States interest rates and the effects thereof on mortgage prepayment and closing behavior, as well as depositors' choices ("interest rate risk"). Changes in these interest rates will result in changes in the Company's earnings and the market value of its assets and liabilities. The Company does not have any material exposure to foreign exchange rate risk or commodity price risk. Movements in equity prices may have an indirect, but limited, effect on certain of the Company's business activities or the value of credit sensitive loans and securities.
Interest Rate Risk Management
The Company manages its interest rate risk through strategies designed to maintain acceptable levels of interest rate exposure throughout a range of interest rate environments. These strategies are intended not only to protect the Company from significant long-term declines in net interest income as a result of certain changes in the interest rate environment, but also to mitigate the negative effect of certain interest rate changes upon the Company's mortgage banking operating results. The Company seeks to contain its interest rate risk within a band that it believes is manageable and prudent given its capital and income generating capacity. As a component of its interest rate risk management process, the Company employs various derivative financial instruments.
The Company's sensitivity to interest rates is driven primarily by the mismatch between the term to maturity or repricing of its interest-earning assets and that of its interest-bearing liabilities. Historically, the Company's interest-bearing liabilities have repriced or matured, on average, sooner than its interest-earning assets.
The Company is also exposed to interest rate risk arising from the "option risk" embedded in many of the Company's interest-earning assets. For example, mortgages and the mortgages underlying MBS may contain prepayment options, interim and lifetime interest rate caps and other such features affected by changes in interest rates. Prepayment option risk affects mortgage-related assets in both rising and falling interest rate environments as the financial incentive to refinance a mortgage loan is directly related to the level of the existing interest rate on the loan relative to current market interest rates.
Extension risk on mortgage-related assets is the risk that the duration of such assets may increase as a result of declining prepayments due to rising interest rates. Certain mortgage-related assets are more sensitive to changes in interest rates than others, resulting in a higher risk profile. Because the Company's interest-bearing liabilities are not similarly affected, the gap between the duration of the Company's interest-earning assets and interest-bearing liabilities generally increases as interest rates rise. In addition, in a rising interest rate environment, adjustable-rate assets may reach interim or lifetime interest rate caps, thereby limiting the amount of their upward adjustment, which effectively lengthens the duration of such assets.
Lower interest rate environments may also present interest rate risk exposure. In general, lower interest rate environments tend to accelerate loan prepayment rates, thus reducing the duration of mortgage-related assets and accelerating the amortization of any premiums paid in the acquisition of these assets. The amortization of any premiums over a shorter than expected term causes yields on the related assets to decline from anticipated levels.
In addition, unanticipated accelerated prepayment rates increase the likelihood of potential losses of net future servicing revenues associated with the Company's mortgage servicing assets.
The Company is also exposed to interest rate risk resulting from certain changes in the shape of the yield curve (particularly a flattening or inversion -- also called "yield curve twist risk" -- of the yield curve) and to differing indices upon which the yield on the Company's interest-earning assets and the cost of its interest-bearing liabilities are based ("basis risk").
In evaluating and managing its interest rate risk, the Company employs simulation models to help assess its interest rate risk exposure and the impact of alternate interest rate scenarios, which consider the effects of adjustable-rate loan indices, periodic and lifetime interest rate adjustment caps, estimated loan prepayments, anticipated deposit retention rates and other dynamics of the Company's portfolios of interest-earning assets and interest-bearing liabilities.
Derivative Financial Instruments
The Company currently uses a variety of derivative financial instruments to assist in managing its interest rate risk exposures. While the Company's use of derivative financial instruments in managing its interest rate exposures has served to mitigate the unfavorable effects that changes in interest rates may have on its results of operations, the Company continues to be subject to interest rate risk.
Interest Rate Risk-Management Instruments. The Company's assets have historically repriced or matured at a longer term than the liabilities used to fund those assets. At March 31, 2000, the Company used the following derivative financial instruments in its efforts to reduce its repricing risk: (i) interest rate swaps, where, based on the notional amount of the related agreement, the Company makes fixed-rate payments and receives variable-rate payments, all of which are tied to the one- or three-month London Interbank Offered Rate ("LIBOR"); (ii) interest rate caps, where, in exchange for the payment of a premium, the Company receives the excess of a designated market interest rate (one-month LIBOR or the Bond Market Association municipal bond index) over a specified strike rate, as applied to the notional amount of the related agreement; (iii) interest rate cap corridors, where, in exchange for the payment of a premium to the counterparty, the Company receives the amount by which one-month LIBOR exceeds a specified strike rate up to a maximum rate, as applied to the notional amount of the related agreement; (iv) interest rate futures, where the Company pays any increase, or receives any decrease, in the market value of the underlying financial instrument; (v) short sales of MBS; and (vi) call options written on U.S. Treasury note futures. In addition, the Company, in connection with its issuance of time deposits with various call features, has entered into pay variable (based on three-month LIBOR)/receive fixed interest rate swaps with matching call features that, considered together with the related time deposits, results in short-term repricing liabilities. The Company uses these time deposits to replace short-term repricing wholesale funds.
