SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              FORM 10-K

 X  ANNUAL   REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF   THE
    SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
    For the Fiscal Year Ended June 30, 1996

    TRANSITION  REPORT  PURSUANT TO SECTION  13  OR  15(d)  OF  THE
    SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
    For the transaction period from        to


                    Commission file Number 0-27782

                     Dime Community Bancorp, Inc.
        (Exact Name of registrant as specified in its charter)

            Delaware                           11-3297463
 (State or other jurisdiction of            (I.R.S. employer
        incorporation or                 identification number)
          organization)
                                                    
 209 Havemeyer Street, Brooklyn,                 11211
               NY                              (Zip Code)
 (Address of principal executive
            offices)

  Registrant's telephone number, including area code: (718) 782-6200

     Securities Registered Pursuant to Section 12(b) of the Act:
                                 None

     Securities Registered Pursuant to Section 12(g) of the Act:
                Common Stock, par value $.01 per share
                           (Title of Class)

   Indicate  by check mark whether the Company (1) has filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange  Act  of 1934 during  the  preceding  twelve
months  (or  for  such  shorter period that  the  Registrant  was
required  to  file  reports) and (2) has  been  subject  to  such
requirements for the past 90 days.
YES  X    NO ___

   Indicate  by  check  mark if disclosure of  delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not be contained, to the best of Company's knowledge, in
definitive  proxy  or  information  statements  incorporated   by
reference in Part III of this Form 10-K or any amendments to this
Form 10-K.   [ X]

   As  of  September 23, 1996, there were issued and  outstanding
14,547,500  shares of the Company's Common Stock.  The  aggregate
market  value of the voting stock held by non-affiliates  of  the
Company as of September 23, 1996 was $ 177,877,005.  This  figure
is based upon the closing price on the NASDAQ National Market for
a  share  of  the  Company's Common Stock, $0.01  par  value,  on
September  23, 1996, which was $13.625 as reported  in  the  Wall
Street Journal on September 24, 1996.

TABLE OF CONTENTS Page PART 1 Item 1. Business General.............................................................. 3 Acquisition of Conestoga Bancorp,Inc........................... 4 Market Area and Competition.................................... 6 Lending Activities............................................. 7 Asset Quality.................................................. 15 Allowance for Loan Losses...................................... 17 Investment Activities.......................................... 20 Sources of Funds............................................... 24 Subsidiary Activities.......................................... 27 Personnel...................................................... 27 Federal , State and Local Taxation Federal Taxation............................................ 27 State and Local Taxation.................................... 28 Regulation General..................................................... 29 Regulation of Federal Savings Associations............... 30 Regulation of Holding Company............................ 38 Federal Securities Laws.................................. 39 Item 2. Properties................................................... 40 Item 3. Legal Proceedings............................................ 41 Item 4. Submission of Matters to a Vote of Security Holders.......... 41 PART II Item 5. Market for the Company's Common Stock and Related Stockholder Matters.......................................... 41 Item 6. Selected Financial Data...................................... 43 Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations Management's Strategy.......................................... 45 Analysis of Net Interest Income................................ 49 Rate/Volume Analysis........................................... 50 Comparison of Financial Condition.............................. 50 Comparison of Operating Results................................ 52 Liquidity and Capital Resources................................ 55 Impact of Inflation and Changing Prices........................ 56 Impact of Accounting Standards................................. 56 Item 8. Financial Statements and Supplementary Data.................. 59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 89 PART III Item 10. Directors and Executive Officers of the Company............. 89 Item 11. Executive Compensation...................................... 89 Item 12. Security Ownership of Certain Beneficial Owners and Management.............................................. 89 Item 13. Certain Relationships and Related Transactions.............. 89 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-k .................................... 90 Signatures........................................................... 92

Statements contained in this Annual Report on Form 10-K relating to plans, strategies, economic performance and trends, and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed under the captions "Item 1 -Business and Item 7 - Management's Discussion and Analysis" below, and elsewhere in this Form 10-K. The Company has no obligation to update these forward looking statements. PART I Item 1. Business General Dime Community Bancorp, Inc. (the "Company") is a Delaware corporation organized in December, 1995 at the direction of the Board of Directors of the Dime Savings Bank of Williamsburgh (the "Bank") for the purpose of acquiring all of the capital stock of the Bank issued in the conversion of the Bank from a federal mutual savings bank to a federal stock savings bank (the "Conversion"). In connection with the Conversion, the Company issued 14,547,500 shares (par value $0.01) of common stock at a price of $10.00 per share to the Bank's eligible depositors who subscribed for shares and to an Employee Stock Ownership Plan ("ESOP") established by the Company. The Company realized net proceeds of $141.4 million from the sale of its common stock and utilized approximately $76.4 million of the proceeds to purchase 100% of the Bank's common stock and $11.6 million to fund a loan to the ESOP for its purchase of 1,163,800 shares, or 8%, of the Company's common stock. The remaining proceeds of $53.4 million were retained by the Company. The primary business of the Company is the operation of its wholly-owned subsidiary, the Bank. In addition to directing, planning and coordinating the business activities of the Bank, the Company retained proceeds of $53.4 million in connection with the Conversion, which are invested in federal funds, short-term, investment grade marketable securities and mortgage-backed securities. The Company also holds a note evidencing the loan that it made to the ESOP to purchase 8% of its common stock issued in the Conversion. See - "-Regulation - Regulation of the Holding Company." The Company is a unitary savings and loan holding company, which, under existing law, is generally not restricted as to the types of business activities in which it may engage, provided that the Bank continues to be a qualified thrift lender. Under regulations of the Office of Thrift Supervision ("OTS") the Bank is a qualified thrift lender if its ratio of qualified thrift investments to portfolio assets ("QTL Ratio") is 65% or more, on a monthly average basis in nine of every twelve months. At June 30, 1996, the Bank's QTL Ratio was 76%, and the Bank has maintained more that 65% of its portfolio assets in qualified thrift investments in at least nine of the preceding twelve months. In the future, the Company may organize or acquire, through merger or otherwise, other subsidiaries, including other financial institutions, or branches thereof, or other financial services related companies, although there are no current arrangements, understandings or agreements regarding any such acquisition or expansion. The Company neither owns nor leases any property but instead uses the premises and equipment of the Bank. At the present time, the Company does not employ any persons other than certain officers of the Bank who do not receive any extra compensation as officers of the Company. The Company utilizes the support staff of the Bank from time to time, as needed. Additional employees may be hired as deemed appropriate by the management of the Company. Unless otherwise disclosed, the information presented in this Form 10-K reflect the financial condition and results of operations of the Company and the Bank on a consolidated basis. At June 30, 1996, the Company had total consolidated assets of $1.37 billion, which included $131.1 million of excess proceeds resulting from the oversubscription to the Company's initial public offering, which was refunded on July 1, 1996. Certain information which discloses percentages of total assets will include parenthetical disclosure for "Adjusted Assets," which represents total assets adjusted for the refund of excess proceeds on July 1, 1996. The Bank's principal business has been, and continues to be, gathering deposits from customers within its market area, and investing those deposits, primarily in multi-family and one- to four-family residential mortgage loans, mortgage-backed securities, and obligations of the U.S. Government and Government Sponsored Entities ("GSEs"). The Bank's revenues are derived principally from interest on its loan and securities portfolios. The Bank's primary sources of funds are: deposits; loan amortization, prepayments and maturities; amortization, prepayments and maturities of mortgage-backed and investment securities; and, to a lesser extent, the sale of fixed-rate mortgage loans to the secondary market. The Bank is also a member of the Federal Home Loan Bank of New York ("FHLBNY") and is eligible to utilize the FHLBNY as a source of borrowed funds. Acquisition of Conestoga Bancorp, Inc. On June 26, 1996 (the "Effective Time"), the Bank completed the acquisition of Conestoga Bancorp, Inc. ("Conestoga") pursuant to the Agreement and Plan of Merger dated as of November 2, 1995 (the "Merger Agreement"). The acquisition (the "Acquisition") of Conestoga by the Bank resulted in the merger of Conestoga's wholly-owned subsidiary, Pioneer Savings Bank, F.S.B. ("Pioneer") with and into the Bank, with the Bank as the resulting financial institution. The Board of Directors of the Bank, as the surviving entity of the merger, consists solely of all of the Directors of the Bank immediately prior to the Acquisition. Each share of Conestoga's common stock, par value $0.01 per share, issued and outstanding as of the Effective Time (other than shares held as treasury stock of Conestoga and unallocated shares held in Conestoga's Recognition and Retention Plans and Trust) was canceled and converted automatically into the right to receive $21.31 per share in cash pursuant to the terms and conditions of the Merger Agreement. As a result of the Acquisition, shareholders of Conestoga were paid approximately $101.3 million in cash (the "Merger Consideration"). In addition, the Bank paid to each holder of an outstanding option which had been granted by Conestoga to purchase shares of Conestoga's common stock an amount in cash computed by multiplying (i) any positive difference obtained by subtracting from (x) the per share amount of the Merger Consideration from (y) the per share exercise price applicable to such option, by (ii) the number of shares of Conestoga common stock subject to such option. These payments totaled approximately $4.1 million. The Acquisition of Conestoga occurred immediately after the Conversion. A portion of the proceeds received from the Conversion, along with cash generated in the Bank's ordinary course of business, were utilized by the Bank to pay the Merger Consideration. Set forth below is the Pro Forma Statement of Operations for the year ended June 30, 1996. The historical portion has been derived from the audited statement of operations of the Company for the year ended June 30, 1996 and the audited statement of operations of Conestoga for the year ended March 31, 1996. Pro forma adjustments have been prepared assuming that the Acquisition was consummated as of July 1, 1995. The Acquisition has been accounted for in the financial statements using the purchase method of accounting. Under purchase accounting, the acquired assets and liabilities of Conestoga are recognized at their fair value as of the date of the Acquisition. The Pro Forma Combined Statement of Operations for the year ended June 30, 1996 does not purport to be indicative of the financial position or operating results which would have been achieved had the Acquisition been consummated as of July 1, 1995 and should not be construed as representative of future operating results. The pro forma adjustments are based upon available information and assumptions the Company believes are reasonable under the circumstances. Unaudited Pro Forma Combined Statement of Operations For the Year Ended June 30, 1996 Dime Community Conestoga Purchase Pro Forma Note Bancorp, Inc. Bancorp, Inc. Adjustments Combined Reference ------------- ------------- ----------- ----------- ----------- (In thousands) Interest income: Loans............................. $39,654 $9,069 $ 58 $48,781 (1) Investment securities............. 5,738 8,761 49 14,548 (1) Mortgage backed securities........ 5,927 12,383 (22) 18,288 (1) Federal funds sold................ 1,300 2,189 - 3,489 ------------- ------------- ----------- ----------- Total interest income............. 52,619 32,402 85 85,106 Interest expense: Deposits and escrow............... 22,508 17,084 168 39,760 (1) Borrowed funds.................... 1,008 1,209 - 2,217 ------------- ------------- ----------- ----------- Total interest expense............ 23,516 18,293 168 41,977 Net interest income............... 29,103 14,109 (83) 43,129 Provision for loan losses 2,979 104 - 3,083 ------------- ------------- ----------- ----------- Net interest income after provision for loan losses......... 26,124 14,005 (83) 40,046 ------------- ------------- ----------- ----------- Non-interest income: Service charges and other fees.... 911 568 - 1,479 Gain (loss) on sales of securities and other assets.................. (30) 1,771 - 1,741 Net gain (loss) on sales of loans. 12 - - 12 Other............................. 482 251 - 733 ------------- ------------- ----------- ----------- Total non-interest income......... 1,375 2,590 - 3,965 ------------- ------------- ----------- ----------- Non-interest expense: Salaries and employee benefits.... 7,359 3,792 (1,497) 9,654 (2) ESOP and RRP benefits............. 114 1,045 (1,045) 114 (3) Occupancy and equipment........... 1,775 1,454 (107) 3,122 (1) Federal deposit insurance premiums.......................... 109 938 - 1,047 Data Processing................... 557 460 - 1,017 Amortization of goodwill.......... 25 - 2,325 2,350 (4) Merger related expenses............ - 842 (842) - (6) Provision for losses on Other real estate owned................. 586 - - 586 Other............................. 3,496 1,735 (231) 5,000 (5) ------------- ------------- ----------- ----------- Total non-interest expense........ 14,021 10,266 (1,397) 22,890 ------------- ------------- ----------- ----------- Income before income tax expense and cumulative effect of changes in accounting principles........................ 13,478 6,329 1,314 21,121 Income tax expense................ 6,181 3,119 1,674 10,974 (7) ------------- ------------- ----------- ----------- Income before cumulative effect of changes in accounting principles........................ $7,297 $3,210 $(360) $10,147 ============= ======================== =========== (Notes on following page)

Notes to Unaudited Pro Forma Combined Statement of Operations Amounts in Thousands (1) Purchase adjustments column represents one year of amortization of the following total purchase accounting adjustments to Conestoga's loan, investment securities, mortgage-backed securities, deposits, and premises and equipment to new cost basis. Total Purchase Accounting Annual Item Adjustment Amortization ------------------------------ ------------- ----------------- Loans......................... $ 463 $ 58 Investment securities......... 249 49 Mortgage-backed securities.... (112) (22) Deposits...................... 839 168 Premises and equipment........ (4,288) (107) (2) To record reductions in employee salaries and benefits expense resulting from reductions in Conestoga staffing levels. (3) To reflect the decrease in ESOP and RRP expense resulting from the termination of Conestoga plans. (4) Purchase adjustments column represents one year of amortization of Goodwill totaling $28,438 acquired in the Acquisition, amortized over a period of 12 years. (5) To record the reduction in certain Other operating expenses of Conestoga, as itemized below: Directors' fees.............. $204 Automobile Expense....... 27 ----- $231 ===== (6) To reflect the elimination of attorney, consulting and accounting expenses incurred by Conestoga in connection with the Acquisition. (7) To reflect the income tax effect of the adjustments described in Notes (1) through (6). Market Area and Competition The Bank has been, and intends to continue to be, a community- oriented financial institution providing financial services and loans for housing within its market areas. The Bank maintains its headquarters in the Williamsburgh section of the borough of Brooklyn. Fourteen additional offices are located in the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County. The Bank gathers deposits primarily from the communities and neighborhoods in close proximity to its branches. The Bank's primary lending area is larger, and includes much of New York City and Nassau County. Most of the Bank's mortgage loans are secured by properties located in its primary lending area. The New York City metropolitan area has historically benefited from having a large number of corporate headquarters and a diversity of financial services industries. However, due to (1) the lingering effects of the decline of the stock market in 1987, (2) the resulting decline in the regional economy and (3) layoffs and corporate relocations in the financial services industry, the New York City metropolitan area experienced reduced levels of employment and an overall decline in the underlying values of local properties from 1987 to 1993. Since then, the local economy has begun to show signs of improvement in recent periods. Perhaps the most important of these signs has been the gradual decrease in the area unemployment rate from a 1992 peak. Improvement can also be seen in the local real estate market, as reflected in the increase in existing home sales during the past four years and the stabilization of local real estate values. The rise and decline of the Bank's non-performing asset portfolio closely parallels the trend of the local economy during this period. See "- Asset Quality." Despite these encouraging trends, the outlook for the local economy remains uncertain. Total New York City employment, for example, remains significantly below the high reached in 1988. Other troubling signs include a stubbornly high commercial property (non-residential) vacancy rate and continued weakness in local manufacturing and construction activity. The Bank faces significant competition both in making loans and in attracting deposits. The Bank's market area has a high density of financial institutions, many of which have greater financial resources than the Bank, and all of which are competitors of the Bank to varying degrees. The Bank's competition for loans comes principally from commercial banks, savings banks, savings and loan associations, mortgage banking companies and insurance companies. The Bank has recently faced increased competition for the origination of multi-family loans, which comprised 50.6% of the Bank's loan portfolio at June 30, 1996. Management anticipates that competition for both multi-family and one- to four-family loans will continue to increase in the future. Thus, no assurances can be made that the Bank will be able to maintain its current level of such loans. The Bank's most direct competition for deposits has historically come from savings and loan associations, savings banks, commercial banks and direct purchases of government securities. The Bank faces additional competition for deposits from short-term money market funds and other corporate and government securities funds, and from other financial institutions such as brokerage firms and insurance companies. Competition may also increase as a result of the lifting of restrictions on the interstate operations of financial institutions. Lending Activities Loan Portfolio Composition. The Bank's loan portfolio consists primarily of multi-family loans secured by apartment buildings (including loans underlying apartment buildings organized under cooperative form of ownership, "underlying cooperatives"), conventional first mortgage loans secured primarily by one- to four-family residences, including condominiums and cooperative apartment share loans, and non- residential (commercial) property loans. At June 30, 1996, the Bank's loan portfolio totaled $585.9 million. Within the loan portfolio, $296.6 million or 50.6% were multi-family loans, $229.3 million or 39.1% were loans to finance the purchase of one- to four-family properties and cooperative apartment share loans, $37.7 million or 6.4% were loans to finance the purchase of commercial properties, primarily small shopping centers, warehouses and nursing homes, and $16.7 million or 2.9% were loans to finance multi-family and residential properties with either full or partial credit guarantees provided by either the Federal Housing Administration (''FHA'') or the Veterans' Administration (''VA''). Of the total mortgage loan portfolio outstanding at that date, 20.1% were fixed-rate loans and 79.1% were adjustable-rate loans (''ARMs''), of which 72.9% are multi- family and non-residential property loans which carry a maturity of 10 years, and an amortization period of no longer than 25 years. These loans have a fixed interest rate that adjusts after the fifth year indexed to the 5-year FHLBNY advance rate, but may not adjust below the initial interest rate of the loan. At June 30, 1996, the Bank's loan portfolio also included $3.0 million in passbook loans, $1.3 million in student loans, and $1.2 million in other consumer loans. The types of loans that the Bank may originate are subject to federal and state laws and regulations. Interest rates charged by the Bank on loans are affected principally by the demand for such loans, the supply of money available for lending purposes, and the rates offered by its competitors. These factors are, in turn, affected by general and economic conditions, and the fiscal and monetary policy of the federal government.

The following table sets forth the composition of the Bank's mortgage and other loan portfolios in dollar amounts and percentages at the dates indicated. At June 30, ---------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------------- ----------------- ----------------- ----------------- ----------------- Percent Percent Percent Percent Percent Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- (Dollars in thousands) Mortgage loans: One- to four-family...................... $170,182 29.05% $ 58,291 13.52% $ 59,461 13.74% $ 75,248 16.26% $ 86,175 17.91% Multi-family and underlying cooperative.. 296,630 50.63 252,436 58.56 242,088 55.92 243,803 52.67 238,018 49.48 Non-residential........................... 37,708 6.44 26,972 6.26 26,896 6.21 25,873 5.59 26,988 5.61 FHA/VA insured........................... 16,686 2.85 22,061 5.12 27,264 6.30 33,421 7.22 37,334 7.76 Cooperative apartment.................... 59,083 10.08 67,524 15.67 73,250 16.92 80,469 17.39 88,438 18.38 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total mortgage loans..................... 580,289 99.05 427,284 99.13 428,959 99.09 458,814 99.13 476,953 99.14 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Other loans: Student loans............................ 1,307 0.22 1,431 0.33 1,506 0.35 1,696 0.37 1,879 0.39 Passbook savings (secured by savings and time deposits)................... 3,044 0.52 1,510 0.35 1,516 0.35 1,375 0.30 1,194 0.25 Consumer installment loans............... 323 0.06 336 0.08 362 0.08 302 0.06 284 0.06 Home improvement loans................... 891 0.15 475 0.11 550 0.13 665 0.14 747 0.16 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total other loans........................ 5,565 0.95 3,752 0.87 3,934 0.91 4,038 0.87 4,104 0.86 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Gross loans.............................. 585,854 100.00% 431,036 100.00% 432,893 100.00% 462,852 100.00% 481,057 100.00% -------- ======== -------- ======== -------- ======== -------- ======== -------- ======== Less: Unearned discounts and net deferred loan fees........................... 2,168 1,182 1,300 1,434 1,447 Allowance for loan losses................. 7,812 5,174 3,633 2,996 2,094 -------- -------- -------- -------- -------- Loans, net................................ $575,874 $424,680 $427,960 $458,422 $477,516 ======== ======== ======== ======== ======== Loans serviced for others: One- to four-family and cooperative apartment................ $63,360 $ 63,192 $ 65,063 $59,403 $30,578 Multi-family and underlying cooperative... 27,690 30,264 34,396 44,079 49,644 -------- -------- -------- -------- -------- Total loans serviced for others........... $91,050 $ 93,456 $ 99,459 $103,482 $80,222 ======== ======== ======== ======== ======== Includes loans held for sale. Includes acquisition of loans from Conestoga, substantially all of which were one-to-four family loans.

Loan Originations, Purchases, Sales and Servicing. The Bank originates both ARMs and fixed-rate loans, which activity is dependent upon customer demand and market rates of interest, and generally does not purchase whole mortgage loans or loan participations. Generally, the Bank sells all originated one- to four-family fixed-rate mortgage loans in the secondary market to the Federal National Mortgage Association (''FNMA''), the Federal Home Loan Mortgage Corporation (''FHLMC''), the State of New York Mortgage Agency (''SONYMA'') and other private secondary market purchasers. ARMs, including adjustable-rate multi-family loans, and fixed-rate multi-family and non-residential mortgage loans with maturities up to 15 years, are retained for the Bank's portfolio. For the fiscal year ended June 30, 1996 origination of ARMs totaled $95.4 million or 83.0% of all loan originations. Originations of fixed-rate mortgage loans totaled $5.1 million, while sales of fixed-rate loans totaled $5.7 million. The Bank generally sells all fixed-rate loans without recourse and retains the servicing rights. As of June 30, 1996, the Bank was servicing $91.1 million of loans for others. The Bank generally receives a loan servicing fee equal to 0.25% of the outstanding principal balance for servicing loans sold. On April 9, 1996, the Bank entered into a Community Reinvestment Banking Agreement (the ''CRB Agreement'') with a local, Bronx-based community group. In the CRB Agreement, the Bank has agreed to use its best efforts, consistent with safe and sound banking practices, to increase its dollar volume of lending in certain low and moderate income neighborhoods to at least $46.8 million and a maximum of $86.0 million over the three-year period ending December 31, 1998. Pursuant to the CRB Agreement, the Bank also has agreed to use its best efforts to open three automated teller machines (''ATMs'') in the neighborhoods of East Brooklyn, Upper Manhattan and the South Bronx in New York City. Consistent with the CRB Agreement, the Bank has expanded its Community Reinvestment Act service territory to include the entirety of Brooklyn, Manhattan and the Bronx. The Bank is in compliance with all currently applicable provisions of the CRB Agreement.

The following table sets forth the Bank's loan originations, loan sales and principal repayments for the periods indicated. For the Years Ended June 30, ------------------- --------- 1996 1995 1994 --------- --------- --------- (In thousands) Loans (gross): At beginning of period......................... $431,036 $432,893 $462,852 --------- --------- --------- Mortgage loans originated: One- to four-family............................ 6,087 5,509 17,111 Multi-family and underlying cooperative........ 94,379 36,326 41,595 Non-residential................................ 11,764 2,563 3,584 Cooperative apartment.......................... 568 888 679 --------- --------- --------- Total mortgage loans originated................ 112,798 45,286 62,969 Other loans originated: Other loans.................................... 2,122 2,115 1,691 --------- --------- --------- Total loans originated......................... 114,920 47,401 64,660 --------- --------- --------- Loans acquired from Conestoga (2) ............. 113,140 - - Principal repayments........................... 67,308 45,988 72,831 Loans sold(1).................................. 5,740 2,791 19,866 Loans transferred from real estate pending foreclosure.................................... (875) (2,316) (1,949) Mortgage loans transferred to OREO............. 1,069 2,795 3,871 --------- --------- --------- Unpaid principal balances at end of period..... $585,854 $431,036 $432,893 ========= ========= ========= (1) Includes fixed-rate mortgage loans and student loans. (2) Substantially all of these mortgage loans are one-to-four family mortgage loans.

Loan Maturity and Repricing. The following table shows the earlier of maturity or repricing period of the Bank's loan portfolio at June 30, 1996. Loans that have adjustable rates are shown as being due in the period during which the interest rates are next subject to change. The table does not include prepayments or scheduled principal amortization. Prepayments and scheduled principal amortization on the Bank's loan portfolio totaled $67.3 million for the year ended June 30, 1996. At June 30, 1996 ---------------------------------------------------- Mortgage Loans --------------------------------------------------- Multi- One- to family and Four- Underlying Non- Cooperative Other Total Family Cooperative residential FHA/VA Apartment Loans Loans ------- ----------- ----------- ------- ----------- ------ -------- (In thousands) Amount due: One year or less........................ $63,027 $43,939 $ 5,395 $ - $ 54,809 $ 974 $168,144 ------- ----------- ----------- ------- ----------- ------ -------- After one year: One to three years...................... 12,433 78,569 9,033 - 4,008 2,825 106,868 More than three years to five years..... 7,446 143,404 14,012 9,229 231 1,271 175,593 More than five years to ten years....... 18,720 30,104 7,481 192 19 495 57,011 More than ten years to twenty years..... 37,567 614 1,253 5,554 16 - 45,004 Over twenty years....................... 30,989 - 534 1,711 - - 33,234 ------- ----------- ----------- ------- ----------- ------ -------- Total due or repricing after one year... 107,155 252,691 32,313 16,686 4,274 4,591 417,710 ------- ----------- ----------- ------- ----------- ------ -------- Total amounts due or repricing, gross...$170,182 $296,630 $37,708 $16,686 $59,083 $5,565 $585,854 ======= =========== =========== ======= =========== ====== ========

The following table sets forth the dollar amounts in each loan category at June 30, 1996 that are due after June 30, 1997, and whether such loans have fixed- or adjustable-interest rates. Due after June 30,1997 --------------------------- Fixed Adjustable Total ------- ---------- -------- (In thousands) Mortgage loans: One- to four-family....................... $87,747 $19,408 $107,155 Multi-family and underlying cooperative... 8,104 244,587 252,691 Non-residential........................... 6,729 25,584 32,313 FHA/VA.................................... 16,686 - 16,686 Cooperative apartment..................... 209 4,065 4,274 Other loans............................... 4,591 - 4,591 ------- ---------- -------- Total loans...............................$124,066 $293,644 $417,710 ======= ========== ======== Multi-family and Non-residential Lending. The Bank originates adjustable-rate and fixed-rate multi-family (five or more units) and non-residential loans which are secured primarily by apartment buildings, underlying cooperatives, mixed-use (residential combined with commercial) and other non-residential properties, generally located in the Bank's primary lending area. The main competitors for loans in this market tend to be other small- to medium-sized local savings institutions. Multi-family and non-residential loans in the Bank's portfolio generally range in amount from $100,000 to $3.6 million, and have an average loan size of approximately $572,000. Residential multi-family loans in this range generally have between 5 and 100 apartments per building. The Bank had a total of $226.2 million of multi-family loans in its portfolio on buildings with under 100 units as of June 30, 1996. Mostly as a result of rent control and rent stabilization, the associated rent rolls for buildings of this type indicate a rent range that would be considered affordable for low- to moderate-income households. In addition, at June 30, 1996, the Bank had a total of $59.1 million in loans secured by mortgages on underlying cooperative apartment buildings. The Bank originated multi-family loans totaling $94.4 million during the fiscal year ended June 30, 1996, versus $36.3 million June 30, 1995. At June 30, 1996, the Bank had $81.2 million of commitments outstanding to originate mortgage loans, which included $11.0 million of commitments to refinance existing mortgage loans. This compares to $26.2 million of commitments outstanding at June 30, 1995. All the mortgage commitments outstanding at June 30, 1996 were issued to borrowers within the Bank's service area, $80.3 million of which are secured by multi- family and underlying cooperative apartment buildings. The Bank's current lending policy requires loans in excess of $500,000 to be approved by the Board of Directors. The Bank's lending policy provides for a maximum loan amount of $5.0 million. The Bank also considers the financial resources and income level of the borrower, the borrower's experience in owning or managing similar properties, the market value of the property and the Bank's lending experience with the borrower. The typical adjustable-rate multi-family loan carries a maturity of 10 years, and an amortization period of no longer than 25 years. These loans have a fixed interest rate that adjusts after the fifth year indexed to the 5-year FHLBNY advance rate, but may not adjust below the initial interest rate of the loan. Prepayment penalties are assessed throughout the life of the loans. The Bank also offers fixed-rate, self-amortizing, multi-family and non-residential loans with maturities of up to 15 years. At June 30, 1996, the Bank had multi-family loans totaling $296.6 million in its portfolio, comprising 50.6% of the gross loan portfolio. The underwriting standards for new loans generally require (1) a maximum loan-to-value ratio of 75% based on an appraisal performed by an independent, state-certified appraiser, and (2) sufficient cash flow from the underlying property to adequately service the debt, represented by a debt service ratio not below 1.15. Of the Bank's multi-family loans, $235.2 million, or 79.3%, were secured by apartment buildings, and $59.1 million, or 20.7%, were secured by underlying cooperatives at June 30, 1996. Multi-family loans are generally viewed as exposing the Bank to a greater risk of loss than one- to four-family residential loans and typically involve higher loan principal amounts. At June 30, 1996, the Bank had 80 multi- family and non-residential loans with principal balances of $1.0 million or more, totaling $138.7 million. These loans, while underwritten to the same standards as all other multi-family and non-residential loans, tend to expose the Bank to a higher degree of risk due to the potential impact of losses from any one loan relative to the size of the Bank's capital position. As of June 30, 1996, one of the 80 loans was in process of foreclosure, with an outstanding balance of $2.1 million. See ''- Asset Quality.'' Three other loans totaling $6.4 million were on the Bank's ''watch list,'' none of which were in arrears at that date. In addition, the Bank has identified 107 large real estate loans or commitments, totaling $90.4 million, derived in connection with 34 principal parties, each of which has certain financial interests in more than one real estate loan held by the Bank. The principal parties identified may, for example, be officers of corporations, or sponsors of cooperative corporations, which own the real estate on which the Bank holds a mortgage. No combination of these loans are in violation of the OTS limitations on loans to one borrower. See ''- Regulation - Regulation of Federal Savings Associations - Loans to One Borrower.'' Repayment of multi-family loans is dependent, in large part, on sufficient cash flow from the property to cover operating expenses and debt service. Economic events 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 meet increases in the loan rate at repricing, or increases in overhead expenses (i.e., utilities, taxes). During the last five fiscal years, the Bank's charge-offs related to its multi-family loan portfolio totaled $5.3 million. As of June 30, 1996, the Bank had $4.7 million of non-performing multi-family loans. See "- Asset Quality and - Allowance for Loan Losses" for discussions of the Bank's underwriting procedures utilized in originating multi-family loans. The Bank's loan portfolio also includes $37.7 million in non- residential real estate mortgage loans which represented 6.4% of gross loans at June 30, 1996. This portfolio is comprised of commercial and industrial properties, and shopping centers. The Bank utilizes, where appropriate, rent or lease income, business receipts, the borrowers' credit history and business experience, and comparable appraisal values when underwriting non-residential applications. As of June 30, 1996, there were no non-performing non-residential loans in the Bank's portfolio. The Bank's three largest loans at June 30, 1996, consisted of a $3.6 million loan secured by a first mortgage on a twelve story apartment building located in midtown Manhattan originated in February, 1996; a $3.5 million first mortgage loan, originated in November, 1995, secured by a three-story catering hall located in the Howard Beach section of Queens; and a $3.5 million first mortgage loan, originated in October, 1995, secured by mortgages on three contiguous mixed-use properties in lower Manhattan combining both residential and commercial space. As of June 30, 1996, all of these loans were performing in accordance with their terms. Additionally, as of June 30, 1996, the Bank had an outstanding commitment to originate a loan for portfolio in the amount of $3.5 million, to a 23-store shopping center located in Hewlett, New York. The loan, which had a debt service ratio in excess of 4.0 and a loan-to-value ratio of 31.8%, closed in August, 1996. See ''- Regulation - Regulation of Federal Savings Associations - Loans to One Borrower.'' The Bank also currently services a total of $27.7 million in multi-family loans for various private investors. These loans were sold in the late 1980s, without recourse. One- to Four-Family Mortgage and Cooperative Apartment Lending. The Bank offers residential first mortgage loans secured primarily by owner-occupied, one- to four-family residences, including condominiums, and cooperative apartment share loans. Lending is primarily confined to an area covered by a 50-mile radius from the Bank's Main Office in Brooklyn. The Bank offers conforming and non-conforming fixed-rate mortgage loans and adjustable-rate mortgage loans with maturities of up to 30 years and a maximum loan amount of $500,000. The Bank's residential mortgage loan originations are generally obtained from existing or past loan customers, depositors of the Bank, members of the local community and referrals from attorneys, realtors and independent mortgage brokers who refer members of the communities located in the Bank's primary lending area. The Bank is a participating seller/servicer with several government-sponsored mortgage agencies: FNMA, FHLMC, and SONYMA, and generally underwrites its one- to four-family residential mortgage loans to conform with standards required by these agencies. At June 30, 1996, $229.3 million, or 39.1%, of the Bank's loans consisted of one- to four-family and cooperative apartment mortgage loans. ARMs represented 61.6% of total one- to four-family and cooperative apartment loans, while fixed-rate mortgages comprised 38.4% of the total. Of the total fixed-rate one-to four-family and cooperative apartment loans 90.5% were acquired from Conestoga. See "- Acquisition of Conestoga." From 1985 to 1988, the Bank was an active lender in the cooperative apartment share loan market. Although the collateral for cooperative apartment loans is comprised of shares in a cooperative corporation (a corporation whose primary asset is the underlying real estate), cooperative apartment loans generally are treated as one- to four-family loans. From 1985 to 1988, the Bank originated for portfolio over $117 million of cooperative apartment loans, or 26.8% of total loans as of December 31, 1988. These were exclusively one- and three-year adjustable-rate loans and were well-suited to the Bank's asset/liability strategy. By the end of 1988, in response to the steep decline in the market value of cooperative apartments, the Bank enacted more stringent underwriting guidelines for cooperative apartment loans. Of particular importance was the requirement that the number of units sold to owner-occupants of the subject building be greater than 65% of total units available in the building in order for a loan application to be considered. Since 1988, originations of cooperative apartment loans have significantly declined. Thus, as a result of prepayments and amortization, the Bank's portfolio of such loans has declined to $59.1 million, or 10.1% of total loans as of June 30, 1996. The recent market for cooperative apartment loan financing has improved with the support of certain government agencies, particularly SONYMA and FNMA, who are insuring and purchasing, respectively, cooperative apartment share loans in qualifying buildings. The Bank adheres to underwriting guidelines established by SONYMA and FNMA for all fixed-rate cooperative apartment loans which are originated for sale. Adjustable-rate cooperative apartment loans continue to be originated both for portfolio and for sale. The Bank currently offers one- to four-family ARMs secured by residential properties with rates that adjust every one or three years. One- to four-family ARMs are offered with terms of up to 30 years. The interest rate at repricing on one- to four-family ARMs currently offered fluctuates based upon a spread above the average yield on United States Treasury securities, adjusted to a constant maturity which corresponds to the adjustment period of the loan (the ''U.S. Treasury constant maturity index'') as published weekly by the Federal Reserve Board. Additionally, one- and three-year one- to four-family ARMs are generally subject to limitations on interest rate increases of 2% and 3%, respectively, per adjustment period, and an aggregate adjustment of 6% over the life of the loan. For the year ended June 30, 1996, the Bank originated $1.0 million of one- to four-family ARMs. The volume and types of ARMs originated by the Bank have been affected by such market factors as the level of interest rates, competition, consumer preferences and availability of funds. During fiscal 1996 , demand for one- to four-family ARMs was relatively weak due to the prevailing low interest rate environment and consumer preference for fixed-rate loans. Accordingly, although the Bank will continue to offer one- to four-family ARMs, there can be no assurance that in the future the Bank will be able to originate a sufficient volume of one- to four-family ARMs to increase or maintain the proportion that these loans bear to total loans. The retention of one- to four-family ARMs, as opposed to fixed- rate residential mortgage loans, in the Bank's loan portfolio helps reduce the Bank's exposure to increases in interest rates. However, one- to four-family ARMs generally pose credit risks different from the risks inherent in fixed-rate loans, primarily because as interest rates rise, the underlying payments of the borrower rise, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected. In order to minimize risks, applicants for one- to four-family ARMs are qualified at the highest rate which would be in effect after the first interest rate adjustment, if rates were to rise. The Bank did not in the past, nor does it currently, originate one- to four-family ARMs which provide for negative amortization. The Bank currently offers fixed-rate mortgage loans with terms of 10 to 30 years secured by one- to four-family residences and cooperative apartments. Interest rates charged on fixed-rates loans are competitively priced based on market conditions. The Bank generally originates fixed-rate loans for sale in amounts up to the maximum allowed by FNMA, FHLMC and SONYMA, with private mortgage insurance required for loans with loan-to-value ratios in excess of 80%. For the year ended June 30, 1996, the Bank originated $5.7 million of fixed-rate, one- to four-family residential mortgage and cooperative apartment loans. The Bank generally sells its newly originated conforming fixed- rate mortgage loans in the secondary market to federal and state agencies such as FNMA, FHLMC and SONYMA, and its non-conforming fixed-rate mortgage loans to various private sector secondary market purchasers. With few exceptions, such as SONYMA, the Bank retains the servicing rights on all such loans sold. For the year ended June 30, 1996, the Bank sold mortgage loans totaling $5.1 million. As of June 30, 1996, the Bank's portfolio of one-to four- family fixed-rate mortgage loans serviced for others totaled $63.4 million. The Bank intends to continue to sell all of its newly-originated fixed-rate mortgage loans to conform to its interest-rate risk policy. No assurances can be made, however, that the Bank will be able to do so. Originated mortgage loans in the Bank's one-to-four family portfolio generally include due-on-sale clauses which provide the Bank with the contractual right to deem the loan immediately due and payable in the event that the borrower transfers ownership of the property without the Bank's consent. It is the Bank's policy to enforce due-on-sale provisions within the applicable regulations and guidelines imposed by New York law and secondary market purchasers. Home equity loans currently are originated to a maximum of $250,000. When combined with the balance of the first mortgage lien, the home equity loan may not exceed 75% of the appraised value of the property at the time of the loan commitment. The Bank's home equity loans outstanding at June 30, 1996, totaled $760,000 against total available credit lines of $1.2 million. Other Lending. The Bank also originates other loans, primarily student and passbook loans. Total other loans outstanding at June 30, 1996, amounted to $5.6 million, or 0.95%, of the Bank's loan portfolio. Passbook loans, totaling $3.0 million, and student loans, totaling $1.3 million, comprise the majority of the Bank's other loan portfolio. Loan Approval Authority and Underwriting. The Board of Directors establishes lending authorities for individual officers as to its various types of loan products. For multi-family and one- to four-family mortgage loans, including cooperative apartment and condominium loans, the Loan Operating Committee, which is comprised of the Chief Executive Officer, Executive Vice President and Senior Vice President, and the heads of both the residential loan and multi-family loan origination departments, has the authority to approve loans in amounts up to $500,000. Any loan in excess of $500,000, however, must be approved by the Board of Directors. In addition, regulatory restrictions imposed on the Bank's lending activities limit the amount of credit that can be extended to any one borrower to 15% of total capital. See ''- Regulation - Regulation of Federal Savings Associations - Loans to One Borrower.'' For all one- to four-family loans originated by the Bank, upon receipt of a completed loan application from a prospective borrower, a credit report is ordered, income, assets and certain other information are verified by an independent credit agency, and if necessary, additional financial information is required to be submitted by the borrower. An appraisal of the real estate intended to secure the proposed loan is required, which currently is performed by an independent appraiser designated and approved by the Board of Directors. In certain cases, the Bank may also require certain environmental hazard reports on multi-family properties. It is the Bank's policy to require appropriate insurance protection, including title and hazard insurance, on all real estate mortgage loans prior to closing. Borrowers generally are required to advance funds for certain items such as real estate taxes, flood insurance and private mortgage insurance, when applicable.

Asset Quality Delinquent Loans and Foreclosed Assets. Management does not expect to incur significant losses on its current portfolio of delinquent mortgage loans. Loans in the process of foreclosure and other non-accrual loans, 27 loans in all, totaled $6.6 million at June 30, 1996 versus $5.1 million at June 30, 1995. The largest loan in this group is a $2.1 million foreclosure on an underlying cooperative apartment building located in Brooklyn, New York. The Bank has received a preliminary offer to purchase the mortgage for $1.5 million. No assurance can be given that the mortgage will be sold, or as to the ultimate terms of any such sale. The Bank believes that its allowance for loan losses as of June 30, 1996 is adequate after taking into consideration the proposed sale of the loan and expected charge to the allowance for loan losses. The Bank had twelve loans totaling $1.7 million delinquent 60-89 days at June 30, 1996, as compared to seven such delinquent loans totaling $479,000 at June 30, 1995. The Bank's real estate loan servicing policies and procedures require that the Bank initiate contact with a delinquent borrower as soon after the tenth day of delinquency as possible. Generally, the policy calls for a late notice to be sent 10 days after the due date of the late payment. If payment has not been received within 30 days of the due date, a letter is sent to the borrower. Thereafter, periodic letters and phone calls are placed to the borrower until payment is received. In addition, Bank policy calls for the cessation of interest accruals on loans delinquent 60 days or more. When contact is made with the borrower at any time prior to foreclosure, the Bank will attempt to obtain the full payment due, or work out a repayment schedule with the borrower to avoid foreclosure. Generally, foreclosure proceedings are initiated by the Bank when a loan is 90 days past due. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan is generally sold at foreclosure or by the Bank as soon thereafter as practicable. Management reviews delinquent loans on a continuous basis and reports monthly to the Board of Directors regarding the status of all delinquent and non-accrual loans in the Bank's portfolio. The Bank retains outside counsel experienced in foreclosure and bankruptcy procedures to institute foreclosure and other actions on the Bank's delinquent loans. It is the policy of the Bank to initiate foreclosure proceedings after a loan becomes 90 days past due. As soon as practicable after initiating foreclosure proceedings on a loan, the Bank prepares an estimate of the fair value of the underlying collateral. In the event the carrying balance of the loan, including all accrued interest, exceeds the estimate of fair value, the loan is considered to be impaired and a reserve is established pursuant to Statement of Financial Accounting Standards ("SFAS") No. 114. At June 30, 1996, $7.4 million of loans were deemed impaired under SFAS 114. It is the Bank's general policy to dispose of properties acquired through foreclosure or deeds in lieu thereof as quickly and as prudently as possible in consideration of market conditions, the physical condition of the property, and any other mitigating conditions. Under Generally Accepted Accounting Principles ("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 debt 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 the Bank would not otherwise consider. Debt restructurings or loan modifications for a borrower do not necessarily always constitute troubled-debt restructurings, however, and troubled-debt restructurings do not necessarily result in non-accrual loans. The Bank had four loans classified as troubled-debt restructurings at June 30, 1996, totaling $4.7 million, and all are currently performing according to their restructured terms. The largest restructured debt, a $2.7 million loan secured by a mortgage on an underlying cooperative apartment building located in Forest Hills, New York, was originated in 1987. The loan was first restructured in 1988, and again in 1994.

Non-performing Assets and Troubled-Debt Restructurings. The following table sets forth information regarding the Bank's non- performing assets and troubled-debt restructurings at the dates indicated. At Year Ended June 30, -------------------------------------------- 1996 1995 1994 1993 1992 ------- -------- -------- -------- -------- (Dollars in thousands) Non-accrual mortgage loans: One- to four-family...................... $ 1,149 $572 $ 1,276 $ 3,449 $ 4,184 Multi-family and underlying cooperative.. 4,734 3,978 4,363 7,265 11,528 Non-residential.......................... - - - - - Cooperative apartment.................... 668 523 609 918 1,001 Non-accrual other loans.................. - - - - - --------------- -------- -------- -------- -------- Total non-performing loans.................. 6,551 5,073 6,248 11,632 16,713 --------------- -------- -------- -------- -------- Total OREO.................................. 1,946 4,466 8,200 7,981 7,367 Total non-performing assets................. $8,497 $9,539 $ 14,448 $19,613 $24,080 =============== ======== ======== ======== ======== Troubled-debt restructurings................ $4,671 $7,651 $ 7,421 $5,219 $- Total non-performing assets and troubled- debt restructurings...................... $13,168 $17,190 $21,869 $24,832 $24,080 Total non-performing loans to total loans... 1.12% 1.18% 1.45% 2.52% 3.48% Total non-performing assets to total assets 0.62 1.44 2.23 3.04 3.74 Total non-performing assets and troubled- debt restructurings to total assets. 0.96 2.59 3.38 3.84 3.74 Total non-performing assets to total Adjusted Assets were 0.68% at June 30, 1996. Total non-performing assets and troubled-debt restructurings to total Adjusted Assets were 1.06% at June 30, 1996. The Bank recorded $47,000 and $344,000 of interest income on non-performing loans and troubled-debt restructurings, respectively, for the year ended June 30, 1996, and $104,000 and $587,000, respectively, for the fiscal year ended June 30, 1995. If the Bank's non-performing loans and troubled-debt restructurings had been performing in accordance with their terms, the Bank would have recorded additional interest income of $410,000 and $127,000, respectively, for the year ended June 30, 1996, and $325,000 and $210,000, respectively, for the fiscal year ended June 30, 1995. Other Real Estate Owned ("OREO"). Property acquired by the Bank as a result of a foreclosure on a mortgage loan is classified as OREO and is recorded at the lower of the recorded investment in the related loan or the fair value of the property at the date of acquisition, with any resulting write down charged to the allowance for loan losses. The Bank obtains an appraisal on a real estate owned property as soon as practicable after it takes possession of the real property. The Bank will generally reassess the value of OREO at least annually thereafter. Classified Assets. The Bank's Loan Loss Reserve Committee meets every other month to review all problem loans in the portfolio to determine whether any loans require reclassification in accordance with applicable regulatory guidelines. Recommendations are reported by the Loan Loss Reserve Committee to the Board of Directors on a quarterly basis. The Loan Loss Reserve Committee, subject to Board approval, establishes policy relating to the internal classification of loans and believes that its classification policies are consistent with regulatory policies. All non-performing loans and OREO are considered to be classified assets. In addition, the Bank maintains a "watch list" comprised of loans totaling $8.1 million at June 30, 1996 which, while performing, are characterized by weaknesses which require special attention from management and are considered to be potential problem loans. All loans on the watch list are considered to be classified assets or are otherwise categorized as "Special Mention" as discussed below. As a result of its bi-monthly review of the loan portfolio, the Loan Loss Reserve Committee may decide to reclassify one or more of the loans on the watch list. Federal regulations and Bank policy require that loans and other assets considered to be of lesser quality 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 of 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 sufficient risk to warrant classification in one of the aforementioned categories but possess potential weaknesses that deserve management's attention are designated ''Special Mention'' by management. At June 30, 1996 the Bank had $9.4 million of loans designated Special Mention. When an insured institution classifies one or more assets, or portion thereof, as Substandard or Doubtful, it is required to establish a general valuation allowance for loan losses in an amount deemed prudent by management. Generally, federally-insured institutions must maintain an allowance for loan losses at a level that is ''adequate to absorb estimated credit losses associated with the loan portfolio.'' The general valuation allowance, which is a regulatory term, represents a loss allowance which has been established to recognize the inherent risk associated with lending activities, but which, unlike the specific allowance, has not been allocated to particular problem assets. When an insured institution classifies one or more assets, or proportions thereof, as ''Loss,'' it is required to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge-off such amount. At June 30, 1996, the Bank had $7.3 million of assets classified Substandard, consisting of 42 loans, no assets classified as Doubtful, and $5,000 of assets classified as Loss, consisting of 1 loan.

The following table sets forth at June 30, 1996 the Bank's aggregate carrying value of the assets classified as Substandard, Doubtful or Loss or designated as Special Mention. Special Mention Substandard Doubtful Loss ---------------- -------------- ------------- ------------- Number Amount Number Amount Number Amount Number Amount ------ ------ ------ ------ ------ ------ ------ ------ (Dollars in thousands) Mortgage Loans: One- to four-family....................... 4 $704 3 $ 690 - $ - - $ - Multi-family and underlying cooperative... 11 8,347 7 4,090 - - 1 5 Non-residential........................... - - - - - - - - Cooperative apartment..................... 6 339 9 604 - - - - ------ ------ ------ ------ ------ ------ ------ ------ Total Mortgage Loans...................... 21 9,390 19 5,384 - - 1 5 ------ ------ ------ ------ ------ ------ ------ ------ Real Estate Owned: One- to four-family....................... - - 5 1,388 - - - - Multi-family and underlying cooperative... - - - - - - - - Non-residential........................... - - - - - - - - Cooperative apartment..................... - - 18 558 - - - - ------ ------ ------ ------ ------ ------ ------ ------ Total Real Estate Owned................... - - 23 1,946 - - - - ------ ------ ------ ------ ------ ------ ------ ------ Total..................................... 21 $9,390 42 $7,330 - $- 1 $ 5 ====== ====== ====== ====== ====== ====== ====== ====== The Bank had $215,777 of receivables from Nationar, a failed check-clearing and trust company, which are included in Other Assets. These receivables are fully reserved at June 30, 1996. See "Notes to Consolidated Financial Statements." Allowance for Loan Losses The Bank has established a Loan Loss Reserve Committee and has charged it with, among other things, specific responsibility for monitoring the adequacy of the loan loss reserve. The Loan Loss Reserve Committee's findings, along with recommendations for additional loan loss reserve provisions, if any, are reported directly to senior management of the Bank, and to the Board of Directors. The Allowance for Loan Losses is supplemented through a periodic provision for loan losses based on the Loan Loss Reserve Committee's evaluation of several variables, including the level of non-performing loans, the ratio of reserves to total performing loans, the level and composition of new loan activity, and an estimate of future losses determinable at the date the portfolio is evaluated. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters, the fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an adequate loan loss allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses, its valuation of OREO, and both the level of loans in foreclosure and pending foreclosure. Based on their judgments about information available to them at the time of their examination, the regulators may require the Bank to recognize additions to the allowance. Loan loss reserves are established based upon a review of the two components of the Bank's loan portfolio, performing loans and non-performing loans. Performing loans are reviewed based upon the premise that, over time, the loan portfolio will generate losses and that some portion of the loan portfolio which is currently performing will default. The evaluation process is thus based upon the Bank's historical loss experience. Non-performing loans are reviewed individually to determine if the liquidation value of the underlying collateral is sufficient to pay off the existing debt. Should the bank determine that a non-performing loan is likely to result in a principal loss, the loan is then placed into one of four classifications. The particular classification assigned to any one loan, or proportion thereof, (loss, doubtful, substandard or special mention) is based upon the actual level of loss attributable to that loan, as determined by the Loan Loss Reserve Committee. The Bank will then increase its general valuation allowance in an amount established by the Loan Loss Reserve Committee to appropriately reflect the anticipated loss from each loss classification category. Specific reserves are established against loans classified as ''loss.'' Rather than an estimation of potential loss, the establishment of a specific reserve represents the identification of an actual loss which will result in a charge-off. This loss amount will be set aside on the Bank's balance sheet as a specific reserve and will serve to reduce the carrying value of the associated loan. The Bank's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by various regulatory agencies which can order the establishment of additional general or specific loss allowances. The Bank has increased its allowance for loan losses to a level which management believes is adequate to absorb possible losses that may be incurred within the Bank's loan portfolio. The Bank provided $3.0 million to its allowance for loan losses for the fiscal year ended June 30, 1996 and acquired reserves of $668,000 from Conestoga. At June 30, 1996, the total allowance was $7.8 million, which amounted to 119.3% of non-performing loans and 1.34% of total loans. The increase in the allowance reflects management's assessment of the risks inherent in its loan portfolio, including those risks associated with the Bank's emphasis on multi-family mortgage loans, which are considered to be at greater risk of loss than one- to four-family loans. The Bank will continue to monitor and modify the level of its allowance for loan losses in order to maintain such allowance at a level which management considers adequate to provide for loan losses. For the fiscal year ended June 30, 1996, the Bank had charge-offs, net of recoveries, of $1.0 million against the allowance. Since 1985, total principal losses attributable to the Bank's loan portfolio have averaged 0.42% of the average outstanding loan balance.

The following table sets forth activity in the Bank's allowance for loan losses at or for the dates indicated. At or For the Year Ended June 30, ------------------- ----------------------------- 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- (Dollars in thousands) Total loans outstanding at end of period(1)............... $583,686 $429,854 $431,593 $461,418 $479,610 ========= ========= ========= ========= ========= Average total loans outstanding(1)........................ $449,063 $430,845 $455,705 $474,362 $468,594 ========= ========= ========= ========= ========= Balance at beginning of period............................ $5,174 $3,633 $2,996 $2,094 $1,340 Provision for loan losses................................. 2,979 2,950 4,105 3,395 1,409 Charge-offs: One- to four-family....................................... (21) (146) (224) (272) (40) Multi-family and underlying cooperative................... (553) (1,081) (2,203) (1,355) (114) Non-residential........................................... (274) (92) - (19) - F.H.A./V.A................................................ - (9) - (13) - Cooperative apartment..................................... (170) (328) (1,109) (876) (557) Other..................................................... (5) - - - (1) --------- --------- --------- --------- --------- - Total charge-offs......................................... (1,023) (1,656) (3,536) (2,535) (712) --------- --------- --------- --------- --------- - Recoveries................................................ 14 247 68 42 57 --------- --------- --------- --------- --------- Reserve acquired in purchase of Conestoga.................. 668 - - - - --------- --------- --------- --------- --------- Balance at end of period.................................. $7,812 $5,174 $3,633 $2,996 $2,094 ========= ========= ========= ========= ========= Allowance for loan losses to total loans at end of period. 1.34% 1.20% 0.84% 0.65% 0.44% Allowance for loan losses to total non-performing loans at end of period(2).......................................... 119.25 101.99 58.15 25.76 12.53 Allowance for losses on OREO: Balance at beginning of period............................ $- $- $- $- $- Provision charged to operations........................... 586 - - - - Charge-offs, net of recoveries............................ (472) - - - - --------- --------- --------- --------- --------- Balance at end of period.................................. $114 $- $- $- $- ========= ========= ========= ========= ========= Total loans represents loans, net, plus the allowance for loan losses. Total loans at June 30, 1996 includes $113.1 million of loans acquired from Conestoga. The Bank adopted SFAS No. 114 on July 1, 1995. See ''Management's Discussion and Analysis of Financial Condition and Results of Operations-Impact of Accounting Standards.''

The following table sets forth the Bank's allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. At June 30, -------------------------------------------------------------- 1996 1995 1994 -------------------- -------------------- -------------------- Percent of Percent of Percent of Loans in Loans in Loans in Each Each Each Category Category Category Allowance to Total Allowance to Total Allowance to Total Amount Loans Amount Loans Amount Loans --------- ---------- --------- ---------- --------- ---------- (Dollars in thousands) Mortgage loans: One- to four-family........ $1,171 29.90% $556 14.25% $398 14.66% Multi-family and underlying cooperative................ 4,763 52.11 3,372 61.72 2,267 59.68 Non-residential............ 605 6.63 103 6.60 72 6.63 Cooperative apartment...... 1,085 10.38 1,031 16.51 784 18.06 Other...................... 188 0.98 112 0.92 112 0.97 --------- ---------- --------- ---------- --------- ---------- Total...................... $7,812 100.00% $5,174 100.00% $3,633 100.00% ========= ========== ========= ========== ========= ========== Total loans represent gross loans less FHA and VA loans, which are government guaranteed loans. Investment Activities Investment Strategies of the Company - After using $76.4 million of the proceeds raised in the initial public offering to purchase the 100% of the Bank's Common Stock, the Company retained approximately $65. 0 million in cash, of which $11.6 million was loaned to the Company's ESOP. The remaining $53.4 million is to be utilized for general business activities which may include, but are not limited to: (1) repurchases of Common Stock, (2) acquisition of other companies, (3) subject to applicable limitations, the payment of dividends, and/or (4) investments in the equity securities of other financial institutions and other investments not permitted for federally-insured institutions. There can be no assurance that the Company will engage in any of these activities in the future. See "Item 5 - Market for the Company's Common Stock and Related Stockholder Matters." Otherwise, the investment policy of the Company calls for investments in relatively short-term, liquid securities similar to such securities defined in the securities investment policy of the Bank. Investment Policy of the Bank. The securities investment policy of the Bank, which is established by the Board of Directors, is designed to help the Bank achieve its overall asset/liability management objectives. Generally, the policy calls for management to emphasize principal preservation, liquidity, diversification, short maturities and/or repricing terms, and a favorable return on investment when selecting new investments for the Bank's portfolio. The Bank's current securities investment policy permits investments in various types of liquid assets including obligations of the U.S. Treasury and federal agencies, investment grade corporate obligations, various types of mortgage-backed securities, commercial paper, certificates of deposit, and federal funds sold to select financial institutions periodically approved by the Board of Directors. Investment strategies are implemented by the Asset and Liability Management Committee ("ALCO") comprised of the Chief Executive Officer, the Executive Vice President and other senior management officers. The strategies take into account the Bank's overall balance sheet, including loans and deposits, and are intended to protect and enhance the Company's earnings and market value. The strategies are reviewed monthly by the ALCO and reported regularly to the Board of Directors. The Bank converted to a federally chartered mutual savings bank on November 1, 1995. Prior to that date, the Bank operated as a New York State chartered mutual savings Bank. While operating under its New York State charter, the Bank was permitted to make certain investments in equity securities and stock mutual funds. At June 30, 1996, these equity investments totaled $3.2 million, comprised primarily of a $2.1 million investment in a common stock mutual fund designed specifically for New York State Savings Banks, and a $1.1 million investment divided among two additional common stock mutual funds and one fixed income mutual fund. Pursuant to current law, the Bank is required to divest or transfer such securities. The Bank expects that it will either dispose of such securities to a third-party or sell or transfer such securities to the Company. The Bank currently does not participate in hedging programs, interest rate swaps, or other activities involving the use of off- balance sheet derivative financial instruments. These activities are prohibited by the Bank's securities investment policy. Similarly, the Bank has not and does not invest in mortgage- backed securities which are deemed to be ''high risk,'' or purchase bonds which are not rated investment grade. Mortgage-Backed Securities. In its securities investment activities over the past few years the Bank has increased its purchases of mortgage-backed securities, which provide the portfolio with investments consisting of desirable repricing, cash flow and credit quality characteristics. Mortgage-backed securities generally yield less than the loans that underlie the securities because of the cost of payment guarantees and credit enhancements that reduce credit risk to the investor. However, mortgage-backed securities are more liquid than individual mortgage loans and may be used to collateralize borrowings of the Bank. Virtually all (99.9%) of the Company's $209.9 million mortgage-backed securities portfolio, which represented 15.3% of the Company's total assets (or 16.9% of Adjusted Assets) at June 30, 1996, was comprised of securities backed by either the Governmental National Mortgage Association (''GNMA''), FHLMC, or FNMA. In addition to the superior credit quality provided by the agency backing, the mortgage-backed securities portfolio also provides the Company with important interest rate risk management features. One year adjustable-rate mortgage-backed securities, which total $111.3 million, are the single largest component of the Bank's mortgage-backed securities portfolio. These securities are structured so that the interest rate received by the Company adjusts annually in tandem with changes in other short-term market interest rates, a feature which reduces the Bank's exposure to interest rate risk. The Company also has a $50.9 million investment in fixed-rate balloon mortgage-backed securities which provide a return of principal and interest on a monthly basis, and have original maturities of between five to seven years, at which point the entire remaining principal balance is repaid (the ''balloon'' payment). The remainder of the Company's mortgage-backed securities portfolio is split between a $39.1 million investment in seasoned pass-through certificates backed by GNMA, FNMA or FHLMC, with an average remaining maturity of 7 years, and an $8.6 million investment in Collateralized Mortgage Obligations ("CMOs") comprised entirely of fixed rate, short-term classes with relatively little cash flow volatility or floating rate classes which reprice periodically. While mortgage-backed securities backed by federally sponsored agencies carry a reduced credit risk as compared to whole loans, such securities remain subject to the risk that fluctuating interest rates, along with other factors such as the geographic distribution of the underlying mortgage loans, may alter the prepayment rate of such mortgage loans and so affect both the prepayment speed, and value, of such securities. The Bank adopted SFAS 115 effective July 1, 1994. SFAS 115 requires that investments in equity securities that have readily determinable fair values and all investments in debt securities be classified in one of the following three categories and accounted for accordingly: trading securities, securities available for sale, or securities held to maturity. The Company had no securities classified as trading securities during the year ended June 30, 1996, and does not intend to trade securities. Unrealized gains and losses on available for sale securities are excluded from earnings and are reported as a separate component of stockholders' equity, net of deferred taxes. At June 30, 1996, the Company had $498.7 million of securities classified as available for sale which represented 36.3% of total assets (or 39.93% of Adjusted Assets) at June 30, 1996. Given the size of the available for sale portfolio, future fluctuations in market values of these securities could result in fluctuations in the Company's stockholders' equity. As a mitigating factor, approximately $360.4 million, or 72%, of the total available for sale portfolio at June 30, 1996 either matures or reprices within one year. The maturities on the Bank's fixed-term mortgage-backed securities (balloons, seasoned GNMAs and FHLMCs) are relatively short as compared to the final maturities on its ARMs and CMO portfolios. Except for fixed rate mortgage backed securities acquired from Conestoga, which were generally classified as available for sale, the Company typically classifies purchased fixed rate mortgage-backed securities as held-to-maturity, and carries the securities at amortized cost. The Company is confident of its ability to hold these securities to final maturity. The Company typically classifies purchased ARMs and CMOs as available for sale, in recognition of the greater prepayment uncertainty associated with these securities, and carries these securities at fair market value. The following table sets forth activity in the Company's mortgage- backed securities portfolio for the periods indicated. For the Year Ended June 30, ---------------------------------- 1996 1995 1994 ----------- ----------- ---------- (In thousands) Amortized cost at beginning of period.......... $ 90,543 $94,356 $82,077 Purchases/Sales (net).......................... 20,743 10,067 29,753 Principal repayments........................... (25,871) (13,595) (16,906) Premium and discount amortization, net......... (283) (285) (568) Securities acquired in purchase of Conestoga 124,409 - - ----------- ---------- --------- Amortized cost at end of period................ $ 209,541 $90,543 $94,356 =========== ========== ========= Amount comprised of $9.9 million of FHLMC securities, $38.4 million of FNMA securities, $70.1 of GNMA securities, and $6.0 million of CMOs. The following table sets forth the amortized cost and fair value of the Company's securities at the dates indicated. At June 30, ---------------------------------------------------------- 1996 1995 1994 -------------------- ------------------ ------------------ Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value ---------- --------- --------- -------- --------- -------- (In thousands) Mortgage-backed securities: GNMA.......................... $88,133 $88,563 $24,402 $24,960 $29,764 $29,224 FNMA.......................... 56,720 56,654 7,417 7,599 5,941 5,965 FHLMC......................... 56,122 56,151 54,888 55,382 53,950 53,010 CMOs.......................... 8,566 8,589 3,836 3,964 4,701 4,738 ---------- --------- --------- -------- --------- -------- Total mortgage-backed securities.................... 209,541 209,957 90,543 91,905 94,356 92,937 ---------- --------- --------- -------- --------- -------- Investment securities: U.S. Treasury and Agency...... 297,994 297,906 25,834 25,694 18,989 18,684 Other..................... 83,700 83,610 67,991 67,909 61,352 60,379 ---------- --------- --------- -------- --------- -------- Total investment securities... 381,694 381,516 93,825 93,603 80,341 79,063 Equity securities............. 2,977 3,205 3,304 3,070 1,356 1,359 Net unrealized gain....... 575 - 770 - - - ---------- --------- --------- -------- --------- -------- Total securities, net......... $594,787 $594,678 $188,442 $188,578 $176,053 $173,359 ========== ========= ========= ======== ========= ======== Includes $9.9 million of FHLMC securities, $38.4 million of FNMA securities, $70.1 million in GNMA securities, $6.0 million in CMOs, $119.1 million in agency obligations, and $51.7 million in corporate obligations acquired from Conestoga. The net unrealized gain at June 30, 1996 and 1995 relates to available for sale securities in accordance with SFAS No. 115. The net unrealized gain is presented in order to reconcile the ''Amortized Cost'' of the Company's securities portfolio to the recorded value reflected in the Consolidated Statements of Condition. Corporate Debt Obligations. The Company invests in the short- term investment grade debt obligations of various corporations. Corporate debt obligations generally carry both a higher rate of return and a higher degree of credit risk than U.S. Treasury securities with comparable maturities. In addition, corporate securities are generally less liquid than comparable U.S. Treasury securities. In recognition of the additional risks associated with investing in these securities, the Company's investment policy limits new investments in corporate obligations to those companies which are rated single ''A'' or better by one of the nationally recognized rating agencies, and limits investments in any one corporate entity to the lesser of 1% of total assets or 15% of the Company's equity. At June 30, 1996, the Company's portfolio of corporate debt obligations totaled $79.2 million, or 5.8% of total assets. The following table sets forth the amortized cost and fair value of the Company's securities, by accounting classification and by type of security, at the dates indicated. At June 30, ---------------------------------------------------------- 1996 1995 1994 -------------------- ------------------ ------------------ Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value ---------- --------- --------- -------- --------- --------- (In thousands) Held-to-Maturity: Mortgage-backed securities: Pass-through securities........ $52,580 $52,596 $53,815 $54,172 $89,655 $88,199 CMOs........................... - - - - 4,701 4,738 ---------- --------- --------- -------- --------- -------- Total mortgage-backed securities.................... 52,580 52,596 53,815 54,172 94,356 92,937 Investment securities 43,552 43,428 51,475 51,254 80,341 79,063 Equity securities............. - - - - 1,356 1,359 ---------- --------- --------- -------- --------- -------- Total Held-to-Maturity........ $ 96,132 $ 96,024 $105,290 $105,426 $176,053 $173,359 ========== ========= ========= ======== ========= ======== Available-for-Sale: Mortgage-backed securities: Pass-through securities........ $148,396 $148,772 $32,892 $33,769 - - CMOs........................... 8,566 8,589 3,836 3,964 - - ---------- --------- --------- -------- --------- -------- Total mortgage-backed securities.................... 156,962 157,361 36,728 37,733 - - Investment securities. 338,141 338,089 42,350 42,349 - - Equity securities............. 2,977 3,205 3,304 3,070 - - Net unrealized gain....... 575 - 770 - - - ---------- --------- --------- -------- --------- -------- Total available-for-sale...... $498,655 $498,655 $83,152 83,152 - - ========== ========= ========= ======== ========= ======== Total securities, net......... $594,787 $594,679 $188,442 $188,578 $176,053 $173,359 ========== ========= ========= ======== ========= ======== Includes $118.4 million of mortgage-backed pass-through securities, $6.0 million in CMOs, and $170.8 million in investment securities acquired from Conestoga. Except, for $10.7 million of investment securities which were classified as held-to-maturity, all securities acquired were classified as available for sale. Includes corporate debt obligations. The net unrealized gain at June 30, 1996 and 1995 relates to available for sale securities in accordance with SFAS No. 115. The net unrealized gain is presented in order to reconcile the ''Amortized Cost'' of the Company's securities portfolio to the recorded value reflected in the Consolidated Statements of Condition. Amount includes $125.0 million of investment securities (short-term agency obligations) which matured on July 1, 1996 in order to coincide with the refund of excess subscription proceeds received in the Company's initial public offering.

