UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-Q
 
 [x]   QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For
the quarterly period ended March 31, 2009
 OR
 
 [
]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period
from                 to
 
 Commission
file number 0-27782
 
 Dime
Community Bancshares, Inc.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                  (State
      or other jurisdiction of incorporation or organization)
                
                11-3297463
                  (I.R.S.
      employer identification number)209
      Havemeyer Street, Brooklyn, NY
                  (Address of principal
      executive offices)
                
                11211
                  (Zip
      Code)
 
 (718)
782-6200
 (Registrant's
telephone number, including area code)
 
 Indicate
by check mark whether the registrant (1) has filed all the reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 YES           
X           NO
___
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
 
 LARGE
      ACCELERATED FILER ___
                ACCELERATED
      FILER X
                NON
      -ACCELERATED FILER  ___
                SMALLER
      REPORTING COMPANY ___
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 YES                                  NO           X
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
 
 Classes of Common Stock
                
                Number of Shares Outstanding at May 7,
      2008$.01
      Par Value
                
                34,387,097
 
  
  
 PagePART
      I - FINANCIAL INFORMATIONItem
      1.
                  Unaudited
      Condensed Financial StatementsConsolidated
      Statements of Financial Condition at March 31, 2009 and December 31,
      2008
                  3Consolidated
      Statements of Operations for the Three-Months Ended March 31, 2009 and
      2008
                  4Consolidated Statements of Changes in Stockholders' Equity for the Three
      Months Ended March 31, 2009 and 2008 and Consolidated
                    Statements of Comprehensive Income for the Three-MonthsEnded
      March 31, 2009 and 2008
                  5Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      2008
                  6Notes
      to Consolidated Financial Statements
                  7-19Item
      2.
                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  19-36Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  36-37Item
      4.
                  Controls
      and Procedures
                  38PART
      II - OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  38Item
      1A.
                  Risk
      Factors
                  38-42Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  42Item
      3.
                  Defaults
      Upon Senior Securities
                  42Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  42Item
      5.
                  Other
      Information
                  42Item
      6.
                  Exhibits
                  43-44Signatures
                  45
 
 Certain
statements contained in this quarterly report on Form 10-Q that are not
statements of historical fact constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”),
notwithstanding that such statements are not specifically identified as
such.  In addition, certain statements may be contained in future
filings with the U.S. Securities and Exchange Commission ("SEC"), in press
releases, and in oral and written statements made by management or with their
approval that are not statements of historical fact and constitute
forward-looking statements within the meaning of the Act.  Examples of
forward-looking statements include, but are not limited to: (i) projections of
revenues, expenses, income or loss, earnings or loss per share, the payment or
nonpayment of dividends, capital structure and other financial items; (ii)
statements of plans, objectives and expectations of Dime Community Bancshares,
Inc. and its subsidiaries (the "Company") or those of its management or board of
directors, including those relating to products or services; (iii) statements of
future economic performance; and (iv) statements of assumptions underlying such
statements.  Forward-looking statements include information concerning
possible or assumed future results of operations and statements preceded by,
followed by or that include the words “believes,” “expects,” “feels,”
“anticipates,” “intends,” “plans,” “estimates,” “predicts,” “projects,”
“potential,” “outlook,” “could,” “will,” “may” or similar
expressions.
  Forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions.  Actual results may differ materially
from those expressed in or implied by these forward-looking
statements.  Factors that could cause actual results to differ from
these forward-looking statements include, but are not limited to, the following,
as well as those discussed elsewhere in this report and the documents
incorporated by reference herein:
  ·
                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 The Dime Savings Bank of Williamsburgh
      (the"Bank");·
                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 business or financial condition;·
                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 banking industry, may be less favorable than currently
      anticipated;·
                legislation
      or regulatory changes may adversely affect the Company's
      business;·
                technological
      changes may be more difficult or expensive than what the Company
      anticipates;·
                success
      or consummation of new business initiatives may be more difficult or
      expensive than what the Company anticipates;·
                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 what the Company anticipates; and·
                the
      risks referred to in the section entitled "Risk
  Factors."
 
 Undue
reliance should not be placed on any forward-looking
statements.  Forward-looking statements speak only as of the date they
are made, and the Company undertakes no obligation to update them in light of
new information or future events except to the extent required by Federal
securities laws.
 
  2
  Item
1.  Condensed Financial Statements
 
 DIME
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
 (Dollars
in thousands except share amounts)
 
 March
      31, 2009
                    (Unaudited)
                  December
      31, 2008ASSETS:Cash
      and due from banks
                  $199,318
                  $211,020Federal
      funds sold and other short-term investments
                  20,230
                  -Investment
      securities held-to-maturity (estimated fair value of $6,754 and $9,082 at
      March 31, 2009 andDecember
      31, 2008, respectively) (Fully Unencumbered)
                  9,406
                  10,861Investment
      securities available-for-sale, at fair value (fully
      unencumbered)
                  5,966
                  16,602Mortgage-backed
      securities available-for-sale, at fair value:Encumbered
                  244,978
                  251,744Unencumbered
                  42,357
                  49,607287,335
                  301,351Loans:Real
      estate, net
                  3,196,030
                  3,289,314Other
      loans
                  1,942
                  2,191Less
      allowance for loan losses
                  (18,351)
                  (17,454)Total
      loans, net
                  3,179,621
                  3,274,051Loans
      held for sale
                  100,377
                  -Premises
      and fixed assets, net
                  30,144
                  30,426Federal
      Home Loan Bank of New York capital stock
                  50,735
                  53,435Other
      real estate owned ("OREO")
                  300
                  300Goodwill
                  55,638
                  55,638Other
      assets
                  101,688
                  101,914Total
      Assets
                  $4,040,758
                  $4,055,598LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilities:Due
      to depositors:Interest
      bearing deposits
                  $2,243,572
                  $2,169,341Non-interest
      bearing deposits
                  91,952
                  90,710Total
      deposits
                  2,335,524
                  2,260,051Escrow
      and other deposits
                  96,423
                  130,121Securities
      sold under agreements to repurchase
                  230,000
                  230,000Federal
      Home Loan Bank of New York advances
                  959,675
                  1,019,675Subordinated
      notes payable
                  25,000
                  25,000Trust
      Preferred securities payable
                  72,165
                  72,165Other
      liabilities
                  42,249
                  41,622Total
      Liabilities
                  3,761,036
                  3,778,634Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding
      atMarch
      31, 2009 and December 31, 2008)
                  -
                  -Common
      stock ($0.01 par, 125,000,000 shares authorized, 51,122,319 shares and
      51,122,319shares
      issued at March 31, 2009 and
                    December 31, 2008, respectively, and 34,179,900 shares and34,179,900
      shares outstanding at March 31, 2009 and December 31, 2008,
                    respectively)
                  511
                  511Additional
      paid-in capital
                  214,357
                  213,917Retained
      earnings
                  297,350
                  297,848Accumulated
      other comprehensive loss, net of deferred taxes
                  (8,584)
                  (11,111)Unallocated
      common stock of Employee Stock Ownership Plan ("ESOP")
                  (3,875)
                  (3,933)Unearned
      Restricted Stock Award common stock
                  (1,559)
                  (1,790)Common
      stock held by Benefit Maintenance Plan ("BMP")
                  (8,007)
                  (8,007)Treasury
      stock, at cost (16,942,419 shares and 16,942,419 shares at
                    March
      31, 2009 and December 31, 2008, respectively)
                  (210,471)
                  (210,471)Total
      Stockholders' Equity
                  279,722
                  276,964Total
      Liabilities And Stockholders' Equity
                  $4,040,758
                  $4,055,598
 See notes
to condensed consolidated financial statements.
 
  3
  DIME
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars
in thousands except per share amounts)
 
 Three
      Months Ended March 31,2009
                2008Interest
      income:Loans
      secured by real estate
                $48,329
                $43,066Other
      loans
                37
                44Mortgage-backed
      securities
                3,280
                2,216Investment
      securities
                245
                708Federal
      funds sold and other short-term investments
                503
                2,196Total
      interest  income
                52,394
                48,230Interest
      expense:Deposits
      and escrow
                14,212
                17,968Borrowed
      funds
                14,042
                11,031Total
      interest expense
                28,254
                28,999Net
      interest income
                24,140
                19,231Provision
      for loan losses
                2,640
                60Net
      interest income after provision for loan losses
                21,500
                19,171Non-interest
      income:Total
      other than temporary impairment ("OTTI") losses
                (6,104)
                -Less:  Non-credit
      portion of OTTI recorded in other comprehensive income (before
      taxes)
                1,064
                -Net
      OTTI recognized in earnings
                (5,040)
                -Service
      charges and other fees
                858
                1,049Net
      mortgage banking (loss) income
                (1,169)
                286Net
      gain on sales of investment securities
                431
                -Income
      from bank owned life insurance
                493
                492Other
                381
                340Total
      non-interest (loss) income
                (4,046)
                2,167Non-interest
      expense:Salaries
      and employee benefits
                6,874
                6,401Stock
      benefit plan amortization expense
                927
                833Occupancy
      and equipment
                2,086
                1,570Federal
      deposit insurance premiums
                809
                65Data
      processing costs
                754
                778Other
                2,158
                2,633Total
      non-interest expense
                13,608
                12,280Income
      before income taxes
                3,846
                9,058Income
      tax expense
                996
                3,101Net
      income
                $2,850
                $5,957Earnings
      per Share:Basic
                $0.09
                $0.18Diluted
                $0.09
                $0.18
 
 See notes
to condensed consolidated financial statements.
  4
  
 DIME
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 UNAUDITED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 AND
COMPREHENSIVE INCOME
 (Dollars
in thousands)
 Three
      Months EndedMarch
      31,2009
                            2008STATEMENTS
      OF CHANGES IN STOCKHOLDERS' EQUITYCommon
      Stock (Par Value $0.01):Balance
      at beginning of period
                            $511
                            $509Balance
      at end of period
                            511
                            509Additional
      Paid-in Capital:Balance
      at beginning of period
                            213,917
                            208,369Stock
      options exercised
                            -
                            180Tax
      (expense) benefit of stock plans
                            (11)
                            16Amortization
      of excess fair value over cost – ESOP stock and stock options
      expense
                            451
                            471Balance
      at end of period
                            214,357
                            209,036Retained
      Earnings:Balance
      at beginning of period
                            297,848
                            288,112Net
      income for the period
                            2,850
                            5,957Cash
      dividends declared and paid
                            (4,603)
                            (4,546)Cumulative
      effect adjustment for the adoption of the transition requirements of
      Statement of Financial AccountingStandards
      ("SFAS") No. 158,
                              "Employers' Accounting for Defined Benefit Pension and Other
      PostretirementPlans
      - an amendment of FASB Statements No. 87, 88, 106, and
                              132(R)"
      ("SFAS 158")
                            -
                            (23)Cumulative
      effect adjustment for the adoption of Financial Accounting Standards Board
      ("FASB")  Staff Position
                              No.
      FAS 115-2 and FAS 124-2, "Recognition and Presentation of
      Other-Than-Temporary Impairments" ("FSP 115-2"),net
      of taxes
                            1,255
                            -Balance
      at end of period
                            297,350
                            289,500Accumulated
      Other Comprehensive Loss, net of tax:Balance
      at beginning of period
                            (11,111)
                            (4,278)Cumulative
      effect adjustment for the adoption of FSP 115-2, net of
tax
                            (1,255)
                            (64)Amortization
      and reversal of net unrealized loss on securities transferred from
      available-for- sale to held-to-maturity, net of tax
                            891
                            -Non-credit
      component of OTTI charge recognized during the period, net of
      tax
                            (583)
                            -Change
      in other comprehensive (loss) income during the period, net of
      tax
                            3,474
                            (343)Balance
      at end of period
                            (8,584)
                            (4,685)ESOP:Balance
      at beginning of period
                            (3,933)
                            (4,164)Amortization
      of earned portion of ESOP stock
                            58
                            58Balance
      at end of period
                            (3,875)
                            (4,106)Unearned
      Restricted Stock Award Common StockBalance
      at beginning of period
                            (1,790)
                            (634)Amortization
      of earned portion of restricted stock awards
                            231
                            107Balance
      at end of period
                            (1,559)
                            (527)Treasury
      Stock, at costBalance
      at beginning of period
                            (210,471)
                            (211,121)Purchase
      of treasury shares, at cost
                            -
                            (654)Balance
      at end of period
                            (210,471)
                            (211,775)Common
      Stock Held by BMPBalance
      at beginning and end of period
                            (8,007)
                            (7,941)Total
      Stockholders' Equity
                            279,722
                            270,011STATEMENTS
      OF COMPREHENSIVE INCOMENet
      Income
                            $2,850
                            $5,957Amortization
      and reversal of net unrealized loss on securities transferred from
      available-for- sale toheld-to-maturity,
      net of taxes
                              of $734 during the three months ended March 31, 2009
                            891
                            -Non-credit
      component of OTTI charge recognized during the period, net of tax benefit
      of $(479) during the three monthsended
      March 31, 2009
                            (583)
                            -Reclassification
      adjustment for securities sold during the period, net of taxes of $195
      during the threemonths
      ended March 31, 2009
                            (236)
                            -Net
      unrealized securities gains(losses) arising during the period, net of
      taxes (benefit) of $3,054 and $(292)during
      the three months ended
                              March 31, 2009 and 2008, respectively
                            3,710
                            (343)Comprehensive
      Income
                            $6,632
                            $5,614
 See notes
to condensed consolidated financial statements.
  5
  DIME
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars
In thousands)
 
 Three Months Ended March 31,2009
                2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income
                $2,850
                $5,957Adjustments
      to reconcile net income to net cash provided by  operating
      activities:Net
      gain on sale of loans originated for sale
                (1)
                (87)Net
      gain on sale of investment securities available-for-sale
                (431)
                -Net
      depreciation and amortization
                670
                189ESOP
      compensation expense
                200
                290Stock
      plan compensation (excluding ESOP)
                540
                346Provision
      for loan losses
                2,640
                60Provision
      to increase the liability for loans sold with recourse
                1,424
                -Recovery
      of write down of mortgage servicing asset
                (60)
                -OTTI
      charge for investment securities recognized in earnings
                5,040
                -Increase
      in cash surrender value of Bank Owned Life Insurance
                (493)
                (492)Deferred
      income tax credit
                (2,804)
                (222)Excess
      tax cost (benefit) of stock plans
                11
                (16)Changes
      in assets and liabilities:Origination
      of loans held for sale
                (8,106)
                (7,574)Proceeds
      from sale of loans held for sale
                7,730
                7,004Decrease
      (Increase) in other assets
                291
                (234)(Decrease)
      Increase in other liabilities
                (737)
                7,106Net
      cash provided by operating activities
                8,764
                12,327CASH
      FLOWS FROM INVESTING ACTIVITIES:Net
      (increase) decrease in federal funds sold and other short term
      investments
                (20,230)
                36,512Proceeds
      from principal repayments of investment securities
      held-to-maturity
                49
                -Proceeds
      from maturities of investment securities
available-for-sale
                -
                1,000Proceeds
      from calls and principal repayments of investment securities
      available-for-sale
                -
                508Proceeds
      from sales of investment securities available-for-sale
                10,359
                -Purchases
      of investment securities available-for-sale
                -
                (4,428)Principal
      collected on mortgage backed securities available-for-sale
                17,946
                9,845Purchases
      of mortgage backed securities available-for-sale
                -
                (100,854)Net
      increase in loans
                (8,210)
                (57,093)Purchases
      of fixed assets, net
                (241)
                (1,361)Redemption
      (Purchase) of FHLBNY capital stock
                2,700
                (450)Net
      cash provided by (used in) investing activities
                2,373
                (116,321)CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      increase in due to depositors
                75,473
                13,638Net
      (decrease) increase in escrow and other deposits
                (33,698)
                32,064Increase
      in securities sold under agreements to repurchase
                -
                75,000(Decrease)
      Increase in FHLBNY advances
                (60,000)
                10,000Cash
      dividends paid
                (4,603)
                (4,546)Exercise
      of stock options
                -
                180Excess
      tax (cost) benefit of stock plans
                (11)
                16Purchase
      of treasury stock
                -
                (654)Net
      cash (used in) provided by financing activities
                (22,839)
                125,698(DECREASE)
      INCREASE IN CASH AND DUE FROM BANKS
                (11,702)
                21,704CASH
      AND DUE FROM BANKS, BEGINNING OF PERIOD
                211,020
                101,708CASH
      AND DUE FROM BANKS, END OF PERIOD
                $199,318
                $123,412SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
                $691
                $3,439Cash
      paid for interest
                28,224
                28,259Portfolio
      loans transferred to held for sale
                $100,000
                -Amortization
      of unrealized loss on securities transferred from available-for-sale to
      held-to-maturity
                53
                -Reversal
      of unrealized loss on securities transferred from available-for-sale to
      held-to-maturity
                1,572
                -Increase
      (Decrease) in accumulated other comprehensive loss
                (3,710)
                343
 
 See notes
to condensed consolidated financial statements.
  6
  
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 
 1.   NATURE
OF OPERATIONS
 
 Dime Community Bancshares, Inc. (the
"Holding Company") is a Delaware corporation and parent company of The Dime
Savings Bank of Williamsburgh (the "Bank"), a federally-chartered stock savings
bank.  The Holding Company's direct subsidiaries are the Bank, Dime
Community Capital Trust 1 and 842 Manhattan Avenue Corp.  The Bank's
direct subsidiaries are Boulevard Funding Corp., Havemeyer Investments, Inc.,
DSBW Preferred Funding Corporation, DSBW Residential Preferred Funding Corp.,
Dime Reinvestment Corp. and 195 Havemeyer Corp.
 
 The Bank
maintains its headquarters in the Williamsburg section of Brooklyn, New York and
operates twenty-three 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 has been, and continues to be,
gathering deposits from customers within its market area, and investing them
primarily in multifamily residential, commercial real estate, one- to
four-family residential, construction and land acquisition, and consumer loans,
as well as mortgage-backed securities (“MBS”), obligations of the U.S.
Government and Government Sponsored Entities ("GSEs"), and corporate debt and
equity securities.
 
 2.   SUMMARY
OF ACCOUNTING POLICIES
 
 In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial condition as of March 31, 2009, and
the results of operations and statements of comprehensive income, changes in
stockholders' equity and cash flows for the three-month periods ended March 31,
2009 and 2008.  The results of operations for the three-month periods
ended March 31, 2009 are not necessarily indicative of the results of operations
for the remainder of the year ending December 31, 2009.  Certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") have been omitted pursuant to the rules and
regulations of the SEC.
 
 The
preparation of the condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Areas in the accompanying
consolidated financial statements where estimates are significant include the
allowance for loans losses, valuation of mortgage servicing rights, asset
impairment adjustments related to the valuation of goodwill and OTTI of
securities, loan income recognition, the valuation of financial instruments,
recognition of deferred tax assets and unrecognized tax benefits and the
accounting for defined benefit plans sponsored by the Company.
 
 These unaudited condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements as of and for the year ended December 31, 2008 and notes
thereto.
 
 3.   RECENT
ACCOUNTING PRONOUNCEMENTS
 
 On April
9, 2009, the FASB issued FSP 115-2.  FSP 115-2 amended the guidance
provided under GAAP related to OTTI of debt securities in order to make it more
operational.  FSP 115-2 modifies the technical criteria related to
both the recovery of impairment and collectibility of cash flows that a
reporting entity may employ in order to avoid recognizing OTTI.  Under
FSP 115-2, OTTI that has been determined to exist on debt securities is required
to be divided between credit and non-credit components, with changes in the
credit component recognized in earnings, and changes in the non-credit component
recognized in other comprehensive income.  In determining the
credit-related amount of OTTI to be recognized, FSP 115-2 permits the reporting
entity to discount the expected cash flows at the effective interest rate
implicit in the security at the date of acquisition.  FSP 115-2 also
requires additional disclosures related to all securities owned by the reporting
entity.  The guidance provided by FSP 115-2 did not amend existing
recognition and measurement guidance related to OTTI of equity
securities.  FSP 115-2 is required to be applied to existing and new
investments held by the reporting entity at the beginning of the interim period
of adoption.  For debt securities held at the beginning of the interim
period of adoption for which OTTI was previously recognized, the entity
recognizes the cumulative effect of adopting FSP 115-2 as an adjustment to the
opening balance of retained earnings.  FSP 115-2 is effective for
interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted.   The Company elected to early adopt FSP
115-2 effective January 1, 2009, reclassifying $1.2 million from accumulated
other comprehensive loss to retained earnings as a cumulative effect adjustment,
representing the non-credit component of previously recognized
OTTI.
 
 7
 On April
9, 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, "Interim
Disclosures about Fair Value of Financial Instruments" ("FAS
107-1").  FAS 107-1 amends SFAS 107, "Disclosures about Fair Value of
Financial Instruments" ("SFAS 107"), to require that disclosures about fair
value of financial instruments mandated under SFAS 107 be made for all interim
periods.  FAS 107-1 also amended FASB Accounting Practice Board
Opinion No. 28, "Interim Financial Reporting" ("APB 28"), to require that the
disclosures mandated under APB 28 be made at each interim period.  FAS
107-1 is effective for interim periods ending after June 15, 2009, with early
adoption permitted.   The Company did not elect to early adopt
FAS 107-1.
 
