Profile: Dime Community Bancshares, Inc. (DCOM.O)

Dime Community Bancshares, Inc. is the parent company of The Dime Savings Bank of Williamsburgh (the Bank), a federally chartered stock savings bank. The Bank maintains its headquarters in the Williamsburg section of the borough of Brooklyn, New York and operates 23 full-service retail banking offices located in the New York City boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County, New York. The Bank’s principal business is gathering deposits from customers within its market area, and investing them primarily in multifamily residential mortgage loans, commercial real estate loans, one- to four-family residential mortgage loans, construction loans, consumer loans, mortgage-backed securities (MBS), obligations of the United States Government and government-sponsored entities, and corporate debt and equity securities. The Bank’s primary sources of funds are deposits; loan amortization, prepayments and maturities; MBS amortization, prepayments and maturities; investment securities maturities and sales; advances from the Federal Home Loan Bank of New York (FHLBNY); securities sold under agreement to repurchase (REPOS), and the sale of real estate loans to the secondary market.

Lending Activities

As of December 31, 2008, the Bank’s loan portfolio totaled $3.29 billion, consisting primarily of mortgage loans secured by multifamily residential apartment buildings, including buildings organized under a cooperative form of ownership (Underlying Cooperatives); commercial properties; real estate construction and land acquisition; and one- to four-family residences and cooperative apartments. Within the loan portfolio, $2.24 billion, or 68.2%, were classified as multifamily residential loans; $848.2 million, or 25.8%, were classified as commercial real estate loans; $130.7 million, or 4.0%, were classified as one- to four-family residential, including condominium or cooperative apartments; $742,000, or 0.02%, were loans to finance multifamily residential and one- to four-family residential properties with full or partial credit guarantees provided by either the Federal Housing Administration (FHA) or the Veterans Administration (VA), and $53.0 million, or 1.6%, were loans to finance real estate construction and land acquisition within the New York City metropolitan area. Of the total mortgage loan portfolio outstanding on December 31, 2008, $2.77 billion, or 84.3%, were adjustable-rate loans (ARMs) and $514.8 million, or 15.7%, were fixed-rate loans. Of the Bank’s multifamily residential and commercial real estate loans, over 80% were ARMs as of December 31, 2008. As of December 31, 2008, the Bank’s loan portfolio additionally included $2.2 million in consumer loans, composed of passbook loans, consumer installment loans, overdraft loans and mortgagor advances.

During the year ended December 31, 2008, total loan originations were $1.09 billion. The Bank originates both ARMs and fixed-rate loans, depending upon customer demand and market rates of interest. ARMs were approximately 96% of total loan originations during the period. The majority of both ARM and fixed-rate originations were multifamily residential and commercial real estate loans. Multifamily residential real estate loans are either retained in the Bank’s portfolio or sold in the secondary market to Federal National Mortgage Association (FNMA) and occasionally to other third-party financial institutions. One- to four-family adjustable rate and fixed-rate mortgage loans with maturities up to 15 years are retained for the Bank’s portfolio. The Bank sells its newly originated one- to four-family fixed-rate mortgage loans with maturities greater than 15 years in the secondary market.

The Bank’s lending activities consist of originating adjustable-rate and fixed-rate multifamily residential (buildings possessing a minimum of five residential units) and commercial real estate loans. As of December 31, 2008, $2.24 billion, or 68.2% of the Bank’s gross loan portfolio, were multifamily residential loans. Of the multifamily residential loans, $2.13 billion, or 95.2%, were secured by apartment buildings and $107.4 million, or 4.8%, were secured by Underlying Cooperatives. The Bank also had $848.2 million of commercial real estate loans in its portfolio as of December 31, 2008, representing 25.8% of its total loan portfolio. The Bank originated multifamily residential and commercial real estate loans totaling $1.01 billion during 2008. As of December 31, 2008, multifamily residential and commercial real estate loans originated by the Bank were secured by three property types: fully residential apartment buildings, mixed-use properties featuring a combination of residential and commercial units within the same building and fully commercial buildings.

Investment Activities

The investment policy of the Bank permits investments in various types of liquid assets, including obligations of the United States Treasury and Federal agencies, investment-grade corporate debt, various types of MBS, commercial paper, certificates of deposit and overnight federal funds sold to financial institutions. The Company’s consolidated investment in MBS totaled $301.4 million, or 7.4% of total assets, as of December 31, 2008, the majority of which was owned by the Bank. As of December 31, 2008, included in the MBS portfolio were $93.2 million in Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage Investment Conduits (REMICs) owned by the Bank. All of the CMOs and REMICs were United States agency guaranteed obligations, with the exception of three CMOs that were issued by private financial institutions. Both the Company and the Bank invest in investment-grade debt obligations of various corporations.

Sources of Funds

The Bank’s primary sources of funding for its lending and investment activities include deposits, repayments of loans and MBS, investment security maturities and redemptions, FHLBNY advances and borrowing in the form of REPOS entered into with various financial institutions, including the FHLBNY. The Bank also sells selected multifamily residential and mixed use loans to either FNMA or third party financial institutions, and long-term, one- to four-family residential real estate loans directly to FNMA. The Bank offers a variety of deposit accounts possessing a range of interest rates and terms. The Bank, as of December 31, 2008, offered savings, money market, interest bearing and non-interest bearing checking accounts, and CDs. The Bank had FHLBNY advances totaling $1.02 billion during 2008. REPOS totaled $230 million as of December 31, 2008. REPOS involve the delivery of securities to broker-dealers as collateral for borrowing transactions.