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

FORM 10-Q

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

For the quarterly period ended September 30, 2020
OR

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

For the transition period from            to

Commission file number 0-27782

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

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

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

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

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

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

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

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

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

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

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

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

Classes of Common Stock
Number of shares outstanding at November 6, 2020
$0.01 Par Value
33,047,862





PART I – FINANCIAL INFORMATION
 
Page
 
 
 
Item 1.
4
 
4
 
6
 
7
 
8
 
12
 
14
Item 2.
44
Item 3.
68
Item 4.
70
 
PART II - OTHER INFORMATION
 
Item 1.
72
Item 1A.
72
Item 2.
72
Item 3.
73
Item 4.
73
Item 5.
73
Item 6.
74
 
75


Cautionary Note Regarding Forward-Looking Statements

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

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

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

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

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


Item 1.
Condensed Consolidated Financial Statements

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

 
September 30,
2020
   
December 31,
2019
 
ASSETS:
           
Cash and due from banks
 
$
147,283
   
$
155,488
 
Total cash and cash equivalents
   
147,283
     
155,488
 
Securities available-for-sale, at fair value
   
525,597
     
550,995
 
Marketable equity securities, at fair value
   
5,759
     
5,894
 
Loans:
               
Real estate
   
4,933,515
     
5,002,354
 
Commercial and industrial (“C&I”) loans
   
642,540
     
336,412
 
Other loans
   
1,448
     
1,772
 
Less allowance for loan losses
   
(48,492
)
   
(28,441
)
Total loans, net
   
5,529,011
     
5,312,097
 
Premises and fixed assets, net
   
20,539
     
21,692
 
Premises held for sale
   
     
514
 
Loans held for sale
   
2,625
     
500
 
Federal Home Loan Bank of New York (“FHLBNY”) capital stock
   
57,305
     
56,019
 
Bank Owned Life Insurance (“BOLI”)
   
155,068
     
114,257
 
Goodwill
   
55,638
     
55,638
 
Operating lease assets
   
35,503
     
37,858
 
Derivative assets
   
19,845
     
2,443
 
Accrued interest receivable
   
33,774
     
18,891
 
Other assets
   
31,444
     
22,174
 
Total Assets
 
$
6,619,391
   
$
6,354,460
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Liabilities:
               
Due to depositors:
               
Interest-bearing deposits
 
$
3,714,225
   
$
3,804,076
 
Non-interest-bearing deposits
   
658,297
     
478,549
 
Total deposits
   
4,372,522
     
4,282,625
 
Escrow and other deposits
   
119,626
     
76,481
 
FHLBNY advances
   
1,128,400
     
1,092,250
 
Subordinated debt, net
   
114,016
     
113,906
 
Other borrowings
   
70,000
     
110,000
 
Operating lease liabilities
   
41,314
     
44,098
 
Derivative liabilities
   
47,955
     
9,080
 
Other liabilities
   
31,400
     
29,262
 
Total Liabilities
   
5,925,233
     
5,757,702
 
                 
Stockholders’ Equity:
               
Preferred stock, Series A ($0.01 par, $25.00 liquidation value, 9,000,000 shares authorized, 5,299,200 shares issued and outstanding at September 30, 2020, and none issued or outstanding at December 31, 2019)
   
116,569
     
 
Common stock ($0.01 par, 125,000,000 shares authorized, 53,724,233 shares and 53,721,189 shares issued at September 30, 2020 and December 31, 2019, respectively, and 33,049,822 shares and 35,154,642 shares outstanding at September 30, 2020 and December 31, 2019, respectively)
   
537
     
537
 
Additional paid-in capital
   
278,580
     
279,322
 
Retained earnings
   
601,913
     
581,817
 
Accumulated other comprehensive loss, net of deferred taxes
   
(11,539
)
   
(5,940
)
Unearned equity awards
   
(6,695
)
   
(6,731
)
Common stock held by the Benefit Maintenance Plan (“BMP”)
   
(1,496
)
   
(1,496
)
Treasury stock, at cost (20,674,411 shares and 18,566,547 shares at September 30, 2020 and December 31, 2019, respectively)
   
(283,711
)
   
(250,751
)
Total Stockholders’ Equity
   
694,158
     
596,758
 
Total Liabilities and Stockholders’ Equity
 
$
6,619,391
   
$
6,354,460
 

See notes to unaudited condensed consolidated financial statements.