 On April
9, 2009, the FASB issued Staff Position No. FAS 157-4, "Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FAS
157-4").  FAS 157-4 provides additional guidance for estimating fair
value when the volume and level of activity for the asset or liability have
significantly decreased, and provides guidance on identifying circumstances that
indicate a transaction is not orderly.  FAS 157-4 is effective for
interim and annual reporting periods ending after June 15, 2009, with earlier
adoption permitted.  If a reporting entity elects to early adopt
either FAS 115-2 or FAS 107-1, it must also early adopt FAS 157-4 in the same
interim period.  Since the Company elected to early adopt FAS 115-2,
it was required to early adopt FAS 157-4.  FAS 157-4 was applied to
the methodology utilized by the Company to determine the fair value of its
pooled trust preferred securities at March 31, 2009.
 
 On
January 12, 2009, the FASB issued Staff Position No. EITF 99-20-1, "Amendments
to the Impairment Guidance of EITF Issue No. 99-20"  ("FSP EITF
99-20-1").  FSP EITF 99-20-1 amends the impairment guidance in EITF
Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased
Beneficial Interests and Beneficial Interests That Continue to Be Held by a
Transferor in Securitized Financial Assets" ("EITF 99-20"), to achieve more
consistent determination of whether an OTTI has occurred.  GAAP
provides two different models for determining whether the impairment of a debt
security is other than temporary.  EITF 99-20 requires the use of
market participant assumptions about future cash flows. This cannot be overcome
by management judgment of the probability of collecting all cash flows
previously projected.  SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115") does not
require exclusive reliance on market participant assumptions about future cash
flows. Rather, SFAS 115 permits the use of reasonable management judgment of the
probability that the holder will be unable to collect all amounts
due.  FSP EITF 99-20-1 retains and emphasizes the objective of an OTTI
assessment and the related disclosure requirements in SFAS 115, and permits the
evaluation of impaired assets under the jurisdiction of EITF 99-20 to be
evaluated in accordance with the OTTI methodology of SFAS 115.  EITF
99-20-1 was effective immediately upon issuance.  Adoption of EITF
99-20-1 did not have a material impact on the Company’s consolidated financial
condition or results of operations.
 
 In
December 2008, the FASB issued Staff Position No. FAS 132(R)-1, "Employers'
Disclosures About Postretirement Benefit Plan Assets" ("FSP
132R-1").  FSP 132R-1 requires additional disclosure regarding
investment allocations, major categories, valuation techniques and
concentrations of risk related to plan assets held in an employer's defined
benefit pension or postretirement plan.  FSP 132R-1 further requires
disclosure of any effects of utilizing significant unobservable inputs [as
defined in SFAS 157, "Fair Value Measurements" ("SFAS 157")] upon the overall
change in the fair value of plan assets during the reporting
period.  FSP 132R-1 is effective for years ending after December 31,
2009.  The Company is currently evaluating the impact of
adoption.
 
 In June
2008, the FASB issued Staff Position No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities" ("FSP EITF 03-6-1"). Under FSP EITF 03-6-1, unvested share-based
payment awards which receive non-forfeitable dividend rights or dividend
equivalents are considered participating securities and are required to be
included in computing earnings per share ("EPS") under the two-class method
outlined in SFAS 128, "Earnings per Share."  FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning on or after
December 15, 2008.  Adoption of FSP EITF 03-6-1 did not have a
material impact upon the Company's consolidated results of operations, as all
potential participating securities were already included in the calculation of
the Company's periodic basic and diluted shares.
 
 In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities—an amendment of FASB Statement No. 133" ("SFAS
161").   SFAS 161 changes the disclosure requirements for
derivative instruments and hedging activities by requiring enhanced disclosures
about (i) the manner in which and reason that an entity uses derivative
instruments, with particular emphasis upon underlying risk, (ii) the manner in
which derivative instruments and related hedged items are accounted for under
SFAS 133, " Accounting for Derivative Instruments and Hedging Activities" and
its related interpretations, and (iii) (in tabular form) the manner in which
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows.  SFAS 161 further
requires enhanced disclosures of credit-risk-related contingent features of
derivative instruments.  This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial
adoption.  Adoption of SFAS 161 did not have a material impact upon
the Company's consolidated financial condition or results of
operations.
 
 In
February 2008, the FASB issued Staff Position No. FAS 140-3, "Accounting for
Transfers of Financial Assets and Repurchase Financing Transactions" ("FSP
140-3"), which provides guidance on accounting for a transfer of a financial
asset and repurchase financing. FSP 140-3 presumes that an initial transfer of a
financial asset and a repurchase financing
  8
 are
considered part of the same arrangement (linked transaction) under SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS 140"), however, if certain criteria are satisfied, the
initial transfer and repurchase financing shall not be evaluated as a linked
transaction and shall be evaluated separately under SFAS 140. Under FSP 140-3, a
transferor and transferee shall not separately account for a transfer of a
financial asset and a related repurchase financing unless: (i) the two
transactions have a valid and distinct business or economic purpose for being
entered into separately, and (ii) the repurchase financing does not result in
the initial transferor regaining control over the financial
asset.  FSP 140-3 is effective for financial statements issued for
fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years.  Adoption of FSP 140-3 did not have a material impact
upon the Company's consolidated financial condition or results of
operations.
 
 In December 2007, the FASB issued SFAS
No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"), which replaces
FASB Statement No. 141. SFAS 141R establishes principles and requirements
governing the manner in which  an acquirer of a business recognizes
and measures in its financial statements the identifiable assets acquired,
liabilities assumed, any non-controlling interest in the acquiree, and goodwill
acquired. SFAS 141R also establishes disclosure requirements intended to enable
users to evaluate the nature and financial effects of the business combination.
SFAS 141R is effective for business combinations occurring during a fiscal year
beginning after December 15, 2008.
 
 In December 2007, the FASB issued SFAS
No. 160, "Noncontrolling Interests in Consolidated Financial Statements— an
amendment of ARB No. 51" ("SFAS 160").  SFAS 160 requires that, for
purposes of accounting and reporting, minority interests be re-characterized as
non-controlling interests and classified as a component of
equity.  SFAS 160 also requires financial reporting disclosures that
clearly identify and distinguish between the interests of the parent and the
non-controlling owners. SFAS 160 applies to all entities that prepare
consolidated financial statements other than not-for-profit organizations,
however, will affect only those entities that have an outstanding
non-controlling interest in one or more subsidiaries or that deconsolidate a
subsidiary.  SFAS 160 is effective for fiscal years beginning after
December 15, 2008.  Adoption of SFAS 160 did not have a material
impact upon the Company's consolidated financial condition or results of
operations.
 
 4.   TREASURY
STOCK
 
 There was no activity related to
treasury stock during the three months ended March 31, 2009.
 
 5.   ACCOUNTING
FOR GOODWILL
 
 The
Company has designated the last day of its fiscal year as its date for annual
impairment testing.  The Company performed an impairment test as of
December 31, 2008 and concluded that no impairment of goodwill
existed.  However, subsequent to December 31, 2008, the price of the
Holding Company's common stock declined to such a level that its total market
capitalization has, on occasion, fallen below its consolidated stockholders'
equity.  As a result, the Company performed goodwill impairment tests
periodically during the three months ended March 31, 2009 and concluded, in each
instance, that no impairment of goodwill existed.  The latest of these
tests was performed as of March 31, 2009.  No events or circumstances
have changed subsequent to March 31, 2009 that would reduce the fair value of
the Company's reporting unit below its carrying value.  Such events or
changes in circumstances would require the immediate performance of an
impairment test in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets."
 
 6.   EARNINGS
PER SHARE
 
 EPS is calculated and reported in
accordance with SFAS No. 128, "Earnings Per Share.''  For entities
like the Company with complex capital structures, SFAS No. 128 requires
disclosure of basic EPS and diluted EPS on the face of the income statement,
along with a reconciliation of the numerators and denominators of basic and
diluted EPS.
 
 Basic EPS is computed by dividing net
income by the weighted-average number of common shares outstanding during the
period (weighted-average common shares are adjusted to exclude unvested
restricted stock award shares and unallocated ESOP shares).  Diluted
EPS is computed using the same method as basic EPS, however, the computation
reflects the potential dilution that would occur if unvested RRP shares or
restricted stock awards became vested and outstanding in-the-money stock options
were exercised and converted into common stock.
  9
  
 The following is a reconciliation of
the numerators and denominators of basic EPS and diluted EPS for the periods
presented:
 
 Three Months EndedMarch
      31,2009
                
                2008(Dollars
      in Thousands)Numerator:Net
      Income per the Consolidated Statements of Operations
                $2,850
                
                $5,957Denominator:Weighted-average
      number of shares outstanding utilized in the calculation of basic
      EPS
                32,883,077
                
                32,464,132Common
      stock equivalents resulting from the dilutive effect of "in-the-money"
      outstanding stock options
                5,242
                
                214,180Anti-dilutive
      effect of tax benefits associated with "in-the-money" outstanding stock
      options
                -
                
                (57,499)Weighted
      average number of shares outstanding utilized in the calculation of
      diluted EPS
                32,888,319
                
                32,620,813
 
 Common
stock equivalents resulting from the dilutive effect of "in-the-money"
outstanding stock options are calculated based upon the excess of the average
market value of the Company's common stock over the exercise price of
outstanding in-the-moneystock
options during the period.
 
 There
were 3,107,099 and 1,067,575 weighted-average stock options outstanding for the
three-month periods ended March 31, 2009 and 2008, respectively, that were not
considered in the calculation of diluted EPS since their exercise prices
exceeded the average market price during the period.
 
 7.    ACCOUNTING
FOR STOCK BASED COMPENSATION
 
 During the three-months ended March 31,
2009 and 2008, the Holding Company and Bank maintained the Dime Community
Bancshares, Inc. 1996 Stock Option Plan for Outside Directors, Officers and
Employees, the Dime Community Bancshares, Inc. 2001 Stock Option Plan for
Outside Directors, Officers and Employees and the 2004 Stock Incentive Plan
(collectively the "Stock Plans"), which are discussed more fully in Note 15 to
the Company's audited consolidated financial statements for the year ended
December 31, 2008, and which are subject to the accounting requirements of SFAS
No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R").
 
  10
  Stock
Option Awards
 
 Combined activity related to stock
options granted under the Stock Plans during the periods presented was as
follows:
 
 At
      or for the Three MonthsEnded
      March 31,2009
                2008(Dollars
      in Thousands Except Option Price Amounts)Options
      outstanding – beginning of period
                3,116,564
                3,165,997Options
      granted
                -
                34,425Weighted
      average exercise price of grants
                -
                $14.92Options
      exercised
                -
                13,863Weighted
      average exercise price of exercised options
                -
                $13.07Options
      forfeited
                -
                -Weighted
      average exercise price of forfeited options
                -
                -Options
      outstanding – end of period
                3,116,564
                3,186,559Weighted
      average exercise price of outstanding options at the end of
      period
                $14.97
                $14.64Remaining
      options available for grant
                1,133,027
                84,550Exercisable
      options at end of period
                2,261,198
                2,155,634Weighted
      average exercise price of exercisable options at the end of
      period
                $15.18
                $15.05Cash
      received for option exercise cost
                -
                $180Income
      tax benefit (cost) recognized
                -
                (16)Compensation
      expense recognized
                310
                238Remaining
      unrecognized compensation expense
                2,419
                2,249Weighted
      average remaining years for which compensationexpense
      is to be recognized
                2.4
                3.1
 
 The range
of exercise prices and weighted-average remaining contractual lives of both
options outstanding and vested options were as follows:
 
 Outstanding
      Options as of March 31, 2009Range
      of Exercise Prices
                    Amount
                    Weighted
      Average
                      Exercise
      Price
                    Weighted
      Average Contractual Years Remaining
                    Exercisable
                      Options
      as of
                      March
      31, 2009$4.50
      -  $5.00
                    9,465
                    $4.56
                    0.8
                    9,465$10.50
      - $11.00
                    380,351
                    10.91
                    2.6
                    380,351$13.00-$13.50
                    530,278
                    13.16
                    3.8
                    530,278$13.51-$14.00
                    958,875
                    13.74
                    8.1
                    279,000$14.50-$15.00
                    34,425
                    14.92
                    9.1
                    -$15.00-$15.50
                    318,492
                    15.10
                    6.2
                    318,492$16.00-$16.50
                    76,320
                    16.45
                    5.8
                    76,320$16.51-$17.00
                    61,066
                    16.73
                    9.3
                    -$18.00-$18.50
                    90,000
                    18.18
                    9.2
                    10,000$19.50-$20.00
                    657,292
                    19.90
                    4.8
                    657,292Total
                    3,116,564
                    $14.97
                    5.8
                    2,261,198
 
 The
weighted average exercise price and contractual years remaining for exercisable
options was $15.18 and 4.9 years, respectively, at March 31,
2009.  There were no grants of stock options under the Stock Plans
during the three months ended March 31, 2009.  The weighted average
fair value per option at the date of grant for stock options granted during the
three-months ended March 31, 2008 was estimated as follows:
  11
  
 Three
      Months Ended March 31, 2008Total
      options granted
                34,425Estimated
      fair value on date of grant
                $3.20Pricing
      methodology utilized
                Black-
      ScholesExpected
      life (in years)
                6.25Interest
      rate
                2.77%Volatility
                30.00Dividend
      yield
                3.75
 
 Other
Stock Awards
 
 Restricted Stock Awards – The
Company, from time to time, issues restricted stock awards to outside directors
and officers under the 2004 Stock Incentive Plan.  Typically, awards
made to outside directors fully vest on the first anniversary of the grant date,
while awards made to officers vest in equal annual installments over a four or
five-year period.
 
 The
following is a summary of activity related to the restricted stock awards
granted under the 2004 Stock Incentive Plan during the periods
indicated:
 
 At
      or for the Three Months Ended March 31,2009
                2008(Dollars in Thousands)Unvested
      allocated shares – beginning of period
                141,710
                66,304Shares
      granted
                -
                -Shares
      vested
                6,000
                6,000Unvested
      allocated shares – end of period
                135,710
                60,304Unallocated
      shares - end of period
                -
                -Compensation
      recorded to expense
                $231
                $107Income
      tax expense (benefit) recognized
                11
                (2)
 
 8.  
ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR RECOURSE EXPOSURE ON MULTIFAMILY LOANS
SOLD TO FANNIE MAE ("FNMA")
 
 Changes in the allowance for loan
losses for loans owned by the Bank were as follows:
 
 Three
      Months Ended March 31,2009
                  2008(Dollars
      in Thousands)Balance
      at beginning of period
                  $17,454
                  $15,387Provision
      for loan losses
                  2,640
                  60Charge-offs
                  (1,529)
                  (144)Transfers
      to specific reserves for future losses deemed likely to
    occur
                  (347)
                  -Recoveries
                  -
                  -Transfer
      from reserves on loan commitments
                  133
                  362Balance
      at end of period
                  $18,351
                  $15,665
 
 Management's
quarterly evaluation of the loan loss reserves takes into account not only
performance of the current loan portfolio, but also general credit conditions
and volume of new business, in determining the timing and amount of any future
credit loss provisions. The increase in the provision for loan losses during the
three months ended March 31, 2009 compared to the three months ended March 31,
2008 reflected deterioration in the Bank's local real estate
market.
 
 The Bank
also maintains a reserve liability in relation to the recourse exposure on
multifamily loans sold to FNMA that reflects estimated future losses on this
loan pool at each period end.  In determining the estimate of probable
future losses, the Bank utilizes a methodology similar to that used in the
calculation of its allowance for loan losses.  For all performing
loans within the FNMA serviced pool, the reserve recognized is the present value
of the estimated future losses calculated based upon the historical loss
experience for
  12
 comparable
multifamily loans owned by the Bank.  For problem loans within the
pool, the estimated future losses are determined in a manner consistent with
impaired or classified loans within the Bank's loan portfolio.
 
 The
following is a summary of the aggregate balance of multifamily loans serviced
for FNMA, the period-end balance of total recourse exposure associated with
these loans, and activity related to the reserve liability.
 
 At
      or for the Three Months Ended March 31,2009
                  2008(Dollars
      in Thousands)Outstanding
      balance of multifamily loans serviced for FNMA at period
    end
                  $507,476
                  $563,529Total
      recourse exposure at end of period
                  21,865
                  21,189Reserve
      Liability on the Recourse ExposureBalance
      at beginning of period
                  $5,573
                  $2,436Transfer
      of specific reserve for serviced loans re-acquired by the
    Bank
                  (3,025)
                  22Provision
      for losses on problem loans(1)
                  1,424
                  -Charge-offs
      and other net reductions in balance
                  (9)
                  -Balance
      at period end
                  $3,963
                  $2,458
 (1) Amount
recognized as a component of mortgage banking income during the
period.
 
 On
January 30, 2009, the Bank re-acquired four problem loans within this pool of
loans serviced with recourse exposure for FNMA.  Upon re-acquisition,
aggregate reserves of $3.0 million that were recorded related to these loans
within other liabilities served to reduce the outstanding principal balance of
the loans (reflecting a write-down of their outstanding principal balance to the
lower of the current appraised or market value of the underlying
collateral).
  9.  
INVESTMENT AND MORTGAGE-BACKED SECURITIES
  The
following is a summary of major categories of securities owned by the Company at
March 31, 2009:
 
 Unrealized
      Gains or Losses Recognized in Accumulated Other Comprehensive
      LossPurchase
                      Amortized
      / Historical Cost
                    Recorded
      Amortized/
                      Historical
      Cost (1)
                    Non-Credit
                      OTTI
                    Unrealized
                      Gains
                    Unrealized
      Losses
                    Book
      Value
                    Other
      Unrealized Losses
                    Market
      ValueHeld-to-Maturity:Pooled
      bank trust preferred securities
                    $19,731
                    $16,832
                    $(3,351)
                    -
                    $(4,075)(2)
                    $9,406
                    $(2,670)
                    $6,736Available-for-sale:Mutual
      fund investments
                    8,055
                    4,992
                    -
                    -
                    (48)
                    4,944
                    -
                    4,944Agency
      note
                    1,020
                    1,020
                    -
                    2
                    -
                    1,022
                    -
                    1,022Pass-through
      MBS issued by GSEs
                    190,573
                    190,573
                    -
                    4,993
                    -
                    195,566
                    
                    195,566Collateralized
      mortgage obligations ("CMOs")  issued by GSEs
                    79,652
                    79,652
                    -
                    1,737
                    -
                    81,389
                    -
                    81,389Private
      issuer pass through MBS
                    4,276
                    4,276
                    -
                    -
                    (847)
                    3,429
                    -
                    3,429Private
      issuer CMOs
                    7,147
                    7,147
                    -
                    -
                    (196)
                    6,951
                    -
                    6,951Total
                    $310,454
                    $304,492
                    (3,351)
                    $6,732
                    $(5,166)
                    $302,707
                    $(2,670)
                    $300,037
 (1)
Amount represents the purchase amortized / historical cost less any
credit-related OTTI recognized through earnings.
 (2)
Amount represents the unamortized portion of the unrealized loss that was
recognized in accumulated other comprehensive loss on September 1, 2008 (the day
on which these securities were transferred from available-for-sale to
held-to-maturity)
 
 As of March 31, 2009, the Company owned
eight securities with an aggregate remaining amortized cost of $19.7 million
based upon their purchase cost basis that were primarily secured by the
preferred debt obligations of a pool of U.S. banks (with a small portion secured
by debt obligations of insurance companies).  All eight of the pooled
trust preferred securities have paid all contractual cash flows since the
Company’s initial investment. In management’s judgment, however, the credit
quality of the collateral pool underlying three of the securities deteriorated
to the point that full recovery of the Company’s initial investment was
considered uncertain, thus resulting in recognition of an OTTI
charge.  The aggregate OTTI charge recognized on these securities was
$6.3 million at March 31, 2009, of which $2.9 million was determined to be
attributable to credit related factors and $3.4 million was determined to be
attributable to non-credit related factors.
 
 13
 As of
March 31, 2009, the Company also recognized an OTTI charge of $3.1 million on
five actively-managed equity mutual fund investments.  This OTTI
reflected both the significant deterioration in the valuation of the U.S. and
international equity markets, as well as the extended duration of the
decline.  At March 31, 2009, the unrealized loss on these equity
mutual funds represented 47% of their cost basis, and the earliest estimated
period in which the unrealized loss could reasonably be expected to be fully
recovered was between 1.5 and 2.0 years.
 
 The
Company adopted FSP 115-2 effective January 1, 2009.  For its pooled
bank trust preferred securities that were deemed to meet the OTTI criteria
established under FSP 115-2, the Company applied the FSP 115-2 provisions for
determining the credit related component of OTTI by discounting the expected
future cash flows applicable to the securities at the effective interest rate
implicit in the security at the date of acquisition.
 
