What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 219 added, 99 removed, 258 unchanged (55% of the section changed)

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Dime Community Bancshares, Inc., a New York corporation previously known as “Bridge Bancorp, Inc.,” is a bank holding company formed in 1988.

On a parent-only basis, the Holding Company has had minimal results of operations.

On a parent-only basis, the Holding Company has minimal operations, other than as owner of Dime Community Bank.

The Holding Company is dependent on dividends from its wholly-owned subsidiary, Dime Community Bank, which was previously known as “BNB Bank,” its own earnings, additional capital raised, and borrowings as sources of funds.

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The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings.

The Bank also generates non-interest income, such as fee income on deposit accounts and merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans.

The Bank also generates non-interest income, such as fee income on deposit accounts, merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans.

The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank’s title insurance subsidiary, and income tax expense, further affects our net income.

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The Bank also offers mobile and digital banking platforms.

The Company also prioritizes the well-being of employees.

The Company also prioritizes the well-being of its employees.

The Company has deployed its Business Continuity Plans and shifted to a remote working environment during the "New York State on PAUSE"

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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.

As the COVID-19 vaccine is becoming more readily available, the Company continues to assess its own internal “return to office” strategy.

The Company continues to follow the guidance of New York State in the reopening phases, and continues to assess its own internal “return to office” strategy.

Guidelines have been established for those employees that are working from a corporate office location.

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Consistent with regulatory guidance to work with borrowers during the unprecedented situation caused by the COVID-19 pandemic and as outlined in the CARES Act, the Company established a formal payment deferral program in April 2020 for borrowers that have been adversely affected by the pandemic.

As of March 31, 2021, the Company had 34 loans, representing outstanding loan balances of $66.7 million, that were deferring both principal and interest.

As of June 30, 2021, the Company had 25 loans, representing outstanding loan balances of $44.5 million, that were deferring both principal and interest.

In accordance with Section 4013 of the CARES Act, issued in March 2020, these deferrals are not considered troubled debt restructurings.

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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 March 31, 2021, the Company had PPP loans totaling $1.4 billion, net of deferred fees.

As of June 30, 2021, the Company had PPP loans totaling $465.5 million, net of deferred fees.

It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S.

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At or For the

Three Months Ended

Six Months Ended

Per Share Data:

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Non-performing assets

Net charge-offs (recoveries)

Net charge-offs

Non-performing assets/Total assets

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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 Company’s policies with respect to the methodologies it uses to determine the allowance for credit losses (including reserves for loan commitments) and loans acquired in a business combination, 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.

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The Bank’s methods and assumptions utilized to periodically determine its allowance for credit losses are summarized in Note 3 to the Company’s condensed consolidated financial statements.

Loans Acquired in a Business Combination.

The Bank’s methods are summarized in Note 3 to the Company’s condensed consolidated financial statements.

Liquidity and Capital Resources

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The Bank’s Asset Liability Committee (“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.

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 are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings.

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However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.

Total deposits increased $6.36 billion during the three months ended March 31, 2021, compared to a decrease of $42.8 million for the three months ended March 31, 2020.

Within deposits, core deposits ( i.e., non-CDs) increased $6.15 billion during the three months ended March 31, 2020 and decreased $111.4 million during the three months ended March 31, 2020.

CDs decreased $217.7 million during the three months ended March 31, 2021 compared to an increase of $68.6 million during the three months ended March 31, 2020.

Total deposits increased $6.54 billion during the six months ended June 30, 2021, compared to an increase of $155.8 million for the six months ended June 30, 2020.

Within deposits, core deposits ( i.e., non-CDs) increased $6.56 billion during the six months ended June 30, 2020 and increased $335.1 million during the six months ended June 30, 2020.

CDs decreased $21.7 million during the six months ended June 30, 2021 compared to a decrease of $179.3 million during the six months ended June 30, 2020.

The increase in deposits during the current period was primarily due to the acquisition of deposits in the merger.

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 and lines of credit with unaffiliated correspondent banks.

At March 31, 2021, the Bank had an additional unused borrowing capacity of $2.3 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e.

At June 30, 2021, the Bank had an additional unused borrowing capacity of $2.9 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e.

