|
Page
|
||
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
1
|
|
|
FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2006 AND 2005 AND
FOR THE YEAR ENDED DECEMBER 31, 2006:
|
||
|
Statements
of Net Assets Available for Plan Benefits
|
2
|
|
|
Statement
of Changes in Net Assets Available for Plan Benefits
|
3
|
|
|
Notes
to Financial Statements
|
4-8
|
|
|
SUPPLEMENTAL
SCHEDULES:
|
||
|
Form
5500, Schedule H , Part IV, Line 4i - Schedule of Assets (Held At
End Of
Year) as of December 31, 2006
|
9
|
|
|
Form
5500, Schedule H , Part IV, Line 4j - Schedule of Reportable
Transactions:
|
||
|
Series
of Transactions from Same Issue Exceeding 5% of Assets - Year Ended
December 31, 2006
|
10
|
|
|
SIGNATURES
|
11
|
|
As
of December 31, 2006
|
As
of December 31, 2005
|
||||||
|
Allocated
|
Unallocated
|
Total
|
Allocated
|
Unallocated
|
Total
|
||
|
ASSETS:
|
|||||||
|
Investments
in shares of Dime Community
|
|||||||
|
Bancshares,
Inc. common stock, at fair value
|
$27,783,483
|
$20,803,967
|
$48,587,450
|
$28,433,938
|
$22,836,774
|
$51,270,712
|
|
|
Investment in short-term investments and cash
equivalents
|
554,994
|
-
|
554,994
|
536,941
|
-
|
536,941
|
|
|
Sub-total
|
28,338,477
|
20,803,967
|
49,142,444
|
28,970,879
|
22,836,774
|
51,807,653
|
|
|
Contributions
receivable from the Dime Savings Bank of
Williamsburgh
|
-
|
410,040
|
410,040
|
-
|
397,837
|
397,837
|
|
|
TOTAL
ASSETS
|
28,338,477
|
21,214,007
|
49,552,484
|
28,970,879
|
23,234,611
|
52,205,490
|
|
|
LIABILITIES:
|
|||||||
|
Borrowing
from Dime Community Bancshares, Inc.
|
-
|
4,553,510
|
4,553,510
|
-
|
4,655,238
|
4,655,238
|
|
|
Due
to The Dime Savings Bank ofWilliamsburgh 401(k) Plan
|
-
|
410,040
|
410,040
|
-
|
397,837
|
397,837
|
|
|
Cash
dividend payable to participants
|
266,934
|
218,833
|
485,767
|
261,292
|
229,774
|
491,066
|
|
|
TOTAL
LIABILITIES
|
266,934
|
5,182,383
|
5,449,317
|
261,292
|
5,282,849
|
5,544,141
|
|
|
NET
ASSETS AVAILABLE FOR PLAN BENEFITS
|
$28,071,543
|
$16,031,624
|
$44,103,167
|
$28,709,587
|
$17,951,762
|
$46,661,349
|
|
|
Allocated
|
Unallocated
|
Total
|
|||
|
ADDITIONS:
|
|||||
|
Investment
income
|
$1,110,311
|
$875,328
|
$1,985,639
|
||
|
Investment
activities – net depreciation
|
|||||
|
in
market value of Dime Community
|
|||||
|
Bancshares,
Inc. common stock
|
(1,178,265)
|
(922,219)
|
(2,100,484)
|
||
|
Total
investment activities
|
(67,954)
|
(46,891)
|
(114,845)
|
||
|
Contributions
from Dime Savings Bank of Williamsburg - net
|
-
|
314,059
|
314,059
|
||
|
Total
contributions and investment activities
|
(67,954)
|
267,168
|
199,214
|
||
|
DEDUCTIONS:
|
|||||
|
Cash
disbursed for interest expense on borrowings from Dime
Community Bancshares, Inc.
