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.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
273
|
|
|
$
|
3,038
|
|
|
$
|
273
|
|
|
$
|
3,038
|
|
|
|
|
—
|
|
|
|
39
|
|
|
|
—
|
|
|
|
39
|
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
|
|
12
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,403
|
|
|
|
—
|
|
|
|
25,403
|
|
|
|
—
|
|
|
|
|
1,344
|
|
|
|
—
|
|
|
|
1,344
|
|
|
|
—
|
|
|
|
|
423
|
|
|
|
—
|
|
|
|
423
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
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.
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
|
|
|
(42,492
|
)
|
|
|
(28,441
|
)
|
Loans, net
|
|
$
|
5,401,890
|
|
|
$
|
5,312,097
|
|
Included in C&I loans was $310,509 of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans. These loans carry a 100% guarantee from the SBA and have no allowance for loan losses allocated to them based on the nature of the guarantee.
The allowance for loan losses consists of specific and general components. At June 30, 2020, the Bank’s periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) specific reserve on impaired loans and (2) general reserve on non-impaired loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses: (1) real estate loans; (2) C&I loans; and (3) other loans (which includes consumer loans). Within these segments, the Bank analyzes the allowance for loan losses based upon the underlying collateral type (classes). Smaller balance homogeneous real estate loans, such as condominium or cooperative apartment and one-to-four family residential real estate loans with balances equal to or less than the Federal National Mortgage Association (“FNMA”) Limits, and consumer loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.
The following tables present data regarding the allowance for loan losses activity for the periods indicated:
|
|
At or for the Three Months Ended June 30, 2020
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Beginning balance
|
|
$
|
645
|
|
|
$
|
14,283
|
|
|
$
|
6,336
|
|
|
$
|
1,671
|
|
|
$
|
22,935
|
|
|
$
|
13,513
|
|
|
$
|
15
|
|
|
$
|
36,463
|
|
Provision (credit) for loan losses
|
|
|
30
|
|
|
|
2,415
|
|
|
|
3,523
|
|
|
|
106
|
|
|
|
6,074
|
|
|
|
(16
|
)
|
|
|
2
|
|
|
|
6,060
|
|
Charge-offs
|
|
|
(4
|
)
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
Recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
Ending balance
|
|
$
|
671
|
|
|
$
|
16,666
|
|
|
$
|
9,859
|
|
|
$
|
1,777
|
|
|
$
|
28,973
|
|
|
$
|
13,502
|
|
|
$
|
17
|
|
|
$
|
42,492
|
|
|
|
At or for the Three Months Ended June 30, 2019
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Beginning balance
|
|
$
|
201
|
|
|
$
|
12,988
|
|
|
$
|
4,022
|
|
|
$
|
643
|
|
|
$
|
17,854
|
|
|
$
|
4,069
|
|
|
$
|
18
|
|
|
$
|
21,941
|
|
Provision (credit) for loan losses
|
|
|
8
|
|
|
|
(1,136
|
)
|
|
|
(36
|
)
|
|
|
337
|
|
|
|
(827
|
)
|
|
|
379
|
|
|
|
(1
|
)
|
|
|
(449
|
)
|
Charge-offs
|
|
|
(5
|
)
|
|
|
(35
|
)
|
|
|
(140
|
)
|
|
|
—
|
|
|
|
(180
|
)
|
|
|
(182
|
)
|
|
|
—
|
|
|
|
(362
|
)
|
Recoveries
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
1
|
|
|
|
—
|
|
|
|
4
|
|
Ending balance
|
|
$
|
207
|
|
|
$
|
11,817
|
|
|
$
|
3,846
|
|
|
$
|
980
|
|
|
$
|
16,850
|
|
|
$
|
4,267
|
|
|
$
|
17
|
|
|
$
|
21,134
|
|
|
|
At or for the Six Months Ended June 30, 2020
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Beginning balance
|
|
$
|
269
|
|
|
$
|
10,142
|
|
|
$
|
3,900
|
|
|
$
|
1,244
|
|
|
$
|
15,555
|
|
|
$
|
12,870
|
|
|
$
|
16
|
|
|
$
|
28,441
|
|
Provision for loan losses
|
|
|
406
|
|
|
|
6,542
|
|
|
|
5,965
|
|
|
|
533
|
|
|
|
13,446
|
|
|
|
625
|
|
|
|
1
|
|
|
|
14,072
|
|
Charge-offs
|
|
|
(4
|
)
|
|
|
(32
|
)
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(42
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(42
|
)
|
Recoveries
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
7
|
|
|
|
—
|
|
|
|
21
|
|
Ending balance
|
|
$
|
671
|
|
|
$
|
16,666
|
|
|
$
|
9,859
|
|
|
$
|
1,777
|
|
|
$
|
28,973
|
|
|
$
|
13,502
|
|
|
$
|
17
|
|
|
$
|
42,492
|
|
|
|
At or for the Six Months Ended June 30, 2019
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Beginning balance
|
|
$
|
198
|
|
|
$
|
13,446
|
|
|
$
|
3,777
|
|
|
$
|
397
|
|
|
$
|
17,818
|
|
|
$
|
3,946
|
|
|
$
|
18
|
|
|
$
|
21,782
|
|
Provision (credit) for loan losses
|
|
|
12
|
|
|
|
(1,589
|
)
|
|
|
214
|
|
|
|
583
|
|
|
|
(780
|
)
|
|
|
652
|
|
|
|
—
|
|
|
|
(128
|
)
|
Charge-offs
|
|
|
(6
|
)
|
|
|
(40
|
)
|
|
|
(145
|
)
|
|
|
—
|
|
|
|
(191
|
)
|
|
|
(332
|
)
|
|
|
(1
|
)
|
|
|
(524
|
)
|
Recoveries
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
1
|
|
|
|
—
|
|
|
|
4
|
|
Ending balance
|
|
$
|
207
|
|
|
$
|
11,817
|
|
|
$
|
3,846
|
|
|
$
|
980
|
|
|
$
|
16,850
|
|
|
$
|
4,267
|
|
|
$
|
17
|
|
|
$
|
21,134
|
|
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment evaluation method as of the dates indicated:
|
|
At June 30, 2020
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,129
|
|
|
$
|
—
|
|
|
$
|
10,129
|
|
Collectively evaluated for impairment
|
|
|
671
|
|
|
|
16,666
|
|
|
|
9,859
|
|
|
|
1,777
|
|
|
|
28,973
|
|
|
|
3,373
|
|
|
|
17
|
|
|
|
32,363
|
|
Total ending allowance balance
|
|
$
|
671
|
|
|
$
|
16,666
|
|
|
$
|
9,859
|
|
|
$
|
1,777
|
|
|
$
|
28,973
|
|
|
$
|
13,502
|
|
|
$
|
17
|
|
|
$
|
42,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
1,377
|
|
|
$
|
3,003
|
|
|
$
|
—
|
|
|
$
|
4,380
|
|
|
$
|
10,176
|
|
|
$
|
—
|
|
|
$
|
14,556
|
|
Collectively evaluated for impairment
|
|
|
182,264
|
|
|
|
2,987,134
|
|
|
|
1,501,017
|
|
|
|
136,606
|
|
|
|
4,807,021
|
|
|
|
621,342
|
|
|
|
1,463
|
|
|
|
5,429,826
|
|
Total ending loans balance
|
|
$
|
182,264
|
|
|
$
|
2,988,511
|
|
|
$
|
1,504,020
|
|
|
$
|
136,606
|
|
|
$
|
4,811,401
|
|
|
$
|
631,518
|
|
|
$
|
1,463
|
|
|
$
|
5,444,382
|
|
|
|
At December 31, 2019
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-Four
Family
Residential,
Including
Condominium
and
Cooperative
Apartment
|
|
|
Multifamily
Residential
and
Residential
Mixed-Use
|
|
|
Commercial
Real Estate
and
Commercial
Mixed-Use
|
|
|
ADC
|
|
|
Total
Real
Estate
|
|
|
C&I
|
|
|
Other
Loans
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,082
|
|
|
$
|
—
|
|
|
$
|
10,082
|
|
Collectively evaluated for impairment
|
|
|
269
|
|
|
|
10,142
|
|
|
|
3,900
|
|
|
|
1,244
|
|
|
|
15,555
|
|
|
|
2,788
|
|
|
|
16
|
|
|
|
18,359
|
|
Total ending allowance balance
|
|
$
|
269
|
|
|
$
|
10,142
|
|
|
$
|
3,900
|
|
|
$
|
1,244
|
|
|
$
|
15,555
|
|
|
$
|
12,870
|
|
|
$
|
16
|
|
|
$
|
28,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
—
|
|
|
|
153
|
|
|
|
60
|
|
|
|
—
|
|
|
|
213
|
|
|
|
10,082
|
|
|
|
—
|
|
|
|
10,295
|
|
Collectively evaluated for impairment
|
|
|
148,429
|
|
|
|
3,385,222
|
|
|
|
1,350,125
|
|
|
|
118,365
|
|
|
|
5,002,141
|
|
|
|
326,330
|
|
|
|
1,772
|
|
|
|
5,330,243
|
|
Total ending loans balance
|
|
$
|
148,429
|
|
|
$
|
3,385,375
|
|
|
$
|
1,350,185
|
|
|
$
|
118,365
|
|
|
$
|
5,002,354
|
|
|
$
|
336,412
|
|
|
$
|
1,772
|
|
|
$
|
5,340,538
|
|
Troubled debt restructurings (“TDRs”)
A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:
|
•
|
A reduction of interest rate has been made for the remaining term of the loan
|
|
•
|
The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk
|
|
•
|
The outstanding principal amount and/or accrued interest have been reduced
|
In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors. There were no loans modified in a manner that met the criteria of a TDR during the three-month and six month periods ended June 30, 2020 or 2019. There were no TDRs as of June 30, 2020 or December 31, 2019.
Loan payment deferrals due to COVID-19
Consistent with the Interagency Statement issued in March 2020, and subsequently revised in April 2020 to align with Section 4013 of the CARES Act, the Company established a formal payment deferral program in April 2020 to work with borrowers adversely affected during the unprecedented situation caused by the COVID-19 pandemic. The payment deferral programs primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan.
Pursuant to regulatory guidance, and guidance under Section 4013 of the CARES Act, a qualified loan modification, such as a payment deferral, is exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak is lifted. The table below presents the loans with payment deferrals as of June 30, 2020:
|
|
June 30, 2020
|
|
|
|
Number
of Loans
|
|
|
Booked Amount
|
|
|
Booked % of
Portfolio
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
|
19
|
|
|
$
|
23,824
|
|
|
|
12.0
|
%
|
Multifamily residential and residential mixed-use real estate
|
|
|
126
|
|
|
|
544,197
|
|
|
|
18.3
|
|
Commercial real estate and commercial mixed-use
|
|
|
103
|
|
|
|
335,597
|
|
|
|
22.5
|
|
C&I
|
|
|
6
|
|
|
|
12,644
|
|
|
|
3.9
|
|
Total
|
|
|
254
|
|
|
$
|
916,262
|
|
|
|
|
|
In addition, the risk-rating on loans with payment deferrals did not change, and these loans will not be considered past due until after the deferral period ends. The credit quality of these loans will be re-evaluated after the deferral period ends.
Impaired Loans
A loan is considered impaired when, based on then current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired. Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The Bank considers TDRs and all non-accrual loans, except non-accrual one-to-four family loans in less than the FNMA Limits, to be impaired. Non-accrual one-to-four family loans equal to or less than the FNMA Limits, as well as all consumer loans, are considered homogeneous loan pools and are not required to be evaluated individually for impairment unless considered a TDR.
Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral; or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for certain performing TDRs). If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of the collateral is considered when measuring impairment. Measured impairment is either charged off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses.
