DIME COMMUNITY BANCSHARES INC (Form: 10-Q, Received: 05/10/2005 16:39:13)

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, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-27782

Dime Community Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		11-3297463 (I.R.S. employer identification number)
209 Havemeyer Street, Brooklyn, NY ( Address of principal executive offices)		11211 (Zip Code)

(718) 782-6200

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all the 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.

YES X NO ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES X NO

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Classes of Common Stock		Number of Shares Outstanding at May 6, 2005
$.01 Par Value		37,201,195

	PART I - FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition at March 31, 2005 and December 31, 2004	3
	Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2005 and 2004	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2005 and 2004 and Statements of Comprehensive Income for the Three-Month Periods Ended March 31, 2005 and 2004	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004	6
	Notes to Consolidated Financial Statements	7-9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10-23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23-25
Item 4.	Controls and Procedur es	25

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Submission of Matters to a Vote of Security Holders	25
Item 5.	Other Information	26
Item 6.	Exhibits	26-27
	Signatures	28

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Item 1. Financial Statements (Unaudited)

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands except share amounts)

	March 31, 2005	December 31, 2004
ASSETS:
Cash and due from banks	$25,575	$26,581
Federal funds sold and short-term investments	117,507	103,291
Encumbered investment securities held-to-maturity (estimated fair value of $588 and $589 at March 31, 2005 and December 31, 2004, respectively)	585	585
Unencumbered investment securities available-for-sale	92,568	54,840
Mortgage-backed securities held-to-maturity (estimated fair value of $428 and $485 at March 31, 2005 and December 31, 2004, respectively):
Encumbered	149	166
Unencumbered	266	299
	415	465
Mortgage-backed securities available-for-sale:
Encumbered	239,137	235,401
Unencumbered	243,258	284,019
	482,395	519,420
Loans:
Real estate	2,474,894	2,493,398
Other loans	2,650	2,916
Less allowance for loan losses	(15,230)	(15,543)
Total loans, net	2,462,314	2,480,771
Loans held for sale	1,290	5,491
Premises and equipment, net	16,648	16,652
Federal Home Loan Bank of New York capital stock	25,325	25,325
Goodwill	55,638	55,638
Other assets	90,132	88,207
Total Assets	$3,370,392	$3,377,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Due to depositors:
Interest bearing deposits	$2,072,885	$2,116,825
Non-interest bearing deposits	95,088	93,224
Total deposits	2,167,973	2,210,049
Escrow and other deposits	78,546	48,284
Securities sold under agreements to repurchase	205,584	205,584
Federal Home Loan Bank of New York advances	506,500	506,500
Subordinated notes payable	25,000	25,000
Trust Preferred securities payable	72,165	72,165
Other liabilities	31,854	27,963
Total Liabilities	3,087,622	3,095,545
Commitments and Contingencies
Stockholders' Equity:
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at March 31, 2005 and December 31, 2004)	-	-
Common stock ($0.01 par, 125,000,000 shares authorized, 50,289,996 shares and 50,111,988 shares issued at March 31, 2005 and December 31, 2004, respectively, and 37,190,852 shares and 37,165,740 shares outstanding at March 31, 2005 and December 31, 2004, respectively)	503	501
Additional paid-in capital	199,269	198,183
Retained earnings	264,140	258,237
Accumulated other comprehensive loss, net of deferred taxes	(6,158)	(3,228)
Unallocated common stock of Employee Stock Ownership Plan ("ESOP")	(4,726)	(4,749)
Unearned and unallocated common stock of Recognition and Retention Plan ("RRP")	(3,071)	(2,612)
Common stock held by Benefit Maintenance Plan ("BMP")	(7,348)	(7,348)
Treasury stock, at cost (13,099,144 shares and 12,946,248 shares at March 31, 2005 and December 31, 2004, respectively)	(159,839)	(157,263)
Total Stockholders' Equity	282,770	281,721
Total Liabilities And Stockholders' Equity	$3,370,392	$3,377,266

See notes to consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIA RIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share amounts)

	Three Months Ended March 31,
	2005	2004
Interest income:
Loans secured by real estate	$34,848	$33,615
Other loans	32	63
Mortgage-backed securities	4,490	4,712
Investment securities	606	312
Other	954	343
Total interest income	40,930	39,045

Interest expense:
Deposits and escrow	9,381	9,004
Borrowed funds	8,573	5,925
Total interest expense	17,954	14,929
Net interest income	22,976	24,116
Provision for loan losses	60	60
Net interest income after provision for loan losses	22,916	24,056

Non-interest income:
Service charges and other fees	1,408	1,560
Net gain on sales of loans	135	60
Net gain on sales and redemptions of securities	-	516
Income from Bank owned life insurance	477	504
Prepayment fee income	1,585	2,543
Other	449	434
Total non-interest income	4,054	5,617

Non-interest expense:
Salaries and employee benefits	5,035	4,683
ESOP and RRP compensation expense	572	1,033
Occupancy and equipment	1,336	1,263
Federal deposit insurance premiums	84	84
Data processing costs	413	700
Other	2,318	2,602
Total non-interest expense	9,758	10,365

Income before income taxes	17,212	19,308
Income tax expense	6,341	6,968
Net income	$10,871	$12,340

Earnings per Share:
Basic	$0.31	$0.35
Diluted	$0.30	$0.33

See notes to consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

AND COMPREHENSIVE INCOME

(Dollars in thousands)

	Three Months Ended March 31,
	2005	2004
Common Stock (Par Value $0.01):
Balance at beginning of period	$501	$492
Shares issued in exercise of options	2	3
Balance at end of period	503	495

Additional Paid-in Capital:
Balance at beginning of period	198,183	185,991
Cash paid for fractional shares of stock dividend	-	(12)
Stock options exercised	696	1,345
Tax Benefit of benefit plans	-	1,450
RRP shares acquired from treasury	103	-
Amortization of excess fair value over cost - ESOP stock	287	656
Balance at end of period	199,269	189,430

Retained earnings:
Balance at beginning of period	258,237	231,771
Net income for the period	10,871	12,340
Cash dividends declared and paid	(4,968)	(4,836)
Balance at end of period	264,140	239,275

Accumulated other comprehensive income:
Balance at beginning of period	(3,228)	(846)
Change in other comprehensive (loss) income during the period, net of deferred taxes	(2,930)	2,367
Balance at end of period	(6,158)	1,843

Employee Stock Ownership Plan:
Balance at beginning of period	(4,749)	(5,202)
Amortization of earned portion of ESOP stock	23	113
Balance at end of period	(4,726)	(5,089)

Recognition and Retention Plan:
Balance at beginning of period	(2,612)	(2,617)
Common stock acquired by RRP	(491)	-
Amortization of earned portion of RRP stock	32	27
Balance at end of period	(3,071)	(2,590)

Treasury Stock:
Balance at beginning of period	(157,263)	(120,086)
Common stock acquired by RRP	388	^-
Purchase of treasury shares, at cost	(2,964)	(21,524)
Balance at end of period	(159,839)	(141,610)

Common Stock Held by Benefit Maintenance Plan
Balance at end of period	(7,348)	(5,584)

Statements of Comprehensive Income
Net Income	$10,871	$12,340
Reclassification adjustment for securities sold, net of benefit of $237 during the three months ended March 31, 2004	-	(278)
Net unrealized securities (losses) arising during the period, net of taxes of $(2,253) and $2,496 during the three months ended March 31, 2005 and 2004, respectively	(2,930)	2,645
Comprehensive Income	$7,941	$14,707

See notes to consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Three Months Ended March 31,
	2005	2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$10,871	$12,340
Adjustments to reconcile net income to net cash provided by operating activities:
Net gain on investment and mortgage backed securities sold	-	(516)
Net gain on sale of loans held for sale	(135)	(60)
Net depreciation and amortization	849	1,079
ESOP and RRP compensation expense	342	797
Provision for loan losses	60	60
Origination of loans held for sale	(39,760)	(4,615)
Proceeds from sale of loans held for sale	44,096	6,555
Decrease (Increase) in other assets	507	(12,966)
Increase in other liabilities	3,889	5,514
Net cash provided by operating activities	20,719	8,188
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in other short term investments	(14,216)	1,670
Proceeds from maturities of investment securities available-for-sale	-	5,000
Proceeds from sales of investment securities available-for-sale	-	2,959
Proceeds from sales of mortgage backed securities available-for-sale	-	18,172
Purchases of investment securities available-for-sale	(38,050)	(15,038)
Purchases of mortgage backed securities available-for-sale	-	(338,673)
Principal collected on mortgage backed securities held-to-maturity	50	82
Principal collected on mortgage backed securities available-for-sale	31,470	35,018
Net decrease (increase) in loans	18,397	(96,854)
Purchases of premises and equipment	(329)	(627)
Redemption of Federal Home Loan Bank stock	-	500
Net cash used in investing activities	(2,678)	(387,791)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in due to depositors	(42,076)	230,989
Net increase in escrow and other deposits	30,263	22,555
Increase in securities sold under agreements to repurchase	-	88,137
Decrease in FHLBNY Advances	-	(10,000)
Increase in Trust Preferred Securities payable	-	72,165
Cash dividends paid	(4,968)	(4,836)
Cash disbursed for the payment of the stock dividend	-	(12)
Stock options exercised and tax benefits of RRP	698	2,798
Purchase of treasury stock	(2,964)	(21,524)
Net cash (used in) provided by financing activities	(19,047)	380,272
(DECREASE) INCREASE IN CASH AND DUE FROM BANKS	(1,006)	669
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD	26,581	24,073
CASH AND DUE FROM BANKS, END OF PERIOD	$25,575	$24,742
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$1,415	$6,576
Cash paid for interest	16,905	14,322
(Decrease) Increase in accumulated other comprehensive or loss	(2,930)	2,367

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the "Holding Company," and together with its direct and indirect subsidiaries, the "Company") is a Delaware corporation and parent company of The Dime Savings Bank of Williamsburgh (the "Bank"), a federally-chartered stock savings bank. The Holding Company's direct subsidiaries are the Bank and 842 Manhattan Avenue Corp. The Bank's direct subsidiaries are Havemeyer Equities Corp. (''HEC''), Boulevard Funding Corp., Havemeyer Investments, Inc., DSBW Residential Preferred Funding Corp. and Dime Reinvestment Corp. HEC has one direct subsidiary, DSBW Preferred Funding Corporation.

The Bank has been, and intends to remain, a community-oriented financial institution providing financial services and loans for housing within its market areas. The Bank maintains its headquarters in the Williamsburg section of the borough of Brooklyn, New York, and operates twenty full-service retail banking offices located in the New York City boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County, New York. The Bank gathers deposits primarily from the communities and neighborhoods in close proximity to its branches. The Bank's primary lending area is the New York City metropolitan area, although its overall lending area is much larger, and extends approximately 150 miles in each direction from its corporate headquarters in Brooklyn.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial condition as of March 31, 2005, and the results of operations, changes in stockholders' equity, comprehensive income and cash flows for the three-month periods ended March 31, 2005 and 2004. The results of operations for the three-month period ended March 31, 2005 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2005. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas in the accompanying financial statements where estimates are significant include the allowance for loan losses, the valuation of mortgage servicing rights ("MSR"), asset impairment adjustments, the valuation of debt and equity securities, loan income recognition and the realization of deferred tax assets.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2004 and notes thereto.

3. TREASURY STOCK

During the three months ended March 31, 2005, the Holding Company repurchased 184,700 shares of its common stock into treasury. All shares repurchased were recorded at the acquisition cost, which totaled $3.0 million during the three months ended March 31, 2005.

On March 17, 2005, 31,804 shares of the Company's common stock were released from treasury in order to fulfill benefit obligations calculated under the 2004 Stock Incentive Plan for Outside Directors, Officers and Employees of Dime Community Bancshares, Inc. The closing price of the Company's common stock on that date was $15.44. The shares were released utilizing the average historical cost method.

4. ACCOUNTING FOR GOODWILL

The Company has designated the last day of its fiscal year as its annual date for impairment testing. The Company performed an impairment test as of December 31, 2004 and concluded that no impairment of goodwill existed. No events have occurred nor have circumstances changed subsequent to December 31, 2004 that would reduce the fair value of the Company's reporting unit below its carrying value. Such events or changes in circumstances would require an immediate impairment test to be performed in accordance with SFAS No. 142.

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Aggregate amortization expense related to the core deposit intangible was $48,000 for the three months ended March 31, 2005 and $206,000 for the three months ended March 31, 2004. The core deposit intangible was fully amortized as of March 31, 2005.

5. EARNINGS PER SHARE ("EPS")

EPS is calculated and reported in accordance with SFAS No. 128, "Earnings Per Share.'' SFAS No. 128 requires disclosure of basic EPS and diluted EPS for entities with complex capital structures on the face of the income statement, along with a reconciliation of the numerator and denominator of basic and diluted EPS.

Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the period (weighted average common shares are adjusted to include vested RRP shares and allocated ESOP shares). Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if unvested RRP shares became vested and stock options were exercised and converted into common stock.