The following table sets forth the derivative financial instruments used by the Company at March 31, 2000 for interest rate risk-management purposes, segregated by the activities that they hedge (dollars in thousands):
WEIGHTED AVERAGE
ESTIMATED ------------------------
NOTIONAL FAIR RATE RATE
AMOUNT VALUE PAYABLE RECEIVABLE
------------ ---------- ----------- ------------
Pay fixed/receive variable interest rate swaps hedging:
Securities available for sale (1) $ 685,349 $ 6,469 6.33% 6.08%
Loans receivable (1) 1,768,518 45,688 6.38 6.07
Short-term borrowings (1) 1,075,000 7,000 6.10 6.05
Pay variable/receive fixed interest rate swaps hedging:
Time deposits (1) 65,000 (398) 6.00 8.00
Interest rate caps hedging:
Loans receivable (2) 35,600 200 -- --
Interest rate cap corridors hedging:
Securities available for sale (3) 59,810 2,895 -- --
Loans receivable (4) 300,272 13,713 -- --
Interest rate futures hedging:
Securities available for sale 157,400 -- -- --
Loans receivable 34,600 -- -- --
Short sales hedging:
Loans receivable 178,000 (914) -- --
Call options written hedging:
Loans receivable 200,000 (508) -- --
------------ ----------
$4,559,549 $ 74,145
============ ==========
|
(2) The weighted average strike rate was 5.64%.
(3) The weighted average strike rate was 5.16% and the weighted average maximum rate was 6.28%.
(4) The weighted average strike rate was 5.15% and the weighted average maximum rate was 6.26%.
Mortgage Banking Risk-Management Instruments. At March 31, 2000, the Company used the following derivative financial instruments to protect against the adverse impact on the value of the Company's mortgage servicing assets of substantial declines in long-term interest rates and the consequent increase in mortgage prepayment rates: (i) interest rate floors, where, in exchange for the payment of a premium to the counterparty, the Company receives the excess of a specified strike rate over a designated market interest rate (generally constant maturity Treasury or swap indices), as applied to the notional amount of the related agreement; (ii) interest rate swaps, where the Company receives a fixed rate and pays a variable rate tied to one- or three-month LIBOR; (iii) interest rate swaptions, where, in exchange for the payment of a premium to the counterparty, the Company, at a future date, has the right to enter into interest rate swap agreements; and (iv) principal-only swaps, where the Company: (a) receives the discount realized on the underlying principal-only security and pays a variable rate based on one-month LIBOR as applied to the notional amount of the agreement; and (b) pays or receives changes in the market value of the underlying principal-only security.
Two major classes of derivative financial instruments were used by the Company at March 31, 2000 to hedge the risk in its loans held for sale and related commitment pipeline. To the extent that the Company estimates that it will have loans to sell, the Company sells loans into the forward MBS market. Such short sales are similar in composition as to term and coupon with the loans held in, or expected to be funded into, the loans held for sale portfolio. In addition, because the amount of loans that the Company will fund, as compared with the total amount of loans that it has committed to fund, is uncertain, the Company purchased put options on MBS and interest rate futures.
The following table sets forth the derivative financial instruments used by the Company at March 31, 2000 in connection with its mortgage banking activities, segregated by the activities that they hedge (dollars in thousands):
WEIGHTED AVERAGE
ESTIMATED -------------------------
NOTIONAL FAIR VARIABLE-RATE FIXED-RATE
AMOUNT VALUE PAYABLE RECEIVABLE
------------ ---------- ------------ -----------
Interest rate floors hedging mortgage servicing assets (1) $2,885,000 $ 16,195 --% --%
Interest rate swaps hedging mortgage servicing assets (2) 1,162,000 (68,343) 6.06 6.01
Interest rate swaptions hedging mortgage servicing assets (3) 1,180,000 28,673 -- --
Principal-only swaps hedging mortgage servicing assets (2) 50,315 141 6.18 --
Forward contracts hedging loans held for sale 2,190,490 (9,531) -- --
Put options purchased hedging loans held for sale 100,000 127 -- --
------------ ----------
Total $7,567,805 $(32,738)
============ ==========
|
(2) Variable rates payable are presented on the basis of rates in effect at March 31, 2000; however, actual repricings will be based on the applicable interest rates in effect at the actual repricing dates.
(3) The weighted average strike rate was 7.34%.
Asset/Liability Repricing
The measurement of differences (or "gaps") between the Company's interest-earning assets and interest-bearing liabilities that mature or reprice within a period of time is one indication of the Company's sensitivity to changes in interest rates. A negative gap generally indicates that, in a period of rising interest rates, deposit and borrowing costs will increase more rapidly than the yield on loans and securities and, therefore, reduce the Company's net interest margin and net interest income. The opposite effect will generally occur in a declining interest rate environment. Although the Company has a large portfolio of adjustable-rate assets, the protection afforded by such assets in the event of substantial rises in interest rates for extended time periods is limited due to interest rate reset delays, periodic and lifetime interest rate caps, payment caps and the fact that indices used to reprice a portion of the Company's adjustable-rate assets lag changes in market rates. Moreover, in declining interest rate environments or certain shifts in the shape of the yield curve, these assets may prepay at significantly faster rates than otherwise anticipated. It should also be noted that the Company's gap measurement reflects broad judgmental assumptions with regard to repricing intervals for certain assets and liabilities.
