Fitch Affirms Dime Community's Ratings; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Dime Community Bancshares, Inc.'s (DCOM) long- and short-term Issuer Default Ratings (IDR) at 'BBB' and 'F2' respectively. The Rating Outlook remains Stable. A full list of rating actions follows at the end of this release.

Fitch's affirmation of DCOM's ratings reflects strong asset quality, a sufficient level of capital and loan loss reserves as well as stable profitability metrics. The Stable Outlook reflects the consistency of credit and earnings performance and is also indicative of management adopting a more conservative approach to capital management.

Asset quality remains the main strength of the company, particularly after demonstrating resilience during the current economic cycle. As of June 30, 2010, the NPA ratio was just 57bps, and annualized charge-offs for the six months ended June 30, 2010 were 34bps of average loans. DCOM's concentration in the New York City (NYC) multi-family real estate market is mitigated by low LTVs, generally around 60%, and the rent-controlled nature of many of the properties backing the loans. Over the coming year, Fitch expects asset quality to remain relatively strong as the NYC real estate market starts to show signs of recovery. The management team's familiarity and experience with DCOM's current market is seen as one of the key positive drivers for asset quality. Although not expected, any significant changes in the mix of business, either by product type or geography, would be carefully considered by Fitch to determine any potential ratings impact.

While profitability metrics have improved notably over the past year, Fitch does not view this as a sustainable long-term trend. Like many of its peers, DCOM has benefitted from a steep yield curve and easing of competitive pressures related to deposit pricing and conduits leaving the NYC real estate lending market. Both of these factors are likely to reverse as the banking industry continues to recover and the Federal Reserve begins to tighten interest rate policy. Although DCOM's tangible equity is modestly lower than similarly rated peers (6.46% at June 30, 2010), Fitch believes DCOM's regulatory capital levels are sufficient in the context of good reserve coverage and modest NCO levels. Management's decision to curtail stock repurchase activity and adopt a controlled growth strategy is viewed positively by Fitch.

Although Fitch regards DCOM's liquidity management as adequate, the holding company would benefit from a more formalized liquidity management policy. Moreover, the looming regulatory changes emerging from the Dodd-Frank Act are likely to have a meaningful impact on DCOM's regulatory regime and capital requirements. As a thrift holding company, DCOM was not subjected to specific regulatory capital requirements at the holding company level. However, with the elimination of the Office of Thrift Supervision under the Dodd-Frank Act, Fitch expects that DCOM will become subject to stricter regulatory capital requirements. The specifics of these requirements have not yet been detailed by the Federal Reserve, however, Fitch's ratings incorporate DCOM's ability to meet any new regulatory capital standards. Although not an immediate issue, Fitch will evaluate how management responds to these changes in terms of its growth and capital strategies.

Factors that could have positive rating implications on DCOM's ratings and/or Outlook include:

--Stronger regulatory and tangible (Fitch Core Capital) capital ratios;

--Ability to sustain a consistent level of profitability, particularly in a higher interest rate environment;

--Institution of a more formalized liquidity management policy, which, in Fitch's opinion, will provide for more robust liquidity at the holding company.

Factors that could have negative implications on the ratings and/or Outlook include:

--Deterioration in credit metrics that deviates materially from DCOM's historical norms;

--Inability to sustain or improve current levels of regulatory and tangible capital;

--Changes to the NYC rent stabilization laws that could negatively impact vacancy rates and introduce more volatility into cash flows and property valuations.

With $4.1 billion in assets, DCOM is a Brooklyn, NY based thrift holding company whose sole subsidiary is Dime Savings Bank of Williamsburgh, operates 24 branches in the New York City metropolitan area.

Fitch has affirmed the following ratings with a Stable Outlook:

Dime Community Bancshares, Inc.

--Long-term Issuer Default Rating (IDR) at 'BBB';

--Short-term IDR at 'F2';

--Individual rating at 'B/C';

--Support at '5';

--Support Floor at 'NF'.

Dime Savings Bank of Williamsburgh

--Long-term IDR at 'BBB';

--Long-term Deposits at 'BBB+';

--Short-Term IDR at 'F2';

--Short-Term Deposits at 'F2';

--Individual Rating at 'B/C';

--Support at '5';

--Support Floor at 'NF';

Dime Community Capital Trust I

--Preferred stock at 'BB+'

Additional information is available at 'www.fitchratings.com'

This rating action reflects the application of Fitch's current criteria which is available on Fitch's web site at 'www.fitchratings.com' and specifically includes:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010)

--'Bank Holding Companies' (Dec. 30, 2009)

--'Rating Hybrid Securities' (Dec. 29, 2009)

--'Equity Credit for Hybrids & Other Capital Securities' (Dec. 29, 2009)

Related Research:

--'U.S. Banking Quarterly, 1Q10', June 2, 2010

--'U.S. Bank CRE Exposure Review', Nov. 16, 2009

Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324

Rating Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493086

Equity Credit for Hybrids & Other Capital Securities - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493112

U.S. Banking Quarterly 1Q10 -- Finding Stability

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=530107

U.S. Bank CRE Exposure Review (Midsized Regional Banks Most at Risk)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=485006

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or
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or
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