The following is a reconciliation of the numerator and denominator of basic EPS and diluted EPS for the periods presented:

	Three Months Ended March 31,
	2005	2004
(Dollars in thousands, except per share amounts)
Numerator:
Net Income per the Consolidated Statement of Operations	$10,871	$12,340
Denominator:
Weighted average number of shares outstanding utilized in the calculation of basic EPS	35,197,291	35,691,801

Unvested shares of RRP	32,301	40,500
Common stock equivalents resulting from the dilutive effect of "in-the-money" stock options	528,400	1,130,959
Weighted average number of shares outstanding u tilized in the calculation of diluted EPS	35,757,992	36,863,260

Common stock equivalents resulting from the dilutive effect of "in-the-money" stock options are calculated based upon the excess of the average market value of the Company's common stock over the exercise price of outstanding options.

6. ACCOUNTING FOR STOCK BASED COMPENSATION

The Holding Company and Bank maintain the Recognition and Retention Plan for Outside Directors, Officers and Employees of Dime Community Bancshares, Inc. ("RRP"), the Dime Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors, Officers and Employees (the "1996 Stock Option Plan"), the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (the "2001 Stock Option Plan") and the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan (the "2004 Stock Incentive Plan," and collectively the "Stock Plans"); which are discussed more fully in Note 15 to the Company's consolidated audited financial statements for the year ended December 31, 2004, and which are subject to the accounting requirements of SFAS 123, "Accounting for Stock-Based Compensation," as amended by SFAS 148 "Accounting for Stock-Based Compensation - Transition and Disclosures, an Amendment of FASB Statement No. 123" (collectively "SFAS 123"). SFAS 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company accounts for stock-based compensation under the Stock Plans using the intrinsic value recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations. Accordingly, no stock-based compensation cost has been reflected in net income for stock options, since, for all options granted under the Stock Plans, the market value of the underlying common stock on the date of grant equaled the exercise price of the common stock.

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. See Note 15 to the Company's consolidated audited financial statements for the year ended December 31, 2004.

In accordance with APB 25, compensation expense related to the RRP is recorded for all shares earned by participants during the period at the average historical acquisition cost of all allocated RRP shares.

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In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), "Share-Based Payment", ("SFAS 123R"), that addresses the accounting for share-based payment transactions ( e.g ., stock options and awards of restricted stock) in which an employer receives employee services in exchange for equity securities of the company or liabilities that are based on the fair value of the company’s equity securities. The proposed statement, if adopted as proposed, would eliminate APB 25 and generally require that such transactions be accounted for using a fair-value-based method and the recording of compensation expense rather than optional pro forma disclosure. Adoption of SFAS 123R is required for fiscal year beginning after June 15, 2005. Management of the Company is evaluating the impact of adoption of SFAS 123R upon its consolidated financial position and results of operations.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for the Stock Plans:

	Three Months Ended March 31,
	2005	2004
(Dollars in thousands, except per share amounts)
Net income, as reported	$10,871	$12,340
Less: Excess stock-based compensation expense determined under the fair value method over the stock-based compensation recorded for all plans, net of applicable taxes	(388)	(420)
Pro forma net income	$10,483	$11,920

Earnings per share
Basic, as reported	$0.31	$0.35
Basic, pro forma	0.30	0.33

Diluted, as reported	$0.30	$0.33
Diluted, pro forma	0.29	0.32

7. UNREALIZED LOSSES ON INVESTMENT AND MORTGAGE-BACKED SECURITIES

The following table summarizes the gross unrealized losses and fair value of investment securities and mortgage-backed securities available-for-sale as of March 31, 2005, aggregated by investment category and the length of time the securities were in a continuous unrealized loss position:

	Less than 12 Months Consecutive Unrealized Losses		12 Months or More Consecutive Unrealized Losses		Total
			(Dollars in Thousands)
	Fair Value	Unrealized Losses	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Obligations of U.S. Government corporations and agencies	$37,986	$64	-	-	$37,986	$64
Corporate securities	6,806	203	17,363	636	24,169	839
Equity securities	-	-	2,741	239	2,741	239
Fannie Mae pass-through certificates	12,704	316	12,141	324	24,845	640
Collateralized Mortgage Obligations	124,343	2,647	314,396	8,301	438,739	10,948
	$181,839	$3,230	$346,641	$9,500	$528,480	$12,730

Management believes that the unrealized losses were temporary at March 31, 2005. In making this determination, management considered the severity and duration of the loss, as well as its intent to hold the security until the loss is recovered. As of March 31, 2005, no other investment or mortgage-backed securities ("MBS") possessed unrealized losses for twelve consecutive months or more.

The aggregate amount of held-to-maturity investment securities and MBS carried at historical cost was $1.0 million as of March 31, 2005. No individual security that was carried at historical cost possessed an unrealized loss as of March 31, 2005.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q 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.

General

Dime Community Bancshares, Inc. is a Delaware corporation and parent company of the Bank, a federally-chartered stock savings bank. The Bank maintains its headquarters in the Williamsburg section of the borough of Brooklyn, New York and operates twenty full-service retail banking offices located in the New York City boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County, New York. The Bank’s principal business has been, and continues to be, gathering deposits from customers within its market area, and investing those deposits primarily in multifamily residential mortgage loans, commercial real estate loans, one- to four-family residential mortgage loans, construction loans, consumer loans, mortgage-backed securities (“MBS”), obligations of the U.S. Government and Government Sponsored Entities (“GSEs”), and corporate debt and equity securities.

Executive Summary

The Holding Company’s primary business is the operation of the Bank. The Company’s consolidated results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Bank additionally generates non-interest income such as service charges and other fees, as well as income associated with the Bank’s purchase of Bank Owned Life Insurance. Non-interest expense primarily consists of employee compensation and benefits, federal deposit insurance premiums, data processing fees, marketing expenses and other operating expenses. The Company’s consolidated results of operations are also significantly affected by general economic and competitive conditions (particularly fluctuations in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies.

The Bank’s primary strategy is generally to increase its household and deposit market shares in the communities which it serves. The Bank also seeks to increase its product and service utilization for each individual depositor. In addition, the Bank’s primary strategy includes the origination of, and investment in, mortgage loans, with an emphasis on multifamily

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residential and commercial real estate loans. Recently, the Bank has increased its portfolio of loans secured by mixed-use properties typically comprised of ground level commercial units and residential apartments on the upper floors.

The Company believes that multifamily residential and commercial real estate loans provide advantages as investment assets. Initially, they offer a higher yield than investment securities of comparable maturities or terms to repricing. Origination and processing costs for the Bank’s multifamily residential and commercial real estate loans are lower per thousand dollars of originations than comparable one-to four-family loan costs. In addition, the Bank’s market area has generally provided a stable flow of new and refinanced multifamily residential and commercial real estate loan originations. In order to address the higher credit risk associated with multifamily residential and commercial real estate lending, the Bank has developed underwriting standards that it believes are reliable in order to maintain consistent credit quality for its loans.

The Bank also strives to provide a stable source of liquidity and earnings through the purchase of investment grade securities; seeks to maintain the asset quality of its loans and other investments; and uses appropriate portfolio and asset/liability management techniques in an effort to manage the effects of interest rate volatility on its profitability and capital.

The continued low interest rate on loans during the three months ended March 31, 2005 coupled with increases in short-term interest rates during the period June 2004 through March 2005 resulted in a decreased average yield on interest earning assets and an increased average cost of interest bearing liabilities during the March 2005 quarter. Additionally, the 7.0% coupon trust preferred borrowing issued by the Company in March 2004 added to interest expense on borrowed funds during the three months ended March 31, 2005. As a result, both the net interest spread and the net interest margin declined during the three months ended March 31, 2005 when compared to the three months ended March 31, 2004. Also contributing to the decline in net income during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 was a $958,000 decline in multifamily residential and commercial real estate loan prepayment fees.

Selected Financial Highlights and Other Data

(Dollars in thousands except per share amounts)

	For the Three Months
	Ended March 31,
	2005	2004
Performance and Other Selected Ratios:
Return on Average Assets	1.30%	1.60%
Return on Average Stockholders' Equity	15.47	17.72
Stockholders' Equity to Total Assets	8.39	8.18
Tangible Equity to Total Tangible Assets	7.01	6.57
Loans to Deposits at End of Period	114.34	100.65
Loans to Earning Assets at End of Period	77.52	71.38
Net Interest Spread	2.59	3.05
Net Interest Margin	2.87	3.29
Average Interest Earning Assets to Average Interest Bearing Liabilities	110.71	111.46
Non-Interest Expense to Average Assets	1.16	1.34
Efficiency Ratio	36.28	35.55
Effective Tax Rate	36.84	36.09
Dividend Payout Ratio	46.07	40.40
Per Share Data:
Reported EPS (Diluted)	$0.30	$0.33
Cash Dividends Paid Per Share	0.14	0.13
Stated Book Value	7.60	7.37
Tangible Book Value	6.27	5.82
table continued on next page

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	For the Three Months
	Ended March 31,
	2005		2004

Asset Quality Summary:
Net (Recoveries) Charge-offs	$(1)	$30
Non-performing Loans	2,712	1,381
Non-performing Loans/Total Loans	0.11%	0.06%
Non-performing Assets/Total Assets	0.08	0.04
Allowance for Loan Loss/Total Loans	0.61	0.66
Allowance for Loan Loss/Non-performing Loans	561.68	1,085.59
Regulatory Capital Ratios: (Bank Only)
Tangible Capital	8.23%	7.16%
Leverage Capital	8.23	7.16
Total Risk-based capital	13.13	14.40
Earnings to Fixed Charges Ratios
Including Interest on Deposits	1.96x	2.29x
Excluding Interest on Deposits	3.01	4.26

Critical Accounting Policies

Various elements of the Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. The Company’s policies with respect to the methodologies it uses to determine the allowance for loan losses, the valuation of MSRs, asset impairment judgments (including the valuation of goodwill and other intangible assets, and other than temporary declines in the valuation of securities), and loan income recognition are the Company’s most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a high degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions and estimates could result in material variations in the Company's results of operations or financial condition.

The following is a description of the Company's critical accounting policies and an explanation of the methods and assumptions underlying their application. These policies and their application are reviewed periodically and at least annually with the Audit Committee of the Holding Company.

Allowance for Loan Losses. The loan loss reserve methodology consists of several key components, including a review of the two elements of the Bank's loan portfolio, classified loans [ i.e., non-performing loans, troubled-debt restructuring and impaired loans under SFAS No. 114 "Accounting By Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure an Amendment of FASB Statement No. 114" ("Amended SFAS 114")] and performing loans.

Factors considered in determining the appropriateness of the allowance for loan losses for both classified and performing loans include the Bank's past loan loss experience, known and inherent risks in the portfolio, existing adverse situations which may affect the ability of borrowers to repay, estimated value of underlying collateral and current economic conditions in the Bank's lending area. Management uses available information to estimate losses on loans, however, future additions to, or reductions in, the allowance may be necessary based on changes in economic conditions beyond management's control. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to, or reductions in, the allowance based on judgments different from those of management.

GAAP requires the Bank to maintain an appropriate allowance for loan losses. Management believes that the Bank maintains its allowance for loan losses at appropriate levels, however, adjustments may be necessary if future economic, market or other conditions differ from the current operating environment. Although the Bank believes it utilizes the most reliable information available, the level of the allowance for loan losses remains an estimate subject to significant judgment. These evaluations are inherently subjective because, although based upon objective data, it is management's interpretation of that data that determines the amount of the appropriate allowance. The Company, therefore, periodically reviews the actual performance and charge-off of its portfolio and compares them to the previously determined allowance coverage percentages. In so doing, the Company evaluates the impact that the previously mentioned variables may have on the portfolio to determine whether or not changes should be made to the assumptions and analyses.

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Performing Loans

At March 31, 2005, the majority of the allowance for loan losses was allocated to performing loans, which represented the overwhelming majority of the Bank's loan portfolio. Performing loans are reviewed at least quarterly based upon the premise that there are losses inherent within the loan portfolio that have not been identified as of the review date. The Bank thus calculates an allowance for loan losses related to its performing loans by deriving an expected loan loss percentage and applying it to its performing loans. In deriving the expected loan loss percentage, the Bank considers the following criteria: the Bank's historical loss experience; the age and payment history of the loans (commonly referred to as their "seasoned quality"); the type of loan ( i.e. , one- to four-family, multifamily residential, commercial real estate, cooperative apartment, construction or consumer); the underwriting history of the loan ( i.e ., whether it was underwritten by the Bank or a predecessor institution acquired by the Bank and, therefore, originally subjected to different underwriting criteria); both the current condition and recent history of the overall local real estate market (in order to determine the accuracy of utilizing recent historical charge-off data to derive the expected loan loss percentages); the level of, and trend in, non-performing loans; the level and composition of new loan activity; and the existence of geographic loan concentrations (as the overwhelming majority of the Bank's loans are secured by real estate properties located in the New York City metropolitan area) or specific industry conditions within the portfolio segments. Since these criteria affect the expected loan loss percentages that are applied to performing loans, changes in any of them will effect the amount of the allowance and the provision for loan losses. The Bank applied the process of determining the allowance for loan losses consistently throughout the three months ended March 31, 2005 and 2004.

