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Page
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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1
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FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2008 AND 2007 AND
FOR THE YEAR ENDED DECEMBER 31, 2008:
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Statements
of Net Assets Available for Plan Benefits
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2
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Statement
of Changes in Net Assets Available for Plan Benefits
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3
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Notes
to Financial Statements
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4-9
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SUPPLEMENTAL
SCHEDULE:
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Form 5500, Schedule H , Part IV, Line 4i - Schedule of Assets (Held At End
Of Year)as of December 31, 2008
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10
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SIGNATURES
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11
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As
of December 31, 2008
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As
of December 31, 2007
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||||||
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Allocated
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Unallocated
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Total
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Allocated
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Unallocated
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Total
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ASSETS:
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Cash
equivalents
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$6,433
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-
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$6,433
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$931
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-
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$931
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Non-participant
directed investments, at fair value
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|||||||
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Federated
Prime Value Obligations Fund
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90,337
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-
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90,337
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567,383
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-
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567,383
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Dime
Community Bancshares, Inc. common stock
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26,562,175
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$17,670,739
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44,232,914
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25,330,994
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$17,964,606
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43,295,600
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Sub-total
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26,658,945
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17,670,739
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44,329,684
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25,899,308
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17,964,606
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43,863,914
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Contributions
receivable from the Dime Savings Bank of
Williamsburgh
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-
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-
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-
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-
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455,038
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455,038
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TOTAL
ASSETS
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26,658,945
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17,670,739
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44,329,684
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25,899,308
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18,419,644
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44,318,952
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LIABILITIES:
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Borrowing
from Dime Community Bancshares, Inc.
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-
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4,324,985
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4,324,985
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-
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4,443,640
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4,443,640
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Due
to The Dime Savings Bank of Williamsburgh 401(k)
Plan
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-
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-
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-
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-
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455,038
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455,038
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Cash
dividend payable to participants
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-
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-
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-
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268,771
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203,716
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472,487
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TOTAL
LIABILITIES
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-
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4,324,985
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4,324,985
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268,771
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5,102,394
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5,371,165
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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$26,658,945
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$13,345,754
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$40,004,699
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$25,630,537
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$13,317,250
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$38,947,787
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Allocated
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Unallocated
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Total
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ADDITIONS:
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Interest and dividend income
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$1,099,008
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$787,798
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$1,886,806
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Net appreciation in the fair value of Dime Community Bancshares, Inc.
common stock
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1,308,718
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745,595
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2,054,313
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Net
investment income
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2,407,726
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1,533,393
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3,941,119
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Contributions from Dime Savings Bank of Williamsburgh -
net
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-
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449,875
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449,875
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Total
additions
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2,407,726
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1,983,268
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4,390,994
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DEDUCTIONS:
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Cash disbursed for interest expense on borrowings from Dime
Community Bancshares, Inc.
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24,271
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331,220
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355,491
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Benefit
payments, net
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2,394,503
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584,082
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2,978,585
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Expenses
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6
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-
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6
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Total
deductions
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2,418,780
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915,302
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3,334,082
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TRANSFERS:
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Allocation of 78,155 shares of Dime CommunityBancshares, Inc. common stock
to participant accounts, net
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1,039,462
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(1,039,462)
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-
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Total
transfers
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1,039,462
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(1,039,462)
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-
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INCREASE
IN NET ASSETS AVAILABLE FOR PLAN
BENEFITS
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1,028,408
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28,504
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1,056,912
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NET
ASSETS AVAILABLE FOR PLAN BENEFITS
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Beginning
of year
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25,630,537
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13,317,250
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38,947,787
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End
of year
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$26,658,945
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$13,345,754
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$40,004,699
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1.
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SUMMARY
DESCRIPTION OF PLAN
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a.
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General
- The ESOP was adopted by the Board of Directors of the Dime Savings Bank
of Williamsburgh (the “Bank”) on February 8, 1996, with an effective date
of July 1, 1995. Dime Community Bancshares, Inc. (the
"Company") acts as the Plan Sponsor for the ESOP, and members of
management of the Company or its direct subsidiaries serve as Plan
Administrator for the ESOP. The Employee Benefits Committee,
comprised of members of both the Company's Board of Directors and
management, oversees the operation and administration of the
ESOP.
