Maturities of the Company's operating lease liabilities at March 31, 2019 are as follows:
|
|
Rent to be
Capitalized
|
|
2019
|
|
$
|
5,184
|
|
2020
|
|
|
6,807
|
|
2021
|
|
|
6,664
|
|
2022
|
|
|
6,362
|
|
2023
|
|
|
5,395
|
|
Thereafter
|
|
|
23,573
|
|
Total undiscounted lease payments
|
|
|
53,985
|
|
Less amounts representing interest
|
|
|
7,117
|
|
Lease liability
|
|
$
|
46,868
|
|
Other information related to our operating leases was as follows:
|
|
At March 31, 2019
|
|
Operating lease cost
|
|
$
|
1,620
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
|
1,712
|
|
Weighted average remaining lease term
|
|
8.55 years
|
|
Weighted average discount rate
|
|
|
3.28
|
%
|
11.
|
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. Interest rate swaps designated as 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 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 period(s) 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 $907 will be reclassified as a reduction to interest expense.
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 March 31, 2019
|
|
|
At December 31, 2018
|
|
|
|
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
|
|
|
17
|
|
|
$
|
295,000
|
|
|
$
|
3,258
|
|
|
$
|
(3,970
|
)
|
|
|
14
|
|
|
$
|
245,000
|
|
|
$
|
4,669
|
|
|
$
|
(2,097
|
)
|
The table below presents the effect of the cash flow hedge accounting on Accumulated Other Comprehensive Income Loss as of March 31, 2019 and 2018.
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Interest rate products
|
|
|
|
|
|
|
Amount of gain (loss) recognized in other comprehensive income
|
|
$
|
(2,928
|
)
|
|
$
|
2,081
|
|
Amount of loss reclassified from other comprehensive income into interest expense
|
|
|
(356
|
)
|
|
|
(65
|
)
|
The table below presents a gross presentation, the effects of offsetting of derivative assets, and a net presentation of the Company's derivatives for
the periods indicated. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value in Note 12 provides the location that derivative assets and liabilities
are presented on the Balance Sheet.
|
|
At March 31, 2019
|
|
|
|
Gross
Amounts
of
Recognized
Assets
|
|
|
Gross
Amounts
Offset in the
Statement of
Financial
Position
|
|
|
Net Amounts of
Assets Presented
in
the Statement of
Financial
Position
|
|
|
Gross Amounts Not Offset
in the
Statement of Financial
Position
|
|
|
Net
Amount
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
FHLB Advances
|
|
$
|
3,258
|
|
|
$
|
(3,970
|
)
|
|
$
|
(712
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(712
|
)
|
|
|
At December 31, 2018
|
|
|
|
Gross
Amounts
of
Recognized
Assets
|
|
|
Gross
Amounts
Offset in the
Statement of
Financial
Position
|
|
|
Net Amounts of
Assets Presented
in
the Statement of
Financial
Position
|
|
|
Gross Amounts Not Offset
in the
Statement of Financial
Position
|
|
|
Net
Amount
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
FHLB Advances
|
|
$
|
4,669
|
|
|
$
|
(2,097
|
)
|
|
$
|
2,572
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,572
|
|
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 March 31, 2019, 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 $(597). If the Company had breached any of the above provisions at March 31, 2019, it could have been required to settle its obligations under the agreements at the termination value and would
have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. There were no provisions breached for the period ended March 31, 2019.
12.
|
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 securities available-for-sale are guaranteed either implicitly or explicitly by GSEs as of March 31, 2019 and December 31, 2018. Obtaining market
values as of March 31, 2019 and December 31, 2018 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.
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.
|
|
Total
|
|
|
Fair Value Measurements
at March 31, 2019 Using
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
1,611
|
|
|
$
|
1,611
|
|
|
$
|
—
|
|
|
$
|
—
|
|
International Equity Mutual Funds
|
|
|
416
|
|
|
|
416
|
|
|
|
—
|
|
|
|
—
|
|
Fixed Income Mutual Funds
|
|
|
3,885
|
|
|
|
3,885
|
|
|
|
—
|
|
|
|
—
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency Notes
|
|
|
25,173
|
|
|
|
—
|
|
|
|
25,173
|
|
|
|
—
|
|
Corporate Securities
|
|
|
29,233
|
|
|
|
—
|
|
|
|
29,233
|
|
|
|
—
|
|
Pass-through MBS issued by GSEs
|
|
|
348,607
|
|
|
|
—
|
|
|
|
348,607
|
|
|
|
—
|
|
Agency CMOs
|
|
|
108,610
|
|
|
|
—
|
|
|
|
108,610
|
|
|
|
—
|
|
Loans Held for Sale
|
|
|
682
|
|
|
|
—
|
|
|
|
682
|
|
|
|
—
|
|
Derivative – interest rate product
|
|
|
3,258
|
|
|
|
—
|
|
|
|
3,258
|
|
|
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative – interest rate product
|
|
|
3,970
|
|
|
|
—
|
|
|
|
3,970
|
|
|
|
—
|
|
|
|
Total
|
|
|
Fair Value Measurements
at December 31, 2018 Using
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Equity Securities (Registered Mutual Funds)
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
1,420
|
|
|
$
|
1,420
|
|
|
$
|
—
|
|
|
$
|
—
|
|
International Equity Mutual Funds
|
|
|
377
|
|
|
|
377
|
|
|
|
—
|
|
|
|
—
|
|
Fixed Income Mutual Funds
|
|
|
3,870
|
|
|
|
3,870
|
|
|
|
—
|
|
|
|
—
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency Notes
|
|
|
25,145
|
|
|
|
—
|
|
|
|
25,145
|
|
|
|
—
|
|
Corporate Securities
|
|
|
11,135
|
|
|
|
—
|
|
|
|
11,135
|
|
|
|
—
|
|
Pass-through MBS issued by GSEs
|
|
|
354,613
|
|
|
|
—
|
|
|
|
354,613
|
|
|
|
—
|
|
Agency CMOs
|
|
|
111,992
|
|
|
|
—
|
|
|
|
111,992
|
|
|
|
—
|
|
Loans Held for Sale
|
|
|
1,097
|
|
|
|
—
|
|
|
|
1,097
|
|
|
|
—
|
|
Derivative – interest rate product
|
|
|
4,669
|
|
|
|
—
|
|
|
|
4,669
|
|
|
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative – interest rate product
|
|
|
2,097
|
|
|
|
—
|
|
|
|
2,097
|
|
|
|
—
|
|
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), and are subject to fair value adjustments. Financial assets measured at fair value on a non-recurring basis include certain impaired loans reported at the
fair value of the underlying collateral if repayment is expected solely from the collateral.