, 4.5% of the Bank’s outstanding FHLBNY borrowings).

The Bank decreased its outstanding FHLBNY advances by $670.1 million during the three months ended March 31, 2021, compared to a $25.1 million increase during the three months ended March 31, 2020.

The Bank decreased its outstanding FHLBNY advances by $1.18 billion during the six months ended June 30, 2021, compared to a $75.0 million decrease during the six months ended June 30, 2020.

Federal Home Loan Bank Advances for further information.

During the three months ended March 31, 2021 and 2020, real estate loan originations totaled $349.1 million and $166.8 million, respectively.

During the three months ended March 31, 2021 and 2020, C&I loan originations totaled $612.1 million (including $573.3 million of PPP loans) and $51.9 million, respectively.

Sales of available-for-sale securities totaled $133.8 million and $4.2 million during the three-month periods ended March 31, 2021 and 2020, respectively.

Purchases of available-for-sale securities totaled $979.2 million and $33.2 million during the three-month periods ended March 31, 2021 and 2020, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $214.0 million and $32.3 million for the three-month periods ended March 31, 2021 and 2020, respectively.

During the six months ended June 30, 2021 and 2020, real estate loan originations totaled $762.0 million and $375.6 million, respectively.

During the six months ended June 30, 2021 and 2020, C&I loan originations totaled $641.1 million (including $609.7 million of PPP loans) and $386.3 million (including $319.4 million of PPP loans), respectively.

Sales of available-for-sale securities totaled $137.6 million and $62.8 million during the six-month periods ended June 30, 2021 and 2020, respectively.

Purchases of available-for-sale securities totaled $508.3 million and $107.3 million during the six-month periods ended June 30, 2021 and 2020, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $290.4 million and $67.3 million for the six-month periods ended June 30, 2021 and 2020, 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, 2021, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized"

As a general matter, these capital requirements are based on the amount and composition of an institution’s

At June 30, 2021, 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 March 31, 2021

Actual Ratios at June 30, 2021

To Be Categorized as

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(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 March 31, 2021, the Bank has not opted into the Community Bank Leverage Ratio framework.

Legacy Dime repurchased 825,992 shares of its common stock during the three months ended March 31, 2020.

The Holding Company did not repurchase any shares of its common stock during the three months ended March 31, 2021.

As of March 31, 2021, up to 797,870 shares remained available for purchase under the authorized share repurchase programs.

Legacy Dime repurchased 1,457,833 shares of its common stock during the six months ended June 30, 2020.

The Holding Company repurchased 424,121 shares of its common stock during the six months ended June 30, 2021.

As of June 30, 2021, up to 373,659 shares remained available for purchase under the authorized share repurchase programs.

See "Part II - Item 2.

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for additional information about repurchases of common stock.

The Holding Company paid $1.8 million in cash dividends on preferred stock during the three months ended March 31, 2021, and none during the three months ended March 31, 2020.

The Holding Company paid $4.9 million in cash dividends on common stock during the three months ended March 31, 2020.

The Holding Company paid $3.6 million in cash dividends on preferred stock during the six months ended June 30, 2021, and $1.1 million during the six months ended June 30, 2020.

The Holding Company paid $15.1 million and $9.5 million in cash dividends on common stock during the six months ended June 30, 2021 and 2020, respectively.

Contractual Obligations

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As of March 31, 2021, the Company had 34 loans, representing outstanding loan balances of $66.7 million, that were deferring both principal and interest (“P&I” deferrals).

The table below presents the loans with P&I deferrals as of March 31, 2021:

March 31, 2021

As of June 30, 2021, the Company had 25 loans, representing outstanding loan balances of $44.5 million, that were deferring both principal and interest (“P&I” deferrals).

The table below presents the loans with P&I deferrals as of June 30, 2021:

June 30, 2021

(Dollars in thousands)

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

Pursuant to regulatory guidance, and guidance under Section 4013 of the CARES Act, a qualified loan modification, such as a payment deferral, is exempt by law from classification as a TDR as defined by GAAP, was expected to expire on December 31, 2020.

Pursuant to guidance under Section 4013 of the CARES Act, a qualified loan modification, such as a payment deferral, is exempt from classification as a TDR as defined by GAAP.

