Fitch Affirms Dime Community's Ratings; Outlook Negative

Business Wire, Feb 1, 2008

NEW YORK -- Fitch Ratings has affirmed Dime Community Bancshares, Inc.'s (DCOM) Long-term and Short-term Issuer Default Ratings (IDR) at 'BBB' and 'F2' respectively. The Outlook remains Negative.

DCOM's ratings are as follows:

-- Long-Term IDR at 'BBB';

-- Short-Term IDR at 'F2';

-- Individual Rating at 'B/C';

-- Subordinated Debt at 'BBB-';

-- Support at '5';

-- Support Floor at 'NF'.

The maintenance of the Negative Outlook reflects the continued profitability pressure DCOM exhibited in 2007. Further, capital continues to decline, driven by payout of earnings through common stock dividends and stock repurchases. In order to resolve the Negative Outlook, Fitch expects a reversal of the negative trend and a more conservative approach to capital maintenance. While tangible capital compares favorably to peers, a significant downturn in asset quality could adversely affect the loan loss reserve, earnings and capital. Continued negative profitability trends and declining capital ratios may result in a ratings downgrade.

DCOM's affirmed ratings reflect strong asset quality, sufficient capital, and a reasonable level of loan loss reserves. Asset quality remains a bright spot for DCOM, especially in the current operating environment. Since management views the current strong state of asset quality as unsustainable, it took proactive steps to mitigate loan delinquencies by enhancing collections personnel and monitoring systems. The proactive steps helped to keep the occurrence of foreclosures and losses at negligible levels in 2007. Fitch views these proactive steps positively and the likelihood of dramatic deterioration of asset quality as modest. Further, Fitch believes the reserve coverage ratios should be adequate to compensate for a moderate increase in problem loans and charge-offs. Nevertheless, compared to peers, DCOM's earnings performance and reserve levels are unfavorable, leaving DCOM more susceptible to earnings pressure in a stressed asset quality scenario.

As management anticipated, earnings pressure continued in 2007 due to contraction of revenue and higher expenses. In order to minimize net interest margin (NIM) compression in 2007, management would have had to contract the balance sheet, running contrary to its strategic intentions. Looking ahead to 2008, Fitch expects some modest strengthening of the NIM. This is due in part to changes in the origination environment in late-2007 and early-2008. Margins have improved due to reduced competition from conduits and a repricing of risk. Aided by improved margins and a significant portion of fixed-rate loan portfolio repricing to these higher margins in 2008 and 2009, management believes NIM compression hit a trough in the first half of 2007.

The following related entities are affected by the rating action, and are also affirmed, with a Negative Outlook:

Dime Savings Bank of Williamsburgh

--Long-term IDR at 'BBB';

--Long-term deposits at 'BBB ';

--Short-Term IDR at 'F2';

--Short-Term Deposits at 'F2';

--Individual Rating at 'B/C';

--Support at '5';

--Support Floor at 'NF'.

Dime Community Capital Trust I

--Preferred stock affirmed at 'BBB-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.