The following tables summarize impaired loans with no related allowance recorded and with related allowance recorded as of the periods indicated (by collateral type within the real estate loan segment):
The following table summarizes impaired loans recorded as of the dates indicated:
|
|
At June 30, 2020
|
|
|
At December 31, 2019
|
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
(1)
|
|
|
Related
Allowance
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
(1)
|
|
|
Related
Allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily residential and residential mixed-use
|
|
$
|
1,377
|
|
|
$
|
1,377
|
|
|
$
|
—
|
|
|
$
|
153
|
|
|
$
|
153
|
|
|
$
|
—
|
|
Commercial real estate and commercial mixed-use
|
|
|
3,003
|
|
|
|
3,003
|
|
|
|
—
|
|
|
|
60
|
|
|
|
60
|
|
|
|
—
|
|
Total with no related allowance recorded
|
|
|
4,380
|
|
|
|
4,380
|
|
|
|
—
|
|
|
|
213
|
|
|
|
213
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I
|
|
|
10,176
|
|
|
|
10,176
|
|
|
|
10,129
|
|
|
|
10,082
|
|
|
|
10,082
|
|
|
|
10,082
|
|
Total with an allowance recorded
|
|
|
10,176
|
|
|
|
10,176
|
|
|
|
10,129
|
|
|
|
10,082
|
|
|
|
10,082
|
|
|
|
10,082
|
|
Total
|
|
$
|
14,556
|
|
|
$
|
14,556
|
|
|
$
|
10,129
|
|
|
$
|
10,295
|
|
|
$
|
10,295
|
|
|
$
|
10,082
|
|
(1)
|
The recorded investment excludes accrued interest receivable and net deferred costs due to immateriality.
|
The following table presents information for impaired loans for the periods indicated:
|
|
Three Months Ended
June 30, 2020
|
|
|
Three Months Ended
June 30, 2019
|
|
|
|
Average
Recorded
Investment (1)
|
|
|
Interest
Income
Recognized
(2)
|
|
|
Average
Recorded
Investment (1)
|
|
|
Interest
Income
Recognized
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
2,948
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
Multifamily residential and residential mixed-use
|
|
|
1,355
|
|
|
|
—
|
|
|
|
608
|
|
|
|
9
|
|
Commercial real estate and commercial mixed-use
|
|
|
1,529
|
|
|
|
—
|
|
|
|
6,789
|
|
|
|
91
|
|
Total with no related allowance recorded
|
|
|
5,832
|
|
|
|
—
|
|
|
|
7,408
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I
|
|
|
10,129
|
|
|
|
—
|
|
|
|
116
|
|
|
|
—
|
|
Total
|
|
$
|
15,961
|
|
|
$
|
—
|
|
|
$
|
7,524
|
|
|
$
|
100
|
|
(1)
|
The recorded investment excludes accrued interest receivable and net deferred costs due to immateriality.
|
(2)
|
Cash basis interest and interest income recognized on accrual basis approximate each other.
|
The following table presents information for impaired loans for the periods indicated:
|
|
Six Months Ended
June 30, 2020
|
|
|
Six Months Ended
June 30, 2019
|
|
|
|
Average
Recorded
Investment
(1)
|
|
|
Interest
Income
Recognized
(2)
|
|
|
Average
Recorded
Investment
(1)
|
|
|
Interest
Income
Recognized
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
1,965
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
Multifamily residential and residential mixed-use
|
|
|
954
|
|
|
|
6
|
|
|
|
589
|
|
|
|
22
|
|
Commercial real estate and commercial mixed-use
|
|
|
1,039
|
|
|
|
1
|
|
|
|
6,234
|
|
|
|
189
|
|
Total with no related allowance recorded
|
|
|
3,958
|
|
|
|
7
|
|
|
|
6,835
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I
|
|
|
10,113
|
|
|
|
—
|
|
|
|
181
|
|
|
|
6
|
|
Total
|
|
$
|
14,071
|
|
|
$
|
7
|
|
|
$
|
7,016
|
|
|
$
|
217
|
|
(1)
|
The recorded investment excludes accrued interest receivable and net deferred costs due to immateriality.
|
(2)
|
Cash basis interest and interest income recognized on accrual basis approximate each other.
|
The following tables summarize the past due status of the Company’s investment in loans (excluding deferred costs and accrued interest) as of the dates indicated:
|
|
At June 30, 2020
|
|
|
|
30 to 59
Days
Past Due
|
|
|
60 to 89
Days
Past Due
|
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
Interest
|
|
|
Non-
accrual (1)
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total
Loans
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
44
|
|
|
$
|
819
|
|
|
$
|
925
|
|
|
$
|
181,339
|
|
|
$
|
182,264
|
|
Multifamily residential and residential mixed-use
|
|
|
3,705
|
|
|
|
510
|
|
|
|
1,480
|
|
|
|
1,377
|
|
|
|
7,072
|
|
|
|
2,981,439
|
|
|
|
2,988,511
|
|
Commercial real estate and commercial mixed-use
|
|
|
1,990
|
|
|
|
—
|
|
|
|
2,167
|
|
|
|
3,003
|
|
|
|
7,160
|
|
|
|
1,496,860
|
|
|
|
1,504,020
|
|
ADC
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
136,606
|
|
|
|
136,606
|
|
Total real estate
|
|
|
5,695
|
|
|
|
572
|
|
|
|
3,691
|
|
|
|
5,199
|
|
|
|
15,157
|
|
|
|
4,796,244
|
|
|
|
4,811,401
|
|
C&I
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,176
|
|
|
|
10,176
|
|
|
|
621,342
|
|
|
|
631,518
|
|
Other
|
|
|
2
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
18
|
|
|
|
1,445
|
|
|
|
1,463
|
|
Total
|
|
$
|
5,697
|
|
|
$
|
580
|
|
|
$
|
3,691
|
|
|
$
|
15,383
|
|
|
$
|
25,351
|
|
|
$
|
5,419,031
|
|
|
$
|
5,444,382
|
|
(1)
|
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of June 30, 2020.
|
|
|
At December 31, 2019
|
|
|
|
30 to 59
Days
Past Due
|
|
|
60 to 89
Days
Past Due
|
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
Interest
|
|
|
Non-
accrual (1)
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total
Loans
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
417
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
794
|
|
|
$
|
1,211
|
|
|
$
|
147,218
|
|
|
$
|
148,429
|
|
Multifamily residential and residential mixed-use
|
|
|
214
|
|
|
|
—
|
|
|
|
1,169
|
|
|
|
153
|
|
|
|
1,536
|
|
|
|
3,383,839
|
|
|
|
3,385,375
|
|
Commercial real estate and commercial mixed-use
|
|
|
—
|
|
|
|
—
|
|
|
|
364
|
|
|
|
60
|
|
|
|
424
|
|
|
|
1,349,761
|
|
|
|
1,350,185
|
|
ADC
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
118,365
|
|
|
|
118,365
|
|
Total real estate
|
|
|
631
|
|
|
|
—
|
|
|
|
1,533
|
|
|
|
1,007
|
|
|
|
3,171
|
|
|
|
4,999,183
|
|
|
|
5,002,354
|
|
C&I
|
|
|
44
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,082
|
|
|
|
10,126
|
|
|
|
326,286
|
|
|
|
336,412
|
|
Other
|
|
|
6
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
|
9
|
|
|
|
1,763
|
|
|
|
1,772
|
|
Total
|
|
$
|
681
|
|
|
$
|
1
|
|
|
$
|
1,533
|
|
|
$
|
11,091
|
|
|
$
|
13,306
|
|
|
$
|
5,327,232
|
|
|
$
|
5,340,538
|
|
(1)
|
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2019.
|
Accruing Loans 90 Days or More Past Due
The Bank continued accruing interest on six loans with an aggregate outstanding balance of $3,691 at June 30, 2020, and two real estate loans with an aggregate outstanding balance of $1,533 at December 31, 2019, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and therefore remained on accrual status and were deemed performing assets at the dates indicated above.
Credit Quality Indicators
The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of then existing facts, conditions, and values, highly questionable and improbable.
All real estate and C&I loans not classified as Special Mention, Substandard, or Doubtful were deemed pass loans at both June 30, 2020 and December 31, 2019.
The following is a summary of the credit risk profile of real estate and C&I loans (excluding deferred costs) by internally assigned grade as of the dates indicated:
|
|
Balance at June 30, 2020
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
181,368
|
|
|
$
|
—
|
|
|
$
|
896
|
|
|
$
|
—
|
|
|
$
|
182,264
|
|
Multifamily residential and residential mixed-use
|
|
|
2,907,528
|
|
|
|
47,313
|
|
|
|
33,670
|
|
|
|
—
|
|
|
|
2,988,511
|
|
Commercial real estate and commercial mixed-use
|
|
|
1,485,575
|
|
|
|
4,783
|
|
|
|
13,662
|
|
|
|
—
|
|
|
|
1,504,020
|
|
ADC
|
|
|
136,606
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
136,606
|
|
Total real estate
|
|
|
4,711,077
|
|
|
|
52,096
|
|
|
|
48,228
|
|
|
|
—
|
|
|
|
4,811,401
|
|
C&I
|
|
|
618,214
|
|
|
|
2,058
|
|
|
|
1,164
|
|
|
|
10,082
|
|
|
|
631,518
|
|
Total Real Estate and C&I
|
|
$
|
5,329,291
|
|
|
$
|
54,154
|
|
|
$
|
49,392
|
|
|
$
|
10,082
|
|
|
$
|
5,442,919
|
|
|
|
Balance at December 31, 2019
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
147,635
|
|
|
$
|
—
|
|
|
$
|
794
|
|
|
$
|
—
|
|
|
$
|
148,429
|
|
Multifamily residential and residential mixed-use
|
|
|
3,319,226
|
|
|
|
14,606
|
|
|
|
51,543
|
|
|
|
—
|
|
|
|
3,385,375
|
|
Commercial real estate and commercial mixed-use
|
|
|
1,334,518
|
|
|
|
4,840
|
|
|
|
10,827
|
|
|
|
—
|
|
|
|
1,350,185
|
|
ADC
|
|
|
118,365
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
118,365
|
|
Total real estate
|
|
|
4,919,744
|
|
|
|
19,446
|
|
|
|
63,164
|
|
|
|
—
|
|
|
|
5,002,354
|
|
C&I
|
|
|
325,296
|
|
|
|
1,034
|
|
|
|
—
|
|
|
|
10,082
|
|
|
|
336,412
|
|
Total Real Estate and C&I
|
|
$
|
5,245,040
|
|
|
$
|
20,480
|
|
|
$
|
63,164
|
|
|
$
|
10,082
|
|
|
$
|
5,338,766
|
|
The following is a summary of the credit risk profile of other loans:
|
|
Balance at
|
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Performing
|
|
$
|
1,455
|
|
|
$
|
1,770
|
|
Non-accrual
|
|
|
8
|
|
|
|
2
|
|
Total
|
|
$
|
1,463
|
|
|
$
|
1,772
|
|
The Company recognizes operating lease assets and corresponding lease liabilities related to its office facilities and retail branches. The operating lease assets represent the Company’s right to use an underlying asset for the lease term, and the lease liability represents the Company’s obligation to make lease payments over the lease term.
The operating lease asset and lease liability are determined at the commencement date of the lease based on the present value of the lease payments. As most of our leases do not provide an implicit rate, the Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at the lease commencement date.
The Company made a policy election to exclude the recognition requirements of ASU 2016-02 to short-term leases, those leases with original terms of 12 months or less. Short-term lease payments are recognized in the income statement on a straight-line basis over the lease term. Certain leases may include one or more options to renew. The exercise of lease renewal options is typically at the Company’s discretion and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised. Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not sublease any of its leased properties. The Company does not lease properties from any related parties.
Maturities of the Company’s operating lease liabilities at June 30, 2020 are as follows:
|
|
Rent to be Capitalized
|
|
2020
|
|
$
|
3,501
|
|
2021
|
|
|
7,030
|
|
2022
|
|
|
6,829
|
|
2023
|
|
|
5,870
|
|
2024
|
|
|
5,985
|
|
Thereafter
|
|
|
19,108
|
|
Total undiscounted lease payments
|
|
|
48,323
|
|
Less amounts representing interest
|
|
|
5,590
|
|
Lease liability
|
|
$
|
42,733
|
|
Other information related to operating leases was as follows:
|
|
For Three Months Ended
June 30,
|
|
|
For Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating lease cost
|
|
$
|
1,628
|
|
|
$
|
1,621
|
|
|
$
|
3,231
|
|
|
$
|
3,241
|
|
|
|
At June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Weighted average remaining lease term
|
|
7.7 years
|
|
|
8.5 years
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
3,550
|
|
|
$
|
3,433
|
|
Weighted average discount rate
|
|
|
3.23
|
%
|
|
|
3.25
|
%
|
9.
|
DERIVATIVES AND HEDGING ACTIVITIES
|
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loan portfolio.
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. The Company engages in both cash flow hedges and freestanding derivatives.
Cash Flow Hedges
Cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company uses these types of derivatives to hedge the variable cash flows associated with existing or forecasted issuances of short-term borrowings debt.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that an additional $9,571 will be reclassified as an increase to interest expense.
The Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of twenty-four months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
During the three month period ended March 31, 2020, the Company terminated two derivatives with notional values totaling $30,000, resulting in a termination value of $175 which will be recognized in interest expense over the remaining term of the original derivative.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition as of the periods indicated.
|
|
At June 30, 2020
|
|
|
At December 31, 2019
|
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair
Value
Assets
|
|
|
Fair
Value
Liabilities
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair
Value
Assets
|
|
|
Fair
Value
Liabilities
|
|
Included in other assets/(liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps related to FHLBNY advances
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
7
|
|
|
$
|
130,000
|
|
|
$
|
1,081
|
|
|
$
|
—
|
|
Interest rate swaps related to FHLBNY advances
|
|
|
38
|
|
|
$
|
750,000
|
|
|
$
|
—
|
|
|
$
|
30,504
|
|
|
|
19
|
|
|
$
|
315,000
|
|
|
$
|
—
|
|
|
$
|
7,718
|
|
The table below presents the effect of the cash flow hedge accounting on Accumulated Other Comprehensive Income (Loss) as of June 30, 2020 and 2019.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of loss recognized in other comprehensive income
|
|
$
|
(4,617
|
)
|
|
$
|
(5,745
|
)
|
|
$
|
(25,198
|
)
|
|
$
|
(8,673
|
)
|
Amount of gain (loss) reclassified from other comprehensive income into interest expense
|
|
|
(1,156
|
)
|
|
|
332
|
|
|
|
(1,360
|
)
|
|
|
688
|
|
All cash flow hedges are recorded gross on the balance sheet.