The following table reflects the repricing of the Company's interest-earning assets, interest-bearing liabilities and related derivative financial instruments at March 31, 2000. The amount of each asset, liability or derivative financial instrument is included in the table at the earlier of the next repricing date or maturity. Prepayment assumptions for loans and MBS used in preparing the table are based upon industry standards as well as the Company's experience and estimates. Non-accrual loans have been included in the "Over One Through Three Years" category. Demand deposits, money market deposits and savings accounts are allocated to the various repricing intervals in the table based on the Company's experience and estimates.
PROJECTED REPRICING
--------------------------------------
OVER ONE
THROUGH OVER
ONE YEAR THREE THREE
OR LESS YEARS YEARS TOTAL
----------- ---------- ----------- -----------
(DOLLARS IN MILLIONS)
Total interest-earning assets $ 9,369 $ 4,406 $ 7,744 $21,519
Total interest-bearing liabilities 14,001 3,661 4,423 22,085
----------- ---------- ----------- -----------
Periodic gap before impact of derivative financial instruments (4,632) 745 3,321 (566)
Impact of derivative financial instruments 3,038 (1,430) (1,608) --
----------- ---------- ----------- -----------
Periodic gap $ (1,594) $ (685) $ 1,713 $ (566)
=========== ========== =========== ===========
Cumulative gap $ (1,594) $ (2,279) $ (566)
=========== ========== ===========
Cumulative gap as a percentage of total assets (6.6)% (9.4)% (2.3)%
|
MANAGEMENT OF CREDIT RISK
The Company's credit risk arises from the possibility that borrowers, issuers, or counterparties will not perform in accordance with contractual terms. The Company has a process of credit risk controls and management procedures by which it monitors and manages its level of credit risk.
The Company's non-performing assets consist of non-accrual loans and other real estate owned, net. Non-accrual loans are all loans 90 days or more delinquent, as well as loans less than 90 days past due for which the full collectability of contractual principal or interest payments is doubtful.
The following table presents the components of the Company's non-performing assets at the dates indicated (dollars in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2000 1999 1999
------------- ------------- ----------------
Non-accrual loans:
Residential real estate $ 54,377 $51,293 $ 44,877
Commercial real estate 5,088 5,208 10,753
Consumer 10,328 10,424 4,950
Business 3,769 2,437 24
------------- ------------- --------------
Total non-accrual loans 73,562 69,362 60,604
------------- ------------- --------------
Other real estate owned, net:
Residential real estate 13,497 9,978 11,582
Commercial real estate 3,409 6,963 13,516
Allowance for losses (271) (250) (1,196)
------------- ------------- --------------
Total other real estate owned, net 16,635 16,691 23,902
------------- ------------- --------------
Total non-performing assets $90,197 $86,053 $84,506
============= ============= ==============
Non-performing assets to total assets 0.37 % 0.36 % 0.39 %
Non-accrual loans to loans receivable 0.47 0.46 0.48
|
The Company continues to expand its lending activities and product mix. The Company intends to continue to monitor closely the effects of these efforts on the overall risk profile of its loans receivable portfolio, which the Company expects will continue to change over time.
The level of loans delinquent less than 90 days may, to some degree, be an indicator of future levels of non-performing assets. The following table sets forth, at March 31, 2000, such delinquent loans of the Company, net of those already in non-performing status (in thousands):
DELINQUENCY PERIOD
---------------------------------
30 - 59 60 - 89
DAYS DAYS TOTAL
---------- ----------- ----------
Residential real estate $28,540 $9,768 $38,308
Commercial real estate 468 3,570 4,038
Consumer 14,427 4,181 18,608
Business 6,892 566 7,458
---------- ----------- ----------
Total $50,327 $18,085 $68,412
========== =========== ==========
|
The following table sets forth the activity in the Company's allowance for loan losses for the periods indicated (in thousands):
FOR THE
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
----------- -----------
Balance at beginning of period $140,296 $105,081
Provision for loan losses 7,000 8,000
Loan charge-offs:
Residential real estate (3,454) (2,750)
Commercial real estate (14) (306)
Consumer (2,736) (682)
Business (5) (27)
----------- -----------
Total loan charge-offs (6,209) (3,765)
----------- -----------
Loan recoveries:
Residential real estate 558 1,022
Commercial real estate 28 1,595
Consumer 803 436
Business 9 --
----------- -----------
Total loan recoveries 1,398 3,053
----------- -----------
Net loan charge-offs (4,811) (712)
----------- -----------
Balance at end of period $142,485 $112,369
=========== ===========
|
On an annualized basis, net loan charge-offs represented 0.13% of average loans receivable for the first quarter of 2000, as compared with 0.02% for the first quarter of 1999.
