NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the "Holding Company") is a Delaware corporation and parent company of the Bank, a federally chartered stock savings bank.  The Holding Company's direct subsidiaries are the Bank, Dime Community Capital Trust 1 and 842 Manhattan Avenue Corp.  The Bank's direct subsidiaries are Boulevard Funding Corp., Dime Insurance Agency Inc. ( f/k/a Havemeyer Investments, Inc.), DSBW Preferred Funding Corporation, DSBW Residential Preferred Funding Corp., Dime Reinvestment Corp. and 195 Havemeyer Corp.

The Bank maintains its headquarters in the Williamsburg section of Brooklyn, New York and operates twenty-six 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 is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, one- to four-family residential, construction and land acquisition, and consumer loans, as well as mortgage-backed securities (“MBS”), obligations of the U.S. Government and Government Sponsored Entities ("GSEs"), and corporate debt and equity securities.

2.   SUMMARY OF ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the Company's financial condition as of March 31, 2011, the results of operations and statements of comprehensive income for the three-month periods ended March 31, 2011 and 2010, and the changes in stockholders' equity and cash flows for the three months ended March 31, 2011 and 2010.  The results of operations for the three-months ended March 31, 2011 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2011.  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 SEC.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Please see “Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” for a discussion of areas in the accompanying condensed consolidated financial statements where significant estimates are utilized.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2010 and notes thereto.

3.   RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2011-2, "A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring" ("ASU 2011-2").  ASU 2011-2 clarifies the guidance for determining whether a loan restructuring constitutes a troubled debt restructuring ("TDR") outlined in Accounting Standards Codification ("ASC") No. 310-40, "Receivables—Troubled Debt Restructurings by Creditors," by providing additional guidance to a creditor in making the following required assessments needed to determine whether a restructuring is a TDR: (i) whether or not a concession has been granted in a debt restructuring; (ii) whether a temporary or permanent increase in the contractual interest rate precludes the restructuring from being a TDR; (iii) whether a restructuring results in an insignificant  delay in payment; (iv) whether a borrower that is not currently in payment default is experiencing financial difficulties; and (v) whether a creditor can use the effective interest rate test outlined in debtor’s guidance on restructuring of payables (ASC Topic No. 470-60-55-10) when evaluating whether or not a restructuring constitutes a TDR.  ASU 2011-2 is effective for interim periods beginning on or after June 15, 2011.  Adoption of ASU 2011-2 is not expected to have a material effect upon the Company's consolidated financial condition or results of operations.

In July 2010. the FASB issued Accounting Standards Update No. 2010-20, "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses" ("ASU 2010-20").  ASU 2010-20 requires companies to provide a greater level of disaggregated information regarding: (1) the credit quality of their financing receivables; and (2) their allowance for credit losses.  ASU 2010-20 further requires companies to disclose credit quality indicators, past due information, and modifications of their financing receivables. For public companies, ASU 2010-20 is effective for interim and annual reporting periods ending on or after December 15, 2010.  ASU 2010-20 encourages, but does not require, comparative disclosures for earlier reporting periods that ended before initial adoption.  Adoption of ASU 2010-20 did not have a material impact upon the Company's consolidated financial condition or results of operations.

In February 2010, the FASB issued ASU No. 2010-11,  "Derivatives and Hedging (Topic 815) – Scope Exception Related to Embedded Credit Derivatives"  ("ASU 2010-11").  ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation (separate accounting) requirements, and addresses various accounting issues associated with subordination of one financial instrument to another. ASU 2010-11 affirms that a credit derivative feature related to the transfer of credit risk that is the only form of subordination of one financial instrument to another is not subject to the embedded derivative bifurcation requirement.  Under ASU 2010-11, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may thus need to separately account for the embedded credit derivative feature.  In initially adopting ASU 2010-11, an entity may elect the fair value option for any investment in a beneficial interest in a securitized financial asset.  The election must be made on an instrument-by-instrument basis at the beginning of the fiscal quarter of initial adoption.  However, an entity must perform an impairment analysis of the investment before the initial adoption.  ASU 2010-11 was effective at the beginning of an entity’s first fiscal quarter commencing after June 15, 2010.   Adoption of ASU 2010-11 did not have a material effect upon the Company's financial condition or results of operations.

In January 2010, FASB issued Accounting Standards Update No. 2010-06, " Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements" ("ASU 2010-6").  ASU 2010-6 required new disclosures related to transfers into and out of fair value hierarchy Levels 1 and 2, as well as certain activities for assets whose fair value is measured under the Level 3 hierarchy. ASU 2010-6 also provided amendments clarifying the level of disaggregation and disclosures about inputs and valuation techniques along with conforming amendments to the guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-6 was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Adoption of ASU 2010-6 has not had, and is not expected to have, a material impact upon the Company's financial condition or results of operations.

4.   TREASURY STOCK

The Company did not repurchase any shares of treasury stock during the three months ended March 31, 2011 and 2010.

5.   ACCOUNTING FOR GOODWILL

The Company has designated the last day of its fiscal year as its date for annual impairment testing.  The Company performed an impairment test as of December 31, 2010 and concluded that no impairment of goodwill existed.  No events or circumstances have occurred subsequent to December 31, 2010 that would, in management's opinion, reduce the fair value of the Company's reporting unit below its carrying value.  Such events or circumstances would require the immediate performance of an impairment test in accordance with ASC 350.

6.   EARNINGS PER SHARE ("EPS")

EPS is calculated and reported in accordance with ASC 260.  For entities like the Company with complex capital structures, ASC 260 requires disclosure of basic EPS and diluted EPS on the face of the income statement, along with a reconciliation of their numerators and denominators.

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 exclude unallocated ESOP shares).  Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock.

The following is a reconciliation of the numerators and denominators of basic EPS and diluted EPS for the periods presented:

 

 

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

There were 1,166,048 and 2,675,037 weighted-average stock options outstanding for the three-month periods ended March 31, 2011 and 2010, respectively, that were not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period.

7.    ACCOUNTING FOR STOCK BASED COMPENSATION

During the three-month periods ended March 31, 2011 and 2010, the Holding Company and Bank maintained the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees; and the 2004 Stock Incentive Plan (collectively the "Stock Plans"), which are discussed more fully in Note 15 to the Company's audited consolidated financial statements for the year ended December 31, 2010, and which are subject to the accounting requirements of ASC 505-50 and ASC 718.