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

 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Interest income:
                       
Loans secured by real estate
 
$
47,482
   
$
50,732
   
$
146,657
   
$
150,720
 
C&I loans
   
5,752
     
4,442
     
14,868
     
12,012
 
Other loans
   
11
     
18
     
39
     
54
 
Mortgage-backed securities (“MBS”)
   
2,707
     
2,973
     
9,076
     
9,131
 
Investment securities
   
715
     
626
     
1,718
     
1,616
 
Other short-term investments
   
729
     
1,488
     
2,577
     
4,392
 
Total interest income
   
57,396
     
60,279
     
174,935
     
177,925
 
Interest expense:
                               
Deposits and escrow
   
6,672
     
16,582
     
28,298
     
47,870
 
Borrowed funds
   
5,780
     
7,501
     
17,613
     
22,031
 
Total interest expense
   
12,452
     
24,083
     
45,911
     
69,901
 
Net interest income
   
44,944
     
36,196
     
129,024
     
108,024
 
Provision for loan losses
   
5,931
     
11,228
     
20,003
     
11,100
 
Net interest income after provision for loan losses
   
39,013
     
24,968
     
109,021
     
96,924
 
Non-interest income:
                               
Service charges and other fees
   
1,632
     
1,780
     
3,918
     
4,143
 
Net mortgage banking income
   
71
     
77
     
189
     
206
 
Net gain on equity securities
   
175
     
14
     
139
     
430
 
Net gain (loss) on sale of securities and other assets
   
215
     
66
     
3,357
     
(67
)
Gain on sale of loans
   
1,425
     
443
     
1,946
     
1,037
 
Income from BOLI
   
1,033
     
723
     
3,831
     
2,124
 
Loan level derivative income
   
1,544
     
197
     
5,201
     
488
 
Other
   
54
     
61
     
190
     
180
 
Total non-interest income
   
6,149
     
3,361
     
18,771
     
8,541
 
Non-interest expense:
                               
Salaries and employee benefits
   
13,512
     
12,948
     
43,077
     
36,893
 
Severance
   
     
     
4,000
     
 
Stock benefit plan compensation expense
   
804
     
574
     
1,953
     
1,349
 
Occupancy and equipment
   
4,046
     
3,970
     
12,061
     
11,666
 
Data processing costs
   
2,146
     
1,803
     
6,177
     
5,777
 
Marketing
   
134
     
466
     
667
     
1,397
 
Federal deposit insurance premiums
   
761
     
(506
)
   
1,767
     
534
 
Merger expenses
   
769
     
     
2,427
     
 
Other
   
2,681
     
3,519
     
8,110
     
9,506
 
Total non-interest expense
   
24,853
     
22,774
     
80,239
     
67,122
 
Income before income taxes
   
20,309
     
5,555
     
47,553
     
38,343
 
Income tax expense
   
4,441
     
850
     
10,327
     
9,102
 
Net income
   
15,868
     
4,705
     
37,226
     
29,241
 
Preferred stock dividends
   
1,822
     
     
2,962
     
 
Net income available to common stockholders
 
$
14,046
   
$
4,705
   
$
34,264
   
$
29,241
 
 
                               
Earnings per Share:
                               
Basic
 
$
0.43
   
$
0.13
   
$
1.02
   
$
0.81
 
Diluted
 
$
0.42
   
$
0.13
   
$
1.01
   
$
0.81
 

See notes to unaudited condensed consolidated financial statements.


