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

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020
OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number 0-27782

DIME COMMUNITY BANCSHARES INC.
(Exact name of registrant as specified in its charter)

N/A
(Former name or former address, if changed since last report)

Delaware
 
11-3297463
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. employer identification number)
 
 
 
300 Cadman Plaza West, 8Th Floor, Brooklyn, NY
 
11201
 (Address of principal executive offices)
 
(Zip Code)

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

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 Par Value
 
DCOM
 
The NASDAQ Stock Market
Preferred Stock, Series A, $0.01 Par Value
 
DCOMP
 
The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ☐
Accelerated Filer ☒
Non -Accelerated Filer  ☐
Smaller Reporting Company ☐
 
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Classes of Common Stock
Number of shares outstanding at August 7, 2020
$0.01 Par Value
33,057,426

 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
4
 
4
 
5
 
6
 
7
 
9
 
10
Item 2.
29
Item 3.
43
Item 4.
45
 
PART II - OTHER INFORMATION
 
Item 1.
45
Item 1A.
45
Item 2.
48
Item 3.
48
Item 4.
48
Item 5.
48
Item 6.
49
 
50


Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by use of words such as “annualized,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based upon various assumptions and analyses made by Dime Community Bancshares, Inc. together with its direct and indirect subsidiaries, the “Company”, in light of management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes appropriate under the circumstances. These include statements regarding the proposed merger (the “Merger”) of the Company with Bridge Bancorp, Inc. (“Bridge Bancorp”). These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company’s control) that could cause actual conditions or results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on such statements. These factors include, without limitation, the following:

●
there may be increases in competitive pressure among financial institutions or from non-financial institutions;
●
the net interest margin is subject to material short-term fluctuation based upon market rates;
●
changes in deposit flows, loan demand or real estate values may affect the business of Dime Community Bank (the “Bank”);
●
changes in the quality and composition of our loan or investment portfolios;
●
changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently;
●
changes in corporate and/or individual income tax laws may adversely affect the Company’s business or financial condition or results of operations;
●
general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry, may differ than the Company currently anticipates;
●
legislative, regulatory or policy changes may adversely affect the Company’s business or results of operations;
●
technological changes may be more difficult or expensive than the Company anticipates;
●
success or consummation of new business initiatives or the integration of any acquired entities may be more difficult or expensive than the Company anticipates;
●
the businesses of the Company and Bridge Bancorp may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected;
●
the expected growth opportunities or cost savings from the Merger may not be fully realized or may take longer to realize than expected;
●
deposit attrition, operating costs, loss of customers and business disruption prior to and following the Merger, including adverse effects on relationships with employees and customers, may be greater than expected;
●
the regulatory and shareholder approvals required for the Merger may not be obtained, or may not be obtained on the proposed terms or on the anticipated schedule;
●
litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events, including the Merger,  longer than the Company anticipates; and
●
the risks referred to in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 as updated by our Quarterly Reports on Form 10-Q.

Further, the COVID-19 pandemic has caused local and national economic disruption and has had an impact on the Company’s operations and financial results. Given its ongoing and dynamic nature, it is difficult to predict what effects the pandemic will have on our business and results of operations in the future. The pandemic and related local and national economic disruption may, among other effects, result in a decline in demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; branch closures, work stoppages and unavailability of personnel; and increased cybersecurity risks, as employees  continue to increasingly work remotely.

The Company has no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.


Item 1.
Condensed Consolidated Financial Statements

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in thousands except share amounts)

  
June 30,
2020
    
December 31,
2019
  
ASSETS:
            
Cash and due from banks
  
$
117,013
    
$
155,488
  
Total cash and cash equivalents
    
117,013
      
155,488
  
Securities available-for-sale, at fair value
    
542,007
      
550,995
  
Marketable equity securities, at fair value
    
5,707
      
5,894
  
Loans:
                
Real estate
    
4,811,401
      
5,002,354
  
Commercial and industrial (“C&I”) loans
    
631,518
      
336,412
  
Other loans
    
1,463
      
1,772
  
Less allowance for loan losses
    
(42,492
)
    
(28,441
)
Total loans, net
    
5,401,890
      
5,312,097
  
Premises and fixed assets, net
    
21,423
      
21,692
  
Premises held for sale
    
—
      
514
  
Loans held for sale
    
1,794
      
500
  
Federal Home Loan Bank of New York (“FHLBNY”) capital stock
    
52,305
      
56,019
  
Bank Owned Life Insurance (“BOLI”)
    
154,036
      
114,257
  
Goodwill
    
55,638
      
55,638
  
Operating lease assets
    
36,813
      
37,858
  
Other assets
    
78,895
      
43,508
  
Total Assets
  
$
6,467,521
    
$
6,354,460
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Liabilities:
                
Due to depositors:
                