A portion of the cash flow hedges involve derivative agreements with the FHLBNY. These derivatives (with the FHLBNY) are cross collateralized with the Bank’s existing loan portfolio and as such do not require any additional cash collateral. A portion of the cash flow hedges involve derivative agreements with other third-party counterparties that contain provisions requiring the Bank to post cash collateral if the derivative exposure exceeds a threshold amount. As of June 30, 2020, posted collateral to the other third-party counterparties was $6,773.
Freestanding Derivatives
The Company maintains an interest-rate risk protection program for its loan portfolio, which was established in 2019, in order to offer loan level derivatives with certain borrowers and to generate loan level derivative income. The Company enters into interest rate swap or interest rate floor agreements with borrowers. These interest rate derivatives are designed such that the borrower synthetically attains a fixed-rate loan, while the Company receives floating rate loan payments. The Company offsets the loan level interest rate swap exposure by entering into an offsetting interest rate swap or interest rate floor with an unaffiliated and reputable bank counterparties. These interest rate derivatives do not qualify as designated hedges, under ASU 815; therefore, each interest rate derivative is accounted for as a freestanding derivative. The notional amount of the interest rate derivatives do not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate derivative agreements. The following table reflects freestanding derivatives included in the Consolidated Statements of Financial Condition as of the period indicated:
|
|
At June 30, 2020
|
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair Value
Assets
|
|
|
Fair Value
Liabilities
|
|
Included in other assets/(liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan level interest rate swaps with borrower
|
|
|
30
|
|
|
$
|
277,792
|
|
|
$
|
20,019
|
|
|
$
|
—
|
|
Loan level interest rate floors with borrower
|
|
|
7
|
|
|
|
94,492
|
|
|
|
—
|
|
|
|
1,544
|
|
Loan level interest rate swaps with third-party counterparties
|
|
|
30
|
|
|
|
277,792
|
|
|
|
—
|
|
|
|
20,019
|
|
Loan level interest rate floors with third-party counterparties
|
|
|
7
|
|
|
|
94,492
|
|
|
|
1,544
|
|
|
|
—
|
|
|
|
At December 31, 2019
|
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair Value
Assets
|
|
|
Fair Value
Liabilities
|
|
Included in other assets/(liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan level interest rate swaps with borrower
|
|
|
7
|
|
|
$
|
61,038
|
|
|
$
|
$1,347
|
|
|
$
|
—
|
|
Loan level interest rate swaps with borrower
|
|
|
1
|
|
|
|
7,205
|
|
|
|
—
|
|
|
|
15
|
|
Loan level interest rate swaps with third-party counterparties
|
|
|
7
|
|
|
|
61,038
|
|
|
|
—
|
|
|
|
1,347
|
|
Loan level interest rate swaps with third-party counterparties
|
|
|
1
|
|
|
|
7,205
|
|
|
|
15
|
|
|
|
—
|
|
These freestanding derivatives did not have a material impact on the Company’s results of operation or financial condition.
Loan level derivative income is recognized on the mark-to-market of the interest rate swap as a fair value adjustment at the time the transaction is closed. Total loan level derivative income is included in non-interest income as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan level derivative income
|
|
$
|
2,494
|
|
|
$
|
291
|
|
|
$
|
3,657
|
|
|
$
|
291
|
|
The interest rate swap product with the borrower is cross collateralized with the underlying loan and therefore there is no posted collateral. Certain interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. As of June 30, 2020, posted collateral was $18,847.
Credit Risk Related Contingent Features
The Company’s agreements with each of its derivative counterparties state that if the Company defaults on any of its indebtedness, it could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.
The Company’s agreements with certain of its derivative counterparties state that if the Bank fails to maintain its status as a well-capitalized institution, the Bank could be required to terminate its derivative positions with the counterparty.
As of June 30, 2020, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $31,338 for those related to FHLBNY advances and $18,475 for those related to loan level derivatives. If the Company had breached any of the above provisions at June 30, 2020, it could have been required to settle its obligations under the agreements at the termination value with the respective counterparty. There were no provisions breached for the period ended June 30, 2020.
10.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs – Significant other observable inputs such as any of the following: (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level 3 Inputs – Significant unobservable inputs for the asset or liability. Significant unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Significant unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Securities
The Company’s marketable equity securities and available-for-sale securities are reported at fair value, which were determined utilizing prices obtained from independent parties. The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Prioritization of inputs may vary on any given day based on market conditions.
All MBS, CMO and agency notes available-for-sale are guaranteed either implicitly or explicitly by GSEs as of June 30, 2020 and December 31, 2019. In accordance with the Company’s investment policy, corporate securities are rated “investment grade” at the time of purchase and the financials of the issuers are reviewed quarterly. Obtaining market values as of June 30, 2020 and December 31, 2019 for these securities utilizing significant observable inputs was not difficult due to their liquid nature.
Derivatives
Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.
The following tables present financial assets liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
Fair Value Measurements
at June 30, 2020 Using
|
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
1,503
|
|
|
$
|
1,503
|
|
|
$
|
—
|
|
|
$
|
—
|
|
International equity mutual funds
|
|
|
385
|
|
|
|
385
|
|
|
|
—
|
|
|
|
—
|
|
Fixed income mutual funds
|
|
|
3,819
|
|
|
|
3,819
|
|
|
|
—
|
|
|
|
—
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency Notes
|
|
|
35,008
|
|
|
|
—
|
|
|
|
35,008
|
|
|
|
—
|
|
Corporate Securities
|
|
|
42,720
|
|
|
|
—
|
|
|
|
42,720
|
|
|
|
—
|
|
Pass-through MBS issued by GSEs
|
|
|
191,802
|
|
|
|
—
|
|
|
|
191,802
|
|
|
|
—
|
|
Agency CMOs
|
|
|
272,477
|
|
|
|
—
|
|
|
|
272,477
|
|
|
|
—
|
|
Derivative – freestanding derivatives, net
|
|
|
18,475
|
|
|
|
—
|
|
|
|
18,475
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative – cash flow hedges
|
|
|
30,504
|
|
|
|
—
|
|
|
|
30,504
|
|
|
|
—
|
|
Derivative – freestanding derivatives, net
|
|
|
18,475
|
|
|
|
—
|
|
|
|
18,475
|
|
|
|
—
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2019 Using
|
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities (Registered Mutual Funds)
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
1,657
|
|
|
$
|
1,657
|
|
|
$
|
—
|
|
|
$
|
—
|
|
International equity mutual funds
|
|
|
420
|
|
|
|
420
|
|
|
|
—
|
|
|
|
—
|
|
Fixed income mutual funds
|
|
|
3,817
|
|
|
|
3,817
|
|
|
|
—
|
|
|
|
—
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency Notes
|
|
|
19,935
|
|
|
|
—
|
|
|
|
19,935
|
|
|
|
—
|
|
Corporate Securities
|
|
|
28,596
|
|
|
|
—
|
|
|
|
28,596
|
|
|
|
—
|
|
Pass-through MBS issued by GSEs
|
|
|
247,483
|
|
|
|
—
|
|
|
|
247,483
|
|
|
|
—
|
|
Agency CMOs
|
|
|
254,981
|
|
|
|
—
|
|
|
|
254,981
|
|
|
|
—
|
|
Derivative – cash flow hedges
|
|
|
1,081
|
|
|
|
—
|
|
|
|
1,081
|
|
|
|
—
|
|
Derivative – freestanding derivatives
|
|
|
1,362
|
|
|
|
—
|
|
|
|
1,362
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative – cash flow hedges
|
|
|
7,718
|
|
|
|
—
|
|
|
|
7,718
|
|
|
|
—
|
|
Derivative – freestanding derivatives
|
|
|
1,362
|
|
|
|
—
|
|
|
|
1,362
|
|
|
|
—
|
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a nonrecurring basis include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. There were no impaired loans carried at fair value at June 30, 2020 or December 31, 2019.
Financial Instruments Not Measured at Fair Value
The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 24 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K.
The following tables present the carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or nonrecurring is as follows for the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
Fair Value Measurements
at June 30, 2020 Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
117,013
|
|
|
$
|
117,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
117,013
|
|
Loans, net
|
|
|
5,401,890
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,413,499
|
|
|
|
5,413,499
|
|
Accrued interest receivable
|
|
|
27,506
|
|
|
|
—
|
|
|
|
1,559
|
|
|
|
25,947
|
|
|
|
27,506
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
|
3,044,858
|
|
|
|
3,044,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,044,858
|
|
Certificates of Deposits (“CDs”)
|
|
|
1,393,554
|
|
|
|
—
|
|
|
|
1,400,677
|
|
|
|
—
|
|
|
|
1,400,677
|
|
Escrow and other deposits
|
|
|
87,646
|
|
|
|
87,646
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,646
|
|
FHLBNY Advances
|
|
|
1,017,300
|
|
|
|
—
|
|
|
|
1,026,525
|
|
|
|
—
|
|
|
|
1,026,525
|
|
Subordinated debt, net
|
|
|
113,979
|
|
|
|
—
|
|
|
|
109,379
|
|
|
|
—
|
|
|
|
109,379
|
|
Accrued interest payable
|
|
|
1,961
|
|
|
|
—
|
|
|
|
1,961
|
|
|
|
—
|
|
|
|
1,961
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2019 Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
155,488
|
|
|
$
|
155,488
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
155,488
|
|
Loans, net
|
|
|
5,312,097
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,301,708
|
|
|
|
5,301,708
|
|
Accrued interest receivable
|
|
|
18,891
|
|
|
|
—
|
|
|
|
1,674
|
|
|
|
17,217
|
|
|
|
18,891
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
|
2,709,756
|
|
|
|
2,709,756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,709,756
|
|
CDs
|
|
|
1,572,869
|
|
|
|
—
|
|
|
|
1,576,706
|
|
|
|
—
|
|
|
|
1,576,706
|
|
Escrow and other deposits
|
|
|
76,481
|
|
|
|
76,481
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76,481
|
|
FHLBNY Advances
|
|
|
1,092,250
|
|
|
|
—
|
|
|
|
1,093,964
|
|
|
|
—
|
|
|
|
1,093,964
|
|
Subordinated debt, net
|
|
|
113,906
|
|
|
|
—
|
|
|
|
114,769
|
|
|
|
—
|
|
|
|
114,769
|
|
Other borrowings
|
|
|
110,000
|
|
|
|
110,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
110,000
|
|
Accrued interest payable
|
|
|
4,570
|
|
|
|
—
|
|
|
|
4,570
|
|
|
|
—
|
|
|
|
4,570
|
|
11.
|
RETIREMENT AND POSTRETIREMENT PLANS
|
The Holding Company or the Bank maintains the Retirement Plan of Dime Community Bank (the “Employee Retirement Plan”), the Retirement Plan for Board Members of Dime Community Bancshares, Inc. (the “Outside Director Retirement Plan”), the BMP, and the Postretirement Welfare Plan of Dime Community Bank (the “Postretirement Plan”).
The components of net periodic costs are included in other non-interest expense in the Consolidated Statements of Income. Net expenses associated with these plans were comprised of the following components:
|
|
Three Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
|
241
|
|
|
|
10
|
|
|
|
312
|
|
|
|
13
|
|
Expected return on assets
|
|
|
(428
|
)
|
|
|
—
|
|
|
|
(382
|
)
|
|
|
—
|
|
Unrecognized past service liability
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
Amortization of unrealized loss (gain)
|
|
|
274
|
|
|
|
—
|
|
|
|
243
|
|
|
|
(3
|
)
|
Net periodic cost
|
|
$
|
87
|
|
|
$
|
8
|
|
|
$
|
173
|
|
|
$
|
8
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
|
482
|
|
|
|
20
|
|
|
|
625
|
|
|
|
27
|
|
Expected return on assets
|
|
|
(856
|
)
|
|
|
—
|
|
|
|
(764
|
)
|
|
|
—
|
|
Unrecognized past service liability
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
Amortization of unrealized loss (gain)
|
|
|
548
|
|
|
|
—
|
|
|
|
486
|
|
|
|
(6
|
)
|
Net periodic cost
|
|
$
|
174
|
|
|
$
|
16
|
|
|
$
|
347
|
|
|
$
|
17
|
|
The following table presents the Company’s planned contributions to, or benefit payments on behalf of each benefit plan as disclosed in its consolidated financial statements for the year ended December 31, 2019, as well as the actual contributions to, or benefit payments on behalf of each benefit plan during the period indicated:
|
|
Planned Contributions/Benefit
|
|
|
Actual Contributions/Benefit Payments for the
|
|
|
|
Payments for the Year Ended
December 31, 2020
|
|
|
Three Months Ended
June 30, 2020
|
|
|
Six Months Ended
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Employee Retirement Plan
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Outside Director Retirement Plan
|
|
|
263
|
|
|
|
56
|
|
|
|
112
|
|
Post Retirement Plan
|
|
|
109
|
|
|
|
137
|
|
|
|
274
|
|
BMP
|
|
|
569
|
|
|
|
57
|
|
|
|
95
|
|
The Company expects to make the remainder of the contributions to, or benefit payments on behalf of, each benefit plan during the year ended December 31, 2020, except for the Employee Retirement Plan as there is a surplus and no contributions are required.
