DIME COMMUNITY BANCSHARES INC, DEF 14A, 1999-10-07

DIME COMMUNITY BANCSHARES INC
DEF 14A, 1999-10-07
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

DIME COMMUNITY BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

Common stock, $0.01 par value.
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(2) Aggregate number of securities to which transaction applies:

N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

N/A
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(4) Proposed maximum aggregate value of transaction:

N/A
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(5) Total fee paid:

N/A
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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

Reg. (S) 240.14a-101.

SEC 1913 (3-99)

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[LOGO] DIME COMMUNITY
----------------
BANCSHARES, INC.

October 7, 1999

Dear Shareholder:

You are cordially invited to attend the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of Dime Community Bancshares, Inc. (the "Company"), the
holding company for The Dime Savings Bank of Williamsburgh, Brooklyn, New
York, which will be held on November 10, 1999 at 10:00 a.m., local time, at
Giando on the Water, 400 Kent Avenue, Brooklyn, New York 11211.

The attached Notice of the 1999 Annual Meeting of Shareholders and Proxy
Statement describe the business to be transacted at the Annual Meeting.
Directors and officers of the Company, as well as a representative of Deloitte
& Touche LLP, the accounting firm appointed by the Board of Directors to be
the Company's independent auditors for the fiscal year ending June 30, 2000,
will be present at the Annual Meeting to respond to questions.

The Board of Directors of the Company has determined that an affirmative
vote on each matter to be considered at the Annual Meeting is in the best
interests of the Company and its shareholders and unanimously recommends a
vote "FOR" each of these matters.

Please complete, sign and return the enclosed proxy card promptly, whether
or not you plan to attend the Annual Meeting. Your vote is important
regardless of the number of shares you own. Voting by proxy will not prevent
you from voting in person at the Annual Meeting, but will assure that your
vote is counted if you are unable to attend. If you are a shareholder whose
shares are not registered in your own name, you will need additional
documentation from your record holder to attend and to vote personally at the
Annual Meeting. Examples of such documentation include a broker's statement,
letter or other document confirming your ownership of shares of the Company.

On behalf of the Board of Directors and the employees of Dime Community
Bancshares, Inc. and The Dime Savings Bank of Williamsburgh, we thank you for
your continued support and hope to see you at the Annual Meeting.

Sincerely yours,

/s/ Vincent F. Palagiano

Vincent F. Palagiano
Chairman of the Board
and Chief Executive Officer

<PAGE>

Dime Community Bancshares, Inc.
209 Havemeyer Street
Brooklyn, New York 11211
(718) 782-6200

NOTICE OF THE 1999 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on November 10, 1999

NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of Dime
Community Bancshares, Inc. (the "Company") will be held at Giando on the
Water, 400 Kent Avenue, Brooklyn, New York 11211, on November 10, 1999 at
10:00 a.m., local time, to consider and vote upon the:

1. Election of four directors for terms of three years each;

2. Approval of the Dime Community Bancshares, Inc. Annual Incentive Plan;

3. Ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending June 30, 2000;
and

4. Such other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof. As of the date hereof,
management is not aware of any other such business.

The Board of Directors has fixed September 20, 1999, as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment or postponement thereof. Only shareholders
of record at the close of business on that date will be entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
A list of such shareholders will be available for inspection at the office of
the Company for 10 days prior to the Annual Meeting.

By Order of the Board of Directors

/s/ Kenneth A. Ceonzo
Kenneth A. Ceonzo
First Vice President and Secretary

Brooklyn, New York
October 7, 1999

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. RETURNING THE
PROXY CARD WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE
ANNUAL MEETING.

<PAGE>

DIME COMMUNITY BANCSHARES, INC.

PROXY STATEMENT FOR THE
1999 ANNUAL MEETING OF SHAREHOLDERS

To Be Held on November 10, 1999

GENERAL INFORMATION

General

This Proxy Statement and accompanying proxy card are being furnished to the
shareholders of Dime Community Bancshares, Inc. (the "Company") in connection
with the solicitation of proxies by the Board of Directors of the Company from
holders of the shares of the Company's issued and outstanding common stock,
par value $0.01 per share (the "Common Stock"), as of the close of business on
September 20, 1999 (the "Record Date"), for use at the 1999 Annual Meeting of
Shareholders of the Company to be held on November 10, 1999 at Giando on the
Water, 400 Kent Avenue, Brooklyn, New York, at 10:00 a.m., local time, and at
any adjournment or postponement thereof (the "Annual Meeting"). The Company is
a Delaware corporation and operates as a unitary savings and loan holding
company for The Dime Savings Bank of Williamsburgh (the "Bank"). This Proxy
Statement, together with the enclosed proxy card, is first being mailed to
shareholders on or about October 8, 1999.

Record Date and Voting Rights

The Board of Directors of the Company has fixed the close of business on
September 20, 1999 as the record date for the determination of the Company's
shareholders entitled to notice of, and to vote at, the Annual Meeting.
Accordingly, only holders of record of shares of Common Stock at the close of
business on such date will be entitled to vote at the Annual Meeting. On the
Record Date, there were 12,725,588 shares of Common Stock issued and
outstanding. The presence, in person or by proxy, of the holders of at least a
majority of the total number of outstanding shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum thereat.

Each holder of shares of Common Stock outstanding on the Record Date will be
entitled to one vote for each share held of record (other than Excess Shares
as defined below) at the Annual Meeting. As provided in the Company's
Certificate of Incorporation, record holders (other than any compensation plan
maintained by the Company and certain affiliates) of Common Stock who
beneficially own in excess of 10% of the outstanding shares of Common Stock
("Excess Shares") shall be entitled to cast only one-hundredth of one vote per
share for each Excess Share. A person or entity is deemed to beneficially own
shares owned by an affiliate or associate as well as by persons acting in
concert with such person or entity. The Company's Certificate of Incorporation
authorizes the Board of Directors to interpret and apply the provisions of the
Certificate of Incorporation governing Excess Shares, and to determine on the
basis of information known to them after reasonable inquiry all facts
necessary to ascertain compliance with the Certificate of Incorporation,
including, without limitation, (i) the number of shares of Common Stock
beneficially owned by any person or purported owner, (ii) whether a person or
purported owner is an affiliate or associate of, or is acting in concert with,
any other person or purported owner and (iii) whether a person or purported
owner has an agreement or understanding with any person or purported owner as
to the voting or disposition of any shares of Common Stock.

All properly executed proxies received by the Company will be voted in
accordance with the instructions indicated thereon. If no instructions are
given, executed proxies will be voted FOR election of each of the four
nominees for director, and FOR each other proposal identified in the Notice of
the 1999 Annual Meeting of Shareholders.

Management is not aware of any matters other than those set forth in the
Notice of the 1999 Annual Meeting of Shareholders that may be brought before
the Annual Meeting. If any other matters properly come before the

1
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Annual Meeting, the persons named in the accompanying proxy will vote the
shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Board of Directors of the
Company.

If you are a shareholder whose shares are not registered in your own name,
you will need appropriate documentation from your shareholder of record to
vote personally at the Annual Meeting. Examples of such documentation would
include a broker's statement, letter or other document that will confirm your
ownership of shares of the Company.

Vote Required

Directors are elected by a plurality of the votes cast in person or by proxy
at the Annual Meeting. The holders of Common Stock may not vote their shares
cumulatively for the election of directors. Proposals 2, 3 and 4 each require
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock represented, in person or by proxy, and entitled to vote at the
Annual Meeting.

Shares as to which the "ABSTAIN" box has been selected on the Proxy Card
with respect to all matters except the election of directors will be counted
as present and entitled to vote and will have the effect of a vote against the
proposal so indicated. In contrast, shares underlying broker non-votes will
not be counted as present and entitled to vote and will have no effect on the
vote on such matters presented.

Revocability of Proxies

A proxy may be revoked at any time before it is voted by filing a written
revocation of the proxy with the Secretary of the Company or by submitting a
duly executed proxy bearing a later date. A proxy also may be revoked by
attending and voting at the Annual Meeting, only if a written revocation is
filed with the Secretary of the Annual Meeting prior to the voting of such
proxy.

Solicitation of Proxies

The Company will bear the costs of soliciting proxies from its shareholders.
In addition to the use of mail, proxies may be solicited by officers,
directors or employees of the Company and the Bank by telephone or through
other forms of communication. The Company will also request persons, firms and
corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners, and will reimburse such holders for
reasonable expenses incurred in connection therewith. In addition, the Company
has retained ChaseMellon Shareholder Services, L.L.C. to assist in the
solicitation of proxies. The estimated cost of such solicitation is $4,500
plus reimbursement for reasonable out-of-pocket expenses.

Interest of Certain Persons in Matters to be Acted Upon

Certain officers and employees of the Bank and the Company will have the
opportunity to earn cash bonuses under the Dime Community Bancshares, Inc.
Annual Incentive Plan ("Annual Incentive Plan") if shareholders approve
Proposal 2 and may, therefore, be deemed to have a personal interest in the
outcome of the vote. For a complete description of this plan, see "Proposal
2--Annual Incentive Plan."

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders of the Company

The following table sets forth, as of August 31, 1999, certain information
as to Common Stock beneficially owned by persons owning in excess of 5% of the
outstanding shares of Common Stock. Management knows of no person, except as
listed below, who beneficially owned more than 5% of the Company's outstanding
shares of Common Stock as of August 31, 1999. Except as otherwise indicated,
the information provided in the following table was obtained from filings with
the Securities and Exchange Commission (the "SEC") and with

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the Company pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Addresses provided are those listed in the filings as the
address of the person authorized to receive notices and communications. For
purposes of the table below and the table set forth under "Security Ownership
of Management," in accordance with Rule 13d-3 under the Exchange Act, a person
is deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock (1) over which he or she has or shares, directly or
indirectly, voting or investment power, or (2) of which he or she has the
right to acquire beneficial ownership at any time within 60 days after August
31, 1999. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" includes the power to dispose or
direct the disposition of such shares. Unless otherwise noted, each beneficial
owner has sole voting and sole investment power over the shares beneficially
owned.

