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.


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

1.
NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Delaware corporation organized by Dime Community Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank’s conversion to stock ownership on June 26, 1996.  At 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 $72,224. 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 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
   
—
     
—
     
—
     
—
 
Corporate Securities:
                               
Proceeds
   
—
     
3,038
     
25,403
     
3,038
 
Gross gains
   
—
     
39
     
1,344
     
39
 
Tax expense on gain
   
—
     
12
     
423
     
12
 
Gross losses
   
—
     
—
     
—
     
—
 
Tax benefit on loss
   
—
     
—
     
—
     
—
 
Pass through MBS issued by GSEs:
                               
Proceeds
   
5,987
     
15,149
     
39,182
     
106,860
 
Gross gains
   
215
     
22
     
2,005
     
270
 
Tax expense on gain
   
67
     
7
     
630
     
86
 
Gross losses
   
—
     
2
     
—
     
520
 
Tax benefit on loss
   
—
     
332
     
—
     
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 September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Proceeds:
                       
Marketable equity securities
 
$
137
   
$
136
   
$
410
   
$
409
 

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 $175 and $14 were recognized on marketable equity securities for the three-month periods ended September 30, 2020 and 2019, respectively. Net gain of $139 and $430 were recognized on marketable equity securities for the nine-month periods ended September 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:

 
 
September 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:
                                   
Agency Notes
 
$
9,957
   
$
43
   
$
—
   
$
—
   
$
9,957
   
$
43
 
Corporate Notes
   
4,950
     
50
     
—
     
—
     
4,950
     
50
 
Agency CMOs
   
14,221
     
21
     
4,951
     
48
     
19,172
     
69
 

 
 
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 September 30, 2020.

7.
LOANS

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

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

 
 
Balance at
 
 
 
September 30, 2020
   
December 31, 2019
 
One-to-four family residential, including condominium and cooperative apartment
 
$
186,975
   
$
148,429
 
Multifamily residential and residential mixed-use
   
2,919,186
     
3,385,375
 
Commercial real estate and commercial mixed-use
   
1,675,488
     
1,350,185
 
Acquisition, development, and construction (“ADC”)
   
151,866
     
118,365
 
Total Real Estate
   
4,933,515
     
5,002,354
 
C&I
   
642,540
     
336,412
 
Other
   
1,448
     
1,772
 
Total
   
5,577,503
     
5,340,538
 
Allowance for loans losses
   
(48,492
)
   
(28,441
)
Loans, net
 
$
5,529,011
   
$
5,312,097
 

As of September 30, 2020, included in C&I loans was $318,568 of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans. There were no SBA PPP loans at December 31, 2019. 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 September 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 September 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
 
$
671
   
$
16,666
   
$
9,859
   
$
1,777
   
$
28,973
   
$
13,502
   
$
17
   
$
42,492
 
Provision (credit) for loan losses
   
134
     
3,468
     
2,162
     
274
     
6,038
     
(107
)
   
—
     
5,931
 
Charge-offs
   
(6
)
   
(13
)
   
—
     
—
     
(19
)
   
—
     
(1
)
   
(20
)
Recoveries
   
—
     
89
     
—
     
—
     
89
     
—
     
—
     
89
 
Ending balance
 
$
799
   
$
20,210
   
$
12,021
   
$
2,051
   
$
35,081
   
$
13,395
   
$
16
   
$
48,492
 

 
 
At or for the Three Months Ended September 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
 
$
207
   
$
11,817
   
$
3,846
   
$
980
   
$
16,850
   
$
4,267
   
$
17
   
$
21,134
 
Provision (credit) for loan losses
   
52
     
(838
)
   
(43
)
   
5
     
(824
)
   
12,046
     
6
     
11,228
 
Charge-offs
   
(6
)
   
(14
)
   
—
     
—
     
(20
)
   
(5,046
)
   
(7
)
   
(5,073
)
Recoveries
   
4
     
—
     
—
     
—
     
4
     
1
     
—
     
5
 
Ending balance
 
$
257
   
$
10,965
   
$
3,803
   
$
985
   
$
16,010
   
$
11,268
   
$
16
   
$
27,294
 

 
 
At or for the Nine Months Ended September 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
   
540
     
10,010
     
8,127
     
807
     
19,484
     
518
     
1
     
20,003
 
Charge-offs
   
(10
)
   
(45
)
   
(6
)
   
—
     
(61
)
   
—
     
(1
)
   
(62
)
Recoveries
   
—
     
103
     
—
     
—
     
103
     
7
     
—
     
110
 
Ending balance
 
$
799
   
$
20,210
   
$
12,021
   
$
2,051
   
$
35,081
   
$
13,395
   
$
16
   
$
48,492
 

 
 
At or for the Nine Months Ended September 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
   
64
     
(2,427
)
   
171
     
588
     
(1,604
)
   
12,698
     
6
     
11,100
 
Charge-offs
   
(12
)
   
(54
)
   
(145
)
   
—
     
(211
)
   
(5,378
)
   
(8
)
   
(5,597
)
Recoveries
   
7
     
—
     
—
     
—
     
7
     
2
     
—
     
9
 
Ending balance
 
$
257
   
$
10,965
   
$
3,803
   
$
985
   
$
16,010
   
$
11,268
   
$
16
   
$
27,294
 

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 September 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
 
$
—
   
$
—
   
$
—
   
$
—
   
$
—
   
$
10,184
   
$
—
   
$
10,184
 
Collectively evaluated for impairment
   
799
     
20,210
     
12,021
     
2,051
     
35,081
     
3,211
     
16
     
38,308
 
Total ending allowance balance
 
$
799
   
$
20,210
   
$
12,021
   
$
2,051
   
$
35,081
   
$
13,395
   
$
16
   
$
48,492
 
 
                                                               
Loans:
                                                               
Individually evaluated for impairment
 
$
—
   
$
1,213
   
$
47
   
$
—
   
$
1,260
   
$
10,287
   
$
—
   
$
11,547
 
Collectively evaluated for impairment
   
186,975
     
2,917,973
     
1,675,441
     
151,866
     
4,932,255
     
632,253
     
1,448
     
5,565,956
 
Total ending loans balance
 
$
186,975
   
$
2,919,186
   
$
1,675,488
   
$
151,866
   
$
4,933,515
   
$
642,540
   
$
1,448
   
$
5,577,503
 

 
 
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 nine-month periods ended September 30, 2020 or 2019.  There were no TDRs as of September 30, 2020 or December 31, 2019.

Loan payment deferrals due to COVID-19

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 three-month or six-month deferrals of interest and/or principal payments. As of September 30, 2020, the Company had 90 loans, representing outstanding loan balances of $334.3 million, on payment deferral (inclusive of loans deferring principal and interest payments and loans deferring only principal payments).  

Pursuant to Section 4013 of the CARES Act, a qualified loan modification, is not considered a TDR as defined by GAAP, if granted to a borrower between March 1, 2020 and 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. 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. As of September 30, 2020, the risk-ratings on COVID-19 loan deferrals had not been changed. The loans will be subject to the Bank’s normal credit monitoring. The collectability of accrued interest will be evaluated on a periodic basis. The table below presents the loans with payment deferrals as of September 30, 2020:

 
 
September 30, 2020
 
 
 
Number
of Loans
   
Balance (1)
   
% of
Portfolio
 
(Dollars in thousands)
                 
One-to-four family residential, including condominium and cooperative apartment
   
9
   
$
8,765
     
4.7
%
Multifamily residential and residential mixed-use real estate
   
50
     
237,872
     
8.1
 
Commercial real estate and commercial mixed-use
   
28
     
75,440
     
4.5
 
C&I
   
3
     
12,257
     
1.9
 
Total
   
90
   
$
334,334
         

(1) Amount excludes net deferred costs due to immateriality.