Interest-bearing deposits
  
$
3,774,089
    
$
3,804,076
  
Non-interest-bearing deposits
    
664,323
      
478,549
  
Total deposits
    
4,438,412
      
4,282,625
  
Escrow and other deposits
    
87,646
      
76,481
  
FHLBNY advances
    
1,017,300
      
1,092,250
  
Subordinated debt, net
    
113,979
      
113,906
  
Other borrowings
    
5,000
      
110,000
  
Operating lease liabilities
    
42,733
      
44,098
  
Other liabilities
    
80,908
      
38,342
  
Total Liabilities
    
5,785,978
      
5,757,702
  
                 
Stockholders’ Equity:
                
Preferred stock, Series A ($0.01 par, $25.00 liquidation value, 9,000,000 shares authorized, 5,299,200 shares issued and outstanding at June 30, 2020, and none issued or outstanding at December 31, 2019)
    
116,569
      
—
  
Common stock ($0.01 par, 125,000,000 shares authorized, 53,724,233 shares and 53,721,189 shares issued at June 30, 2020 and December 31, 2019, respectively, and 33,089,585 shares and 35,154,642 shares outstanding at June 30, 2020 and December 31, 2019, respectively)
    
537
      
537
  
Additional paid-in capital
    
278,581
      
279,322
  
Retained earnings
    
592,497
      
581,817
  
Accumulated other comprehensive loss, net of deferred taxes
    
(14,403
)
    
(5,940
)
Unearned equity awards
    
(7,549
)
    
(6,731
)
Common stock held by the Benefit Maintenance Plan (“BMP”)
    
(1,496
)
    
(1,496
)
Treasury stock, at cost (20,634,648 shares and 18,566,547 shares at June 30, 2020 and December 31, 2019, respectively)
    
(283,193
)
    
(250,751
)
Total Stockholders’ Equity
    
681,543
      
596,758
  
Total Liabilities and Stockholders’ Equity
  
$
6,467,521
    
$
6,354,460
  

 
See notes to unaudited condensed consolidated financial statements.


DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

 
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
Interest income:
                        
Loans secured by real estate
  
$
49,058
    
$
50,811
    
$
99,175
    
$
99,988
  
C&I loans
    
5,071
      
4,134
      
9,116
      
7,570
  
Other loans
    
13
      
18
      
28
      
36
  
Mortgage-backed securities (“MBS”)
    
3,064
      
2,961
      
6,369
      
6,158
  
Investment securities
    
582
      
570
      
1,003
      
990
  
Other short-term investments
    
846
      
1,457
      
1,848
      
2,904
  
Total interest income
    
58,634
      
59,951
      
117,539
      
117,646
  
Interest expense:
                                
Deposits and escrow
    
9,700
      
16,271
      
21,626
      
31,288
  
Borrowed funds
    
5,378
      
7,176
      
11,833
      
14,530
  
Total interest expense
    
15,078
      
23,447
      
33,459
      
45,818
  
Net interest income
    
43,556
      
36,504
      
84,080
      
71,828
  
Provision (credit) for loan losses
    
6,060
      
(449
)
    
14,072
      
(128
)
Net interest income after provision for loan losses
    
37,496
      
36,953
      
70,008
      
71,956
  
Non-interest income:
                                
Service charges and other fees
    
1,083
      
1,264
      
2,286
      
2,363
  
Net mortgage banking income
    
52
      
61
      
118
      
129
  
Net gain on sale of equity securities
    
436
      
148
      
(36
)
    
416
  
Net gain on sale of securities and other assets
    
3,134
      
(57
)
    
3,142
      
(133
)
Gain on sale of loans
    
206
      
339
      
521
      
594
  
Income from BOLI
    
911
      
707
      
2,798
      
1,401
  
Loan level derivative income
    
2,494
      
291
      
3,657
      
291
  
Other
    
70
      
67
      
136
      
119
  
Total non-interest income
    
8,386
      
2,820
      
12,622
      
5,180
  
Non-interest expense:
                                
Salaries and employee benefits
    
14,719
      
12,061
      
29,565
      
23,945
  
Severance
    
3,930
      
—
      
4,000
      
—
  
Stock benefit plan compensation expense
    
478
      
491
      
1,149
      
775
  
Occupancy and equipment
    
3,959
      
3,827
      
8,015
      
7,696
  
Data processing costs
    
2,007
      
1,908
      
4,031
      
3,974
  
Marketing
    
136
      
465
      
533
      
931
  
Federal deposit insurance premiums
    
529
      
586
      
1,006
      
1,040
  
Merger expenses
    
1,072
      
—
      
1,658
      
—
  
Other
    
2,516
      
2,958
      
5,429
      
5,987
  
Total non-interest expense
    
29,346
      
22,296
      
55,386
      
44,348
  
Income before income taxes
    
16,536
      
17,477
      
27,244
      
32,788
  
Income tax expense
    
3,570
      
4,442
      
5,886
      
8,252
  
Net income
    
12,966
      
13,035
      
21,358
      
24,536
  
Preferred stock dividends
    
1,140
      
—
      
1,140
      
—
  
Net income available to common stockholders
  
$
11,826
    
$
13,035
    
$
20,218
    
$
24,536
  
 
                                
Earnings per Share:
                                
Basic
  
$
0.36
    
$
0.36
    
$
0.60
    
$
0.68
  
Diluted
  
$
0.35
    
$
0.36
    
$
0.59
    
$
0.68
  

See notes to unaudited condensed consolidated financial statements.


DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

 
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
Net Income
  
$
12,966
    
$
13,035
    
$
21,358
    
$
24,536
  
Other comprehensive income (loss):
                                
Change in unrealized holding gain (loss) on securities available-for-sale
    
659
      
4,261
      
10,911
      
8,948
  
Change in pension and other postretirement obligations
    
271
      
237
      
542
      
729
  
Change in unrealized gain (loss) on derivatives
    
(3,461
)
    
(6,077
)
    
(23,838
)
    
(9,361
)
Other comprehensive income (loss) before income taxes
    
(2,531
)
    
(1,579
)
    
(12,385
)
    
316
  
Deferred tax expense (benefit)
    
(760
)
    
(523
)
    
(3,922
)
    
104
  
Other comprehensive income (loss), net of tax
    
(1,771
)
    
(1,056
)
    
(8,463
)
    
212
  
Total comprehensive income
  
$
11,195
    
$
11,979
    
$
12,895
    
$
24,748
  

See notes to unaudited condensed consolidated financial statements.


DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands)

 
  
Six Month Period Ended June 30, 2020
  
 
  
Number of
Shares of
Common
Stock
    
Preferred
Stock
    
Common
Stock
    
Additional
Paid-in
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss,
Net of Deferred
Taxes
    
Unearned
Equity
Awards
    
Common
Stock
Held
by BMP
    
Treasury
Stock, at
cost
    
Total
Stockholders’
  
Beginning balance as of January 1, 2020
    
35,154,642
    
$
—
    
$
537
    
$
279,322
    
$
581,817
    
$
(5,940
)
  
$
(6,731
)
  
$
(1,496
)
  
$
(250,751
)
  
$
596,758
  
Net income
    
—
      
—
      
—
      
—
      
8,392
      
—
      
—
      
—
      
—
      
8,392
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
—
      
—
      
(6,692
)
    
—
      
—
      
—
      
(6,692
)
Release of shares, net of forfeitures
    
91
      
—
      
—
      
5
      
—
      
—
      
(7
)
    
—
      
2
      
—
  
Stock-based compensation
    
—
      
—
      
—
      
—
      
—
      
—
      
671
      
—
      
—
      
671
  
Proceeds from Preferred Stock issuance, net
    
—
      
72,224
      
—
      
—
      
—
      
—
      
—
      
—
      
—
      
72,224
  
Shares received related to tax withholding
    
(4,668
)
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
(79
)
    
(79
)
Cash dividends declared and paid
    
—
      
—
      
—
      
—
      
(4,915
)
    
—
      
—
      
—
      
—
      
(4,915
)
Repurchase of shares of Common Stock
    
(1,274,679
)
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
(20,711
)
    
(20,711
)
Ending balance as of March 31, 2020
    
33,875,386
      
72,224
      
537
      
279,327
      
585,294
      
(12,632
)
    
(6,067
)
    
(1,496
)
    
(271,539
)
    
645,648
  
                                                                                 
Net income
    
—
      
—
      
—
      
—
      
12,966
      
—
      
—
      
—
      
—
      
12,966
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
—
      
—
      
(1,771
)
    
—
      
—
      
—
      
(1,771
)
Exercise of stock options, net
    
3,044
      
—
              
38
      
—
      
—
      
—
      
—
      
—
      
38
  
Release of shares, net of forfeitures
    
196,886
      
—
      
—
      
(784
)
    
—
      
—
      
(1,960
)
    
—
      
2,772
      
28
  
Stock-based compensation
    
—
      
—
      
—
      
—
      
—
      
—
      
478
      
—
      
—
      
478
  
Proceeds from Preferred Stock issuance, net
    
—
      
44,345
      
—
      
—
      
—
      
—
      
—
      
—
      
—
      
44,345
  
Shares received related to tax withholding
    
(10,667
)
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
(169
)
    
(169
)
Cash dividends declared and paid to preferred stockholders
    
—
      
—
      
—
      
—
      
(1,140
)
    
—
      
—
      
—
      
—
      
(1,140
)
Cash dividends declared and paid to common  stockholders
    
—
      
—
      
—
      
—
      
(4,623
)
    
—
      
—
      
—
      
—
      
(4,623
)
Repurchase of shares of Common Stock
    
(975,064
)
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
(14,257
)
    
(14,257
)
Ending balance as of June 30, 2020
    
33,089,585
    
$
116,569
    
$
537
    
$
278,581
    
$
592,497
    
$
(14,403
)
  