The following table sets forth certain information regarding the amortized cost, fair value and weighted average yield of the Company's debt securities at June 30, 1996, by remaining period to contractual maturity. With respect to mortgage-backed securities, the entire amount is reflected in the maturity period that includes the final security payment date and, accordingly, no effect has been given to periodic repayments or possible prepayments. Other than obligations of federal agencies and GSEs, the Company has no investments in securities issued by any one entity in excess of 10% of stockholders' equity at June 30, 1996. At June 30, 1996 ------------------------------------------------------ Held-to-Maturity Available-for-Sale --------------------------- -------------------------- Weighted Weighted Amortized Fair Average Amortized Fair Average Cost Value Yield Cost Value Yield --------- -------- -------- --------- -------- -------- (Dollars in thousands) Mortgage-backed securities: Due within 1 year....................... $ - $ - - % $2,075 $2,075 6.00% Due after 1 year but within 5 years..... 32,300 31,962 6.20 12,930 12,930 6.04 Due after 5 years but within 10 years... 2,817 2,740 6.10 5,945 5,968 6.83 Due after 10 years...................... 17,463 17,894 7.01 136,012 136,388 6.72 --------- -------- --------- -------- Total................................... 52,580 52,596 6.46 156,962 157,361 6.65 --------- -------- --------- -------- U.S. Treasury and Agency: Due within 1 year .................. 6,000 5,982 4.87 230,934 230,934 5.35 Due after 1 year but within 5 years..... 5,340 5,314 5.62 46,307 46,247 6.12 Due after 5 years but within 10 years... 8,093 8,111 6.86 - - - Due after 10 years...................... 1,320 1,320 7.41 - - - --------- -------- --------- -------- Total................................... 20,753 20,727 6.00 277,241 277,181 5.48 --------- -------- --------- -------- Corporate & Other: Due within 1 year....................... 13,039 13,043 5.55 42,417 42,420 5.37 Due after 1 year but within 5 years..... 9,760 9,658 6.10 14,109 14,132 6.62 Due after 5 years but within 10 years... - - - 3,376 3,348 7.99 Due after 10 years...................... - - - 3,975 4,213 8.15 --------- -------- --------- -------- Total................................... 22,799 22,701 5.79 63,877 64,113 5.96 --------- -------- --------- -------- Total: Due within 1 year....................... 19,039 19,025 5.33 275,426 275,429 5.36 Due after 1 year but within 5 years..... 47,400 46,934 6.11 73,346 73,309 6.20 Due after 5 years but within 10 years... 10,910 10,851 6.67 9,321 9,316 7.24 Due after 10 years...................... 18,783 19,214 7.03 139,987 140,601 6.76 --------- -------- --------- -------- Total................................... $ 96,132 $ 96,024 6.20% $498,080 $498,655 5.91% ========= ======== ========= ======== Amount includes $125.0 million of investment securities (short-term agency GSE notes) which matured on July 1,1996 in order to coincide with the refund of excess subscription proceeds received in the Company's initial public offering. Sources of Funds General. Deposits, repayments of loans and mortgage-backed securities, investment security maturities and redemptions, and short- to medium-term borrowings from the FHLBNY are the Bank's primary sources of funding for its lending and investment activities. The Bank is also active in the secondary mortgage market, selling substantially all of its new long-term, fixed- rate residential mortgage product to either FNMA, FHLMC, or SONYMA. Deposits. The Bank offers a variety of deposit accounts having a range of interest rates and terms. The Bank presently offers savings accounts, money market accounts, checking accounts, NOW and Super NOW accounts, and certificates of deposit. The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, and competition from other financial institutions and investment products. The Bank has not used brokers to attract and retain deposits, relying instead on customer service, convenience and long-standing relationships with customers. Consequently, the communities in which the bank maintains branch offices have historically provided the Bank with nearly all of its deposits. At June 30, 1996, the Bank had deposit liabilities of $950.1 million, up $395.3 million from June 30, 1995. The increase was due primarily to $394.3 of deposits acquired in the purchase of Conestoga. Within total deposits, $40.1 million, or 4.2%, consisted of certificates of deposit with balances of $100,000 or greater. Individual Retirement Accounts (''IRA's'') totaled $98.0 million, or 10.3% of total deposits. The following table presents the deposit activity of the Bank for the periods indicated. For the Year Ended June 30, ------------------------------ 1996 1995 1994 --------- ---------- --------- (In thousands) Deposits............................................... $696,881 $699,479 $646,338 Withdrawals............................................ 718,534 709,317 680,325 --------- --------- ---------- (Withdrawals) in excess of deposits.................... (21,653) (9,838) (33,987) Deposits acquired in purchase of Conestoga ........ 394,250 - - Interest credited...................................... 22,676 17,918 16,638 --------- --------- ---------- Total increase (decrease) in deposits.................. $395,273 $8,080 $(17,349) ========= ========= ========== Amount comprised of $216.3 million in certificate of deposits, $129.2 in savings accounts, $16.9 million in checking accounts, $30.8 million in money market accounts, and $954,000 in NOW and Super NOW accounts. At June 30, 1996 the Bank had $40.1 million in certificate of deposit accounts over $100,000 maturing as follows: Weighted Amount Average Rate -------- ------------- (Dollars in thousands) Maturity Period Within three months................. $11,005 5.24% After three but within six months... 7,584 5.43 After six but within 12 months...... 11,721 5.56 After 12 months..................... 9,755 6.23 -------- Total............................... $40,065 5.61% ======== The following table sets forth the distribution of the Bank's deposit accounts and the related weighted average interest rates at the dates indicated. At June 30, -------------------------------------------------------------------------------------- 1996 1995 1994 ----------------------------- ---------------------------- ----------------------------- Percent of Weighted Percent of Weighted Percent of Weighted Total Average Total Average Total Average Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate ---------- --------- --------- ---------- -------- -------- --------- ----------- --------- (Dollars in thousands) Checking accounts............. $27,684 2.91% -% $10,219 1.85% - % $9,865 1.80% -% NOW accounts.................. 15,029 1.58% 1.50 13,877 2.50 1.50 13,596 2.49 1.50 Super NOW..................... 552 0.06 1.50 674 0.12 1.50 416 0.08 1.50 Money market accounts......... 45,948 4.84 3.04 16,698 3.01 2.65 22,145 4.05 2.66 Savings accounts.............. 365,146 38.43 2.50 238,217 42.93 2.50 294,387 53.84 2.50 Certificates of deposit ...... 495,755 52.18 5.50 275,156 49.59 5.72 206,352 37.74 3.78 ---------- -------- ---------- -------- --------- -------- Totals........................ $950,114 100.00% $554,841 100.00% $546,761 100.00% ========== ======== ========== ======== ========= ======== The following table presents, by interest rate ranges, the amount of certificate accounts outstanding at the dates indicated and the period to maturity of the certificate accounts outstanding at June 30, 1996. Period to Maturity at June 30, 1996 --------------------------------------- ------------------------------ Total at June 30, Less than One to Four to ------------------------------ Interest Rate Range One Year Three Years Five Years 1996 1995 1994 - ------------------- ----------- ------------- ------------ ------------ -------- -------- (In thousands) 4.00% and below.... $3,257 $42 $1 $3,300 $20,646 $146,755 4.01% to 5.00%..... 192,562 12,261 3 204,826 45,135 18,331 5.01% to 6.00%..... 65,720 71,613 6,998 144,331 86,389 29,049 6.01% to 7.00%..... 86,597 11,558 18,390 116,545 112,929 7,774 7.01% and above.... 11,220 4,865 10,668 26,753 10,057 4,443 ----------- ------------- ------------ ------------ -------- -------- Total.............. $359,356 $100,339 $36,060 $495,755 $275,156 $206,352 =========== ============= ============ ============ ======== ======== Borrowings. The Bank has been a member and shareholder of the FHLBNY since February 14, 1980. One of the privileges accorded FHLBNY shareholders is the ability to borrow money under various lending (''advance'') programs at competitive interest rates. The Bank's total borrowing capacity at the FHLBNY at June 30, 1996 is in excess of $152 million. Included as part of the total borrowing capacity at the FHLBNY, the Bank has been approved for an ''Overnight Line of Credit'' of $32.1 million, and a $32.1 million ''One-Month Overnight Line of Credit,'' both priced at 0.125% over the prevailing federal funds rate. At June 30, 1996, the Bank had a total of $15.7 million in fixed-rate advances outstanding with the FHLBNY with remaining maturities of between two and three years, at an average rate of 5.40%. Securities sold with agreement to repurchase totaled $12.0 million at June 30, 1996. Of this total, $10.0 million were acquired in the acquisition of Conestoga. The U.S. Government, agency and mortgage-backed securities sold with agreement to repurchase all mature beyond ten years as of June 30, 1996.. Borrowings under such reverse repurchase agreements involve the delivery of securities to broker-dealers who arrange the transactions. The securities remain registered in the name of the Bank, and are returned upon the maturities of the agreements. Funds to repay the Bank's securities sold with agreement to repurchase at maturity will be provided primarily by cash received from the maturing securities. Presented below is information concerning securities sold with agreement to repurchase for the years ended June 30, 1996, 1995 and 1994: At of for the Years Ended June 30, ---------------------------------------- 1996 1995 1994 ------------- ------------- ------------ (Dollars in thousands) Average amounts outstanding............................. $2,148 $2,212 $2,196 Total interest cost..................................... 153 160 164 Average interest rate paid.............................. 7.13% 7.25% 7.48% Maximum amount outstanding at any month end............. $11,998 $2,164 $2,277 Ending balance.......................................... 11,998 2,110 2,161 Weighted average interest rate on balance outstanding... 6.00% 7.50% 7.56% Subsidiary Activities The Company's only subsidiary is the Bank. The Bank was originally founded in 1864 as a New York State-chartered mutual savings bank. On November 1, 1995, the Bank converted to a federal mutual savings bank. On June 26, 1996, the Bank converted from the mutual to the stock form of ownership, and 100% of its outstanding shares were acquired by the Company. The operation of the Bank is the primary business of the Company. The Bank has three wholly-owned subsidiary corporations. Havemeyer Brokerage Corporation (''HBC'') is currently engaged in the sale of insurance and annuity products primarily to the Bank's customers and members of the local community. As of June 30, 1996. HBC had $597,690 in consolidated assets, and for the year ended June 30, 1996, had pre-tax income of $47,889. Havemeyer Equities Corporation (''HEC'') and Boulevard Funding Corporation (''BFC'') are currently inactive. As of June 30, 1996, HEC had $7,688 and BFC had $1,868 of consolidated assets. Personnel As of June 30, 1996, the Company had 208 full-time employees and 73 part-time employees. The employees are not represented by a collective bargaining unit, and the Company considers its relationship with its employees to be good. Federal, State and Local Taxation Federal Taxation General. The following is a discussion of material tax matters and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company. The Bank was last audited for its taxable year ended December 31, 1988 For federal income tax purposes, the Company and the Bank will file separate income tax returns and report their income on a June 30 fiscal year basis using the accrual method of accounting and will be subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank's tax reserve for bad debts, discussed below. Tax Bad Debt Reserves. The Small Business Job Protection Act of 1996 (the "1996 Act"), which was enacted on August 20, 1996, made significant changes to provisions of the Internal Revenue Code of 1986 (the "Code") relating to a savings institution's use of bad debt reserves for federal income tax purposes and requires such an institution to recapture (i.e., take into income) certain portions of its accumulated bad debt reserves. The effect of the 1996 Act on the Bank is discussed below. Prior to the enactment of the 1996 Act, the Bank was permitted to establish tax reserves for bad debts and to make annual additions thereto, which additions, within specified formula limits, were deducted in arriving at the Bank's taxable income. The Bank's deduction with respect to "qualifying loans," which are generally loans secured by certain interests in real property, was permitted to be computed using an amount based on a six-year moving average of the Bank's charge-offs for actual losses (the "Experience Method"), or an amount equal to 8% of the Bank's taxable income (the "PTI Method"), computed without regard to this deduction and with additional modifications and reduced by the amount of any permitted addition to the non-qualifying reserve. Use of the PTI Method had the effect of reducing the marginal rate of federal tax on the Bank's income to 32.2%, exclusive of any minimum or environmental tax, as compared to the generally applicable maximum corporate federal income tax rate of 35%. The Bank's deduction with respect to non-qualifying loans was required to be computed under the Experience Method. Each year the Bank reviewed the most favorable way to calculate the deduction attributable to an addition to the tax bad debt reserves. The 1996 Act. Under the 1996 Act, for its current and future taxable years, the Bank is not permitted to make additions to its tax bad debt reserves. The Bank will be allowed to deduct bad debts as incurred. In addition, the Bank is required to recapture (i.e., take into income) over a six year period the excess of the balance of its tax bad debt reserves as of the first taxable year beginning after December 31, 1995 (other than its supplemental reserve for losses on loans) over the balance of such reserves as of December 31, 1987. As a result of such recapture, the Bank will pay additional federal tax of approximately $1.1 million. Since the Bank has already provided a deferred income tax liability of this amount for financial reporting purposes, the enactment of the 1996 Act will not adversely impact the Bank's financial condition or results of operations. Moreover, such recapture will be suspended for each of the two successive taxable years, beginning with the Bank's current taxable year, in which the Bank originates a minimum of certain residential loans based upon the average of the principal amounts of such loans made by the Bank during its six taxable years preceding its current taxable year. Distributions. Under the 1996 Act, if the Bank makes "non- dividend distributions" to the Company, such distributions will be considered to have been made from the Bank's unrecaptured tax bad debt reserve balance as of December 31, 1987, to the extent thereof, and then from the Bank's supplemental reserve for losses on loans, to the extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in the Bank's income. Non-dividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of the Bank's current or accumulated earnings and profits will not be so included in the Bank's income. The amount of additional taxable income created from a non- dividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, if, after the Conversion, the Bank makes a non-dividend distribution to the Company, approximately one and one-half times the amount of such distribution (but not in excess of the amount of such reserves) would be includable in income for federal income tax purposes, assuming a 35% federal corporate income tax rate. See "Regulation" and "Dividend Policy" for limits on the payment of dividends by the Bank. The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserves. Corporate Alternative Minimum Tax. The Code imposes a tax ("AMT") on alternative minimum taxable income ("AMTI") at a rate of 20%. AMTI is also adjusted by determining the tax treatment of certain items in a manner that negates the deferral of income resulting from the regular tax treatment of those items. Thus, the Bank's AMTI is increased by an amount equal to 75% of the amount by which the Bank's adjusted current earnings exceeds its AMTI (determined without regard to this adjustment and prior to reduction for net operating losses). In addition, for taxable years beginning after December 31, 1986 and before January 1, 1996, an environmental tax of 0.12% of the excess of AMTI (with certain modifications) over $2 million is imposed on corporations, including the Bank, whether or not an AMT is paid.. State and Local Taxation State of New York. The Bank and the Company are subject to New York State franchise tax on one of several alternative bases, whichever results in the highest tax, and will file combined returns for purposes of this tax. The basic tax is measured by "entire net income," which is federal taxable income with adjustments. For New York State tax purposes, so long as the Bank continues to meet certain definitional tests relating to its assets and the nature of its business, it will be permitted deductions, within specified formula limits, for additions to its bad debt reserves for purposes of computing its entire net income. The Bank's deduction with respect to "qualifying loans," which are generally loans secured by certain interests in real property, may be computed using an amount based on the Bank's actual loss experience (the "Experience Method") or an amount equal to 32% of the Bank's entire net income (the "PTI Method"), computed without regard to this deduction and reduced by the amount of any permitted addition to the Bank's reserve for non- qualifying loans. Because of a recent amendment to the New York State tax law, the Bank is not required to recapture any portion of its New York bad debt reserves because of the automatic recapture of its federal bad debt reserves pursuant to the 1996 Act (see Federal Taxation, Tax Bad Debt Reserves). However, the New York bad debt reserves are subject to recapture for "non- dividend distributions" in a manner similar to the recapture of the federal bad debt reserves for such distributions (see Federal Taxation, Distributions). Also, the New York bad debt reserve is subject to recapture in the event that the Bank fails to satisfy the definitional tests. The Bank's deduction with respect to non-qualifying loans must be computed under the Experience Method which is based on the Bank's actual charge-offs. Each year the Bank will review the most favorable way to calculate the deduction attributable to an addition to the tax bad debt reserves. The New York State tax rate for the 1996 calendar year is 10.755% (including commuter transportation and other surcharges) of net income. In general, the Company will not be required to pay New York State tax on dividends and interest received from the Bank. City of New York. The Bank and the Company are also subject to a similarly calculated New York City banking corporation tax of 9% on income allocated to New York City. Unless the New York City tax law is amended to conform with the New York State law, the Bank will be required to include in its New York City income for its current taxable year the excess of its post-1987 New York City reserves for losses on qualifying real property loans over its reserve for losses on such loans maintained for federal income tax purposes (the "Excess Reserves"). If the Bank's Excess Reserve of $29.6 million as of the first taxable year beginning after December 31, 1995 were so included, the Bank would pay an additional city tax liability of approximately $1.2 million. Since the Bank has already provided a deferred income tax liability of this amount for financial reporting purposes, this will not adversely impact the Bank's financial condition or results of operations. State of Delaware. As a Delaware holding company not earning income in Delaware, the Company is exempted from Delaware corporate income tax, but is required to file an annual report and pay an annual franchise tax to the State of Delaware. Regulation General The Bank is subject to extensive regulation, examination, and supervision by the OTS, as its chartering agency, and the FDIC, as its deposit insurer. The Bank's deposit accounts are insured up to applicable limits by the Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF") administered by the FDIC, and it is a member of the FHLBNY. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition, and it must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions. The OTS and the FDIC conduct periodic examinations to assess the Bank's compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings association can engage and is intended primarily for the protection of the insurance fund and depositors. The Company, as a unitary savings and loan holding company, is required to file certain reports with, and otherwise comply with, the rules and regulations of the OTS and of the Securities and Exchange Commission (the ''SEC'') under the federal securities laws. The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on the Company, the Bank, and the operations of both. The following discussion is intended to be a summary of the material statutes and regulations applicable to savings associations, and it does not purport to be a comprehensive description of all such statutes and regulations. Regulation of Federal Savings Associations Business Activities. The Bank derives its lending and investment powers from the Home Owner's Loan Act, as amended (''HOLA''), and the regulations of the OTS thereunder. Under these laws and regulations, the Bank may invest in mortgage loans secured by residential and commercial real estate, commercial and consumer loans, certain types of debt securities, and certain other assets. The Bank may also establish service corporations that may engage in activities not otherwise permissible for the Bank, including certain real estate equity investments and securities and insurance brokerage. These investment powers are subject to various limitations, including (a) a prohibition against the acquisition of any corporate debt security that is not rated in one of the four highest rating categories; (b) a limit of 400% of an association's capital on the aggregate amount of loans secured by non-residential real estate property; (c) a limit of 10% of an association's assets on commercial loans; (d) a limit of 35% of an association's assets on the aggregate amount of consumer loans and acquisitions of certain debt securities; (e) a limit of 5% of assets on non-conforming loans (loans in excess of the specific limitations of HOLA); and (f) a limit of the greater of 5% of assets or an association's capital on certain construction loans made for the purpose of financing what is or is expected to become residential property. Loans to One Borrower. Under HOLA, savings associations are generally subject to the same limits on loans to one borrower as are imposed on national banks. Generally, under these limits, a savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of the association's unimpaired capital and surplus. Additional amounts may be lent, not in excess of 10% of unimpaired capital and surplus, if such loans or extensions of credit are fully secured by readily-marketable collateral. Such collateral is defined to include certain debt and equity securities and bullion, but generally does not include real estate. At June 30, 1996, the Bank's limit on loans to one borrower was $12.4 million. At June 30, 1996, the Bank's largest aggregate amount of loans to one borrower was $8.2 million and the second largest borrower had an aggregate balance of $4.9 million. QTL Test. HOLA requires a savings association to meet a QTL test. Under the QTL test, a savings association is required to maintain at least 65% of its ''portfolio assets'' in certain ''qualified thrift investments'' in at least nine months of the most recent twelve-month period. ''Portfolio assets'' means, in general, an association's total assets less the sum of (a) specified liquid assets up to 20% of total assets, (b) certain intangibles, including goodwill and credit card and purchased mortgage servicing rights, and (c) the value of property used to conduct the association's business. ''Qualified thrift investments'' includes various types of loans made for residential and housing purposes, investments related to such purposes, including certain mortgage-backed and related securities, and consumer loans up to 10% of the association's portfolio assets. At June 30, 1996, the Bank maintained 76.0% of its portfolio assets in qualified thrift investments. The Bank had also met the QTL test in each of the prior 12 months and, therefore, was a qualified thrift lender. A savings association that fails the QTL test must either operate under certain restrictions on its activities or convert to a bank charter. The initial restrictions include prohibitions against (a) engaging in any new activity not permissible for a national bank, (b) paying dividends not permissible under national bank regulations, (c) obtaining new advances from any FHLB, and (d) establishing any new branch office in a location not permissible for a national bank in the association's home state. In addition, within one year of the date a savings association ceases to meet the QTL test, any company controlling the association would have to register under, and become subject to the requirements of, the Bank Holding Company Act of 1956, as amended. If the savings association does not requalify under the QTL test within the three-year period after it failed the QTL test, it would be required to terminate any activity and to dispose of any investment not permissible for a national bank and would have to repay as promptly as possible any outstanding advances from an FHLB. A savings association that has failed the QTL test may requalify under the QTL test and be free of such limitations, but it may do so only once. Capital Requirements. The OTS regulations require savings associations to meet three minimum capital standards: a tangible capital ratio requirement of 1.5% of total assets as adjusted under the OTS regulations, a leverage ratio requirement of 3% of core capital to such adjusted total assets, and a risk-based capital ratio requirement of 8% of core and supplementary capital to total risk-based assets. In determining the amount of risk- weighted assets for purposes of the risk-based capital requirement, a savings association must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights, which range from 0% for cash and obligations issued by the United States Government or its agencies, to 100% for consumer and commercial loans, as assigned by the OTS capital regulation based on the risks OTS believes are inherent in the type of asset. Tangible capital is defined, generally, as common stockholders' equity (including retained earnings), certain noncumulative perpetual preferred stock and related earnings, minority interests in equity accounts of fully consolidated subsidiaries, less intangibles other than certain purchased mortgage servicing rights and investments in and loans to subsidiaries engaged in activities not permissible for a national bank. Core capital is defined similarly to tangible capital, but core capital also includes certain qualifying supervisory goodwill and certain purchased credit card relationships. Supplementary capital currently includes cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, and the allowance for possible loan losses. The allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets, and the amount of supplementary capital that may be included as total capital cannot exceed the amount of core capital. The OTS regulations require a savings association with ''above normal'' interest rate risk is required to deduct a portion of such capital from its total capital to account for the ''above normal'' interest rate risk. A savings association's interest rate risk is measured by the decline in the net portfolio value of its assets (i.e., the difference between incoming and outgoing discounted cash flows from assets, liabilities and off-balance sheet contracts) resulting from a hypothetical 2% increase or decrease in market rates of interest, divided by the estimated economic value of the association's assets, as calculated in accordance with guidelines set forth by the OTS. At the times when the 3-month Treasury bond equivalent yield falls below 4%, an association may compute its interest rate risk on the basis of a decrease equal to one-half of that Treasury rate rather than on the basis of 2%. A savings association whose measured interest rate risk exposure exceeds 2% would be considered to have ''above normal'' risk. The interest rate risk component is an amount equal to one-half of the difference between the association's measured interest rate risk and 2%, multiplied by the estimated economic value of the association's assets. That dollar amount is deducted from an association's total capital in calculating compliance with its risk-based capital requirement. Any required deduction for interest rate risk becomes effective on the last day of the third quarter following the reporting date of the association's financial data on which the interest rate risk was computed. Pending other regulatory developments, the OTS has deferred enforcing the general requirement to deduct capital on account of "above normal" interest rate risk. The table below presents the Bank's regulatory capital as compared to the OTS regulatory capital requirements at June 30, 1996: Minimum Actual Capital Requirement ------------------- --------------------- Amount Ratio Amount Ratio --------- --------- ----------- --------- As of June 30, 1996: Tangible.............................. $ 119,125 9.49% >= $18,828 >= 1.5% Core Capital.......................... $ 119,259 9.50% >= $37,659 >= 3.0% Risk-based capital.................... $ 126,715 21.24% >= $47,718 >= 8.0% The Bank received approximately $131.1 million of excess proceeds resulting from the oversubscription of the Company's initial public offering. The Bank's tangible, core, and risk-based capital ratios were 10.60%, 10.61%, and 23.86% respectively, excluding the effects of the excess proceeds on the balance sheet, at June 30, 1996. The following is a reconciliation of generally accepted accounting principles (GAAP) capital to regulatory capital for the Bank: June 30, 1996 ----------------------------- Tangible Core Risk-Based Capital Capital Capital -------- --------- ---------- GAAP capital........................$148,008 $148,008 $148,008 --------- --------- --------- Non-allowable assets: Core deposit intangible............. (134) - - Unrealized gain on AFS securities... (311) (311) (311) Goodwill............................ (28,438) (28,438) (28,438) General valuation allowance......... - - 7,456 --------- --------- ---------- Regulatory capital.................. 119,125 119,259 126,715 Minimum capital requirement......... 18,828 37,659 47,718 --------- --------- ---------- Regulatory capital-excess...........$100,297 $ 81,600 $78,997 ========= ========= ========== Limitation on Capital Distributions. OTS regulations currently impose limitations upon capital distributions by savings associations, such as cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger, and other distributions charged against capital. At least 30-days written notice must be given to the OTS of a proposed capital distribution by a savings association, and capital distributions in excess of specified earnings or by certain institutions are subject to approval by the OTS. An association that has capital in excess of all fully phased-in regulatory capital requirements before and after a proposed capital distribution and that is not otherwise restricted in making capital distributions, could, after prior notice but without the approval of the OTS, make capital distributions during a calendar year equal to the greater of (a) 100% of its net earnings to date during the calendar year plus the amount that would reduce by one-half its ''surplus capital ratio'' (the excess capital over its fully phased-in capital requirements) at the beginning of the calendar year, or (b) 75% of its net earnings for the previous four quarters. Any additional capital distributions would require prior OTS approval. In addition, the OTS can prohibit a proposed capital distribution, otherwise permissible under the regulation, if the OTS has determined that the association is in need of more than normal supervision or if it determines that a proposed distribution by an association would constitute an unsafe or unsound practice. Furthermore, under the OTS prompt corrective action regulations, the Bank would be prohibited from making any capital distribution if, after the distribution, the Bank failed to meet its minimum capital requirements, as described above. See '' - Prompt Corrective Regulatory Action.'' The OTS has proposed regulations that would simplify the existing procedures governing capital distributions by savings associations. Under the proposed regulations, the approval of the OTS would be required only for an association that is deemed to be in troubled condition or that is undercapitalized or would be undercapitalized after the capital distribution. A savings association would be able to make a capital distribution without notice to or approval of the OTS if it is not held by a savings association holding company, is not deemed to be in troubled condition, has received either of the two highest composite supervisory ratings, and would continue to be adequately capitalized after such distribution. Notice would have to be given to the OTS by any association that is held by a savings association holding company or that had received a composite supervisory rating below the highest two composite supervisory ratings. An association's capital rating would be determined under the prompt corrective action regulations. See '' Prompt Corrective Regulatory Action.'' The Company however, is subject to the terms of a certification requested by and delivered to the OTS in connection with the Bank's application to the OTS for approval of the Conversion, which certification prohibits the Company from taking any actions to further any payments to its shareholders through a return of excess capital until June 26, 1997. The certification expressly does not apply to taxable dividend payments made by the Company or to dividend payments made by the Bank to the Company. Liquidity. The Bank is required to maintain an average daily balance of liquid assets (cash, certain time deposits, bankers' acceptances, specified United States Government, state or federal agency obligations, shares of certain mutual funds and certain corporate debt securities and commercial paper) equal to a monthly average of not less than a specified percentage of its net withdrawable deposit accounts plus short-term borrowings. This liquidity requirement may be changed from time to time by the OTS to any amount within the range of 4% to 10% depending upon economic conditions and the savings flows of member institutions, and is currently 5%. OTS regulations also require each savings association to maintain an average daily balance of short-term liquid assets at a specified percentage (currently 1%) of the total of its net withdrawable deposit accounts and borrowings payable in one year or less. Monetary penalties may be imposed for failure to meet these liquidity requirements. The Bank's average liquidity ratio for the month ended June 30, 1996 was 43.0%, which exceeded the applicable requirements. The Bank has never been subject to monetary penalties for failure to meet its liquidity requirements. Assessments. Savings associations are required by OTS regulation to pay assessments to the OTS to fund the operations of the OTS. The general assessment, paid on a semi-annual basis, is computed upon the savings association's total assets, including consolidated subsidiaries, as reported in the association's latest quarterly Thrift Financial Report. During January 1996, the Bank paid its first assessment as a federal savings bank of $72,493 for the period January 1, 1996 through June 30, 1996. Prior to that date, the Bank had not paid any OTS assessments as it converted to a federal charter on November 1, 1995. Branching. Subject to certain limitations, HOLA and the OTS regulations permit federally chartered savings associations to establish branches in any state of the United States. The authority to establish such a branch is available (a) in states that expressly authorize branches of savings associations located in another state and (b) to an association that qualifies as a ''domestic building and loan association'' under the Internal Revenue Code of 1986, which imposes qualification requirements similar to those for a ''qualified thrift lender'' under HOLA. See '' QTL Test.'' The authority for a federal savings association to establish an interstate branch network would facilitate a geographic diversification of the association's activities. This authority under HOLA and the OTS regulations preempts any state law purporting to regulate branching by federal savings associations. Community Reinvestment. Under the CRA, as implemented by OTS regulations, a savings association has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with its examination of a savings association, to assess the association's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such association. The CRA also requires all institutions to make public disclosure of their CRA ratings. The Bank received a ''Satisfactory'' CRA rating in its most recent examination. In April 1995, the OTS and the other federal banking agencies adopted amendments revising their CRA regulations. Among other things, the amended CRA regulations substitute for the prior process-based assessment factors a new evaluation system that would rate an institution based on its actual performance in meeting community needs. In particular, the proposed system would focus on three tests: (a) a lending test, to evaluate the institution's record of making loans in its service areas; (b) an investment test, to evaluate the institution's record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and (c) a service test, to evaluate the institution's delivery of services through its branches, ATMs, and other offices. The amended CRA regulations also clarify how an institution's CRA performance would be considered in the application process. Transactions with Related Parties. The Bank's authority to engage in transactions with its ''affiliates'' is limited by the OTS regulations and by Sections 23A and 23B of the Federal Reserve Act (''FRA''). In general, an affiliate of the Bank is any company that controls the Bank or any other company that is controlled by a company that controls the Bank, excluding the Bank's subsidiaries other than those that are insured depository institutions. The OTS regulations prohibit a savings association (a) from lending to any of its affiliates that is engaged in activities that are not permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act (''BHC Act'') and (b) from purchasing the securities of any affiliate other than a subsidiary. Section 23A limits the aggregate amount of transactions with any individual affiliate to 10% of the capital and surplus of the savings association and also limits the aggregate amount of transactions with all affiliates to 20% of the savings association's capital and surplus. Extensions of credit to affiliates are required to be secured by collateral in an amount and of a type described in Section 23A, and the purchase of low quality assets from affiliates is generally prohibited. Section 23B provides that certain transactions with affiliates, including loans and asset purchases, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the association as those prevailing at the time for comparable transactions with nonaffiliated companies. In the absence of comparable transactions, such transactions may only occur under terms and circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated companies. The Bank's authority to extend credit to its directors, executive officers, and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the FRA and Regulation O of the Federal Reserve Board (''FRB'') thereunder. Among other things, these provisions require that extensions of credit to insiders (a) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (b) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the association's capital. In addition, extensions of credit in excess of certain limits must be approved by the association's board of directors. Enforcement. Under the Federal Deposit Insurance Act (''FDI Act''), the OTS has primary enforcement responsibility over savings associations and has the authority to bring enforcement action against all ''institution-affiliated parties,'' including any controlling stockholder or any shareholder, attorney, appraiser and accountant who knowingly or recklessly participates in any violation of applicable law or regulation or breach of fiduciary duty or certain other wrongful actions that causes or is likely to cause a more than a minimal loss or other significant adverse effect on an insured savings association. Civil penalties cover a wide range of violations and actions and range from $5,000 for each day during which violations of law, regulations, orders, and certain written agreements and conditions continue, up to $1 million per day for such violations if the person obtained a substantial pecuniary gain as a result of such violation or knowingly or recklessly caused a substantial loss to the institution. Criminal penalties for certain financial institution crimes include fines of up to $1 million and imprisonment for up to 30 years. In addition, regulators have substantial discretion to take enforcement action against an institution that fails to comply with its regulatory requirements, particularly with respect to its capital requirements. Possible enforcement actions range from the imposition of a capital plan and capital directive to receivership, conservatorship, or the termination of deposit insurance. Under the FDI Act, the FDIC has the authority to recommend to the Director of OTS that enforcement action be taken with respect to a particular savings association. If action is not taken by the Director of the OTS, the FDIC has authority to take such action under certain circumstances. Standards for Safety and Soundness. The FDI Act, as amended by FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994 (''Community Development Act''), requires the OTS, together with the other federal bank regulatory agencies, to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation, and compensation, fees and benefits and such other operational and managerial standards as the agencies deem appropriate. The OTS and the federal bank regulatory agencies have adopted, effective August 9, 1995, a set of guidelines prescribing safety and soundness standards pursuant to FDICIA, as amended. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder. The OTS and the other agencies determined that the adoption of stock valuation standards was not appropriate. In addition, the OTS adopted regulations pursuant that authorize, but do not require, the OTS to order an institution that has been given notice by the OTS that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the OTS must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized association is subject under the ''prompt corrective action'' provisions of FDICIA. If an institution fails to comply with such an order, the OTS may seek to enforce such order in judicial proceedings and to impose civil money penalties. Effective October 1, 1996, the OTS and the federal bank regulatory agencies adopted guidelines for identifying and monitoring asset quality and earnings standards. Real Estate Lending Standards. The OTS and the other federal banking agencies adopted regulations to prescribe standards for extensions of credit that (a) are secured by real estate or (b) are made for the purpose of financing the construction of improvements on real estate. The OTS regulations require each savings association to establish and maintain written internal real estate lending standards that are consistent with safe and sound banking practices and appropriate to the size of the association and the nature and scope of its real estate lending activities. The standards also must be consistent with accompanying OTS guidelines, which include loan-to-value ratios for the different types of real estate loans. Associations are also permitted to make a limited amount of loans that do not conform to the proposed loan-to-value limitations so long as such exceptions are reviewed and justified appropriately. The guidelines also list a number of lending situations in which exceptions to the loan-to-value standards are justified. Prompt Corrective Regulatory Action. Under the OTS prompt corrective action regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings associations. For this purpose, a savings association would be placed in one of five categories based on the association's capital. Generally, a savings association is treated as ''well capitalized'' if its ratio of total capital to risk-weighted assets is at least 10.0%, its ratio of core capital to risk-weighted assets is at least 6.0%, its ratio of core capital to total assets is at least 5.0%, and it is not subject to any order or directive by the OTS to meet a specific capital level. A savings association will be treated as ''adequately capitalized'' if its ratio of total capital to risk- weighted assets is at least 8.0%, its ratio of core capital to risk-weighted assets is at least 4.0%, and its ratio of core capital to total assets is at least 4.0% (3.0% if the association receives the highest rating on the CAMEL financial institutions rating system). A savings association that has a total risk-based capital of less than 8.0% or a leverage ratio or a Tier 1 capital ratio that is less than 4.0% (3.0% leverage ratio if the association receives the highest rating on the CAMEL financial institutions rating system) is considered to be ''undercapitalized.'' A savings association that has a total risk- based capital of less than 6.0% or a Tier 1 risk-based capital ratio or a leverage ratio of less than 3.0% is considered to be ''significantly undercapitalized.'' A savings association that has a tangible capital to assets ratio equal to or less than 2% is deemed to be ''critically undercapitalized.'' The elements of an association's capital for purposes of the prompt corrective action regulations are defined generally as they are under the regulations for minimum capital requirements. As of the most recent notification from the Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category. See ''- Capital Requirements.'' The severity of the action authorized or required to be taken under the prompt corrective action regulations increases as an association's capital deteriorates within the three undercapitalized categories. All associations are prohibited from paying dividends or other capital distributions or paying management fees to any controlling person if, following such distribution, the association would be undercapitalized. An undercapitalized association is required to file a capital restoration plan within 45 days of the date the association receives notice that it is within any of the three undercapitalized categories. The OTS is required to monitor closely the condition of an undercapitalized association and to restrict the asset growth, acquisitions, branching, and new lines of business of such an association. Significantly undercapitalized associations are subject to restrictions on compensation of senior executive officers; such an association may not, without OTS consent, pay any bonus or provide compensation to any senior executive officer at a rate exceeding the officer's average rate of compensation (excluding bonuses, stock options and profit-sharing) during the 12 months preceding the month when the association became undercapitalized. A significantly undercapitalized association may also be subject, among other things, to forced changes in the composition of its board of directors or senior management, additional restrictions on transactions with affiliates, restrictions on acceptance of deposits from correspondent associations, further restrictions on asset growth, restrictions on rates paid on deposits, forced termination or reduction of activities deemed risky, and any further operational restrictions deemed necessary by the OTS. If one or more grounds exist for appointing a conservator or receiver for an association, the OTS may require the association to issue additional debt or stock, sell assets, be acquired by a depository association holding company or combine with another depository association. The OTS and the FDIC have a broad range of grounds under which they may appoint a receiver or conservator for an insured depository association. Under FDICIA, the OTS is required to appoint a receiver (or with the concurrence of the FDIC, a conservator) for a critically undercapitalized association within 90 days after the association becomes critically undercapitalized or, with the concurrence of the FDIC, to take such other action that would better achieve the purposes of the prompt corrective action provisions. Such alternative action can be renewed for successive 90-day periods. However, if the association continues to be critically undercapitalized on average during the quarter that begins 270 days after it first became critically undercapitalized, a receiver must be appointed, unless the OTS makes certain findings with which the FDIC concurs and the Director of the OTS and the Chairman of the FDIC certify that the association is viable. In addition, an association that is critically undercapitalized is subject to more severe restrictions on its activities, and is prohibited, without prior approval of the FDIC from, among other things, entering into certain material transactions or paying interest on new or renewed liabilities at a rate that would significantly increase the association's weighted average cost of funds. When appropriate, the OTS can require corrective action by a savings association holding company under the ''prompt corrective action'' provisions of FDICIA. Insurance of Deposit Accounts. Pursuant to FDICIA, the FDIC established a new risk-based assessment system for determining the deposit insurance assessments to be paid by insured depository institutions. Under the new assessment system, which began in 1993, the FDIC assigns an institution to one of three capital categories based on the institution's financial information as of the reporting period ending seven months before the assessment period. The three capital categories consist of (a) well capitalized, (b) adequately capitalized, or (c) undercapitalized. The FDIC also assigns an institution to one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information that the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. An institution's assessment rate depends on the capital category and supervisory category to which it is assigned. Under the regulation, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. The FDI Act requires that the BIF and the SAIF funds each be recapitalized until reserves are at least 1.25% of the deposits insured by that fund. After a fund reached the 1.25% reserve ratio, the assessment rates for that fund could be reduced. The FDIC reported that the BIF reached the required reserve ratio during May 1995. As a result of the recapitalization of the BIF, the FDIC reduced BIF-assessment rates. Beginning in 1993, the assessment rates for the BIF and the SAIF had ranged from 0.23% of deposits for an institution in the highest category (i.e., well-capitalized and financially sound, with no more than a few minor weaknesses) to 0.31% of deposits for an institution in the lowest category (i.e., undercapitalized and substantial supervisory concern). Effective June 1, 1995, the FDIC reduced the BIF assessment rates to a range of 0.04% to 0.27% of deposits for such institutions. The Bank's assessment rates for 1995 were 0.23% of deposits through May 31, 1995 and were 0.04% of deposits beginning on June 1, 1995. On November 14, 1995, the FDIC again decided to reduce the BIF assessments. Having determined that the BIF had sufficient reserves in excess of the required 1.25% ratio, the FDIC decided that ''well capitalized'' institutions without any significant supervisory concerns should begin paying assessments at the statutory minimum of $2,000 annually, beginning with the first quarter of 1996, and the BIF-assessment rates for other institutions range from 0.03% to 0.27% of deposits. The FDIC has reported that, under current law and appropriate financial projections, the SAIF is not expected to be recapitalized until 2001. Accordingly, the FDIC has determined that SAIF-insured institutions should continue to pay assessments at the current SAIF assessment rates, which range from 0.23% of deposits to 0.31% of deposits. The assessment rates on the Oakar Deposits were not subject to the decrease in assessment rates and continue to be assessed at a rate of 0.23%. The resulting disparity in deposit insurance assessments rates between the SAIF members and the BIF members is likely to provide institutions paying only the BIF assessments with certain competitive advantages in the pricing of loans and deposits, and in lowered operating costs, pending any legislative action to remedy the disparity. Congress considered proposed legislation to address these issues. The proposed Balanced Budget Act of 1995 (the "Budget Act"), which was approved by the Congress but vetoed by the President, included provisions that focused on a recapitalization of the SAIF. Under the provisions of the Budget Act, all SAIF-member institutions would have paid a special assessment to recapitalize the SAIF, and the assessment base for the payments on the FICO bonds (as herein defined) would have been expanded to include the deposits of both BIF- and SAIF-insured institutions. The amount of the special assessment required to recapitalize the SAIF was then estimated to be approximately 80 basis points of the SAIF- assessable deposits. The special assessment would have been imposed as of the first business day of January 1996 or on such other date prescribed by the FDIC not later than 60 days after enactment of the Budget Act, based on the amount of SAIF deposits on March 31, 1995. If an 80-basis-point assessment were assessed against the Bank's deposits as of March 31, 1995, the Bank's special assessment would be approximately $2.8 million, or $1.5 million on an after-tax basis. The Budget Act also provided for the merger of the BIF and SAIF on January 1, 1998, with such merger being conditioned upon the prior elimination of the thrift charter. Congressional leaders had also agreed that Congress should consider and act upon separate legislation to eliminate the thrift charter as early as possible in 1996. If adopted, such legislation would require that the Bank, as a federal savings bank, convert to a bank charter. See "- Financial Institution Regulation and Possible Legislation." The veto of the Budget Act by the President was not based on the above described provisions of the Budget Act, and the federal banking regulators continue to seek a legislative solution for the recapitalization of the SAIF. In February 1996, representatives of the FDIC, the OTS and the Treasury Department stated to Congress that, unless Congress adopts legislation to strengthen the SAIF, the SAIF's current problems could result in an erosion of the SAIF deposit base, could cause a default on the FICO bonds that are paid from SAIF assessments, and could leave the SAIF unable to meet its obligations to insured depositors. If enacted by Congress, legislation to recapitalize the SAIF as proposed in the Budget Act would have the effect of reducing the capital of SAIF member institutions by the after-tax cost of the special SAIF assessment, plus any related additional tax liabilities. The legislation would also have the effect of reducing any differential that may otherwise be required in the assessment rates for the BIF and SAIF. Management cannot predict whether the above legislation or any other legislative proposal will be enacted as described above or, if enacted, the amount of any special SAIF assessment or whether ongoing SAIF premiums will be reduced to a level equal to that of BIF premiums. It also cannot be predicted whether some other legislative action will be taken to address the BIF/SAIF disparity and what consequences such action could have for SAIF members. A significant increase in SAIF insurance premiums, either absolutely or relative to BIF premiums, or a significant one-time fee to recapitalize the SAIF could have an adverse effect on the operating expenses and results of operations of the Bank. Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. The management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance. Federal Home Loan Bank System. The Bank is a member of the FHLBNY, which is one of the regional FHLBs composing the FHLB System. Each FHLB provides a central credit facility primarily for its member institutions. The Bank, as a member of the FHLBNY, is required to acquire and hold shares of capital stock in the FHLB in an amount at least equal to the greater of 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year or 1/20 of its advances (borrowings) from the FHLBNY. The Bank was in compliance with this requirement with an investment in FHLB stock at June 30, 1996, of $7.6 million. Any advances from a FHLB must be secured by specified types of collateral, and all long- term advances may be obtained only for the purpose of providing funds for residential housing finance. The FHLBs are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of earnings that the FHLBs can pay as dividends to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members. The FHLBNY paid dividends on the capital stock of $332,964, $367,131, and $422,943 and during the years ended June 30, 1996, 1995 and 1994, respectively. If dividends were reduced, or interest on future FHLB advances increased, the Bank's net interest income would likely also be reduced. Further, there can be no assurance that the impact of FDICIA and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (''FIRREA'') on the FHLBs will not also cause a decrease in the value of the FHLB stock held by the Bank. Federal Reserve System. The Bank is subject to provisions of the FRA and the FRB's regulations pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, reserves must be maintained against transaction accounts (primarily NOW and regular checking accounts). The FRB regulations generally require that reserves be maintained in the amount of 3% of the aggregate of transaction accounts up to $52.0 million. The amount of aggregate transaction accounts in excess of $52.0 million are currently subject to a reserve ratio of 10%, which ratio the FRB may adjust between 8% and 12%. The FRB regulations currently exempt $4.3 million of otherwise reservable balances from the reserve requirements, which exemption is adjusted by the FRB at the end of each year. The Bank is in compliance with the foregoing reserve requirements. Because required reserves must be maintained in the form of either vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a pass-through account as defined by the FRB, the effect of this reserve requirement is to reduce the Bank's interest-earning assets. The balances maintained to meet the reserve requirements imposed by the FRB may be used to satisfy liquidity requirements imposed by the OTS. FHLB System members are also authorized to borrow from the Federal Reserve ''discount window,'' but FRB regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank. Regulation of Holding Company The Company is a non-diversified unitary savings association holding company within the meaning of HOLA, as amended. As such, the Company is required to register with the OTS and is subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over the Company and its non-savings association subsidiaries, if any. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness, or stability of a subsidiary savings association. HOLA prohibits a savings association holding company, directly or indirectly, or through one or more subsidiaries, from acquiring another savings association or holding company thereof, without prior written approval of the OTS; acquiring or retaining, with certain exceptions, more than 5% of a non- subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by HOLA; or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating an application by a holding company to acquire a savings association, the OTS must consider the financial and managerial resources and future prospects of the company and savings association involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community, and competitive factors. As a unitary savings and loan holding company, the Company generally is restricted under existing laws as to the types of business activities in which it may engage, provided that the Bank continues to satisfy the QTL test. See ''- Regulation of Federal Savings Associations QTL Test'' for a discussion of the QTL requirements. Upon any non-supervisory acquisition by the Company of another savings association or savings bank that meets the QTL test and is deemed to be a savings association by the OTS and that will be held as a separate subsidiary, the Company will become a multiple savings association holding company and will be subject to limitations on the types of business activities in which it can engage. HOLA limits the activities of a multiple savings association holding company and its non-insured association subsidiaries primarily to activities permissible for bank holding companies under Section 4(c)(8) of the BHC Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation. The OTS is prohibited from approving any acquisition that would result in a multiple savings association holding company controlling savings associations in more than one state, subject to two exceptions: an acquisition of a savings association in another state (a) in a supervisory transaction, and (b) pursuant to authority under the laws of the state of the association to be acquired that specifically permit such acquisitions. The conditions imposed upon interstate acquisitions by those states that have enacted authorizing legislation vary. Some states impose conditions of reciprocity, which have the effect of requiring that the laws of both the state in which the acquiring holding company is located (as determined by the location of its subsidiary savings association) and the state in which the association to be acquired is located, have each enacted legislation allowing its savings associations to be acquired by out-of-state holding companies on the condition that the laws of the other state authorize such transactions on terms no more restrictive than those imposed on the acquiror by the state of the target association. Some of these states also impose regional limitations, which restrict such acquisitions to states within a defined geographic region. Other states allow full nationwide banking without any condition of reciprocity. Some states do not authorize interstate acquisitions of savings associations. Transactions between the Company and the Bank, including any of its subsidiaries, and any of its affiliates are subject to various conditions and limitations. See '' Regulation of Federal Savings Associations Transactions with Related Parties.'' The Bank must give 30-days written notice to the OTS prior to any declaration of the payment of any dividends or other capital distributions to the Company. See ''- Regulation of Federal Savings Associations - Limitation on Capital Distributions.'' Federal Securities Laws . The Company's Common stock is registered with the SEC under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

Item 2 - Properties The Bank conducts its business through fifteen full-service offices, including eight offices acquired from Conestoga.. The Bank's Main Office and headquarters is located at 209 Havemeyer Street, Brooklyn, New York. The Bank believes that its current facilities are adequate to meet the present and immediately foreseeable needs of the Bank and the Company. Date Leased or Leased or Lease Expiration Net Book Value at Owned Acquired Date June 30, 1996 --------- --------- ---------------- ----------------- Main Office ..................................... Owned 1906 - $398,031 209 Havemeyer Street Brooklyn, New York 11211 Avenue M Branch ................................. Owned 1993 - 491,546 1600 Avenue M at E. 16th Street Brooklyn, New York 11230 Bayside Branch .................................. Leased 1974 May, 2004 66,310 61-38 Springfield Boulevard Bayside, New York 11364 Merrick Branch .................................. Owned 1960 - 252,426 1775 Merrick Avenue Merrick, New York 11566 Hillcrest Branch ................................ Leased 1971 May, 2001 67,737 176-47 Union Turnpike Flushing, New York 11366 Bellmore Branch ................................. Owned 1973 - 522,697 2412 Jerusalem Avenue Bellmore, New York 11710 Bronx Branch ................................ Leased 1965 October, 1996 48,905 1931 Turnbull Avenue Bronx, New York 10473 Roslyn Branch.................................... Owned 1990 - 3,084,876 1075 Northern Boulevard Roslyn, New York 11576 Gates Avenue Branch.............................. Owned 1905 - 282,020 1012 Gates Avenue Brooklyn, New York 11221 Marine Park Branch............................ Owned 1993 - 821,135 2172 Coyle Street Brooklyn, New York 11229 Kings Highway Branch............................. Owned 1976 - 845,493 1902-1904 Kings Highway Brooklyn, New York 11229 Port Washington Branch........................... Owned 1971 - 496,215 1000 Port Washington Boulevard Port Washington, New York 11050 Bensonhurst Branch............................... Owned 1978 - 1,367,523 1545 86th Street Brooklyn, New York 11228 Whitestone Branch................................ Owned 1979 - 827,194 24-44 Francis Lewis Boulevard Whitestone, New York 11357 Westbury Branch ............................. 1994 - 599,281 622 Old Country Road Westbury, New York 11590 Administrative Office ........................... Owned 1989 - 4,226,772 275 South 5th Street (Corner of Havemeyer Street) Brooklyn, New York 11211 The Bank has an option to extend this lease for an additional ten year term at fair market rent, as determined by the agreement of the parties or, if the parties cannot agree, by arbitration. Prior to October 2, 1993, this branch office was located at 2161 Coyle Street, Brooklyn, New York. This branch office opened April 29, 1995. Building owned, land leased. Lease expires in October, 2003. Item 3 - Legal Proceedings The Company is involved in various legal actions arising in the ordinary course of its business which, in the aggregate, involve amounts which are believed to be immaterial to the financial condition and results of operations of the Bank. On December 4, 1995, a purported class action complaint was filed in the Delaware Chancery Court, New Castle County, on behalf of the stockholders of Conestoga by Jeffrey Simon (''Plaintiff'') against Conestoga, each of the members of the Conestoga Board, and the Bank. The Plaintiff alleges that each of the members of Conestoga's Board breached his fiduciary duties to Conestoga stockholders by, among other things, agreeing to accept the Acquisition consideration, which Plaintiff alleges is inadequate. The Bank is alleged to have aided and abetted this breach. Plaintiff seeks various remedies, including compensatory damages in an unspecified amount. On February 9, 1996, Conestoga and the director defendants filed an answer in which they denied the allegations of liability raised in the complaint and raised affirmative defenses. In addition, they moved to dismiss the complaint. On February 12, 1996, the Bank filed its own motion to dismiss the complaint. On or about March 12, 1996, Plaintiff served a motion for leave to file an amended complaint. In his proposed amended complaint, Plaintiff asserts, among other things, that the proxy statement distributed to Conestoga's stockholders did not provide sufficient disclosure, that the Acquisition is unfair to Conestoga's stockholders and disproportionately benefits Conestoga's Board and the Bank. The Court has not yet ruled on the Plaintiff's motion to amend the complaint. The Bank intends to vigorously defend against the claims made against it. Item 4 - Submission of Matters to a Vote of Security Holders. None PART II Item 5- Market for the Company's Common Stock and Related Stockholder Matters Dime Community Bancorp, Inc. common stock is traded on the Nasdaq National Market and quoted under the symbol "DIME." The following table shows the high and low sales price during the period indicated. The Company's Common stock began trading on June 26, 1996, the date of the initial public offering. 1996 High Low - ----------------- ------- -------- June 26 - June 28 $11.75 $11.6875 At June 28, 1996, the last trading date in the fiscal year, the Company's stock closed at $11.6875. At September 23, 1996 the Company had approximately 1,613 shareholders of record respectively, not including the number of persons or entities holding stock in nominee or street name through various brokers and banks. There were 14,547,500 shares of common stock outstanding at June 30, 1996. The Board of Directors of the Company did not declare any dividends on Common Stock during the year ended June 30, 1996. The Board of Directors may consider a policy of paying cash dividends on the Common Stock in the future subject to statutory and regulatory requirements. However, no decision has been made as to the amount or timing of such dividends. Declarations of dividends by the Board of Directors, if any, will depend upon a number of factors, including, investment opportunities available to the Company or the Bank, capital requirements, regulatory limitations, the Company's and the Bank's financial condition, results of operations, tax considerations and general economic conditions. No assurances can be given, however, that any dividends will be paid or, if commenced, will continue to be paid. As the principal asset of the Company, the Bank will provide the principal source of funds for payment of dividends by the Company. The Bank will not be permitted to pay dividends on its capital stock if its stockholders' equity would be reduced below the amount required for the liquidation account. See ''Item 1 - Business - Regulation.'' For information concerning federal regulations which apply to the Bank in determining the amount of proceeds which may be retained by the Company and regarding a savings institution's ability to make capital distributions including payment of dividends to its holding company, see ''Item 1 - Business - Regulation - Regulation of Federal Savings Associations - Limitation on Capital Distributions'' and ''Item 1 - - Business - Federal and State Taxation - Federal Taxation - Distributions.'' Unlike the Bank, the Company is not subject to OTS regulatory restrictions on the payment of dividends to its shareholders, although the source of such dividends will be dependent on the net proceeds retained by the Company and earnings thereon and may be dependent, in part, upon dividends from the Bank. The Company is subject, however, to the requirements of Delaware law, which generally limit dividends to an amount equal to the excess of the net assets of the Company (the amount by which total assets exceed total liabilities) over its statutory capital, or if there is no such excess, to its net profits for the current and/or immediately preceding fiscal year. At June 30, 1996, the Company has approximately $53.4 million available for the payment of dividends. The Company however, is subject to the terms of a certification requested by and delivered to the OTS in connection with the Bank's application to the OTS for approval of the Conversion, which certification prohibits the Company from taking any actions to further any payments to its shareholders through a return of excess capital until June 26, 1997. The certification expressly does not apply to taxable dividend payments made by the Company or to dividend payments made by the Bank to the Company. Item 6. - Selected Financial Data The selected consolidated financial and other data of the Company set below is derived in part from and should be read in conjunction with, the Consolidated Financial Statements of the Company and Notes thereto presented under Item 8 of this document. No cash dividends were declared or paid during the year ended June 30, 1996. As a result, dividends per share information is not presented. Since the sale of the Company's stock occurred substantially at year-end (June 26, 1996) earnings per share information for the Company for the year ended June 30, 1996 is not meaningful. At June 30, -------------------------------------------------- 1996 1995 1994 1993 1992 --------------- -------- -------- -------- -------- (In thousands) Selected Financial Condition Data: Total assets (1).................. $1,371,821 $662,739 $646,458 $645,899 $643,120 Loans, net(2)..................... 575,874 424,680 427,960 458,422 477,516 Mortgage-backed securities(3)..... 209,941 91,548 94,356 82,077 58,404 Investment securities (1)(3)...... 392,450 101,695 86,686 56,724 72,055 Federal funds sold (1)............ 115,130 17,809 7,029 21,037 9,348 Deposits.......................... 950,114 554,841 546,761 564,110 564,520 Stockholders' Equity (4).......... 213,071 77,067 67,919 58,920 49,648 (Notes on following page) For the Year Ended June 30, ---------------------------------------- 1996(5) 1995 1994 1993 1992 ------- -------- -------- ------- ------- (In thousands) Selected Operating Data: Interest income..................................$52,619 $49,223 $49,821 $51,393 $55,230 Interest expense on deposits and borrowings...... 23,516 18,946 17,594 21,251 32,391 ------- ------- -------- ------- ------- Net interest income.............................. 29,103 30,277 32,227 30,142 22,839 Provision for loan losses........................ 2,979 2,950 4,105 3,395 1,409 ------- ------- -------- ------- ------- Net interest income after provision for loan losses........................................... 26,124 27,327 28,122 26,747 21,430 Non-interest income.............................. 1,375 1,773 2,267 3,195 2,107 Non-interest expense............................. 14,021 14,053 12,714 12,214 11,768 ------- ------- -------- ------- ------- Income before income tax expense and cumulative effect of changes in accounting principles....................................... 13,478 15,047 17,675 17,728 11,769 Income tax expense............................... 6,181 6,621 8,211 8,530 5,227 ------- ------- -------- ------- ------- Income before cumulative effect of changes in accounting principles............................ 7,297 8,426 9,464 9,198 6,542 Cumulative effect on prior years of changing to a different method of accounting for: Income taxes(6).................................. - - (383) - - Post-retirement benefits other than pensions(7)...................................... (1,032) - - - - ------- ------- -------- ------- ------- Net income....................................... $6,265 $8,426 $9,081 $9,198 $6,542 ======= ======= ======== ======= ======= (Notes on following page) At or For the Year Ended June 30, ----------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- -------- -------- (Dollars in thousands) Selected Financial Ratios and Other Data(8): Performance Ratios: Return on average assets(9)....................... 1.07% 1.33% 1.46% 1.47% 1.03% Return on average equity(9)....................... 9.07 11.50 14.66 16.83 14.16 Average equity to average assets.................. 11.84 11.53 9.98 8.72 7.30 Equity to total assets at end of period........... 15.53 11.63 10.51 9.12 7.72 Average interest rate spread(10).................. 3.85 4.51 4.80 4.61 3.44 Net interest margin(11)........................... 4.41 4.91 5.12 4.95 3.72 Average interest-earning assets to average interest-bearing liabilities.................... 115.68 113.15 111.50 109.66 105.26 Non-interest expense to average assets............ 2.06 2.21 1.97 1.95 1.86 Efficiency Ratio(12).............................. 45.98 44.11 37.63 38.18 48.29 Regulatory Capital Ratios(13): Tangible capital.................................. 9.49% 11.53% 10.47% 9.07% 7.72% Core capital...................................... 9.50 11.56 10.51 9.12 7.72 Total risk-based capital.......................... 21.24 22.18 19.83 14.13 11.59 Asset Quality Ratios and Other Data: Total non-performing loans(14)....................$6,551 $5,073 $6,248 $11,632 $16,713 Other real estate owned, net......................$1,946 $4,466 $8,200 $7,981 $7,367 Ratios(15)(16): Non-performing loans to total loans............... 1.12% 1.18% 1.45% 2.52% 3.48% Non-performing loans and real estate owned to total assets................................. 0.62 1.44 2.23 3.04 3.74 Allowance for loan losses to: Non-performing loans................................. 19.25 101.99 58.15 25.76 12.53 Total loans.......................................... 1.34 1.20 0.84 0.65 0.44 Full service branches................................ 15 7 7 7 7 (Notes follow) (1) June 30, 1996, Investment securities include $125.0 million and Federal funds sold include $6.1 million of excess proceeds resulting from the oversubscription to the Company's initial public offering, which was refunded on July 1, 1996. (2) Loans, net, represents gross loans less net deferred loan fees and allowance for loan losses. (3) The Company has classified its securities as ''held-to- maturity'' or ''available-for-sale'' since July 1, 1994, when it adopted SFAS No. 115. (4) Stockholders' Equity increased from June 30, 1995 to June 30, 1996 primarily due to the initial public offering. (5) Since the merger with Conestoga was completed at June 26, 1996, its contribution to the Company's earnings and the effect upon average balance computation for fiscal year ended June 30, 1996 were not material. (6) Pursuant to SFAS No. 109, on July 1, 1993, the Bank changed prospectively to the deferred method of accounting for income taxes. The effect of the adoption of this standard is reflected in the financial statements as the cumulative effect of adopting a change in accounting principles. (7) The Bank adopted SFAS No. 106 effective July 1, 1995. The Bank elected to record the full accumulated post retirement benefit obligation upon adoption. This resulted in a cumulative effect adjustment of $1,032,000 (after reduction for income taxes of $879,000) to apply retroactively to previous years the new method of accounting, which is shown in the consolidated statement of income for the year ended June 30, 1996. (8) With the exception of end of period ratios, all ratios are based on average daily balances during the indicated periods. Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios. (9) Income before cumulative effect of changes in accounting principles is used to calculate return on average assets and return on average equity ratios. (10) The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. (11) The net interest margin represents net interest income as a percentage of average interest-earning assets. (12) The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income and non-interest income excluding any gains or losses on sales of assets. (13) All ratios calculated for the Bank only. For definitions and further information relating to the Bank's regulatory capital requirements. See "Item 1- Business- Regulation-Regulation of Federal Savings Associations." (14) Non-performing loans consists of non-accrual loans; the Bank did not have any loans that were 90 days or more past due and still accruing at any of the dates presented. Non- performing loans do not include troubled-debt restructurings (''TDRs''). See "Item 1 -Business - Asset Quality - Non- performing Assets and Troubled-Debt Restructurings.'' (15) Total loans represents loans, net, plus the allowance for loan losses. (16) The Bank adopted SFAS No. 114 on July 1, 1995.

