Dime Community Bancshares, Inc. Reports Strong Quarterly

BROOKLYN, NY --(Marketwired - July 27, 2016) - Dime Community Bancshares, Inc. ( NASDAQ : DCOM ) today reported net income of $11.2 million for the second quarter of 2016, or $0.30 per diluted common share, compared with $50.0 million, or $1.36 per diluted common share, in the first quarter of 2016. Net income in the first quarter of 2016 (excluding the impact of the gain on sale of real estate taxed at the statutory rate) was $12.6 million, or $0.34 per diluted common share and $11.5 million, or $0.32 per diluted common share, in the second quarter of 2015.

Highlights for the second quarter of 2016 included:

• Average real estate loans grew 26.7% (annualized) on a linked quarter basis and 21.9% over the second quarter of 2015;
• Average deposits grew 34.1% (annualized) on a linked quarter basis and 24.1% over the second quarter of 2015; the strong deposit growth benefited the loan-to-deposit ratio, which declined to 137.8% in the second quarter of 2016 from 147.0% in the first quarter of 2016;
• Strong credit quality, with nonperforming loans to total loans of eight basis points; and
• Efficiency ratio of 47.8%, compared to 49.5% in the first quarter of 2016 and 47.1% in the second quarter of 2015.

Vincent F. Palagiano, Chairman and Chief Executive Officer of the Company, commented, "We are pleased to report another solid quarter of performance, despite the significant headwinds we face from continued low interest rates. Steady loan growth and strong deposit growth led to increased net interest income despite a decline in net interest margin. It's important to note that we delivered these results while maintaining our risk profile and managing our capital effectively."

According to President and Chief Operating Officer Kenneth J. Mahon, "We continue to execute on our strategy to create superior long-term shareholder value. Our focus on deposit growth saw the loan-to-deposit ratio fall to 137.8%, the lowest level since 2007. This quarter continued to show pristine credit quality, with exceptionally low levels of nonperforming loans, and we stayed focused on our cost base, with well-controlled expenses leading to a superior efficiency ratio."

Management's Discussion of Quarterly Operating Results

Net Interest Income

Net interest income in the second quarter of 2016 was $35.6 million, an increase of $979,000 (2.8%) over the first quarter of 2016 and an increase of $2.5 million (7.7%) over the second quarter of 2015. Net Interest Margin ("NIM") was 2.68% during the second quarter of 2016, compared to 2.80% in the first quarter of 2016 and 3.05% in the second quarter of 2015. NIM was negatively impacted in the second quarter of 2016 due to lower income recognized from loan prepayment activity. For the second quarter of 2016, income from prepayment activity totaled $2.0 million, benefiting NIM by 15 basis points, compared to $2.6 million, or 22 basis points, during the first quarter of 2016 and $4.2 million, or 39 basis points, during the second quarter of 2015. Average earning assets were $5.31 billion for the second quarter of 2016, a 28.5% (annualized) increase from $4.96 billion for the first quarter of 2016 and a 22.4% increase from $4.34 billion for the second quarter of 2015. For the second quarter of 2016, the average yield on interest earning assets (excluding prepayment income) was 3.50%, four basis points lower than the 3.54% for first quarter 2016 and 19 basis points lower than the 3.69% for second quarter 2015, while the average cost of funds was 1.14%, two basis points higher than the 1.12% for first quarter 2016 and six basis points lower than the 1.20% for second quarter 2015.

Real Estate Loans

Real estate loan portfolio growth was $151.5 million (11.9% annualized) on a net basis during the second quarter of 2016. Real estate loan originations were $357.3 million during the quarter, at a weighted average interest rate of 3.34%. Of this amount, $104.9 million represented loan refinances from the existing portfolio. Loan amortization and satisfactions totaled $206.1 million, or 16.1% (annualized) of the quarterly average portfolio balance, at an average rate of 4.08%. The average yield on the loan portfolio (excluding income recognized from prepayment activity) was 3.53% during the second quarter of 2016, compared to 3.57% during the first quarter of 2016, and 3.73% during the second quarter of 2015. Average real estate loans were $5.14 billion in the second quarter of 2016, an increase of $321.0 million (26.7% annualized) from the first quarter of 2016 and an increase of $923.4 million (21.9%) from the second quarter of 2015.

Deposits and Borrowed Funds

Deposit growth was $340.5 million (39.6% annualized) during the second quarter of 2016. Given the strong growth in deposits, the loan-to-deposit ratio fell to 137.8% at June 30, 2016, from 147.0% at March 31, 2016 and 146.8% at June 30, 2015. Core deposits increased to $2.75 billion during the second quarter of 2016, from $2.46 billion during the first quarter of 2016 and $2.04 billion during the second quarter of 2015. The average cost of deposits increased three basis points on a linked quarter basis to 0.85%.

