SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): May 17, 2005
DIME
COMMUNITY BANCSHARES, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
0-27782 |
|
11-3297463 |
|
(State
or other jurisdiction of incorporation) |
|
(Commission
File Number) |
|
(IRS
Employer
Identification
No.) |
209
Havemeyer Street, Brooklyn, New York 11211
(Address
of principal executive offices, including zip code)
Registrant's
telephone number, including area code: (718)
782-6200
None
(Former
name or former address, if changed since last report)
Item
8.01 Other Events.
This
Current Report on Form 8-K contains a number of forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These statements may be identified by use of words such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "outlook," "plan,"
"potential," "predict," "project," "should," "will," "would" and similar terms
and phrases, including references to assumptions.
Forward-looking
statements are based upon various assumptions and analyses made by the Company
in light of management's experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors it
believes are appropriate under the circumstances. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
other factors (many of which are beyond the Company's control) that could cause
actual results to differ materially from future results expressed or implied by
such forward-looking statements. These factors include, without limitation, the
following:
| · |
the
timing and occurrence or non-occurrence of events may be subject to
circumstances beyond the Company’s control;
|
| · |
there
may be increases in competitive pressure among financial institutions or
from non-financial institutions; |
| · |
changes
in the interest rate environment may reduce interest
margins; |
| · |
changes
in deposit flows, loan demand or real estate values may adversely affect
the business of the Bank; |
| · |
changes
in accounting principles, policies or guidelines may cause the Company’s
financial condition to be perceived
differently; |
| · |
changes
in corporate and/or individual income tax laws may adversely affect the
Company's financial condition or results of
operations; |
| · |
general
economic conditions, either nationally or locally in some or all areas in
which the Company conducts business, or conditions in the securities
markets or the banking industry may be less favorable than the Company
currently anticipates; |
| · |
legislation
or regulatory changes may adversely affect the Company’s
business; |
| · |
technological
changes may be more difficult or expensive than the Company
anticipates; |
| · |
success
or consummation of new business initiatives may be more difficult or
expensive than the Company anticipates; or |
| · |
litigation
or other matters before regulatory agencies, whether currently existing or
commencing in the future, may delay the occurrence or non-occurrence of
events longer than the Company anticipates. |
The
Company has no obligation to update any forward-looking statements to reflect
events or circumstances after the date of this document.
On May
17, 2005, Dime Community Bancshares, Inc. and subsidiaries (the "Company')
completed the open market sale of $276 million of portfolio securities,
primarily mortgage backed securities ("MBS") and collateralized mortgage
obligations ("CMOs").
The
Transaction. The
Company sold $276 million of securities, representing 48% of the total
securities portfolio as of March 31, 2005, having a yield of 3.62%, and an
estimated average duration of 2.4 years. Upon completing the transaction, the
average estimated duration of the Company's securities portfolio declined to
approximately 2.3 years, with an average yield of 3.81%. The cash proceeds
received from the sale will be reinvested initially in overnight funds and other
short-term investments with an average yield approximating 3.10%.
The
Benefit. In
today’s climate of rising short-term interest rates, this transaction creates
overnight liquidity on the balance sheet of approximately 10% of earning assets
with a relatively small impact to current income. As initially completed, the
transaction reduces both duration risk and the potential for further reduction
to stockholders' equity associated with the mark-to-market accounting on the
securities disposed.
The
one-year GAP, which approximated negative 26% at March 31, 2005, improved to
approximately negative 19% immediately following the transaction.
The
transaction would become accretive to future earnings under the following
scenarios: 1) short-term interest rates continue to rise and the liquidity
generated from the sale is regularly reinvested in short-term investments and
overnight funds with an average yield in excess of 3.62%; or 2) the liquidity
generated from the sale is reinvested in multifamily residential and commercial
loans with yields that currently exceed 5.0%.
Cost.
The
Company will incur a $5.2 million pre-tax charge, which will reduce after-tax
earnings per share by 9 cents in the quarter ending June 30, 2005.
Timing.
The
Federal Open Market Committee (the "Fed") has been clear about its intentions to
continue to raise the federal funds rate at a measured pace this year. In the
Company's view, the Fed's resolve places a premium on short-term liquidity.
Further, the Company expects that the only way the value of the securities sold
would increase is if longer-term interest rates declined from current levels.
However, the Company believes that longer-term interest rates are more likely to
increase than decline, and, as a result, the market value of the securities, if
held, would continue to decline. Therefore, the Company entered into this
transaction in order to take advantage of the current flatness of the yield
curve, which has created this favorable environment to restructure.
Use
of Proceeds. The
Company's intention is to hold the cash proceeds from the sale in federal funds
and other short-term investments while the Fed continues to raise short-term
rates. However, a portion of the proceeds could be deployed for other funding
needs, for example to fund multifamily and commercial real estate loans at rates
well in excess of current overnight rates.
Capital
and Leverage. This
transaction will have minimal impact on the Company’s tangible capital and no
impact upon total stockholders' equity since the mark-to-market adjustment on
the securities sold was previously included in the calculation of total
stockholders' equity. As of March 31, 2005, the Company’s consolidated tangible
capital ratio was 7.01% and the ratio of stockholders' equity to total assets
was 8.39%.
Purpose.
The
Company considers the transaction to be prudent
balance sheet management in what it continues to believe is a rising interest
rate environment. The Company views its investment portfolio primarily as a
source of liquidity rather than yield. Therefore, the Company tends to invest in
low average life and short tranche MBS and CMOs. It is for this reason that this
relatively large transaction could be effected at this time for a relatively
small after-tax charge.
Risk. There is
a risk that short-term interest rates could move lower in the near term, which
might temporarily mitigate some of the benefit to be derived from this
transaction.
Capital
and Leverage. This
transaction will have minimal impact on the Company’s tangible capital and no
impact upon total stockholders' equity since the mark-to-market adjustment on
the securities sold is included in the calculation of total stockholders'
equity. As of March 31, 2005, the Company’s consolidated tangible capital ratio
was 7.01% and the ratio of stockholders' equity to total assets was
8.39%.
Purpose.
By
entering into this transaction, the Company is attempting to effect prudent
balance sheet management in what it continues to believe is a rising interest
rate environment. The Company views its investment portfolio primarily as a
source of liquidity rather than yield. Therefore, the Company tends to invest in
low average life and short tranche MBS and CMOs. It is for this reason that this
relatively large transaction could be effected at this time for a relatively
small after-tax penalty.
Risk. There is
a risk that short-term interest rates could move lower in the near term, which
might temporarily mitigate some of the benefit to be derived from this
transaction.
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 hereunto
duly authorized.
DIME
COMMUNITY BANCSHARES, INC.
/s/
KENNETH J. MAHON
By:
___________________________________________
Kenneth
J. Mahon
Executive
Vice President and Chief Financial Officer
Dated:
May 18, 2005