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Page
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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1
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FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2007 AND 2006 AND
FOR THE YEAR ENDED DECEMBER 31, 2007:
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Statements
of Net Assets Available for Plan Benefits
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2
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Statement
of Changes in Net Assets Available for Plan Benefits
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3
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Notes
to Financial Statements
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4-9
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SUPPLEMENTAL
SCHEDULES:
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Form
5500, Schedule H , Part IV, Line 4i - Schedule of Assets (Held At End Of
Year) as of December 31, 2007
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10
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Form
5500, Schedule H , Part IV, Line 4j - Schedule of Reportable
Transactions:
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Series
of Transactions from Same Issue Exceeding 5% of Assets Year Ended December
31, 2007
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11 | |
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SIGNATURES
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12
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As
of December 31, 2007
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As
of December 31, 2006
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Allocated
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Unallocated
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Total
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Allocated
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Unallocated
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Total
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ASSETS:
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Cash
equivalents
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$931
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$-
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$931
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$73
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$-
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$73
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Federated
Prime Value Obligations Fund
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567,383
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-
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567,383
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554,921
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-
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554,921
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Dime
CommunityBancshares, Inc. common stock,
at fair value
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25,330,994
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17,964,606
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43,295,600
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27,783,483
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20,803,967
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48,587,450
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Sub-total
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25,899,308
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17,964,606
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43,863,914
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28,338,477
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20,803,967
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49,142,444
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Contributions
receivable from the Dime Savings Bank of
Williamsburgh
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-
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455,038
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455,038
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-
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410,040
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410,040
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TOTAL
ASSETS
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25,899,308
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18,419,644
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44,318,952
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28,338,477
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21,214,007
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49,552,484
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LIABILITIES:
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Borrowing
from Dime Community Bancshares, Inc.
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-
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4,443,640
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4,443,640
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-
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4,553,510
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4,553,510
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Due to The Dime Savings Bank of Williamsburgh 401(k) Plan ["401(k)
Plan"]
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-
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455,038
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455,038
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-
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410,040
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410,040
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Cash
dividend payable to participants
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268,771
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203,716
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472,487
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266,934
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218,833
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485,767
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TOTAL
LIABILITIES
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268,771
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5,102,394
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5,371,165
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266,934
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5,182,383
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5,449,317
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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$25,630,537
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$13,317,250
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$38,947,787
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$28,071,543
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$16,031,624
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$44,103,167
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Allocated
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Unallocated
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Total
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ADDITIONS:
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Interest
and dividend income
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$1,121,397
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$831,565
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$1,952,962
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Net
depreciation in the market value of Dime Community Bancshares, Inc. common
stock
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(2,427,018)
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(1,841,322)
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(4,268,340)
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Net
investment loss
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(1,305,621)
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(1,009,757)
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(2,315,378)
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Contributions
from Dime Savings Bank of Williamsburg - net
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410,040
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392,896
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802,936
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Total
additions
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(895,581)
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(616,861)
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(1,512,442)
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DEDUCTIONS:
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Cash disbursed for interest expense on borrowings from Dime
Community Bancshares, Inc.
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-
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364,280
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364,280
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Benefit payments, net
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2,883,739
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(15,121)
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2,868,618
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Transfers out to the 401(k) Plan
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410,040
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-
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410,040
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Total
deductions
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3,293,779
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349,159
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3,642,938
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TRANSFERS:
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Allocation
of 78,155 shares of Dime Community Bancshares, Inc. common stock to
participant accounts, net
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916,789
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(916,789)
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-
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Transfer
of dividend income for distribution to participants
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831,565
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(831,565)
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-
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Total
transfers
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1,748,354
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(1,748,354)
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-
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DECREASE
IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
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(2,441,006)
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(2,714,374)
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(5,155,380)
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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Beginning
of year
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28,071,543
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16,031,624
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44,103,167
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End
of year
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$25,630,537
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$13,317,250
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$38,947,787
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1.
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SUMMARY
DESCRIPTION OF PLAN
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a.
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General
- The ESOP was adopted by the Board of Directors of the Dime Savings Bank
of Williamsburgh (the “Bank”) on February 8, 1996, with an effective date
of July 1, 1995. The Company acts as the Plan Sponsor for the
ESOP, and members of management of the Company or its direct subsidiaries
serve as Plan Administrator for the ESOP. The Employee Benefits
Committee, comprised of members of both the Company's Board of Directors
and management, oversees the operation and administration of the
ESOP.