|
-
|
372,419
|
372,419
|
||
|
Benefit
payments
|
2,395,918
|
(10,941)
|
2,384,977
|
||
|
Total
deductions
|
2,395,918
|
361,478
|
2,757,396
|
||
|
TRANSFERS:
|
|||||
|
Allocation
of 78,155 shares of Dime CommunityBancshares, Inc. common stock to
participant accounts, net
|
950,496
|
(950,496)
|
-
|
||
|
Transfer
of dividend income for distribution to participants
|
875,332
|
(875,332)
|
-
|
||
|
Total
transfers
|
1,825,828
|
(1,825,828)
|
-
|
||
|
DECREASE
IN NET ASSETS AVAILABLE
|
|||||
|
FOR
PLAN BENEFITS DURING THE YEAR
|
(638,044)
|
(1,920,138)
|
(2,558,182)
|
||
|
NET
ASSETS AVAILABLE FOR PLAN BENEFITS
|
|||||
|
Beginning
of year
|
28,709,587
|
17,951,762
|
46,661,349
|
||
|
End
of year
|
$28,071,543
|
$16,031,624
|
$44,103,167
|
|
1.
|
SUMMARY
DESCRIPTION OF PLAN
|
|
|
a.
|
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. The Bank acts as the Plan Sponsor for the
ESOP, and members of management of the Bank serve as Plan Administrator
for the ESOP.
|
|
|
On
June 26, 1996, the Bank converted from a federally chartered mutual
savings bank to a federally chartered stock savings bank and all
of its
outstanding capital stock was acquired by Dime Community Bancshares,
Inc.
(the “Company”). Simultaneously, the Company issued 49,097,812
shares of common stock [adjusted for stock splits that occurred on
August
21, 2001, April 24, 2002 and March 16, 2004 ("Stock Splits") ] in
a
Subscription and Community offering. The ESOP purchased
3,927,825 (adjusted for Stock Splits), or 8%, of the shares issued
by the
Company in its community offering at the initial issuance price of
$2.96
per share (adjusted for Stock
Splits).
|
|
|
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 Dime Community Bancshares, Inc. (the
"Compensation Committee"). Prior to September 2002, the trust
services department of HSBC Bank, USA acted as the trustee for the
ESOP. In September 2002, RSGroup Trust Company assumed trustee
responsibilities for the ESOP and currently serves as
trustee.
|
|
|
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, as of
June
30, 2000, 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.
|
|
|
b.
|
Eligibility
and Participation - All 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
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.
|
|
|
c.
|
Contributions and
Distributions - 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 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.
|
|
|
Effective
July 1, 2000, the Company or Bank also makes a required 100% vested
cash
contribution to all participants in the ESOP in the amount of 3%
of total
W-2 compensation [including amounts deducted from W-2 compensation
for
pre-tax benefits such as health insurance premiums and contributions
to
the Dime Savings Bank of Williamsburgh 401(k) Plan] minus any amount
included in W-2 compensation as a result of the grant or vesting
of
restricted stock, the exercise of stock options or the disqualifying
disposition of incentive stock options up to applicable IRS
limits. This contribution is guaranteed through December 31,
2006 (unless the ESOP is terminated before then) and will be discretionary
after that date. 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 based
upon
the total covered compensation through December 31st
of the
previous year. In March 2007, a contribution of $410,040 was
made to the ESOP and transferred to the 401(k) Plan for the 2006
plan
year. In March 2006, a contribution of $397,837 was made to the
ESOP and transferred to the 401(k) Plan for the 2005 plan
year.
|
|
|
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 distributions are
made in the form of a cash payment. Otherwise, no 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. Distributions are made in cash
and/or stock payments.
|
|
|
d.
|
Vesting
- The balance credited to each
Participant’s account shall become vested in accordance with the following
schedule:
|
|
Number
of Years Of Service
|
Vested
Percentage
|
|
Less
than 2 years
|
0%
|
|
Less
than 3 years
|
25
|
|
Less
than 4 years
|
50
|
|
Less
than 5 years
|
75
|
|
5
or more years
|
100
|
|
|
Under
the provisions of the ESOP, participants were granted credit, for
purposes
of vesting, for years of service at the Bank 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.
|
|
|
e.
|
Investments
- As of December 31, 2006 and 2005, 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 commingled or
group trust fund, or common trust fund that are exempt from taxes
under
Section 501(a) of the Internal Revenue
Code.