 The
Company did not recognize an OTTI charge on any of its securities during the
quarter ended March 31, 2008, and had no cumulative OTTI related to its
securities as of March 31, 2008.  The following is a reconciliation of
the pre-tax OTTI charges recognized on the Company's investment securities
during the three months ended March 31, 2009:
 
 At
      or for the Three Months Ended March 31, 2009Credit
      Related OTTI Recognized in Earnings
                      Non-Credit
      OTTI Recognized in
                        Accumulated
      Other Comprehensive Loss
                      Total
      OTTICumulative
      balance at December 31, 2008
                      $3,209
                      $-
                      $3,209Cumulative
      effect adjustment of adopting FSP 115-2
                      (2,287)
                      2,287
                      -OTTI
      recognized during the period
                      5,040
                      1,064
                      6,104Cumulative
      balance at March 31, 2009
                      5,962
                      3,351
                      9,313
 
 The
remaining aggregate amortized cost of pooled bank trust preferred securities
that could be subject to future OTTI charges through earnings was $16.8 million
at March 31, 2009.  Of this total, unrealized losses of $7.4 million
have already been recognized as a component of accumulated other comprehensive
income.
 
 The following table summarizes the
gross unrealized losses and fair value of investment securities and MBS as of
March 31, 2009, aggregated by investment category and the length of time the
securities were in a continuous unrealized loss position:
 
 Total
                    12
      or MoreConsecutive
      Months
                      of
      Unrealized Losses
                    Less
      than 12Consecutive
      Months
                      of
      Unrealized Losses(Dollars
      in thousands)Fair
      Value
                    Unrealized
      Losses
                    Fair
      Value
                    Unrealized
      Losses
                    Fair
      Value
                    Unrealized
      LossesHeld-to-Maturity
      Securities:Pooled
      bank trust preferred securities (a)
                    $6,736
                    $10,096
                    $6,736
                    $10,096
                    $-
                    $-Available-for-Sale
      Securities:Private
      label MBS and CMOs
                    10,380
                    1,042
                    10,380
                    1,042
                    -
                    -PIMCO
      Total Return Mutual Fund
                    1,398
                    48
                    -
                    -
                    1,398
                    48Total
                    $18,514
                    $11,186
                    $17,116
                    $11,138
                    $1,398
                    $48
 (a) At
March 31, 2009, the recorded balance of these securities was $9.4
million.  This balance reflected both the remaining unrealized loss of
$4.1 million that was recognized in accumulated other comprehensive loss on
September 1, 2008 (the day on which these securities were transferred from
available-for-sale to held-to-maturity) for five trust preferred securities that
have not been deemed OTTI, and an unrealized loss of $3.4 million that has been
recognized in accumulated other comprehensive loss that represents the
non-credit component of impairment for three trust preferred securities that
have been deemed OTTI.  In accordance with both SFAS 115, and FSP
115-2, these unrealized losses are currently being amortized over the remaining
estimated life of these securities.
 
 None of
the unrealized losses associated with the private label MBS and CMOs or PIMCO
Total Return Fund shown in the above table were deemed to meet the criteria for
OTTI at March 31, 2009.  Of the total unrealized loss on pooled bank
trust preferred securities shown in the above table, $6.7 million was not deemed
to satisfy the criteria for OTTI at March 31, 2009.  The following is
a summary of management's determination that the criteria for OTTI was not met
for each security classification:
 
  14
  Trust
Preferred Securities
 
 At March
31, 2009, the Bank owned five pooled bank trust preferred securities with an
amortized cost of $11.4 million.  On September 1, 2008, the Company
transferred these securities from its available-for-sale portfolio to its
held-to-maturity portfolio.  Based upon the lack of an orderly market
for these securities, management determined that a formal election to hold them
to maturity was consistent with its initial investment decision.  The
cumulative unrealized loss on these five securities is $6.7 million at March 31,
2009.
 
 As of
March 31, 2009, each of these securities had made all principal and interest
payments in accordance with their contractual terms.  However, the
market value of these securities was significantly below their amortized cost
basis, reflecting both illiquidity in the marketplace and concerns over future
bank failures.  Despite the significant decline in market value,
management believes that the unrealized losses on these securities at March 31,
2009 were temporary, and that the full value of the investments would be
realized once the market dislocations have been removed, or as the securities
continue to make their contractual payments of principal and
interest.  In making this determination, management considered the
following:
 
 In
addition to satisfying all contractual payments since inception, each of the
five securities demonstrated the following beneficial
characteristics:
 
 ·
              The
      Company has the intent and ability to hold these securities until they
      fully recover their impairment, evidenced by the election to reclassify
      them to held-to-maturity in 2008.
 ·
              Each
      security has a diverse pool of underlying
  issuers
 ·
              None
      of the securities have exposure to real estate investment trust issued
      debt (which has experienced high default
rates)
 ·
              Each
      security features either a mandatory auction or a de-leveraging mechanism
      that could result in principal repayments to the Bank prior to the stated
      maturity of the security
 ·
              Each
      security is characterized by some level of
      over-collateralization
 ·
              Based
      upon an internal review of the collateral backing the trust preferred
      securities portfolio, which accounted for current and prospective
      deferrals, each of the securities could reasonably be expected to continue
      making all contractual payments
 ·
              Three
      of the five securities have maintained an investment grade rating since
      inception
 
 Private
Label Pass Through MBS and CMOs That Have Maintained an Unrealized Holding Loss
for 12 or More Consecutive Months
 
 At March
31, 2009, the Company owned one private label pass-through MBS and three private
label CMOs that possessed unrealized losses for 12 or more consecutive
months.   One of the private label CMOs was satisfied in May
2009, with the Company receiving its full contractual principal and
interest.  The two remaining private label CMOs had the highest
possible credit quality rating by all independent rating agencies, while the
private label pass-through MBS has maintained a split credit rating, with the
most recently issued rating of AAA.  The unrealized losses on these
securities have resulted from reduced marketplace liquidity, as private label
MBS underwriting activity has ceased and investors have preferred MBS issued by
GSEs.  These securities were not deemed to be other than temporarily
impaired at March 31, 2009 due to the following: (1) their credit quality rating
remained superior; (2) the Company's investment was in the most senior tranche
(or repayment pool); (3) the Company has received all contractual payments of
principal and interest on these securities and anticipates receipt of all future
contractual payments; and (4) the Company had the intent and ability to hold the
securities until the earlier of recovery or full receipt of their contractual
payments.
 
 10.   FAIR
VALUE OF FINANCIAL INSTRUMENTS
 
 The
Company adopted SFAS 157 on January 1, 2008.  The fair value hierarchy
established under SFAS 157 is summarized as follows:
 
 Level 1 Inputs – Quoted
prices (unadjusted) for identical assets or liabilities in active markets that
the reporting entity has the ability to access at the measurement
date.
 
 Level 2 Inputs – Significant
other observable inputs such as any of the following: (1) quoted prices for
similar assets or liabilities in active markets, (2) quoted prices for identical
or similar assets or liabilities in markets that are not active, (3) inputs
other than quoted prices that are observable for the asset or liability (e.g., interest rates and
yield curves observable at commonly quoted intervals, volatilities, prepayment
speeds, loss severities, credit risks, and default rates), or (4) inputs that
are derived principally from or corroborated by observable market data by
correlation or other means (market-corroborated inputs).
 
 15
 Level 3 Inputs– Unobservable
inputs for the asset or liability. Unobservable inputs reflect the reporting
entity's own assumptions about the assumptions that market participants would
use in pricing the asset or liability (including assumptions about
risk).  Unobservable inputs shall be used to measure fair value to the
extent that observable inputs are not available, thereby allowing for situations
in which there is little, if any, market activity for the asset or liability at
the measurement date.
 
 The
following tables present the assets that are reported on the condensed
consolidated statements of financial condition at fair value as of March 31,
2009 by level within the fair value hierarchy.  As required by SFAS
157, financial assets are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
 
 Assets
      Measured at Fair Value on a Recurring BasisFair
      Value Measurements UsingDescription
                
                Total
      at
                  March
      31, 2009
                
                Level
      1
                
                Level
      2
                Level
      3
                
                Losses
      for the Three Months EndedMarch
      31, 2009(Dollars
      in Thousands)Investment
      securities available-for-sale
                
                $5,966
                
                $4,944
                
                $1,022
                $-
                
                $3,063MBS
      available-for-sale
                
                287,335
                
                -
                
                287,335
                -
                
                -
 
 The
Company’s available-for-sale investment securities and MBS are
reported at fair value, which is determined utilizing prices obtained from
independent parties. The valuations obtained are based upon market data, and
often utilize evaluated pricing models that vary by asset and incorporate
available trade, bid and other market information. For securities that do not
trade on a daily basis, pricing applications apply available information such as
benchmarking and matrix pricing. The market inputs normally sought in the
evaluation of securities include benchmark yields, reported trades,
broker/dealer quotes (obtained only from market makers or broker/dealers
recognized as market participants), issuer spreads, two-sided markets, benchmark
securities, bid, offers and reference data. For certain securities, additional
inputs may be used or some market inputs may not be
applicable.  Prioritization of inputs may vary on any given day based
on market conditions.
 
 The
Company's available-for-sale investment securities and MBS at March 31, 2009
were categorized as follows:
 
 Investment
      Category
                
                Percentage
      ofTotal
                
                Valuation
      LevelUnder
      SFAS 157Pass
      Through MBS or CMOs issued by GSEs
                
                94.4%
                
                TwoPass
      Through MBS or CMOs issued by entities other than GSEs
                
                3.5
                
                TwoAgency
      note
                
                0.4
                
                TwoMutual
      fund investments
                
                1.7
                
                One
 
 The
agency note owned by the Company possessed the highest possible credit rating
published by multiple established credit rating agencies as of March 31,
2009.  Obtaining a market value as of March 31, 2009 for this security
utilizing significant observable inputs as defined under SFAS 157 was not
difficult due to its continued marketplace demand.  The pass through
MBS and CMOs issued by GSEs, which comprised approximately 94.4% of the
Company's total available-for-sale investment securities and MBS at March 31,
2009, all possessed the highest possible credit rating published by multiple
established credit rating agencies as of March 31, 2009.  Obtaining a
market value as of March 31, 2009 for these securities utilizing significant
observable inputs as defined under SFAS 157 was not difficult due to their
considerable demand.  For the pass through MBS and CMOs issued by
entities other than GSEs, obtaining a market value utilizing significant
observable inputs as defined under SFAS 157 was slightly more difficult due to
the lack of regular trading activity as of March 31, 2009.  For these
securities, the Company obtained market values from at least two credible market
sources, and verified that these values were prepared utilizing significant
observable inputs as defined under SFAS 157.  In accordance with
established policies and procedures, the Company utilized a midpoint value
obtained as its recorded fair value for securities that were valued with
significant observable inputs.
   16
  
 Assets
      Measured at Fair Value on a Non-Recurring BasisFair
      Value Measurements UsingDescription
                
                Total
      at March 31, 2009
                
                Level
      1
                
                Level
      2
                Level
      3
                
                Losses
      for the Three Months Ended March 31, 2009(Dollars
      in Thousands)Pooled
      trust preferred securities(1)
                
                $2,095
                
                $-
                
                $-
                $2,095
                
                $3,039(2)Impaired
      loans
                
                3,965
                
                -
                
                -
                3,965
                
                495(3)Loans
      held for sale
                
                377
                
                -
                
                377
                -
                
                7
 (1)
              Amount
      represents the fair value of three held-to-maturity trust preferred
      securities that were deemed other-than temporarily impaired at March 31,
      2009.
 (2)
              Amount
      represents the total OTTI recognized (credit or non-credit related) during
      the three months ended March 31,
2009.
 (3)
              Amount
      represents $148 of charge-offs and $347 of specific reserves established
      to write the outstanding principal down to the current appraised or
      marketed value of the underlying collateral
  property.
 
 Pooled
Trust Preferred Securities, Held to Maturity
 
 At March
31, 2009, the Company owned eight pooled trust preferred securities classified
as held-to-maturity.  Late in 2008, the market for these securities
was deemed to be highly illiquid, and continued to be deemed as such as of March
31, 2009.  As a result, while the valuation of these securities had
previously been obtained utilizing broker quotations (based upon significant
observable inputs as defined in SFAS 157), at March 31, 2009, their estimated
fair value was obtained primarily using a cash flow valuation approach (Level 3
pricing as defined by SFAS 157). Broker quotations, which were deemed to meet
the criteria of "distressed sale" pricing under the guidance of FAS 157-4, were
given a minor 10% weighting in the valuation of the securities at March 31,
2009.  A  cash flow valuation for the eight securities
performed utilizing default, cash flow and discount rate assumptions determined
by the Company's management (the "Internal Cash Flow Valuation") was given a 45%
weighting. This valuation considered the creditworthiness of each individual
issuer underlying the collateral pool of the eight securities.  In
addition, for five of the eight securities, three independent cash flow model
valuations were averaged and given a 45% weighting.  For the remaining
three securities, only one independent cash flow valuation was available and was
similarly given a 45% weighting.  The 10% weighting of broker quotes
represents a change from the methodology applied at December 31, 2008 (at which
time these quotes were given no weighting) and reflected the continued emphasis
upon considering broker quotes stated by the FASB in FAS 157-4.
 
 The major
assumptions utilized (each of which represent significant unobservable inputs as
defined in SFAS 157) in the Internal Cash Flow Valuation were as
follows:
 
 Discount
rate – The discount rate utilized was derived from the Bloomberg fair market
value curve for debt offerings of similar credit rating.  In the event
that a security had a split investment rating, separate cash flow valuations
were made utilizing the appropriate discount rate and were averaged in order to
determine the Internal Cash Flow Valuation.
 
 Defaults
- All underlying issuers with a Fitch bank rating of 5.0 were assumed to
default.  Underlying issuers with a Fitch bank rating of 3.5 through
4.5 were assumed to default at levels ranging from 5% to 75% based upon both
their rating as well as whether they had been granted approval to receive
funding under the U.S. Department of Treasury's Troubled Asset Relief Program
Capital Purchase Program.
 
 Cash
flows – The actual cash flows for the Company's investment tranche of each
security, adjusted to assume that all estimated defaults occurred on April 1,
2009, with an estimated recovery range between 1% and 10% over the cash flow
period (the remaining life of the security).
 
 Two of
the three independent cash flow valuations were made utilizing a methodology
similar to the Internal Cash Flow Valuation, differing only in the underlying
assumptions deriving estimated cash flows, individual bank defaults and discount
rate.  The third independent cash flow valuation was derived from a
different methodology in which the actual cash flow estimate based upon the
underlying collateral of the securities (including default estimates) was not
considered.  Instead, this cash flow valuation was determined
utilizing a discount rate determined from the Bloomberg fair market value curve
for similar assets that continued to trade actively, with adjustments made for
the illiquidity of the pooled trust preferred market.  Because of the
significant judgment underlying each of the pricing assumptions, management
elected to recognize each of the independent valuations and apply a weighting
system to all of the valuations, including the Internal Cash Flow Valuation, as
all of these valuations were determined utilizing a valid and objective pricing
methodology.
  17
 The
following is a summary of the average valuation derived on the eight securities
from each of the three pricing sources considered in valuing these
investments:
  Source
                
                Average
      PricePer
      $100
                
                Weighting
      AppliedBroker
      sale quotation
                
                $18.43
                
                10%Third
      party cash flow valuations
                
                35.78
                
                45%Internal
      Cash Flow Valuation
                
                38.33
                
                45%
 
 Impaired
Loans
 
 Loans
with certain characteristics are evaluated individually for impairment. A loan
is considered impaired when, based upon current information and events, it is
probable that the Bank will be unable to collect all amounts due, including
principal and interest, according to the contractual terms of the loan
agreement. The Bank's impaired loans at March 31, 2009 were collateralized by
real estate and were thus carried at the lower of the outstanding principal
balance or the estimated fair value of the collateral.  Fair value is
estimated through current appraisals, where practical, or a drive-by inspection
and comparison of the collateral with similar properties in the area by either a
licensed appraiser or real estate broker and adjusted as deemed necessary by
management to reflect current market conditions.  At March 31, 2009,
four impaired loans were carried at fair value, with their principal balance
reduced to the current appraised or market value of the underlying collateral
property.  Net charge-offs recognized on these impaired loans were
$148,000 during the quarter ended March 31, 2009, and were charged against the
allowance for loans losses.  In addition, specific reserves of
$347,000 were established on these loans as part of the provision for loan
losses recorded during the three months ended March 31, 2009.  These
reserves were recorded in order to reduce the principal balance of these loans
to the current appraised or market value of their underlying collateral
property.   Total charge-offs on impaired loans, including such
loans that are not carried at fair value, were $3.2 million.
 
 Loans
Held for Sale
 
 Three
loans held for sale were recorded at fair value at March 31, 2009 since the
contractual purchase price on the loan (as adjusted for all costs associated
with the loan origination) did not exceed the principal balance of the
loan.  The value of the loan represented the actual market quote
issued by the purchasing institution that was subsequently paid for the
respective loan shortly after March 31, 2009.
 
 11.   RETIREMENT
AND POSTRETIREMENT PLANS
 
 The
Holding Company or the Bank maintain the Retirement Plan of The Dime Savings
Bank of Williamsburgh (the "Employee Retirement Plan"), the Retirement Plan for
Board Members of Dime Community Bancshares, Inc. (the "Outside Director
Retirement Plan"), the BMP and the Postretirement Welfare Plan of The Dime
Savings Bank of Williamsburgh ("Postretirement Plan").  Net expenses
associated with these plans were comprised of the following
components:
 
 Three
      Months EndedMarch
      31, 2009
                  
                  Three
      Months EndedMarch
      31, 2008BMP,Employee
      and Outside Director Retirement
      Plans
                  Postretirement
      Plan
                  
                  BMP,Employee
      and Outside DirectorRetirement
      Plans
                  Postretirement
                    Plan(Dollars
      in thousands)Service
      cost
                  $-
                  $29
                  
                  $-
                  $21Interest
      cost
                  340
                  76
                  
                  358
                  65Expected
      return on assets
                  (297)
                  -
                  
                  (485)
                  -Unrecognized
      past service liability
                  -
                  14
                  
                  -
                  (7)Amortization
      of unrealized loss
                  291
                  -
                  
                  67
                  4Net
      periodic (credit) cost
                  $334
                  $119
                  
                  $(60)
                  $83
 
 
 The
Company disclosed in its consolidated financial statements for the year ended
December 31, 2008 that it expected to make contributions or benefit payments
totaling $198,000 to the BMP, $131,000 to the Outside Director Retirement Plan,
and $161,000 to the Postretirement Plan during the year ending December 31,
2009.  The Company made benefit payments of $32,000 to the Outside
Director Retirement Plan during the three months ended March 31, 2009, and
expects to make an additional $97,000 of contributions or benefit payments
during the remainder of 2009.  The Company made net contributions
totaling $17,000 to the Postretirement Plan during the three months ended March
31, 2009, and expects to make an additional estimated $144,000 of contributions
or benefit payments during the remainder of 2009.  The Company made no
contributions to the BMP during the three months
  18
  ended
March 31, 2009.  The Company does not expect to make any benefit
payments or contributions to the BMP during the remainder of 2009, since
anticipated retirements that formed the basis for the expected benefit payments
in 2009 are presently not expected to occur.
 
 The
Company disclosed in its consolidated financial statements for the year ended
December 31, 2008 that, due to changes in pension funding law that occurred in
2008 and sharp declines in asset values, the Company was unable to provide an
estimate of expected contributions to the Employee Retirement Plan in
2009.  The Company made no contributions to the Employee Retirement
Plan during the three months ended March 31, 2009, and, for the same reasons,
remains unable to provide an estimate of expected contributions to the Employee
Retirement Plan in 2009.
 
 Effective
December 31, 2008, the Company changed the financial statement disclosure
measurement date for its defined benefit plans from October 1st to
December 31st.  On
January 1, 2008, the Company recorded reductions of $23,000 to retained earnings
and $64,000 to accumulated other comprehensive loss related to this
transition.
 
 12.   INCOME
TAXES
 
 During
the three months ended March 31, 2009, the Company's consolidated effective tax
rate, which normally approximates 37%, was reduced to 26% as a result of $5.0
million of recorded OTTI expense.  Excluding this item, the Company's
effective tax rate approximated 37.0% during the three months ended March 31,
2009.  During the three months ended March 31, 2008, the Company
recorded a decline of $662,000 in income tax expense related to a reduction in
its reserve for unrecognized tax benefits, as events occurring during the period
resulted in the probable recognition of these benefits.  This decline
lowered the effective tax rate to 34% during the quarter ended March 31,
2008.  Excluding this item, the consolidated effective tax rate would
have been 37% during the three months ended March 31, 2008.
 
 13.   NET
MORTGAGE BANKING INCOME
 
 Net
mortgage banking income presented in the condensed consolidated statements of
operations was comprised of the following items:
 
 Three Months EndedMarch
      31,2009
                2008(Dollars
      in Thousands)Gain
      on the sale of loans originated for sale (1)
                $1
                $87Provision
      to increase the reserve for loans sold with recourse
                (1,424)
                -Recovery
      of write down of mortgage servicing asset
                60
                -Mortgage
      banking fees (1)
                194
                199Net
      mortgage banking (loss) income
                $(1,169)
                $286
 
 (1)
              These
      amountsfor
      the three-months ended March 31, 2008 have been reclassified to conform to
      their presentation for the three-months ended March 31,
      2009.  These amounts were included in non-interest income during
      the three-months ended March 31, 2008.  The reclassification
      thus does not result in a materially different
    presentation.
 