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 September 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
 
$
1,213
   
$
1,213
   
$
—
   
$
153
   
$
153
   
$
—
 
Commercial real estate and commercial mixed-use
   
47
     
47
     
—
     
60
     
60
     
—
 
Total with no related allowance recorded
   
1,260
     
1,260
     
—
     
213
     
213
     
—
 
 
                                               
With an allowance recorded:
                                               
C&I
   
10,287
     
10,287
     
10,184
     
10,082
     
10,082
     
10,082
 
Total with an allowance recorded
   
10,287
     
10,287
     
10,184
     
10,082
     
10,082
     
10,082
 
Total
 
$
11,547
   
$
11,547
   
$
10,184
   
$
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
September 30, 2020
   
Three Months Ended
September 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
 
$
—
   
$
—
   
$
10
   
$
4
 
Multifamily residential and residential mixed-use
   
1,295
     
—
     
416
     
7
 
Commercial real estate and commercial mixed-use
   
1,525
     
—
     
2,688
     
54
 
Total with no related allowance recorded
   
2,820
     
—
     
3,114
     
65
 
 
                               
With an allowance recorded:
                               
C&I
   
10,232
     
—
     
7,500
     
153
 
Total
 
$
13,052
   
$
—
   
$
10,614
   
$
218
 

(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:

 
 
Nine Months Ended
September 30, 2020
   
Nine Months Ended
September 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
 
$
1,474
   
$
—
   
$
11
   
$
4
 
Multifamily residential and residential mixed-use
   
1,019
     
6
     
480
     
29
 
Commercial real estate and commercial mixed-use
   
791
     
1
     
4,691
     
244
 
Total with no related allowance recorded
   
3,284
     
7
     
5,182
     
277
 
 
                               
With an allowance recorded:
                               
C&I
   
10,157
     
—
     
3,885
     
159
 
Total
 
$
13,441
   
$
7
   
$
9,067
   
$
435
 

(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 September 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
 
$
354
   
$
—
   
$
470
   
$
867
   
$
1,691
   
$
185,284
   
$
186,975
 
Multifamily residential and residential mixed-use
   
210
     
—
     
—
     
1,213
     
1,423
     
2,917,763
     
2,919,186
 
Commercial real estate and commercial mixed-use
   
16,173
     
—
     
1,470
     
47
     
17,690
     
1,657,798
     
1,675,488
 
ADC
   
—
     
—
     
—
     
—
     
—
     
151,866
     
151,866
 
Total real estate
   
16,737
     
—
     
1,940
     
2,127
     
20,804
     
4,912,711
     
4,933,515
 
C&I
   
84
     
—
     
—
     
10,287
     
10,371
     
632,169
     
642,540
 
Other
   
5
     
—
     
—
     
10
     
15
     
1,433
     
1,448
 
Total
 
$
16,826
   
$
—
   
$
1,940
   
$
12,424
   
$
31,190
   
$
5,546,313
   
$
5,577,503
 

(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of September 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 four loans with an aggregate outstanding balance of $1,940 at September 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 September 30, 2020 and December 31, 2019.

The following is a summary of the credit risk profile of real estate and C&I loans by internally assigned grade as of the dates indicated:

 
Balance at September 30, 2020
 
   
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Real Estate:
                             
One-to-four family residential, including condominium and cooperative apartment
 
$
186,093
   
$
—
   
$
882
   
$
—
   
$
186,975
 
Multifamily residential and residential mixed-use
   
2,840,057
     
47,181
     
31,948
     
—
     
2,919,186
 
Commercial real estate and commercial mixed-use
   
1,657,975
     
6,859
     
10,654
     
—
     
1,675,488
 
ADC
   
151,866
     
—
     
—
     
—
     
151,866
 
Total real estate
   
4,835,991
     
54,040
     
43,484
     
—
     
4,933,515
 
C&I
   
629,942
     
1,490
     
1,026
     
10,082
     
642,540
 
Total Real Estate and C&I
 
$
5,465,933
   
$
55,530
   
$
44,510
   
$
10,082
   
$
5,576,055
 

 
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
 
 
 
September 30, 2020
   
December 31, 2019
 
Performing
 
$
1,438
   
$
1,770
 
Non-accrual
   
10
     
2
 
Total
 
$
1,448
   
$
1,772
 

8.
LEASES

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 September 30, 2020 are as follows:

 
 
Rent to be Capitalized
 
2020
 
$
1,756
 
2021
   
7,030
 
2022
   
6,829
 
2023
   
5,870
 
2024
   
5,985
 
Thereafter
   
19,108
 
Total undiscounted lease payments
   
46,578
 
Less amounts representing interest
   
5,264
 
Lease liability
 
$
41,314
 

Other information related to operating leases was as follows:

 
 
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Operating lease cost
 
$
1,636
   
$
1,622
   
$
4,867
   
$
4,863
 
Cash paid for amounts included in the measurement of operating lease liabilities
   
1,745
     
1,728
     
5,295
     
5,161
 

The weighted average remaining lease term at September 30, 2020 was 7.4 years.  The weighted average discount rate at September 30, 2020 was 3.21%.


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 $9,864 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 September 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
   
$
—
   
$
28,110
     
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 September 30, 2020 and 2019.

 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
                         
Amount of gain (loss) recognized in other comprehensive income
 
$
100
   
$
(2,044
)
 
$
(25,098
)
 
$
(10,717
)
Amount of gain (loss) reclassified from other comprehensive income into interest expense
   
(2,319
)
   
279
     
(3,679
)
   
967
 

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 September 30, 2020, posted collateral to the other third-party counterparties was $6,196.

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 September 30, 2020
 
 
 
Count
   
Notional
Amount
   
Fair Value
Assets
   
Fair Value
Liabilities
 
Included in other assets/(liabilities):
                       
Loan level interest rate swaps with borrower
   
44
   
$
381,659
   
$
23,184
   
$
—
 
Loan level interest rate floors with borrower
   
21
     
199,186
     
—
     
3,339
 
Loan level interest rate swaps with third-party counterparties
   
44
     
381,659
     
—
     
23,184
 
Loan level interest rate floors with third-party counterparties
   
21
     
199,186
     
3,339
     
—
 

 
 
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
     
—
 


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
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
                         
Loan level derivative income
 
$
1,544
   
$
197
   
$
5,201
   
$
488
 

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 September 30, 2020, posted collateral was $20,484.

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 September 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 $29,221 for those related to FHLBNY advances and $19,845 for those related to loan level derivatives. If the Company had breached any of the above provisions at September 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 September 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 September 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 September 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 September 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
 
$
1,580
   
$
1,580
   
$
—
   
$
—
 
International equity mutual funds
   
407
     
407
     
—
     
—
 
Fixed income mutual funds
   
3,772
     
3,772
     
—
     
—
 
Securities available-for-sale:
                               
Agency Notes
   
24,973
     
—
     
24,973
     
—
 
Corporate Securities
   
56,800
     
—
     
56,800
     
—
 
Pass-through MBS issued by GSEs
   
178,379
     
—
     
178,379
     
—
 
Agency CMOs
   
265,445
     
—
     
265,445
     
—
 
Derivative – freestanding derivatives, net
   
19,845
     
—
     
19,845
     
—
 
 
                               
Financial Liabilities
                               
Derivative – cash flow hedges
   
28,110
     
—
     
28,110
     
—
 
Derivative – freestanding derivatives, net
   
19,845
     
—
     
19,845
     
—
 


 
       
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 September 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 September 30, 2020 Using
 
 
 