Classified Loans

Federal regulations and Bank policy require that loans possessing certain weaknesses be classified as Substandard, Doubtful or Loss assets. Assets that do not expose the Bank to risk sufficient to justify classification in one of these categories, however, which possess potential weaknesses that deserve management's attention, are designated Special Mention. Loans classified as Special Mention, Substandard or Doubtful are reviewed individually on a quarterly basis by the Bank's Loan Loss Reserve Committee to determine the level of possible loss, if any, that should be provided for within the Bank's allowance for loan losses.

If approved by the Board of Directors, the Bank will additionally increase its valuation allowance in an amount recommended by the Loan Loss Reserve Committee to appropriately reflect the anticipated loss from any other loss classification category. Typically, the Bank's policy is to charge-off immediately all balances classified ''Loss'' and record a reduction of the allowance for loan losses. The Bank applied this process consistently throughout the years ended March 31, 2005 and 2004.

Under the guidance established by Amended SFAS 114, loans determined to be impaired (generally, non-performing and troubled-debt restructured multifamily residential and commercial real estate loans and non-performing one- to four-family loans in excess of $360,000) are evaluated in order to establish whether the estimated value of the underlying collateral determined based upon an independent appraisal is sufficient to satisfy the existing debt. For each loan that the Bank determines to be impaired, impairment is measured by the amount that the carrying balance of the loan, including all accrued interest, exceeds the estimate of its fair value. A specific reserve is established on all impaired loans to the extent of impairment and comprises a portion of the allowance for loan losses. The Loan Loss Reserve Committee's determination of the estimated fair value of the underlying collateral is subject to assumptions and judgments made by the committee. A specific valuation allowance could differ materially as a result of changes in these assumptions and judgments.

Valuation of MSR. The estimated origination and servicing costs of mortgage loans sold with servicing rights retained by the Bank are allocated between the loans and the servicing rights based on their estimated fair values at the time of the loan sale. Servicing assets are carried at the lower of cost or fair value and are amortized in proportion to, and over the period of, net servicing income. The estimated fair value of loan servicing assets is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, servicing costs and discount rates that the Company believes market participants would use for similar assets. All estimates and assumptions utilized in the valuation of MSR are derived based upon actual historical results for either the Bank or its industry peers.

Capitalized loan servicing assets are stratified based on predominant risk characteristics of the underlying loans for the purpose of evaluating impairment. A valuation allowance is then established in the event the recorded value of an individual stratum exceeds its fair value.

The fair value of MSR is sensitive to changes in assumptions. Fluctuations in prepayment speed assumptions have the most significant impact on the fair value of MSR. In the event that loan prepayment activities increase due to increased loan refinancing, the fair value of MSR would likely decline. In the event that loan prepayment activities decrease due to

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a decline in loan refinancing, the fair value of MSR would likely increase. Any measurement of MSR is limited by the existing conditions and assumptions utilized at a particular point in time, and would not necessarily be appropriate if applied at a different point in time.

Asset Impairment Adjustments. Certain of the Company’s assets are carried in its consolidated statements of financial condition at fair value or at the lower of cost or fair value. Management periodically performs analyses to test for impairment of these assets. Valuation allowances are established when necessary to recognize such impairment. Two significant impairment analyses relate to the value of goodwill and other than temporary declines in the value of the Company's securities.

Goodwill is accounted for in accordance with SFAS No. 142 which was adopted on July 1, 2001. SFAS No. 142 eliminated amortization of goodwill and instead requires performance of an annual impairment test at the reporting unit level. As of both July 1, 2001 and March 31, 2005, the Company had goodwill totaling $55.6 million.

The Company identified a single reporting unit for purposes of its goodwill impairment testing. The impairment test is therefore performed on a consolidated basis and compares the Company's market capitalization (reporting unit fair value) to its outstanding equity (reporting unit carrying value). The Company utilizes its closing stock price as reported on the Nasdaq National Market on the date of the impairment test in order to compute market capitalization. The Company has designated the last day of its fiscal year as the annual date for impairment testing. The Company performed its annual impairment test as of December 31, 2004 and concluded that no potential impairment of goodwill existed since the fair value of the Company's reporting unit exceeded its carrying value. No events have occurred, nor circumstances changed, subsequent to March 31, 2005 that would reduce the fair value of the Company's reporting unit below its carrying value. Such events or changes in circumstances would require an immediate impairment test to be performed in accordance with SFAS No. 142. Differences in the identification of reporting units and the use of valuation techniques can result in materially different evaluations of impairment.

Available-for-sale debt and equity securities that have readily determinable fair values are carried at fair value. Estimated fair values for securities are based on published or securities dealers' market values. Debt securities are classified as held-to-maturity, and carried at amortized cost, only if the Company has a positive intent and ability to hold them to maturity. If not classified as held-to-maturity, such securities are classified as securities available-for-sale or as trading securities. Unrealized holding gains or losses on securities available-for-sale are excluded from net income and reported net of income taxes as other comprehensive income or loss. The Company conducts a periodic review and evaluation of its securities portfolio taking into account the severity and duration of the unrealized loss, as well as management's intent with regard to the securities, in order to determine if a decline in market value of any security below its amortized cost basis is other than temporary. If such decline is deemed other than temporary, the carrying amount of the security is adjusted through a valuation allowance. For the periods ended March 31, 2005 and 2004, there were no other-than temporary impairments in the securities portfolio.

Loan Income Recognition . Interest income on loans is recorded using the level yield method. Loan origination fees and certain direct loan origination costs are deferred and amortized as a yield adjustment over the contractual loan terms. Accrual of interest is discontinued when its receipt is in doubt, which typically occurs when a loan becomes 90 days past due as to principal or interest. Any interest accrued to income in the year when interest accruals are discontinued is reversed. Payments on nonaccrual loans are generally applied to principal. Management may elect to continue the accrual of interest when a loan is in the process of collection and the estimated fair value of the collateral is sufficient to satisfy the principal balance and accrued interest. Loans are returned to accrual status once the doubt concerning collectibility has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a minimum of twelve months.

Liquidity and Capital Resources

The Bank's primary sources of funding for its lending and investment activities include deposits, repayments of loans and MBS, investment security maturities and redemptions, advances from the Federal Home Loan Bank of New York ("FHLBNY"), and borrowings in the form of securities sold under agreement to repurchase ("REPOS") entered into with various financial institutions, including the FHLBNY. The Bank also sells selected multifamily residential and commercial real estate loans to the Federal National Mortgage Agency ("FNMA'), and long-term, one- to four-family residential real estate loans to either FNMA or the State of New York Mortgage Agency. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposits flows and prepayments on mortgage loans and MBS are influenced by interest rates, economic conditions and competition.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. In addition, it must also compete for deposit monies against the stock markets and mutual funds, especially during periods of strong performance in the equity markets. The Bank's deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general increases or declines in interest rates, its deposit flows should not be materially impacted. However, favorable

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performance of the equity markets could adversely impact the Bank’s deposit flows.

Deposits decreased $42.1 million during the three months ended March 31, 2005, compared to an increase of $231.0 million during the three months ended March 31, 2004. During both the second half of 2004 and the three months ended March 31, 2005, the Company temporarily elected to forego growth in its loan portfolio and asset levels while both medium and long-term interest rates remained at near historic low levels, especially in relation to increasing deposit rates. The Company additionally temporarily interrupted deposit growth in order to avoid excessive liquidity during the period of diminished loan production. In furtherance of this strategy, the Company did not aggressively compete to retain higher cost deposits that repriced during the three months ended March 31, 2005 or to attract new deposits through promotional campaigns. As a result, certificates of deposit ("CDs") and money markets (the two largest components of deposit funds) declined $12.5 million and $24.0 million, respectively, during the three months ended March 31, 2005. The increase in deposits during the three months ended March 31, 2004 reflected increased marketing efforts that helped generate additional deposit balances in CDs and core ( i.e. , non-CD) deposit accounts. Successful CD promotional campaigns implemented during the three months ended March 31, 2004 resulted in growth in CDs of $168.9 million during the period. Additionally, during the three months ended March 31, 2004, money market accounts increased $60.2 million as a result of successful promotional activities.

During the three months ended March 31, 2005, principal repayments totaled $94.9 million on real estate loans and $31.5 million on MBS. During the three months ended March 31, 2004, principal repayments totaled $144.8 million on real estate loans and $35.1 million on MBS. The decrease in principal repayments on loans and MBS resulted from a reduction in customer refinance activities associated with mortgage-backed assets that resulted from increases in interest rates during the period June 2004 through March 2005.

Since December 2002, the Bank has originated and sold multi-family residential mortgage loans in the secondary market to FNMA while retaining servicing. The Bank underwrites these loans using its customary underwriting standards, funds the loans, and sells them to FNMA at agreed upon pricing. Typically, the Bank seeks to sell loans with terms to maturity or repricing in excess of seven years from the origination date since the Bank does not desire to retain such loans in portfolio as a result of the heightened interest rate risk they possess. Under the terms of the sales program, the Bank retains a portion of the associated credit risk. Once established, such amount continues to increase as long as the Bank continues to sell loans to FNMA under the program. The Bank retains this level of exposure until the portfolio of loans sold to FNMA is satisfied in its entirety or the Bank funds claims by FNMA for the maximum loss exposure. During the three months ended March 31, 2005 and 2004, the Bank sold FNMA $23.6 million and $5.0 million of loans, respectively, pursuant to this program. During the three months ended March 31, 2004, the terms offered on these loans by FNMA were less competitive than the market, resulting in diminished originations and sales during the period.

In furtherance of the Bank's strategy to limit asset growth during the March 2005 quarter, no new REPO borrowings or FHLBNY advances were undertaken during the period. During the three months ended March 31, 2004, REPOS increased $88.1 million. During the three months ended March 31, 2004, the Company added REPO borrowings with an average maturity of 1.74 years and a weighted average interest cost of 1.7% in order to fund securities purchases. Net activity related to FHLBNY advances was minimal during the three months ended March 31, 2004.

On March 17, 2004, the Company received net proceeds of $72.2 million from the issuance of debt in the form of Trust Preferred securities. These borrowings bear interest at a rate of 7.0% for 30 years and are callable at any time after 5 years. The Company has utilized a portion of the proceeds to repurchase its common stock, and has invested the remaining balance in short-term securities.

The Bank uses its liquidity and capital resources primarily for the origination of real estate loans and the purchase of mortgage-backed and other securities. During the three months ended March 31, 2005 and 2004, real estate loan originations totaled $115.1 million and $246.0 million, respectively. Purchases of investment securities and MBS, which were $353.7 million during the three months ended March 31, 2004, totaled $38.1 million for the three months ended March 31, 2005. The decrease in both loan origination levels and investment purchases during the three months ended March 31, 2005 reflected management's decision to temporarily reduce growth in assets while medium and long-term interest rates remained at historically low levels. Additionally contributing to the decrease in loan originations, were increases in interest rates during both the second half of 2004 and the three months ended March 31, 2005 which resulted in a decline in the level of loan refinance activity during the three months ended March 31, 2005 compared to the three months ended March 31, 2004.

During the three months ended March 31, 2005, the Holding Company purchased 184,700 shares of its common stock into treasury. All shares were recorded at their respective acquisition cost, which totaled $3.0 million during the period. As of March 31, 2005, up to 1,232,856 shares remained available for purchase under authorized share purchase programs. Based upon the closing price of its common stock of $15.20 per share as of March 31, 2005, the Holding Company would utilize $18.7 million in order to purchase all of the remaining

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authorized shares. For the Holding Company to complete these share purchases, it will likely require dividend distributions from the Bank.

The levels of the Bank's short-term liquid assets are dependent on its operating, financing and investing activities during any given period. The Bank monitors its liquidity position daily. During the three months ended March 31, 2005, the Bank experienced increased liquidity that resulted from real estate loan and MBS repayments and the sale of loans to FNMA. As of March 31, 2005, a portion of these funds had not been used to fund loan originations or other investment activities, and instead was invested in overnight federal funds sold and various money market investments.

In the event that the Bank should require funds beyond its ability to generate them internally, an additional source of funds is available through use of its borrowing line at the FHLBNY. At March 31, 2005, the Bank had an additional potential borrowing capacity of $507.3 million available should it purchase the minimum required level of FHLBNY common stock ( i.e., 1/20 ^th of its outstanding FHLBNY borrowings).

The Bank is subject to minimum regulatory capital requirements imposed by the Office of Thrift Supervision ("OTS"), which, as a general matter, are based on the amount and composition of an institution's assets. At March 31, 2005, the Bank was in compliance with all applicable regulatory capital requirements. In addition, at March 31, 2005, the Bank was considered "well-capitalized" for all regulatory purposes.

Contractual Obligations

The Bank has outstanding at any time, a significant number of borrowings in the form of FHLBNY advances or REPOS. The Holding Company also has an outstanding $25.0 million non-callable subordinated note payable due to mature in 2010, and $72.2 million of trust preferred borrowings from third parties due to mature in April 2034, which is callable at any time after April 2009.

