Dime Community Bancshares Reports Earnings for Fourth Quarter and Fiscal Year Ended December 31, 2008

Interest expense declined by $298,000 during the December 2008 quarter compared to the December 2007 quarter, despite an increase of $511.8 million in the average balance of interest bearing liabilities, as the average cost of interest bearing liabilities declined from 4.02% in the December 2007 quarter to 3.38% in the December 2008 quarter, due to a 90 basis point decrease in the average cost of interest bearing deposits and a 47 basis point decline in the average cost of borrowings during the comparative period.

For the quarter ended December 31, 2008, non-interest income was $5.3 million below the quarter ended December 31, 2007. The decline resulted primarily from the $3.2 million impairment charge on securities and a decrease of $2.2 million in mortgage banking income, primarily reflecting a provision of $1.9 million to the book reserve for losses on loans sold to Fannie Mae with recourse.

Finally for the quarter ended December 31, 2008, non-interest expense was $1.2 million higher than the same quarter last year. Salary and benefit expense was the largest component of the variance, and included both ongoing salary increases and an increase of $251,000 related to stock benefit expenses associated with equity awards granted in July 2008 along with higher ESOP expense resulting from an increase in the Company's stock price. Deposit insurance costs increased $234,000 during the comparative period, due to a re-capitalization program instituted by the FDIC in 2006 that resulted in increased insurance premiums for all insured institutions. Under this program, the Bank's insurance costs increased commencing in the June 2008 quarter.

REAL ESTATE LENDING, LOAN SALES AND CREDIT QUALITY

Real estate loan originations totaled $230.0 million during the quarter ended December 31, 2008. The average rate on real estate loan originations during the quarter was 6.09%, compared to 6.10% during the quarter ended December 31, 2007 and 5.86% during the quarter ended September 30, 2008.

Real estate loan amortization during the December 2008 quarter approximated 16% of the real estate loan portfolio on an annualized basis, compared to 15% during the December 2007 quarter and 21% during the September 2008 quarter. This was consistent with management's forecast of prepayment speeds disclosed at the commencement of the year.

Loan sales were negligible during the quarter ended December 31, 2008. The Company sold $126.1 million of loans, for a gain of $802,000, during the September 2008 quarter. Loan sales were $30.4 million for a gain of $204,000 during the December 2007 quarter. Gains on loan sales are included in the mortgage banking income line item in the consolidated statements of operations. The Bank's contract for sale of new loans to Fannie Mae expired on December 31, 2008, its stated termination date.

Non-performing assets were $7.7 million at December 31, 2008, up from $6.4 million at September 30, 2008. One non-performing loan was transferred to other real estate owned during the December 2008 quarter. A charge-off of $340,000 was recognized to the allowance for loan losses on this loan at the point of transfer to other real estate owned. Within the Bank's owned portfolio, non-performing assets (non-performing loans plus other real estate owned) represented only 0.19% of total assets at December 31, 2008. Excluding the property transferred to other real estate owned, net charge-offs were negligible during the most recent quarter.