The BMP exists in order to compensate executive officers for any curtailments in benefits due to statutory limitations on qualifying benefit plans. There were no retirement distributions for the three month or six month periods ended June 30, 2020 or 2019.
12.
|
STOCK-BASED COMPENSATION
|
The Company maintains the Dime Community Bancshares, Inc. 2001 Stock Incentive Plan for Outside Directors, Officers and Employees, the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees, the 2013 Equity and Incentive Plan (“2013 Equity Plan”), and the 2020 Equity and Incentive Plan (“2020 Equity Plan”) (collectively, the “Stock Plans”), which are discussed more fully in Note 22 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2019, and which are subject to the accounting requirements of ASC 505-50 and ASC 718. The 2020 Equity Plan was approved during the three months ended June 30, 2020.
Stock Option Awards
The following table presents a summary of activity related to stock options granted under the Stock Plans, and changes during the period then ended:
|
|
Number of
Options
|
|
|
Weighted-Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Years
|
|
|
Aggregate
Intrinsic Value
|
|
Options outstanding at January 1, 2020
|
|
|
42,031
|
|
|
$
|
14.63
|
|
|
|
|
|
|
|
Options granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Options expired
|
|
|
(4,077
|
)
|
|
|
12.75
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(3,044
|
)
|
|
|
12.75
|
|
|
|
|
|
|
|
Options outstanding at June 30, 2020
|
|
|
34,910
|
|
|
$
|
15.01
|
|
|
|
1.1
|
|
|
$
|
—
|
|
Options vested and exercisable at June 30, 2020
|
|
|
34,910
|
|
|
$
|
15.01
|
|
|
|
1.1
|
|
|
$
|
—
|
|
Information related to stock options during each period is as follows:
|
|
For Three Months Ended June 30,
|
|
|
For Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Cash received for option exercise cost
|
|
$
|
38
|
|
|
$
|
73
|
|
|
$
|
38
|
|
|
$
|
73
|
|
Income tax benefit recognized on stock option exercises
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
|
18
|
|
Intrinsic value of options exercised
|
|
|
8
|
|
|
|
103
|
|
|
|
8
|
|
|
|
103
|
|
Restricted Stock Awards
The Company has made restricted stock award grants to outside Directors and certain officers under the Stock Plans. Typically, awards to outside Directors fully vest on the first anniversary of the grant date, while awards to officers may vest in equal annual installments over a three or four-year period or at the end of the pre-determined requisite period. All awards were made at the fair value of Common Stock on the grant date. Compensation expense on all restricted stock awards are based upon the fair value of the shares on the respective dates of the grant.
The following table presents a summary of activity related to the RSAs granted, and changes during the period then ended:
|
|
Number of
Shares
|
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Unvested allocated shares outstanding at January 1, 2020
|
|
|
256,575
|
|
|
$
|
19.79
|
|
Shares granted
|
|
|
120,478
|
|
|
|
13.93
|
|
Shares vested
|
|
|
(63,161
|
)
|
|
|
19.80
|
|
Shares forfeited
|
|
|
(36,283
|
)
|
|
|
17.93
|
|
Unvested allocated shares at June 30, 2020
|
|
|
277,609
|
|
|
$
|
17.49
|
|
Information related to RSAs during each period is as follows:
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Compensation expense recognized
|
|
$
|
406
|
|
|
$
|
354
|
|
|
$
|
867
|
|
|
$
|
643
|
|
Income tax benefit (expense) recognized on vesting of RSA
|
|
|
(61
|
)
|
|
|
7
|
|
|
|
(57
|
)
|
|
|
10
|
|
As of June 30, 2020, there was $3,620 of total unrecognized compensation cost related to unvested restricted stock awards. The cost is expected to be recognized over a weighted-average period of 2.7 years.
Performance Based Equity Awards
The Company maintains the LTIP, a long term incentive award program for certain officers, which meets the criteria for equity-based accounting. For each award, threshold (50% of target), target (100% of target) and stretch (150% of target) opportunities are eligible to be earned over a three-year performance period based on the Company’s relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently. Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. Shares are issued at the stretch opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.
The following table presents a summary of activity related to performance-based equity awards, and changes during the period then ended:
|
|
Number of
Shares
|
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Maximum aggregate share payout at January 1, 2020
|
|
|
214,948
|
|
|
$
|
18.96
|
|
Shares granted
|
|
|
102,080
|
|
|
|
9.96
|
|
Shares vested
|
|
|
—
|
|
|
|
—
|
|
Shares forfeited
|
|
|
(61,525
|
)
|
|
|
15.22
|
|
Maximum aggregate share payout at June 30, 2020
|
|
|
255,503
|
|
|
$
|
14.87
|
|
Minimum aggregate share payout
|
|
|
—
|
|
|
|
—
|
|
Expected aggregate share payout
|
|
|
147,697
|
|
|
$
|
13.75
|
|
Information related to LTIP share awards during each period is as follows:
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Compensation expense recognized
|
|
$
|
(3
|
)
|
|
$
|
155
|
|
|
$
|
152
|
|
|
$
|
81
|
|
Income tax benefit recognized on vesting of LTIP
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
10
|
|
Sales Incentive Awards
The Company established the SIP, a sales incentive award program for certain officers, which meets the criteria for equity-based accounting. For each quarter an individual can earn their shares based on their sales performance in that quarter. The shares then vest one year from the quarter in which they are earned. Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. They are issued at the maximum opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.
The following table presents a summary of activity related to sales incentive equity awards, and changes during the period then ended:
|
|
Number of
Shares
|
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Maximum aggregate share payout at January 1, 2020
|
|
|
19,396
|
|
|
$
|
19.15
|
|
Shares granted
|
|
|
72,291
|
|
|
|
13.32
|
|
Shares vested
|
|
|
(10,144
|
)
|
|
|
19.14
|
|
Shares forfeited
|
|
|
(2,208
|
)
|
|
|
19.14
|
|
Maximum aggregate share payout at June 30, 2020
|
|
|
79,335
|
|
|
$
|
13.83
|
|
Minimum aggregate share payout
|
|
|
—
|
|
|
|
—
|
|
Expected aggregate share payout
|
|
|
79,335
|
|
|
$
|
13.83
|
|
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Compensation expense recognized
|
|
$
|
75
|
|
|
$
|
(19
|
)
|
|
$
|
130
|
|
|
$
|
51
|
|
Income tax (espense) recognized on vesting of awards
|
|
|
(49
|
)
|
|
|
—
|
|
|
|
(43
|
)
|
|
|
—
|
|
During the three months ended June 30, 2020 and 2019, the Company’s consolidated effective tax rates were 21.6% and 25.4%, respectively. During the six months ended June 30, 2020 and June 30, 2019, the Company’s consolidated effective tax rates were 21.6% and 25.2%, respectively. There were no significant unusual income tax items during the six-month periods ended either June 30, 2020 or 2019.
On July 1, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bridge Bancorp, Inc. (“Bridge Bancorp”). The Merger Agreement provides that upon the terms and subject to the conditions set forth therein, the Company will merge with and into Bridge Bancorp (the “Merger”), with Bridge Bancorp as the surviving corporation under the name “Dime Community Bancshares, Inc.” (the “Surviving Corporation”). The Surviving Corporation will be headquartered in Hauppauge, New York, and will have a corporate office located in New York, New York. At the effective time of the Merger, each outstanding share of Company common stock, par value $0.01 per share, will be converted into the right to receive 0.648 shares of Bridge Bancorp common stock, par value $0.01 per share.
Following the Merger, Dime Community Bank will merge with and into BNB Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of Bridge Bancorp, with BNB Bank as the surviving bank, under the name “Dime Community Bank.”
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
General
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.
In addition to the Bank, the Holding Company’s direct and indirect subsidiaries consist of six corporations and one limited liability company, which are wholly-owned by the Bank. The following table presents an overview of the Holding Company’s indirect subsidiaries, other than the Bank, as of June 30, 2020:
Direct Subsidiaries of the Bank
|
Year/ State of
Incorporation
|
Primary Business Activities
|
Boulevard Funding Corp.
|
1981 / New York
|
Management and ownership of real estate.
|
DSBW Preferred Funding Corp.
|
1998 / Delaware
|
Real Estate Investment Trust investing in multifamily
residential and commercial real estate loans.
|
DSBW Residential Preferred Funding Corp.
|
1998 / Delaware
|
Real Estate Investment Trust investing in one-to-four
family residential loans.
|
Dime Insurance Agency Inc. (f/k/a Havemeyer Investments, Inc.)
|
1997 / New York
|
Sale of non-FDIC insured investment products.
|
Dime Reinvestment Corporation
|
2004 / Delaware
|
Community Development Entity. Currently inactive.
|
195 Havemeyer Corp.
|
2008 / New York
|
Management and ownership of real estate. Currently inactive.
|
DSB Holdings NY, LLC
|
2015 / New York
|
Management and ownership of real estate. Currently inactive.
|
Executive Summary
The Holding Company’s primary business is the ownership of the Bank. The Company’s consolidated results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Bank additionally generates non-interest income such as service charges and other fees, mortgage banking related income, income associated with bank owned life insurance (“BOLI”) and loan level derivative income. Non-interest expense primarily consists of employee compensation and benefits, federal deposit insurance premiums, data processing costs, occupancy and equipment, marketing and other operating expenses. The Company’s consolidated results of operations are also significantly affected by general economic and competitive conditions (particularly fluctuations in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies.
The Bank’s primary deposit strategy is generally to increase its product and service utilization for each depositor, and to increase its household and deposit market shares in the communities that it serves. In recent years, particular emphasis has been placed upon growing individual and business commercial checking account balances. The Bank also actively strives to obtain checking account balances affiliated with the operation of the collateral underlying its real estate and C&I loans, as well as personal deposit accounts from its borrowers. Historically, the Bank’s primary lending strategy included the origination of, and investment in, real estate loans secured by multifamily and mixed-use properties, and, to a lesser extent, real estate loans secured by commercial real estate properties, primarily located in the greater NYC metropolitan area. As part of the development of the Bank’s Business Banking division, which began in 2017, the Bank has been focused on products and services to serve both the credit and business banking needs in its footprint. Additionally, the Bank resumed offering one-to-four family loan products.
The Business Banking division is focused on total relationship banking and will enable the Bank to diversify its loan portfolio into areas such as C&I loans, Small Business Administration (“SBA”) loans (a portion of which is guaranteed by the SBA), ADC loans, finance loans and leases, one-to-four family loans and consumer loans. These business lines are intended to supplement core deposit growth and provide greater funding diversity. In the first quarter of 2017, the Bank hired seasoned executives, and bolstered its lending and credit and administrative staff. In the third quarter of 2017, the Bank was approved by the SBA as a lender, and in December 2018 the Bank received “Preferred Lender” status from the SBA, thus better positioning the Business Banking division for future expansion.
Recent Events
On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $75.0 million 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. 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 $57.5 million 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 Company will 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, beginning on May 15, 2020. 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.
On July 1, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bridge Bancorp, Inc. (“Bridge Bancorp”). The Merger Agreement provides that upon the terms and subject to the conditions set forth therein, the Company will merge with and into Bridge Bancorp (the “Merger”), with Bridge Bancorp as the surviving corporation under the name “Dime Community Bancshares, Inc.” (the “Surviving Corporation”). The Surviving Corporation will be headquartered in Hauppauge, New York, and will have a corporate office located in New York, New York. At the effective time of the Merger, each outstanding share of Company common stock, par value $0.01 per share, will be converted into the right to receive 0.648 shares Bridge Bancorp common stock, par value $0.01 per share.
Following the Merger, Dime Community Bank will merge with and into BNB Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of Bridge Bancorp, with BNB Bank as the surviving bank, under the name “Dime Community Bank.”