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

 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net Income
 
$
15,868
   
$
4,705
   
$
37,226
   
$
29,241
 
Other comprehensive income (loss):
                               
Change in unrealized holding gain (loss) on securities available-for-sale
   
1,501
     
1,996
     
12,412
     
10,944
 
Change in pension and other postretirement obligations
   
271
     
237
     
813
     
966
 
Change in unrealized gain (loss) on derivatives
   
2,419
     
(2,323
)
   
(21,419
)
   
(11,684
)
Other comprehensive income (loss) before income taxes
   
4,191
     
(90
)
   
(8,194
)
   
226
 
Deferred tax expense (benefit)
   
1,327
     
(70
)
   
(2,595
)
   
34
 
Other comprehensive income (loss), net of tax
   
2,864
     
(20
)
   
(5,599
)
   
192
 
Total comprehensive income
 
$
18,732
   
$
4,685
   
$
31,627
   
$
29,433
 

See notes to unaudited condensed consolidated financial statements.


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

 
 
Nine Month Period Ended September 30, 2020
 
 
 
Number of
Shares of
Common
Stock
   
Preferred
Stock
   
Common
Stock
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss,
Net of Deferred
Taxes
   
Unearned
Equity
Awards
   
Common
Stock
Held
by BMP
   
Treasury
Stock, at
cost
   
Total
Stockholders’
Equity
 
Beginning balance as of January 1, 2020
   
35,154,642
   
$
   
$
537
   
$
279,322
   
$
581,817
   
$
(5,940
)
 
$
(6,731
)
 
$
(1,496
)
 
$
(250,751
)
 
$
596,758
 
Net income
   
     
     
     
     
8,392
     
     
     
     
     
8,392
 
Other comprehensive loss, net of tax
   
     
     
     
     
     
(6,692
)
   
     
     
     
(6,692
)
Release of shares, net of forfeitures
   
91
     
     
     
5
     
     
     
(7
)
   
     
2
     
 
Stock-based compensation
   
     
     
     
     
     
     
671
     
     
     
671
 
Proceeds from Preferred Stock issuance, net
   
     
72,224
     
     
     
     
     
     
     
     
72,224
 
Shares received related to tax withholding
   
(4,668
)
   
     
     
     
     
     
     
     
(79
)
   
(79
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
     
(4,915
)
   
     
     
     
     
(4,915
)
Repurchase of shares of Common Stock
   
(1,274,679
)
   
     
     
     
     
     
     
     
(20,711
)
   
(20,711
)
Ending balance as of March 31, 2020
   
33,875,386
     
72,224
     
537
     
279,327
     
585,294
     
(12,632
)
   
(6,067
)
   
(1,496
)
   
(271,539
)
   
645,648
 
                                                                                 
Net income
   
     
     
     
     
12,966
     
     
     
     
     
12,966
 
Other comprehensive loss, net of tax
   
     
     
     
     
     
(1,771
)
   
     
     
     
(1,771
)
Exercise of stock options, net
   
3,044
     
             
38
     
     
     
     
     
     
38
 
Release of shares, net of forfeitures
   
196,886
     
     
     
(784
)
   
     
     
(1,960
)
   
     
2,772
     
28
 
Stock-based compensation
   
     
     
     
     
     
     
478
     
     
     
478
 
Proceeds from Preferred Stock issuance, net
   
     
44,345
     
     
     
     
     
     
     
     
44,345
 
Shares received related to tax withholding
   
(10,667
)
   
     
     
     
     
     
     
     
(169
)
   
(169
)
Cash dividends declared and paid to preferred stockholders
   
     
     
     
     
(1,140
)
   
     
     
     
     
(1,140
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
     
(4,623
)
   
     
     
     
     
(4,623
)
Repurchase of shares of Common Stock
   
(975,064
)
   