The range of exercise prices and weighted-average remaining contractual lives of options outstanding, vested and unvested, under the Stock Plans were as follows:

 

 

The weighted average exercise price and contractual years remaining for vested options under the Stock Plans were $15.08 and 3.8 years, respectively, at March 31, 2011. There were no grants of stock options during the three months ended March 31, 2011 or 2010, respectively.

Restricted Stock Awards

The Company, from time to time, issues restricted stock awards to outside directors and officers under the 2004 Stock Incentive Plan.  Typically, awards to outside directors fully vest on the first anniversary of the grant date, while awards to officers vest in equal annual installments over a four- or five-year period.

The following is a summary of activity related to the restricted stock awards granted under the 2004 Stock Incentive Plan during the periods indicated:

8.   LOANS RECEIVABLE AND CREDIT QUALITY

		Balance at March 31, 2011
Grade		One- to Four-Family Residential and Cooperative Unit				Multifamily Residential and Residential Mixed Use				Mixed Use Commercial Real Estate				Commercial Real Estate				Construction				Total
		(Dollars in Thousands)
Pass		$	67,345			$	2,497,695			$	359,576			$	402,121			$	8,428			$	3,335,165
Special Mention			125				8,163				1,590				31,219				4,900				45,997
Substandard			195				8,166				5,885				18,593				-				32,839
Total real estate loans individually assigned a credit grade		$	67,665			$	2,514,024			$	367,051			$	451,933			$	13,328			$	3,414,001
Real estate loans not individually assigned a credit grade (1)		$	42,437				-				-				-				-			$	42,437

		Balance at December 31, 2010
Grade		One- to Four-Family Residential and Cooperative Unit				Multifamily Residential and Residential Mixed Use				Mixed Use Commercial Real Estate				Commercial Real Estate				Construction				Total
		(Dollars in Thousands)
Pass		$	70,831			$	2,483,695			$	357,463			$	426,518			$	9,465			$	3,347,972
Special Mention			127				10,367				5,989				23,150				5,773				45,406
Substandard			257				11,216				1,613				18,435				-				31,521
Total real estate loans individually assigned a credit grade		$	71,215			$	2,505,278			$	365,065			$	468,103			$	15,238			$	3,424,899
Real estate loans not individually assigned a credit grade (1)		$	46,053				-				-				-				-			$	46,053

Grade		Balance at March 31, 2011				Balance at December 31, 2010
		(Dollars in Thousands)
Performing		$	2,050			$	2,523
Non-accrual			20				17
Total		$	2,070			$	2,540

At March 31, 2011
	30 to 59 Days Past Due	60 to 89 Days Past Due	90 Days or More Past Due	Total Past Due	Current	Total Loans	Loans 90 Days or More Past Due and Still Accruing Interest
	(Dollars in Thousands)
Real Estate:
One- to four-family residential and cooperative unit	$977	$138	$62	$1,177	$108,925	$110,102	-
Multifamily residential and residential mixed use	1,859	1,294	7,201	10,354	2,503,670 (a)	2,514,024	$1,750
Mixed use commercial real estate	1,634	-	3,909	5,543	361,508	367,051	-
Commercial real estate	4,036	2,070	9,758	15,864	436,069	451,933	-
Construction	-	-	2,283	2,283	11,045	13,328	2,283
Total real estate (including loans held for sale)	$8,506	$3,502	$23,213	$35,221	$3,421,217	$3,456,438	$4,033
Consumer	$2	$2	$20	$24	$2,046	$2,070	-

At December 31, 2010
	30 to 59 Days Past Due	60 to 89 Days Past Due	90 Days or More Past Due	Total Past Due	Current	Total Loans	Loans 90 Days or More Past Due and Still Accruing Interest
	(Dollars in Thousands)
Real Estate:
One- to four-family residential and cooperative unit	$130	$141	$223	$494	$116,774	$117,268	-
Multifamily residential and residential mixed use	4,435	2,631	11,058	18,124	2,487,054 (a)	2,505,178	$3,510
Mixed use commercial real estate	190	3,051	1,217	4,458	360,607	365,065	-
Commercial real estate	3,059	7,592	11,494	22,145	446,058	468,203	331
Construction	-	-	4,500	4,500	10,738	15,238	4,500
Total real estate (including loans held for sale)	$7,814	$13,415	$28,492	$49,721	$3,421,231	$3,470,952	$8,341
Consumer	$6	$1	$17	$24	$2,516	$2,540	-

		At March 31, 2011				At December 31, 2010
		(Dollars in Thousands)
Real Estate Loans:
One- to four-family residential and cooperative unit		$	62			$	223
Multifamily residential and residential mixed use			5,451				7,548
Mixed use commercial real estate			3,909				1,217
Commercial real estate			9,758				11,163
Construction			-				-
Total real estate loans (including loans held for sale)			19,180				20,151
Consumer loans			20				17
Total non-accrual		$	19,200			$	20,168

	At or for the Three Months Ended March 31, 2011		At or for the Three Months Ended March 31, 2010
	No. of Loans	Balance	No. of Loans	Balance
	(Dollars in Thousands)
Loans modified during the period in a manner that met the definition of a TDR	-	$-	6	$14,200
Modifications granted:
Reduction of outstanding principal due	-	-	-	-
Deferral of principal amounts due	-	-	6	14,200
Temporary reduction in  interest rate	-	-	6	14,200
Below market interest rate granted	-	-	5	13,150
Outstanding principal balance immediately before and after modification	-	-	6	14,200
Aggregate principal charge-off recognized on TDRs outstanding  at period end	3	623	-	-
Outstanding principal balance at period end	17	19,828	9	19,517
TDRs that re-defaulted subsequent to being modified (at period end):	5	7,427	7	17,427
TDRs on accrual status at period end	12	12,401	2	2,090
TDRs on non-accrual status at period end	5	7,427	7	17,427

		Three Months Ended March 31,
		2011				2010
		(Dollars in Thousands)
Balance at beginning of period		$	19,166			$	21,505
Provision for loan losses			1,426				3,447
Loans charged off			(1,201	)			(769	)
Recoveries			221				-
Transfer from reserves on loan commitments			51				437
Balance at end of period		$	19,663			$	24,620