This applies if the loan was current as of December 31, 2019 and the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate of the loan.

This guidance was expected to expire on December 31, 2020.

The 2021 Consolidated Appropriations Act, which was signed into law December of 2020, extended the exemption for TDR classification until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak is lifted.

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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.

Management of the Bank reviews delinquent loans on a quarterly 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.

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.

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:

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The Bank generally initiates foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement.

The Bank obtains an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss.

The Bank obtains an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to

reserve appropriately for the potential loss.

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.

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Non-accrual Loans

Within the Bank’s held-for-investment loan portfolio, non-accrual loans totaled $35.5 million at March 31, 2021, and $17.9 million at December 31, 2020.

During the three months ended March 31, 2021, loans totaling $17.7 million were placed on non-accrual status, including $11.9 million in non-accrual PCD loans.

There were no sales or payoffs of non-accrual loans during the three months ended March 31, 2021.

Within the Bank’s held-for-investment loan portfolio, non-accrual loans totaled $28.3 million at June 30, 2021, and $17.9 million at December 31, 2020.

During the three months ended June 30, 2021, loans totaling $5.2 million were placed on non-accrual status, including $181 thousand in PCD loans.

There were $7.9 million of non-accrual loan sales during the three months ended June 30, 2021.

There were $16 thousand of non-accrual loans paid off during the three months ended June 30, 2021.

During the six months ended June 30, 2020, loans totaling $11.4 million were placed on non-accrual status, of which loans totaling $7.1 million were sold.

Principal amortization of $0.03 million was recognized on non-accrual loans during the six months ended June 30, 2020.

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

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Total non-performing assets to total assets

(1) There were no TDRs for the periods indicated.

(1) Non-performing assets includes non-accrual loans.

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 modified two loans in a manner that met the criteria for a TDR during the six months ended June 30, 2021.

The Bank did not modify any loans in a manner that met the criteria for a TDR during the six months ended June 30, 2020.

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

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

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.

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As a result, OREO properties have generally not warranted subsequent independent appraisals.

The Bank had no OREO properties at March 31, 2021 or December 31, 2020.

The Bank did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2021 or 2020.

The Bank had no OREO properties at June 30, 2021 or December 31, 2020.

The Bank did not recognize any provisions for losses on OREO properties during the three or six months ended June 30, 2021 or 2020.

Other Potential Problem Loans

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on eight loans with an aggregate outstanding balance of $8.8 million at March 31, 2021, and three loans with an aggregate outstanding balance of $3.3 million at December 31, 2020, 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/or 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 59 Days

The Bank had loans totaling $41.8 million that were delinquent between 30 and 89 days at March 31, 2021 and $16.3 million at December 31, 2020.

The increase in 30 to 89 day delinquencies was primarily attributable to acquired loans totaling $18.3 million.

At June 30, 2021, the Company had loans totaling $147.7 million that were past due between 30 and 59 days.

By July 22, 2021, loans delinquent 30 to 59 days declined to $38 million.

At December 31, 2020, the Company had loans totaling $15.4 million that were past due between 30 and 59 days.

The 30 to 59 day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Loans Delinquent 60 to 89 Days

At June 30, 2021, the Company had loans totaling $10.8 million that were past due between 60 and 89 days.

At December 31, 2020, the Company had loans totaling $918 thousand that were past due between 60 and 89 days.

The 60 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.

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on eleven loans with an aggregate outstanding balance of $6.7 million at June 30, 2021, and three loans with an aggregate outstanding balance of $3.3 million at December 31, 2020, all of which were 90 days or more past due.

These loans were well secured and/or awaiting a forbearance extension or formal payment deferral, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.

Reserve for Loan Commitments

The Bank maintains a reserve associated with unfunded loan commitments accepted by the borrower.

The amount of reserve was $4.6 million at March 31, 2021 and $25 thousand at December 31, 2020.

The amount of reserve was $4.9 million, recorded in other liabilities, at June 30, 2021 and $25 thousand at December 31, 2020.

This reserve is determined based upon the outstanding volume of loan commitments at each period end.

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The adoption of the CECL standard resulted in a $1.4 million increase in the reserve.