The Bank is obligated under leases for rental payments on certain of its branches and equipment. A summary of the contractual obligations associated with CDs, borrowings and lease obligations as of March 31, 2005 is as follows:

Contractual Obligations	Less than One Year	One Year to Three Years	Over Three Years to Five Years	Over Five Years	Total at March 31, 2005
	(Dollars in Thousands)
CDs	$737,475	$177,841	$32,184	$-	$947,500
Borrowings (including subordinated note payable)	$230,000	$195,000	$90,584	$293,665	$809,249
Operating lease obligations	$1,010	$1,979	$1,626	$3,085	$7,700
Recourse obligation on loans sold to FNMA	-	-	-	$14,069	$14,069
Data processing system obligation	$516	$1,377	$1,377	$688	$3,958

Off-Balance Sheet Arrangements

As part of its loan origination business, the Bank has outstanding commitments to extend credit to third parties, which are subject to strict credit control assessments. Since many of these loan commitments expire prior to funding, in whole or in part, the contract amounts are not estimates of future cash flows.

	Less than One Year	One Year to Three Years	Over Three Years to Five Years	Over Five Years	Total at March 31, 2005
	(Dollars in Thousands)
Credit Commitments:
Available lines of credit	$48,114	$-	$-	$-	$48,114
Other loan commitments	109,427	-	-	-	109,427
Total Credit Commitments	$157,541	$-	$-	$-	$157,541

Asset Quality

Non-performing loans ( i.e. , delinquent loans for which interest accruals have ceased in accordance with the Bank's policy discussed below) totaled $2.7 million and $1.5 million at March 31, 2005 and December 31, 2004, respectively. The increase in non-performing loans during the three months ended March 31, 2005 resulted primarily from the addition of six

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loans totaling $2.0 million to nonaccrual status, which was partially offset by the removal of five loans totaling $752,000 from nonaccrual status.

Pursuant to Bank policy, accrual of interest is discontinued when its receipt is in doubt, which typically occurs when a loan becomes 90 days past due as to principal or interest. When interest accruals are discontinued, any interest previously accrued to income in the year of discontinuance is reversed. Payments on nonaccrual loans are generally applied to principal. Management may elect to continue the accrual of interest when a loan is in the process of collection and the estimated fair value of the collateral is sufficient to satisfy the principal balance and accrued interest. Loans are returned to accrual status once the doubt concerning collectibility has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a minimum of twelve months. The Bank had no loans that were 90 days past due and accruing interest at March 31, 2005 or December 31, 2004.

The Bank had a total of 16 real estate and consumer loans, totaling $1.3 million, delinquent 60-89 days at March 31, 2005, compared to a total of 10 such delinquent loans, totaling $754,000, at December 31, 2004. The majority of the dollar amount of both non-performing loans and loans delinquent 60-89 days was composed of real estate loans. The majority of the count of both non-performing loans and loans delinquent 60-89 days was composed of consumer loans (primarily depositor loans). The increase in the amount delinquent 60-89 days from December 31, 2004 to March 31, 2005 resulted from a net increase of $714,000 of delinquent real estate loans during the period. The 60-89 day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of credit quality trends than non-performing loans.

GAAP requires the Bank to account for certain loan modifications or restructurings as ''troubled-debt restructurings.'' In general, the modification or restructuring of a loan constitutes a troubled-debt restructuring if the Bank, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. Current regulations of the OTS require that troubled-debt restructurings remain classified as such until the loan is either repaid or returns to its original terms. The Bank had no loans classified as troubled-debt restructurings at March 31, 2005 or December 31, 2004.

See "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Classified Loans" for a discussion of impairment and reserves.

The recorded investment in loans deemed impaired was approximately $2.1 million, consisting of three loans, at March 31, 2005, compared to two loans, totaling $830,000 at December 31, 2004. The average total balance of impaired loans was approximately $1.5 million and $457,000 during the three months ended March 31, 2005 and 2004, respectively. The increase in both the average and ending balances of impaired loans during the three months ended March 31, 2005 resulted primarily from the addition of one impaired loan with an outstanding balance of $1.3 million. At March 31, 2005, reserves totaling $208,000 were allocated within the allowance for loan losses for impaired loans. At December 31, 2004, reserves totaling $83,000 were allocated within the allowance for loan losses for impaired loans. At March 31, 2005, non-performing loans exceeded impaired loans by $636,000, due to $636,000 of one- to four-family and consumer loans, which, while on non-performing status, were not deemed impaired since they had individual outstanding balances less than $360,000.

Other Real Estate Owned (“OREO”) . Property acquired by the Bank as a result of a foreclosure on a mortgage loan or deed in lieu of foreclosure is classified as OREO and is recorded at the lower of the recorded investment in the related loan or the fair value of the property at the date of acquisition, with any resulting write down charged to the allowance for loan losses. The Bank obtains a current appraisal on OREO property as soon as practicable after it takes possession of the realty and generally reassesses its value at least annually thereafter. There were no OREO properties as of March 31, 2005 and December 31, 2004.

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The following table sets forth information regarding non-performing loans, non-performing assets, impaired loans and troubled-debt restructurings at the dates indicated:

	At March 31, 2005	At December 31, 2004
(Dollars in Thousands)
Non-performing loans
One- to four-family	$172	$475
Multi-family residential	2,076	830
Cooperative apartment	312	-
Other	152	154
Total non-performing loans	2,712	1,459
Other Real Estate Owned	-	-
Total non-performing assets	2,712	1,459
Troubled-debt restructurings	-	-
Total non-performing assets and troubled-debt restructurings	$2,712	$1,459

Impaired loans	$2,076	$830
Ratios:
Total non-performing loans to total loans	0.11%	0.06%
Total non-performing loans and troubled-debt restructurings to total loans	0.11	0.06
Total non-performing assets to total assets	0.08	0.04
Total non-performing assets and troubled-debt restructurings to total assets	0.08	0.04

Allowance for Loan Losses

The allowance for loan losses was $15.2 million at March 31, 2005, compared to $15.5 million at December 31, 2004. During the three months ended March 31, 2005, the Bank recorded a provision of $60,000 to the allowance for loan losses to provide for additional inherent losses in the portfolio. The Bank also recorded net recoveries of approximately $2,000 during the same period, virtually all of which related to consumer loans, and reclassified $374,000 of its existing allowance for loan losses to other liabilities in order to separately account for reserves related to loan origination commitments. (See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies") .

Comparison of Financial Condition at March 31, 2005 and December 31, 2004

Assets. Assets totaled $3.37 billion at March 31, 2005, a decrease of $6.9 million from total assets of $3.38 billion at December 31, 2004. The decline in assets was experienced primarily in MBS available-for-sale and real estate loans, which decreased $37.0 million and $18.3 million, respectively. During the three months ended March 31, 2005, principal payments received on MBS available-for-sale and real estate loans totaled $31.5 million and $94.9 million, respectively. In addition, sales of multifamily real estate loans to FNMA totaled $23.6 million during the three months ended March 31, 2005, and the market value of MBS available-for-sale declined $5.0 million as a result of interest rate increases during the period, which further contributed to their respective declines during the period. Partially offsetting the principal repayment and sales of real estate loans were originations of $115.1 million during the three months ended March 31, 2005.

Investment securities available-for-sale increased $37.7 million during the three months ended March 31, 2005, as the Company purchased $38.1 million of such securities (primarily short-term interest rate re-pricing investments) during the period. In addition, pursuant to the Bank's strategy to limit growth in the loan portfolio during the period, excess liquidity generated from principal repayments on real estate loans and MBS and real estate loan sales was temporarily retained in federal funds sold and other short-term investments, which increased $14.2 million during the three months ended March 31, 2005.

Liabilities. Total liabilities decreased $7.9 million during the three months ended March 31, 2005. Deposits declined $42.1 million during the period. (See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources") .

Escrow and other deposits increased $30.3 million during the three months ended March 31, 2005, due to increased funding for real estate taxes during the period. Real estate tax installments were paid on behalf of the great majority of the Bank's loan customers in late December 2004, thus reducing the escrow deposit balance as of December 31, 2004.

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Stockholders' Equity. Stockholders' equity increased $1.0 million during the three months ended March 31, 2005, due to net income of $10.9 million, common stock issued in fulfillment of stock option exercises totaling $698,000, and an increase of $342,000 related to amortization of the ESOP and RRP stock benefit plans. The ESOP and RRP possess investments in the Holding Company's common stock that are recorded as reductions in stockholders' equity ("Contra Equity Balances"). As compensation expense is recognized on the ESOP and RRP, the Contra Equity Balances are reduced, resulting in an increase to their respective equity balances. This increase to equity offsets the decline in the Company's retained earnings related to the periodic recorded ESOP and RRP expenses. Offsetting these increases to stockholders' equity during the three months ended March 31, 2005 were cash dividends of $5.0 million and treasury stock repurchases of $3.0 million during the period. The stockholders' equity component of other comprehensive income decreased $2.9 million during the three months ended March 31, 2005 as a result of a increase in the net unrealized loss on investment and mortgage-backed securities available-for-sale attributable to increases in short-term interest rates during the quarter.

Comparison of the Operating Results for the Three Months Ended March 31, 2005 and 2004

General. Net income was $10.9 million during the three months ended March 31, 2005, a decrease of $1.5 million from net income of $12.3 million during the three months ended March 31, 2004. During the comparative period, net interest income decreased $1.1 million, non-interest income decreased $1.6 million and non-interest expense decreased $607,000, resulting in a decline in pre-tax income of $2.1 million. Income tax expense decreased $627,000 as a result of the decline in pre-tax income.

Net Interest Income. The discussion of net interest income for the three months ended March 31, 2005 and 2004 presented below should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of operations for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. The yields and costs include fees that are considered adjustments to yields.

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Analysis of Net Interest Income (Unaudited)

	Three Months Ended March 31,
		2005			2004
			Average			Average
	Average		Yield/	Average		Yield/
	Balance	Interest	Cost	Balance	Interest	Cost
*(Dollars* In *Thousands)*
Assets:
Interest-earning assets:
Real estate loans	$2,478,992	$34,848	5.62%	$2,214,940	$33,615	6.07%
Other loans	2,562	32	5.00	3,450	63	7.30
Mortgage-backed securities	504,077	4,490	3.56	543,070	4,712	3.47
Investment securities	68,252	606	3.55	37,715	312	3.31
Other short-term investments	150,791	954	2.53	131,981	343	1.04
Total interest-earning assets	3,204,674	$40,930	5.11%	2,931,156	$39,045	5.33%
Non-interest earning assets	152,465			163,043
Total assets	$3,357,138			$3,094,199

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW and Super Now accounts	$43,071	$80	0.75%	$36,919	$88	0.96%
Money Market accounts	724,333	2,745	1.54	763,185	2,691	1.41
Savings accounts	360,842	491	0.55	367,196	494	0.54
Certificates of deposit	961,947	6,065	2.56	884,235	5,731	2.60
Borrowed Funds	804,339	8,573	4.32	578,296	5,925	4.11
Total interest-bearing liabilities	2,894,532	$17,954	2.52%	2,629,831	$14,929	2.28%
Checking accounts	93,730			93,107
Other non-interest-bearing liabilities	87,838			92,676
Total liabilities	3,076,100			2,815,614
Stockholders' equity	281,038			278,585
Total liabilities and stockholders' equity	$3,357,138			$3,094,199
Net interest income		$22,976			$24,116
Net interest spread			2.59%			3.05%
Net interest-earning assets	$310,142			$301,325
Net interest margin			2.87%			3.29%
Ratio of interest-earning assets to interest-bearing liabilities			110.71%			111.46%

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Rate/Volume Analysis (Unaudited)

	Three Months Ended
	March 31, 2005
	Compared to
	Three Months Ended
	March 31, 2004
	Increase/ (Decrease)
	Due to:
	Volume	Rate	Total
(Dollars In Thousands)
Interest-earning assets:
Real Estate Loans	$3,866	$(2,633)	$1,233
Other loans	(14)	(17)	(31)
Mortgage-backed securities	(341)	119	(222)
Investment securities	262	32	294
Other short-term investments	84	527	611
Total	3,857	(1,972)	1,885

Interest-bearing liabilities:
NOW and Super Now accounts	$13	$(21)	$(8)
Money market accounts	(163)	217	54
Savings accounts	(10)	7	(3)
Certificates of deposit	460	(126)	334
Borrowed funds	2,320	328	2,648
Total	2,620	405	3,025
Net change in net interest income	$1,237	$(2,377)	$(1,140)

Net interest income for the three months ended March 31, 2005 decreased $1.1 million to $23.0 million, from $24.1 million during the three months ended March 31, 2004. This decrease was attributable to an increase of $3.0 million in interest expense that was partially offset by an increase of $1.9 million in interest income. The net interest spread decreased 46 basis points, from 3.05% for the three months ended March 31, 2004 to 2.59% for the three months ended March 31, 2005, and the net interest margin decreased 42 basis points, from 3.29% to 2.87% during the same period.

The decrease in both the net interest spread and net interest margin reflected a 22 basis point decline in the average yield on interest earning assets (particularly real estate loans and MBS) that resulted from the re-pricing of assets during 2003 and the first half of 2004 during the historically low interest rate environment. These assets, being medium- and long-term in interest rate re-pricing duration, have not subsequently re-priced upward while short-term interest rates have increased during the period June 2004 through March 2005.

During the three months ended March 31, 2005 compared to the three months ended March 31, 2004, the average yield on real estate loans, the largest segment of the Company's interest earning assets, declined by 45 basis points (See the discussion entitled "Interest Income" below for a further examination of these declines).

