UNDERSTANDING OUR MARKETS A Look to the Future – “Staying Ahead of the Curve” Michael P. Devine President and  Chief Operating Officer Vincent F. Palagiano Chairman of the Board and Chief Executive Officer 4 On behalf of the Board of Directors, we want to once again thank our dedicated staff for their continued efforts in implementing our proven business plan. Without their efforts, the success we achieved would not have been possible. We look forward to another successful and eventful year in 2003. The primary action that we have undertaken to ensure our success is the continued growth of deposit funding, which we believe will offer average interest costs below that of borrowings in the current interest rate environment and will lag the repricing of alternative sources of funding in the event that interest rates rise. Growing our deposits and expanding our customer base also greatly enhances the value of DCOM’s retail banking franchise. Additionally, we have  created the flexibility to sell longer-term loan originations made in the current low interest  rate environment to Fannie Mae, while retaining servicing rights and improving non-interest income. Finally, during the six months ended December 31, 2002, we prepaid or restructured $152.5 million in borrowed funds that had an average interest cost of 6.6% and an average term to next repricing of less than six months, and replaced them with $132.5 million of new borrowings with an average cost of 3.3% and an average term to next repricing of 5.2 years. We believe that these actions go a long way toward protecting DCOM against either sustained low interest rates or a future increase in interest rates. While certainly not reflected in the performance of our stock, we generated record financial results during the six-month period ended December 31, 2002. We recognize that our primary challenges are to continue to maintain our profitability, and to outperform our peer group whether the current historic low interest rate environment continues or interest rates rise in the future. We have therefore taken several steps to ensure that DCOM continues to outperform its peer group in the event that either of these circumstances come about. opportunities within our niche multi-family residential lending market, along with providing us critical asset management flexibility during the current low interest rate environment. *Component companies as follows: AF, FFIC,  GPT, ICBC, NFB, NYB, RSLN and SIB. Average total return calculated as total return for each individual company weighted by the total market capitalization at December 31, 2002.