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 23 to the Company's Consolidated Financial Statements included in the Annual Report on Form 10-K.
Other borrowings consists of overnight or short-term borrowings carried at amortized cost, equal to the amount payable on demand at the reporting date (deemed a Level 1 valuation).
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 non-recurring 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.
|
|
Carrying
Amount
|
|
|
Fair Value Measurements
at March 31, 2019 Using
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
143,473
|
|
|
$
|
143,473
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
143,473
|
|
Loans, net
|
|
|
5,484,495
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,410,989
|
|
|
|
5,410,989
|
|
Accrued interest receivable
|
|
|
18,868
|
|
|
|
27
|
|
|
|
1,664
|
|
|
|
17,177
|
|
|
|
18,868
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
|
2,826,844
|
|
|
|
2,826,844
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,826,844
|
|
Certificates of Deposits ("CDs")
|
|
|
1,580,778
|
|
|
|
—
|
|
|
|
1,577,338
|
|
|
|
—
|
|
|
|
1,577,338
|
|
Escrow and other deposits
|
|
|
137,116
|
|
|
|
137,116
|
|
|
|
—
|
|
|
|
—
|
|
|
|
137,116
|
|
FHLBNY Advances
|
|
|
1,087,325
|
|
|
|
—
|
|
|
|
1,085,118
|
|
|
|
—
|
|
|
|
1,085,118
|
|
Subordinated debt, net
|
|
|
113,796
|
|
|
|
—
|
|
|
|
112,089
|
|
|
|
—
|
|
|
|
112,089
|
|
Other borrowings
|
|
|
45,000
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,000
|
|
Accrued interest payable
|
|
|
4,352
|
|
|
|
10
|
|
|
|
4,342
|
|
|
|
—
|
|
|
|
4,352
|
|
|
|
Carrying
Amount
|
|
|
Fair Value Measurements
at December 31, 2018 Using
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
147,256
|
|
|
$
|
147,256
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
147,256
|
|
Loans, net
|
|
|
5,372,036
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,301,281
|
|
|
|
5,301,281
|
|
Accrued interest receivable
|
|
|
17,875
|
|
|
|
—
|
|
|
|
1,296
|
|
|
|
16,579
|
|
|
|
17,875
|
|
Financial Liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Savings, money market and checking accounts
|
|
|
2,946,717
|
|
|
|
2,946,717
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,946,717
|
|
CDs
|
|
|
1,410,037
|
|
|
|
—
|
|
|
|
1,407,747
|
|
|
|
—
|
|
|
|
1,407,747
|
|
Escrow and other deposits
|
|
|
85,234
|
|
|
|
85,234
|
|
|
|
—
|
|
|
|
—
|
|
|
|
85,234
|
|
FHLBNY Advances
|
|
|
1,125,350
|
|
|
|
—
|
|
|
|
1,119,548
|
|
|
|
—
|
|
|
|
1,119,548
|
|
Subordinated debt, net
|
|
|
113,759
|
|
|
|
—
|
|
|
|
110,346
|
|
|
|
—
|
|
|
|
110,346
|
|
Accrued interest payable
|
|
|
2,710
|
|
|
|
—
|
|
|
|
2,710
|
|
|
|
—
|
|
|
|
2,710
|
|
13.
|
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 Company adopted ASU 2017-07
, Compensation-Retirement Benefits
(Topic 715),
on January 1, 2018. The components of net periodic costs are included in other non-interest expense in the Consolidated Statements of Operations. Net expenses associated with these plans were comprised of the following
components:
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
BMP, Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
|
313
|
|
|
|
14
|
|
|
|
292
|
|
|
|
14
|
|
Expected return on assets
|
|
|
(382
|
)
|
|
|
—
|
|
|
|
(430
|
)
|
|
|
—
|
|
Unrecognized past service liability
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
Amortization of unrealized loss (gain)
|
|
|
243
|
|
|
|
(3
|
)
|
|
|
289
|
|
|
|
—
|
|
Net periodic cost
|
|
$
|
174
|
|
|
$
|
9
|
|
|
$
|
151
|
|
|
$
|
12
|
|
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, 2018, as well as the actual contributions to, or benefit payments on behalf of each benefit plan during the period indicated:
|
|
Planned
Contributions/Benefit
Payments for the
Year Ended
December 31, 2019
|
|
|
Actual
Contributions/Benefit
Payments for the
Three Months Ended
March, 31, 2019
|
|
|
|
|
|
|
|
|
Employee Retirement Plans
|
|
$
|
1,492
|
|
|
$
|
—
|
|
Outside Director Retirement Plans
|
|
|
225
|
|
|
|
56
|
|
Post Retirement Plan
|
|
|
109
|
|
|
|
44
|
|
BMP
|
|
|
564
|
|
|
|
137
|
|
The Company expects to make the remainder of the contributions to, or benefit payments on behalf of, each benefit plan during 2019.