The following table sets forth the Company's allowance for loan losses coverage ratios at the dates indicated:
MARCH 31, DECEMBER 31, MARCH 31,
2000 1999 1999
------------ ------------- -----------
Allowance for loan losses to:
Loans receivable 0.91% 0.92% 0.89%
Non-accrual loans 193.69 202.27 185.42
|
Of the $3.5 billion carrying value of the Company's MBS available for sale portfolio at March 31, 2000, $2.7 billion were issued by entities other than the Federal Home Loan Mortgage Corporation ("FHLMC"), the Government National Mortgage Association ("GNMA"), and the Federal National Mortgage Association ("FNMA"). These privately-issued MBS, which have generally been underwritten by large investment banking firms, are subject to certain credit-related risks normally not associated with MBS issued by FHLMC, GNMA and FNMA. While substantially all of the privately-issued MBS held by the Company at March 31, 2000 were rated "AA" or better by one or more of the nationally recognized securities rating agencies, no assurance can be given that such ratings will be maintained.
The level of credit risk associated with derivative financial instruments depends on a variety of factors, including the estimated fair value of the instrument, the collateral maintained, the use of master netting arrangements and the ability of the counterparty to comply with its contractual obligations. In the event of default by a counterparty, the Company would be subject to an economic loss that corresponds to the cost to replace the agreement. The Company's credit risk associated with its use of derivative financial instruments amounted to $57.6 million at March 31, 2000 and $73.9 million at December 31, 1999. There were no past due amounts related to the Company's derivative financial instruments at March 31, 2000 or December 31, 1999.
FINANCIAL CONDITION
General
The Company's total assets amounted to $24.2 billion at March 31, 2000, up $258.6 million from December 31, 1999. This increase was primarily due to growth in loans receivable, the impact of which was partially offset by a reduction in loans held for sale.
Securities Available for Sale
The following table summarizes the amortized cost and estimated fair value of securities available for sale at the dates indicated (in thousands):
MARCH 31, 2000 DECEMBER 31, 1999
------------------------- -------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
------------ ------------ ------------ ------------
MBS:
Pass-through securities:
Privately-issued $2,274,605 $2,217,252 $2,296,046 $2,245,491
U.S. government agencies 875,000 833,471 886,854 845,159
Collateralized mortgage obligations:
Privately-issued 445,903 434,181 422,938 408,945
U. S. government agencies 19,028 18,281 18,726 18,093
Interest-only 891 461 940 499
------------ ------------ ------------ ------------
Total MBS 3,615,427 3,503,646 3,625,504 3,518,187
------------ ------------ ------------ ------------
Other debt securities:
U. S. government agencies 75,000 75,000 -- --
State and municipal 25,759 25,682 15,478 15,112
Domestic corporate 356,284 313,862 345,410 304,081
Foreign government 500 500 500 500
------------ ------------ ------------ ------------
Total other debt securities 457,543 415,044 361,388 319,693
------------ ------------ ------------ ------------
Equity securities 9,632 9,729 12,490 11,796
------------ ------------ ------------ ------------
Total securities available for sale $4,082,602 $3,928,419 $3,999,382 $3,849,676
============ ============ ============ ============
|
Loans Held for Sale
Loans held for sale into the secondary market in connection with the Company's mortgage banking activities amounted to $1.5 billion at March 31, 2000. In comparison, loans held for sale totaled $1.7 billion at December 31, 1999.
Loans Receivable
Loans receivable (exclusive of the allowance for loan losses) amounted to $15.6 billion at March 31, 2000, up $372.1 million from year-end 1999.
A key component of the Company's strategy with respect to its loans receivable is to continue to increase the aggregate percentage of its commercial real estate, consumer and business loans receivable to total loans receivable. The aggregate balance of commercial real estate, consumer and business loans increased $340.7 million, or 4.9%, during the first three months of 2000 and, at March 31, 2000, these loans comprised approximately 47% of total loans receivable, up from 46% at December 31, 1999 and 32% at March 31, 1999. Contributing significantly to the increase from March 31, 1999 was the impact of the 1999 Acquisitions.
The following table sets forth a summary of the Company's loans receivable at the dates indicated (dollars in thousands):
MARCH 31, 2000 DECEMBER 31, 1999
------------------------ ------------------------ INCREASE
PERCENTAGE PERCENTAGE (DECREASE)
AMOUNT OF TOTAL AMOUNT OF TOTAL IN AMOUNT
------------- ---------- ------------- ---------- -------------
Residential real estate $ 8,231,525 52.8% $ 8,200,120 53.9% $ 31,405
Commercial real estate 3,648,372 23.4 3,482,857 22.9 165,515
Consumer 2,608,209 16.8 2,495,321 16.4 112,888
Business 1,091,004 7.0 1,028,756 6.8 62,248
------------- ---------- ------------- ---------- -------------
Total loans receivable $15,579,110 100.0% $15,207,054 100.0% $372,056
============= ========== ============= ========== =============
|
Deposits
Total deposits amounted to $14.4 billion at March 31, 2000, an increase of $144.1 million from year-end 1999, of which $125.1 million was associated with core deposits. Part of the Company's strategy with respect to its deposits is to increase the percentage of core deposits to total deposits. At the end of the first quarter of 2000, core deposits represented 54.2% of total deposits, up from 53.9% at year-end 1999 and 51.6% at March 31, 1999.