Recent Developments Relating to the COVID-19 Pandemic
The disruption to the economy and financial markets brought on by the COVID-19 pandemic will continue to have an impact on the Company’s operations and financial results. As Banking was designated by New York State as an essential business, the Company remains committed to being a source of capital to businesses in its footprint. Over the past several years, the Company has taken numerous steps, including hiring personnel and adding new processes and systems, that have put the bank in a position to help our business customers, through programs such as the SBA Payroll Protection Program. Our retail branch office locations remain open to conduct business. The locations are following the Centers for Disease Control and Prevention guidance on safe practices and social distancing, including social distancing signs and floor markings to guide employees and customers. All employees and customers must wear masks and floor traffic is limited to three customers in a branch. The Bank also offers mobile and digital banking platforms.
The Company also prioritizes the well-being of employees. The Company has deployed its Business Continuity Plans and shifted to a remote working environment during the “New York State on PAUSE” executive order, which began on March 22, 2020. Over 200 associates, 100% of non-branch staff, are using remote desktop software to re-create their desktop environment in order to work from home. The Company has not furloughed any of its employees.
The Company continues to follow the guidance of New York State in the reopening phases, with phase four beginning for New York City on July 20, 2020. The Company has assessed its own internal “return to office” strategy, and has developed a timeline and guidelines to help bring employees back safely into the office.
Financial position and results of operations
The impact of the COVID-19 pandemic is expected to continue to evolve and may negatively affect the Company’s operations and the operations of the Company’s clients in future periods. Additionally, certain provisions of the CARES Act and other regulatory relief efforts could also have a material impact on the Company’s operations.
|
•
|
On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points, followed by an additional reduction of 100 basis points on March 16, 2020. These reductions in interest rates may adversely affect the Company’s financial condition and results of operations.
|
|
•
|
The Company’s interest income could be reduced due to COVID-19. In adherence with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their interest and /or principal payments. While interest is expected to still accrue to income during the deferral period, should deterioration in the financial condition of the borrowers that would not support ultimate repayment of interest emerge, interest income accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted.
|
|
•
|
The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis.
|
|
•
|
The Company’s operating expenses could increase due to additional expenditures for salaries in effort to compensate employees who are working in the front lines of retail operations, supporting a remote work environment, information technology and cybersecurity costs, and facility maintenance and cleaning costs.
|
At this time, the Company is unable to project the materiality of the aforementioned items on the financial position and results of operations that could occur due to the uncertainties around the impact of COVID-19.
Capital and liquidity
As of June 30, 2020, the Company and Bank capital ratios were in excess of all regulatory requirements. While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by credit losses.
The Company relies on cash on hand as well as capital contributions from its subsidiary bank to service its debt and pay dividends to both its preferred and common stockholders. If its subsidiary bank is unable to make capital contributions to it for an extended period of time, the Company may not be able to service its debt or pay dividends.
The Company maintains access to multiple sources of liquidity, including unused borrowing capacity with the FHLBNY of $1.24 billion as of June 30, 2020, and access to borrow or lend funds through American Fund Exchange (“AFX”) on an overnight or short-term basis with other member institutions. The availability of funds with AFX changes daily. Wholesale funding markets have remained open to us, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.
Asset valuation
Currently, the Company does not expect COVID-19 to affect its ability to timely account for the assets on its balance sheet. While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP. These assumptions could change in future periods.
Business Continuity Plan
When “New York State on PAUSE” was initiated, the Company had already invoked its Board-approved Business Continuity Plan (“BCP”), that was updated earlier in the year, to address specific risks and operational concerns related to the COVID-19 pandemic. The BCP includes a remote working environment for many of the Company’s back office personnel, strategic branch closures for locations that do not have plexiglass barriers, and other considerations. No material operational or internal control challenges or risks have been identified to date. The Company does not currently anticipate significant challenges to its ability to maintain its systems.
Lending operations and accommodations to borrowers
The Company’s business, financial condition and results of operations generally rely upon the ability of the Bank’s borrowers to repay their loans, the value of collateral underlying the Bank’s secured loans, and demand for loans and other products and services the Bank offers, which are highly dependent on the business environment in the Bank’s primary markets where it operates.
Consistent with regulatory guidance to work with borrowers during the unprecedented situation caused by the COVID-19 pandemic and as outlined in the CARES Act, the Company established a formal payment deferral program in April 2020 for borrowers that have been adversely affected by the pandemic. The payment deferral programs, which formally began in the month of April 2020, primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan. As of June 30, 2020, the Company had 254 loans, representing outstanding loan balances of $916.3 million, on payment deferral. In accordance with interagency guidance issued in March 2020, these short-term deferrals are not considered troubled debt restructurings. In addition, the risk-rating on COVID-19 modified loans did not change, and these loans will not be considered past due until after the deferral period ends. The credit quality of these loans will be re-evaluated after the deferral period ends.
Of the tranche of $489.1 million of payment deferrals that were granted in the month of April 2020 (for the April 1, 2020 through June 30, 2020 timeframe), $194.9 million, or 39.8%, had either begun to repay in accordance to their original loan agreements or indicated that no additional payment deferrals will be needed. For the remaining loans in the April tranche, loan payment deferrals are being extended for another three-month period. Of the $294.1 million of loans in the April tranche where deferrals were extended for another three-month period, $120.1 million are paying full escrow and interest (i.e., only principal is being deferred).
With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company is actively participating in assisting its customers with applications for resources through the program. Dime’s PPP loans generally have a two-year term and earn interest at 1%. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of June 30, 2020, the Company had 2,358 PPP loans totaling $310.5 million, net of deferred fees. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish additional allowance for loan loss through additional provision expense charged to earnings.
The Bank is closely monitoring the rapid developments and uncertainties regarding the pandemic, including various segments of our loan portfolio that may be disproportionately impacted by the pandemic. As of June 30, 2020, the Company had 15 loans aggregating $27.0 million to restaurants and 13 loans aggregating $176.3 million to hotels. As of June 30, 2020, loans with payment deferrals to restaurants totaled $12.4 million and loans with payment deferrals to hotels totaled $43.1 million. The Company does not have any exposure to the energy industry, airline industry, leveraged lending, shared national credits, credits card loans, or auto loans.
Further, in sensitivity and service to its borrowers during this unprecedented time, the Company is waiving late payment fees. These waivers are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis.
We continue to monitor unfunded commitments through the pandemic, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.
Selected Financial Highlights and Other Data
(Dollars in Thousands Except Per Share Amounts)
|
|
At or For the Three
Months Ended
June 30,
|
|
|
At or For the Six Months
Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (Diluted)
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
$
|
0.59
|
|
|
$
|
0.68
|
|
Cash dividends paid per share
|
|
|
0.14
|
|
|
|
0.14
|
|
|
|
0.28
|
|
|
|
0.28
|
|
Book value per share
|
|
|
17.07
|
|
|
|
16.96
|
|
|
|
17.07
|
|
|
|
16.96
|
|
Dividend Payout Ratio
|
|
|
40.00
|
%
|
|
|
38.89
|
%
|
|
|
47.46
|
%
|
|
|
41.18
|
%
|
Performance and Other Selected Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.81
|
%
|
|
|
0.82
|
%
|
|
|
0.68
|
%
|
|
|
0.77
|
%
|
Return on average common equity
|
|
|
7.96
|
|
|
|
8.59
|
|
|
|
6.68
|
|
|
|
8.10
|
|
Net interest spread
|
|
|
2.61
|
|
|
|
2.08
|
|
|
|
2.53
|
|
|
|
2.05
|
|
Net interest margin
|
|
|
2.86
|
|
|
|
2.38
|
|
|
|
2.79
|
|
|
|
2.35
|
|
Average interest-earning assets to average interest-bearing liabilities
|
|
|
124.97
|
|
|
|
119.47
|
|
|
|
122.94
|
|
|
|
118.80
|
|
Non-interest expense to average assets
|
|
|
1.84
|
|
|
|
1.40
|
|
|
|
1.76
|
|
|
|
1.39
|
|
Efficiency Ratio
|
|
|
60.67
|
|
|
|
56.83
|
|
|
|
59.18
|
|
|
|
57.80
|
|
Loan-to-Deposit ratio at end of period
|
|
|
122.67
|
|
|
|
124.71
|
|
|
|
122.67
|
|
|
|
124.71
|
|
Effective tax rate
|
|
|
21.59
|
|
|
|
25.42
|
|
|
|
21.60
|
|
|
|
25.17
|
|
Asset Quality Summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans (1)
|
|
$
|
15,383
|
|
|
$
|
2,538
|
|
|
$
|
15,383
|
|
|
$
|
2,538
|
|
Non-performing assets
|
|
|
15,383
|
|
|
|
2,538
|
|
|
|
15,383
|
|
|
|
2,538
|
|
Net charge-offs
|
|
|
31
|
|
|
|
358
|
|
|
|
21
|
|
|
|
520
|
|
Non-performing assets/Total assets
|
|
|
0.24
|
%
|
|
|
0.04
|
%
|
|
|
0.24
|
%
|
|
|
0.04
|
%
|
Non-performing loans/Total loans
|
|
|
0.28
|
|
|
|
0.05
|
|
|
|
0.28
|
|
|
|
0.05
|
|
Allowance for loan loss/Total loans
|
|
|
0.78
|
|
|
|
0.38
|
|
|
|
0.78
|
|
|
|
0.38
|
|
Allowance for loan loss/Non-performing loans
|
|
|
276.23
|
|
|
|
832.70
|
|
|
|
276.23
|
|
|
|
832.70
|
|
(1)
|
Non-performing loans are defined as all loans on non-accrual status.
|
Critical Accounting Policies
The Company’s policies with respect to the methodologies it uses to determine the allowance for loan losses (including reserves for loan commitments), are its most critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations, involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions or estimates could result in material variations in the Company’s consolidated results of operations or financial condition.
Allowance for Loan Losses. The Bank’s methods and assumptions utilized to periodically determine its allowance for loan losses are summarized in Note 7 to the Company’s condensed consolidated financial statements.
Liquidity and Capital Resources
The Board of Directors of the Bank has approved a liquidity policy that it reviews and updates at least annually. Senior management is responsible for implementing the policy. The Bank’s ALCO is responsible for general oversight and strategic implementation of the policy and management of the appropriate departments are designated responsibility for implementing any strategies established by ALCO. On a daily basis, appropriate senior management receives a current cash position report and one-week forecast to ensure that all short-term obligations are timely satisfied and that adequate liquidity exists to fund future activities. Reports detailing the Bank’s liquidity reserves and forecasted cash flows are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings. In addition on a monthly basis, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.
The Bank’s primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers, and has in the past sold such loans to FNMA and FHLMC. The Company may additionally issue debt or equity under appropriate circumstances. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.
The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. As of June 30, 2020, the Bank had $5.0 million of borrowings through AFX.
The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. It must additionally compete for deposit monies against the stock and bond markets, especially during periods of strong performance in those arenas. The Bank’s deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general market increases or declines in interest rates, its deposit flows should not be materially impacted. However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.
Total deposits increased $155.8 million during the six months ended June 30, 2020, compared to an increase of $78.8 million for the six months ended June 30, 2019. Within deposits, core deposits (i.e., non-CDs) increased $335.1 million during the six months ended June 30, 2020 and decreased $165.4 million during the six months ended June 30, 2019. CDs decreased $179.3 million during the six months ended June 30, 2020 compared to an increase of $244.1 million during the six months ended June 30, 2019. The increase in deposits during the current period was primarily due to growth in the municipal deposits business and inflows of SBA PPP-related deposits. The decrease in CDs was primarily due to $242.5 million of outflows of brokered CDs.
In the event that the Bank should require funds beyond its ability or desire to generate them internally, an additional source of funds is available through its borrowing line at the FHLBNY or borrowing capacity through AFX. At June 30, 2020, the Bank had an additional unused borrowing capacity of $1.24 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank’s outstanding FHLBNY borrowings).
The Bank decreased its outstanding FHLBNY advances by $75.0 million during the six months ended June 30, 2020, compared to a $10.2 million reduction during the six months ended June 30, 2019, reflecting deposit inflows.
During the six months ended June 30, 2020, principal repayments on real estate loans (including refinanced loans) totaled $567.7 million compared to $418.6 million during the six months ended June 30, 2019. The increase resulted primarily from higher prepayment activity. During the six months ended June 30, 2020 and 2019, real estate loan originations totaled $375.6 million and $483.5 million, respectively.
During the six months ended June 30, 2020, principal repayments on C&I loans (including refinanced loans, excluding SBA PPP) totaled $79.6 million compared to $52.4 million during the six months ended June 30, 2019. During the six months ended June 30, 2020 and 2019, C&I loan originations totaled $386.3 million (including $319.4 million of PPP loans) and $142.5 million, respectively.
Sales of available-for-sale securities totaled $62.8 million and $104.1 million during the six-month periods ended June 30, 2020 and 2019, respectively. Purchases of available-for-sale securities totaled $107.3 million and $117.7 million during the six-month periods ended June 30, 2020 and 2019 respectively. Proceeds from pay downs and calls of available-for-sale securities were $67.3 million and $48.4 million for the six-month periods ended June 30, 2020 and 2019, respectively.