 
 Item
2.                      Management's
Discussion and Analysis of Financial Condition and Results of
Operations
 
 General
 
 The
Holding Company is a Delaware corporation and parent company of the Bank, a
federally-chartered stock savings bank.  The Bank maintains its
headquarters in the Williamsburg section of Brooklyn, New York and operates
twenty-three full service retail banking offices located in the New York City
("NYC") boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County, New
York.  The Bank’s principal business has been, and continues to be,
gathering deposits from customers within its market area, and investing them
primarily in multifamily residential, commercial real estate, one- to
four-family residential, construction and land acquisition loans, consumer
loans, MBS, obligations of the U.S. government and GSEs, and corporate debt and
equity securities.
 
 Executive
Summary
 
 The
Holding Company’s primary business is the operation of the Bank.  The
Company’s consolidated results of operations are dependent primarily on net
interest income, which is the difference between the interest income earned on
interest-earning assets, such as loans and securities, and the interest expense
paid on interest-bearing liabilities, such as deposits
  19
  and
borrowings.  The Bank additionally generates non-interest income such
as service charges and other fees, as well as income associated with Bank Owned
Life Insurance.  Non-interest expense primarily consists of employee
compensation and benefits, federal deposit insurance premiums, data processing
costs, and occupancy and equipment, marketing and other operating
expenses.  The Company’s consolidated results of operations are also
significantly affected by general economic and competitive conditions
(particularly fluctuations in market interest rates), government policies,
changes in accounting standards and actions of regulatory agencies.
 
 The
Bank's primary strategy is to generally seek to increase its product and service
utilization for each individual depositor, and to increase its household and
deposit market shares in the communities that it serves.  In addition,
the Bank’s primary strategy includes the origination of, and investment in,
mortgage loans, with an emphasis on multifamily residential and mixed use real
estate loans.  During 2008, the Company grew assets due to continued
loan demand and favorable marketplace conditions surrounding the origination of
multifamily residential real estate loans.  In late 2008 and during
the three months ended March 31, 2009, the Company restricted asset growth due
to concerns over the health of the commercial real estate markets, and the
desire to preserve capital levels to accommodate these concerns.
 
 The
Company believes that multifamily residential and mixed use loans provide
advantages as investment assets.  Initially, they offer a higher yield
than investment securities of comparable maturities or terms to
repricing.  In addition, origination and processing costs for the
Bank’s multifamily residential and mixed loans are lower per thousand dollars of
originations than comparable one-to four-family loan costs.  Further,
the Bank’s market area has generally provided a stable flow of new and
refinanced multifamily residential and mixed use loan
originations.  In order to address the credit risk associated with
multifamily residential and mixed use lending, the Bank has developed
underwriting standards that it believes are reliable in order to maintain
consistent credit quality for its loans.
 
 The Bank
also strives to provide a stable source of liquidity and earnings through the
purchase of investment grade securities; seeks to maintain the asset quality of
its loans and other investments; and uses appropriate portfolio and
asset/liability management techniques in an effort to manage the effects of
interest rate volatility on its profitability and capital.
 
 The year
ended December 31, 2008 and the three months ended March 31, 2009 were dominated
by a global real estate and economic recession fueled by significant weakness
and/or failure in many of the world's largest financial
institutions.  As a result, the Bank recognized higher credit costs on
portfolio loans, loans sold to FNMA with recourse, and pooled trust preferred
and equity mutual fund security investments during the three months ended March
31, 2009 compared to the three months ended March 31, 2008. However,
historically high dislocations in credit markets caused origination spreads from
the benchmark origination interest rate to increase significantly during the
year ended December 31, 2008 and the three months ended March 31,
2009.  This increase, coupled with a reduction in benchmark short-term
interest rates by the Federal Open Market Committee ("FOMC") (which greatly
impacted the pricing of the Bank's retail deposits), favorably impacted the
Company's net interest spread and net interest margin during the three months
ended March 31, 2009 compared to the three months ended March 31,
2008.
 
 Recent
Market Developments
 
 Emergency
Economic Stabilization Act of 2008 (the “EESA”)
 
 The U.S.
and global economies are experiencing significantly reduced activity as a result
of, among other factors, disruptions in the financial system during the past
year as well as various other recessionary conditions. Reflecting concern about
the stability of the financial markets, many lenders and institutional investors
have reduced, and in some cases ceased to provide, funding to borrowers,
including other financial institutions. These factors resulted in limited
availability of credit, reduced confidence in the financial sector, and an
increased level of volatility in the financial markets.
 
 In
response to the financial crises affecting the banking system and financial
markets, the EESA was enacted on October 3, 2008. The EESA grants the U.S.
Department of Treasury ("Treasury") the authority, among others, to establish
the Troubled Asset Relief Program ("TARP") to purchase up to $700 billion of
certain troubled assets, including mortgages, MBS and certain other financial
instruments, from financial institutions for the purpose of stabilizing and
providing liquidity to the U.S. financial markets.
 
 If a
publicly-traded financial institution sells troubled assets into the TARP,
Treasury will receive a warrant giving it the right to receive nonvoting common
stock or preferred stock in such financial institution, or voting stock with
respect to which Treasury agrees not to exercise voting power, subject to
certain de minimis exceptions.  Further, all financial institutions
that sell troubled assets to the TARP and satisfy certain conditions will also
be subject to certain executive compensation restrictions.
 
 In
addition to establishing the TARP, the EESA urges the Secretary of the Treasury
to establish a program that will guarantee the principal of, and interest on,
troubled assets originated or issued prior to March 14, 2008.  The
Secretary of the Treasury will establish premiums for financial institutions
that participate in this program and may provide for variations in such rates in
accordance with the credit risk associated with the particular troubled asset
being guaranteed.
 
 20
 TARP
Capital Purchase Program
 
 Under the
TARP, on October 14, 2008, the Treasury announced the TARP Capital Purchase
Program to strengthen the capital and liquidity positions of viable institutions
and encourage banks and thrifts to increase lending to creditworthy borrowers.
Under the TARP Capital Purchase Program, qualifying financial institutions were
able to sell senior preferred shares to the Treasury, which qualify as Tier 1
capital for regulatory capital purposes. In conjunction with its senior
preferred investment, Treasury also receives warrants to purchase common stock
of the participating institution with an aggregate market price equal to 15% of
the senior preferred investment.  The minimum amount of preferred
stock that would be issued was equal to 1% of the institution’s risk-weighted
assets, and the maximum was the lesser of $25 billion or 3% of the institution's
risk-weighted assets. Participating financial institutions are required to adopt
Treasury’s standards for executive compensation and corporate governance for the
period during which the Treasury holds equity issued under the
program.
 
 On January 5, 2009, after receiving
approval of its application from Treasury, the Company announced that it decided
to forego participation in the TARP Capital Purchase Program.  The
Company conducted extensive financial analysis and concluded that the benefits
of the TARP Capital Purchase Program to the Company and its shareholders were
mitigated by several factors, including the Company's strong capital levels and
historically prudent investment and underwriting practices, and the potential
dilution to both earnings and book value that participation in the TARP Capital
Purchase Program would have created over the next three to five
years.
 
 Temporary
Liquidity Guarantee Program
 
 On
November 21, 2008, the FDIC adopted the Temporary Liquidity Guarantee Program
(“TLGP”) pursuant to its authority to prevent “systematic risk” in the U.S
banking system. It was adopted as an initiative to counter the system-wide
crisis in the nation’s financial sector.  Under the TLGP, the FDIC
will (i) guarantee, through the earlier of maturity or June 30, 2012, certain
senior unsecured debt issued by participating institutions on or after October
14, 2008 and before June 30, 2009 under the Debt Guarantee Program ("DGP"), and
(ii) fully insure non-interest bearing transaction deposit accounts held at
participating FDIC-insured institutions through December 31, 2009 under the
Transaction Account Guarantee Program ("TAGP").  The Company elected
not to participate in the TLGP.
 
 Eligible
institutions were covered under the TLGP at no cost for the first 30
days.  Institutions that elected not to participate in one or both
parts of the TLGP were required to notify the FDIC of their election to opt out
on or before December 5, 2008.  Institutions that did not opt out are
subject to a fee of 50 to 100 basis points per annum based on the length of
maturity of senior unsecured debt issued under the DGP.  Under the
TAGP, a 10 basis point surcharge will be added to the institution’s current
insurance assessment, quarterly, for balances in non-interest bearing
transaction accounts that exceed the existing deposit insurance limit of
$250,000.  Although the TLGP was originally scheduled to expire in
June 2009, on February 10, 2009 the FDIC announced its intention to extend the
TLGP through October 2009 for an additional premium.
 
 On
January 16, 2009, in an effort to further strengthen the financial system and
U.S economy, the FDIC announced that it will soon propose rule changes to the
TLGP to extend the maturity of the guarantee from three to up to 10 years where
the debt is supported by collateral and the issuance supports new consumer
lending.  Until the details of this extended program are finalized and
published, management cannot determine to what extent, if any, the Company would
participate in this program.
 
 It is unclear what impact the EESA,
TARP Capital Purchase Program, TLGP, other previously announced liquidity and
funding initiatives of the Federal Reserve and other agencies, and any
additional programs that may be initiated in the future will have on the
financial markets and the other difficulties described above, including the
current levels of volatility and limited credit availability, or on the U.S.
banking and financial industries and the broader U.S. and global economies.
Further negative effects could have an adverse impact on the Company and its
business.
 
 Insurance
of Deposit Accounts
 
 On
February 27, 2009, the FDIC adopted a final rule modifying the risk-based
assessment system and set the initial base assessment rates beginning April 1,
2009 at 12 to 45 basis points depending on an institution’s risk category, with
adjustments resulting in increased assessment rates generally for institutions
with a significant reliance on secured liabilities and brokered
deposits.
 
 On
February 27, 2009, the FDIC also adopted an interim rule imposing a 20 basis
point emergency special assessment on the industry on June 30, 2009, to be
collected on September 30, 2009.  The interim rule also permits the
FDIC to impose an emergency special assessment of up to 10 basis points after
June 30, 2009, if necessary to maintain public confidence in federal deposit
insurance.
 
 Based
upon the Bank's insured deposit balances at March 31, 2009, the Bank estimates
that its total assessments will range between 15 and 17 basis points (not
including the
  21
 special
assessment) during the year ending December 31, 2009.  The adopted
increases in assessments will result in total pre-tax assessment expense of
approximately $3.5 million to $4.0 million during 2009, and the 20 basis point
special assessment under the interim rule would result in aggregate additional
pre-tax expense of approximately $4.5 million.
 
 Selected
Financial Highlights and Other Data
 (Dollars
in Thousands Except Per Share Amounts)
 For the Three MonthsEnded March 31,2009
                  
                  2008Performance
      and Other Selected Ratios:Return
      on Average Assets
                  0.28%
                  
                  0.68%Return
      on Average Stockholders' Equity
                  4.08
                  
                  8.87Stockholders'
      Equity to Total Assets
                  6.92
                  
                  7.42Tangible
      Equity to Total Tangible Assets
                  5.83
                  
                  6.09Loans
      to Deposits at End of Period
                  141.23
                  
                  133.76Loans
      to Earning Assets at End of Period
                  89.82
                  
                  87.44Net
      Interest Spread
                  2.21
                  
                  2.01Net
      Interest Margin
                  2.51
                  
                  2.32Average
      Interest Earning Assets to Average Interest Bearing
      Liabilities
                  108.65
                  
                  108.50Non-Interest
      Expense to Average Assets
                  1.35
                  
                  1.40Efficiency
      Ratio
                  55.09
                  
                  57.39Effective
      Tax Rate
                  25.90
                  
                  34.23Dividend
      Payout Ratio
                  155.56
                  
                  77.78Average
      Tangible Equity
                  $233,200
                  
                  $216,623Per
      Share Data:Reported
      EPS (Diluted)
                  $0.09
                  
                  $0.18Cash
      Dividends Paid Per Share
                  0.14
                  
                  0.14Stated
      Book Value
                  8.18
                  
                  7.97Tangible
      Book Value
                  6.80
                  
                  6.46Asset
      Quality Summary:Net
      Charge-offs
                  $1,876
                  
                  $144Non-performing
      Loans
                  13,123
                  
                  3,090Non-performing
      Loans/Total Loans
                  0.40%
                  
                  0.11%Non-performing
      Assets
                  $13,423
                  
                  $3,985Non-performing
      Assets/Total Assets
                  0.33%
                  
                  0.11%Allowance
      for Loan Loss/Total Loans
                  0.56
                  
                  0.53Allowance
      for Loan Loss/Non-performing Loans
                  139.84
                  
                  506.96Regulatory
      Capital Ratios (Bank Only):Tangible
      Capital
                  7.85%
                  
                  7.77%Leverage
      Capital
                  7.85
                  
                  7.77Tier
      1 Risk-based Capital
                  11.14
                  
                  11.10Total
      Risk-based Capital
                  11.83
                  
                  11.78Earnings
      to Fixed Charges Ratios (1)Including
      Interest on Deposits
                  1.13x
                  
                  1.31xExcluding
      Interest on Deposits
                  1.26
                  
                  1.77
 (1)
Please refer to Exhibit 12.1 for further detail on the calculation of these
ratios.
 
 Critical
Accounting Policies
 
 Various
elements of the Company’s accounting policies are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments.
The Company’s policies with respect to the methodologies it uses to determine
the allowance for loan losses, reserves for loan commitments and FNMA recourse
exposure, the valuation of mortgage servicing rights ("MSR"), asset impairments
(including the valuation of goodwill and other than temporary declines in the
valuation of securities), the recognition of deferred tax assets and
unrecognized tax positions, the recognition of loan income, the valuation of
financial instruments and accounting for defined benefit plans are its most
critical accounting
  22
 policies
because they are important to the presentation of the Company’s consolidated
financial condition and results of operations, involve a significant degree of
complexity and require management to make difficult and subjective judgments
which often necessitate assumptions or estimates about highly uncertain matters.
The use of different judgments, assumptions and estimates could result in
material variations in the Company's consolidated results of operations or
financial condition.
 
 The
following are descriptions of the Company's critical accounting policies and
explanations of the methods and assumptions underlying their
application.
 
 Allowance for Loan
Losses.GAAP requires the Bank to maintain an appropriate
allowance for loan losses.  Management uses available information to
estimate losses on loans and believes that the Bank maintains its allowance for
loan losses at appropriate levels.  Adjustments may be necessary,
however, if future economic, market or other conditions differ from the current
operating environment.
 
 Although
the Bank believes it utilizes the most reliable information available, the level
of the allowance for loan losses remains an estimate subject to significant
judgment.  These evaluations are inherently subjective because,
although based upon objective data, it is management's interpretation of the
data that determines the amount of the appropriate allowance.  The
Company, therefore, periodically reviews the actual performance and charge-offs
of its portfolio and compares them to the previously determined allowance
coverage percentages.  In doing so, the Company evaluates the impact
that the variables discussed below may have on the portfolio to determine
whether or not changes should be made to the assumptions and
analyses.
 
 The
Bank's loan loss reserve methodology consists of several components, including a
review of the two elements of its loan portfolio: problem loans [i.e., classified loans and
impaired loans under SFAS No. 114, "Accounting By Creditors for Impairment of a
Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures an amendment of FASB Statement No.
114" ("Amended SFAS 114")] and performing loans.  The Bank applied the
process of determining the allowance for loan losses consistently throughout the
three months ended March 31, 2009 and 2008.
 
 Performing
Loans
 
 At March
31, 2009, the majority of the allowance for loan losses was allocated to
performing loans, which represented the overwhelming majority of the Bank's loan
portfolio.  Performing loans are reviewed at least quarterly based
upon the premise that there are losses inherent within the loan portfolio that
have not been identified as of the review date.  The Bank thus
calculates an allowance for loan losses related to its performing loans by
deriving an expected loan loss percentage and applying it to its performing
loans.  In deriving the expected loan loss percentage, the Bank
generally considers, among others, the following criteria: the Bank's historical
loss experience; the age and payment history of the loans (commonly referred to
as their "seasoned quality"); the type of loan (i.e., one- to four-family,
multifamily residential, commercial real estate, cooperative apartment,
construction and land acquisition or consumer); the underwriting history of the
loan (i.e., whether it
was underwritten by the Bank or a predecessor institution acquired by the Bank
and, therefore, originally subjected to different underwriting criteria); both
the current condition and recent history of the overall local real estate market
(in order to determine the accuracy of utilizing recent historical charge-off
data to derive the expected loan loss percentages); the level of, and trend in,
non-performing loans; the level and composition of new loan activity; and the
existence of geographic loan concentrations (as the overwhelming majority of the
Bank's loans are secured by real estate located in the NYC metropolitan area) or
specific industry conditions within the portfolio segments.  Since
these criteria affect the expected loan loss percentages that are applied to
performing loans, changes in any of them may affect the amounts of the allowance
and the provision for loan losses.
 
 Problem
Loans
 
 OTS
regulations and Bank policy require that loans possessing certain weaknesses be
classified as Substandard, Doubtful or Loss assets.  Assets that do
not expose the Bank to risk sufficient to justify classification in one of these
categories, however, which possess potential weaknesses that deserve
management's attention, are designated Special Mention.  Loans
classified as Special Mention, Substandard or Doubtful are reviewed individually
on a quarterly basis by the Bank's Loan Loss Reserve Committee to determine the
level of possible loss, if any, that should be provided for within the Bank's
allowance for loan losses.
 
 The
Bank's policy is to charge-off immediately all balances classified as ''Loss''
and record a reduction of the allowance for loan losses for the full amount of
the outstanding loan balance.  The Bank applied this process
consistently throughout the three months ended March 31, 2009 and
2008.
 
 Under the
guidance established by Amended SFAS 114, loans determined to be impaired (i.e., loans where it is
probable that all contractual amounts due will not be collected in accordance
with the terms of the loan; generally, non-accrual one- to four-family loans in
excess of $625,500 and non-accrual and troubled-debt restructured multifamily
residential and
  23
 commercial
real estate loans) are evaluated at least quarterly in order to establish
impairment.  For each loan that the Bank determines to be impaired,
impairment is measured by the amount that the carrying balance of the loan,
including all accrued interest, exceeds the estimated fair value of the
collateral.  A specific reserve is established on all impaired loans
to the extent of impairment and comprises a portion of the allowance for loan
losses.   (See "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations – Asset Quality – Impaired Loans"
for a discussion of impaired loans).
 
 Non-performing
one- to four-family loans of $625,500 or less are not required to be evaluated
for impairment, and are classified as Substandard, Doubtful or Loss, and
reviewed and reserved for or recorded in the manner discussed above for loans of
such classification.
 
 Reserve for Loan
Commitments.  The Bank maintains a separate reserve within
other liabilities associated with commitments to fund future loans that have
been accepted by the borrower.  This reserve is determined based upon
the historical loss experience of similar loans owned by the Bank at each period
end.  Any increases in this reserve amount are obtained via a transfer
of reserves from the Bank's allowance for loan losses, with any resulting
shortfall in the Bank's allowance for loan losses being satisfied through the
quarterly provision for loan losses.  Any decreases in this reserve
amount are recognized as a transfer of reserve balances back to the allowance
for loans losses at each period end.
 
 Reserve For the Recourse Exposure on
Multifamily Loans Sold to FNMA.  A reserve is also recorded
related to certain multifamily residential real estate loans sold with recourse
under an agreement with FNMA.  This reserve, which is included in
other liabilities, is determined in a manner similar to the Company's allowance
for loan losses related to loans held in portfolio.
 
 Valuation of MSR.The cost of
mortgage loans sold with servicing rights retained by the Bank is allocated
between the loans and the servicing rights based on their estimated fair values
at the time of the loan sale. In accordance with GAAP, MSR are carried at the
lower of cost or fair value and are amortized in proportion to, and over the
period of, anticipated net servicing income.   The Company
adopted SFAS No. 156, "Accounting for Servicing of Financial Assets" ("SFAS
156") effective January 1, 2007.  SFAS 156 requires all separately
recognized MSR to be initially measured at fair value, if
practicable.  The estimated fair value of MSR is determined by
calculating the present value of estimated future net servicing cash flows,
using estimated prepayment, default, servicing cost and discount rate
assumptions.  All estimates and assumptions utilized in the valuation
of MSR are derived based upon actual historical results for the Bank, or, in the
absence of such data, from historical results for the Bank's peers.
 
 The fair
value of MSR is sensitive to changes in assumptions.  Fluctuations in
prepayment speed assumptions have the most significant impact on the estimated
fair value of MSR.  In the event that loan prepayment activities
exceed the assumed amount (generally due to increased loan refinancing), the
fair value of MSR would likely decline.  In the event that loan
prepayment activities fall below the assumed amount (generally due to a decline
in loan refinancing), the fair value of MSR would likely
increase.  Any measurement of the value of MSR is limited by the
existing conditions and assumptions utilized at a particular point in time, and
would not necessarily be appropriate if applied at a different point in
time.
 
 Assumptions
utilized in measuring the fair value of MSR for the purpose of evaluating
impairment additionally include the stratification based on predominant risk
characteristics of the underlying loans. Increases in the risk characteristics
of the underlying loans from the assumed amounts would result in a decline in
the fair value of the MSR.  A valuation allowance is established in
the event the recorded value of an individual stratum exceeds its fair value for
the full amount of the difference.
 