$
(7,549
)
  
$
(1,496
)
  
$
(283,193
)
  
$
681,543
  



 
  
Six Month Period Ended June 30, 2019
  
 
  
Number of
Shares of
Common
Stock
    
Common
Stock
    
Additional
Paid-in
Capital
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
    
Unearned
Equity
Awards
    
Common
Stock Held
by BMP
    
Treasury
stock, at
cost
    
Total
Stockholders’
Equity
  
 
                                                      
Beginning balance as of January 1, 2019
    
36,081,455
    
$
537
    
$
277,512
    
$
565,713
    
$
(6,500
)
  
$
(3,623
)
  
$
(1,509
)
  
$
(230,049
)
  
$
602,081
  
Net Income
    
—
      
—
      
—
      
11,501
      
—
      
—
      
—
      
—
      
11,501
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
—
      
1,268
      
—
      
—
      
—
      
1,268
  
Release of shares, net of forfeitures
    
138,329
      
—
      
846
      
—
      
—
      
(2,729
)
    
—
      
1,883
      
—
  
Stock-based compensation
    
—
      
—
      
—
      
—
      
—
      
284
      
—
      
—
      
284
  
Shares received related to tax withholding
    
(418
)
    
—
      
—
      
—
      
—
      
—
      
—
      
(7
)
    
(7
)
Cash dividends declared and paid
    
—
      
—
      
—
      
(5,039
)
    
—
      
—
      
—
      
—
      
(5,039
)
Repurchase of shares of Common Stock
    
(199,254
)
    
—
      
—
      
—
      
—
      
—
      
—
      
(3,814
)
    
(3,814
)
Ending balance as of March 31, 2019
    
36,020,112
      
537
      
278,358
      
572,175
      
(5,232
)
    
(6,068
)
    
(1,509
)
    
(231,987
)
    
606,274
  
                                                                         
Net Income
    
—
      
—
      
—
      
13,035
      
—
      
—
      
—
      
—
      
13,035
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
—
      
(1,056
)
    
—
      
—
      
—
      
(1,056
)
Exercise of stock options
    
8,869
      
—
      
73
      
—
      
—
      
—
      
—
      
—
      
73
  
Release of shares, net of forfeitures
    
133,451
      
—
      
896
      
—
      
—
      
(2,588
)
    
—
      
1,747
      
55
  
Stock-based compensation
    
—
      
—
      
—
      
—
      
—
      
491
      
—
      
—
      
491
  
Payments related to tax withholding for stock-based compensation
    
(4,901
)
    
—
      
—
      
—
      
—
      
—
      
—
      
(98
)
    
(98
)
Cash dividends declared and paid
    
—
      
—
      
—
      
(5,051
)
    
—
      
—
      
—
      
—
      
(5,051
)
Repurchase of shares of Common Stock
    
(270,136
)
    
—
      
—
      
—
      
—
      
—
      
—
      
(5,022
)
    
(5,022
)
Ending balance as of June 30, 2019
    
35,887,395
    
$
537
    
$
279,327
    
$
580,159
    
$
(6,288
)
  
$
(8,165
)
  
$
(1,509
)
  
$
(235,360
)
  
$
608,701
  

See notes to unaudited condensed consolidated financial statements.


DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

 
  
Six Months Ended June 30,
  
 
  
2020
    
2019
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net Income
  
$
21,358
    
$
24,536
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Net (gain) loss on sales of securities available-for-sale
    
(3,142
)
    
133
  
Net (gain) loss recognized on marketable equity securities
    
36
      
(416
)
Net gain on sale of loans held for sale
    
(521
)
    
(594
)
Net depreciation, amortization and accretion
    
2,489
      
2,495
  
Stock-based compensation
    
1,149
      
775
  
Provision (credit) for loan losses
    
14,072
      
(128
)
Originations of loans held for sale
    
(12,308
)
    
(4,202
)
Proceeds from sale of loans originated for sale
    
14,024
      
7,969
  
Increase in cash surrender value of BOLI
    
(1,664
)
    
(1,401
)
Gain from death benefits from BOLI
    
(1,134
)
    
—
  
Deferred income tax expense (benefit)
    
(4,263
)
    
1,005
  
Changes in assets and liabilities:
                
Increase in other assets
    
(12,946
)
    
(237
)
Increase (decrease) in other liabilities
    
6,431
      
(3,940
)
Net cash provided by Operating Activities
    
23,581
      
25,995
  
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from sales of securities available-for-sale
    
62,797
      
104,131
  
Proceeds from sales of marketable equity securities
    
273
      
273
  
Purchases of securities available-for-sale
    
(107,342
)
    
(117,656
)
Acquisition of marketable equity securities
    
(122
)
    
(143
)
Proceeds from calls and principal repayments of securities available-for-sale
    
67,250
      
48,399
  
Purchase of BOLI
    
(40,000
)
    