At or for the Three Months Ended March 31, 2011
	Real Estate Loans						Consumer Loans
	One- to Four Family Residential and Cooperative Unit	Multifamily Residential and Residential Mixed Use	Mixed Use Commercial Real Estate	Commercial Real Estate	Construction	Total Real Estate
	(Dollars in Thousands)
Beginning balance	$409	$14,226	$1,331	$2,821	$345	$19,132	$34
Charge-offs	(75)	(366)	(203)	(557)	-	(1,201)	-
Recoveries	-	121	3	97	-	221	-
Transfer from (to) reserve for loan commitments	-	97	(39)	(15)	8	51	-
Provision (reduction)	(54)	347	(18)	1,186	(35)	1,426	-
Ending balance	$280	$14,425	$1,074	$3,532	$318	$19,629	$34
Ending balance – loans individually evaluated for impairment	-	$13,130	$5,074	$20,669	$2,283	$41,156	-
Ending balance – loans collectively e valuated for impairment	$110,102	$2,500,894	$361,977	$431,264	$11,045	$3,415,282	$2,070
Allowance balance associated with loans individually    evaluated for impairment	$-	$-	$-	$298	$-	$298	$-
Allowance balance associated with loans collectivelly    evaluated for impairment	280	14,425	1,074	3,234	318	19,331	34

	At or for the Three Months Ended March 31, 2011
	Unpaid Principal Balance at Period End	Recorded Investment at Period End	Reserve Balance Allocated Within the Allowance for Loan Losses at Period End	Average Balance	Interest Income Recognized
	(Dollars in Thousands)
Multifamily Residential and Residential Mixed Use
With no allocated reserve	$15,751	$13,130	-	$14,749	$123
With an allocated reserve	-	-	-	-	-
Mixed Use Commercial Real Estate
With no allocated reserve	5,074	5,074	-	3,731	36
With an allocated reserve	-	-	-	-	-
Commercial Real Estate
With no allocated reserve	16,748	14,826	-	17,834	48
With an allocated reserve	5,843	5,843	298	2,922	156
Construction
With no allocated reserve	2,283	2,283	-	3,391	91
With an allocated reserve	-	-	-	-	-
Total
With no allocated reserve	$39,856	$35,313	-	$39,705	$298
With an allocated reserve	5,843	5,843	298	2,922	156

At December 31, 2010:	Unpaid Principal Balance at Period End	Recorded Investment at Period End	Reserve Balance Allocated Within the Allowance for Loan Losses at Period End
	(Dollars in Thousands)
Multifamily Residential and Residential Mixed Use
With no allocated reserve	$19,460	$16,368	-
With an allocated reserve		-	-
Mixed Use Commercial Real Estate
With no allocated reserve	2,388	2,387	-
With an allocated reserve	-	-	-
Commercial Real Estate
With no allocated reserve	23,771	20,842	-
With an allocated reserve	-	-	-
Construction
With no allocated reserve	4,500	4,500	-
With an allocated reserve	-	-	-
Total
With no allocated reserve	$50,119	$44,097	-
With an allocated reserve	-	-	-

		At or for the Three Months Ended March 31,
		2011				2010
		(Dollars in Thousands)
Outstanding balance of multifamily loans serviced for FNMA at period end		$	360,971			$	428,044
Total First Loss Position at end of period			16,789				18,697
Reserve Liability on the First Loss Position
Balance at beginning of period		$	2,993			$	4,373
Transfer of specific reserve for serviced loans re-acquired by the Bank			-				-
Provision for losses on problem loans (1)			-				-
Charge-offs and other net reductions in balance			-				(152	)
Balance at period end		$	2,993			$	4,221

10.   INVESTMENT AND MORTGAGE-BACKED SECURITIES

The following is a summary of major categories of securities owned by the Company at March 31, 2011.

			Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
	Purchase Amortized / Historical Cost	Recorded Amortized/ Historical Cost (1)	Non-Credit OTTI	Unrealized Gains	Unrealized Losses	Book Value	Other Unrealized Losses	Fair Value
			(Dollars in Thousands)
Held-to-Maturity:
Pooled bank trust preferred securities ("TRUPS")	$18,983	$10,673	$(1,591)	-	$(1,890) (2)	$7,192	$(634)	$6,558
Available-for-sale:
Mutual fund investments	4,970	3,545	-	1,106	(7)	4,644	-	4,644
Agency notes	129,331	129,331	-	3	(337)	128,997	-	128,997
Pass-through MBS issued by GSEs	91,382	91,382	-	4,890	-	96,272	-	96,272
Collateralized mortgage obligations ("CMOs")  issued by GSEs	27,722	27,722	-	812	-	28,534	-	28,534
Private issuer pass through MBS	2,120	2,120	-	-	(138)	1,982	-	1,982
Private issuer CMOs	1,912	1,912	-	32	-	1,944	-	1,944
Total	$276,420	$266,685	$(1,591)	$6,843	$(2,372)	$269,565	$(634)	$268,931

			Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
	Purchase Amortized / Historical Cost	Recorded Amortized/ Historical Cost (1)	Non-Credit OTTI	Unrealized Gains	Unrealized Losses	Book Value	Other Unrealized Losses	Fair Value
			(Dollars in Thousands)
Held-to-Maturity:
TRUPs	$19,008	$10,760	$(2,203)	-	$(1,916) (2)	$6,641	$(2,233)	$4,408
Available-for-sale:
Mutual fund investments	4,962	3,537	-	957	(4)	4,490	-	4,490
Agency notes	81,388	81,388	-	5	(241)	81,152	-	81,152
Pass-through MBS issued by GSEs	100,847	100,847	-	5,236	-	106,083	-	106,083
CMOs issued by GSEs	32,953	32,953	-	1,012	-	33,965	-	33,965
Private issuer pass through MBS	2,363	2,363	-	-	(65)	2,298	-	2,298
Private issuer CMOs	2,122	2,122	-	50	-	2,172	-	2,172
Total	243,643	233,970	$(2,203)	7,260	(2,226)	236,801	(2,233)	$234,568

		Amortized Cost				Estimated Fair Value
		(Dollars in Thousands)
Due after one year through five years		$	128,941			$	128,605
Due after five years through ten years			390				392
		$	129,331			$	128,997