Item 7. -Management's Discussion and Analysis of Financial Condition and Results of Operations The Company began operations substantially at year end (June 26, 1996). Substantially all of the Company's earnings for the fiscal year ended June 30, 1996 represented earnings of the Bank prior to its acquisition of Conestoga Bancorp, Inc. The Bank's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits. The Bank also generates non-interest income such as service charges and other fees. The Bank's non-interest expenses primarily consist of employee compensation and benefits, occupancy expenses, federal deposit insurance premiums, net costs of other real estate owned, data processing fees and other operating expenses. The Bank's results of operations are also significantly affected by general economic and competitive conditions (particularly changes in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies. Management Strategy The Bank's primary management strategy is to increase its household and deposit market shares in the communities it serves, either through acquisitions or purchases of deposits, or by direct marketing, and to increase its origination of, and investment in, mortgage loans, with an emphasis on multi-family loans. Multi-family lending is a significant business of the Bank and reflects the fact that much of the housing in the Bank's primary lending area is multi-family housing. The Bank's secondary, or supplemental, strategy, is to provide a stable source of liquidity and earnings through the purchase of short-to medium-term, investment grade securities; seek to maintain the Bank's asset quality for loans and other investments; and use appropriate portfolio and asset/liability management techniques in an effort to reduce the effects of interest rate volatility on the Bank's profitability and capital. Franchise Expansion. The Bank completed its merger of Conestoga into the Bank on June 26, 1996, providing eight additional full service branches with deposits totaling $394.3 million at June 26, 1996. The Bank will continue to evaluate acquisition and other growth opportunities as they become available. See "Item 1 - Business - Acquisition of Conestoga Bancorp, Inc." Additionally, management plans to supplement this strategy with direct marketing efforts designed to increase household balances and the number of the Bank's services used per household among its existing customers. Loan Originations with an emphasis on Multi-family Lending. Management believes that multi-family loans provide advantages as portfolio investments. First, they provide a higher yield than single family loans or investment securities of comparable maturities or terms to repricing. Second, the Bank's market area generally has provided a stable flow of new and refinanced multi- family loan originations. In addition to its emphasis on multi- family lending, the Bank will continue to market and originate residential first mortgage loans secured primarily by owner- occupied, one- to four-family residences, including condominiums and cooperative apartments. See "Item 1 - Business - Lending." Third, origination and processing costs for the Bank's multi- family loans are lower per thousand than comparable single family costs. In addition, to address the higher credit risk associated with multi-family lending, management has developed what it believes are reliable underwriting standards for loan applications in order to maintain a consistent credit quality for new loans. Stable Source of Liquidity and Earnings. The Bank purchases short- to medium-term investment grade securities combining what management believes to be appropriate yield, liquidity, and credit quality, in its efforts to achieve (1) a managed and predictable source of liquidity to meet loan demand, (2) a stable source of interest income and (3) diversification in the Bank's portfolio of earning assets. This portfolio is comprised of fixed- and adjustable-rate obligations of various corporate and federal agency issuers $594.8 million at June 30, 1996. In accordance with the Bank's policies, new investments in this category must be rated at least ''investment grade'' upon purchase and have a final maturity or repricing term no greater than ten years, although no security purchased since 1990 has had a term to maturity or repricing greater than five years. See "Item 1 - Business - Investment Activities." Asset Quality. The Bank has sought to maintain high asset quality by utilizing comprehensive loan underwriting standards and collection efforts and by generally limiting its origination of mortgage loans to its market area. In addition, the Bank has established a loan workout group whose responsibility is to manage the Bank's Other Real Estate Owned (''OREO'') properties and foreclosures. Total non-performing assets have decreased steadily since 1992, due in part to the efforts of this group and also to the general improvement in the area economy. See "Item 1 - - Business - Asset Quality." The Bank's ratio of non-performing loans to total loans at year end ranged from 1.12% to 3.48% during the five-year period ended June 30, 1996. Non-performing assets to total assets averaged 2.21% during the last five years, and was 0.62% at June 30, 1996. The Bank's allowance for loan losses to non-performing loans averaged 63.5% over the five years ended June 30, 1996, and was 119.25% at June 30, 1996. Interest Rate Volatility. The Bank's profitability, like that of most financial institutions, is dependent to a large extent upon its net interest income, which is the difference between its interest income on interest-earning assets, such as loans and securities, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. The Bank's balance sheet is primarily comprised of assets which mature or reprice within five years, with a significant portion maturing or repricing within one year. In addition, the Bank's deposit base is comprised primarily of savings accounts, and certificates of deposit with maturities of three years or less, representing 38.4% and 48.4%, respectively, of total deposits at June 30, 1996. As a result, at June 30, 1996, the Bank's interest-bearing liabilities maturing or repricing within one year totaled $599.6 million, while interest earning assets maturing or repricing within one year totaled $758.1 million, resulting in a positive one-year interest sensitivity gap of $159.1 million, or 11.6% of total assets. The Bank's estimate of repricing liabilities for selected deposit types which do not carry contractual maturities, such as savings accounts, is based upon the decay rate tables published by the OTS. Under interest rate scenarios other than that which existed on June 30, 1996, the gap ratio for the Bank's assets and liabilities could differ substantially based upon different assumptions about how core deposit decay rates and loan prepayments would change. For example, the Bank's interest rate risk management model assumes that in a rising rate scenario, by paying competitive rates on non-core deposits, a large share of core deposits will transfer to certificates of deposit and be retained, although at higher cost to the Bank. Also, loan and mortgage-backed security prepayment rates would be expected to slow, as borrowers postpone property sales or loan refinancings until rates again decline. As a result, while a positive one-year gap ratio indicates that the Bank's net interest income would grow in a period of rising rates (that is, more assets reprice upwards as rates rise than do liabilities), historically, the opposite has been true. In every rising rate scenario since the early 1980s, the Bank's net income has declined. Conversely, when rates declined the Bank's net interest income has risen. Increases in the level of interest rates also may adversely affect the fair value of the Bank's and the Company's securities and other earning assets. Generally, the fair value of fixed-rate instruments fluctuates inversely with changes in interest rates. As a result, increases in interest rates could result in decreases in the fair value of the Bank's and the Company's interest earning assets, which could adversely affect the Company's results of operations if sold, or, in the case of interest earning assets classified as available for sale, the Company's stockholders' equity if retained. Under SFAS No. 115, which was adopted by the Bank on July 1, 1994, changes in the unrealized gains and losses, net of taxes, on securities classified as available for sale will be reflected in the Company's stockholders' equity. As of June 30, 1996, the Company's securities portfolio included $498.7 million in securities classified as available for sale. Accordingly, as a result of adoption of SFAS No. 115 and the magnitude of the Company's holdings of securities available for sale, changes in interest rates could produce significant changes in the value of such securities and could produce significant fluctuations in the stockholders' equity of the Company. The Company relies primarily on an income-simulation model to measure its risk exposure to changes in interest rates. Income- simulation analysis attempts to capture not only the potential of assets and liabilities to mature or reprice but also the potential magnitude of these changes based upon various sets of assumptions used in the model. The interest rate risk management strategy of the Company is designed to stabilize net interest income and preserve capital over a broad range of interest rate movements and has three primary components: Assets. To aid in the implementation of this strategy, in addition to the origination of multi-family loans, management has sought to include various types of adjustable-rate single family (including cooperative apartment) whole loans and adjustable-rate investment securities in its portfolio. These categories of adjustable-rate assets generally have repricing terms of 3 years or less. Adjustable-rate whole loans (single family and cooperative apartments) totaled $141.3 million as of June 30, 1996, and adjustable-rate investment securities (mortgage-backed securities issued by GSEs) totaled $131.3 million at the same date. Deposit Liabilities. The Bank, a traditional community-based savings bank, is largely dependent upon its base of competitively priced core deposits to provide stability on the liability side of the balance sheet. The Bank has retained many loyal customers over the years through a combination of service quality, convenience, and a stable and experienced staff. Core deposits at June 30, 1996 were $454.4 million, or 47.8% of total deposits. The balance of certificates of deposit as of June 30, 1996 was $495.8 million, or 52.2% of total deposits. Depending on market conditions, management prices its certificates of deposit in an effort to encourage the extension of the average maturities of deposit liabilities beyond one year. Over the twelve-month period ending June 30, 1996, the Bank had an 80.4% retention rate on maturing certificates of deposit. Wholesale Funds. The Bank does not accept brokered deposits as a source of funds and has no plans to do so in the future. However, the Bank is a member of the FHLBNY which provides it with a borrowing line equal to $152.0 million. From time to time, the Bank will borrow ("Advances") from the FHLBNY for various purposes. At June 30, 1996, the Bank had $15.7 million in medium-term advances outstanding. The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at June 30, 1996, which are anticipated by the Bank, based upon certain assumptions, to reprice or mature in each of the future time periods shown. Except as stated below, the amount of assets and liabilities shown which reprice or mature during a particular period were determined based on the earlier of term to repricing or the term to repayment of the asset or liability. The table is intended to provide an approximation of the projected repricing of assets and liabilities at June 30, 1996 on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. For purposes of presentation in the following table, the Bank utilized the national deposit decay rate assumptions published by the OTS as of December 31, 1992 (the latest available), which for savings accounts, NOW and Super NOW accounts and money market accounts in the one year or less category, were 17%, 37% and 79%, respectively. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated early payoffs of adjustable-and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans. The amounts attributable to mortgage-backed securities reflect principal balances expected to be redeployed and/or repriced as a result of anticipated principal repayments, and as a result of contractual rate adjustments on adjustable-rate mortgage-backed securities. At June 30, 1996 ----------------------------------------------------------------------------------------- More than More than More than More than 3 Months 3 Months 6 Months 1 Year 3 Years More than Non-interest or Less to 6 Months to 1Year to 3 Years to 5 Years 5 Years Bearing Total --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- (Dollars in thousands) Interest-earning assets: Mortgages and other loans (total)..... $48,559 $48,289 $96,579 $100,904 $206,163 $83,192 $- $583,686 Investment securities................. 237,474 19,717 50,224 52,227 8,312 16,892 - 384,846 Mortgage-backed securities........ 44,465 35,879 54,736 40,964 19,386 14,511 - 209,941 Federal funds sold.................... 115,130 - - - - - - 115,130 FHLB capital stock.................... 7,604 - - - - - - 7,604 --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- Total interest-earning assets......... 453,252 103,885 201,539 194,095 233,861 114,595 - 1,301,207 Less: Loan loss reserves.................... - - - - - - (7,812) (7,812) --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- Net interest-earning assets........... 453,252 103,885 201,539 194,095 233,861 114,595 (7,812) 1,293,395 Non-interest-earning assets........... - - - - - - 78,426 78,426 --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- Total assets.......................... $453,252 $103,885 $201,539 $194,095 $233,861 $114,595 $70,614 $1,371,821 ========= =========== ========= ========== ========== ========== ============ =========== Interest-bearing liabilities: Savings accounts...................... $15,519 $15,519 $31,037 $94,285 $61,467 $147,319 $- $365,146 NOW and Super NOW accounts............ 1,441 1,441 2,882 5,277 1,412 3,128 - 15,581 Money market accounts................. 9,075 9,075 18,149 5,055 2,407 2,187 - 45,948 Certificates of deposit............... 124,903 96,316 138,137 100,339 36,060 - - 495,755 Borrowed funds........................ 5,000 - - 20,710 - 1,998 - 27,708 Interest-bearing escrow............... 131,052 - - - - 2,898 - 133,950 --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- Total interest-bearing liabilities.... 286,990 122,351 190,205 225,666 101,346 157,530 - 1,084,088 Checking accounts..................... - - - - - - 27,684 27,684 Other non-interest-bearing liabilities........................... - - - - - - 46,978 46,978 Equity................................ - - - - - - 213,071 213,071 --------- ----------- --------- ---------- ---------- ---------- ------------ ----------- Total liabilities and Stockholders' Equity.................. $286,990 $122,351 $190,205 $225,666 $101,346 $157,530 $287,733 $1,371,821 ========= =========== ========= ========== ========== ========== ============ =========== Interest sensitivity gap per period... $166,242 $(18,466) $11,334 $(31,571) $132,515 $(42,935) - ========= =========== ========= ========== ========== ========== Cumulative interest sensitivity gap... $166,242 $147,766 $159,110 $127,539 $260,054 $217,119 - ========= =========== ========= ========== ========== ========== Cumulative interest sensitivity gap as a percent of total assets............. 12.12% 10.77% 11.60% 9.30% 18.96% 15.83% - Cumulative total interest-earning assets as a percent of cumulative total interest-bearing liabilities.... 157.93% 136.10% 126.54% 115.46% 128.07% 120.03% - Interest-earning assets are included in the period in which the balances are expected to be redeployed and/or repriced as result of anticipated pre-payments, scheduled rate adjustments, and contractual maturities. Based upon historical repayment experience. Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may not react correspondingly to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate with changes in market interest rates, while interest rates on other types of assets may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features, like annual and lifetime rate caps, which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate from those assumed in the table. Finally, the ability of certain borrowers to make scheduled payments on their adjustable-rate loans may decrease in the event of an interest rate increase. Analysis of Net Interest Income Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. The following table sets forth certain information relating to the Company's consolidated statements of operations for the years ended June 30, 1996, 1995 and 1994, and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yields and costs include fees which are considered adjustments to yields. For the Years Ended June 30, -------------------------------------------------------------------------------------- 1996 1995 1994 ---------------------------- ---------------------------- ---------------------------- Average Average Average Average Yield/ Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost Balance Interest Cost ---------- -------- --------- -------- --------- --------- --------- -------- -------- (Dollars in thousands) Assets: Interest-earning assets: Real estate loans.................... $435,948 $39,314 9.02% $427,042 $38,375 8.99% $451,699 $40,596 8.99% Other loans.............................. 3,497 340 9.72 3,803 307 8.07 4,006 337 8.41 Mortgage-backed securities........... 89,001 5,927 6.66 89,232 5,464 6.12 86,040 4,858 5.65 Investment securities............ 107,206 5,738 5.35 84,188 4,402 5.23 69,975 3,454 4.94 Federal funds sold....................... 23,904 1,300 5.44 12,179 675 5.54 18,000 576 3.20 --------- ------- ---------- -------- ---------- -------- Total interest-earning assets............ 659,556 $52,619 7.98 616,444 $49,223 7.99% 629,720 $49,821 7.91% ========= ======= ========== ======== ========== ======== Allowance for loan losses................ (4,797) (4,404) (3,278) Non-interest-earning assets.............. 25,221 23,662 20,476 --------- ---------- ---------- Total assets............................. $679,980 $635,702 $646,918 ========= ========== ========== Liabilities and stockholders' equity: Interest-bearing liabilities: NOW, Super NOW and Money market accounts.......................... $30,759 $634 2.06% $33,583 $716 2.13% $37,334 $840 2.25% Savings accounts......................... 232,631 5,789 2.49 264,247 6,575 2.49 294,348 7,511 2.55 Certificates of deposit.................. 285,524 16,013 5.61 225,785 10,571 4.68 213,092 8,219 3.86 Mortgagors' escrow....................... 3,371 72 2.14 3,253 71 2.18 3,183 67 2.10 Borrowed funds........................... 17,854 1,008 5.65 17,922 1,013 5.65 16,819 957 5.69 --------- -------- ---------- -------- ---------- -------- Total interest bearing liabilities....... 570,139 23,516 4.12 544,790 $18,946 3.48% 564,776 $17,594 3.11% --------- ======== ---------- ======== ---------- ======== Checking accounts........................ 11,646 10,950 10,926 Other non-interest bearing liabilities... 17,718 6,678 6,647 --------- ---------- ---------- Total liabilities........................ 599,503 562,418 582,349 Stockholders' equity..................... 80,477 73,284 64,569 ---------- ---------- ---------- Total liabilities and equity............. $ 679,880 $ 635,702 $646,918 ========== ========== ========== Net interest income/interest rate spread............................... $29,103 3.85% $30,277 4.51% $32,227 4.80% ======== ======== ======== Net interest-earning assets/net interest margin............................... $ 89,417 4.41% $71,654 4.91% $64,944 5.12% ========= ========== ========== Ratio of interest-earning assets to interest-bearing liabilities............. 115.68% 113.15% 111.50% In computing the average balance of loans, non-accrual loans have been included. Includes securities classified ''available for sale.'' Includes interest bearing deposits in other banks and FHLB stock. Net interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average interest-earning assets. Rate/Volume Analysis Net interest income can also be analyzed in terms of the impact of changing interest rates on interest-earning assets and interest-bearing liabilities and changing the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Bank's interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (change in volume multiplied by prior rate), (ii) changes attributable to rate (changes in rate multiplied by prior volume), and (iii) the net change. Changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to the volume and the changes due to rate. Year Ended Year Ended Year Ended June 30, 1996 June 30, 1995 June 30, 1994 Compared to Compared to Compared to Year Ended Year Ended Year Ended June 30, 1995 June 30, 1994 June 30, 1993 Increase/(Decrease) Increase/(Decrease) Increase/(Decrease) Due to Due to Due to --------------------------- --------------------------- ------------------------- Volume Rate Net Volume Rate Net Volume Rate Net ------- --------- --------- --------- ------- --------- --------- --------- --------- (In thousands) Interest-earning assets: Real estate loans........... $802 $137 $939 $(2,216) $(5) $(2,221) $(1,691) $(375) $(2,066) Other loans................. (28) 61 33 (17) (13) (30) 6 (38) (32) Mortgage-backed securities.. (24) 487 463 188 418 606 1,735 (1,076) 659 Investment securities....... 1,431 (95) 1,336 722 226 948 328 (682) (354) Federal funds sold.......... 1,036 (411) 625 (254) 353 99 195 26 221 ------- --------- --------- --------- ------- --------- --------- --------- --------- Total....................... $3,217 $179 $3,396 $(1,577) $979 $(598) $573 $(2,145) $(1,572) ======= ========= ========= ========= ======= ========= ========= ========= ========= Interest-bearing liabilities: NOW, Super NOW and money market accounts..... $(76) $ (6) $(82) $(82) $(42) $(124) $(9) $(190) $(199) Savings accounts............ (976) 190 (786) (759) (177) (936) 725 (1,667) (942) Certificate of deposit and other..................... 3,846 1,596 5,442 542 1,810 2,352 (572) (1,283) (1,855) Mortgagors' escrow.......... 8 (7) 1 2 2 4 9 1 10 Borrowed funds.............. (6) 1 (5) 63 (7) 56 (160) (511) (671) ------- --------- --------- --------- ------- --------- --------- --------- --------- Total....................... 2,796 1,774 4,570 (234) 1,586 1,352 (7) (3,650) (3,657) ------- --------- --------- --------- ------- --------- --------- --------- --------- Net change in net interest income........... $ 421 $(1,595) $ (1,174) $(1,343) $(607) $(1,950) $580 $1,505 $2,085 ======= ========= ========= ========= ======= ========= ========= ========= ========= Comparison of Financial Condition at June 30,1996 and June 30,1995 The Company's assets grew $709.1 million during the fiscal year ended June 30, 1996, increasing to $1.37 billion at June 30, 1996 from $662.7 million at June 30, 1995. The growth resulted primarily from increases of $406.3 million and $151.2 million in investment and mortgage-backed securities and loans respectively. Both investment and loan growth were enhanced by the acquisition of Conestoga, which provided $295.2 million and $113.1 million of investments and mortgage-backed securities and loans respectively. In addition, the Company's investment in federal funds sold increased by $97.3 million, due primarily to net proceeds of $141.4 raised in the Company's initial public offering, as well as excess proceeds of $131.1 million resulting from the oversubscription to the Company's initial public offering, which were refunded to subscribers on July 1, 1996. The Company continued its strategy of emphasizing multi- family lending with multi-family loan originations of $94.4 during the fiscal year ended June 30, 1996. As a result, multi- family loans grew to $296.6 million or 21.6% of assets (23.9% of Adjusted assets) at June 30, 1996 from $252.4 million at June 30, 1995. In addition, the Company increased its non-residential loans by $10.7 million. Growth in both of these segments were attributable to more competitive loan pricing during the period. Offsetting this growth were declines of $2.4 million and $14.2 million in one-to-four family residential loans (excluding loans acquired from Conestoga) and cooperative apartment loans, as the Company originated only $6.6 million of one-to-four family and cooperative apartment loans, the majority of which were fixed rate loans sold in the secondary market. The acquisition of Conestoga provided $124.4 million of mortgage-backed securities, of which $70.0 million were GNMAs, and $170.8 of investment securities, of which $119.1 million and $51.7 million was comprised of agency obligations and corporate obligations, respectively. The growth in securities portfolio also reflected the proceeds from the initial public offering and the excess subscription proceeds. The growth in assets was funded primarily through increased stockholders' equity of $136.0 million and the excess subscription proceeds of $131.1 million included in escrow and other deposits at June 30, 1996. The growth in stockholders' equity was due primarily to $141.4 million in net proceeds received from the Company's initial public offering and $6.3 million in net income for the year. Offsetting these increases to equity was purchases of the Company's Common Stock by the ESOP totaling $11.6 million. Total stockholders' equity was $213.1 million or 15.53% of total assets (17.17% of Adjusted Assets) at June 30, 1996. The Company acquired deposits totaling $394.3 million from Conestoga. Removing this effect, deposits increased only $1.0 million during the year ended June 30, 1996, as net outflows of $21.6 million offset interest credits of $22.7 million. Liabilities at June 30, 1996 reflect a purchase by the Company of $34.0 million of investment securities available for sale dated June 28, 1996 for which the proceeds were not disbursed until after July 1, 1996. The Company utilized the proceeds raised in the initial public offering to fund the Merger Consideration of $101.3 million for the Bank's acquisition of Conestoga. The Acquisition resulted in goodwill of $28.4 million, which is currently being amortized over a twelve year period. Comparison of Financial Condition at June 30, 1995 and June 30, 1994 Total assets increased to $662.7 million at June 30, 1995, from $646.5 million at June 30, 1994, an increase of $16.2 million. The annual growth that occurred in fiscal year 1995 was funded by a combination of net income, which was $8.4 million, and deposit growth, which totaled $8.1 million for the year. Asset growth was concentrated in the Bank's securities portfolio, as weak demand for new residential mortgages at the rates offered, and strong prepayment activity in the existing mortgage loan portfolio, combined to lower the Bank's loan holdings. Total loans fell $1.7 million to $429.9 million at June 30, 1995. A portion of the liquidity created by the combination of the increase in deposits (which was due to interest credited) and the reduction in the size of the loan portfolio is reflected in the $10.8 million increase in the size of the Bank's investment in federal funds sold, which was $17.8 million at June 30, 1995. The remaining liquidity was used for new security purchases. Growth in the securities portfolio totaled $12.2 million, primarily attributable to new purchases of short-term, fixed-rate securities backed by GSEs, consistent with the Bank's supplemental strategy of seeking investments that provide a stable source of liquidity and earnings. See ''Management Strategy Stable Source of Liquidity and Earnings.'' At June 30, 1995, the Bank's investment in mortgage-backed and investment securities had increased to $193.2 million, as compared to $181.0 million at June 30, 1994. Total equity of the Bank was $77.1 million at June 30, 1995, or 11.63% of total assets. This compares with total equity of $67.9 million and an equity to total assets ratio of 10.51% at June 30, 1994. Included in the equity calculation is a component recognizing the net unrealized gain or loss on the Bank's available for sale securities portfolio, as required by SFAS No. 115, which the Bank adopted effective July 1, 1994. The net addition to equity resulting from this requirement totaled $416,000, net of deferred taxes, at June 30, 1995. Whether the application of SFAS No. 115 will result in an addition to or a deduction from equity in the future is subject to change with changes in market conditions and interest rates. See '' Impact of Accounting Standards.'' Comparison of Operating Results for the Fiscal Years Ended June 30, 1996 and 1995 General. Net income for the fiscal year ended June 30, 1996 was $6.3 million as compared to $8.4 million for the fiscal year ended June 30, 1995. Income before cumulative effect of change in accounting principles for the year ended June 30, 1996 was $7.3 million, a decrease of $1.1 million from $8.4 million for prior year. Decreases of $1.2 million and $398,000 in net interest income and non-interest income, respectively, were offset by a $440,000 decrease in income tax expense. Interest Income. Interest income amounted to $52.6 million for the year ended June 30, 1996, representing an increase of $3.4 million from the prior year. The increase was the result of the effect of a $43.1 million increase in average interest- earning assets, as the average yield on interest-earning assets decreased by 1 basis point. The largest components of the increase in interest income were interest income on real estate loans, investment securities and federal funds sold, of $939,000, $1.3 million and $625,000, respectively. All of these increases were driven primarily by the increases in average interest- earning assets of $8.9 million, $23.0 million and $11.7 million, in real estate loans, investment securities and federal funds sold, respectively. Average yields on real estate loans, and investment securities increased by 3 basis points and 12 basis points respectively, while the average yield on federal funds sold declined by 10 basis points. The small increase in yields on these assets resulted from general increase in interest rates during the year ended June 30, 1996 offset by a shift of funds to shorter-term, lower yielding investments and competitive loan pricing, which reduced rates slightly on loan originations. The increase in average interest-earning assets is consistent with the Bank's supplemental strategy of seeking loan growth and investments that provide a stable source of earnings. See "- Management Strategy." Since much of the real estate loan originations occurred during the fourth quarter, its effect upon average balance and interest income for the year ended June 30, 1996 was minor. Interest Expense. Interest expense was $23.5 million for the fiscal year 1996, an increase of $4.6 million from fiscal year 1995. Interest-bearing liabilities averaged $570.1 million for the year ended June 30, 1996, representing an increase of $25.3 million, or 4.65%, over the prior year. The average rate paid on interest-bearing liabilities increased 64 basis points, from 3.48% to 4.12%. The increase in the average rate paid on interest- bearing liabilities resulted from the higher interest rate environment and from a steady shift of deposits out of savings accounts and into higher costing certificates of deposit. Management's strategy of paying competitive interest rates on certificates of deposit with maturities in excess of one year, which management believes should help to stabilize the Bank's cost of funds over the longer term, contributed to a higher cost of funds in the current period. Average savings account balances decreased by $31.6 million from $264.2 million for the year ended June 30, 1995 to $232.6 million for the year ended June 30, 1996, at the same time the average certificates of deposit balance increased by $59.7 million from $225.8 million for the year ended June 30, 1995 to $285.5 million for the year ended June 30, 1996. The average rate paid on certificates of deposit increased by 93 basis points over the same period. Provision for loan losses. The provision for loan losses increased slightly to $2.97 million for the year ended June 30, 1996 from $2.95 million for the year ended June 30, 1995. The allowance for loan losses increased from $5.2 million at June 30, 1995 to $7.8 million at June 30, 1996, reflecting net charge-offs of $1.0 million during the fiscal year ended June 30, 1996 compared to $1.4 million for the fiscal year ended June 30, 1995, the provision for loan losses, and the addition for Conestoga allowance for loan losses of $668,000. In management's judgment, it was prudent to continue to increase the loan loss allowance based upon an evaluation of the adequacy of the reserve in the context of the Bank's historical loan loss experience and to reflect the growing volume of multi-family loan originations during 1996. Although charge-offs declined during fiscal 1996 to fiscal 1995, the Bank experienced an increase in non-performing loans of $1.5 million, from $5.1 million at June 30, 1995 to $6.6 million at June 30, 1996. See "Item 1 -Business - Asset Quality." Non-interest income. Non-interest income declined $398,000 to $1.4 million for the year ended June 30, 1996 from $1.8 million for the year ended June 30, 1995. This decrease reflects a $53,000 reduction in net gain on the sale of OREO, a decrease of $258,000 on net gains on sales of stock, and a decline of $136,000 in income provided from service charges. The decrease in net gain on sale of stocks was attributable primarily to a loss of $195,000 on the sale of preferred stocks in December, 1995. The decrease in income provided by service charges resulted primarily from a change in the manner in which the Bank accounts for income from the rental of safe deposit boxes. In addition, declines of $34,000 and $39,000 occurred in dividends on FHLBNY stock and annuity fees, respectively. Offsetting these declines, was an increase of $106,000 in net gains on sale of bonds. Non-interest expense. Non-interest expense declined $32,000 from $14.1 million for the year ended June 30, 1995 to $14.0 million for the year ended June 30, 1996, attributable primarily to a decrease of $1.1 million in insurance premiums paid to the Federal Deposit Insurance Corporation ("FDIC"). This decrease resulted from a reduction in the rate paid by the Bank to the FDIC for deposit insurance premiums, combined with a refund from the FDIC for premiums previously paid in the amount of $319,000. The Bank acquired $394.3 million of deposits insured by SAIF, from Conestoga, on which the annual insurance premium is expected to be $0.23 per $100 of deposit balance. As a result, future FDIC insurance premium expense is expected to increase from the amount recorded during the fiscal year ended June 30, 1996. See "Item 1 - Business - Regulation - Regulation of Federal Savings Associations." The decrease in deposit insurance expense was partially offset by a $594,000 increase in compensation and benefits expense, which was attributable to an increase in employee bonuses and normal salary increases, and a $586,000 provision for losses attributable to the Bank's holding of OREO. Beginning with the fiscal year ended June 30, 1996, periodic provisions to the OREO valuation reserve are recorded as non-interest expense. Income tax expense. Income tax expense totaled $6.2 million for the year ended June 30, 1996 compared to $6.6 million for the year ended June 30, 1995, a decline of $440,000. The decline was attributable primarily to a decrease of $1.6 million in pre-tax income, offset by an increase in the effective tax rate from 44.0% for the year ended June 30, 1995 to 45.9% for the year ended June 30, 1996. The reduced effective tax rate during the year ended June 30, 1995 resulted substantially from the utilization of capital gains tax loss carryforwards totaling $183,000 during the fiscal year. Cumulative Effect of Changes in Accounting Principles. On July 1, 1995, the Bank adopted SFAS No. 106, which requires accrual of post-retirement benefits, such as health care benefits, during the years an employee provides services. The cumulative effect of the adoption of SFAS No. 106 on prior years was $1,032,000, after a reduction for income taxes of $879,000. As permitted by the Standard, the Bank elected to record this liability at the time of adoption. See '' - Impact of Accounting Standards.'' Comparison of Operating Results for the Fiscal Years Ended June 30, 1995 and 1994 General. Net income for fiscal year 1995 was $8.4 million, as compared to $9.1 million during fiscal year 1994. Interest rates rose sharply beginning in February, 1994, and then gradually declined after January, 1995. The result was a higher yield on earning assets and a higher cost of interest-bearing liabilities in 1995 than in fiscal year 1994. The effect on the Bank's liabilities was greater, however, as more interest-bearing liabilities than interest earning assets repriced during the year. The result was a decline in both net interest income and net income for the Bank in fiscal year 1995. Net income fell to $8.4 million, a decrease of $655,000 from the previous fiscal year, due to (1) the decline in net interest income, which fell by $2.0 million, (2) a $494,000 decrease in non-interest income, and (3) a $1.3 million increase in non-interest expense. These were partially offset by a $1.2 million decrease in the provision for loan losses and adoption of Statement of Financial Accounting Standards No. 109, ''Accounting for Income Taxes,'' effective July 1, 1993, whereby the Bank changed prospectively from the deferred method to the liability method of accounting for income taxes, which resulted in a charge of $383,000 during the fiscal year ended June 30, 1994. Interest Income. Total interest income was $49.2 million in fiscal year 1995, a decrease of $598,000 from fiscal year 1994. Despite an increase in the average yield on earning assets during the year, interest income fell, primarily because of a $13.3 million decrease in the amount of average interest-earning assets. The Bank's average investment in real estate loans was $427.0 million in fiscal year 1995 versus $451.7 million during the prior year, as principal repayments exceeded new loan originations for the Bank's portfolio. The result was a drop of $2.2 million in interest income from the real estate loan portfolio during 1995. Interest income from mortgage-backed securities increased by $606,000 to $5.5 million, due to the $3.2 million growth in the Bank's average investment in these securities and to a 47 basis point increase in the average yield on the mortgage-backed securities portfolio. Similarly, interest income provided by the Bank's portfolio of other securities increased by $948,000 from fiscal year 1994 to fiscal year 1995. A $14.2 million increase in the average balance invested in this portfolio combined with an increase in yield to 5.23% in 1995 from 4.94% in fiscal year 1994 accounted for the increase. Federal funds sold, despite averaging $5.8 million less in fiscal year 1995, provided $99,000 more in interest income during the year due to a 234 basis point increase in the average yield on federal funds. Interest Expense. Average interest-bearing liabilities decreased by $20.0 million in fiscal year 1995, reflecting net deposit outflows during the year. Total interest expense rose during the period, however, as rising funding costs offset the drop in average interest-bearing liabilities. Throughout the first half of the 1995 fiscal year, the Bank's depositors responded to higher interest rates by extending their deposit maturities. Savings account deposits, which had previously grown during a period of low rates existing in 1993 and 1992, began to shift into higher yielding certificates of deposit. During fiscal year 1995, average savings account balances decreased by $30.1 million from year earlier average balances. Meanwhile average balances of certificates of deposit grew from $213.1 million during the 1994 fiscal year, to $225.8 million during the 1995 fiscal year, an increase of $12.7 million. The net result was an increase in deposit expense of $1.3 million. Interest expense attributable to borrowed funds increased by $56,000 on a $1.1 million increase in average borrowings. Net Interest Income. Net interest income for the 1995 fiscal year was $30.3 million, a decline of $1.95 million, or 6.1%, from 1994's results. A lower average interest rate spread and a $11.2 million reduction in the average assets of the Bank combined to reduce net interest income. The interest rate spread and net interest margin were 4.51% and 4.91%, respectively, in 1995, as compared with 4.80% and 5.12% in 1994. Generally, the Bank's assets repriced less quickly than the Bank's liabilities during the year, a result due in large part to the high volume of deposit flows out of savings accounts and into higher cost certificates of deposit. Provision for Loan Losses. The provision for loan losses was $2.95 million in 1995 as compared to $4.11 million in the 1994 fiscal year. The change in the level of loan loss provisions reflected the general improvement in the overall credit quality of the Bank's balance sheet during fiscal year 1995. By June 30, 1995, both non-performing loans and non-performing assets had declined significantly from year earlier levels. During the period, total non-performing loans declined by $1.2 million, or 18.8%. Non-performing assets showed similar improvement, falling from $14.4 million at June 30, 1994, to $9.5 million a year later. In addition, net charge-offs for the fiscal year 1995 were $1.4 million, representing a decline of $2.1 million from fiscal year 1994. At June 30, 1995, the allowance for loan losses totaled 101.99% of non-performing loans and 1.20% of total loans, up from 58.15% and 0.84%, respectively, at June 30, 1994. See "Item 1 - Business - Asset Quality Non-performing Assets and Troubled-Debt Restructurings.'' Non-Interest Income. Non-interest income for the 1995 fiscal year decreased to $1.8 million from $2.3 million in 1994, a reduction of $494,000. Bonds called in the low interest rate environment of the 1994 fiscal year provided $342,000 in non- interest income, as compared to the $52,000 generated in fiscal year 1995 by the sale of securities, a decline of $290,000. Additionally, net gains on the sale of fixed-rate loans to the secondary mortgage market fell by $184,000 in fiscal year 1995 as compared with fiscal year 1994, due to the change in direction of interest rates during each respective period. Non-Interest Expense. Total non-interest expense increased $1.3 million, or 10.5%, in the 1995 fiscal year to $14.1 million, as compared to $12.7 million in fiscal year 1994. The primary factor behind this increase was a $565,000 charge taken during 1995 for possible losses from the Bank's investment in the capital stock and debentures of Nationar, which was one of the Bank's primary correspondent banks. Additionally, the Bank established a $75,000 reserve against the possibility of losses relating to its federal funds held by Nationar at February 6, 1995. (See Item 8 - Financial Statements and Supplemental Data - Note 16 - Commitments and Contingencies) Other factors contributing to the increase in total non- interest expense in the 1995 fiscal year were a $418,000 increase in compensation and benefits and a $112,000 increase in expenses associated with managing the Bank's portfolio of OREO. The increase in OREO expenses in fiscal year 1995 was due to the payment of maintenance arrears on four cooperative apartments on which the Bank foreclosed during 1995. The increase in compensation and benefits expenses reflects, in part, the Bank's establishment of a Supplemental Executive Retirement Plan (''SERP'') in February of 1994 in the middle of the Bank's 1994 fiscal year. Thus, fiscal 1995 was the first full year for SERP expense accruals. Expenses attributable to the SERP were $64,000 higher in fiscal year 1995 than in fiscal year 1994 as a result. In addition, there was a $312,000 increase in employee salaries and benefits expense in fiscal year 1995 due to normal salary increases. Income Tax Expense. Income tax expense declined by $1.6 million in fiscal year 1995 as compared to fiscal year 1994 due to a decrease in pre-tax income. The Bank's effective income tax rates for the fiscal year 1995 and fiscal year 1994 were 44.0% and 46.5%, respectively. The effective rate was higher in fiscal year 1994 due to several factors, the most important of which were the application of accrued tax loss carryforwards to a capital gain on one of the Bank's mutual fund investments, and the impact of a graduated federal tax rate schedule, which increased the Bank's marginal tax rate in fiscal year 1994 due to higher pre-tax earnings. Liquidity and Capital Resources The Company's primary sources of funds are deposits, proceeds from principal and interest payments on loans, mortgage-backed securities and investments, and, to a lesser extent, proceeds from the sale of fixed-rate mortgage loans to the secondary mortgage market. While maturities and scheduled amortization of loans and investments are a predictable source of funds, deposit flows, mortgage prepayments and mortgage loan sales are influenced by general interest rates, economic conditions and competition. The Company completed the sale of 14,547,500 shares of common stock at $10.00 per share on June 26, 1996, realizing net proceeds of $141.4 million and utilized approximately $88.0 million of the proceeds to purchase 100% of the Bank's common stock. The Bank used these proceeds, along with cash generated in the Bank's ordinary course of business, to fund the Merger Consideration of $101.3 million paid to Conestoga shareholders for the Acquisition. The Bank is required to maintain an average daily balance of liquid assets and short-term liquid assets as a percentage of net withdrawable deposit accounts plus short-term borrowings as defined by OTS regulations. The minimum required liquidity and short-term liquidity ratios are currently 5.0% and 1.0%, respectively. At June 30, 1996, the Bank's liquidity ratio and short-term liquid asset ratios were 43.0% and 37.0%, respectively. The levels of the Bank's short-term liquid assets are dependent on the Bank's operating, financing and investing activities during any given period. The primary investing activities of the Bank are the origination of multi-family and single-family mortgage loans, and the purchase of mortgage-backed and other securities. During the fiscal years ended June 30, 1996, 1995 and 1994, the Bank's loan originations totaled $114.9 million, $47.4 million and $64.7 million, respectively. Purchases of mortgage-backed and other securities totaled $574.5 million, $55.4 million and $101.3 million for the fiscal years ended June 30, 1996, 1995, and 1994, respectively. These activities were funded primarily by principal repayments on loans, mortgage-backed securities and other securities. Loan sales provided additional liquidity to the Bank, totaling $5.1 million, $2.8 million and $19.9 million for the fiscal years ended June 30, 1996, 1995, and 1994 respectively. The Bank experienced a net increase in total deposits of $395.3 million and $8.1 million respectively in the fiscal years ended June 30, 1996 and 1995, respectively, while the fiscal year ended June 30, 1994 produced a decrease in total deposits of $17.3 million. As discussed previously, the increase in deposits during the year ended June 30, 1996 was attributable primarily to the acquisition of $394.3 million in deposits from Conestoga. Deposit flows are affected by the level of interest rates, the interest rates and products offered by local competitors, and other factors. The Bank closely monitors its liquidity position on a daily basis. Excess short-term liquidity is invested in overnight federal funds sales and various money market investments. In the event that the Bank should require funds beyond its ability to generate them internally, additional sources of funds are available through the use of the Bank's $152.0 million borrowing limit at the FHLBNY. At June 30, 1996, the Bank had $15.7 million in medium term borrowings outstanding at the FHLBNY and additional overall borrowing capacity from the FHLBNY of $136.3 million. Loan commitments totaled $81.2 million at June 30, 1996, comprised of $80.2 million in multi-family commitments and residential mortgage loan commitments totaling $971,000. Management of the Company anticipates that it will have sufficient funds available to meet its current loan commitments. Certificates of deposit which are scheduled to mature in one year or less from June 30, 1996 totaled $359.4 million. From October 1, 1994 to June 30, 1996, the Company experienced an 80.4% retention rate of funds from maturing certificates of deposit. Based upon this experience and the Company's current pricing strategy, management believes that a significant portion of such deposits will remain with the Company. At June 30, 1996, the Bank was in compliance with all applicable regulatory capital requirements. Tangible capital totaled $119.1 million, or 9.49% of total tangible assets, compared to a 1.50% regulatory requirement; core capital, at 9.50%, exceeded the required 3.0% regulatory minimum, and total risk-based capital, at 21.24% of risk weighted assets, exceeded the 8.0% regulatory requirement. Impact of Inflation and Changing Prices The Financial Statements and Notes thereto presented herein have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Bank's operations. Unlike industrial companies, nearly all of the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a greater impact on the Bank's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services. Impact of Accounting Standards In December, 1990 the FASB issued SFAS No. 106, which significantly changed the prevailing practice of accounting for post-retirement benefits (such as health care benefits) on a cash basis to requiring an accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. The Bank adopted SFAS No. 106 effective July 1, 1995, electing to record the entire accumulated benefit obligations immediately. The net cumulative effect of the adjustment of $1.0 million (after reduction for income taxes of $879,000) to apply retroactively to prior years was included as a charge to net income for the year ended June 30, 1996. In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114, ''Accounting by Creditors for Impairment of a Loan'' (''SFAS No. 114''). Under the provisions of SFAS No. 114, a loan is considered impaired when, based on current information and events, it is probable that the lender will be unable to collect all principal and interest due according to the contractual terms of the loan agreement. SFAS No. 114 requires lenders to measure impairment of a loan based on (i) the present value of expected future cash flows discounted at the loan's effective interest rate, (ii) the loan's observable market price or (iii) the fair value of the collateral if the loan is collateral-dependent. SFAS No. 114 also applies to restructured loans and eliminates the requirement to classify loans that are in-substance foreclosures as foreclosed assets except for loans where the creditor has physical possession of the underlying collateral, but not legal title. As amended by SFAS No. 118, SFAS No. 114 allows a creditor to use existing methods for recognizing interest income on impaired loans. The Bank adopted SFAS No. 114 effective July 1, 1995. Adoption of this standard did not have a material effect upon the Bank's financial condition or results from operations. In March 1995, the FASB issued SFAS No. 121, ''Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of'' which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment and reported at the lower of carrying amount or fair value, less cost to sell, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995. Management anticipates that the adoption of SFAS No. 121 will not have a material impact on the financial condition or results of operations of the Bank. In May 1995, the FASB issued Statement of Financial Accounting Standards No. 122, ''Accounting for Mortgage Servicing Rights'' (''SFAS 122''). SFAS No. 122 amends Statement of Financial Accounting Standards No. 65, ''Accounting for Certain Mortgage Banking Activities,'' requiring separate capitalization of the costs of rights to service mortgage loans for others regardless of whether these rights are acquired through a purchase or loan origination activity. SFAS No. 122 is effective for fiscal years beginning after December 15, 1995, and applies only to servicing rights on loans sold subsequent to adoption. Management anticipates that the adoption of SFAS No. 122 will not have a material impact upon the financial condition or results of operations of the Bank. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, ''Accounting for Stock-Based Compensation'' (''SFAS No. 123''). SFAS No. 123 encourages a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt this method for all employee stock compensation plans. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. SFAS No. 123 is effective for fiscal years beginning after December 15, 1995. On November 15, 1995, the FASB issued a special report entitled: ''A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities, Questions and Answers'' (''The Guide''). The Guide permitted a one-time reassessment and related reclassifications from the held to maturity category (no later than December 31, 1995) that will not call into question the intent of the enterprise to hold other debt securities at maturity in the future. In December, 1995, the Bank performed a reassessment of its investment and mortgage- backed securities portfolios which resulted in a reclassification of approximately $3.3 million of investment securities from held- to-maturity into available for sale. The impact upon the Bank's financial condition resulting from this transfer was not material. There was no impact on the Bank's results from operations resulting from this transfer. In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125 ''Accounting for Transfers of Financial Assets and Extinguishments of Liabilities.'' The statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are borrowings. This statement also requires that liabilities and derivatives incurred or obtained as part of a transfer be measured initially at fair value. This statement also provides guidance on measurement of servicing rights on assets transferred and derecognition of liabilities transferred. The statement is effective for all transfers, servicing, or extinguishments occurring after December 31, 1996. Adoption of this standard is not expected to have a material effect upon the Company's financial condition or results of operations. In November 1993, the American Institute of Certified Public Accountants (''AICPA'') issued Statement of Position No. 93-6, ''Employers' Accounting for Employee Stock Ownership Plans'' (''SOP 93-6'') which is effective for fiscal years beginning after December 15, 1993. SOP 93-6 will apply to the Bank's ESOP and requires the recognition of compensation expense by employers based on the fair value of ESOP shares. Under SOP 93-6, the Bank will recognize compensation expense equal to the fair value of the ESOP shares that become committed to be released to participant accounts. To the extent that the fair value of the Bank's ESOP shares at the time they become committed to be released differs from the original cost of such shares, the difference will be charged or credited to shareholders' equity. The cost of the stock acquired by the ESOP which has not yet been committed to be released to participant accounts will be reflected as a reduction of shareholders' equity. In December 1994, the AICPA issued Statement of Position No. 94- 6, ''Disclosure of Certain Significant Risks and Uncertainties'' (''SOP 94-6'') which is effective for fiscal years ending after December 15, 1995. SOP 94-6 requires disclosure in the financial statements about certain risks and uncertainties that could significantly affect the amounts reported in the financial statements in the near term and relate to: (i) the nature of operations; (ii) the necessary use of estimates in the preparation of financial statements, and; (iii) significant concentrations in certain aspects of operations. The adoption of SOP 94-6 did not have a material impact upon the financial condition or results of operations of the Bank. Item 8. - Financial Statements and Supplementary Data Financial Statements begin on following page.

INDEPENDENT AUDITORS' REPORT To the Stockholders and the Board of Directors of the Dime Community Bancorp, Inc. and Subsidiary We have audited the accompanying consolidated statements of condition of the Dime Community Bancorp, Inc. and Subsidiary (the ''Company'') as of June 30, 1996 and 1995, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Dime Community Bancorp, Inc. and Subsidiary as of June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 15, effective July 1, 1995, the Company changed its method of accounting for postretirement benefits other than pensions to comply with Statement of Financial Accounting Standards No. 106. As discussed in Notes 1 and 14, effective July 1, 1993 the Company changed its method of accounting for income taxes to comply with Statement of Financial Accounting Standards No. 109. /s/ Deloitte & Touche llp ________________________________ New York, New York August 30, 1996

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CONDITION JUNE 30, 1996 AND 1995 (In Thousands) 1996 1995 ----------- ---------- ASSETS: Cash and due from banks................................................... $17,055 $6,807 Investment securities held to maturity (estimated market value of $43,428 and $51,254 at June 30, 1996 and June 30, 1995 respectively) (Notes 2, 4 and 12)....................................... 43,552 51,475 Investment securities available for sale (Notes 2,4, and 12): Bonds and notes (amortized cost of $338,141 and $42,350 at June 30, 1996 and June 30, 1995, respectively).......................... 338,089 42,349 Marketable equity securities (historical cost of $2,977 and $3,304 at June 30, 1996 and June 30, 1995, respectively)................ 3,205 3,070 Mortgage-backed securities held to maturity (estimated market value of $52,596 and $54,172 at June 30, 1996 and June 30, 1995 respectively) (Notes 5 and 12)........................................... 52,580 53,815 Mortgage-backed securities available for sale (amortized cost of $156,962 and $36,728 at June 30, 1996 and June 30, 1995, respectively) (Notes 5 and 12)........................................... 157,361 37,733 Federal funds sold (Note 2)............................................... 115,130 17,809 Loans (Note 6): Real estate............................................................. 577,663 425,965 Other loans............................................................. 5,564 3,751 Less allowance for loan losses.......................................... (7,812) (5,174) ----------- ---------- Total loans, net.......................................................... 575,415 424,542 ----------- ---------- Loans held for sale....................................................... 459 138 Premises and fixed assets (Note 9)........................................ 14,399 5,921 Federal Home Loan Bank of New York capital stock (Note 10)................ 7,604 4,801 Other real estate owned, net(Note 7)...................................... 1,946 4,466 Goodwill (Note 3)......................................................... 28,438 - Other assets (Notes 14 and 15)............................................ 16,588 9,813 ------------ --------- TOTAL ASSETS.............................................................. $1,371,821 $662,739 ============ ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Due to depositors (Note 11)............................................... $950,114 $554,841 Escrow and other deposits (Note 2)........................................ 141,732 12,109 Securities sold under agreements to repurchase (Note 12).................. 11,998 2,110 Federal Home Loan Bank of New York advances (Note 13)..................... 15,710 15,710 Payable for securities purchased.......................................... 33,994 - Accrued postretirement benefit obligation (Note 15)....................... 2,381 - Other liabilities (Notes 1 and 15)........................................ 2,821 902 ------------ --------- TOTAL LIABILITIES......................................................... 1,158,750 585,672 ------------ --------- COMMITMENTS AND CONTINGENCIES (Note 16) STOCKHOLDERS' EQUITY: Preferred Stock ($0.01 par, 9,000,000 shares authorized, none outstanding at June 30, 1996 and 1995).............................................. - - Common Stock ($0.01 par, 45,000,000 shares authorized, 14,547,500 shares outstanding at June 30, 1996, none outstanding at June 30,1995)........ 145 - Additional paid-incapital................................................ 141,240 - Employee Stock Ownership Plan (Note 15)................................... (11,541) - Retained earnings (Notes 2 and 14)........................................ 82,916 76,651 Unrealized gain on securities available for sale, net of deferred taxes... 311 416 ------------ --------- TOTAL STOCKHOLDERS' EQUITY................................................ 213,071 77,067 ------------ --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $1,371,821 $662,739 ============ ========= See notes to consolidated financial statements.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands) For the Years Ended June 30, -------------------------- 1996 1995 1994 -------- -------- -------- Interest income: Loans secured by real estate.............................................. $39,314 $38,375 $40,596 Other loans............................................................... 340 307 337 Investment securities..................................................... 5,738 4,402 3,454 Mortgage-backed securities................................................ 5,927 5,464 4,858 Federal funds sold........................................................ 1,300 675 576 -------- -------- -------- Total interest income..................................................... 52,619 49,223 49,821 -------- -------- -------- Interest expense: Deposits and escrow....................................................... 22,508 17,933 16,637 Borrowed funds............................................................ 1,008 1,013 957 -------- -------- -------- Total interest expense.................................................... 23,516 18,946 17,594 Net interest income....................................................... 29,103 30,277 32,227 Provision for loan losses (Note 6)........................................ 2,979 2,950 4,105 -------- -------- -------- Net interest income after provision for loan losses....................... 26,124 27,327 28,122 -------- -------- -------- Non-interest income: Service charges and other fees............................................ 911 1,047 995 Net gain (loss) on sales and redemptions of securities and other assets... (30) 159 495 Net gain on sales of loans................................................ 12 33 217 Other..................................................................... 482 534 560 -------- -------- -------- Total non-interest income................................................. 1,375 1,773 2,267 -------- -------- -------- Non-interest expense: Salaries and employee benefits............................................ 7,359 6,879 6,461 ESOP benefit expense...................................................... 114 - - Occupancy and equipment................................................... 1,775 1,610 1,613 Federal deposit insurance premiums........................................ 109 1,245 1,268 Data processing costs..................................................... 557 481 477 Provision for losses on Other real estate owned (Note 7).................. 586 - - Other..................................................................... 3,521 3,838 2,895 -------- -------- -------- Total non-interest expense................................................ 14,021 14,053 12,714 -------- -------- -------- Income before income taxes and cumulative effect of changes in accounting principles..................................................... 13,478 15,047 17,675 Income tax expense (Note 14).............................................. 6,181 6,621 8,211 -------- -------- -------- Income before cumulative effect of changes in accounting principles................................................................ 7,297 8,426 9,464 Cumulative effect on prior years of changing to a different method of accounting for: Income taxes (Notes 1 and 14)............................................. - - (383) Post-retirement benefits other than pensions (Notes 1 and 15)............. (1,032) - - -------- -------- -------- Net income................................................................ $6,265 $8,426 $9,081 ======== ======== ======== See notes to consolidated financial statements.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) For the Years Ended June 30, -------------------------- 1996 1995 1994 -------- -------- -------- Common Stock (Par value $0.01): Balance at beginning of period............................................ $ - $ - $ - Issuance of common stock in initial public offering (14,547,500 shares)... 145 - - -------- -------- -------- Balance at end of period.................................................. 145 - - -------- -------- -------- Additional paid-in capital: Balance at beginning of period............................................ - - - Issuance of common stock in initial public offering....................... 145,330 - - Cost of issuance of common stock.......................................... (4,107) Allocation of ESOP stock.................................................. 17 - - -------- -------- -------- Balance at end of period.................................................. 141,240 - - -------- -------- -------- Employee Stock Ownership Plan: Balance at beginning of period............................................ - - - Common stock acquired by ESOP............................................. (11,638) - - Allocation of ESOP stock.................................................. 97 - - -------- -------- -------- Balance at end of period.................................................. (11,541) - - -------- -------- -------- Retained earnings: Balance at beginning of period............................................ 76,651 68,225 59,144 Net income for the period................................................. 6,265 8,426 9,081 -------- -------- -------- Balance at end of period.................................................. 82,916 76,651 68,225 -------- -------- -------- Marketable equity securities valuation reserve: Balance at beginning of period............................................ - (306) (225) Change in marketable equity valuation reserve............................. - - (81) Effect of adoption of SFAS 115............................................ - 306 - -------- -------- -------- Balance at end of period.................................................. - - (306) -------- -------- -------- Unrealized gain(loss) on securities available for sale, net: Balance at beginning of period............................................ 416 - - Effect of adoption of SFAS 115, net of deferred taxes..................... - (146) - Change in unrealized gain (loss) on securities available for sale during the year, net of deferred taxes......................................... (105) 562 - -------- -------- -------- Balance at end of period.................................................. $ 311 $ 416 $ - -------- -------- -------- See notes to consolidated financial statements.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands) For the Years Ended June 30, 1996 1995 1994 -------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income....................................................................... $6,265 $8,426 $9,081 Adjustments to reconcile net income to net cash provided by operating activities: Net gain on investment and mortgage-backed securities called................... (79) - (342) Net loss on investment and mortgage-backed securities sold..................... 164 11 - Net gain on sale of loans held for sale........................................ (12) (33) (217) Depreciation and amortization.................................................. 127 1,509 1,662 ESOP plan compensation expense................................................. 114 - - Provision for loan losses...................................................... 2,979 2,950 4,105 Decrease (increase) in loans held for sale..................................... (310) 580 902 Decrease (increase) in other assets and other real estate owned................ 3,040 3,762 (1,260) Increase in accrued postretirement benefit obligation.......................... 2,115 - - Increase in payable for securities purchased................................... 33,994 - - Increase in other liabilities.................................................. 1,677 291 53 --------- -------- -------- Net cash provided by operating activities...................................... 50,074 17,496 13,984 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in Federal funds sold.................................... (52,253) (10,780) 14,008 Proceeds from maturities of investment securities held to maturity............... 13,065 2,060 29,800 Proceeds from maturities of investment securities available for sale............. 399,135 26,300 - Proceeds from calls of investment securities held to maturity.................... 11,056 - 11,420 Proceeds from calls of investment securities available for sale.................. 11,323 - - Proceeds from sale of investment securities available for sale................... 501 - - Proceeds from sale of mortgage-backed securities held to maturity................ 2,555 1,067 - Purchases of investment securities held to maturity.............................. (9,292) (1,000) (71,542) Purchases of investment securities available for sale.......................... (541,951) (43,251) - Purchases of mortgage-backed securities held to maturity......................... (11,714) (6,093) (29,753) Purchases of mortgage-backed securities available for sale....................... (11,554) (5,053) - Principal collected on mortgage-backed securities held to maturity............... 9,995 7,905 16,906 Principal collected on mortgage-backed securities available for sale............. 15,877 5,690 - Net (increase) decrease in loans................................................. (41,856) (215) 25,670 Cash disbursed in acquisition of Conestoga Bancorp, net of cash acquired (93,074) - - Purchases of fixed assets........................................................ (779) (125) (226) Sale (purchase) of Federal Home Loan Bank capital stock.......................... (123) 188 (6) --------- -------- -------- Net cash used in investing activities............................................ (299,089) (23,307) (3,723) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in due to depositors..................................... 1,019 8,080 (17,350) Net (decrease) increase in escrow and other deposits............................. 128,625 (1,187) 2,967 Net proceeds from issuance of common stock....................................... 129,730 - - Proceeds from FHLB advances...................................................... - - 6,005 Decrease in repurchase agreements................................................ (111) (51) (115) --------- -------- -------- Net cash (used in) provided by financing activities............................. 259,263 6,842 (8,493) --------- -------- -------- INCREASE IN CASH AND DUE FROM BANKS.............................................. 10,248 1,031 1,768 CASH AND DUE FROM BANKS, BEGINNING OF PERIOD..................................... 6,807 5,776 4,008 --------- -------- -------- CASH AND DUE FROM BANKS, END OF PERIOD........................................... $17,055 $6,807 $5,776 ========= ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes....................................................... $ 6,993 $ 5,996 $9,689 ========= ======== ======== Cash paid for interest........................................................... $ 23,744 $18,932 $17,575 ========= ======== ======== Transfer of investment and mortgage-backed securities held-to- maturity to available for sale............................................................... $ 3,300 $70,000 $ - ========= ======== ========= On June 26, 1996, the Bank acquired all of the outstanding common stock of Conestoga Bancorp, Inc. for cash. In connection with this acquisition, the following assets were acquired and liabilities assumed: Fair Value of Investments, Loans and Other Assets Acquired, net $ 507,023 Cash paid for Common Stock (101,272) ----------- Deposits and Other Liabilities Assumed $ 405,751 =========== See notes to consolidated financial statements.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - Dime Community Bancorp, Inc. (the "Company") is a Delaware corporation organized by the Bank for the purpose of acquiring all of the capital stock of The Dime Savings Bank of Williamsburgh (the "Bank") issued in the Conversion on June 26, 1996. Presently, the only significant assets of the Company are the capital stock of the Bank, the Company's loan to the Bank's ESOP, and investments of the net conversion proceeds retained by the Company. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended. The Bank was originally founded in 1864 as a New York State-chartered mutual savings bank. On November 1, 1995, the Bank converted to a federal mutual savings bank. The Bank has been, and intends to continue to be, a community-oriented financial institution providing financial services and loans for housing within its market areas. The Bank maintains its headquarters in the Williamsburgh section of the borough of Brooklyn. Fourteen additional offices are located in the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County. The sale of the Company's stock and the merger of Conestoga Bancorp, Inc. into the Bank occurred substantially at year-end (June 26, 1996). Accordingly, the Company's results of operations for the year ended June 30, 1996 are substantially comprised of the results of operations of the Bank, and earnings per share information for the Company for the year ended June 30, 1996 is not meaningful. Summary of Significant Accounting Policies - The accounting and reporting policies of the Company conform to generally accepted accounting principles. The following is a description of the significant policies: Principles of Consolidation - The accompanying 1996 consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiary, the Bank. All financial statements presented include the accounts of the Bank's three wholly-owned subsidiaries, Havemeyer Equities Corp. (''HEC''), Boulevard Funding Corp. (''BFC'') and Havemeyer Brokerage Corp. (''HBC''). HBC is currently engaged in the sale of insurance and annuity products primarily to the Bank's customers and members of the local community. BFC and HEC were established in order to invest in real estate joint ventures and other real estate assets. BFC and HEC had no investments in real estate at June 30, 1996 and are currently inactive. All significant intercompany accounts and transactions have been eliminated in consolidation. Investment Securities and Mortgage-backed Securities - Purchases and sales of Investments and Mortgage-backed securities are recorded on trade date. Gains and losses on sales of Investment and Mortgage- backed securities are recorded on the specific identification basis. On July 1, 1994, the Bank adopted SFAS No. 115, ''Accounting for Investments in Debt and Equity Securities'' (''SFAS 115''). The Statement requires that debt and equity securities that have readily determinable fair values be carried at fair value unless they are held to maturity. Debt securities are classified as held to maturity and carried at amortized cost only if the reporting entity has a positive intent and ability to hold these securities to maturity. If not classified as held to maturity, such securities are classified as securities available for sale or as trading securities. Unrealized holding gains or losses on securities available for sale are excluded from earnings and reported net of income taxes as a separate component of stockholders' equity. The effect of adopting this statement was not material. At June 30, 1996 and 1995, all equity securities are classified as available for sale. At June 30, 1994, all debt securities were carried at amortized cost and all equity securities were carried at lower of cost or market. Loans Held for Sale - Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or estimated market value. Allowance for Loan Losses - It is the policy of the Bank to provide a valuation allowance for estimated losses on loans based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations which may affect the borrower's ability to repay, estimated value of underlying collateral and current economic conditions in the Bank's lending area. The allowance is increased by provisions for loan losses charged to operations and is reduced by charge-offs, net of recoveries. Management's periodic evaluation of the adequacy of the allowance is based on the Bank's

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management uses available information to estimate losses on loans, future additions to the allowance may be necessary based on changes in economic conditions beyond management's control. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management. Management believes, based upon all relevant and available information, that the allowance for loan losses is adequate to absorb losses inherent in the portfolio. On July 1, 1995, the Bank adopted Statement of Financial Accounting Standards No. 114, ''Accounting by Creditors for Impairment of a Loan'' (''SFAS 114''). The Statement requires all creditors to account for impaired loans, except those loans that are accounted for at fair value or at the lower of cost or fair value, at the present value of expected future cash flows discounted at the loan's effective interest rate. As an expedient, creditors may account for impaired loans at the fair value of the collateral or at the observable market price of the loan if one exists. The adoption of SFAS No. 114, as amended by SFAS No. 118, did not have a material effect on the Bank's financial condition or results of operations. Loan Fees - Loan origination fees and certain direct loan origination costs are deferred and amortized as a yield adjustment over the contractual loan terms. Other Real Estate Owned, net - Properties acquired as a result of foreclosure on a mortgage loan are classified as Other real estate owned and are recorded at the lower of the recorded investment in the related loan or the fair value of the property at the date of acquisition, with any resulting write down charged to the allowance for loan losses. Subsequent write downs are charged to the valuation allowance for possible losses on Other real estate owned. Prior to July 1, 1995, the Bank was required to include in Other real estate owned loans which have been in substance foreclosed. Effective July 1, 1995, the Bank adopted SFAS 114. The provisions of this Statement eliminated the Bank's requirement to include in substance foreclosed loans in other real estate, except where the Bank has completed foreclosure proceedings. In substance foreclosed real estate is not material to the financial condition or results of operations of the Bank. Premises and Fixed Assets - Land is stated at original cost. Buildings and furniture and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the straight- line method over the estimated useful lives of the properties as follows: Buildings 2.22% to 2.50% per year Furniture and equipment 10% per year Leasehold improvements are amortized over the remaining non- cancelable terms of the related leases. Income Taxes - Pursuant to Statement of Financial Accounting Standards No. 109, ''Accounting for Income Taxes'' (''SFAS 109''), on July 1, 1993, the Bank changed prospectively from the deferred method to the liability method of accounting for income taxes. The effect of the adoption of this standard is reflected in the financial statements as the cumulative effect of adopting a change in accounting principle. Cash Flows - For purposes of the Consolidated Statement of Cash Flows, the Bank considers cash and due from banks to be cash equivalents. Recently Issued Accounting Standards - On July 1, 1995, the Bank adopted Statement of Financial Accounting Standards No. 106, ''Employers' Accounting for Postretirement Benefits Other Than Pensions.'' This Statement requires accrual of postretirement benefits (such as health care benefits) during the years an employee provides services. The cumulative effect of the adoption of this standard on prior years was approximately $1,032 (after reduction for income taxes of $879). As permitted by the Statement, the Bank elected to record the full liability at the time of adoption.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) In March 1995, the FASB issued SFAS No. 121, ''Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of'' which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment and reported at the lower of carrying amount or fair value, less cost to sell, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995. Management anticipates that the adoption of SFAS No. 121 will not have a material impact on the financial condition or results of operations of the Bank. In May 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 122, ''Accounting for Mortgage Servicing Rights.'' The Statement which amends Statement of Financial Accounting Standards No. 65, ''Accounting for Certain Mortgage Banking Activities,'' requires separate capitalization of the costs of rights to service mortgage loans for others regardless of whether these rights are acquired through a purchase or loan origination activity. Adoption of this Statement is required for fiscal years beginning after December 15, 1995. Given the current level of the Bank's mortgage banking activities, adoption of this Standard is not expected to have a material effect upon the Bank's financial condition or results of operations. In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125 ''Accounting for Transfers of Financial Assets and Extinguishments of Liabilities.'' The statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are borrowings. This statement also requires that liabilities and derivatives incurred or obtained as part of a transfer be measured initially at fair value. This statement also provides guidance on measurement of servicing rights on assets transferred and derecognition of liabilities transferred. The statement is effective for all transfers, servicing, or extinguishments occurring after December 31, 1996. Adoption of this standard is not expected to have a material effect upon the Company's financial condition or results of operations. Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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 financial statements where estimates are significant include the allowance for loans losses and the carrying value of other real estate. Reclassification - Certain June 30, 1995, and 1994 amounts have been reclassified to conform to the June 30, 1996 presentation. 2. CONVERSION TO STOCK FORM OF OWNERSHIP: On November 2, 1995, the Board of Directors of the Bank adopted a Plan of Conversion to convert from mutual to stock form. As part of the conversion, the Company was incorporated under Delaware law for the purpose of acquiring and holding all of the outstanding stock of the Bank. On June 26, 1996, the Company completed its initial public offering and issued 14,547,500 shares of common stock (par value $.01 per share) at a price of $10.00 per share, resulting in net proceeds of approximately $141,368 prior to the acquisition of stock by the Employee Stock Ownership Plan. The Company retained approximately $53,397 of the net proceeds and used the remaining net proceeds to purchase all of the outstanding stock of the Bank. Costs related to the conversion were charged against the Company's proceeds from the sale of the stock. The Company received approximately $131,078 of excess proceeds resulting from the oversubscription of the Company's initial public offering. In accordance with the terms of the offering, these funds were refunded on July 1, 1996 inclusive of interest earned at the Bank's existing passbook rate for the period held. The excess proceeds were recorded in Escrow and other deposits, and were invested in short-term Investment securities and Federal funds sold at June 30, 1996. At the time of conversion, the Bank established a liquidation account in an amount equal to the retained earnings of the Bank as of the date of the most recent financial statements contained in the final conversion prospectus. The liquidation

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits as of each anniversary date. Subsequent increases will not restore an eligible account holder's interest in the liquidation account. In the event of a complete liquidation, each eligible account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for accounts then held. As discussed in Note 3, the Company acquired Conestoga Bancorp, Inc. on June 26, 1996. The liquidation account previously established by Conestoga's subsidiary, Pioneer Savings Bank, F.S.A. during its initial public offering in March, 1993, was assumed by the Company in the acquisition. The Company may not declare or pay cash dividends on or repurchase any of its shares of common stock if the effect thereof would cause stockholders' equity to be reduced below applicable regulatory capital maintenance requirements, the amount required for the liquidation account, or if such declaration and payment would otherwise violate regulatory requirements. 3. BUSINESS ACQUISITIONS On June 26, 1996, the Bank completed the acquisition of Conestoga Bancorp, Inc., the holding company for the Pioneer Savings Bank, F.S.B. The Bank received approximately $170,836, $124,411 and $111,991 of investment securities, mortgage-backed securities and loans, respectively, at fair value and assumed approximately $394,250 of customer deposit liabilities. Approximately $10,000 of investment securities acquired were classified as held-to-maturity at June 30, 1996. All other securities acquired were classified as available for sale. Total cash paid for the acquisition was $101,272. The goodwill generated in the transaction of $28,438 is being amortized on a straight line basis over 12 years for financial reporting purposes. This acquisition was recorded using the purchase method of accounting; accordingly, the purchase price is allocated to the respective assets acquired and liabilities assumed based on their estimated fair values. A pro forma consolidated statement of condition is not presented since the assets and liabilities were merged on June 26, 1996. The information below presents, on an unaudited pro forma basis, the consolidated statement of operations for the Company for the years ended June 30, 1996 and 1995. All information below is adjusted for the acquisition of Conestoga, as if the transaction had been consummated on July 1, 1995 and 1994 respectively for the years ended June 30, 1996 and 1995. Pro Forma for Year Ended June 30, 1996 1995 ---------- ---------- Net interest income....................... $43,129 $44,658 Provision for possible loan losses........ 3,083 2,914 Non-interest income....................... 3,965 3,603 Non-interest expense: Goodwill amortization................... 2,350 2,347 Other non-interest expense.............. 20,540 19,833 ----------- ---------- Total non-interest expense 22,890 22,180 ----------- ---------- Income before income taxes $21,121 $23,167 =========== ========== On December 4, 1995, a purported class action complaint was filed in the Delaware Chancery Court, New Castle County, on behalf of the stockholders of Conestoga by Jeffrey Simon (''Plaintiff'') against Conestoga, each of the members of the Conestoga Board, and the Company. The Plaintiff alleges that each of the members of Conestoga's Board breached his fiduciary duties to Conestoga stockholders by, among other things, agreeing to accept the Acquisition consideration, which Plaintiff alleges is inadequate. The Company is alleged to have aided and abetted this breach. Plaintiff seeks various remedies, including compensatory damages in an unspecified amount. The Company intends to pursue vigorously their defenses in this action.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 4. INVESTMENT SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE The amortized cost, gross unrealized gains and losses and estimated market value of investment securities held to maturity at June 30, 1996 were as follows: Investment Securities Held to Maturity ---------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value -------- ---------- ---------- --------- Debt securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. $18,705 $ - $(58) $18,647 Obligations of state and political subdivisions............ 2,048 31 - 2,079 Corporate securities....................................... 20,531 34 (117) 20,448 Public utilities........................................... 2,268 - (14) 2,254 -------- ---------- ---------- --------- $43,552 $65 $(189) $43,428 ======== ========== ========== ========= The amortized cost and estimated market value of investment securities held to maturity at June 30, 1996, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Estimated Amortized Market Cost Value --------- --------- Due in one year or less.................. $19,039 $19,025 Due after one year through five years.... 15,100 14,972 Due after five years through ten years... 8,093 8,111 Due after ten years...................... 1,320 1,320 --------- --------- $43,552 $43,428 ========= ========= During the year ended June 30, 1996, proceeds from the calls of investment securities held to maturity totaled $11,056. A gain of $56 was realized on these calls. There were no sales of investment securities held to maturity during the year ended June 30, 1996. The amortized/historical cost, gross unrealized gains and losses and estimated market value of investment securities available for sale at June 30, 1996 were as follows: Investment Securities Available for Sale ----------------------------------------- Amortized/ Gross Gross Estimated Historical Unrealized Unrealized Market Cost Gains Losses Value ---------- ---------- ---------- --------- Debt securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. $277,240 $20 $(80) $277,180 Corporate securities....................................... 58,652 27 - 58,679 Public utilities........................................... 2,249 9 (28) 2,230 --------- ---------- ---------- --------- 338,141 56 (108) 338,089 Equity securities: Mutual funds............................................... 2,977 229 (1) 3,205 --------- ---------- ---------- --------- $341,118 $285 $(109) $341,294 ========= ========== ========== =========

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) During the year ended June 30, 1996, proceeds from the sales and calls of investment securities available for sale totaled $501 and $11,323, respectively. A loss of $195 and gain of $24 resulted from the sales and calls respectively. The amortized/historical cost and estimated market value of investment securities available for sale at June 30, 1996, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized/ Estimated Historical Market Cost Value ---------- --------- Due in one year or less.................. $273,351 $273,354 Due after one year through five years.... 60,416 60,379 Due after five years through ten years... 3,376 3,348 Due after ten years...................... 3,975 4,213 --------- --------- $341,118 $341,294 ========= ========= The amortized cost, gross unrealized gains and losses and estimated market value of investment securities held to maturity at June 30, 1995 were as follows: Investment Securities Held to Maturity ---------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------- ---------- ---------- --------- Debt securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. $15,000 $2 $(170) $14,832 Obligations of state and political subdivisions............ 2,168 44 - 2,212 Corporate securities....................................... 23,712 47 (150) 23,609 Public utilities........................................... 10,595 82 (76) 10,601 -------- ---------- ---------- --------- $51,475 $175 $(396) $51,254 ======== ========== ========== =========

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The amortized/historical cost, gross unrealized gains and losses and estimated market value of investment securities available for sale at June 30, 1995 were as follows: Investment Securities Available for Sale ----------------------------------------- Amortized/ Gross Gross Estimated Historical Unrealized Unrealized Market Cost Gains Losses Value ---------- ---------- ---------- --------- Debt securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies.................................. $15,821 $50 $(10) $15,861 Corporate securities....................................... 25,516 10 (47) 25,479 Public utilities........................................... 1,013 - (4) 1,009 --------- ---------- ---------- --------- 42,350 60 (61) 42,349 --------- ---------- ---------- --------- Equity securities: Preferred stock............................................ 694 - (265) 429 Mutual funds............................................... 2,610 99 (68) 2,641 --------- ---------- ---------- --------- 3,304 99 (333) 3,070 --------- ---------- ---------- --------- $45,654 $159 $(394) $45,419 ========= ========== ========== ========= There were no calls or sales of investment securities held to maturity or available for sale during the year ended June 30, 1995. 5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE The amortized cost, gross unrealized gains and losses and the estimated market value of mortgage-backed securities held to maturity at June 30, 1996 were as follows: Mortgage-Backed Securities Held to Maturity ------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------- ----------- ----------- --------- GNMA pass-through certificates... $17,997 $437 $(8) $18,426 FHLMC pass-through certificates.. 27,296 15 (274) 27,037 FNMA pass-through certificates... 7,287 2 (156) 7,133 --------- ----------- ----------- --------- $52,580 $454 $(438) $52,596 ========= =========== =========== ========= Proceeds from the sale of mortgage-backed securities held to maturity were approximately $2,555 for the year ended June 30, 1996 and a gross gain of approximately $31 was realized on these sales. The securities sold met the de minimus exemption in SFAS No. 115, as the unpaid principal at the date of sale was less than 15% of their acquired par value.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The amortized cost, gross unrealized gains and losses and the estimated market value of mortgage-backed securities available for sale at June 30, 1996 were as follows: Mortgage-Backed Securities Available for Sale --------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------- ----------- ----------- ---------- Collateralized mortgage obligations $8,566 $23 $- $8,589 GNMA pass-through certificates..... 70,136 - - 70,136 FHLMC pass-through certificates.... 28,826 344 (54) 29,116 FNMA pass-through certificates..... 49,434 118 (32) 49,520 --------- ----------- ----------- ---------- $156,962 $485 $(86) $157,361 ========= =========== =========== ========== There were no sales of mortgage-backed securities available for sale during the year ended June 30, 1996. The amortized cost, gross unrealized gains and losses and the estimated market value of mortgage-backed securities held to maturity at June 30, 1995 were as follows: Mortgage-Backed Securities Held to Maturity ------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------- ----------- ----------- --------- GNMA pass-through certificates.... $24,402 $562 $(4) $24,960 FHLMC pass-through certificates... 28,429 28 (244) 28,213 FNMA pass-through certificates.... 984 15 - 999 --------- ----------- ----------- --------- $53,815 $605 $(248) $54,172 ========= =========== =========== ========= Proceeds from the sale of mortgage-backed securities held to maturity were approximately $1,067 for the year ended June 30, 1995 and a gross loss of approximately $11 was realized on these sales. The securities sold met the de minimus exemption in SFAS No. 115, as the unpaid principal at the date of sale was less than 15% of their acquired par value. The amortized cost, gross unrealized gains and losses and estimated market value of mortgage-backed securities available for sale at June 30, 1995 were as follows: Mortgage-Backed Securities Available for Sale -------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value --------- ----------- ----------- --------- Collateralized mortgage obligations $3,836 $128 $ - $3,964 FHLMC pass-through certificates.... 26,458 710 - 27,168 FNMA pass-through certificates..... 6,434 167 - 6,601 --------- ----------- ----------- --------- $36,728 $1,005 $- $37,733 ========== ========== =========== ========= There were no sales of mortgage-backed securities available for sale during the year ended June 30, 1995.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 6. LOANS Real estate loans at June 30, 1996 and 1995 consisted of the following: 1996 1995 --------- --------- One-to-four family........................ $ 169,723 $ 58,153 Multi-family and underlying cooperative... 296,630 252,436 Nonresidential............................ 37,708 26,972 F.H.A. insured mortgage loans............. 14,132 18,890 V.A. guaranteed mortgage loans............ 2,554 3,171 Co-op loans............................... 59,083 67,524 --------- --------- 579,830 427,146 Net unearned fees......................... (2,167) (1,181) --------- --------- $577,663 $425,965 ========= ========= Other loans at June 30, 1996 and 1995 consisted of the following: 1996 1995 ------- ------- Student loans........................................... $1,307 $1,431 Passbook loans (secured by savings and time deposits)... 3,044 1,510 Consumer installment loans.............................. 323 336 Home improvement loans.................................. 891 475 ------- ------- 5,565 3,752 Unearned discount....................................... (1) (1) ------- ------- $5,564 $3,751 ======= ======= A concentration of credit risk exists within the Bank's loan portfolio, as the majority of real estate loans are collateralized by properties located in New York City and Long Island. The Bank originates both adjustable and fixed interest rate real estate loans. At June 30, 1996, the approximate composition of these loans was as follows: Fixed Rate Adjustable Rate - ------------------------------ ----------------------------- Term to Maturity Book Value Term of Adjustment Book Value - ------------------- ---------- ------------------ ---------- 1 month-1 year..... $ 4,556 1 month-1 year..... $167,168 1 year-3 years..... 809 1 year-3 years..... 100,479 3 years-5 years.... 12,261 3 years-5 years.... 161,822 5 years-10 years... 24,617 5 years-10 years... 28,514 Over 10 years...... 79,128 Over 10 years...... 476 ---------- ---------- $121,371 $458,459 ========== ========== The adjustable rate loans have interest rate adjustment limitations and are generally indexed to the Federal Home Loan Bank of New York five-year borrowing funds rate, the one-year constant maturity Treasury index, or the Federal Home Loan Bank national mortgage contract rate. Loans on which the accrual of interest has been discontinued amounted to approximately $6,551 and $5,073 at June 30, 1996 and 1995, respectively. If interest on those loans had been accrued, interest income would have been increased by approximately $410 and $325 for the years ended June 30, 1996 and 1995, respectively.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The Bank had outstanding loans considered troubled-debt restructurings of $4,671, and $7,651 at June 30, 1996 and 1995, respectively. Income recognized on these loans was approximately $344 and $587 for the years ended June 30, 1996 and 1995, respectively, compared to interest income of $471 and $797 calculated under the original terms of the loans, for the years ended June 30, 1996 and 1995, respectively. At June 30, 1996, the recorded investment in loans for which impairment has been recognized under the guidance of SFAS No. 114 was approximately $7,419. The average balance of impaired loans was approximately $6,696 for the year ended June 30, 1996. The impaired portion of these loans is represented by specific reserves totaling $955 allocated within the allowance for loan losses at June 30, 1996. Net principal received and interest income recognized on impaired loans during the year ended June 30, 1996 was not material. At June 30, 1996, one loan totaling $2,681, was deemed impaired for which no reserves have been provided. This loan, which is included in troubled-debt restructurings at June 30, 1996, has performed in accordance with the provisions of the restructuring agreement signed in October, 1995. The loan has been retained on accrual status at June 30, 1996. The following assumptions were utilized in evaluating the loan portfolio pursuant to the provisions of SFAS No. 114: Homogenous Loans - One-to-four family residential mortgage loans and loans on cooperative apartments having a balance of less than $203 and consumer loans are considered to be small balance homogenous loan pools and, accordingly, are not covered by SFAS No. 114. Loans Evaluated for Impairment - All non-homogeneous loans greater than $1,000 are individually evaluated for potential impairment. Additionally, residential mortgage loans exceeding $203 and delinquent in excess of 60 days are evaluated for impairment. 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 if a delay in receipt of payment is expected to be less than 30 days or if, during a longer period of delay, the Bank expects to collect all amounts due, including interest accrued at the contractual rate during the period of the delay. Factors considered by management include the property location, economic conditions, and any unique circumstances affecting the loan. Except as noted above, at June 30, 1996, all impaired loans were on nonaccrual status. In addition, at June 30, 1996, approximately $1,817 of one to four family residential mortgage loans and loans on cooperative apartments with a balance of less than $203 were on nonaccrual status. These loans are considered as a homogeneous loan pool not covered by SFAS No. 114. Reserves and Charge-Offs - The Bank allocates a portion of its total allowance for loan losses to loans deemed impaired under SFAS No. 114. All charge-offs on impaired loans are recorded as a reduction in both loan principal and the allowance for loan losses. Management evaluates the adequacy of its allowance for loan losses on a regular basis. At June 30, 1996, management believes that its allowance is adequate to provide for losses inherent in the total loan portfolio, including impaired loans. Measurement of Impairment - Since all impaired loans are collateralized by real estate properties, the fair value of the collateral is utilized to measure impairment. Income Recognition - Accrual of interest is discontinued on loans identified as impaired and past due ninety days. Subsequent cash receipts are applied initially to the outstanding loan principal balance. Additional receipts beyond the recorded outstanding balance at the time interest is discontinued are recorded as recoveries in the Bank's allowance for loan losses.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) Changes in the allowance for loan losses for the years ended June 30, 1996, 1995 and 1994 were as follows: 1996 1995 1994 -------- -------- -------- Balance, beginning of period............... $ 5,174 $ 3,633 $ 2,996 Provision charged to operations............ 2,979 2,950 4,105 Loans charged off.......................... (1,023) (1,656) (3,535) Recoveries................................. 14 247 67 Reserve acquired in purchase of Conestoga.. 668 - - -------- -------- -------- Balance, end of period..................... $7,812 $ 5,174 $3,633 ======== ======== ======== 7. VALUATION ALLOWANCE FOR POSSIBLE LOSSES ON OTHER REAL ESTATE OWNED Changes in the valuation allowance for possible losses on Other real estate owned for the year ended June 30, 1996 is summarized as follows: Balance, beginning of period........... $- Provision charged to operations........ 586 Charge-offs net of recoveries (472) ----- Balance, end of period................. $114 ===== Prior to July 1, 1995, no valuation allowance for possible losses on Other real estate owned was maintained by the Bank. 8. MORTGAGE SERVICING ACTIVITIES At June 30, 1996 and 1995, the Bank was servicing loans for others having principal amounts outstanding of approximately $91,050 and $93,456 respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. In connection with these loans serviced for others, the Bank held borrowers' escrow balances of approximately $1,055, $1,440 and $1,452 at June 30, 1996, 1995 and 1994, respectively. 9. PREMISES AND FIXED ASSETS The following is a summary of premises and fixed assets at June 30, 1996 and 1995: 1996 1995 --------- -------- Land............................................. $ 3,964 $ 990 Buildings........................................ 12,527 6,033 Leasehold improvements........................... 1,190 1,200 Furniture and equipment.......................... 6,673 2,881 --------- -------- 24,354 11,104 Less accumulated depreciation and amortization... (9,955) (5,183) --------- -------- $14,399 $5,921 ========= ======== Depreciation and amortization expense amounted to approximately $501, $459, and $465 for the years ended June 30, 1996, 1995 and 1994, respectively.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 10. FEDERAL HOME LOAN BANK OF NEW YORK CAPITAL STOCK The Bank is a Savings Bank Member of the Federal Home Loan Bank of New York (FHLBNY). Membership requires the purchase of shares of FHLBNY capital stock at $100 per share. The Bank owned 76,043 and 48,006 shares at June 30, 1996 and 1995, respectively. The FHLBNY paid dividends on the capital stock of 6.9% , 7.5%, and 8.5% during the years ended June 30, 1996, 1995 and 1994, respectively. 11. DUE TO DEPOSITORS The deposit accounts of each depositor are insured up to $100 by either the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). Deposits are summarized as follows: June 30, 1996 June 30, 1995 ------------------- ------------------- Effective Effective Cost Liability Cost Liability --------- --------- --------- --------- Savings accounts...................... 2.50% 365,146 2.53% 238,217 Certificates of deposit............... 5.50 495,755 5.89 275,156 Money market accounts................. 2.65 45,948 2.69 16,698 NOW accounts.......................... 1.51 15,029 1.51 13,877 Super NOW accounts.................... 1.51 552 1.51 674 Non-interest bearing checking accounts - 27,684 - 10,219 ---------- --------- 4.09% $ 950,114 4.12% $ 554,841 ========= ========== ======= ========= The remaining maturity distribution of Certificates of deposits at June 30, 1996 and 1995 was as follows: 1996 1995 -------- -------- Maturity in three months or less.... $124,903 $ 58,063 Over 3 through 6 months............. 96,316 58,093 Over 6 through 12 months............ 138,137 68,459 Over 12 months...................... 136,399 90,541 -------- -------- Total time deposits................. $495,755 $275,156 ======== ======== The aggregate amount of Certificates of deposits with a minimum denomination of $100 was approximately $40,065 and $21,659 at June 30, 1996 and 1995, respectively.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 12. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The Bank has sold certain securities under agreements to repurchase with a weighted average cost of 6.0%. The transactions were accounted for as borrowings since the securities can be put back to the Bank under certain conditions. The amounts outstanding at June 30, 1996 and 1995 were $11,998 and $2,110, respectively. The transactions were further collateralized by GNMA/FNMA certificates with a carrying value of $13,433, and $2,767, and an approximate market value of $13,660 and $2,843, at June 30, 1996 and 1995, respectively. 13. FEDERAL HOME LOAN BANK OF NEW YORK ADVANCES The Bank had borrowings (''Advances'') from the Federal Home Loan Bank of New York totaling $15,710 at June 30, 1996 and 1995, respectively. The advances mature within five years and bear interest at an average rate of 5.40%. At June 30, 1996, in accordance with the Advances, Collateral Pledge and Security Agreement, the Bank maintained in excess of $15,710 of qualifying collateral (principally bonds and mortgage-backed securities), as defined, to secure such advances. 14. INCOME TAXES Federal, State and City income tax provisions for the years ended June 30, 1996, 1995 and 1994 are comprised of the following: Year Ended Year Ended Year Ended June 30, 1996 June 30, 1995 June 30, 1994 ---------------------------- ---------------------------- -------------------------- State State State Federal and City Total Federal and City Total Federal and City Total ------- -------- ------- ------- -------- ------- -------- -------- ------ Current.... $4,218 $ 2,563 $ 6,781 $4,328 $2,416 $6,744 $5,758 $3,183 $8,941 Deferred... (332) (268) (600) (314) 191 (123) (537) (193) (730) ------- --------- -------- ------- -------- -------- --------- -------- ------ $3,886 $ 2,295 $ 6,181 $4,014 $2,607 $6,621 $5,221 $2,990 $8,211 ======= ========= ======== ======= ======== ======== ======= ======= ======= Effective July 1, 1993, the Bank adopted SFAS 109. Pursuant to SFAS 109, deferred income taxes are provided for temporary differences in the bases of certain assets and liabilities for income tax and financial reporting purposes. The cumulative effect on prior years of the adoption of SFAS 109 was an increase in the deferred tax liability of $383 and a corresponding decrease to income. A deferred asset of $879 was recorded as a result of the adoption of SFAS 106. The deferred asset is netted against the cumulative effect of the adoption of this standard. Additionally, deferred tax assets include $1,908 related to the tax effect of purchase accounting fair value adjustments resulting from the acquisition of Conestoga Bancorp, Inc. Deferred tax liabilities include $2,029 which were originally recorded on Conestoga's books. Deferred tax liabilities also include a decrease of $91 resulting from adjustments pursuant to SFAS 115.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The components of Federal and net State and City deferred income taxes as of June 30, 1996 and 1995, respectively, were as follows: June 30, 1996 June 30, 1995 ---------------------- ---------------------- Federal State and City Federal State and City ------- -------------- ------- -------------- Deferred tax assets Deferred loan fees............................ $ 47 $ 30 $ 100 $ 63 Excess book bad debt over tax bad debt reserve 2,300 - 2,639 - Reserve for loss on investments............... 61 38 163 104 Accumulated postretirement benefit obligation. 598 374 - - Tax effect of purchase accounting fair value adjustments................................. 1,173 735 - - Other......................................... 9 18 47 27 ------- -------------- ------- -------------- Total deferred tax assets..................... 4,188 1,195 2,949 194 Less: Valuation allowance on deferred tax assets - - - - ------- -------------- ------- -------------- Deferred tax assets after valuation allowance. $4,188 $ 1,195 $2,949 $ 194 ======= ============== ======= ============== Deferred tax liabilities: Excess tax bad debt over book bad debt reserve $ - $ 2,083 $ - $ 1,706 Excess tax depreciation to book depreciation.. 309 196 - - Tax effect of unrealized gain on securities available for sale............................ 160 104 216 139 ------- -------------- ------- -------------- Total deferred tax liabilities................ $ 469 $ 2,383 $ 216 $ 1,845 ======= ============== ======= ============== Net deferred tax asset (liability)............ $3,719 $(1,188) $2,733 $ (1,651) ======= ============== ======= ============== The provision for income taxes for the years ended June 30, 1996, 1995 and 1994 differs from that computed at the Federal statutory rate as follows: 1996 1995 1994 ------- ------- ------- Tax at Federal statutory rate...................... $4,717 $5,266 $6,186 State and local taxes, net of Federal income tax benefit......................... 1,492 1,694 1,944 Reserve for loss on sale of loans.................. - (185) - Utilization of capital loss on sale of securities.. - (86) - Other, net......................................... (28) (68) 81 ------- ------- ------- $6,181 $6,621 $8,211 ======= ======= ======= Effective rate..................................... 45.9% 44.0% 46.5% ======= ======= ======= Savings banks that meet certain definitions, tests, and other conditions prescribed by the Internal Revenue Code are allowed to deduct, with limitations, a bad debt deduction. This deduction can be computed as a percentage of taxable income before such deduction or based upon actual loss experience. Pursuant to SFAS 109, the Bank is not required to provide deferred taxes on its tax loan loss reserve as of December 31, 1987 ("base year reserve"). The amount of this reserve on which no deferred taxes have been provided is approximately $12,153. This reserve could be recognized as taxable income and create a current tax liability using the income tax rates then in effect if one of the following occur: 1) the Bank's retained earnings represented by the reserve