—
  
Proceeds received from cash surrender value of BOLI
    
1,452
      
—
  
Loans purchased
    
(18,892
)
    
—
  
Proceeds from the sale of portfolio loans transferred to held for sale
    
7,074
      
8,282
  
Net increase in loans
    
(94,706
)
    
(152,459
)
Purchases of fixed assets, net
    
(1,297
)
    
(466
)
Sale of FHLBNY capital stock, net
    
3,714
      
500
  
Net cash used in Investing Activities
    
(119,799
)
    
(109,139
)
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Increase in due to depositors
    
155,787
      
78,782
  
Increase in escrow and other deposits
    
11,165
      
577
  
Repayments of FHLBNY advances
    
(4,590,520
)
    
(1,657,650
)
Proceeds from FHLBNY advances
    
4,515,570
      
1,647,500
  
Proceeds (repayments) of other borrowings, net
    
(105,000
)
    
58,000
  
Proceeds from preferred stock issuance, net
    
116,569
      
—
  
Proceeds from exercise of stock options
    
38
      
73
  
Release of stock for benefit plan awards
    
28
      
55
  
Payments related to tax withholding for stock-based compensation
    
(248
)
    
(105
)
Treasury shares repurchased
    
(34,968
)
    
(8,836
)
Cash dividends paid to preferred stockholders
    
(1,140
)
    
—
  
Cash dividends paid to common stockholders, net
    
(9,538
)
    
(10,090
)
Net cash provided by Financing Activities
    
57,743
      
108,306
  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
(38,475
)
    
25,162
  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
155,488
      
147,256
  
CASH AND CASH EQUIVALENTS, END OF PERIOD
  
$
117,013
    
$
172,418
  
 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
Cash paid for income taxes
  
$
8,055
    
$
6,435
  
Cash paid for interest
    
36,068
      
46,407
  
Loans transferred to held for sale
    
9,583
      
5,778
  
Premises held for sale transferred to investment
    
(514
)
    
—
  
Operating lease assets in exchange for operating lease liabilities
    
1,524
      
49,160
  
Transfer of cash surrender value for BOLI to other assets
    
1,567
      
—
  

See notes to unaudited condensed consolidated financial statements.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Per Share Amounts)

1.
NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Delaware corporation organized by Dime Community Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank’s conversion to stock ownership on June 26, 1996.  At June 30, 2020 the significant assets of the Holding Company were the capital stock of the Bank and investments retained by the Holding Company.  The liabilities of the Holding Company were comprised primarily of $115,000 subordinated notes due in 2027, which become callable commencing in 2022.  The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.

The Bank was originally founded in 1864 as a New York State-chartered mutual savings bank, and currently operates as a New York State-chartered commercial bank.  Effective August 1, 2016, the Bank changed its name from The Dime Savings Bank of Williamsburgh to Dime Community Bank.  The new name more accurately reflected the Bank’s evolving business model and emphasized its broader geographic and business reach while retaining the Bank’s mission to be in and of the communities it served, including the virtual online community. The Bank’s principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, mixed use, and, to an increasing extent, commercial and industrial (“C&I”) loans, and one-to-four family residential real estate loans, as well as mortgage-backed securities, obligations of the U.S. government and government-sponsored enterprises (“GSEs”), and corporate debt and equity securities.

The Holding Company neither owns nor leases any property, but instead uses the back office of the Bank, located in the Brooklyn Heights section of the borough of Brooklyn, New York. The Bank maintains its principal office in the Williamsburg section of the borough of Brooklyn, New York. As of June 30, 2020, the Bank had twenty-eight retail banking offices located throughout the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County and Suffolk County, New York.

In July 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bridge Bancorp, Inc. (“Bridge Bancorp”).  See note 14 for additional details.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which has spread to most countries, including the United States. The pandemic has adversely affected economic activity globally, nationally and locally.

In March 2020, the United States declared a National Public Health Emergency in response to the COVID-19 pandemic. In an effort to mitigate the spread of COVID-19, local state governments, including New York (in which the Bank has retail banking offices), have taken preventative or protective actions such as travel restrictions, advising or requiring individuals to limit or forego their time outside of their homes, and other forced closures for certain types of non-essential businesses. The impact of these actions is expected to continue to have an adverse impact on the economies and financial markets in the United States.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020.  The CARES Act is intended to provide relief and lessen a severe economic downturn. The stimulus package includes direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and healthcare providers.

It is possible that there will be material, adverse impacts to significant estimates, asset valuations, and business operations, including intangible assets, investments, loans, deferred tax assets, and derivative counter party risk



2.
SUMMARY OF ACCOUNTING POLICIES

Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the Company’s financial condition as of June 30, 2020 and December 31, 2019, the results of operations and statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, the changes in stockholders’ equity for the six-month period ended June 30, 2020 and 2019, and cash flows for the three-month and six-month periods ended June 30, 2020 and 2019.  The results of operations for the three-month and six-month periods ended June 30, 2020 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2020.  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Please see “Part I - Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” for a discussion of areas in the accompanying unaudited condensed consolidated financial statements utilizing significant estimates.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2019 and notes thereto contained in our Annual Report on Form 10-K

Recent Accounting Pronouncements

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires that the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current condition, and reasonable and supportable forecasts. This standard requires financial institutions and other organizations to use forward-looking information to better inform their credit loss estimates.