An additional $3.1 million increase in the reserve was recorded as a provision for credit losses primarily attributable to acquired loan commitments.

An additional $3.5 million increase in the reserve was recorded as a provision for credit losses primarily attributable to acquired loan commitments during the six months ended June 30, 2021.

Allowance for Credit Losses

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The adoption of the CECL standard resulted in an initial decrease of $3.9 million to the allowance for credit losses and an increase of $1.4 million to the reserve for unfunded commitments.

The after-tax cumulative-effect adjustment of $1.7 million was recorded in retained earnings as of January 1, 2021.

A provision of $15.8 million and $8.0 million were recorded during the three month periods ended March 31, 2021 and 2020, respectively.

The $15.8 million credit loss provision for the first quarter of 2021 was primarily associated with the provision for credit losses recorded on acquired non-PCD loans which totaled $20.3 million for the first quarter of 2021 and a provision for unfunded commitments which totaled $3.1 million for the first quarter of 2021.

The provision on the remainder of the portfolio for the first quarter of 2021 was negative $7.6 million primarily as a result of improvement in forecasted macroeconomic conditions.

Durin g the three - mont hs ende d Marc h 31 , 2020 , th e credit los s provisio n wa s drive n mainl y b y a n increas e i n th e genera l allowanc e fo r credit losse s due t o th e adjustmen t o f qualitativ e factor s t o accoun t fo r th e effect s o f th e COVID - 1 9 pandemi c an d relate d economi c disruption .

For a further discussion of the allowance for loan losses and related activity during the three-month periods ended March 31, 2021 and 2020, and as of December 31, 2020, please see Note 8 to the condensed consolidated financial statements.

Comparison of Financial Condition at March 31, 2021 and December 31, 2020

Assets totaled $13.02 billion at March 31, 2021, $6.24 billion above their level at December 31, 2020, primarily due to an increase in the loan portfolio of $4.83 billion, an increase in securities of $607.7 million, an increase in BOLI of $95.4 million, an increase in derivative assets of $26.8 million, an increase in accrued interest receivable of $16.3 million, and an increase in other assets of $47.9 million, offset by a decrease in FHLBNY capital stock of $15.6 million.

The after-tax cumulative-effect adjustment of $1.7 million was recorded as an increase to retained earnings as of January 1, 2021.

A provision of $11.5 million and $14.1 million were recorded during the six-month periods ended June 30, 2021 and 2020, respectively.

The $11.5 million credit loss provision for the six months ended June 30, 2021 was primarily associated with the provision for credit losses recorded on acquired non-PCD loans which totaled $20.3 million for the Day 2 accounting of acquired loans from the Merger, and a provision for unfunded commitments which totaled $3.4 million.

The provision on the remainder of the portfolio for the six months ended June 30, 2021 was negative $12.2 million primarily as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on PDC individually analyzed loans.

Durin g the six mont hs ende d June 30 , 2020 , th e credit los s provisio n wa s drive n mainl y b y a n increas e i n th e genera l allowanc e fo r credit losse s due t o th e adjustmen t o f qualitativ e factors t o accoun t fo r th e effect s o f th e COVID - 1 9 pandemi c an d relate d economi c disruption .

During the three months ended June 30, 2021 and 2020, a release of $4.2 million and a provision of $6.1 million were recorded, respectively.

During the three months ended June 30, 2021, the change in the provision was primarily the result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on PCD individually analyzed loans.

Durin g the three mont hs ende d June 30 , 2020 , th e credit los s provisio n wa s drive n mainl y b y a n increas e i n th e genera l allowanc e fo r credit losse s due t o th e adjustmen t o f qualitativ e factors t o accoun t fo r th e effect s o f th e COVID - 1 9 pandemi c an d relate d economi c disruption .

For a further discussion of the allowance for credit losses and related activity during the three- or six-month periods ended June 30, 2021 and 2020, and as of December 31, 2020, please see Note 8 to the unaudited condensed consolidated financial statements.

Comparison of Financial Condition at June 30, 2021 and December 31, 2020

Assets totaled $12.70 billion at June 30, 2021, $5.92 billion above their level at December 31, 2020, primarily due to an increase in the loan portfolio of $3.87 billion, an increase in securities of $717.0 million, an increase in BOLI of $137.0 million, an increase in derivative assets of $26.5 million, an increase in accrued interest receivable of $12.4 million, and an increase in other assets of $50.5 million, offset by a decrease in FHLBNY capital stock of $38.3 million.