     
     
     
     
     
     
     
(14,257
)
   
(14,257
)
Ending balance as of June 30, 2020
   
33,089,585
     
116,569
     
537
     
278,581
     
592,497
     
(14,403
)
   
(7,549
)
   
(1,496
)
   
(283,193
)
   
681,543
 
                                                                                 
Net Income
   
     
     
     
     
15,868
     
     
     
     
     
15,868
 
Other comprehensive income, net of tax
   
     
     
     
     
     
2,864
     
     
     
     
2,864
 
Release of shares, net of forfeitures
   
(3,654
)
   
     
     
(1
)
   
     
     
50
     
     
(49
)
   
 
Stock-based compensation
   
     
     
     
     
     
     
804
     
     
     
804
 
Shares received related to tax withholding
   
(6,486
)
   
     
     
     
     
     
     
     
(81
)
   
(81
)
Cash dividends declared and paid to preferred stockholders
           
     
     
     
(1,822
)
   
     
     
     
     
(1,822
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
     
(4,630
)
   
     
     
     
     
(4,630
)
Repurchase of shares of Common Stock
   
(29,623
)
   
     
     
     
     
     
     
     
(388
)
   
(388
)
Ending balance as of September 30, 2020
   
33,049,822
   
$
116,569
   
$
537
   
$
278,580
   
$
601,913
   
$
(11,539
)
 
$
(6,695
)
 
$
(1,496
)
 
$
(283,711
)
 
$
694,158
 


 
 
Nine Month Period Ended September 30, 2019
 
 
 
Number of
Shares of
Common
Stock
   
Common
Stock
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
   
Unearned
Equity
Awards
   
Common
Stock Held
by BMP
   
Treasury
stock, at
cost
   
Total
Stockholders’
Equity
 
 
                                                     
Beginning balance as of January 1, 2019
   
36,081,455
   
$
537
   
$
277,512
   
$
565,713
   
$
(6,500
)
 
$
(3,623
)
 
$
(1,509
)
 
$
(230,049
)
 
$
602,081
 
Net Income
   
     
     
     
11,501
     
     
     
     
     
11,501
 
Other comprehensive income, net of tax
   
     
     
     
     
1,268
     
     
     
     
1,268
 
Release of shares, net of forfeitures
   
138,329
     
     
846
     
     
     
(2,729
)
   
     
1,883
     
 
Stock-based compensation
   
     
     
     
     
     
284
     
     
     
284
 
Shares received related to tax withholding
   
(418
)
   
     
     
     
     
     
     
(7
)
   
(7
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
(5,039
)
   
     
     
     
     
(5,039
)
Repurchase of shares of Common Stock
   
(199,254
)
   
     
     
     
     
     
     
(3,814
)
   
(3,814
)
Ending balance as of March 31, 2019
   
36,020,112
     
537
     
278,358
     
572,175
     
(5,232
)
   
(6,068
)
   
(1,509
)
   
(231,987
)
   
606,274
 
                                                                         
Net Income
   
     
     
     
13,035
     
     
     
     
     
13,035
 
Other comprehensive loss, net of tax
   
     
     
     
     
(1,056
)
   
     
     
     
(1,056
)
Exercise of stock options
   
8,869
     
     
73
     
     
     
     
     
     
73
 
Release of shares, net of forfeitures
   
133,451
     
     
896
     
     
     
(2,588
)
   
     
1,747
     
55
 
Stock-based compensation
   
     
     
     
     
     
491
     
     
     
491
 
Shares received related to tax withholding
   
(4,901
)
   
     
     
     
     
     
     
(98
)
   
(98
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
(5,051
)
   
     
     
     
     
(5,051
)
Repurchase of shares of Common Stock
   
(270,136
)
   
     
     
     
     
     
     
(5,022
)
   
(5,022
)
Ending balance as of June 30, 2019
   
35,887,395
     
537
     
279,327
     
580,159
     
(6,288
)
   