The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator. As a general matter, these capital requirements are based on the amount and composition of an institution’s assets. At June 30, 2020, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered “well capitalized” for all regulatory purposes.
The following table summarizes Company and Bank capital ratios calculated under the Basel III Capital Rules framework as of the period indicated:
|
|
Actual Ratios at June 30, 2020
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
Consolidated
Company
|
|
|
Basel III
Minimum
Requirement
|
|
|
To Be
Categorized as
“Well
Capitalized” (1)
|
|
Tier 1 common equity ratio
|
|
|
13.10
|
%
|
|
|
10.79
|
%
|
|
|
4.5
|
%
|
|
|
6.5
|
%
|
Tier 1 risk-based based capital ratio
|
|
|
13.10
|
|
|
|
13.20
|
|
|
|
6.0
|
|
|
|
8.0
|
|
Total risk-based based capital ratio
|
|
|
13.99
|
|
|
|
16.45
|
|
|
|
8.0
|
|
|
|
10.0
|
|
Tier 1 leverage ratio
|
|
|
9.98
|
|
|
|
10.11
|
|
|
|
4.0
|
|
|
|
5.0
|
|
(1)
|
Only the Bank is subject to these requirements.
|
In accordance with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, will be eligible to opt into a “Community Bank Leverage Ratio” framework. The leverage ratio was temporarily lowered to 8% by the Federal Reserve Board in March 2020, gradually increasing back to 9% by 2022. The framework is available for use by election in the Bank’s Call Report. Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules and will be considered to have met the “well capitalized” ratio requirements under the Prompt Corrective Action statutes. The agencies reserved the authority to disallow the use of the Community Bank Leverage Ratio by a financial institution or holding company based on the risk profile of the organization. As of June 30, 2020, the Bank has not opted into the Community Bank Leverage Ratio framework.
The Holding Company repurchased 2,249,743 and 270,136 shares of its common stock during the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, up to 619,405 shares remained available for purchase under the authorized share repurchase programs. See “Part II - Item 2. Other Information - Unregistered Sales of Equity Securities and Use of Proceeds” for additional information about repurchases of common stock.
The Holding Company paid $1.1 million in cash dividends on preferred stock during the six months ended June 30, 2020, and none during the six months ended June 30, 2019. The Holding Company paid $9.7 million and $10.1 million in cash dividends on common stock during the six months ended June 30, 2020 and 2019, respectively.
Contractual Obligations
The Bank is obligated to make rental payments under leases on certain of its branches and equipment. In addition, the Bank generally has outstanding at any time significant borrowings in the form of FHLBNY advances, or overnight or short-term borrowings, as well as customer and brokered CDs with fixed contractual interest rates.
Off-Balance Sheet Arrangements
As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to third parties, which are granted pursuant to its regular underwriting standards. Since these loan commitments may expire prior to funding, in whole or in part, the contract amounts are not estimates of future cash flows.
The following table presents off-balance sheet arrangements as of June 30, 2020:
|
|
Less than
One Year
|
|
|
One Year to
Three Years
|
|
|
Over Three
Years to
Five Years
|
|
|
Over Five
Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Credit Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available lines of credit
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stand-by letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Off-Balance Sheet Arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
General
The Bank does not originate or purchase loans, either whole loans or loans underlying mortgage-backed securities (“MBS”), which would have been considered subprime loans at origination, i.e., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history. See Note 6 to the Company’s Unaudited Condensed Consolidated Financial Statements for a discussion of evaluation for impaired securities.
COVID-19 Related Loan Deferrals
The COVID-19 pandemic has caused substantial disruptions to the global economy and the communities in which the Bank serves. In response to the pandemic, the Bank has focused on supporting borrowers that have been adversely affected by the pandemic, including making loan deferrals as needed. The payment deferral programs, which formally began in the month of April 2020, primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan. The table below presents the loans with payment deferrals as of June 30, 2020:
|
|
June 30, 2020
|
|
|
|
Number
of Loans
|
|
|
Balance
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
|
19
|
|
|
$
|
23,824
|
|
Multifamily residential and residential mixed-use real estate
|
|
|
126
|
|
|
|
544,197
|
|
Commercial real estate and commercial mixed-use
|
|
|
103
|
|
|
|
335,597
|
|
C&I
|
|
|
6
|
|
|
|
12,644
|
|
Total
|
|
|
254
|
|
|
$
|
916,262
|
|
Of the tranche of $489.1 million of payment deferrals that were granted in the month of April 2020 for the April 1, 2020 through June 30, 2020 timeframe, $194.9 million, or 39.8%, had either begun to repay in accordance to their original loan agreements or indicated that no additional payment deferrals will be needed. For the remaining loans in the April tranche, loan payment deferrals are being extended for another three-month period. Of the $294.1 million of loans in the April tranche where deferrals were extended for another three-month period, $120.1 million are paying full escrow and interest (i.e., only principal is being deferred).
Loans modified under COVID-19 deferral programs will not be considered delinquent during the deferral period. While interest is expected to still accrue to income during the deferral period, should deterioration in the financial condition of the borrowers that would not support the ultimate repayment of interest emerge, interest income accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted.
In accordance with issued interagency guidance, or as outlined in the CARES Act, these short-term deferrals are not considered troubled debt restructurings. These loans will continue to accrue interest and will not be considered past due so long as any required payments are made in accordance with the deferral terms. In addition, the risk-rating on COVID-19 modified loans did not change at the time the deferral was approved. The loans will be subject to the Bank’s normal credit monitoring, and will be re-evaluated after the deferral period ends. The collectability of accrued interest will be evaluated on a periodic basis.
Monitoring and Collection of Delinquent Loans
Management of the Bank reviews delinquent loans on a monthly basis and reports to its Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in the Bank’s portfolio.
The Bank’s loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of multifamily residential, commercial real estate loans, and C&I loans, or fifteen days late in connection with one-to-four family or consumer loans. A second letter is sent to the borrower if payment has not been received within 30 days of the due date, or 32 days for one-to-four family loans serviced by the subservicer. Thereafter, periodic letters are mailed and phone calls placed to the borrower until payment is received. When contact is made with the borrower at any time prior to foreclosure, the Bank will attempt to obtain the full payment due or negotiate a repayment schedule with the borrower to avoid foreclosure.
Accrual of interest is generally discontinued on a loan that meets any of the following three criteria: (i) full payment of principal or interest is not expected; (ii) principal or interest has been in default for a period of 90 days or more (unless the loan is both deemed to be well secured and in the process of collection); or (iii) an election has otherwise been made to maintain the loan on a cash basis due to deterioration in the financial condition of the borrower. Such non-accrual determination practices are applied consistently to all loans regardless of their internal classification or designation. Upon entering non-accrual status, the Bank reverses all outstanding accrued interest receivable.
The Bank generally initiates foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, and typically does not accept partial payments once foreclosure proceedings have commenced. At some point during foreclosure proceedings, the Bank procures current appraisal information in order to prepare an estimate of the fair value of the underlying collateral. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”) status. The Bank generally attempts to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a period of at least six months.
The C&I portfolio is actively managed by the Bank’s lenders and underwriters. All credit facilities at a minimum require an annual review of the exposure and typically terms of the loan require annual and interim financial reporting and have financial covenants to indicate expected performance levels. Guarantors are also required to, at a minimum, annually update their financial reporting. All exposures are risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny. Measures taken typically include amendments to the amount of the available credit facility, requirements for increased collateral, a request for a capital infusion, additional guarantor support or a material enhancement to the frequency and quality of financial reporting. Loans determined to reach adverse risk rating standards are subject to quarterly updating to Credit Administration and executive management. When warranted, loans reaching a Substandard rating could be reassigned to Credit Administration for direct handling.
Non-accrual Loans
Within the Bank’s held-for-investment loan portfolio (excluding other loans), seventeen non-accrual loans totaled $15.4 million at June 30, 2020, and eleven non-accrual loans totaled $11.1 million at December 31, 2019. During the six months ended June 30, 2020, eight loans totaling $11.4 million were placed on non-accrual status, two of which totaling $7.1 million were sold. Principal amortization of $0.03 million was recognized on five non-accrual loans. There were no changes on the remaining six non-accrual loans during the six-month period ended June 30, 2020.
Impaired Loans
The recorded investment in loans deemed impaired (as defined in Note 7 to the unaudited condensed consolidated financial statements) totaled $14.6 million, consisting of eight loans, at June 30, 2020, compared to $10.3 million, consisting of four loans, at December 31, 2019. During the six months ended June 30, 2020, six loans totaling $11.3 million were added to impaired status, two of which totaling $7.1 million were sold. Principal amortization of $0.01 million was recognized on one impaired loan. There were no changes on the remaining impaired loans during the six-month period ended June 30, 2020.
The following is a reconciliation of non-accrual and impaired loans as of the dates indicated:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
June 30, 2019
|
|
|
|
(Dollars in thousands)
|
|
Non-accrual loans (1):
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
819
|
|
|
$
|
794
|
|
|
$
|
832
|
|
Multifamily residential and residential mixed-use real estate
|
|
|
1,377
|
|
|
|
153
|
|
|
|
428
|
|
Commercial real estate and commercial mixed-use
|
|
|
3,003
|
|
|
|
60
|
|
|
|
1,274
|
|
C&I
|
|
|
10,176
|
|
|
|
10,082
|
|
|
|
—
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
Total non-accrual loans
|
|
|
15,377
|
|
|
|
11,091
|
|
|
|
2,538
|
|
Non-accrual one-to-four family residential and other loans deemed homogeneous loans
|
|
|
(821
|
)
|
|
|
(796
|
)
|
|
|
(836
|
)
|
TDRs:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
|
Multifamily residential and residential mixed-use real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
252
|
|
Commercial real estate and commercial mixed-use
|
|
|
—
|
|
|
|
—
|
|
|
|
4,037
|
|
Total TDRs
|
|
|
—
|
|
|
|
—
|
|
|
|
4,300
|
|
Impaired loans
|
|
$
|
14,556
|
|
|
$
|
10,295
|
|
|
$
|
6,002
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans to total loans
|
|
|
0.28
|
%
|
|
|
0.21
|
%
|
|
|
0.05
|
%
|
Total non-performing assets to total assets(2)
|
|
|
0.24
|
|
|
|
0.17
|
|
|
|
0.04
|
|
(1)
|
There were no non-accruing TDRs for the periods indicated.
|
(2)
|
Non-performing assets includes non-accrual loans.
|
TDRs
Under ASC 310-40-15, the Bank is required to recognize loans for which certain modifications or concessions have been made as TDRs. A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:
|
●
|
A reduction of interest rate has been made for the remaining term of the loan
|
|
●
|
The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk
|
|
●
|
The outstanding principal amount and/or accrued interest have been reduced
|
In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors. The Bank did not modify any loans in a manner that met the criteria for a TDR during the six months ended June 30, 2020 or 2019.
Accrual status for TDRs is determined separately for each TDR in accordance with the Bank’s policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in the Bank’s determination that a TDR has been created, the loan can be on either accrual or non-accrual status. If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least three months. Conversely, if at the time of restructuring the loan is performing (and accruing) it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under the Bank’s policy and agency regulations.
The Bank does not accept receivables or equity interests in satisfaction of TDRs.
For TDRs that demonstrated conditions sufficient to warrant accrual status, the present value of the expected net cash flows of the underlying property was utilized as the primary means of determining impairment. Any shortfall in the present value of the expected cash flows calculated at each measurement period (typically quarter-end) compared to the present value of the expected cash flows at the time of the original loan agreement was recognized as either an allocated reserve (in the event that it related to lower expected interest payments) or a charge-off (if related to lower expected principal payments). For TDRs on non-accrual status, an appraisal of the underlying real estate collateral is deemed the most appropriate measure to utilize when evaluating impairment and any shortfall in valuation from the recorded balance is accounted for through a charge-off. In the event that either an allocated reserve or a charge-off is recognized on TDRs, the periodic loan loss provision is impacted.
OREO
Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO. Upon entering OREO status, the Bank obtains a current appraisal on the property and reassesses the likely realizable value (a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period. The Bank typically seeks to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.
The Bank had no OREO properties at June 30, 2020 or December 31, 2019. The Bank did not recognize any provisions for losses on OREO properties during the three or six months ended June 30, 2020 or 2019.
Other Potential Problem Loans
Accruing Loans 90 Days or More Past Due
The Bank continued accruing interest on six loans with an aggregate outstanding balance of $3.7 million at June 30, 2020, and two loans with an aggregate outstanding balance of $1.5 million at December 31, 2019, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.
Loans Delinquent 30 to 89 Days
The Bank had loans totaling $6.3 million that were delinquent between 30 and 89 days at June 30, 2020 and $0.6 million at December 31, 2019. The 30 to 89 day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.