In anticipation of adoption, the Company has established the Current Expected Credit Loss (“CECL”) Subcommittee, a subcommittee of the Loan Loss Reserve Committee, to oversee the adoption of ASU 2016-13 on its consolidated financial statements. The Company has engaged a third party software provider to use their model to measure the expected credit losses. The CECL Subcommittee has determined loan segments based on credit risk of the loan portfolio, completed data validation, and developed qualitative adjustments. The CECL Subcommittee is in the process of developing and updating internal policies, procedures, and key controls over the calculation of the allowance for credit losses (“ACL”). The Company has also engaged an independent third party vendor which has reviewed and validated the regression models and assumptions utilized for measuring the expected credit losses.

ASU 2016-13 was effective for the Company as of January 1, 2020.  Under Section 4014 of the recently enacted CARES Act, financial institutions required to adopt ASU 2016-13 as of January 1, 2020 were provided an option to delay the adoption of the CECL framework until the earlier of December 31, 2020 or when the national emergency is lifted. The Bank has elected to defer adoption of CECL and is utilizing the incurred loss framework as of June 30, 2020.

Upon completion of the aforementioned items, the Loan Loss Reserve Committee, which has oversight over the implementation of CECL, will adopt the standard at the earlier of December 31, 2020 or when the national emergency is lifted. Upon adoption, the Company will recognize a one-time cumulative effect change to the allowance for loan losses through retained earnings as of January 1, 2020. In the period of adoption, any year-to-date catch-up adjustments related to the period end CECL estimate will be adjusted through the income statement.



3.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

 
  
Securities
Available-for-Sale
    
Defined
Benefit Plans
    
Derivatives
    
Total
Accumulated Other
Comprehensive
Loss
  
Balance as of January 1, 2020
  
$
4,621
    
$
(6,024
)
  
$
(4,537
)
  
$
(5,940
)
Other comprehensive income (loss) before reclassifications
    
9,609
      
241
      
(17,218
)
    
(7,368
)
Amounts reclassified from accumulated other comprehensive loss
    
(2,154
)
    
130
      
929
      
(1,095
)
Net other comprehensive income during the period
    
7,455
      
371
      
(16,289
)
    
(8,463
)
Balance as of June 30, 2020
  
$
12,076
    
$
(5,653
)
  
$
(20,826
)
  
$
(14,403
)
 
                                
Balance as of January 1, 2019
  
$
(1,957
)
  
$
(6,290
)
  
$
1,747
    
$
(6,500
)
Other comprehensive income (loss) before reclassifications
    
5,981
      
250
      
(5,890
)
    
341
  
Amounts reclassified from accumulated other comprehensive loss
    
89
      
245
      
(463
)
    
(129
)
Net other comprehensive income during the period
    
6,070
      
495
      
(6,353
)
    
212
  
Balance as of June 30, 2019
  
$
4,113
    
$
(5,795
)
  
$
(4,606
)
  
$
(6,288
)

The before and after-tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below for the periods indicated.

  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2020
    
2019
    
2020
    
2019
  
Change in unrealized holding gain or loss on securities available-for-sale:
                        
Change in net unrealized gain or loss during the period
  
$
3,793
    
$
4,204
    
$
14,053
    
$
8,815
  
Reclassification adjustment for net (gains) losses included in net gain on securities and other assets
    
(3,134
)
    
57
      
(3,142
)
    
133
  
Net change
    
659
      
4,261
      
10,911
      
8,948
  
Tax expense
    
248
      
1,371
      
3,456
      
2,878
  
Net change in unrealized holding gain or loss on securities available-for-sale
    
411
      
2,890
      
7,455
      
6,070
  
Change in pension and other postretirement obligations:
                                
Reclassification adjustment for expense included in other expense
    
95
      
181
      
190
      
364
  
Change in the net actuarial gain or loss
    
176
      
56
      
352
      
365
  
Net change
    
271
      
237
      
542
      
729
  
Tax expense
    
85
      
76
      
171
      
234
  
Net change in pension and other postretirement obligations
    
186
      
161
      
371
      
495
  
Change in unrealized gain or loss on derivatives:
                                
Change in net unrealized gain or loss during the period
    
(4,617
)
    
(5,745
)
    
(25,198
)
    
(8,673
)
Reclassification adjustment for expense included in interest expense
    
1,156
      
(332
)
    
1,360
      
(688
)
Net change
    
(3,461
)
    
(6,077
)
    
(23,838
)
    
(9,361
)
Tax benefit
    
(1,093
)
    
(1,970
)
    