In addition to the decline in yield, the average cost of interest bearing liabilities increased 24 basis points during the three months ended March 31, 2005 compared to the three months ended March 31, 2004, due primarily to a partial movement of the composition of the Bank's funding from deposits into borrowings possessing a higher average cost as a result of a runoff in deposit balances during the quarter (see "Interest Expense" below) coupled with increases in the average cost of money market deposits and borrowings of 13 basis points and 21 basis points, respectively, reflecting increases in short-term interest rates during the period June 2004 through March 2005.

The tightening of monetary policy by the Federal Open Market Committee during both the second half of 2004 and the quarter ended March 31, 2005 resulted in a narrowing spread between short and long-term interest rates, which negatively impacted the Company's earnings during the three months ended March 31, 2005. Absent any future change in interest rates, the narrowing of spreads between long and short-term interest rates is currently expected to negatively impact the Company's earnings during the year ending December 31, 2005 since it is anticipated that the Company will experience a greater level of re-pricing of interest-bearing liabilities compared to interest-earning assets. Management believes that by funding a large portion of its long-term investments with core deposits, which have historically been less sensitive to interest rate fluctuations than wholesale funding, the negative impact upon the Company's future earnings that would otherwise result from the narrowing spread between short and long-term interest rates, could be partially mitigated. In addition, in the event that the spread between long and short-term interest rates were to increase during the year ending December 31, 2005, the Company has attempted to position itself to

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benefit from this occurrence by: (i) not fully deploying its strong capital position during the low interest rate environments of 2003 and 2004; and (ii) maintaining a short-duration securities portfolio that is expected to provide a steady source of liquidity during 2005.

Interest Income. Interest income was $40.9 million during the three months ended March 31, 2005, an increase of $1.9 million from $39.0 million during the three months ended March 31, 2004. Interest income on real estate loans, investment securities and other short term investments increased by $1.2 million, $294,000 and $611,000, respectively, during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. Partially offsetting these increases was a decline of $222,000 in interest income on MBS during the comparable period.

The increase in interest income on real estate loans and investment securities resulted primarily from growth in their average balances of $264.1 million and $30.5 million, respectively, during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. The growth in the average balance of real estate loans during this period reflected loan originations of $882.3 million during the period April 2004 through March 2005, which were partially offset by principal repayments and loan sales during the period. The increase in the average balance of investment securities reflected the purchase of investment securities available-for-sale totaling $38.1 million during the three months ended March 31, 2005.

The average yield on real estate loans declined 45 basis points during the three months ended March 31, 2005 compared to the three months ended March 31, 2004, due to the increase in short-term interest rates during the period June 2004 through March 2005. This increase negatively impacted the yield on the Bank's real estate loans because: (1) the Bank's loan originations were derived based upon medium and long-term interest rates which did not rise in direct proportion to the increase in short-term interest rates during this period; and (2) since the majority of Bank's loan portfolio is comprised of loans that do not re-price for a minimum of five years from their origination date, they typically lag increases in medium- and long-term interest rates.

The average yield on investment securities increased 24 basis points during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 due to increases in interest rates during the period June 2004 through March 2005. Since the Company's investment securities portfolio is predominantly short and medium-term in nature, its overall yield was favorably impacted by the recent increases in interest rates.

The increase in interest income on federal funds and other short term investments was attributable primarily to an increase of 149 basis points in their average yield, reflecting an increase of 150 basis points in short-term interest rates from June 2004 through March 2005.

The decline in interest income on MBS during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 resulted from a decreased average balance of $39.0 million (resulting from principal repayments during the period April 2004 through March 2005) that was partially offset by an increase of 9 basis points in average yield during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 (resulting from increases in short and medium-term interest rates during the period June 2004 through March 2005).

Interest Expense. Interest expense increased $3.0 million, to $17.9 million, during the three months ended March 31, 2005, from $14.9 million during the three months ended March 31, 2004. The growth in interest expense resulted primarily from increases of $2.6 million and $334,000 in interest expense on borrowings and CDs, respectively.

During the three months ended March 31, 2005 compared to the three months ended March 31, 2004, the average balance of borrowings and CDs increased $226.0 million and $77.7 million, respectively. During the year ended December 31, 2004, the Company added $192.9 million of REPOS and a $72.2 million trust preferred borrowing. These additions resulted in an increase in average balance of borrowings of $226.0 million during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. The increase in the average balance of CDs during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 resulted from growth of $159.6 million in the outstanding balance of CDs during the year ended December 31, 2004 (which had an accretive impact on the average balance calculation during the quarter ended March 31, 2005), that was partially offset by a decline of $12.5 million during the three months ended March 31, 2005. (See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" ).

The average cost of borrowed funds increased 21 basis points during the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004 due to the replacement of maturing low cost short-term borrowings while short-term interest rates rose during the period June 2004 through March 2005.

Provision for Loan Losses. The provision for loan losses was $60,000 during both the three months ended March 31, 2005 and 2004 (See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Loan Losses" ).

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Non-Interest Income. Non-interest income decreased $1.6 million, to $4.1 million, during the three months ended March 31, 2005, from $5.6 million during the three months ended March 31, 2004. The decline resulted primarily from decreased prepayment fee income (included in other non-interest income) of $1.0 million caused by a decline in refinancings driven by the increases in interest rates during the period June 2004 through March 2005, and a decrease of $516,000 in the net gain on the sale of investment securities.

During the three months ended March 31, 2004, the Company recorded net gains of $516,000 on the sale of investment and mortgage-backed securities. During the quarter ended March 31, 2005 the Company did not sell any investment securities or MBS.

Service charges and other fees declined $152,000 during the three months ended March 31, 2005 compared to the three months ended March 31, 2004 due primarily to a reduction of $247,000 in retail deposit fees, reflecting both reduced customer fee-based activities and competitive fee policies implemented in the local market.

Non-Interest Expense. Non-interest expense was $9.8 million during the quarter ended March 31, 2005, a decrease of $607,000 from the three months ended March 31, 2004.

The benefit costs associated with the ESOP and RRP declined $461,000 during the comparative period due to both a reduction in the anticipated level of allocated shares during the year ending December 31, 2005, (which is attributable to a reduction in level of the anticipated loan principal repayment to be made on the underlying ESOP borrowing that became effective January 1, 2005), along with a reduction in the average price of the Company's common stock (from which the recorded ESOP expense is derived).

Salaries and employee benefits increased $352,000 during the three months ended March 31, 2005 compared to the three months ended March 31, 2004, reflecting both additional staffing and general salary increases during the year ended December 31, 2004.

Data processing costs decreased $287,000 during the comparative period due to both promotional and ongoing cost savings associated with the new data systems implemented in November 2004.

Other expenses declined $284,000 due primarily to the reduction of $158,000 in the core deposit intangible expense associated with the Company's 1999 acquisition of Financial Bancorp, Inc. , which fully amortized in January 2005.

Income Tax Expense. Income tax expense decreased $627,000 during the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004, due primarily to a decline of $2.1 million in pre-tax net income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are presented at December 31, 2004 in Item 7A of the Company's Annual Report on Form 10-K, filed with the SEC on March 15, 2005. The following is an update of the discussion provided therein.

General . Virtually all of the Company's market risk continues to reside at the Bank level. The Bank's largest component of market risk remains interest rate risk. The Company is not subject to foreign currency exchange or commodity price risk. At March 31, 2005, the Company owned no trading assets, nor did it conduct transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Assets, Deposit Liabilities and Wholesale Funds . There has been no material change in the composition of assets, deposit liabilities or wholesale funds from December 31, 2004 to March 31, 2005.

Interest Sensitivity GAP . There was no material change in the computed one-year interest sensitivity gap from December 31, 2004 to March 31, 2005.

Interest Rate Risk Exposure (Net Portfolio Value) Compliance . The Bank continues to monitor the impact of interest rate volatility upon net interest income and net portfolio value ("NPV") in the same manner as at December 31, 2004. There were no changes in the Board-approved limits of acceptable variance in net interest income and NPV at March 31, 2005 compared to December 31, 2004.

The analysis that follows presents the estimated NPV resulting from market interest rates prevailing at a given quarter-end ("Pre-Shock Scenario"), and under four other interest rate scenarios ("Rate Shock Scenarios") represented by immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed at March 31, 2005 and December 31, 2004. The analysis additionally presents a measurement of the percentage by which each of the Rate Shock Scenario NPVs change from the Pre-Shock Scenario

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NPV at March 31, 2005 and December 31, 2004. Interest rate sensitivity is measured by the changes in the various Rate Shock Scenario NPV ratios ("NPV Ratios") from the Pre-Shock NPV ratio.

	At March 31, 2005
	Net Portfolio Value					At December 31, 2004
	Dollar Amount	Dollar Change	Percentage Change	NPV Ratio	Sensitivity Change (in Basis Points)	NPV Ratio	Sensitivity Change (in Basis Points)
Change in Interest Rate
+ 200 Basis Points	$292,616	$(92,222)	(23.96)%	9.01%	(241)	8.94%	(250)
+ 100 Basis Points	340,999	(43,839)	(11.39)	10.30	(112)	10.23	(121)
Pre-Shock	384,838	-	-	11.42	-	11.44	-
- 100 Basis Points	411,143	26,305	6.84	12.04	62	12.17	73
- 200 Basis Points	415,234	30,396	7.90	12.07	65	N/A	N/A

The NPVs presented above incorporate asset and liability values, some of which were derived from the Bank’s valuation model (i.e., mortgage loans and time deposits), and others of which were provided by reputable independent sources (i.e., MBS and structured borrowings). In valuing its assets and liabilities, the Bank's valuation model incorporates, at each level of interest rate change, estimates of cash flows from non-contractual sources such as unscheduled principal payments received on loans and passbook deposits balance decay. The Bank's estimates for loan prepayment levels are influenced by the recent history of prepayment activity in its loan portfolio as well as the interest-rate composition of the existing portfolio, especially vis-à-vis the current interest rate environment. In addition, the Bank considers the amount of prepayment fee protection inherent in the loan portfolio when estimating future prepayment cash flows.

Regarding passbook deposit flows, the Bank tracks and analyzes the decay rate of its passbook deposits over time and over various interest rate scenarios and then estimates its passbook decay rate for use in the valuation model. Nevertheless, no matter the care and precision with which the estimates are derived, actual cash flows for loans, as well as passbooks, could differ significantly from the Bank's estimates resulting in significantly different NPV calculations.

The Bank also generates a series of spot discount rates that are integral to the valuation of the projected monthly cash flows of its assets and liabilities. The Bank's valuation model employs discount rates that are representative of prevailing market rates of interest, with appropriate adjustments suited to the heterogeneous characteristics of the Bank’s various asset and liability portfolios.

The NPV Ratio at March 31, 2005 was 11.42% in the Pre-Shock Scenario, a decrease from the NPV Ratio of 11.44% at December 31, 2004. The NPV Ratio was 9.01% in the +200 basis point Rate Shock Scenario at March 31, 2005, an increase from the NPV Ratio of 8.94% in the +200 basis point Rate Shock Scenario at December 31, 2004. At March 31, 2005, the sensitivity measure in the +200 basis point Rate Shock Scenario was 241 basis points, compared to a sensitivity measure of 250 basis points in the +200 basis point Rate Shock Scenario at December 31, 2004.

The slight decreases in the Bank’s Pre-Shock NPV and Pre-Shock NPV Ratio were due primarily to rising interest rates during the quarter. Higher rates reduced the value of the Bank’s real estate mortgage loan and investment securities portfolios relative to the prior quarter. The reductions in the values of the Bank’s loan and securities portfolios were partially offset by an increase in the intangible value ascribed to the Bank’s core deposits, a decrease in the value of the Bank’s borrowings, and continued growth in the Bank’s tangible capital.

During the quarter ended March 31, 2005, market rates of interest increased significantly from December 31, 2004. Although rates increased across the entire yield curve, the most significant increases, between 50 and 70 basis points, occurred in the 3-month to 5-year sector. Because the Bank’s assets, primarily mortgage loans, have a longer average duration than its liabilities, the overall impact of this magnitude of rate increases was a greater decline in the value of the Bank’s assets relative to the decline in value of the Bank’s liabilities.

The +200 basis point Rate Shock Scenario NPV and NPV Ratio were slightly higher at March 31, 2005 than at December 31, 2004. This was primarily the result of a reduction in the projected decline in the value of the Bank’s real estate mortgage loan and investment securities portfolios resulting from a 200 basis point interest rate shock at March 31, 2005, than projected at December 31, 2004, due in part to management’s decision to limit new long term investments in the current low interest rate environment.

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Finally, the Bank’s sensitivity change at March 31, 2005 was 241 basis points, compared to 250 basis points at December 31, 2004. Similar to the +200 Rate Shock Scenario NPV and NPV Ratio, the improvement in sensitivity was primarily attributable to the improved valuation of the Bank’s real estate mortgage loan and MBS portfolios in the +200 Rate Shock Scenario.