The following table sets forth a summary of the Company's deposits at the dates indicated (dollars in thousands):
MARCH 31, 2000 DECEMBER 31, 1999
------------------------ ------------------------ INCREASE
PERCENTAGE PERCENTAGE (DECREASE)
AMOUNT OF TOTAL AMOUNT OF TOTAL IN AMOUNT
------------- ---------- ------------- ---------- -------------
Core:
Demand $ 2,157,968 15.0% $ 2,071,419 14.5% $ 86,549
Savings 2,378,809 16.5 2,407,528 16.9 (28,719)
Money market 3,268,557 22.7 3,201,298 22.5 67,259
------------- ---------- ------------- ---------- -------------
Total core 7,805,334 54.2 7,680,245 53.9 125,089
------------- ---------- ------------- ---------- -------------
Time 6,600,261 45.8 6,581,204 46.1 19,057
------------- ---------- ------------- ---------- -------------
Total deposits $14,405,595 100.0% $14,261,449 100.0% $ 144,146
============= ========== ============= ========== =============
|
Borrowed Funds
The following table sets forth a summary of the Company's borrowed funds at the dates indicated (dollars in thousands)
MARCH 31, DECEMBER 31,
2000 1999
------------- ------------
Federal funds purchased and securities sold under agreements to
repurchase:
Federal funds purchased $ 2,384,000 $ 785,000
Securities sold under agreements to repurchase 1,219,841 321,067
------------- ------------
Total federal funds purchased and securities sold
under agreements to repurchase 3,603,841 1,106,067
------------- ------------
Other short-term borrowings:
Federal Home Loan Bank of New York advances 2,350,000 3,711,086
Treasury tax and loan notes 302,463 1,598,154
Other 114,998 12,598
------------- ------------
Total other short-term borrowings 2,767,461 5,321,838
------------- ------------
Long-term debt:
Federal Home Loan Bank of New York advances 741,563 751,600
Senior notes 348,633 348,322
Medium-term notes 48,443 48,541
Bonds, preferred stock and loans transferred in
put transactions 17,186 17,405
------------- ------------
Total long-term debt 1,155,825 1,165,868
------------- ------------
Guaranteed preferred beneficial interests in Dime Bancorp,
Inc.'s junior subordinated deferrable interest debentures 152,225 152,219
------------- ------------
Total borrowed funds $7,679,352 $7,745,992
============= ============
|
Stockholders' Equity
Stockholders' equity amounted to $1.6 billion at March 31, 2000, up $57.3 million, or 3.8%, from year-end 1999. This increase was largely due to net income of $65.3 million. At the end of the first quarter of 2000, stockholders' equity represented 6.51% of total assets, as compared with 6.34% at December 31, 1999. Book value per common share and tangible book value per common share increased to $14.09 and $9.34, respectively, at March 31, 2000 from $13.67 and $8.84, respectively, at the end of 1999.
During February 2000, in connection with the Merger, the Holding Company rescinded its Common Stock repurchase program that was announced in September 1998, which had authorized the Holding Company to repurchase up to approximately 5.6 million shares of Common Stock (the "Stock Repurchase Program"). A total of 4.2 million shares of Common Stock were repurchased under the Stock Repurchase Program, all of which were acquired prior to the beginning of 2000.
Cash dividends declared and paid by the Holding Company on the Common Stock were $0.06 per share in the first quarter of 2000, up from $0.05 per share in the first quarter of 1999. The Holding Company's Common Stock dividend payout ratio was 10.17% for the first quarter of 2000, compared with 10.20% for the first quarter of 1999. On April 28, 2000, the Holding Company announced the declaration of a cash dividend of $0.08 per share of Common Stock. This dividend will be paid on June 1, 2000 to Dime Stockholders of record as of the close of business on May 19, 2000.
LIQUIDITY
The Company's liquidity management process focuses on ensuring that sufficient funds exist to meet withdrawals by depositors, loan funding commitments, debt service requirements and other financial obligations and expenditures, as well as ensuring Dime FSB's compliance with regulatory liquidity requirements. The
liquidity position of the Company, which is monitored on a daily basis, is managed pursuant to established policies and guidelines.
The Company's sources of liquidity include principal repayments on loans and MBS, borrowings, deposits, sales of loans in connection with mortgage banking activities, sales of securities available for sale and cash provided by operations. The Company has access to the capital markets for issuing debt or equity securities, as well as access to the discount window of the Federal Reserve Bank of New York, if necessary, for the purpose of borrowing to meet temporary liquidity needs.
Excluding funds raised through the capital markets, the primary source of funds of the Holding Company, on an unconsolidated basis, has been dividends from Dime FSB, whose ability to pay dividends is subject to regulations of the Office of Thrift Supervision (the "OTS"). At March 31, 2000, the Holding Company had an effective shelf registration with the Commission under which it could issue an aggregate of $150.0 million of debentures, notes or other unsecured evidences of indebtedness. These debt securities, which may be unsubordinated or subordinated to certain other obligations of the Holding Company, may be offered separately or together in one or more series.