Carrying
Amount
   
Level 1
Inputs
   
Level 2
Inputs
   
Level 3
Inputs
   
Total
 
 
                             
Financial Assets
                             
Cash and due from banks
 
$
147,283
   
$
147,283
   
$
—
   
$
—
   
$
147,283
 
Loans, net
   
5,529,011
     
—
     
—
     
5,557,285
     
5,557,285
 
Accrued interest receivable
   
33,774
     
4
     
1,804
     
31,966
     
33,774
 
Financial Liabilities
                                       
Savings, money market and checking accounts
   
3,015,012
     
3,015,012
     
—
     
—
     
3,015,012
 
Certificates of Deposits (“CDs”)
   
1,357,510
     
—
     
1,363,610
     
—
     
1,363,610
 
Escrow and other deposits
   
119,626
     
119,626
     
—
     
—
     
119,626
 
FHLBNY Advances
   
1,128,400
     
—
     
1,135,936
     
—
     
1,135,936
 
Subordinated debt, net
   
114,016
     
—
     
113,441
     
—
     
113,441
 
Other borrowings
   
70,000
     
70,000
     
—
     
—
     
70,000
 
Accrued interest payable
   
3,510
     
—
     
3,510
     
—
     
3,510
 


 
       
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 September 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
     
313
     
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
   
$
174
   
$
8
 

 
 
Nine Months Ended September 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
   
723
     
30
     
938
     
40
 
Expected return on assets
   
(1,284
)
   
—
     
(1,146
)
   
—
 
Unrecognized past service liability
   
—
     
(6
)
   
—
     
(6
)
Amortization of unrealized loss (gain)
   
822
     
—
     
729
     
(9
)
Net periodic cost
 
$
261
   
$
24
   
$
521
   
$
25
 

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
September 30, 2020
   
Nine Months Ended
September 30, 2020
 
 
                 
Employee Retirement Plan
 
$
58
   
$
—
   
$
—
 
Outside Director Retirement Plan
   
263
     
56
     
168
 
Post Retirement Plan
   
109
     
44
     
139
 
BMP
   
569
     
137
     
410
 

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 nine month periods ended September 30, 2020.

 
 
For the Three Months and
Nine Months Ended
September 30, 2019
 
 
     
Cash
 
$
24
 
Market value of Common Stock from Employee Stock Ownership Plan of BMP (685 shares)
   
13
 
Gross lump-sum distribution
 
$
37
 
Non-cash tax benefit
 
$
—
 


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 cancelled
   
(6,068
)
   
14.82
             
Options expired
   
(4,077
)
   
12.75
             
Options exercised
   
(3,044
)
   
12.75
             
Options outstanding at September 30, 2020
   
28,842
   
$
15.05
     
0.8
   
$
—
 
Options vested and exercisable at September 30, 2020
   
28,842
   
$
15.05
     
0.8
   
$
—
 

Information related to stock options during each period is as follows:

 
 
For Three Months Ended September 30,
   
For the Nine Months Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Cash received for option exercise cost
 
$
—
   
$
—
   
$
38
   
$
73
 
Income tax benefit recognized on stock option exercises
   
—
     
—
     
—
     
18
 
Intrinsic value of options exercised
   
—
     
—
     
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
   
(78,409
)
   
19.80
 
Shares forfeited
   
(38,819
)
   
17.65
 
Unvested allocated shares at September 30, 2020
   
259,825
   
$
17.39
 

Information related to RSAs during each period is as follows:

 
 
For the Three Months Ended September 30,
   
For the Nine Months Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Compensation expense recognized
 
$
444
   
$
449
   
$
1,311
   
$
1,092
 
Income tax benefit (expense) recognized on vesting of RSA
   
(38
)
   
7
     
(95
)
   
16
 

As of September 30, 2020, there was $3,142 of total unrecognized compensation cost related to unvested restricted stock awards.  The cost is expected to be recognized over a weighted-average period of 2.6 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 September 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 September 30,
   
For the Nine Months Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Compensation expense recognized
 
$
210
   
$
55
   
$
362
   
$
136
 
Income tax benefit recognized on vesting of LTIP
   
—
     
—
     
—
     
—
 


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
   
(14,048
)
   
19.14
 
Shares forfeited
   
(3,326
)
   
17.21
 
Maximum aggregate share payout at September 30, 2020
   
74,313
   
$
13.56
 
Minimum aggregate share payout
   
—
     
—
 
Expected aggregate share payout
   
74,313
   
$
13.56
 

 
 
For the Three Months Ended September 30,
   
For the Nine Months Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Compensation expense recognized
 
$
150
   
$
70
   
$
280
   
$
121
 
Income tax expense recognized on vesting of awards
   
(22
)
   
—
     
(65
)
   
—
 


13.
INCOME TAXES

During the three months ended September 30, 2020 and 2019, the Company’s consolidated effective tax rates were 21.9% and 15.3%, respectively. During the nine months ended September 30, 2020 and September 30, 2019, the Company’s consolidated effective tax rates were 21.7% and 23.7%, respectively. There were no significant unusual income tax items during the three-month or nine-month periods ended September 30, 2020 or 2019.


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 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.

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 September 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. Currently inactive.
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 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.”

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 which began 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.

•
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 September 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 dividends 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 dividends 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 $959.4 million as of September 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 been operating efficiently through the pandemic.  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.

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 three-month or six-month deferrals of interest and/or principal payments. As of September 30, 2020, the Company had 90 loans, representing outstanding loan balances of $334.3 million, on payment deferral (inclusive of loans deferring principal and interest payments and loans deferring only principal payments).  In accordance with Section 4013 of the CARES Act, issued in March 2020, these deferrals are not considered troubled debt restructurings. As of September 30, 2020, the risk-rating on COVID-19 loan deferrals had not been changed. The loans will be subject to the Bank’s normal credit monitoring. The collectability of accrued interest will be evaluated on a periodic basis.

The Bank is closely monitoring the developments and uncertainties regarding the pandemic, including various segments of our loan portfolio that may be disproportionately impacted by the pandemic. As of September 30, 2020, the Company had 15 loans aggregating $25.6 million to restaurants of which 2 loans aggregating $12.2 million were in payment deferrals. As of September 30, 2020, within the commercial real estate portfolio, the Company had 11 loans aggregating $171.4 million to hotels of which 1 loan aggregating $6.5 million was in payment deferral, The Company does not have any exposure to the energy industry, airline industry, leveraged lending, shared national credits, credits card loans, or auto loans.

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 September 30, 2020, the Company had 2,474 PPP loans totaling $318.6 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 losses through additional provision expense charged to earnings.