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The
ESOP is designed to comply with Section 4975(e)(7) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended (the “Code”),
and is subject to the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). The ESOP is
administered by the Plan Administrator, who is appointed by the
Compensation Committee of the Company (the "Compensation
Committee"). Since February 2009, Pentegra Asset Management
("Pentegra") has served as trustee for the ESOP. From September
2002 through January 2009, RS Group Trust Company served as the trustee
for the ESOP. Pentegra acquired RS Group Trust Company on
August 18, 2008.
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In
order to purchase the shares of the Company’s common stock, the ESOP
obtained a borrowing from the Company of $11,638,000, which originally was
to be repaid over a ten-year period at a fixed interest rate of
8.0%. Effective July 1, 2000, the maturity of the ESOP
loan was extended from June 2006 to December 2025, with the continued
option of prepayment. Repayments of the borrowing are made from
fully deductible contributions from the Bank to the ESOP. As
the ESOP makes each payment of principal on the borrowing, an appropriate
percentage of stock will be allocated to eligible participants accounts in
accordance with applicable regulations under the Code.
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| The borrowing is collateralized by the unallocated shares of the Company's stock held by the ESOP. The Company, as lender, has no rights against shares once they are allocated under the ESOP. Accordingly, the financial statements of the ESOP for the years ended December 31, 2008 and 2007, present separately the assets and liabilities and changes therein pertaining to: |
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(1)
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the
accounts of employees with vested rights in allocated stock (Allocated)
and
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(2)
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stock
not yet allocated to employees
(Unallocated).
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b.
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Eligibility
and Participation - Eligible employees, defined as salaried, common
law employees of the Company or the Bank and its subsidiaries, who have
completed a period of service of at least
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| one year, automatically become eligible participants of the ESOP. An employee is not an eligible employee if he or she is compensated principally on an hourly, daily, commission fee or retainer basis, or has waived any claim to membership in the ESOP. |
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c.
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Contributions - The Company or
the Bank shall contribute to the ESOP an amount which, at minimum, shall
serve to finance the ESOP’s obligation under its outstanding borrowing
from the Company. The Company or the Bank may contribute
additional amounts, if designated by the Compensation Committee, to the
ESOP, which shall be applied as a prepayment of principal or interest for
the outstanding borrowing from the Company. Any additional
contributions approved by the Employee Benefits Committee shall be treated
as an ESOP contribution and shall be allocated among the accounts of
eligible participants in accordance with a pre-established
formula. Participant contributions are not
permitted.
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| The Company or Bank also makes a 100% vested discretionary cash contribution to all participants in the ESOP. This contribution is automatically transferred to the Dime Savings Bank of Williamsburgh 401(k) Plan (the “401(k) Plan”) whereby the participant has the ability to invest this contribution in any of the investment options offered under the 401(k) Plan. This annual contribution is made in the first quarter of each year. In March 2008, a contribution of $455,038 was made to the ESOP and transferred to the 401(k) Plan (relecting benefits for the year ended December 31, 2007). Effective January 1, 2009, the Bank elected to make all vested cash contributions on behalf of employees directly to the 401(k) Plan, and thus made its discretionary employer contribution directly to the 401(k) Plan in March 2009 (reflecting benefits for the year ended December 31, 2008). |
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d.
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Vesting
- The
balance credited to each participant’s account shall become vested in
accordance with the following
schedule:
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Number of Years Of Service
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Vested Percentage
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Less
than 2 years
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0%
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Less
than 3 years
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25
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Less
than 4 years
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50
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Less
than 5 years
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75
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5
or more years
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100
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Under
the provisions of the ESOP, participants were granted credit, for purposes
of vesting, for years of service at the Company or any of its direct or
indirect subsidiaries prior to the establishment of the ESOP. Any previously
unvested portion shall become fully vested to participants upon
attainment of age 65, or, if earlier, upon the termination of his or her
participation by reason of death, disability, retirement or upon
occurrence of change in control of the Company or the
Bank.
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e.