(8,165
)
   
(1,509
)
   
(235,360
)
   
608,701
 
                                                                         
Net Income
   
     
     
     
4,705
     
     
     
     
     
4,705
 
Other comprehensive loss, net of tax
   
     
     
     
     
(20
)
   
     
     
     
(20
)
Release of shares, net of forfeitures
   
64,912
     
     
454
     
     
     
(1,301
)
   
     
847
     
 
Stock-based compensation
   
     
     
     
     
     
574
     
     
     
574
 
Shares received to satisfy distribution of retirement benefits
   
(189
)
   
     
(13
)
   
     
     
     
13
     
(4
)
   
(4
)
Shares received related to tax withholding
   
(466
)
   
     
     
     
     
     
     
(18
)
   
(18
)
Cash dividends declared and paid to common stockholders, net
   
     
     
     
(5,034
)
   
     
     
     
     
(5,034
)
Ending balance as of September 30, 2019
   
35,951,652
   
$
537
   
$
279,768
   
$
579,830
   
$
(6,308
)
 
$
(8,892
)
 
$
(1,496
)
 
$
(234,535
)
 
$
608,904
 

See notes to unaudited condensed consolidated financial statements.


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

 
 
Nine Months Ended September 30,
 
 
 
2020
   
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net Income
 
$
37,226
   
$
29,241
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Net (gain) loss on sales of securities available-for-sale
   
(3,357
)
   
67
 
Net gain recognized on marketable equity securities
   
(139
)
   
(430
)
Net gain on sale of loans held for sale
   
(1,946
)
   
(1,037
)
Net depreciation, amortization and accretion
   
3,786
     
2,939
 
Stock-based compensation
   
1,953
     
1,349
 
Provision for loan losses
   
20,003
     
11,100
 
Originations of loans held for sale
   
(26,007
)
   
(15,119
)
Proceeds from sale of loans originated for sale
   
38,789
     
25,496
 
Increase in cash surrender value of BOLI
   
(2,697
)
   
(2,124
)
Gain from death benefits from BOLI
   
(1,134
)
   
 
Deferred income tax expense (benefit)
   
(6,841
)
   
(1,408
)
Changes in assets and liabilities:
               
Increase in other assets
   
(17,810
)
   
(1,073
)
Increase (decrease) in other liabilities
   
6,148
     
(2,608
)
Net cash provided by Operating Activities
   
47,974
     
46,393
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from sales of securities available-for-sale
   
68,784
     
130,504
 
Proceeds from sales of marketable equity securities
   
410
     
434
 
Purchases of securities available-for-sale
   
(149,353
)
   
(214,582
)
Acquisition of marketable equity securities
   
(136
)
   
(172
)
Proceeds from calls and principal repayments of securities available-for-sale
   
121,169
     
78,586
 
Purchase of BOLI
   
(40,000
)
   
 
Proceeds received from cash surrender value of BOLI
   
3,020
     
 
Loans purchased
   
(18,892
)
   
 
Proceeds from the sale of portfolio loans transferred to held for sale
   
35,025
     
9,684
 
Net increase in loans
   
(266,490
)
   
(114,807
)
Purchases of fixed assets, net
   
(1,442
)
   
(977
)
Sale (purchase) of FHLBNY capital stock, net
   
(1,286
)
   
3,130
 
Net cash used in Investing Activities
   
(249,191
)
   
(108,200
)
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Increase in due to depositors
   
89,897
     
34,652
 
Increase in escrow and other deposits
   
43,145
     
24,999
 
Repayments of FHLBNY advances, long-term
   
(188,800
)
   
(223,600
)
Proceeds from FHLBNY advances, long-term
   
97,450
     
132,000
 
Proceeds from FHLBNY advances, short-term, net
   
127,500
     
23,000
 
Proceeds (repayments) of other borrowings, net
   
(40,000
)
   