The BMP exists in order to compensate executive officers for any curtailments in benefits due to statutory limitations on qualifying benefit plans. In
addition to benefit payments from the defined benefit component of the BMP discussed above, the following distributions were made to retired participants:
|
|
For the Three Months Ended March 31,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
—
|
|
|
$
|
257
|
|
Market value of Common Stock from Employee Stock Ownership Plan of BMP (22,051 shares for March 31, 2018)
|
|
|
—
|
|
|
|
942
|
|
Gross lump-sum distribution
|
|
$
|
—
|
|
|
$
|
1,199
|
|
Non-cash tax benefit
|
|
$
|
—
|
|
|
$
|
285
|
|
14.
|
ACCOUNTING FOR STOCK BASED COMPENSATION
|
The Company maintains the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees, the 2004 Stock Incentive
Plan and the 2013 Equity and Incentive Plan ("2013 Equity Plan") (collectively, the "Stock Plans"), which are discussed more fully in Note 21 to the Company's Consolidated Financial Statements included in the Annual Report on Form 10-K for the
year ended December 31, 2018, and which are subject to the accounting requirements of ASC 505-50 and ASC 718.
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, 2019
|
|
|
72,395
|
|
|
$
|
13.58
|
|
|
|
|
|
|
|
Options granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Options expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2019
|
|
|
72,395
|
|
|
$
|
13.58
|
|
|
|
1.7
|
|
|
$
|
373
|
|
Options vested and exercisable at March 31, 2019
|
|
|
72,395
|
|
|
$
|
13.58
|
|
|
|
1.7
|
|
|
$
|
373
|
|
Information related to stock options during each period is as follows:
|
|
For the Three Months
Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash received for option exercise cost
|
|
$
|
—
|
|
|
$
|
290
|
|
Income tax benefit recognized on stock option exercises
|
|
|
—
|
|
|
|
4
|
|
Intrinsic value of options exercised
|
|
|
—
|
|
|
|
97
|
|
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 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, 2019
|
|
|
148,235
|
|
|
$
|
19.48
|
|
Shares granted
|
|
|
11,584
|
|
|
|
17.24
|
|
Shares vested
|
|
|
(4,329
|
)
|
|
|
20.50
|
|
Shares forfeited
|
|
|
(3,743
|
)
|
|
|
19.45
|
|
Unvested allocated shares at March 31, 2019
|
|
|
151,747
|
|
|
$
|
19.28
|
|
Information related to restricted stock awards during each period is as follows:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Compensation expense recognized
|
|
$
|
289
|
|
|
$
|
304
|
|
Income tax benefit (expense) recognized on vesting of RSA
|
|
|
(3
|
)
|
|
|
(2
|
)
|
Weighted average remaining years for which compensation expense is to be recognized
|
|
|
2.4
|
|
|
|
2.7
|
|
Performance Based Equity Awards
The Company established 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 maximum (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. 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 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, 2019
|
|
|
120,880
|
|
|
$
|
18.90
|
|
Shares granted
|
|
|
138,562
|
|
|
|
19.18
|
|
Shares vested
|
|
|
(2,276
|
)
|
|
|
17.35
|
|
Shares forfeited
|
|
|
(2,574
|
)
|
|
|
17.35
|
|
Maximum aggregate share payout at March 31, 2019
|
|
|
254,592
|
|
|
$
|
19.08
|
|
Minimum aggregate share payout
|
|
|
—
|
|
|
|
—
|
|
Expected aggregate share payout
|
|
|
112,388
|
|
|
$
|
19.28
|
|
Compensation expense recorded for performance based equity awards was $(75) and $84 for the three-month periods ended March 31, 2019 and March 31, 2018,
respectively.
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 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, 2019
|
|
|
8,151
|
|
|
$
|
18.40
|
|
Shares granted
|
|
|
—
|
|
|
|
—
|
|
Shares vested
|
|
|
—
|
|
|
|
—
|
|
Shares forfeited
|
|
|
(5,500
|
)
|
|
|
18.40
|
|
Maximum aggregate share payout at March 31, 2019
|
|
|
2,651
|
|
|
$
|
18.40
|
|
Minimum aggregate share payout
|
|
|
—
|
|
|
|
—
|
|
Expected aggregate share payout
|
|
|
2,651
|
|
|
$
|
18.40
|
|
Compensation expense recorded for sales incentive based equity awards was $70 for the three-month period ended March 31, 2019. No compensation expense
was recognized for the three-month period ended March 31, 2018.
Other borrowings consists of overnight or short-term borrowings with member commercial banks within a network of financial institutions. The availability
of funds changes daily. As of March 31, 2019, the Bank had $45,000 of such borrowings outstanding. Interest expense for the three month period ended March 31, 2019 was $65. There was no activity during 2018.
During the three months ended March 31, 2019 and 2018, the Company's consolidated effective tax rates were 24.9% and 23.7%, respectively. There were no
significant unusual income tax items during the three-month periods ended either March 31, 2019 or 2018.
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.
On
January 24, 2019, the Bank filed an application with the New York Department of Financial Services (“NYSDFS”) seeking approval to convert from a New York stock form savings bank to a New York commercial bank (the “Charter Conversion”).