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) is used for purposes other than to absorb losses from bad debts, including dividends or distributions in liquidation; 2) the Bank fails to qualify as a Bank as provided by the Internal Revenue Code, or 3) there is a change in federal tax law. On August 20, 1996, legislation was signed into law which repealed the percentage of taxable income method tax bad debt deduction available for thrift institutions. This repeal is effective for the Bank's taxable year beginning January 1, 1996. In addition, the legislation requires the Bank to include in taxable income its bad debt reserves in excess of its base year reserve over a 6-8 year period depending upon the maintenance of certain loan origination levels. Since the percentage of taxable income method tax bad debt deduction and the corresponding increase in the tax bad debt reserve in excess of the base year have been treated as temporary differences pursuant to SFAS 109, this change in tax law will have no effect on the Company's future consolidated statement of operations. Since the Bank's bad debt reserve as of exceeds its base year reserve by $3,100, approximately $176 will be currently payable as a result of the legislation. On July 30, 1996, New York State enacted legislation, effective January 1, 1996, which generally retains the percentage of taxable income method tax bad debt deduction and does not require the Bank to recapture into income its excess tax bad debt reserves over its base year reserve for New York State tax purposes. 15. EMPLOYEE BENEFIT PLANS Employee Retirement Plan - The Bank is a participant in a noncontributory defined benefit retirement plan with the Savings Bank Retirement System. Substantially all full-time employees are eligible for participation after one year of service. In addition, a participant must be at least 21 years of age at the date of enrollment. The retirement cost (benefit) for the pension plan includes the following components: Year Ended June 30, 1996 1995 1994 ------- ------- ------- Service cost.................... $ 206 $ 216 $ 231 Interest cost................... 488 455 428 Actual return on plan assets.... (546) (227) (339) Net amortization and deferral... ( 82) (325) (177) ------- ------ ------ Net periodic pension cost....... $ 66 $ 119 $ 143 ======= ====== ====== The funded status of the plan as of June 30, 1996 and 1995 was as follows: 1996 1995 -------- -------- Accumulated benefit obligation, including vested benefits of $8,613,and $5,037 respectively............................................. $ 8,848 $5,304 ======== ======== Projected benefit obligation............................................... $ 9,960 $6,180 Plan assets at fair value (investments in trust funds managed by RSI)...... 10,594 6,284 -------- -------- Excess of plan assets over projected benefit obligation.................... 634 104 Unrecognized loss from experience different from that assumed.............. 967 747 Unrecognized net transition asset.......................................... (167) (261) Unrecognized net past service liability.................................... (271) (284) -------- -------- Prepaid retirement expense included in Other assets........................ $1,163 $306 ======== ========

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) Major assumptions utilized at June 30, 1996 and 1995 are as follows: 1996 1995 ------ ------ Discount rate.................................... 7.50% 8.25% Rate of increase in compensation levels.......... 5.50 6.00 Expected long-term rate on plan assets........... 9.00 9.00 Directors' Retirement Plan - Effective July 1, 1996, the Company adopted a non-qualified Retirement plan for all of its Outside Directors, which will provide benefits to each eligible Outside Director commencing upon his termination of Board service or at age 65. Each Outside Director who serves or has agreed to serve as an outside director will automatically become a participant in the plan. The plan is not expected to have a material effect upon the Company's results of operations. Supplemental Executive Retirement Plan (''SERP'') - The Bank established a Supplemental Executive Retirement Plan (''SERP'') for its executive officers. The SERP was established to compensate the executive officers for any curtailments in benefits due to the statutory limitations on benefit plans. The SERP exists as a nonqualified plan which supplements the existing qualified plans. Defined benefit and defined contribution costs are incurred annually related to the SERP. The defined benefit cost for the SERP plan for the years ended June 30, 1996 and 1995 includes the following components: Years Ended June 30, ---------------- 1996 1995 -------- ------- Service cost.................... $ 56 $ 51 Interest cost................... 88 75 Net amortization and deferral... 49 54 -------- ------- Net periodic pension cost....... $ 193 $180 ======== ======= The defined contribution costs incurred by the Bank related to the SERP plan for the years ended June 30, 1996 and 1995 were $25 and $20, respectively. The funded status of the defined benefit portion of the plan as of June 30, 1996 and 1995 was as follows: 1996 1995 -------- -------- Accumulated benefit obligation, fully vested at June 30, 1996 and 1995, respectively........................................................ $ 450 $ 165 ======== ======== Projected benefit obligation.................................................... $1,690 $ 870 Plan assets at fair value....................................................... - - -------- -------- Deficiency of plan assets over projected benefit obligation..................... (1,690) (870) Unrecognized loss from experience different from that assumed................... 884 230 Unrecognized net past service liability......................................... 317 343 -------- -------- Accrued retirement expense included in Other liabilities........................ $(489) $(297) ======== ========

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) Major assumptions utilized at June 30, 1996 and 1995 are as follows: 1996 1995 ------- ------- Discount rate............................. 7.50% 8.25% Rate of increase in compensation levels... 5.50 6.00 401(k) Plan - The Bank also has a 401(k) plan which covers substantially all employees. Prior to May 31, 1996, under such plan the Bank matched 50% of each participant's contribution up to 6% of the participant's annual compensation for the first four years of participation and thereafter 100% of the participant's contribution up to a maximum of 6%. Effective May 31, 1996, the plan was amended whereby the Bank ceased all matching contributions. Participation in the 401(k) plan is voluntary. A salaried employee becomes eligible for the plan after completion of one year of service. The Bank contributed approximately $181, $190, and $170 for the years ended June 30, 1996, 1995 and 1994, respectively, to the plan. At June 30, 1996, the 401(k) plan owns participant investments totaling $2,092 in the Company's common stock. Postretirement Benefits other than Pensions - The Bank offers additional postretirement benefits to its retired employees who have provided at least five (5) consecutive years of credited service and were active employees prior to April 1, 1991, as follows: (1) Employees who retired prior to April 1, 1991 receive full medical coverage in effect until their death at no cost to such retirees; (2) Eligible employees retiring after April 1, 1991 will be eligible for continuation of their medical coverage in effect at the time of such employees' retirement until their death. Throughout an employee's retirement, the Bank will continue to pay the premiums for this coverage up to the premium amount paid for the first year of retirement coverage. Should the premiums increase, the employee will have to pay the differential to maintain full medical coverage. Postretirement medical benefits are only available to those full- time employees who, upon termination of service, start collecting retirement benefits immediately from the Bank. The Bank reserves the right at any time, and to the extent permitted by law, to change, terminate or discontinue any of the group benefits, and can exercise the maximum discretion permitted by law, in administering, interpreting, modifying or taking any other action with respect to the plan or benefits. The Bank accrues the cost of such benefits during the years an employee renders the necessary service. The Bank adopted Statement of Financial Accounting Standards No. 106, ''Accounting for Postretirement Benefits Other than Pensions,'' effective July 1, 1995. The Bank elected to record the full accumulated postretirement benefit obligation upon adoption. This resulted in a cumulative effect adjustment of $1,032 (after reduction for income taxes of $879), which is shown in the consolidated statement of income for the year ended June 30, 1996. The postretirement cost for the plan for the year ended June 30, 1996 includes the following components: Service cost....................... $ 62 Interest cost...................... 167 ---- Net periodic postretirement cost... $229 ====

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The funded status of the plan as of June 30, 1996 was as follows: Accumulated postretirement benefit obligation: Retirees.......................................... $ 1,364 Fully eligible active participants................ 173 Other active participants......................... 1,005 ------- Total............................................. 2,542 Plan assets at fair value........................ - ------- Deficiency of plan assets over accumulated benefit obligation (funded status)........... 2,542 Unrecognized loss................................. (161) -------- Accrued postretirement benefit obligation......... $2,381 ======== The assumed medical cost trend rates used in computing the accumulated postretirement benefit obligation was 10% in 1995 and was assumed to decrease gradually to 5.5% in 2005 and to remain at that level thereafter. Increasing the assumed medical care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation by approximately $175. The assumed discount rate and rate of compensation increase used to measure the accumulated postretirement benefit obligation at June 30, 1996 were 7.5% and 5.5%, respectively. Employee Stock Ownership Plan - In connection with the conversion, the Board of Directors of the Company adopted the Dime Community Bancorp Employee Stock Ownership Plan (the "ESOP"). The ESOP borrowed $11,638 from the Company and used the funds to purchase 1,163,800 shares of the Company's common stock. The loan will be repaid principally from the Bank's discretionary contributions to the ESOP over a period of time not to exceed 10 years. The Bank's obligation to make such contributions is reduced by any investment earnings realized on such contributions or any dividends paid by the Company on stock held in the unallocated account. At June 30, 1996, the loan had an outstanding balance of $11,541 and a fixed rate of 8.0%. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants on the basis of compensation, as described in the plan, in the year of allocation. The ESOP vests at a rate of 25% per year of service beginning after two years with full vesting after five years, or upon attainment of age 65, death, disability, retirement or change of control. ESOP benefit expense totaled $114 for the year ended June 30, 1996. Shares of common stock allocated to participating employees totaled 9,698 at June 30, 1996. 16. COMMITMENTS AND CONTINGENCIES Mortgage Loan Commitments and Lines of Credit - At June 30, 1996 and 1995, the Bank had outstanding commitments to make mortgage loans aggregating approximately $81,252 and $26,163, respectively. At June 30, 1996, commitments to originate fixed rate and adjustable rate mortgage loans were $455 and $80,797, respectively. Interest rates on fixed rate commitments ranged between 7.25% to 9.0%. Substantially all of the Bank's commitments will expire within two months. The Bank had available at June 30, 1996 unused lines of credit with the Federal Home Loan Bank of New York totaling $64,165, expiring on August 8, 1996. These credit lines were renewed on August 8, 1996 for one year.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) Lease Commitments - At June 30, 1996, aggregate net minimum annual rental commitments on leases are as follows: Calendar Year Ending: Amount - --------------------- ------ 1996................. $ 273 1997................. 229 1998................. 237 1999................. 257 2000................. 259 Thereafter........... 1,475 ------ $2,730 ====== Net rental expense for the years ended June 30, 1996, 1995 and 1994 approximated $278, $267, and $206, respectively. Litigation - The Company and its subsidiary are subject to certain pending and threatened legal actions which arise out of the normal course of business. Management believes that the resolution of any pending or threatened litigation will not have a material adverse effect on the financial condition or results of operations. Outstanding Claims with Nationar - On February 8, 1995 the New York State Banking Department took possession of Nationar, a check clearing and trust company. At that time, the Bank had $2,500 invested in Nationar, comprised of approximately $1,900 in cash demand accounts and Federal funds sold and approximately $567 in debenture bonds and stock. During the year ended June 30, 1995, the Bank established reserves for possible losses related to investments in Nationar. The following is a summary of activity in the reserve account: Year ended June 30, 1996 1995 ------- ------- Beginning balance ..................................... 640 - Provision for losses, net of recoveries received....... 143 640 Charge-off of investments deemed uncollectible......... (567) - ------- ------- Ending balance ........................................ 216 640 ======= ======= During the year ended June 30, 1996, management of the Bank deemed the investments in debentures worthless, and accordingly charged- off all outstanding amounts against the established reserve. The Bank received approximately $1,700 in refunds from the New York State Banking Department which was related primarily to its cash demand accounts. At June 30, 1996, the Bank has outstanding claims totaling $216 which are fully reserved. 17. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, ''Disclosures About Fair Value of Financial Instruments.'' The estimated fair value amounts have been determined by the Bank using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Bank could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Investment Securities and Mortgage-Backed Securities - The fair value of these securities is based on quoted market prices obtained from an independent pricing service.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) Federal Funds Sold - The fair value of these assets, principally overnight deposits, is assumed to be equal to their carrying value due to their short maturity. Federal Home Loan Bank of New York (FHLBNY) Stock - The fair value of FHLBNY stock is assumed to be equal to the carrying value as the stock is carried at par value and redeemable at par value by the FHLBNY. Loans and Loans Held for Sale - The fair value of approximately 4.0% of loans receivable is determined by utilizing secondary market prices. The fair value of the remainder of the portfolio is determined by discounting the future cash flows, net of prepayments of the loans using a rate for which similar loans would be originated to new borrowers with similar terms. Deposits - The fair value of savings, money market, NOW, Super NOW and checking accounts is assumed to be their carrying amount. The fair value of certificates of deposit is based upon the current rates for instruments of the same remaining maturity. Escrow, Other Deposits and Borrowed Funds - The estimated fair value of escrow, other deposits and borrowed funds is assumed to be their carrying amount. Other Liabilities - The estimated fair value of other liabilities, which primarily include trade accounts payable, is assumed to be their carrying amount. Commitments to Extend Credit - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The estimated fair values of the Bank's financial instruments at June 30, 1996 and 1995 were as follows: June 30, 1996 ------------------ Carrying Fair Amount Value -------- --------- Assets: Investment securities held to maturity..................... $ 43,552 $ 43,428 Investment securities available for sale................... 341,294 341,294 Mortgage-backed securities held to maturity................ 52,580 52,596 Mortgage-backed securities available for sale.............. 157,361 157,361 Loans and loans held for sale.............................. 583,686 579,754 Federal funds sold......................................... 115,130 115,130 FHLB stock................................................. 7,604 7,604 Liabilities: Savings, money market, NOW, Super NOW and checking accounts 454,359 454,359 Certificates of deposit.................................... 495,755 494,975 Escrow, other deposits and borrowed funds.................. 169,440 169,440 Other liabilities.......................................... 36,816 36,816 Off-balance-sheet liability-commitments to extend credit... - (664)

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) June 30, 1995 ----------------- Carrying Fair Amount Value -------- -------- Assets: Investment securities held to maturity..................... $ 51,475 $ 51,254 Investment securities available for sale................... 45,419 45,419 Mortgage-backed securities held to maturity................ 53,815 54,172 Mortgage-backed securities available for sale.............. 37,733 37,733 Loans and loans held for sale.............................. 429,854 427,895 Federal funds sold......................................... 17,809 17,809 FHLB stock................................................. 4,801 4,801 Liabilities: Savings, money market, NOW, Super NOW and checking accounts 279,685 279,685 Certificates of deposit.................................... 275,156 274,020 Escrow, other deposits and borrowed funds.................. 29,929 29,929 Other liabilities.......................................... 902 902 Off-balance-sheet liability-commitments to extend credit... - (56) 18. REGULATORY MATTERS The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary-- actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Effective November 1, 1995, the Bank converted from a state- chartered mutual savings bank to a Federally chartered mutual savings bank. Prior to the conversion, the Bank was required under FDIC capital regulations to have minimum Tier 1, total capital, and minimum leverage ratios of 4%, 8% and 3% respectively. At June 30, 1995, the Bank's Tier 1, total capital and leverage ratios were 20.89%, 22.31%, and 11.63% respectively. Deposits assumed by the Bank in the acquisitions of its Avenue M branch in 1993 and Conestoga Bancorp, Inc. in 1996 are insured by the Savings Association Insurance Fund of the FDIC, to the extent applicable by law. All other deposits, including future deposit accounts of the Bank, are insured by the Bank Insurance Fund of the FDIC to the extent applicable by law. At June 30, 1996, the Bank's primary regulator is the Office of Thrift Supervision (''OTS''). Under OTS capital regulations, the Bank is required to maintain minimum tangible capital, core capital and total risk-based capital to risk-adjusted assets ratios of 1.5%, 3% and 8%, respectively.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) The Company and Bank's actual capital amounts and ratios at June 30, 1996 are presented in the following table. There was no deduction from capital for interest-rate risk. Minimum Actual Capital Requirement ------------------- -------------------- Amount Ratio Amount Ratio --------- --------- --------- ---------- As of June 30, 1996: Tangible Capital: Consolidated Company...........$ 184,188 12.66% N/A N/A Bank...........................$ 119,125 9.49% >= $18,828 >= 1.5% Core Capital: Consolidated Company...........$ 184,322 13.72% N/A N/A Bank...........................$ 119,259 9.50% >= $37,659 >= 3.0% Risk-based capital: Consolidated Company...........$ 191,778 31.23% N/A N/A Bank...........................$ 126,715 21.24% >= $47,718 >= 8.0% As discussed in Note 2, the Bank received approximately $131,078 of excess proceeds resulting from the oversubscription of the Company's initial public offering. The Bank's tangible, core, and risk-based capital ratios were 10.60%, 10.61%, and 23.86% respectively, excluding the effects of the excess proceeds on the balance sheet, at June 30, 1996. The following is a reconciliation of generally accepted accounting principles (GAAP) capital to regulatory capital for the Bank: June 30, 1996 ----------------------------- Tangible Core Risk-Based Capital Capital Capital -------- --------- ---------- GAAP capital........................$148,008 $148,008 $148,008 --------- --------- --------- Non-allowable assets: Core deposit intangible............. (134) - - Unrealized gain on AFS securities... (311) (311) (311) Goodwill............................ (28,438) (28,438) (28,438) General valuation allowance......... - - 7,456 --------- --------- ---------- Regulatory capital.................. 119,125 119,259 126,715 Minimum capital requirement......... 18,828 37,659 47,718 --------- --------- ---------- Regulatory capital-excess...........$100,297 $ 81,600 $78,997 ========= ========= ========== Under its prompt corrective action regulations, the OTS is required to take certain supervisory actions with respect to undercapitalized institutions. These regulations establish a framework for the classification of depository institutions into five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Generally, an institution is considered well capitalized if it has a leverage ratio of core capital of at least 5.0%, a Tier I risk-based capital ratio of at least 6.0% and a total risk-based capital ratio of at least

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) 10.0%. As The most recent notification from the Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category. 19. QUARTERLY FINANCIAL INFORMATION The following represents the unaudited results of operations for each of the quarters during the fiscal years ended June 30, 1996 and 1995: For the Three Months Ended September 30, December 31, March 31, June 30, 1995 1995 1996 1996 ------------- ---------- --------- -------- Net interest income....................... $ 6,913 $ 7,379 $ 7,171 $ 7,640 Provision for possible loan losses........ 600 351 900 1,128 Net interest income after provision for possible loan losses................ 6,313 $ 7,028 6,271 6,512 Non-interest income....................... 414 186 379 396 Non-interest expense...................... 2,922 3,478 3,901 3,720 Income before income taxes and cumulative effect of change in accounting principle 3,805 3,736 2,749 3,188 Income tax expense........................ 1,741 1,705 1,266 1,469 Income before cumulative effect of change in accounting principle................. 2,064 2,031 1,483 1,719 Cumulative effect of change in accounting principle............................... (1,032) - - - ------------- ---------- --------- --------- Net income $ 1,032 $ 2,031 $ 1,483 $ 1,719 ============= ========== ========= ========= For the Three Months Ended September 30, December 31, March 31, June 30, 1994 1994 1995 1995 ------------- ---------- --------- -------- Net interest income....................... $ 7,863 $ 7,936 $ 7,401 $ 7,077 Provision for possible loan losses........ 737 738 738 737 Net interest income after provision for possible loan losses................ 7,126 $ 7,198 6,663 6,340 Non-interest income....................... 428 378 465 502 Non-interest expense...................... 3,250 3,292 3,591 3,920 Income before income taxes................ 4,304 4,284 3,537 2,922 Income tax expense........................ 1,783 2,010 1,638 1,190 ------------- ---------- --------- --------- Net income $ 2,521 $ 2,274 $ 1,899 $ 1,732 ============= ========== ========= ========= 20. DIME COMMUNITY BANCORP, INC. PARENT COMPANY ONLY FINANCIAL STATEMENTS: The Company began operations on June 26, 1996. Since operations began substantially at year-end, substantially all of the Company's results from operations represent the earnings of its wholly-owned subsidiary. As a result, a separate statement of operations for the Company for the year ended June 30, 1996 is not presented . The following statement of condition as of June 30, 1996, and the related statement of cash flows for the year ended June 30, 1996, reflect the Company's investment in its wholly-owned subsidiary, the Bank, using the equity method of accounting.

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) DIME COMMUNITY BANCORP, INC. STATEMENT OF CONDITION (In thousands except share and per share amounts) June 30, 1996 ---------- ASSETS: Cash and due from banks.......................................................... $ 117 Investment securities available for sale......................................... 33,994 Federal funds sold............................................................... 53,623 ESOP loan to subsidiary.......................................................... 11,541 Investment in subsidiary......................................................... 148,008 Other assets..................................................................... 23 ---------- TOTAL ASSETS..................................................................... $ 247,306 ========== LIABILITIES: Payable for securities purchased................................................. 33,994 Other liabilities................................................................ 241 ---------- TOTAL LIABILITIES................................................................ 34,235 ---------- STOCKHOLDERS' EQUITY: Preferred Stock ($.01 par, 9,000,000 shares authorized, none outstanding at June 30,1996)................................................. - Common Stock ($.01 par, 45,000,000 shares authorized, 14,547,500 shares outstanding at June 30,1996)..................................................... 145 Additional paid-in capital........................................................ 141,240 Employee Stock Ownership Plan..................................................... (11,541) Retained earnings................................................................. 82,916 Unrealized gain on securities available for sale, net of deferred taxes........... 311 ---------- TOTAL STOCKHOLDERS' EQUITY........................................................ 213,071 ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................ $ 247,306 ==========

DIME COMMUNITY BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands Except Per Share Amounts) DIME COMMUNITY BANCORP, INC. STATEMENT OF CASH FLOWS (In thousands except share and per share amounts) Year Ended June 30, 1996 -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income...................................................................... $ 6,265 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of subsidiary bank....................................... (6,238) Increase in otherassets........................................................ (23) Increase in payable for securities purchased.................................... 33,994 ESOP compensation expense ...................................................... 114 Increase in other liabilities................................................... 241 -------------- Net cash provided by operating activities....................................... 34,353 -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in federal funds sold.................................................. (53,623) Equity in undistributed earnings of subsidiary.................................. (76,349) Purchases of investment securities available for sale........................... (33,994) -------------- Net cash provided by (used in) investing activities............................. (163,966) -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net Proceeds from issuance of common stock...................................... 129,730 -------------- Net cash provided by (used in) financing activities............................. 129,730 -------------- Net increase in cash and cash equivalents....................................... 117 CASH AND CASH EQUIVALENTS, beginning of period.................................. - -------------- CASH AND CASH EQUIVALENTS, end of period........................................ $ 117 ============== * * * * * * Item 9. - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. - Directors and Executive Officers of the Company Information regarding directors and executive officers of the Company is presented under the headings "Election of Directors - Nominees for Election as Director," "- Continuing Directors," "- Meetings and Committees of the Board of Directors," "-Directors' Compensation," "-Executive Officers," and "-Executive Compensation" in the Company's definitive Proxy Statement for its Annual Meeting of Shareholders to be held on December 17, 1996 (the "Proxy Statement") which will be filed with the SEC within 120 days of June 30, 1996, and is incorporated herein by reference. Item 11. - Executive Compensation Information regarding executive and director compensation is presented under the headings "Election of Directors - Directors' Compensation," "-Executive Compensation," "-Summary Compensation Table," "Employment Agreements," "- Employee Retention Agreements," "-Employee Severance Compensation Plan," and "- Benefits," in the Proxy Statement and is incorporated herein by reference. Item 12. - Security Ownership of Certain Beneficial Owners and Management Information regarding security ownership of certain beneficial owners and management is included under the heading "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Proxy Statement and is incorporated herein by reference. Item 13. - Certain Relationships and Related Transactions. Information regarding certain relationships and related transactions is included under the heading "Transactions with Certain Related Persons" in the Proxy Statement and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements The following consolidated financial statements and schedules of the Company, and the independent auditors' report thereon are included in this Form 10-K at Item 8. Independent Auditors' Report Consolidated Statements of Financial Condition at June 30,1996 and 1995 Consolidated Statements of Operations for each of the years in the three year period ended June 30, 1996 Consolidated Statements of Stockholders' Equity for each of the years in the three year period ended June 30, 1996 Consolidated Statements of Cash Flows for each of the years in the three year period ended June 30,1996 Notes to Consolidated Financial Statements Quarterly Results of Operations (Unaudited) for each of the years in the two year period ended June 30, 1996 2. Financial Statement Schedules Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. (b) Exhibits Required by Item 601 of Securities and Exchange Commission Regulation S-K: Exhibit Number - ------------ 3.1 Certificate of Incorporation of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 31 to the Registration Statement on Form S-1, No. 33-80735 filed on December 22, 1995, as amended (the "Registration Statement")) 3.2 Bylaws of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 3.2 to the Registration Statement) 4.1 Certificate of Incorporation of Dime Community Bancorp, Inc. (See Exhibit 3.1 hereto) 4.2 Bylaws of Dime Community Bancorp, Inc. (See Exhibit 3.2 hereto) 4.3 Draft Stock Certificate of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 4.3 to the Registration Statement) 10.1 Agency Agreement, by and among Dime Community Bancorp, Inc., The Dime Savings Bank of Williamsburgh and Sandler O'Neill & Partners, L.P. (Incorporated by reference to Exhibit 1.1 to the Registration Statement) 10.2 Agreement and Plan of Merger dated as of the 2nd day of November, 1995 by and between The Dime Savings Bank of Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by reference to the Schedule 13D of The Dime Savings Bank of Williamsburgh, filed with the Commission on November 23, 1995) 10.3 Stock Option Agreement dated as of the 2nd day of November, 1995 by and between The Dime Savings Bank of Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by reference to the Schedule 13D of The Dime Savings Bank of Williamsburgh, filed with the Commission on November 23, 1995) 10.4 Engagement Letter, dated September 11, 1995 between The Dime Savings Bank of Williamsburgh and Ryan Beck & Co., Inc. (Incorporated by referenced to Exhibit 10.3 to the Registration Statement) 10.5 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Vincent F. Palagiano 10.6 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Michael P. Devine Exhibit Number - ------------ 10.7 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Kenneth J. Mahon 10.8 Employment Agreement between Dime Community Bancorp, Inc. and Vincent F. Palagiano 10.9 Employment Agreement between Dime Community Bancorp, Inc. and Michael P. Devine 10.10 Employment Agreement between Dime Community Bancorp, Inc. and Kenneth J. Mahon 10.11 Form of Employee Retention Agreements by and among The Dime Savings Bank of Williamsburgh, Dime Community Bancorp, Inc. and certain executive officers 10.12 Employee Stock Ownership Plan of Dime Community Bancorp, Inc. and certain affiliates (Incorporated by reference to Exhibit 10.14 to the Registration Statement) 10.13 First Amendment to Employee Stock Ownership Plan of Dime Community Bancorp, Inc. and Certain Affiliates 10.14 ESOP Loan Commitment Letter and ESOP Loan Documents 10.15 The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust (Incorporated by reference to Exhibit 10.14 to the Registration Statement) 10.16 Seventh, Eighth and Ninth Amendments to The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust 10.17 The Dime Savings Bank of Williamsburgh Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.16 to the Registration Statement) 10.18 Severance Pay Plan of The Dime Savings Bank of Williamsburgh 10.19 Retirement Plan for Board Members of Dime Community Bancorp, Inc. 21.1 Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1 to the Registration Statement) 27.1 Financial Data Schedule (EDGAR filing only) SIGNATURES Pursuant to the requirements of Section 13 or 15 of the Securities Exchange Act of 1934, as amended, the Registrant certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on September 24, 1996. Dime Community Bancorp, Inc. By: /s/ Vincent F. Palagiano Vincent F. Palagiano Chairman of the Board President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated. Name Title Date /s/ Vincent F. Chairman of the September 24, 1996 Palagiano Board, Vincent F. Palagiano President and Chief Executive Officer (Principal executive officer) /s/ Michael P. Executive Vice September 24, 1996 Devine President, Chief Michael P. Devine Operating Officer and Secretary and Director /s/ Kenneth J. Senior Vice September 24, 1996 Mahon President and Chief Kenneth J. Mahon Financial Officer (Principal financial officer) /s/ Anthony Bergamo Director September 24, 1996 Anthony Bergamo /s/ George L. Director September 24, 1996 Clark, Jr. George L. Clark, Jr. /s/ Steven D. Cohn Director September 24, 1996 Steven D. Cohn /s/ Patrick E. Director September 24, 1996 Curtin Patrick E. Curtin /s/ Joseph H. Director September 24, 1996 Farrell Joseph H. Farrell /s/ Fred P. Director September 24, 1996 Fehrenbach Fred P. Fehrenbach /s/ John J. Flynn Director September 24, 1996 John J. Flynn /s/ Malcolm T. Director September 24, 1996 Kitson Malcolm T. Kitson /s/ Stanley Meisels Director September 24, 1996 Stanley Meisels /s/ Louis V. Varone Director September 24, 1996 Louis V. Varone

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________ EXHIBITS to FORM 10-K SEC File No. 0-27782 __________________________ DIME COMMUNITY BANCORP, INC. Brooklyn, New York

DESIGNATION DESCRIPTION PAGE 3.1 Certificate of Incorporation of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 31 to the Registration Statement on Form S-1, No. 33-80735 filed on December 22, 1995, as amended (the "Registration Statement")) 3.2 Bylaws of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 3.2 to the Registration Statement) 4.1 Certificate of Incorporation of Dime Community Bancorp, Inc. (See Exhibit 3.1 hereto) 4.2 Bylaws of Dime Community Bancorp, Inc. (See Exhibit 3.2 hereto) 4.3 Draft Stock Certificate of Dime Community Bancorp, Inc. (Incorporated by reference to Exhibit 4.3 to the Registration Statement) 10.1 Agency Agreement, by and among Dime Community Bancorp, Inc., The Dime Savings Bank of Williamsburgh and Sandler O'Neill & Partners, L.P. (Incorporated by reference to Exhibit 1.1 to the Registration Statement) 10.2 Agreement and Plan of Merger dated as of the 2nd day of November, 1995 by and between The Dime Savings Bank of Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by reference to the Schedule 13D of The Dime Savings Bank of Williamsburgh, filed with the Commission on November 23, 1995) 10.3 Stock Option Agreement dated as of the 2nd day of November, 1995 by and between The Dime Savings Bank of Williamsburgh and Conestoga Bancorp, Inc. (Incorporated by reference to the Schedule 13D of The Dime Savings Bank of Williamsburgh, filed with the Commission on November 23, 1995) 10.4 Engagement Letter, dated September 11, 1995 between The Dime Savings Bank of Williamsburgh and Ryan Beck & Co., Inc. (Incorporated by referenced to Exhibit 10.3 to the Registration Statement) 10.5 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Vincent F. Palagiano 10.6 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Michael P. Devine 10.7 Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Kenneth J. Mahon 10.8 Employment Agreement between Dime Community Bancorp, Inc. and Vincent F. Palagiano 10.9 Employment Agreement between Dime Community Bancorp, Inc. and Michael P. Devine 10.10 Employment Agreement between Dime Community Bancorp, Inc. and Kenneth J. Mahon 10.11 Form of Employee Retention Agreements by and among The Dime Savings Bank of Williamsburgh, Dime Community Bancorp, Inc. and certain executive officers 10.12 Employee Stock Ownership Plan of Dime Community Bancorp, Inc. and certain affiliates (Incorporated by reference to Exhibit 10.14 to the Registration Statement) 10.13 First Amendment to Employee Stock Ownership Plan of Dime Community Bancorp, Inc. and Certain Affiliates 10.14 ESOP Loan Commitment Letter and ESOP Loan Documents 10.15 The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust (Incorporated by reference to Exhibit 10.14 to the Registration Statement) 10.16 Seventh, Eighth and Ninth Amendments to The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust 10.17 The Dime Savings Bank of Williamsburgh Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.16 to the Registration Statement) 10.18 Severance Pay Plan of The Dime Savings Bank of Williamsburgh 10.19 Retirement Plan for Board Members of Dime Community Bancorp, Inc. 21.1 Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1 to the Registration Statement) 27.1 Financial Data Schedule (EDGAR filing only)



           AMENDED AND RESTATED EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered into as of the 26th day of June, 1996, by and between The
Dime  Savings  Bank  of  Williamsburgh,  a  mutual  savings  bank
organized  and  operating under the federal laws  of  the  United
States  and  having an office at 209 Havemeyer Street,  Brooklyn,
New  York  11211 ("Bank") and Vincent F. Palagiano,  residing  at
[home  address deleted] and amends and restates the  Amended  and
Restated Employment Agreement made as of October 1, 1995  between
the Bank and Mr. Palagiano.


                     W I T N E S S E T H :


          WHEREAS, Mr. Palagiano currently serves the Bank in the
capacity  of Chairman of the Board, President and Chief Executive
Officer; and

           WHEREAS, the Bank and Mr. Palagiano are parties to  an
Employment Agreement made and entered into as of the 1st  day  of
January,  1992  and amended and restated as of  the  1st  day  of
October, 1995 ("Prior Agreement"); and

          WHEREAS, the Bank and Mr. Palagiano desire to amend and
restate  the Prior Agreement in its entirety as set forth herein;
and

           WHEREAS,  for purposes of securing for  the  Bank  Mr.
Palagiano's  continued services, the Board of  Directors  of  the
Bank  ("Board") has approved and authorized the execution of this
Agreement with Mr. Palagiano; and

           WHEREAS, Mr. Palagiano is willing to continue to  make
his  services  available to the Bank on the terms and  conditions
set forth herein.

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Bank and Mr. Palagiano hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)   The Bank hereby represents and warrants  to  Mr.
Palagiano that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Bank; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which the Bank is a  party
or  by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any  order
of any order of any court or administrative agency, applicable to
the Bank or its business.

           (b)   Mr. Palagiano hereby represents and warrants  to
the Bank that:

           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

            2.    Employment.   The  Bank  hereby  continues  the
employment  of  Mr. Palagiano, and Mr. Palagiano  hereby  accepts
such  continued employment, during the period and upon the  terms
and conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

          (b)  Prior to the first anniversary of the date of this
Agreement   and  each  anniversary  date  thereafter  (each,   an
"Anniversary  Date"), the Board shall review the  terms  of  this
Agreement  and Mr. Palagiano's performance of services  hereunder
and  may, in the absence of objection from Mr. Palagiano, approve
an  extension  of  the Employment Period.   In  such  event,  the
Employment  Period shall be extended to the third anniversary  of
the relevant Anniversary Date.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs  and  the Bank is not  subject  to  rules  and
regulations  of  the  Office  of  Thrift  Supervision,  then  the
Employment  Period  shall be extended through and  including  the
third  anniversary of the earliest date after the effective  date
of  such  Change  of  Control on which either  the  Bank  or  Mr.
Palagiano elects, by written notice pursuant to section  3(d)  of
this  Agreement  to  the non-electing party, to  discontinue  the
Employment Period; provided, however, that this section shall not
apply  in  the  event that, prior to the Change  of  Control  (as
defined  in  section  13 of this Agreement),  Mr.  Palagiano  has
provided  written notice to the Bank of his intent to discontinue
the Employment Period.

           (d)   The  Bank or Mr. Palagiano may, at any  time  by
written  notice  given  to  the other, elect  to  terminate  this
Agreement.   Any  such  notice  given  by  the  Bank   shall   be
accompanied by a certified copy of a resolution, adopted  by  the
affirmative  vote of a majority of the entire membership  of  the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:  (i)  Mr. Palagiano's employment with the Bank  may  be
terminated during the Employment Period, in accordance  with  the
terms and conditions of this Agreement; and (ii) nothing in  this
Agreement  shall  mandate  or  prohibit  a  continuation  of  Mr.
Palagiano's employment following the expiration of the Employment
Period  upon  such  terms and conditions  as  the  Bank  and  Mr.
Palagiano may mutually agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

            4.    Duties.   During  the  Employment  Period,  Mr.
Palagiano shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the business and affairs of the Bank and use his best efforts  to
advance the Bank's interests;

           (b)   serve  as  Chairman of the Board, President  and
Chief Executive Officer if duly appointed and/or elected to serve
in such position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board, in accordance  with
organization Certificate, By-laws, Applicable Laws, Statutes  and
Regulations, custom and practice of the Bank as in effect on  the
date first above written.
Mr.  Palagiano  shall  have such authority  as  is  necessary  or
appropriate to carry out his assigned duties. Mr. Palagiano shall
report  to  and  be subject to direction and supervision  by  the
Board.

          (d)  none of the functions, duties and responsibilities
to be performed by Mr. Palagiano pursuant to this Agreement shall
be deemed to include those functions, duties and responsibilities
performed  by  Mr. Palagiano in his capacity as director  of  the
Bank.

          5.   Compensation -- Salary and Bonus. In consideration
for  services rendered by Mr. Palagiano under this Agreement, the
Bank  shall pay to Mr. Palagiano a salary at an annual rate equal
to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $450,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change in Control, the product of Mr. Palagiano's annual rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:

                              (i)  1.06;

                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers  of  the Bank (other  than  Mr.
                    Palagiano)  who are assistant vice presidents
                    or  more senior officers, divided by (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar  year, of the officers of  the  Bank
                    (other  than Mr. Palagiano) who are assistant
                    vice presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately  equal installments in accordance with  the  Bank's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Palagiano of a salary
in  excess  of  that  prescribed  under  this  section  5  or  of
additional  cash  or non-cash compensation in a form  other  than
salary, to the extent that such payment is duly authorized by  or
under the authority of the Board.

           (d)   no  portion  of  the compensation  paid  to  Mr.
Palagiano  pursuant  to  this Agreement shall  be  deemed  to  be
compensation  received  by  Mr.  Palagiano  in  his  capacity  as
director of the Bank.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr. Palagiano shall be treated as an employee of the Bank and  be
entitled to participate in and receive benefits under the  Bank's
Retirement  Plan, Incentive Savings Plan, group life  and  health
(including  medical  and major medical) and disability  insurance
plans,  and  such  other  employee benefit  plans  and  programs,
including   but  not  limited  to  any  long-term  or  short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time,  in  accordance  with  the terms  and  conditions  of  such
employee  benefit plans and programs and compensation  plans  and
programs  and with the Bank's customary practices.   Following  a
Change  in Control, all such benefits to Mr. Palagiano  shall  be
continued on terms and conditions substantially identical to, and
in  no  event less favorable than, those in effect prior  to  the
Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"), the Bank will provide, or cause to  be  provided,
to  Mr. Palagiano in connection with such Conversion, stock-based
compensation  and benefits, including, without limitation,  stock
options,   restricted   stock  awards,   and   participation   in
tax-qualified  stock  bonus plans which, in  the  aggregate,  are
either  (A)  accepted  by  Mr.  Palagiano  in  writing  as  being
satisfactory  for  purposes  of this  Agreement  or  (B)  in  the
written,  good faith opinion of a nationally recognized executive
compensation   consulting  firm  selected   by   the   Bank   and
satisfactory  to  Mr.  Palagiano, whose agreement  shall  not  be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions.

           7.    Board Memberships and Personal Activities.   Mr.
Palagiano may serve as a member of the board of directors of such
business,  community  and  charitable  organizations  as  he  may
disclose  to  the Board from time to time, and he may  engage  in
personal  business and investment activities for his own account;
provided,  however, that such service and personal  business  and
investment  activities shall not materially  interfere  with  the
performance  of his duties under this Agreement.   Mr.  Palagiano
may  also  serve as an officer or director of any parent  of  the
Bank on such terms and conditions as the Bank and its parent  may
mutually  agree  upon, and such service shall not  be  deemed  to
materially  interfere  with Mr. Palagiano's  performance  of  his
duties hereunder or otherwise result in a material breach of this
Agreement.

           8.   Working Facilities and Expenses.  Mr. Palagiano's
principal  place  of employment shall be at the Bank's  executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.   The  Bank shall provide Mr. Palagiano, at his  principal
place of employment, with a private office, stenographic services
and  other  support  services  and  facilities  suitable  to  his
position with the Bank and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement.
The  Bank shall provide Mr. Palagiano with an automobile suitable
to  his  position  with  the Bank in accordance  with  its  prior
practices, and such automobile shall be used by Mr. Palagiano  in
carrying out his duties under this Agreement, including commuting
between his residence and his principal place of employment.  The
Bank shall reimburse Mr. Palagiano for his ordinary and necessary
business  expenses, including, without limitation,  all  expenses
associated   with   his  business  use  of   the   aforementioned
automobile,  fees for memberships in such clubs and organizations
as  Mr. Palagiano and the Bank shall mutually agree are necessary
and   appropriate   for   business  purposes   and   travel   and
entertainment   expenses   incurred  in   connection   with   the
performance of his duties under this Agreement, upon presentation
to  the Bank of an itemized account of such expenses in such form
as  the  Bank  may  reasonably require.  Mr. Palagiano  shall  be
entitled to no less than four (4) weeks of paid vacation   during
each year in the Employment Period.

          9.   Termination Giving Rise to Severance Benefits.

           (a)  In the event that Mr. Palagiano's employment with
the  Bank shall terminate during the Employment Period on account
of  the  termination of Mr. Palagiano's employment with the  Bank
other than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

           (ii)  a  voluntary resignation by Mr. Palagiano  other
than a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement);

           (iii)      a termination on account of Mr. Palagiano's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A) Mr. Palagiano has been  absent  from  the
full-time  service of the Bank on account of his  Disability  (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive  months; and (B) Mr. Palagiano shall have  failed  to
return to work in the full-time service of the Bank within thirty
(30) days after written notice requesting such return is given to
Mr.  Palagiano  by the Bank; then the Bank shall provide  to  Mr.
Palagiano  the  benefits  and pay to Mr.  Palagiano  the  amounts
provided under section 9(b) of this Agreement.

           (b)  In the event that Mr. Palagiano's employment with
the Bank shall terminate under circumstances described in section
9(a)  of  this Agreement or if the Bank terminates this Agreement
pursuant  to  section  3(d), the following benefits  and  amounts
shall  be paid or provided to Mr. Palagiano (or, in the event  of
his death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;

           (ii)  (A) the benefits, if any, to which Mr. Palagiano
and  his family and dependents are entitled as a former employee,
or  family or dependents of a former employee, under the employee
benefit  plans and programs and compensation plans  and  programs
maintained  for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on  the  date  of  his  termination  of  employment,  or  if  his
termination  of employment occurs after a Change in  Control,  on
the  date of his termination of employment or on the date of such
Change  in Control, whichever results in more favorable  benefits
as  determined by Mr. Palagiano, where credit is given for  three
additional  years  of service and age in determining  eligibility
and  benefits for any plan and program where age and service  are
relevant  factors, and (B) payment for all unused  vacation  days
and  floating  holidays in the year in which  his  employment  is
terminated, at his highest annual rate of salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer, if and to the extent necessary to provide Mr. Palagiano
and  his  family  and  dependents  for  the  Remaining  Unexpired
Employment Period, coverage identical to and in any event no less
favorable  than  the  coverage to  which  they  would  have  been
entitled  under  such plans (as in effect  on  the  date  of  his
termination  of employment, or, if his termination of  employment
occurs  after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such  Change  in  Control, whichever results  in  more  favorable
benefits  as  determined by Mr. Palagiano) if  he  had  continued
working  for  the Bank during the Remaining Unexpired  Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section 5(c) would apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the present value of the salary and the bonus that  Mr.
Palagiano would have earned if he had worked for the Bank  during
the  Remaining Unexpired Employment Period at the highest  annual
rate  of  salary (assuming, if a Change in Control has  occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided  for
under  this  Agreement,  where  such  present  value  is  to   be
determined  using a discount rate of six percent (6%) per  annum,
compounded,   in   the  case  of  salary,  with   the   frequency
corresponding to the Bank's regular payroll periods with  respect
to its officers, and, in the case of bonus, annually;

           (v)  within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans   maintained  by,  or  covering  employees  of,  the   Bank
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for  the  Bank during the Remaining Unexpired  Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Bank  during  the  Remaining Unexpired  Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees  of,  the Bank as of the date of his termination  where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable  to the Bank's contribution  to  which  he
would be entitled under any defined contribution plans maintained
by,  or  covering employees of, the Bank (including  any  "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if  he  had worked for  the  Bank  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment Period which is prior  to  Mr.  Palagiano's
termination of employment with the Bank, and been fully vested in
such  plan  or plans, over (B) the present value of the  benefits
attributable to the Bank's contributions to which he is  actually
entitled  under  such plans as of the date of his termination  of
employment  with the Bank, where such present values  are  to  be
determined  using a discount rate of six percent (6%) per  annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;

          (vii)     the payments that would have been made to Mr.
Palagiano under any incentive compensation plan maintained by, or
covering  employees of, the Bank (other than  bonus  payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working  for the Bank during the  Remaining  Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to  Mr.  Palagiano under such  incentive  compensation
plan,  multiplied by (B) the compensation that  would  have  been
paid  to  Mr. Palagiano during each calendar year at the  highest
annual rate of compensation (assuming, if a Change in Control has
occurred,  that  the  annual increases under section  5(c)  would
apply) under the Agreement, such payments to be made at the  same
time  and  in  the  same manner as payments  are  made  to  other
officers  of  the  Bank pursuant to the terms of  such  incentive
compensation  plan; provided, however, that payments  under  this
section 9(b)(vii) shall not be made to Mr. Palagiano for any year
on  account  of which no payments are made to any of  the  Bank's
officers under any such incentive compensation plan; and

           (viii)     the  benefits  to which  Mr.  Palagiano  is
entitled under the Bank's Supplemental Executive Retirement  Plan
(or  other excess benefits plan with the meaning of section 3(36)
of  ERISA or other special or supplemental plan) shall be paid to
him  in  a  lump sum, where such lump sum is computed  using  the
mortality tables under the Bank's tax-qualified pension plan  and
a discount rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty  (30)  days  after the  date  of  Mr.  Palagiano's
election,  and  if the amount may be increased  by  a  subsequent
Change  in  Control, any additional payment shall be made  within
thirty (30) days of such Change in Control.

           (c)   Mr.  Palagiano shall not be required to mitigate
the  amount  of  any payment provided for in this  section  9  by
seeking  other employment or otherwise, nor shall the  amount  of
any  payment or benefit provided for in this section 9 be reduced
by  any  compensation earned by Mr. Palagiano as  the  result  of
employment by another employer, by retirement benefits, by offset
against  any  amount claimed to be owed by Mr. Palagiano  to  the
Bank,  or  otherwise except as specifically provided  in  section
9(b)  (iii) of this Agreement.  The Bank and Mr. Palagiano hereby
stipulate that the damages which may be incurred by Mr. Palagiano
as  a  consequence of any such termination of employment are  not
capable  of  accurate  measurement as of  the  date  first  above
written  and that the benefits and payments provided for in  this
Agreement   constitute   a   reasonable   estimate   under    the
circumstances  of all damages sustained as a consequence  of  any
such  termination of employment, other than damages arising under
or  out  of  any  stock option, restricted stock  or  other  non-
qualified  stock acquisition or investment plan  or  program,  it
being  understood  and  agreed  that  this  Agreement  shall  not
determine  the  measurement of damages under  any  such  plan  or
program in respect of any termination of employment.

           10.   Termination Without Severance Benefits.  In  the
event  that  Mr.  Palagiano's  employment  with  the  Bank  shall
terminate during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);

           (b)  voluntary resignation by Mr. Palagiano other than
a  Resignation  for  Good Reason (within the meaning  of  section
12(b) of this Agreement); or

          (c)  Mr. Palagiano's death;

then  the  Bank  shall  have no further  obligations  under  this
Agreement,  other than the payment to Mr. Palagiano (or,  in  the
event  of  his  death, to his estate) of his  earned  but  unpaid
salary  as of the date of the termination of his employment,  and
the  provision  of such other benefits, if any, to  which  he  is
entitled  as a former employee under the Bank's employee  benefit
plans  and  programs  and  compensation plans  and  programs  and
payment for all unused vacation days and floating holidays in the
year in which his employment is terminated, at his highest annual
salary for such year.

          11.  Death and Disability.

           (a)   Death.  If Mr. Palagiano's employment  is  termi
nated  by  reason of Mr. Palagiano's death during the  Employment
Period,   this   Agreement   shall  terminate   without   further
obligations to Mr. Palagiano's legal representatives  under  this
Agreement,  other  than for payment of amounts and  provision  of
benefits  under  sections 9(b) (i) and (ii);  provided,  however,
that  if Mr. Palagiano dies while in the employment of the  Bank,
his  designated  beneficiary(ies) shall receive a death  benefit,
payable  through  life  insurance  or  otherwise,  which  is  the
equivalent on a net after-tax basis of the death benefit  payable
under  a  term life insurance policy, with a stated death benefit
of three times Mr. Palagiano's then Annual Base Salary.

           (b)   Disability.   If Mr. Palagiano's  employment  is
terminated by reason of Mr. Palagiano's Disability as defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without  further obligations to Mr.  Palagiano,  other
than  for  payment  of amounts and provision  of  benefits  under
section  9(b) (i) and (ii); provided, however, that in the  event
of  Mr.  Palagiano's Disability while in the  employment  of  the
Bank,  the Bank will pay to him a lump sum amount equal to  three
times his then Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined in accordance with the terms of the Bank's long  term
disability policy.


           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Palagiano's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

          (a)  Mr. Palagiano's termination of employment with the
Bank   shall  be  deemed  a  "Termination  for  Cause"  if   such
termination  occurs  for "cause," which,  for  purposes  of  this
Agreement  shall mean personal dishonesty, incompetence,  willful
misconduct,  breach of fiduciary duty involving personal  profit,
intentional  failure to perform stated duties, willful  violation
of  any law, rule or regulation (other than traffic violations or
similar  offenses)  or  final cease  and  desist  order,  or  any
material  breach  of  this Agreement, in each  case  as  measured
against  standards generally prevailing at the relevant  time  in
the  savings and community banking industry;  provided,  however,
that  Mr.  Palagiano shall not be deemed to have been  discharged
for  cause  unless  and until he shall have  received  a  written
notice of termination from the Board, accompanied by a resolution
duly  adopted  by affirmative vote of a majority  of  the  entire
Board  at  a  meeting  called and held for  such  purpose  (after
reasonable  notice to Mr. Palagiano and a reasonable  opportunity
for  Mr. Palagiano to make oral and written presentations to  the
members  of  the  Board, on his own behalf, or  through  a  repre
sentative,  who may be his legal counsel, to refute  the  grounds
for  the  proposed determination) finding that in the good  faith
opinion  of the Board grounds exist for discharging Mr. Palagiano
for cause.

          (b)  Mr. Palagiano's termination of employment with the
Bank  shall  be  deemed a Resignation for  Good  Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)  (A) the assignment to Mr. Palagiano of any duties
inconsistent  with  Mr. Palagiano's status  as  Chairman  of  the
Board, President and Chief Executive Officer of the Bank or (B) a
substantial  adverse alteration in the nature or  status  of  Mr.
Palagiano's  responsibilities from those  in  effect  immediately
prior  to  the alteration; or (C) any Change in Control described
in section 13(b);

           (ii) a reduction by the Bank in Mr. Palagiano's annual
base  salary as in effect on the date first above written  or  as
the  same  may  be  increased  from time  to  time,  unless  such
reduction  was  mandated  at  the initiation  of  any  regulatory
authority having jurisdiction over the Bank;

           (iii)      the  relocation  of  the  Bank's  principal
executive offices to a location outside the New York metropolitan
area  or  the Bank's requiring Mr. Palagiano to be based anywhere
other  than  the  Bank's principal executive offices  except  for
required travel on the Bank's business to an extent substantially
consistent  with Mr. Palagiano's business travel  obligations  at
the date first above written;

           (iv)  the failure by the Bank, without Mr. Palagiano's
consent,  to pay to Mr. Palagiano, within seven (7) days  of  the
date  when due, (A) any portion of his compensation, or  (B)  any
portion  of  an  installment of deferred compensation  under  any
deferred compensation program of the Bank, which failure  is  not
inadvertent and immaterial and which is not promptly cured by the
Bank  after  notice of such failure is given to the Bank  by  the
Executive;

           (v)  the failure by the Bank to continue in effect any
compensation  plan in which Mr. Palagiano participates  which  is
material to his total compensation, including but not limited  to
the  Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in  an
ongoing  substitute  or  alternative plan)  has  been  made  with
respect to such plan, or the failure by the Bank to continue  his
participation therein (or in such substitute or alternative plan)
on  a  basis not materially less favorable, both in terms of  the
amount  of  benefits provided and the level of his  participation
relative to other participants, unless such failure is the result
of  action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;

          (vi) the failure by the Bank to continue to provide Mr.
Palagiano with benefits substantially similar to those enjoyed by
Mr.  Palagiano under the Retirement Plan and the Bank's Incentive
Savings  Plan or under any of the Bank's life, health  (including
hospitalization,  medical and major medical),  dental,  accident,
and   long-term  disability  insurance  benefits,  in  which  Mr.
Palagiano  is participating, or the taking of any action  by  the
Bank which would directly or indirectly materially reduce any  of
such  benefits  or deprive Mr. Palagiano of the  number  of  paid
vacation  days to which he is entitled, on the basis of years  of
service with the Bank, rank or otherwise, in accordance with  the
Bank's  normal vacation policy, unless such failure is the result
of  action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;

            (vii)      the  failure  of  the  Bank  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the Bank which is not effected pursuant the provisions of section
12(a)   regarding  Termination  for  Cause  or  on   account   of
Disability;

           (ix)  a material breach of this Agreement by the Bank,
which  the  Bank fails to cure within thirty (30) days  following
written notice thereof from Mr. Palagiano;

           (x)  in the event of a Change in Control described  in
section  13(b)  of  this  Agreement, a failure  of  the  Bank  to
provide,  or cause to be provided, to Mr. Palagiano in connection
with  such  Change  in  Control,  stock-based  compensation   and
benefits,   including,   without   limitation,   stock   options,
restricted stock awards, and participation in tax-qualified stock
bonus  plans which, in the aggregate, are either (A) accepted  by
Mr.  Palagiano in writing as being satisfactory for  purposes  of
this  Agreement or (B) in the written, good faith  opinion  of  a
nationally  recognized  executive  compensation  consulting  firm
selected  by  the  Bank and satisfactory to Mr. Palagiano,  whose
agreement  shall  not  be  unreasonably  withheld,  are  no  less
favorable than the stock-based compensation and benefits  usually
and  customarily  provided to similarly  situated  executives  of
similar   financial  institutions  in  connection  with   similar
transactions; or

           (xi)  a requirement that Mr. Palagiano report  to  any
person or group other than the Board;

          (xii)     in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Bank shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of  the  Bank; (B) a corporation  owned,  directly  or
indirectly, by the stockholders of the Bank in substantially  the
same proportions as their ownership of stock of the Bank; or  (C)
Mr.  Palagiano, or any group otherwise constituting a  person  in
which  Mr. Palagiano is a member, becomes the "beneficial  owner"
(as  defined  in Rule 13d-3 promulgated under the Exchange  Act),
directly  or  indirectly,  of  securities  issued  by  the   Bank
representing 25% or more of the combined voting power of  all  of
the Bank's then outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank  to effect a transaction described in section 13(a) or 13(c)
of  this Agreement) whose election by the Board or nomination for
election  by  the  Bank's  stockholders  was  approved   by   the
affirmative vote of at least two-thirds of the members  of  Board
then  in office who were either members of the Board on the  date
first   above  written  or  whose  nomination  or  election   was
previously  so  approved  cease for any reason  to  constitute  a
majority  of  the members of the Board, but excluding,  for  this
purpose,  any such individual whose initial assumption of  office
is  in  connection with an actual or threatened election  contest
relating to the election of directors of the Bank (as such  terms
are  used in Rule 14a-11 of Regulation 14A promulgated under  the
Exchange Act); or

          (c)  the shareholders of the Bank approve either:

                (i)   a merger or consolidation of the Bank  with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (A) the members of the
               Board of the Bank immediately prior to such merger
               or consolidation constitute at least a majority of
               the   members  of  the  governing  body   of   the
               institution   resulting  from   such   merger   or
               consolidation; or (B) the shareholders of the Bank
               own  securities of the institution resulting  from
               such  merger or consolidation representing 80%  or
               more  of  the  combined voting power of  all  such
               securities  then outstanding in substantially  the
               same  proportions  as  their ownership  of  voting
               securities  of  the  Bank before  such  merger  or
               consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to   assume  and  perform   the   Bank's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Bank or
an  agreement for the sale or disposition by the Bank of  all  or
substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a), (b) or (c) if the term "Company" were substituted for  the
term  "Bank"  therein.  Such an event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Palagiano's employment during the Employment  Period  or
thereafter, whether by the Bank or by Mr. Palagiano,  shall  have
no  effect  on  the rights and obligations of the parties  hereto
under  the  Bank's  the Retirement Plan and the Bank's  Incentive
Savings  Plan,  group  life,  health (including  hospitalization,
medical  and  major  medical), dental,  accident  and  long  term
disability  insurance plans or such other employee benefit  plans
or  programs, or compensation plans or programs (whether  or  not
employee benefit plans or programs) and, following the conversion
of  the  Bank  to  stock form, any stock option and  appreciation
rights  plan, employee stock ownership plan and restricted  stock
plan,  as  may be maintained by, or cover employees of, the  Bank
from time to time.

          15.  Successors and Assigns.

           (a)   The  Bank  shall require any successor  (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets of the Bank to expressly assume and agree to perform  this
Agreement in the same manner and to the same extent that the Bank
would  be required to perform it if no such succession had  taken
place.  Failure  of  the  Bank  to  obtain  such  assumption  and
agreement prior to the effectiveness of any such succession shall
be   deemed  to  constitute  a  material  breach  of  the  Bank's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Palagiano, his legal representatives and testate
or   intestate  distributees,  and  the  Bank,  their  respective
successors  and  assigns, including any successor  by  merger  or
consolidation or a statutory receiver or any other person or firm
or   corporation  to  which  all  or  substantially  all  of  the
respective  assets  and  business of the  Bank  may  be  sold  or
otherwise transferred.

           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Palagiano:

          [Home address deleted].


          If to the Bank:

          The Dime Savings Bank of Williamsburgh
          209 Havemeyer Street
          Brooklyn, New York 11211

          Attention:  Corporate Secretary

          With a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright

           17.   Indemnification and Attorneys'  Fees.  The  Bank
shall  pay to or on behalf of Mr. Palagiano all reasonable costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however,  that Mr. Palagiano shall have  substantially
prevailed on the merits pursuant to a judgment, decree  or  order
of  a  court of competent jurisdiction or of an arbitrator in  an
arbitration  proceeding, or in a settlement;  provided,  further,
that this section 17 shall not obligate the Bank to pay costs and
legal  fees  on behalf of Mr. Palagiano under this  Agreement  in
excess   of  $50,000.   For  purposes  of  this  Agreement,   any
settlement agreement which provides for payment of any amounts in
settlement   of  the  Bank's  obligations  hereunder   shall   be
conclusive   evidence   of   Mr.   Palagiano's   entitlement   to
indemnification hereunder, and any such indemnification  payments
shall  be  in  addition  to  amounts  payable  pursuant  to  such
settlement agreement, unless such settlement agreement  expressly
provides otherwise.

           18.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           19.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           20.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

          21.  Governing Law. This Agreement shall be governed by
and  construed and enforced in accordance with the  laws  of  the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            22.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement,  unless otherwise stated.  Any reference to  the  term
"Board"  shall mean the Board of Trustees of the Bank  while  the
Bank  is a mutual savings bank and the Board of Directors of  the
Bank  while  the Bank is a stock savings bank.  Any reference  to
the  term "Bank" shall mean the Bank in its mutual form prior  to
the conversion and in its stock form on and after the conversion.
If  the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.

           23.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr. Palagiano.  No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.

           24.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Bank.

           25.   Required  Regulatory Provisions.  The  following
provisions  are  included  for the  purposes  of  complying  with
various   laws,   rules  and  regulations   applicable   to   the
Association:

           (a)  Notwithstanding anything herein contained to  the
contrary,  in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive  of
amounts described in section 9(b)(i) and (viii)) exceed the three
times  the Executive's average annual total compensation for  the
last  five  consecutive  calendar  years  to  end  prior  to  his
termination of employment with the Association (or for his entire
period  of  employment with the Association  if  less  than  five
calendar years).

           (b)  Notwithstanding anything herein contained to  the
contrary,  any  payments  to the Executive  by  the  Association,
whether  pursuant to this Agreement or otherwise, are subject  to
and  conditioned upon their compliance with section 18(k) of  the
Federal  Deposit  Insurance Act ("FDI Act"), 12 U.S.C.  Section
1828(k), and any regulations promulgated thereunder.

           (c)  Notwithstanding anything herein contained to  the
contrary,  if  the  Executive  is suspended  from  office  and/or
temporarily prohibited from participating in the conduct  of  the
affairs  of  the  Association pursuant to a notice  served  under
section  8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section
1818(e)(3) or 1818(g)(1), the Association's obligations under this
Agreement shall  be  suspended as of the date of service  of  such
notice, unless stayed by appropriate proceedings.   If the charges
in such notice are dismissed, the Association, in  its  discretion,
may (i) pay  to  the  Executive all or part of  the  compensation
withheld while the Association's obligations hereunder were susp-
ended  and (ii) reinstate, in whole or in part, any of the obli-
gations which were suspended.

           (d)  Notwithstanding anything herein contained to  the
contrary,   if  the  Executive  is  removed  and/or   permanently
prohibited from participating in the conduct of the Association's
affairs  by  an order issued under section 8(e)(4) or 8(g)(1)  of
the  FDI  Act,  12 U.S.C. Section 1818(e)(4) or (g)(1), all
prospective obligations  of  the  Association  under  this
Agreement   shall terminate  as  of  the effective date of the
order,  but  vested rights and obligations of the Association and
the Executive shall not be affected.

           (e)  Notwithstanding anything herein contained to  the
contrary, if the Association is in default (within the meaning of
section  3(x)(1)  of the  FDI Act, 12 U.S.C.  Section 1813(x)(1),
all  prospective  obligations  of  the  Association  under  this
Agreement shall terminate as of the date of default,  but  vested
rights and obligations of the Association and the Executive shall
not  be affected.

           (f)  Notwithstanding anything herein contained to  the
contrary,   all   prospective  obligations  of  the   Association
hereunder  shall  be  terminated, except to  the  extent  that  a
continuation  of  this Agreement is necessary for  the  continued
operation of the Association:  (i) by the Director of the OTS  or
his   designee  or  the  Federal  Deposit  Insurance  Corporation
("FDIC"),  at  the  time the FDIC enters  into  an  agreement  to
provide  assistance to or on behalf of the Association under  the
authority  contained in section 13(c) of the FDI Act,  12  U.S.C.
Section 1823(c); (ii) by the Director of the OTS  or his designee
at  the time  such Director or  designee  approves  a supervisory
merger  to resolve  problems related to the operation of the
Association  or when  the Association is determined by such
Director to be in  an unsafe  or  unsound condition.  The vested
rights and obligations of the parties shall not be affected.

If  and to the extent that any of the foregoing provisions  shall
cease  to  be  required or by applicable law, rule or regulation,
the  same shall become inoperative as though eliminated by formal
amendment of this Agreement.

IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and Mr. Palagiano has hereto set his hand, all as of the day and year first above written. /s/ Vincent F. Palagiano VINCENT F. PALAGIANO ATTEST THE DIME SAVINGS BANK OF WILLIAMSBURGH By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].



           AMENDED AND RESTATED EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered into as of the 26th day of June, 1996, by and between The
Dime  Savings  Bank  of  Williamsburgh,  a  mutual  savings  bank
organized  and  operating under the federal laws  of  the  United
States  and  having an office at 209 Havemeyer Street,  Brooklyn,
New  York 11211 ("Bank") and Michael P. Devine, residing at [home
address deleted] and amends and restates the Amended and Restated
Employment Agreement made as of October 1, 1995 between the  Bank
and Mr. Devine.


                     W I T N E S S E T H :


           WHEREAS, Mr. Devine currently serves the Bank  in  the
capacity  of  Executive  Vice  President,  Secretary  and   Chief
Operating Officer; and

           WHEREAS,  the  Bank and Mr. Devine are parties  to  an
Employment Agreement made and entered into as of the 1st  day  of
January,  1992  and amended and restated as of  the  1st  day  of
October, 1995 ("Prior Agreement"); and

           WHEREAS,  the Bank and Mr. Devine desire to amend  and
restate  the Prior Agreement in its entirety as set forth herein;
and

           WHEREAS,  for purposes of securing for  the  Bank  Mr.
Devine's  continued services, the Board of Directors of the  Bank
("Board")  has  approved and authorized  the  execution  of  this
Agreement with Mr. Devine; and

           WHEREAS, Mr. Devine is willing to continue to make his
services  available to the Bank on the terms and  conditions  set
forth herein.

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Bank and Mr. Devine hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)   The Bank hereby represents and warrants  to  Mr.
Devine that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Bank; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which the Bank is a  party
or  by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any  order
of any order of any court or administrative agency, applicable to
the Bank or its business.

           (b)  Mr. Devine hereby represents and warrants to  the
Bank that:

           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

            2.    Employment.   The  Bank  hereby  continues  the
employment  of  Mr.  Devine, and Mr. Devine hereby  accepts  such
continued  employment, during the period and upon the  terms  and
conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

          (b)  Prior to the first anniversary of the date of this
Agreement   and  each  anniversary  date  thereafter  (each,   an
"Anniversary  Date"), the Board shall review the  terms  of  this
Agreement and Mr. Devine's performance of services hereunder  and
may,  in  the  absence of objection from Mr. Devine,  approve  an
extension   of  the  Employment  Period.   In  such  event,   the
Employment  Period shall be extended to the third anniversary  of
the relevant Anniversary Date.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs  and  the Bank is not  subject  to  rules  and
regulations  of  the  Office  of  Thrift  Supervision,  then  the
Employment  Period  shall be extended through and  including  the
third  anniversary of the earliest date after the effective  date
of  such Change of Control on which either the Bank or Mr. Devine
elects,  by  written  notice pursuant to  section  3(d)  of  this
Agreement   to   the  non-electing  party,  to  discontinue   the
Employment Period; provided, however, that this section shall not
apply  in  the  event that, prior to the Change  of  Control  (as
defined in section 13 of this Agreement), Mr. Devine has provided
written  notice  to  the Bank of his intent  to  discontinue  the
Employment Period.

          (d)  The Bank or Mr. Devine may, at any time by written
notice  given  to  the other, elect to terminate this  Agreement.
Any  such  notice  given by the Bank shall be  accompanied  by  a
certified  copy of a resolution, adopted by the affirmative  vote
of  a majority of the entire membership of the Board at a meeting
of the Board duly called and held, authorizing the giving of such
notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:   (i)   Mr. Devine's employment with the  Bank  may  be
terminated during the Employment Period, in accordance  with  the
terms and conditions of this Agreement; and (ii) nothing in  this
Agreement  shall  mandate  or  prohibit  a  continuation  of  Mr.
Devine's  employment following the expiration of  the  Employment
Period  upon such terms and conditions as the Bank and Mr. Devine
may mutually agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

           4.   Duties.  During the Employment Period, Mr. Devine
shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the business and affairs of the Bank and use his best efforts  to
advance the Bank's interests;

           (b)  serve as Executive Vice President, Secretary  and
Chief Operating Officer if duly appointed and/or elected to serve
in such position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board, in accordance  with
organization Certificate, By-laws, Applicable Laws, Statutes  and
Regulations, custom and practice of the Bank as in effect on  the
date first above written.
Mr.  Devine  shall  have  such  authority  as  is  necessary   or
appropriate  to carry out his assigned duties. Mr.  Devine  shall
report  to  and  be subject to direction and supervision  by  the
Board.

          (d)  none of the functions, duties and responsibilities
to be performed by Mr. Devine pursuant to this Agreement shall be
deemed  to  include those functions, duties and  responsibilities
performed by Mr. Devine in his capacity as director of the Bank.

          5.   Compensation -- Salary and Bonus. In consideration
for  services  rendered by Mr. Devine under this  Agreement,  the
Bank shall pay to Mr. Devine a salary at an annual rate equal to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $340,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change  in  Control, the product of Mr. Devine's annual  rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:

                               (i)  1.06;

                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers  of  the Bank (other  than  Mr.
                    Devine) who are assistant vice presidents  or
                    more  senior  officers, divided  by  (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar  year, of the officers of  the  Bank
                    (other  than  Mr. Devine) who  are  assistant
                    vice presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately  equal installments in accordance with  the  Bank's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Devine of a salary in
excess  of  that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent  that  such payment is duly authorized  by  or  under  the
authority of the Board.

           (d)  no portion of the compensation paid to Mr. Devine
pursuant  to  this Agreement shall be deemed to  be  compensation
received by Mr. Devine in his capacity as director of the Bank.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr.  Devine  shall be treated as an employee of the Bank  and  be
entitled to participate in and receive benefits under the  Bank's
Retirement  Plan, Incentive Savings Plan, group life  and  health
(including  medical  and major medical) and disability  insurance
plans,  and  such  other  employee benefit  plans  and  programs,
including   but  not  limited  to  any  long-term  or  short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time,  in  accordance  with  the terms  and  conditions  of  such
employee  benefit plans and programs and compensation  plans  and
programs  and with the Bank's customary practices.   Following  a
Change  in  Control,  all such benefits to Mr.  Devine  shall  be
continued on terms and conditions substantially identical to, and
in  no  event less favorable than, those in effect prior  to  the
Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"), the Bank will provide, or cause to  be  provided,
to  Mr.  Devine  in connection with such Conversion,  stock-based
compensation  and benefits, including, without limitation,  stock
options,   restricted   stock  awards,   and   participation   in
tax-qualified  stock  bonus plans which, in  the  aggregate,  are
either   (A)  accepted  by  Mr.  Devine  in  writing   as   being
satisfactory  for  purposes  of this  Agreement  or  (B)  in  the
written,  good faith opinion of a nationally recognized executive
compensation   consulting  firm  selected   by   the   Bank   and
satisfactory  to  Mr.  Devine,  whose  agreement  shall  not   be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions.

           7.    Board Memberships and Personal Activities.   Mr.
Devine  may serve as a member of the board of directors  of  such
business,  community  and  charitable  organizations  as  he  may
disclose  to  the Board from time to time, and he may  engage  in
personal  business and investment activities for his own account;
provided,  however, that such service and personal  business  and
investment  activities shall not materially  interfere  with  the
performance of his duties under this Agreement.  Mr.  Devine  may
also serve as an officer or director of any parent of the Bank on
such terms and conditions as the Bank and its parent may mutually
agree  upon,  and such service shall not be deemed to  materially
interfere  with Mr. Devine's performance of his duties  hereunder
or otherwise result in a material breach of this Agreement.

           8.    Working  Facilities and Expenses.  Mr.  Devine's
principal  place  of employment shall be at the Bank's  executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.  The Bank shall provide Mr. Devine, at his principal place
of  employment, with a private office, stenographic services  and
other  support services and facilities suitable to  his  position
with the Bank and necessary or appropriate in connection with the
performance  of  his assigned duties under this  Agreement.   The
Bank shall provide Mr. Devine with an automobile suitable to  his
position  with  the Bank in accordance with its prior  practices,
and  such automobile shall be used by Mr. Devine in carrying  out
his  duties under this Agreement, including commuting between his
residence and his principal place of employment.  The Bank  shall
reimburse  Mr.  Devine  for his ordinary and  necessary  business
expenses,  including, without limitation, all expenses associated
with his business use of the aforementioned automobile, fees  for
memberships in such clubs and organizations as Mr. Devine and the
Bank  shall  mutually  agree are necessary  and  appropriate  for
business  purposes and travel and entertainment expenses incurred
in  connection  with  the performance of his  duties  under  this
Agreement,  upon presentation to the Bank of an itemized  account
of such expenses in such form as the Bank may reasonably require.
Mr.  Devine shall be entitled to no less than four (4)  weeks  of
paid vacation  during each year in the Employment Period.