60,000
 
Proceeds from preferred stock issuance, net
   
116,569
     
 
Proceeds from exercise of stock options
   
38
     
73
 
Release of stock for benefit plan awards
   
28
     
55
 
BMP ESOP shares received to satisfy distribution of retirement benefits
   
     
(4
)
Payments related to tax withholding for stock-based compensation
   
(329
)
   
(123
)
Treasury shares repurchased
   
(35,356
)
   
(8,836
)
Cash dividends paid to preferred stockholders, net
   
(2,962
)
   
 
Cash dividends paid to common stockholders, net
   
(14,168
)
   
(15,124
)
Net cash provided by Financing Activities
   
193,012
     
27,092
 
DECREASE IN CASH AND CASH EQUIVALENTS
   
(8,205
)
   
(34,715
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
155,488
     
147,256
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
147,283
   
$
112,541
 
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid for income taxes
 
$
13,755
   
$
10,164
 
Cash paid for interest
   
46,972
     
72,837
 
Loans transferred to held for sale
   
47,938
     
19,664
 
Premises held for sale transferred to premises and fixed assets, net
   
(514
)
   
 
Operating lease assets in exchange for operating lease liabilities
   
1,524
     
49,160
 

See notes to unaudited condensed consolidated financial statements.


NO TES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Per Share Amounts)

1.
NATURE OF OPERATIONS

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

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

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

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.”

Risks and Uncertainties

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

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

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

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


2.
SUMMARY OF ACCOUNTING POLICIES

Summary of Significant Accounting Policies

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

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

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

Recent Accounting Pronouncements

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

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

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

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


3.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

 
 
Securities
Available-for-Sale
   
Defined
Benefit Plans
   
Derivatives
   
Total
Accumulated Other
Comprehensive
Loss
 
Balance as of January 1, 2020
 
$
4,621
   
$
(6,024
)
 
$
(4,537
)
 
$
(5,940
)
Other comprehensive income (loss) before reclassifications
   
10,783
     
423
     
(17,150
)
   
(5,944
)
Amounts reclassified from accumulated other comprehensive loss
   
(2,302
)
   
133
     
2,514
     
345
 
Net other comprehensive income (loss) during the period
   
8,481
     
556
     
(14,636
)
   
(5,599
)
Balance as of September 30, 2020
 
$
13,102
   
$
(5,468
)
 
$
(19,173
)
 
$
(11,539
)
 
                               
Balance as of January 1, 2019
 
$
(1,957
)
 
$
(6,290
)
 
$
1,747
   
$
(6,500
)
Other comprehensive income (loss) before reclassifications
   
7,420
     
285
     
(7,274
)
   
431
 
Amounts reclassified from accumulated other comprehensive loss
   
46
     
371
     
(656
)
   
(239
)
Net other comprehensive income (loss) during the period
   
7,466
     
656
     
(7,930
)
   
192
 
Balance as of September 30, 2019
 
$
5,509
   
$
(5,634
)
 
$
(6,183
)
 
$
(6,308
)

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
September 30,
   
Nine Months Ended
September 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
 
$
1,716
   
$
2,062
     
15,769
   
$
10,877
 
Reclassification adjustment for net (gains) losses included in net gain on securities and other assets
   
(215
)
   
(66
)
   
(3,357
)
   
67
 
Net change
   
1,501
     
1,996
     
12,412
     
10,944
 
Tax expense
   
475
     
600
     
3,931
     
3,478
 
Net change in unrealized holding gain or loss on securities available-for-sale
   
1,026
     
1,396
     
8,481
     
7,466
 
Change in pension and other postretirement obligations:
                               
Reclassification adjustment for expense included in other expense
   
4
     
182
     
194
     
546
 
Change in the net actuarial gain or loss
   
267
     
55
     
619
     
420
 
Net change
   
271
     
237
     
813
     
966
 
Tax expense
   
86
     
76
     
257
     
310
 
Net change in pension and other postretirement obligations
   
185
     
161
     
556
     
656
 
Change in unrealized gain or loss on derivatives:
                               