 Asset Impairment
Adjustments.Certain assets are carried in the Company's
consolidated statements of financial condition at fair value or at the lower of
cost or fair value.
 
 Goodwill Impairment
Analysis.
 
 As of
March 31, 2009, the Company had goodwill totaling $55.6 million, which is
accounted for in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142").  SFAS 142 eliminates amortization of goodwill
and instead requires performance of an annual impairment test at the reporting
unit level.  Management annually performs analyses to test for
impairment of goodwill.  In the event that an impairment of goodwill
is determined to exist, it is recognized as a charge to earnings.
 
 The
Company identified a single reporting unit for purposes of its goodwill
impairment testing, and thus performs its impairment test on a consolidated
basis.  The impairment test has two potential stages.  In
the initial stage, the Holding Company's market capitalization (reporting unit
fair value) is compared to its outstanding equity (reporting unit carrying
value).  The Company utilizes closing price data for the Holding
Company's common stock as reported on the Nasdaq National Market in order to
compute market capitalization. The Company has designated the last day of its
fiscal year as the annual date for impairment testing. The Company performed its
annual impairment test as of December 31, 2008 and concluded that no potential
impairment of goodwill existed since the fair value of the Company's reporting
unit exceeded its carrying value.  However, subsequent to December 31,
2008,
  24
 the price
of the Holding Company's common stock declined to such a level that the
Company's total market capitalization has, on occasion, fallen below its
consolidated stockholders' equity.  As a result, no assurance can be
given that the Company will not recognize an impairment loss on goodwill during
the year ending December 31, 2009.  In the event that an impairment is
recognized, it will not impact the Company's consolidated tangible capital ratio
or tangible book value, nor will it impact any of the Bank's requisite capital
levels or ratios.
 
 Valuation of Financial
Instruments and
Analysis of OTTI Related to Investment Securities and MBS
 
 Debt
securities are classified as held-to-maturity, and carried at amortized cost,
only if the Company has a positive intent and ability to hold them to
maturity.
 
 At March
31, 2009, the Company owned eight pooled trust preferred securities classified
as held-to-maturity.  Late in 2008, the market for these securities
was deemed to be highly illiquid, and continued to be deemed as such as of March
31, 2009.  As a result, while the valuation of these securities had
previously been obtained utilizing broker quotations (based upon significant
observable inputs as defined in SFAS 157), at March 31, 2009, their estimated
fair value was obtained primarily using a cash flow valuation approach (Level 3
pricing as defined by SFAS 157). Broker quotations, which were deemed to meet
the criteria of "distressed sale" pricing under the guidance of FAS 157-4, were
given a minor 10% weighting in the valuation of the securities at March 31,
2009.  The Internal Cash Flow Valuation was given a 45%
weighting.  In addition, for five of the eight securities, three
independent cash flow model valuations were averaged and given a 45%
weighting.  For the remaining three securities, only one independent
cash flow valuation was available and was similarly given a 45%
weighting.
 
 The major
assumptions utilized (each of which represent significant unobservable inputs as
defined in SFAS 157) in the Internal Cash Flow Valuation were as
follows:
 
 Discount
rate – The discount rate utilized was derived from the Bloomberg fair market
value curve for debt offerings of similar credit rating.  In the event
that a security had a split investment rating, separate cash flow valuations
were made utilizing the appropriate discount rate and were averaged in order to
determine the Internal Cash Flow Valuation.
 
 Defaults
- All underlying issuers with a Fitch bank rating of 5.0 were assumed to
default.  Underlying issuers with a Fitch bank rating of 3.5 through
4.5 were assumed to default at levels ranging from 5% to 75% based upon both
their rating as well as whether they had been granted approval to receive
funding under the TARP Capital Purchase Program.
 
 Cash flows – The actual cash flows for
the Company's investment tranche of each security, adjusted to assume that all
estimated defaults occurred on April 1, 2009, with an estimated recovery range
between 1% and 10% over the cash flow period (the remaining life of the
security).
 
 Two of
the three independent cash flow valuations were made utilizing a methodology
similar to the Internal Cash Flow Valuation, differing only in the underlying
assumptions deriving estimated cash flows, individual bank defaults and discount
rate.  The third independent cash flow valuation was derived from a
different methodology in which the actual cash flow estimate based upon the
underlying collateral of the securities (including default estimates) was not
considered.  Instead, this cash flow valuation was determined
utilizing a discount rate determined from the Bloomberg fair market value curve
for similar assets that continued to trade actively, with adjustments made for
the illiquidity of the pooled trust preferred market.  Because of the
significant judgment underlying each of the pricing assumptions, management
elected to recognize each of the independent valuations and apply a weighting
system to all of the valuations, including the Internal Cash Flow Valuation, as
all of these valuations were determined utilizing a valid and objective pricing
methodology.
  The
following is a summary of the average valuation derived on the eight securities
from each of the three pricing sources considered in valuing these
investments:
  Source
                
                Average
      Price Per $100
                
                Weighting
      AppliedBroker
      sale quotation
                
                $18.43
                
                10%Third
      party cash flow valuations
                
                35.78
                
                45%Internal
      Cash Flow Valuation
                
                38.33
                
                45%
 
 Debt
securities that are not classified as held-to-maturity, along with all equity
securities, are classified as available-for-sale.  The Company owned
no securities classified as trading securities during the three months ended
March 31, 2009 and 2008.  Available-for-sale debt and equity
securities that have readily determinable fair values are carried at fair
value.  All of the Company's available-for-sale securities at March
31, 2009 had readily determinable fair values, which were based on published or
securities dealers' market values.
 
 25
 The
Company conducts a periodic review and evaluation of its securities portfolio,
taking into account the severity and duration of each unrealized loss, as well
as management's intent and ability to hold the security until the unrealized
loss is substantially eliminated, in order to determine if a decline in market
value of any security below its carrying value is either temporary or other than
temporary.  Unrealized losses on held-to-maturity securities that are
deemed temporary are disclosed but not recognized.  Unrealized losses
on debt or equity securities available-for-sale that are deemed temporary are
excluded from net income and reported net of deferred taxes as other
comprehensive income or loss.  All unrealized losses that are deemed
other than temporary on either available-for-sale or held-to-maturity securities
are recognized immediately as a reduction of the carrying amount of the
security, with a corresponding decline in either net income or accumulated other
comprehensive income or loss in accordance with FSP 115-2.  During the
three months ended March 31, 2009, unrealized losses of $5.0 million were deemed
other than temporary associated with three held-to-maturity pooled trust
preferred securities and five available for sale equity mutual fund
investments.  No OTTI was recognized in the Company's securities
portfolio during the three months ended March 31, 2008.  Total
unrealized holding gains on securities were $1.6 million at March 31, 2009, net
of  $4.1 million of unamortized unrealized holding losses on
securities that were transferred from available-for-sale to held-to-maturity on
September 1, 2008.  Unrealized holding gains totaled $3.0 million at
March 31, 2008.
 
 Recognition of Deferred Tax
Assets.Management reviews all deferred tax assets
periodically.  Upon such review, in the event that there is a greater
likelihood that the deferred tax asset will not be fully realized, a valuation
allowance is recognized against the deferred tax asset in the amount for which
realization is determined to be more unlikely than likely to occur.
 
 Unrecognized Tax Positions.The Company performs two levels of evaluation for all uncertain tax
positions. Initially, a determination is made as to whether it is more likely
than not that a tax position will be sustained upon examination, including
resolution of any related appeals or litigation, based on the technical merits
of the position. In conducting this evaluation, management is required to
presume that the position will be examined by the appropriate taxing authority
possessing full knowledge of all relevant information. The second level of
evaluation is the measurement of a tax position that satisfies the
more-likely-than-not recognition threshold.  This measurement is
performed in order to determine the amount of benefit to recognize in the
financial statements. The tax position is measured at the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate
settlement.  In making its evaluation, management reviews applicable
tax rulings and other advice provided by reputable tax
professionals.
 
 Loan Income
Recognition.  Interest income on loans is recorded using the
level yield method.  Loan origination fees and certain direct loan
origination costs are deferred and amortized as yield adjustments over the
contractual loan terms.
 
 Accrual
of interest is generally discontinued on loans that have missed three
consecutive monthly payments, at which time the Bank reverses all previously
accrued interest.  Payments on non-accrual loans are generally applied
to principal.  Management may elect to continue the accrual of
interest when a loan is in the process of collection and the estimated fair
value of the collateral is sufficient to satisfy the outstanding principal
balance (including any outstanding advances related to the loan) and accrued
interest. Loans are returned to accrual status once the doubt concerning
collectibility has been removed and the borrower has demonstrated performance in
accordance with the loan terms and conditions for a period of at least 6
months.
 
 Accounting for Defined Benefit
Plans.  Defined benefit plans are accounted for in accordance
with SFAS 158.  SFAS 158 requires an employer sponsoring a single
employer defined benefit plan to recognize the funded status of a benefit plan
in its statements of financial condition, measured as the difference between
plan assets at fair value (with limited exceptions) and the benefit
obligation.  The Company utilizes the services of trained actuaries
employed at an independent benefits plan administration entity in order to
assist in measuring the funded status of its defined benefit plans.
 
 Liquidity
and Capital Resources
 
 The Board
of Directors of the Bank has approved a liquidity policy that it reviews and
updates at least annually. Senior management is responsible for implementing the
policy.  The Bank's Asset-Liability Committee ("ALCO") is responsible
for general oversight and strategic implementation of the policy, and management
of the appropriate departments are designated responsibility for implementing
any strategies established by ALCO.  On a daily basis, senior
management receives a current cash position report and one-week forecast to
ensure that all short-term obligations are satisfied timely and that adequate
liquidity exists to fund future activities.  On a monthly basis,
reports detailing the Bank's liquidity reserves and forecasted cash flows are
presented to both senior management and the Board of Directors.  In
addition, on a monthly basis a twelve-month liquidity forecast is presented to
ALCO in order to assess potential future liquidity concerns.  A
summary of cash flow data for the upcoming 12 months is presented to the Board
of Directors on an annual basis.
 
 The
Bank's primary sources of funding for its lending and investment activities
include deposits, loan and MBS payments, investment security maturities,
advances from the Federal Home Loan Bank of New York ("FHLBNY"), and securities
sold under agreement to repurchase ("REPOS") entered into with various financial
institutions, including the FHLBNY.  The Bank also sells selected
multifamily residential, mixed use and one- to four-family residential real
estate loans to either FNMA or other private sector secondary market
  26
 purchasers.  The
Company may additionally issue debt under appropriate
circumstances.  Although maturities and scheduled amortization of
loans and investments are predictable sources of funds, deposit flows and
prepayments on mortgage loans and MBS are influenced by interest rates, economic
conditions and competition.
 
 The Bank
gathers deposits in direct competition with commercial banks, savings banks and
brokerage firms, many among the largest in the nation.  It must
additionally compete for deposit monies against the stock and bond markets,
especially during periods of strong performance in those arenas.  The
Bank's deposit flows are affected primarily by the pricing and marketing of its
deposit products compared to its competitors, as well as the market performance
of depositor investment alternatives such as the U.S. bond or equity
markets.  To the extent that the Bank is responsive to general market
increases or declines in interest rates, its deposit flows should not be
materially impacted.   However, favorable performance of the
equity or bond markets could adversely impact the Bank’s deposit
flows.
 
 Retail branch and internet banking
deposits increased $75.5 million during the three months ended March 31, 2009,
and $13.6 million during the three months ended March 31,
2008.  During the three months ended March 31, 2009, core deposits
increased $114.3 million, and were partially offset by a decline of $38.8
million in certificates of deposit ("CDs").  During this period,
deposit pricing pressure diminished in the Bank's marketplace and the Bank
experienced an unusually large inflow of money market and checking deposits from
commercial customers.  The growth in deposit balances during the three
months ended March 31, 2008 resulted primarily from continued success of the
interest bearing "Prime Dime" checking account launched during the second half
of 2007, that contributed to an increase of $16.8 million in total interest
bearing checking accounts during the period.  Otherwise, the remaining
deposit balances remained relatively unchanged as a percentage of the aggregate
balance during the three months ended March 31, 2008, with growth of
approximately $44 million in money market accounts offset by a reduction of
approximately $42 million in CDs, as the Bank elected to utilize borrowings to
fund asset growth.
 
 During the three months ended March
31, 2009, principal repayments totaled $75.9 million on real estate loans and
$17.9 million on MBS.  During the three months ended March 31, 2008,
principal repayments totaled $99.6 million on real estate loans and $9.8 million
on MBS.  The decline in principal repayments on loans related to lower
borrower refinance activities, reflecting weakness in the local real estate
market.  The increase in principal paydowns on MBS resulted from the
purchase of $183.8 million of MBS during the year ended December 31, 2008, that
increased their average balance by $100.1 million during the three months ended
March 31, 2009 compared to the three months ended March 31, 2008.  The
Company does not presently believe that its future levels of principal
repayments will be materially impacted by problems currently experienced in the
residential mortgage market. See "Item 2 – Management's Discussion and Analysis
of Financial Condition and Results of Operations - Asset Quality" for a further
discussion of the Bank's asset quality.
 
 From December 2002 through February
2009, the Bank originated and sold multifamily residential mortgage and mixed
use loans in the secondary market to FNMA while retaining servicing and
generating fee income while it services the loans. The Bank underwrote these
loans using its customary underwriting standards, funded the loans, and sold
them to FNMA at agreed upon pricing.  Typically, the Bank sought to
sell loans with terms to maturity or repricing in excess of seven years from the
origination date since it did not desire to retain such loans in portfolio as a
result of the heightened interest rate risk they possessed.  Under the
terms of the sales program, the Bank retains a recourse exposure on these sold
loans. Once established, such amount continued to increase as long as the Bank
sold loans to FNMA under the program.  The Bank retains this exposure
until the portfolio of loans sold to FNMA is satisfied in its entirety or the
Bank funds claims by FNMA for the maximum loss exposure.  During the
three months ended March 31, 2008 the Bank sold FNMA $6.7 million of loans
pursuant to this program.
 
 During the three months ended March
31, 2009, the Company reduced its level of FHLBNY advances by $60.0 million, as
it elected to utilize liquidity provided by deposit inflows in order to reduce
its overall borrowing level during the period.  During the three
months ended March 31, 2008, the Company increased its REPO borrowings by $75.0
million and FHLBNY advances by $10.0 million, respectively.  These
borrowings were added in order to fund purchases of investment securities and
MBS during the period.  Contained within these added REPO borrowings
and FHLBNY advances were interest rate caps that provide a significant benefit
to their average cost in the event of an increase in short-term interest
rates.
 
 In the event that the Bank should
require funds beyond its ability to generate them internally, an additional
source of funds is available through use of its borrowing line at the
FHLBNY.  At March 31, 2009, the Bank had an additional potential
borrowing capacity of $450.3 million available provided it owned the minimum
required level of FHLBNY common stock (i.e., 4.5% of its outstanding
FHLBNY borrowings).
 
 The Bank is subject to minimum
regulatory capital requirements imposed by its primary regulator, The Office of
Thrift Supervision (the "OTS"), which, as a general matter, are based on the
amount and composition of an institution's assets. At March 31, 2009, the Bank
was in compliance with all applicable regulatory capital requirements and was
considered "well-capitalized" for all regulatory purposes.
 
 27
 The Company generally utilizes its
liquidity and capital resources primarily to fund the origination of real estate
loans, the purchase of mortgage-backed and other securities, the repurchase of
Holding Company common stock into treasury and the payment of quarterly cash
dividends to shareholders of the Holding Company's common
stock.  During the three months ended March 31, 2009 and 2008, real
estate loan originations totaled $83.7 million and $163.2 million,
respectively.  There were no purchases of investment securities
(excluding short-term investments and federal funds sold) and MBS during the
three months ended March 31, 2009.  Purchases of investment securities
(excluding short-term investments and federal funds sold) and MBS totaled $105.3
million during the three months ended March 31, 2008.  The decrease in
real estate loan originations and investment security and MBS purchases both
resulted from management's election to curb asset growth during the three months
ended March 31, 2009, and thus: 1) focus lending primarily upon retaining
existing loans that were nearing their contractual repricing; and 2) retain an
unusually high level of liquidity in order manage the balance sheet with greater
flexibility during the remainder of 2009, especially if deposit balances decline
as a result of their historically low offering rates.
 
 The Holding Company did not repurchase
any shares of its common stock during the three months ended March 31,
2009.  As of March 31, 2009, up to 1,124,549 shares remained available
for purchase under authorized share purchase programs.  Based upon the
$9.38 per share closing price of its common stock as of March 31, 2009, the
Holding Company would utilize $10.5 million in order to purchase all of the
remaining authorized shares.  For the Holding Company to complete
these share purchases, it would likely require dividend distributions from the
Bank.
 
 During
the three months ended March 31, 2009, the Company paid $4.6 million in cash
dividends on its common stock, relatively unchanged from the three months ended
March 31, 2008.
 
 Contractual
Obligations
 
 The Bank
is obligated for rental payments under leases on certain of its branches and
equipment and for minimum monthly payments under its current data systems
contract.   The Bank generally has outstanding at any time
significant borrowings in the form of FHLBNY advances and/or REPOS, and the
Holding Company has an outstanding $25.0 million non-callable subordinated note
payable due to mature in 2010, and $72.2 million of trust preferred borrowings
from third parties due to mature in April 2034, which are callable at any time
after April 2009.  The Holding Company currently does not intend to
call this debt.  None of these contractual obligations have changed
materially since December 31, 2008.  The Company additionally had a
reserve recorded related to unrecognized income tax benefits totaling $1.2
million at March 31, 2009.  The facts and circumstances surrounding
this obligation have not changed materially since December 31,
2008.  Please refer to Note 14 to the Company's consolidated audited
financial statements for the year ended December 31, 2008 for a further
discussion of the unrecognized income tax benefits.
 
 Off-Balance
Sheet Arrangements
 
 From December 2002 through February
2009, the Bank originated and sold multifamily residential mortgage loans in the
secondary market to FNMA while retaining servicing.  The Bank is
required to retain a recourse obligation on all loans sold under this program,
which will remain in effect until either the entire portfolio of loans sold to
FNMA is satisfied or the Bank funds claims by FNMA for the full balance of the
recourse obligation.
 
 In addition, as part of its loan
origination business, the Bank generally has outstanding commitments to extend
credit to third parties, which are subject to strict credit control
assessments.  Since many of these loan commitments expire prior to
funding, in whole or in part, the contract amounts are not estimates of future
cash flows.  The following table presents off-balance sheet
arrangements as of March 31, 2009:
 
 Less
      than One Year
                  One
      Year to Three Years
                  Over
      Three Years to Five Years
                  Over
      Five Years
                  
                  Total(Dollars
      in thousands)Credit
      Commitments:Available
      lines of credit
                  $47,903
                  $-
                  $-
                  $-
                  
                  $47,903Other
      loan commitments (1)
                  48,156
                  -
                  -
                  -
                  
                  48,156Other
      Commitments:Recourse
      obligation on loans sold to FNMA (1)
                  21,865
                  -
                  -
                  -
                  
                  21,865Total
      Commitments
                  $117,924
                  $-
                  $-
                  $-
                  
                  $117,924
 
 (1) In
accordance with FASB Interpretation No. 45 "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," as well as SFAS 5, "Accounting for Contingencies," as
of March 31, 2009, reserves related to other loan commitments and the recourse
obligation on loans sold to FNMA were $440,000 and $4.0 million, respectively,
and were recorded in other liabilities in the Company's condensed consolidated
statements of financial condition.
 
 28
 Asset
Quality
  General
  At both March 31, 2009 and December 31,
2008, the Company had neither whole loans nor collateral underlying MBS that
would be considered subprime loans, i.e., mortgage loans advanced
to borrowers who did not qualify for market interest rates because of problems
with their income or credit history.  See Note 9 to the condensed
consolidated financial statements for a discussion of impaired investment
securities and MBS.
 
 Monitoring and Collection of
Delinquent Loans
 
  Management
of the Bank reviews delinquent loans on a monthly basis and reports to its Board
of Directors regarding the status of all non-performing and otherwise delinquent
loans in the Bank's portfolio.
  
 The
Bank's loan servicing policies and procedures require that an automated late
notice be sent to a delinquent borrower as soon as possible after a payment is
ten days late in the case of a multifamily residential or commercial real estate
loan, or fifteen days late in connection with a one- to four-family or consumer
loan.  A second letter is sent to the borrower if payment has not been
received within 30 days of the due date.  Thereafter, periodic letters
are mailed and phone calls are placed to the borrower until payment is
received.  When contact is made with the borrower at any time prior to
foreclosure, the Bank will attempt to obtain the full payment due or negotiate a
repayment schedule with the borrower to avoid foreclosure.
 
 Accrual of interest is generally
discontinued on loans that have missed three consecutive monthly payments, at
which time the Bank reverses all previously accrued
interest.  Payments on non-accrual loans are generally applied to
principal.  Management may elect to continue the accrual of interest
when a loan is in the process of collection and the estimated fair value of the
collateral is sufficient to satisfy the outstanding principal balance (including
any outstanding advances related to the loan) and accrued interest. Loans are
returned to accrual status once the borrower has returned the loan to current
status in accordance with its original terms and conditions and doubt concerning
collectibility of future payments has been removed.
 