Item 4. Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation, as of March 31, 2005, of the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer each found that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in the Company's internal control over financial reporting that occurred during the Company's last quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings other than legal actions arising in the ordinary course of business. In the aggregate, amounts involved are believed to be immaterial to its financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) During the three months ended March 31, 2005, the Holding Company purchased 184,700 shares of its common stock into treasury. These repurchases were made under the Company's Tenth Stock Repurchase Program, which was publicly announced on May 20, 2004.

A summary of the shares repurchased by month is as follows:

Period	Total Number Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of a Publicly Announced Programs	Maximum Number of Shares that May Yet be Purchased Under the Programs
January 2005	65,000	$16.82	65,000	1,352,556
February 2005	92,700	15.74	92,700	1,259,856
March 2005	27,000	15.25	27,000	1, 232,856

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number

------------

3(i)		Amended and Restated Certificate of Incorporation of Dime Community Bancshares, Inc. (1)
3(ii)		Amended and Restated Bylaws of Dime Community Bancshares, Inc.
4.1		Amended and Restated Certificate of Incorporation of Dime Community Bancshares, Inc. [See Exhibit 3(i) hereto]
4.2		Amended and Restated Bylaws of Dime Community Bancshares, Inc. [See Exhibit 3(ii) hereto]
4.3		Draft Stock Certificate of Dime Community Bancshares, Inc. (2)
4.4		Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock (3)
4.5		Rights Agreement, dated as of April 9, 1998, between Dime Community Bancorp, Inc. and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (3)
4.6		Form of Rights Certificate (3)
4.7		Second Amended and Restated Declaration of Trust, dated as of July 29, 2004, by and among Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company as Institutional Trustee, Dime Community Bancshares, Inc., as Sponsor, the Administrators of Dime Community Capital Trust I and the holders from time to time of undivided beneficial interests in the assets of Dime Community Capital Trust I (8)
4.8		Indenture, dated as of March 19, 2004, between Dime Community Bancshares, Inc. and Wilmington Trust Company, as trustee (8)
4.9		Series B Guarantee Agreement, dated as of July 29, 2004, executed and delivered by Dime Community Bancshares, Inc., as Guarantor and Wilmington Trust Company, as Guarantee Trustee, for the benefit of the holders from time to time of the Series B Capital Securities of Dime Community Capital Trust I (8)
10.1		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Vincent F. Palagiano (4)
10.2		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Michael P. Devine (4)
10.3		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Kenneth J. Mahon (4)
10.4		Employment Agreement between Dime Community Bancorp, Inc. and Vincent F. Palagiano (9)
10.5		Employment Agreement between Dime Community Bancorp, Inc. and Michael P. Devine (9)
10.6		Employment Agreement between Dime Community Bancorp, Inc. and Kenneth J. Mahon (9)
10.7		Form of Employee Retention Agreement by and among The Dime Savings Bank of Williamsburgh, Dime Community Bancorp, Inc. and certain officers (4)
10.8		The Benefit Maintenance Plan of Dime Community Bancorp, Inc. (5)
10.9		Severance Pay Plan of The Dime Savings Bank of Williamsburgh (4)
10.10		Retirement Plan for Board Members of Dime Community Bancorp, Inc. (5)
10.11		Dime Community Bancorp, Inc. 1996 Stock Option Plan for Outside Directors, Officers and Employees, as amended by amendments number 1 and 2 (5)
10.12		Recognition and Retention Plan for Outside Directors, Officers and Employees of Dime Community Bancorp, Inc., as amended by amendments number 1 and 2 (5)
10.13		Form of stock option agreement for Outside Directors under Dime Community Bancshares, Inc. 1996 and 2001 Stock Option Plans for Outside Directors, Officers and Employees and the 2004 Stock Incentive Plan. (5)
10.14		Form of stock option agreement for officers and employees under Dime Community Bancshares, Inc. 1996and 2001 Stock Option Plans for Outside Directors, Officers and Employees and the 2004 Stock Incentive Plan (5)
10.15		Form of award notice for outside directors under the Recognition and Retention Plan for Outside Directors, Officers and Employees of Dime Community Bancorp, Inc. (5)
10.16		Form of award notice for officers and employees under the Recognition and Retention Plan for Outside Directors, Officers and Employees of Dime Community Bancorp, Inc. (5)
10.17		Financial Federal Savings Bank Incentive Savings Plan in RSI Retirement Trust (6)
10.18		Financial Federal Savings Bank Employee Stock Ownership Plan (6)
10.19		Option Conversion Certificates between Dime Community Bancshares, Inc. and each of Messrs. Russo, Segrete, Calamari, Latawiec, O'Gorman, and Ms. Swaya pursuant to Section 1.6(b) of the Agreement and Plan of Merger, dated as of July 18, 1998 by and between Dime Community Bancshares, Inc. and Financial Bancorp, Inc. (6)
10.20		Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (7)
		Exhibits continued on next page

-26_


10.21		Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees (11)
10.22		Waiver executed by Vincent F. Palagiano
10.23		Waiver executed by Michael P. Devine
10.24		Waiver executed by Kenneth J. Mahon
10.25		Form of restricted stock award notice for officers and employees under the 2004 Stock Incentive Plan (11)
31.1		Certification of Chief Executive Officer Pursuant to 17 CFR 240.13a-14(a)
31.2		Certification of Chief Financial Officer Pursuant to 17 CFR 240.13a-14(a)
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

(1) Incorporated by reference to the registrant's Transition Report on Form 10-K for the transition period ended December 31, 2002 filed on March 28, 2003.

(2) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1998 filed on September 28, 1998.

(3) Incorporated by reference to the registrant's Current Report on Form 8-K dated April 9, 1998 and filed on April 16, 1998.

(4) Incorporated by reference to Exhibits to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 filed on September 26, 1997.

(5) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 filed on September 26, 1997, and the Current Reports on

Form 8-K filed on March 22, 2004 and March 29, 2005.

(6) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 filed on September 28, 2000.

(7) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 filed on November 14, 2003.

(8) Incorporated by reference to Exhibits to the registrant’s Registration Statement No. 333-117743 on Form S-4 filed on July 29, 2004.

(9) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 15, 2004.

(10) Incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed on March 15, 2005.

(11) Incorporated by reference to the registrant's Current Report on Form 8-K filed on March 22, 2005.

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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 Community Bancshares, Inc.

Dated: May 10, 2005		By: /s/ VINCENT F. PALAGIANO
		Vincent F. Palagiano
		Chairman of the Board and Chief Executive Officer

Dated: May 10, 2005		By: /s/ KENNETH J. MAHON
		Kenneth J. Mahon
		Executive Vice President and Chief Financial Officer (Principal Accounting Officer)

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Exhibit 3(ii)

AMENDED AND RESTATED BYLAWS

DIME COMMUNITY BANCSHARES, INC.

Adopted on December 14, 1995

Amended and Restated on March 17, 2005

BYLAWS

DIME COMMUNITY BANCORP, INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of Dime Community Bancorp, Inc. (the "Corporation") in the State of Delaware shall be in the City of Wilmington, County of New Castle.

Section 2. Additional Offices. The Corporation may also have offices and places of business at such other places, within or without the State of Delaware, as the Board of Directors (the "Board") may from time to time designate or the business of the Corporation may require.

ARTICLE II

SHAREHOLDERS

Section 1. Place Of Meetings. Meetings of shareholders of the Corporation shall be held at such place, within or without the State of Delaware, as may be fixed by the Board and designated in the notice of meeting. If no place is so fixed, they shall be held at the principal administrative office of the Corporation.

Section 2. Annual Meetings. The annual meeting of shareholders of the Corporation for the election of directors and the transaction of any other business which may properly come before such meeting shall be held each year on a date and at a time to be designated by the Board.

Section 3. Special Meetings . Special meetings of shareholders, for any purpose, may be called at any time only by the Chairman of the Board or by resolution of at least three-fourths of the entire Board. Special meetings shall be held on the date and at the time and place as may be designated by the Board. At a special meeting, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of meeting.

Section 4. Notice of Meetings. Except as otherwise required by law, written notice stating the place, date and hour of any meeting of shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each shareholder of record entitled to vote at such meeting, either personally or by mail not less than ten (10) nor more than sixty (60) days before the date of such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the U.S. mail, with postage thereon prepaid, addressed to the shareholder at his or her address as it appears on the stock transfer books or records of the Corporation as of the record date prescribed in Section 6 of this Article II, or at such other address as the shareholder shall have furnished in writing to the Secretary. Notice of any special meeting shall indicate that the notice is being issued by or at the direction of the person or persons calling such meeting. When any meeting of shareholders, either annual or special, is adjourned to another time or place, no notice of the adjourned meeting need be given other than an announcement at the meeting at which such adjournment is taken giving the time and place to which the meeting is adjourned; provided, however, that if the adjournment is for more than thirty (30) days, or if after adjournment, the Board fixes a new record date for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.

Section 5. Waiver of Notice. Notice of any annual or special meeting need not be given to any shareholder who submits a signed waiver of notice of any meeting, in person or by proxy or by his or her duly authorized attorney-in-fact, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, shall constitute a waiver of notice by such shareholder, except where a shareholder attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or in order to make a determination of shareholders for any other purpose, the Board shall fix a date as the record date for any such determination of shareholders, which date shall not precede the date upon which the resolution fixing the record date is adopted by the Board. Such date in any case shall be not more than sixty (60) days and, in the case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 6, such determination shall, unless otherwise provided by the Board, also apply to any adjournment thereof. If no record date is fixed, (a) the record date for determining shareholders entitled to notice of or vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which the notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (b) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 7. Quorum . The holders of record of a majority of the total number of votes eligible to be cast in the election of directors generally by the holders of the outstanding shares of the capital stock of the Corporation entitled to vote thereat, represented in person or by proxy, shall constitute a quorum for the transaction of business at a meeting of shareholders, except as otherwise provided by law, these Bylaws or the Certificate of Incorporation. If less than a majority of such total number of votes are represented at a meeting, a majority of the number of votes so represented may adjourn the meeting from time to time without further notice, PROVIDED, that if such adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called. When a quorum is once present to organize a meeting of shareholders, such quorum is not broken by the subsequent withdrawal of any shareholders.

Section 8. Conduct Of Meetings . The Chairman of the Board shall serve as chairman at all meetings of the shareholders or, if the Chairman of the Board is absent or otherwise unable to so serve, the President shall serve as chairman at any meeting of shareholders held in such absence. If both the Chairman of the Board and the President are absent or otherwise unable to so serve, such other person as shall be appointed by a majority of the entire Board of Directors shall serve as chairman at

any meeting of shareholders held in such absence. The Secretary or, in his or her absence, such other person as the chairman of the meeting shall appoint, shall serve as secretary of the meeting. The chairman of the meeting shall conduct all meetings of the shareholders in accordance with the best interests of the Corporation and shall have the authority and discretion to establish reasonable procedural rules for the conduct of such meetings, including such regulation of the manner of voting and the conduct of discussion as he or she shall deem appropriate.

Section 9. Voting; Proxies . Each shareholder entitled to vote at any meeting may vote either in person or by proxy. Unless otherwise specified in the Certificate of Incorporation or in a resolution, or resolutions, of the Board providing for the issuance of preferred stock, each shareholder entitled to vote shall be entitled to one vote for each share of capital stock registered in his or her name on the transfer books or records of the Corporation. Each shareholder entitled to vote may authorize another person or persons to act for him or her by proxy. All proxies shall be in writing, signed by the shareholder or by his or her duly authorized attorney-in-fact, and shall be filed with the Secretary before being voted. No proxy shall be valid after three (3) years from the date of its execution unless otherwise provided in the proxy. The attendance at any meeting by a shareholder who shall have previously given a proxy applicable thereto shall not, as such, have the effect of revoking the proxy. The Corporation may treat any duly executed proxy as not revoked and in full force and effect until it receives a duly executed instrument revoking it, or a duly executed proxy bearing a later date. If ownership of a share of voting stock of the Corporation stands in the name of two or more persons, in the absence of written directions to the Corporation to the contrary, any one or more of such shareholders may cast all votes to which such ownership is entitled. If an attempt is made to cast conflicting votes by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present at such meeting. If such conflicting votes are evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. Except for the election of directors or as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of shareholders, all matters shall be determined by a vote of the holders of a majority of the number of votes eligible to be cast by the holders of the outstanding shares of capital stock of the Corporation present and entitled to vote thereat. Directors shall, except as otherwise required by law, these Bylaws or the Certificate of Incorporation, be elected by a plurality of the votes cast by each class of shares entitled to vote at a meeting of shareholders, present and entitled to vote in the election.

Section 10. Inspectors of Election. In advance of any meeting of shareholders, the Board shall appoint one or more persons, other than officers, directors or nominees for office, as inspectors of election to act at such meeting or any adjournment thereof. Such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the meeting shall make such appointment at the meeting. If any person appointed as inspector fails to appear or fails or refuses to act at the meeting, the vacancy so created may be filled by appointment by the Board in advance of the meeting or at the meeting by the chairman of the meeting. The duties of the inspectors of election shall include determining the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, receiving votes, ballots or consents, hearing and deciding all challenges and questions arising in connection with the right to vote, counting and tabulating all votes, ballots or consents, determining the results, and doing such acts as are proper to the conduct of the election or the vote with fairness to all shareholders. Any report or certificate made by them shall be PRIMA FACIE evidence of the facts stated and of the vote as certified by them. Each inspector shall be entitled to a reasonable compensation for his or her services, to be paid by the Corporation.