<TABLE>
<CAPTION>
Naemand Address of Amount and Nature of
eneficialBOwner Beneficial Ownership Percent
- ------------------- -------------------- -------
<S> <C> <C>
The Employee Stock Ownership Plan Trust of
Dime Community Bancshares, Inc. and
Certain Affiliates............................... 1,137,735(1) 8.92%
140 Broadway
New York, NY 10005
Compensation Committee of Dime Community
Bancshares, Inc. ................................ 1,794,266(2) 14.07%
209 Havemeyer Street
Brooklyn, NY 11211
Thomson Horstmann & Bryant, Inc. ................. 696,500(3) 5.46%
Park 80 West, Plaza Two
Saddle Brook, NJ 07663
</TABLE>
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(1) The Employee Stock Ownership Plan ("ESOP") filed a Schedule 13G with the
SEC on February 9, 1999. The ESOP is administered by the Compensation
Committee of the Company's Board of Directors (the "Compensation
Committee"). The ESOP's assets are held in a trust (the "ESOP Trust") for
which HSBC Bank USA (formerly Marine Midland Bank) serves as trustee (the
"ESOP Trustee"). The ESOP Trust purchased these shares with funds borrowed
from the Company and initially placed these shares in a suspense account
for release and allocation to participants' accounts in annual
installments. As of June 30, 1999, 336,102 shares held by the ESOP Trust
have been allocated. The terms of the ESOP provide that, subject to the
ESOP Trustee's fiduciary responsibilities under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the ESOP Trustee will
vote, tender or exchange shares of Common Stock held in the ESOP Trust in
accordance with instructions received from the participants. The ESOP
Trustee will vote allocated shares as to which no instructions are
received and any shares that have not been allocated to participants'
accounts in the same proportion as allocated shares with respect to which
the ESOP Trustee receives instructions are voted, subject to fiduciary
duties of the ESOP Trustee. The ESOP Trustee will tender or exchange any
shares in the suspense account or that otherwise have not been allocated
to participants' accounts in the same proportion as allocated shares with
respect to which the ESOP Trustee receives instructions are tendered or
exchanged, subject to fiduciary duties of the ESOP Trustee. With respect
to allocated shares as to which no instructions are received, the ESOP
Trustee will be deemed to have received instructions not to tender or
exchange such shares. Each of the members of the Compensation Committee
disclaims beneficial ownership of such shares. For a discussion of the
voting and investment powers of the Compensation Committee, see footnote
2.
(2) The Compensation Committee filed a Schedule 13G with the SEC on February
9, 1999. The Compensation Committee serves certain administrative
functions for the ESOP, the Recognition and Retention Plan for Outside
Directors, Officers and Employees of Dime Community Bancshares, Inc.
("RRP"), and the Company Stock Fund of the Dime Savings Bank of
Williamsburgh 401(k) Plan ("401(k) Plan Stock Fund"). As of August 31,
1999, the RRP owns 357,138 shares of the Company's common stock, of which
310,368 have been allocated to individuals, and the individual participant
accounts of the 401(k) Plan Stock Fund own 210,308 shares of the Company's
Common Stock. All shares of common stock owned by the RRP and within the
401(k) Plan Stock Fund are held at HSBC Bank USA, as Trustee, as of August
31, 1999. The Committee has the power and authority to direct the Trustee
of the RRP with respect to the exercise of voting rights, but has assigned
voting and tender rights over allocated shares to participating officers
and directors. Shares indicated as beneficially owned by the Compensation
Committee include all shares indicated in the table as beneficially owned
by the ESOP Trust. The Committee has the power and authority to direct the
ESOP Trustee with respect to the investment of the ESOP's assets
(including the acquisition or disposition of both allocated and
unallocated shares) in the absence of a tender offer, but has no voting
power with respect to any shares. With respect to the ESOP, ERISA, in
limited circumstances, may confer upon the ESOP Trustee, the power and
duty to control the voting and tendering of Common Stock allocated to the
accounts of participating employees and beneficiaries who fail to exercise
their voting and/or tender rights. Each of the members of the Compensation
Committee disclaims beneficial ownership of such shares.
(3) Thomson Horstmann & Bryant, Inc. ("Thomson") filed a Schedule 13G/A on
January 28. 1999. Thomson is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, as amended. Thomson
has sole voting power over 482,600 shares, shared voting power over 11,500
shares and sole dispositive power over 696,500 shares.

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Security Ownership of Management

The following table sets forth information with respect to the shares of
Common Stock beneficially owned by each director of the Company, by each named
executive officer of the Company identified in the Summary Compensation Table
included elsewhere herein, and all directors and executive officers of the
Company or the Bank as a group as of the record date. Except as otherwise
indicated, each person and each group shown in the table has sole voting and
investment power with respect to the shares of Common Stock indicated.

<TABLE>
<CAPTION>
Amount and Nature Percent of
Position with of Beneficial Common Stock
Name The Company(1) Ownership(2)(3)(4)(5)(6) Outstanding
- ------------------------ -------------------------------------------- ------------------------ ------------
<S> <C> <C> <C>
Vincent F. Palagiano.... Director, Chairman of the Board and Chief 282,179(7) 2.22%
Executive Officer
Michael P. Devine....... Director, President and Chief Operating 197,679(8) 1.55
Officer
Anthony Bergamo......... Director 46,740 *
George L. Clark, Jr. ... Director 81,390(9) *
Steven D. Cohn.......... Director 41,890(10) *
Patrick E. Curtin....... Director 55,842(11) *
Joseph H. Farrell....... Director 61,740 *
Fred P. Fehrenbach...... Director 56,840(12) *
John J. Flynn........... Director 41,740 *
Malcolm T. Kitson....... Director 37,340 *
Stanley Meisels......... Director 41,840 *
Louis V. Varone......... Director 48,740 *
Kenneth J. Mahon........ Executive Vice President and Chief Financial
Officer, and Director of the Bank 127,566 1.00
Timothy B. King......... Senior Vice President and Treasurer 60,885(13) *
Michael Pucella......... Senior Vice President--Finance 59,627(14) *
Michael Henchy.......... Senior Vice President--Retail Banking 3,957 *
All directors and executive officers as a group (17 persons)......... 2,092,637 16.44%
</TABLE>
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* Less than one percent
(1) Titles are for both the Company and the Bank unless otherwise specified.
(2) See "Principal Shareholders of the Company" for a definition of
"beneficial ownership.
(3) The figures shown include shares held in trust pursuant to the ESOP that
have been allocated as of June 30, 1999 to individual accounts as follows:
Mr. Palagiano, 9,179 shares; Mr. Devine, 9,179 shares; Mr. Mahon, 9,179
shares; Mr. King, 8,272 shares; Mr. Pucella, 7,243 shares, Mr. Henchy,
1,957 shares and all executive officers as a group, 45,009 shares. Such
persons have voting power (subject to the legal duties of the ESOP
Trustee) but no investment power, except in limited circumstances, as to
such shares. The figures shown for Messrs. Palagiano, Devine, Mahon, King
and Pucella do not include 36,497 shares, 23,341 shares, 9,499 shares,
2,060 shares and 2,011 shares, respectively, which are held in Trust for
the benefit of Messrs. Palagiano, Devine, Mahon, King and Pucella under
the Benefit Maintenance Plan of Dime Community Bancshares, Inc. ("BMP").
Messrs. Palagiano, Devine, Mahon, King and Pucella have neither voting nor
investment rights with respect to these shares. The figures shown for
Messrs. Palagiano, Devine, Mahon, King, Pucella and Henchy also do not
include any portion of the 801,633 shares held in trust pursuant to the
ESOP that have not been allocated to any individual's account and as to
which Messrs. Palagiano, Devine, Mahon, King, Pucella and Henchy may be
deemed to share voting power with other ESOP participants. The figure
shown for all directors and executive officers as a group includes such
801,633 shares as to which the members of the Company's Compensation
Committee (consisting of Messrs. Bergamo, Fehrenbach, Kitson and Meisels)
may be deemed to have sole investment power, except in limited
circumstances, thereby causing each such Committee member to be deemed a
beneficial owner of such shares. Each of the members of the Compensation
Committee disclaims beneficial ownership of such shares and, accordingly,
such shares are not attributed to the members of the Compensation
Committee individually. In addition, the figure shown for all directors
and executive officers as a group includes 73,408 shares held in trust
(the "BMP Trust") for the benefit of Messrs. Palagiano, Devine, Mahon,
King and Pucella under the BMP. The BMP Trust, as directed by the Company,
exercises voting and investment power over these shares. See "Compensation
of Directors and Officers -- Benefits -- Employee Stock Ownership Plan and
Trust."
(4) The figures shown include shares held pursuant to The Dime Savings Bank
of Williamsburgh 401(k) Savings Plan in RSI Retirement Trust in
individual participant accounts as of June 30, 1999, as follows: Mr.
Palagiano, 20,000 shares; Mr. Devine, 20,000 shares; Mr. Mahon, 19,355
shares; Mr. King, 5,001 shares; Mr. Pucella, 10,976 shares; and all
directors and executive officers as a group, 75,332 shares. Such persons
have sole voting power and sole investment power as to such shares. See
"Compensation of Directors and Executive Officers--Benefits--401(k)
Plan."

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(5) The figures shown include unvested shares held in trust pursuant to the
Recognition and Retention Plan ("RRP") that have been awarded as of
August 31, 1999 to individuals as follows: Mr. Palagiano, 69,000 shares;
Mr. Devine, 45,000 shares; each other director of the Company, 9,522
shares; Mr. Mahon, 33,000 shares; Mr. King, 17,274 shares; Mr. Pucella,
17,274 shares and all directors and executive officers as a group,
276,768 shares. Such persons have sole voting power (subject to the legal
duties of the RRP Trustee) but no investment power, except in limited
circumstances, as to such shares.
(6) The figures shown include the following shares which may be acquired upon
exercise of stock options that are, or will become, exercisable within
60-days after August 31, 1999: Mr. Palagiano, 114,000 shares; Mr. Devine,
76,000 shares; Mr. Mahon, 52,000 shares; Messrs. King and Pucella, 20,000
shares; and each of Messrs. Bergamo, Clark, Cohn, Curtin, Farrell,
Fehrenbach, Flynn, Kitson, Meisels, and Varone, 15,870 shares; and all
directors and officers as a group, 440,700 shares.
(7) Includes 4,000 shares as to which Mr. Palagiano may be deemed to share
voting and investment power.
(8) Includes 47,500 shares as to which Mr. Devine may be deemed to share
voting and investment power.
(9) Includes 25,000 shares as to which Mr. Clark may be deemed to share
voting and investment power.
(10) Includes 100 shares as to which Mr. Cohn may be deemed to share voting
and investment power.
(11) Includes 838 shares as to which Mr. Curtin may be deemed to share voting
and investment power.
(12) Includes 6,448 shares as to which Mr. Fehrenbach may be deemed to share
voting and investment power.
(13) Includes 3,717 shares as to which Mr. King may be deemed to share voting
and investment power.
(14) Includes 450 shares as to which Mr. Pucella may be deemed to share voting
and investment power.

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<PAGE>

PROPOSAL 1

ELECTION OF DIRECTORS

General

The Certificate of Incorporation and Bylaws of the Company provide for the
election of directors by the shareholders. For this purpose, the Board of
Directors of the Company is divided into three classes, each class to be as
nearly equal in number as possible. The terms of office of the members of one
class expire, and a successor class is to be elected, at each annual meeting
of shareholders. There are currently twelve directors of the Company.

The four incumbent directors with terms expiring at the Annual Meeting,
Vincent F. Palagiano, George L. Clark, Jr., Steven D. Cohn and John J. Flynn,
have been nominated by the Nominating Committee of the Board of Directors to
be re-elected at the Annual Meeting for three-year terms expiring at the
annual meeting of shareholders to be held in 2002, or when their successors
are otherwise duly elected and qualified. Each nominee has consented to being
named in this Proxy Statement and to serve, if elected.

The terms of the remaining two classes of directors expire at the annual
meetings of shareholders to be held in 2000 and 2001, respectively, or when
their successors are otherwise duly elected and qualified. In the event that
any nominee for election as a director at the Annual Meeting is unable or
declines to serve, which the Board of Directors has no reason to expect, the
persons named in the Proxy Card will vote with respect to a substitute nominee
designated by the present Board of Directors.

Information as to Nominees and Continuing Directors

The following table sets forth certain information with respect to each
nominee for election as a director and each director whose term does not
expire at the Annual Meeting ("Continuing Director"). There are no
arrangements or understandings between the Company and any director or nominee
pursuant to which such person was elected or nominated to be a director of the
Company. For information with respect to security ownership of directors, see
"Security Ownership of Certain Beneficial Owners and Management--Security
Ownership of Management."

