Dime Community Bancshares Announces the Prepayment of the ESOP Share Acquisition Loan
December 28 2016 - 3:45PM
The Board of Directors of Dime Community Bancshares, Inc.
(NASDAQ:DCOM) (the “Company” or "Dime"), the parent company of Dime
Community Bank (the “bank”) has authorized the prepayment of the
outstanding balance on the Company’s Employee Stock Ownership Plan
(“ESOP”) Share Acquisition Loan effective December 31, 2016, and
the merger of the ESOP into the bank’s 401(K) Plan (such merged
plans referred to herein as the “KSOP”).
In 1996, the ESOP obtained a loan from the Company in the amount
of $11.6 million to purchase shares of Company common stock (the
“Share Acquisition Loan”). The current maturity date of the
Share Acquisition Loan is December 2025, and, as of December 31,
2016, the loan balance will be $2.8 million. The terms and
conditions of the Share Acquisition Loan documents permit
prepayment without penalty.
The prepayment of the outstanding Share Acquisition Loan balance
will result in a one-time, non-cash, non-tax deductible charge to
earnings of approximately $11.0 million, or $0.30 per diluted
share, in the quarter ending December 31, 2016. While this
prepayment will cause bank capital to increase by $2.8 million,
overall consolidated stockholders’ equity at the Company will not
change primarily as a result of the elimination of the
contra-equity account.
"The decision to prepay the Share Acquisition Loan and create
the KSOP was motivated primarily by our desire to distribute future
employee benefits more equitably among both our long-standing
employees and those employees who joined the bank within the past
several years,” stated Kenneth J. Mahon, President and incoming
Chief Executive Officer of the Company and bank. “In addition,
creation of the KSOP will provide participants with greater control
over their retirement funds, including the ability to diversify
their account balances.”
In connection with the prepayment of the Share Acquisition Loan,
the ESOP Trustee will be directed to repay the Share Acquisition
Loan as of December 31, 2016 (following the 2016 plan year loan
payment) by transferring to the Company (as lender) the number of
unallocated pledged shares of Company common stock with a Fair
Market Value (as defined in the ESOP) equal to the outstanding
Share Acquisition Loan balance as of such date. Upon such transfer,
the shares will be treated as treasury stock.
Following the prepayment of the Share Acquisition Loan, the
approximately 560,000 shares of unallocated Company common stock
remaining in the ESOP Trust will be allocated to the accounts of
all ESOP participants who are employed by the bank as of the loan
repayment date based on their account balance.
Going forward, establishment of the KSOP and the repayment of
the Share Acquisition Loan are expected to result in an annual
reduction to operating expense of approximately $1.1 million and an
increase of approximately $0.03 in diluted earnings per share.
Although it is the Company’s current intention to accomplish the
prepayment and plan merger, there can be no assurance provided that
they will be concluded.
ABOUT DIME COMMUNITY BANCSHARES, INC.
The Company had $5.82 billion in consolidated assets as of
September 30, 2016. The bank was founded in 1864, is headquartered
in Brooklyn, New York, and currently has twenty-five branches
located throughout Brooklyn, Queens, the Bronx and Nassau County,
New York. More information on the Company and the bank can be found
on Dime's website at www.dime.com.
Contact: Anthony Rose, Executive Vice President and Director of
Investor Relations, 718-782-6200, extension 5260.
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