Simultaneous with the Charter Conversion application to NYSDFS, the Company filed an application with the Federal Reserve Bank of Philadelphia to delist as a savings and loan holding company and elect to become a bank holding company. Having
received all applicable regulatory approvals, on April 25, 2019 the Bank completed the Charter Conversion, and began operating as a New York commercial bank. Simultaneously, the Company began operating as a bank holding company. At March 31,
2019 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 $113,796 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 operate as a New York State-chartered stock savings bank until April 2019. 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 reflects the
Bank's evolving business model and emphasizes its broader geographic and business reach while retaining the Bank's mission to be in and of the communities it serves, 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 seven corporations, 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 March 31, 2019:
Direct Subsidiaries of the Bank
|
Year/ State of
Incorporation
|
Primary Business Activities
|
Boulevard Funding Corp.
|
1981 / New York
|
Management and ownership of real estate
|
Dime Insurance Agency Inc. (
f/k/a
Havemeyer Investments,
Inc.)
|
1997 / New York
|
Sale of non-FDIC insured investment products
|
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 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, and income associated with bank owned life insurance (“BOLI”). 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 small 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
its strategic plan for 2019, the Bank is investing in the development of its Business Banking division, by adding products and services to serve both the credit and business banking needs in its footprint.
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.
Additionally, during the year ended December 31, 2018, the Bank resumed offering one-to-four family loan products.
The Bank also purchases securities primarily for liquidity purposes as defined by the Bank's investment policy. The Bank seeks to maintain the asset
quality of its loans and other investments, and uses portfolio and asset/liability management techniques in an effort to manage the effects of interest rate volatility on its profitability and capital.
Selected Financial Highlights and Other Data
(Dollars in Thousands Except Per Share Amounts)
|
|
At or For the Three
Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Per Share Data:
|
|
|
|
|
|
|
EPS (Diluted)
|
|
$
|
0.32
|
|
|
$
|
0.39
|
|
Cash dividends paid per share
|
|
|
0.14
|
|
|
|
0.14
|
|
Book value per share
|
|
|
16.83
|
|
|
|
16.22
|
|
Dividend payout ratio
|
|
|
43.75
|
%
|
|
|
35.90
|
%
|
Performance and Other Selected Ratios:
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.72
|
%
|
|
|
0.93
|
%
|
Return on average common equity
|
|
|
7.62
|
|
|
|
9.77
|
|
Net interest spread
|
|
|
2.02
|
|
|
|
2.28
|
|
Net interest margin
|
|
|
2.31
|
|
|
|
2.47
|
|
Average interest earning assets to average interest-bearing liabilities
|
|
|
118.14
|
|
|
|
115.84
|
|
Non-interest expense to average assets
|
|
|
1.39
|
|
|
|
1.36
|
|
Efficiency ratio
|
|
|
59.22
|
|
|
|
54.60
|
|
Loan-to-deposit ratio at end of period
|
|
|
124.93
|
|
|
|
124.31
|
|
Effective tax rate
|
|
|
24.88
|
|
|
|
23.73
|
|
Asset Quality Summary:
|
|
|
|
|
|
|
|
|
Non-performing loans
|
|
$
|
5,425
|
|
|
$
|
1,719
|
|
Non-performing assets
|
|
|
5,425
|
|
|
|
1,719
|
|
Net charge-offs
|
|
|
162
|
|
|
|
23
|
|
Non-performing loans/Total loans
|
|
|
0.10
|
%
|
|
|
0.03
|
%
|
Non-performing assets/Total assets
|
|
|
0.08
|
|
|
|
0.03
|
|
Allowance for loan loss/Total loans
|
|
|
0.40
|
|
|
|
0.39
|
|
Allowance for loan loss/Non-performing loans
|
|
|
404.44
|
|
|
|
1,233.51
|
|
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 9 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 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.
In December 2018, the Bank became a member of the American Financial Exchange ("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 March 31, 2019, the Bank had $45.0 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 $50.9 million during the three months ended March 31, 2019, compared to an increase of $27.0 million for the three months ended
March 31, 2018. Within deposits, core deposits (
i.e.,
non-CDs) decreased $119.9 million during the three months ended March 31, 2019 and decreased $105.6
million during the three months ended March 31, 2018. CDs increased $170.7 million during the three months ended March 31, 2019 compared to an increase of $132.6 million during the three months ended March 31, 2018. The increase in deposits
during the current period was primarily due to successful gathering efforts tied to CD products, offset by declines in money market deposits.
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. At March 31, 2019, the Bank had an additional potential borrowing capacity of $988.4 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 reduced its outstanding FHLBNY advances by $38.0 million during the three months ended March 31, 2019, compared to a $159.6 million reduction
during the three months ended March 31, 2018, reflecting deposit inflows.
During the three months ended March 31, 2019, principal repayments on real estate loans (including refinanced loans) tota
led $150.5
million compared to $183.1 million during the three months ended March 31, 2018. The decrease resulted primarily from lower prepayment activity. During the three
months ended March 31, 2019 and 2018, real estate loan originations totaled $233.9 million and $75.0 million, respectively.