(7,549
)
    
(3,008
)
Net change in unrealized gain or loss on derivatives
    
(2,368
)
    
(4,107
)
    
(16,289
)
    
(6,353
)
Other comprehensive income (loss)
  
$
(1,771
)
  
$
(1,056
)
  
$
(8,463
)
  
$
212
  



4.
EARNINGS PER COMMON SHARE (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding during the reporting period.  Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if “in the money” stock options were exercised and converted into Common Stock, and if all likely aggregate Long-term Incentive Plan (“LTIP”) and Sales Incentive Plan (“SIP”) shares are issued.  In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares are excluded.  Vested restricted stock award (“RSA”) shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.  Unvested RSA and SIP shares not yet awarded are recognized as a special class of participating securities under ASC 260, and are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

The following is a reconciliation of the numerators and denominators of basic and diluted EPS for the periods presented:

 
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
Net income available to common stockholders
  
$
11,826
    
$
13,035
    
$
20,218
    
$
24,536
  
Less: Dividends paid and earnings allocated to participating securities
    
(46
)
    
(63
)
    
(113
)
    
(100
)
Income attributable to common stock
  
$
11,780
    
$
12,972
    
$
20,105
    
$
24,436
  
Weighted average common shares outstanding, including participating securities
    
33,357,104
      
35,891,341
      
34,083,656
      
35,951,257
  
Less: weighted average participating securities
    
(320,316
)
    
(197,249
)
    
(299,079
)
    
(178,538
)
Weighted average common shares outstanding
    
33,036,789
      
35,694,092
      
33,784,577
      
35,772,719
  
Basic EPS
  
$
0.36
    
$
0.36
    
$
0.60
    
$
0.68
  
Income attributable to common stock
  
$
11,780
    
$
12,972
    
$
20,105
    
$
24,436
  
Weighted average common shares outstanding
    
33,036,789
      
35,694,092
      
33,784,577
      
35,772,719
  
Weighted average common equivalent shares outstanding
    
206,911
      
170,297
      
209,547
      
171,642
  
Weighted average common and equivalent shares outstanding
    
33,243,700
      
35,864,389
      
33,994,124
      
35,944,361
  
Diluted EPS
  
$
0.35
    
$
0.36
    
$
0.59
    
$
0.68
  

Common and equivalent shares resulting from the dilutive effect of “in-the-money” outstanding stock options are calculated based upon the excess of the average market value of the common stock over the exercise price of outstanding in-the-money stock options during the period.

There were 25,134 weighted-average stock options outstanding for the three-month period ended June 30, 2020, which was not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period. There were no “out-of-the-money” stock options during the three-month period ended June 30, 2019 or the six-month periods ended June 30, 2020 and 2019.

For information about the calculation of expected aggregate LTIP and SIP share payouts, see Note 12.

5.
PREFERRED STOCK

On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $74,980 in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $25.00 per share. The net proceeds received from the issuance of preferred stock at the time of closing was $72,224. On June 10, 2020, the Company completed an underwritten public offering, a reopening of the February 5, 2020 original issuance, of 2,300,000 shares, or $57,500 in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Preferred Stock”), with a liquidation preference of $25.00 per share. The net proceeds received from the issuance of preferred stock at the time of closing was $44,345.  The Company expects to pay dividends  when, as, and if declared by its board of directors, at a fixed rate of 5.50% per annum, payable quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year. The Preferred Stock is perpetual and has no stated maturity. The Company may redeem the Preferred Stock at its option at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after June 15, 2025 or within 90 days following a regulatory capital treatment event, as described in the prospectus supplement and accompanying prospectus relating to the offering. 


6.
INVESTMENT AND MORTGAGE-BACKED SECURITIES

The following tables summarize the major categories of securities owned by the Company as of the dates indicated:

 
  
At June 30, 2020
  
 
  
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Fair
Value
  
Securities available-for-sale:
                        
Agency Notes
  
$
34,998
    
$
10
    
$
—
    
$
35,008
  
Corporate Securities
    
43,065
      
120
      
(465
)
    
42,720
  
Pass-through MBS issued by GSEs
    
182,031
      
9,771
      
—
      
191,802
  
Agency Collateralized Mortgage Obligations (“CMOs”)
    
264,243
      
8,534
      
(300
)
    
272,477
  
Total securities available-for-sale
  
$
524,337
    
$
18,435
    
$
(765
)
  
$
542,007
  

 
  
At December 31, 2019
  
 
  
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Fair
Value
  
Securities available-for-sale:
                        
Agency Notes
  
$
20,000
    
$
—
    
$
(65
)
  
$
19,935
  
Corporate Securities
    
28,086
      
510
      
—
      
28,596
  
Pass-through MBS issued by GSEs
    
241,695
      
5,788
      
—
      
247,483
  
Agency CMOs
    
254,453
      
1,105
      
(577
)
    
254,981
  
Total securities available-for-sale
  
$
544,234
    
$
7,403
    
$
(642
)
  
$
550,995
  

The carrying amount of securities pledged was $38,660 and $27,884 at June 30, 2020 and December 31, 2019, respectively.

