Dime Bancorp struggled with margin pressure in the second quarter. But the thrift, New York's largest, still managed to report $18.1 million in earnings on the basis of strong mortgage originations and merger-related cost savings.

"It was a good, solid quarter," said Smith Barney analyst Thomas O'Donnell. "And the story with Dime is: As long as there are no surprises, that's positive. So far, earnings are on track."

Compared to a year ago, Dime's earnings were down 50%, from $36.3 million. But the second quarter of 1994 included a recognition of deferred tax assets that helped artificially boost net income by $19.8 million.

The current quarter is the second to reflect operating results following Dime's merger with Anchor Bancorp, another New York-based thrift. Chairman and chief executive James M. Large Jr. said "the merger process is continuing to go smoothly, with some three-fourths of the merger 'milestones' now successfully completed."

Dime has committed to achieving $50 million in annual cost savings from the merger by next year's first quarter.

Mr. Large said general and administrative expenses declined 4.9% from the first quarter to $75.1 million with the cutting of 300 staff positions.

On the revenue side, residential loan production volume increased by 85% from the first quarter to $333 million, "with high levels of loan application activity continuing through the end of the quarter," Mr. Large said.

Dime's net interest margin eroded, however, to 2.09% - a falloff of 7 basis points from the first quarter. As a result, net interest income was down 5% from the first quarter, to $102.3 million.

During the latest quarter, Dime's borrowed funds, which are generally tied to the short-term London interbank offered rate, had an average cost of 6.28%. By contrast, its mortgage-backed-securities portfolio, which is largely adjustable rate and indexed to the one-year Treasury, yielded only 6.31% during the quarter.

Mr. Large cautioned that Dime's net interest margin will experience continued pressure as long as the yield curve - the spread between long- term and short-term interest rates - remains flat.

Dime is the nation's fourth-largest publicly traded thrift, with $19.9 billion of assets. After completion of a planned restructuring of its branch system, it will operate 86 retail banking offices in the New York metropolitan area.

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