Under existing OTS regulations, Dime FSB must maintain, for each calendar quarter, an average daily balance of liquid assets (as defined) equal to at least 4.00% of either (i) its liquidity base (Dime FSB's net withdrawable accounts plus short-term borrowings) at the end of the preceding calendar quarter or (ii) the average daily balance of its liquidity base during the preceding quarter. Dime FSB was in compliance with these regulations for the first quarter of 2000.
REGULATORY CAPITAL
Pursuant to OTS regulations, Dime FSB is required to maintain tangible capital of at least 1.5% of adjusted total assets, core ("tier 1") capital of at least 3.0% of adjusted total assets and total risk-based capital of at least 8.0% of risk-weighted assets. Dime FSB exceeded these capital requirements at March 31, 2000.
Under the prompt corrective action regulations adopted by the OTS pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991, an institution is considered well capitalized, the highest of five categories, if its ratio of total risk-based capital to risk-weighted assets is 10.0% or more, its ratio of tier 1 capital to risk-weighted assets is 6.0% or more, its ratio of core capital to adjusted total assets is 5.0% or greater, and it is not subject to any order or directive by the OTS to meet a specific capital level. At March 31, 2000, Dime FSB met the published standards for a well capitalized designation under these regulations.
The following table sets forth the regulatory capital position of Dime FSB at the dates indicated (dollars in thousands):
MARCH 31, 2000 DECEMBER 31, 1999
------------------------ ------------------------
AMOUNT RATIO AMOUNT RATIO
------------- ---------- ------------- ----------
Tangible and core capital $1,458,436 6.16% $1,383,046 5.90%
Tier 1 risk-based capital 1,458,436 9.00 1,383,046 8.80
Total risk-based capital 1,700,921 10.50 1,623,342 10.33
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is contained in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset/Liability Management," incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have not been any material developments regarding the status of Dime FSB's goodwill lawsuit against the United States since the filing of the 1999 10-K.
On March 5, 2000, North Fork announced its intention to make a hostile offer to acquire all of the outstanding Common Stock and to terminate the Merger Agreement. In connection with the Hostile Tender Offer, Fleet Boston Corporation ("Fleet Boston") announced that it had agreed, among other things, to invest an aggregate of $250 million in exchange for preferred stock of North Fork and rights to purchase North Fork's common stock.
On March 6, 2000, North Fork filed a lawsuit in the Delaware Court of Chancery against the Holding Company, members of the Board and Hudson, challenging a number of the provisions in the Merger Agreement and alleging, among other things, breaches of fiduciary duties by the Board (the "Delaware Action"). The complaint sought, among other things, an order invalidating certain provisions of the Merger Agreement. On March 9, 2000, North Fork amended its complaint in the Delaware Action to include allegations of breach of fiduciary duties by the Board for compelling a premature stockholder vote on the Merger Agreement and of false and misleading statements in the Holding Company's proxy statement/prospectus supplement dated March 7, 2000. After the Holding Company postponed its Special Meeting on the Merger Agreement from March 15, 2000 to March 24, 2000, North Fork withdrew its additional motion for a temporary restraining order to enjoin the March 15th meeting but reserved its right to proceed in the future. On March 17, 2000, North Fork moved for an expedited hearing and partial summary judgment with respect to its challenges to the provisions of the Merger Agreement. As a result of the termination of the Merger Agreement on April 28, 2000, these motions have been withdrawn.
The Holding Company is the subject of at least 14 putative class action
lawsuits filed on or after March 6, 2000 by various Dime Stockholders: Brecher
v. Toal, et. al., Miller v. Toal, et. al., Weiss v. Toal, et. al., Susser v.
Toal, et. al., Lifshitz v. Toal, et. al., Pill v. Toal, et. al., Milite v.
Toal, et. al., Steiner v. Toal, et. al., Shiry v. Toal, et. al., Lewis v. Toal,
et. al., and Coleman v. Toal, et. al., each filed in the Delaware Court of
Chancery on March 6, 2000; Great Neck Capital Appreciation Partnership v. Dime
Bancorp, Inc., filed in the Delaware Court of Chancery on March 7, 2000;
Silverberg v. Dime Bancorp, Inc., filed in the Supreme Court of the State of
New York, County of Queens on March 9, 2000; and Graifman v. Koons, et. al.,
filed in the Supreme Court of the State of New York, County of New York, on
March 15, 2000 (collectively, the "Stockholder Actions"). Each of the
Stockholder Actions alleges, among other things, breaches of fiduciary duties
by the Board and challenges the Stock Option, purported benefits to the Holding
Company's directors and officers that were to have resulted from the Merger,
and the rejection by the Board of the Hostile Tender Offer. On March 10, 2000,
the Dime Stockholder plaintiffs in some of the Stockholder Actions filed a
motion for partial summary judgment seeking a determination invalidating the
same provisions of the Merger Agreement that were the subject of North Fork's
complaint. The motions have become moot as a result of the termination of the
Merger Agreement.