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
September 30,
   
At or For the Nine
Months Ended
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
Per Share Data:
                       
EPS (Diluted)
 
$
0.42
   
$
0.13
   
$
1.01
   
$
0.81
 
Cash dividends paid per share
   
0.14
     
0.14
     
0.42
     
0.42
 
Book value per share
   
17.48
     
16.94
     
17.48
     
16.94
 
Dividend Payout Ratio
   
33.33
%
   
107.69
%
   
41.58
%
   
51.85
%
Performance and Other Selected Ratios:
                               
Return on average assets
   
0.98
%
   
0.29
%
   
0.78
%
   
0.61
%
Return on average common equity
   
9.22
     
3.08
     
7.59
     
6.42
 
Net interest spread
   
2.72
     
2.07
     
2.53
     
2.06
 
Net interest margin
   
2.92
     
2.34
     
2.79
     
2.34
 
Average interest-earning assets to average interest-bearing liabilities
   
125.10
     
118.38
     
123.68
     
118.70
 
Non-interest expense to average assets
   
1.53
     
1.41
     
1.68
     
1.40
 
Efficiency Ratio
   
49.02
     
57.69
     
55.61
     
57.76
 
Loan-to-Deposit ratio at end of period
   
127.56
     
124.86
     
127.56
     
124.86
 
Effective tax rate
   
21.87
     
15.30
     
21.72
     
23.74
 
Asset Quality Summary:
                               
Non-performing loans (1)
 
$
12,424
   
$
16,378
   
$
12,424
   
$
16,378
 
Non-performing assets
   
12,424
     
16,378
     
12,424
     
16,378
 
Net charge-offs (recoveries)
   
(69
)
   
5,068
     
(48
)
   
5,588
 
Non-performing assets/Total assets
   
0.19
%
   
0.25
%
   
0.19
%
   
0.25
%
Non-performing loans/Total loans
   
0.22
     
0.30
     
0.22
     
0.30
 
Allowance for loan loss/Total loans
   
0.87
     
0.50
     
0.87
     
0.50
 
Allowance for loan loss/Non-performing loans
   
390.31
     
166.65
     
390.31
     
166.65
 

(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 September 30, 2020, the Bank had $70.0 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 $89.9 million during the nine months ended September 30, 2020, compared to an increase of $34.7 million for the nine months ended September 30, 2019. Within deposits, core deposits (i.e., non-CDs) increased $305.3 million during the nine months ended September 30, 2020 and decreased $206.0 million during the nine months ended September 30, 2019. CDs decreased $215.4 million during the nine months ended September 30, 2020 compared to an increase of $240.7 million during the nine months ended September 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 outflows of CDs from pro-active downward pricing of such products, and outflows of $87.0 million 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 September 30, 2020, the Bank had an additional unused borrowing capacity of $959.4 million 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 increased its outstanding FHLBNY advances by $36.2 million during the nine months ended September 30, 2020, compared to a $68.6 million reduction during the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, principal repayments on real estate loans (including refinanced loans) totaled $681.6 million compared to $614.5 million during the nine months ended September 30, 2019. During the nine months ended September 30, 2020 and 2019, real estate loan originations totaled $653.2 million and $649.5 million, respectively.

During the nine months ended September 30, 2020, principal repayments on C&I loans (including refinanced loans) totaled $112.8 million compared to $77.0 million during the nine months ended September 30, 2019. During the nine months ended September 30, 2020 and 2019, C&I loan originations totaled $442.4 million (including $334.3 million of PPP loans) and $168.9 million, respectively.

Sales of available-for-sale securities totaled $68.8 million and $130.5 million during the nine-month periods ended September 30, 2020 and 2019, respectively. Purchases of available-for-sale securities totaled $149.4 million and $214.6 million during the nine-month periods ended September 30, 2020 and 2019, respectively. Proceeds from pay downs and calls of available-for-sale securities were $121.2 million and $78.6 million for the nine-month periods ended September 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 September 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 September 30,
2020
             
   
Bank
   
Consolidated
Company
   
Basel III
Minimum
Requirement
   
To Be
Categorized as
“Well
Capitalized” (1)
 
Tier 1 common equity ratio
   
12.88
%
   
10.69
%
   
4.5
%
   
6.5
%
Tier 1 risk-based based capital ratio
   
12.88
     
13.02
     
6.0
     
8.0
 
Total risk-based based capital ratio
   
13.87
     
16.30
     
8.0
     
10.0
 
Tier 1 leverage ratio
   
9.97
     
10.10
     
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 September 30, 2020, the Bank has not opted into the Community Bank Leverage Ratio framework.

The Holding Company repurchased 2,279,366 and 469,390 shares of its common stock during the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, up to 589,782 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 $3.0 million in cash dividends on preferred stock during the nine months ended September 30, 2020, and none during the nine months ended September 30, 2019.  The Holding Company paid $14.2 million and $15.1 million in cash dividends on common stock during the nine months ended September 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 September 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
 
$
132,964
   
$
97,319
   
$
—
   
$
—
   
$
230,283
 
Other loan commitments
   
91,441
     
—
     
—
     
—
     
91,441
 
Stand-by letters of credit
   
8,753
     
—
     
—
     
—
     
8,753
 
Total Off-Balance Sheet Arrangements
 
$
233,158
   
$
97,319
   
$
—
   
$
—
   
$
330,477
 

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 three-month or six-month deferrals of interest and/or principal payments. The table below presents the loans with payment deferrals as of September 30, 2020:


 
September 30, 2020
 
   
Number of Loans
   
Balance(1)
 
(Dollars in thousands)
           
One-to-four family residential, including condominium and cooperative apartment
   
9
   
$
8,765
 
Multifamily residential and residential mixed-use real estate
   
50
     
237,872
 
Commercial real estate and commercial mixed-use
   
28
     
75,440
 
C&I
   
3
     
12,257
 
Total
   
90
   
$
334,334
 

(1) Amount excludes net deferred costs due to immateriality.

As outlined in the CARES Act, these 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. As of September 30, 2020, the risk-ratings on COVID-19 loan deferrals had not been changed. The loans will be subject to the Bank’s normal credit monitoring. The collectability of accrued interest will be evaluated on a periodic basis.

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.  

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 $12.4 million at September 30, 2020, and eleven non-accrual loans totaled $11.1 million at December 31, 2019.  During the nine months ended September 30, 2020, ten loans totaling $11.6 million were placed on non-accrual status, three of which totaling $10.0 million were sold, and one was paid off for $0.2 million. Principal amortization of $0.05 million was recognized on five non-accrual loans. There were no changes on the remaining six non-accrual loans during the nine-month period ended September 30, 2020.

Impaired Loans

The recorded investment in loans deemed impaired (as defined in Note 7 to the unaudited condensed consolidated financial statements) totaled $11.5 million, consisting of seven loans, at September 30, 2020, compared to $10.3 million, consisting of four loans, at December 31, 2019.  During the nine months ended September 30, 2020, seven loans totaling $11.5 million were added to impaired status, three of which totaling $10.0 million were sold, and one loan was paid off of $0.2 million. Principal amortization of $0.02 million was recognized on one impaired loan.  There were no changes on the remaining impaired loans during the nine-month period ended September 30, 2020.

The following is a reconciliation of non-accrual and impaired loans as of the dates indicated:

 
September
30, 2020
   
December 31,
2019
   
September
30, 2019
 
   
(Dollars in thousands)
 
Non-accrual loans (1):
                 
One-to-four family residential, including condominium and cooperative apartment
 
$
867
   
$
794
   
$
1,161
 
Multifamily residential and residential mixed-use real estate
   
1,213
     
153
     
153
 
Commercial real estate and commercial mixed-use
   
47
     
60
     
63
 
C&I
   
10,287
     
10,082
     
15,000
 
Other
   
10
     
2
     
1
 
Total non-accrual loans
   
12,424
     
11,091
     
16,378
 
Non-accrual one-to-four family residential and other loans deemed homogeneous loans
   
(877
)
   
(796
)
   
(1,162
)
TDRs:
                       
One-to-four family residential, including condominium and cooperative apartment
   
—
     
—
     
9
 
Multifamily residential and residential mixed-use real estate
   
—
     
—
     
—
 
Commercial real estate and commercial mixed-use
   
—
     
—
     
—
 
Total TDRs
   
—
     
—
     
9
 
Impaired loans
 
$
11,547
   
$
10,295
   
$
15,225
 
Ratios:
                       
Total non-accrual loans to total loans
   
0.22
%
   
0.21
%
   
0.30
%
Total non-performing assets to total assets(2)
   
0.19
     
0.17
     
0.25
 

(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 nine months ended September 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 September 30, 2020 or December 31, 2019. The Bank did not recognize any provisions for losses on OREO properties during the three or nine months ended September 30, 2020 or 2019.