<TABLE>
<CAPTION>
Position(s) Held with
Director Term the
Nominees Age(1) Since(2) Expires Company and the Bank
-------- ------ -------- ------- -----------------------
<C> <C> <C> <C> <S>
Vincent F. Palagiano........... 58 1978 1999 Director, Chairman of
the Board and Chief
Executive Officer
George L. Clark, Jr............ 58 1980 1999 Director
Steven D. Cohn................. 50 1994 1999 Director
John J. Flynn.................. 63 1994 1999 Director
Continuing Directors
Michael P. Devine.............. 53 1980 2000 Director, President and
Chief Operating Officer
Anthony Bergamo................ 53 1986 2000 Director
Patrick E. Curtin.............. 54 1986 2001 Director
Joseph H. Farrell.............. 68 1969 2000 Director
Fred P. Fehrenbach............. 62 1987 2001 Director
Malcolm T. Kitson.............. 71 1990 2001 Director
Stanley Meisels................ 69 1990 2001 Director
Louis V. Varone................ 69 1985 2000 Director
</TABLE>
- --------
(1) As of August 31, 1999.
(2) Includes service as a Director or Trustee with The Dime Savings Bank of
Williamsburgh and predecessor institutions prior to the incorporation of
the Company on December 12, 1995.

6
<PAGE>

The principal occupation and business experience of each nominee for
election as a director and each Continuing Director are set forth below.
Unless otherwise indicated, each of the following persons has held his present
position for the last five years.

Nominees for Election as Director

Vincent F. Palagiano has served as Chairman of the Board and Chief Executive
Officer of the Company since its formation in 1995 and of the Bank since 1989.
He has served as a Trustee or Director of the Bank since 1978. In addition,
Mr. Palagiano has served on the Board of Directors of the Institutional
Investors Capital Appreciation Fund since 1996. Mr. Palagiano joined the Bank
in 1970 as an appraiser and has also served as the Company's President and the
Bank's President, Executive Vice President, Chief Operating Officer and Chief
Lending Officer. Prior to 1970, Mr. Palagiano served in the real estate and
mortgage departments at other financial institutions and title companies.

George L. Clark, Jr. has served as a Director of the Company since its
formation in 1995 and as a Trustee or Director of the Bank since 1980. Mr.
Clark is President of George L. Clark Inc. (Realtors), a New York State
licensed real estate firm. Mr. Clark is a former director of the Federal
National Mortgage Association, and a former Chairman of the New York
Republican State Committee. Mr. Clark has been a licensed real estate broker
for 37 years.

Steven D. Cohn has served as a Director of the Company since its formation
in 1995 and as a Trustee or Director of the Bank since 1994. Mr. Cohn is the
managing partner in the law firm of Goldberg and Cohn LLP, in Brooklyn
Heights, New York.

John J. Flynn has served as a Director of the Company since its formation in
1995 and as a Trustee or Director of the Bank since October, 1994, and before
that from February, 1983, to February, 1993. From February, 1993, through
August, 1994, Mr. Flynn was Executive Vice President of Flushing Savings Bank,
FSB in Flushing, New York. From 1990 to February, 1993, and since September,
1994, Mr. Flynn has been a self-employed real estate mortgage broker.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE NOMINEES FOR ELECTION AS DIRECTORS.

Continuing Directors

Michael P. Devine has served as President of the Company and the Bank since
January 1, 1997 and Chief Operating Officer of the Bank since 1989. Prior to
Mr. Devine's appointment as President, he served as Executive Vice President
and Secretary of the Company and the Bank. Mr. Devine has served as a Director
of the Company since its formation in 1995 and as a Trustee or Director of the
Bank since 1980. Mr. Devine joined the Bank in 1971 and has served as the
Internal Auditor, Comptroller and Investment Officer. Prior to 1971, Mr.
Devine served as a Senior Accountant with the firm of Peat Marwick Mitchell &
Co.

Anthony Bergamo has served as a Director of the Company since its formation
in 1995 and as a Trustee or Director of the Bank since 1986. Mr. Bergamo is a
licensed attorney in New York and New Jersey and is an independent fiduciary.

Patrick E. Curtin has served as a Director of the Company since its
formation in 1995 and as a Trustee or Director of the Bank since 1986. Mr.
Curtin is a senior partner in the law firm of Conway Farrell Curtin & Kelly,
P.C. in New York, New York.

Joseph H. Farrell has served as a Director of the Company since its
formation in 1995 and as a Trustee or Director of the Bank since 1969. Mr.
Farrell is Chairman of the law firm of Conway Farrell Curtin & Kelly, P.C. Mr.
Farrell is also President of the William F. Casey Foundation, which is a not-
for-profit real estate holding foundation. Mr. Farrell is a trial attorney for
the Roman Catholic Diocese of Brooklyn and Vice President of the New York
State Bar Association.

7
<PAGE>

Fred P. Fehrenbach has served as a Director of the Company since its
formation in 1995 and as a Trustee or Director of the Bank since 1987. Mr.
Fehrenbach is President of Consolidated Brokerage Corp. located in Great Neck,
New York, which is a retail insurance brokerage business. Mr. Fehrenbach has
been with Consolidated Brokerage Corp. since 1975. Mr. Fehrenbach is also the
President of BF International Corp., an import/export sales organization.

Malcolm T. Kitson has served as a Director of the Company since its
formation in 1995 and as a Trustee or Director of the Bank since 1990. Mr.
Kitson served as a Vice President of Citibank, N.A. until his retirement in
1990.

Stanley Meisels has served as a Director of the Company since its formation
in 1995 and as a Trustee or Director of the Bank since 1990. Mr. Meisels has
been a stockbroker with Gruntal & Co. in Hewlett, New York since 1986. Mr.
Meisels is also President and sole owner of Small Business Electronics
Investment Corp., a private investment company.

Louis V. Varone has served as a Director of the Company since its formation
in 1995 and as a Trustee or Director of the Bank since 1985. Mr. Varone has
been a licensed real estate broker for over 30 years. Mr. Varone is self-
employed.

Meetings and Committees of the Board of Directors of the Company

The Board of Directors meets on a monthly basis and may have additional
special meetings upon the request of the Chairman of the Board. The Company's
Board of Directors met 13 times during the fiscal year ended June 30, 1999. No
current director attended fewer than 75% of the total number of Board meetings
and committee meetings of which such director was a member.

The Board of Directors of the Company has established the following
committees:

The Executive Committee consists of Messrs. Palagiano, Devine, Bergamo,
Clark, Farrell and Varone. The purpose of this committee is to consider
longer-term strategic, planning and industry issues. This committee, from time
to time, also reviews regulatory issues and reports of regulatory
examinations. This committee meets as requested by the Board of Directors. The
Executive Committee did not meet in fiscal 1999.

The Compensation Committee consists of Messrs. Bergamo (Chairman),
Fehrenbach, Kitson and Meisels. This committee establishes the compensation of
the Chief Executive Officer, approves the compensation of other officers, and
determines compensation and benefits to be paid to employees of the Bank. The
committee meets yearly and as requested by the Board of Directors. The
Compensation Committee met twice in fiscal 1999.

The Audit Committee consists of Messrs. Cohn (Chairman), Farrell, Flynn,
Meisels and Varone. The purpose of this committee is to provide assurance that
the Company's internal controls are adequate and that financial disclosures
made by management portray the Company's financial condition and results of
operations. The committee is responsible for the classification of assets and
the establishment of adequate valuation allowances. The committee also
maintains a liaison with the outside auditors. The committee meets at least
annually or as called by the Committee Chairman. The Audit Committee met twice
in fiscal 1999.

The Nominating Committee consists of Messrs. Curtin (Chairman), Fehrenbach,
Kitson and Meisels. The committee nominates candidates for the election of
directors. The committee meets as called by the Committee Chairman. The
Nominating Committee met once in fiscal 1999. In addition, the Nominating
Committee met on July 15, 1999, to select the nominees for election as
directors at the Annual Meeting. In accordance with the Company's Bylaws, no
nominations for election as director, except those made by the Nominating
Committee, shall be voted upon at the Annual Meeting unless properly made by a
shareholder in accordance with the procedures set forth under "Additional
Information--Notice of Business to be Conducted at Annual Meeting."

8
<PAGE>

Directors' Compensation

Fee Arrangements. During the year ended June 30, 1999, each non-officer
director ("Outside Director") of the Company received an annual retainer of
$18,000 and a fee of $1,000 per meeting of the Company or the Bank attended.
All committee members received a fee of $400 for attendance at each committee
meeting of the Company or the Bank. In September, 1999, the annual retainer
was increased to $20,000 while all per meeting fees remained unchanged. If
both the Company's and the Bank's Boards of Directors or corresponding
committees of the Company and the Bank meet on the same day, such directors
will only receive one fee for the Board meetings and one fee for the Committee
meetings, paid by the Bank.

Directors' Retirement Plan. The Company has adopted a non-qualified
Retirement Plan for Outside Directors of the Company and the Bank (the
"Directors' Retirement Plan"), which will provide benefits to each eligible
Outside Director commencing on his termination of Board service at or after
age 65. An eligible Outside Director retiring at or after age 65 will be paid
an annual retirement benefit equal to the amount of the aggregate compensation
for services as a director (excluding stock compensation) paid to him for the
twelve-month period immediately prior to his termination of Board service,
multiplied by a fraction, the numerator of which is the number of his years of
service, up to a maximum of 10, as an Outside Director (including service as a
director or trustee of the Bank or any predecessor) and the denominator of
which is 10. An individual who terminates Board service after having served as
an Outside Director for 10 years may elect to begin collecting benefits under
the Directors' Retirement Plan at or after attainment of age 55, but the
annual retirement benefits payable to him will be reduced pursuant to the
Directors' Retirement Plan's early retirement reduction formula to reflect the
commencement of benefit payments prior to age 65. An Outside Director may
elect to have his benefits distributed in any one of the following forms: (i)
a single life annuity; (ii) a 50% or 100% joint and survivor annuity; or (iii)
a single life annuity with a 5, 10, or 15 year guaranteed term. In the event
an Outside Director dies prior to the commencement of benefit payments under
the Directors' Retirement Plan, a 50% survivor annuity will automatically be
paid to his surviving spouse, unless the decedent has elected otherwise.

Option Plan and RRP. The Dime Community Bancshares, Inc. 1996 Stock Option
Plan for Outside Directors, Officers and Employees (the "1996 Stock Option
Plan") and RRP were adopted by the Board of Directors of the Company and
subsequently approved by the Company's shareholders at the annual meeting held
on December 17, 1996 (the "1996 Annual Meeting"). On December 26, 1996, the
effective date of the 1996 Stock Option Plan, each Outside Director of the
Company and the Bank was granted a non-qualified stock option to purchase
39,675 shares of Common Stock. These options are scheduled to vest at the rate
of 20% per year over a five-year period and will become immediately
exercisable upon a director's death, disability, retirement, or in the event
of a "change in control" of the Company, as defined in the 1996 Stock Option
Plan. Similarly, on December 26, 1996, the effective date of the RRP,
restricted stock awards were granted to each director with respect to 15,870
shares of Common Stock. These awards are also scheduled to vest in 20%
increments over a five-year period beginning on February 1, 1998, with
accelerated vesting to occur in the event of the director's death, disability,
retirement or in the event of a "change in control" of the Company, as defined
in the RRP.

