Dime Community Bancshares, Inc. Posts Strong Quarterly Earnings

BROOKLYN, NY--(Marketwired - July 23, 2015) - 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 June 30, 2015. Consolidated net income for the quarter was $11.5 million, or $0.32 per diluted share, compared to $11.8 million, or $0.33 per diluted share, for the quarter ended March 31, 2015, and $10.5 million, or $0.29 per diluted share, for the quarter ended June 30, 2014.

Vincent F. Palagiano, Chairman and Chief Executive Officer of Dime, commented, "We are pleased to report another solid operating quarter, fueled by increased prepayment fee income, a $1.1 million credit to the allowance for loan losses that was primarily attributable to the resolution of our largest problem loan, and continued low funding and operating costs. Dime's traditionally favorable asset quality metrics have even returned to pre-crisis levels." The allowance for loan losses as a percentage of total loans remained relatively unchanged from the 0.43% level at March 31, 2015.

Mr. Palagiano continued, "Despite the elevated loan amortization experienced in the June 2015 quarter, we were still able to grow loans by 7% on an annualized basis during the quarter, utilizing core deposits to fund the growth. We continue to have success in our deposit operation, and, over the first six months of 2015, have experienced over 17% growth in business deposits. Consolidated tangible capital increased by over 10% annualized in the second quarter, leaving the Company well positioned to support its double digit annual asset growth target."

Management's Discussion of Quarterly Operating Results
There were no variances between reported and "core" net income (as computed on page 9 of this release) during the three months ended both June 30, 2015 and 2014. The quarter ended March 31, 2015 featured several items that were non-recurring in nature, which produced a net increase of $1.9 million, or $0.06 per diluted share, in after-tax earnings for the period. Excluding these items, net income was $9.9 million, or $0.27 per diluted share during the three months ended March 31, 2015.

• Net Interest Margin

Net interest margin ("NIM") was 3.05% during the quarter ended June 30, 2015 compared to 2.80% during the March 2015 quarter, and 2.96% during the June 2014 quarter. Income recognized from loan prepayment activity, which varies from quarter to quarter, had a positive impact on the Company's NIM during each of the reporting periods presented. Due to the refinancing activities of two large borrowers, loan amortization and prepayments were significantly higher during the June 2015 quarter than during the March 2015 quarter. For the second quarter 2015, income from prepayment activity totaled $4.1 million, or 39 basis points of impact upon NIM, compared to $2.3 million, or 22 basis points of impact upon NIM, during the quarter ended March 31, 2015. In addition during the March 2015 quarter, the NIM was adversely impacted by 12 basis points as a result of $1.4 million in additional interest expense recognized from the prepayment of a Federal Home Loan Bank of New York ("FHLBNY") advance. The "core" NIM, which excludes the impact of these prepayment income and expense items, declined from 2.71% during the March 2015 quarter to 2.66% during the June 2015 quarter, caused by a reduction of 8 basis points in the average yield on interest earning assets and an increase of one basis point in the average cost of deposits. Core NIM for the June 2014 quarter was 2.73%.

As mentioned in the Company's previous earnings release, NIM, excluding the effects of prepayment fee income, is not expected to fluctuate significantly as long as the current interest rate environment remains in effect.

The average cost of funds declined by 19 basis points from the March 2015 to the June 2015 quarter, reflecting a 44 basis point reduction in the average cost of borrowings, as the March 2015 quarterly average cost of borrowings was increased by 47 basis points as a result of the prepayment of an FHLBNY advance.

• Net Interest Income

Net interest income was $33.1 million in the quarter ended June 30, 2015, an increase of $3.0 million from $30.1 million reported in the March 2015 quarter, and $2.5 million from the $30.6 million reported in the June 2014 quarter. The increase from the March 2015 quarter resulted from both an additional $1.8 million of prepayment fee income recognized during the June 2015 quarter, and the additional $1.4 million of interest expense recognized in the March 2015 quarter from the prepayment of the FHLBNY advance. The increase from the June 2014 quarter reflected both $1.8 million of additional prepayment fee income and a reduction of $1.9 million in interest expense on borrowings, as the average balance of borrowings declined $86.6 million from the June 2014 quarter to the June 2015 quarter.

• (Credit) 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 June 2015 quarter of $1.1 million, due primarily to a recovery of $1.5 million recognized on the resolution of a $4.5 million non-accrual loan. The credit to the allowance for loan losses recognized during the June 2015 quarter was reduced by loan loss reserves added from growth in the loan portfolio experienced during the quarter.

• Non-Interest Income

Non-interest income was $1.7 million for the quarter ended June 30, 2015, a reduction of $1.6 million from the March 2015 quarter, due primarily to a non-recurring $1.4 million gain on the sale of mortgage-backed securities recognized in the March 2015 quarter, and lower loan-related fee income. Non-interest income was $110,000 above the June 2014 quarter, due to additional income recognized from Bank Owned Life Insurance assets, as the Company purchased additionally BOLI policies in October 2014.

• Non-Interest Expense

Non-interest expense was $16.4 million in the quarter ended June 30, 2015, up $2.5 million from the March 2015 quarter, but slightly below the $16.5 million projected level. During the March 2015 quarter, a $3.4 million reduction to expense was recognized from the curtailment of a previously-grandfathered post-retirement benefit plan. Excluding the curtailment benefit, non-interest expense was $17.3 million in the March 2015 quarter.

Non-interest expense was 1.44% of average assets during the most recent quarter, compared to 1.53% during the March 2015 quarter (excluding the impact of the postretirement plan curtailment benefit). The efficiency ratio approximated 47% during the June 2015 quarter.