These changes were mainly due to the acquisition of assets due to the Merger.

Total loans increased $4.83 billion during the three months ended March 31, 2021.

During the period, the Bank had originations of $909.7 million.

Additionally, the allowance for credit losses increased by $56.7 million which was due to the acquisition (credit mark on PCD loans plus provision on non-PCD), offset by CECL adoption and improvements in forecasted macroeconomic conditions during the three months ended March 31, 2021.

The $26.8 million increase in derivative assets was primarily the result of the Merger.

The Company had 111 loan swaps that were acquired.

The $16.3 million increase in accrued interest receivables was primarily due to the acquired loan portfolio as part of the Merger.

Total liabilities increased $5.77 billion during the three months ended March 31, 2021, primarily due to an increase of $6.29 billion in deposits, an increase of $83.2 million in subordinated debt, an increase of $31.4 million in

lease liability for operating leases, and an increase of $4.4 million in derivative liabilities.

These changes were mainly due to the assumption of liabilities due to the Merger.

FHLBNY advances and other borrowings declined by $670.1 million, as the Company used excess liquidity on the balance sheet to paydown borrowings.

The Company terminated 28 interest rates swaps related to FHLBNY advances totaling $505.0 million during the quarter with a termination fee of $16.0 million.

The remaining four interest rate swaps are in an asset position as of the end of the quarter.

Total loans increased $3.87 billion during the six months ended June 30, 2021, to $9.45 billion at period end.

During the period, the Bank had originations of $1.37 billion.

Additionally, the allowance for credit losses increased by $51.3 million which was due to the acquisition (credit mark on PCD loans plus provision on non-PCD), offset by CECL adoption, improvements in forecasted macroeconomic conditions, and releases of reserves on PCD individually analyzed loans during the six months ended June 30, 2021.

The $137.0 million increase in BOLI was mainly due to purchases of $40 million during the six months ended June 30, 2021, and acquisition of $94.1 million in the merger.

Total liabilities increased $5.42 billion during the six months ended June 30, 2021, to $11.53 billion at period end, primarily due to an increase of $6.54 billion in deposits, an increase of $83.4 million in subordinated debt, an increase of $32.3 million in lease liability for operating leases, and an increase of $5.5 million in derivative liabilities.

These changes

were mainly due to the assumption of liabilities due to the Merger.

FHLBNY advances and other borrowings declined by $1.18 billion, as the Company used excess liquidity on the balance sheet to paydown borrowings.

The Company terminated 28 interest rates swaps related to FHLBNY advances totaling $505.0 million during the six months ended June 30, 2021 with a termination fee of $16.5 million.

The remaining four interest rate swaps are in an asset position as of June 30, 2021.

Stockholders’ Equity.

Stockholders’ equity increased $471.7 million during the three months ended March 31, 2021, due to share issuances associated with the Merger of $491.2 million and income from other comprehensive income of $6.5 million, offset by net loss in the period of $21.0 million, common stock dividends of $5.2 million and preferred stock dividends of $1.8 million.

Comparison of Operating Results for the Three Months Ended March 31, 2021 and 2020

Net loss was $22.9 million during the three months ended March 31, 2021, lower than net income of $8.4 million for the three months ended March 31, 2020.

During the three months ended March 31, 2021, net interest income increased by $37.3 million, non-interest income decreased by $11.6 million, non-interest expense increased by $56.8 million, income tax expense decreased by $9.4 million and the loan loss provision increased by $7.8 million, compared to the three months ended March 31, 2020.

Stockholders’ equity increased $503.2 million during the six months ended June 30, 2021 to $1.20 billion at period end, due to share issuances associated with the Merger of $491.2 million, net income for the period of $30.2 million, and income from other comprehensive income of $10.5 million, offset by common stock dividends of $15.1 million and preferred stock dividends of $3.6 million.

Comparison of Operating Results for the Three Months Ended June 30, 2021 and 2020

The Company’s results of operations for the second quarter of 2021 include income for the full quarter from the merger with Bridge Bancorp, Inc.