	At or for the Three Months Ended March 31, 2011				At or for the Three Months Ended March 31, 2010
	Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI		Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI
	(Dollars in Thousands)
Cumulative balance at the beginning of the period	$8,247	$2,203	$10,450		$5,772	$4,425	$10,197
Cumulative effect adjustment of adopting ASC 320-10-65	-	-	-		-	-	-
OTTI recognized on securities with previous OTTI	63	-	63		166	50	216
Reductions and transfers to credit-related OTTI	-	(605)	(605)		-	(254)	(254)
Amortization of previously recognized OTTI	-	(7)	(7)		-	(26)	(26)
Cumulative balance at end of the period	$8,310	$1,591	$9,901		$5,938	$4,195	$10,133

		Total								12 or More Consecutive Months of Unrealized Losses								Less than 12 Consecutive Months of Unrealized Losses
		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
										(Dollars in thousands)
Held-to-Maturity Securities:
TRUPs (1)		$	6,558			$	4,115			$	6,558			$	4,115			$	-			$	-
Available-for-Sale Securities:
Federal agency Obligations			118,639				337				-				-				118,639				337
Fixed Income mutual fund			506				7				-				-				506				7
Private issuer pass through MBS			1,982				138				1,982				138
Total		$	127,685			$	4,597			$	8,540			$	4,253			$	119,145			$	344

		Total								12 or More Consecutive Months of Unrealized Losses								Less than 12 Consecutive Months of Unrealized Losses
		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
										(Dollars in thousands)
Held-to-Maturity Securities:
TRUPs		$	4,408			$	6,352			$	4,408			$	6,352			$	-			$	-
Available-for-Sale Securities:
Federal agency Obligations			75,756				241				-				-				75,756				241
Fixed Income mutual fund			506				4				-				-				506				4
Private issuer pass through MBS			2,298				65				2,298				65
Total		$	82,968			$	6,662			$	6,706			$	6,417			$	76,262			$	245

Investment Category		Percentage of Total			Valuation Level Under ASC 820-10
Pass Through MBS or CMOs issued by GSEs			47.6	%	Two
Federal agency obligation notes			49.1		Two
Pass Through MBS or CMOs issued by entities other than GSEs			1.5		Two
Mutual fund investments			1.8		One

At March 31, 2011	Carrying Amount	Fair Value
	(Dollars in Thousands)
Assets:
Cash and due from banks	$171,745	$171,745
Federal funds sold and other short term investments	4,461	4,461
Investment securities held to maturity (TRUPs)	7,192	6,558
Available-for-sale securities:
Mutual fund investments	4,644	4,644
Agency notes	128,997	128,997
Pass-through MBS issued by GSEs	97,004	97,004
CMOs  issued by GSEs	27,802	27,802
Private issuer pass-through MBS	1,982	1,982
Private issuer CMOs	1,944	1,944
Trading securities	1,541	1,541
Loans, net	3,437,124	3,584,243
Loans held for sale	1,721	1,720
MSR	2,095	2,593
FHLBNY capital stock	51,718	N/A
Liabilities:
Savings, money market and checking accounts	1,313,656	1,313,656
CDs	1,089,029	1,103,095
Escrow and other deposits	108,865	108,865
REPOs	195,000	215,110
FHLBNY advances	990,525	1,027,652
Trust Preferred securities payable 1	70,680	67,146
Commitments to extend credit	786	786

At December 31, 2010	Carrying Amount	Fair Value
Assets:
Cash and due from banks	$86,193	$86,193
Investment securities held to maturity (TRUPs)	6,641	4,408
Available-for-sale securities:
Mutual fund investments	4,490	4,490
Agency notes	81,152	81,152
Pass-through MBS issued by GSEs	106,083	106,083
CMOs  issued by GSEs	33,965	33,965
Private issuer pass through MBS	2,298	2,298
Private issuer CMOs	2,172	2,172
Loans, net	3,451,018	3,598,027
Loans held for sale	3,308	3,309
MSR	2,271	2,840
Federal funds sold and other short-term investments	4,536	4,536
FHLBNY capital stock	51,718	N/A
Liabilities:
Savings, money market and checking accounts	1,290,929	1,290,929
CDs	1,059,652	1,074,114
Escrow and other deposits	68,542	68,542
REPOs	195,000	217,735
FHLBNY Advances	990,525	1,032,555
Trust Preferred securities payable 1	70,680	63,612
Commitments to extend credit	631	631

12.   RETIREMENT AND POSTRETIREMENT PLANS

The Holding Company or the Bank maintains the Retirement Plan of The Dime Savings Bank of Williamsburgh (the "Employee Retirement Plan"), the Retirement Plan for Board Members of Dime Community Bancshares, Inc. (the "Outside Director Retirement Plan"), the BMP, and the Postretirement Welfare Plan of The Dime Savings Bank of Williamsburgh ("Postretirement Plan").  Net expenses associated with these plans were comprised of the following components:

		Three Months Ended March 31, 2011								Three Months Ended March 31, 2010
		BMP, Employee and Outside Director Retirement Plans				Postretirement Plan				BMP, Employee and Outside Director Retirement Plans				Postretirement Plan
		(Dollars in thousands)
Service cost		$	-			$	33			$	-			$	29
Interest cost			339				86				336				79
Actuarial adjustment to prior period interest cost and amortization			-				-				(325	)			-
Expected return on assets			(361	)			-				-				-
Unrecognized past service liability			-				-				-				-
Amortization of unrealized loss			312				29				232				14
Net periodic cost		$	290			$	148			$	243			$	122

14.   NET MORTGAGE BANKING INCOME

Net mortgage banking income presented in the condensed consolidated statements of operations was comprised of the following items:

		Three Months Ended March 31,
		2011				2010
		(Dollars in thousands)
(Loss) Gain on the sale of loans held for sale		$	(67	)		$	42
Credit (Provision) to the liability for First Loss Position			-				-
Recovery of write down of mortgage servicing asset			-				-
Mortgage banking fees			160				169
Net mortgage banking income		$	93			$	211

Selected Financial Highlights and Other Data

(Dollars in Thousands Except Per Share Amounts)