Sales of mortgage-backed securities total
ed $15.5 million and
$158.5 mil
lion during the three-month periods ended March 31, 2019 and 2018, respectively. Purchases of mortgage-backed securities totaled $20.3 million and $189.9 million during the three-month periods ended March 31, 2019 and 2018
respectively. Proceeds from pay downs were $18.5 million and $25.0 million for the three-month periods ended March 31, 2019 and 2018, 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 March 31, 2019, 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 March 31, 2019:
|
|
Actual Ratios at March
31, 2019
|
|
|
Basel III
|
|
|
|
|
Bank
|
|
|
Consolidated
Company
|
|
|
Minimum
Requirement
|
|
|
Minimum
Requirement
Plus
2.5%
Buffer
(1)
|
|
|
Well Capitalized
Requirement Under FDIC
Prompt
Corrective Action
Framework
(2)
|
|
Tier 1 common equity ratio
|
|
|
12.39
|
%
|
|
|
11.04
|
%
|
|
|
4.50
|
%
|
|
|
7.0
|
%
|
|
|
6.5
|
%
|
Tier 1 risk-based based capital ratio
|
|
|
12.39
|
|
|
|
11.04
|
|
|
|
6.0
|
|
|
|
8.5
|
|
|
|
8.0
|
|
Total risk-based based capital ratio
|
|
|
12.84
|
|
|
|
13.77
|
|
|
|
8.0
|
|
|
|
10.5
|
|
|
|
10.0
|
|
Tier 1 leverage ratio
|
|
|
9.77
|
|
|
|
8.81
|
|
|
|
4.00
|
|
|
|
n/a
|
|
|
|
5.0
|
|
(1)
|
The 2.5% buffer percentage represents the fully phased-in requirement as of January 1, 2019.
|
(2)
|
Only the Bank is subject to these requirements.
|
Implementation of the Basel III Capital Rules on January 1, 2019 did not have a material impact upon the operations of the Bank or Holding Company.
As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop
a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be
deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial
institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less
than 8% and not more than 10%. A financial institution can elect to be subject to this new definition.
The Holding Company repurchased 199,254 shares of its common stock during the three months ended March 31, 2019. No shares were repurchased during the
three months ended March 31, 2018. As of March 31, 2019, up to 1,267,886 shares remained available for purchase under authorized share purchase 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 $5.0 million and $5.2 million in cash dividends on common stock during the three months ended March 31, 2019 and 2018,
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, as well as customer 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 March 31, 2019:
|
|
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
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
212,650
|
|
Other loan commitments
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,515
|
|
Stand-by letters of credit
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,011
|
|
Total Off-Balance Sheet Arrangements
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
335,176
|
|
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 Consolidated Financial Statements for a discussion of evaluation for impaired investment securities and MBS.
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 consumer loans), eighteen non-accrual loans totaled $5.4 million at March 31, 2019, and
sixteen non-accrual loans totaled $2.3 million at December 31, 2018. During the three months ended March 31, 2019, five loans totaling $3.4 million were placed on non-accrual status, two loans totaling $0.1 million were returned to accrual
status, one loan totaling $0.2 million was fully charged off, and principal amortization of $0.04 million was recognized on eight non-accrual loans. There were no changes on the remaining five non-accrual loans during the three-month period ended
March 31, 2019.
Impaired Loans
The recorded investment in loans deemed impaired (as defined in Note 9 to the condensed consolidated financial statements) totaled $9.0 million,
consisting of fifteen loans, at March 31, 2019, compared to $6.0 million, consisting of thirteen loans, at December 31, 2018. During the three months ended March 31, 2019, five loans totaling $3.4 million were added to impaired status, two loans
totaling $0.1 million were removed from impaired status, one loan totaling $0.02 million was fully charged off, and principal amortization totaling $0.07 million was recognized on eight impaired loans.
The following is a reconciliation of non-accrual and impaired loans as of the dates indicated:
|
|
March 31,
2019
|
|
|
December
31, 2018
|
|
|
|
(Dollars in Thousands)
|
|
Non-accrual loans
(1)
:
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
$
|
706
|
|
|
$
|
712
|
|
Multifamily residential and residential mixed-use real estate
|
|
|
276
|
|
|
|
280
|
|
Commercial real estate and commercial mixed-use
|
|
|
4,205
|
|
|
|
1,041
|
|
C&
I
|
|
|
232
|
|
|
|
309
|
|
Consumer
|
|
|
6
|
|
|
|
3
|
|
Total non-accrual loans
|
|
|
5,425
|
|
|
|
2,345
|
|
Non-accrual one-to-four family residential and consumer loans deemed homogeneous loans
|
|
|
(712
|
)
|
|
|
(715
|
)
|
TDRs:
|
|
|
|
|
|
|
|
|
One-to-four family residential, including condominium and cooperative apartment
|
|
|
12
|
|
|
|
14
|
|
Multifamily residential and residential mixed-use real estate
|
|
|
261
|
|
|
|
271
|
|
Commercial real estate and commercial mixed-use
|
|
|
4,061
|
|
|
|
4,084
|
|
Total TDRs
|
|
|
4,334
|
|
|
|
4,369
|
|
Impaired loans
|
|
$
|
9,047
|
|
|
$
|
5,999
|
|
(1)
|
There were no non-accruing TDRs for the periods indicated.
|
Ratios:
|
|
|
|
|
|
|
Total non-accrual loans to total loans
|
|
|
0.10
|
%
|
|
|
0.04
|
%
|
Total non-performing assets to total assets
|
|
|
0.08
|
|
|
|
0.04
|
|
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 three months ended March 31, 2019 or 2018.
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.
At March 31, 2019 and December 31, 2018, all TDRs but one were collateralized by real estate that generated rental income. 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.
Please refer to Note 8 to the condensed consolidated financial statements for a further discussion of TDRs.
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 March 31, 2019 or December 31, 2018. The Bank did not recognize any provisions for losses on OREO properties during
the three months ended March 31, 2019 or 2018.