          9.   Termination Giving Rise to Severance Benefits.

          (a)  In the event that Mr. Devine's employment with the
Bank  shall terminate during the Employment Period on account  of
the  termination of Mr. Devine's employment with the  Bank  other
than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

          (ii) a voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement);

           (iii)      a  termination on account of  Mr.  Devine's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A)  Mr. Devine  has  been  absent  from  the
full-time  service of the Bank on account of his  Disability  (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive  months;  and (B) Mr. Devine  shall  have  failed  to
return to work in the full-time service of the Bank within thirty
(30) days after written notice requesting such return is given to
Mr. Devine by the Bank; then the Bank shall provide to Mr. Devine
the  benefits  and pay to Mr. Devine the amounts  provided  under
section 9(b) of this Agreement.

          (b)  In the event that Mr. Devine's employment with the
Bank  shall  terminate under circumstances described  in  section
9(a)  of  this Agreement or if the Bank terminates this Agreement
pursuant  to  section  3(d), the following benefits  and  amounts
shall be paid or provided to Mr. Devine (or, in the event of  his
death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;

           (ii) (A) the benefits, if any, to which Mr. Devine and
his  family and dependents are entitled as a former employee,  or
family  or  dependents of a former employee, under  the  employee
benefit  plans and programs and compensation plans  and  programs
maintained  for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on  the  date  of  his  termination  of  employment,  or  if  his
termination  of employment occurs after a Change in  Control,  on
the  date of his termination of employment or on the date of such
Change  in Control, whichever results in more favorable  benefits
as  determined  by Mr. Devine, where credit is  given  for  three
additional  years  of service and age in determining  eligibility
and  benefits for any plan and program where age and service  are
relevant  factors, and (B) payment for all unused  vacation  days
and  floating  holidays in the year in which  his  employment  is
terminated, at his highest annual rate of salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer,  if and to the extent necessary to provide  Mr.  Devine
and  his  family  and  dependents  for  the  Remaining  Unexpired
Employment Period, coverage identical to and in any event no less
favorable  than  the  coverage to  which  they  would  have  been
entitled  under  such plans (as in effect  on  the  date  of  his
termination  of employment, or, if his termination of  employment
occurs  after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such  Change  in  Control, whichever results  in  more  favorable
benefits as determined by Mr. Devine) if he had continued working
for the Bank during the Remaining Unexpired Employment Period  at
the highest annual rate of compensation (assuming, if a Change in
Control  has  occurred, that the annual increases  under  section
5(c) would apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the present value of the salary and the bonus that  Mr.
Devine would have earned if he had worked for the Bank during the
Remaining Unexpired Employment Period at the highest annual  rate
of  salary  (assuming, if a Change in Control has occurred,  that
the  annual  increases under section 5(c) would  apply)  and  the
highest bonus as a percentage of the rate of salary provided  for
under  this  Agreement,  where  such  present  value  is  to   be
determined  using a discount rate of six percent (6%) per  annum,
compounded,   in   the  case  of  salary,  with   the   frequency
corresponding to the Bank's regular payroll periods with  respect
to its officers, and, in the case of bonus, annually;

           (v)  within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans   maintained  by,  or  covering  employees  of,  the   Bank
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for  the  Bank during the Remaining Unexpired  Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Bank  during  the  Remaining Unexpired  Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees  of,  the Bank as of the date of his termination  where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable  to the Bank's contribution  to  which  he
would be entitled under any defined contribution plans maintained
by,  or  covering employees of, the Bank (including  any  "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if  he  had worked for  the  Bank  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment  Period which  is  prior  to  Mr.  Devine's
termination of employment with the Bank, and been fully vested in
such  plan  or plans, over (B) the present value of the  benefits
attributable to the Bank's contributions to which he is  actually
entitled  under  such plans as of the date of his termination  of
employment  with the Bank, where such present values  are  to  be
determined  using a discount rate of six percent (6%) per  annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;

          (vii)     the payments that would have been made to Mr.
Devine  under any incentive compensation plan maintained  by,  or
covering  employees of, the Bank (other than  bonus  payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working  for the Bank during the  Remaining  Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to Mr. Devine under such incentive compensation  plan,
multiplied by (B) the compensation that would have been  paid  to
Mr.  Devine during each calendar year at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the  Agreement, such payments to be made at the same time and  in
the  same  manner as payments are made to other officers  of  the
Bank  pursuant to the terms of such incentive compensation  plan;
provided,  however,  that payments under this  section  9(b)(vii)
shall  not be made to Mr. Devine for any year on account of which
no payments are made to any of the Bank's officers under any such
incentive compensation plan; and

           (viii)    the benefits to which Mr. Devine is entitled
under the Bank's Supplemental Executive Retirement Plan (or other
excess  benefits plan with the meaning of section 3(36) of  ERISA
or other special or supplemental plan) shall be paid to him in  a
lump  sum,  where such lump sum is computed using  the  mortality
tables under the Bank's tax-qualified pension plan and a discount
rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty (30) days after the date of Mr. Devine's election,
and  if  the  amount may be increased by a subsequent  Change  in
Control, any additional payment shall be made within thirty  (30)
days of such Change in Control.

           (c)  Mr. Devine shall not be required to mitigate  the
amount  of any payment provided for in this section 9 by  seeking
other  employment  or  otherwise, nor shall  the  amount  of  any
payment  or benefit provided for in this section 9 be reduced  by
any compensation earned by Mr. Devine as the result of employment
by  another  employer, by retirement benefits, by offset  against
any  amount  claimed to be owed by Mr. Devine  to  the  Bank,  or
otherwise  except as specifically provided in section 9(b)  (iii)
of this Agreement.  The Bank and Mr. Devine hereby stipulate that
the  damages which may be incurred by Mr. Devine as a consequence
of any such termination of employment are not capable of accurate
measurement  as  of  the date first above written  and  that  the
benefits and payments provided for in this Agreement constitute a
reasonable  estimate  under  the  circumstances  of  all  damages
sustained as a consequence of any such termination of employment,
other  than  damages arising under or out of  any  stock  option,
restricted  stock  or  other non-qualified stock  acquisition  or
investment  plan or program, it being understood and agreed  that
this  Agreement  shall not determine the measurement  of  damages
under  any such plan or program in respect of any termination  of
employment.

           10.   Termination Without Severance Benefits.  In  the
event  that Mr. Devine's employment with the Bank shall terminate
during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);

           (b)  voluntary resignation by Mr. Devine other than  a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement); or

          (c)  Mr. Devine's death;

then  the  Bank  shall  have no further  obligations  under  this
Agreement, other than the payment to Mr. Devine (or, in the event
of  his death, to his estate) of his earned but unpaid salary  as
of  the  date  of  the  termination of his  employment,  and  the
provision of such other benefits, if any, to which he is entitled
as  a former employee under the Bank's employee benefit plans and
programs and compensation plans and programs and payment for  all
unused  vacation days and floating holidays in the year in  which
his  employment is terminated, at his highest annual  salary  for
such year.

          11.  Death and Disability.

           (a)   Death.  If Mr. Devine's employment is terminated
by  reason  of  Mr. Devine's death during the Employment  Period,
this Agreement shall terminate without further obligations to Mr.
Devine's  legal representatives under this Agreement, other  than
for  payment of amounts and provision of benefits under  sections
9(b)  (i)  and (ii); provided, however, that if Mr.  Devine  dies
while   in   the   employment  of  the   Bank,   his   designated
beneficiary(ies) shall receive a death benefit,  payable  through
life  insurance or otherwise, which is the equivalent  on  a  net
after-tax  basis of the death benefit payable under a  term  life
insurance policy, with a stated death benefit of three times  Mr.
Devine's then Annual Base Salary.

            (b)   Disability.   If  Mr.  Devine's  employment  is
terminated  by  reason of Mr. Devine's Disability as  defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without further obligations to Mr. Devine, other  than
for  payment  of amounts and provision of benefits under  section
9(b)  (i) and (ii); provided, however, that in the event  of  Mr.
Devine's Disability while in the employment of the Bank, the Bank
will  pay to him a lump sum amount equal to three times his  then
Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined in accordance with the terms of the Bank's long  term
disability policy.

           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Devine's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

           (a)   Mr. Devine's termination of employment with  the
Bank   shall  be  deemed  a  "Termination  for  Cause"  if   such
termination  occurs  for "cause," which,  for  purposes  of  this
Agreement  shall mean personal dishonesty, incompetence,  willful
misconduct,  breach of fiduciary duty involving personal  profit,
intentional  failure to perform stated duties, willful  violation
of  any law, rule or regulation (other than traffic violations or
similar  offenses)  or  final cease  and  desist  order,  or  any
material  breach  of  this Agreement, in each  case  as  measured
against  standards generally prevailing at the relevant  time  in
the  savings and community banking industry;  provided,  however,
that  Mr. Devine shall not be deemed to have been discharged  for
cause unless and until he shall have received a written notice of
termination  from  the Board, accompanied by  a  resolution  duly
adopted by affirmative vote of a majority of the entire Board  at
a  meeting  called  and held for such purpose  (after  reasonable
notice  to Mr. Devine and a reasonable opportunity for Mr. Devine
to  make  oral  and written presentations to the members  of  the
Board, on his own behalf, or through a representative, who may be
his  legal  counsel,  to  refute the  grounds  for  the  proposed
determination)  finding that in the good  faith  opinion  of  the
Board grounds exist for discharging Mr. Devine for cause.

           (b)   Mr. Devine's termination of employment with  the
Bank  shall  be  deemed a Resignation for  Good  Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)   (A)  the assignment to Mr. Devine of any  duties
inconsistent   with  Mr.  Devine's  status  as   Executive   Vice
President, Secretary and Chief Operating Officer of the  Bank  or
(B)  a substantial adverse alteration in the nature or status  of
Mr.  Devine's  responsibilities from those in effect  immediately
prior  to  the alteration; or (C) any Change in Control described
in section 13(b);

           (ii)  a  reduction by the Bank in Mr. Devine's  annual
base  salary as in effect on the date first above written  or  as
the  same  may  be  increased  from time  to  time,  unless  such
reduction  was  mandated  at  the initiation  of  any  regulatory
authority having jurisdiction over the Bank;

           (iii)      the  relocation  of  the  Bank's  principal
executive offices to a location outside the New York metropolitan
area  or  the  Bank's requiring Mr. Devine to be  based  anywhere
other  than  the  Bank's principal executive offices  except  for
required travel on the Bank's business to an extent substantially
consistent with Mr. Devine's business travel obligations  at  the
date first above written;

           (iv)  the  failure by the Bank, without  Mr.  Devine's
consent, to pay to Mr. Devine, within seven (7) days of the  date
when due, (A) any portion of his compensation, or (B) any portion
of  an  installment of deferred compensation under  any  deferred
compensation   program  of  the  Bank,  which  failure   is   not
inadvertent and immaterial and which is not promptly cured by the
Bank  after  notice of such failure is given to the Bank  by  the
Executive;

           (v)  the failure by the Bank to continue in effect any
compensation  plan  in  which Mr. Devine  participates  which  is
material to his total compensation, including but not limited  to
the  Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in  an
ongoing  substitute  or  alternative plan)  has  been  made  with
respect to such plan, or the failure by the Bank to continue  his
participation therein (or in such substitute or alternative plan)
on  a  basis not materially less favorable, both in terms of  the
amount  of  benefits provided and the level of his  participation
relative to other participants, unless such failure is the result
of  action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;

          (vi) the failure by the Bank to continue to provide Mr.
Devine  with benefits substantially similar to those  enjoyed  by
Mr.  Devine  under  the Retirement Plan and the Bank's  Incentive
Savings  Plan or under any of the Bank's life, health  (including
hospitalization,  medical and major medical),  dental,  accident,
and  long-term disability insurance benefits, in which Mr. Devine
is  participating, or the taking of any action by the Bank  which
would  directly  or  indirectly materially  reduce  any  of  such
benefits  or  deprive Mr. Devine of the number of  paid  vacation
days  to  which he is entitled, on the basis of years of  service
with  the Bank, rank or otherwise, in accordance with the  Bank's
normal  vacation  policy, unless such failure is  the  result  of
action  mandated  at  the initiation of any regulatory  authority
having jurisdiction over the Bank;

            (vii)      the  failure  of  the  Bank  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the Bank which is not effected pursuant the provisions of section
12(a)   regarding  Termination  for  Cause  or  on   account   of
Disability;

           (ix)  a material breach of this Agreement by the Bank,
which  the  Bank fails to cure within thirty (30) days  following
written notice thereof from Mr. Devine;

           (x)  in the event of a Change in Control described  in
section  13(b)  of  this  Agreement, a failure  of  the  Bank  to
provide,  or  cause to be provided, to Mr. Devine  in  connection
with  such  Change  in  Control,  stock-based  compensation   and
benefits,   including,   without   limitation,   stock   options,
restricted stock awards, and participation in tax-qualified stock
bonus  plans which, in the aggregate, are either (A) accepted  by
Mr.  Devine in writing as being satisfactory for purposes of this
Agreement  or  (B)  in  the  written, good  faith  opinion  of  a
nationally  recognized  executive  compensation  consulting  firm
selected  by  the  Bank  and satisfactory to  Mr.  Devine,  whose
agreement  shall  not  be  unreasonably  withheld,  are  no  less
favorable than the stock-based compensation and benefits  usually
and  customarily  provided to similarly  situated  executives  of
similar   financial  institutions  in  connection  with   similar
transactions; or

           (xi)  a  change  in the position to which  Mr.  Devine
reports;

          (xii)     in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Bank shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of  the  Bank; (B) a corporation  owned,  directly  or
indirectly, by the stockholders of the Bank in substantially  the
same proportions as their ownership of stock of the Bank; or  (C)
Mr. Devine, or any group otherwise constituting a person in which
Mr.  Devine  is  a  member, becomes the  "beneficial  owner"  (as
defined  in  Rule  13d-3  promulgated under  the  Exchange  Act),
directly  or  indirectly,  of  securities  issued  by  the   Bank
representing 25% or more of the combined voting power of  all  of
the Bank's then outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank  to effect a transaction described in section 13(a) or 13(c)
of  this Agreement) whose election by the Board or nomination for
election  by  the  Bank's  stockholders  was  approved   by   the
affirmative vote of at least two-thirds of the members  of  Board
then  in office who were either members of the Board on the  date
first   above  written  or  whose  nomination  or  election   was
previously  so  approved  cease for any reason  to  constitute  a
majority  of  the members of the Board, but excluding,  for  this
purpose,  any such individual whose initial assumption of  office
is  in  connection with an actual or threatened election  contest
relating to the election of directors of the Bank (as such  terms
are  used in Rule 14a-11 of Regulation 14A promulgated under  the
Exchange Act); or

          (c)  the shareholders of the Bank approve either:

                (i)   a merger or consolidation of the Bank  with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (A) the members of the
               Board of the Bank immediately prior to such merger
               or consolidation constitute at least a majority of
               the   members  of  the  governing  body   of   the
               institution   resulting  from   such   merger   or
               consolidation; or (B) the shareholders of the Bank
               own  securities of the institution resulting  from
               such  merger or consolidation representing 80%  or
               more  of  the  combined voting power of  all  such
               securities  then outstanding in substantially  the
               same  proportions  as  their ownership  of  voting
               securities  of  the  Bank before  such  merger  or
               consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to   assume  and  perform   the   Bank's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Bank or
an  agreement for the sale or disposition by the Bank of  all  or
substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a), (b) or (c) if the term "Company" were substituted for  the
term  "Bank"  therein.  Such an event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Devine's  employment during  the  Employment  Period  or
thereafter, whether by the Bank or by Mr. Devine, shall  have  no
effect on the rights and obligations of the parties hereto  under
the  Bank's the Retirement Plan and the Bank's Incentive  Savings
Plan, group life, health (including hospitalization, medical  and
major   medical),  dental,  accident  and  long  term  disability
insurance plans or such other employee benefit plans or programs,
or  compensation  plans  or  programs (whether  or  not  employee
benefit plans or programs) and, following the conversion  of  the
Bank  to  stock  form,  any stock option and appreciation  rights
plan, employee stock ownership plan and restricted stock plan, as
may  be maintained by, or cover employees of, the Bank from  time
to time.

          15.  Successors and Assigns.

           (a)   The  Bank  shall require any successor  (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets of the Bank to expressly assume and agree to perform  this
Agreement in the same manner and to the same extent that the Bank
would  be required to perform it if no such succession had  taken
place.  Failure  of  the  Bank  to  obtain  such  assumption  and
agreement prior to the effectiveness of any such succession shall
be   deemed  to  constitute  a  material  breach  of  the  Bank's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Devine, his legal representatives and testate or
intestate distributees, and the Bank, their respective successors
and  assigns,  including any successor by merger or consolidation
or   a  statutory  receiver  or  any  other  person  or  firm  or
corporation  to which all or substantially all of the  respective
assets  and  business  of  the Bank  may  be  sold  or  otherwise
transferred.

           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Devine:

          [Home address deleted].


          If to the Bank:

          The Dime Savings Bank of Williamsburgh
          209 Havemeyer Street
          Brooklyn, New York 11211

          Attention:  Corporate Secretary

          With a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright

           17.   Indemnification and Attorneys'  Fees.  The  Bank
shall  pay  to  or on behalf of Mr. Devine all reasonable  costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however,  that  Mr. Devine  shall  have  substantially
prevailed on the merits pursuant to a judgment, decree  or  order
of  a  court of competent jurisdiction or of an arbitrator in  an
arbitration  proceeding, or in a settlement;  provided,  further,
that this section 17 shall not obligate the Bank to pay costs and
legal fees on behalf of Mr. Devine under this Agreement in excess
of  $50,000.   For  purposes  of this Agreement,  any  settlement
agreement which provides for payment of any amounts in settlement
of  the Bank's obligations hereunder shall be conclusive evidence
of Mr. Devine's entitlement to indemnification hereunder, and any
such  indemnification payments shall be in  addition  to  amounts
payable  pursuant  to  such  settlement  agreement,  unless  such
settlement agreement expressly provides otherwise.

           18.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           19.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           20.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

          21.  Governing Law. This Agreement shall be governed by
and  construed and enforced in accordance with the  laws  of  the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            22.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement,  unless otherwise stated.  Any reference to  the  term
"Board"  shall mean the Board of Trustees of the Bank  while  the
Bank  is a mutual savings bank and the Board of Directors of  the
Bank  while  the Bank is a stock savings bank.  Any reference  to
the  term "Bank" shall mean the Bank in its mutual form prior  to
the conversion and in its stock form on and after the conversion.
If  the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.

           23.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr.  Devine.  No modifications of this Agreement shall  be  valid
unless made in writing and signed by the parties hereto.

           24.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Bank.

           25.   Required  Regulatory Provisions.  The  following
provisions  are  included  for the  purposes  of  complying  with
various   laws,   rules  and  regulations   applicable   to   the
Association:

           (a)  Notwithstanding anything herein contained to  the
contrary,  in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive  of
amounts described in section 9(b)(i) and (viii)) exceed the three
times  the Executive's average annual total compensation for  the
last  five  consecutive  calendar  years  to  end  prior  to  his
termination of employment with the Association (or for his entire
period  of  employment with the Association  if  less  than  five
calendar years).

           (b)  Notwithstanding anything herein contained to  the
contrary,  any  payments  to the Executive  by  the  Association,
whether  pursuant to this Agreement or otherwise, are subject  to
and  conditioned upon their compliance with section 18(k) of  the
Federal  Deposit  Insurance Act ("FDI Act"), 12 U.S.C.  Section
1828(k), and any regulations promulgated thereunder.

           (c)  Notwithstanding anything herein contained to  the
contrary,  if  the  Executive  is suspended  from  office  and/or
temporarily prohibited from participating in the conduct  of  the
affairs  of  the  Association pursuant to a notice  served  under
section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818
(e)(3) or 1818(g)(1),  the  Association's  obligations under this
Agreement shall  be suspended as of the date of service  of  such
notice, unless stayed by appropriate proceedings.  If the charges
in such notice are dismissed, the Association, in its discretion,
may (i) pay  to  the  Executive  all or part of the compensation
withheld while the Association's obligations hereunder were
suspended  and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.

           (d)  Notwithstanding anything herein contained to  the
contrary,   if  the  Executive  is  removed  and/or   permanently
prohibited from participating in the conduct of the Association's
affairs  by  an order issued under section 8(e)(4) or 8(g)(1)  of
the  FDI  Act,  12 U.S.C. Section 1818(e)(4) or (g)(1), all
prospective obligations of the Association under  this  Agreement
shall terminate as of the effective date of the order, but vested
rights and obligations of the Association and the Executive shall
not be affected.

           (e)  Notwithstanding anything herein contained to  the
contrary, if the Association is in default (within the meaning of
section  3(x)(1)  of  the FDI Act, 12  U.S.C. Section 1813(x)(1),
all prospective obligations of the Association under this Agreement
shall terminate as of the date of default, but vested rights  and
obligations  of the Association and the Executive  shall  not  be
affected.

           (f)  Notwithstanding anything herein contained to  the
contrary,   all   prospective  obligations  of  the   Association
hereunder  shall  be  terminated, except to  the  extent  that  a
continuation  of  this Agreement is necessary for  the  continued
operation of the Association:  (i) by the Director of the OTS  or
his   designee  or  the  Federal  Deposit  Insurance  Corporation
("FDIC"),  at  the  time the FDIC enters  into  an  agreement  to
provide  assistance to or on behalf of the Association under  the
authority  contained in section 13(c) of the FDI Act,  12  U.S.C.
Section 1823(c); (ii) by the Director of the OTS or his  designee
at the time such Director or designee approves a supervisory merger
to resolve problems related to the operation of the Association or
when  the Association is determined by such Director to be in  an
unsafe  or  unsound condition.  The vested rights and obligations
of the parties shall not be affected.

If  and to the extent that any of the foregoing provisions  shall
cease  to  be  required or by applicable law, rule or regulation,
the  same shall become inoperative as though eliminated by formal
amendment of this Agreement.


IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and Mr. Devine has hereto set his hand, all as of the day and year first above written. /s/ Michael P. Devine MICHAEL P. DEVINE ATTEST THE DIME SAVINGS BANK OF WILLIAMSBURGH By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].



           AMENDED AND RESTATED EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered into as of the 26th day of June, 1996, by and between The
Dime  Savings  Bank  of  Williamsburgh,  a  mutual  savings  bank
organized  and  operating under the federal laws  of  the  United
States  and  having an office at 209 Havemeyer Street,  Brooklyn,
New  York 11211 ("Bank") and Kenneth J. Mahon, residing at  [home
address deleted] and amends and restates the Amended and Restated
Employment Agreement made as of October 1, 1995 between the  Bank
and Mr. Mahon.


                     W I T N E S S E T H :


           WHEREAS,  Mr. Mahon currently serves the Bank  in  the
capacity  of  Senior Vice President and Chief Financial  Officer;
and

           WHEREAS,  the  Bank and Mr. Mahon are  parties  to  an
Employment Agreement made and entered into as of the 1st  day  of
January,  1992  and amended and restated as of  the  1st  day  of
October, 1995 ("Prior Agreement"); and

           WHEREAS,  the Bank and Mr. Mahon desire to  amend  and
restate  the Prior Agreement in its entirety as set forth herein;
and

           WHEREAS,  for purposes of securing for  the  Bank  Mr.
Mahon's  continued services, the Board of Directors of  the  Bank
("Board")  has  approved and authorized  the  execution  of  this
Agreement with Mr. Mahon; and

           WHEREAS, Mr. Mahon is willing to continue to make  his
services  available to the Bank on the terms and  conditions  set
forth herein.

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Bank and Mr. Mahon hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)   The Bank hereby represents and warrants  to  Mr.
Mahon that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Bank; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which the Bank is a  party
or  by which it is bound, or (B) any provision of law, including,
without limitation, any statute, rule or regulation or any  order
of any order of any court or administrative agency, applicable to
the Bank or its business.

           (b)   Mr. Mahon hereby represents and warrants to  the
Bank that:

           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

            2.    Employment.   The  Bank  hereby  continues  the
employment  of  Mr.  Mahon,  and Mr. Mahon  hereby  accepts  such
continued  employment, during the period and upon the  terms  and
conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

          (b)  Prior to the first anniversary of the date of this
Agreement   and  each  anniversary  date  thereafter  (each,   an
"Anniversary  Date"), the Board shall review the  terms  of  this
Agreement  and Mr. Mahon's performance of services hereunder  and
may,  in  the  absence of objection from Mr.  Mahon,  approve  an
extension   of  the  Employment  Period.   In  such  event,   the
Employment  Period shall be extended to the third anniversary  of
the relevant Anniversary Date.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs  and  the Bank is not  subject  to  rules  and
regulations  of  the  Office  of  Thrift  Supervision,  then  the
Employment  Period  shall be extended through and  including  the
third  anniversary of the earliest date after the effective  date
of  such Change of Control on which either the Bank or Mr.  Mahon
elects,  by  written  notice pursuant to  section  3(d)  of  this
Agreement   to   the  non-electing  party,  to  discontinue   the
Employment Period; provided, however, that this section shall not
apply  in  the  event that, prior to the Change  of  Control  (as
defined  in section 13 of this Agreement), Mr. Mahon has provided
written  notice  to  the Bank of his intent  to  discontinue  the
Employment Period.

           (d)  The Bank or Mr. Mahon may, at any time by written
notice  given  to  the other, elect to terminate this  Agreement.
Any  such  notice  given by the Bank shall be  accompanied  by  a
certified  copy of a resolution, adopted by the affirmative  vote
of  a majority of the entire membership of the Board at a meeting
of the Board duly called and held, authorizing the giving of such
notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:   (i)   Mr. Mahon's employment with  the  Bank  may  be
terminated during the Employment Period, in accordance  with  the
terms and conditions of this Agreement; and (ii) nothing in  this
Agreement shall mandate or prohibit a continuation of Mr. Mahon's
employment following the expiration of the Employment Period upon
such  terms and conditions as the Bank and Mr. Mahon may mutually
agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

           4.    Duties.  During the Employment Period, Mr. Mahon
shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the business and affairs of the Bank and use his best efforts  to
advance the Bank's interests;

          (b)  serve as Senior Vice President and Chief Financial
Officer  if  duly  appointed and/or  elected  to  serve  in  such
position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board, in accordance  with
organization Certificate, By-laws, Applicable Laws, Statutes  and
Regulations, custom and practice of the Bank as in effect on  the
date first above written.
Mr.   Mahon  shall  have  such  authority  as  is  necessary   or
appropriate  to  carry out his assigned duties. Mr.  Mahon  shall
report  to  and  be subject to direction and supervision  by  the
Board.

          5.   Compensation -- Salary and Bonus. In consideration
for services rendered by Mr. Mahon under this Agreement, the Bank
shall pay to Mr. Mahon a salary at an annual rate equal to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $178,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change  in  Control, the product of Mr. Mahon's  annual  rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:

                              (i)  1.06;

                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers  of  the Bank (other  than  Mr.
                    Mahon)  who are assistant vice presidents  or
                    more  senior  officers, divided  by  (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar  year, of the officers of  the  Bank
                    (other than Mr. Mahon) who are assistant vice
                    presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately  equal installments in accordance with  the  Bank's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Mahon of a salary  in
excess  of  that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent  that  such payment is duly authorized  by  or  under  the
authority of the Board.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr.  Mahon  shall be treated as an employee of the  Bank  and  be
entitled to participate in and receive benefits under the  Bank's
Retirement  Plan, Incentive Savings Plan, group life  and  health
(including  medical  and major medical) and disability  insurance
plans,  and  such  other  employee benefit  plans  and  programs,
including   but  not  limited  to  any  long-term  or  short-term
incentive compensation plans or programs (whether or not employee
benefit plans or programs), as the Bank may maintain from time to
time,  in  accordance  with  the terms  and  conditions  of  such
employee  benefit plans and programs and compensation  plans  and
programs  and with the Bank's customary practices.   Following  a
Change  in  Control,  all such benefits to  Mr.  Mahon  shall  be
continued on terms and conditions substantially identical to, and
in  no  event less favorable than, those in effect prior  to  the
Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"), the Bank will provide, or cause to  be  provided,
to  Mr.  Mahon  in  connection with such Conversion,  stock-based
compensation  and benefits, including, without limitation,  stock
options,   restricted   stock  awards,   and   participation   in
tax-qualified  stock  bonus plans which, in  the  aggregate,  are
either (A) accepted by Mr. Mahon in writing as being satisfactory
for  purposes of this Agreement or (B) in the written, good faith
opinion   of   a  nationally  recognized  executive  compensation
consulting  firm  selected by the Bank and  satisfactory  to  Mr.
Mahon, whose agreement shall not be unreasonably withheld, are no
less  favorable  than the stock-based compensation  and  benefits
usually and customarily provided to similarly situated executives
of  similar  financial  institutions in connection  with  similar
transactions.

           7.    Board Memberships and Personal Activities.   Mr.
Mahon  may  serve as a member of the board of directors  of  such
business,  community  and  charitable  organizations  as  he  may
disclose  to  the Board from time to time, and he may  engage  in
personal  business and investment activities for his own account;
provided,  however, that such service and personal  business  and
investment  activities shall not materially  interfere  with  the
performance  of his duties under this Agreement.  Mr.  Mahon  may
also serve as an officer or director of any parent of the Bank on
such terms and conditions as the Bank and its parent may mutually
agree  upon,  and such service shall not be deemed to  materially
interfere with Mr. Mahon's performance of his duties hereunder or
otherwise result in a material breach of this Agreement.

           8.    Working  Facilities and Expenses.   Mr.  Mahon's
principal  place  of employment shall be at the Bank's  executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.  The Bank shall provide Mr. Mahon, at his principal  place
of  employment, with a private office, stenographic services  and
other  support services and facilities suitable to  his  position
with the Bank and necessary or appropriate in connection with the
performance  of  his assigned duties under this  Agreement.   The
Bank  shall  reimburse Mr. Mahon for his ordinary  and  necessary
business  expenses,  including,  without  limitation,  fees   for
memberships in such clubs and organizations as Mr. Mahon and  the
Bank  shall  mutually  agree are necessary  and  appropriate  for
business  purposes and travel and entertainment expenses incurred
in  connection  with  the performance of his  duties  under  this
Agreement,  upon presentation to the Bank of an itemized  account
of such expenses in such form as the Bank may reasonably require.
Mr.  Mahon  shall be entitled to no less than four (4)  weeks  of
paid vacation  during each year in the Employment Period.

          9.   Termination Giving Rise to Severance Benefits.

           (a)  In the event that Mr. Mahon's employment with the
Bank  shall terminate during the Employment Period on account  of
the  termination of Mr. Mahon's employment with  the  Bank  other
than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

           (ii) a voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement);

           (iii)      a  termination on account  of  Mr.  Mahon's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A)  Mr.  Mahon  has  been  absent  from  the
full-time  service of the Bank on account of his  Disability  (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive months; and (B) Mr. Mahon shall have failed to return
to  work in the full-time service of the Bank within thirty  (30)
days after written notice requesting such return is given to  Mr.
Mahon  by the Bank; then the Bank shall provide to Mr. Mahon  the
benefits and pay to Mr. Mahon the amounts provided under  section
9(b) of this Agreement.

           (b)  In the event that Mr. Mahon's employment with the
Bank  shall  terminate under circumstances described  in  section
9(a)  of  this Agreement or if the Bank terminates this Agreement
pursuant  to  section  3(d), the following benefits  and  amounts
shall  be paid or provided to Mr. Mahon (or, in the event of  his
death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Bank, payable when due but
in no event later than thirty (30) days following his termination
of employment with the Bank;

           (ii) (A) the benefits, if any, to which Mr. Mahon  and
his  family and dependents are entitled as a former employee,  or
family  or  dependents of a former employee, under  the  employee
benefit  plans and programs and compensation plans  and  programs
maintained  for the benefit of the Bank's officers and employees,
in accordance with the terms of such plans and programs in effect
on  the  date  of  his  termination  of  employment,  or  if  his
termination  of employment occurs after a Change in  Control,  on
the  date of his termination of employment or on the date of such
Change  in Control, whichever results in more favorable  benefits
as  determined  by  Mr. Mahon, where credit is  given  for  three
additional  years  of service and age in determining  eligibility
and  benefits for any plan and program where age and service  are
relevant  factors, and (B) payment for all unused  vacation  days
and  floating  holidays in the year in which  his  employment  is
terminated, at his highest annual rate of salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer, if and to the extent necessary to provide Mr. Mahon and
his  family and dependents for the Remaining Unexpired Employment
Period,  coverage identical to and in any event no less favorable
than  the  coverage to which they would have been entitled  under
such  plans  (as  in  effect on the date of  his  termination  of
employment, or, if his termination of employment occurs  after  a
Change  in  Control, on the date of his termination of employment
or  during the one-year period ending on the date of such  Change
in  Control,  whichever  results in more  favorable  benefits  as
determined by Mr. Mahon) if he had continued working for the Bank
during  the Remaining Unexpired Employment Period at the  highest
annual rate of compensation (assuming, if a Change in Control has
occurred,  that  the  annual increases under section  5(c)  would
apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the present value of the salary and the bonus that  Mr.
Mahon would have earned if he had worked for the Bank during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  salary  (assuming, if a Change in Control has occurred,  that
the  annual  increases under section 5(c) would  apply)  and  the
highest bonus as a percentage of the rate of salary provided  for
under  this  Agreement,  where  such  present  value  is  to   be
determined  using a discount rate of six percent (6%) per  annum,
compounded,   in   the  case  of  salary,  with   the   frequency
corresponding to the Bank's regular payroll periods with  respect
to its officers, and, in the case of bonus, annually;

           (v)  within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans   maintained  by,  or  covering  employees  of,  the   Bank
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for  the  Bank during the Remaining Unexpired  Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Bank  during  the  Remaining Unexpired  Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees  of,  the Bank as of the date of his termination  where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment  with the Bank, a lump sum payment  in  an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable  to the Bank's contribution  to  which  he
would be entitled under any defined contribution plans maintained
by,  or  covering employees of, the Bank (including  any  "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if  he  had worked for  the  Bank  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment  Period  which  is  prior  to  Mr.  Mahon's
termination of employment with the Bank, and been fully vested in
such  plan  or plans, over (B) the present value of the  benefits
attributable to the Bank's contributions to which he is  actually
entitled  under  such plans as of the date of his termination  of
employment  with the Bank, where such present values  are  to  be
determined  using a discount rate of six percent (6%) per  annum,
compounded with the frequency corresponding to the Bank's regular
payroll periods with respect to its officers;

          (vii)     the payments that would have been made to Mr.
Mahon  under  any incentive compensation plan maintained  by,  or
covering  employees of, the Bank (other than  bonus  payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working  for the Bank during the  Remaining  Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to  Mr. Mahon under such incentive compensation  plan,
multiplied by (B) the compensation that would have been  paid  to
Mr. Mahon during each calendar year at the highest annual rate of
compensation (assuming, if a Change in Control has occurred, that
the  annual increases under section 5(c) would apply)  under  the
Agreement, such payments to be made at the same time and  in  the
same  manner as payments are made to other officers of  the  Bank
pursuant  to  the  terms  of  such incentive  compensation  plan;
provided,  however,  that payments under this  section  9(b)(vii)
shall  not be made to Mr. Mahon for any year on account of  which
no payments are made to any of the Bank's officers under any such
incentive compensation plan; and

           (viii)     the benefits to which Mr. Mahon is entitled
under the Bank's Supplemental Executive Retirement Plan (or other
excess  benefits plan with the meaning of section 3(36) of  ERISA
or other special or supplemental plan) shall be paid to him in  a
lump  sum,  where such lump sum is computed using  the  mortality
tables under the Bank's tax-qualified pension plan and a discount
rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty (30) days after the date of Mr. Mahon's  election,
and  if  the  amount may be increased by a subsequent  Change  in
Control, any additional payment shall be made within thirty  (30)
days of such Change in Control.

           (c)   Mr. Mahon shall not be required to mitigate  the
amount  of any payment provided for in this section 9 by  seeking
other  employment  or  otherwise, nor shall  the  amount  of  any
payment  or benefit provided for in this section 9 be reduced  by
any  compensation earned by Mr. Mahon as the result of employment
by  another  employer, by retirement benefits, by offset  against
any  amount  claimed  to be owed by Mr. Mahon  to  the  Bank,  or
otherwise  except as specifically provided in section 9(b)  (iii)
of  this Agreement.  The Bank and Mr. Mahon hereby stipulate that
the  damages  which may be incurred by Mr. Mahon as a consequence
of any such termination of employment are not capable of accurate
measurement  as  of  the date first above written  and  that  the
benefits and payments provided for in this Agreement constitute a
reasonable  estimate  under  the  circumstances  of  all  damages
sustained as a consequence of any such termination of employment,
other  than  damages arising under or out of  any  stock  option,
restricted  stock  or  other non-qualified stock  acquisition  or
investment  plan or program, it being understood and agreed  that
this  Agreement  shall not determine the measurement  of  damages
under  any such plan or program in respect of any termination  of
employment.

           10.   Termination Without Severance Benefits.  In  the
event  that Mr. Mahon's employment with the Bank shall  terminate
during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);

           (b)   voluntary resignation by Mr. Mahon other than  a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement); or

          (c)  Mr. Mahon's death;

then  the  Bank  shall  have no further  obligations  under  this
Agreement, other than the payment to Mr. Mahon (or, in the  event
of  his death, to his estate) of his earned but unpaid salary  as
of  the  date  of  the  termination of his  employment,  and  the
provision of such other benefits, if any, to which he is entitled
as  a former employee under the Bank's employee benefit plans and
programs and compensation plans and programs and payment for  all
unused  vacation days and floating holidays in the year in  which
his  employment is terminated, at his highest annual  salary  for
such year.

          11.  Death and Disability.

          (a)  Death.  If Mr. Mahon's employment is terminated by
reason  of  Mr. Mahon's death during the Employment Period,  this
Agreement  shall  terminate without further  obligations  to  Mr.
Mahon's  legal representatives under this Agreement,  other  than
for  payment of amounts and provision of benefits under  sections
9(b)  (i)  and  (ii); provided, however, that if Mr.  Mahon  dies
while   in   the   employment  of  the   Bank,   his   designated
beneficiary(ies) shall receive a death benefit,  payable  through
life  insurance or otherwise, which is the equivalent  on  a  net
after-tax  basis of the death benefit payable under a  term  life
insurance policy, with a stated death benefit of three times  Mr.
Mahon's then Annual Base Salary.

            (b)   Disability.   If  Mr.  Mahon's  employment   is
terminated  by  reason of Mr. Mahon's Disability  as  defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without further obligations to Mr. Mahon,  other  than
for  payment  of amounts and provision of benefits under  section
9(b)  (i) and (ii); provided, however, that in the event  of  Mr.
Mahon's Disability while in the employment of the Bank, the  Bank
will  pay to him a lump sum amount equal to three times his  then
Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined in accordance with the terms of the Bank's long  term
disability policy.

           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Mahon's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

           (a)   Mr.  Mahon's termination of employment with  the
Bank   shall  be  deemed  a  "Termination  for  Cause"  if   such
termination  occurs  for "cause," which,  for  purposes  of  this
Agreement  shall mean personal dishonesty, incompetence,  willful
misconduct,  breach of fiduciary duty involving personal  profit,
intentional  failure to perform stated duties, willful  violation
of  any law, rule or regulation (other than traffic violations or
similar  offenses)  or  final cease  and  desist  order,  or  any
material  breach  of  this Agreement, in each  case  as  measured
against  standards generally prevailing at the relevant  time  in
the  savings and community banking industry;  provided,  however,
that  Mr.  Mahon shall not be deemed to have been discharged  for
cause unless and until he shall have received a written notice of
termination  from  the Board, accompanied by  a  resolution  duly
adopted by affirmative vote of a majority of the entire Board  at
a  meeting  called  and held for such purpose  (after  reasonable
notice to Mr. Mahon and a reasonable opportunity for Mr. Mahon to
make  oral and written presentations to the members of the Board,
on  his  own behalf, or through a representative, who may be  his
legal   counsel,   to  refute  the  grounds  for   the   proposed
determination)  finding that in the good  faith  opinion  of  the
Board grounds exist for discharging Mr. Mahon for cause.

           (b)   Mr.  Mahon's termination of employment with  the
Bank  shall  be  deemed a Resignation for  Good  Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)   (A)  the assignment to Mr. Mahon of  any  duties
inconsistent with Mr. Mahon's status as Senior Vice President and
Chief  Financial Officer of the Bank or (B) a substantial adverse
alteration   in   the   nature   or   status   of   Mr.   Mahon's
responsibilities from those in effect immediately  prior  to  the
alteration;  or  (C) any Change in Control described  in  section
13(b);

          (ii) a reduction by the Bank in Mr. Mahon's annual base
salary  as  in effect on the date first above written or  as  the
same  may  be increased from time to time, unless such  reduction
was mandated at the initiation of any regulatory authority having
jurisdiction over the Bank;

           (iii)      the  relocation  of  the  Bank's  principal
executive offices to a location outside the New York metropolitan
area or the Bank's requiring Mr. Mahon to be based anywhere other
than  the  Bank's principal executive offices except for required
travel   on  the  Bank's  business  to  an  extent  substantially
consistent  with Mr. Mahon's business travel obligations  at  the
date first above written;

           (iv)  the  failure  by the Bank, without  Mr.  Mahon's
consent,  to pay to Mr. Mahon, within seven (7) days of the  date
when due, (A) any portion of his compensation, or (B) any portion
of  an  installment of deferred compensation under  any  deferred
compensation   program  of  the  Bank,  which  failure   is   not
inadvertent and immaterial and which is not promptly cured by the
Bank  after  notice of such failure is given to the Bank  by  the
Executive;

           (v)  the failure by the Bank to continue in effect any
compensation  plan  in  which  Mr. Mahon  participates  which  is
material to his total compensation, including but not limited  to
the  Retirement Plan and the Bank's Incentive Savings Plan or any
substitute plans unless an equitable arrangement (embodied in  an
ongoing  substitute  or  alternative plan)  has  been  made  with
respect to such plan, or the failure by the Bank to continue  his
participation therein (or in such substitute or alternative plan)
on  a  basis not materially less favorable, both in terms of  the
amount  of  benefits provided and the level of his  participation
relative to other participants, unless such failure is the result
of  action mandated at the initiation of any regulatory authority
having jurisdiction over the Bank;

          (vi) the failure by the Bank to continue to provide Mr.
Mahon with benefits substantially similar to those enjoyed by Mr.
Mahon  under the Retirement Plan and the Bank's Incentive Savings
Plan   or  under  any  of  the  Bank's  life,  health  (including
hospitalization,  medical and major medical),  dental,  accident,
and  long-term disability insurance benefits, in which Mr.  Mahon
is  participating, or the taking of any action by the Bank  which
would  directly  or  indirectly materially  reduce  any  of  such
benefits or deprive Mr. Mahon of the number of paid vacation days
to  which  he is entitled, on the basis of years of service  with
the Bank, rank or otherwise, in accordance with the Bank's normal
vacation  policy,  unless such failure is the  result  of  action
mandated  at  the  initiation of any regulatory authority  having
jurisdiction over the Bank;

            (vii)      the  failure  of  the  Bank  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the Bank which is not effected pursuant the provisions of section
12(a)   regarding  Termination  for  Cause  or  on   account   of
Disability;

           (ix)  a material breach of this Agreement by the Bank,
which  the  Bank fails to cure within thirty (30) days  following
written notice thereof from Mr. Mahon;

           (x)  in the event of a Change in Control described  in
section  13(b)  of  this  Agreement, a failure  of  the  Bank  to
provide, or cause to be provided, to Mr. Mahon in connection with
such  Change  in Control, stock-based compensation and  benefits,
including,  without limitation, stock options,  restricted  stock
awards,  and  participation in tax-qualified  stock  bonus  plans
which, in the aggregate, are either (A) accepted by Mr. Mahon  in
writing  as being satisfactory for purposes of this Agreement  or
(B) in the written, good faith opinion of a nationally recognized
executive compensation consulting firm selected by the  Bank  and
satisfactory  to  Mr.  Mahon,  whose  agreement  shall   not   be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions; or

           (xi)  a  change  in the position to  which  Mr.  Mahon
reports;

          (xii)     in the event of a Change in Control described
in section 13(a) of this Agreement, termination of employment for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Bank shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of  the  Bank; (B) a corporation  owned,  directly  or
indirectly, by the stockholders of the Bank in substantially  the
same proportions as their ownership of stock of the Bank; or  (C)
Mr.  Mahon, or any group otherwise constituting a person in which
Mr. Mahon is a member, becomes the "beneficial owner" (as defined
in  Rule  13d-3 promulgated under the Exchange Act), directly  or
indirectly, of securities issued by the Bank representing 25%  or
more  of  the  combined voting power of all of  the  Bank's  then
outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Bank  to effect a transaction described in section 13(a) or 13(c)
of  this Agreement) whose election by the Board or nomination for
election  by  the  Bank's  stockholders  was  approved   by   the
affirmative vote of at least two-thirds of the members  of  Board
then  in office who were either members of the Board on the  date
first   above  written  or  whose  nomination  or  election   was
previously  so  approved  cease for any reason  to  constitute  a
majority  of  the members of the Board, but excluding,  for  this
purpose,  any such individual whose initial assumption of  office
is  in  connection with an actual or threatened election  contest
relating to the election of directors of the Bank (as such  terms
are  used in Rule 14a-11 of Regulation 14A promulgated under  the
Exchange Act); or

          (c)  the shareholders of the Bank approve either:

                (i)   a merger or consolidation of the Bank  with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (A) the members of the
               Board of the Bank immediately prior to such merger
               or consolidation constitute at least a majority of
               the   members  of  the  governing  body   of   the
               institution   resulting  from   such   merger   or
               consolidation; or (B) the shareholders of the Bank
               own  securities of the institution resulting  from
               such  merger or consolidation representing 80%  or
               more  of  the  combined voting power of  all  such
               securities  then outstanding in substantially  the
               same  proportions  as  their ownership  of  voting
               securities  of  the  Bank before  such  merger  or
               consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to   assume  and  perform   the   Bank's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Bank or
an  agreement for the sale or disposition by the Bank of  all  or
substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a), (b) or (c) if the term "Company" were substituted for  the
term  "Bank"  therein.  Such an event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Mahon's  employment  during  the  Employment  Period  or
thereafter,  whether by the Bank or by Mr. Mahon, shall  have  no
effect on the rights and obligations of the parties hereto  under
the  Bank's the Retirement Plan and the Bank's Incentive  Savings
Plan, group life, health (including hospitalization, medical  and
major   medical),  dental,  accident  and  long  term  disability
insurance plans or such other employee benefit plans or programs,
or  compensation  plans  or  programs (whether  or  not  employee
benefit plans or programs) and, following the conversion  of  the
Bank  to  stock  form,  any stock option and appreciation  rights
plan, employee stock ownership plan and restricted stock plan, as
may  be maintained by, or cover employees of, the Bank from  time
to time.

          15.  Successors and Assigns.

           (a)   The  Bank  shall require any successor  (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets of the Bank to expressly assume and agree to perform  this
Agreement in the same manner and to the same extent that the Bank
would  be required to perform it if no such succession had  taken
place.  Failure  of  the  Bank  to  obtain  such  assumption  and
agreement prior to the effectiveness of any such succession shall
be   deemed  to  constitute  a  material  breach  of  the  Bank's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Mahon, his legal representatives and testate  or
intestate distributees, and the Bank, their respective successors
and  assigns,  including any successor by merger or consolidation
or   a  statutory  receiver  or  any  other  person  or  firm  or
corporation  to which all or substantially all of the  respective
assets  and  business  of  the Bank  may  be  sold  or  otherwise
transferred.

           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Mahon:

          [Home address deleted].


          If to the Bank:

          The Dime Savings Bank of Williamsburgh
          209 Havemeyer Street
          Brooklyn, New York 11211

          Attention:  Corporate Secretary


          With a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright, Esq.

           17.   Indemnification and Attorneys'  Fees.  The  Bank
shall  pay  to  or  on behalf of Mr. Mahon all reasonable  costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however,  that  Mr.  Mahon  shall  have  substantially
prevailed on the merits pursuant to a judgment, decree  or  order
of  a  court of competent jurisdiction or of an arbitrator in  an
arbitration  proceeding, or in a settlement;  provided,  further,
that this section 17 shall not obligate the Bank to pay costs and
legal  fees on behalf of Mr. Mahon under this Agreement in excess
of  $50,000.   For  purposes  of this Agreement,  any  settlement
agreement which provides for payment of any amounts in settlement
of  the Bank's obligations hereunder shall be conclusive evidence
of  Mr. Mahon's entitlement to indemnification hereunder, and any
such  indemnification payments shall be in  addition  to  amounts
payable  pursuant  to  such  settlement  agreement,  unless  such
settlement agreement expressly provides otherwise.

           18.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           19.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           20.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

          21.  Governing Law. This Agreement shall be governed by
and  construed and enforced in accordance with the  laws  of  the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            22.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement,  unless otherwise stated.  Any reference to  the  term
"Board"  shall mean the Board of Trustees of the Bank  while  the
Bank  is a mutual savings bank and the Board of Directors of  the
Bank  while  the Bank is a stock savings bank.  Any reference  to
the  term "Bank" shall mean the Bank in its mutual form prior  to
the conversion and in its stock form on and after the conversion.
If  the Bank does not convert to stock form, any reference to the
Bank's being a stock savings bank shall have no effect.

           23.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr.  Mahon.   No modifications of this Agreement shall  be  valid
unless made in writing and signed by the parties hereto.

           24.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Bank.

           25.   Required  Regulatory Provisions.  The  following
provisions  are  included  for the  purposes  of  complying  with
various   laws,   rules  and  regulations   applicable   to   the
Association:

           (a)  Notwithstanding anything herein contained to  the
contrary,  in no event shall the aggregate amount of compensation
payable to the Executive under section 9(b) hereof (exclusive  of
amounts described in section 9(b)(i) and (viii)) exceed the three
times  the Executive's average annual total compensation for  the
last  five  consecutive  calendar  years  to  end  prior  to  his
termination of employment with the Association (or for his entire
period  of  employment with the Association  if  less  than  five
calendar years).

           (b)  Notwithstanding anything herein contained to  the
contrary,  any  payments  to the Executive  by  the  Association,
whether  pursuant to this Agreement or otherwise, are subject  to
and  conditioned upon their compliance with section 18(k) of  the
Federal  Deposit  Insurance Act ("FDI Act"), 12 U.S.C.  Section
1828(k), and any regulations promulgated thereunder.

           (c)  Notwithstanding anything herein contained to  the
contrary,  if  the  Executive  is suspended  from  office  and/or
temporarily prohibited from participating in the conduct  of  the
affairs  of  the  Association pursuant to a notice  served  under
section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818
(e)(3)or 1818(g)(1), the Association's obligations under this
Agreement shall  be  suspended as of the date of service of  such
notice, unless stayed by appropriate proceedings.  If the charges
in such notice are dismissed, the Association, in its discretion,
may (i)pay  to  the  Executive all or part of the compensation
withheld while the Association's obligations hereunder were sus-
pended  and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.

           (d)  Notwithstanding anything herein contained to  the
contrary,   if  the  Executive  is  removed  and/or   permanently
prohibited from participating in the conduct of the Association's
affairs by an order issued under section 8(e)(4) or 8(g)(1) of the
FDI  Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all prospective
obligations  of  the  Association  under  this  Agreement   shall
terminate  as  of  the effective date of the  order,  but  vested
rights and obligations of the Association and the Executive shall
not be affected.

           (e)  Notwithstanding anything herein contained to  the
contrary, if the Association is in default (within the meaning of
section  3(x)(1)  of the FDI Act, 12  U.S.C.  Section 1813(x)(1),
all prospective obligations of the Association under this Agreement
shall terminate as of the date of default, but vested rights  and
obligations  of the Association and the Executive  shall  not  be
affected.

           (f)  Notwithstanding anything herein contained to  the
contrary,   all   prospective  obligations  of  the   Association
hereunder  shall  be  terminated, except to  the  extent  that  a
continuation  of  this Agreement is necessary for  the  continued
operation of the Association:  (i) by the Director of the OTS  or
his   designee  or  the  Federal  Deposit  Insurance  Corporation
("FDIC"),  at  the  time the FDIC enters  into  an  agreement  to
provide  assistance to or on behalf of the Association under  the
authority  contained in section 13(c) of the FDI Act,  12  U.S.C.
Section 1823(c); (ii) by  the Director of the OTS or his designee
at  the  time  such  Director or designee  approves a supervisory
merger  to  resolve  problems  related  to  the  operation of the
Association  or  when  the  Association  is  determined  by  such
Director to be in  an unsafe  or  unsound condition.  The  vested
rights and obligations of the parties shall not be affected.

If  and to the extent that any of the foregoing provisions  shall
cease  to  be  required or by applicable law, rule or regulation,
the  same shall become inoperative as though eliminated by formal
amendment of this Agreement.

IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and Mr. Mahon has hereto set his hand, all as of the day and year first above written. /s/ Kenneth J. Mahon KENNETH J. MAHON ATTEST THE DIME SAVINGS BANK OF WILLIAMSBURGH By:/s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].



                      EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered  into  as of the 26th day of June, 1996, by  and  between
Dime  Community Bancorp, Inc., a savings and loan holding company
organized  and operating under the laws of the State of  Delaware
and  having an office at 209 Havemeyer Street, Brooklyn, New York
11211  ("Company")  and Vincent F. Palagiano, residing  at  [home
address deleted].


                     W I T N E S S E T H :


           WHEREAS, Mr. Palagiano currently serves the Company in
the  capacity  of  Chairman  of the Board,  President  and  Chief
Executive  Officer  of  its  wholly owned  subsidiary,  The  Dime
Savings Bank of Williamsburgh ("Bank"); and

           WHEREAS, the Company desires to assure for itself  the
continued  availability  of  Mr.  Palagiano's  services  and  the
ability  of Mr. Palagiano to perform such services with a minimum
of  personal distraction in the event of a pending or  threatened
Change in Control (as hereinafter defined); and

           WHEREAS, Mr. Palagiano is willing to continue to serve
the Company on the terms and conditions hereinafter set forth;

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Company and Mr. Palagiano hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)  The Company hereby represents and warrants to Mr.
Palagiano that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Company; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A)  any  agreement or instrument to which the Company  is  a
party  or  by  which  it is bound, or (B) any provision  of  law,
including, without limitation, any statute, rule or regulation or
any  order  of  any order of any court or administrative  agency,
applicable to the Company or its business.

           (b)   Mr. Palagiano hereby represents and warrants  to
the Company that:


           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

           2.    Employment.   The Company hereby  continues  the
employment  of  Mr. Palagiano, and Mr. Palagiano  hereby  accepts
such  continued employment, during the period and upon the  terms
and conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

           (b)  Except as provided in section 3(c), beginning  on
the   date  of  this  Agreement,  the  Employment  Period   shall
automatically  be extended for one (1) additional day  each  day,
unless  either the Company or Mr. Palagiano elects not to  extend
the  Agreement  further by giving written  notice  to  the  other
party, in which case the Employment Period shall end on the third
anniversary  of the date on which such written notice  is  given.
Upon  termination of Mr. Palagiano's employment with the  Company
for any reason whatsoever, any daily extensions provided pursuant
to  this  section  3(b),  if  not therefore  discontinued,  shall
automatically cease.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs, then the Employment Period shall be  extended
through and including the third anniversary of the earliest  date
after  the  effective  date of such Change in  Control  on  which
either  the  Company or Mr. Palagiano elects, by  written  notice
pursuant  to  section 3(d) of this Agreement to the  non-electing
party,  to discontinue the Employment Period; provided,  however,
that this section shall not apply in the event that, prior to the
Change  in  Control (as defined in section 13 of this Agreement),
Mr.  Palagiano has provided written notice to the Company of  his
intent to discontinue the Employment Period.

           (d)  The Company or Mr. Palagiano may, at any time  by
written  notice  given  to  the other, elect  to  terminate  this
Agreement.   Any  such  notice given  by  the  Company  shall  be
accompanied by a certified copy of a resolution, adopted  by  the
affirmative  vote of a majority of the entire membership  of  the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:   (i)  Mr. Palagiano's employment with the Company  may
be  terminated  during the Employment Period, in accordance  with
the  terms and conditions of this Agreement; and (ii) nothing  in
this  Agreement shall mandate or prohibit a continuation  of  Mr.
Palagiano's employment following the expiration of the Employment
Period  upon  such terms and conditions as the  Company  and  Mr.
Palagiano may mutually agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

            4.    Duties.   During  the  Employment  Period,  Mr.
Palagiano shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the  business and affairs of the Company and use his best efforts
to advance the Company's interests;

           (b)   serve  as  Chairman of the Board, President  and
Chief Executive Officer if duly appointed and/or elected to serve
in such position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board of Directors of  the
Company  ("Board"), in accordance with organization  Certificate,
By-laws,  Applicable Laws, Statutes and Regulations,  custom  and
practice  of  the  Company as in effect on the date  first  above
written.

Mr.  Palagiano  shall  have such authority  as  is  necessary  or
appropriate to carry out his assigned duties. Mr. Palagiano shall
report  to  and  be subject to direction and supervision  by  the
Board.

          (d)  none of the functions, duties and responsibilities
to be performed by Mr. Palagiano pursuant to this Agreement shall
be deemed to include those functions, duties and responsibilities
performed  by  Mr. Palagiano in his capacity as director  of  the
Company.

          5.   Compensation -- Salary and Bonus. In consideration
for  services rendered by Mr. Palagiano under this Agreement, the
Company  shall  pay to Mr. Palagiano a salary at an  annual  rate
equal to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $450,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change in Control, the product of Mr. Palagiano's annual rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:

                               (i)  1.06;
 
                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers of the Company (other than  Mr.
                    Palagiano)  who are assistant vice presidents
                    or  more senior officers, divided by (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar year, of the officers of the Company
                    (other  than Mr. Palagiano) who are assistant
                    vice presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately equal installments in accordance with the Company's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Palagiano of a salary
in  excess  of  that  prescribed  under  this  section  5  or  of
additional  cash  or non-cash compensation in a form  other  than
salary, to the extent that such payment is duly authorized by  or
under the authority of the Board.

           (d)   No  portion  of  the compensation  paid  to  Mr.
Palagiano  pursuant  to  this Agreement shall  be  deemed  to  be
compensation  received  by  Mr.  Palagiano  in  his  capacity  as
director of the Company.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr.  Palagiano shall be treated as an employee of the Company and
be  entitled  to  participate in and receive benefits  under  the
Company's Retirement Plan, Incentive Savings Plan, group life and
health  (including  medical  and major  medical)  and  disability
insurance  plans,  and  such  other employee  benefit  plans  and
programs,   including  but  not  limited  to  any  long-term   or
short-term  incentive compensation plans or programs (whether  or
not  employee  benefit plans or programs),  as  the  Company  may
maintain  from  time to time, in accordance with  the  terms  and
conditions  of  such  employee benefit  plans  and  programs  and
compensation plans and programs and with the Company's  customary
practices.   Following a Change in Control, all such benefits  to
Mr.   Palagiano  shall  be  continued  on  terms  and  conditions
substantially identical to, and in no event less favorable  than,
those in effect prior to the Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"),  the  Company  will  provide,  or  cause  to   be
provided,  to  Mr. Palagiano in connection with such  Conversion,
stock-based   compensation  and  benefits,   including,   without
limitation,   stock   options,  restricted  stock   awards,   and
participation  in tax-qualified stock bonus plans which,  in  the
aggregate, are either (A) accepted by Mr. Palagiano in writing as
being  satisfactory for purposes of this Agreement or (B) in  the
written,  good faith opinion of a nationally recognized executive
compensation  consulting  firm  selected  by  the   Company   and
satisfactory  to  Mr.  Palagiano, whose agreement  shall  not  be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions.

          7.   Board Memberships and Personal Activities.

           (a)   Mr. Palagiano may serve as a member of the board
of   directors   of  such  business,  community  and   charitable
organizations as he may disclose to the Board from time to  time,
and  he may engage in personal business and investment activities
for  his  own  account; provided, however, that such service  and
personal  business and investment activities shall not materially
interfere   with  the  performance  of  his  duties  under   this
Agreement.

           (b)   Mr.  Palagiano may also serve as an  officer  or
director of the Bank on such terms and conditions as the  Company
and  the Bank may mutually agree upon, and such service shall not
be   deemed   to   materially  interfere  with  Mr.   Palagiano's
performance  of  his duties hereunder or otherwise  result  in  a
material   breach  of  this  Agreement.   If  Mr.  Palagiano   is
discharged   or  suspended,  or  is  subject  to  any  regulatory
prohibition or restriction with respect to participation  in  the
affairs of the Bank, he shall (subject to the Company's powers of
termination  hereunder)  continue to  perform  services  for  the
Company  in accordance with this Agreement but shall not directly
or  indirectly provide services to or participate in the  affairs
of  the  Bank  in a manner inconsistent with the  terms  of  such
discharge or suspension or any applicable regulatory order.

           8.   Working Facilities and Expenses.  Mr. Palagiano's
principal place of employment shall be at the Company's executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.  The Company shall provide Mr. Palagiano, at his principal
place of employment, with a private office, stenographic services
and  other  support  services  and  facilities  suitable  to  his
position  with  the  Company  and  necessary  or  appropriate  in
connection with the performance of his assigned duties under this
Agreement.   The  Company shall provide  Mr.  Palagiano  with  an
automobile   suitable  to  his  position  with  the  Company   in
accordance with its prior practices, and such automobile shall be
used  by  Mr.  Palagiano in carrying out his  duties  under  this
Agreement,  including  commuting between his  residence  and  his
principal  place of employment.  The Company shall reimburse  Mr.
Palagiano  for  his  ordinary  and necessary  business  expenses,
including, without limitation, all expenses associated  with  his
business   use  of  the  aforementioned  automobile,   fees   for
memberships in such clubs and organizations as Mr. Palagiano  and
the  Company  shall mutually agree are necessary and  appropriate
for  business  purposes  and  travel and  entertainment  expenses
incurred  in connection with the performance of his duties  under
this  Agreement, upon presentation to the Company of an  itemized
account  of  such  expenses  in such  form  as  the  Company  may
reasonably require.  Mr. Palagiano shall be entitled to  no  less
than  four  (4) weeks of paid vacation  during each year  in  the
Employment Period.

          9.   Termination Giving Rise to Severance Benefits.

           (a)  In the event that Mr. Palagiano's employment with
the  Company  shall  terminate during the  Employment  Period  on
account of the termination of Mr. Palagiano's employment with the
Company other than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

           (ii)  a  voluntary resignation by Mr. Palagiano  other
than a Resignation for Good Reason (within the meaning of section
12(b) of this Agreement);

           (iii)      a termination on account of Mr. Palagiano's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A) Mr. Palagiano has been  absent  from  the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive  months; and (B) Mr. Palagiano shall have  failed  to
return  to  work  in the full-time service of the Company  within
thirty  (30) days after written notice requesting such return  is
given  to  Mr.  Palagiano by the Company; then the Company  shall
provide  to  Mr. Palagiano the benefits and pay to Mr.  Palagiano
the amounts provided under section 9(b) of this Agreement.

           (b)  In the event that Mr. Palagiano's employment with
the  Company  shall  terminate under circumstances  described  in
section 9(a) of this Agreement or if the Company terminates  this
Agreement  pursuant to section 3(d), the following  benefits  and
amounts  shall be paid or provided to Mr. Palagiano (or,  in  the
event of his death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when  due
but  in  no  event  later  than thirty (30)  days  following  his
termination of employment with the Company;

           (ii)  (A) the benefits, if any, to which Mr. Palagiano
and  his family and dependents are entitled as a former employee,
or  family or dependents of a former employee, under the employee
benefit  plans and programs and compensation plans  and  programs
maintained  for  the  benefit  of  the  Company's  officers   and
employees,  in  accordance  with the  terms  of  such  plans  and
programs  in effect on the date of his termination of employment,
or  if  his  termination of employment occurs after a  Change  in
Control, on the date of his termination of employment or  on  the
date  of  such  Change  in  Control, whichever  results  in  more
favorable  benefits as determined by Mr. Palagiano, where  credit
is  given  for  three  additional years of  service  and  age  in
determining  eligibility and benefits for any  plan  and  program
where  age and service are relevant factors, and (B) payment  for
all  unused  vacation days and floating holidays in the  year  in
which his employment is terminated, at his highest annual rate of
salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer, if and to the extent necessary to provide Mr. Palagiano
and  his  family  and  dependents  for  the  Remaining  Unexpired
Employment Period, coverage identical to and in any event no less
favorable  than  the  coverage to  which  they  would  have  been
entitled  under  such plans (as in effect  on  the  date  of  his
termination  of employment, or, if his termination of  employment
occurs  after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such  Change  in  Control, whichever results  in  more  favorable
benefits  as  determined by Mr. Palagiano) if  he  had  continued
working for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section 5(c) would apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the present value of the salary and the bonus that  Mr.
Palagiano  would  have earned if he had worked  for  the  Company
during  the Remaining Unexpired Employment Period at the  highest
annual  rate  of  salary (assuming, if a Change  in  Control  has
occurred,  that  the  annual increases under section  5(c)  would
apply)  and  the  highest bonus as a percentage of  the  rate  of
salary  provided  for under this Agreement,  where  such  present
value  is  to be determined using a discount rate of six  percent
(6%)  per  annum,  compounded, in the case of  salary,  with  the
frequency corresponding to the Company's regular payroll  periods
with  respect  to  its  officers, and,  in  the  case  of  bonus,
annually;

           (v)  within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans  maintained  by,  or  covering employees  of,  the  Company
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Company  during the Remaining Unexpired Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable to the Company's contribution to which  he
would be entitled under any defined contribution plans maintained
by,  or covering employees of, the Company (including any "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if he had worked for the  Company  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment Period which is prior  to  Mr.  Palagiano's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable  to  the  Company's contributions  to  which  he  is
actually  entitled  under  such plans  as  of  the  date  of  his
termination  of employment with the Company, where  such  present
values  are to be determined using a discount rate of six percent
(6%)  per  annum, compounded with the frequency corresponding  to
the  Company's  regular  payroll  periods  with  respect  to  its
officers;

          (vii)     the payments that would have been made to Mr.
Palagiano under any incentive compensation plan maintained by, or
covering employees of, the Company (other than bonus payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working for the Company during the Remaining Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to  Mr.  Palagiano under such  incentive  compensation
plan,  multiplied by (B) the compensation that  would  have  been
paid  to  Mr. Palagiano during each calendar year at the  highest
annual rate of compensation (assuming, if a Change in Control has
occurred,  that  the  annual increases under section  5(c)  would
apply) under the Agreement, such payments to be made at the  same
time  and  in  the  same manner as payments  are  made  to  other
officers  of the Company pursuant to the terms of such  incentive
compensation  plan; provided, however, that payments  under  this
section 9(b)(vii) shall not be made to Mr. Palagiano for any year
on  account of which no payments are made to any of the Company's
officers under any such incentive compensation plan; and

           (viii)     the  benefits  to which  Mr.  Palagiano  is
entitled  under  the Company's Supplemental Executive  Retirement
Plan  (or other excess benefits plan with the meaning of  section
3(36)  of  ERISA or other special or supplemental plan) shall  be
paid  to him in a lump sum, where such lump sum is computed using
the  mortality  tables under the Company's tax-qualified  pension
plan and a discount rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty  (30)  days  after the  date  of  Mr.  Palagiano's
election,  and  if the amount may be increased  by  a  subsequent
Change  in  Control, any additional payment shall be made  within
thirty (30) days of such Change in Control.

           (c)   Mr.  Palagiano shall not be required to mitigate
the  amount  of  any payment provided for in this  section  9  by
seeking  other employment or otherwise, nor shall the  amount  of
any  payment or benefit provided for in this section 9 be reduced
by  any  compensation earned by Mr. Palagiano as  the  result  of
employment by another employer, by retirement benefits, by offset
against  any  amount claimed to be owed by Mr. Palagiano  to  the
Company, or otherwise except as specifically provided in  section
9(b) (iii) of this Agreement or except as provided in section  28
to  avoid duplication of payments.  The Company and Mr. Palagiano
hereby  stipulate that the damages which may be incurred  by  Mr.
Palagiano  as a consequence of any such termination of employment
are  not  capable of accurate measurement as of  the  date  first
above written and that the benefits and payments provided for  in
this  Agreement  constitute  a  reasonable  estimate  under   the
circumstances  of all damages sustained as a consequence  of  any
such  termination of employment, other than damages arising under
or  out  of  any  stock option, restricted stock  or  other  non-
qualified  stock acquisition or investment plan  or  program,  it
being  understood  and  agreed  that  this  Agreement  shall  not
determine  the  measurement of damages under  any  such  plan  or
program in respect of any termination of employment.

           10.   Termination Without Severance Benefits.  In  the
event  that  Mr.  Palagiano's employment with the  Company  shall
terminate during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);

           (b)  voluntary resignation by Mr. Palagiano other than
a  Resignation  for  Good Reason (within the meaning  of  section
12(b) of this Agreement); or

          (c)  Mr. Palagiano's death;

then  the  Company shall have no further obligations  under  this
Agreement,  other than the payment to Mr. Palagiano (or,  in  the
event  of  his  death, to his estate) of his  earned  but  unpaid
salary  as of the date of the termination of his employment,  and
the  provision  of such other benefits, if any, to  which  he  is
entitled  as  a  former  employee under  the  Company's  employee
benefit  plans and programs and compensation plans  and  programs
and payment for all unused vacation days and floating holidays in
the  year  in which his employment is terminated, at his  highest
annual salary for such year.

          11.  Death and Disability.

           (a)   Death.  If Mr. Palagiano's employment  is  termi
nated  by  reason of Mr. Palagiano's death during the  Employment
Period,   this   Agreement   shall  terminate   without   further
obligations to Mr. Palagiano's legal representatives  under  this
Agreement,  other  than for payment of amounts and  provision  of
benefits  under  sections 9(b) (i) and (ii);  provided,  however,
that  if  Mr.  Palagiano  dies while in  the  employment  of  the
Company,  his designated beneficiary(ies) shall receive  a  death
benefit,  payable through life insurance or otherwise,  which  is
the  equivalent  on  a net after-tax basis of the  death  benefit
payable  under a term life insurance policy, with a stated  death
benefit of three times Mr. Palagiano's then Annual Base Salary.

           (b)   Disability.   If Mr. Palagiano's  employment  is
terminated by reason of Mr. Palagiano's Disability as defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without  further obligations to Mr.  Palagiano,  other
than  for  payment  of amounts and provision  of  benefits  under
section  9(b) (i) and (ii); provided, however, that in the  event
of  Mr.  Palagiano's Disability while in the  employment  of  the
Company,  the Company will pay to him a lump sum amount equal  to
three times his then Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined  in  accordance with the terms of the Company's  long
term disability policy.

           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Palagiano's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

          (a)  Mr. Palagiano's termination of employment with the
Company  shall  be  deemed  a "Termination  for  Cause"  if  such
termination occurs upon:

           (i)  Mr. Palagiano's willful and continued failure  to
substantially perform his duties with the Company (other than any
failure  resulting  from incapacity due  to  physical  or  mental
illness or any actual or anticipated failure following notice  by
Mr. Palagiano of an intended Resignation for Good Reason) after a
written demand for substantial performance is delivered to him by
the  Board,  which demand specifically identifies the  manner  in
which  the  Board  believes Mr. Palagiano has  not  substantially
performed his duties, and the failure to cure such breach  within
sixty  (60)  days  following  written  notice  thereof  from  the
Company;  or  (ii)  the  intentional  and  willful  engaging   in
dishonest conduct in connection with his performance of  services
for  the Company resulting in his conviction of a felony,  fraud,
personal dishonesty, incompetence, willful misconduct, breach  of
fiduciary  duty involving personal profit, willful  violation  of
any  law,  rule  or regulation (other than traffic violations  or
similar offenses), or final cease-and-desist order.