		At or For the Three Months Ended March 31,
		2011				2010
Performance and Other Selected Ratios:
Return on Average Assets			1.08	%			0.94	%
Return on Average Stockholders' Equity			13.31				12.59
Stockholders' Equity to Total Assets			8.14				7.50
Loans to Deposits at End of Period			143.94				150.81
Loans to Earning Assets at End of Period			91.35				91.52
Net Interest Spread			3.38				3.23
Net Interest Margin			3.62				3.46
Average Interest Earning Assets to Average Interest Bearing Liabilities			110.99				108.79
Non-Interest Expense to Average Assets			1.65				1.56
Efficiency Ratio			45.60				45.00
Effective Tax Rate			40.64				41.31
Dividend Payout Ratio			42.42				50.00
Per Share Data:
Reported EPS (Diluted)		$	0.33			$	0.28
Cash Dividends Paid Per Share			0.14				0.14
Stated Book Value			9.72				8.97
Asset Quality Summary:
Net Charge-offs		$	980			$	769
Non-performing Loans			19,200				29,520
Non-performing Loans/Total Loans			0.56	%			0.85	%
Non-performing Assets		$	19,770			$	30,936
Non-performing Assets/Total Assets			0.48	%			0.75	%
Allowance for Loan Loss/Total Loans			0.57				0.71
Allowance for Loan Loss/Non-performing Loans			102.41				83.40
Earnings to Fixed Charges Ratios (1)
Including Interest on Deposits			1.98	x			1.75	x
Excluding Interest on Deposits			2.52				2.15

		Less than One Year				One Year to Three Years				Over Three Years to Five Years				Over Five Years				Total
		(Dollars in thousands)
Credit Commitments:
Available lines of credit		$	32,955			$	-			$	-			$	-			$	32,955
Other loan commitments (1)			71,307				-				-				-				71,307
Other Commitments:
First Loss Position on loans sold to FNMA (1)			16,789				-				-				-				16,789
Total Commitments		$	121,051			$	-			$	-			$	-			$	121,051

		(Dollars in Thousands)
Non-accrual loans		$	19,200
Non-accrual one- to four-family and consumer loans with balances of $730,000 or less			(182	)
TDRs retained on accrual status			12,401
Other loans deemed impaired but retained on accrual status			9,737	(a)
Impaired loans		$	41,156

	At or for the Three Months Ended March 31, 2011		At or for the Three Months Ended March 31, 2010
	No. of Loans	Balance	No. of Loans	Balance
	(Dollars in Thousands)
Loans modified during the period in a manner that met the definition of a TDR	-	$-	6	$14,200
Modifications granted:
Reduction of outstanding principal due	-	-	-	-
Deferral of principal amounts due	-	-	6	14,200
Temporary reduction in  interest rate	-	-	6	14,200
Below market interest rate granted	-	-	5	13,150
Outstanding principal balance immediately before and after modification	-	-	6	14,200
Aggregate principal charge-off recognized on TDRs outstanding at period end	3	623	-	-
Outstanding principal balance at period end	17	19,828	9	19,517
TDRs that re-defaulted subsequent to being modified (at period end):	5	7,427	7	17,427
TDRs on accrual status at period end (1)	12	12,401	2	2,090
TDRs on non-accrual status at period end	5	7,427	7	17,427

		At March 31, 2011				At December 31, 2010
		(Dollars in Thousands)
Real Estate Loans:
One- to four-family residential and cooperative unit		$	62			$	223
Multifamily residential and residential mixed use			5,451				7,548
Mixed use commercial real estate			3,909				1,217
Commercial real estate			9,758				11,163
Construction			-				-
Total real estate loans (including loans held for sale)			19,180				20,151
Consumer loans			20				17
Total non-accrual loans		$	19,200			$	20,168
OREO			-				-
Non-performing investment securities			570				564
Total non-performing assets		$	19,770			$	20,732
Ratios:
Total non-accrual loans to total loans			0.56	%			0.58	%
Total non-performing assets to total assets			0.48				0.51

	At or for the Three Months Ended March 31, 2011			At or for the Three Months Ended March 31, 2010
	# Loans	Balance		# Loans	Balance
	(Dollars in Thousands)
Loans modified in a manner that did not meet the definition of a TDR	6	$5,963		2	$2,690
Concessions granted:
Reduction of outstanding principal due	-	-		-	-
Deferral of principal amounts due	5	5,599		1	1,256
Temporary reduction in interest rate	1	364		1	1,434
Below market interest rate granted	-	-		-	-
Outstanding principal balance immediately before and after modification	6	5,963		2	2,690

Analysis of Net Interest Income

		Three Months Ended March 31,
						2011												2010
										Average												Average
		Average								Yield/				Average								Yield/
		Balance				Interest				Cost				Balance				Interest				Cost
Assets:		(Dollars In Thousands)
Interest-earning assets:
Real estate loans		$	3,468,902			$	50,629				5.84	%		$	3,446,103			$	50,122				5.82	%
Other loans			1,149				26				9.05				1,426				39				10.94
MBS			129,635				1,452				4.48				206,466				2,271				4.40
Investment securities			134,299				316				0.94				57,159				407				2.85
Federal funds sold and other short-term investments			138,285				772				2.23				78,860				742				3.76
Total interest-earning assets			3,872,270			$	53,195				5.49	%			3,790,014			$	53,581				5.65	%
Non-interest earning assets			216,952												225,414
Total assets		$	4,089,222											$	4,015,428
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest bearing checking accounts			99,305			$	110				0.45	%		$	104,117			$	182				0.71	%
Money Market accounts			732,274				1,258				0.70				716,696				1,710				0.97
Savings accounts			333,129				193				0.23				302,151				200				0.27
CDs			1,068,006				5,224				1.98				1,015,951				5,501				2.20
Borrowed Funds			1,256,205				11,367				3.67				1,344,911				13,222				3.99
Total interest-bearing liabilities			3,488,919			$	18,152				2.11	%			3,483,826			$	20,815				2.42	%
Non-interest bearing checking accounts			135,586												109,070
Other non-interest-bearing liabilities			131,771												121,658
Total liabilities			3,756,276												3,714,554
Stockholders' equity			332,946												300,874
Total liabilities and stockholders' equity		$	4,089,222											$	4,015,428
Net interest income						$	35,043											$	32,766
Net interest spread											3.38	%											3.23	%
Net interest-earning assets		$	383,351											$	306,188
Net interest margin											3.62	%											3.46	%
Ratio of interest-earning assets to interest-bearing liabilities											110.99	%											108.79	%