Other Potential Problem Loans

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on four loans with an aggregate outstanding balance of $1.9 million at September 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 $16.8 million that were delinquent between 30 and 89 days at September 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 September 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 September 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 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:

 
September 30,
2020
   
December 31,
2019
   
September 30,
2019
 
   
(Dollars in Thousands)
 
Impaired loans
 
$
10,184
   
$
10,082
   
$
7,500
 
Non-impaired loans:
                       
Real estate loans
   
35,081
     
15,555
     
16,010
 
C&I loans
   
3,211
     
2,788
     
3,768
 
Consumer loans
   
16
     
16
     
16
 
Total
 
$
48,492
   
$
28,441
   
$
27,294
 

A provision of $5.9 million and $11.2 million were recorded during the three month periods ended September 30, 2020 and 2019, respectively. A provision of $20.0 million and $11.1 million were recorded during the nine month periods ended September 30, 2020 and 2019, respectively.

During the three-month and nine-month periods ended September 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.

During the three and nine month periods ended September 30, 2019, the loan loss provision was driven mainly by a $5.0 million charge-off and a $7.5 million specific reserve both related to a single $20.0 million C&I relationship.

For a further discussion of the allowance for loan losses and related activity during the three-month and nine-month periods ended September 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 September 30, 2020 and December 31, 2019

Assets.  Assets totaled $6.62 billion at September 30, 2020, $264.9 million above their level at December 31, 2019, primarily due to an increase in the loan portfolio of $216.9 million, an increase in BOLI of $40.8 million due to additional purchases, an increase in derivative assets of $17.4 million, an increase in accrued interest receivable of $14.9 million, and an increase in other assets of $9.3 million, offset by a decrease in securities of $25.4 million.

Total loans increased $216.9 million during the nine months ended September 30, 2020. During the period, the Bank had originations of $1.10 billion and purchases of $18.9 million, which exceeded the $794.4 million of aggregate amortization on loans (also including refinancing of existing loans) and sales of $71.5 million. Additionally, the allowance for loan losses increased by $20.0 million during the nine months ended September 30, 2020.

The $17.4 million increase in derivative assets was primarily due to the freestanding derivative asset with borrowers related to loan swaps as a result of the 56 interest rate swap and floor transactions during the period and the interest rate environment at September 30, 2020.  The $14.9 million increase in accrued interest receivables was primarily due to COVID-19 related payment deferrals of interest on loans.

Liabilities.  Total liabilities increased $167.5 million during the nine months ended September 30, 2020, primarily due to an increase of $89.9 million in deposits, an increase of $43.1 million in escrows and other deposits, an increase of $36.2 million in FHLBNY advances, and an increase of $38.9 million in derivative liabilities, offset by a decrease of $40.0 million in other borrowings.

The increase of $38.9 million in derivative liabilities was primarily the result of an increase of $20.4 million in the interest rate derivative liability related to FHLBNY advances, primarily due to 14 interest rate swap transactions during the period, and a $18.5 million increase in the freestanding derivative liability with counterparties related to loan swaps, which was primarily the result of 56 interest rate swap and floor transactions during the period.  The interest rate environment as of September 30, 2020 also contributed to the increase.

Stockholders' Equity.  Stockholders' equity increased $97.4 million during the nine months ended September 30, 2020, due primarily to the issuance of $116.6 million of preferred stock and net income of $37.2 million, offset by $14.2 million in cash dividends paid on common stock and $3.0 million in cash dividends paid on preferred stock during the period, $35.4 million for the repurchase of Company common stock, and other comprehensive loss, net of tax, of $5.6 million.

Comparison of Operating Results for the Three Months Ended September 30, 2020 and 2019

General.  Net income was $15.9 million during the three months ended September 30, 2020, higher than $4.7 million for the three months ended September 30, 2019.  During the three months ended September 30, 2020, net interest income increased by $8.7 million, non-interest income increased by $2.8 million, non-interest expense increased by $2.1 million, income tax expense increased by $3.6 million and the loan loss provision decreased by $5.3 million, compared to the three months ended September 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 September 30, 2020.

Net Interest Income.  The discussion of net interest income for the three months ended September 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 September 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
 
$
4,874,780
   
$
47,482
     
3.90
%
 
$
5,188,967
   
$
50,732
     
3.91
%
C&I loans
   
643,383
     
5,752
     
3.58
     
312,472
     
4,442
     
5.69
 
Other loans
   
1,444
     
11
     
3.16
     
1,794
     
18
     
4.01
 
MBS and CMO securities
   
435,920
     
2,707
     
2.48
     
432,071
     
2,973
     
2.75
 
Investment securities
   
78,405
     
715
     
3.65
     
74,349
     
626
     
3.37
 
Other short-term investments
   
130,520
     
729
     
2.23
     
181,646
     
1,488
     
3.28
 
Total interest-earning assets
   
6,164,452
     
57,396
     
3.72
%
   
6,191,299
     
60,279
     
3.89
%
Non-interest earning assets
   
327,721
                     
255,083
                 
Total assets
 
$
6,492,173
                   
$
6,446,382
                 
                                                 
Liabilities and Stockholders' Equity:
                                               
Interest-bearing liabilities:
                                               
Interest-bearing checking accounts
 
$
241,248
   
$
186
     
0.31
%
 
$
125,310
   
$
56
     
0.18
%
Money Market accounts
   
1,696,297
     
1,858
     
0.44
     
1,845,594
     
6,883
     
1.48
 
Savings accounts
   
405,582
     
170
     
0.17
     
341,170
     
158
     
0.18
 
CDs
   
1,425,083
     
4,458
     
1.24
     
1,674,478
     
9,485
     
2.25
 
Total interest-bearing deposits
   
3,768,210
     
6,672
     
0.70
     
3,986,552
     
16,582
     
1.65
 
FHLBNY Advances
   
1,040,127
     
4,448
     
1.70
     
1,127,379
     
6,159
     
2.17
 
Subordinated notes
   
113,992
     
1,330
     
4.64
     
113,845
     
1,330
     
4.64
 
Other borrowings
   
5,283
     
2
     
0.12
     
2,337
     
12
     
1.99
 
Borrowed funds
   
1,159,402
     
5,780
     
1.98
     
1,243,561
     
7,501
     
2.39
 
Total interest-bearing liabilities
   
4,927,612
     
12,452
     
1.01
%
   
5,230,113
     
24,083
     
1.83
%
Non-interest-bearing checking accounts
   
652,880
                     
429,591
                 
Other non-interest-bearing liabilities
   
223,285
                     
176,191
                 
Total liabilities
   
5,803,777
                     
5,835,895
                 
Stockholders' equity
   
688,396
                     
610,487
                 
Total liabilities and stockholders' equity
 
$
6,492,173
                   
$
6,446,382
                 
Net interest income
         
$
44,944
                   
$
36,196
         
Net interest spread
                   
2.72
%
                   
2.07
%
Net interest-earning assets
 
$
1,236,839
                   
$
961,186
                 
Net interest margin
                   
2.92
%
                   
2.34
%
Ratio of interest-earning assets to interest-bearing liabilities
                   
125.10
%
                   
118.38
%
                                                 
Deposits
 
$
4,421,090
   
$
6,672
     
0.60
%
 
$
4,416,143
   
$
16,582
     
1.49
%

Rate/Volume Analysis

 
Three Months Ended September 30,
2020
Compared to Three Months Ended
September 30, 2019
Increase/ (Decrease) Due to:
 
   
Volume
   
Rate
   
Total
 
   
(Dollars In thousands)
 
Interest-earning assets:
                 
Real estate loans
 
$
(3,096
)
 