No  act,  or  failure to act, on Mr. Palagiano's  part  shall  be
deemed  willful unless done, or omitted to be done, not  in  good
faith  and without reasonable belief that such action or omission
was in the best interest of the Company.  Any act, or failure  to
act,  based  upon  authority given pursuant to a resolution  duly
adopted  by the Board or based upon the written advice of counsel
for  the  Company shall be conclusively presumed to be  done,  or
omitted  to  be done, by Mr. Palagiano in good faith and  in  the
best interests of the Company.  Notwithstanding the foregoing, no
termination  of Mr. Palagiano's employment shall be a Termination
for Cause unless there shall have been delivered to Mr. Palagiano
a  copy of a resolution duly adopted by the affirmative vote of a
majority  of  the Board of Directors (or, following a  Change  in
Control,  an affirmative vote of three-quarters of the  Board  of
Directors)  at  a meeting of the Board called and held  for  such
purpose  (after  reasonable  notice  to  Mr.  Palagiano  and   an
opportunity for Mr. Palagiano, together with his counsel,  to  be
heard before the Board) finding that in good faith opinion of the
Board  circumstances described in section 12(a) (i) or (ii) exist
and specifying the particulars thereof in detail.

          (b)  Mr. Palagiano's termination of employment with the
Company  shall  be deemed a Resignation for Good Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)  (A) the assignment to Mr. Palagiano of any duties
inconsistent  with  Mr. Palagiano's status  as  Chairman  of  the
Board,  President and Chief Executive Officer of the  Company  or
(B)  a substantial adverse alteration in the nature or status  of
Mr. Palagiano's responsibilities from those in effect immediately
prior  to  the alteration; or (C) any Change in Control described
in section 13(b);

           (ii)  a  reduction by the Company in  Mr.  Palagiano's
annual  base salary as in effect on the date first above  written
or  as  the same may be increased from time to time, unless  such
reduction  was  mandated  at  the initiation  of  any  regulatory
authority having jurisdiction over the Company;

           (iii)      the  relocation of the Company's  principal
executive offices to a location outside the New York metropolitan
area  or  the  Company's  requiring Mr.  Palagiano  to  be  based
anywhere  other  than the Company's principal  executive  offices
except for required travel on the Company's business to an extent
substantially  consistent  with Mr. Palagiano's  business  travel
obligations at the date first above written;

            (iv)   the  failure  by  the  Company,  without   Mr.
Palagiano's  consent, to pay to Mr. Palagiano, within  seven  (7)
days  of  the date when due, (A) any portion of his compensation,
or  (B)  any  portion of an installment of deferred  compensation
under any deferred compensation program of the Company;

           (v)   the failure by the Company to continue in effect
any  compensation plan in which Mr. Palagiano participates  which
is  material to his total compensation, including but not limited
to  the Retirement Plan and the Company's Incentive Savings  Plan
or any substitute plans unless an equitable arrangement (embodied
in  an ongoing substitute or alternative plan) has been made with
respect  to such plan, or the failure by the Company to  continue
his  participation therein (or in such substitute or  alternative
plan) on a basis not materially less favorable, both in terms  of
the   amount   of  benefits  provided  and  the  level   of   his
participation relative to other participants, unless such failure
is  the  result  of  action mandated at  the  initiation  of  any
regulatory authority having jurisdiction over the Company;

           (vi) the failure by the Company to continue to provide
Mr.  Palagiano  with  benefits  substantially  similar  to  those
enjoyed  by  Mr.  Palagiano under the  Retirement  Plan  and  the
Company's  Incentive Savings Plan or under any of  the  Company's
life,   health  (including  hospitalization,  medical  and  major
medical),  dental,  accident, and long-term disability  insurance
benefits, in which Mr. Palagiano is participating, or the  taking
of  any  action by the Company which would directly or indirectly
materially  reduce any of such benefits or deprive Mr.  Palagiano
of  the number of paid vacation days to which he is entitled,  on
the  basis  of  years  of  service  with  the  Company,  rank  or
otherwise,  in  accordance  with the  Company's  normal  vacation
policy,  unless such failure is the result of action mandated  at
the  initiation  of any regulatory authority having  jurisdiction
over the Company;

           (vii)      the  failure  of the Company  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the  Company  which  is not effected pursuant the  provisions  of
section  12(a) regarding Termination for Cause or on  account  of
Disability;

           (ix)  a  material  breach of  this  Agreement  by  the
Company, which the Company fails to cure within thirty (30)  days
following written notice thereof from Mr. Palagiano;

           (x)  in the event of a Change in Control described  in
section  13(b)  of this Agreement, a failure of  the  Company  to
provide,  or cause to be provided, to Mr. Palagiano in connection
with  such  Change  in  Control,  stock-based  compensation   and
benefits,   including,   without   limitation,   stock   options,
restricted stock awards, and participation in tax-qualified stock
bonus  plans which, in the aggregate, are either (A) accepted  by
Mr.  Palagiano in writing as being satisfactory for  purposes  of
this  Agreement or (B) in the written, good faith  opinion  of  a
nationally  recognized  executive  compensation  consulting  firm
selected by the Company and satisfactory to Mr. Palagiano,  whose
agreement  shall  not  be  unreasonably  withheld,  are  no  less
favorable than the stock-based compensation and benefits  usually
and  customarily  provided to similarly  situated  executives  of
similar   financial  institutions  in  connection  with   similar
transactions; or

           (xi)  a requirement that Mr. Palagiano report  to  any
person or group other than the Board;

          (xii)     in the event of a Change in Control described
in  section  13 of this Agreement, termination of employment  for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Company shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of the Company; (B) a corporation owned,  directly  or
indirectly,  by the stockholders of the Company in  substantially
the  same proportions as their ownership of stock of the Company;
or  (C)  Mr.  Palagiano,  or any group otherwise  constituting  a
person   in  which  Mr.  Palagiano  is  a  member,  becomes   the
"beneficial  owner" (as defined in Rule 13d-3  promulgated  under
the  Exchange Act), directly or indirectly, of securities  issued
by  the  Company representing 25% or more of the combined  voting
power of all of the Company's then outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company  to  effect a transaction described in section  13(a)  or
13(c)  of  this  Agreement)  whose  election  by  the  Board   or
nomination  for  election  by  the  Company's  stockholders   was
approved  by the affirmative vote of at least two-thirds  of  the
members  of Board then in office who were either members  of  the
Board  on  the  date first above written or whose  nomination  or
election  was  previously so approved cease  for  any  reason  to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office  is  in  connection with an actual or threatened  election
contest relating to the election of directors of the Company  (as
such  terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or

          (c)  the shareholders of the Company approve either:

               (i)  a merger or consolidation of the Company with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (1) the members of the
               Board  of  the Company immediately prior  to  such
               merger  or  consolidation constitute  at  least  a
               majority of the members of the governing  body  of
               the  institution  resulting from  such  merger  or
               consolidation;  or  (2) the  shareholders  of  the
               Company   own   securities  of   the   institution
               resulting   from  such  merger  or   consolidation
               representing  80% or more of the  combined  voting
               power  of all such securities then outstanding  in
               substantially  the  same  proportions   as   their
               ownership  of  voting securities  of  the  Company
               before such merger or consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to  assume  and  perform  the  Company's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a),  (b)  or (c) if the term "Bank" were substituted  for  the
term  "Company"  therein.  Such event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Palagiano's employment during the Employment  Period  or
thereafter,  whether  by the Company or by Mr.  Palagiano,  shall
have  no  effect  on the rights and obligations  of  the  parties
hereto under the Company's or the Bank's Retirement Plan and  the
Company's  Incentive Savings Plan, group life, health  (including
hospitalization, medical and major medical), dental, accident and
long  term  disability  insurance plans or  such  other  employee
benefit  plans  or  programs, or compensation plans  or  programs
(whether  or  not  employee  benefit  plans  or  programs)   and,
following the conversion of the Company to stock form, any  stock
option  and  appreciation rights plan, employee  stock  ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.

          15.  Successors and Assigns.

           (a)   The Company shall require any successor (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets  of  the Company to expressly assume and agree to  perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be  deemed  to  constitute  a material breach  of  the  Company's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Palagiano, his legal representatives and testate
or  intestate  distributees, and the  Company,  their  respective
successors  and  assigns, including any successor  by  merger  or
consolidation or a statutory receiver or any other person or firm
or   corporation  to  which  all  or  substantially  all  of  the
respective  assets and business of the Company  may  be  sold  or
otherwise transferred.

           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Palagiano:

          [Home address deleted].


          If to the Company:

          Dime Community Bancorp, Inc.

          209 Havemeyer Street
          Brooklyn, New York 11211
          Attention: Corporate Secretary

          with a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright, Esq.


           17.  Indemnification and Attorneys' Fees.  The Company
shall  pay to or on behalf of Mr. Palagiano all reasonable costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however, that this section 17 shall not  obligate  the
Company  to  pay costs and legal fees on behalf of Mr.  Palagiano
under this Agreement in excess of $50,000.

          18.  Excise Tax Indemnification.

           (a)   This  section 18 shall apply if Mr.  Palagiano's
employment  is  terminated  in  circumstances  giving   rise   to
liability  for excise taxes under section 4999 of the  Code.   If
this  Section  18  applies, then, if for any  taxable  year,  Mr.
Palagiano shall be liable for the payment of an excise tax  under
section  4999  of  the Code with respect to any  payment  in  the
nature  of  compensation made by the Company  or  any  direct  or
indirect  subsidiary or affiliate of the Company to (or  for  the
benefit of) Mr. Palagiano, the Company shall pay to Mr. Palagiano
an amount equal to X determined under the following formula:

                           E x P
          X =   ____________________________________
                1 - [(FI x (1 - SLI)) + SLI + E + M]

          where
                     E  =  the rate at which the excise  tax
                           is assessed under section 4999 of the Code;

                     P  =  the amount with respect to which
                           such   excise  tax  is  assessed,  determined
                           without regard to this section 18;

                    FI  =  the  highest  marginal  rate  of
                           income tax applicable to Mr. Palagiano  under
                           the Code for the taxable year in question;

                   SLI  =      the  sum  of  the  highest
                           marginal  rates of income tax  applicable  to
                           Mr.  Palagiano under all applicable state and
                           local  laws for the taxable year in question;
                           and

                    M   =  the  highest  marginal  rate  of
                           Medicare  tax  applicable  to  Mr.  Palagiano
                           under  the  Code  for  the  taxable  year  in
                           question.

With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Mr. Palagiano under the terms  of
this  Agreement, or otherwise, and on which an excise  tax  under
section 4999 of the Code will be assessed, the payment determined
under  this section 18(a) shall be made to Mr. Palagiano  on  the
earlier  of  (i) the date the Company or any direct  or  indirect
subsidiary  or affiliate of the Company is required  to  withhold
such tax, or (ii) the date the tax is required to be paid by  Mr.
Palagiano.

          (b)  Notwithstanding anything in this section 18 to the
contrary,  in  the event that Mr. Palagiano's liability  for  the
excise  tax under section 4999 of the Code for a taxable year  is
subsequently  determined to be different than  the  amount deter-
mined  by  the  formula (X + P) x E, where X, P and  E  have  the
meanings provided in section 18(a), Mr. Palagiano or the Company,
as the case may be, shall pay to the other party at the time that
the  amount  of  such  excise  tax  is  finally  determined,   an
appropriate  amount, plus interest, such that  the  payment  made
under  section 18(a), when increased by the amount of the payment
made to Mr. Palagiano under this section 18(b) by the Company, or
when  reduced  by the amount of the payment made to  the  Company
under this section 18(b) by Mr. Palagiano, equals the amount that
should  have  properly been paid to Mr. Palagiano  under  section
18(a).   The  interest  paid under this section  18(b)  shall  be
determined  at  the rate provided under section 1274(b)(2)(B)  of
the Code.  To confirm that the proper amount, if any, was paid to
Mr.  Palagiano under this section 18, Mr. Palagiano shall furnish
to  the  Company  a  copy  of each tax return  which  reflects  a
liability for an excise tax payment made by the Company, at least
20  days before the date on which such return is required  to  be
filed with the Internal Revenue Service.

           (c)  The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement.  If, after the date
hereof,  there shall be any change in any such laws, this section
18  shall  be  modified in such manner as Mr. Palagiano  and  the
Company may mutually agree upon if and to the extent necessary to
assure  that  Mr.  Palagiano  is fully  indemnified  against  the
economic  effects of the tax imposed under section  4999  of  the
Code or any similar federal, state or local tax.

           19.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           20.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           21.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

           22.   Governing Law.  This Agreement shall be governed
by  and construed and enforced in accordance with the laws of the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            23.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement, unless otherwise stated.

           24.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr. Palagiano.  No modifications of this Agreement shall be valid
unless made in writing and signed by the parties hereto.

           25.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Company.

           26.   Provisions  of  Law.   Notwithstanding  anything
herein  contained to the contrary, any payments to Mr.  Palagiano
by  the Company, whether pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with section
18(k) of the  Federal  Deposit  Insurance  Act, 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.

          27.  Guarantee.  The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the  Executive  is  or  may be entitled to under  the  terms  and
conditions of the employment agreement dated as of the  26th  day
of June, 1996 between the Bank and Mr. Palagiano, a copy of which
is attached hereto as Exhibit A.

           28.  Non-duplication.  In the event that Mr. Palagiano
shall  perform  services  for the Bank or  any  other  direct  or
indirect  subsidiary of the Company, any compensation or benefits
provided to Mr. Palagiano by such other employer shall be applied
to  offset  the  obligations of the Company hereunder,  it  being
intended that this Agreement set forth the aggregate compensation
and  benefits  payable to Mr. Palagiano for all services  to  the
Company and all of its direct or indirect subsidiaries.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and Mr. Palagiano has hereto set his hand, all as of the day and year first above written. /s/ Vincent F. Palagiano VINCENT F. PALAGIANO ATTEST DIME COMMUNITY BANCORP, INC. By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].



                      EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered  into  as of the 26th day of June, 1996, by  and  between
Dime  Community Bancorp, Inc., a savings and loan holding company
organized  and operating under the laws of the State of  Delaware
and  having an office at 209 Havemeyer Street, Brooklyn, New York
11211  ("Company")  and  Michael P.  Devine,  residing  at  [home
address deleted].


                     W I T N E S S E T H :


          WHEREAS, Mr. Devine currently serves the Company in the
capacity  of  Executive  Vice  President,  Secretary  and   Chief
Operating  Officer  of  its  wholly owned  subsidiary,  The  Dime
Savings Bank of Williamsburgh ("Bank"); and

           WHEREAS, the Company desires to assure for itself  the
continued  availability of Mr. Devine's services and the  ability
of Mr. Devine to perform such services with a minimum of personal
distraction  in  the event of a pending or threatened  Change  in
Control (as hereinafter defined); and

          WHEREAS, Mr. Devine is willing to continue to serve the
Company on the terms and conditions hereinafter set forth;

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Company and Mr. Devine hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)  The Company hereby represents and warrants to Mr.
Devine that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Company; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A)  any  agreement or instrument to which the Company  is  a
party  or  by  which  it is bound, or (B) any provision  of  law,
including, without limitation, any statute, rule or regulation or
any  order  of  any order of any court or administrative  agency,
applicable to the Company or its business.

           (b)  Mr. Devine hereby represents and warrants to  the
Company that:

           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

           2.    Employment.   The Company hereby  continues  the
employment  of  Mr.  Devine, and Mr. Devine hereby  accepts  such
continued  employment, during the period and upon the  terms  and
conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

           (b)  Except as provided in section 3(c), beginning  on
the   date  of  this  Agreement,  the  Employment  Period   shall
automatically  be extended for one (1) additional day  each  day,
unless either the Company or Mr. Devine elects not to extend  the
Agreement further by giving written notice to the other party, in
which   case  the  Employment  Period  shall  end  on  the  third
anniversary  of the date on which such written notice  is  given.
Upon termination of Mr. Devine's employment with the Company  for
any reason whatsoever, any daily extensions provided pursuant  to
this   section   3(b),  if  not  therefore  discontinued,   shall
automatically cease.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs, then the Employment Period shall be  extended
through and including the third anniversary of the earliest  date
after  the  effective  date of such Change in  Control  on  which
either  the  Company  or  Mr. Devine elects,  by  written  notice
pursuant  to  section 3(d) of this Agreement to the  non-electing
party,  to discontinue the Employment Period; provided,  however,
that this section shall not apply in the event that, prior to the
Change  in  Control (as defined in section 13 of this Agreement),
Mr.  Devine  has  provided written notice to the Company  of  his
intent to discontinue the Employment Period.

           (d)   The  Company or Mr. Devine may, at any  time  by
written  notice  given  to  the other, elect  to  terminate  this
Agreement.   Any  such  notice given  by  the  Company  shall  be
accompanied by a certified copy of a resolution, adopted  by  the
affirmative  vote of a majority of the entire membership  of  the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:  (i)  Mr. Devine's employment with the Company  may  be
terminated during the Employment Period, in accordance  with  the
terms and conditions of this Agreement; and (ii) nothing in  this
Agreement  shall  mandate  or  prohibit  a  continuation  of  Mr.
Devine's  employment following the expiration of  the  Employment
Period  upon  such terms and conditions as the  Company  and  Mr.
Devine may mutually agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

           4.   Duties.  During the Employment Period, Mr. Devine
shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the  business and affairs of the Company and use his best efforts
to advance the Company's interests;

           (b)  serve as Executive Vice President, Secretary  and
Chief Operating Officer if duly appointed and/or elected to serve
in such position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board of Directors of  the
Company  ("Board"), in accordance with organization  Certificate,
By-laws,  Applicable Laws, Statutes and Regulations,  custom  and
practice  of  the  Company as in effect on the date  first  above
written.

Mr.  Devine  shall  have  such  authority  as  is  necessary   or
appropriate  to carry out his assigned duties. Mr.  Devine  shall
report  to  and  be subject to direction and supervision  by  the
Board.

          (d)  none of the functions, duties and responsibilities
to be performed by Mr. Devine pursuant to this Agreement shall be
deemed  to  include those functions, duties and  responsibilities
performed  by  Mr.  Devine in his capacity  as  director  of  the
Company.

          5.   Compensation -- Salary and Bonus. In consideration
for  services  rendered by Mr. Devine under this  Agreement,  the
Company shall pay to Mr. Devine a salary at an annual rate  equal
to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $340,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change  in  Control, the product of Mr. Devine's annual  rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:

                               (i)  1.06;

                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers of the Company (other than  Mr.
                    Devine) who are assistant vice presidents  or
                    more  senior  officers, divided  by  (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar year, of the officers of the Company
                    (other  than  Mr. Devine) who  are  assistant
                    vice presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately equal installments in accordance with the Company's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Devine of a salary in
excess  of  that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent  that  such payment is duly authorized  by  or  under  the
authority of the Board.

           (d)  No portion of the compensation paid to Mr. Devine
pursuant  to  this Agreement shall be deemed to  be  compensation
received  by  Mr.  Devine  in his capacity  as  director  of  the
Company.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr. Devine shall be treated as an employee of the Company and  be
entitled  to  participate  in  and  receive  benefits  under  the
Company's Retirement Plan, Incentive Savings Plan, group life and
health  (including  medical  and major  medical)  and  disability
insurance  plans,  and  such  other employee  benefit  plans  and
programs,   including  but  not  limited  to  any  long-term   or
short-term  incentive compensation plans or programs (whether  or
not  employee  benefit plans or programs),  as  the  Company  may
maintain  from  time to time, in accordance with  the  terms  and
conditions  of  such  employee benefit  plans  and  programs  and
compensation plans and programs and with the Company's  customary
practices.   Following a Change in Control, all such benefits  to
Mr.   Devine   shall  be  continued  on  terms   and   conditions
substantially identical to, and in no event less favorable  than,
those in effect prior to the Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"),  the  Company  will  provide,  or  cause  to   be
provided,  to  Mr.  Devine in connection  with  such  Conversion,
stock-based   compensation  and  benefits,   including,   without
limitation,   stock   options,  restricted  stock   awards,   and
participation  in tax-qualified stock bonus plans which,  in  the
aggregate,  are either (A) accepted by Mr. Devine in  writing  as
being  satisfactory for purposes of this Agreement or (B) in  the
written,  good faith opinion of a nationally recognized executive
compensation  consulting  firm  selected  by  the   Company   and
satisfactory  to  Mr.  Devine,  whose  agreement  shall  not   be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions.

          7.   Board Memberships and Personal Activities.

           (a)  Mr. Devine may serve as a member of the board  of
directors    of   such   business,   community   and   charitable
organizations as he may disclose to the Board from time to  time,
and  he may engage in personal business and investment activities
for  his  own  account; provided, however, that such service  and
personal  business and investment activities shall not materially
interfere   with  the  performance  of  his  duties  under   this
Agreement.

           (b)   Mr.  Devine  may also serve  as  an  officer  or
director of the Bank on such terms and conditions as the  Company
and  the Bank may mutually agree upon, and such service shall not
be  deemed  to materially interfere with Mr. Devine's performance
of  his duties hereunder or otherwise result in a material breach
of  this Agreement.  If Mr. Devine is discharged or suspended, or
is  subject  to  any regulatory prohibition or  restriction  with
respect  to  participation in the affairs of the Bank,  he  shall
(subject  to  the  Company's  powers  of  termination  hereunder)
continue  to perform services for the Company in accordance  with
this  Agreement  but  shall not directly  or  indirectly  provide
services to or participate in the affairs of the Bank in a manner
inconsistent  with the terms of such discharge or  suspension  or
any applicable regulatory order.

           8.    Working  Facilities and Expenses.  Mr.  Devine's
principal place of employment shall be at the Company's executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.   The  Company shall provide Mr. Devine, at his  principal
place of employment, with a private office, stenographic services
and  other  support  services  and  facilities  suitable  to  his
position  with  the  Company  and  necessary  or  appropriate  in
connection with the performance of his assigned duties under this
Agreement.   The  Company  shall  provide  Mr.  Devine  with   an
automobile   suitable  to  his  position  with  the  Company   in
accordance with its prior practices, and such automobile shall be
used  by  Mr.  Devine  in  carrying out  his  duties  under  this
Agreement,  including  commuting between his  residence  and  his
principal  place of employment.  The Company shall reimburse  Mr.
Devine   for  his  ordinary  and  necessary  business   expenses,
including, without limitation, all expenses associated  with  his
business   use  of  the  aforementioned  automobile,   fees   for
memberships in such clubs and organizations as Mr. Devine and the
Company  shall  mutually agree are necessary and appropriate  for
business  purposes and travel and entertainment expenses incurred
in  connection  with  the performance of his  duties  under  this
Agreement,  upon  presentation to  the  Company  of  an  itemized
account  of  such  expenses  in such  form  as  the  Company  may
reasonably require.  Mr. Devine shall be entitled to no less than
four  (4)  weeks  of  paid  vacation  during  each  year  in  the
Employment Period.


          9.   Termination Giving Rise to Severance Benefits.

          (a)  In the event that Mr. Devine's employment with the
Company  shall terminate during the Employment Period on  account
of  the  termination of Mr. Devine's employment with the  Company
other than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

          (ii) a voluntary resignation by Mr. Devine other than a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement);

           (iii)      a  termination on account of  Mr.  Devine's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A)  Mr. Devine  has  been  absent  from  the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive  months;  and (B) Mr. Devine  shall  have  failed  to
return  to  work  in the full-time service of the Company  within
thirty  (30) days after written notice requesting such return  is
given  to  Mr.  Devine  by the Company; then  the  Company  shall
provide  to  Mr.  Devine the benefits and pay to Mr.  Devine  the
amounts provided under section 9(b) of this Agreement.

          (b)  In the event that Mr. Devine's employment with the
Company  shall terminate under circumstances described in section
9(a)  of  this  Agreement  or  if  the  Company  terminates  this
Agreement  pursuant to section 3(d), the following  benefits  and
amounts shall be paid or provided to Mr. Devine (or, in the event
of his death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when  due
but  in  no  event  later  than thirty (30)  days  following  his
termination of employment with the Company;

           (ii) (A) the benefits, if any, to which Mr. Devine and
his  family and dependents are entitled as a former employee,  or
family  or  dependents of a former employee, under  the  employee
benefit  plans and programs and compensation plans  and  programs
maintained  for  the  benefit  of  the  Company's  officers   and
employees,  in  accordance  with the  terms  of  such  plans  and
programs  in effect on the date of his termination of employment,
or  if  his  termination of employment occurs after a  Change  in
Control, on the date of his termination of employment or  on  the
date  of  such  Change  in  Control, whichever  results  in  more
favorable  benefits as determined by Mr. Devine, where credit  is
given   for  three  additional  years  of  service  and  age   in
determining  eligibility and benefits for any  plan  and  program
where  age and service are relevant factors, and (B) payment  for
all  unused  vacation days and floating holidays in the  year  in
which his employment is terminated, at his highest annual rate of
salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer,  if and to the extent necessary to provide  Mr.  Devine
and  his  family  and  dependents  for  the  Remaining  Unexpired
Employment Period, coverage identical to and in any event no less
favorable  than  the  coverage to  which  they  would  have  been
entitled  under  such plans (as in effect  on  the  date  of  his
termination  of employment, or, if his termination of  employment
occurs  after a Change in Control, on the date of his termination
of employment or during the one-year period ending on the date of
such  Change  in  Control, whichever results  in  more  favorable
benefits as determined by Mr. Devine) if he had continued working
for  the Company during the Remaining Unexpired Employment Period
at the highest annual rate of compensation (assuming, if a Change
in  Control has occurred, that the annual increases under section
5(c) would apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the present value of the salary and the bonus that  Mr.
Devine  would have earned if he had worked for the Company during
the  Remaining Unexpired Employment Period at the highest  annual
rate  of  salary (assuming, if a Change in Control has  occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided  for
under  this  Agreement,  where  such  present  value  is  to   be
determined  using a discount rate of six percent (6%) per  annum,
compounded,   in   the  case  of  salary,  with   the   frequency
corresponding  to  the  Company's regular  payroll  periods  with
respect to its officers, and, in the case of bonus, annually;

           (v)  within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans  maintained  by,  or  covering employees  of,  the  Company
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Company  during the Remaining Unexpired Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable to the Company's contribution to which  he
would be entitled under any defined contribution plans maintained
by,  or covering employees of, the Company (including any "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if he had worked for the  Company  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment  Period which  is  prior  to  Mr.  Devine's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable  to  the  Company's contributions  to  which  he  is
actually  entitled  under  such plans  as  of  the  date  of  his
termination  of employment with the Company, where  such  present
values  are to be determined using a discount rate of six percent
(6%)  per  annum, compounded with the frequency corresponding  to
the  Company's  regular  payroll  periods  with  respect  to  its
officers;

          (vii)     the payments that would have been made to Mr.
Devine  under any incentive compensation plan maintained  by,  or
covering employees of, the Company (other than bonus payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working for the Company during the Remaining Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to Mr. Devine under such incentive compensation  plan,
multiplied by (B) the compensation that would have been  paid  to
Mr.  Devine during each calendar year at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the  Agreement, such payments to be made at the same time and  in
the  same  manner as payments are made to other officers  of  the
Company  pursuant  to  the terms of such  incentive  compensation
plan;   provided,  however,  that  payments  under  this  section
9(b)(vii) shall not be made to Mr. Devine for any year on account
of  which  no payments are made to any of the Company's  officers
under any such incentive compensation plan; and

           (viii)    the benefits to which Mr. Devine is entitled
under  the Company's Supplemental Executive Retirement  Plan  (or
other  excess benefits plan with the meaning of section 3(36)  of
ERISA or other special or supplemental plan) shall be paid to him
in  a  lump  sum,  where  such lump sum  is  computed  using  the
mortality  tables under the Company's tax-qualified pension  plan
and a discount rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty (30) days after the date of Mr. Devine's election,
and  if  the  amount may be increased by a subsequent  Change  in
Control, any additional payment shall be made within thirty  (30)
days of such Change in Control.

           (c)  Mr. Devine shall not be required to mitigate  the
amount  of any payment provided for in this section 9 by  seeking
other  employment  or  otherwise, nor shall  the  amount  of  any
payment  or benefit provided for in this section 9 be reduced  by
any compensation earned by Mr. Devine as the result of employment
by  another  employer, by retirement benefits, by offset  against
any  amount  claimed to be owed by Mr. Devine to the Company,  or
otherwise  except as specifically provided in section 9(b)  (iii)
of  this  Agreement or except as provided in section 28 to  avoid
duplication  of  payments.  The Company  and  Mr.  Devine  hereby
stipulate that the damages which may be incurred by Mr. Devine as
a  consequence  of  any such termination of  employment  are  not
capable  of  accurate  measurement as of  the  date  first  above
written  and that the benefits and payments provided for in  this
Agreement   constitute   a   reasonable   estimate   under    the
circumstances  of all damages sustained as a consequence  of  any
such  termination of employment, other than damages arising under
or  out  of  any  stock option, restricted stock  or  other  non-
qualified  stock acquisition or investment plan  or  program,  it
being  understood  and  agreed  that  this  Agreement  shall  not
determine  the  measurement of damages under  any  such  plan  or
program in respect of any termination of employment.

           10.   Termination Without Severance Benefits.  In  the
event  that  Mr.  Devine's  employment  with  the  Company  shall
terminate during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);

           (b)  voluntary resignation by Mr. Devine other than  a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement); or

          (c)  Mr. Devine's death;

then  the  Company shall have no further obligations  under  this
Agreement, other than the payment to Mr. Devine (or, in the event
of  his death, to his estate) of his earned but unpaid salary  as
of  the  date  of  the  termination of his  employment,  and  the
provision of such other benefits, if any, to which he is entitled
as  a  former employee under the Company's employee benefit plans
and  programs and compensation plans and programs and payment for
all  unused  vacation days and floating holidays in the  year  in
which  his employment is terminated, at his highest annual salary
for such year.

          11.  Death and Disability.

           (a)   Death.  If Mr. Devine's employment is terminated
by  reason  of  Mr. Devine's death during the Employment  Period,
this Agreement shall terminate without further obligations to Mr.
Devine's  legal representatives under this Agreement, other  than
for  payment of amounts and provision of benefits under  sections
9(b)  (i)  and (ii); provided, however, that if Mr.  Devine  dies
while   in   the  employment  of  the  Company,  his   designated
beneficiary(ies) shall receive a death benefit,  payable  through
life  insurance or otherwise, which is the equivalent  on  a  net
after-tax  basis of the death benefit payable under a  term  life
insurance policy, with a stated death benefit of three times  Mr.
Devine's then Annual Base Salary.

            (b)   Disability.   If  Mr.  Devine's  employment  is
terminated  by  reason of Mr. Devine's Disability as  defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without further obligations to Mr. Devine, other  than
for  payment  of amounts and provision of benefits under  section
9(b)  (i) and (ii); provided, however, that in the event  of  Mr.
Devine's  Disability while in the employment of the Company,  the
Company  will pay to him a lump sum amount equal to  three  times
his then Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined  in  accordance with the terms of the Company's  long
term disability policy.


           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Devine's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

           (a)   Mr. Devine's termination of employment with  the
Company  shall  be  deemed  a "Termination  for  Cause"  if  such
termination occurs upon:

           (i)   Mr.  Devine's willful and continued  failure  to
substantially perform his duties with the Company (other than any
failure  resulting  from incapacity due  to  physical  or  mental
illness or any actual or anticipated failure following notice  by
Mr.  Devine of an intended Resignation for Good Reason)  after  a
written demand for substantial performance is delivered to him by
the  Board,  which demand specifically identifies the  manner  in
which  the  Board  believes  Mr.  Devine  has  not  substantially
performed his duties, and the failure to cure such breach  within
sixty  (60)  days  following  written  notice  thereof  from  the
Company;  or  (ii)  the  intentional  and  willful  engaging   in
dishonest conduct in connection with his performance of  services
for  the Company resulting in his conviction of a felony,  fraud,
personal dishonesty, incompetence, willful misconduct, breach  of
fiduciary  duty involving personal profit, willful  violation  of
any  law,  rule  or regulation (other than traffic violations  or
similar offenses), or final cease-and-desist order.

No  act, or failure to act, on Mr. Devine's part shall be  deemed
willful unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best  interest of the Company.  Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the
Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by  Mr.  Devine  in good faith and in the best interests  of  the
Company.   Notwithstanding the foregoing, no termination  of  Mr.
Devine's employment shall be a Termination for Cause unless there
shall  have  been delivered to Mr. Devine a copy of a  resolution
duly  adopted by the affirmative vote of a majority of the  Board
of  Directors (or, following a Change in Control, an  affirmative
vote of three-quarters of the Board of Directors) at a meeting of
the  Board  called  and held for such purpose  (after  reasonable
notice  to Mr. Devine and an opportunity for Mr. Devine, together
with  his counsel, to be heard before the Board) finding that  in
good  faith  opinion  of  the  Board circumstances  described  in
section  12(a)  (i) or (ii) exist and specifying the  particulars
thereof in detail.

           (b)   Mr. Devine's termination of employment with  the
Company  shall  be deemed a Resignation for Good Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)   (A)  the assignment to Mr. Devine of any  duties
inconsistent   with  Mr.  Devine's  status  as   Executive   Vice
President,  Secretary and Chief Operating Officer of the  Company
or  (B)  a substantial adverse alteration in the nature or status
of Mr. Devine's responsibilities from those in effect immediately
prior  to  the alteration; or (C) any Change in Control described
in section 13(b);

           (ii) a reduction by the Company in Mr. Devine's annual
base  salary as in effect on the date first above written  or  as
the  same  may  be  increased  from time  to  time,  unless  such
reduction  was  mandated  at  the initiation  of  any  regulatory
authority having jurisdiction over the Company;

           (iii)      the  relocation of the Company's  principal
executive offices to a location outside the New York metropolitan
area  or  the Company's requiring Mr. Devine to be based anywhere
other  than the Company's principal executive offices except  for
required   travel  on  the  Company's  business  to   an   extent
substantially  consistent  with  Mr.  Devine's  business   travel
obligations at the date first above written;

           (iv)  the failure by the Company, without Mr. Devine's
consent, to pay to Mr. Devine, within seven (7) days of the  date
when due, (A) any portion of his compensation, or (B) any portion
of  an  installment of deferred compensation under  any  deferred
compensation program of the Company;

           (v)   the failure by the Company to continue in effect
any  compensation plan in which Mr. Devine participates which  is
material to his total compensation, including but not limited  to
the  Retirement Plan and the Company's Incentive Savings Plan  or
any substitute plans unless an equitable arrangement (embodied in
an  ongoing  substitute or alternative plan) has been  made  with
respect  to such plan, or the failure by the Company to  continue
his  participation therein (or in such substitute or  alternative
plan) on a basis not materially less favorable, both in terms  of
the   amount   of  benefits  provided  and  the  level   of   his
participation relative to other participants, unless such failure
is  the  result  of  action mandated at  the  initiation  of  any
regulatory authority having jurisdiction over the Company;

           (vi) the failure by the Company to continue to provide
Mr.  Devine with benefits substantially similar to those  enjoyed
by  Mr.  Devine  under  the Retirement  Plan  and  the  Company's
Incentive Savings Plan or under any of the Company's life, health
(including  hospitalization, medical and major medical),  dental,
accident, and long-term disability insurance benefits,  in  which
Mr.  Devine is participating, or the taking of any action by  the
Company which would directly or indirectly materially reduce  any
of  such  benefits or deprive Mr. Devine of the  number  of  paid
vacation  days to which he is entitled, on the basis of years  of
service  with the Company, rank or otherwise, in accordance  with
the  Company's normal vacation policy, unless such failure is the
result  of  action mandated at the initiation of  any  regulatory
authority having jurisdiction over the Company;

           (vii)      the  failure  of the Company  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the  Company  which  is not effected pursuant the  provisions  of
section  12(a) regarding Termination for Cause or on  account  of
Disability;

           (ix)  a  material  breach of  this  Agreement  by  the
Company, which the Company fails to cure within thirty (30)  days
following written notice thereof from Mr. Devine;


           (x)  in the event of a Change in Control described  in
section  13(b)  of this Agreement, a failure of  the  Company  to
provide,  or  cause to be provided, to Mr. Devine  in  connection
with  such  Change  in  Control,  stock-based  compensation   and
benefits,   including,   without   limitation,   stock   options,
restricted stock awards, and participation in tax-qualified stock
bonus  plans which, in the aggregate, are either (A) accepted  by
Mr.  Devine in writing as being satisfactory for purposes of this
Agreement  or  (B)  in  the  written, good  faith  opinion  of  a
nationally  recognized  executive  compensation  consulting  firm
selected  by  the Company and satisfactory to Mr.  Devine,  whose
agreement  shall  not  be  unreasonably  withheld,  are  no  less
favorable than the stock-based compensation and benefits  usually
and  customarily  provided to similarly  situated  executives  of
similar   financial  institutions  in  connection  with   similar
transactions; or

           (xi)  a  change  in the position to which  Mr.  Devine
reports;

          (xii)     in the event of a Change in Control described
in  section  13 of this Agreement, termination of employment  for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Company shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of the Company; (B) a corporation owned,  directly  or
indirectly,  by the stockholders of the Company in  substantially
the  same proportions as their ownership of stock of the Company;
or  (C)  Mr. Devine, or any group otherwise constituting a person
in  which Mr. Devine is a member, becomes the "beneficial  owner"
(as  defined  in Rule 13d-3 promulgated under the Exchange  Act),
directly  or  indirectly, of securities  issued  by  the  Company
representing 25% or more of the combined voting power of  all  of
the Company's then outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company  to  effect a transaction described in section  13(a)  or
13(c)  of  this  Agreement)  whose  election  by  the  Board   or
nomination  for  election  by  the  Company's  stockholders   was
approved  by the affirmative vote of at least two-thirds  of  the
members  of Board then in office who were either members  of  the
Board  on  the  date first above written or whose  nomination  or
election  was  previously so approved cease  for  any  reason  to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office  is  in  connection with an actual or threatened  election
contest relating to the election of directors of the Company  (as
such  terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or

          (c)  the shareholders of the Company approve either:

               (i)  a merger or consolidation of the Company with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (1) the members of the
               Board  of  the Company immediately prior  to  such
               merger  or  consolidation constitute  at  least  a
               majority of the members of the governing  body  of
               the  institution  resulting from  such  merger  or
               consolidation;  or  (2) the  shareholders  of  the
               Company   own   securities  of   the   institution
               resulting   from  such  merger  or   consolidation
               representing  80% or more of the  combined  voting
               power  of all such securities then outstanding  in
               substantially  the  same  proportions   as   their
               ownership  of  voting securities  of  the  Company
               before such merger or consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to  assume  and  perform  the  Company's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a),  (b)  or (c) if the term "Bank" were substituted  for  the
term  "Company"  therein.  Such event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Devine's  employment during  the  Employment  Period  or
thereafter, whether by the Company or by Mr. Devine,  shall  have
no  effect  on  the rights and obligations of the parties  hereto
under  the  Company's  or  the Bank's  Retirement  Plan  and  the
Company's  Incentive Savings Plan, group life, health  (including
hospitalization, medical and major medical), dental, accident and
long  term  disability  insurance plans or  such  other  employee
benefit  plans  or  programs, or compensation plans  or  programs
(whether  or  not  employee  benefit  plans  or  programs)   and,
following the conversion of the Company to stock form, any  stock
option  and  appreciation rights plan, employee  stock  ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.

          15.  Successors and Assigns.

           (a)   The Company shall require any successor (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets  of  the Company to expressly assume and agree to  perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be  deemed  to  constitute  a material breach  of  the  Company's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Devine, his legal representatives and testate or
intestate   distributees,  and  the  Company,  their   respective
successors  and  assigns, including any successor  by  merger  or
consolidation or a statutory receiver or any other person or firm
or   corporation  to  which  all  or  substantially  all  of  the
respective  assets and business of the Company  may  be  sold  or
otherwise transferred.

           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Devine:

          [Home address deleted].


          If to the Company:

          Dime Community Bancorp, Inc.

          209 Havemeyer Street
          Brooklyn, New York 11211
          Attention: Corporate Secretary

          with a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright, Esq.

           17.  Indemnification and Attorneys' Fees.  The Company
shall  pay  to  or on behalf of Mr. Devine all reasonable  costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however, that this section 17 shall not  obligate  the
Company to pay costs and legal fees on behalf of Mr. Devine under
this Agreement in excess of $50,000.

          18.  Excise Tax Indemnification.

           (a)   This  section  18 shall apply  if  Mr.  Devine's
employment  is  terminated  in  circumstances  giving   rise   to
liability  for excise taxes under section 4999 of the  Code.   If
this  Section  18  applies, then, if for any  taxable  year,  Mr.
Devine  shall  be liable for the payment of an excise  tax  under
section  4999  of  the Code with respect to any  payment  in  the
nature  of  compensation made by the Company  or  any  direct  or
indirect  subsidiary or affiliate of the Company to (or  for  the
benefit  of) Mr. Devine, the Company shall pay to Mr.  Devine  an
amount equal to X determined under the following formula:

                           E x P
          X =   ____________________________________
                1 - [(FI x (1 - SLI)) + SLI  + E + M]
          where
                     E  =  the rate at which the excise  tax
                           is assessed under section 4999 of the Code;

                     P  =  the amount with respect to which
                           such   excise  tax  is  assessed,  determined
                           without regard to this section 18;

                    FI  =  the  highest  marginal  rate  of
                           income  tax  applicable to Mr.  Devine  under
                           the Code for the taxable year in question;

                   SLI  =  the  sum  of  the  highest
                           marginal  rates of income tax  applicable  to
                           Mr.  Devine  under all applicable  state  and
                           local  laws for the taxable year in question;
                           and

                    M   =  the  highest  marginal  rate  of
                           Medicare  tax applicable to Mr. Devine  under
                           the Code for the taxable year in question.

With respect to any payment in the nature of compensation that is
made  to  (or for the benefit of) Mr. Devine under the  terms  of
this  Agreement, or otherwise, and on which an excise  tax  under
section 4999 of the Code will be assessed, the payment determined
under  this  section 18(a) shall be made to  Mr.  Devine  on  the
earlier  of  (i) the date the Company or any direct  or  indirect
subsidiary  or affiliate of the Company is required  to  withhold
such tax, or (ii) the date the tax is required to be paid by  Mr.
Devine.

          (b)  Notwithstanding anything in this section 18 to the
contrary, in the event that Mr. Devine's liability for the excise
tax  under section 4999 of the Code for a taxable year  is  subse
quently determined to be different than the amount determined  by
the  formula  (X  +  P) x E, where X, P and E have  the  meanings
provided in section 18(a), Mr. Devine or the Company, as the case
may  be, shall pay to the other party at the time that the amount
of  such excise tax is finally determined, an appropriate amount,
plus  interest,  such that the payment made under section  18(a),
when  increased by the amount of the payment made to  Mr.  Devine
under  this section 18(b) by the Company, or when reduced by  the
amount  of  the  payment made to the Company under  this  section
18(b)  by Mr. Devine, equals the amount that should have properly
been  paid to Mr. Devine under section 18(a).  The interest  paid
under this section 18(b) shall be determined at the rate provided
under  section  1274(b)(2)(B) of the Code.  To confirm  that  the
proper  amount, if any, was paid to Mr. Devine under this section
18,  Mr.  Devine shall furnish to the Company a copy of each  tax
return which reflects a liability for an excise tax payment  made
by  the  Company, at least 20 days before the date on which  such
return is required to be filed with the Internal Revenue Service.

           (c)  The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement.  If, after the date
hereof,  there shall be any change in any such laws, this section
18 shall be modified in such manner as Mr. Devine and the Company
may  mutually agree upon if and to the extent necessary to assure
that Mr. Devine is fully indemnified against the economic effects
of  the tax imposed under section 4999 of the Code or any similar
federal, state or local tax.

           19.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           20.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           21.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

           22.   Governing Law.  This Agreement shall be governed
by  and construed and enforced in accordance with the laws of the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            23.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement, unless otherwise stated.

           24.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr.  Devine.  No modifications of this Agreement shall  be  valid
unless made in writing and signed by the parties hereto.

           25.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Company.

           26.   Provisions  of  Law.   Notwithstanding  anything
herein  contained to the contrary, any payments to Mr. Devine  by
the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with section 18(k)
of  the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k),
and any regulations promulgated thereunder.

          27.  Guarantee.  The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the  Executive  is  or  may be entitled to under  the  terms  and
conditions of the employment agreement dated as of the  26th  day
of June, 1996 between the Bank and Mr. Devine, a copy of which is
attached hereto as Exhibit A.

           28.   Non-duplication.  In the event that  Mr.  Devine
shall  perform  services  for the Bank or  any  other  direct  or
indirect  subsidiary of the Company, any compensation or benefits
provided to Mr. Devine by such other employer shall be applied to
offset  the  obligations  of  the  Company  hereunder,  it  being
intended that this Agreement set forth the aggregate compensation
and  benefits  payable  to Mr. Devine for  all  services  to  the
Company and all of its direct or indirect subsidiaries.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and Mr. Devine has hereto set his hand, all as of the day and year first above written. /s/ Michael P. Devine MICHAEL P. DEVINE ATTEST DIME COMMUNITY BANCORP, INC. By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].



                      EMPLOYMENT AGREEMENT


           This  EMPLOYMENT AGREEMENT ("Agreement") is  made  and
entered  into  as of the 26th day of June, 1996, by  and  between
Dime  Community Bancorp, Inc., a savings and loan holding company
organized  and operating under the laws of the State of  Delaware
and  having an office at 209 Havemeyer Street, Brooklyn, New York
11211 ("Company") and Kenneth J. Mahon, [home address deleted].


                     W I T N E S S E T H :


           WHEREAS, Mr. Mahon currently serves the Company in the
capacity of Senior Vice President and Chief Financial Officer  of
its   wholly   owned  subsidiary,  The  Dime  Savings   Bank   of
Williamsburgh ("Bank"); and

           WHEREAS, the Company desires to assure for itself  the
continued availability of Mr. Mahon's services and the ability of
Mr.  Mahon  to perform such services with a minimum  of  personal
distraction  in  the event of a pending or threatened  Change  in
Control (as hereinafter defined); and

           WHEREAS, Mr. Mahon is willing to continue to serve the
Company on the terms and conditions hereinafter set forth;

           NOW,  THEREFORE, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Company and Mr. Mahon hereby agree as follows:

          1.   Representations and Warranties of the Parties.

           (a)  The Company hereby represents and warrants to Mr.
Mahon that:

           (i)   it  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of its obligations hereunder; and

           (ii)  the execution, delivery and performance of  this
Agreement  have  been duly authorized by all requisite  corporate
action on the part of the Company; and

           (iii)      neither the execution or delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A)  any  agreement or instrument to which the Company  is  a
party  or  by  which  it is bound, or (B) any provision  of  law,
including, without limitation, any statute, rule or regulation or
any  order  of  any order of any court or administrative  agency,
applicable to the Company or its business.

           (b)   Mr. Mahon hereby represents and warrants to  the
Company that:

           (i)   he  has  all  requisite power and  authority  to
execute,  enter  into and deliver this Agreement and  to  perform
each and every one of his obligations hereunder; and

            (ii)  neither  the  execution  or  delivery  of  this
Agreement, nor the performance of or compliance with any  of  the
terms  and conditions hereof, is prevented or in any way  limited
by  (A) any agreement or instrument to which he is a party or  by
which  he  is  bound, or (B) including, without  limitation,  any
statute,  rule  or  regulation or  any  order  of  any  court  or
administrative agency, applicable to him.

           2.    Employment.   The Company hereby  continues  the
employment  of  Mr.  Mahon,  and Mr. Mahon  hereby  accepts  such
continued  employment, during the period and upon the  terms  and
conditions set forth in this Agreement.

          3.   Employment Period.

           (a)   The terms and conditions of this Agreement shall
be   and  remain  in  effect  during  the  period  of  employment
established  under  this  section 3 ("Employment  Period").   The
Employment  Period shall be for an initial term  of  three  years
beginning  on the date of this Agreement and ending on the  third
anniversary date of this Agreement, plus such extensions, if any,
as are provided by the Board pursuant to section 3(b).

           (b)  Except as provided in section 3(c), beginning  on
the   date  of  this  Agreement,  the  Employment  Period   shall
automatically  be extended for one (1) additional day  each  day,
unless  either the Company or Mr. Mahon elects not to extend  the
Agreement further by giving written notice to the other party, in
which   case  the  Employment  Period  shall  end  on  the  third
anniversary  of the date on which such written notice  is  given.
Upon  termination of Mr. Mahon's employment with the Company  for
any reason whatsoever, any daily extensions provided pursuant  to
this   section   3(b),  if  not  therefore  discontinued,   shall
automatically cease.

           (c)   If,  prior  to the date on which the  Employment
Period  would  end  pursuant  to section  3(a)  or  (b)  of  this
Agreement, a Change in Control (as defined in section 13 of  this
Agreement)  occurs, then the Employment Period shall be  extended
through and including the third anniversary of the earliest  date
after  the  effective  date of such Change in  Control  on  which
either  the  Company  or  Mr.  Mahon elects,  by  written  notice
pursuant  to  section 3(d) of this Agreement to the  non-electing
party,  to discontinue the Employment Period; provided,  however,
that this section shall not apply in the event that, prior to the
Change  in  Control (as defined in section 13 of this Agreement),
Mr.  Mahon  has  provided written notice to the  Company  of  his
intent to discontinue the Employment Period.

           (d)   The  Company or Mr. Mahon may, at  any  time  by
written  notice  given  to  the other, elect  to  terminate  this
Agreement.   Any  such  notice given  by  the  Company  shall  be
accompanied by a certified copy of a resolution, adopted  by  the
affirmative  vote of a majority of the entire membership  of  the
Board at a meeting of the Board duly called and held, authorizing
the giving of such notice.

           (e)  Notwithstanding anything herein contained to  the
contrary:   (i)  Mr. Mahon's employment with the Company  may  be
terminated during the Employment Period, in accordance  with  the
terms and conditions of this Agreement; and (ii) nothing in  this
Agreement shall mandate or prohibit a continuation of Mr. Mahon's
employment following the expiration of the Employment Period upon
such  terms  and  conditions as the Company  and  Mr.  Mahon  may
mutually agree upon.

           (f)  For all purposes of this Agreement, any reference
to   the  "Remaining  Unexpired  Employment  Period"  as  of  any
specified  date  shall  mean  a period  commencing  on  the  date
specified and ending on the last day of the third (3rd) year from
the  date  specified,  or,  if neither  party  has  given  notice
electing a discontinuance of the Employment Period, on the  third
(3rd) anniversary of the date specified.

           4.    Duties.  During the Employment Period, Mr. Mahon
                 shall:

           (a)   except to the extent allowed under section 7  of
this  Agreement, devote his full business time and  attention  to
the  business and affairs of the Company and use his best efforts
to advance the Company's interests;

           (b) serve as Senior Vice President and Chief Financial
Officer  if  duly  appointed and/or  elected  to  serve  in  such
position; and

           (c)   have such functions, duties and responsibilities
not inconsistent with his title and office as may be assigned  to
him  by  or under the authority of the Board of Directors of  the
Company  ("Board"), in accordance with organization  Certificate,
By-laws,  Applicable Laws, Statutes and Regulations,  custom  and
practice  of  the  Company as in effect on the date  first  above
written.

Mr.   Mahon  shall  have  such  authority  as  is  necessary   or
appropriate  to  carry out his assigned duties. Mr.  Mahon  shall
report  to  and  be subject to direction and supervision  by  the
Board.

          5.   Compensation -- Salary and Bonus. In consideration
for  services  rendered by Mr. Mahon under  this  Agreement,  the
Company  shall pay to Mr. Mahon a salary at an annual rate  equal
to:

          (a)  during the period beginning on January 1, 1996 and
ending on December 31, 1996, no less than $178,000;

           (b)   during  each  calendar year  that  begins  after
December  31,  1996,  such  amount  as  the  Board  may,  in  its
discretion,  determine, but in no event less  than  the  rate  in
effect on December 31, 1996; or

           (c)  for each calendar year that begins on or after  a
Change  in  Control, the product of Mr. Mahon's  annual  rate  of
salary  in  effect  immediately  prior  to  such  calendar  year,
multiplied by the greatest of:


                               (i)  1.06;

                               (ii) the quotient of (A) the  U.S.
                    City  Average All Items Consumer Price  Index
                    for  All  Urban Consumers (or, if such  index
                    shall  cease  to  be  published,  such  other
                    measure  of general consumer price levels  as
                    the  Board may, in good faith, prescribe) for
                    October of the immediately preceding calendar
                    year,  divided by (B) the U.S.  City  Average
                    All  Items Consumer Price Index for All Urban
                    Consumers (or, if such index shall  cease  to
                    be  published, such other measure of  general
                    consumer  price levels as the Board  may,  in
                    good  faith,  prescribe) for October  of  the
                    second preceding calendar year; and

                               (iii)     the quotient of (A)  the
                    average annual rate of salary, determined  as
                    of  the  first day of such calendar year,  of
                    the  officers of the Company (other than  Mr.
                    Mahon)  who are assistant vice presidents  or
                    more  senior  officers, divided  by  (B)  the
                    average annual rate of salary, determined  as
                    of the first day of the immediately preceding
                    calendar year, of the officers of the Company
                    (other than Mr. Mahon) who are assistant vice
                    presidents or more senior officers;

The  salary  payable  under  this section  5  shall  be  paid  in
approximately equal installments in accordance with the Company's
customary payroll practices.  Nothing in this section 5 shall  be
construed as prohibiting the payment to Mr. Mahon of a salary  in
excess  of  that prescribed under this section 5 or of additional
cash or non-cash compensation in a form other than salary, to the
extent  that  such payment is duly authorized  by  or  under  the
authority of the Board.

           6.    Employee  Benefits  Plans  and  Programs;  Other
Compensation.   Except as otherwise provided in  this  Agreement,
Mr.  Mahon shall be treated as an employee of the Company and  be
entitled  to  participate  in  and  receive  benefits  under  the
Company's Retirement Plan, Incentive Savings Plan, group life and
health  (including  medical  and major  medical)  and  disability
insurance  plans,  and  such  other employee  benefit  plans  and
programs,   including  but  not  limited  to  any  long-term   or
short-term  incentive compensation plans or programs (whether  or
not  employee  benefit plans or programs),  as  the  Company  may
maintain  from  time to time, in accordance with  the  terms  and
conditions  of  such  employee benefit  plans  and  programs  and
compensation plans and programs and with the Company's  customary
practices.   Following a Change in Control, all such benefits  to
Mr.   Mahon   shall   be  continued  on  terms   and   conditions
substantially identical to, and in no event less favorable  than,
those in effect prior to the Change in Control.

           In the event of a conversion of the Bank from a mutual
savings  bank  to  a form of organization owned  by  stockholders
("Conversion"),  the  Company  will  provide,  or  cause  to   be
provided,  to  Mr.  Mahon  in connection  with  such  Conversion,
stock-based   compensation  and  benefits,   including,   without
limitation,   stock   options,  restricted  stock   awards,   and
participation  in tax-qualified stock bonus plans which,  in  the
aggregate,  are either (A) accepted by Mr. Mahon  in  writing  as
being  satisfactory for purposes of this Agreement or (B) in  the
written,  good faith opinion of a nationally recognized executive
compensation  consulting  firm  selected  by  the   Company   and
satisfactory  to  Mr.  Mahon,  whose  agreement  shall   not   be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions.


          7.   Board Memberships and Personal Activities.

           (a)   Mr. Mahon may serve as a member of the board  of
directors    of   such   business,   community   and   charitable
organizations as he may disclose to the Board from time to  time,
and  he may engage in personal business and investment activities
for  his  own  account; provided, however, that such service  and
personal  business and investment activities shall not materially
interfere   with  the  performance  of  his  duties  under   this
Agreement.

          (b)  Mr. Mahon may also serve as an officer or director
of  the Bank on such terms and conditions as the Company and  the
Bank  may  mutually  agree upon, and such service  shall  not  be
deemed  to  materially interfere with Mr. Mahon's performance  of
his duties hereunder or otherwise result in a material breach  of
this  Agreement.  If Mr. Mahon is discharged or suspended, or  is
subject to any regulatory prohibition or restriction with respect
to participation in the affairs of the Bank, he shall (subject to
the  Company's  powers  of  termination  hereunder)  continue  to
perform  services  for  the  Company  in  accordance  with   this
Agreement  but shall not directly or indirectly provide  services
to  or  participate  in  the affairs of  the  Bank  in  a  manner
inconsistent  with the terms of such discharge or  suspension  or
any applicable regulatory order.

           8.    Working  Facilities and Expenses.   Mr.  Mahon's
principal place of employment shall be at the Company's executive
offices  at  the address first above written, or  at  such  other
location in the New York metropolitan area as determined  by  the
Board.   The  Company shall provide Mr. Mahon, at  his  principal
place of employment, with a private office, stenographic services
and  other  support  services  and  facilities  suitable  to  his
position  with  the  Company  and  necessary  or  appropriate  in
connection with the performance of his assigned duties under this
Agreement.   The  Company  shall  reimburse  Mr.  Mahon  for  his
ordinary  and  necessary  business expenses,  including,  without
limitation,  fees for memberships in such clubs and organizations
as  Mr.  Mahon and the Company shall mutually agree are necessary
and   appropriate   for   business  purposes   and   travel   and
entertainment   expenses   incurred  in   connection   with   the
performance of his duties under this Agreement, upon presentation
to  the  Company of an itemized account of such expenses in  such
form  as the Company may reasonably require.  Mr. Mahon shall  be
entitled to no less than four (4) weeks of paid vacation   during
each year in the Employment Period.

          9.   Termination Giving Rise to Severance Benefits.

           (a)  In the event that Mr. Mahon's employment with the
Company  shall terminate during the Employment Period on  account
of  the  termination of Mr. Mahon's employment with  the  Company
other than:

           (i)   a  Termination for Cause (within the meaning  of
section 12(a) of this Agreement);

           (ii) a voluntary resignation by Mr. Mahon other than a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement);

           (iii)      a  termination on account  of  Mr.  Mahon's
death; or

            (iv)  a  termination  after  both  of  the  following
conditions  exist:  (A)  Mr.  Mahon  has  been  absent  from  the
full-time service of the Company on account of his Disability (as
defined in section 11(b) of this Agreement) for at least six  (6)
consecutive months; and (B) Mr. Mahon shall have failed to return
to  work  in  the full-time service of the Company within  thirty
(30) days after written notice requesting such return is given to
Mr.  Mahon by the Company; then the Company shall provide to  Mr.
Mahon  the  benefits  and pay to Mr. Mahon the  amounts  provided
under section 9(b) of this Agreement.

           (b)  In the event that Mr. Mahon's employment with the
Company  shall terminate under circumstances described in section
9(a)  of  this  Agreement  or  if  the  Company  terminates  this
Agreement  pursuant to section 3(d), the following  benefits  and
amounts shall be paid or provided to Mr. Mahon (or, in the  event
of his death, to his estate):

          (i)  his earned but unpaid salary as of the date of the
termination of his employment with the Company, payable when  due
but  in  no  event  later  than thirty (30)  days  following  his
termination of employment with the Company;

           (ii) (A) the benefits, if any, to which Mr. Mahon  and
his  family and dependents are entitled as a former employee,  or
family  or  dependents of a former employee, under  the  employee
benefit  plans and programs and compensation plans  and  programs
maintained  for  the  benefit  of  the  Company's  officers   and
employees,  in  accordance  with the  terms  of  such  plans  and
programs  in effect on the date of his termination of employment,
or  if  his  termination of employment occurs after a  Change  in
Control, on the date of his termination of employment or  on  the
date  of  such  Change  in  Control, whichever  results  in  more
favorable  benefits as determined by Mr. Mahon, where  credit  is
given   for  three  additional  years  of  service  and  age   in
determining  eligibility and benefits for any  plan  and  program
where  age and service are relevant factors, and (B) payment  for
all  unused  vacation days and floating holidays in the  year  in
which his employment is terminated, at his highest annual rate of
salary for such year;

           (iii)      continued  group  life,  health  (including
hospitalization, medical and major medical, dental, accident  and
long-term  disability insurance benefits), in  addition  to  that
provided pursuant to section 9(b)(ii) of this Agreement and after
taking  into  account  the coverage provided  by  any  subsequent
employer, if and to the extent necessary to provide Mr. Mahon and
his  family and dependents for the Remaining Unexpired Employment
Period,  coverage identical to and in any event no less favorable
than  the  coverage to which they would have been entitled  under
such  plans  (as  in  effect on the date of  his  termination  of
employment, or, if his termination of employment occurs  after  a
Change  in  Control, on the date of his termination of employment
or  during the one-year period ending on the date of such  Change
in  Control,  whichever  results in more  favorable  benefits  as
determined  by  Mr. Mahon) if he had continued  working  for  the
Company during the Remaining Unexpired Employment Period  at  the
highest  annual rate of compensation (assuming, if  a  Change  in
Control  has  occurred, that the annual increases  under  section
5(c) would apply) under the Agreement;

           (iv) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the present value of the salary and the bonus that  Mr.
Mahon  would have earned if he had worked for the Company  during
the  Remaining Unexpired Employment Period at the highest  annual
rate  of  salary (assuming, if a Change in Control has  occurred,
that the annual increases under section 5(c) would apply) and the
highest bonus as a percentage of the rate of salary provided  for
under  this  Agreement,  where  such  present  value  is  to   be
determined  using a discount rate of six percent (6%) per  annum,
compounded,   in   the  case  of  salary,  with   the   frequency
corresponding  to  the  Company's regular  payroll  periods  with
respect to its officers, and, in the case of bonus, annually;

           (v)  within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to the excess, if any, of:  (A)  the present value of  the
benefits to which he would be entitled under any defined  benefit
plans  maintained  by,  or  covering employees  of,  the  Company
(including  any  "excess  benefit plan"  within  the  meaning  of
section 3(36) of the Employee Retirement Income Security  Act  of
1974,  as  amended  ("ERISA"), or other special  or  supplemental
plan)  as  in effect on the date of his termination,  if  he  had
worked  for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation (assuming, if a
Change  in Control has occurred, that the annual increases  under
section  5(c)  would apply) under the Agreement  and  been  fully
vested  in such plan or plans and had continued working  for  the
Company  during the Remaining Unexpired Employment  Period,  such
benefits  to  be  determined as of the  date  of  termination  of
employment  by  adding to the service actually  recognized  under
such  plans an additional period equal to the Remaining Unexpired
Employment  Period  and by adding to the compensation  recognized
under  such plans for the year in which termination of employment
occurs  all  amounts  payable under sections  9(b)(i),  (iv)  and
(vii), over (B) the present value of the benefits to which he  is
actually entitled under any such plans maintained by, or covering
employees of, the Company as of the date of his termination where
such present values are to be determined using a discount rate of
six percent (6%) per annum, compounded monthly, and the mortality
tables  prescribed under section 72 of the Internal Revenue  Code
of 1986 ("Code");

           (vi) within thirty (30) days following his termination
of  employment with the Company, a lump sum payment in an  amount
equal  to  the  excess, if any, of (A) the present value  of  the
benefits  attributable to the Company's contribution to which  he
would be entitled under any defined contribution plans maintained
by,  or covering employees of, the Company (including any "excess
benefit  plan" within the meaning of section 3(36) of  ERISA,  or
other  special or supplemental plan) as in effect on the date  of
his  termination,  if he had worked for the  Company  during  the
Remaining Unexpired Employment Period at the highest annual  rate
of  compensation (assuming, if a Change in Control has  occurred,
that  the annual increases under section 5(c) would apply)  under
the   Agreement,  and  made  the  maximum  amount   of   employee
contributions, if any, required or permitted under such  plan  or
plans,  and  been  eligible  for the  highest  rate  in  matching
contributions  under  such  plan or plans  during  the  Remaining
Unexpired  Employment  Period  which  is  prior  to  Mr.  Mahon's
termination of employment with the Company, and been fully vested
in such plan or plans, over (B) the present value of the benefits
attributable  to  the  Company's contributions  to  which  he  is
actually  entitled  under  such plans  as  of  the  date  of  his
termination  of employment with the Company, where  such  present
values  are to be determined using a discount rate of six percent
(6%)  per  annum, compounded with the frequency corresponding  to
the  Company's  regular  payroll  periods  with  respect  to  its
officers;

          (vii)     the payments that would have been made to Mr.
Mahon  under  any incentive compensation plan maintained  by,  or
covering employees of, the Company (other than bonus payments  to
which section 9(b)(iv) of this Agreement is applicable) if he had
continued  working for the Company during the Remaining Unexpired
Employment  Period  and  had earned an incentive  award  in  each
calendar year that ends during the Remaining Unexpired Employment
Period  in  an  amount equal to the product of  (A)  the  maximum
percentage  rate  of  compensation at which  an  award  was  ever
available  to  Mr. Mahon under such incentive compensation  plan,
multiplied by (B) the compensation that would have been  paid  to
Mr. Mahon during each calendar year at the highest annual rate of
compensation (assuming, if a Change in Control has occurred, that
the  annual increases under section 5(c) would apply)  under  the
Agreement, such payments to be made at the same time and  in  the
same manner as payments are made to other officers of the Company
pursuant  to  the  terms  of  such incentive  compensation  plan;
provided,  however,  that payments under this  section  9(b)(vii)
shall  not be made to Mr. Mahon for any year on account of  which
no  payments are made to any of the Company's officers under  any
such incentive compensation plan; and

           (viii)     the benefits to which Mr. Mahon is entitled
under  the Company's Supplemental Executive Retirement  Plan  (or
other  excess benefits plan with the meaning of section 3(36)  of
ERISA or other special or supplemental plan) shall be paid to him
in  a  lump  sum,  where  such lump sum  is  computed  using  the
mortality  tables under the Company's tax-qualified pension  plan
and a discount rate of 6% per annum.

The  payments  specified in section 9(b)  (viii)  shall  be  made
within  thirty (30) days after the date of Mr. Mahon's  election,
and  if  the  amount may be increased by a subsequent  Change  in
Control, any additional payment shall be made within thirty  (30)
days of such Change in Control.

           (c)   Mr. Mahon shall not be required to mitigate  the
amount  of any payment provided for in this section 9 by  seeking
other  employment  or  otherwise, nor shall  the  amount  of  any
payment  or benefit provided for in this section 9 be reduced  by
any  compensation earned by Mr. Mahon as the result of employment
by  another  employer, by retirement benefits, by offset  against
any  amount  claimed to be owed by Mr. Mahon to the  Company,  or
otherwise  except as specifically provided in section 9(b)  (iii)
of  this  Agreement or except as provided in section 28 to  avoid
duplication  of  payments.   The Company  and  Mr.  Mahon  hereby
stipulate that the damages which may be incurred by Mr. Mahon  as
a  consequence  of  any such termination of  employment  are  not
capable  of  accurate  measurement as of  the  date  first  above
written  and that the benefits and payments provided for in  this
Agreement   constitute   a   reasonable   estimate   under    the
circumstances  of all damages sustained as a consequence  of  any
such  termination of employment, other than damages arising under
or  out  of  any  stock option, restricted stock  or  other  non-
qualified  stock acquisition or investment plan  or  program,  it
being  understood  and  agreed  that  this  Agreement  shall  not
determine  the  measurement of damages under  any  such  plan  or
program in respect of any termination of employment.

           10.   Termination Without Severance Benefits.  In  the
event   that  Mr.  Mahon's  employment  with  the  Company  shall
terminate during the Employment Period on account of:

           (a)   Termination  for Cause (within  the  meaning  of
section 12(a) of this Agreement);


           (b)   voluntary resignation by Mr. Mahon other than  a
Resignation for Good Reason (within the meaning of section  12(b)
of this Agreement); or

           (c)  Mr. Mahon's death;

then  the  Company shall have no further obligations  under  this
Agreement, other than the payment to Mr. Mahon (or, in the  event
of  his death, to his estate) of his earned but unpaid salary  as
of  the  date  of  the  termination of his  employment,  and  the
provision of such other benefits, if any, to which he is entitled
as  a  former employee under the Company's employee benefit plans
and  programs and compensation plans and programs and payment for
all  unused  vacation days and floating holidays in the  year  in
which  his employment is terminated, at his highest annual salary
for such year.

          11.  Death and Disability.

          (a)  Death.  If Mr. Mahon's employment is terminated by
reason  of  Mr. Mahon's death during the Employment Period,  this
Agreement  shall  terminate without further  obligations  to  Mr.
Mahon's  legal representatives under this Agreement,  other  than
for  payment of amounts and provision of benefits under  sections
9(b)  (i)  and  (ii); provided, however, that if Mr.  Mahon  dies
while   in   the  employment  of  the  Company,  his   designated
beneficiary(ies) shall receive a death benefit,  payable  through
life  insurance or otherwise, which is the equivalent  on  a  net
after-tax  basis of the death benefit payable under a  term  life
insurance policy, with a stated death benefit of three times  Mr.
Mahon's then Annual Base Salary.

            (b)   Disability.   If  Mr.  Mahon's  employment   is
terminated  by  reason of Mr. Mahon's Disability  as  defined  in
section 11(c) during the Employment Period, this Agreement  shall
terminate  without further obligations to Mr. Mahon,  other  than
for  payment  of amounts and provision of benefits under  section
9(b)  (i) and (ii); provided, however, that in the event  of  Mr.
Mahon's  Disability while in the employment of the  Company,  the
Company  will pay to him a lump sum amount equal to  three  times
his then Annual Base Salary.

          (c)  For purposes of this Agreement, "Disability" shall
be  defined  in  accordance with the terms of the Company's  long
term disability policy.

           (d)   Payments  under this section 11  shall  be  made
within 30 days after Mr. Mahon's death or disability.

            12.    Definition  of  Termination  for   Cause   and
Resignation for Good Reason.

           (a)   Mr.  Mahon's termination of employment with  the
Company  shall  be  deemed  a "Termination  for  Cause"  if  such
termination occurs upon:

           (i)   Mr.  Mahon's  willful and continued  failure  to
substantially perform his duties with the Company (other than any
failure  resulting  from incapacity due  to  physical  or  mental
illness or any actual or anticipated failure following notice  by
Mr.  Mahon  of an intended Resignation for Good Reason)  after  a
written demand for substantial performance is delivered to him by
the  Board,  which demand specifically identifies the  manner  in
which   the  Board  believes  Mr.  Mahon  has  not  substantially
performed his duties, and the failure to cure such breach  within
sixty  (60)  days  following  written  notice  thereof  from  the
Company;  or  (ii)  the  intentional  and  willful  engaging   in
dishonest conduct in connection with his performance of  services
for  the Company resulting in his conviction of a felony,  fraud,
personal dishonesty, incompetence, willful misconduct, breach  of
fiduciary  duty involving personal profit, willful  violation  of
any  law,  rule  or regulation (other than traffic violations  or
similar offenses), or final cease-and-desist order.

No  act,  or failure to act, on Mr. Mahon's part shall be  deemed
willful unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the
best  interest of the Company.  Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the
Board or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by  Mr.  Mahon  in  good faith and in the best interests  of  the
Company.   Notwithstanding the foregoing, no termination  of  Mr.
Mahon's employment shall be a Termination for Cause unless  there
shall  have  been delivered to Mr. Mahon a copy of  a  resolution
duly  adopted by the affirmative vote of a majority of the  Board
of  Directors (or, following a Change in Control, an  affirmative
vote of three-quarters of the Board of Directors) at a meeting of
the  Board  called  and held for such purpose  (after  reasonable
notice  to  Mr. Mahon and an opportunity for Mr. Mahon,  together
with  his counsel, to be heard before the Board) finding that  in
good  faith  opinion  of  the  Board circumstances  described  in
section  12(a)  (i) or (ii) exist and specifying the  particulars
thereof in detail.