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Investments
- As of December 31, 2008 and 2007, the ESOP’s investments consists of the
investment in common stock of the Company and the investment of cash
balances in a short-term investment funds administered by the ESOP
trustee. The ESOP is permitted to invest in any of the
following: (i) shares of the Company's common stock; (ii) such Investment
Funds as may be established from time to time by the Employee Benefits
Committee; and (iii) such other investments as may be permitted under the
ESOP trust agreement. The terms of the ESOP trust agreement
permits investment in any commingled or group trust fund, or common trust
fund that is exempt from taxes under Section 501(a) of the
Code.
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f.
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Allocation
of Shares to Participant Accounts - As
of the last day of each plan year during which a borrowing is outstanding,
a portion of the financed shares purchased with the proceeds of the
borrowing shall be released in accordance with a predetermined
formula. The released shares are allocated to eligible
participant accounts in the proportion that each such eligible
participant’s compensation, as measured under the terms of the ESOP, for
the portion of the immediately preceding calendar year during which he or
she was a participant, bears to the aggregate compensation of all eligible
participants, as measured under the terms of the
ESOP.
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Released
shares allocated to participant accounts totaled 78,155 during each of the
years ended
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December
31, 2008 and 2007.
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Each
participant’s account reflects an allocation of the Bank’s contributions,
ESOP earnings and the forfeiture of terminated participant non-vested
accounts.
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Each
participant is entitled to exercise voting rights attributable to the
shares allocated to his or her account and is notified by the ESOP trustee
prior to the time that such rights are to be exercised. The
ESOP trustee is permitted, upon grant of authority by the Plan
Administrator, to vote shares for which instructions have not been given
by a participant within the stated time period. Such vote is
made in direct proportion to the votes received from
participants.
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g.
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Forfeitures - Upon the
termination of employment of a participant or former participant for
reason other than death, disability, or retirement, that portion of the
balance credited to his or her account which is not vested at the date of
termination shall be forfeited as of the last Valuation Date, defined as
the last business day of March, June, September or
December. The proceeds of such forfeitures shall be treated as
loan repayments and ESOP contributions as designated by the Employee
Benefits Committee.
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| There were 1,588 shares and 5,219 shares forfeited during the years ended December 31, 2008 and 2007, respectively. These forfeitures were utilized to reduce the employer contribution (which was the annual repayment of principal on the outstanding loan in accordance with the loan amortization schedule) in each respective year. | ||
| h. | Benefit Payments - Effective July 1, 2000, cash dividends received on allocated and unallocated holdings of Dime Community Bancshares, Inc. common stock are distributed quarterly to all ESOP participants. These benefit distributions are made in the form of a cash payment. Otherwise, no benefit distributions from the ESOP are made until a participant retires, dies (in which case, payment are made to his or her beneficiary or, if none, his or her legal representatives), or otherwise terminates employment with the Company or the Bank and its subsidiaries. | |
| On termination of services due to death, disability, retirement or other reason, a participant may elect to receive a lump-sum amount equal to the value of the participant's vested interest in his or her account. This distribution is made by means of cash and/or stock payments. |
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i.
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ESOP
Termination - Although it has not expressed any intention to do so,
the Company reserves the right to terminate the ESOP at any time, subject
to the provisions of ERISA. Upon such termination of the ESOP,
the interest of each participant in the ESOP will be distributed to such
participant or his or her beneficiary at the time prescribed by the ESOP
provisions and the Code. Upon termination of the ESOP, the
Compensation Committee shall direct the ESOP trustee to pay all
liabilities and expenses of the trust fund and to sell the shares of
financed stock held in the loan suspense account to the extent it
determines such sale to be necessary in order to repay the
borrowing.
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2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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a.
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Basis of
Accounting -
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America.
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b.
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Investment
Transactions and Income Recognition - Investment
transactions are accounted for on a trade-date basis. Net
investment income consists of gains and losses realized from the sales of
investments, the net change in the unrealized appreciation or depreciation
on investments, and interest and dividends earned. Realized
gains and losses from securities transactions are recorded on the average
cost basis. Interest income on the Federated Prime Value
Obligations Fund is recorded on the accrual basis and dividend income on
Dime Community Bancshares, Inc. common stock is recorded on the
ex-dividend date. During the year ended December 31, 2008, cash
dividends totaling $1,879,724 were declared and paid on Dime Community
Bancshares, Inc. common stock, which were recorded in "Interest and
dividend income" in the Statement of Changes in Net Assets Available for
Plan Benefits. All dividends on unallocated shares and shares
allocated to each participant are distributed to participants in the ESOP
no later than the close of the calendar quarter after the calendar quarter
in which such dividends are received by the
ESOP.