Reserve for Loan Commitments
The Bank maintains a reserve associated with unfunded loan commitments accepted by the borrower. The amount of reserve was $0.03 million at both June 30, 2020 and December 31, 2019. This reserve is determined based upon the outstanding volume of loan commitments at each period end. Any increases or reductions in this reserve are recognized in periodic non-interest expense.
Allowance for Loan Losses
Under Section 4014 of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act), financial institutions had the option to delay the adoption of the Current Expected Credit Loss (“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. The Bank’s election to defer adoption of CECL was primarily due to the uncertainty around forecasting the economic variables used to calculate the expected lifetime loan losses, due to the ongoing and dynamic nature of the COVID-19 pandemic.
Upon adoption, the Bank will recognize the adoption impact as of January 1, 2020 through the balance sheet as an adjustment through equity. 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.
As a result, the tables present the allowance for loan losses under the incurred loss model in all periods.
The methodology utilized to determine the Company’s allowance for loan losses on real estate, C&I, and consumer loans, along with periodic associated activity, remained constant during the periods presented below. The following is a summary of the components of the allowance for loan losses as of the following dates:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
June 30, 2019
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans
|
|
$
|
10,129
|
|
|
$
|
10,082
|
|
|
$
|
—
|
|
Non-impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
|
28,973
|
|
|
|
15,555
|
|
|
|
16,850
|
|
C&I loans
|
|
|
3,373
|
|
|
|
2,788
|
|
|
|
4,267
|
|
Consumer loans
|
|
|
17
|
|
|
|
16
|
|
|
|
17
|
|
Total
|
|
$
|
42,492
|
|
|
$
|
28,441
|
|
|
$
|
21,134
|
|
A provision of $14.1 million and a credit of $0.1 million were recorded during the six month periods ended June 30, 2020 and 2019, respectively. During the six-month period ended June 30, 2020, the loan loss provision was driven mainly by an increase in the general allowance for loan losses due to the adjustment of qualitative factors to account for the effects of the COVID-19 pandemic and related economic disruption. It is difficult to predict what effects the pandemic will have on our probable incurred loss framework in the future. The pandemic and related local and national economic disruption may, among other effects, result in increased levels of allowance for loan losses.
For a further discussion of the allowance for loan losses and related activity during the three-month and six-month periods ended June 30, 2020 and 2019, and as of December 31, 2019, please see Note 7 to the condensed consolidated financial statements.
Comparison of Financial Condition at June 30, 2020 and December 31, 2019
Assets. Assets totaled $6.47 billion at June 30, 2020, $113.1 million above their level at December 31, 2019, primarily due to an increase in the loan portfolio of $89.8 million, an increase in BOLI of $39.8 million due to additional purchases, and an increase of $35.4 million in other assets, offset by a decrease of $38.5 million in cash, a decrease of $3.7 million in FHLBNY capital stock, and a decrease of $9.0 million in securities.
Total loans increased $89.8 million during the six months ended June 30, 2020. During the period, the Bank had originations of $762.2 million which exceeded the $654.6 million of aggregate amortization on loans (also including refinancing of existing loans). Additionally, the allowance for loan losses increased by $14.1 million during the six month period ended June 30, 2020.
The increase in other assets was primarily the result of a $17.1 million increase in the freestanding derivative asset with borrowers related to loan swaps, which was primarily the result of the 29 interest rate swap and floor transactions during the period and the interest rate environment at June 30, 2020, and an $8.2 million increase in accrued interest receivables, primarily due to COVID-19 related payment deferrals of interest on loans.
Liabilities. Total liabilities increased $28.3 million during the six months ended June 30, 2020, primarily due to an increase of $155.8 million in deposits, an increase of $11.2 million in escrows and other deposits, and an increase of $42.6 million in other liabilities, offset by a decrease of $105.0 million in other borrowings, and a decrease of $75.0 million in FHLBNY advances.
The increase in other liabilities was primarily the result of a $22.8 million increase in the interest rate derivative liability related to FHLBNY advances, primarily due to 12 interest rate swap transactions during the period, and a $17.1 million increase in the freestanding derivative liability with counterparties related to loan swaps, which was primarily the result of 29 interest rate swap and floor transactions during the period. The interest rate environment as of June 30, 2020 also contributed to the increase.
Stockholders’ Equity. Stockholders’ equity increased $84.8 million during the six months ended June 30, 2020, due primarily to the issuance of $116.6 million of preferred stock and net income of $21.4 million, offset by $9.5 million in cash dividends paid on common stock and $1.1 million in cash dividends paid on preferred stock during the period, $35.0 million for the repurchase of Company common stock, and other comprehensive loss, net of tax, of $8.5 million.
Comparison of Operating Results for the Three Months Ended June 30, 2020 and 2019
General. Net income was $13.0 million during the three months ended June 30, 2020, comparable to the three months ended June 30, 2019. During the three months ended June 30, 2020, net interest income increased by $7.1 million, non-interest income increased by $5.6 million, non-interest expense increased by $7.1 million, income tax expense decreased by $0.9 million and the loan loss provision increased by $6.5 million. Please see “Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Loan Losses” for a discussion of the increase in the loan loss provision for the period ended June 30, 2020.
Net Interest Income. The discussion of net interest income for the three months ended June 30, 2020 and 2019 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. The yields include fees that are considered adjustments to yields.
Analysis of Net Interest Income
|
|
Three Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
Assets:
|
|
(Dollars in Thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
4,867,970
|
|
|
$
|
49,058
|
|
|
|
4.03
|
%
|
|
$
|
5,201,395
|
|
|
$
|
50,811
|
|
|
|
3.91
|
%
|
C&I loans
|
|
|
518,999
|
|
|
|
5,071
|
|
|
|
3.91
|
|
|
|
289,843
|
|
|
|
4,134
|
|
|
|
5.71
|
|
Other loans
|
|
|
870
|
|
|
|
13
|
|
|
|
5.98
|
|
|
|
1,217
|
|
|
|
18
|
|
|
|
5.92
|
|
MBS and CMO securities
|
|
|
468,705
|
|
|
|
3,064
|
|
|
|
2.61
|
|
|
|
423,387
|
|
|
|
2,961
|
|
|
|
2.80
|
|
Investment securities
|
|
|
65,155
|
|
|
|
582
|
|
|
|
3.57
|
|
|
|
64,488
|
|
|
|
570
|
|
|
|
3.54
|
|
Other short-term investments
|
|
|
169,846
|
|
|
|
846
|
|
|
|
1.99
|
|
|
|
154,180
|
|
|
|
1,457
|
|
|
|
3.78
|
|
Total interest-earning assets
|
|
|
6,091,545
|
|
|
|
58,634
|
|
|
|
3.85
|
%
|
|
|
6,134,510
|
|
|
|
59,951
|
|
|
|
3.91
|
%
|
Non-interest earning assets
|
|
|
298,223
|
|
|
|
|
|
|
|
|
|
|
|
256,966
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,389,768
|
|
|
|
|
|
|
|
|
|
|
$
|
6,391,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
222,694
|
|
|
$
|
212
|
|
|
|
0.38
|
%
|
|
$
|
125,041
|
|
|
$
|
91
|
|
|
|
0.29
|
%
|
Money Market accounts
|
|
|
1,656,394
|
|
|
|
2,495
|
|
|
|
0.61
|
|
|
|
1,908,737
|
|
|
|
7,397
|
|
|
|
1.55
|
|
Savings accounts
|
|
|
404,389
|
|
|
|
305
|
|
|
|
0.30
|
|
|
|
327,312
|
|
|
|
46
|
|
|
|
0.06
|
|
CDs
|
|
|
1,511,598
|
|
|
|
6,688
|
|
|
|
1.78
|
|
|
|
1,595,849
|
|
|
|
8,737
|
|
|
|
2.20
|
|
Total interest-bearing deposits
|
|
|
3,795,075
|
|
|
|
9,700
|
|
|
|
1.03
|
|
|
|
3,956,939
|
|
|
|
16,271
|
|
|
|
1.65
|
|
FHLBNY Advances
|
|
|
962,657
|
|
|
|
4,047
|
|
|
|
1.69
|
|
|
|
1,050,824
|
|
|
|
5,756
|
|
|
|
2.20
|
|
Subordinated notes
|
|
|
113,955
|
|
|
|
1,330
|
|
|
|
4.69
|
|
|
|
113,808
|
|
|
|
1,330
|
|
|
|
4.69
|
|
Other borrowings
|
|
|
2,747
|
|
|
|
1
|
|
|
|
0.15
|
|
|
|
13,308
|
|
|
|
65
|
|
|
|
2.71
|
|
Borrowed funds
|
|
|
1,079,359
|
|
|
|
5,378
|
|
|
|
2.00
|
|
|
|
1,177,940
|
|
|
|
7,176
|
|
|
|
2.44
|
|
Total interest-bearing liabilities
|
|
|
4,874,434
|
|
|
|
15,078
|
|
|
|
1.24
|
%
|
|
|
5,134,879
|
|
|
|
23,447
|
|
|
|
1.83
|
%
|
Non-interest-bearing checking accounts
|
|
|
618,107
|
|
|
|
|
|
|
|
|
|
|
|
422,060
|
|
|
|
|
|
|
|
|
|
Other non-interest-bearing liabilities
|
|
|
245,908
|
|
|
|
|
|
|
|
|
|
|
|
227,385
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,738,449
|
|
|
|
|
|
|
|
|
|
|
|
5,784,324
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
651,319
|
|
|
|
|
|
|
|
|
|
|
|
607,152
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
6,389,768
|
|
|
|
|
|
|
|
|
|
|
$
|
6,391,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
43,556
|
|
|
|
|
|
|
|
|
|
|
$
|
36,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.61
|
%
|
|
|
|
|
|
|
|
|
|
|
2.08
|
%
|
Net interest-earning assets
|
|
$
|
1,217,111
|
|
|
|
|
|
|
|
|
|
|
$
|
999,631
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
2.86
|
%
|
|
|
|
|
|
|
|
|
|
|
2.38
|
%
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
124.97
|
%
|
|
|
|
|
|
|
|
|
|
|
119.47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
4,413,182
|
|
|
$
|
9,700
|
|
|
|
0.88
|
%
|
|
$
|
4,378,999
|
|
|
$
|
16,271
|
|
|
|
1.49
|
%
|
Rate/Volume Analysis
|
|
Three Months Ended June 30, 2020
Compared to Three Months Ended
June 30, 2019
Increase/ (Decrease) Due to:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(Dollars In thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
(3,285
|
)
|
|
$
|
1,532
|
|
|
$
|
(1,753
|
)
|
C&I loans
|
|
|
2,755
|
|
|
|
(1,818
|
)
|
|
|
937
|
|
Other loans
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
(5
|
)
|
MBS and CMO securities
|
|
|
311
|
|
|
|
(208
|
)
|
|
|
103
|
|
Investment securities
|
|
|
7
|
|
|
|
5
|
|
|
|
12
|
|
Other
|
|
|
114
|
|
|
|
(725
|
)
|
|
|
(611
|
)
|
Total
|
|
$
|
(103
|
)
|
|
$
|
(1,214
|
)
|
|
$
|
(1,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
82
|
|
|
$
|
39
|
|
|
$
|
121
|
|
Money market accounts
|
|
|
(708
|
)
|
|
|
(4,194
|
)
|
|
|
(4,902
|
)
|
Savings accounts
|
|
|
38
|
|
|
|
221
|
|
|
|
259
|
|
CDs
|
|
|
(421
|
)
|
|
|
(1,628
|
)
|
|
|
(2,049
|
)
|
FHLBNY Advances
|
|
|
(430
|
)
|
|
|
(1,279
|
)
|
|
|
(1,709
|
)
|
Subordinated notes
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
Other borrowings
|
|
|
(38
|
)
|
|
|
(51
|
)
|
|
|
(89
|
)
|
Total
|
|
$
|
(1,476
|
)
|
|
$
|
(6,893
|
)
|
|
$
|
(8,369
|
)
|
Net change in net interest income
|
|
$
|
1,373
|
|
|
$
|
5,679
|
|
|
$
|
7,052
|
|
Net interest income was $43.6 million during the three months ended June 30, 2020, an increase of $7.1 million from the three months ended June 30, 2019. Average interest-earning assets were $6.09 billion for the three months ended June 30, 2020, a decrease of $43.0 million from $6.13 billion for the three months ended June 30, 2019. Net interest margin (“NIM”) was 2.86% during the three months ended June 30, 2020, up from 2.38% during the three months ended June 30, 2019.
Interest Income. Interest income was $58.6 million during the three months ended June 30, 2020, a decrease of $1.3 million from the three months ended June 30, 2019, primarily reflecting decreases in interest income of $1.8 million on real estate loans, and $0.6 million on other interest-bearing assets, offset by an increase in interest income of $0.9 million on C&I loans. The decreased interest income on real estate loans was related to a reduction of $333.4 million in the average balance of such loans in the period, offset by a 12 basis point increase in the yield. The decreased interest income on other interest-bearing assets was due to a decrease in the target Federal funds rate versus the year-ago time period. The increased interest income on C&I loans was due to an increase of $229.2 million in the average balance of such loans during the period, reflecting the Bank’s participation in the SBA PPP loan program. The SBA PPP loans negatively impacted the yield on C&I loans as SBA PPP loans have a weighted average rate of 1.0%.