At June 30, 2020, the available-for-sale agency notes possessed a weighted average contractual maturity of 8.9 years.  At June 30, 2020, available-for-sale agency CMO and MBS securities possessed a weighted average contractual maturity of 17.8 years.  At June 30, 2020, the corporate securities possessed a weighted average contractual maturity of 9.2 years.

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
Agency Notes:
                        
Proceeds
  
$
273
    
$
3,038
    
$
273
    
$
3,038
  
Gross gains
    
—
      
39
      
—
      
39
  
Tax expense on gain
    
—
      
12
      
—
      
12
  
Gross losses
    
—
      
—
      
—
      
—
  
Tax benefit on loss
    
—
      
—
      
—
      
—
  
Corporate Securities:
                                
Proceeds
    
25,403
      
—
      
25,403
      
—
  
Gross gains
    
1,344
      
—
      
1,344
      
—
  
Tax expense on gain
    
423
      
—
      
423
      
—
  
Gross losses
    
—
      
—
      
—
      
—
  
Tax benefit on loss
    
—
      
—
      
—
      
—
  
Pass through MBS issued by GSEs:
                                
Proceeds
    
33,195
      
85,594
      
33,195
      
91,711
  
Gross gains
    
1,790
      
248
      
1,790
      
248
  
Tax expense on gain
    
563
      
79
      
563
      
79
  
Gross losses
    
—
      
344
      
—
      
518
  
Tax benefit on loss
    
—
      
(110
)
    
—
      
(166
)
Agency CMOs:
                                
Proceeds
    
—
      
—
      
4,199
      
—
  
Gross gains
    
—
      
—
      
8
      
—
  
Tax expense on gain
    
—
      
—
      
3
      
—
  
Gross losses
    
—
      
—
      
—
      
—
  
Tax benefit on loss
    
—
      
—
      
—
      
—
  


 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2020
    
2019
    
2020
    
2019
  
Proceeds:
                        
Marketable equity securities
  
$
136
    
$
136
    
$
273
    
$
273
  

The gain or loss on equity securities shown in the unaudited condensed consolidated statements of income was due to market valuation changes.  Net gain of $436 and $148 were recognized on marketable equity securities for the three-month periods ended June 30, 2020 and 2019, respectively. Net (loss) gain of $(36) and$416 were recognized on marketable equity securities for the six-month periods ended June 30, 2020 and 2019, respectively.

The following table summarizes the gross unrealized losses and fair value of investment securities aggregated by investment category and the length of time the securities were in a continuous unrealized loss position as of the dates indicated:

 
  
June 30, 2020
  
 
  
Less than 12
Consecutive Months
    
12 Consecutive
Months or Longer
    
Total
  
 
  
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
Securities available-for-sale:
                                    
Corporate Notes
  
$
16,600
    
$
465
    
$
—
    
$
—
    
$
16,600
    
$
465
  
Agency CMOs
    
49,916
      
209
      
4,909
      
91
      
54,825
      
300
  

 
  
December 31, 2019
  
 
  
Less than 12
Consecutive Months
    
12 Consecutive
Months or Longer
    
Total
  
 
  
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
Securities available-for-sale:
                                    
Agency Notes
  
$
9,935
    
$
65
    
$
—
    
$
—
    
$
9,935
    
$
65
  
Agency CMOs
    
107,150
      
548
      
4,304
      
29
      
111,454
      
577
  

The issuers of securities available-for-sale are primarily U.S. government-sponsored entities or agencies. The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. In accordance with the Company’s investment policy, corporate notes are rated “investment grade” at the time of purchase and the financials of the issuers are reviewed quarterly.  It is likely that the Company will not be required to sell the securities before their anticipated recovery, and as such, the Company does not consider these securities to be other-than-temporarily-impaired at June 30, 2020.

7.
LOANS

Loans are reported at the principal amount outstanding, net of unearned fees or costs.  Interest income on loans is recorded using the level yield method.  Under this method, discount accretion and premium amortization are included in interest income.  Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms.

The following table presents the loan categories for the period ended as indicated:

 
  
Balance at
  
 
  
June 30, 2020
    
December 31, 2019
  
One-to-four family residential, including condominium and cooperative apartment
  
$
182,264
    
$
148,429
  
Multifamily residential and residential mixed-use
    
2,988,511
      
3,385,375
  
Commercial real estate and commercial mixed-use
    
1,504,020
      
1,350,185
  
Acquisition, development, and construction (“ADC”)
    
136,606
      
118,365
  
Total Real Estate
    
4,811,401
      
5,002,354
  
C&I
    
631,518
      
336,412
  
Other
    
1,463
      
1,772
  
Total
    
5,444,382
      
5,340,538
  
Allowance for loans losses