Dime Community Bancshares, Inc. Reports Solid Quarterly

BROOKLYN, NY --(Marketwired - October 27, 2016) - Dime Community Bancshares, Inc. ( NASDAQ : DCOM ) today reported net income of $10.5 million for the third quarter of 2016, or $0.29 per diluted common share, compared with $11.2 million, or $0.30 per diluted common share, in the second quarter of 2016.

Highlights for the third quarter of 2016 included:

• Real estate loans grew 21.6% (annualized) on a linked quarter basis and 22.2% over the third quarter of 2015;
• Deposits grew 40.1% (annualized) on a linked quarter basis and 37.3% over the third quarter of 2015;
• Loan-to-deposit ratio declined to 132.0% in the third quarter of 2016 from 137.8% in the second quarter of 2016;
• The bank's excellent credit quality on its $5.4 billion commercial real estate ("CRE") portfolio continues, with nonperforming loans to total loans of seven (7) basis points;
• Quarterly loan loss provisioning of $1.2 million based solely on growth of our New York City-based CRE loan portfolio; and
• Consistent operational excellence, with the efficiency ratio of 48.8%, compared to 47.8% in the second quarter of 2016 and 47.6% in the third quarter of 2015.

Vincent F. Palagiano, Chairman and Chief Executive Officer of the Company, commented, "The high rate of growth this quarter is gratifying, especially funded by the strong growth in deposits. We were able to grow loans significantly as we continue to execute on our strategy and remain on track to meet our balance sheet growth objective for 2016. This quarter, given the strong deposit growth, we were able to lower our loan-to-deposit ratio to 132%, the lowest level in nine years."

According to President and Chief Operating Officer Kenneth J. Mahon, "I'm pleased that we were able to maintain our focus on our two competitive advantages of low operating costs and low credit costs during a quarter of exceptionally strong growth. We maintained strong underwriting standards while growing loan balances, continued to build deeper relationships with our customers, and prudently managed our expense base. We remain focused on expense discipline, which is evidenced by our ability to lower the ratio of non-interest expense to average assets, a key measure of operating efficiency."

Management's Discussion of Quarterly Operating Results

Net Interest Income

Net interest income in the third quarter of 2016 was $35.3 million, a decrease of $263,000 (0.7%) from the second quarter of 2016 and an increase of $3.5 million (11.1%) over the third quarter of 2015. Net Interest Margin ("NIM") was 2.59% during the third quarter of 2016, compared to 2.68% in the second quarter of 2016 and 2.84% in the third quarter of 2015. NIM was negatively impacted in the third quarter of 2016 primarily by lower yields on loan originations compared to portfolio loans that amortized or refinanced. NIM was also negatively impacted due to lower income recognized from loan prepayment activity. For the third quarter of 2016, income from prepayment activity totaled $1.7 million, benefiting NIM by 12 basis points, compared to $2.0 million, or 15 basis points, during the second quarter of 2016 and $2.1 million, or 19 basis points, during the third quarter of 2015.

Average earning assets were $5.45 billion for the third quarter of 2016, a 10.9% (annualized) increase from $5.31 billion for the second quarter of 2016 and a 21.8% increase from $4.48 billion for the third quarter of 2015.

For the third quarter of 2016, the average yield on interest earning assets (excluding prepayment income) was 3.47%, three basis points lower than the 3.50% for second quarter 2016 and 17 basis points lower than the 3.64% for third quarter 2015, while the average cost of funds was 1.15%, one basis point higher than the 1.14% for both second quarter 2016 and third quarter 2015. For the year ending December 31, 2017, $414.7 million of real estate loans with an average coupon of 3.60% are expected to reprice or mature.

Real Estate Loans

Real estate loan portfolio growth was $281.7 million (21.6% annualized) during the third quarter of 2016. Real estate loan originations were $445.5 million during the quarter, at a weighted average interest rate of 3.25%. Of this amount, $62.4 million represented loan refinances from the existing portfolio. Loan amortization and satisfactions totaled $169.1 million, or 12.7% (annualized) of the quarterly average portfolio balance, at an average rate of 3.94%. The annualized loan amortization and satisfaction rate of 12.7% for third quarter 2016 was lower than both second quarter 2016 (16.1%) and third quarter 2015 (17.8%). The average yield on the loan portfolio (excluding income recognized from prepayment activity) was 3.48% during the third quarter of 2016, compared to 3.53% during the second quarter of 2016, and 3.66% during the third quarter of 2015. Average real estate loans were $5.33 billion in the third quarter of 2016, an increase of $190.7 million (14.8% annualized) from the second quarter of 2016 and an increase of $959.9 million (22.0%) from the third quarter of 2015.