$
(154
)
 
$
(3,250
)
C&I loans
   
3,831
     
(2,521
)
   
1,310
 
Other loans
   
(3
)
   
(3
)
   
(6
)
MBS and CMO securities
   
26
     
(292
)
   
(266
)
Investment securities
   
36
     
54
     
90
 
Other
   
(351
)
   
(409
)
   
(760
)
Total
 
$
443
   
$
(3,325
)
 
$
(2,882
)
                         
Interest-bearing liabilities:
                       
Interest-bearing checking accounts
 
$
70
   
$
61
   
$
131
 
Money market accounts
   
(378
)
   
(4,648
)
   
(5,026
)
Savings accounts
   
26
     
(13
)
   
13
 
CDs
   
(1,093
)
   
(3,934
)
   
(5,027
)
FHLBNY Advances
   
(427
)
   
(1,284
)
   
(1,711
)
Subordinated notes
   
1
     
(1
)
   
—
 
Other borrowings
   
8
     
(18
)
   
(10
)
Total
 
$
(1,793
)
 
$
(9,837
)
 
$
(11,630
)
Net change in net interest income
 
$
2,236
   
$
6,512
   
$
8,748
 

Net interest income was $44.9 million during the three months ended September 30, 2020, an increase of $8.7 million from the three months ended September 30, 2019.  Average interest-earning assets were $6.16 billion for the three months ended September 30, 2020, a decrease of $26.8 million from $6.19 billion for the three months ended September 30, 2019. Net interest margin (“NIM”) was 2.92% during the three months ended September 30, 2020, up from 2.34% during the three months ended September 30, 2019.

Interest Income.  Interest income was $57.4 million during the three months ended September 30, 2020, a decrease of $2.9 million from the three months ended September 30, 2019, primarily reflecting decreases in interest income of $3.3 million on real estate loans, and $0.8 million on other interest-bearing assets, offset by an increase in interest income of $1.3 million on C&I loans. The decreased interest income on real estate loans was related to a reduction of $314.2 million in the average balance of such loans in the period and a 1 basis point decrease 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 $330.9 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 $11.6 million, to $12.5 million, during the three months ended September 30, 2020, from $24.1 million during the three months ended September 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 $149.3 million, a reduction in interest rates offered on CDs as well as a decrease in average balances of $249.4 million in CD products, and a decrease in average balances of $87.3 million in FHLBNY advances.


Provision for Loan Losses. The Company recognized a provision for loan losses of $5.9 million during the three months ended September 30, 2020, compared to a provision of $11.2 million for the three months ended September 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 decrease in the loan loss provision for the period ended September 30, 2020.

Non-Interest Income.  Non-interest income was $6.1 million during the three months ended September 30, 2020, an increase of $2.8 million from $3.4 million during the three months ended September 30, 2019, primarily due to an increase of $1.3 million of loan level derivative income, and an increase of $1.0 million in gains on sale of loans for the three months ended September 30, 2020.

Non-Interest Expense.  Non-interest expense was $24.9 million during the three months ended September 30, 2020, an increase of $2.1 million from $22.8 million during the three months ended September 30, 2019, primarily the result of increase in salaries and employee benefit expense of $0.6 million, FDIC premiums of $1.3 million, and merger related expenses of $0.8 million. These increases in non-interest expense were partially offset by a decrease in other non-interest expense of $0.8 million. During the three month period ended September 30, 2019, the Bank received notice that the FDIC’s Deposit Insurance Fund Reserve Ratio reached a pre-determined threshold, and as a result, an assessment credit from the FDIC totaling $0.5 million was recorded. In addition, no FDIC insurance premium expense was recognized for the three month period ended September 30, 2019.

Non-interest expense was 1.53% and 1.41% of average assets during the three-month periods ended September 30, 2020 and 2019, respectively.

Income Tax Expense.   Income tax expense was $4.4 million during the three months ended September 30, 2020, an increase of $3.6 million from $0.9 million during the three months ended September 30, 2019.  The Company's consolidated tax rate was 21.9% during the three months ended September 30, 2020, compared to 15.3% during the three months ended September 30, 2019.  The higher tax rate for the three months ended September 30, 2020 was primarily the result of higher pre-tax income during the period.

Comparison of Operating Results for the Nine Months Ended September 30, 2020 and 2019

General.  Net income was $37.2 million during the nine months ended September 30, 2020, an increase of $8.0 million from net income of $29.2 million during the nine months ended September 30, 2019.  During the nine months ended September 30, 2020, net interest income increased by $21.0 million and non-interest income increased by $10.2 million. This was offset by an increase in the provision of $8.9 million, non-interest expense of $13.1 million, and income tax expense of $1.2 million.

Net Interest Income.  The discussion of net interest income for the nine months ended September 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

   
Nine Months Ended September 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
 
$
4,898,959
   
$
146,657
     
3.99
%
 
$
5,195,438
   
$
150,720
     
3.87
%
C&I loans
   
497,214
     
14,868
     
3.99
     
283,527
     
12,012
     
5.65
 
Other loans
   
1,253
     
39
     
4.12
     
1,365
     
54
     
5.27
 
MBS and CMO
   
463,681
     
9,076
     
2.61
     
439,920
     
9,131
     
2.77
 
Investment securities
   
63,594
     
1,718
     
3.60
     
62,005
     
1,616
     
3.47
 
Other
   
144,414
     
2,577
     
2.38
     
163,446
     
4,392
     
3.59
 
Total interest-earning assets
   
6,069,115
     
174,935
     
3.84
%
   
6,145,701
   
$
177,925
     
3.86
%
Non-interest earning assets
   
294,653
                     
254,951
                 
Total assets
 
$
6,363,768
                   
$
6,400,652
                 
                                                 
Liabilities and Stockholders' Equity:
                                               
Interest-bearing liabilities:
                                               
Interest-bearing checking accounts
 
$
207,779
   
$
486
     
0.31
%
 
$
121,865
   
$
169
     
0.19
%
Money Market accounts
   
1,644,679
     
7,938
     
0.64
     
1,928,042
     
21,920
     
1.52
 
Savings accounts
   
397,941
     
842
     
0.28
     
333,381
     
248
     
0.10
 
CDs
   
1,507,442
     
19,032
     
1.69
     
1,578,922
     
25,533
     
2.16
 
Total interest-bearing deposits
   
3,757,841
     
28,298
     
1.01
     
3,962,210
     
47,870
     
1.62
 
FHLBNY advances
   
1,029,485
     
13,580
     
1.76
     
1,094,663
     
17,872
     
2.18
 
Subordinated notes
   
113,955
     
3,991
     
4.68
     
113,808
     
3,991
     
4.69
 
Other borrowings
   
5,971
     
42
     
0.95
     
8,615
     
167
     
2.60
 
Borrowed funds
   
1,149,411
     
17,613
     
2.05
     
1,217,036
     
22,031
     
2.42
 
Total interest-bearing liabilities
   
4,907,252
     
45,911
     
1.25
%
   
5,179,246
   
$
69,901
     
1.80
%
Non-interest-bearing checking accounts
   
579,753
                     
416,519
                 
Other non-interest-bearing liabilities
   
222,659
                     
19,769
                 
Total liabilities
   
5,709,664
                     
5,793,414
                 
Stockholders' equity
   
654,104
                     
607,238
                 
Total liabilities and stockholders' equity
 
$
6,363,768
                   
$
6,400,652
                 
Net interest income
         
$
129,024
                   
$
108,024
         
Net interest spread
                   
2.59
%
                   
2.05
%
Net interest-earning assets
 
$
1,161,863
                   
$
966,455
                 
Net interest margin
                   
2.83
%
                   
2.34
%
Ratio of interest-earning assets to interest-bearing liabilities
                   
123.68
%
                   
118.70
%
                                                 
Deposits
 
$
4,337,594
   
$
28,298
     
0.87
%
 
$
4,378,729
   
$
47,870
     
1.46
%

Rate/Volume Analysis

   
Nine Months Ended September 30,
2020
Compared to Nine Months Ended
September 30, 2019
Increase/ (Decrease) Due to:
 