Rate/Volume Analysis

		Three Months Ended March 31, 2011 Compared to Three Months
		Ended March 31, 2010 Increase/ (Decrease) Due to:
		Volume				Rate				Total
		(Dollars In thousands)
Interest-earning assets:
Real Estate Loans		$	333			$	174			$	507
Other loans			(8	)			(5	)			(13	)
MBS			(853	)			34				(819	)
Investment securities			366				(457	)			(91	)
Federal funds sold and other short-term investments			446				(416	)			30
Total			284			$	(670	)		$	(386	)
Interest-bearing liabilities:
Interest bearing checking accounts		$	(7	)		$	(65	)		$	(72	)
Money market accounts			34				(486	)			(452	)
Savings accounts			22				(29	)			(7	)
CDs			283				(560	)			(277	)
Borrowed funds			(832	)			(1,023	)			(1,855	)
Total		$	(500	)		$	(2,163	)		$	(2,663	)
Net change in net interest income		$	784			$	1,493			$	2,277

Item 3.            Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk were presented at December 31, 2010 in Item 7A of the Company's Annual Report on Form 10-K, filed with the SEC on March 14, 2011.  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, 2011, the Company owned six mutual fund investments totaling $1.41 million that were designated as trading.  At March 31, 2011, the Company did not conduct transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Assets, Deposit Liabilities and Wholesale Funds .  There was no material change in the composition of assets, deposit liabilities or wholesale funds from December 31, 2010 to March 31, 2011.

Interest Sensitivity Gap .  There was no material change in the computed one-year interest sensitivity gap from December 31, 2010 to March 31, 2011.

Interest Rate Risk Exposure (Net Portfolio Value) Compliance .  At March 31, 2011, the Bank continued 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, 2010.  There were no changes in the Board-approved limits of acceptable variance in the effect of interest rate fluctuations upon net interest income and NPV at March 31, 2011 compared to December 31, 2010.

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 (each a "Rate Shock Scenario") represented by immediate, permanent, parallel shifts in interest rates from those observed at March 31, 2011 and December 31, 2010.  The analysis additionally presents a measurement of the interest rate sensitivity at March 31, 2011 and December 31, 2010.  Interest rate sensitivity is measured by the basis point changes in the various NPV ratios ("NPV Ratios") from the Pre-Shock Scenario to the Rate Shock Scenarios.  NPV Ratios represent the NPV as a percentage of the total value of assets determined under each respective Pre- and Rate Shock Scenario.  An increase in the NPV Ratio is considered favorable, while a decline is considered unfavorable.

		At March 31, 2011
		Net Portfolio Value																				At December 31, 2010
		Dollar Amount				Dollar Change				Percentage Change				NPV Ratio				Basis Point Change in NPV Ratio				NPV Dollar Amount				NPV Ratio				Basis Point Change in NPV Ratio				Board Approved NPV Ratio Limit
		(Dollars in thousands)
Rate Shock Scenario
+ 200 Basis Points		$	461,993			$	(10,207	)			-2.16	%			11.06	%			3			$	432,333				10.63	%			(9	)			5.0	%
+ 100 Basis Points			476,287				4,087				0.87				11.24				21				448,038				10.86				14				6.0
Pre-Shock Scenario			472,200				-				-				11.03				-				447,222				10.72				-				7.0
- 100 Basis Points			480,282				8,082				1.71				11.07				4				457,563				10.81				9				7.0
- 200 Basis Points			N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A				7.0

The NPVs presented above incorporate some asset and liability values derived from the Bank’s valuation model, such as those for mortgage loans and time deposits, and some asset and liability values that are provided by reputable independent sources, such as values for the Bank's MBS and CMO portfolios, as well as its putable borrowings.  The Bank's valuation model makes various estimates regarding cash flows from principal repayments on loans and passbook deposit decay rates at each level of interest rate change.  The Bank's estimates for loan repayment 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 existing interest rate environment.  In addition, the Bank considers the amount of fee protection inherent in the loan portfolio when estimating future repayment cash flows.  Regarding passbook deposit decay rates, the Bank tracks and analyzes the decay rate of its passbook deposits over time and over various interest rate scenarios and then makes estimates of its passbook deposit decay rate for use in the valuation model.  No matter the care and precision with which the estimates are derived, however, actual cash flows for passbooks, as well as loans, 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 it considers representative of prevailing market rates of interest, with appropriate adjustments it believes are suited to the heterogeneous characteristics of the Bank’s various asset and liability portfolios.

 The Pre-Shock Scenario NPV increased from $447.2 million at December 31, 2010 to $472.2 million at March 31, 2011.  The NPV Ratio at March 31, 2011 was 11.03% in the Pre-Shock Scenario, compared to 10.72% at December 31, 2010.  The increase in the Pre-Shock Scenario NPV was due primarily to an increase in the valuation of multifamily loans (reflecting lower marketplace offering rates on such loans at March 31, 2011 compared to December 31, 2010). The growth in the Pre-Shock Scenario NPV Ratio reflected the increased Pre-Shock Scenario NPV at March 31, 2011 compared to December 31, 2010.

 

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The Bank’s +200 basis point Rate Shock Scenario NPV increased from $432.3 million at December 31, 2010 to $462.0 million at March 31, 2011.  The increase resulted primarily from a more favorable valuation of multifamily loans at March 31, 2011 compared to December 31, 2010, reflecting a decline in their estimated term to next interest rate repricing at March 31, 2011 compared to December 31, 2010.  Assets with a reduced term to next interest rate repricing generate a more favorable NPV in a rising rate interest rate environment.  As a result, the decline in the NPV of total assets from the Pre-Shock Scenario to the +200 basis point Rate Shock Scenario was lower at  March 31, 2011 than December 31, 2010.

The NPV Ratio was 11.06% in the +200 basis point Rate Shock Scenario at March 31, 2011, an increase from the NPV Ratio of 10.63% in the +200 basis point Rate Shock Scenario at December 31, 2010.  The increase reflected the aforementioned increase in the +200 basis point Rate Shock Scenario NPV during the comparative period.

At March 31, 2011, the interest rate sensitivity in the +200 basis point Rate Shock Scenario was positive 3 basis points, compared to interest rate sensitivity of negative 9 basis points in the +200 basis point Rate Shock Scenario at December 31, 2010.  The reduction in sensitivity was due primarily to less sensitivity in the valuation of multifamily loans in the +200 basis point Rate Shock Scenario at March 31, 2011 compared to December 31, 2010, as the majority of these loans moved closer to their contractual repricing.

Item 4.  Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of March 31, 2011, 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 concluded that the Company's disclosure controls and procedures were effective as of March 31, 2011 in ensuring 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, and that such information is accumulated and communicated to management of the Company as appropriate to allow timely decisions regarding required disclosures.