Other Potential Problem Loans
Loans Delinquent 30 to 89 Days
The Bank had two real estate loans totaling $0.3 million and three real estate loans totaling $0.3 million that were delinquent between 30 and 89 days at
March 31, 2019 and at December 31, 2018, respectively. 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 March
31, 2019 and December 31, 2018. 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
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 ended March 31, 2019 and December 31, 2018. The following is a summary of the components of the allowance for loan losses as of the following dates:
|
|
March 31,
2019
|
|
|
December
31, 2018
|
|
|
March 31,
2018
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans
|
|
$
|
116
|
|
|
$
|
230
|
|
|
$
|
294
|
|
Non-impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
|
17,854
|
|
|
|
17,818
|
|
|
|
18,742
|
|
C&I loans
|
|
|
3,953
|
|
|
|
3,716
|
|
|
|
2,151
|
|
Consumer loans
|
|
|
18
|
|
|
|
18
|
|
|
|
17
|
|
Total
|
|
$
|
21,941
|
|
|
$
|
21,782
|
|
|
$
|
21,204
|
|
Provisions
of $0.3 million
and
$0.2 million
were recorded during the three month periods ended March 31, 2019 and 2018, respectively. During the three month period ended March 31,
2019, the loan loss provision was driven mainly by a charge-off of one C&I loan.
For a further discussion of the allowance for loan losses and related activity during the three-month periods ended March 31, 2019 and 2018, and as of
December 31, 2018, please see Note 9 to the condensed consolidated financial statements.
Comparison of Financial Condition at March 31, 2019 and December 31, 2018
Assets.
Assets totaled $6.48 billion at March 31, 2019, $154.7
million above their level at December 31, 2018, primarily due to an increase in the loan portfolio, the initial recognition of the operating lease asset as a result of the adoption of ASU 2016-02, and an increase in securities available-for-sale.
Total loans increased $112.5 million during the three months ended March 31, 2019. During the period, the Bank had originations of $286.7 million which
exceeded $165.7 million of aggregate amortization on loans (also including refinancing of existing loans).
The Company adopted ASU 2016-02 on January 1, 2019 which resulted in $41.6 million of operating lease assets.
Total securities increased by $9.0 million during the three months ended March 31, 2019, as a result of holding increased on-balance sheet liquidity,
which will be based on monetary policy, interest rates, the Bank's funding needs, and periodic stress testing analysis.
Liabilities.
Total liabilities increased $150.5 million during
the three months ended March 31, 2019, primarily due to an increase of $50.9 million in deposits, an increase of $51.9 million in escrow and other deposits, and $48.2 million for the initial recognition of the operating lease liabilities as a
result of the adoption of ASU 2016-02. The $51.9 million increase in escrow and other deposits at March 31, 2019 was in part due to the annual reassessment of borrower escrow accounts.
Stockholders' Equity.
Stockholders' equity increased $4.2
million during the three months ended March 31, 2019, due primarily to net income of $11.5 million, and a decrease of $1.3 million in accumulated other comprehensive loss, partially offset by $5.0 million in cash dividends paid during the period,
and the repurchase of 199,254 shares into treasury at a cost of $3.8 million.
Comparison of Operating Results for the Three Months Ended March 31, 2019 and 2018
General.
Net income was $11.5 million during the three months ended March 31, 2019, a decrease of $3.2 million from net income of $14.7 million during the three months ended March 31, 2018.
During the three months ended March 31,
2019, net interest income decreased by $2.7 million, non-interest income decreased by $0.9 million, non-interest expense increased by $0.3 million and the provision for loan losses increased by $0.1 million, offset in part by a decrease in income
tax expense of $0.8 million due to lower pre-tax income. The decrease in non-interest income was primarily due to $1.4 million of gains from the sale of securities that the Bank had retained from its Freddie Mac sponsored Q-deal securitization
completed in December of 2017 recorded during the three months ended March 31, 2018.
Net Interest Income.
The discussion of net interest income
for the three months ended March 31, 2019 and 2018 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 March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Average
Yield/Cost
|
|
Assets:
|
|
(Dollars in Thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
5,195,951
|
|
|
$
|
49,177
|
|
|
|
3.79
|
%
|
|
$
|
$5,435,400
|
|
|
$
|
$49,575
|
|
|
|
3.65
|
%
|
C&I loans
|
|
|
248,267
|
|
|
|
3,436
|
|
|
|
5.54
|
|
|
|
140,720
|
|
|
|
1,656
|
|
|
|
4.71
|
|
Other loans
|
|
|
1,083
|
|
|
|
18
|
|
|
|
6.65
|
|
|
|
1,189
|
|
|
|
19
|
|
|
|
6.39
|
|
MBS
and CMO securities
|
|
|
464,303
|
|
|
|
3,197
|
|
|
|
2.75
|
|
|
|
351,196
|
|
|
|
2,257
|
|
|
|
2.57
|
|
Investment securities
|
|
|
47,177
|
|
|
|
420
|
|
|
|
3.56
|
|
|
|
6,492
|
|
|
|
15
|
|
|
|
0.92
|
|
Other
|
|
|
154,512
|
|
|
|
1,447
|
|
|
|
3.75
|
|
|
|
210,016
|
|
|
|
1,511
|
|
|
|
2.88
|
|