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On
June 26, 1996, the Bank converted from a federally chartered mutual
savings bank to a federally chartered stock savings bank and all of its
outstanding capital stock was acquired by Dime Community Bancshares, Inc.
(the “Company”). Simultaneously, the Company issued 49,097,812
shares of common stock [adjusted for stock splits that occurred on August
21, 2001, April 24, 2002 and March 16, 2004 ("Stock Splits") ] in a
Subscription and Community offering. The ESOP purchased
3,927,825 (adjusted for Stock Splits), or 8%, of the shares issued by the
Company in its community offering at the initial issuance price of $2.96
per share (adjusted for Stock
Splits).
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The
ESOP is designed to comply with Section 4975(e)(7) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended (the “Code”),
and is subject to the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). The ESOP is
administered by the Plan Administrator, who is appointed by the
Compensation Committee of Dime Community Bancshares, Inc. (the
"Compensation Committee"). Prior to September 2002, the trust
services department of HSBC Bank, USA acted as the trustee for the
ESOP. In September 2002, RSGroup Trust Company assumed trustee
responsibilities for the ESOP and currently serves as
trustee.
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In
order to purchase the shares of the Company’s common stock, the ESOP
obtained a borrowing from the Company of $11,638,000, which, as of June
30, 2000, was to be repaid over a ten-year period at a fixed interest rate
of 8.0%. Effective July 1, 2000, the maturity of the ESOP
loan was extended from June 2006 to December 2025, with the continued
option of prepayment. Repayments of the borrowing are made from
fully deductible contributions from the Bank to the ESOP. As
the ESOP makes each payment of principal on the borrowing, an appropriate
percentage of stock will be allocated to eligible participants accounts in
accordance with applicable regulations under the
Code.
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| The borrowing is collateralized by the unallocated shares of stock held by the ESOP. The Company, as lender, has no rights against shares once they are allocated under the ESOP. Accordingly, the financial statements of the ESOP for the years ended December 31, 2007 and 2006, present separately the assets and liabilities and changes therein pertaining to: |
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(1)
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the
accounts of employees with vested rights in allocated stock (Allocated)
and
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stock
not yet allocated to employees
(Unallocated).
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b.
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Eligibility
and Participation - Eligible employees, defined as salaried, common
law employees of the Company or the Bank and its subsidiaries, who have
completed a period of service of at least one year, automatically become
eligible participants of the ESOP. An employee is not an
eligible employee if he or she is compensated principally on an hourly,
daily, commission fee or retainer basis, or has waived any claim to
membership in the ESOP.
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c.
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Contributions and
Distributions - The Company or
the Bank shall contribute to the ESOP an amount which, at minimum, shall
serve to finance the ESOP’s obligation under its outstanding borrowing
from the Company. The Company or the Bank may contribute
additional amounts, if designated by the Compensation Committee, to the
ESOP, which shall be applied as a prepayment of principal or interest for
the outstanding borrowing from the Company. Any additional
contributions approved by the Employee Benefits Committee shall be treated
as an ESOP contribution and shall be allocated among the accounts of
eligible participants in accordance with a pre-established
formula. Participant contributions are not
permitted.
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Effective
July 1, 2000, the Company or Bank also makes a required 100% vested cash
contribution to all participants in the ESOP in the amount of 3% of total
W-2 compensation [including amounts deducted from W-2 compensation for
pre-tax benefits such as health insurance premiums and contributions to
the Dime Savings Bank of Williamsburgh 401(k) Plan] minus any amount
included in W-2 compensation as a result of the grant or vesting of
restricted stock, the exercise of stock options or the disqualifying
disposition of incentive stock options up to applicable IRS
limits. This contribution was guaranteed through December 31,
2006 and has been discretionary since that
date. This contribution is automatically transferred to the
Dime Savings Bank of Williamsburgh 401(k) Plan (the “401(k) Plan”) whereby
the participant has the ability to invest this contribution in any of the
investment options offered under the 401(k) Plan. This annual
contribution is made in the first quarter of each year based upon the
total covered compensation through December 31st
of the previous year. In March 2008, a contribution of $455,038
was made to the ESOP and transferred to the 401(k) Plan for the 2007 plan
year. In March 2007, a contribution of $410,040 was made to the
ESOP and transferred to the 401(k) Plan for the 2006 plan
year.