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c.
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Use of
Estimates - The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these
estimates.
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d.
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Risks and
Uncertainties - The ESOP has an equity investment concentrated
solely in one equity security, which, in general, is exposed to various
risks such as interest rate, credit and overall market
volatility. Due to the level of risk associated with investment
securities, it is reasonably possible that changes in the value of
investment securities will occur in the near term and that such changes
would materially affect the amounts reported in the financial
statements.
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e.
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Administrative
Expenses - Administrative
expenses are paid by the the Company as provided in the
ESOP.
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f.
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Fair Value
of Investments -
Dime Community Bancshares, Inc. common stock and the Federated
Prime Value Obligations Fund are valued at fair value based upon quoted
market prices. The closing price of Dime Community Bancshares,
Inc. common stock was $13.30 as of December 31, 2008 and $12.77 as of
December 31, 2007. The closing price of the Federated Prime
Value Obligations Fund was $1.00 at both December 31, 2008 and
2007.
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g.
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Recent
Accounting Pronouncements
- The financial statements reflect the prospective adoption of Statement
of Financial Accounting Standrds No. 157, "Fair Value Measurements,"
("SFAS 157") as of the beginning of the year ended December 31,
2008. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and establishes a single
authoritative definition of fair value, sets a framework for measuring
fair value, and requires additional disclosures about fair value
measurements. The effect of the adoption of SFAS 157 had no impact on the
statements of net assets available for benefits and statement of changes
in net assets available for benefits.
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| 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. Adoption of FAS 157-4 is not expected to have a material impact upon the ESOP's financial statements. |
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3.
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FAIR
VALUE MEASUREMENTS
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In
accordance with SFAS 157, the ESOP classifies its investments
into Level 1, which refers to securities valued using quoted prices from
active markets for identical assets; Level 2, which refers to securities
not traded on an active market but for which observable market inputs are
readily available; and Level 3, which refers to securities valued based on
significant unobservable inputs. Assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to
the fair value measurement. The following table sets forth by level within
the fair value hierarchy a summary of the ESOP’s investments measured at
fair value on a recurring basis at December 31,
2008.
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Fair
Value Measurements Using (1)
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Description
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Quoted
Prices in Active Markets for Identical Assets (Level 1)
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Significant
Other Observable Inputs(Level 2)
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Significant
Unobservable Inputs (Level
3)
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Total
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|
Federated
Prime Value Obligations Fund
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$90,337
|
-
|
-
|
$90,337
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|
Dime
Community Bancshares, Inc. common
stock
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44,232,914
|
-
|
-
|
44,232,914
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(1)
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Please
refer to footnotes 2(f) for a discussion of the valuation methods utilized
for these investments.
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4.
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FEDERAL
INCOME TAX STATUS
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5.
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EXEMPT
PARTY-IN-INTEREST TRANSACTIONS
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6.
|
INVESTMENTS
|
|
December
31, 2008
|
December
31, 2007
|
||||||
|
Allocated
|
Unallocated
|
Allocated
|
Unallocated
|
||||
|
Shares
of Dime CommunityBancshares, Inc. Common Stock:
|
|||||||
|
Number
of shares
|
1,997,156
|
1,328,627
|
1,983,633
|
1,406,782
|
|||
|
Cost
|
$5,995,130
|
$3,966,693
|
$5,954,536
|
$4,200,029
|
|||
|
Market
Value
|
$26,562,175
|
$17,670,739
|
$25,330,994
|
$17,964,606
|
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|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||
|
Parties
in Interest
|
Identity
of Issuer
|
Description
of Investment
|
Cost
|
Current Value
|
|||
|
*
|
Dime
Community Bancshares, Inc.
|
Shares
of common stock
|
$9,961,823
|
$44,232,914
|
|||
|
Federated
Investors
|
Prime
Value Obligations Fund
|
90,337
|
90,337
|
||||
|
Total
|
$10,052,160
|
$44,323,251
|