 Generally,
the Bank initiates foreclosure proceedings when a loan enters non-accrual
status.  At some point during foreclosure proceedings, the Bank
procures current appraisal information in order to prepare an estimate of the
fair value of the underlying collateral.  If a foreclosure action is
instituted and the loan is not brought current, paid in full, or refinanced
before the foreclosure action is completed, the property securing the loan is
generally sold.  It is the Bank's general policy to dispose of OREO
properties as quickly and prudently as possible in consideration of market
conditions, the physical condition of the property and any other mitigating
circumstances.
 
 Non-accrual
loans
 
 Within the Bank's portfolio,
non-accrual loans totaled $13.1 million and $7.4 million at March 31, 2009 and
December 31, 2008, respectively.  During the three months ended March
31, 2009, five loans totaling $7.1 million were added to non-accrual
status.  Partially offsetting this increase were two loans totaling
$1.3 million that were removed from non-accrual status as they were satisfied
during the period.  The difficulties experienced in both the national
real estate and financial services marketplaces combined to adversely impact the
metropolitan NYC area multifamily and commercial real estate markets during the
quarter ended March 31, 2009.
 
 Impaired
Loans
 
 Amended SFAS 114, provides guidelines
for determining and measuring impairment in loans.  A loan is
considered impaired when it is probable that all contractual amounts due will
not be collected in accordance with the terms of the loan. A loan is not deemed
to be impaired, even during a period of delayed payment by the borrower, if the
Bank ultimately expects to collect all amounts due, including interest accrued
at the contractual rate.  Generally, the Bank considers non-accrual
and troubled-debt restructured multifamily residential and commercial real
estate loans, along with non-accrual one- to four-family loans exceeding
$625,500, to be impaired. Non-accrual one-to four-family loans of $625,500 or
less, as well as all consumer loans, are considered homogeneous loan pools and
are not required to be evaluated individually for
impairment.  Impairment is measured by the amount that the carrying
balance of the loan, including all accrued interest, exceeds the estimate of the
fair value of the collateral.  A reserve is established on all
impaired loans to the extent of impairment and comprises a portion of the
allowance for loan losses. The recorded investment in loans deemed impaired was
approximately $24.1 million, consisting of twenty-one loans, at March 31, 2009,
compared to $8.9 million, consisting of fifteen loans, at December 31,
2008.  During the three months ended March 31, 2009, seven loans
totaling $16.4 million were added to
  29
 impaired
status, while one loan totaling $1.2 million was removed from impaired
status.  Of the $16.4 million added during the period, $9.3 million
represented problematic loans that remained on accrual status at March 31,
2009.  A combination of their problem payment history and concerns
over their realizable disposal value in the event of foreclosure resulted in
their being deemed impaired at March 31, 2009, with recommended reserves against
their principal balance being allocated within the allowance for loan
losses.  The $1.2 million loan removed from impaired status
represented a satisfaction that occurred during the period.  During
the three months ended March 31, 2008, two impaired loans totaling $1.0 million
were transferred from loans to OREO, and one impaired loan totaling $208,000 was
satisfied.  These reductions were partially offset by the addition of
one impaired loan totaling $1.0 million during the period.  At March
31, 2009 and December 31, 2008, reserves totaling $2.2 million and $1.1 million,
respectively, were allocated within the allowance for loan losses for impaired
loans.  At March 31, 2009, impaired loans exceeded non-accrual loans
by $10.9 million due to $11.4 million of impaired loans that remained on accrual
status at March 31, 2009, which were partially offset by $493,000 of one- to
four-family and consumer loans, which, while on non-accrual status, were not
deemed impaired since they had individual outstanding balances of $625,500 or
less.
 
 Troubled-Debt
Restructurings
 
 Under GAAP, the Bank is required to
account for certain loan modifications or restructurings as ''troubled-debt
restructurings.'' In general, the modification or restructuring of a loan
constitutes a troubled-debt restructuring if the Bank, for economic or legal
reasons related to the borrower's financial difficulties, grants a concession to
the borrower that it would not otherwise consider.  Current OTS
regulations require that troubled-debt restructurings remain classified as such
until either the loan is repaid or returns to its original terms.  The
Bank had no loans classified as troubled-debt restructurings at March 31, 2009
and December 31, 2008.
 
 OREO
 
 Property acquired by the Bank as
a result of a foreclosure on a mortgage loan or deed in lieu of foreclosure is
classified as OREO and recorded at the lower of the recorded investment in the
related loan or the fair value of the property on the date of acquisition, with
any resulting write down charged to the allowance for loan losses and any
disposition expenses charged to the valuation allowance for possible losses on
OREO. The Bank obtains a current appraisal on OREO property as soon as
practicable after it takes possession and will generally reassess the value of
OREO at least annually thereafter.  At both March 31, 2009 and
December 31, 2008, the Bank owned one OREO property with a recorded balance of
$300,000.  This property was sold in April 2009.
 
 The
following table sets forth information regarding non-accrual loans, OREO, and
troubled-debt restructurings at the dates indicated:
 
 At
      March 31, 2009
                At
      December 31, 2008Non-accrual
      loansOne-
      to four-family
                $427
                $566Multifamily
      residential
                4,848
                776Commercial
      real estate
                5,337
                3,439Mixed
      Use
                2,445
                2,590Cooperative
      apartment
                45
                26Other
                21
                5Total
      non-accrual loans
                13,123
                7,402OREO
                300
                300Total
      non-performing assets
                13,423
                7,702Troubled-debt
      restructurings
                -
                -Total
      non-performing assets andtroubled-debt
      restructurings
                $13,423
                $7,702Impaired
      loans
                $24,050
                $8,900Ratios:Total
      non-accrual loans to total loans
                0.40%
                0.22%Total
      non-accrual loans and troubled-debtrestructurings
      to total loans
                0.40
                0.22Total
      non-performing assets to total assets
                0.33
                0.19Total
      non-performing assets and troubled-debt
      restructurings to total assets
                0.33
                0.19
 
 Loans Delinquent Over 30
Days
 
 The Bank had a total of 25 real estate
and consumer loans, totaling $19.3 million, delinquent over 30 days (two
consecutive missed payments) at March 31, 2009, compared to 10
  30
  such
delinquent loans, totaling $4.8 million, at December 31,
2008.   The majority of the dollar amount of both non-accrual
loans and loans over 30 days delinquent were real estate loans.  The
growth in the dollar amount delinquent over 30 days from December 31, 2008 to
March 31, 2009 resulted primarily from a net increase of $14.4 million of 60 to
89 day delinquent real estate loans during the period.  The over 30
days delinquent levels fluctuate monthly, and are generally considered a less
accurate indicator of credit quality trends than non-accrual
loans.  However, given the considerable challenges facing the NYC area
multifamily and commercial real estate markets at March 31, 2009, it is
reasonable to expect that these delinquencies will remain above their December
31, 2008 level for the foreseeable future.
 
 Classified
Assets
 
  OTS regulations and Bank policy require
that loans and other assets possessing certain negative characteristics be
classified as ''Substandard,'' ''Doubtful'' or ''Loss'' assets. An asset is
considered ''Substandard'' if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged, if any.
''Substandard'' assets have a well-defined weakness or weaknesses and are
characterized by the distinct possibility that the Bank will sustain ''some
loss'' if deficiencies are not corrected. Assets classified as ''Doubtful'' have
all of the weaknesses inherent in those classified ''Substandard'' with the
added characteristic that the weaknesses present make ''collection or
liquidation in full,'' on the basis of current existing facts, conditions, and
values, ''highly questionable and improbable.'' Assets classified as ''Loss''
are those considered ''uncollectible'' and of such little value that their
continuance as assets without the establishment of a specific loss reserve is
not warranted.  Assets which do not expose the Bank to risk sufficient
to warrant classification in one of the aforementioned categories, but possess
potential weaknesses that deserve management's attention, are designated
''Special Mention.''
  
 The Bank's Loan Loss Reserve
Committee, subject to approval of the Bank's Board of Directors, establishes
policies relating to the internal classification of loans.  The Bank
believes that its classification policies are consistent with regulatory
requirements. All non-accrual and impaired loans and OREO are considered
classified assets. In addition, the Bank maintains a "watch list," comprised of
loans that, while performing, are characterized by weaknesses requiring special
attention from management and are considered to be potential problem
loans.  This list can include loans that have either been classified
as Substandard or Special Mention in previous years but have remained current
for at least 6 months, loans that have experienced irregular payment histories,
or troubled-debt restructurings to the extent that they do fall into either of
the previous groups.
 
 The Loan Loss Reserve Committee
reviews all loans in the Bank's portfolio quarterly, with particular emphasis on
problem loans, in order to determine whether any loans require reclassification
in accordance with applicable regulatory guidelines.  The Loan Loss
Reserve Committee reports its conclusions to the Bank's Board of Directors on a
quarterly basis.
 
 At
March 31, 2009, the Bank had one loan with an unpaid principal balance of
$246,000 classified as Loss.  This loan, a second mortgage, was
written down to a zero balance during the three months ended March 31,
2009.  At March 31, 2009, the Bank had no loans classified as
Doubtful.  At December 31, 2008, the Bank had no loans classified as
either Doubtful or Loss.  At March 31, 2009, the Bank had 26 loans
totaling $12.2 million designated Special Mention, compared to 27 loans totaling
$2.7 million at December 31, 2008, reflecting the addition of three commercial
real estate loans totaling $9.5 million during the three months ended March 31,
2009.  At March 31, 2009, the Bank had $13.2 million of loans and OREO
classified as Substandard, compared to $7.4 million at December 31, 2008,
primarily reflecting the increase in non-accrual loans during the
period.
 
  31
  
 The following table sets forth the
Bank's aggregate carrying value of assets classified as either Special Mention
or Substandard at March 31, 2009:
 
 Special Mention
                            
                            SubstandardNumber
                            Amount
                            
                            Number
                            Amount(Dollars
      in Thousands)Mortgage
      Loans:Multifamily
      residential
                            3
                            $1,550
                            
                            3
                            $4,521Commercial
      real estate
                            6
                            10,407
                            
                            4
                            5,372Mixed
      Use
                            -
                            -
                            
                            5
                            2,543One-
      to four-family
                            1
                            58
                            
                            4
                            418Cooperative
      apartment
                            4
                            151
                            
                            2
                            58Total
      Mortgage Loans
                            14
                            $12,166
                            
                            18
                            $12,912Other
      loans
                            12
                            7
                            
                            17
                            21OREO
                            -
                            -
                            
                            1
                            300Total
      loans and OREO
                            26
                            $12,173
                            
                            36
                            $13,233
 
 Problem Loans Serviced for
Other Financial Institutions That are Subject to Recourse
Exposure
 
 The Bank
services a pool of multifamily loans sold to FNMA with an outstanding principal
balance of $507.5 million at March 31, 2009.  This pool of loans was
subject to a recourse exposure totaling $21.9 million at March 31,
2009.  Within this pool of loans, the Bank had not received a payment
from the borrower in excess of 90 days on loans totaling $17.3 million at March
31, 2009, and has identified another $3.7 million of other problem
loans.  Under the terms of the servicing agreement with FNMA, the Bank
is obligated to fund FNMA all monthly principal and interest payments under the
original terms of the loans until the earlier of the following events: (1) the
loans have been fully satisfied or enter OREO status; or (2) the recourse
exposure is fully exhausted.  One of these problem loans, with an
aggregate outstanding principal balance of $13.2 million, was re-acquired by the
Bank from FNMA on April 27, 2009.  The property is currently under
contract of sale, with the existing mortgage to be assumed by the
purchaser.
 
 Allowance
for Loan Losses and Reserve Liability on Loan Origination
Commitments
 
 Management's
quarterly evaluation of the loan loss reserves takes into account not only
performance of the current loan portfolio, but also general credit conditions
and volume of new business, in determining the timing and amount of any future
loan loss provisions.
 
 The
allowance for loan losses was $18.4 million at March 31, 2009, up from $17.5
million at December 31, 2008.  In addition, the Bank had a reserve
liability related to loan origination commitments (recorded in other
liabilities) that totaled $440,000 at March 31, 2009 and $572,000 at December
31, 2008.  During the three months ended March 31, 2009, the Bank
recorded a provision of $2.6 million to its allowance for loan losses in order
to provide for additional inherent losses in the portfolio and loans committed
for funding at period end.  During the same period, the Bank also
recorded net charge-offs of approximately $1.9 million against its allowance for
loan losses, and reclassified $133,000 of its reserves related to loan
origination commitments to its allowance for loan losses due to the decline in
loan commitments from December 31, 2008 to March 31, 2009.   (See
"Item 2.  Management's Discussion and Analysis of Financial Condition
and Results of Operations – Critical Accounting Policies – Allowance for Loan
Losses" for a further discussion).
 
 Comparison
of Financial Condition at March 31, 2009 and December 31, 2008
 
 Assets.  Assets
totaled $4.04 billion at March 31, 2009, a decline of $14.8 million from total
assets of $4.06 billion at December 31, 2008.
 
 Real
estate loans designated to remain in portfolio declined $93.3 million during the
period.  At March 31, 2009, the Company designated $100.0 million of
loans previously originated and owned for sale to a third party financial
institution.  This sale was completed in April 2009.  Absent
this transaction, real estate loans (excluding the allowance for loan losses)
would have increased $6.7 million, as a result of real estate loan originations
of $83.7 million during the three months ended March 31, 2009, that exceeded
amortization and satisfactions of $75.9 million during the same
period.  In addition, MBS available-for-sale declined $14.0 million as
principal repayments of $17.9 million on these securities were partially offset
by an increase of $4.1 million in their market valuation during the three months
ended March 31, 2009.  Investment securities available-for-sale
declined $10.6 million, primarily as a result of the sale of $10.0 million of
municipal agency securities during the period.  The Company reduced
its outstanding FHLBNY borrowings by $60.0 million during the three months
  32
  ended
March 31, 2009 as it elected to utilize liquidity provided by deposit inflows in
order to reduce its overall borrowing level during the period.  As a
result of the decline in the FHLBNY borrowings, the Company's investment in
FHLBNY capital stock declined $2.7 million, reflecting an election to limit this
investment to the minimum level required to maintain its aggregate outstanding
FHLBNY borrowings.
 
 Partially offsetting these declines was
a net increase of $8.5 million in the combined balance of cash and due from
banks and federal funds sold, which represent the primary measure of the
Company's short-term liquidity.  This aggregate increase was due to
the Company's election to hold cash inflows from deposits highly liquid in order
to manage the balance sheet with greater flexibility during the remainder
2009.
 
 Liabilities.  Total
liabilities decreased $17.6 million during the three months ended March 31,
2009, reflecting declines of $60.0 million in FHLBNY advances, and $33.7 million
in escrow and other deposits, that were partially offset by an increase of $75.5
million in retail branch and Internet banking deposits during the
period.  The decline in escrow and other deposits resulted from the
payment of semi-annual real estate tax payments for mortgage loan customers in
early January 2009 (See "Item 2.  Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources" for a discussion of the increase in retail branch and Internet
banking deposits and the decline in FHLBNY advances during the
period).
 
 Stockholders'
Equity.  Stockholders' equity increased $2.8 million during the
three months ended March 31, 2009, due primarily to a reduction of $3.8 million
in the after-tax balance of accumulated other comprehensive loss (which
increases stockholders' equity), net income of $2.9 million, and amortization of
stock plan benefit expense of $740,000, which were partially offset by $4.6
million in cash dividends paid during the period.  The decline in the
balance of accumulated other comprehensive loss reflected the increase in
valuation of a great majority of the Company's available-for sale-investments
and MBS during the period.
 
 Comparison
of Operating Results for the Three Months Ended March 31, 2009 and
2008
 
 General.  Net
income was $2.9 million during the three months ended March 31, 2009, a decline
of $3.1 million from net income of $6.0 million during the three months ended
March 31, 2008.  During the comparative period, the provision for loan
losses increased $2.6 million, non-interest income declined $6.2 million and
non-interest expense increased $1.3 million, while net interest income increased
$4.9 million, resulting in a net reduction in pre-tax net income of $5.2
million.  Income tax expense decreased $2.1 million during the
comparative period due to the decline in pre-tax earnings.
 
 Net Interest
Income.The discussion of net interest income for the three
months ended March 31, 2009 and 2008 presented below should be read in
conjunction with the following tables, which set forth certain information
related to the condensed consolidated statements of operations for those
periods, and which also present the average yield on assets and average cost of
liabilities for the periods indicated.  The average yields and costs
were derived by dividing income or expense by the average balance of their
related assets or liabilities during the periods represented. Average balances
were derived from average daily balances. The yields include fees that are
considered adjustments to yields.
  33
  Analysis
of Net Interest Income
 
 Three
      Months Ended March 31,2009
                  
                  
                  2008Average
                  
                  
                  AverageAverageBalance
                  Interest
                  Yield/Cost
                  AverageBalance
                  Interest
                  Yield/CostAssets:
                  (Dollars
      In Thousands)Interest-earning
      assets:Real
      estate loans
                  $3,309,307
                  $48,329
                  5.84%
                  2,894,264
                  $43,066
                  5.95%Other
      loans
                  1,699
                  37
                  8.71
                  1,817
                  44
                  9.69Mortgage-backed
      securities
                  292,865
                  3,280
                  4.48
                  192,772
                  2,216
                  4.60Investment
      securities
                  22,806
                  245
                  4.30
                  35,655
                  708
                  7.94Federal
      funds sold and other short-term investments
                  227,015
                  503
                  0.89
                  195,616
                  2,196
                  4.49Total
      interest-earning assets
                  3,853,692
                  $52,394
                  5.44%
                  3,320,124
                  $48,230
                  5.81%Non-interest
      earning assets
                  186,070
                  
                  
                  192,600Total
      assets
                  $4,039,762
                  
                  
                  3,512,724Liabilities
      and Stockholders' Equity:Interest-bearing
      liabilities:Interest
      bearing checking accounts
                  $109,621
                  $407
                  1.51%
                  63,834
                  $410
                  2.58%Money
      Market accounts
                  712,311
                  3,596
                  2.05
                  670,662
                  5,956
                  3.56Savings
      accounts
                  272,893
                  353
                  0.52
                  271,839
                  367
                  0.54Certificates
      of deposit
                  1,130,672
                  9,856
                  3.54
                  1,057,803
                  11,235
                  4.26Borrowed
      Funds
                  1,321,340
                  14,042
                  4.31
                  995,888
                  11,031
                  4.44Total
      interest-bearing liabilities
                  3,546,837
                  28,254
                  3.23%
                  3,060,026
                  $28,999
                  3.80%Non-interest
      bearing checking accounts
                  96,116
                  
                  
                  88,893Other
      non-interest-bearing liabilities
                  117,737
                  
                  
                  95,293Total
      liabilities
                  3,760,690
                  
                  
                  3,244,212Stockholders'
      equity
                  279,072
                  
                  
                  268,512Total
      liabilities and stockholders' equity
                  $4,039,762
                  
                  
                  3,512,724Net
      interest income
                  
                  $24,140
                  
                  
                  $19,231Net
      interest spread
                  
                  
                  2.21%
                  
                  
                  2.01%Net
      interest-earning assets
                  $306,855
                  
                  
                  $260,098Net
      interest margin
                  
                  
                  2.51%
                  
                  
                  2.32%Ratio
      of interest-earning assets to interest-bearing liabilities
                  
                  
                  108.65%
                  
                  
                  108.50%
 
 Rate/Volume
Analysis
 
 Three Months Ended March 31, 2009Compared to Three MonthsEnded March 31, 2008 Increase/ (Decrease) Due to:Volume
                  Rate
                  Total(Dollars
      In thousands)Interest-earning
      assets:Real
      Estate Loans
                  $6,118
                  ($855)
                  $5,263Other
      loans
                  (2)
                  (5)
                  (7)Mortgage-backed
      securities
                  1,137
                  (73)
                  1,064Investment
      securities
                  (197)
                  (266)
                  (463)Federal
      funds sold and other short-term investments
                  210
                  (1,903)
                  (1,693)Total
                  $7,266
                  ($3,102)
                  $4,164Interest-bearing
      liabilities:Interest
      bearing checking accounts
                  $233
                  ($236)
                  ($3)Money
      market accounts
                  $301
                  ($2,661)
                  ($2,360)Savings
      accounts
                  4
                  (18)
                  (14)Certificates
      of deposit
                  739
                  (2,118)
                  (1,379)Borrowed
      funds
                  3,569
                  (558)
                  3,011Total
                  $4,846
                  ($5,591)
                  ($745)Net
      change in net interest income
                  $2,420
                  $2,489
                  $4,909
 
  34
 During
the three months ended March 31, 2009, FOMC monetary policies resulted in the
maintenance of the overnight federal funds rate in a range of 0.0% to
0.25%.  In addition, dislocations in the securitization marketplace
for loans secured by multifamily and commercial real estate reduced the overall
competition for the Bank's primary loan product, thus permitting origination
rates on these loans to remain unaffected by general reductions in interest
rates.  The combination of these events favorably impacted the
Company's net interest income and net interest margin during the three months
ended March 31, 2009 compared to the three months ended March 31,
2008.
 
