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DIME COMMUNITY BANCSHARES, INC. POSTS HIGHER QUARTERLY EPS

Third Quarter EPS of $0.33 surpasses June 2014 quarter on higher prepayment fees;

Real estate loan originations also up 50% over prior quarter

Brooklyn, NY – October 23, 2014 - Dime Community Bancshares, Inc. (NASDAQ: DCOM) (the "Company" or "Dime"), the parent company of The Dime Savings Bank of Williamsburgh (the "Bank"), today reported financial results for the quarter ended September 30, 2014.  Consolidated net income for the quarter ended September 30, 2014 was $11.8 million, or $0.33 per diluted share, compared to $10.5 million, or $0.29 per diluted share, for the quarter ended June 30, 2014, and $10.6 million, or $0.30 per diluted share, for the quarter ended September 30, 2013.

Vincent F. Palagiano, Chairman and Chief Executive Officer of Dime, commented, "We were pleased to report earnings of $0.33 during the most recent quarter, which were elevated above both the previous quarter and quarterly consensus estimate by a combination of higher prepayment fee income, a reserve recapture of $501,000, and lower operating expenses."

Mr. Palagiano concluded, "During the most recent quarter, approximately $275 million of real estate loans were originated, a 50% increase from the June 2014 quarter, and were mainly comprised of our core 5-year repricing term loans.  As we move closer to year-end, the Bank remains on pace to achieve our annual loan growth target of 12%."

Management's Discussion of Quarterly Operating Results

·	Net Interest Margin

Reported net interest margin ("NIM") was 3.09% during the quarter ended September 30, 2014 compared to 2.96% during the June 2014 quarter, and 3.35% during the September 2013 quarter.  Net interest income recognized from loan prepayment activity, which varies from quarter to quarter, positively impacted the Company's NIM during each of the reporting periods presented.  For the third quarter 2014, income from prepayment activity was $3.9 million, or 38 basis points of impact upon NIM, compared to $2.2 million, or 21 basis points of impact upon NIM, during the quarter ended June 30, 2014.  The "core" NIM, which excludes the impact of these items, decreased from 2.75% during the June 2014 quarter to 2.71% during the September 2014 quarter, caused primarily by a reduction of 5 basis points in the average yield on interest earning assets.  Core NIM for the September 2013 quarter was 2.98%.

Commenting on the margin, Kenneth J. Mahon, Chief Operating Officer, said, "As long as rates stay unchanged, we expect only basis point movements in the margin over the next two quarters, leading to a range-bound NIM".

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Loan amortization and prepayments, which had moderated during the first six months of 2014 compared to their historically high levels during 2013, increased in the September 2014 quarter primarily as a result of the refinancing of loans by the Bank's largest borrower relationship, which contributed an additional $2.2 million in prepayment fee income from the level experienced in the June 2014 quarter.

The average cost of funds declined by 2 basis points from the June 2014 to the September 2014 quarter, reflecting reductions of 5 basis points in the average cost of borrowings and 1 basis point in the average cost of deposits, as funding costs continued to remain at historically low levels.

·	Net Interest Income

Net interest income ("NII") was $32.0 million in the quarter ended September 30, 2014, up $1.4 million from $30.6 million reported in the June 2014 quarter, and $305,000 higher than the $31.7 million reported in the September 2013 quarter. The increase from the June 2014 quarter reflected a 13 basis point increase in the average yield on interest earning assets, which benefitted from both the addition of $1.8 million in prepayment fee income, as well as a reduction of $60.4 million in the average balance of cash reservesthat were yielding less than 25 basis points.  The increase in NII from the September 2013 quarter resulted from $476,000 of higher prepayment fee income coupled with the growth of $356.8 million in average interest earnings assets.

·	Provision/Allowance For Loan Losses

A recapture of a portion of the allowance for loan loss reserve resulted in a credit, rather than a charge, to earnings in the third quarter of $501,000, due primarily to a lower loss experience applied to pass graded loans.

·	Non-Interest Income

Non-interest income was $1.8 million for the quarter ended September 30, 2014, an increase of $252,000 from the June 2014 quarter, and resulted primarily from higher seasonal administrative fees collected on portfolio loans.

·	Non-Interest Expense

Non-interest expense was $14.7 million in the quarter ended September 30, 2014, approximately $574,000 below the $15.3 million level experienced in the June 2014 quarter, due primarily to reductions of $355,000 in compensation and benefits, and approximately $100,000 in both marketing and legal costs, respectively.  These items also accounted for the great majority of the reduction from the $15.5 million of non-interest expense forecasted for the September 2014 quarter.

Non-interest expense was 1.36% of average assets during the most recent quarter, compared to 1.42% during the June 2014 quarter.  The efficiency ratio approximated 43.54% during the September 2014 quarter.

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·	Income Tax Expense

The effective tax rate approximated 39.8% during the most recent quarter, lower than the forecasted 41.0% level, due to a favorable adjustment related to a prior year tax return.  The lower effective tax rate contributed approximately $0.01 to diluted earnings per share during the September 2014 quarter.

Management's Discussion of the September 30, 2014 Balance Sheet

Total assets were $4.38 billion at September 30, 2014, up $82.7 million, or 1.9%, from June 30, 2014.