           (b)   Mr.  Mahon's termination of employment with  the
Company  shall  be deemed a Resignation for Good Reason  if  such
termination  occurs following any one or more  of  the  following
events:

           (i)   (A)  the assignment to Mr. Mahon of  any  duties
inconsistent with Mr. Mahon's status as Senior Vice President and
Chief  Financial  Officer of the Company  or  (B)  a  substantial
adverse  alteration  in  the nature  or  status  of  Mr.  Mahon's
responsibilities from those in effect immediately  prior  to  the
alteration;  or  (C) any Change in Control described  in  section
13(b);

           (ii)  a reduction by the Company in Mr. Mahon's annual
base  salary as in effect on the date first above written  or  as
the  same  may  be  increased  from time  to  time,  unless  such
reduction  was  mandated  at  the initiation  of  any  regulatory
authority having jurisdiction over the Company;

           (iii)      the  relocation of the Company's  principal
executive offices to a location outside the New York metropolitan
area  or  the Company's requiring Mr. Mahon to be based  anywhere
other  than the Company's principal executive offices except  for
required   travel  on  the  Company's  business  to   an   extent
substantially   consistent  with  Mr.  Mahon's  business   travel
obligations at the date first above written;

           (iv)  the failure by the Company, without Mr.  Mahon's
consent,  to pay to Mr. Mahon, within seven (7) days of the  date
when due, (A) any portion of his compensation, or (B) any portion
of  an  installment of deferred compensation under  any  deferred
compensation program of the Company;

           (v)   the failure by the Company to continue in effect
any  compensation plan in which Mr. Mahon participates  which  is
material to his total compensation, including but not limited  to
the  Retirement Plan and the Company's Incentive Savings Plan  or
any substitute plans unless an equitable arrangement (embodied in
an  ongoing  substitute or alternative plan) has been  made  with
respect  to such plan, or the failure by the Company to  continue
his  participation therein (or in such substitute or  alternative
plan) on a basis not materially less favorable, both in terms  of
the   amount   of  benefits  provided  and  the  level   of   his
participation relative to other participants, unless such failure
is  the  result  of  action mandated at  the  initiation  of  any
regulatory authority having jurisdiction over the Company;

           (vi) the failure by the Company to continue to provide
Mr. Mahon with benefits substantially similar to those enjoyed by
Mr.  Mahon  under the Retirement Plan and the Company's Incentive
Savings  Plan  or  under  any  of  the  Company's  life,   health
(including  hospitalization, medical and major medical),  dental,
accident, and long-term disability insurance benefits,  in  which
Mr.  Mahon is participating, or the taking of any action  by  the
Company which would directly or indirectly materially reduce  any
of  such  benefits  or deprive Mr. Mahon of the  number  of  paid
vacation  days to which he is entitled, on the basis of years  of
service  with the Company, rank or otherwise, in accordance  with
the  Company's normal vacation policy, unless such failure is the
result  of  action mandated at the initiation of  any  regulatory
authority having jurisdiction over the Company;

           (vii)      the  failure  of the Company  to  obtain  a
satisfactory agreement from any successor to assume and agree  to
perform this Agreement, as contemplated in section 15(a) of  this
Agreement;

           (viii)     any purported termination of employment  by
the  Company  which  is not effected pursuant the  provisions  of
section  12(a) regarding Termination for Cause or on  account  of
Disability;

           (ix)  a  material  breach of  this  Agreement  by  the
Company, which the Company fails to cure within thirty (30)  days
following written notice thereof from Mr. Mahon;

           (x)  in the event of a Change in Control described  in
section  13(b)  of this Agreement, a failure of  the  Company  to
provide, or cause to be provided, to Mr. Mahon in connection with
such  Change  in Control, stock-based compensation and  benefits,
including,  without limitation, stock options,  restricted  stock
awards,  and  participation in tax-qualified  stock  bonus  plans
which, in the aggregate, are either (A) accepted by Mr. Mahon  in
writing  as being satisfactory for purposes of this Agreement  or
(B) in the written, good faith opinion of a nationally recognized
executive  compensation consulting firm selected by  the  Company
and  satisfactory  to  Mr. Mahon, whose agreement  shall  not  be
unreasonably withheld, are no less favorable than the stock-based
compensation  and  benefits usually and customarily  provided  to
similarly  situated executives of similar financial  institutions
in connection with similar transactions; or

           (xi)  a  change  in the position to  which  Mr.  Mahon
reports;

          (xii)     in the event of a Change in Control described
in  section  13 of this Agreement, termination of employment  for
any  or no reason whatsoever during the period of sixty (60) days
beginning on the first anniversary of the effective date of  such
Change in Control.

           13.  Definition of Change in Control.  For purposes of
this Agreement, a Change in Control of the Company shall mean:

           (a)   the  occurrence  of any  event  upon  which  any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended  ("Exchange  Act")),
other  than  (A) a trustee or other fiduciary holding  securities
under  an  employee benefit plan maintained for  the  benefit  of
employees  of the Company; (B) a corporation owned,  directly  or
indirectly,  by the stockholders of the Company in  substantially
the  same proportions as their ownership of stock of the Company;
or (C) Mr. Mahon, or any group otherwise constituting a person in
which  Mr. Mahon is a member, becomes the "beneficial owner"  (as
defined  in  Rule  13d-3  promulgated under  the  Exchange  Act),
directly  or  indirectly, of securities  issued  by  the  Company
representing 25% or more of the combined voting power of  all  of
the Company's then outstanding securities; or

           (b)   the  occurrence  of any  event  upon  which  the
individuals  who on the date first above written are  members  of
the  Board,  together with individuals (other than any individual
designated by a person who has entered into an agreement with the
Company  to  effect a transaction described in section  13(a)  or
13(c)  of  this  Agreement)  whose  election  by  the  Board   or
nomination  for  election  by  the  Company's  stockholders   was
approved  by the affirmative vote of at least two-thirds  of  the
members  of Board then in office who were either members  of  the
Board  on  the  date first above written or whose  nomination  or
election  was  previously so approved cease  for  any  reason  to
constitute a majority of the members of the Board, but excluding,
for this purpose, any such individual whose initial assumption of
office  is  in  connection with an actual or threatened  election
contest relating to the election of directors of the Company  (as
such  terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or

          (c)  the shareholders of the Company approve either:

               (i)  a merger or consolidation of the Company with
any  other  corporation,  other than a  merger  or  consolidation
following which both of the following conditions are satisfied:

                               (A)  either (1) the members of the
               Board  of  the Company immediately prior  to  such
               merger  or  consolidation constitute  at  least  a
               majority of the members of the governing  body  of
               the  institution  resulting from  such  merger  or
               consolidation;  or  (2) the  shareholders  of  the
               Company   own   securities  of   the   institution
               resulting   from  such  merger  or   consolidation
               representing  80% or more of the  combined  voting
               power  of all such securities then outstanding  in
               substantially  the  same  proportions   as   their
               ownership  of  voting securities  of  the  Company
               before such merger or consolidation; and

                               (B)  the entity which results from
               such  merger or consolidation expressly agrees  in
               writing   to  assume  and  perform  the  Company's
               obligations under this Agreement; or

               (ii) a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of its assets; and

           (d)   any  event which would be described  in  section
13(a),  (b)  or (c) if the term "Bank" were substituted  for  the
term  "Company"  therein.  Such event shall be  deemed  to  be  a
Change  in Control under the relevant provision of section 13(a),
(b) or (c).

It  is understood and agreed that more than one Change in Control
may  occur  at the same or different times during the  Employment
Period and that the provisions of this Agreement shall apply with
equal  force  and  effect with respect to  each  such  Change  in
Control.

           14.   No Effect on Employee Benefit Plans or Programs.
Except  as  expressly provided in this Agreement, the termination
of  Mr.  Mahon's  employment  during  the  Employment  Period  or
thereafter, whether by the Company or by Mr. Mahon, shall have no
effect on the rights and obligations of the parties hereto  under
the  Company's  or the Bank's Retirement Plan and  the  Company's
Incentive   Savings   Plan,   group   life,   health   (including
hospitalization, medical and major medical), dental, accident and
long  term  disability  insurance plans or  such  other  employee
benefit  plans  or  programs, or compensation plans  or  programs
(whether  or  not  employee  benefit  plans  or  programs)   and,
following the conversion of the Company to stock form, any  stock
option  and  appreciation rights plan, employee  stock  ownership
plan and restricted stock plan, as may be maintained by, or cover
employees of, the Company from time to time.

          15.  Successors and Assigns.

           (a)   The Company shall require any successor (whether
direct  or  indirect,  by  purchase,  merger,  consolidation   or
otherwise)  to  all or substantially all of the  business  and/or
assets  of  the Company to expressly assume and agree to  perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be  deemed  to  constitute  a material breach  of  the  Company's
obligations under this Agreement.

          (b)  This Agreement will inure to the benefit of and be
binding upon Mr. Mahon, his legal representatives and testate  or
intestate   distributees,  and  the  Company,  their   respective
successors  and  assigns, including any successor  by  merger  or
consolidation or a statutory receiver or any other person or firm
or   corporation  to  which  all  or  substantially  all  of  the
respective  assets and business of the Company  may  be  sold  or
otherwise transferred.


           16.  Notices.  Any communication required or permitted
to   be   given  under  this  Agreement,  including  any  notice,
direction,   designation,  consent,  instruction,  objection   or
waiver,  shall  be in writing and shall be deemed  to  have  been
given  at  such time as it is delivered personally, or  five  (5)
days  after mailing if mailed, postage prepaid, by registered  or
certified mail, return receipt requested, addressed to such party
at  the address listed below or at such other address as one such
party may by written notice specify to the other party:

          If to Mr. Mahon:

          [Home address deleted].


          If to the Company:

          Dime Community Bancorp, Inc.

          209 Havemeyer Street
          Brooklyn, New York 11211
          Attention: Corporate Secretary

          with a copy to:

          Thacher Proffitt & Wood
          Two World Trade Center, 39th Floor
          New York, New York  10048

          Attention:  W. Edward Bright

           17.  Indemnification and Attorneys' Fees.  The Company
shall  pay  to  or  on behalf of Mr. Mahon all reasonable  costs,
including  legal  fees,  incurred by him in  connection  with  or
arising  out  of  his  consultation  with  legal  counsel  or  in
connection  with or arising out of any action, suit or proceeding
in  which he may be involved, as a result of his efforts, in good
faith,  to  defend  or  enforce  the  terms  of  this  Agreement;
provided,  however, that this section 17 shall not  obligate  the
Company to pay costs and legal fees on behalf of Mr. Mahon  under
this Agreement in excess of $50,000.

          18.  Excise Tax Indemnification.

           (a)   This  section  18  shall apply  if  Mr.  Mahon's
employment  is  terminated  in  circumstances  giving   rise   to
liability  for excise taxes under section 4999 of the  Code.   If
this Section 18 applies, then, if for any taxable year, Mr. Mahon
shall  be  liable for the payment of an excise tax under  section
4999  of  the Code with respect to any payment in the  nature  of
compensation  made  by  the Company or  any  direct  or  indirect
subsidiary or affiliate of the Company to (or for the benefit of)
Mr. Mahon, the Company shall pay to Mr. Mahon an amount equal  to
X determined under the following formula:

                               E x P
          X =   ____________________________________
                1 - [(FI x (1 - SLI)) + SLI  + E + M]
          where
                      E  =  the rate at which the excise  tax
                            is assessed under section 4999 of the Code;

                     P   =  the amount with respect to which
                            such   excise  tax  is  assessed,  determined
                            without regard to this section 18;

                     FI  =  the  highest  marginal  rate  of
                            income tax applicable to Mr. Mahon under  the
                            Code for the taxable year in question;

                    SLI  =  the  sum  of  the  highest
                            marginal  rates of income tax  applicable  to
                            Mr.  Mahon  under  all applicable  state  and
                            local  laws for the taxable year in question;
                            and

                     M   =  the  highest  marginal  rate  of
                            Medicare  tax applicable to Mr.  Mahon  under
                            the Code for the taxable year in question.

With respect to any payment in the nature of compensation that is
made to (or for the benefit of) Mr. Mahon under the terms of this
Agreement, or otherwise, and on which an excise tax under section
4999  of the Code will be assessed, the payment determined  under
this  section 18(a) shall be made to Mr. Mahon on the earlier  of
(i) the date the Company or any direct or indirect subsidiary  or
affiliate  of  the Company is required to withhold such  tax,  or
(ii) the date the tax is required to be paid by Mr. Mahon.

          (b)  Notwithstanding anything in this section 18 to the
contrary, in the event that Mr. Mahon's liability for the  excise
tax  under section 4999 of the Code for a taxable year  is  subse
quently determined to be different than the amount determined  by
the  formula  (X  +  P) x E, where X, P and E have  the  meanings
provided in section 18(a), Mr. Mahon or the Company, as the  case
may  be, shall pay to the other party at the time that the amount
of  such excise tax is finally determined, an appropriate amount,
plus  interest,  such that the payment made under section  18(a),
when  increased by the amount of the payment made  to  Mr.  Mahon
under  this section 18(b) by the Company, or when reduced by  the
amount  of  the  payment made to the Company under  this  section
18(b)  by  Mr. Mahon, equals the amount that should have properly
been  paid  to Mr. Mahon under section 18(a).  The interest  paid
under this section 18(b) shall be determined at the rate provided
under  section  1274(b)(2)(B) of the Code.  To confirm  that  the
proper  amount, if any, was paid to Mr. Mahon under this  section
18,  Mr.  Mahon shall furnish to the Company a copy of  each  tax
return which reflects a liability for an excise tax payment  made
by  the  Company, at least 20 days before the date on which  such
return is required to be filed with the Internal Revenue Service.

           (c)  The provisions of this section 18 are designed to
reflect the provisions of applicable federal, state and local tax
laws in effect on the date of this Agreement.  If, after the date
hereof,  there shall be any change in any such laws, this section
18  shall be modified in such manner as Mr. Mahon and the Company
may  mutually agree upon if and to the extent necessary to assure
that  Mr. Mahon is fully indemnified against the economic effects
of  the tax imposed under section 4999 of the Code or any similar
federal, state or local tax.

           19.  Severability.  A determination that any provision
of  this  Agreement is invalid or unenforceable shall not  affect
the validity or enforceability of any other provision hereof.

           20.  Waiver.  Failure to insist upon strict compliance
with  any of the terms, covenants or conditions hereof shall  not
be deemed a waiver of such term, covenant, or condition. A waiver
of  any  provision  of this Agreement must be  made  in  writing,
designated as a waiver, and signed by the party against  who  its
enforcement  is  sought.   Any waiver or relinquishment  of  such
right  or  power at any one or more times shall not be  deemed  a
waiver or relinquishment of such right or power at any other time
or times.

           21.   Counterparts. This Agreement may be executed  in
two  (2)  or more counterparts, each of which shall be deemed  an
original,  and  all of which shall constitute one  and  the  same
Agreement.

           22.   Governing Law.  This Agreement shall be governed
by  and construed and enforced in accordance with the laws of the
State  of  New  York,  without  reference  to  conflicts  of  law
principles.

            23.   Headings  and  Construction.  The  headings  of
sections in this Agreement are for convenience of reference  only
and  are not intended to qualify the meaning of any section.  Any
reference  to a section number shall refer to a section  of  this
Agreement, unless otherwise stated.

           24.   Entire Agreement; Modifications. This instrument
contains  the  entire agreement of the parties  relating  to  the
subject matter hereof, and supersedes in its entirety any and all
prior  agreements, understandings or representations relating  to
the  subject  matter hereof, including the Amended  and  Restated
Employment Agreement dated October 1, 1995 between the  Bank  and
Mr.  Mahon.   No modifications of this Agreement shall  be  valid
unless made in writing and signed by the parties hereto.

           25.   Arbitration Clause. Any dispute  or  controversy
arising  under  or  in connection with this  Agreement  shall  be
settled  exclusively by arbitration, conducted before a panel  of
three  arbitrators in New York, New York, in accordance with  the
rules  of  the American Arbitration Association then  in  effect.
Judgment  may be entered on the arbitrator's award in  any  court
having  jurisdiction;  the expense of such arbitration  shall  be
borne by the Company.

           26.   Provisions  of  Law.   Notwithstanding  anything
herein  contained to the contrary, any payments to Mr.  Mahon  by
the Company, whether pursuant to this Agreement or otherwise, are
subject  to  and conditioned upon their compliance  with  section
18(k)  of  the Federal Deposit Insurance Act, 12 U.S.C. Section
1828(k), and any regulations promulgated thereunder.

          27.  Guarantee.  The Company hereby agrees to guarantee
the payment by the Bank of any benefits and compensation to which
the  Executive  is  or  may be entitled to under  the  terms  and
conditions of the employment agreement dated as of the  26th  day
of  June, 1996 between the Bank and Mr. Mahon, a copy of which is
attached hereto as Exhibit A.

           28.   Non-duplication.  In the event  that  Mr.  Mahon
shall  perform  services  for the Bank or  any  other  direct  or
indirect  subsidiary of the Company, any compensation or benefits
provided to Mr. Mahon by such other employer shall be applied  to
offset  the  obligations  of  the  Company  hereunder,  it  being
intended that this Agreement set forth the aggregate compensation
and benefits payable to Mr. Mahon for all services to the Company
and all of its direct or indirect subsidiaries.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and Mr. Mahon has hereto set his hand, all as of the day and year first above written. /s/ Kenneth J. Mahon KENNETH J. MAHON ATTEST DIME COMMUNITY BANCORP, INC. By: /s/ Evelyn McLoughlin By: /s/ Anthony Bergamo Assistant Secretary for the Board of Directors [Seal] [Witnessed and attested to by Notary Public].

                  EMPLOYEE RETENTION AGREEMENT


          This Employee Retention Agreement ("Agreement") is made
and  entered into as of _______________   by and among  The  Dime
Savings  Bank  of  Williamsburgh, a savings  bank  organized  and
operating under the federal laws of the United States and  having
its executive offices at 209 Havemeyer Street, Brooklyn, New York
11211   ("Bank");  Dime  Community  Bancorp,  Inc.,  a   business
corporation organized and existing under the laws of the State of
Delaware  and  having  its  executive offices  at  209  Havemeyer
Street,  Brooklyn,  New  York  11211  ("Holding  Company");   and
,_________  an individual residing at ___________________________
__________________ ("Officer").


                     W I T N E S S E T H :


           Whereas,  effective as of the date of this  Agreement,
the  Bank has converted from a federal mutual savings bank  to  a
federal   stock  savings  bank  and  has  become  a  wholly-owned
subsidiary of the Holding Company; and

           Whereas,  the  Bank desires to secure for  itself  the
continued availability of the Officer's services; and

           Whereas, the Bank recognizes that a third party may at
some time in the future pursue a Change of Control of the Bank or
the  Holding Company and that this possibility may result in  the
departure or distraction of the Bank's officers; and

          Whereas, the Bank has determined that appropriate steps
should  be taken to encourage the continued attention and  dedica
tion  of  the  Bank's officers, including the Officer,  to  their
duties  for the Bank without the distraction that may arise  from
the possibility of a Change of Control of the Bank or the Holding
Company; and

           Whereas,  the Bank believes that, by assuring  certain
officers, including the Officer, of reasonable financial security
in  the  event of a Change of Control of the Bank or the  Holding
Company,  such  officers will be in a position to  perform  their
duties  free  from  financial  self  interest  and  in  the  best
interests of the Bank and its shareholders; and

            Whereas,  for  purposes  of  securing  the  Officer's
services  for  the  Bank,  the Board of  Directors  of  the  Bank
("Board") has authorized the proper officers of the Bank to enter
into  an  employee retention agreement with the  Officer  on  the
terms and conditions set forth herein; and

           Whereas, the Board of Directors of the Holding Company
has  authorized  the  Holding Company  to  guarantee  the  Bank's
obligations under such an employee retention agreement; and

           Whereas,  the Officer is willing to make the Officer's
services  available to the Bank on the terms and  conditions  set
forth herein;

           Now,  Therefore, in consideration of the premises  and
the  mutual covenants and obligations hereinafter set forth,  the
Bank,  the  Holding  Company  and the  Officer  hereby  agree  as
follows:


          Section 1.     Effective Date.

           (a)   This Agreement shall be effective as of the date
first above written and shall remain in effect during the term of
this  Agreement  which shall be for a period of three  (3)  years
commencing on the date of this Agreement, plus such extensions as
are provided pursuant to section 1(b); provided, however, that if
the term of this Agreement has not otherwise terminated, the term
of  this  Agreement will terminate on the date of  the  Officer's
termination  of employment with the Bank; and provided,  further,
that  the  obligations  under section 8 of this  Agreement  shall
survive  the term of this Agreement if payments become  due  here
under.

           (b)  Prior to each anniversary date of this Agreement,
the  Board shall consider the advisability of an extension of the
term  in  light of the circumstances then prevailing and may,  in
its  discretion, approve an extension to take effect  as  of  the
upcoming anniversary date.  If an extension is approved, the term
of  this Agreement shall be extended so that it will expire three
(3) years after such anniversary date.

           (c)  Notwithstanding anything herein contained to  the
contrary:   (i)  the Officer's employment with the  Bank  may  be
terminated  at  any time, subject to the terms and conditions  of
this  Agreement; and (ii) nothing in this Agreement shall mandate
or  prohibit a continuation of the Officer's employment following
the  expiration  of  the Assurance Period  upon  such  terms  and
conditions as the Bank and the Officer may mutually agree upon.

          Section 2.     Assurance Period.

          (a)  The assurance period ("Assurance Period") shall be
for  a  period commencing on the date of a Change of Control,  as
defined  in  section  10 of this Agreement,  and  ending  on  the
anniversary of the date on which the Assurance Period  commences,
plus  such  extensions as are provided pursuant to the  following
sentence.   The Assurance Period shall be automatically  extended
for  one  (1) additional day each day, unless either the Bank  or
the Officer elects not to extend the Assurance Period further  by
giving  written  notice to the other party,  in  which  case  the
Assurance  Period  shall  become  fixed  and  shall  end  on  the
anniversary  of the date on which such written notice  is  given;
provided,  however, that if following a Change  of  Control,  the
Office  of  Thrift Supervision (or its successor) is  the  Bank's
primary  federal  regulator, the Agreement shall  be  subject  to
extension not more frequently than annually and only upon  review
and approval of the Board.

           (b)  Upon termination of the Officer's employment with
the Bank, any daily extensions provided pursuant to the preceding
sentence,  if not theretofore discontinued, shall cease  and  the
remaining  unexpired Assurance Period under this Agreement  shall
be  a  fixed period ending on the later of the        anniversary
of the date of the Change of Control, as defined in section 10 of
this  Agreement, or the         anniversary of the date on  which
the daily extensions were discontinued.


          Section 3.     Duties.

           During  the  period of the Officer's  employment  that
falls within the Assurance Period, the Officer shall:  (a) except
to  the  extent allowed under section 6 of this Agreement, devote
his full business time and attention (other than during weekends,
holidays, vacation periods, and periods of illness, disability or
approved  leave  of absence) to the business and affairs  of  the
Bank  and  use his best efforts to advance the Bank's  interests;
(b)  serve  in the position to which the Officer is appointed  by
the  Bank,  which,  during the Assurance  Period,  shall  be  the
position  that  the Officer held on the day before the  Assurance
Period commenced or any higher office at the Bank to which he may
subsequently  be appointed; and (c) subject to the  direction  of
the  Board  and  the  By-laws of the Bank, have  such  functions,
duties,  responsibilities and authority commonly associated  with
such position.

          Section 4.     Compensation.

           In  consideration  for the services  rendered  by  the
Officer  during the Assurance Period, the Bank shall pay  to  the
Officer  during the Assurance Period a salary at an  annual  rate
equal to the greater of:

           (a)  the annual rate of salary in effect for  the
     Officer   on  the  day  before  the  Assurance   Period
     commenced; or

           (b)  such higher annual rate as may be prescribed
     by or under the authority of the Board;

provided,  however, that in no event shall the  Officer's  annual
rate  of  salary under this Agreement in effect at  a  particular
time during the Assurance Period be reduced without the Officer's
prior  written  consent.  The annual salary  payable  under  this
section  4 shall be subject to review at least once annually  and
shall  be  paid in approximately equal installments in accordance
with  the  Bank's customary payroll practices.  Nothing  in  this
section  4  shall be deemed to prevent the Officer from receiving
additional compensation other than salary for his services to the
Bank,  or additional compensation for his services to the Holding
Company,  upon such terms and conditions as may be prescribed  by
or  under the authority of the Board or the Board of Directors of
the Holding Company.

          Section 5.     Employee Benefit Plans and Programs.

           Except  as  otherwise provided in this Agreement,  the
Officer  shall,  during the Assurance Period, be  treated  as  an
employee  of the Bank and be eligible to participate  in  and  re
ceive  benefits  under  any  qualified or  non-qualified  defined
benefit or defined contribution retirement plan, group life,  hea
lth  (including  hospitalization,  medical  and  major  medical),
dental,  accident and long term disability insurance  plans,  and
such  other  employee benefit plans and programs, including,  but
not  limited  to,  any incentive compensation plans  or  programs
(whether  or not employee benefit plans or programs),  any  stock
option  and  appreciation rights plan, employee  stock  ownership
plan  and  restricted stock plan, as may from  time  to  time  be
maintained  by,  or cover employees of, the Bank,  in  accordance
with the terms and conditions of such employee benefit plans  and
programs and compensation plans and programs and with the  Bank's
customary practices.

          Section 6.     Board Memberships.

           The  Officer  may serve as a member of the  boards  of
directors  of  such  business, community and charitable  organiza
tions  as he may disclose to and as may be approved by the  Board
(which  approval shall not be unreasonably withheld), and he  may
engage in personal business and investment activities for his own
account;  provided,  however,  that  such  service  and  personal
business and investment activities shall not materially interfere
with the performance of his duties under this Agreement.

          Section 7.     Working Facilities and Expenses.

           During  the Assurance Period, the Officer's  principal
place  of employment shall be at the Bank's executive offices  at
the address first above written, or at such other location within
the  City  of  New  York  at which the Bank  shall  maintain  its
principal  executive offices, or at such other  location  as  the
Bank  and  the Officer may mutually agree upon.  The  Bank  shall
provide the Officer, at his principal place of employment, with a
private  office and support services and facilities  suitable  to
his  position  with  the  Bank and necessary  or  appropriate  in
connection with the performance of his assigned duties under this
Agreement.  The Bank shall reimburse the Officer for his ordinary
and  necessary business expenses, including, without  limitation,
the  Officer's  travel  and entertainment expenses,  incurred  in
connection  with  the performance of the Officer's  duties  under
this  Agreement,  upon presentation to the Bank  of  an  itemized
account  of such expenses in such form as the Bank may reasonably
require.

          Section 8.     Termination of Employment with Severance
                         Benefits.

           (a)   In the event that the Officer's employment  with
the Bank shall terminate during the Assurance Period, or prior to
the  commencement  of the Assurance Period but within  three  (3)
months  of and in connection with a Change of Control as  defined
in section 10 of this Agreement on account of:

           (i)   The  Officer's voluntary  resignation  from
     employment  with  the  Bank  within  ninety  (90)  days
     following:

                     (A)  the failure of the Bank's Board to
          appoint  or  re-appoint or elect or  re-elect  the
          Officer to serve in the same position in which the
          Officer  was  serving,  on  the  day  before   the
          Assurance  Period  commenced  or  a  more   senior
          office;

                     (B)  the failure of the stockholders of
          the  Holding  Company  to elect  or  re-elect  the
          Officer  as  a member of the Board, if  he  was  a
          member  of  the  Board  on  the  day  before   the
          Assurance Period commenced;

                    (C)  the expiration of a thirty (30) day
          period  following  the date on which  the  Officer
          gives  written notice to the Bank of its  material
          failure,  whether  by  amendment  of  the   Bank's
          Organization Certificate or By-laws, action of the
          Board  or  the  Holding Company's stockholders  or
          otherwise,  to vest in the Officer the  functions,
          duties,  or responsibilities vested in the Officer
          on  the  day before the Assurance Period commenced
          (or the functions, duties and responsibilities  of
          a  more senior office to which the Officer may  be
          appointed),  unless during such  thirty  (30)  day
          period, the Bank fully cures such failure;

                     (D)  the failure of the Bank to cure  a
          material  breach of this Agreement  by  the  Bank,
          within  thirty (30) days following written  notice
          from the Officer of such material breach;

                     (E)   a  reduction in the  compensation
          provided  to the Officer, or a material  reduction
          in  the benefits provided to the Officer under the
          Bank's program of employee benefits, compared with
          the  compensation and benefits that were  provided
          to  the  Officer on the day before  the  Assurance
          Period commenced;

                    (F)  a change in the Officer's principal
          place of employment that would result in a one-way
          commuting time in excess of the greater of (I)  30
          minutes  or  (II)  the  Officer's  commuting  time
          immediately prior to such change; or

           (ii) the discharge of the Officer by the Bank for
     any  reason other than for "cause" as provided  in  sec
     tion 9(a);

then,  subject to section 21, the Bank shall provide the benefits
and  pay  to  the Officer the amounts provided for under  section
8(b)  of  this Agreement; provided, however, that if benefits  or
payments  become  due  hereunder as a  result  of  the  Officer's
termination  of  employment  prior to  the  commencement  of  the
Assurance  Period, the benefits and payments provided  for  under
section 8(b) of this Agreement shall be determined as though  the
Officer  had remained in the service of the Bank (upon the  terms
and conditions in effect at the time of his actual termination of
service)  and had not terminated employment with the  Bank  until
the  date  on  which  the Officer's Assurance Period  would  have
commenced.

           (b)   Upon the termination of the Officer's employment
with  the Bank under circumstances described in section  8(a)  of
this  Agreement, the Bank shall pay and provide  to  the  Officer
(or,  in  the  event  of the Officer's death,  to  the  Officer's
estate):

           (i)  the Officer's earned but unpaid compensation
     (including,   without  limitation,  all   items   which
     constitute  wages under section 190.1 of the  New  York
     Labor  Law  and  the payment of which is not  otherwise
     provided for under this section 8(b)) as of the date of
     the  termination of the Officer's employment  with  the
     Bank,  such payment to be made at the time and  in  the
     manner  prescribed by law applicable to the payment  of
     wages but in no event later than thirty (30) days after
     termination of employment;

          (ii) the benefits, if any, to which the Officer is
     entitled  as  a  former  employee  under  the  employee
     benefit  plans and programs and compensation plans  and
     programs  maintained  for the  benefit  of  the  Bank's
     officers and employees;

           (iii)     continued group life, health (including
     hospitalization,  medical and major medical),  accident
     and  long term disability insurance benefits,  in  addi
     tion to that provided pursuant to section 8(b)(ii)  and
     after taking into account the coverage provided by  any
     subsequent employer, if and to the extent necessary  to
     provide  for  the Officer, for the remaining  unexpired
     Assurance  Period, coverage equivalent to the  coverage
     to  which  the  Officer would have been entitled  under
     such plans (as in effect on the date of his termination
     of  employment,  or, if his termination  of  employment
     occurs  after a Change of Control, on the date of  such
     Change  of Control, whichever benefits are greater)  if
     the  Officer had continued working for the Bank  during
     the remaining unexpired Assurance Period at the highest
     annual   rate  of  compensation  achieved  during   the
     Officer's period of actual employment with the Bank;

            (iv)  within  thirty  (30)  days  following  the
     Officer's  termination of employment with the  Bank,  a
     lump  sum  payment, in an amount equal to  the  present
     value  of the salary that the Officer would have earned
     if  the  Officer  had continued working  for  the  Bank
     during the remaining unexpired Assurance Period at  the
     highest  annual  rate  of salary  achieved  during  the
     Officer's  period of actual employment with  the  Bank,
     where  such present value is to be determined  using  a
     discount   rate  equal  to  the  applicable  short-term
     federal  rate prescribed under section 1274(d)  of  the
     Internal  Revenue  Code  of 1986  ("Code"),  compounded
     using  the  compounding periods  corresponding  to  the
     Bank's  regular payroll periods for its officers,  such
     lump  sum  to be paid in lieu of all other payments  of
     salary provided for under this Agreement in respect  of
     the period following any such termination;

            (v)   within  thirty  (30)  days  following  the
     Officer's  termination of employment with the  Bank,  a
     lump  sum payment in an amount equal to the excess,  if
     any, of:

                     (A)  the present value of the aggregate
          benefits  to  which the Officer would be  entitled
          under  any  and  all  qualified and  non-qualified
          defined  benefit pension plans maintained  by,  or
          covering  employees of, the Bank  if  the  Officer
          were  100%  vested  thereunder and  had  continued
          working   for   the  Bank  during  the   remaining
          unexpired  Assurance Period such  benefits  to  be
          determined  as  of  the  date  of  termination  of
          employment  by  adding  to  the  service  actually
          recognized  under such plans an additional  period
          equal  to the remaining unexpired Assurance Period
          and by adding to the compensation recognized under
          such  plans  for the year in which termination  of
          employment   occurs  all  amounts  payable   under
          sections 8(b)(i), (iv) and (vii);

                     (B)   the present value of the benefits
          to  which  the Officer is actually entitled  under
          such  defined benefit pension plans as of the date
          of his termination;

     where  such  present values are to be determined  using
     the   mortality   tables   prescribed   under   section
     415(b)(2)(E)(v)  of  the  Code  and  a  discount  rate,
     compounded  monthly, equal to the  annualized  rate  of
     interest  prescribed  by the Pension  Benefit  Guaranty
     Corporation  for  the valuation of immediate  annuities
     payable   under  terminating  single-employer   defined
     benefit  plans  for  the month in which  the  Officer's
     termination  of  employment  occurs  ("Applicable  PBGC
     Rate").

            (vi)  within  thirty  (30)  days  following  the
     Officer's  termination of employment with the  Bank,  a
     lump  sum  payment in an amount equal  to  the  present
     value  of the additional employer contributions (or  if
     greater  in  the  case  of a leveraged  employee  stock
     ownership  plan or similar arrangement, the  additional
     assets allocable to him through debt service, based  on
     the fair market value of such assets at termination  of
     employment) to which he would have been entitled  under
     any   and   all  qualified  and  non-qualified  defined
     contribution plans maintained by, or covering employees
     of, the Bank, if he were 100% vested thereunder and had
     continued  working  for the Bank during  the  remaining
     unexpired  Assurance Period at the highest annual  rate
     of compensation achieved during the Officer's period of
     actual employment with the Bank, and making the maximum
     amount  of  employee contributions,  if  any,  required
     under  such  plan or plans, such present  value  to  be
     determined   on   the  basis  of  the  discount   rate,
     compounded   using   the   compounding   period    that
     corresponds  to  the  frequency  with  which   employer
     contributions are made to the relevant plan,  equal  to
     the Applicable PBGC Rate;

           (vii)     the payments that would have been  made
     to  the  Officer under any cash bonus or  long-term  or
     short-term  cash incentive compensation plan maintained
     by,  or  covering  employees of, the Bank,  if  he  had
     continued  working  for the Bank during  the  remaining
     unexpired  Assurance Period and had earned the  maximum
     bonus  or  incentive award in each calendar  year  that
     ends  during the remaining unexpired Assurance  Period,
     such payments to be equal to the product of:

                     (A)   the  maximum percentage  rate  at
          which  an award was ever available to the  Officer
          under such incentive compensation plan; multiplied
          by

                     (B)   the  salary that would have  been
          paid to the Officer during each such calendar year
          at  the  highest  annual rate of  salary  achieved
          during  the remaining unexpired Assurance  Period,
          such payments to be made (without discounting  for
          early  payment) within thirty (30) days  following
          the Officer's termination of employment; and

The  Bank and the Officer hereby stipulate that the damages which
may be incurred by the Officer following any such termination  of
employment are not capable of accurate measurement as of the date
first  above  written  and  that the payments  and  benefits  con
templated  by this section 8(b) constitute a reasonable  estimate
under the circumstances of all damages sustained as a consequence
of any such termination of employment, other than damages arising
under or out of any stock option, restricted stock or other  non-
qualified  stock acquisition or investment plan  or  program,  it
being  understood  and  agreed  that  this  Agreement  shall  not
determine  the  measurement of damages under  any  such  plan  or
program  in  respect  of  any termination  of  employment.   Such
damages  shall  be payable without any requirement  of  proof  of
actual  damage  and without regard to the Officer's  efforts,  if
any, to mitigate damages.  The Bank and the Officer further agree
that  the  Bank may condition the payments and benefits (if  any)
due  under sections 8(b)(iii), (iv), (v), (vi) and (vii)  on  the
receipt  of the Officer's resignation from any and all  positions
which  he holds as an officer, director or committee member  with
respect  to the Bank, the Company or any subsidiary or  affiliate
of either of them.

          Section 9.     Termination without Severance Benefits.

           In  the  event that the Officer's employment with  the
Bank shall terminate during the Assurance Period on account of:

           (a)   the  discharge of the Officer for  "cause,"
     which,  for  purposes  of  this  Agreement  shall  mean
     personal  dishonesty, incompetence, willful misconduct,
     breach  of  fiduciary duty involving  personal  profit,
     intentional  failure to perform stated duties,  willful
     violation  of any law, rule or regulation  (other  than
     traffic violations or similar offenses) or final  cease
     and  desist  order,  or  any material  breach  of  this
     Agreement,  in each case as measured against  standards
     generally  prevailing  at  the  relevant  time  in  the
     savings  and  community  banking  industry;   provided,
     however, that the Officer shall not be deemed  to  have
     been  discharged for cause unless and  until  he  shall
     have received a written notice of termination from  the
     Board,  accompanied  by a resolution  duly  adopted  by
     affirmative vote of a majority of the entire Board at a
     meeting  called  and  held  for  such  purpose   (after
     reasonable notice to the Officer and a reasonable oppor
     tunity  for  the  Officer  to  make  oral  and  written
     presentations to the members of the Board, on  his  own
     behalf,  or  through a representative, who may  be  his
     legal  counsel, to refute the grounds for the  proposed
     determination) finding that in the good  faith  opinion
     of  the Board grounds exist for discharging the Officer
     for cause; or

           (b)   the  Officer's voluntary  resignation  from
     employment  with the Bank for reasons other than  those
     specified in section 8(a)(i); or

           (c)  the Officer's death; or

           (d)  a determination that the Officer is eligible
     for long-term disability benefits under the Bank's long-
     term  disability insurance program or, if there  is  no
     such program, under the federal Social Security Act;

then  the Bank shall have no further obligations under this Agree
ment, other than the payment to the Officer (or, in the event  of
his  death, to his estate) of his earned but unpaid salary as  of
the  date of the termination of his employment, and the provision
of  such other benefits, if any, to which the Officer is entitled
as  a  former employee under the employee benefit plans  and  pro
grams  and  compensation  plans and programs  maintained  by,  or
covering employees of, the Bank.

          Section 10.    Change of Control.

           (a)   A  Change  of  Control of the Bank  ("Change  of
Control") shall be deemed to have occurred upon the happening  of
any of the following events:

          (i)  approval by the stockholders of the Bank of a
     transaction  that  would result in the  reorganization,
     merger or consolidation of the Bank, respectively, with
     one  or  more  other persons, other than a  transaction
     following which:

                      (A)    at  least  51%  of  the  equity
          ownership  interests of the entity resulting  from
          such  transaction are beneficially  owned  (within
          the  meaning of Rule 13d-3 promulgated  under  the
          Exchange  Act) in substantially the same  relative
          proportions by persons who, immediately  prior  to
          such  transaction, beneficially owned (within  the
          meaning  of  Rule  13d-3  promulgated  under   the
          Exchange  Act)  at  least 51% of  the  outstanding
          equity ownership interests in the Bank; and

                     (B)   at  least  51% of the  securities
          entitled  to  vote generally in  the  election  of
          directors  of  the  entity  resulting  from   such
          transaction  are  beneficially owned  (within  the
          meaning  of  Rule  13d-3  promulgated  under   the
          Exchange  Act) in substantially the same  relative
          proportions by persons who, immediately  prior  to
          such  transaction, beneficially owned (within  the
          meaning  of  Rule  13d-3  promulgated  under   the
          Exchange  Act)  at  least 51%  of  the  securities
          entitled  to  vote generally in  the  election  of
          directors of the Bank;

           (ii) the acquisition of substantially all of  the
     assets of the Bank or beneficial ownership (within  the
     meaning  of  Rule 13d-3 promulgated under the  Exchange
     Act)  of  20% or more of the outstanding securities  of
     the Bank entitled to vote generally in the election  of
     directors  by  any person or by any persons  acting  in
     concert, or approval by the stockholders of the Bank of
     any  transaction which would result in an  acquisition;
     or

          (iii)     a complete liquidation or dissolution of
     the  Bank, or approval by the stockholders of the  Bank
     of a plan for such liquidation or dissolution;

           (iv)  the occurrence of any event if, immediately
     following such event, at least fifty percent  (50%)  of
     the  members of the Board do not belong to any  of  the
     following groups:

                    (A)  individuals who were members of the
          Board on the date of this Agreement; or

                    (B)    individuals  who  first  became
          members  of  the  Board after  the  date  of  this
          Agreement either:

                              (1)  upon election to serve as
               a  member of the Board by affirmative vote of
               three-quarters (3/4) of the members  of  such
               Board, or a nominating committee thereof,  in
               office at the time of such first election; or

                               (2)   upon  election  by  the
               stockholders  of  the Board  to  serve  as  a
               member  of  the Board, but only if  nominated
               for  election by affirmative vote  of  three-
               quarters  (3/4) of the members of the  Board,
               or  of  a  nominating committee  thereof,  in
               office at the time of such first nomination;

     provided,  however, that such individual's election  or
     nomination  did not result from an actual or threatened
     election contest (within the meaning of Rule 14a-11  of
     Regulation 14A promulgated under the Exchange  Act)  or
     other  actual or threatened solicitation of proxies  or
     consents   (within  the  meaning  of  Rule  14a-11   of
     Regulation  14A  promulgated under  the  Exchange  Act)
     other than by or on behalf of the Board of the Bank;

          (v)  any event which would be described in section
     10(a)(i),  (ii),  (iii) or (iv) if  the  term  "Holding
     Company" were substituted for the term "Bank" therein.

          (b)  In no event, however, shall a Change of Control be
deemed  to  have  occurred  as a result  of  any  acquisition  of
securities  or  assets of the Holding Company, the  Bank  or  any
subsidiary of either of them, by the Holding Company, the Bank or
any subsidiary of either of them, or by any employee benefit plan
maintained by any of them.

           Section 11.    No Effect on Employee Benefit Plans  or
                          Programs.

           The termination of the Officer's employment during the
Assurance  Period or thereafter, whether by the Bank  or  by  the
Officer,  shall  have no effect on the rights and obligations  of
the  parties  hereto under the Bank's qualified and non-qualified
defined  benefit or defined contribution retirement plans,  group
life,   health  (including  hospitalization,  medical  and  major
medical),  dental,  accident and long term  disability  insurance
plans  or  such  other  employee benefit plans  or  programs,  or
compensation  plans or programs (whether or not employee  benefit
plans  or  programs) and any defined contribution plan,  employee
stock  ownership plan, stock option and appreciation rights plan,
and  restricted  stock plan, as may be maintained  by,  or  cover
employees of, the Bank from time to time; provided, however, that
nothing  in  this  Agreement shall be  deemed  to  duplicate  any
compensation  or benefits provided under any agreement,  plan  or
program  covering the Officer to which the Bank  or  the  Holding
Company  is a party and any duplicative amount payable under  any
such agreement, plan or program shall be applied as an offset  to
reduce the amounts otherwise payable hereunder.

          Section 12.    Successors and Assigns.

          This Agreement will inure to the benefit of and be bind
ing  upon  the Officer, his legal representatives and testate  or
intestate  distributees, and the Bank and  the  Holding  Company,
their  respective successors and assigns, including any successor
by  merger or consolidation or a statutory receiver or any  other
person  or firm or corporation to which all or substantially  all
of  the respective assets and business of the Bank or the Holding
Company may be sold or otherwise transferred.

          Section 13.    Notices.

           Any communication required or permitted to be given un
der this Agreement, including any notice, direction, designation,
consent,  instruction, objection or waiver, shall be  in  writing
and  shall be deemed to have been given at such time as it is  de
livered  personally, or five (5) days after  mailing  if  mailed,
postage  prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or
at  such  other  address as one such party may by written  notice
specify to the other party:

          If to the Officer:

                ________________
                ________________
                ________________


          If to the Bank:

               The Dime Savings Bank of Williamsburgh
               209 Havemeyer Street
               Brooklyn, New York  11211

               Attention:  Corporate Secretary


          with a copy to:

               Thacher Proffitt & Wood
               Two World Trade Center
               New York, New York 10048

               Attention:  W. Edward Bright, Esq.


          If to the Holding Company:

               Dime Community Bancorp, Inc.
               209 Havemeyer Street
               Brooklyn, New York  11211

               Attention:  Corporate Secretary


          with a copy to:

               Thacher Proffitt & Wood
               Two World Trade Center
               New York, New York 10048

               Attention:  W. Edward Bright, Esq.

          Section 14.    Indemnification and Attorneys' Fees.

           The Bank shall indemnify, hold harmless and defend the
Officer  against reasonable costs, including legal fees, incurred
by  the  Officer in connection with or arising out of any action,
suit or proceeding in which the Officer may be involved, as a  re
sult  of  the  Officer's efforts, in good  faith,  to  defend  or
enforce the terms of this Agreement; provided, however, that  the
Officer shall have substantially prevailed on the merits pursuant
to   a  judgment,  decree  or  order  of  a  court  of  competent
jurisdiction or of an arbitrator in an arbitration proceeding, or
in  a  settlement; provided, further, that this section 14  shall
not  obligate the Bank to pay costs and legal fees on  behalf  of
the  Officer  under  this Agreement in excess  of  $20,000.   For
purposes  of  this  Agreement,  any  settlement  agreement  which
provides  for payment of any amounts in settlement of the  Bank's
obligations  hereunder  shall  be  conclusive  evidence  of   the
Officer's entitlement to indemnification hereunder, and any  such
indemnification payments shall be in addition to amounts  payable
pursuant  to  such settlement agreement, unless  such  settlement
agreement expressly provides otherwise.

          Section 15.    Severability.

          A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforce
ability of any other provision hereof.

          Section 16.    Waiver.

           Failure to insist upon strict compliance with  any  of
the  terms, covenants or conditions hereof shall not be deemed  a
waiver  of  such term, covenant, or condition.  A waiver  of  any
provision  of this Agreement must be made in writing,  designated
as a waiver, and signed by the party against whom its enforcement
is  sought.  Any waiver or relinquishment of any right  or  power
hereunder at any one or more times shall not be deemed  a  waiver
or  relinquishment of such right or power at any  other  time  or
times.


          Section 17.    Counterparts.

           This Agreement may be executed in two (2) or more coun
terparts, each of which shall be deemed an original, and  all  of
which shall constitute one and the same Agreement.

          Section 18.    Governing Law.

           This Agreement shall be governed by and construed  and
enforced  in  accordance  with the federal  laws  of  the  United
States,  and in the absence of controlling federal law, the  laws
of  the State of New York, without reference to conflicts of  law
principles.

          Section 19.    Headings and Construction.

           The headings of sections in this Agreement are for con
venience  of  reference only and are not intended to qualify  the
meaning of any section.  Any reference to a section number  shall
refer to a section of this Agreement, unless otherwise stated.

          Section 20.    Entire Agreement; Modifications.

           This  instrument contains the entire agreement of  the
parties relating to the subject matter hereof, and supersedes  in
its  entirety any and all prior agreements, understandings or rep
resentations  relating to the subject matter hereof.   No  modifi
cations  of this Agreement shall be valid unless made in  writing
and signed by the parties hereto.

          Section 21.    Required Regulatory Provisions.

           The following provisions are included for the purposes
of  complying with various laws, rules and regulations applicable
to the Bank:

           (a)  Notwithstanding anything herein contained to
     the contrary, in no event shall the aggregate amount of
     compensation payable to the Officer under section  8(b)
     hereof  (exclusive  of  amounts  described  in  section
     8(b)(i))  exceed the three times the Officer's  average
     annual total compensation for the last five consecutive
     calendar  years  to  end prior to  his  termination  of
     employment with the Bank (or for his entire  period  of
     employment  with  the Bank if less than  five  calendar
     years).

           (b)  Notwithstanding anything herein contained to
     the  contrary, any payments to the Officer by the Bank,
     whether  pursuant to this Agreement or  otherwise,  are
     subject  to and conditioned upon their compliance  with
     section  18(k)  of  the Federal Deposit  Insurance  Act
     ("FDI  Act"),   12 U.S.C. Section 1828(k),  and  any
     regulations promulgated thereunder.

           (c)  Notwithstanding anything herein contained to
     the  contrary, if the Officer is suspended from  office
     and/or temporarily prohibited from participating in the
     conduct of the affairs of the Bank pursuant to a notice
     served under section 8(e)(3) or 8(g)(1) of the FDI Act,
     12 U.S.C. Section 1818(e)(3) or 1818(g)(1), the  Bank's
     obligations under this Agreement shall be suspended  as
     of the date of service of such notice, unless stayed by
     appropriate proceedings.  If the charges in such notice
     are dismissed, the Bank, in its discretion, may (i) pay
     to the Officer all or part of the compensation withheld
     while  the  Bank's obligations hereunder were suspended
     and  (ii)  reinstate, in whole or in part, any  of  the
     obligations which were suspended.

           (d)  Notwithstanding anything herein contained to
     the   contrary,  if  the  Officer  is  removed   and/or
     permanently  prohibited  from  participating   in   the
     conduct of the Bank's affairs by an order issued  under
     section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C.
     Section 1818(e)(4) or (g)(1), all prospective obligations
     of the Bank under this Agreement shall terminate as of the
     effective  date  of  the order, but vested  rights  and
     obligations  of the Bank and the Officer shall  not  be
     affected.

           (e)  Notwithstanding anything herein contained to
     the  contrary,  if the Bank is in default  (within  the
     meaning  of section 3(x)(1) of the FDI Act,  12  U.S.C.
     Section 1813(x)(1), all prospective obligations  of the
     Bank under this Agreement shall terminate as of the date
     of default, but vested rights and obligations of the Bank
     and the Officer shall not be affected.

           (f)  Notwithstanding anything herein contained to
     the  contrary, all prospective obligations of the  Bank
     hereunder  shall be terminated, except  to  the  extent
     that a continuation of this Agreement is necessary  for
     the  continued  operation of  the  Bank:   (i)  by  the
     Director of the Office of Thrift Supervision ("OTS") or
     his   designee   or   the  Federal  Deposit   Insurance
     Corporation ("FDIC"), at the time the FDIC enters  into
     an  agreement to provide assistance to or on behalf  of
     the Bank under the authority contained in section 13(c)
     of the FDI Act, 12 U.S.C. Section 1823(c); (ii) by  the
     Director  of the OTS or his designee at the  time  such
     Director  or designee approves a supervisory merger  to
     resolve  problems related to the operation of the  Bank
     or  when the Bank is determined by such Director to  be
     in  an  unsafe or unsound condition.  The vested rights
     and obligations of the parties shall not be affected.
     
If  and to the extent any of the foregoing provisions shall cease
to  be  required by applicable law, rule or regulation, the  same
shall become inoperative as though eliminated by formal amendment
of this Agreement.

          Section 22.    Guaranty.

           The Holding Company hereby irrevocably and uncondition
ally  guarantees to the Officer the payment of all  amounts,  and
the  performance of all other obligations, due from the  Bank  in
accordance  with  the terms of this Agreement  as  and  when  due
without  any  requirement  of  presentment,  demand  of  payment,
protest  or  notice of dishonor or nonpayment.  For  purposes  of
this section 22, the application of sections 21(a), (c), (d), (e)
or  (f) to the Bank shall have no effect on the Holding Company's
obligations hereunder.


            Section   23.     Maximum  Limitations  on  Severance
                              Benefits.

           Notwithstanding  anything in  this  Agreement  to  the
contrary, in the event that the payments provided to the  Officer
(or  in  the  event  of  his death, to  his  estate)  under  this
Agreement constitute an "excess parachute payment" under  section
280G of the Code, such payments shall be limited to the lesser of
             
           (a)   2.99  times his average compensation  (including
salary, bonuses, amounts contributed on behalf of the Officer  to
any  employee  benefit plans and programs and compensation  plans
and  programs maintained for the benefit of the Holding Company's
officers   and   employees  and  any  other  cash   or   non-cash
compensation paid to the Officer) for the period of five  taxable
years  ending immediately prior to his termination of employment;
or

           (b)   whichever  of the following amounts  yields  the
larger  net payment to the Officer, after provision for  the  tax
(if any) imposed under section 4999 of the Code:

           (i)  the  amount determined  under  section 23(a); or

           (ii) the maximum amount (if any) which may be
                paid  to the Officer hereunder without giving rise
                to any tax under section 4999 of the Code;

as determined by the Officer in his sole discretion.

In Witness Whereof, the Bank and the Holding Company have caused this Agreement to be executed and the Officer has hereunto set his hand, all as of the day and year first above written. _________________________________ _______________ ATTEST: The Dime Savings Bank of Williamsburgh By ___________________ Secretary By _____________________________ Name: [Seal] Title: ATTEST: Dime Community Bancorp, Inc. By____________________ Secretary By _____________________________ Name: [Seal] Title:

STATE OF NEW YORK ) : ss.: COUNTY OF KINGS ) On this _____ day of ____________ , 19__, before me personally came ________________________________ , to me known, and known to me to be the individual described in the foregoing instrument, who, being by me duly sworn, did depose and say that he resides at the address set forth in said instrument, and that he signed his name to the foregoing instrument. ________________________ Notary Public STATE OF NEW YORK ) : ss.: COUNTY OF KINGS ) On this _____ day of __________________ , 19__, before me personally came ________________________________, to me known, who, being by me duly sworn, did depose and say that he resides at _____________________________________________________ , that he is a member of the Board of Directors of The Dime Savings Bank of Williamsburgh, the savings bank described in and which executed the foregoing instrument; that he knows the seal of said mutual savings bank; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said savings bank; and that he signed his name thereto by like authority. __________________________ Notary Public STATE OF NEW YORK ) : ss.: COUNTY OF KINGS ) On this ____ day of ________________ , 19__, before me personally came _________________________________________________ , to me known, who, being by me duly sworn, did depose and say that he resides at ______________________________________________ , that he is a member of the Board of Directors of Dime Community Bancorp, Inc., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. __________________________ Notary Public


                 Employee Stock Ownership Plan of
                   Dime Community Bancorp, Inc.
                      and Certain Affiliates


                   Adopted on February 8, 1996
                      Effective July 1, 1995

                            AMENDMENT




Effective  as  of July 1, 1995, the Employee Stock Ownership  Plan  of
Dime Community Bancorp, Inc. and Certain Affiliates ("Plan") is hereby
amended as follows:

1.   The effective date on the cover page is deleted and the following
     is substituted therefor:

            "Effective July 1, 1995"

2.   Section  1.14  is  deleted in its entirety and the  following  is
     substituted therefor:

            "Effective Date means July 1, 1995."

3.   Section 1.44 is amended in its entirety to read as follows:

            Section  1.44   Plan Year means  the  period
          commencing  on  the Effective Date and  ending  on
          June  30, 1996 and each fiscal year beginning July
          1 and ending June 30 thereafter.

4.   Section 7.2 is amended in its entirety to read as follows:

            Section  7.2   Allocation of Released Shares or Other
                           Property.

                           Subject  to  the  limitations  of
          Article VIII, in the event that Financed Shares or
          other   property  are  released  from   the   Loan
          Repayment  Account for a Plan Year  in  accordance
          with  section 6.4, such released Shares  or  other
          property shall be allocated among the Accounts  of
          the Eligible Participants for the Plan Year in the
          proportion  that each such Eligible  Participant's
          Allocation  Compensation for the  portion  of  the
          immediately  preceding calendar year during  which
          he  was  a  Participant  bears  to  the  aggregate
          Allocation    Compensation   of    all    Eligible
          Participants  for the portion of  the  immediately
          preceding calendar year during which they were Par
          ticipants.

5.   Section 8.2(c)(v) is amended in its entirety to read as follows:

                "(v)  Limitation  Year  means  the  calendar year."

                                Page 1 of 2

In Witness Whereof, the undersigned has hereunto set his hand this _____ day of ________, 1996 pursuant to authority granted by the Board of Directors on _______, 1996. Dime Community Bancorp, Inc. Name: Title: Page 2 of 2




                                   June 12, 1996




Employee Stock Ownership Plan Trust of
 Dime Community Bancorp, Inc. and Certain Affiliates
c/o The Dime Savings Bank of Williamsburgh
209 Havemeyer Street
Brooklyn, NY  11211
Attention:  Mr. Vincent F. Palagiano,
Chief Executive Officer

Dear Mr. Palagiano:

       This   letter  confirms  Dime  Community  Bancorp,  Inc.'s
commitment  to  fund  a  leveraged  ESOP  in  an  amount  up   to
$11,638,000.   The commitment is subject to the  following  terms
and conditions:

     1.   Lender:  Dime Community Bancorp, Inc. (the "Company").

          2.    Borrower:  Employee Stock Ownership Plan Trust of
          Dime  Community  Bancorp, Inc. and  Certain  Affiliates
          ("Borrower").

          3.   Trustee:  Marine Midland Bank.

          4.    Security:   Unreleased shares  of  stock  of  the
          Company held in the Employee Stock Ownership Plan Trust
          of Dime Community Bancorp, Inc. and Certain Affiliates.

          5.     Maturity:   Generally,  up  to  10  years   from
          takedown.

          6.    Amortization:  Equal principal payments on annual
          basis,  with  pro-rated principal payments for  partial
          years.   Certain principal payments may be deferred  to
          the  extent  that such payments would be  nondeductible
          for  federal  income tax purposes or  our  consolidated
          annual  return  on average assets or annual  return  on
          average equity (after provision for the payment)  would
          be  less than 0.5% or 4%, respectively, for the  fiscal
          year in which the payment would otherwise be due.

Employee Stock Ownership Plan Trust of
 Dime Community Bancorp, Inc. and Certain Affiliates
 June 12, 1996                                              Page 2


          7.   Pricing:  Eight percent (8%) per annum.

          8.   Interest Payments:  Annually, 365 day basis.

          9.    Funding:   In full by June 26, 1996, unless  such
          date is waived by the Company.

          10.   Prepayment:  Voluntary prepayments are  permitted
          at  any  time provided advance notice is given  by  the
          Borrower to the Company.

          11.   Conditions Precedent to Closing:  Receipt by  the
          Company of all supporting loan documents in a form  and
          with  terms and conditions satisfactory to the  Company
          and its counsel.

          12.   Closing  Date:   Not later than  June  26,  1996,
          unless such date is waived by the Company.

          13.   Other:   Loan to be structured to comply  in  all
          respects  with the Employee Retirement Income  Security
          Act of 1974, as amended ("ERISA").

      If  the  terms and conditions are agreeable to you,  please
indicate  your  acceptance  by  signing  the  enclosed  copy  and
returning it to my attention.

                                 Sincerely,

                                 Dime Community Bancorp, Inc.


                                 By: /s/ Michael P. Devine
                                     Michael P. Devine
                                     Executive Vice President and Secretary



Accepted on Behalf of
Employee Stock Ownership Plan Trust of
 Dime Community Bancorp, Inc. and Certain Affiliates
By:  Marine Midland Bank, as Trustee              Date: June 14, 1996
     Name: /s/ Richard A. Glover
     Title: Vice President

LOAN AGREEMENT by and between EMPLOYEE STOCK OWNERSHIP PLAN TRUST of DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES and DIME COMMUNITY BANCORP, INC. Made and Entered Into as of June 26, 1996

TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.1 Business Day .......................................... 1 Section 1.2 Code .................................................. 1 Section 1.3 Default ............................................... 2 Section 1.4 ERISA ................................................. 2 Section 1.5 Event of Default ...................................... 2 Section 1.6 Fiscal Year ........................................... 2 Section 1.7 Independent Counsel ................................... 2 Section 1.8 Loan .................................................. 2 Section 1.9 Loan Documents ........................................ 2 Section 1.10 Pledge Agreement ...................................... 2 Section 1.11 Principal Amount ...................................... 2 Section 1.12 Promissory Note ....................................... 2 Section 1.13 Register .............................................. 2 ARTICLE II THE LOAN; PRINCIPAL AMOUNT; INTEREST; SECURITY; INDEMNIFICATION Section 2.1 The Loan; Principal Amount. ........................... 2 Section 2.2 Interest. ............................................. 3 Section 2.3 Promissory Note. ..................................... 4 Section 2.4 Payment of Trust Loan. ................................ 4 Section 2.5 Prepayment. ........................................... 5 Section 2.6 Method of Payments. ................................... 5 Section 2.7 Use of Proceeds of Loan. .............................. 6 Section 2.9 Registration of the Promissory Note. .................. 6 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BORROWER Section 3.1 Power, Authority, Consents. ........................... 7 Section 3.2 Due Execution, Validity, Enforceability. .............. 7 Section 3.3 Properties, Priority of Liens. ........................ 7 Section 3.4 No Defaults, Compliance with Laws. .................... 7 Section 3.5 Purchases of Common Stock. ............................ 8 (i)

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDER Section 4.1 Power, Authority, Consents. ........................... 8 Section 4.2 Due Execution, Validity, Enforceability. .............. 8 Section 4.3 ESOP; Contributions. .................................. 9 Section 4.4 Trustee; Committee. ................................... 9 Section 4.5 Compliance with Laws; Actions. ........................ 9 ARTICLE V EVENTS OF DEFAULT Section 5.1 Events of Default under Loan Agreement. ............... 9 Section 5.2 Lender's Rights upon Event of Default. ................ 10 ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1 Payments Due to the Lender. ........................... 10 Section 6.2 Payments. ............................................. 11 Section 6.3 Survival. ............................................. 11 Section 6.4 Modifications, Consents and Waivers; Entire Agreement.. 11 Section 6.5 Remedies Cumulative. .................................. 11 Section 6.6 Further Assurances; Compliance with Covenants. ........ 11 Section 6.7 Notices. .............................................. 12 Section 6.8 Counterparts. ......................................... 13 Section 6.9 Construction; Governing Law. .......................... 13 Section 6.10 Severability. ......................................... 13 Section 6.11 Binding Effect; No Assignment or Delegation. .......... 14 EXHIBIT A Form of Promissory Note ................................. A-1 EXHIBIT B Form of Pledge Agreement ................................ B-1 EXHIBIT C Form of Assignment ...................................... C-1 EXHIBIT D Form of Irrevocable Proxy ............................... D-1 (ii)

LOAN AGREEMENT This LOAN AGREEMENT ("Loan Agreement") is made and entered into as of the 26th day of June, 1996, by and between the EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES ("Borrower"), a trust forming part of the Employee Stock Ownership Plan of Dime Community Bancorp, Inc. and Certain Affiliates ("ESOP"), acting through and by its Trustee, MARINE MIDLAND BANK ("Trustee"), a banking corporation organized under the laws of the State of New York and having an office at 250 Park Avenue, New York, New York 10177; and Dime Community Bancorp, Inc. ("Lender"), a corporation organized and existing under the laws of the state of Delaware, having an office at 209 Havemeyer Street, Brooklyn, New York 11211. W I T N E S S E T H : Whereas, the Compensation Committee of the Lender ("Committee") has authorized the Borrower to purchase shares of common stock of Dime Community Bancorp, Inc. ("Common Stock"), either directly from Dime Community Bancorp, Inc. or in open market purchases in an amount not to exceed 1,163,800 shares of Common Stock or, if less, shares of Common Stock having an aggregate purchase price of Eleven Million, Six Hundred and Thirty Eight Thousand Dollars ($11,638,000.00); and Whereas, the Committee has further authorized the Borrower to borrow funds from the Lender for the purpose of financing authorized purchases of Common Stock; and Whereas, the Lender is willing to make a loan to the Borrower for such purpose; Now, Therefore, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly indicated by the context: Section 1.1 Business Day means any day other than a Saturday, Sunday or other day on which banks are authorized or required to close under federal law or the laws of the State of New York. Section 1.2 Code means the Internal Revenue Code of 1986 (including the corresponding provisions of any succeeding law). Section 1.3 Default means an event or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirement of notice or lapse of time. Section 1.4 ERISA means the Employee Retirement Income Security Act of 1974, as amended (including the cor responding provisions of any succeeding law). Section 1.5 Event of Default means an event or condition described in Article 5. Section 1.6 Fiscal Year means the fiscal year of Dime Community Bancorp. Section 1.7 Independent Counsel means Thacher Proffitt & Wood or other counsel mutually satisfactory to both the Lender and the Borrower. Section 1.8 Loan means the loan described in section 2.1. Section 1.9 Loan Documents means, collectively, this Loan Agreement, the Promissory Note and the Pledge Agreement and all other documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents. Section 1.10 Pledge Agreement means the agreement described in section 2.8(a). Section 1.11 Principal Amount means the face amount of the Promissory Note, determined as set forth in section 2.1(c). Section 1.12 Promissory Note means the promissory note described in section 2.3. Section 1.13 Register means the register described in section 2.9. ARTICLE II THE LOAN; PRINCIPAL AMOUNT; INTEREST; SECURITY; INDEMNIFICATION Section 2.1 The Loan; Principal Amount. (a) The Lender hereby agrees to lend to the Borrower such amounts, and at such times, as shall be determined under this section 2.1; provided, however, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed the lesser of (i) Eleven Million, Six Hundred and Thirty Eight Thousand Dollars ($11,638,000.00) or (ii) the aggregate amount paid by the Borrower, exclusive of commissions, fees and other charges, to purchase 1,163,800 shares of Common Stock. (b) Subject to the limitations of section 2.1(a), the Borrower shall determine the amounts borrowed under this Agree ment, and the times at which such borrowings are effected. Each such determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be furnished to the Lender by notice from the Borrower. The Lender shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender's receipt of such notice; provided, however, that the Lender shall have no obligation to disburse funds pursuant to this Agreement following the occur rence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured. (c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of: (i) the aggregate amount disbursed by the Lender pursuant to section 2.1(b) on or before such date; over (ii) the aggregate amount of any repayments of such amounts made before such date. The Lender shall maintain on the Register a record of, and shall record on the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the Principal Amount. Section 2.2 Interest. (a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing on the date of this Loan Agreement and continuing until the Principal Amount shall be paid in full, the rate of eight percent (8%) per annum. Interest payable under this Agreement shall be computed on the basis of a year of 365 days and actual days elapsed (including the first day but excluding the last) occurring in the period to which the computation relates. (b) Except as otherwise provided in this section 2.2(b), accrued interest on the Principal Amount shall be payable by the Borrower quarterly in arrears commencing on the last Business Day of the first calendar quarter to end following the date of this Agreement and continuing on the last Business Day of each calendar quarter thereafter and upon the payment or prepay ment of such Loan. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds. The Lender shall remit to the Borrower, at least three (3) Business Days before the end of each calendar quarter, a statement of the interest payment due under section 2.2(a) for such quarter; provided, however, that a delay or failure by the Lender in providing the Borrower with such statement shall not alter the Borrower's obligation to make such payment. (c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest. Section 2.3 Promissory Note. The Loan shall be evidenced by a Promissory Note of the Borrower in substantially the form of Exhibit A attached hereto, dated the date hereof, payable to the order of the Lender in the Principal Amount and otherwise duly completed. Section 2.4 Payment of Trust Loan. (a) The Principal Amount of the Loan shall be repaid in annual installments payable on the last Business Day of each Fiscal Year ending after the date of this Agreement. The amount of each such annual installment shall be equal to a fraction of the Principal Amount on the due date of such installment, determined in accordance with the following schedule: Installment Due on Fraction of Outstanding Last Business Day of Principal Amount Fiscal Year Ending in 1996 1/120 1997 1/10 1998 1/10 1999 1/10 2000 1/10 2001 1/10 2002 1/10 2003 1/10 2004 1/10 2005 1/10 10th anniversary of loan entire outstanding Principal Amount ; provided, however, that the Borrower shall not be required to make any payment of principal due to be made in any Fiscal Year to the extent that (i) following such payment, the consolidated return on average assets of Dime Community Bancorp. Inc. for such Fiscal Year would be less than one-half of one percent (0.5%) or the consolidated return on average equity for such Fiscal Year would be less than four percent (4%) or (ii) such payment would not be deductible for federal income tax purposes for such Fiscal Year under section 404 of the Code. (b) Any payment not required to made pursuant to the clause (i) of the proviso in section 2.4(a) shall be deferred to and be payable on the earlier of the tenth (10th) anniversary of the loan origination date or the last day of the first Fiscal Year in which such proviso would not apply to alleviate a requirement of payment; and payment not required to be made pursuant to clause (ii) of section 2.4(a) shall be deferred to and be payable on the last day of the first Fiscal Year in which such payment may be made on a tax deductible basis. Section 2.5 Prepayment. The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; provided, however, that the Borrower shall give notice to the Lender of any such prepayment; and provided, further, that any partial prepay ment of the Loan shall be in an amount not less than TEN THOUSAND DOLLARS ($10,000.00). Any such prepayment shall be: (a) per manent and irrevocable: (b) accompanied by all accrued interest through the date of such prepayment; (c) made without premium or penalty; and (d) applied in the inverse order of the maturity of the installments thereof unless the Lender and the Borrower agree to apply such prepayments in some other order. Section 2.6 Method of Payments. (a) All payments of principal, interest, other charges (including indemnities) and other amounts payable by the Borrower hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified in or pursuant to this Loan Agreement for notices to the Lender, not later than 3:00 P.M., New York time, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which such payment is in fact made. (b) Notwithstanding anything to the contrary contained in this Loan Agreement or the Promissory Note, neither the Borrower nor the Trustee shall be obligated to make any payment, repayment or prepayment on the Promissory Note or take or refrain from taking any other action hereunder or under the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of section 4975(e)(7) of the Code or qualified under section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under section 501(a) of the Code or if such act or failure to act would cause the Borrower or the Trustee to engage in any "prohibited transaction" as such term is defined in section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in section 406 of ERISA and the regulations promulgated thereunder which is not exempted by section 408(b) of ERISA and the regulations promulgated there under; provided, however, that in each case, the Borrower or the Trustee or both, as the case may be, may act or refrain from acting pursuant to this section 2.6(b) on the basis of an opinion of Independent Counsel. The Borrower and the Trustee may consult with Independent Counsel, and any opinion of such Independent Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of Independent Counsel. Nothing contained in this section 2.6(b) shall be construed as imposing a duty on either the Borrower or the Trustee to consult with Independent Counsel. Any obligation of the Borrower or the Trustee to make any payment, repayment or prepayment on the Promissory Note or to take or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this section 2.6(b) shall be considered a binding obligation of the Borrower or the Trustee, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this section 2.6(b) shall be construed as providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance). Section 2.7 Use of Proceeds of Loan. The entire proceeds of the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever. Section 2.8 Security. (a) In order to secure the due payment and performance by the Borrower of all of its obligations under this Loan Agreement, simultaneously with the execution and delivery of this Loan Agreement by the Borrower, the Borrower shall: (i) pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock purchased with the Principal Amount, by the execution and delivery to the Lender of a Pledge Agreement in the form attached hereto as Exhibit B; and (ii) execute and deliver, or cause to be executed and delivered, such other agreements, instruments and documents as the Lender may reasonably require in order to effect the purposes of the Pledge Agreement and this Loan Agreement. (b) The Lender shall release from encumbrance under the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or prepayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral pursuant to section 6.4 of the ESOP. Section 2.9 Registration of the Promissory Note. (a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of transfer and exchange of the Promissory Note. Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a new instrument to the new holder. The old Promissory Note so surrendered shall be cancelled by the Lender and returned to the Borrower after such cancellation. (b) Any new Promissory Note issued pursuant to section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or ex changed so that there will not be any loss or gain of interest on the note surrendered. Such new Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and all other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest theretofore paid. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BORROWER The Borrower hereby represents and warrants to the Lender as follows: Section 3.1 Power, Authority, Consents. The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and the Pledge Agreement, all of which have been duly authorized by all neces sary and proper corporate or other action. Section 3.2 Due Execution, Validity, Enforceability. Each of the Loan Documents, including, without limita tion, this Loan Agreement, the Promissory Note and the Pledge Agreement, have been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms. Section 3.3 Properties, Priority of Liens. The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien. Section 3.4 No Defaults, Compliance with Laws. The Borrower is not in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected. Section 3.5 Purchases of Common Stock. Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable title to all of the Common Stock so purchased, free and clear of any liens, other than a pledge to the Lender of the Common Stock so purchased pursuant to the Pledge Agreement. Neither the execution and delivery of the Loan Documents nor the performance of any obligation thereunder violates any provision of law or conflicts with or results in a breach of or creates (with or without the giving of notice or lapse of time, or both) a default under any agreement to which the Borrower is a party or by which it is bound or any of its properties is affected. No consent of any federal, state or local governmental authority, agency or other regulatory body, the absence of which could have a materially adverse effect on the Borrower or the Trustee, is or was required to be obtained in connection with the execution, delivery or performance of the Loan Documents and the transactions contemplated therein or in connection therewith, including, without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of the Loan pursuant thereto. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDER The Lender hereby represents and warrants to the Borrower as follows: Section 4.1 Power, Authority, Consents. The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement. Section 4.2 Due Execution, Validity, Enforceability. This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender; and each constitutes a valid and legally binding obligation of the Lender, enforceable in accordance with its terms. Section 4.3 ESOP; Contributions. The ESOP and the Borrower have been duly created, organized and maintained by the Lender in compliance with all applicable laws, regulations and rulings. The ESOP qualifies as an "employee stock ownership plan" as defined in section 4975(e) (7) the Code. The ESOP provides that the Lender may make con tributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note and this Loan Agreement, and the Lender will make such contributions; provided, however, that no such contributions shall be required if they would adversely affect the qualifi cation of the ESOP under section 401(a) of the Code. Section 4.4 Trustee; Committee. The Lender has taken such action as is required to be taken by it to duly appoint the Trustee and the members of the Committee. The Lender expressly acknowledges and agrees that this Loan Agreement, the Promissory Note and the Pledge Agreement are being executed by the Trustee not in its individual capacity but solely as trustee of and on behalf of the Borrower. Section 4.5 Compliance with Laws; Actions. Neither the execution and delivery by the Lender of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the Lender, constitutes a violation of any provision of any law or any regulation, order, writ, injunction or decree or any court or governmental instrumentality, or an event of default under any agreement, to which the Lender is a party or by which the Lender is bound or to which the Lender is subject, which violation or event of default would have a material adverse effect on the Lender. There is no action or proceeding pending or threatened against either of the ESOP or the Borrower before any court or administrative agency. ARTICLE V EVENTS OF DEFAULT Section 5.1 Events of Default under Loan Agreement. Each of the following events shall constitute an "Event of Default" hereunder: (a) Failure to make any payment or mandatory prepay ment of principal of the Promissory Note when due, or failure to make any payment of interest on the Promissory Note not later than five (5) Business Days after the date when due. (b) Failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan Documents, including, without limitation, the Promissory Note and the Pledge Agreement. (c) Any representation or warranty made in writing to the Lender in any of the Loan Documents or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered. Section 5.2 Lender's Rights upon Event of Default. If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower other than: (a) contributions (other than contributions of Common Stock) that are made by the Lender to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such contributions and (b) "Eligible Collateral" (as defined in the Pledge Agreement); provided, however, that: (i) the value of the Borrower's assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default (without regard to amounts owing solely as a result of any acceleration of the Loan); (ii) the Borrower's assets shall be transferred to the Lender follow ing an Event of Default only to the extent of the failure of the Borrower to meet the payment schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement. ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1 Payments Due to the Lender. If any amount is payable by the Borrower to the Lender pursuant to any indemnity obligation contained herein, then the Borrower shall pay, at the time or times provided therefor, any such amount and shall indemnify the Lender against and hold it harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such amount. If any amounts as to which the Borrower has so indemnified the Lender hereunder shall be assessed or levied against the Lender, the Lender may notify the Borrower and make immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from the Borrower, together with interest on each such amount as provided in section 2.2(c). Not withstanding any other provision contained in this Loan Agree ment, the covenants and agreements of the Borrower contained in this section 6.1 shall survive: (a) payment of the Promissory Note and (b) termination of this Loan Agreement. Section 6.2 Payments. All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note "Paid" and return it to the Borrower. Section 6.3 Survival. All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note. Section 6.4 Modifications, Consents and Waivers; Entire Agreement. No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof. Section 6.5 Remedies Cumulative. Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender or the holder of the Promissory Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the obliga tions under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or proceed ing instituted by the Lender for payment or performance of such obligations. Section 6.6 Further Assurances; Compliance with Covenants. At any time and from time to time, upon the request of the Lender, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably request in order to fully effect the terms of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan. Section 6.7 Notices. Except as otherwise specifically provided for herein, all notices, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex or facsimile, addressed as follows: (a) If to the Borrower: Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates c/o The Dime Savings Bank of Williamsburgh 209 Havemeyer Street Brooklyn, New York 11211 Attention: Mr. Vincent F. Palagiano Chief Executive Officer with copies to: Marine Midland Bank 250 Park Avenue New York, New York 10177 Attention: Mr. Richard A. Glover Vice President Thacher Proffitt & Wood Two World Trade Center, 39th Floor New York New York 10048 Attention: W. Edward Bright, Esq. Helm, Shapiro, Anito & McCale, P.C. 20 Corporate Woods Boulevard Albany, New York 12211-2350 Attention: Brian P. Goldstein, Esq. (b) If to the Lender: Dime Community Bancorp, Inc. 209 Havemeyer Street Brooklyn, New York 11211 Attention: Mr. Vincent F. Palagiano Chief Executive Officer with a copy to: Thacher Proffitt & Wood Two World Trade Center, 39th Floor New York New York 10048 Attention: W. Edward Bright, Esq. Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or facsimile, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed. Section 6.8 Counterparts. This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document. Section 6.9 Construction; Governing Law. The headings used in the table of contents and in this Loan Agreement are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement to an Article or section shall be to an Article or section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. Section 6.10 Severability. Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Loan Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Loan Agreement is independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other. The Borrower shall not take any action the effect of which shall constitute a breach or violation of any provision of this Loan Agreement. Section 6.11 Binding Effect; No Assignment or Delegation. This Loan Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation without such consent shall be void. In Witness Whereof, the parties hereto have caused this Loan Agreement to be duly executed as of the date first above written. Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. By Marine Midland Bank, as Trustee By: /s/ Richard A. Glover Title: Vice President Dime Community Bancorp, Inc. By: /s/ Michael P. Devine Title: Executive Vice President


                           EXHIBIT A
                       TO LOAN AGREEMENT
                         BY AND BETWEEN
             EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF
                  DIME COMMUNITY BANCORP, INC.
                     AND CERTAIN AFFILIATES
                              AND
                    DIME COMMUNITY BANCORP, INC.