 Interest
Income.  Interest income was $52.4 million during the three
months ended March 31, 2009, an increase of $4.2 million from $48.2 million
during the three months ended March 31, 2008.  This resulted primarily
from increases in interest income of $5.3 million and $1.1 million on real
estate loans and MBS, respectively, that were partially offset by a decline of
$1.7 million in interest income on federal funds sold and other short-term
investments, and $463,000 on investment securities.
 
 The
increase in interest income on real estate loans resulted from growth in their
average balance of $415.0 million during the three months ended March 31, 2009
compared to the three months ended March 31, 2008, reflecting originations of
$1.09 billion during 2008, which were partially offset by principal repayments
of $522.4 million and loan sales of $151.0 million during the same
period.
 
 The
increase in interest income on MBS resulted from an increase of $100.1 million
in their average balance during the three months ended March 31, 2009 compared
to the three months ended March 31, 2008.  The increase in average
balance resulted from $183.8 million of MBS purchases during 2008, that were
partially offset by $48.2 million in principal repayments during the same
period.
 
 The
decrease in interest income on federal funds sold and other short-term
investments resulted from a decline 360 basis points in their average yield
(reflecting lower federal funds and benchmark short-term interest rates during
the three months ended March 31, 2009 as a result of FOMC monetary policy
actions).  The decline in interest income on other short-term
investment securities reflected reductions of both $12.8 million in their
average balance and 364 basis points in their average yield.  The
decline in average yield reflected lower interest rates that resulted from FOMC
monetary policy actions.  The decline in their average balance
reflected management's preference to either purchase MBS or retain funds in
highly liquid short-term investments during the latter half of 2008 and the
three months ended March 31, 2009.
 
 Interest
Expense.  Interest expense decreased $745,000, to $28.3
million, during the three months ended March 31, 2009, from $29.0 million during
the three months ended March 31, 2008.  The decline resulted primarily
from reductions in interest expense of $1.4 million and $2.4 million on CDs and
money market accounts, respectively, which were partially offset by increased
interest expense of $3.0 million on borrowed funds.
 
 The
decline in interest expense on CDs resulted primarily from a decrease of 72
basis points in their average cost during the three months ended March 31, 2009
compared to the three months ended March 31, 2008.  The decline in
average cost reflected lower offering rates during the three months ended March
31, 2009 compared to the three months ended March 31, 2008, as short-term market
interest rates, which influence the pricing of CDs, declined significantly
throughout 2008, and remained near zero during the three months ended March 31,
2009.  The decrease in interest expense on money market accounts
similarly resulted from a decline of 155 basis points in their average cost, as
the Bank lowered offering rates on money market accounts during the period April
2008 through March 2009 in response to the significant reduction in benchmark
short-term interest rates that occurred throughout 2008 and remained in effect
during the March 2009 quarter.
 
 The
increase in interest expense on borrowed funds resulted from $325.5 million of
growth in their average balance during the three months ended March 31, 2009
compared to the three months ended March 31, 2008, as the Company added $388.1
million of REPOS and FHLBNY advances throughout 2008 in order to fund
operational requirements and help maintain pricing discipline on
deposits.  Partially offsetting the increased interest expense
resulting from the higher average balance of borrowed funds was a reduction of
62 basis points in their average cost during the comparative period attributable
to favorable borrowings undertaken in late 2008 and the first three months of
2009.
 
 Provision for Loan
Losses.  The provision for loan losses was $2.6 million during
the three months ended March 31, 2009, an increase of $2.6 million over the
provision of $60,000 recorded during the three months ended March 31,
2008.  This increase reflected the increase in non-accrual and other
problem loans from March 31, 2008 to March 31, 2009, along with deteriorating
conditions in the Bank's local real estate marketplace that resulted in a higher
level of estimated loan loss reserves on these non-accrual and other problem
loans.
 
 Non-Interest Income. Non-interest income
decreased $6.2 million, from income of $2.2 million during the three months
ended March 31, 2008 to a loss of $4.0 million during the three months ended
March 31, 2009.  The decline resulted primarily from $5.1 million of
OTTI recognized on investment securities during the three months ended March 31,
2009.  (See Note 9 to the Condensed Consolidated Financial Statements
for a further discussion of the OTTI).
 
 35
 In
addition, the Company experienced a reduction in net mortgage banking income of
$1.5 million during the three months ended March 31, 2009 compared to the three
months ended March 31, 2008, reflecting provisions to net mortgage banking
income of $1.5 million recognized to increase the reserve liability for losses
on loans sold to FNMA with recourse.  (See Note 8 to the Company's
Condensed Consolidated Financial Statements for a further discussion of the
provisions to the book reserve for losses on loans sold with
recourse).
 
 The
Company also experienced lower volumes of retail banking and loan administrative
activity during the March 2009 quarter compared to the March 2008 quarter, which
served to reduce service and other fee income by $191,000 during the
period.
 
 Non-Interest
Expense.  Non-interest expense was $13.6 million during the
three months ended March 31, 2009, an increase of $1.3 million from $12.3
million during the three months ended March 31, 2008.
 
 Salaries
and employee benefits increased $473,000 during the comparative period as a
result of increased staffing levels (primarily from an additional branch opened
in late 2008), and higher expenses associated with the employee retirement plan.
Occupancy and equipment expense increased by $516,000 during the comparative
period, reflecting the addition of the Brooklyn Heights branch that opened in
late 2008 and a building acquired in late 2008 for future operational
use.  Federal deposit insurance costs increased $744,000 as a result
of an insurance fund re-capitalization plan implemented by the FDIC in late
2006.  Other operating expenses declined $475,000 primarily as a
result of reduced marketing expenses as promotional activities were minimized
during the March 2009 quarter.
 
 Non-interest
expense was 1.35% of average assets during the three months ended March 31,
2009, compared to 1.40% during the three months ended March 31,
2008.  This ratio declined despite the increase in non-interest
expense during the comparative period due to growth of $527.0 million in average
assets.
 
 Income Tax
Expense.  Income tax expense declined $2.1 million during the
three months ended March 31, 2009 compared to the three months ended March 31,
2008, due primarily to a reduction of $5.2 million in pre-tax income during the
period.  The Company's customary consolidated effective tax rate
approximates 37%.  The impact of the non-recurring OTTI charges on
investment securities reduced the actual effective tax rate for the quarter
ended March 31, 2009 to 26%, while a non-recurring reduction of $662,000 in the
reserve for unrecognized tax benefits lowered the effective tax rate to 34%
during the quarter ended March 31, 2008.
 
 Outlook
for the Remainder of 2009
 
 Please
refer to the section entitled "Outlook" in Exhibit 99 to the Current Report on
Form 8-K furnished to the SEC on April 29, 2009 for a discussion of the
Company's outlook for financial reporting periods subsequent to March 31,
2009.
 
 Item
3.                      
Quantitative and Qualitative Disclosures About Market Risk
 
 Quantitative
and qualitative disclosures about market risk were presented at December 31,
2008 in Item 7A of the Company's Annual Report on Form 10-K, filed with the SEC
on March 16, 2009.  The following is an update of the discussion
provided therein.
 
 General.  Virtually
all of the Company's market risk continues to reside at the Bank
level.  The Bank's largest component of market risk remains interest
rate risk.  The Company is not subject to foreign currency exchange or
commodity price risk.  At March 31, 2009, the Company owned no trading
assets, nor did it conduct transactions involving derivative instruments
requiring bifurcation in order to hedge interest rate or market
risk.
 
 Assets, Deposit Liabilities and
Wholesale Funds.  There was no material change in the
composition of assets, deposit liabilities or wholesale funds from December 31,
2008 to March 31, 2009.
 
 Interest Sensitivity
Gap.  There was no material change in the computed one-year
interest sensitivity gap from December 31, 2008 to March 31, 2009.
 
 Interest Rate Risk Exposure (Net
Portfolio Value) Compliance.  At March 31, 2009, the Bank
continued to monitor the impact of interest rate volatility upon net interest
income and net portfolio value ("NPV") in the same manner as at December 31,
2008.  There were no changes in the Board-approved limits of
acceptable variance in the effect of interest rate fluctuations upon net
interest income and NPV at March 31, 2009 compared to December 31,
2008.
 
 The
analysis that follows presents the estimated NPV resulting from market interest
rates prevailing at a given quarter-end ("Pre-Shock Scenario"), and under four
other interest
  36
  rate
scenarios (each a "Rate Shock Scenario") represented by immediate, permanent,
parallel shifts in interest rates from those observed at March 31, 2009 and
December 31, 2008.  The analysis additionally presents a measurement
of the interest rate sensitivity at March 31, 2009 and December 31,
2008.  Interest rate sensitivity is measured by the basis point
changes in the various NPV ratios ("NPV Ratios") from the Pre-Shock Scenario to
the Rate Shock Scenarios.  NPV Ratios represent the NPV as a
percentage of the total value of assets determined under each respective Pre-
and Rate Shock Scenario.  An increase in the NPV Ratio is considered
favorable, while a decline is considered unfavorable.
 
 At
      March 31, 2009Net
      Portfolio Value
                  
                  
                  
                  
                  At
      December 31, 2008Dollar
                    Amount
                  Dollar
                    Change
                  Percentage
                    Change
                  
                  NPV
                    Ratio
                  Basis
      Point Change in NPV Ratio
                  
                  NPV
      Dollar
                    Amount
                  NPV
                    Ratio
                  Basis
      Point Change in NPV Ratio
                  Board
      Approved NPV Ratio Limit(Dollars
      in thousands)Rate
      Shock Scenario+
      200 Basis Points
                  $285,801
                  $(42,045)
                  -12.82%
                  
                  7.22%
                  (82)
                  
                  $236,751
                  6.02%
                  (126)
                  5.0%+
      100 Basis Points
                  313,445
                  (14,381)
                  -4.39
                  
                  7.80
                  (24)
                  
                  270,905
                  6.77
                  (51)
                  6.0Pre-Shock
      Scenario
                  327,826
                  -
                  -
                  
                  8.04
                  -
                  
                  296,834
                  7.28
                  -
                  7.0-
      100 Basis Points
                  320,109
                  (7,717)
                  -2.35
                  
                  7.77
                  (27)
                  
                  312,334
                  7.54
                  26
                  7.0-
      200 Basis Points
                  N/A
                  N/A
                  N/A
                  
                  N/A
                  N/A
                  
                  N/A
                  N/A
                  N/A
                  7.0
 
 The NPVs
presented above incorporate some asset and liability values derived from the
Bank’s valuation model, such as those for mortgage loans and time deposits, and
some asset and liability values that are provided by reputable independent
sources, such as values for the Bank's MBS and CMO portfolios, as well as its
putable borrowings.  The Bank's valuation model makes various
estimates regarding cash flows from principal repayments on loans and passbook
deposit balance decay rates at each level of interest rate
change.  The Bank's estimates for loan repayment levels are influenced
by the recent history of prepayment activity in its loan portfolio as well as
the interest rate composition of the existing portfolio, especially vis-à-vis
the current interest rate environment.  In addition, the Bank
considers the amount of fee protection inherent in the loan portfolio when
estimating future repayment cash flows.  Regarding passbook deposit
decay rates, the Bank tracks and analyzes the decay rate of its passbook
deposits over time and over various interest rate scenarios and then makes
estimates of its passbook deposit decay rate for use in the valuation
model.  No matter the care and precision with which the estimates are
derived, actual cash flows for passbooks, as well as loans, could differ
significantly from the Bank's estimates, resulting in significantly different
NPV calculations.
  The Bank
also generates a series of spot discount rates that are integral to the
valuation of the projected monthly cash flows of its assets and
liabilities.  The Bank's valuation model employs discount rates that
are representative of prevailing market rates of interest, with appropriate
adjustments it believes are suited to the heterogeneous characteristics of the
Bank’s various asset and liability portfolios.
 
 The
Pre-Shock Scenario NPV increased from $296.8 million at December 31, 2008 to
$327.8 million at March 31, 2009.  The NPV Ratio at March 31, 2009 was
8.04% in the Pre-Shock Scenario, an increase from the NPV Ratio of 7.28% in that
Scenario at December 31, 2008.  The increase in the Pre-Shock Scenario
NPV was due primarily to both an increase in the valuation of multifamily loans
(reflecting lower marketplace offering rates on such loans at March 31, 2009
compared to December 31, 2008), and a decline in the valuation of borrowings
(which positively impacts NPV) that resulted from higher quoted interest rates
from the FHLBNY for comparable borrowings at March 31, 2009 compared to December
31, 2008.
 
 The
Bank’s +200 basis point Rate Shock Scenario NPV increased from $236.8 million at
December 31, 2008 to $285.8 million at March 31, 2009.  The increase
resulted primarily from a more favorable valuation of multifamily loans at March
31, 2009 compared to December 31, 2008, reflecting a decline in their estimated
term to next interest rate repricing at March 31, 2009 compared to December 31,
2008.  Assets with a reduced term to next interest rate repricing
generate a more favorable NPV in a rising rate interest rate
environment.  As a result, the decline in the NPV of total assets from
the Pre-Shock Scenario to the +200 basis point Rate Shock Scenario was lower at
March 31, 2009 than December 31, 2008.
 
 The NPV
Ratio was 7.22% in the +200 basis point Rate Shock Scenario at March 31, 2009,
an increase from the NPV Ratio of 6.02% in the +200 basis point Rate Shock
Scenario at December 31, 2008.  The increase reflected the
aforementioned increase in the +200 basis point Rate Shock Scenario NPV during
the comparative period.
 
 At March
31, 2009, the interest rate sensitivity (i.e.,the basis point change
in the NPV Ratio calculated under the various Rate Shock Scenarios compared to
the Pre-Shock Scenario) in the +200 basis point Rate Shock Scenario was negative
82 basis points, compared to interest rate sensitivity of negative 126 basis
points in the +200 basis point Rate Shock Scenario at December 31,
2008.  The reduction in sensitivity was due primarily to a combination
of less sensitivity in the valuation of multifamily loans, as well as a larger
increase in the deposit intangible value in the +200 basis point Rate Shock
Scenario at March 31, 2009 compared to December 31, 2008 (reflecting lower
market offering rates at March 31, 2009 compared to December 31,
2008).
 
 37
 Item
4.  Controls and Procedures
 
 Management
of the Company, with the participation of its Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness as of March 31,
2009, of the Company's disclosure controls and procedures, as defined in Rules
13a-15(e) and 15(d)-15(e) under the Exchange Act.  Based upon this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective as of March
31, 2009 in ensuring that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Security and Exchange Commission’s rules and forms.
 
 Changes
in Internal Control Over Financial Reporting
 
 There was
no change in the Company's internal control over financial reporting that
occurred during the Company's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
 
 PART
II – OTHER INFORMATION
 
 Item
1.                      Legal
Proceedings
 
 In the
ordinary course of business, the Company is routinely named as a defendant in or
party to various pending or threatened legal actions or
proceedings.  Certain of these matters may seek substantial monetary
damages.  In the opinion of management, the Company is involved in no
actions or proceedings that will have a material adverse impact on its financial
condition and results of operations.
 
 Item
1A.   Risk Factors
 
 The
Company's  business may be adversely affected by conditions in the
financial markets and economic conditions generally.
 
 The
United States continues to be in a recession.  Business activity
across a wide range of industries and regions is greatly reduced and
individuals, local governments and many businesses are experiencing serious
financial difficulty.
 
 The
Company has been materially and adversely affected by significant declines in
the values of nearly all asset classes. Declining asset values, defaults on
mortgages and consumer loans, and the lack of market and investor confidence, as
well as other factors, have all combined to decrease the availability of
liquidity.  Some banks and other lenders have suffered significant
losses. The foregoing has significantly weakened the strength and liquidity of
many financial institutions worldwide.
 
 The
Company's financial performance generally, and in particular the ability of
borrowers to pay interest on and repay principal of outstanding loans and the
value of collateral securing those loans, is highly dependent upon the business
environment in the markets where the Company operates, in the New York
metropolitan area and in the United States as a whole. The business environment
continues to deteriorate for many of the Bank's borrowers.  It is
expected that the business environment in the New York metropolitan area, the
United States and worldwide will continue to deteriorate for the foreseeable
future. There can be no assurance that these conditions will improve in the near
term. Such conditions adversely affected and may continue to adversely affect
the credit quality of the Bank's loans, results of operations and financial
condition.
 
 The
Bank’s focus on multifamily and commercial real estate lending may subject it to
greater risk of an adverse impact on operations from a decline in the
economy.
 
 The
credit quality of the Bank's portfolio can have a significant impact on the
Company's earnings, results of operations and financial
condition.  The majority of loans in the Bank’s portfolio are secured
by multifamily residential property. Multifamily loans have traditionally been
viewed as exposing lenders to a greater risk of loss than one- to four-family
residential loans, due to the following concerns:  1) They typically
involve higher loan principal amounts and thus expose the Bank to a greater
potential impact of losses from any one loan or concentration of loans to one
borrower relative to the size of the Bank’s capital position; 2) their borrowers
often own several properties, and often a borrower experiencing financial
difficulties in connection with one income producing property may default on all
of his or her outstanding loans, even if the properties securing the other loans
are generating positive cash flow.  See "Item 3. Quantitative and
Qualitative Disclosures About Market Risk" for a further
discussion.
 
 As part
of the Company’s strategic plan, it increased its emphasis on commercial real
estate loans from 2002 through 2007. Loans secured by commercial real estate are
generally larger and involve a greater degree of risk than one- to four-family
and multifamily residential mortgage loans. Because payments on loans secured by
commercial real estate
  38
 are often
dependent upon successful operation or management of the collateral properties,
repayment of such loans is generally subject to a greater extent to prevailing
conditions in the real estate market or the economy. Further, the collateral
securing such loans may depreciate over time, may be difficult to appraise and
may fluctuate in value based upon the success of the business.
 
 Multifamily
and commercial real estate loans additionally involve a greater risk than one-
to four- family residential mortgage loans because economic and real estate
conditions, and government regulations such as rent control and rent
stabilization laws, which are outside the control of the borrower or the Bank,
could impair the value of the security for the loan or the future cash flow of
such properties. As a result, rental income might not rise sufficiently over
time to satisfy increases in the loan rate at repricing or increases in overhead
expenses (i.e.,
utilities, taxes, etc.). Impaired loans are thus difficult to identify before
they become problematic. In addition, if the cash flow from a collateral
property is reduced (e.g., if leases are not
obtained or renewed), the borrower’s ability to repay the loan and the value of
the security for the loan may be impaired.
 
 In
addition, in deciding whether to extend credit or enter into other transactions,
the Bank may rely on information furnished by or on behalf of customer and
counterparties, including financial statements, credit reports and other
financial information. Reliance on inaccurate or misleading financial
information could have a material adverse impact on the Company's business and,
in turn, its financial condition and results of operations.
 
 The
Company is dependent on economic and real estate conditions and geographic
concentration in its market area.
 
 The Bank
gathers deposits primarily from the communities and neighborhoods in close
proximity to its branches. The Bank lends primarily in the NYC metropolitan
area, although its overall lending area is much larger, and extends
approximately 150 miles in each direction from its corporate headquarters in
Brooklyn. The majority of the Bank’s mortgage loans are secured by properties
located in its primary lending area, approximately 75% of which are located in
the NYC boroughs of Brooklyn, Queens and Manhattan.  As a result of
this geographic concentration, the Bank’s results of operations depend largely
upon economic conditions in this area. A deterioration in economic conditions in
the NYC metropolitan area could have a material adverse impact upon the quality
of the Bank’s loan portfolio and the demand for its products and services, and,
accordingly, on the Company’s results of operations, cash flows, business,
financial condition and prospects.
 
 Conditions
in the real estate markets in which the collateral for the Bank’s mortgage loans
are located strongly influence the level of the Bank’s non-performing loans and
the value of its collateral. Real estate values are affected by, among other
items, fluctuations in general or local economic conditions, supply and demand,
changes in governmental rules or policies, the availability of loans to
potential purchasers and acts of nature. Declines in real estate markets have in
the past, and may in the future, negatively impact the Company’s results of
operations, cash flows, business, financial condition and
prospects.
 
 The
Bank’s allowance for loan losses may be insufficient.
 
 The
Bank’s allowance for loan losses is maintained at a level considered adequate by
management to absorb losses inherent in its loan portfolio. The amount of
inherent loan losses which could be ultimately realized is susceptible to
changes in economic, operating and other conditions, including changes in
interest rates, that could be beyond the Bank’s control. Such losses could
exceed current estimates. Although management believes that the Bank’s allowance
for loan losses is adequate, there can be no assurance that the allowance will
be sufficient to satisfy actual loan losses should such losses be realized. Any
increases in the allowance for loan losses will result in a decrease in net
income and, possibly, capital, and may have a material adverse effect on the
Bank’s financial condition and results of operations.
 
 Increases
in interest rates may reduce the Company’s profitability.
 
 The
Bank’s primary source of income is its net interest income, which is the
difference between the interest income earned on its interest earning assets and
the interest expense incurred on its interest bearing liabilities. The one-year
interest rate sensitivity gap is the difference between interest rate sensitive
assets maturing or repricing within one year and interest rate sensitive
liabilities maturing or repricing within one year, expressed as a percentage of
total assets. In a rising interest rate environment, an institution with a
negative gap would generally be expected, absent the effects of other factors,
to experience a greater increase in its cost of liabilities relative to its
yield on assets, and thus decrease its net interest income.
 