Section 11. Procedure for Nominations. Subject to the provisions hereof, the Nominating Committee of the Board shall select nominees for election as directors. Except in the case of a nominee substituted as a result of the death, incapacity, withdrawal or other inability to serve of a nominee, the Nominating Committee shall deliver written nominations to the Secretary at least sixty (60) days prior to the date of the annual meeting. Provided the Nominating Committee makes such nominations, no nominations for directors except those made by the Nominating Committee shall be voted upon at the annual meeting of shareholders unless other nominations by shareholders are made in accordance with the provisions of this Section 11. Nominations of individuals for election to the Board at an annual meeting of shareholders may be made by any shareholder of record of the Corporation entitled to vote for the election of directors at such meeting who provides timely notice in writing to the Secretary as set forth in this Section 11. To be timely, a shareholder's notice must be delivered to or received by the Secretary not later than the following dates: (i) with respect to an election of directors to be held at an annual meeting of shareholders, sixty (60) days in advance of such meeting if such meeting is to be held on a day which is within thirty (30) days preceding the anniversary of the previous year's annual meeting, or ninety (90) days in advance of such meeting if such meeting is to be held on or after the anniversary of the previous year's annual meeting; and (ii) with respect to an election to be held at an annual meeting of shareholders held at a time other than within the time periods set forth in the immediately preceding clause (i), or at a special meeting of shareholders for the election of directors, the close of business on the tenth (10th) day following the date on which notice of such meeting is first given to shareholders. For purposes of this Section 11, notice shall be deemed to first be given to shareholders when disclosure of such date of the meeting of shareholders is first made in a press release reported to Dow Jones News Services, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. Such shareholder's notice shall set forth (a) as to each person whom the shareholder ,proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) such person's written consent to serve as a director, if elected, and (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission (whether or not the Corporation is then subject to such rules); and (b) as to the shareholder giving the notice (i) the name and address of such shareholder, (ii) the class and number of shares of the Corporation which are owned of record by such shareholder and the dates upon which he or she acquired such shares, (iii) a description of all arrangements or understandings between the shareholder and nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, and (iv) the identification of any person employed, retained, or to be compensated by the shareholder submitting the nomination or by the person nominated, or any person acting on his or her behalf to make solicitations or recommendations to shareholders for the purpose of assisting in the election of such director, and a brief description of the terms of such employment, retainer or arrangement for compensation. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the Secretary that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee together with the required written consent. No person shall be elected as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 11.

The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not properly brought before the meeting in accordance with the provisions hereof and, if he should so determine, he shall declare to the meeting that such nomination was not properly brought before the meeting and shall not be considered.

Section 12. Substitution of Nominees . In the event that a person is validly designated as a nominee in accordance with Section 11 of this Article II and shall thereafter become unwilling or unable to stand for election to the Board, the Nominating Committee may designate a substitute nominee upon delivery, not fewer than five (5) days prior to the date of the meeting for the election of such nominee, of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to Section 11 of this Article II had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a director of the Corporation, if elected, of each such substituted nominee.

Section 13. New Business . Any new business to be taken up at the annual meeting at the request of the Chairman of the Board, the President or by resolution of at least three-fourths of the entire Board shall be stated in writing and filed with the Secretary at least fifteen (15) days before the date of the annual meeting, and all business so stated, proposed and filed shall be considered at the annual meeting, but, except as provided in this Section 13, no other proposal shall be acted upon at the annual meeting. Any proposal offered by any shareholder may be made at the annual meeting and the same may be discussed and considered, but unless properly brought before the meeting such proposal shall not be acted upon at the meeting. For a proposal to be properly brought before an annual meeting by a shareholder, the shareholder must be a shareholder of record and have given timely notice thereof in writing to the Secretary. To be timely, a shareholder's notice must be delivered to or received by the Secretary not later than the following dates: (i) with respect to an annual meeting of shareholders, sixty (60) days in advance of such meeting if such meeting is to be held on a day which is within thirty (30) days preceding the anniversary of the previous year's annual meeting, or ninety (90) days in advance of such meeting if such meeting is to be held on or after the anniversary of the previous year's annual meeting; and (ii) with respect to an annual meeting of shareholders held at a time other than within the time periods set forth in the immediately preceding clause (i), the close of business on the tenth (10th) day following the date on which notice of such meeting is first given to shareholders. For purposes of this Section 13, notice shall be deemed to first be given to shareholders when disclosure of such date of the meeting of shareholders is first made in a press release reported to Dow Jones News Services, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. A shareholder's notice to the Secretary shall set forth as to the matter the shareholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting; (b) the name and address of the shareholder proposing such business; (c) the class and number of shares of the Corporation which are owned of record by the shareholder and the dates upon which he or she acquired such shares; (d) the identification of any person employed, retained, or to be compensated by the shareholder submitting the proposal, or any person acting on his or her behalf, to make solicitations or recommendations to shareholders for the purpose of assisting in the passage of such proposal, and a brief description of the terms of such employment, retainer or arrangement for compensation; and (e) such other information regarding such proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission or required to be delivered to the Corporation pursuant to the proxy rules of the Securities and Exchange Commission (whether or not the Corporation is then subject to such rules). This provision shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors and committees of the Board or the management of the Corporation, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. This provision shall not constitute a waiver of any right of the Corporation under the proxy rules of the Securities and Exchange Commission or any other rule or regulation to omit a shareholder's proposal from the Corporation's proxy materials.

The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that any new business was not properly brought before the meeting in accordance with the provisions hereof and, if he should so determine, he shall declare to the meeting that such new business was not properly brought before the meeting and shall not be considered.

ARTICLE III

CAPITAL STOCK

Section 1. Certificates of Stock . Certificates representing shares of stock shall be in such form as shall be determined by the Board. Each certificate shall state that the Corporation will furnish to any shareholder upon request and without charge a statement of the powers, designations, preferences and relative, participating, optional or other special rights of the shares of each class or series of stock and the qualifications or restrictions of such preferences and/or rights, or shall set forth such statement on the certificate itself. The certificates shall be numbered in the order of their issue and entered in the books of the Corporation or its transfer agent or agents as they are issued. Each certificate shall state the registered holder's name and the number and class of shares, and shall be signed by the Chairman of the Board or the President, and the Secretary or any Assistant Secretary, and may, but need not, bear the seal of the Corporation or a facsimile thereof. Any or all of the signatures on the certificates may be facsimiles. In case any officer who shall have signed any such certificate hall cease to be such officer of the Corporation, whether because of death, resignation or otherwise, before such certificate shall have been delivered by the Corporation, such certificate may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer or officers of the Corporation.

Section 2. Transfer Agent and Registrar . The Board shall have the power to appoint one or more Transfer Agents and Registrars for the transfer and registration of certificates of stock of any class, and may require that stock certificates be countersigned and registered by one or more of such Transfer Agents and Registrars.

Section 3. Registration and Transfer of Shares . Subject to the provisions of the Certificate of Incorporation of the Corporation, the name of each person owning a share of the capital stock of the Corporation shall be entered on the books of the Corporation together with the number of shares held by him or her, the numbers of the certificates covering such shares and the dates of issue of such certificates. Subject to the provisions of the Certificate of Incorporation of the Corporation, the shares of stock of the Corporation shall be transferable on the books of the Corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates for a like number of shares, accompanied by an assignment or power of transfer endorsed thereon or attached thereto, duly executed, with such guarantee or proof of the authenticity of the signature as the Corporation or its agents may reasonably require and with proper evidence of payment of any applicable transfer taxes. Subject to the provisions of the Certificate of Incorporation of the Corporation, a record shall be made of each transfer.

Section 4. Lost, Destroyed and Mutilated Certificates . The holder of any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificates therefor. The Corporation may issue, or cause to be issued, a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost, stolen or destroyed upon evidence satisfactory to the Corporation of the loss, theft or destruction of the certificate, and in the case of mutilation, the surrender of the mutilated certificate. The Corporation may, in its discretion, require ,the owner of the lost, stolen or destroyed certificate, or his or her legal representatives, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft, destruction or mutilation of any such certificate and the issuance of such new certificate, or may refer such owner to such remedy or remedies as he or she may have under the laws of the State of Delaware.

Section 5. Holder of Record . Subject to the provisions of the Certificate of Incorporation of the Corporation, the Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof in fact and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law.

ARTICLE IV

BOARD OF DIRECTORS

Section 1. Responsibilities; Number of Directors . The business and affairs of the Corporation shall be under the direction of the Board. The Board shall consist of not less than five (5) nor more than fifteen (15) directors. Within the foregoing limits, the number of directors shall be determined only by resolution of the Board. A minimum of three (3) directors shall be persons other than officers or employees of the Corporation or its subsidiaries and shall not have a relationship which, in the opinion of the Board (exclusive of such persons), could interfere with the exercise of independent judgment in carrying out the responsibilities of a director. No more than two directors shall be officers or employees of the Corporation or its subsidiaries.

Section 2. Qualifications . Each director shall be at least eighteen (18) years of age.

Section 3. Mandatory Retirement . No director shall serve beyond the end of the annual meeting of the Corporation coincident with or immediately following the date on which his or her seventy-fifth (or seventy-sixth in connection with the class of directors whose term expires in 2006) birthday occurs.

Section 4. Regular and Annual Meetings . An annual meeting of the Board for the election of officers shall be held, without notice other than these Bylaws, immediately after, and at the same place as, the annual meeting of the shareholders, or, with notice, at such other time or place as the Board may fix by resolution. The Board may provide, by resolution, the time and place, within or without the State of Delaware, for the holding of regular meetings of the Board without notice other than such resolution.

Section 5. Special Meetings. Special meetings of the Board may be called for any purpose at any time by or at the request of the Chairman of the Board or the President. Special meetings of the Board shall also be called by the Secretary upon the written request, stating the purpose or purposes of the meeting, of at least sixty percent (60%) of the directors then in office, but in any event not less than five (5) directors. The persons authorized to call special meetings of the Board shall give notice of such meetings in the manner prescribed by these Bylaws and may fix any place, within or without the Corporation's regular business area, as the place for holding any special meeting of the Board called by such persons. No business shall be conducted at a special meeting other than that specified in the notice of meeting.

Section 6. Notice of Meetings; Waiver of Notice. Except as otherwise provided in Section 4 of this Article IV, at least twenty-four (24) hours notice of meetings shall be given to each director if given in person or by telephone, telegraph, telex, facsimile or other electronic transmission and at least five (5) days notice of meetings shall be given if given in writing and delivered by courier or by postage prepaid mail. The purpose of any special meeting shall be stated in the notice. Such notice shall be deemed given when sent or given to any mail or courier service or company providing electronic transmission service. Any director may waive notice of any meeting by submitting a signed waiver of notice with the Secretary, whether before or after the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 7. Conduct of Meetings. Meetings of the Board shall be presided over by the Chairman of the Board or such other director or officer as the Chairman of the Board shall designate, and in the absence or incapacity of the Chairman of the Board, the presiding officer shall be the then senior member of the Board in terms of length of service on the Board (which length of service shall include length of service on the Board of Directors of The Dime Savings Bank of Williamsburgh and any predecessors thereto). The Secretary or, in his absence, a person appointed by the Chairman of the Board (or other presiding person), shall act as secretary of the meeting. The Chairman of the Board (or other person presiding) shall conduct all meetings of the Board in accordance with the best interests of the Corporation and shall have the authority and discretion to establish reasonable procedural rules for the conduct of Board meetings. At the discretion of the Chairman of the Board, any one or more directors may participate in a meeting of the Board or a committee of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at any such meeting.

Section 8. Quorum and Voting Requirements . A quorum at any meeting of the Board shall consist of not less than a majority of the directors then in office or such greater number as shall be required by law, these Bylaws or the Certificate of Incorporation, but not less than one-third (1/3) of the total number. If less than a required quorum is present, the majority of those directors present shall adjourn the meeting to another time and place without further notice. At such adjourned meeting at which a quorum shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, a majority vote of the directors present at a meeting, if a quorum is present, shall constitute an act of the Board.

Section 9. Informal Action By Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the principal office of the Corporation addressed to the Chairman of the Board or the President. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof.

Section 11. Vacancies. To the extent not inconsistent with the Certificate of Incorporation and subject to the limitations prescribed by law and the rights of holders of Preferred Stock, vacancies in the office of director, including vacancies created by newly created directorships resulting from an increase in the number of directors, shall be filled only by a vote of a majority of the directors then holding office, whether or not a quorum, at any regular or special meeting of the Board called for that purpose. Subject to the rights of holders of Preferred Stock, no person shall be so elected a director unless nominated by the Nominating Committee. Subject to the rights of holders of Preferred Stock, any director so elected shall serve for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until his or her successor shall be elected and qualified.

Section 12. Compensation. From time to time, as the Board deems necessary, the Board shall fix the compensation of directors, and officers of the Corporation in such one or more forms as the Board may determine.