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 fiscal 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

In the ordinary course of business, the Company is routinely named as a defendant in or party to various pending or threatened legal actions or proceedings.  Certain of these matters may seek substantial monetary damages.  In the opinion of management, the Company is involved in no actions or proceedings that will have a material adverse impact on its financial condition and results of operations.

Item 1A.   Risk Factors

Except as noted below, there were no material changes from the risks disclosed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

The FDIC’s restoration plan and the related increased assessment rate schedule may have a further material effect on the Company's results of operations.

In February 2009, the FDIC adopted a final rule which set the initial base assessment rates beginning April 1, 2009 and provided for the following adjustments to an institution's assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt; (2) an increase for secured liabilities above a threshold amount; and (3) for non-Risk Category I institutions, an increase for brokered deposits above a threshold amount.  The Bank's deposit insurance assessments totaled $3.7 million for the year ended December 31, 2009, compared to $899,000 for the year ended December 31, 2008.

The FDIC also adopted a final rule in May 2009 imposing a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009, which was collected on September 30, 2009.  The Bank's FDIC special assessment totaled $1.8 million for the year ended December 31, 2009.

On September 29, 2009, the FDIC adopted an amendment to the restoration plan that increases the deposit insurance assessment rate uniformly across all four risk categories by three basis points (annualized) of insured deposits beginning January 1, 2011.  In addition, on November 17, 2009, the FDIC adopted a final rule that required insured depository institutions to prepay their quarterly deposit insurance assessments for the fourth quarter of 2009

 

 

44

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and for all of 2010, 2011 and 2012 on December 30, 2009, together with their regular deposit insurance assessment for the third quarter of 2009.  The Bank's payment on December 30, 2009 totaled approximately $13.4 million, and was $9.6 million as of December 31, 2010.

 

On October 19, 2010, the Board of Directors of the FDIC adopted the Restoration Plan  to ensure that the Deposit Insurance Fund reserve ratio reaches 1.35% by September 30, 2020, as required by the Reform Act.  Among other matters, the Restoration Plan provides that the FDIC will forego the uniform three basis point increase in initial assessment rates that was previously scheduled to take effect on January 1, 2011 and will maintain the current assessment rate schedule for all insured depository institutions until the reserve ratio reaches 1.15%.  The FDIC intends to pursue further rulemaking in 2011 regarding the requirement under the Reform Act that the FDIC offset the effect on institutions with less than $15 billion in assets (such as the Bank) of the requirement that the reserve ratio reach 1.35% by September 30, 2020, rather than 1.15% by the end of 2016 (as required under the prior restoration plan), so that more of the cost of raising the reserve ratio to 1.35% will be borne by institutions with more than $10 billion in assets.

On February 7, 2011, the FDIC adopted a final rule that redefines the assessment base for deposit insurance assessments as average consolidated total assets minus average tangible equity, rather than on deposit bases, as required by the Reform Act, and revises the risk-based assessment system for all large insured depository institutions by introducing a scoring system.  This system involves the FDIC establishing a score for each such institution which then translates into an assessment rate.  See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations – Recent Market Developments – Insurance of Deposit Accounts" for a further discussion of the impact of this final rule.

The final rule allows the FDIC to make limited adjustments to the score used to calculate an institution’s assessment rate and provides that the FDIC will not make any adjustments until new guidelines have been published for comment and approved by the FDIC. On April 12, 2011, the FDIC Board of Directors authorized publication of proposed guidelines describing the process that the FDIC would follow to determine whether to make an adjustment to the score used to calculate the assessment rate for a large or highly complex institution, the size of any such adjustment, and the procedure the FDIC would follow to notify an institution of an adjustment. Pursuant to the proposed guidelines, the FDIC can make a limited adjustment, either upward or downward, to an institution’s total score based upon risks or risk mitigating factors that are not adequately captured in the institution’s scorecard.  In addition, an institution can make written request to the FDIC for such an adjustment.  In either case, the FDIC would consult with an institution’s primary federal regulator and appropriate state banking supervisor before making any decision to adjust an institution’s total score.   Any adjustment to an institution’s score must be approved by the FDIC and there is no assurance that a request for an adjustment will result in an downward adjustment.

The recent adoption of regulatory reform legislation has created uncertainty and may have a material effect on the Company's operations and capital requirements.

There are many provisions of the Reform Act which are to be implemented through regulations to be adopted by the federal bank regulatory agencies within specified time frames following the effective date of the Reform Act, which creates a risk of uncertainty as to the ultimate effect of such provisions. Although it is not possible to currently determine whether the Reform Act will have a material effect on the Company's business, financial condition or results of operations, management believes that the following provisions of the Reform Act will impact the Company:

The elimination of the Company’s primary federal regulator, the OTS, and the assumption by the Office of the Comptroller of the Currency ("OCC") of regulatory authority over all federal savings associations, such as the Bank, and the acquisition by the Board of Governors of the Federal Reserve System ("FRB") of regulatory authority over all savings and loan holding companies, such as the Holding Company, as well as all subsidiaries of savings and loan holding companies other than depository institutions.  Although the laws and regulations currently applicable to the Company generally will not change by virtue of the elimination of the OTS (except to the extent such laws have been modified by the Reform Act), the application of these laws and regulations may vary as administered by the OCC and the FRB.

The Reform Act includes other provisions, subject to further rulemaking by the federal bank regulatory agencies, that may affect the Company’s future operations, including provisions that  restrict proprietary trading by banking entities, restrict the sponsorship of and investment in hedge funds and private equity funds by banking entities and that remove certain obstacles to the conversion of savings associations to national banks.  The Company will not be able to determine the impact of these provisions until final rules are promulgated to implement these provisions and other regulatory guidance is provided interpreting these provisions.

As a result of the Reform Act and other proposed changes, the Bank may become subject to more stringent capital requirements.

The Reform Act requires the federal banking agencies to establish consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution holding companies and systemically important nonbank financial companies. These requirements must be no less than those to which insured depository institutions are currently subject, and the new requirements will effectively eliminate the use of trust preferred securities as a component of Tier 1 capital for depository institution holding companies of $10 billion or greater. As a result, in July 2015, the Company will become subject to consolidated capital requirements to which it has not been previously subject. In addition, in December 2010, the Basel Committee on Banking Supervision announced the new "Basel III" capital rules, which set new standards for common equity, Tier 1 and total capital, determined on a risk-

 

 

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weighted basis.  It is not yet known how these standards, which will be phased in over a period of years, will be implemented by U.S. regulators generally or the manner in which they will be applied to financial institutions of the Company's size.