   
Volume
   
Rate
   
Total
 
   
(Dollars In thousands)
 
Interest-earning assets:
                 
Real estate loans
 
$
8,670
   
$
4,606
   
$
(4,063
)
C&I loans
   
7,718
     
(4,864
)
   
2,856
 
Other loans
   
(4
)
   
(13
)
   
(15
)
MBS and CMO
   
483
     
(538
)
   
(55
)
Investment securities
   
42
     
59
     
102
 
Other
   
(422
)
   
(1,394
)
   
(1,815
)
Total
 
$
(853
)
 
$
(2,144
)
 
$
(2,990
)
                         
Interest-bearing liabilities:
                       
Interest-bearing checking accounts
 
$
164
   
$
154
   
$
317
 
Money market accounts
   
(2,253
)
   
(11,730
)
   
(13,982
)
Savings accounts
   
97
     
498
     
595
 
CDs
   
(1,050
)
   
(5,451
)
   
(6,501
)
FHLBNY advances
   
(958
)
   
(3,335
)
   
(4,293
)
Subordinated notes
   
7
     
(7
)
   
—
 
Other borrowings
   
(35
)
   
(90
)
   
(125
)
Total
 
$
(4,028
)
 
$
(19,961
)
 
$
(23,989
)
Net change in net interest income
 
$
3,175
   
$
17,817
   
$
20,999
 

Net Interest Income.  Net interest income was $129.0 million during the nine months ended September 30, 2020, an increase of $21.0 million from $108.0 million during the nine months ended September 30, 2019.  Average interest-earning assets were $6.07 billion for the nine months ended September 30, 2020, a decrease of $76.6 million compared to $6.15 billion for the nine months ended September 30, 2019. Net interest margin was 2.83% during the nine months ended September 30, 2020, up from 2.34% during the nine months ended September 30, 2019.

Interest Income.  Interest income was $174.9 million during the nine months ended September 30, 2020, a decrease of $3.0 million from the nine months ended September 30, 2019, primarily reflecting decreases in interest income of $4.1 million on real estate loans and decreases in interest income of $1.8 million on other interest-bearing assets, offset by increased interest income of $2.9 million on C&I loans. The decreased interest income on real estate loans was due to a reduction of $296.5 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 growth of $213.7 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%.

Interest Expense.  Interest expense decreased $24.0 million, to $45.9 million, during the nine months ended September 30, 2020, from $69.9 million during the nine months ended September 30, 2019. The decrease in interest expense was due to decreased rates offered on money market accounts, and a decrease of $283.4 million in the average balances of such accounts, decreased rates offered on CDs and a decrease of $71.5 million of such accounts, and a decrease of $65.2 million in the average balances of FHLBNY advances and a decrease of  42 basis points in the cost of such borrowings.

Provision for Loan Losses. The Company recognized a provision for loan losses of $20.0 million during the nine months ended September 30, 2020, compared to a provision of $11.1 million for the nine months ended September 30, 2019.

Non-Interest Income.  Non-interest income was $18.8 million during the nine months ended September 30, 2020, an increase of $10.2 million from $8.5 million during the nine months ended September 30, 2019, due to increases in gains on the sales of securities by $3.4 million, loan level derivative income by $4.7 million, increase in gains on sale of loans by $0.9 million, and income from BOLI by $1.7 million.

Non-Interest Expense.  Non-interest expense was $80.2 million during the nine months ended September 30, 2020, an increase of $13.1 million from $67.1 million during the nine months ended September 30, 2019, reflecting an increase of $6.2 million in salaries expense, $4.0 million of severance expense related to an organizational restructuring, $1.2 million in FDIC premiums, and $2.4 million of merger related expenses.  The increases in non-interest expense were offset by a decrease in other non-interest expense of $1.4 million. During the nine month period ended September 30, 2019, the Bank received notice that the FDIC's Deposit Insurance Fund Reserve Ratio reached a pre-determined threshold, and as a result, the Bank only recognized FDIC insurance premium expense for the first quarter of 2019 as an assessment credit from the FDIC totaling $0.5 million was recorded for the second quarter of 2019, and no FDIC insurance premium expense was recognized for the third quarter of 2019.

Non-interest expense was 1.68% and 1.40% of average assets during the nine-month periods ended September 30, 2020 and 2019, respectively.

Income Tax Expense.   Income tax expense was $10.3 million during the nine months ended September 30, 2020, an increase of $1.2 million from $9.1 million during the nine months ended September 30, 2019.  The Company's consolidated tax rate was 21.7% during the nine months ended September 30, 2020, a decrease from 23.7% during the nine months ended September 30, 2019.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk were presented at December 31, 2019 in Item 7A of the Holding Company's Annual Report on Form 10-K, filed with the SEC on March 12, 2020.  The following is an update of the discussion provided therein.

General.  Virtually all of the Company's market risk continues to reside at the Bank level.  The Bank's largest component of market risk remains interest rate risk.  The Company is not subject to foreign currency exchange or commodity price risk.  At September 30, 2020, the Company owned thirteen marketable equity securities carried at a fair value of $5.7 million, in which market value adjustments are recorded through the statement of income.  During the nine months ended September 30, 2020, the Company conducted fifty-six transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Interest Rate Risk Exposure Analysis

Economic Value of Equity ("EVE") Analysis.  In accordance with agency regulatory guidelines, the Bank simulates the impact of interest rate volatility upon EVE using several interest rate scenarios.  EVE is the difference between the present value of the expected future cash flows of the Bank's assets and liabilities and the value of any off-balance sheet items, such as derivatives, if applicable.

Traditionally, the fair value of fixed-rate instruments fluctuates inversely with changes in interest rates. Increases in interest rates thus result in decreases in the fair value of interest-earning assets, which could adversely affect the Company's consolidated results of operations in the event they were to be sold, or, in the case of interest-earning assets classified as available-for-sale, reduce the Company's consolidated stockholders' equity, if retained.  The changes in the value of assets and liabilities due to fluctuations in interest rates measure the interest rate sensitivity of those assets and liabilities.

In order to measure the Bank's sensitivity to changes in interest rates, EVE is calculated under market interest rates prevailing at a given quarter-end ("Pre-Shock Scenario"), and under various other interest rate scenarios ("Rate Shock Scenarios") representing immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed in the Pre-Shock Scenario. An increase in the EVE is considered favorable, while a decline is considered unfavorable. The changes in EVE between the Pre-Shock Scenario and various Rate Shock Scenarios due to fluctuations in interest rates reflect the interest rate sensitivity of the Bank's assets, liabilities, and off-balance sheet items that are included in the EVE. Management reports the EVE results to the Bank's Board of Directors on a quarterly basis. The report compares the Bank's estimated Pre-Shock Scenario EVE to the estimated EVE calculated under the various Rate Shock Scenarios.