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Effective
July 1, 2000, cash dividends received on allocated and unallocated
holdings of Dime Community Bancshares, Inc. common stock are distributed
quarterly to all ESOP participants. These distributions are
made in the form of a cash payment. Otherwise, no distributions
from the ESOP are made until a participant retires, dies (in which case,
payment are made to his or her beneficiary or, if none, his or her legal
representatives), or otherwise terminates employment with the Company or
the Bank and its subsidiaries. Distributions are made in cash
and/or stock payments.
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d.
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Vesting
- The
balance credited to each Participant’s account shall become vested in
accordance with the following
schedule:
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Number of Years Of Service
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Vested Percentage
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Less
than 2 years
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0%
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Less
than 3 years
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25
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Less
than 4 years
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50
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Less
than 5 years
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75
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5
or more years
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100
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Under
the provisions of the ESOP, participants were granted credit, for purposes
of vesting, for years of service at the Company or any of its direct or
indirect subsidiaries prior to the establishment of the ESOP. Any previously
unvested portion shall become fully vested to participants upon
attainment of age 65, or, if earlier, upon the termination of his or her
participation by reason of death, disability, retirement or upon
occurrence of change in control of the Company or the
Bank.
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e.
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Investments
- As of December 31, 2007 and 2006, the ESOP’s investments consists of the
investment in common stock of the Company and the investment of cash
balances in a short-term investment funds administered by the ESOP
trustee. The ESOP is permitted to invest in any commingled or
group trust fund, or common trust fund that is exempt from taxes under
Section 501(a) of the Internal Revenue
Code.
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f.
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Allocation
of Shares to Participant Accounts - As
of the last day of each plan year during which a borrowing is outstanding,
a portion of the financed shares purchased with the proceeds of the
borrowing shall be released in accordance with a predetermined
formula. The released shares are allocated to eligible
participant accounts in the proportion that each such eligible
participant’s compensation, as measured under the terms of the ESOP, for
the portion of the immediately preceding calendar year during which he or
she was a participant, bears to the aggregate compensation of all eligible
participants, as measured under the terms of the
ESOP.
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Released
shares allocated to participant accounts totaled 78,155 during each of the
years ended
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December
31, 2007 and 2006.
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Each
participant’s account reflects an allocation of the Bank’s contributions,
ESOP earnings and the forfeiture of terminated participant non-vested
accounts.
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Each
participant is entitled to exercise voting rights attributable to the
shares allocated to his or her account and is notified by the ESOP trustee
prior to the time that such rights are to be exercised. The
ESOP trustee is permitted, upon grant of authority by the Plan
Administrator, to vote shares for which instructions have not been given
by a participant within the stated time period. Such vote is
made in direct proportion to the votes received from
participants.
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g.
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Forfeitures - Upon the
termination of employment of a participant or former participant for
reason other than death, disability, or retirement, that portion of the
balance credited to his or her account which is not vested at the date of
termination shall be forfeited as of the last Valuation Date, defined as
the last business day of March, June, September or
December. The proceeds of such forfeitures shall be treated as
loan repayments and ESOP contributions as designated by the Employee
Benefits Committee.
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There
were 5,219 shares and 1,995 shares forfeited during the years ended
December 31, 2007 and 2006, respectively. These forfeitures
were utilized to reduce the employer contribution (which was the annual
repayment of principal on the outstanding loan in accordance with the loan
amortization schedule) in each respective
year.
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h.
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Payment of
Benefits – On termination of services due to death, disability,
retirement or other reason, a participant may elect to receive a lump-sum
amount equal to the value of the participant's vested interest in his or
her account.
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i.
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ESOP
Termination - The Company reserves the right to terminate the ESOP
at any time, subject to the provisions of ERISA. Upon such
termination of the ESOP, the interest of each participant in the ESOP will
be distributed to such participant or his or her beneficiary at the time
prescribed by the ESOP provisions and the Code. Upon
termination of the ESOP, the Compensation Committee shall direct the ESOP
trustee to pay all liabilities and expenses of the trust fund and to sell
the shares of financed stock held in the loan suspense account to the
extent it determines such sale to be necessary in order to repay the
borrowing.
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2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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Basis of
Accounting -
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America.