Executive Officers

The following individuals are executive officers of the Company or the Bank
and hold the offices set forth below opposite their names.

<TABLE>
<CAPTION>
Name Position Held
---- ----------------------------------------------------
<S> <C>
Executive Officers of
the Company and Bank
Vincent F. Palagiano.... Chairman of the Board and Chief Executive Officer
Michael P. Devine....... President and Chief Operating Officer
Kenneth J. Mahon........ Executive Vice President and Chief Financial Officer
Timothy B. King......... Senior Vice President and Treasurer
Michael Pucella......... Senior Vice President--Finance
Executive officers of
the Bank only
Michael J. Henchy....... Senior Vice President--Retail Operations
Vincent J. Martucci..... Senior Vice President--Mortgage Officer
</TABLE>

9
<PAGE>

The executive officers of the Company and the Bank are elected annually and
hold office until their respective successors have been elected and qualified
or until death, resignation or removal by the Board of Directors. The Company
has entered into Employment Agreements with certain of its executive officers
which set forth the terms of their employment. See "--Employment Agreements."

Biographical information of executive officers of the Company or the Bank
who are not directors of the Company is set forth below.

Kenneth J. Mahon, age 48, was promoted to Comptroller of the Bank in 1983,
to Senior Vice President in 1988, and to Executive Vice President of the
Company in 1997. He has served as Chief Financial Officer of the Company since
its formation and of the Bank since 1996. Mr. Mahon has also served as a
director of the Bank since 1998. Prior to joining the Bank in 1980, Mr. Mahon
served in the financial areas of several New York metropolitan savings banks.

Timothy B. King, age 41, has over 20 years of banking experience, and has
been with the Bank since 1983. Mr. King was promoted to Senior Vice President
of the Company and the Bank in 1999, First Vice President in 1997, Vice
President in 1993 and Treasurer in 1989. Mr. King manages the securities
investment and interest rate risk functions of the Bank.

Michael Pucella, age 46, was promoted to Comptroller of the Bank in 1989, to
Vice President in 1996, to First Vice President in 1997 and Senior Vice
President of the Finance Division of the Company and the Bank in 1999. He has
been with the Bank since 1981, and is responsible for financial reporting,
budgeting, corporate planning and tax administration. Mr. Pucella has over 24
years of banking experience.

Michael J. Henchy, age 50, joined the Bank in April, 1998, and was promoted
to First Vice President of the Bank in May, 1998 and Senior Vice President in
January, 1999, with the primary responsibility of supervising the Bank's
branch operations. Prior to joining the Bank, Mr. Henchy served as Executive
Vice President and Chief Administrative Officer of the Greater New York
Savings Bank ("Greater New York"), where he supervised Greater New York's
branch operations. Mr. Henchy's career at Greater New York spanned 27 years.

Vincent J. Martucci, age 52, joined the Bank in February, 1999, as a Senior
Vice President and was named an executive officer of the Bank in September,
1999. He currently serves as the Bank's chief lending officer. Mr. Martucci
has over 30 years of real estate and banking experience with companies located
throughout the New York metropolitan area.

COMPENSATION OF EXECUTIVE OFFICERS

Report of Compensation Committee

The following Report of the Company's Compensation Committee is provided in
accordance with the rules and regulations of the SEC. Pursuant to such rules
and regulations, this Report shall not be deemed "soliciting material," filed
with the SEC subject to Regulation 14A or 14C of the SEC or subject to the
liabilities of Section 18 of the Exchange Act.

Compensation Committee Report on Executive Compensation

The Compensation Committee (the "Committee") of the Board of Directors
annually reviews the executive compensation program. Based on its review, the
Committee may make recommendations to the full Board of Directors regarding
changes to compensation levels, incentive compensation opportunities of the
executive officers participating in the program, or to the make-up of the
program itself.

The goal of the executive compensation program is to enable the Company to
attract, develop and retain strong executive officers who are capable of
maximizing the Company's performance for the benefit of its

10
<PAGE>

shareholders. To that end, the Committee has adopted a compensation strategy
that seeks to provide competitive compensation opportunities that are strongly
aligned with the financial and stock performance of the Company. Three key
compensation elements are used in support of the strategy: base salary, annual
incentives and long-term incentives.

The Company retains a nationally recognized compensation consulting firm to
provide guidance as to competitive executive compensation practices and pay
levels. As part of this activity, the consulting firm regularly analyzes the
Company's executive pay levels, by each of the three elements cited and in
total, and the Company's performance. A group of 10 to 15 comparably-sized and
similarly-located public banks are used for comparison purposes; the companies
included in this group may change slightly from year to year due to merger
activity within the industry, or to other relevant factors. The results of
this annual executive pay and company performance comparison and the
consulting firm's corresponding recommendations are considered by the
Committee in making executive compensation program recommendations to the
Board of Directors.

Base Salary

Executive base salary levels are generally reviewed on an annual basis and
adjusted as appropriate. During the 1999 fiscal year, the Company increased
individual base salary levels by approximately 6.3%. In making its
determinations, the Committee considered the competitive base salary review,
as well as strong bank and individual performance. After adjustment, base
salary levels were found to be within an appropriate targeted range when
compared to pay levels of comparison group companies. Individual variations in
the level of salary increase provided reflect an effort to reward outstanding
individual contributions and/or an effort to align a position's pay level with
the market.

Annual Incentive Program

Annual incentive opportunities are provided to the Company's executives to
link the achievement of annual goals with executive compensation. Subsequent
to June 30, 1999, and for the year then ended, an incentive pool of
approximately $570,000 was distributed to executive management based upon the
level of Company earnings and other significant accomplishments the management
team achieved during that performance year. The Committee considered incentive
award guidelines recommended by the compensation consulting firm and the bonus
practices of comparison group companies as reported in their proxy statements
in establishing competitive incentive ranges that would correspond with
varying levels of performance. A new and more formal annual incentive program
to reward appropriate management efforts beginning with fiscal 2000 is being
submitted for shareholder approval as a substitution for the existing program.

Long Term Incentives

The Company uses the 1996 Stock Option Plan and the Recognition and
Retention Plan to provide long-term incentive compensation opportunities to
its executive team. The Committee believes that long-term incentives are the
most effective way of aligning executive rewards with the creation of value
for shareholders through stock appreciation. Initial program awards of stock
options and restricted stock were made to executive officers in the 1997
fiscal year and generally vest over 5 years. No awards were made to this group
in the 1999 fiscal year. The Company intends to annually evaluate and continue
to provide future long term incentive grants to its officers based on Company
and individual performance, as well as competitive market conditions.

Chief Executive Officer

Subsequent to June 30, 1999, the Compensation Committee increased the base
salary level of the Chief Executive Officer by 5.0% for services rendered
during the 1999 fiscal year based upon the same criteria used for other
executive officers. Subsequent to June 30, 1999, the Chief Executive Officer
earned an annual bonus of $210,000 under the annual incentive plan for
services rendered during the 1999 fiscal year to recognize

11
<PAGE>

his successful efforts in leading the Company's growth and profitability
performance and for successful integration of the recent Financial Bancorp
acquisition. As was the case for other executive officers, no long-term
incentive grants were made to the CEO during the 1999 fiscal year.

COMPENSATION COMMITTEE OF DIME
COMMUNITY BANCSHARES, INC.

Anthony Bergamo, Chairman
Fred P. Fehrenbach, Member
Malcolm T. Kitson, Member
Stanley Meisels, Member

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Messrs. Bergamo, Fehrenbach, Kitson
and Meisels. There are no other interlocks, as defined under the rules and
regulations of the SEC, between the members of the Compensation Committee and
or executive officers of the Company and corporations with respect to which
such persons are affiliated, or otherwise.

Performance Graph

Pursuant to the regulations of the SEC, the graph below compares the
performance of the Company with that of the total return for the Nasdaq Stock
Market, United States and for all thrift stocks as reported by SNL Securities
L.C. from June 26, 1996, the date of the Company's initial public offering
through June 30, 1999. The graph assumes the reinvestment of dividends in
additional shares of the same class of equity securities as those listed
below.

[LINE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Period Ended
-------------------------------
Index 6/26/96 6/30/97 6/30/98 6/30/99
- ----- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Dime Community Bancshares, Inc. ................ 100.00 171.57 240.46 206.06
NASDAQ--Total US................................ 100.00 125.06 164.67 235.53
SNL Thrift Index................................ 100.00 163.27 221.09 187.54
</TABLE>

There can be no assurance that stock performance will continue into the
future with the same or similar trends to those depicted in the graph above.

12
<PAGE>

Executive Compensation

Cash Compensation. The following table sets forth the cash compensation paid
by the Bank for services rendered in all capacities during the fiscal years
ended June 30, 1999, June 30, 1998 and June 30, 1997 to the executive officers
of the Bank who received salary plus bonus during the fiscal year ended June
30, 1999 in excess of $100,000 ("Named Executive Officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation(1) Long-Term Compensation
------------------------------------ ---------------------------------------
Awards Payouts
------------------ -------
Other Restricted
Annual Stock LTIP All Other
Name and Principal Bonus Compensation Awards Options Payouts Compensation
Positions Year Salary($) ($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- ------------------ ---- --------- -------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vincent F. Palagiano,
Chairman 1999 $500,000 $210,000 -- -- -- -- $472,074
of the Board and Chief
Executive Officer 1998 477,000 200,000 -- -- -- -- 298,683
1997 450,000 150,000 -- $1,667,500 285,000 -- 197,906
Michael P. Devine,
President 1999 $375,000 $145,000 -- -- -- -- $315,439
and Chief Operating
Officer 1998 360,000 135,000 -- -- -- -- 188,658
1997 340,000 75,000 -- $1,087,500 190,000 -- 139,121
Kenneth J. Mahon,
Executive Vice 1999 $204,000 $80,000 -- -- -- -- $176,875
President and Chief
Financial Officer 1998 189,000 70,000 -- -- -- -- 76,077
1997 178,000 44,500 -- $797,500 130,000 -- 57,569
Timothy B. King, Senior
Vice President 1999 $120,000 $35,000 -- -- -- -- $77,435
and Treasurer 1998 106,000 30,000 -- -- -- -- 26,070
1997 96,000 25,000 -- $417,455 50,000 -- 25,760
Michael Pucella, Senior
Vice President-- 1999 $120,000 $35,000 -- -- -- -- $76,546
Finance 1998 100,000 30,000 -- -- -- -- 20,980
1997 79,000 10,000 -- $417,455 50,000 -- 21,000
Michael J. Henchy,
Senior Vice 1999 $140,000 $35,000 -- -- -- -- $20,070
President--Retail
Operations (7) 1998 26,923 15,000 -- -- -- -- --
1997 -- -- -- -- -- -- --
</TABLE>
- --------
(1) Under Annual Compensation, the column titled "Salary" includes base
salary, amounts deferred under the Bank's 401(k) plan and payroll
deductions for health insurance under the Bank's health insurance plan.
(2) For 1999, there were no: (a) perquisites with an aggregate value for any
named individual in excess of the lesser of $50,000 or 10% of the total of
the individual's salary and bonus for the year; (b) payments of above-
market preferential earnings on deferred compensation; (c) payments of
earnings with respect to long-term incentive plans prior to settlement or
maturation; (d) tax payment reimbursements; or (e) preferential discounts
on stock.
(3) The following Executive Officers were granted shares of restricted stock
pursuant to the RRP approved by the shareholders at the 1996 Annual
Meeting as follows: Mr. Palagiano, 115,000 shares, Mr. Devine, 75,000
shares, Mr. Mahon, 55,000 shares and Messrs. King and Pucella, 28,790
shares each. Stock awards vest in five equal installments on each
February 1 following the first, second, third, fourth and fifth
anniversaries of the grant date, subject to earlier vesting upon
termination of employment. The amount reported above as long-term
compensation for each individual equals the total shares granted valued
at $14.50 per share, which represents the market value of the Company's
common stock on December 26, 1996, the date of grant. At the end of the
1999 fiscal year, 40% of such grants had vested. In the case of
termination due to death or disability, retirement, or under a "change of
control" of the Company as defined by the RRP, all shares granted become
immediately vested. Dividends paid in cash on restricted shares awarded
to each individual will be paid to the individual and dividends paid in
property other than cash will be held in trust for and distributed or
forfeited in accordance with the terms and conditions of the award. As of
June 30, 1999, the number and value of the aggregate restricted stock
holdings based on a per share price of $23.25, the closing sale price of
common stock on June 30, 1999, for each executive officer which have not
yet vested, is: Mr. Palagiano, 69,000 shares and $1,604,250; Mr. Devine,
45,000 shares and $1,046,250; Mr. Mahon 33,000 shares and $767,250 and
Messrs. King and Pucella, 17,274 shares and $401,621.