Total interest-earning assets
|
|
|
6,111,293
|
|
|
|
57,695
|
|
|
|
3.78
|
%
|
|
|
6,145,013
|
|
|
$
|
55,033
|
|
|
|
3.58
|
%
|
Non-interest earning assets
|
|
|
252,805
|
|
|
|
|
|
|
|
|
|
|
|
224,297
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,364,098
|
|
|
|
|
|
|
|
|
|
|
$
|
$6,369,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
115,243
|
|
|
$
|
22
|
|
|
|
0.08
|
%
|
|
$
|
$124,440
|
|
|
$
|
$54
|
|
|
|
0.18
|
%
|
Money Market accounts
|
|
|
2,029,794
|
|
|
|
7,640
|
|
|
|
1.53
|
|
|
|
2,432,242
|
|
|
|
6,318
|
|
|
|
1.05
|
|
Savings accounts
|
|
|
331,662
|
|
|
|
45
|
|
|
|
0.06
|
|
|
|
359,638
|
|
|
|
59
|
|
|
|
0.07
|
|
CDs
|
|
|
1,466,439
|
|
|
|
7,310
|
|
|
|
2.02
|
|
|
|
1,151,146
|
|
|
|
4,320
|
|
|
|
1.52
|
|
Borrowed funds
|
|
|
1,229,607
|
|
|
|
7,354
|
|
|
|
2.43
|
|
|
|
1,237,094
|
|
|
|
6,267
|
|
|
|
2.05
|
|
Total interest-bearing liabilities
|
|
|
5,172,745
|
|
|
|
22,371
|
|
|
|
1.75
|
%
|
|
|
5,304,560
|
|
|
$
|
17,018
|
|
|
|
1.30
|
%
|
Non-interest-bearing checking accounts
|
|
|
397,907
|
|
|
|
|
|
|
|
|
|
|
|
310,651
|
|
|
|
|
|
|
|
|
|
Other non-interest-bearing liabilities
|
|
|
189,372
|
|
|
|
|
|
|
|
|
|
|
|
150,544
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
5,760,024
|
|
|
|
|
|
|
|
|
|
|
$
|
5,765,755
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
604,074
|
|
|
|
|
|
|
|
|
|
|
|
603,555
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
6,364,098
|
|
|
|
|
|
|
|
|
|
|
$
|
$6,369,310
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
35,324
|
|
|
|
|
|
|
|
|
|
|
$
|
$38,015
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.02
|
%
|
|
|
|
|
|
|
|
|
|
|
2.28
|
%
|
Net interest-earning assets
|
|
$
|
938,548
|
|
|
|
|
|
|
|
|
|
|
$
|
$840,453
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
2.31
|
%
|
|
|
|
|
|
|
|
|
|
|
2.47
|
%
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
118.14
|
%
|
|
|
|
|
|
|
|
|
|
|
115.84
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
4,341,045
|
|
|
$
|
15,017
|
|
|
|
1.40
|
%
|
|
$
|
$4,378,117
|
|
|
$
|
$10,751
|
|
|
|
1.00
|
%
|
Rate/Volume Analysis
|
|
Three Months Ended March 31, 2019
Compared to Three Months Ended
March 31, 2018
Increase/ (Decrease) Due to:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(Dollars In thousands)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
Real estate loans
|
|
$
|
(2,242
|
)
|
|
$
|
1,844
|
|
|
$
|
(398
|
)
|
C&I loans
|
|
|
1,377
|
|
|
|
403
|
|
|
|
1,780
|
|
Other loans
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
MBS
and CMO securities
|
|
|
755
|
|
|
|
185
|
|
|
|
940
|
|
Investment securities
|
|
|
228
|
|
|
|
177
|
|
|
|
405
|
|
Other
|
|
|
(460
|
)
|
|
|
396
|
|
|
|
(64
|
)
|
Total
|
|
$
|
(344
|
)
|
|
$
|
3,006
|
|
|
$
|
2,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts
|
|
$
|
(3
|
)
|
|
$
|
(29
|
)
|
|
$
|
(32
|
)
|
Money market accounts
|
|
|
(1,301
|
)
|
|
|
2,623
|
|
|
|
1,322
|
|
Savings accounts
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
(14
|
)
|
CDs
|
|
|
1,377
|
|
|
|
1,613
|
|
|
|
2,990
|
|
Borrowed funds
|
|
|
(55
|
)
|
|
|
1,142
|
|
|
|
1,087
|
|
Total
|
|
$
|
13
|
|
|
$
|
5,340
|
|
|
$
|
5,353
|
|
Net change in net interest income
|
|
$
|
(357
|
)
|
|
$
|
(2,334
|
)
|
|
$
|
(2,691
|
)
|
Net interest income was $35.3 million during the three months ended March 31, 2019, a decrease of $2.7 million from the three months ended March 31,
2018. Average interest-earning assets were $6.11 billion for the three months ended March 31, 2019, a decrease of $33.7 million from $6.15 billion for the three months ended March 31, 2018. Net interest margin (“NIM”) was 2.31% during the three
months ended March 31, 2019, down from 2.47% during the three months ended March 31, 2018, primarily due to a reduction in prepayment fee income.
Interest Income.
Interest income was $57.7 million during the
three months ended March 31, 2019, an increase of $2.7 million from the three months ended March 31, 2018, primarily reflecting increases of interest income of $1.8 million on C&I loans, $0.9 million on mortgage-backed securities, and $0.4 in
investment securities, offset by a decrease of $0.4 million in interest income on real estate loans. The increased interest income on C&I loans reflected the build out of the Business Banking division and growth of $107.5 million in the
average balance of such loans during the period. The increased interest income from mortgage-backed securities and investment securities was due to the increased average balance of $113.1 million and $40.7 million, respectively. The decreased
interest income from real estate loans was due to a decrease in average balance of $239.4 million and a decrease in prepayment fee income.
Interest Expense.
Interest expense increased $5.4 million, to
$22.4 million, during the three months ended March 31, 2019, from $17.0 million during the three months ended March 31, 2018. The increased interest expense was mainly attributable to both growth in certificates of deposits average balances of
$315.3 million and increased offering rates on CD products. This was offset by a decrease in average balance of $402.4 million of money market accounts, offsetting increased offering rates on such products.
Provision for Loan Losses.