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| Investment Valuation and Income Recognition - Dime Community Bancshares, Inc. common stock and the Federated Prime Value Obligations Fund are valued at fair value based upon quoted market prices. The closing price of Dime Community Bancshares, Inc.common stock was $12.77 as of December 31, 2007 and $14.01 as of December 31, 2006. The closing price of the Federated Prime Value Obligations Fund was $1.00 at both December 31, 2007 and 2006. | |
| Net investment income consists of gains and losses realized from the sales of investments, the net change in the unrealized appreciation or depreciation on investments, and interest and dividends earned. | |
| Investment transactions are accounted for on a trade-date basis. Interest income on the Federated Prime Value Obligations Fund is recorded on the accrual basis and dividend income on Dime Community Bancshares, Inc. common stock is recorded on the ex-dividend date. During the years ended December 31, 2007 and 2006, cash dividends totaling $1,924,782 and $1,960,836, respectively, were declared on Dime Community Bancshares, Inc. common stock, which were recorded in Investment Income in the Statement of Changes in Net Assets Available for Plan Benefits. All dividends on unallocated shares and shares allocated to each participant are distributed to participants in the ESOP no later than the close of the calendar quarter after the calendar quarter in which such dividends are received by the ESOP. | |
| Realized gains and losses from securities transactions are recorded on the average cost basis. | |
| Use of Estimates - The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires Plan management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. | |
| Risks and Uncertainties - The ESOP has an equity investment concentrated solely in one equity security, which, in general, is exposed to various risks such as interest rate, credit and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the value of investment securities will occur in the near term and that such changes would materially affect the amounts reported in the financial statements. |
| Administrative Expenses - Administrative expenses are paid by the the Company as provided in the ESOP. | |
| Recent Accounting Standards - In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"), which defined fair value, established a framework for measuring fair value under generally accepted accounting principles, and expanded disclosures about fair value measurements. Other current accounting pronouncements that require or permit fair value measurements will require application of SFAS 157. SFAS 157 does not require any new fair value measurements, however, changes the definition of, and methods used to measure, fair value. SFAS 157 emphasizes fair value as a market-based, not entity-specific, measurement. Under SFAS 157, a fair value measurement should be based on the assumptions that market participants would use in pricing the asset or liability. SFAS 157 further establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs), and (ii) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. SFAS 157 also expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. SFAS 157 applies to reporting periods beginning after November 15, 2007. Adoption of SFAS 157 is not expected to have a material impact upon the ESOP's financial statements. |
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3.
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FEDERAL
INCOME TAX STATUS
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4.
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EXEMPT
PARTY-IN-INTEREST TRANSACTIONS
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5.
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INVESTMENTS
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|
December
31, 2007
|
December
31, 2006
|
||||||
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Allocated
|
Unallocated
|
Allocated
|
Unallocated
|
||||
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Shares
of Dime Community
|
|||||||
|
Bancshares,
Inc.
|
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Common
Stock:
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Number
of shares
|
1,983,633
|
1,406,782
|
1,983,118
|
1,484,937
|
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Cost
|
$5,954,536
|
$4,200,029
|
$5,954,318
|
$4,433,366
|
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Market
Value
|
$25,330,994
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$17,964,606
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$27,783,483
|
$20,803,967
|
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|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
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|
Parties
in
|
Identity
of
|
|
|||||
|
Interest
|
Issuer
|
Description
of Investment
|
Cost
|
Current Value
|
|||
|
|
|
||||||
|
*
|
Dime
Community Bancshares, Inc.
|
Shares
of common stock
|
$10,154,566
|
$43,295,600
|
|||
|
Federated
Investors
|
Prime
Value Obligations Fund
|
567,383
|
567,383
|
||||
|
Total
|
$10,721,949
|
$43,862,983
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(g)
|
(h)
|
(i)
|
||||||
|
Current
Value
|
||||||||||||
|
Description
of asset
|
of
Asset on
|
|||||||||||
|
Identity
of
|
(include
interest rate and
|
Purchase
|
Selling
|
Cost
of
|
Transaction
|
Net
gain
|
||||||
|
Party
Involved
|
Maturity in case of a
loan)
|
Price
|
Price
|
Asset
|
Date
|
or
(loss)
|
||||||
|
Federated
|
Prime
Value Obligations
|
$4,017,133
|
$4,017,133
|
$4,017,133
|
$4,017,133
|
-
|