13
<PAGE>

(4) Includes the following shares subject to options granted to each Executive
Officer pursuant to the Option Plan approved by shareholders at the 1996
Annual Meeting: Mr. Palagiano, 285,000; Mr. Devine, 190,000; Mr. Mahon,
130,000; and Messrs. King and Pucella, 50,000. At June 30, 1999, 114,000
options held by Mr. Palagiano, 76,000 options held by Mr. Devine, 52,000
options held by Mr. Mahon, and 20,000 options each held by Messrs. King
and Pucella, respectively, under the Option Plan to purchase shares of
Commons Stock at the exercise price of $14.50 per share were exercisable.
The options granted under the Option Plan are intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code
of 1986, to the maximum extent possible and any options that do not so
qualify will constitute non-qualified stock options. The Option Plan
provides for options to become exercisable in five equal installments on
the first, second, third, fourth and fifth anniversaries of the grant date
and to generally remain exercisable until the tenth anniversary of the
grant date, subject to earlier expiration upon termination of employment.
In the case of termination due to death or disability, retirement, or
under a "change in control" of the Company as defined by the Option Plan,
all options become immediately exercisable.
(5) During the fiscal year ended June 30, 1999, neither the Bank nor the
Company maintained any long-term incentive plans ("LTIP").
(6) Includes (i) the dollar value of premiums, if any, paid by the Bank with
respect to term life insurance (other than group term insurance coverage
under a plan available to substantially all salaried employees) for the
benefit of the executive officer and (ii) the Bank's contributions on
behalf of the executive officer to the Bank's 401(k) plan and the ESOP.
During the year ended June 30, 1999, the dollar value of such life
insurance premiums were as follows: Mr. Palagiano, $6,573 and Mr. Devine,
$2,830. During the year ended June 30, 1999, shares allocated under the
ESOP to the Executive Officers were as follows: Messrs. Palagiano, Devine,
Mahon, King and Pucella 2,854 shares, and Mr. Henchy, 1,957 shares. The
amount reported above for shares allocated under the ESOP were determined
based upon the acquisition cost of shares by the ESOP of $10.00. See "--
Benefits -- Retirement Plan," "--401(k) Plan," and "--Employee Stock
Ownership Plan and Trust." Amounts also include accruals under the defined
contribution portion of the Bank's Benefit Maintenance Plan ("BMP"), which
during the fiscal year ended June 30, 1999 were $436,961, $284,069,
$148,335, $47,895 and $46,756, respectively, for Messrs. Palagiano,
Devine, Mahon, King and Pucella. See "--Benefits -- Benefit Maintenance
Plan."
(7) Mr. Henchy began employment with the Company on April 27, 1998.

Employment Agreements

Each of the Company and the Bank is a party to an Employment Agreement with
each of Messrs. Palagiano, Devine and Mahon ("Senior Executives"). These
Employment Agreements establish the respective duties and compensation of the
Senior Executives and are intended to ensure that the Bank and the Company
will be able to maintain a stable and competent management base. The continued
success of the Bank and the Company depends to a significant degree on the
skills and competence of the Senior Executives.

The Employment Agreements provide for three-year terms. The Bank's
Employment Agreements provide that, commencing on the first anniversary date
and continuing each anniversary date thereafter, the Bank's Board of Directors
may agree, after conducting a performance evaluation of the Senior Executive,
to extend its Employment Agreements for an additional year, so that the
remaining terms shall be three years. Each of the Bank's Employment Agreements
has been extended to a June 26, 2002 expiration date. The Company's Employment
Agreements provide for automatic daily extensions such that the remaining
terms of the Employment Agreements shall be three years unless written notice
of non-renewal is given by the Board of Directors or the Senior Executive.

The Employment Agreements provide for termination by the Bank or the Company
at any time for cause as defined in the Employment Agreements. In the event
the Bank or the Company chooses to terminate the Senior Executive's employment
for reasons other than for cause, or in the event of the Senior Executive's
resignation from the Bank and the Company for "good reason" as defined in the
Employment Agreements, the Senior Executive or, in the event of death, his
beneficiary, would be entitled to a lump sum cash payment in an amount equal
to the remaining base salary and bonus payments due to the Senior Executive
and the additional contributions or benefits that would have been earned under
any employee benefit plans of the Bank or the Company during the remaining
terms of the Employment Agreements and payments that would have been made
under any incentive compensation plan during the remaining terms of the
Employment Agreements. The Senior Executive would also have the right to
receive a lump sum cash payment of benefits to which the Senior Executive is
entitled under the Bank's BMP. The Bank and the Company would also continue
the Senior Executive's life, health and disability insurance coverage for the
remaining terms of the Employment Agreements. "Good reason" for purposes of
the Employment Agreements generally means (i) assignment of duties
inconsistent with the Senior Executive's status or a substantial adverse
alteration in the nature or status of

14
<PAGE>

responsibilities or a requirement to report to a different position, (ii)
reduction in annual base salary (unless mandated at the initiation of
applicable regulatory authority), (iii) failure to pay compensation or
deferred compensation when due unless inadvertent, immaterial and cured after
notice, (iv) failure to continue in effect compensation plans material to
total compensation (or substitute plans) with respect to the Senior Executive
or to fail to provide certain benefits or materially reduce benefits (unless
mandated at the initiation of applicable regulatory authority), (v) failure of
the Bank to obtain a satisfactory agreement from a successor to assume and
agree to perform the Employment Agreements, (vi) any purported termination by
the Bank not for cause or disability, (vii) any or no reason during the period
of 60 (sixty) days beginning on the first anniversary of the effective date of
a change of control, as defined in the Employment Agreement, (viii) a change
in the majority of the Board, unless approved by a vote of at least two-thirds
of the members of the Board at the time the Employment Agreements were entered
into or members elected or nominated by such members, (ix) a relocation of the
Senior Executive's principal place of employment outside of the New York
metropolitan area or (x) a material breach of the Employment Agreements,
unless cured within 30 days. In general, for purposes of the Employment
Agreements, a "change of control" will generally be deemed to occur when a
person or group of persons acting in concert acquires beneficial ownership of
25% or more of any class of equity security, such as Common Stock of the
Company or the Bank, or in connection with mergers or consolidations of assets
or contested election of directors which results in a change of control of the
majority of the Board of Directors of the Company or the Bank or liquidation
or sale of substantially all the assets of the Company or the Bank.

Payments to the Senior Executives under the Bank's Employment Agreements
will be guaranteed by the Company in the event that payments or benefits are
not paid by the Bank. Payment under the Company's Employment Agreements would
be made by the Company. To the extent that payments under the Company's
Employment Agreements and the Bank's Employment Agreements are duplicative,
payments due under the Company's Employment Agreements would be offset by
amounts actually paid by the Bank. Senior Executives would be entitled to
reimbursement of certain costs incurred in interpreting or enforcing the
Employment Agreements up to $50,000 for each Senior Executive.

Cash and benefits paid to a Senior Executive under the Employment Agreements
together with payments under other benefit plans following a "change of
control" of the Bank or the Company may constitute an "excess parachute"
payment under Section 280G of the Code, resulting in the imposition of a 20%
excise tax on the recipient and the denial of the deduction for such excess
amounts to the Company and the Bank. The Company's Employment Agreements
include a provision indemnifying each Senior Executive on an after-tax basis
for any "golden parachute" excise taxes.

Employee Retention Agreements

The Bank and the Company have jointly entered into Employee Retention
Agreements with 31 additional employees including the following four executive
officers: Messrs. Henchy, King, Martucci and Pucella ("Contract Employee" or
"Contract Employees"). The purpose of the Retention Agreements is to secure
the Contract Employees' continued availability and attention to the Bank's
affairs, relieved of distractions arising from the possibility of a corporate
change of control. The Retention Agreements do not impose an immediate
obligation on the Bank to continue the Contract Employees' employment but
provide for a period of assured employment ("Assurance Period") following the
change of control of the Bank or the Company. The Retention Agreements provide
for initial Assurance Periods of one, two or three years commencing on the
date of a change of control. The Bank and the Company entered into Employee
Retention Agreements with an initial Assurance Period of three years with each
of Messrs: Henchy, King, Martucci and Pucella ("Executives"). The applicable
Assurance Periods will be automatically extended on a daily basis under the
Retention Agreements until written notice of non-extension is given by the
Bank or the Contract Employee, in which case the Assurance Period would end on
the first, second or third anniversary of the date such notice is given.

If, upon a change of control, or within twelve months of, and in connection
with, a change of control, a Contract Employee is discharged without "cause"
(as defined in the Retention Agreements) or voluntarily resigns within one
year following a material adverse change in position, duties or salary or due
to a material

15
<PAGE>

breach of the Retention Agreement by the Bank or the Company, the Contract
Employee (or, in the event of his death, his estate) would be entitled to a
lump sum cash payment equal to the remaining base salary and bonus payments
due during the Assurance Period plus any additional contributions and benefits
that the Contract Employee would have earned under the Bank's or the Company's
employee benefit plans during the Assurance Period. Each Contract Employee's
life, health, and disability coverage would also be continued during the
Assurance Period. The total amount of termination benefits payable to each
Contract Employee under the Retention Agreements, excluding Executives is
limited to three times the Contract Employee's average total compensation for
the prior five years. Payments to the Contract Employees under their
respective Retention Agreements are guaranteed by the Company to the extent
that the required payments are not made by the Bank.

Cash and benefits paid to an Executive under the Employee Retention
Agreements together with payments under other benefit plans following a
"change of control" of the Bank or the Company may constitute an "excess
parachute" payment under Section 280G of the Code, resulting in the imposition
of a 20% excise tax on the recipient and the denial of the deduction for such
excess amounts to the Company and the Bank. The Employee Retention Agreements
include a provision whereby the Company indemnifies each Executive on an
after-tax basis for any "golden parachute" excise taxes.