On March 10, 2000, the Holding Company filed suit in the Supreme Court
of the State of New York, County of New York, against North Fork and Fleet
Boston (the "New York Action"). The complaint alleges violations of New York's
antitrust laws, including a conspiracy between North Fork and Fleet Boston to:
(i) diminish competition in a variety of banking markets; (ii) diminish
competition for the purchase of banks and thrifts in some markets; and (iii)
eliminate a stronger competitor (i.e., the combined institution resulting from
the Merger). In addition, the complaint alleges that Fleet Boston's divestiture
of branches from the Fleet Financial-BankBoston Corporation merger to Sovereign
Bancorp, Inc. ("Sovereign") is part of the conspiracy, as Sovereign is not
capable of competing effectively in markets with Fleet Boston and Fleet Boston
may use monopoly profits gained in those markets to fund the Hostile Tender
Offer. Among other things, the suit asks the court to: (i) enjoin North Fork
and Fleet Boston from acting in concert to acquire the Holding Company; (ii)
enjoin the proposed branch divestiture from Fleet Boston to Sovereign and
require divestiture to a banking organization with a reasonable opportunity to
improve competition in the markets served; and (iii) declare violations of the
New York antitrust laws. On March 31, 2000, North Fork and Fleet Boston moved
to dismiss the New York Action, arguing that it is preempted by federal law.
The Holding Company has filed its response to this motion, and the New York
Attorney General has submitted an amicus curiae brief challenging the
preemption issues raised by North Fork and Fleet Boston.
On March 21, 2000, the Holding Company filed suit in the United States District Court for the Eastern District of New York against North Fork and members of North Fork's board of directors seeking preliminary and permanent injunctive relief in connection with alleged misrepresentations contained in North Fork's proxy statement, dated March 13, 2000, soliciting proxies against the Merger, in violation of the Securities Exchange Act of 1934. On March 30, 2000, North Fork moved to dismiss this action. On April 13, 2000, the Holding Company filed an amended complaint in this action, focusing on the disclosures by North Fork regarding the cost savings that could be achieved if North Fork acquired the Holding Company and North Fork's relationship with Fleet Boston. On April 20, 2000, the court issued a decision recommending that North Fork's motion to dismiss be denied and ordering the parties to conduct expedited discovery. On April 24, 2000, North Fork filed an answer and counterclaims against the Holding Company and sought expedited discovery on those counterclaims. The counterclaims allege that the Holding Company and its Chairman, Mr. Lawrence J. Toal, have made materially false and misleading statements in the Holding Company's proxy materials in connection with the Merger, its press releases and its other filings with the Commission with respect to the Hostile Tender Offer and seek injunctive and other relief. On April 28, 2000, the court denied North Fork's request for expedited discovery. The Holding Company's request for a preliminary injunction was withdrawn in light of the termination of the Merger Agreement.
On March 29, 2000, the Holding Company filed suit in the Supreme Court of the State of New York, County of New York, against Salomon Smith Barney, Inc. ("Salomon"), which had been acting as a financial advisor to North Fork in connection with the Hostile Tender Offer. The complaint alleges violations of a provision of a confidentiality agreement, dated May 12, 1997, between the Holding Company and Salomon, which the complaint states prohibits Salomon, for a three year period, from providing financial advisory services to any entity interested in acquiring or otherwise entering into a business combination transaction with the Holding Company without obtaining the Holding Company's prior written consent to either the transaction or the provision of such advice (the "Confidentiality Agreement"). The suit asks the state court to enjoin Salomon from providing financial or advisory services to North Fork in connection with the Hostile Tender Offer. On April 5, 2000, the state court granted the Holding Company's motion to preliminarily enjoin Salomon from acting as a financial advisor to North Fork until May 12, 2000, the date the relevant provision of the Confidentiality Agreement expires by its terms (the "Preliminary Injunction"). On April 6, 2000, Salomon filed a notice of appeal in the Appellate Division of the State of New York, First Department, alleging that the state court erred when it granted the Preliminary Injunction, and also filed a motion in the appellate court seeking to vacate the state court's order imposing the Preliminary Injunction. The appellate court denied Salomon's motion to vacate on May 3, 2000. On May 10, 2000, the court declined to extend the Preliminary Injunction beyond May 12, 2000.
The Holding Company believes that its various claims against North Fork, Fleet Boston and Salomon are meritorious and that the various claims made against the Holding Company and the Board are without merit. However, it is not possible to predict the outcome of these claims at this time.
Certain claims, suits, complaints and investigations involving the Company, arising in the ordinary course of business, have been filed or are pending. The Company is of the opinion, after discussion with legal counsel representing the Company in these proceedings, that the aggregate liability or loss, if any, arising from the ultimate disposition of these matters would not have a material adverse effect on the Company's consolidated financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 12 -- Ratio of Earnings to Fixed Charges Exhibit 27 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K
During the three-month period ended March 31, 2000, the Holding Company filed with the Commission the following Current Reports on Form 8-K:
- Form 8-K, filed on January 20, 2000, regarding a press release announcing the Company's consolidated financial results for the quarter and year ended December 31, 1999.
- Form 8-K, filed on February 29, 2000, regarding a press release announcing that the Board had rescinded the Stock Repurchase Program.
- Form 8-K, filed on March 8, 2000, filing a supplement, dated March 7, 2000, to the proxy statement of the Holding Company and prospectus relating to the Common Stock in connection with the Merger dated February 9, 2000, certain presentation materials for investors and a consent of the Holding Company's financial advisor.