                    FORM OF PROMISSORY NOTE


$11,638,000                                       Brooklyn, New York
PRINCIPAL AMOUNT                                  June 26, 1996


           FOR  VALUE  RECEIVED, the undersigned, Employee  Stock
Ownership Plan Trust of Dime Community Bancorp, Inc. and  Certain
Affiliates  ("Borrower"),  acting by  and  through  its  Trustee,
Marine  Midland Bank ("Trustee"), hereby promises to pay  to  the
order  of Dime Community Bancorp, Inc. ("Lender") ELEVEN MILLION,
SIX   HUNDRED   THIRTY-EIGHT  THOUSAND  DOLLARS  ($11,638,000.00)
payable  in  accordance with the Loan Agreement made and  entered
into  between  the Borrower and the Lender as of  June  26,  1996
("Loan  Agreement")  pursuant to which this  Promissory  Note  is
issued, in one annual installment of $96,983.33, payable on  June
28, 1996 and nine annual installments of ONE MILLION, ONE HUNDRED
SIXTY-THREE   THOUSAND,   EIGHT  HUNDRED   DOLLARS   ($1,163,800)
commencing  on the last Business Day of June, 1997 and continuing
on  the last Business Day of June of each calendar year until the
last  Business  Day  of  June, 2005, and one  annual  installment
payable  on  June  26, 2006, at which time the  entire  Principal
Amount then outstanding and all accrued interest shall become due
and  payable; provided, however, that the Borrower shall  not  be
required to make any payment of principal due to be made  in  any
Fiscal  Year  to the extent that (i) following such payment,  the
consolidated  return on average assets of Dime Community  Bancorp
Inc.  for  such  Fiscal Year would be less than one-half  of  one
percent  (0.5%) or the consolidated return on average equity  for
such  Fiscal  Year would be less than four percent (4%)  or  (ii)
such  payment  would  not be deductible for  federal  income  tax
purposes for such Fiscal Year under section 404 of the Code.  Any
payment  not required to made pursuant to the clause (i)  of  the
above  proviso shall be deferred to and be payable on the earlier
of  the tenth (10th) anniversary of the loan origination date  or
the last day of the first Fiscal Year in which such proviso would
not  apply to alleviate a requirement of payment; and payment not
required to be made pursuant to clause (ii) of the above  proviso
shall  be deferred to and be payable on the last day of the first
Fiscal Year in which such payment may be made on a tax deductible
basis.

           This  Promissory Note shall bear interest at the  rate
per annum set forth or established under the Loan Agreement, such
interest to be payable quarterly in arrears, commencing  on  June
28, 1996 and thereafter on the last Business Day of each calendar
quarter and upon payment or prepayment of this Promissory Note.

           Anything  herein to the contrary notwithstanding,  the
obligation of the Borrower to make payments of interest shall  be
subject to the limitation that payments of interest shall not  be
required to be made to the Lender to the extent that the Lender's
receipt  thereof would not be permissible under the law  or  laws
applicable to the Lender limiting rates of interest which may  be
charged  or  collected  by  the Lender.   Any  such  payments  of
interest  which  are  not  made as a  result  of  the  limitation
referred  to  in  the preceding sentence shall  be  made  by  the
Borrower to the Lender on the earliest interest payment  date  or
dates on which the receipt thereof would be permissible under the
laws  applicable to the Lender limiting rates of  interest  which
may  be  charged  or  collected by  the  Lender.   Such  deferred
interest shall not bear interest.

           Payments  of  both  principal  and  interest  on  this
Promissory  Note are to be made at the principal  office  of  the
Lender at 209 Havemeyer Street, Brooklyn, New York 11211, or such
other  place as the holder hereof shall designate to the Borrower
in  writing, in lawful money of the United States of  America  in
immediately available funds.

           Failure  to  make  any payment of  principal  on  this
Promissory  Note  when due, or failure to  make  any  payment  of
interest on this Promissory Note not later than five (5) Business
Days  after  the date when due, shall constitute a  default  here
under, whereupon the principal amount of and accrued interest  on
this Promissory Note shall immediately become due and payable  in
accordance with the terms of the Loan Agreement.

           This  Promissory Note is secured by a Pledge Agreement
between the Borrower and the Lender of even date herewith and  is
entitled to the benefits thereof.

                                
                                Employee Stock Ownership Plan Trust
                                of Dime Community Bancorp, Inc.
                                and Certain Affiliates



                                By     Marine Midland Bank, as Trustee


                                By:    /s/ Richard A. Glover

                                Title: Vice President

EXHIBIT B TO LOAN AGREEMENT BY AND BETWEEN EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES AND DIME COMMUNITY BANCORP, INC. FORM OF PLEDGE AGREEMENT This PLEDGE AGREEMENT ("Pledge Agreement") is made as of the 26th day of June, 1996, by and between the EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES, acting by and through its Trustee, MARINE MIDLAND BANK, a banking corporation organized under the laws of the State of New York and having office at 250 Park Avenue, New York, New York 10177 ("Pledgor"), and Dime Community Bancorp, Inc., corporation organized and existing under the laws of the State of New York, having an office at 209 Havemeyer Street, Brooklyn, New York 11211 ("Pledgee"). W I T N E S S E T H : Whereas, this Pledge Agreement is being executed and delivered to the Pledgee pursuant to the terms of a Loan Agree ment of even date herewith ("Loan Agreement"), by and between the Pledgor and the Pledgee; Now, Therefore, in consideration of the mutual agree ments contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree as follows: Section 1. Definitions. The following definitions shall apply for purposes of this Pledge Agreement, except to the extent that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement: (a) Collateral shall mean the Pledged Shares and, subject to section 5 hereof, and to the extent permitted by applicable law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights. (b) Event of Default shall mean an event so defined in the Loan Agreement. (c) Liabilities shall mean all the obligations of the Pledgor to the Pledgee, howsoever created, arising or evidenced, whether direct or indirect, absolute or contin- gent, now or hereafter existing, or due or to become due, under the Loan Agreement and the Promissory Note. (d) Pledged Shares shall mean all the shares of Common Stock of Dime Community Bancorp, Inc. purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but excluding any such shares previously released pursuant to section 4. Section 2. Pledge. To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the Pledgee a security interest in and lien upon, the Collateral. Section 3. Representations and Warranties of the Pledgor. The Pledgor represents, warrants, and covenants to the Pledgee as follows: (a) the execution, delivery and performance of this Pledge Agreement and the pledging of the Collateral here under do not and will not conflict with, result in a violation of, or constitute a default under any agreement binding upon the Pledgor; (b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the rights of all others; (c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms; (d) the Pledgor shall, from time to time, upon request of the Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar documents, satisfactory in form and substance to the Pledgee, with respect to the Collateral as the Pledgee may reasonably request; and (e) subject to the first sentence of section 4(b), the Pledgor shall not, so long as any Liabilities are outstand ing, sell, assign, exchange, pledge or otherwise transfer or encumber any of its rights in and to any of the Collateral. Section 4. Eligible Collateral. (a) As used herein the term "Eligible Collateral" shall mean that amount of Collateral which has an aggregate fair market value equal to the amount by which the Pledgor is in default (without regard to any amounts owing solely as the result of an acceleration of the Loan Agreement) or such lesser amount of Collateral as may be required pursuant to section 13 of this Pledge Agreement. (b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations Section 54.4975-7(b)(8), as the same may be from time to time amended or supplemented, and section 6.4(b) of the ESOP. Subject to such Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of the Eligible Collateral into the name of the Pledgee or its nominee, with or without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or to become due thereunder, (ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (iii) take control of any proceeds of the Eligible Collateral. Section 5. Delivery. (a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) an assignment by the Pledgor of all the Pledgor's rights to and interest in the Pledged Shares and (ii) an irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by the Pledgor with respect to the Pledged Shares. (b) So long as no Default or Event of Default shall have occurred and be continuing, (i) the Pledgor shall be entitled to exercise any and all voting and other rights pertain ing to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and (ii) the Pledgor shall be entitled to receive any and all cash dividends or other distributions paid in respect of the Col lateral. Section 6. Events of Default. (a) If a Default or an Event of Default shall be existing, in addition to the rights it may have under the Loan Agreement, the Promissory Note, and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Collateral, from time to time any rights and remedies available to it under the Uniform Commercial Code as in effect from time to time in the State of New York or otherwise available to it and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsements, assignments, stock powers and other instru ments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposi tion of any of the Eligible Collateral shall be given by the Pledgee to the Pledgor at least three (3) Business Days before such disposition. Subject to section 13 below, any proceeds of any disposition of Eligible Collateral may be applied by the Pledgee to the payment of expenses in connection with the Eligible Collateral, including, without limitation, reasonable attorneys' fees and legal expenses, and any balance of such proceeds may be applied by the Pledgee toward the payment of such of the Liabilities as are in Default, and in such order of application, as the Pledgee may from time to time elect. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in section 1 hereof. (b) In any sale of any of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of ap plicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or offi cial, and the Pledgor further agrees that such compliance shall not result in such sale's being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Eligible Collateral is sold in compliance with any such limitation or restriction. Section 7. Payment in Full. Upon the payment in full of all outstanding Liabilities, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to this Pledge Agreement. Section 8. No Waiver. No failure or delay on the part of the Pledgee in exercising any right or remedy hereunder or under any other document which confers or grants any rights in the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy of the Pledgee. Section 9. Binding Effect; No Assignment or Delegation. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective suc cessors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be with held). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee. Section 10. Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements to be performed wholly within the State of New York. Section 11. Notices. All notices, requests, instruc tions or documents hereunder shall be in writing and delivered personally or sent by United States mail, registered or cer tified, return receipt requested, with proper postage prepaid, as follows: (a) If to the Pledgee: Dime Community Bancorp, Inc. 209 Havemeyer Street Brooklyn, New York 11211 Attention: Mr. Vincent F. Palagiano Chief Executive Officer with a copy to: Thacher Proffitt & Wood Two World Trade Center, 39th Floor New York, New York 10048 Attention: W. Edward Bright, Esq. (b) If to the Pledgor: Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates c/o The Dime Savings Bank of Williamsburgh 209 Havemeyer Street Brooklyn, New York 11211 Attention: Mr. Vincent F. Palagiano Chief Executive Officer with copies to: Marine Midland Bank 250 Park Avenue New York, New York 10177 Attention: Mr. Richard A. Glover Vice President Thacher Proffitt & Wood Two World Trade Center, 39th Floor New York, New York 10048 Attention: W. Edward Bright, Esq. or at such other address as either of the parties may designate by written notice to the other party. If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made, and, if delivered by mail, the date on which such notice, request, instruction or document is deposited in the mail shall be the date of delivery. Each notice, request, instruction or document shall bear the date on which it is delivered. Section 12. Interpretation. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under such law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof. Section 13. Construction. All provisions hereof shall be construed so as to maintain (a) the ESOP as a qualified leveraged employee stock ownership plan under section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986 (the "Code"), (b) the Trust as exempt from taxation under section 501(a) of the Code and (c) the Trust Loan as an exempt loan under section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation section 2550.408b-3. In Witness Whereof, this Pledge Agreement has been duly executed by the parties hereto as of the day and year first above written. Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates By Marine Midland Bank, as Trustee and not in any other capacity By: /s/ Richard A. Glover Title: Vice President Dime Community Bancorp, Inc. By: /s/ Michael P. Devine Title: Executive Vice President

EXHIBIT C TO LOAN AGREEMENT BY AND BETWEEN EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES AND DIME COMMUNITY BANCORP, INC. FORM OF ASSIGNMENT In consideration of the loan made by Dime Community Bancorp, Inc. ("Lender") to the Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and pursuant to the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, the undersigned Borrower hereby transfers, assigns and conveys to Lender all its right, title and interest in and to those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement, and agrees to transfer and endorse to Lender the certificates representing such shares as and when required pursuant to the Loan Agreement or Pledge Agreement. Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates By Marine Midland Bank, as Trustee and not in any other capacity By: /s/ Richard A. Glover Title: Vice President June 26, 1996

EXHIBIT D TO LOAN AGREEMENT BY AND BETWEEN EMPLOYEE STOCK OWNERSHIP PLAN TRUST OF DIME COMMUNITY BANCORP, INC. AND CERTAIN AFFILIATES AND DIME COMMUNITY BANCORP, INC. FORM OF IRREVOCABLE PROXY In consideration of the loan made by Dime Community Bancorp, Inc. ("Lender") to the Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, the undersigned Borrower hereby appoints the Lender as its proxy, with power of substitution, to represent and to vote those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement. This proxy, when properly executed, shall be irrevocable and shall give the Lender full power and authority to vote on any and all matters for which other holders of shares of common stock of the Lender are entitled to vote. Employee Stock Ownership Plan Trust of Dime Community Bancorp, Inc. and Certain Affiliates By: Marine Midland Bank, as Trustee and not in any other capacity By: /s/ Richard A. Glover Title: Vice President June 26, 1996


                     AMENDMENT NUMBER SEVEN

                               TO

             THE DIME SAVINGS BANK OF WILLIAMSBURGH

                      401(k) SAVINGS PLAN

                    IN RSI RETIREMENT TRUST

Pursuant   to   Section  11.1  of  The  Dime  Savings   Bank   of
Williamsburgh  401(k)  Savings  Plan  in  RSI  Retirement   Trust
("Plan"), the Plan is amended as follows, effective as of May 31,
1996:

1.    INTRODUCTION  - A new paragraph shall be added  immediately
prior  to  the  last paragraph, and the last paragraph  shall  be
amended, to read in their entirety as follows:

     Effective   as  of  May  31,  1996,  the  Employer   adopted
     resolutions   ceasing  matching  Bank  Contributions   under
     section 3.4 of the Plan.


2.    ARTICLE  III - Section 3.4 of the Plan shall be amended  to
read in its entirety as follows:

          3.4  Bank Contributions

           Effective as of May 31, 1996, the Employer  shall  not
     make  any  contributions to the Plan to match  Participant's
     Basic Contributions.

3.    ARTICLE IV - The first paragraph of section 4.2 of the Plan
shall be amended to read as follows:

     If a Participant who is not fully vested in the Net Value of
     his  Accounts terminates employment on or subsequent to  the
     Restatement  Date,  the  Units  representing  the  nonvested
     portion   of  his  Accounts  shall  constitute  Forfeitures.
     Forfeitures  shall be treated as employer contributions  and
     shall be applied to reduce the amount of subsequent employer
     contributions (including Basic Contributions) at the end  of
     the  Plan  Year or any other subsequent Plan Year until  the
     amounts are completely utilized.

AMENDMENT NUMBER EIGHT TO THE DIME SAVINGS BANK OF WILLIAMSBURGH 401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST Pursuant to Section 11.1 of The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust ("Plan"), the Plan is amended as follows, effective as of June 26, 1996: 1. INTRODUCTION - A new paragraph shall be added immediately prior to the last paragraph to read in its entirety as follows: Effective as of June 26, 1996, Pioneer Savings Bank, F.S.B. and its parent Conestoga Bancorp, Inc. were acquired by the Employer. In connection with this acquisition, the Employer amended the Plan to give credit to employees of specified "acquired companies" for purposes of vesting and eligibility to participate, and to permit immediate participation as of the date of such acquisition for eligible employees with respect to compensation for the full payroll period that includes the date of such acquisition. 2. ARTICLE I - The following new Section 1.4, the definition of Acquired Company, is added to the Plan to read as follows, and all references and cross-references are renumbered: 1.4 Acquired Company means any of the following companies which is acquired by, or merged or consolidated with, the Bank or its holding company: 1. Pioneer Savings Bank, F.S.B. 2. Conestoga Bancorp, Inc. 3. ARTICLE I - The following paragraph is added to the end of the definition of Compensation, Section 1.18: For purposes of determining Basic Contributions, Compensation of an Employee of an Acquired Company shall include amounts received from the Acquired Company during the payroll period in which the date of the transaction by which such company became an Acquired Company occurs, if such amounts would otherwise be considered to be Compensation under this Section 1.18. 4. ARTICLE I - The following new subsection (c) is added to section 1.47, Period of Service, as follows: (c) For purposes of determining eligibility to participate and vesting of contributions under the Plan, the Period of Service of any individual who was employed by an Acquired Company on the date of the transaction by which such company became an Acquired Company, shall include service recognized for purposes of vesting and eligibility to participate under the Merged Plan of such Acquired Company. 5. ARTICLE I - The following new Section 1.37 is added to the Plan, and all references and cross-references are renumbered: Merged Plan means a defined contribution plan permitting salary reduction contributions or, if none, other defined contribution plan of an Acquired Company. 6. ARTICLE II - The following sentence is added to the end of Section 2.3: Employees of an Acquired Company who are eligible to participate on the date of the transaction by which such company became an Acquired Company, may also elect to participate as of the first day of the payroll period in which such transaction occurs.

AMENDMENT NUMBER NINE TO THE DIME SAVINGS BANK OF WILLIAMSBURGH 401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST Pursuant to Section 11.1 of The Dime Savings Bank of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust ("Plan"), the Plan is amended as follows, effective as of June 26, 1996: 1. INTRODUCTION - A new paragraph shall be added immediately prior to the last paragraph to read in its entirety as follows: Effective June 26, 1996, the Pioneer Savings Bank, FSB Tax Deferral Savings Plan in RSI Retirement Trust ("Pioneer Plan") was merged with and into the Plan. Except and to the extent specifically required to the contrary under the terms of this Plan, the rights and benefits, if any, of a former employee of Pioneer Savings Bank, F.S.B. or Conestoga Bancorp, Inc. whose employment terminated prior to June 26, 1996, shall be determined in accordance with the provisions of the Pioneer Plan in effect prior to June 26, 1996. 2. ARTICLE I - The following new sentence is added to the end of Section 1.11 Bank Contributions: Bank Contributions shall include bank contributions made prior to June 26, 1996 on behalf of an Employee in accordance with the provisions of the Pioneer Plan. 3. ARTICLE I - The following new sentence is added to the end of Section 1.13 Basic Contributions: Basic Contributions shall include basic contributions made prior to June 26, 1996 on behalf of the Employee in accordance with the provisions of the Pioneer Plan. 4. ARTICLE I - The following new sentence is added to the end of Section 1.57, Rollover Contributions: Rollover Contributions shall include rollover contributions made prior to June 26, 1996 on behalf of the Employee in accordance with the provisions of the Pioneer Plan. 5. ARTICLE VIII - The following new subsection (g) is added to section 8.4, Operational Provisions: (g) A loan made in accordance with the provisions of the Pioneer Plan prior to June 26, 1996, shall be deemed to be a loan made in accordance with Article VIII of this Plan.


                       Severance Pay Plan

                               of

             The Dime Savings Bank of Williamsburgh

                  Adopted on February 8, 1996
                 Effective on November 1, 1995

TABLE OF CONTENTS Page ARTICLE I PURPOSE Section 1 Statement of Purpose ............................ 1 ARTICLE II DEFINITIONS Section 2.1 Acquired Company ............................. 1 Section 2.2 Acquired Employee ............................ 1 Section 2.3 Bank ......................................... 1 Section 2.4 Board ........................................ 2 Section 2.5 Cause ........................................ 2 Section 2.6 Change of Control ............................ 2 Section 2.7 Employee ..................................... 4 Section 2.8 FDI Act ...................................... 4 Section 2.9 Involuntary Severance ........................ 4 Section 2.10 Officer ...................................... 4 Section 2.11 OTS .......................................... 4 Section 2.12 Plan ......................................... 4 Section 2.13 Plan Administrator ........................... 4 Section 2.14 Plan Year .................................... 4 Section 2.15 Salary ....................................... 4 Section 2.16 Service ...................................... 5 ARTICLE III BENEFITS Section 3.1 Severance Benefits for Employees ............. 5 Section 3.2 Severance Benefits for Acquired Employees..... 6 Section 3.3 Vesting ...................................... 7 Section 3.4 Indemnification .............................. 7 (i)

Page ARTICLE IV ADMINISTRATION Section 4.1 Named Fiduciaries ............................ 8 Section 4.2 Plan Administrator ........................... 8 Section 4.3 Claims Procedure ............................. 9 Section 4.4 Claims Review Procedure ...................... 10 Section 4.5 Allocation of Fiduciary Responsibilities and Employment of Advisors ....................... 10 Section 4.6 Other Administrative Provisions .............. 11 ARTICLE V MISCELLANEOUS Section 5.1 Rights of Employees ......................... 11 Section 5.2 Non-alienation of Benefits .................. 12 Section 5.3 Non-Duplication of Benefits ................. 12 Section 5.4 Construction ................................ 12 Section 5.5 Headings .................................... 12 Section 5.6 Governing Law ............................... 12 Section 5.7 Severability ................................ 12 Section 5.8 Termination or Amendment .................... 13 Section 5.9 Required Regulatory Provisions .............. 13 Section 5.10 Withholding ................................. 14 Section 5.11 Status as Welfare Benefit Plan Under ERISA .. 14 (ii)

SEVERANCE PAY PLAN OF THE DIME SAVINGS BANK OF WILLIAMSBURGH ARTICLE I PURPOSE Section 1 Statement of Purpose. The Dime Savings Bank of Williamsburgh adopts this Severance Pay Plan for the benefit of its eligible Employees. The Bank recognizes that, as a public company, it will be subject to the possibility of a negotiated or unsolicited change of control which may result in a loss of employment for some of its Employees and that it may acquire other companies in transactions which may result in a loss of employment for the employees of the Acquired Companies. The purpose of the Plan is to encourage the Bank's Employees and those of Acquired Companies to continue working for their employers with their full time and attention devoted to their employer's affairs by providing prescribed income security and job placement assistance in the event of an Involuntary Severance following a Change of Control. ARTICLE II DEFINITIONS For purposes of the Plan, the following terms shall have the meanings assigned to them below, unless a different meaning is plainly indicated by the context: Section 2.1 Acquired Company means any of the following companies which is acquired by, or merged or consolidated with, the Bank: 1. Pioneer Savings Bank, F.S.B. 2. Conestoga Bancorp, Inc. Section 2.2 Acquired Employee means a person who is employed by an Acquired Company at the time when such company becomes an Acquired Company and who becomes an employee of the Bank immediately thereafter. An Acquired Employee whose employment by the Bank terminates for any reason and who is subsequently re-employed by the Bank shall not be considered an Acquired Employee following such re-employment. Section 2.3 Bank means The Dime Savings Bank of Williamsburgh (or its successors or assigns, whether by merger, consolidation, sale of assets, statutory receivership, operation of law or otherwise) and any affiliate of The Dime Savings Bank of Williamsburgh which, with the approval of the Board of Directors of The Dime Savings Bank of Williamsburgh, and subject to such conditions as may be imposed by such Board, adopts this Plan. Section 2.4 Board means the Board of Directors of The Dime Savings Bank of Williamsburgh. Section 2.5 Cause means, with respect to the conduct of an Employee in connection with his employment with the Bank, personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order in each case as measured against standards generally prevailing at the relevant time in the savings and community banking industry; provided, however, that following a Change of Control of the Bank or a company which owns 100% of the outstanding common stock of the Bank, an Employee shall not be deemed to have been discharged for Cause unless and until he shall have received a written notice of termination from the Board, accompanied by a resolution duly adopted by affirmative vote of a majority of the entire Board at a meeting called and held for such purpose (after reasonable notice to the Employee and a reasonable opportunity for the Employee to make oral and written presentations to the members of the Board, on his own behalf, or through a representative, who may be his legal counsel, to refute the grounds for the proposed determination) finding that in the good faith opinion of the Board grounds exist for discharging the Employee for "Cause". Section 2.6 Change of Control means: (a) with respect to The Dime Savings Bank of Williamsburgh: (i) the occurrence of any event upon which any "person" (as such term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act")), other than (A) a trustee or other fiduciary holding securities under an employee benefit plan maintained for the benefit of employees of The Dime Savings Bank of Williamsburgh; (B) a corporation owned, directly or indirectly, by the stockholders of The Dime Savings Bank of Williamsburgh in substantially the same proportions as their ownership of stock of The Dime Savings Bank of Williamsburgh; or (C) any group constituting a person in which employees of The Dime Savings Bank of Williamsburgh are substantial members, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities issued by The Dime Savings Bank of Williamsburgh representing 25% or more of the combined voting power of all of The Dime Savings Bank of Williamsburgh's then outstanding securities; or (ii) the occurrence of any event upon which the individuals who on the date the Plan is adopted are members of the Board, together with individuals whose election by the Board or nomination for election by The Dime Savings Bank of Williamsburgh's stockholders was approved by the affirmative vote of at least two-thirds of the members of the Board then in office who were either members of the Board on the date this Plan is adopted or whose nomination or election was previously so approved, cease for any reason to constitute a majority of the members of the Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of The Dime Savings Bank of Williamsburgh (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) the shareholders of The Dime Savings Bank of Williamsburgh (or, if The Dime Savings Bank of Williamsburgh is not then a stock form institution, the Board of The Dime Savings Bank of Williamsburgh) approve either: (A) a merger or consolidation of The Dime Savings Bank of Williamsburgh with any other corporation, other than a merger or consolidation following which both of the following conditions are satisfied: (I) either (1) the members of the Board of The Dime Savings Bank of Williamsburgh immediately prior to such merger or consolidation constitute at least a majority of the members of the governing body of the institution resulting from such merger or consolidation; or (2) the shareholders of The Dime Savings Bank of Williamsburgh own securities of the institution resulting from such merger or consolidation representing 80% or more of the combined voting power of all such securities then outstanding in substantially the same proportions as their ownership of voting securities of The Dime Savings Bank of Williamsburgh before such merger or consolidation; and (II) the entity which results from such merger or consolidation expressly agrees in writing to assume and perform The Dime Savings Bank of Williamsburgh's obligations under the Plan; or (B) a plan of complete liquidation of The Dime Savings Bank of Williamsburgh or an agreement for the sale or disposition by The Dime Savings Bank of Williamsburgh of all or substantially all of its assets; and (b) with respect to any company which owns 100% of the outstanding common stock The Dime Savings Bank of Williamsburgh, any event that would be described in section 2.6(a) if the name of such company were substituted for "The Dime Savings Bank of Williamsburgh" therein; and (c) with respect to an Acquired Company, the transaction by which such company becomes an Acquired Company. In no event, however, shall the transaction by which The Dime Savings Bank of Williamsburgh converts from a mutual savings bank to a stock savings bank, or any transaction by which a company wholly owned by The Dime Savings Bank of Williamsburgh becomes the parent company of The Dime Savings Bank of Williamsburgh be deemed a Change of Control. Section 2.7 Employee means any person, including an Officer, who is employed by the Bank, other than: (a) a person who is compensated on an hourly rate basis; (b) a person who works for the Bank on a part-time or temporary basis; (c) an Employee receiving long-term disability benefits; or (d) a person who has an employment contract, change of control agreement or other agreement with the Bank or who is covered by other programs which provide severance benefits or by their terms exclude such person from participation in this Plan. Section 2.8 FDI Act means the Federal Deposit Insurance Act, as the same may be amended from time to time, and the corresponding provisions of any successor statute. Section 2.9 Involuntary Severance means (a) the discharge or dismissal of an Employee by the Bank other than for Cause, or the resignation by the Employee from his position with the Bank, which resignation the Employee is asked or compelled by the Bank to tender other than for Cause; or (b) termination of employment at an Employee's election within sixty (60) days after any action following a Change of Control which, either alone or together with other actions, results in: (i) the reduction in the Employee's Salary by more than 20%; (ii) the assignment of the Employee to a job requiring relocation of his residence in order to be able to commute without unreasonable difficulty, expense or inconvenience; (iii) the assignment of the Employee to duties or to an office or working space which involves unreasonable personal embarrassment; or (iv) a material adverse change in the Employee's title, position or responsibilities at the Bank. Section 2.10 Officer means, in the case of an Employee, an officer of the Bank and in the case of an Acquired Employee, a person who is an officer of the Acquired Company immediately prior to the closing of the transaction pursuant to which such company becomes an Acquired Company. Section 2.11 OTS means the Office of Thrift Supervision of the United States Department of the Treasury, and its successors. Section 2.12 Plan means this Severance Pay Plan of The Dime Savings Bank of Williamsburgh, as the same may be amended from time to time. Section 2.13 Plan Administrator means the Compensation Committee of the Board of Directors of The Dime Savings Bank of Williamsburgh. Section 2.14 Plan Year means the calendar year. Section 2.15 Salary means (a) in the case of an Employee, the highest basic annual rate of salary of the Employee for his services to the Bank (excluding overtime, bonuses and other forms of additional compensation) attained by the Employee during his employment with the Bank, and (b) in the case of an Acquired Employee, the highest basic annual rate of salary of an the Acquired Employee for his services to the Acquired Company (excluding overtime, bonuses and other forms of additional compensation) attained by the Employee during his employment with the Acquired Company. Section 2.16 Service means service rendered by an Employee that is, or would be, recognized under the Retirement Plan of The Dime Savings Bank of Williamsburgh in RSI Retirement Trust for vesting purposes as of the date of the Employee's Involuntary Severance. ARTICLE III BENEFITS Section 3.1 Severance Benefits for Employees. (a) An Employee with at least one (1) year of Service whose employment with the Bank is terminated under circumstances constituting an Involuntary Severance, other than for Cause, as a result of, within twelve months following or within three (3) months prior to, a Change of Control with respect to the Bank or any company which owns 100% of the outstanding common stock of the Bank shall be entitled to the following benefits: (i) if the Employee is or has, at any time after November 1, 1995, been an Officer of the Bank, he shall be entitled, as severance pay, to a weekly payment in an amount equal to one week's Salary, commencing with the first week following the date of the Employee's Involuntary Severance and continuing for twice the number of weeks as the Employee has whole years of Service, or, if less, for thirty-nine (39) weeks; or (ii) if the Employee is not an Employee described in section 3.1(a)(i), he shall be entitled, as severance pay, to a weekly payment in an amount equal to one week's Salary, commencing with the first week following the date of the Employee's Involuntary Severance and continuing for the same number of weeks as the Employee has whole years of Service, or, if less, for twenty-six (26) weeks; provided, however, that in no event shall any Employee described in section 3.1(a)(i) or (ii) receive, as severance pay under this Plan, less than four weeks' Salary. (b) Each Employee who is entitled to payments under section 3.1(a)(i) or (ii) shall, for the duration of such payments, continue to be eligible for all of the benefits provided under the Bank's employee benefit plans and programs (excluding tax-qualified plans and other plans which by law must restrict participation to active employees) as if he were still an Employee and working at the Bank, except that he shall cease to accrue vacation and shall be paid a lump sum payment at the date of his Involuntary Severance in lieu of any unused accrued vacation. (c) Each Employee who is entitled to benefits under section 3.1(a)(i) or (ii) shall also be entitled to outplacement services as follows: (i) an Employee described in section 3.1(a)(i) shall be entitled to utilize the services of an outplacement counseling firm at the Bank's expense for assistance in preparing a resume, developing interviewing skills, identifying career opportunities and evaluating job offers and for access to office and secretarial facilities, provided that the fee for such services shall not exceed 12% of the Employee's Salary; and (ii) if the Employee is not an Employee described in section 3.1(a)(i), he shall be entitled to utilize the services of an outplacement counseling firm at the Bank's expense, for assistance in preparing a resume, developing interviewing skills, identifying career opportunities and evaluating job offers, provided that the fee for such services shall not exceed 6% of the Employee's Salary or $1,000, whichever is higher. The outplacement firm utilized by any Employee or group of Employees shall be selected by the Plan Administrator or, if permitted by the Plan Administrator selected by the Employee or Employees subject to the Plan Administrator's approval. Section 3.2 Severance Benefits for Acquired Employees. (a) An Acquired Employee with at least one (1) year of Service whose employment with the Bank is terminated under circumstances constituting an Involuntary Severance, other than for Cause within twelve months following a Change of Control with respect to the relevant Acquired Company shall be entitled to the following benefits: (i) if the Employee was an Officer of the Acquired Company, he shall be entitled, as severance pay, to a weekly payment in an amount equal to one week's Salary, commencing with the first week following the date of the Employee's Involuntary Severance and continuing for twice the number of weeks as the Employee has whole years of Service, or, if less, for thirty-nine (39) weeks; or (ii) if the Employee is not an Employee described in section 3.1(a)(i), he shall be entitled, as severance pay, to a weekly payment in an amount equal to one week's Salary, commencing with the first week following the date of the Employee's Involuntary Severance and continuing for the same number of weeks as the Employee has whole years of Service, or, if less, for twenty-six (26) weeks; provided, however, that in no event shall any Employee described in section 3.1(a)(i) or (ii) receive, as severance pay under this Plan, less than four weeks' Salary. (b) Each Employee who is entitled to payments under section 3.1(a)(i) or (ii) shall, for the duration of such payments, continue to be eligible for all of the benefits provided under the Bank's employee benefit plans and programs (excluding tax-qualified plans and other plans which by law must restrict participation to active employees) as if he were still an Employee and working at the Bank, except that he shall cease to accrue vacation and shall be paid a lump sum payment at the date of his Involuntary Severance in lieu of any unused accrued vacation. (c) Each Employee who is entitled to benefits under section 3.1(a)(i) or (ii) shall also be entitled to outplacement services as follows: (i) an Employee described in section 3.1(a)(i) shall be entitled to utilize the services of an outplacement counseling firm at the Bank's expense for assistance in preparing a resume, developing interviewing skills, identifying career opportunities and evaluating job offers and for access to office and secretarial facilities, provided that the fee for such services shall not exceed 12% of the Employee's Salary; and (ii) if the Employee is not an Employee described in section 3.1(a)(i), he shall be entitled to utilize the services of an outplacement counseling firm at the Bank's expense, for assistance in preparing a resume, developing interviewing skills, identifying career opportunities and evaluating job offers, provided that the fee for such services shall not exceed 6% of the Employee's Salary or $1,000, whichever is higher. The outplacement firm utilized by any Employee or group of Employees shall be selected by the Plan Administrator or, if permitted by the Plan Administrator selected by the Employee or Employees subject to the Plan Administrator's approval. Section 3.3 Vesting. The benefits to be provided under this Article III of the Plan to an Employee shall be completely vested and nonforfeitable upon the occurrence of a Change of Control with respect to the Bank or any company which owns 100% of the outstanding common stock of the Bank. Section 3.4 Indemnification. The Bank shall indemnify, hold harmless and defend each Employee against costs or expenses, including reasonable attorneys' fees, incurred by him or arising out of any action, suit or proceeding in which he may be involved, as a result of his efforts, in good faith, to defend or enforce his rights under this Plan; provided, however, that the Employee shall have substantially prevailed on the merits pursuant to a judgment, decree or order of a court of competent jurisdiction or of an arbitrator in an arbitration proceeding, or in a settlement. For purposes of this Agreement, any settlement agreement which provides for payment of any amounts in settlement of the Bank's obligations hereunder shall be conclusive evidence of the Employee's entitlement to indemnification hereunder, and any such indemnification payments shall be in addition to amounts payable pursuant to such settlement agreement, unless such settlement agreement expressly provides otherwise. ARTICLE IV ADMINISTRATION Section 4.1 Named Fiduciaries. The term "Named Fiduciary" shall mean (but only to the extent of the responsibilities of each of them) the Plan Adminis trator and the Board. This Article V is intended to allocate to each Named Fiduciary the responsibility for the prudent execution of the functions assigned to him or it, and none of such responsi bilities or any other responsibility shall be shared by two or more of such Named Fiduciaries. Whenever one Named Fiduciary is required by the Plan to follow the directions of another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have been assigned a shared responsibility, but the responsibility of the Named Fiduciary giving the directions shall be deemed his sole responsibility, and the responsibility of the Named Fidu ciary receiving those directions shall be to follow them insofar as such instructions are on their face proper under applicable law. Section 4.2 Plan Administrator. The Plan Administrator shall subject to the respon sibilities of the Board, have the responsibility for the day-to- day control, management, operation and administration of the Plan. The Plan Administrator shall have the following responsibilities: (a) To maintain records necessary or appropriate for the administration of the Plan; (b) To give and receive such instructions, notices, information, materials, reports and certifications as may be necessary or appropriate in the administration of the Plan; (c) To prescribe forms and make rules and regulations consistent with the terms of the Plan and with the inter- pretations and other actions of the Committee; (d) To require such proof or evidence of any matter from any person as may be necessary or appropriate in the administration of the Plan; (e) To prepare and file, distribute or furnish all reports, plan descriptions, and other information concerning the Plan, including, without limitation, filings with the Secretary of Labor and employee communications as shall be required of the Plan Admin istrator under ERISA; (f) To determine any question arising in connec tion with the Plan, including any question of Plan interpretation, and the Plan Administrator's decision or action in respect thereof shall be final and conclusive and binding upon all persons having an interest under the Plan; (g) To review and dispose of claims under the Plan filed pursuant to section 4.3 and appeals of claims decisions pursuant to section 4.4; (h) If the Plan Administrator shall determine that by reason of illness, senility, insanity, or for any other reason, it is undesirable to make any payment to the person entitled thereto, to direct the application of any amount so payable to the use or benefit of such person in any manner that the Plan Administrator may deem advisable or to direct in the Plan Administrator's discretion the withholding of any payment under the Plan due to any person under legal disability until a representative competent to receive such payment in his behalf shall be appointed pursuant to law; (i) To discharge such other responsibilities or follow such directions as may be assigned or given by the Board; and (j) To perform any duty or take any action which is allocated to the Plan Administrator under the Plan. The Plan Administrator shall have the power and authority neces sary or appropriate to carry out his responsibilities. Section 4.3 Claims Procedure. Any claim relating to benefits under the Plan shall be filed with the Plan Administrator on a form prescribed by it. If a claim is denied in whole or in part, the Plan Administrator shall give the claimant written notice of such denial, which notice shall specifically set forth: (a) The reasons for the denial; (b) The pertinent Plan provisions on which the denial was based; (c) Any additional material or information necessary for the claimant to perfect his claim and an explanation of why such material or information is needed; and (d) An explanation of the Plan's procedure for review of the denial of the claim. In the event that the claim is not granted and notice of denial of a claim is not furnished by the 30th day after such claim was filed, the claim shall be deemed to have been denied on that day for the purpose of permitting the claimant to request review of the claim. Section 4.4 Claims Review Procedure. Any person whose claim filed pursuant to section 4.3 has been denied in whole or in part by the Plan Administrator may request review of the claim by the Plan Administrator, upon a form prescribed by the Plan Administrator. The claimant shall file such form (including a statement of his position) with the Plan Administrator no later than 60 days after the mailing or delivery of the written notice of denial provided for in section 4.3, or, if such notice is not provided, within 60 days after such claim is deemed denied pursuant to section 4.3. The claimant shall be permitted to review pertinent documents. A decision shall be rendered by the Plan Administrator and communicated to the claimant not later than 30 days after receipt of the claimant's written request for review. However, if the Plan Administrator finds it necessary, due to special circumstances (for example, the need to hold a hearing), to extend this period and so notifies the claimant in writing, the decision shall be rendered as soon as practicable, but in no event later than 120 days after the claimant's request for review. The Plan Administrator's decision shall be in writing and shall specifically set forth: (a) The reasons for the decision; and (b) The pertinent Plan provisions on which the decision is based. Any such decision of the Plan Administrator shall be binding upon the claimant and the Bank, and the Plan Administrator shall take appropriate action to carry out such decision. Section 4.5 Allocation of Fiduciary Responsibilities and Employment of Advisors. Any Named Fiduciary may: (a) Allocate any of his or its responsibilities (other than trustee responsibilities) under the Plan to such other person or persons as he or it may designate, provided that such allocation and designation shall be in writing and filed with the Plan Administrator; (b) Employ one or more persons to render advice to him or it with regard to any of his or its respons- ibilities under the Plan; and (c) Consult with counsel, who may be counsel to the Bank. Section 4.6 Other Administrative Provisions. (a) Any person whose claim has been denied in whole or in part must exhaust the administrative review procedures provided in section 4.4 prior to initiating any claim for judicial review. (b) No bond or other security shall be required of the Plan Administrator, or any officer or Employee of the Bank to whom fiduciary responsibilities are allocated by a Named Fiduciary, except as may be required by ERISA. (c) Subject to any limitation on the application of this section 4.6(c) pursuant to ERISA, neither the Plan Adminis trator, nor any officer or Employee of the Bank to whom fiduciary responsibilities are allocated by a Named Fiduciary, shall be liable for any act of omission or commission by himself or by another person, except for his own individual willful and intentional malfeasance. (d) The Plan Administrator may, except with respect to actions under section 4.4, shorten, extend or waive the time (but not beyond 60 days) required by the Plan for filing any notice or other form with the Plan Administrator, or taking any other action under the Plan. (e) Any person, group of persons, committee, corpo ration or organization may serve in more than one fiduciary capacity with respect to the Plan. (f) Any action taken or omitted by any fiduciary with respect to the Plan, including any decision, interpretation, claim denial or review on appeal, shall be conclusive and binding on the Bank and all interested parties and shall be subject to judicial modification or reversal only to the extent it is determined by a court of competent jurisdiction that such action or omission was arbitrary and capricious and contrary to the terms of the Plan. ARTICLE V MISCELLANEOUS Section 5.1 Rights of Employees. No Employee shall have any right or claim to any benefit under the Plan except in accordance with the provisions of the Plan. The establishment of the Plan shall not be construed as conferring upon any Employee or other person any legal right to a continuation of employment or to any terms or conditions of employment, nor as limiting or qualifying the right of the Bank to discharge any Employee. Section 5.2 Non-alienation of Benefits. The right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation, or assignment, nor shall such right be liable for or subject to debts, contracts, liabilities, or torts. Section 5.3 Non-Duplication of Benefits. No provisions in this Plan shall be deemed to duplicate any compensation or benefits provided under any agreement, plan or program covering the Employee to which the Bank is a party and any duplicative amount payable under any such agreement, plan or program shall be applied as an offset to reduce the amounts otherwise payable hereunder. Section 5.4 Construction. Whenever appropriate in the Plan, words used in the singular may be read in the plural; words used in the plural may be read in the singular; and the masculine gender shall be deemed equally to refer to the feminine gender or the neuter. Any reference to a section number shall refer to a section of this Plan, unless otherwise stated. Section 5.5 Headings. The headings of sections are included solely for con venience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control. Section 5.6 Governing Law. Except to the extent preempted by federal law, the Plan shall be construed, administered and enforced according to the laws of the State of New York applicable to contracts between citizens and residents of the State of New York entered into and to be performed entirely within such jurisdiction. Section 5.7 Severability. The invalidity or unenforceability, in whole or in part, of any provision of this Plan shall in no way affect the validity or enforceability of the remainder of such provision or of any other provision of this Plan, and any provision, or part thereof, deemed to be invalid or unenforceable shall be reformed as necessary to render it valid and enforceable to the maximum possible extent. Section 5.8 Termination or Amendment. The Bank intends to keep this Plan in effect, but, subject to the provisions of section 4 hereunder, the Bank expressly reserves the right to terminate or amend the Plan, in whole or in part, at any time by action of the Board; provided, however, that no such amendment or termination which adversely affects the current or prospective rights of any Employee shall be effective earlier than six (6) months after written notice thereof is given to such Employee. Section 5.9 Required Regulatory Provisions. The following provisions are included for the purposes of complying with various laws, rules and regulations applicable to the Bank: (a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate amount of compensation payable to any person under Article III of this Plan exceed the three times such person's average annual total compensation for the last five consecutive calendar years to end prior to his termination of employment with the Bank (or for his entire period of employment with the Bank and its predecessors, if less than five calendar years). (b) Notwithstanding anything herein contained to the contrary, any payments to the Employee by the Bank, whether pursuant to this Plan or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the FDI Act and any regulations promulgated thereunder. (c) Notwithstanding anything herein contained to the contrary, if the Employee is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Bank pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, the Bank's obligations under this Plan shall be suspended as of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in such notice are dismissed, the Bank, in its discretion, may (i) pay to the Employee all or part of the compensation withheld while the Bank's obligations hereunder were suspended and (ii) reinstate, in whole or in part, any of the obligations which were suspended. (d) Notwithstanding anything herein contained to the contrary, if the Employee is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, all prospective obligations of the Bank under this Plan shall terminate as of the effective date of the order, but vested rights and obligations of the Bank and the Employee shall not be affected. (e) Notwithstanding anything herein contained to the contrary, if the Bank is in default (within the meaning of section 3(x)(1) of the FDI Act, all prospective obligations of the Bank under this Plan shall terminate as of the date of default, but vested rights and obligations of the Bank and the Employee shall not be affected. (f) Notwithstanding anything herein contained to the contrary, all prospective obligations of the Bank hereunder shall be terminated, except to the extent that a continuation of this Plan is necessary for the continued operation of the Bank: (i) by the Director of the OTS or his designee or the FDIC, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in section 13(c) of the FDI Act; (ii) by the Director of the OTS or his designee at the time such Director or designee approves a supervisory merger to resolve problems related to the operation of the Bank or when the Bank is determined by such Director to be in an unsafe or unsound condition. The vested rights and obligations of the parties shall not be affected. If and to the extent that any of the foregoing provisions shall cease to be required by applicable law, rule or regulation, the same shall become inoperative automatically as though eliminated by formal amendment of the Plan. Section 5.10 Withholding. Payments from this Plan shall be subject to all applicable federal, state and local income withholding taxes. Section 5.11 Status as Welfare Benefit Plan Under ERISA. This Plan is an "employee welfare benefit plan" within the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and shall be construed, administered and enforced according to the provisions of ERISA.



               Retirement Plan for Board Members

                               of

                  Dime Community Bancorp, Inc.















                  Adopted on February 8, 1996
                   Effective on June 26, 1996

TABLE OF CONTENTS Page ARTICLE I Definitions x Section 1.1 Annual Compensation ................................... 1 Section 1.2 Bank .................................................. 1 Section 1.3 Beneficiary ........................................... 1 Section 1.4 Board ................................................. 1 Section 1.5 Board Member .......................................... 1 Section 1.6 Change of Control of the Bank ......................... 1 Section 1.7 Code .................................................. 3 Section 1.8 Committee ............................................. 3 Section 1.9 Company ............................................... 3 Section 1.10 Participant ........................................... 3 Section 1.11 Participating Company ................................. 3 Section 1.12 Person ................................................ 3 Section 1.13 Predecessor Board ..................................... 3 Section 1.14 Plan .................................................. 3 Section 1.15 Reorganization Date ................................... 3 Section 1.16 Retired Participant ................................... 4 Section 1.17 Spouse ................................................ 4 Section 1.18 Years of Service ...................................... 4 ARTICLE II ELIGIBILITY Section 2.1 Participation ......................................... 4 Section 2.2 Termination of Participation .......................... 4 ARTICLE III RETIREMENT BENEFITS Section 3.1 Normal Benefits ....................................... 5 Section 3.2 Payments .............................................. 5 Section 3.3 Optional Forms of Retirement Allowance ................ 5 Section 3.4 Payments of Small Amounts ............................. 6 Section 3.5 Automatic Death Benefit for Spouse .................... 7 Section 3.6 Beneficiaries ........................................ 7 Section 3.7 Payment upon Change in Control ........................ 8 (i)

Page ARTICLE IV ADMINISTRATION Section 4.1 Duties of the Committee ............................... 8 Section 4.2 Liabilities of the Committee .......................... 8 Section 4.3 Expenses .............................................. 9 ARTICLE V AMENDMENT AND TERMINATION Section 5.1 Amendment and Termination ............................. 9 ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1 Plan Documents ......................................... 9 Section 6.2 Construction of Language ............................... 9 Section 6.3 Non-Alienation of Benefits ............................. 10 Section 6.4 Indemnification ........................................ 10 Section 6.5 Severability ........................................... 10 Section 6.6 Waiver ................................................. 10 Section 6.7 Notices ................................................ 10 Section 6.8 Operation as an Unfunded Plan .......................... 11 Section 6.9 Required Regulatory Provisions ......................... 11 Section 6.10 Governing Law .......................................... 11 (ii)

RETIREMENT PLAN FOR BOARD MEMBERS OF DIME COMMUNITY BANCORP, INC. ARTICLE I DEFINITIONS The following definitions shall apply for the purposes of this Plan unless a different meaning is plainly indicated by the context: Section 1.1 Annual Compensation means, on any date for any Board Member, the amount of compensation paid to such Board Member for service as a Board Member during the twelve (12) month period ending on such date, including retainer payments, fees paid solely on the basis of attendance at meetings as a Board Member and any amounts thereof deferred at the request of the Board Member, but excluding compensation in the form of stock options, appreciation rights or restricted property, or other special forms of remuneration. In the case of a Board Member who is a non-employee director and who later becomes an employee- director, "Annual Compensation" means the amount of such compensation during the twelve (12) month period immediately preceding service as a employee-director. Section 1.2 Bank means The Dime Savings Bank of Williamsburgh, a federal stock savings bank, and any successor thereto. Section 1.3 Beneficiary means the Person or Persons designated by the Participant or Retired Participant to receive a survivor benefit under one of the optional forms of retirement allowance provided under section 3.3. If more than one Person is designated, each shall have an equal share unless the Participant or Retired Participant directed otherwise. Section 1.4 Board means the Board of Directors of the Company. Section 1.5 Board Member means any individual who is a voting member of the Board or a voting member of the Board of Directors of the Bank or a voting member of the board of directors of a Participating Company. Section 1.6 Change of Control of the Bank means any of the following events: (a) the occurrence of any event upon which any "person" (as such term is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act")), other than (A) a trustee or other fiduciary holding securities under an employee benefit plan maintained for the benefit of employees of the Bank; (B) a corporation owned, directly or indirectly, by the stockholders of the Bank in substantially the same proportions as their ownership of stock of the Bank; or (C) any group constituting a person in which employees of the Bank are substantial members, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities issued by the Bank representing 25% or more of the combined voting power of all of the Bank's then outstanding securities; or (b) the occurrence of any event upon which the individuals who on the date the Plan is adopted are members of the Board, together with individuals whose election by the Board or nomination for election by the Bank's stockholders was approved by the affirmative vote of at least two-thirds of the members of the Board then in office who were either members of the Board on the date this Plan is adopted or whose nomination or election was previously so approved, cease for any reason to constitute a majority of the members of the Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Bank (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (c) the shareholders of the Bank (or, if the Bank is not then a stock form institution, the Board of the Bank) approve either: (i) a merger or consolidation of the Bank with any other corporation, other than a merger or consolidation following which both of the following conditions are satisfied: (A) either (1) the members of the Board of the Bank immediately prior to such merger or consolidation constitute at least a majority of the members of the governing body of the institution resulting from such merger or consolidation; or (2) the shareholders of the Bank own securities of the institution resulting from such merger or consolidation representing 80% or more of the combined voting power of all such securities then outstanding in substantially the same proportions as their ownership of voting securities of the Bank before such merger or consolidation; and (B) the entity which results from such merger or consolidation expressly agrees in writing to assume and perform the Bank's obligations under the Plan; or (ii) a plan of complete liquidation of the Bank or an agreement for the sale or disposition by the Bank of all or substantially all of its assets; and (d) with respect to any company which owns 100% of the outstanding common stock the Bank, any event that would be described in section 1.6(a), (b) or (c) if the name of such company were substituted for "the Bank" therein. In no event, however, shall the transaction by which the Bank converts from a mutual savings bank to a stock savings bank, or any transaction by which a company wholly owned by the Bank becomes the parent company of the Bank be deemed a Change of Control of the Bank. Section 1.7 Code means the Internal Revenue Code of 1986 (including the corresponding provisions of any succeeding law). Section 1.8 Committee means the Compensation Committee of the Board and any successor thereto. Section 1.9 Company means Dime Community Bancorp, Inc. and any successor thereto. Section 1.10 Participant means a Board Member who satisfies the eligibility requirements set forth in section 2.1 and whose participation in the Plan has not terminated pursuant to section 2.2. Section 1.11 Participating Company means any savings bank, savings and loan association, bank, corporation, financial institution or other business organization or institution which, with the prior approval of the Board, and subject to such terms and conditions as may be imposed by the Board, shall adopt this Plan for the benefit of members of its board of directors. Section 1.12 Person means an individual, a corpora tion, a bank, a savings bank, a savings and loan association, a financial institution, a partnership, an association, a joint- stock company, a trust, an estate, any unincorporated organiza tion and any other business organization or institution. Section 1.13 Predecessor Board means, with the prior approval of the Board and subject to such terms and conditions as may be imposed by the Board, the board of trustees or the board of directors of a Participating Company, prior to the date such a company became a Participating Company. Section 1.14 Plan means the Retirement Plan for Board Members, as amended from time to time. The Plan may be referred to as the "Retirement Plan for Board Members of Dime Community Bancorp, Inc." Section 1.15 Reorganization Date means the effective date of the transaction pursuant to which The Dime Savings Bank of Williamsburgh becomes a wholly-owned subsidiary of the Company. Section 1.16 Retired Participant means a former Participant who is receiving a retirement allowance under this Plan or who is entitled to receive a retirement allowance under this Plan at a future date. Section 1.17 Spouse means an individual who is legally married to a Participant or Retired Participant. Section 1.18 Years of Service means the period beginning on the first day of the month in which an individual becomes a Board Member and ending on the last day of the month in which such individual ceases to be a Board Member, but excluding (a) any period during which the individual was a salaried officer of the Company or any Participating Company, and (b) any period during which the individual was a salaried officer of any other institution whose board of directors or board of trustees is considered a Predecessor Board. The Years of Service of an individual with two or more non-consecutive periods of service as a Board Member shall be equal to the sum of such non-consecutive periods. For purposes of determining an individual's Years of Service, service as a member of a Predecessor Board shall be deemed service as a Board Member. The maximum number of Years of Service of any Board Member for purposes of the Plan shall be 10. ARTICLE II ELIGIBILITY Section 2.1 Participation. A person who is a Board Member on the Reorganization Date shall become a Participant in the Plan on the Reorganization Date. A person who becomes a Board Member after the Reorganization Date shall become a Participant in the Plan immediately upon becoming a Board Member. Any person who was a Board Member prior to the Reorganization Date, but who ceased to be a Board Member prior to the Reorganization Date, shall not be eligible for benefits under this Plan unless he again becomes a Board Member after the Reorganization Date. Section 2.2 Termination of Participation. Participation in the Plan shall cease on the date a Participant ceases to be a Board Member for whatever reason. ARTICLE III RETIREMENT BENEFITS Section 3.1 Normal Benefits. (a) Any Participant who terminates service as a Board Member after attaining age 65 shall be entitled to a normal retirement allowance from the Bank, commencing as of the first day of the month following the month in which he ceases to be a Board Member, in an annual amount equal to his Annual Compensation as of the date on which he ceases to be a Board Member multiplied by a fraction, the numerator of which is his Years of Service and the denominator of which is 10. (b) A Participant who ceases to be a Board Member prior to attaining age 65 but after completing 10 Years of Service shall be entitled to a deferred retirement allowance beginning on the first day of the month following the date he attains age 65, in an annual amount equal to his Annual Compensation as of the date on which he ceases to be a Board Member. In lieu thereof, such person may elect to have a retirement allowance commence as of the first day of any month after the later of (i) the month in which he attains age 55 or (ii) the month in which he ceases to be a Board Member, and the amount of the retirement allowance shall be equal to the amount payable at age 65 multiplied by a factor specified in Appendix A. Any such election shall be made at least 30 days prior to termination of service as a Board Member. Section 3.2 Payments. Retirement allowances under section 3.1 shall be paid in monthly installments, each installment being one-twelfth of the annual retirement allowance. The first payment shall be made in accordance with section 3.1 and installments shall continue until the Retired Participant's death. Section 3.3 Optional Forms of Retirement Allowance. (a) With the approval of the Committee and on such terms and conditions as the Committee may prescribe, a Par ticipant or Retired Participant entitled to a retirement al lowance under section 3.1 may elect, at any time prior to termination of service as a Board Member, to convert the allow ance otherwise payable on his account into any one of the follow ing optional forms of retirement allowance: (i) Option 1 (100% Survivor Option). A reduced retirement allowance payable during his life, with the provision that after his death an amount equal to his reduced retirement allowance shall continue during the life of, and shall be paid to, such person, if then living, as he shall have named as his Beneficiary in his written election of the option. (ii) Option 2 (50% Survivor Option). A reduced retirement allowance payable during his life, with the provision that after his death an amount equal to one- half of his reduced retirement allowance shall continue during the life of, and shall be paid to, such person, if then living, as he shall have named as his Benefic iary in his written election of the option. (iii) Option 3 (5, 10 or 15 Year Term Certain). A reduced retirement allowance payable during his life, with the provision that an amount equal to his reduced retirement allowance shall continue to be paid for a term certain elected by the Participant or Retired Participant of 5, 10 or 15 years from the commencement of such retirement allowance, and, in the event of his death before the end of such term, the same amount shall continue to be paid for the remainder of such term to the person (or persons) whom he shall have named as his Beneficiary (or Beneficiaries) in his written election of the option or any change thereof. (b) Where Option 1 or Option 2 has been elected, if payments begin during the Retired Participant's lifetime and if the Beneficiary is living at the date of the Retired Participant's death, then the payments to the Beneficiary shall commence as of the first day of the month after the month in which the Retired Participant died and shall continue during the lifetime of the Beneficiary, the last installment being payable on the first day of the month during which the Beneficiary dies. Where Option 3 has been elected, if payments begin during the Retired Participant's lifetime, and if the Participant or Retired Participant dies prior to the expiration of the term elected, then the payments to the Beneficiary shall commence as of the first day of the month after the month in which the Participant or Retired Participant died, and payments shall continue for the remainder of such term. (c) If Option 1 or Option 2 has been elected and the designated Beneficiary dies after the retirement allowance has commenced to be paid to the Retired Participant who designated him but before the death of such Retired Participant, the amount of the reduced retirement allowance to which such Retired Partici pant is then entitled shall remain unchanged and all payments shall cease upon the death of the Retired Participant. (d) The retirement allowance payable to a Participant or Retired Participant electing one of the optional forms of retirement allowance set forth in section 3.3(a) shall be determined by multiplying the retirement allowance otherwise payable under section 3.1 by the appropriate adjustment factor set forth in Appendix B. (e) Any election under this section 3.3 shall be made in writing in the form and manner prescribed by the Committee, shall be revocable until termination of service as a Board Member and shall thereafter be irrevocable. Section 3.4 Payments of Small Amounts. Notwithstanding any other provision of the Plan, if the present value of the retirement allowance payable to a Par ticipant or Retired Participant and his Beneficiary shall at any time after termination of service as a Board Member and prior to the commencement of payment thereof be less than $10,000, then the Committee may direct that it be paid in such lump sum in lieu of all other benefits under the Plan. For purposes of this section 3.4, present values shall be determined using the interest rate and mortality assumptions then in use under section 415 of the Code for purposes of valuing lump sum payments under tax-qualified defined benefit plans, assuming payment would begin at the later of age 65 or the date of termination of service. Section 3.5 Automatic Death Benefit for Spouse. If (a) a Participant or Retired Participant who is entitled to a retirement allowance under section 3.1 should die prior to the commencement of such retirement allowance and prior to electing an optional form of retirement allowance under section 3.3 or (b) a Participant who is not entitled to a retire ment allowance under section 3.1 should die while a Board Member, and if such Participant or Retired Participant is survived by a Spouse, there shall be paid to such surviving Spouse, until such Spouse dies, a monthly survivor's allowance in an amount equal to that amount which would have been provided to such Spouse had the Participant or Retired Participant retired immediately prior to his death (whether or not he would have been eligible for retirement) and had he effectively elected to take Option 2 under section 3.3 with his Spouse as his Beneficiary and with payments commencing on the first day of the month following his death. Section 3.6 Beneficiaries. (a) A Participant or Retired Participant may designate a Beneficiary or Beneficiaries to receive any survivor benefits payable upon his death under an optional form of benefit elected pursuant to section 3.3. (b) If the Participant or Retired Participant elects Option 1 or Option 2 under section 3.3, he may only designate one Beneficiary and such Beneficiary must be a natural person. Any designation shall be made in writing in the form and manner prescribed by the Committee, shall be revocable until the retirement allowance commences to be paid, and shall thereafter be irrevocable. (c) If the Participant or Retired Participant elects Option 3 under section 3.3, he may designate one or more Benefi ciaries who may be, but need not be, natural persons. Any such election shall be made in writing in the form and manner prescribed by the Committee, shall be revocable until the retirement allowance commences to be paid, and shall thereafter be irrevocable; provided, however, that the Participant or Retired Participant may change or revoke the Beneficiary or Beneficiaries designated at any time or from time to time, but such changes or revocations shall be effective only if received by the Committee prior to the Participant's or Retired Par ticipant's death. (d) A Beneficiary designated by a Participant or Retired Participant to receive a survivor benefit, other than a benefit payable for such Beneficiary's life, may designate a Beneficiary of his own to receive such survivor benefit in the event the Beneficiary designated by the Participant or Retired Participant dies prior to receiving complete payment of such survivor benefit. If a Participant or Retired Participant who has elected Option 3 dies without a Beneficiary, then the present value of any unpaid installments shall be paid to the estate of such Participant or Retired Participant in lieu of all other payments. If a Beneficiary of a deceased Retired Participant entitled to payments under Option 3 dies without a Beneficiary, then the present value of any unpaid installments shall be paid to the estate of such Beneficiary in lieu of all other payments. In determining such present values, the interest rate and life expectancy tables prescribed under section 415 of the Code for purposes of valuing lump sum payments under tax-qualified defined benefit plans shall be used. Section 3.7 Payment upon Change in Control. Upon a Change of Control of the Bank, each Board Member shall be entitled to an immediate lump sum payment of the present value of a single life annuity, commencing upon a Change of Control of the Bank and continuing for life in an annual amount equal to his Annual Compensation multiplied by a fraction (not greater than one) the numerator of which is his Years of Service and the denominator of which is 10. In determining such present values, the interest rate and life expectancy tables prescribed under section 415 of the Code for purposes of valuing lump sum payments under tax-qualified defined benefit plans shall be used. ARTICLE IV ADMINISTRATION Section 4.1 Duties of the Committee. The Committee shall have full responsibility for the management, operation, interpretation and administration of the Plan in accordance with its terms, and shall have such authority as is necessary or appropriate in carrying out its responsibili ties. Actions taken by the Committee pursuant to this section 4.1 shall be conclusive and binding upon the Bank, the Company, the Participating Companies, Participants, Retired Participants and other interested parties. Section 4.2 Liabilities of the Committee. Neither the Committee nor its individual members shall be deemed to be a fiduciary with respect to this Plan; nor shall any of the foregoing individuals or entities be liable to any Participant or Retired Participant in connection with the management, operation, interpretation or administration of the Plan, any such liability being solely that of the Company. Section 4.3 Expenses. Any expenses incurred in the management, operation, interpretation or administration of the Plan shall be paid by the Company. In no event shall the benefits otherwise payable under this Plan be reduced to offset the expenses incurred in managing, operating, interpreting or administering the Plan. ARTICLE V AMENDMENT AND TERMINATION Section 5.1 Amendment and Termination. The Board shall have the right to amend the Plan, from time to time and at any time, in whole or in part, and to termin ate the Plan; provided, however, that no such amendment or termination shall reduce the accrued benefits of, or impose more stringent vesting requirements on any benefits accrued by, any Participant, Retired Participant or Beneficiary through the date of the amendment or termination of the Plan. ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1 Plan Documents. The Secretary of the Board shall provide a copy of this Plan to each Board Member who becomes a Participant in the Plan. Section 6.2 Construction of Language. Wherever appropriate in the Plan, words used in the singular may be read in the plural, words in the plural may be read in the singular, and words importing the masculine gender shall be deemed equally to refer to the feminine or the neuter. Any reference to an article or section shall be to an article or section of the Plan, unless otherwise indicated. Section 6.3 Non-Alienation of Benefits. The right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation or assign ment, nor shall such rights be liable for or subject to debts, contracts, liabilities or torts. Section 6.4 Indemnification. The Company shall indemnify, hold harmless and defend each Board Member, Participant, Retired Participant and the Beneficiaries of each, against their reasonable costs, including legal fees, incurred by them, or arising out of any action, suit or proceeding in which they may be involved, as a result of their efforts, in good faith, to defend or enforce the terms of the Plan. Section 6.5 Severability. A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enfor ceability of any other provision hereof. Section 6.6 Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times. Section 6.7 Notices. Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or 5 days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt re quested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party: (a) if to the Company: Dime Community Bancorp, Inc. 209 Havemeyer Street Brooklyn, New York 11211 Attention: Corporate Secretary (b) if to any party other than the Company, to such party at the address last furnished by such party by written notice to the Company. Section 6.8 Operation as an Unfunded Plan. The Plan is intended to be (a) a contractual obligation of the Company to pay the benefits as and when due in accordance with its terms, (b) an unfunded and non-qualified plan such that the benefits payable shall not be taxable to the recipients until such benefits are paid and (c) a plan covering persons who are independent contractors of the Company. The Plan is not intended to be subject to or comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended, or of section 401(a) of the Code. The Company may establish a trust to which assets may be transferred by the Company in order to provide a portion or all of the benefits otherwise payable by the Company under the Plan; provided, however, that the assets of such trust shall be subject to the claims of the creditors of the Company in the event that it is determined that the Company is insolvent or that grounds exist for the appointment of a conservator or receiver. The Plan shall be administered and construed so as to effectuate these intentions. Section 6.9 Required Regulatory Provisions. Notwithstanding anything herein contained to the contrary, any benefits paid by the Company, whether pursuant to this Plan or otherwise, are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. Section 1828(k), and any regulations promulgated thereunder. Section 6.10 Governing Law. The Plan shall be construed, administered and enforced according to the laws of the State of New York applicable to contracts between citizens and residents of the State of New York entered into and to be performed entirely within such jurisdiction, except to the extent that such laws are preempted by federal law.

Appendix A Early Commencement Factors Number of Years Factor Payments Commence Prior to Age 65 0 1.0000 1 .9205 2 .8496 3 .7860 4 .7289 5 .6774 6 .6308 7 .5885 8 .5500 9 .5149 10 .4829

Appendix B Factors for Determining Optional Benefit Forms under Section 3.3 Age Option 1 Option 2 Option 3 5 Year 10 Year 15 Year Certain Certain Certain 50 90.0% 94.7% 99.6% 98.4% 97.1% 51 89.4 94.4 99.6 98.3 96.6 52 88.8 94.1 99.6 98.2 96.2 53 88.2 93.7 99.5 98.1 95.8 54 87.6 93.4 99.5 98.0 95.4 55 87.0 93.0 99.4 97.9 95.0 56 86.4 92.7 99.3 97.5 94.2 57 85.8 92.4 99.2 97.1 93.4 58 85.2 92.0 99.1 96.7 92.6 59 84.6 91.7 98.9 96.3 91.8 60 84.0 91.3 98.8 95.9 91.0 61 83.2 90.8 98.6 95.2 90.0 62 82.4 90.4 98.4 94.5 89.0 63 81.6 89.9 98.2 93.8 88.0 64 80.8 89.4 98.0 93.1 87.0 65 80.0 88.9 97.8 92.4 86.0 66 79.3 88.5 97.4 91.4 84.4 67 78.6 88.0 97.1 90.4 82.8 68 77.9 87.6 96.7 89.4 81.2 69 77.2 87.1 96.4 88.4 79.6 70 76.5 86.7 96.0 87.4 78.0 71 75.9 86.3 95.4 85.8 76.0 72 75.3 85.9 94.8 84.2 74.0 73 74.7 85.5 94.2 82.6 72.0 74 74.1 85.1 93.6 81.0 70.0 75 73.5 84.7 93.0 79.4 68.0 For Options 1 and 2, the survivorship factors shown above assume that the Participant (or Retired Participant) and the Beneficiary are the same age. For each whole year that the Beneficiary is older than the Participant (or Retired Participant), add Factor B in the case of Option 2, to the percentage shown above (but never go above 99.0%). For each whole year that the Beneficiary is younger than the Participant (or Retired Participant), subtract Factor B in the case of Option 2, from the percentages shown above. Factor B for all members for Option 1 is .7% for the first 10 years, .5% for the next 10 years and .3% for over 20 years, and Factor B for Option 2 is .4% for the first 10 years, .3% for the next 10 years and .2% for over 20 years.

  

9 1,000 YEAR JUN-30-1996 JUN-30-1996 17,055 1,056,380 115,130 0 498,655 96,132 96,024 583,227 7,812 1,371,821 950,114 5,000 39,196 22,708 0 0 145 212,926 1,371,821 39,654 11,665 1,300 52,619 22,508 23,516 29,103 2,979 164 3,521 13,478 7,297 0 (1,032) 6,265 0 0 7.98 6,551 0 4,671 8,109 5,174 1,023 14 7,812 7,812 0 0 Includes interest bearing escrow accounts of $133,950 at June 30, 1996 Includes reserve of $668 acquired from Conestoga Bancorp, Inc.