Benefits

Retirement Plan. The Bank maintains a non-contributory, tax-qualified
defined benefit pension plan (the "Retirement Plan") for eligible employees.
All salaried employees at least age 21 who have completed at least one year of
service are eligible to participate in the Retirement Plan. The Retirement
Plan provides for a benefit for each participant, including the Named
Executive Officers, equal to 2% of the participant's average annual basic
earnings multiplied by the participant's years (and any fraction thereof) of
eligible employment (up to a maximum of 30 years). Such benefit is not reduced
by a Social Security offset. A participant is fully vested in his or her
benefit under the Retirement Plan after five years of service. The Retirement
Plan is funded by the Bank on an actuarial basis and all assets are held in
trust by the Retirement Plan trustee.

The following table illustrates the annual benefit payable upon normal
retirement at age 65 (in single life annuity amounts with no offset for Social
Security benefits) at various levels of compensation and years of service
under the Retirement Plan and the BMP.

<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------
Remuneration(1) 15 20 25 30 35(4)
--------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
150,000(2) $45,000 $60,000 $75,000 $90,000 $90,000
175,000(2) 52,500 70,000 87,500 105,000 105,000
200,000(2) 60,000 80,000 100,000 120,000 120,000
225,000(2) 67,500 90,000 112,500 135,000(3) 135,000(3)
250,000(2) 75,000 100,000 125,000 150,000(3) 150,000(3)
300,000(2) 90,000 120,000 150,000(3) 180,000(3) 180,000(3)
350,000(2) 105,000 140,000 175,000(3) 210,000(3) 210,000(3)
400,000(2) 120,000 160,000(3) 200,000(3) 240,000(3) 240,000(3)
450,000(2) 135,000(3) 180,000(3) 225,000(3) 270,000(3) 270,000(3)
500,000(2) 150,000(3) 200,000(3) 250,000(3) 300,000(3) 300,000(3)
550,000(2) 165,000(3) 220,000(3) 275,000(3) 330,000(3) 330,000(3)
600,000(2) 180,000(3) 240,000(3) 300,000(3) 360,000(3) 360,000(3)
</TABLE>
- --------
(1) The Retirement Plan does not provide a deduction for Social Security
benefits and there are no other offsets to benefits.
(2) Annual Compensation taken into account under the Retirement Plan for the
fiscal year of the Retirement Plan beginning on October 1, 1999, cannot
exceed $160,000 (as adjusted for subsequent years pursuant to the Code
provisions). Benefits in excess of the limitation are provided through the
BMP. See "--Benefit Maintenance Plan."
(3) For the fiscal year of the Retirement Plan beginning on October 1, 1999,
the maximum annual benefit payable under the Retirement Plan cannot exceed
$130,000 (as adjusted for subsequent years pursuant to the Code
provisions). Benefits in excess of the limitations are provided through
the BMP. See "--Benefit Maintenance Plan."
(4) The maximum years of service credited for benefit purposes is 30 years.

16
<PAGE>

The following table sets forth the years of credited service and the average
annual basic earnings (as defined above) determined as of September 30, 1999
for each of the Named Executive Officers.

<TABLE>
<CAPTION>
Years of Credited Service
--------------------------- Average
Years Months Annual Earnings
------------ ------------- ---------------
<S> <C> <C> <C>
Vincent F. Palagiano........ 29 0 $475,667
Michael P. Devine........... 28 2 358,333
Kenneth J. Mahon............ 19 2 190,333
Timothy B. King............. 16 5 107,333
Michael Pucella............. 18 6 99,667
Michael Henchy.............. 1 5 55,808
</TABLE>

401(k) Plan. The Bank maintains the 401(k) Plan, which is a tax-qualified
defined contribution plan which permits salaried employees with at least one
year of service to make pre-tax salary deferrals under Section 401(k) of the
Code. Effective when the Company established the ESOP, the 401(k) Plan was
amended whereby participant contributions were no longer permitted to avoid
violating limitations on contributions to all plans under the Internal Revenue
Code. Employees are fully vested in their salary deferrals, and become 25%
vested in the Bank's contribution after two years, and an additional 25%
vested in each of the next three years. Employees select the investments made
with their account balances from a fixed menu of options.

The Plan permits participating employees to elect to invest all or any part
of their 401(k) Plan account balances in Common Stock. Common Stock held by
the 401(k) Plan may be newly issued or treasury shares acquired from the
Company or outstanding shares purchased on the open market or in privately
negotiated transactions. All Common Stock held by the 401(k) Plan will be held
by an independent trustee and allocated to the accounts of individual
participants. Participants will control the exercise of voting and tender
rights relating to Common Stock held in their accounts.

Employee Stock Ownership Plan and Trust. The Company has established, and
the Bank has adopted, for the benefit of eligible employees, an ESOP and
related trust. All salaried employees of the Bank or the Company are eligible
to become participants in the ESOP. The ESOP currently holds 1,137,735 shares
of Common Stock, all of which were purchased during the Company's initial
public offering. In order to fund the ESOP's purchase of such Common Stock,
the ESOP borrowed funds from the Company to pay the aggregate purchase price
of Common Stock. This loan is for a term of 10 years, bears interest at the
rate of 8% per annum and calls for level annual payments of principal and
interest designed to amortize the loan over its term, except that payments in
any year may be deferred, in whole or in part, in prescribed circumstances.
Prepayments are also permitted.

Shares purchased by the ESOP were pledged as collateral for the loan and are
held in a suspense account until released for allocation among participants in
the ESOP as the loan is repaid. The pledged shares will be released annually
from the suspense account in an amount proportional to the repayment of the
ESOP loan for each plan year. The released shares will be allocated among the
accounts of participants on the basis of the participant's compensation for
the calendar year preceding allocation. Benefits generally become vested at
the rate of 25% per year after two years with 100% vesting after five years of
service. Participants also become immediately vested upon termination of
employment due to death, retirement at age 65, permanent disability or upon
the occurrence of a change of control. Forfeitures will be reallocated among
remaining participating employees, in the same proportion as contributions.
Vested benefits may be paid in a single sum or installment payments and are
payable upon death, retirement at age 65, disability or separation from
service.

The ESOP Committee may instruct the unrelated corporate trustee regarding
investment of funds contributed to the ESOP. The ESOP Trustee, subject to its
fiduciary duty, must vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Under the ESOP,
unallocated shares will be voted in a manner calculated to most accurately
reflect the instructions it has received from participants regarding the
allocated stock as long as such vote is in accordance with the provisions of
ERISA. The ESOP may purchase additional shares of Common Stock in the future.

17
<PAGE>

Benefit Maintenance Plan. The BMP provides eligible employees with benefits
that would be due under the Retirement Plan, ESOP and 401(k) Plan, if such
benefits were not limited under the Code. BMP benefits provided with respect
to the Retirement Plan are reflected in the pension table. See "--Benefits--
Retirement Plan." BMP benefits provided to the Named Executive Officers for
the fiscal year ended June 30, 1999 with respect to the 401(k) Plan and ESOP
are included in the Summary Compensation Table under the column "All Other
Compensation." See " --Executive Compensation--Cash Compensation."

Recognition and Retention Plan. The Board of Directors of the Company has
adopted the Recognition and Retention Plan for Outside Directors, Officers and
Employees of Dime Community Bancshares, Inc. ("RRP") which was approved by
shareholders at the 1996 Annual Meeting. Under the RRP, 581,900 shares were
acquired and allocated to directors, officers and employees of the Company
during the fiscal year ended June 30, 1997.

Stock Option Plan. The Board of Directors of the Company has adopted the
Dime Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors,
Officers and Employees which was approved by shareholders at the 1996 Annual
Meeting. Under the 1996 Stock Option Plan, up to 1,454,750 options are
eligible for grant to outside directors, officers and employees of the
Company. On December 26, 1996, 1,393,425 options were granted to outside
directors, officer and employees. There were no options granted to the Named
Executive Officers during fiscal 1999. All options granted have an exercise
value of $14.50 and become exercisable in five equal installments on the
first, second, third, fourth, and fifth anniversaries of the grant date and
generally remain exercisable until the tenth anniversary of the grant date,
subject to earlier expiration upon termination of employment. In the case of
termination due to death or disability, retirement, or in the event of a
"change in control" of the Company, as such terms are defined by the Stock
Option Plan, all Options granted become immediately exercisable.

The following table provides certain information with respect to the number
of shares of Common Stock acquired through the exercise of, or represented by
outstanding, stock options held by the Named Executive Officers on June 30,
1999. Also reported is the value for "in-the-money" options, which represent
the positive spread between the exercise price of any such existing stock
options and the closing sale price of the Common Stock of $23.25 per share at
fiscal year end, June 30, 1999.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options/SARs at Fiscal Options/SARS at Fiscal
Year-end (1) Year-end (1)
# ($)
Name Exercisable / Unexercisable Exercisable / Unexercisable
------------------------ --------------------------- ---------------------------
<S> <C> <C>
Vincent F. Palagiano.... 114,000 / 171,000 $997,500 / $1,496,250
Michael P. Devine....... 76,000 / 114,000 $665,000 / $997,500
Kenneth J. Mahon........ 52,000 / 78,000 $455,000 / $682,500
Timothy B. King......... 20,000 / 30,000 $175,000 / $262,500
Michael Pucella......... 20,000 / 30,000 $175,000 / $262,500
</TABLE>
- --------
(1) None of the Named Executive Officers have exercised options granted under
the 1996 Stock Option Plan.

Transactions with Certain Related Persons

The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive
officers and directors must be made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of repayment or present other unfavorable features. The

18
<PAGE>

Bank has made loans or extended credit to executive officers and also to
certain persons related to executive officers and directors. All such loans
were made by the Bank in the ordinary course of business and were not made
with more favorable terms nor involved more than the normal risk of
collectibility or presented unfavorable features. The outstanding principal
balance of such loans to executive officers and associates of executive
officers or directors totaled $377,597, or 0.20% of the Bank's total equity as
of August 31, 1999. The Company intends that all transactions in the future
between the Company and its executive officers, directors, holders of 10% or
more of the shares of any class of its Common Stock and affiliates thereof,
similarly will contain terms no less favorable to the Company than could have
been obtained by it in arm's-length negotiations with unaffiliated persons and
will be approved by a majority of independent outside directors of the Company
not having any interest in the transaction.

Messrs. Curtin and Farrell are partners in the law firm of Conway, Farrell,
Curtin & Kelly, P.C., which the Bank retains to provide certain legal
services. The firm received fees in the amount of approximately $2,125,600
$1,385,000 and $1,034,000 from third parties pursuant to its representation of
the Bank in loan closings and other legal matters for each of the fiscal years
ended June 30, 1999, 1998 and 1997, respectively. In addition, during the
fiscal years ended June 30, 1998 and 1997, the Bank paid this firm $24,000 and
$176,000, respectively, for other legal services provided. The Bank did not
pay this firm anything during the fiscal year ended June 30, 1999.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of Common Stock, to file with
the SEC reports of ownership and changes of ownership. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that all filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were complied with.