• Income Tax Expense

The effective tax rate approximated 41% during the most recent quarter, above the forecasted 39% level due to higher than forecasted taxable income from prepayment fees on loan refinancings.

Management's Discussion of the June 30, 2015 Balance Sheet

Total assets were $4.64 billion at June 30, 2015, up $61.2 million, or 1.3%, from March 31, 2015.

• Real Estate Loans

Real estate loan net portfolio growth was $71.2 million for the quarter. Real estate loan originations were $408.7 million, at a weighted average interest rate of 3.25%. Of this amount, $170.4 million represented loan refinances from the existing portfolio. Approximately one-half of the loans originated during the quarter contained repricing terms of five years or less. Loan amortization and satisfactions totaled $333.0 million, or 31.2% (annualized) of the quarterly average portfolio balance, at an average rate of 4.09%. During the three months ended June 30, 2015, $41.2 million of loans to one large borrower were paid off, accounting for the higher than expected satisfaction volume during the quarter. The average yield on the loan portfolio (excluding income recognized from prepayment activity) during the quarter ended June 30, 2015 was 3.73%, compared to 3.79% during the March 2015 quarter and 4.01% during the June 2014 quarter.

• Credit Summary

Non-performing loans were $959,000, or 0.02% of total loans, at June 30, 2015, down from $6.4 million, or 0.15% of total loans, at March 31, 2015. During the most recent quarter, four non-accrual loans totaling $4.9 million were either disposed of or satisfied, and a $333,000 non-accrual loan was transferred to held for sale pending closing of an executed note sale agreement. Accruing loans delinquent between 30 and 89 days were $349,000, or 0.01% of total loans, at June 30, 2015, down from $1.2 million, or 0.03% of total loans, at March 31, 2015.

At June 30, 2015, the Bank also had $9.2 million of loans classified as troubled debt restructurings that remained on accrual status and were deemed performing loans. All such loans were current as of June 30, 2015.

The allowance for loan losses as a percentage of total loans remained relatively unchanged from the 0.43% level at March 31, 2015.

At June 30, 2015, non-performing assets represented 0.80% of the sum of tangible capital plus the allowance for loan losses (this statistic is otherwise known as the "Texas Ratio") (see table). This number compares very favorably to both national and regional industry averages.

• Deposits and Borrowed Funds

Progress continues to be made in lowering the Bank's loan to deposit ratio, and increasing core deposits, as both are presently viewed as significant components of the Company's long term strategic growth plan.

Deposits increased by $91.4 million during the quarter ended June 30, 2015. Recent deposit gathering initiatives focused upon money markets and business accounts led to growth of $111.4 million and $21.9 million in their respective balances during the period. Offsetting this growth was a reduction of $29.5 million in certificates of deposits ("CDs").

Total borrowings declined $15.0 million during the June 2015 quarter, as shorter-term Federal Home Loan Bank of New York advances were reduced by $15.0 million while the Bank was able to replace borrowings with deposits in order to fund asset growth during the period.

• Capital

The Bank and Company recently commenced compliance with the Basel III capital rules. The consolidated leverage ratio (Tier 1 capital to average assets) was 11.12% at June 30, 2015, well in excess of all Basel III capital requirements (inclusive of conservation buffer amounts).

The Bank's leverage ratio (Tier 1 capital to average assets) was 9.47% at June 30, 2015, up from 9.24% at March 31, 2015, as a result of $9.5 million of Tier 1 capital added during the quarter. The Bank's "Tier 1" and "Total" capital ratios were 12.44% and 12.99%, respectively, at June 30, 2015, also well in excess of the most stringent Basel III requirements.

Reported diluted earnings per share exceeded the quarterly cash dividend rate per share by 129% during the quarter ended June 30, 2015, equating to a 44% payout ratio. Additions to capital from earnings during the most recent quarterly period raised tangible book value per share by $0.21 sequentially during the most recent quarter, to $11.61 at June 30, 2015.

Outlook for the Quarter Ending September 30, 2015

At June 30, 2015, Dime had outstanding loan commitments totaling $281.9 million, all of which are likely to close during the quarter ending September 30, 2015, at an average interest rate approximating 3.35%. Loan prepayments and amortization are projected to moderate significantly from the June 2015 quarter, and fall within a targeted range of 15% - 20% during the remainder of 2015.

The Company has a balance sheet growth objective approximating 12% for the year ending December 31, 2015, with a preference toward utilizing retail deposits for most of its funding needs.

Deposit funding costs are expected to remain near current historically low levels through the September 2015 quarter. During the quarter ending September 30, 2015, the Bank has $120.9 million of CDs maturing at an average rate of 0.80%, and $205.0 million of borrowings maturing at an average rate of 1.04%. No significant increase or reduction in funding costs is likely to occur from the rollover or re-positioning of these funds.

Loan loss reserve provisions or credits will continue to depend upon annualized loan portfolio growth, incurred and anticipated losses, and the overall performance of the loan portfolio. Significant provisions or credits are less likely as the expected loss component of the allowance continues to stabilize and portfolio growth remains measured and consistent.

Non-interest expense is expected to approximate $16.3 million during the September 2015 quarter, reflecting strategic technology and infrastructure initiatives that have elevated operating costs from their 2014 level.

The Company projects that the consolidated effective tax rate will approximate 39.0% in the September 2015 quarter.

ABOUT DIME COMMUNITY BANCSHARES, INC.

The Company (NASDAQ: DCOM) had $4.64 billion in consolidated assets as of June 30, 2015, 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.