|
|
|
f.
|
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.
|
|
|
Released
shares allocated to participant accounts totaled 78,155 during each
of the
years ended
|
|
|
December
31, 2006 and 2005.
|
|
|
Each
participant’s account reflects an allocation of the Bank’s contributions,
ESOP earnings and the forfeiture of terminated participant non-vested
accounts.
|
|
|
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.
|
|
|
g.
|
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 ESOP
committee.
|
|
|
There
were 1,995 shares and 5,342 shares forfeited during the years ended
December 31, 2006 and 2005,
respectively.
|
|
|
h.
|
Payment
of Benefits– 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.
|
|
|
i.
|
ESOP
Termination - 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.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
|
Basis
of Accounting - The accompanying financial
statements of the ESOP have been prepared in accordance with accounting
principles generally accepted in the United States of
America.
|
|
|
Investment
Valuation and Income Recognition - The shares of
Dime Community Bancshares, Inc. common stock are valued at fair value
based upon the closing price stated in the Wall Street
Journal. The closing price of the common stock was $14.01 as of
December 31, 2006 and $14.61 as of December 31,
2005.
|
|
|
Investment
transactions are accounted for on a trade-date basis. Interest
income on short term investments is recorded on the accrual basis
and
dividend income on shares of Dime Community Bancshares, Inc. common
stock
is recorded on the ex-dividend date. During the years ended
December 31, 2006 and 2005, cash dividends totaling $1,960,836 and
$1,981,703, respectively, were declared on the Company's common stock,
which were recorded in Investment 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.
|
|
|
Realized
gains and losses from securities transactions are recorded on the
average
cost basis.
|
|
|
Use
of Estimates - The preparation of the financial statements
in conformity with accounting principles generally accepted in the
United
States of America requires Plan management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these
estimates.
|
|
|
Risks
and Uncertainties - The ESOP includes an investment security
(concentrated solely in the Company’s common stock) 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.
|
|
|
Administrative
Expenses - Administrative
expenses are paid by the Plan Sponsor as provided in the
ESOP.
|
|
|
Recently
Issued Accounting Standards – In September 2006, the FASB
issued Statement No. 157, Fair Value Measurement ("FAS
157"). This statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair
value measurements. FAS 157 is effective for the ESOP in the
first quarter of 2008. The ESOP is currently evaluating the
statement's impact upon the financial
statements.
|
|
3.
|
FEDERAL
INCOME TAX STATUS
|
|
4.
|
EXEMPT
PARTY-IN-INTEREST
TRANSACTIONS
|
|
5.
|
INVESTMENTS
|
|
December
31, 2006
|
December
31, 2005
|
||||||
|
Allocated
|
Unallocated
|
Allocated
|
Unallocated
|
||||
|
Shares
of Dime CommunityBancshares, Inc.Common
Stock:
|
|||||||
|
Number
of shares
|
1,983,118
|
1,484,937
|
1,946,197
|
1,563,092
|
|||
|
Cost
|
$5,954,318
|
$4,433,366
|
$5,844,810
|
$4,666,702
|
|||
|
Market
Value
|
$27,783,483
|
$20,803,967
|
$28,433,938
|
$22,836,774
|
|||
|
(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
|
$10,387,684
|
$48,587,450
|
|||
|
*
|
RS
Group
|
Short-term
investment fund
|
552,564
|
552,564
|
|||
|
Total
|
$10,940,248
|
$49,140,014
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(g)
|
(h)
|
(i)
|
||||||
|
Current
Value
|
||||||||||||
|
Description
of asset
|
of
Asset on
|
|||||||||||
|
Identity
of
|
(include
interest rate and
|
Purchase
|
Selling
|
Cost
of
|
Transaction
|
Net
gain
|
||||||
|
Party
Involved
|
Maturity
in case of a loan)
|
Price
|
Price
|
Asset
|
Date
|
or
(loss)
|
||||||
|
Federated
|
Prime
Value Obligations
|
1,960,852
|
1,960,852
|
-
|
||||||||
|
Federated
|
Prime
Value Obligations
|
1,967,502
|
1,967,502
|
-
|