PROPOSAL 2

APPROVAL OF ANNUAL INCENTIVE PLAN

Exhibit A to this proxy statement contains the full text of the Annual
Incentive Plan. Exhibit A is incorporated by reference into the following plan
summary. The summary is qualified in its entirety by this reference. Certain
capitalized terms utilized in this discussion are defined in the Annual
Incentive Plan.

Background

It has been the practice of the Company and the Bank to provide performance-
linked compensation opportunities to their officers, including executive
officers, using cash incentives, the payment of which is linked to the
achievement of predetermined performance objectives. On September 9, 1999, the
Board of Directors approved the Annual Incentive Plan, subject to approval by
the shareholders of the Company. The purpose of the Annual Incentive Plan is
continue the existing practice of providing performance incentives to each
participant who is or may be a "covered employee" within the meaning of
Section 162(m) of the Code, while securing a tax deduction for those payments.
Applicable law does not require that the Company have shareholder approval
before implementing the Annual Incentive Plan. However, under the Code, the
Company cannot deduct fiscal year taxable compensation in excess of $1,000,000
that it pays to either its Chief Executive Officer or any of its other Named
Executives, unless such compensation meets the law's definition of "qualified
performance-based compensation." Cash compensation that the Company pays to
such individuals must be authorized by shareholders to be considered
"qualified performance-based compensation." The Company is not implementing an
additional compensation plan. It is seeking shareholder approval to implement
the Annual Incentive Plan as a substitution for the existing incentive program
to maximize the federal tax deductions available for compensation paid
thereunder. If the shareholders do not approve the Annual Incentive Plan, the
Company will not pay bonuses under the plan.

19
<PAGE>

Administration

The Annual Incentive Plan is administered by a committee of the Board of
Directors which is comprised solely of at least two outside directors. Unless
otherwise determined by the Board of Directors, the Compensation Committee
will be the committee under the Annual Incentive Plan. The Compensation
Committee will interpret and adopt the rules and regulations for carrying out
the plan. Its duties include designating participants, individual award
opportunities, and/or bonus pool award opportunities; designating and
administering performance goals and other award terms and conditions; and
certifying the bonus amounts earned for any award year; determining the effect
on an award of termination of employment; and deciding whether, under what
circumstances, and subject to what terms, bonus payouts are to be paid on a
deferred basis, including automatic deferrals at the Compensation Committee's
election, as well as elective deferrals at the election of participants. The
Compensation Committee has substantial discretion to make all other
determinations related to bonus opportunities under the Annual Incentive Plan.

Eligible Persons and Participation

The eligible persons under the Annual Incentive Plan are the officers and
employees (including officers and employees who are also Directors) of the
Company and its subsidiaries and affiliates. Participants under the Annual
Incentive Plan are senior executive or other key employees of the Company and
its subsidiaries and affiliates selected by the Compensation Committee. As of
September 30, 1999, there were seven eligible employees.

Performance Goals

Prior to the ninetieth day of each fiscal year (or during subsequent periods
permitted under the Annual Incentive Plan or applicable regulations), the
Compensation Committee will set specific performance goals for each
participant for the year. The performance goals are limited to one or more of
the following Company or subsidiary financial performance measures:

(i) earnings per common share*,

(ii) net income*,

(iii) return on average equity*,

(iv) return on average assets*,

(v)core earnings*,

(vi) stock price,

(vii) strategic business objectives, consisting of one or more
objectives based upon meeting specified cost targets, business
expansion goals, and goals relating to acquisitions or
divestitures,

(viii) except in the case of a Covered Officer, any other performance
criteria established by the Committee,
(ix)any combination of (i) through (viii) above.
- --------
* Performance goals indicated may be established on the basis of either
reported earnings or cash earnings.

For each specific performance goal, a predetermined bonus amount can be
earned by the participant upon achievement of the goal. Performance goals must
be established while the performance relative to the target remains
substantially uncertain within the meaning of Section 162(m). The Compensation
Committee believes that the specific performance targets with respect to each
business criterion constitute confidential business information, the
disclosure of which could adversely affect the Company.

Maximum Payout

Under the Annual Incentive Plan, the maximum payment opportunity to each
covered officer for any award year may not exceed $1.0 million.

20
<PAGE>

Payment of Awards

All awards that are earned shall be paid at such time and in such amounts
(not in excess of the maximum established for each person) as determined by
the Compensation Committee and may be paid in cash or in shares of the
Company's common stock at the election of the Compensation Committee and/or
the Participant.

Termination or Amendment of the Annual Incentive Plan

The Board of Directors, subject to its delegation of powers to the
Compensation Committee, may at any time terminate, in whole or in part, or
amend the Annual Incentive Plan, provided that, except as otherwise provided
in the plan, no amendment or termination shall adversely affect the rights of
any participant under any awards previously granted to or deferred by the
participant. In the event of a termination of the plan, the Compensation
Committee may in its sole discretion direct any remaining payments to
participants in a lump sum or installments as the Committee shall prescribe
with respect to each participant. Any material amendment to the plan
(including, but not limited to, a change in the class of individuals eligible
to participate, the maximum annual award, or the authorized performance
measures) that would affect any covered officer must be approved by the
Company's shareholders if required by and in accordance with Section 162(m) of
the Code. The Plan has a five-year term, and any extension of the Plan beyond
such five-year term will require additional shareholder approval.

NEW PLAN BENEFITS
ANNUAL INCENTIVE PLAN

Due to the contingent nature of the performance incentives, the benefits
which may be paid during the 2000 fiscal year are not ascertainable. The
following New Plan Benefits Table reflects the cash incentives paid under a
comparable, pre-existing incentive plan for the 1999 fiscal year.

<TABLE>
<CAPTION>
Dollar
Name and Position Value ($)
----------------- ---------
<S> <C>
Vincent F. Palagiano, Chairman of the Board and Chief Executive
Officer....................................................... $210,000
Michael P. Devine, President and Chief Operating Officer....... 145,000
Kenneth J. Mahon, Executive Vice President and Chief Financial
Officer....................................................... 80,000
Timothy B. King, Senior Vice President and Treasurer........... 35,000
Michael Pucella, Senior Vice President--Finance................ 35,000
Michael J. Henchy, Senior Vice President--Retail Operations.... 35,000
All Named Executive Officers (6 persons)....................... 540,000
All Executive Officers (7 persons)............................. $570,000
</TABLE>

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE DIME COMMUNITY BANCSHARES, INC. ANNUAL INCENTIVE PLAN

PROPOSAL 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

General

The Board of Directors has appointed the firm of Deloitte and Touche LLP to
act as the Company's independent auditors for the fiscal year ending June 30,
2000, subject to ratification of such appointment by the Company's
shareholders. A representative of Deloitte and Touche LLP is expected to be
present at the Annual

21
<PAGE>

Meeting and will be given an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions. No
determination has been made as to what action the Board of Directors would
take if the shareholders do not ratify the appointment.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be brought before the
shareholders at the 1999 Annual Meeting. If, however, any other matters not
known are properly brought before the meeting, the persons named in the
accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in such manner as shall be determined by a majority of
the Board of Directors.

ADDITIONAL INFORMATION

Notice of Business to be Conducted at Annual Meeting

The Bylaws of the Company provide an advance notice procedure for a
shareholder to properly bring business before an annual meeting or to nominate
any person for election to the Board of Directors. The shareholder must be a
shareholder of record and have given timely notice thereof in writing to the
Secretary of the Company. To be timely, a shareholder's notice must be
delivered to or received by the Secretary not later than the following dates:
(i) with respect to an annual meeting of shareholders, sixty (60) days in
advance of such meeting if such meeting is to be held on a day which is within
thirty (30) days preceding the anniversary of the previous year's annual
meeting, or ninety (90) days in advance of such meeting if such meeting is to
be held on or after the anniversary of the previous year's annual meeting; and
(ii) with respect to an annual meeting of shareholders held at a time other
than within the time periods set forth in the immediately preceding clause
(i), the close of business on the tenth (10th) day following the date on which
notice of such meeting is first given to shareholders. Notice shall be deemed
to first be given to shareholders when disclosure of such date of the meeting
of shareholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a
document publicly filed by the Company with the SEC pursuant to Section 13, 14
or 15(d) of the Exchange Act. A shareholder's notice to the Secretary shall
set forth such information as required by the Bylaws of the Company. Nothing
in this paragraph shall be deemed to require the Company to include in its
proxy statement and proxy card relating to an annual meeting any shareholder
proposal or nomination which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal or
nomination is received. See " --Date For Submission of Shareholder Proposals."

Date for Submission of Shareholder Proposals

Any shareholder proposal intended for inclusion in the Company's proxy
statement and proxy card relating to the Company's 2000 Annual Meeting of
Shareholders must be received by the Company by June 8, 2000, pursuant to the
proxy solicitation regulations of the SEC. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
for such meeting any shareholder proposal which does not meet the requirements
of the SEC in effect at the time. Any such proposal will be subject to 17
C.F.R. (S)240.14a-8 of the Rules and Regulations promulgated by the SEC under
the Exchange Act.

Annual Report

A copy of the 1999 Annual Report to shareholders, including the consolidated
financial statements prepared in conformity with generally accepted accounting
principles, for the fiscal year ended June 30, 1999 accompanies

22
<PAGE>

this Proxy Statement. The consolidated financial statements have been audited
by Deloitte and Touche LLP, whose report appears in the Annual Report.
Shareholders may obtain, free of charge, a copy of the Annual Report on Form
10--K filed with the SEC (without exhibits) by writing to Kenneth A. Ceonzo,
Director of Investor Relations, Dime Community Bancshares, Inc., 209 Havemeyer
Street, Brooklyn, New York 11211 or by calling (718) 782-6200, extension 279.

By Order of the Board of Directors

/s/ Kenneth A. Ceonzo

Kenneth A. Ceonzo
First Vice President and Secretary

Brooklyn, New York
October 7, 1999

TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.

23
<PAGE>

EXHIBIT A

DIME COMMUNITY BANCSHARES, INC. ANNUAL INCENTIVE PLAN

SECTION 1. Purpose. The purpose of the Dime Community Bancshares, Inc.
("Dime") Annual Incentive Plan (the "Plan") is to provide incentives for
senior executives and other key employees whose performance in fulfilling the
responsibilities of their positions can have a major impact on the
profitability and future growth of Dime (the "Company"). The Plan is part of
an overall compensation program which ties the achievement of annual strategic
and operating goals with compensation.

SECTION 2. Definitions. For the purposes of the Plan, the following terms
shall have the meanings indicated:

"Award" shall mean the payment of an award by the Committee to a Participant
pursuant to Section 4.

"Applicable Period" shall mean, with respect to any Award Year, a period
commencing on or before the first day of such Award Year and ending no later
than the earlier of (i) the 90th day of such Award Year or (ii) the date on
which 25% of such Award Year has been completed. Any action required under the
Plan to be taken within the period specified in the previous sentence may be
taken at a later date with respect to Participants who are not Covered
Officers and with respect to Covered Officers if Section 162(m) is amended to
permit such later date.

"Award Year" shall mean any fiscal year, or other performance period
designated by the Committee, with respect to the Company's performance in
which an Award is granted.

"Board" shall mean the Board of Directors of the Company.

"Committee" shall mean the Committee designated pursuant to Section 3.
Unless otherwise determined by the Board, the Compensation Committee
designated by the Board shall be the Committee under the Plan.