·	Real Estate Loans

Real estate loan net portfolio growth was $78.7 million for the quarter.  Real estate loan originations were $274.5 million, at a weighted average interest rate of 3.32%.  Of this amount, $88.1 million represented loan refinances from the existing portfolio.  Approximately 80% of the loans originated during the quarter contained repricing terms of 5-years or less.  Loan amortization and satisfactions totaled $194.1 million, or 19.4% (annualized) of the quarterly average portfolio balance, at an average rate of 4.72%.  The average yield on the loan portfolio (excluding income recognized from prepayment activity) during the quarter ended September 30, 2014 was 3.90%, compared to 4.01% during the June 2014 quarter and 4.28% during the September 2013 quarter.

·	Credit Summary

Non-performing loans were $11.5 million, or 0.28% of total loans, at September 30, 2014, compared to $12.3 million, or 0.31% of total loans, at June 30, 2014.  The decline in dollar amount resulted primarily from both a non-performing loan returning to accrual status and a significant reduction in the principal balance of another non-performing loan during the period.  Accruing loans delinquent between 30 and 89 days were $1.1 million, or approximately 0.03% of total loans, at September 30, 2014, compared to $2.3 million or 0.06% of total loans, at June 30, 2014.

At September 30, 2014, the Bank also had $10.7 million of troubled debt restructured loans that remained on accrual status and were deemed performing loans.

As a result of both the net reduction in the allowance balance and the growth in the loan portfolio, the allowance for loan losses as a percentage of total loans declined from 0.49% at June 30, 2014 to 0.47% at September 30, 2014.

At September 30, 2014, non-performing assets represented 3.9% of the sum of tangible capital plus the allowance for loan losses (this statistic is otherwise known as the "Texas Ratio") (see table on page 10).  This number compares very favorably to both national and regional industry averages.

·	Deposits and Borrowed Funds

Deposits declined by $30.5 million during the most recent quarter, reflecting net reductions of $11.2 million in money market deposits and $19.9 million in certificates of deposit ("CDs").  The Bank did not compete aggressively for deposit funding in the September 2014 quarter, but expects to ramp up a deposit campaign in the fourth quarter.   A recently implemented promotional program targeting money market and checking accounts is expected to raise deposit funding in the December 2014 quarter.  Mortgagor escrow deposits experienced a seasonal increase of $18.9 million during the September 2014 quarter.

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The Bank's Federal Home Loan Bank of New York ("FHLBNY") advances grew by $85.1 million during the September 2014 quarter.  Approximately $45.1 million of this growth consisted of a combination of 3-year, 4-year and 5-year fixed rate advances at a weighted average cost approximating 1.50% that were structured to mitigate interest rate risk.  The remaining $40.0 million borrowing growth during the period was short-term in nature.

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Capital

The Company's consolidated tangible capital increased $7.6 million during the most recent quarter, and the consolidated Tier 1 core leverage ratio (tangible common equity to tangible assets) was 9.35% at September 30, 2014, relatively unchanged from June 30, 2014.

The Bank's tangible (leverage) capital ratio was 9.25% at September 30, 2014, up from 9.20% at June 30, 2014, due to retained earnings during the most recent quarter. The Bank's Total Risk-Based Capital Ratio was 12.84% at September 30, 2014, compared to 12.85% at June 30, 2014.

Reported diluted EPS exceeded the quarterly cash dividend rate per share by 136% during the quarter ended September 30, 2014, equating to a 42% payout ratio. Additions to capital from earnings during the most recent quarterly period enabled tangible book value per share to increase $0.20 sequentially during the most recent quarter, to $10.98 at September 30, 2014.

Outlook for the Quarter Ending December 31, 2014

At September 30, 2014, Dime had outstanding loan commitments totaling $170.9 million, all of which are likely to close during the quarter ending December 31, 2014, at an average interest rate approximating 3.25%.

It now appears that the Company will achieve its balance sheet growth objective for the year ending December 31, 2014, of about 10%.  Loan prepayments and amortization are currently projected to run in the 15% - 20% range through the remainder of the year.

On the funding side of the balance sheet, deposit funding costs are expected to remain near current historically low levels through the remainder of 2014.  The Bank has $113.9 million of CDs maturing at an average cost of 1.07% during the quarter ending December 31, 2014.  Offering rates on 12-month term CDs currently approximate 40 basis points.  During the quarter ending December 31, 2014, the Bank has $214.5 million in borrowings due to mature at an average cost of 2.39%.  In the upcoming quarter, management expects to utilize a combination of FHLBNY advances and retail deposits to fund growth.

As previously mentioned, the Bank recently implemented a promotional campaign related to money market and checking accounts, the success of which will determine the direction and degree of funding from both deposits and borrowings, as well as the overall cost of funds for the December 2014 quarter.

Loan loss reserve provisions or credits will likely depend upon annualized loan portfolio growth, incurred and anticipated losses, and the overall performance of the loan portfolio.

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Absent any unforeseen items, non-interest expense is expected to approximate $15.3 million during the December 2014 quarter.  The Company projects that the consolidated effective tax rate will approximate 41.0% in the December 2014 quarter.

ABOUT DIME COMMUNITY BANCSHARES, INC.

The Company (NASDAQ: DCOM) had $4.38 billion in consolidated assets as of September 30, 2014, and is the parent company of the Bank. The Bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has twenty-five branches located throughout Brooklyn, Queens, the Bronx and Nassau County, New York. More information on the Company and Dime can be found on the Dime's Internet website at www.dime.com.

This News Release 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 Dime; 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.

Contact: Kenneth Ceonzo

Director of Investor Relations

718-782-6200 extension 8279

 

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