Section 13. Amendments Concerning The Board . The number, retirement age, and other restrictions and qualifications for directors of the Corporation as set forth in these Bylaws may be altered only by a vote, in addition to any vote required by law, of two-thirds of the entire Board or by the affirmative vote of the holders of record of not less than eighty percent (80%) of the total votes eligible to be cast by holders of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors at a meeting of the shareholders called for that purpose.

ARTICLE V

COMMITTEES

Section 1. Standing Committees. At each annual meeting of the Board, the directors shall designate from their own number, by resolution adopted by a majority of the entire Board, the following committees:

(a) Executive Committee

(b) Audit Committee

(d) Nominating Committee

which shall be standing committees of the Board. The Board shall appoint a director to fill any vacancy on any committee of the Board. The members of the committees shall serve at the pleasure of the Board. All directors who are officers or employees of the Corporation or its subsidiaries, if not otherwise designated by the Board to serve on such committee, shall be ex-officio members of the Executive Committee, possessing the authority to vote on all matters presented before such committee.

Section 2. Executive Committee . There shall be an Executive Committee of the Board consisting of at least six (6) members, as shall be appointed by Board resolution or these Bylaws. The Chief Executive Officer and the President shall be ex-officio members of the Executive Committee, with power to vote on all matters so long as they are also directors of the Corporation. Four (4) members of the Executive Committee, at least three (3) of whom must be non-officer directors, or such other number of members as the Board of Directors may establish by resolution, shall constitute a quorum for the transaction of business. The vote of a majority of members present at any meeting including the residing member, who shall be eligible to vote, shall constitute the action of the Executive Committee.

The Chairman of the Board or such other director or officer as the Chairman of the Board shall designate shall serve as chairman of the Executive Committee or, if the office of the Chairman of the Board is vacant, the President shall serve as chairman of the Executive Committee. In the absence of the chairman of the Executive Committee, the committee shall designate, from among its membership present, a person to preside at any meeting held in such absence. The Executive Committee shall designate, from its membership or otherwise, a secretary who shall report to the Board at its next regular meeting all proceedings and actions taken by the Executive Committee. The Executive Committee shall meet as necessary at the call of the Chairman of the Board, the President or at the call of a majority of the members of the Executive Committee.

The Executive Committee shall, to the extent not inconsistent with law, these Bylaws or the Certificate of Incorporation, exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation in the intervals between the meetings of the Board.

Section 3. Audit Committee . The Audit Committee shall consist of at least three (3) members whose background and experience are financial and/or business management related, none of whom shall be an officer or salaried employee of the Corporation or its subsidiaries, an attorney who receives a fee or other compensation for legal services rendered to the Corporation or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. At any regular meeting of the Board, any director who is otherwise eligible to serve on the Audit Committee may be elected to fill a vacancy that has occurred on the Audit Committee. The Board shall designate one member of the committee to serve as chairman of the committee. The Audit Committee shall meet annually, at the call of the chairman of the committee and may hold such additional meetings as the chairman of the committee may deem necessary, to examine, or cause to be examined, the records and affairs of the Corporation to determine its true financial condition, and shall present a report of examination to the Board at the Board's next regular meeting following the meeting of the Audit Committee. The committee shall appoint, from its membership or otherwise, a secretary who shall cause to be kept written minutes of all meetings of the committee. The Audit Committee shall make, or cause to be made, such other examinations as it may deem advisable or whenever so directed by the Board and shall report thereon in writing at a regular meeting of the Board. The Audit Committee shall make recommendations to the Board in relation to the employment of accountants and independent auditors and arrange for such other assistance as it may deem necessary or desirable. The Audit Committee shall review and evaluate the procedures and performance of the Corporation's internal auditing staff. A quorum shall consist of at least one-third of the members of the committee, and in no event less than two (2) members of the committee.

Section 4. Compensation Committee . The Compensation Committee shall consist of at least three (3) members, none of whom shall be an officer or salaried employee of the Corporation or its subsidiaries as shall be appointed by Board resolution or these Bylaws. In addition, the Chief Executive Officer and the President shall be ex-officio members of the Compensation Committee without any power to vote. The Board shall designate one member of the committee to serve as chairman of the Compensation Committee, who shall have the authority to adopt and establish procedural rules for the conduct of all meetings of the committee.

The committee shall meet annually at the call of the chairman of the committee, and may hold such additional meetings as the Chairman of the Board may deem necessary. A quorum shall consist of at least one- third of the voting members of the Committee, and in no event less than two (2) voting members of the committee. The vote of a majority of the voting members present at any meeting, including the chairman of the committee who shall be eligible to vote, shall constitute the action of the Compensation Committee. The committee shall appoint, from its membership or otherwise, a secretary who shall cause to be kept written minutes of all meetings of the committee.

The Compensation Committee shall be responsible for overseeing the development, implementation and conduct of the Corporation's employment and personnel policies, notices and procedures, including the administration of the Corporation's compensation and benefit programs.

Section 5. Nominating Committee . The Nominating Committee shall consist of at least three (3) members, none of whom shall be an officer or a salaried employee of the Corporation or its subsidiaries. In addition, the Chief Executive Officer and the President shall be ex-officio members of the Nominating Committee, with power to vote on all matters so long as they are also directors of the Corporation. Notwithstanding the foregoing, no director shall serve on the Nominating Committee in any capacity in any year during which such director's term as a director is scheduled to expire. The Nominating Committee shall review qualifications of and interview candidates for the Board and shall make nominations for election of board members in accordance with the provisions of these Bylaws in relation to those suggestions to the Board. A quorum shall consist of at least one-third of the members of the Committee, and in no event less than two (2) members of the committee.

Section 6. Other Committees. The Board may by resolution adopted by a majority of the entire Board at any meeting authorize such other committees as from time to time it may deem necessary or appropriate for the conduct of the business of the Corporation. The members of each committee so authorized shall be appointed by the Board from members of the Board and/or employees of the Corporation. In addition, the Chief Executive Officer and the President shall be ex-officio members of each such committee. Each such committee shall exercise such powers as may be assigned by the Board to the extent not inconsistent with law, these Bylaws or the Certificate of Incorporation.

ARTICLE VI

OFFICERS

Section 1. Number . The Board shall, at each annual meeting, elect a Chairman of the Board, a Chief Executive Officer, a President, a Secretary and such other officers as the Board from time to time may deem necessary or the business of the Corporation may require. Any number of offices may be held by the same person except that no person may simultaneously hold the offices of President and Secretary.

The election of all officers shall be by a majority of the Board. If such election is not held at the meeting held annually for the election of officers, such officers may be so elected at any subsequent regular meeting or at a special meeting called for that purpose, in the same manner above provided. Each person elected shall have such authority, bear such title and perform such duties as provided in these Bylaws and as the Board may prescribe from time to time. All officers elected or appointed by the Board shall assume their duties immediately upon their election and shall hold office at the pleasure of the Board. Whenever a vacancy occurs among the officers, it may be filled at any regular or special meeting called for that purpose, in the same manner as above provided.

Section 2. Term of Office and Removal . Each officer shall serve until his or her successor is elected and duly qualified, the office is abolished, or he or she is removed. Except for the Chairman of the Board, the Chief Executive Officer or the President, any officer may be removed at any regular meeting of the Board with or without cause by an affirmative vote of a majority of the entire Board. The Board may remove the Chairman of the Board, the Chief Executive Officer or the President at any time, with or without cause, only by a vote of two- thirds of the non-officer directors then holding office at any regular or special meeting of the Board called for that purpose.

Section 3. Chairman of the Board . The Chairman shall be the Chief Executive Officer of the Corporation and shall, subject to the direction of the Board, oversee all of the major activities of the Corporation and its subsidiaries and be responsible for assuring that the policy decisions of the Board are implemented as formulated. He shall be responsible, in consultation with such Officers and members of the Board as he deems appropriate, for planning the growth of the Corporation. The Chairman shall be responsible for shareholder relations, relations with investments bankers, other similar financial institutions and financial advisors and shall be empowered to designate Officers of the Corporation and its subsidiaries to assist in such activities. The Chairman shall be principally responsible for exploring opportunities for mergers, acquisitions and new business. The Chairman shall preside at all meetings of the shareholders; preside at all meetings of the Board and the Executive Committee; make recommendations to the Board regarding appointments to all committees; and sign instruments in the name of the Corporation. The Chairman will be a member ex-officio, with power to vote on all matters, of all committees of the Board except the Audit Committee; in his capacity as an ex-officio member of the Compensation Committee, he will be without any power to vote.

In the absence or disability of the Chairman of the Board, the President or such other person who the Board shall designate, shall exercise the powers and perform the duties, which otherwise would fall upon the Chairman of the Board.

Section 4. President . The President shall, subject to the direction of the Board and the Chief Executive Officer, be the Chief Operating Officer of the Corporation and shall assist the Chief Executive Officer in planning the growth of the Corporation, relations with investment bankers, other similar financial institutions and financial advisors. The President, shall under authority given to him, sign instruments in the name of the Corporation. The President shall have the general supervision and direction of all of the Corporation's officers and personnel, subject to and consistent with policies enunciated by the Board. The President shall have such other powers as may be assigned to him by the Board, its committees or the Chief Executive Officer. The President will be a member ex-officio, with power to vote on all matters, of all Committees of the Board, except the Audit Committee; in his capacity as ex-officio member of the Compensation Committee he will be without any power to vote.

Section 5. Vice Presidents. Executive Vice Presidents, Senior Vice Presidents and Vice Presidents may be appointed by the Board of Directors to perform such duties as may be prescribed by these Bylaws, the Board, the Chief Executive Officer or the President as permitted by the Board.

Section 6. Secretary. The Secretary shall attend all meetings of the Board and of the shareholders, and shall record, or cause to be recorded, all votes and minutes of all proceedings of the Board and of the shareholders in a book or books to be kept for that purpose. The Secretary shall perform such executive and administrative duties as may be assigned by the Board, the Chairman of the Board or the President. The Secretary shall have charge of the seal of the Corporation, shall submit such reports and statements as may be required by law or by the Board, shall conduct all correspondence relating to the Board and its proceedings and shall have such other powers and duties as are generally incident to the office of Secretary and as may be assigned to him or her by the Board, the Chairman of the Board or the President.

Section 7. Chief Financial Officer . The Chief Financial Officer of the Company shall have the responsibility for supervising the Comptroller and the Treasurer in maintaining the financial records of the Corporation. He or she shall also supervise the budgeting and forecasting process. He or she shall make such disbursement of the funds of the Corporation as are authorized and monitor the accounts of all transactions and of the financial condition of the Corporation. The Chief Financial Officer shall also perform such other duties as may be prescribed by these bylaws, the Board, or the Chief Executive Officer or the President as permitted by the Board.

Section 8. Comptroller. The Comptroller shall be the chief accounting officer of the Corporation and shall be responsible for the maintenance of adequate systems and records. The Comptroller shall keep a record of all assets, liabilities, receipts, disbursements, and other financial transactions, and shall see that all expenditures are made in accordance with procedures duly established from time to time by the Board. The Comptroller shall make such reports as may be required by the Board or as are required by law.

Section 9. Treasurer. The Treasurer shall be responsible for all of the money management and investment functions of the Corporation. Maintenance of relationships with correspondent banks, securities brokers and safekeeping agents shall be the responsibility of the Treasurer. The Treasurer shall make such reports as may be required by the Board or as are required by law.

Section 10. Other Officers and Employees . Other officers and employees appointed by the Board shall have such authority and shall perform such duties as may be assigned to them, from time to time, by the Board or the Chief Executive Officer or the President.

Section 11. Compensation of Officers and Others. The compensation of all officers and employees shall be fixed from time to time by the Board, or by any committee or officer authorized by the Board to do so, upon the recommendation and report by the Compensation Committee. The compensation of agents shall be fixed by the Board, or by any committee or officer authorized by the Board to do so, upon the recommendation and report of the Compensation Committee.

ARTICLE VII

DIVIDENDS

The Board shall have the power, subject to the provisions of law and the requirements of the Certificate of Incorporation, to declare and pay dividends out of surplus (or, if no surplus exists, out of net profits of the Corporation, for the fiscal year in which the dividend is declared and/or the preceding fiscal year, except where there is an impairment of capital stock), to pay such dividends to the shareholders in cash, in property, or in shares of the capital stock of the Corporation, and to fix the date or dates for the payment of such dividends.

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ARTICLE VIII

AMENDMENTS

These Bylaws, except as provided by applicable law or the Certificate of Incorporation, or as otherwise set forth in these Bylaws, may be amended or repealed at any regular meeting of the entire Board by the vote of two-thirds of the Board; provided, however, that (a) a notice specifying the change or amendment shall have been given at a previous regular meeting and entered in the minutes of the Board; (b) a written statement describing the change or amendment shall be made in the notice mailed to the directors of the meeting at which the change or amendment shall be acted upon; and (c) any Bylaw made by the Board may be altered, amended, rescinded, or repealed by the holders of shares of capital stock entitled to vote thereon at any annual meeting or at any special meeting called for that purpose in accordance with the percentage requirements set forth in the Certificate of Incorporation and/or these Bylaws. Notwithstanding the foregoing, any provision of these Bylaws that contains supermajority voting requirement shall only be altered, amended, rescinded, or repealed by a vote of the Board or holders of capital stock entitled to vote thereon that is not less than the supermajority specified in such provision.