Deposits and Borrowed Funds

Deposit growth was $379.0 million (40.1% annualized) during the third quarter of 2016. Given the strong growth in deposits, the loan-to-deposit ratio fell to 132.0% at September 30, 2016, from 137.8% at June 30, 2016 and 148.3% at September 30, 2015. Core deposits increased to $3.09 billion during the third quarter of 2016, from $2.75 billion during the second quarter of 2016 and $2.14 billion during the third quarter of 2015. The average cost of deposits increased one basis point on a linked quarter basis to 0.86%.

Total borrowings decreased $135.0 million during the third quarter of 2016 as compared to the second quarter of 2016. The reduction in borrowings was due to deposit growth outpacing loan growth, and reflected 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 $2.1 million during the third quarter of 2016, which was $234,000 (10.2%) lower than the second quarter of 2016, given the additional income recognized from mortality proceeds from Bank Owned Life Insurance assets in the second quarter of 2016, which offset strong mortgage servicing fee income during the third quarter of 2016. Non-interest income was $172,000 (9.1%) higher than the third quarter of 2015, which reflects the $138,000 of market valuation adjustments on trading securities held in trust for retirement benefits.

Non-Interest Expense

Non-interest expense was $18.2 million during the third quarter of 2016, which was $140,000 (0.8%) higher than the second quarter of 2016, mostly related to higher occupancy expense. Non-interest expense was $2.1 million (13.1%) higher than the third quarter of 2015, related to higher occupancy, data processing, and marketing expense.

The ratio of non-interest expense to average assets, a key measure of operating efficiency, was 1.29% during the third quarter of 2016, compared to 1.31% during the second quarter of 2016 and 1.37% during the third quarter of 2015, reflecting period-over-period average asset growth of 10.4% (annualized) and 20.5%, respectively, which outpaced non-interest expense growth. The efficiency ratio was 48.8% during the third quarter of 2016, compared to 47.8% during the second quarter of 2016 and 47.6% during the third quarter of 2015.

Income Tax Expense

The effective income tax rate approximated 41.5% during the third quarter of 2016, relatively in-line with the 42.2% recorded in the second quarter of 2016.

Credit Quality

Non-performing loans were $3.9 million, or 0.07% of total loans, at September 30, 2016, down from $4.3 million at June 30, 2016, or 0.08% of total loans. The allowance for loan losses was 0.37% of total loans at September 30, 2016, consistent with the 0.36% at June 30, 2016. At September 30, 2016, non-performing assets represented 1.4% 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 $1.2 million was recorded during the third quarter of 2016, compared to a loan loss provision of $442,000 during the second quarter of 2016, primarily due to growth in the loan portfolio.

"Dime's superlative credit performance continues to reflect the low risk nature of the multifamily collateral securing its loans as well as the conservative nature of Dime's underwriting and origination practices," stated Kenneth J. Mahon. "Vacancies remain low, and even though many new market rate units are in the pipeline, employment is robust throughout the five boroughs with population increases for New York City expected over the coming decade. These underlying economic and demographic conditions, we believe, will provide continued demand for affordable multifamily housing finance and related deposit and other banking services."

Capital Management

The Company's consolidated Tier 1 capital to average assets ("leverage ratio") was 10.29% at September 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 September 30, 2016, the bank's leverage ratio was 9.04%, while Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 11.22% and 11.67%, respectively.

Reported diluted earnings per share exceeded the quarterly cash dividend per share by 107.1% during the third quarter of 2016, equating to a 48.3% payout ratio. Tangible book value per share was $13.52 at September 30, 2016, a 15.0% increase from $11.76 at September 30, 2015.

Outlook for the Quarter Ending December 31, 2016

At September 30, 2016, the bank had outstanding loan commitments totaling $201.5 million, at an average interest rate approximating 3.22%, all of which are likely to close during the quarter ending December 31, 2016. Loan prepayments and amortization are expected to fall within the projected annualized range of 15% - 20% during the December 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. It now appears that asset growth will approach 20% for the year, with a lower loan-to-deposit ratio than a year ago.

Deposit and borrowing funding costs are expected to remain near current historically low levels through the December 2016 quarter. At September 30, 2016, the bank had $93.1 million of Certificate of Deposits at an average rate of 0.82%, and $161.0 million of borrowings, at an average rate of 0.67%, scheduled to mature during the December 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 $1.2 million, mainly due to loan portfolio growth. During the December 2016 quarter, loan loss provisions are expected to continue mainly as a function of loan growth.

Non‐interest expense is expected to approximate $18.5 million during the December 2016 quarter.

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

ABOUT DIME COMMUNITY BANCSHARES, INC.

Dime Community Bancshares, Inc. ( NASDAQ : DCOM ) (the "Company) had $5.82 billion in consolidated assets as of September 30, 2016, and is the parent company of Dime Community Bank (the "bank" or "Dime"). 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.