Change in net unrealized gain or loss during the period
   
100
     
(2,044
)
   
(25,098
)
   
(10,717
)
Reclassification adjustment for expense included in interest expense
   
2,319
     
(279
)
   
3,679
     
(967
)
Net change
   
2,419
     
(2,323
)
   
(21,419
)
   
(11,684
)
Tax benefit
   
766
     
(746
)
   
(6,783
)
   
(3,754
)
Net change in unrealized gain or loss on derivatives
   
1,653
     
(1,577
)
   
(14,636
)
   
(7,930
)
Other comprehensive income (loss)
 
$
2,864
   
$
(20
)
 
$
(5,599
)
 
$
192
 


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
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Net income available to common stockholders
 
$
14,046
   
$
4,705
   
$
34,264
   
$
29,241
 
Less: Dividends paid and earnings allocated to participating securities
   
(83
)
   
(78
)
   
(195
)
   
(172
)
Income attributable to common stock
 
$
13,963
   
$
4,627
   
$
34,069
   
$
29,069
 
Weighted average common shares outstanding, including participating securities
   
32,991,253
     
35,861,268
     
33,716,334
     
35,922,521
 
Less: weighted average participating securities
   
(289,786
)
   
(229,881
)
   
(295,429
)
   
(197,430
)
Weighted average common shares outstanding
   
32,701,467
     
35,631,387
     
33,420,905
     
35,725,091
 
Basic EPS
 
$
0.43
   
$
0.13
   
$
1.02
   
$
0.81
 
Income attributable to common stock
 
$
13,963
   
$
4,627
   
$
34,069
   
$
29,069
 
Weighted average common shares outstanding
   
32,701,467
     
35,631,387
     
33,420,905
     
35,725,091
 
Weighted average common equivalent shares outstanding
   
206,229
     
138,074
     
207,305
     
140,968
 
Weighted average common and equivalent shares outstanding
   
32,907,696
     
35,769,461
     
33,628,210
     
35,866,059
 
Diluted EPS
 
$
0.42
   
$
0.13
   
$
1.01
   
$
0.81
 

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 34,910 and 24,724 weighted-average stock options outstanding for the three-month and nine-month periods ended September 30, 2020, which were 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 or the nine-month periods ended September 30, 2019.

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

5.
PREFERRED STOCK

On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $74,980 in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $25.00 per share. The net proceeds received from the issuance of preferred stock at the time of closing was $72,224On 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 September 30, 2020
 
 
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
Securities available-for-sale:
                       
Agency Notes
 
$
25,000
   
$
16
   
$
(43
)
 
$
24,973
 
Corporate Securities
   
55,044
     
1,806
     
(50
)
   
56,800
 
Pass-through MBS issued by GSEs
   
168,977
     
9,402
     
     
178,379
 
Agency Collateralized Mortgage Obligations (“CMOs”)
   
257,403
     
8,111
     
(69
)
   
265,445
 
Total securities available-for-sale
 
$
506,424
   
$
19,335
   
$
(162
)
 
$
525,597
 

 
 
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 as collateral was $39,708 and $27,884 at September 30, 2020 and December 31, 2019, respectively.

 
 
At September 30, 2020
 
Weighted average contractual maturity (years):
     
Agency Notes
   
10.1
 
Corporate Securities
   
9.2
 
Pass-through MBS issued by GSEs and Agency CMOs
   
17.6
 

The following table presents the information related to sales of securities available-for-sale as of the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Agency Notes:
                       
Proceeds
 
$
   
$
   
$
   
$
 
Gross gains
   
     
     
     
 
Tax expense on gain
   
     
     
     
 
Gross losses
   
     
     
     
 
Tax benefit on loss