The Bank's valuation model makes various estimates regarding cash flows from principal repayments on loans and deposit decay rates at each level of interest rate change.  The Bank's estimates for loan repayment levels are influenced by the recent history of prepayment activity in its loan portfolio, as well as the interest rate composition of the existing portfolio, especially in relation to the existing interest rate environment. In addition, the Bank considers the amount of fee protection inherent in the loan portfolio when estimating future repayment cash flows.  Regarding deposit decay rates, the Bank tracks and analyzes the decay rate of its deposits over time, with the assistance of a reputable third party, and over various interest rate scenarios.  Such results are utilized in determining estimates of deposit decay rates in the valuation model.  The Bank also generates a series of spot discount rates that are integral to the valuation of the projected monthly cash flows of its assets and liabilities.  The Bank's valuation model employs discount rates that it considers representative of prevailing market rates of interest with appropriate adjustments it believes are suited to the heterogeneous characteristics of the Bank's various asset and liability portfolios.  No matter the care and precision with which the estimates are derived, actual cash flows could differ significantly from the Bank's estimates resulting in significantly different EVE calculations.

The analysis that follows presents, as of September 30, 2020 and December 31, 2019, the estimated EVE at both the Pre-Shock Scenario and the +200 Basis Point Rate Shock Scenario. The +200 scenario models the majority of any balance sheet optionality affected by interest rates, which may not be true in the +100 scenario. The analysis additionally presents the percentage change in EVE from the Pre-Shock Scenario to the +200 Basis Point Rate Shock Scenario at both September 30, 2020 and December 31, 2019.

 
At September 30, 2020
   
At December 31, 2019
 
   
EVE
   
Dollar
Change
   
Percentage
Change
   
EVE
   
Dollar
Change
   
Percentage
Change
 
Rate Shock Scenario
 
(Dollars in Thousands)
 
+ 200 Basis Points
 
$
584,300
   
$
2,256
     
0.39
%
 
$
595,201
   
$
(41,682
)
   
(6.5
)%
Pre-Shock Scenario
   
582,044
     
—
     
—
     
636,883
     
—
     
—
 

The Bank's Pre-Shock Scenario EVE decreased from $636.9 million at December 31, 2019 to $582.0 million at September 30, 2020. The primary factors contributing to the lower EVE at September 30, 2020 were the payments of $30.0 million of dividends from the Bank to the Holding Company and an increase in the value of the Bank's core deposit liability. These factors were partially offset by an increase in the value of the Bank's loan portfolio due to a slightly lower duration.

The Bank's EVE in the +200 basis point Rate Shock Scenario decreased from $595.2 million at December 31, 2019 to $584.3 million at September 30, 2020. 

Income Simulation Analysis.  As of the end of each quarterly period, the Bank also monitors the impact of interest rate changes through a net interest income simulation model.  This model estimates the impact of interest rate changes on the Bank's net interest income over forward-looking periods typically not exceeding 36 months (a considerably shorter period than measured through the EVE analysis).  Management reports the net interest income simulation results to the Bank's Board of Directors on a quarterly basis. The following table discloses the estimated changes to the Bank's net interest income over the 12-month period beginning September 30, 2020 assuming gradual changes in interest rates for the given rate scenarios:

Gradual Change in Interest rates of:
 
Percentage Change in
Net Interest Income
 
+ 200 Basis Points
   
(1.51
)%
+ 100 Basis Points
   
(0.92
)%

Item 4.
Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of September 30, 2020, of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act.  Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2020 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management of the Company as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

The Company has 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.

There was no change in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.

PART II – OTHER INFORMATION

Item 1.
Legal Proceedings

In the ordinary course of business, the Company is routinely named as a defendant in or party to various pending or threatened legal actions or proceedings.  Certain of these matters may seek substantial monetary damages.  In the opinion of management, the Company is involved in no actions or proceedings that are likely to have a material adverse impact on its financial condition and results of operations as of September 30, 2020.

Additionally, numerous lawsuits have been filed in federal courts by purported shareholders of the Company alleging the registration statement filed by Bridge Bancorp, Inc. with the SEC on September 14, 2020 contains materially misleading omissions or misrepresentations in violation of Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder. The plaintiffs generally seek injunctive relief, unspecified damages, and an award of attorneys’ fees and expenses. The Company is reviewing the complaints and has not yet formally responded. Such litigations are common in connection with mergers involving public companies, regardless of any merits related to the underlying transaction. Although the ultimate outcome of these actions cannot be predicted with certainty, the Company believes that the claims asserted against them in these lawsuits are without merit and intend to defend against these actions vigorously. 

Item 1A.
Risk Factors
 
There have been no changes to the risks disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as updated by our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
(a)          Not applicable.
(b)          Not applicable.
(c)
Period
 
Total
Number
of Shares
Purchased
   
Average
Price Paid
Per Share
   
Total Number of
Shares Purchased as
Part of Publicly
Announced Programs
   
Maximum Number of
Shares that May Yet be
Purchased Under the
Programs (1) (2)
 
July 2020
   
29,623
   
$
$13.11
     
29,623
     
589,782
 
August 2020
   
—
     
—
     
—
     
589,782
 
September 2020
   
—
     
—
     
—
     
589,782
 

(1)  The thirteenth stock repurchase program was publicly announced in October 2018, authorizing the purchase of up to 1,824,040 shares of Common Stock, and has no expiration date.  The thirteenth stock repurchase program was completed in February 2020. The fourteenth stock repurchase program was publicly announced January 2020, authorizing the purchase of up 2,636,598 shares of common stock, and has no expiration date.

(2) On July 1, 2020, the Company suspended its existing 10b-5-1 plan and is currently not repurchasing any shares. Total shares available for repurchase under the fourteenth stock repurchase plan is 589,782 shares.

Item 3.
Defaults Upon Senior Securities

None.

Item 4.
Mine Safety Disclosures

Not Applicable.

Item 5.
Other Information

None.

Item 6.
Exhibits

Exhibit Number
 
 
 
2.1
Agreement and Plan of Merger, dated July 1, 2020, by and between Bridge Bancorp, Inc. and Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K, filed with the SEC on July 2, 2020 (File No. 001-39211))
3.1
Amended and Restated Certificate of Incorporation of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Transition Report on Form 10-K for the transition period ended December 31, 2002, filed with the SEC on March 28, 2003 (File No. 000-27782))
3.2
Amended and Restated Bylaws of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K, filed with the SEC on September 28, 2018 (File No. 000-27782))
3.3
Certificate of Designations, Preferences and Rights of 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-A Registration of Certain Classes of Securities pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed with the Commission on February 5, 2020 (File No. 333-220175)
4.1
Form of Stock Certificate of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998, filed with the SEC on September 28, 1998 (File No. 000-27782))
4.2
Indenture, dated as of September 13, 2017, by and between Dime Community Bancshares, Inc. and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed with the SEC on September 13, 2017 (File No. 000-27782))
4.3
4.4
Specimen Certificate for 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.4 to the Registrant’s Form 8-A Registration of Certain Classes of Securities pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed with the Commission on February 5, 2020 (File No. 333-220175))
 
 
10.1
Agreement and General Release between Dime Community Bank and Robert S. Volino (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on July 6, 2020 (File No. 001-39211))
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
101
Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2020 is formatted in XBRL (Extensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Financial Condition (Unaudited), (ii) the Consolidated Statements of Income f(Unaudited), (iii) the Consolidated Statements of Comprehensive Income (Unaudited), (iv) the Consolidated Statements of Changes in Stockholders' Equity (Unaudited), (v) the Consolidated Statements of Cash Flows (Unaudited), and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements **
104
The cover page from the Dime Community Bancshares, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL

** Furnished, not filed, herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dime Community Bancshares, Inc.

Dated: November 6, 2020
By:
/s/ KENNETH J. MAHON
 
   
Kenneth J. Mahon
 
   
Chief Executive Officer
 

Dated: November 6, 2020
By:
/s/ AVINASH REDDY
 
   
Avinash Reddy
 
   
Senior Executive Vice President and Chief Financial Officer
 


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