Total borrowings decreased $260.0 million during the second quarter of 2016 as compared to the first quarter of 2016. The reduction in borrowings was due to deposit growth outpacing loan growth, and reflects management's desire to decrease reliance on borrowed funds and to grow both its number of customers and deposits.

Non-Interest Income

Non-interest income was $2.3 million during the second quarter of 2016, which was $751,000 (48.3%) higher than the first quarter of 2016, excluding the gain on the sale of real estate, reflecting additional income recognized from mortality proceeds from Bank Owned Life Insurance assets and strong mortgage service fee income. Non-interest income was $628,000 (37.4%) higher than the second quarter of 2015, reflecting additional income recognized from mortality proceeds from Bank Owned Life Insurance assets and higher service fees.

Non-Interest Expense

Non-interest expense was $18.1 million during the second quarter of 2016, which was $223,000 (1.2%) higher than the first quarter of 2016, related to higher occupancy expense. Non-interest expense was $1.7 million (10.5%) higher than the second quarter of 2015, related to higher occupancy, marketing, and data processing expense. The increase in occupancy expense reflects the accounting expense for the new headquarters lease. The increase above the $17.5 million forecast resulted primarily from the aforementioned occupancy expense.

The ratio of non-interest expense to average assets was 1.31% during the second quarter of 2016, compared to 1.38% during the first quarter of 2016 and 1.44% during the second quarter of 2015, reflecting period-over-period average asset growth of 26.2% (annualized) and 20.9%, respectively. The efficiency ratio was 47.8% during the second quarter of 2016, compared to 49.5% during the first quarter of 2016 and 47.1% during the second quarter of 2015. The efficiency ratio improvement on a linked quarter basis was due to stronger net interest income and higher non-interest income while non-interest expense was relatively flat.

Income Tax Expense

The effective income tax rate approximated 42.2% during the second quarter of 2016, the same rate as the first quarter of 2016.

Credit Quality

Non-performing loans were $4.3 million, or 0.08% of total loans, at June 30, 2016, up from $1.4 million at March 31, 2016, which is mainly due to the addition of one loan. Loans delinquent between 30 and 89 days were $535,000, or 0.01% of total loans, at June 30, 2016, down from $2.3 million at March 31, 2016. The allowance for loan losses was 0.36% of total loans at June 30, 2016, consistent with the 0.37% at March 31, 2016. At June 30, 2016, non-performing assets represented 2.0% of the sum of tangible capital plus the allowance for loan losses (this statistic is otherwise known as the "Texas Ratio") (see table at the end of this news release). A loan loss provision of $442,000 was recorded during the second quarter of 2016, compared to a loan loss credit of $21,000 during the first quarter of 2016, primarily due to growth in the loan portfolio.

Capital Management

The Company's consolidated Tier 1 capital to average assets ("leverage ratio") was 10.47% at June 30, 2016, in excess of Basel III requirements.

The bank's regulatory capital ratios continued to be in excess of Basel III requirements as well, inclusive of conservation buffer amounts. At June 30, 2016, the bank's leverage ratio was 9.13%, while Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 11.82% and 12.27%, respectively.

Reported diluted earnings per share exceeded the quarterly cash dividend per share by 114.3% during the second quarter of 2016, equating to a 46.7% payout ratio. Tangible book value per share was $13.35 at June 30, 2016, a 15.0% increase from $11.61 at June 30, 2015.

Outlook for the Quarter Ending September 30, 2016

At June 30, 2016, the bank had outstanding loan commitments totaling $280.2 million, at an average interest rate approximating 3.42%, all of which are likely to close during the quarter ending September 30, 2016. Loan prepayments and amortization are expected to fall within the projected annualized range of 15% - 20% during the September 2016 quarter.

The Company has a balance sheet growth objective of 15% - 18% for the year ending December 31, 2016, with a preference toward utilizing retail deposits for most of its funding needs.

Deposit and borrowing funding costs are expected to remain near current historically low levels through the September 2016 quarter. At June 30, 2016, the bank had $80.7 million of CDs at an average rate of 0.86%, and $315.0 million of borrowings, at an average rate of 0.96%, scheduled to mature during the September 2016 quarter. No significant increase or reduction in funding costs is anticipated from the rollover or re-positioning of these funds.

The bank recorded a loan loss provision during the just completed quarter of $442,000, mainly due to loan portfolio growth. During the remainder of 2016, quarterly loan loss provisions are expected to continue to be mainly a function of loan growth.

Non‐interest expense is expected to approximate $18 million during the September 2016 quarter.

The Company projects that the consolidated effective tax rate will approximate 42.0% in the September 2016 quarter.

ABOUT DIME COMMUNITY BANCSHARES, INC.

Dime Community Bancshares, Inc. ( NASDAQ : DCOM ) (the "Company) had $5.56 billion in consolidated assets as of June 30, 2016, and is the parent company of The Dime Savings Bank of Williamsburgh (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 the bank can be found on Dime's 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.