The Company recognized a provision
for loan losses of $0.3 million during the three months ended March 31, 2019, compared to $0.2 million for the three months ended March 31, 2018.
Non-Interest Income.
Non-interest income was $2.4 million during the three months ended March 31, 2019, a decrease of $0.9 million from $3.2 million during the three months ended March 31, 2018, primarily due to gains
of $1.4 million on sales of securities and other assets realized during the three months ended March 31, 2018, compared to a loss of $0.08 million for the three months ended March 31, 2019.
Non-Interest Expense.
Non-interest expense was $22.1 million during the three months ended March 31, 2019, an increase of $0.3 million from $21.7 million during the three months ended March 31, 2018,
reflecting increases in salary and employee benefits of $0.7 million and an increase of data processing c
osts of $0.3 million, offset by a decrease in marketing expense of $0.6
million and a decrease in FDIC deposit insurance premiums of $0.2 million. The inc
rease of $0.7 million in salaries and employee benefits was due to new
employees and their associated employee benefits expense. The increase of $0.3 million in data processing costs was primarily due to various technology enhancement initiatives related to customer banking services.
The $0.2 million
decrease in FDIC insurance premiums is due to lower FDIC assessment rates.
Non-interest expense was 1.39% and 1.36% of average assets during the three-month periods ended March 31, 2019 and 2018, respectively.
Income Tax Expense.
Income tax expense was $3.8 million
during the three months ended March 31, 2019, down $0.8 million from $4.6 million during the three months ended March 31, 2018. The Company's consolidated tax rate was 24.9% during the three months ended March 31, 2019, up from 23.7% during the
three months ended March 31, 2018.
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Quantitative and qualitative disclosures about market risk were presented at December 31, 2018 in Item 7A of the Holding Company's Annual Report on Form
10-K, filed with the SEC on March 14, 2019. 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 March 31, 2019, the Company owned thirteen marketable
equity securities carried at a fair value of $5.9 million, in which market value adjustments are recorded through the statement of income. During the three months ended March 31, 2019, the Company conducted seventeen 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 or 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 March 31, 2019 and December 31, 2018, 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 March 31, 2019 and December 31, 2018.
|
|
At March 31, 2019
|
|
|
At December 31, 2018
|
|
|
|
EVE
|
|
|
Dollar
Change
|
|
|
Percentage
Change
|
|
|
EVE
|
|
|
Dollar
Change
|
|
|
Percentage
Change
|
|
Rate Shock Scenario
|
|
(Dollars in Thousands)
|
|
+ 200 Basis Points
|
|
$
|
610,878
|
|
|
$
|
14,100
|
|
|
|
2.4
|
%
|
|
$
|
643,531
|
|
|
$
|
(27,967
|
)
|
|
|
(4.2
|
)%
|
Pre-Shock Scenario
|
|
|
596,777
|
|
|
|
—
|
|
|
|
—
|
|
|
|
671,498
|
|
|
|
—
|
|
|
|
—
|
|
The Bank's Pre-Shock Scenario EVE decreased from $671.5 million at December 31, 2018 to $596.8 million at March 31, 2019. The primary factors contributing to the
lower EVE at March 31, 2019 were the payment of a $30.0 million dividend from the Bank to the Holding Company and an increase in the value of the Bank's core deposit liability and borrowings. 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 $643.5 million at December 31, 2018 to $610.9 million at March 31, 2019.
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 March 31, 2019 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
|
|
|
(2.5
|
)%
|
+ 100 Basis Points
|
|
|
(1.3
|
)%
|
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 March 31, 2019, 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 March 31, 2019 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
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
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 March 31, 2019.
There were no material changes from the risks disclosed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended
December 31, 2018.
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(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
|
|
January 2019
|
|
|
76,000
|
|
|
|
17.76
|
|
|
|
76,000
|
|
|
|
1,397,140
|
|
February 2019
|
|
|
53,254
|
|
|
|
20.24
|
|
|
|
53,254
|
|
|
|
1,321,140
|
|
March 2019
|
|
|
70,000
|
|
|
|
19.96
|
|
|
|
70,000
|
|
|
|
1,267,886
|
|
No existing repurchase programs expired during the three months ended March 31, 2019, nor did the Company terminate any repurchase programs prior to
expiration during the period. On October 26, 2018, the Board of Directors of the Company authorized a stock repurchase program pursuant to which the Company may repurchase up to 1,824,040 shares, or 5.0% of the Company’s currently outstanding
common stock.
Item 3.
|
Defaults Upon Senior Securities
|
None.
Not Applicable.
Item 5.
|
Other Information
|
None.
Exhibit Number
|
|
|
|
|
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))
|
|
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))
|
4.1
|
Draft 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 June 30, 1998, filed with the SEC on September 28, 1998 (File No. 000-27782))
|
|
Indenture, dated as of June 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 June 13, 2017 (File No. 000-27782))
|
|
First Supplemental Indenture, dated as of June 13, 2017, by and between Dime
Community Bancshares, Inc. and Wilmington Trust, National Association, as Trustee, including the form of 4.50% fixed-to-floating rate subordinated debentures due 2027
(incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed with the SEC on June 13, 2017 (File No. 000-27782))
|
|
Change in Control Employment Agreement between Dime Community Bancshares, Inc. and Conrad Gunther
|
|
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
March 31, 2019 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 **
|
** Furnished, not filed, herewith.
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: May 10, 2019
|
By:
|
/s/ KENNETH J. MAHON
|
|
|
|
Kenneth J. Mahon
|
|
|
|
President and Chief Executive Officer
|
|
Dated: May 10, 2019
|
By:
|
/s/
AVINASH REDDY
|
|
|
|
Avinash Reddy
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
45