 Based
upon historical experience, if interest rates were to rise, the Bank would
expect the demand for multifamily loans to decline. Decreased loan origination
volume would likely negatively impact the Bank's interest income. In addition,
if interest rates were to rise rapidly and result in an economic decline, the
Bank would expect its level of non-performing loans to increase. Such an
increase in non-performing loans may result in an increase to the allowance for
loan losses and possible increased charge-offs, which would negatively impact
the Company's net income.
 
 39
 Further,
the actual amount of time before mortgage loans and MBS are repaid can be
significantly impacted by changes in mortgage redemption rates and market
interest rates. Mortgage prepayment, satisfaction and refinancing rates will
vary due to several factors, including the regional economy in the area where
the underlying mortgages were originated, seasonal factors, and other
demographic variables. However, the most significant factors affecting
prepayment, satisfaction and refinancing rates are prevailing interest rates,
related mortgage refinancing opportunities and competition.  The level
of mortgage and MBS prepayment, satisfaction and refinancing activity impacts
the Company's earnings due to its effect on fee income earned on prepayment and
refinancing activities, along with liquidity levels the Company will experience
to fund new investments or ongoing operations.
 
 As a
federally-chartered savings bank, the Bank is required to monitor changes in its
NPV, which is the difference between the estimated market value of its assets
and liabilities. In addition, the Bank monitors its NPV ratio, which is the NPV
divided by the estimated market value of total assets. The NPV ratio can be
viewed as a corollary to the Bank’s capital ratios. To monitor its overall
sensitivity to changes in interest rates, the Bank simulates the effect of
instantaneous changes in interest rates of up to 200 basis points on its assets
and liabilities. Interest rates do and will continue to fluctuate, and the Bank
cannot predict future FOMC actions or other factors that will cause interest
rates to vary.
 
 The
Company is subject to uncertain risks related to changes in laws, government
regulation and monetary policy.
 
 The
Holding Company and the Bank are subject to extensive supervision, regulation
and examination by the OTS, as the Bank's chartering agency, and the FDIC, as
its deposit insurer. Such regulation limits the manner in which the Holding
Company and Bank conduct business, undertake new investments and activities and
obtain financing. This regulation is designed primarily for the protection of
the deposit insurance funds and the Bank’s depositors, and not to benefit the
Bank or its creditors. The regulatory structure also provides the regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect
to capital levels, the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes.  Failure to
comply with applicable laws and regulations could subject the Holding Company
and Bank to regulatory enforcement action that could result in the assessment of
significant civil money penalties against the Holding Company and
Bank.  For further information regarding the laws and regulations that
affect the Holding Company and the Bank, see "Item 1. Business - Regulation -
Regulation of Federal Savings Associations," and "Item 1. Business - Regulation
- Regulation of Holding Company" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2008 filed on March 16, 2009.
 
 The
fiscal and monetary policies of the federal government and its agencies could
have a material adverse effect on the Company's results of operations. The Board
of Governors of the Federal Reserve System regulates the supply of money and
credit in the United States.  Its policies determine in significant
part the cost of funds for lending and investing and the return earned on those
loans and investments, both of which affect the net interest
margin.  Government action can materially decrease the value of the
Company's financial assets, such as debt securities, mortgages and mortgage
servicing rights.  Governmental policies can also adversely affect
borrowers, potentially increasing the risk that they may fail to repay their
loans.  Changes in Federal Reserve Board or governmental policies are
beyond the Company's control and difficult to predict; consequently, the impact
of these changes on the Company's activities and results of operations is
difficult to predict.
 
 Financial
institution regulation has been the subject of significant legislation in recent
years, and may be the subject of further significant legislation in the future,
none of which is within the control of the Holding Company or the Bank.
Significant new laws or changes in, or repeals of, existing laws may cause the
Company's results of operations to differ materially. Further, federal monetary
policy, particularly as implemented through the OTS, significantly affects
credit conditions for the Company, primarily through open market operations in
United States government securities, the discount rate for bank borrowings and
reserve requirements for liquid assets. A material change in any of these
conditions would have a material impact on the Bank, and therefore, on the
Company’s results of operations.
 
 Competition
from other financial institutions in originating loans and attracting deposits
may adversely affect profitability.
 
 The Bank
operates in a highly competitive industry that could become even more
competitive as a result of legislative, regulatory and technological changes,
and continued consolidation.
 
 The
Bank's retail banking and a significant portion of its lending business are
concentrated in the NYC metropolitan area. The NYC banking environment is
extremely competitive. The Bank’s competition for loans exists principally from
savings banks, commercial banks, mortgage banks and insurance
companies.  The Bank has faced sustained competition for the
origination of multifamily residential and commercial real estate loans.
Management anticipates that the current level of competition for multifamily
residential and commercial real estate loans will continue for the foreseeable
future, and this competition may inhibit the Bank’s ability to maintain its
current level and pricing of such loans.
 
 40
 Other
financial institutions that participate in the TARP Capital Purchase Program and
the TLGP may have a source of funding that costs less than market-rate funding
available to the Company.  The Company has declined to participate in
both the TARP Capital Purchase Program and the TLGP.  The Bank’s cost
of borrowing may be higher than competitors with weaker balance sheets but
government backing.  The Bank’s cost of funding may make it difficult
for it to complete with its government backed competitors.
 
 Clients
could pursue alternatives to the Bank's deposits, causing the Bank to lose a
relatively inexpensive source of funding.  The Bank gathers deposits
in direct competition with commercial banks, savings banks and brokerage firms,
many among the largest in the nation. In addition, it must also compete for
deposit monies against the stock markets, mutual funds, and other
securities.  Over the previous decade, consolidation in the financial
services industry, coupled with the emergence of Internet banking, has altered
the deposit gathering landscape and may increase competitive pressures on the
Bank.
 
 The
Bank may not be able to meet the cash flow requirements of its depositors and
borrowers or meet its operating cash needs.
 
 Liquidity
is the ability to meet cash flow needs on a timely basis at a reasonable cost.
The liquidity of the Bank is used to make loans and repay deposit liabilities as
they become due or are demanded by customers. Liquidity policies and limits are
established by the board of directors. The Holding Company's overall liquidity
position and the liquidity position of the Bank are regularly monitored to
ensure that various alternative strategies exist to cover unanticipated events
that could affect liquidity. Funding sources include deposits, repayments of
loans and MBS, investment security maturities and redemptions, advances from the
FHLBNY and REPOS. The Bank maintains a portfolio of securities that can be used
as a secondary source of liquidity. The Bank also can borrow through the Federal
Reserve Bank’s discount window. If the Bank was unable to access any of these
funding sources when needed, it might be unable to meet customers’ needs, which
could adversely impact the Company's financial condition, results of operations,
cash flows, and level of regulatory-qualifying capital.
 
 The
soundness of other financial institutions could adversely affect the
Company.
 
 The
Company's ability to engage in routine funding transactions could be adversely
affected by the actions and commercial soundness of other financial
institutions.  The Company has exposure to many different industries
and counterparties.  As a result, defaults by, or even rumors or
questions about, one or more financial services institutions, or the financial
services industry generally, have led to market-wide liquidity problems and
could lead to losses or defaults by the Company or by other
institutions.  There is no assurance that any such losses would not
materially and adversely affect the Company's results of
operations.
 
 Negative
public opinion could damage the Company's reputation and adversely impact its
business and revenues.
 
 As a
financial institution, the Bank's earnings and capital are subject to risks
associated with negative public opinion.  Negative public opinion
could result from the Company's actual or alleged conduct in any number of
activities, including lending practices, the failure of any product or service
sold by the Bank to meet customers’ expectations or applicable regulatory
requirements, corporate governance and acquisitions, or from actions taken by
government regulators and community organizations in response to those
activities.  Negative public opinion can adversely affect the
Company's ability to attract and/or retain clients and can expose the Company to
litigation and regulatory action.  Actual or alleged conduct by one of
the Company's businesses can result in negative public opinion about its other
businesses.  Negative public opinion could also affect the Company's
credit ratings, which are important to its access to unsecured wholesale
borrowings.  Significant changes in these ratings could change the
cost and availability of these sources of funding.
 
 The
impact of recently enacted and proposed legislation and government programs to
stabilize the financial markets cannot be predicted at this time.
 
 On
October 3, 2008, former President Bush signed the EESA into law in response to
the problems affecting the banking system and financial markets. Pursuant to the
EESA, Treasury was granted the authority to, among other things, purchase up to
$700 billion of troubled assets (including mortgages, MBS and certain other
financial instruments) from financial institutions for the purpose of
stabilizing and providing liquidity to the U.S. financial markets.  On
October 14, 2008, Treasury, the Federal Reserve Bank ("FRB") and the FDIC issued
a joint statement announcing additional steps aimed at stabilizing the financial
markets.  Initially, Treasury announced the TARP Capital Purchase
Program, a $250 billion voluntary capital purchase program available to
qualifying financial institutions that sell preferred shares to
Treasury.  In addition, the FDIC announced that its Board of
Directors, under the authority to prevent "systemic risk" in the U.S. banking
system, approved the TLGP, intended to strengthen confidence and encourage
liquidity in the banking system by permitting the FDIC to (i) guarantee certain
newly issued senior unsecured debt issued by participating institutions under
the DGP, and (ii) fully insure non-interest bearing transaction deposit accounts
held at participating FDIC-insured institutions, regardless of dollar amount
under the TAGP.  Third, to further increase access to funding for
businesses in all sectors of the economy, the FRB announced further details of
its Commercial Paper Funding Facility program ("CPFF"), which provides a broad
backstop for the commercial paper market.  The Company does not
currently participate in the TAGP, CPP, DGP or CPFF.
 
 41
 On
February 10, 2009, in a statement to the Senate Banking Committee Hearing,
Treasury Secretary Timothy Geithner outlined a Financial Stability Plan to
restore stability to the U.S. financial system.  The Financial
Stability Plan includes a variety of measures aimed at the broader credit
markets and includes the creation of a comprehensive housing program to
forestall foreclosures and stabilize the residential mortgage
market.  In addition, on February 11, 2009, the OTS urged
OTS-regulated institutions to suspend foreclosures on owner-occupied homes until
the Financial Stability Plan’s “home loan modification program” is finalized in
the next few weeks.  On February 18, 2009, President Obama announced
the Administration’s Homeowner Affordability and Stability Plan, (the
"HASP").  The HASP aims to accomplish the following three key
objectives: (i) refinance mortgages of up to 4 to 5 million "responsible
homeowners" to prevent additional foreclosures; (ii) provide a $75 billion
initiative to help up to 3 to 4 million "at-risk homeowners" primarily through
the use of uniform loan modifications; and (iii) help maintain low mortgage
rates by strengthening confidence in FNMA and Freddie Mac.  Mortgage
lenders may participate in the program on a voluntary basis.
 
 On
January 27, 2009, the House Judiciary Committee approved H.R. 200, the "Helping
Families Save Their Homes in Bankruptcy Act of 2009" ("Bankruptcy
Legislation").  The Bankruptcy Legislation would grant a judge the
ability to modify the terms of a mortgage for a homeowner in Chapter 13
bankruptcy.  Under the proposed Bankruptcy Legislation, borrowers
would be eligible to have a bankruptcy judge reduce the principal balance on
their home loan.  If any such borrower resells his or her home within
five years, the borrower will be required to share the proceeds with the
lender.
 
 The
Company cannot predict the actual impact that the foregoing or any other
governmental program will have on the financial markets.  The failure
of the financial markets to stabilize and a continuation or worsening of current
financial market conditions could materially and adversely affect the Company's
business, financial condition, results of operations, access to credit or the
trading price of the Holding Company's common stock.  In addition, the
initiatives of President Obama's administration, and the possible enactment of
the Bankruptcy Legislation as proposed, could materially and adversely affect
the Company's financial condition and results of operations.
 
 Item
2.                      Unregistered
Sales of Equity Securities and Use of Proceeds
 
 (c)
              The
      Holding Company did not repurchase any shares of its common stock into
      treasury during the three months ended March 31, 2009.  No
      existing repurchase programs expired during the three months ended March
      31, 2009, nor did the Company terminate any repurchase programs prior to
      expiration during the quarter.  As of March 31, 2009, the
      Company had an additional 1,124,549 shares remaining eligible for
      repurchase under its twelfth stock repurchase program, which was publicly
      announced in June 2007.
 
 Item
3.                      Defaults
Upon Senior Securities
 
 None.
 
 Item
4.                      Submission
of Matters to a Vote of Security Holders
 
 None.
 
 Item
5.                      Other
Information
 
 None.
 42
 Item
6.                      Exhibits
 
 Exhibit
Number
 
 3(i)
                
                Amended
      and Restated Certificate of Incorporation of Dime Community Bancshares,
      Inc. (1)3(ii)
                
                Amended
      and Restated Bylaws of Dime Community Bancshares, Inc.4.1
                
                Amended
      and Restated Certificate of Incorporation of Dime Community Bancshares,
      Inc. [See Exhibit 3(i) hereto]4.2
                
                Amended
      and Restated Bylaws of Dime Community Bancshares, Inc. [See Exhibit 3(ii)
      hereto]4.3
                
                Draft
      Stock Certificate of Dime Community Bancshares,
      Inc.  (2)4.4
                
                Certificate
      of Designations, Preferences and Rights of Series A Junior Participating
      Preferred Stock (3)4.7
                
                Second
      Amended and Restated Declaration of Trust, dated as of July 29, 2004, by
      and among Wilmington TrustCompany,
      as Delaware Trustee, Wilmington Trust
                  Company as Institutional Trustee, Dime Community Bancshares,Inc.,
      as Sponsor, the Administrators of Dime Community Capital Trust I and the
      holders from time to
                  time of undividedbeneficial
      interests in the assets of Dime Community Capital Trust I
    (8)4.8
                
                Indenture,
      dated as of March 19, 2004, between Dime Community Bancshares, Inc. and
      Wilmington Trust Company, astrustee
      (8)4.9
                
                Series
      B Guarantee Agreement, dated as of July 29, 2004, executed and delivered
      by Dime Community Bancshares,Inc.,
      as Guarantor and Wilmington Trust Company,
                  as Guarantee Trustee, for the benefit of the holders from time totime
      of the Series B Capital Securities of Dime Community Capital Trust I
      (8)10.1
                
                Amended
      and Restated Employment Agreement between The Dime Savings Bank of
      Williamsburgh and Vincent F.Palagiano
      (15)10.2
                
                Amended
      and Restated Employment Agreement between The Dime Savings Bank of
      Williamsburgh and Michael P.Devine
      (15)10.3
                
                Amended
      and Restated Employment Agreement between The Dime Savings Bank of
      Williamsburgh andKenneth
      J. Mahon (15)10.4
                
                Employment
      Agreement between Dime Community Bancorp, Inc. and Vincent F. Palagiano
      (15)10.5
                
                Employment
      Agreement between Dime Community Bancorp, Inc. and Michael P.
      Devine  (15)10.6
                
                Employment
      Agreement between Dime Community Bancorp, Inc. and Kenneth J. Mahon
      (15)10.7
                
                Form
      of Employee Retention Agreement by and among The Dime Savings Bank of
      Williamsburgh, Dime CommunityBancorp,
      Inc. and certain officers (4)10.7(i)
                
                Amendment
      to Form of Employee Retention Agreement by and among The Dime Savings Bank
      of Williamsburgh, Dime Community Bancorp, Inc. and certain officers
      (15)10.8
                
                The
      Benefit Maintenance Plan of Dime Community Bancorp, Inc.
    (15)10.9
                
                Severance
      Pay Plan of The Dime Savings Bank of Williamsburgh (15)10.10
                
                Retirement
      Plan for Board Members of Dime Community Bancorp, Inc.
  (15)10.11
                
                Dime
      Community Bancorp, Inc. 1996 Stock Option Plan for Outside Directors,
      Officers and Employees, as amendedby
      amendments number 1 and 2 (5)10.12
                
                Recognition
      and Retention Plan for Outside Directors, Officers and Employees of Dime
      Community Bancorp, Inc., asamended
      by amendments number 1 and 2 (5)10.13
                
                Form
      of stock option agreement for Outside Directors under Dime Community
      Bancshares, Inc. 1996 and 2001Stock
      Option Plans for Outside Directors, Officers and
                  Employees and the 2004 Stock Incentive Plan. (5)10.14
                
                Form
      of stock option agreement for officers and employees under Dime Community
      Bancshares, Inc. 1996 and 2001Stock
      Option Plans for Outside Directors, Officers and
                  Employees and the 2004 Stock Incentive Plan (5)10.15
                
                Form
      of award notice for outside directors under the Recognition and Retention
      Plan for Outside Directors, Officersand
      Employees of Dime Community Bancorp, Inc. (5)10.16
                
                Form
      of award notice for officers and employees under the Recognition and
      Retention Plan for Outside Directors,Officers
      and Employees of Dime Community
                  Bancorp, Inc. (5)10.17
                
                Financial
      Federal Savings Bank Incentive Savings Plan in RSI Retirement Trust
      (6)10.18
                
                Financial
      Federal Savings Bank Employee Stock Ownership Plan (6)10.20
                
                Dime
      Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors,
      Officers and Employees (7)10.21
                
                Dime
      Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside
      Directors, Officers and Employees (14)10.22
                
                Waiver
      executed by Vincent F. Palagiano (11)10.23
                
                Waiver
      executed by Michael P. Devine (11)10.24
                
                Waiver
      executed by Kenneth J. Mahon (11)10.25
                
                Form
      of restricted stock award notice for officers and employees under the 2004
      Stock Incentive Plan (10)10.26
                
                Employee
      Retention Agreement between The Dime Savings Bank of Williamsburgh, Dime
      Community Bancshares, Inc. and Christopher D. Maher
(15)10.27
                
                Form
      of restricted stock award notice for outside directors under the 2004
      Stock Incentive Plan (10)
  43
  10.28
                
                Employee
      Retention Agreement between The Dime Savings Bank of Williamsburgh, Dime
      Community Bancshares, Inc.  and Daniel Harris
    (15)10.29
                
                Dime
      Community Bancshares, Inc. Annual Incentive Plan (15)10.30
                
                Amendment
      to the Dime Savings Bank of Williamsburgh 401(K) Plan
  (15)10.31
                
                Employee
      Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain
      Affiliates (15)12.1
                
                Computation
      of ratios of earnings to fixed charges.31(i).1
                
                Certification
      of Chief Executive Officer Pursuant to Rule
      13a-14(a)/15d-14(a)31(i).2
                
                Certification
      of Chief Financial Officer Pursuant to Rule
      13a-14(a)/15d-14(a)32.1
                
                Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. 135032.2
                
                Certification
      of Chief Financial Officer Pursuant to 18 U.S.C.
  1350
 
 (1)
                Incorporated
      by reference to the registrant's Transition Report on Form 10-K for the
      transition period ended December 31, 2002 filed on March 28,
      2003.(2)
                Incorporated
      by reference to the registrant's Annual Report on Form 10-K for the fiscal
      year ended June 30, 1998 filed on September 28, 1998.(3)
                Incorporated
      by reference to the registrant's Current Report on Form 8-K dated April 9,
      1998 and filed on April 16, 1998.(4)
                Incorporated
      by reference to Exhibits to the registrant's Annual Report on Form 10-K
      for the fiscal year ended June 30, 1997 filed on September 26,
      1997.(5)
                Incorporated
      by reference to the registrant's Annual Report on Form 10-K for the fiscal
      year ended June 30, 1997 filed on September 26, 1997, and the Current
      Reports on Form 8-K filed on March 22, 2004 and March 29,
      2005.(6)
                Incorporated
      by reference to the registrant's Annual Report on Form 10-K for the fiscal
      year ended June 30, 2000 filed on September 28, 2000.(7)
                Incorporated
      by reference to the registrant's Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2003 filed on November 14,
    2003.(8)
                Incorporated
      by reference to Exhibits to the registrant’s Registration Statement No.
      333-117743 on Form S-4 filed on July 29, 2004.(9)
                Incorporated
      by reference to the registrant's Annual Report on Form 10-K for the fiscal
      year ended December 31, 2003 filed on March 15, 2004.(10)
                Incorporated
      by reference to the registrant's Current Report on Form 8-K filed on March
      22, 2005.(11)
                Incorporated
      by reference to the registrant's Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2005 filed on May 10, 2005.(12)
                Incorporated
      by reference to the registrant's Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2006 filed on November 9,
  2006.(13)
                Incorporated
      by reference to the registrant's Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2008 filed on May 12, 2008.(14)
                Incorporated
      by reference to the registrant's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2008 filed on August 8, 2008.(15)
                Incorporated
      by reference to the registrant's Annual Report on Form 10-K for the fiscal
      year ended December 31, 2008 filed on March 16,
  2009.
 
  44
  
 
 SIGNATURES
 
 
 
 Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
 
 
 Dime
      Community Bancshares, Inc.
 
 
 
 Dated:
      May 11, 2009
                
                By:/s/ VINCENT F.
PALAGIANOVincent
      F. PalagianoChairman
      of the Board and Chief Executive
Officer
 
 
 Dated:
      May 11, 2009
                
                By:/s/ KENNETH J. MAHONKenneth
      J. MahonFirst
      Executive Vice President and Chief Financial Officer (Principal Accounting
      Officer)
 
  45