"Covered Officer" shall mean at any date (i) any individual who, with
respect to the previous taxable year of the Company, was a "covered employee"
of the Company within the meaning of Section 162(m), as hereinafter defined;
provided, however, that the term "Covered Officer" shall not include any such
individual who is designated by the Committee, in its discretion, at the time
of any Award or at any subsequent time, as reasonably expected not to be such
a "covered employee" with respect to the current taxable year of the Company
and (ii) any individual who is designated by the Committee, in its discretion,
at the time of any Award or at any subsequent time, as reasonably expected to
be such a "covered employee" with respect to the current taxable year of the
Company or with respect to the taxable year of the Company in which any
applicable Award will be paid.

"Individual Award Opportunity" shall mean the performance-based award
opportunity for a Participant for a given Award Year as specified by the
Committee within the Applicable Period, which may be expressed in dollars or
on a formula basis that is consistent with the provisions of this Plan.

"Participant" shall mean a senior executive or other key employee of the
Company selected by the Committee in accordance with Section 4(a) who receives
an Individual Award Opportunity.

"Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code of
1986 and the rules promulgated thereunder or any successor provision thereto
as in effect from time to time.

SECTION 3. Administration.

(a) Committee. Subject to the authority and powers of the Board in relation
to the Plan as hereinafter provided, the Plan shall be administered by a
Committee designated by the Board consisting of two or more

A-1
<PAGE>

members of the Board each of whom is an "outside director" within the meaning
of Section 162(m). The Committee shall have full authority to interpret the
Plan and from time to time to adopt such rules and regulations for carrying
out the Plan as it may deem best, including without limitation:

(i)to designate Participants and Individual Award Opportunities and/or
bonus pool award opportunities;

(ii)to designate and thereafter administer the performance goals and other
Award terms and conditions;

(iii)to determine and certify the bonus amounts earned for any Award Year;

(iv)to determine the effect on an Award of a termination of employment; and

(v)to decide whether, under what circumstances, and subject to what terms,
bonus payouts are to be paid on a deferred basis, including automatic
deferrals at the Committee's election as well as elective deferrals at the
election of Participants.

(b) Committee Determinations. All determinations by the Committee shall be
made by the affirmative vote of a majority of its members, but any
determination reduced to writing and signed by a majority of the members shall
be fully as effective as if it had been made by a majority vote at a meeting
duly called and held. All decisions by the Committee pursuant to the
provisions of the Plan and all orders or resolutions of the Board pursuant
thereto shall be final, conclusive and binding on all persons, including the
Participants, the Company and its subsidiaries, and stockholders.

SECTION 4. Eligibility for and Payment of Awards.

(a) Eligible Employees. Subject to the provisions of the Plan, within the
Applicable Period, the Committee may select officers or employees of the
Company or any of its subsidiaries who will be eligible to earn Awards under
the Plan with respect to such year and determine the amount of the Individual
Award Opportunities and the conditions under which they may be earned.

(b) Payment of Awards. Awards that are earned with respect to any Award Year
shall be paid to Participants at such times and in such amounts as are
determined by the Committee. The Committee may require that a Participant must
still be employed as of the end of the Award Year and/or the date on which the
bonus is calculated, in order to be eligible for an award for such Award Year
and the Committee may adopt such forfeiture, proration or other rules as it
deems appropriate, in its sole discretion, regarding the impact on an Award of
a Participant's termination of employment. In addition, the Committee may
provide for bonus payouts to be paid on a deferred basis and / or in shares of
Company stock, including automatic deferrals at the Committee's election and /
or elective deferrals at the election of Participants.

(c) During the Applicable Period, the Committee shall establish the
Individual Award Opportunities for such Award Year, which shall be based on
achievement of stated target performance goals, and may be stated in dollars
or on a formula basis.

(d) Awards to Covered Officers.

(i) Notwithstanding the provisions of Sections 4(a), 4(b), and 4(c)
hereof, any Award to any Covered Officer shall be granted in accordance
with the provisions of this Section 4(d). Subject to the discretion of the
Committee as set forth in Section 6(b) hereof, the maximum amount of the
Award that may be granted with respect to any Award Year to any Covered
Officer at the time of such grant shall be $1,000,000.

(ii) Any provision of the Plan to the contrary notwithstanding, no
Covered Officer shall be entitled to any payment of an Award with respect
to an Award Year unless the members of the Committee shall have certified
in accordance with Section 162(m) the extent to which the applicable
performance goals have been satisfied.

A-2
<PAGE>

SECTION 5. Performance Goals

For any given Award Year, the Committee shall, within the Applicable Period,
set one or more objective performance goals for each Participant and/or each
group of Participants and/or each bonus pool (if applicable). The performance
goals shall be limited to one or more of the following Company, subsidiary,
operating unit or division financial performance measures:

(i)earnings per share *

(ii)net income *

(iii)return on average equity *

(iv)return on average assets *

(v)core earnings *

(vi)stock price

(vii)strategic business objectives, consisting of one or more objectives
based on meeting specified cost targets, business expansion goals, and
goals relating to acquisitions or divestitures

(viii)except in the case of a Covered Officer, any other performance
criteria established by the Committee

(ix)any combination of (i) through (viii) above.

* Performance goals indicated may be established on the basis of reported
earnings or cash earnings.

Each goal may be expressed on an absolute and/or relative basis, may be
based on or otherwise employ comparisons based on internal targets, the past
performance of the Company and/or the past or current performance of other
companies.

SECTION 6. General Provisions.

(a) Adjustments. If the performance criteria for any Award Year shall have
been affected by special factors (including material changes in accounting
policies or practices, material acquisitions or dispositions of property, or
other unusual items) that in the Committee's judgment should or should not be
taken into account, in whole or in part, in the equitable administration of
the Plan, the Committee may, for any purpose of the Plan, adjust such criteria
and make payments accordingly under the Plan.

(b) No Adjustments for Covered Officers. Notwithstanding the provisions of
subparagraph (a) above, any adjustments made in accordance with or for the
purposes of subparagraph (a) shall be disregarded for purposes of calculating
the performance criteria if and to the extent that such adjustments would have
the effect of increasing the amount of an Award to a Covered Officer. In
addition, the Committee may, in the exercise of its discretion, reduce or
eliminate the amount of an Award to a Covered Officer otherwise calculated in
accordance with the provisions of Section 4(d) prior to payment thereof.

(c) No Assignment. No portion of any Award under the Plan may be assigned or
transferred otherwise than by will or by the laws of descent and distribution
prior to the payment thereof.

(d) Tax Requirements. All payments made pursuant to the Plan shall be
subject to withholding in respect of income and other taxes required by law to
be withheld, in accordance with procedures to be established by the Committee.

(e) No Additional Participant Rights. The selection of an individual for
participation in the Plan shall not give such Participant any right to be
retained in the employ of the Company or any of its subsidiaries, and the
right of the Company or any such subsidiary to dismiss or discharge any such
Participant, or to terminate any arrangement pursuant to which any such
Participant provides services to the Company is specifically reserved. The
benefits provided for Participants under the Plan shall be in addition to, and
shall in no way preclude, other forms of compensation to or in respect of such
Participants.

A-3
<PAGE>

(f) Liability. The Board and the Committee shall be entitled to rely on the
advice of counsel and other experts, including the independent accountants for
the Company. No member of the Board or of the Committee or any officers of the
Company or its subsidiaries shall be liable for any act or failure to act
under the Plan, except in circumstances involving bad faith on the part of
such member or officer.

(g) Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any subsidiary or affiliate of the Company from
adopting or continuing in effect other compensation arrangements, which
arrangements may be either generally applicable or applicable only in specific
cases.

(h) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall
be determined in accordance with the laws of the State of Delaware.

SECTION 7. Amendment and Termination of the Plan. The Board may at any time
terminate, in whole or in part, or from time to time amend the Plan, provided
that, except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect the rights of any Participant under any
Awards deferred by such Participant pursuant to Section 4(b). In the event of
such termination, in whole or in part, of the Plan, the Committee may in its
sole discretion direct the payment to Participants of any Awards not
theretofore paid out prior to the respective dates upon which payments would
otherwise be made hereunder to such Participants, in a lump sum or
installments as the Committee shall prescribe with respect to each such
Participant. The Board may at any time and from time to time delegate to the
Committee any or all of its authority under this Section 6. Any amendment to
the Plan that would affect any Covered Officer shall be approved by the
Company's stockholders if required by and in accordance with Section 162(m).

SECTION 8. Re-approval by Shareholders. Any material terms of the
performance goals described in Section 5 shall be disclosed to and re-approved
by shareholders no later than the first shareholder meeting that occurs in the
fifth year following the year in which shareholders previously approved the
performance goals.

A-4
<PAGE>

REVOCABLE PROXY
DIME COMMUNITY BANCSHARES, INC.
209 HAVEMEYER STREET
BROOKLYN, NY 11211

This Proxy is solicited on behalf of the Board of Directors of Dime Community
Bancshares, Inc. for the Annual Meeting of Shareholders to be held on November
10, 1999.

The undersigned shareholder of Dime Community Bancshares, Inc. hereby
appoints Patrick E. Curtin, Fred P. Fehrenbach, Malcolm T. Kitson, and Stanley
Meisels, or any of them, with full powers of substitution, to represent and to
vote as proxy, as designated, all shares of common stock of Dime Community
Bancshares, Inc. held of record by the undersigned on September 20, 1999, at the
1999 Annual Meeting of Shareholders (the "Annual Meeting") to be held at 10:00
a.m., on November 10, 1999, or at any adjournment or postponement thereof, upon
the matters described in the accompanying Notice of the 1999 Annual Meeting of
Shareholders and Proxy Statement, dated October 7, 1999, and upon such other
matters as may properly come before the Annual Meeting. The undersigned hereby
revokes all prior proxies.

This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is given, this Proxy will be
voted FOR the election f all nominees in Item 1 and FOR the proposals listed in
Items 2 and 3.

PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.

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<PAGE>

Please mark your votes as [X]
indicated in this example

The Board of Directors unanimously recommends a vote "FOR" all of the nominees
in Item 1 and a vote "FOR" the proposals in Items 2 and 3

1. Election of Directors for terms of FOR WITHHOLD
three years each. All nominees (except for all
as otherwise indicated) nominees
[_] [_]

Nominees: Vincent F. Palagiano, George L. Clark, Jr., Steven D. Cohn and
John J. Flynn.

Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee,
write that nominee's name in the space provided:

______________________________________________________________________

2. Approval of the Dime Community Bancshares, Inc. Annual Incentive Plan.

FOR AGAINST ABSTAIN
[_] [_] [_]

3. Ratification of the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending June 30, 2000.

FOR AGAINST ABSTAIN
[_] [_] [_]

] 4. The proxies are authorized to vote
[ ] upon such other business as may come
[ ] before the Annual Meeting or any
[ ] adjournment or postponement thereof
[ ] in such manner as shall be determined
[ ] by a majority of the Board of
Directors.

The undersigned hereby acknowledges receipt of the Notice of the 1999 Annual
Meeting of Shareholders and the Proxy Statement, dated October 7, 1999 for the
Annual Meeting.

Signature(s) Signature(s) Date:
------------------- ------------------- --------

Please sign exactly as your name appears on the Proxy. Joint owners should each
sign personally. If signing as attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate or partnership proxies
should be signed by an authorized officer

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