Pursuant to the Reform Act, the FRB will become responsible for the supervision of savings and loan holding companies on July 21, 2011.  In accordance with this authority, on April 15, 2011, the FRB requested comment on proposed supervisory guidance pursuant to which the FRB is seeking to apply certain elements of its consolidated supervisory program for bank holding companies, including consolidated capital requirements, to savings and loan holding companies. Pursuant to the proposed supervisory guidance, the FRB is considering applying to savings and loan holding companies the same consolidated risk-based and leverage capital requirements currently applicable to bank holding companies.  The FRB, together with the other federal banking agencies, expects to issue a notice of proposed rulemaking in 2011 that will outline how Basel III-based requirements will be implemented for all institutions, including savings and loan holding companies.  The FRB expects that final rules establishing Basel III-based capital requirements would be finalized in 2012 and implementation would start in 2013.

The FRB’s proposed rule to repeal the prohibition against payment of interest on demand deposits may increase competition for such deposits and  ultimately increase interest expense.

On April 6, 2011, the FRB requested comment on a proposed rule to repeal Regulation Q, which prohibits the payment of interest on demand deposits by institutions that are member banks of the Federal Reserve System.  The proposed rule would implement Section 627 of the Reform Act, which repeals Section 19(i) of the Federal Reserve Act in its entirety effective July 21, 2011. As a result, banks and thrifts will be permitted to offer interest-bearing demand deposit accounts to commercial customers, which were previously forbidden under Regulation Q.  The repeal of Regulation Q may cause increased competition from other financial institutions for these deposits.  If the Bank decides to pay interest on demand accounts, it would expect interest expense to increase.

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

(c)   The Holding Company did not repurchase any shares of its common stock into treasury during the three months ended March 31, 2011.  No existing repurchase programs expired during the three months ended March 31, 2011, nor did the Company terminate any repurchase programs prior to expiration during the quarter.  As of March 31, 2011, the Company had an additional 1,124,549 shares remaining eligible for repurchase under its twelfth stock repurchase program, which was publicly announced in June 2007.

Item 3.                      Defaults Upon Senior Securities

None.

Item 4.           (Removed and Reserved)

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. (14)
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.  (3)
4.4		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 (9)
4.5		Indenture, dated as of March 19, 2004, between Dime Community Bancshares, Inc. and Wilmington Trust Company, as trustee (9)
4.6		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 (9)
10.1		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Vincent F. Palagiano (13)
10.2		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Michael P. Devine (13)

 

 

 

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10.3		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Kenneth J. Mahon (13)
10.4		Employment Agreement between Dime Community Bancorp, Inc. and Vincent F. Palagiano
10.5		Employment Agreement between Dime Community Bancorp, Inc. and Michael P. Devine
10.6		Employment Agreement between Dime Community Bancorp, Inc. and Kenneth J. Mahon
10.7		Form of Employee Retention Agreement by and among The Dime Savings Bank of Williamsburgh, Dime Community    Bancorp, Inc. and certain officers (5)
10.7(i)		Amendment to Form of Employee Retention Agreement by and among The Dime Savings Bank of Williamsburgh, Dime Community    Bancorp, Inc. and certain officers (13)
10.8		The Benefit Maintenance Plan of Dime Community Bancorp, Inc. (16)
10.9		Severance Pay Plan of The Dime Savings Bank of Williamsburgh (13)
10.10		Retirement Plan for Board Members of Dime Community Bancorp, Inc. (13)
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 (6)
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. (6)
10.14		Form of stock option agreement for officers and employees under Dime Community Bancshares, Inc. 1996 and 2001 Stock Option Plans for Outside Directors, Officers and Employees and the 2004 Stock Incentive Plan (6)
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. (6)
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. (6)
10.17		Financial Federal Savings Bank Incentive Savings Plan in RSI Retirement Trust (7)
10.18		Financial Federal Savings Bank Employee Stock Ownership Plan (7)
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. (7)
10.20		Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (8)
10.21		Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees (12)
10.22		Waiver executed by Vincent F. Palagiano (11)
10.23		Waiver executed by Michael P. Devine (11)
10.24		Waiver executed by Kenneth J. Mahon (11)
10.25		Form of restricted stock award notice for officers and employees under the 2004 Stock Incentive Plan (10)
10.27		Form of restricted stock award notice for outside directors under the 2004 Stock Incentive Plan (10)
10.28		Employee Retention Agreement between The Dime Savings Bank of Williamsburgh, Dime Community Bancshares, Inc.  and Daniel Harris (13)
10.29		Dime Community Bancshares, Inc. Annual Incentive Plan (13)
10.30		Amendment to the Dime Savings Bank of Williamsburgh 401(K) Plan (15)
10.31		Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (13)
12.1		Computation of ratio of earnings to fixed charges
31(i).1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
31(i).2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 filed on May 11, 2009.
(3)	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.
(4)	Incorporated by reference to the registrant's Current Report on Form 8-K dated April 9, 1998 and filed on April 16, 1998.
(5)	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.
(6)	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.
(7)	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.

 

 

 

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(8)	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.
(9)	Incorporated by reference to Exhibits to the registrant’s Registration Statement No. 333-117743 on Form S-4 filed on July 29, 2004.
(10)	Incorporated by reference to the registrant's Current Report on Form 8-K filed on March 22, 2005.
(11)	Incorporated by reference to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 filed on May 10, 2005.
(12)	Incorporated by reference to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 filed on August 8, 2008.
(13)	Incorporated by reference to the registrant's Annual Report on Form 10-K for the year ended December 31, 2008 filed on March 16, 2009.
(14)	Incorporated by reference to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 filed on May 11, 2009
(15)	Incorporated by reference to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed on May 10, 2010
(16)	Incorporated by reference to the registrant's Current Report on Form 8-K filed on April 4, 2011.

 

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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, 2011		By: /s/ VINCENT F. PALAGIANO
		Vincent F. Palagiano
		Chairman of the Board and Chief Executive Officer

Dated: May 10, 2011		By: /s/ KENNETH J. MAHON
		Kenneth J. Mahon
		First Executive Vice President and Chief Financial Officer (Principal Accounting Officer)

 

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