Interest Expense. Interest expense decreased $8.4 million, to $15.1 million, during the three months ended June 30, 2020, from $23.4 million during the three months ended June 30, 2019. The decreased interest expense was mainly attributable to a reduction in interest rates offered on money market products as well as a decrease in average balances of $252.3 million, a reduction in interest rates offered on CDs as well as a decrease in average balances of $84.3 million in CD product, and a decrease in average balances of $88.2 million in FHLBNY advances.
Provision for Loan Losses. The Company recognized a provision for loan losses of $6.1 million during the three months ended June 30, 2020, compared to a credit of $0.4 million for the three months ended June 30, 2019. Please see “Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Loan Losses” for a discussion of the increase in the loan loss provision for the period ended June 30, 2020.
Non-Interest Income. Non-interest income was $8.4 million during the three months ended June 30, 2020, an increase of $5.6 million from $2.8 million during the three months ended June 30, 2019, primarily due to an increase of $2.2 million of loan level derivative income, and an increase of $3.1 million in gains on sales of securities for the three months ended June 30, 2020.
Non-Interest Expense. Non-interest expense was $29.3 million during the three months ended June 30, 2020, an increase of $7.1 million from $22.3 million during the three months ended June 30, 2019, primarily the result of severance expense related to an organizational restructuring of $3.9 million, increase in salaries and employee benefit expense of $2.7 million, and merger related expenses of $1.1 million.
Non-interest expense was 1.84% and 1.40% of average assets during the three-month periods ended June 30, 2020 and 2019, respectively.
Income Tax Expense. Income tax expense was $3.6 million during the three months ended June 30, 2020, a decrease of $0.9 million from $4.4 million during the three months ended June 30, 2019. The Company’s consolidated tax rate was 21.6% during the three months ended June 30, 2020, down from 25.4% during the three months ended June 30, 2019. The lower tax rate for the three months ended June 30, 2020 was primarily the result of lower pre-tax income during the period.
Comparison of Operating Results for the Six Months Ended June 30, 2020 and 2019
General. Net income was $21.4 million during the six months ended June 30, 2020, a decrease of $3.2 million from net income of $24.5 million during the six months ended June 30, 2019. During the six months ended June 30, 2020, the provision for loan losses increased by $14.2 million, and non-interest expense increased by $11.0 million. This was offset by an increase in net interest income of $12.3 million, and an increase in non-interest income of $7.4 million, and a decrease in income tax expense of $2.4 million.
Net Interest Income. The discussion of net interest income for the six months ended June 30, 2020 and 2019 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. The yields include fees that are considered adjustments to yields.
Analysis of Net Interest Income
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
Assets:
|
|
(Dollars in Thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
4,911,181
|
|
|
$
|
99,175
|
|
|
|
4.04
|
%
|
|
$
|
5,198,673
|
|
|
$
|
99,988
|
|
|
|
3.85
|
%
|
C&I loans
|
|
|
423,326
|
|
|
|
9,116
|
|
|
|
4.31
|
|
|
|
269,055
|
|
|
|
7,570
|
|
|
|
5.63
|
|
Other loans
|
|
|
1,157
|
|
|
|
28
|
|
|
|
4.84
|
|
|
|
1,150
|
|
|
|
36
|
|
|
|
6.26
|
|
MBS and CMO
|
|
|
477,714
|
|
|
|
6,369
|
|
|
|
2.67
|
|
|
|
443,845
|
|
|
|
6,158
|
|
|
|
2.77
|
|
Investment securities
|
|
|
56,108
|
|
|
|
1,003
|
|
|
|
3.58
|
|
|
|
55,833
|
|
|
|
990
|
|
|
|
3.55
|
|
Other
|
|
|
150,970
|
|
|
|
1,848
|
|
|
|
2.45
|
|
|
|
154,346
|
|
|
|
2,904
|
|
|
|
3.76
|
|
Total interest-earning assets
|
|
|
6,020,454
|
|
|
|
117,539
|
|
|
|
3.90
|
%
|
|
|
6,122,902
|
|
|
$
|
117,646
|
|
|
|
3.84
|
%
|
Non-interest earning assets
|
|
|
278,405
|
|
|
|
|
|
|
|
|
|
|
|
254,885
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,298,859
|
|
|
|
|
|
|
|
|
|
|
$
|
6,377,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
190,861
|
|
|
$
|
299
|
|
|
|
0.31
|
%
|
|
$
|
120,141
|
|
|
$
|
114
|
|
|
|
0.19
|
%
|
Money Market accounts
|
|
|
1,618,587
|
|
|
|
6,081
|
|
|
|
0.75
|
|
|
|
1,969,266
|
|
|
|
15,037
|
|
|
|
1.54
|
|
Savings accounts
|
|
|
394,079
|
|
|
|
672
|
|
|
|
0.34
|
|
|
|
329,487
|
|
|
|
90
|
|
|
|
0.06
|
|
CDs
|
|
|
1,549,074
|
|
|
|
14,574
|
|
|
|
1.89
|
|
|
|
1,531,144
|
|
|
|
16,047
|
|
|
|
2.11
|
|
Total interest-bearing deposits
|
|
|
3,752,600
|
|
|
|
21,626
|
|
|
|
1.16
|
|
|
|
3,950,038
|
|
|
|
31,288
|
|
|
|
1.60
|
|
FHLBNY advances
|
|
|
1,024,105
|
|
|
|
9,131
|
|
|
|
1.79
|
|
|
|
1,078,177
|
|
|
|
11,713
|
|
|
|
2.19
|
|
Subordinated notes
|
|
|
113,937
|
|
|
|
2,661
|
|
|
|
4.68
|
|
|
|
113,790
|
|
|
|
2,661
|
|
|
|
4.72
|
|
Other borrowings
|
|
|
6,319
|
|
|
|
41
|
|
|
|
1.30
|
|
|
|
11,807
|
|
|
|
156
|
|
|
|
2.66
|
|
Borrowed funds
|
|
|
1,144,360
|
|
|
|
11,833
|
|
|
|
2.07
|
|
|
|
1,203,774
|
|
|
|
14,530
|
|
|
|
2.43
|
|
Total interest-bearing liabilities
|
|
|
4,896,960
|
|
|
|
33,459
|
|
|
|
1.37
|
%
|
|
|
5,153,812
|
|
|
$
|
45,818
|
|
|
|
1.79
|
%
|
Non-interest-bearing checking accounts
|
|
|
542,788
|
|
|
|
|
|
|
|
|
|
|
|
409,984
|
|
|
|
|
|
|
|
|
|
Other non-interest-bearing liabilities
|
|
|
219,780
|
|
|
|
|
|
|
|
|
|
|
|
208,378
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,659,527
|
|
|
|
|
|
|
|
|
|
|
|
5,772,174
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
639,332
|
|
|
|
|
|
|
|
|
|
|
|
605,613
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
6,298,859
|
|
|
|
|
|
|
|
|
|
|
$
|
6,377,787
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
84,080
|
|
|
|
|
|
|
|
|
|
|
$
|
71,828
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.53
|
%
|
|
|
|
|
|
|
|
|
|
|
2.05
|
%
|
Net interest-earning assets
|
|
$
|
1,123,495
|
|
|
|
|
|
|
|
|
|
|
$
|
969,090
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
2.79
|
%
|
|
|
|
|
|
|
|
|
|
|
2.35
|
%
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
122.94
|
%
|
|
|
|
|
|
|
|
|
|
|
118.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
4,295,387
|
|
|
$
|
21,626
|
|
|
|
1.01
|
%
|
|
$
|
4,360,022
|
|
|
$
|
31,288
|
|
|
|
1.45
|
%
|
Rate/Volume Analysis
|
|
Six Months Ended June 30, 2020
Compared to Six Months Ended
June 30, 2019
Increase/ (Decrease) Due to:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(Dollars In thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
(5,641
|
)
|
|
$
|
4,828
|
|
|
$
|
(813
|
)
|
C&I loans
|
|
|
3,831
|
|
|
|
(2,285
|
)
|
|
|
1,546
|
|
Other loans
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(8
|
)
|
MBS and CMO
|
|
|
452
|
|
|
|
(241
|
)
|
|
|
211
|
|
Investment securities
|
|
|
5
|
|
|
|
8
|
|
|
|
13
|
|
Other
|
|
|
(55
|
)
|
|
|
(1,001
|
)
|
|
|
(1,056
|
)
|
Total
|
|
$
|
(1,408
|
)
|
|
$
|
1,301
|
|
|
$
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
90
|
|
|
$
|
95
|
|
|
$
|
185
|
|
Money market accounts
|
|
|
(1,946
|
)
|
|
|
(7,010
|
)
|
|
|
(8,956
|
)
|
Savings accounts
|
|
|
70
|
|
|
|
512
|
|
|
|
582
|
|
CDs
|
|
|
198
|
|
|
|
(1,671
|
)
|
|
|
(1,473
|
)
|
FHLBNY advances
|
|
|
(512
|
)
|
|
|
(2,070
|
)
|
|
|
(2,582
|
)
|
Subordinated notes
|
|
|
13
|
|
|
|
(13
|
)
|
|
|
—
|
|
Other borrowings
|
|
|
(54
|
)
|
|
|
(61
|
)
|
|
|
(115
|
)
|
Total
|
|
$
|
(2,141
|
)
|
|
$
|
10,218
|
|
|
$
|
12,359
|
|
Net change in net interest income
|
|
$
|
733
|
|
|
$
|
11,519
|
|
|
$
|
12,252
|
|
Net Interest Income. Net interest income was $84.1 million during the six months ended June 30, 2020, an increase of $12.3 million from $71.8 million during the six months ended June 30, 2019. Average interest-earning assets were $6.02 billion for the six months ended June 30, 2020, a decrease of $102.4 million compared to $6.12 billion for the six months ended June 30, 2019. Net interest margin was 2.79% during the six months ended June 30, 2020, up from 2.35% during the six months ended June 30, 2019.
Interest Income. Interest income was $117.5 million during the six months ended June 30, 2020, a decrease of $0.1 million from the six months ended June 30, 2019, primarily reflecting decreases in interest income of $0.8 million on real estate loans and decreases in interest income of $1.1 million on other interest-bearing assets, offset by increased interest income of $1.5 million on C&I loans, and $0.2 million on MBS and CMO securities. The decreased interest income on real estate loans was due to a reduction of $287.5 million in the average balance of such loans in the period, offset by a 19 basis point increase in the yield. The decreased interest income on other interest-bearing assets was due to a decrease in the target Federal funds rate versus the year-ago time period. The increased interest income on C&I loans was due to growth of $154.3 million in the average balances of C&I loans during the period, reflecting the Bank’s participation in the SBA PPP loan program. The SBA PPP loans negatively impacted the yield on C&I loans as SBA PPP loans have a weighted average rate of 1.0%. The increased interest income from MBS and CMO securities was due to the increase in the average balances of $33.9 million.
Interest Expense. Interest expense decreased $12.4 million, to $33.5 million, during the six months ended June 30, 2020, from $45.8 million during the six months ended June 30, 2019. The decrease in interest expense was due to decreased rates offered on money market accounts, and a decrease of $350.7 million in the average balances of such accounts, decreased rates offered on CDs, offset by growth of $17.9 million in the average balances of such accounts, and a decrease of $54.1 million in the average balances of FHLBNY advances and a decrease of 40 basis points in the cost of such borrowings.
Provision for Loan Losses. The Company recognized a provision for loan losses of $14.1 million during the six months ended June 30, 2020, compared to a credit of $0.1 million for the six months ended June 30, 2019.
Non-Interest Income. Non-interest income was $12.6 million during the six months ended June 30, 2020, an increase of $7.4 million from $5.2 million during the six months ended June 30, 2019, due to increases in gains on the sales of securities by $3.3 million, loan level derivative income by $3.4 million, and income from BOLI by $1.4 million.
Non-Interest Expense. Non-interest expense was $55.4 million during the six months ended June 30, 2020, an increase of $11.0 million from $44.3 million during the six months ended June 30, 2019, reflecting an increase of $5.6 million in salaries expense, and $4.0 million of severance expense related to an organizational restructuring, and $1.4 million of merger related expenses.
Non-interest expense was 1.76% and 1.39% of average assets during the six-month periods ended June 30, 2020 and 2019, respectively.
Income Tax Expense. Income tax expense was $5.9 million during the six months ended June 30, 2020, a decrease of $2.4 million from $8.3 million during the six months ended June 30, 2019. The Company’s consolidated tax rate was 21.6% during the six months ended June 30, 2020, a decrease from 25.2% during the six months ended June 30, 2019.