- Form 8-K, filed on March 8, 2000, regarding a press release that discussed key disclosure omissions by North Fork in connection with its hostile offer to acquire the Holding Company.
- Form 8-K, filed on March 10, 2000, regarding a press release announcing that the Holding Company and Hudson had postponed their respective Special Meetings from March 15, 2000 to March 24, 2000.
- Form 8-K, filed on March 13, 2000, announcing that North Fork had filed the Delaware Action and that certain of the Stockholder Actions had been filed.
- Form 8-K, filed on March 13, 2000, regarding a press release announcing that the Holding Company had filed the New York Action.
- Form 8-K, filed on March 14, 2000, announcing that additional Stockholder Actions had been filed.
- Form 8-K, filed on March 21, 2000, regarding a press release announcing that the Holding Company and Hudson had postponed their Special Meetings from March 24, 2000 to May 17, 2000 and May 18, 2000, respectively.
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 BANCORP, INC.
(Registrant)
Dated: May 12, 2000 By: /s/ Lawrence J. Toal
------------- --------------------
Lawrence J. Toal
Chairman of the Board, Chief Executive Officer,
President and Chief Operating Officer
Dated: May 12, 2000 By: /s/ Anthony R. Burriesci
------------ ------------------------
Anthony R. Burriesci
Executive Vice President and
Chief Financial Officer
Dated: May 12, 2000 By: /s/ John F. Kennedy
------------ -------------------
John F. Kennedy
Controller and Chief Accounting Officer
|
EXHIBIT INDEX
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT ------ ------------------------- 12 Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (filed electronically) |
Dime Bancorp, Inc. and Subsidiaries Exhibit 12 Ratio of Earnings to Fixed Charges
(Dollars in thousands)
For the
Three Months Ended
March 31,
-----------------------
2000 1999
----------- -----------
Excluding Interest on Deposits from Fixed Charges
Earnings:
Income before income taxes and extraordinary items $101,987 $ 93,599
Fixed charges 113,196 87,889
----------- -----------
Total earnings as adjusted $215,183 $181,488
=========== ===========
Fixed charges:
Interest expense on borrowed funds $108,863 $ 84,273
Portion of rent expense deemed representative of the interest
factor (1) 4,333 3,616
----------- -----------
Total fixed charges $113,196 $ 87,889
=========== ===========
Ratio of earnings to fixed charges excluding interest on deposits 1.90x 2.06x
Including Interest on Deposits in Fixed Charges
Earnings:
Income before income taxes and extraordinary items $101,987 $ 93,599
Fixed charges 243,672 207,731
----------- -----------
Total earnings as adjusted $345,659 $301,330
=========== ===========
Fixed charges:
Interest expense on borrowed funds $108,863 $ 84,273
Interest expense on deposits 130,476 119,842
Portion of rent expense deemed representative of the interest
factor (1) 4,333 3,616
----------- -----------
Total fixed charges $243,672 $207,731
=========== ===========
Ratio of earnings to fixed charges including interest on deposits 1.42x 1.45x
|
(1) Represents one-third of total rent expense.
| ARTICLE 9 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DIME BANCORP, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 2000 |
| PERIOD START | JAN 01 2000 |
| PERIOD END | MAR 31 2000 |
| CASH | 331,776 |
| INT BEARING DEPOSITS | 7,577 |
| FED FUNDS SOLD | 0 |
| TRADING ASSETS | 164,059 |
| INVESTMENTS HELD FOR SALE | 3,928,419 |
| INVESTMENTS CARRYING | 0 |
| INVESTMENTS MARKET | 0 |
| LOANS | 17,083,674 |
| ALLOWANCE | 142,485 |
| TOTAL ASSETS | 24,179,930 |
| DEPOSITS | 14,405,595 |
| SHORT TERM | 6,371,302 |
| LIABILITIES OTHER | 521,577 |
| LONG TERM | 1,308,050 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 1,203 |
| OTHER SE | 1,572,203 |
| TOTAL LIABILITIES AND EQUITY | 24,179,930 |
| INTEREST LOAN | 317,544 |
| INTEREST INVEST | 76,216 |
| INTEREST OTHER | 247 |
| INTEREST TOTAL | 394,007 |
| INTEREST DEPOSIT | 130,476 |
| INTEREST EXPENSE | 239,339 |
| INTEREST INCOME NET | 154,668 |
| LOAN LOSSES | 7,000 |
| SECURITIES GAINS | 284 |
| EXPENSE OTHER | 178,862 |
| INCOME PRETAX | 101,987 |
| INCOME PRE EXTRAORDINARY | 65,273 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 65,273 |
| EPS BASIC | 0.59 |
| EPS DILUTED | 0.59 |
| YIELD ACTUAL | 2.96 |
| LOANS NON | 73,562 |
| LOANS PAST | 0 |
| LOANS TROUBLED | 11,529 |
| LOANS PROBLEM | 0 |
| ALLOWANCE OPEN | 140,296 |
| CHARGE OFFS | 6,209 |
| RECOVERIES | 1,398 |
| ALLOWANCE CLOSE | 142,485 |
| ALLOWANCE DOMESTIC | 142,485 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 0 |