(“Bridge”), compared to two months for the first quarter of 2021 following the completion of the merger on February 1, 2021.

The Company’s historical information for the second quarter of 2020 does not include the historical GAAP results of Bridge.

Net income was $51.3 million during the three months ended June 30, 2021, higher than net income of $13.0 million for the three months ended June 30, 2020.

During the three months ended June 30, 2021, net interest income increased by $49.7 million, non-interest income increased by $21.2 million, non-interest expense increased by $25.5 million, income tax expense increased by $17.3 million and the credit loss provision decreased by $10.3 million, compared to the three months ended June 30, 2020.

Please see "Provision for Credit Losses"

for a discussion of the increase in the credit loss provision for the period ended March 31, 2021.

for a discussion of the decrease in the credit loss provision for the three month period ended June 30, 2021.

Net Interest Income.

The discussion of net interest income for the three months ended March 31, 2021 and 2020 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 discussion of net interest income for the three months ended June 30, 2021 and 2020 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.

2 unchanged sentences

Analysis of Net Interest Income

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in Thousands)

30 unchanged sentences

Rate/Volume Analysis

Three Months Ended March 31, 2021

Compared to Three Months Ended March 31, 2020

Three Months Ended June 30, 2021

Compared to Three Months Ended June 30, 2020

Increase / (Decrease) Due to:

16 unchanged sentences

Net change in net interest income

Net interest income was $77.8 million during the three months ended March 31, 2021, an increase of $37.3 million from the three months ended March 31, 2020.

Average interest-earning assets were $10.06 billion for the three months ended March 31, 2021, an increase of $4.11 billion from $5.95 billion for the three months ended March 31, 2020.

Net interest margin (“NIM”) was 3.14% during the three months ended March 31, 2021, up from 2.72% during the three months ended March 31, 2020.

Net interest income was $93.3 million during the three months ended June 30, 2021, an increase of $49.7 million from the three months ended June 30, 2020.

Average interest-earning assets were $11.99 billion for the three months ended June 30, 2021, an increase of $5.98 billion from $6.02 billion for the three months ended June 30, 2020.

Net interest margin (“NIM”) was 3.12% during the three months ended June 30, 2021, up from 2.86% during the three months ended June 30, 2020.

Interest Income.

Interest income was $86.8 million during the three months ended March 31, 2021, an increase of $27.9 million from the three months ended March 31, 2020, primarily reflecting increases in interest income of $16.0 million on real estate loans, $5.8 million on C&I loans, $5.0 million on SBA PPP loans, $0.3 million on other loans, $0.9 million on investment securities, partially offset by decreases of $0.2 million in mortgaged-backed securities and other short term investments.

Interest income was $100.4 million during the three months ended June 30, 2021, an increase of $41.8 million from the three months ended June 30, 2020, primarily reflecting increases in interest income of $25.4 million on real estate loans, $9.7 million on C&I loans, $4.7 million on SBA PPP loans, $0.4 million on other loans, $1.1 million on investment securities, $0.4 million on mortgage-backed securities, and $0.1 million on other short-term investments.

The increased interest income on real estate loans was related to an increase of $3.29 billion in the average balance of such loans in the period, offset by a 37-basis point decrease in the yield.

The increased interest income on C&I loans was due to an increase of $606.0 million in the average balance of such loans during the period.

The increased average balances were due to the merger.

Interest Expense.

Interest expense decreased $9.5 million, to $8.9 million, during the three months ended March 31, 2021, from $18.4 million during the three months ended March 31, 2020.

Interest expense decreased $7.9 million, to $7.1 million, during the three months ended June 30, 2021, from $15.1 million during the three months ended June 30, 2020.

The decreased interest expense was mainly attributable to a reduction in interest rates offered on CDs as well as a decrease in average balances of $90.1 million in CD products, and a decrease in average balances of $817.3 million in FHLBNY advances.

Provision for Credit Losses.

The Company recognized a provision for credit losses of $15.8 million during the three months ended March 31, 2021, compared to a provision of $8.0 million for the three months ended March 31, 2020.

The provision on the remainder of the portfolio for the first quarter of 2021 was negative $7.6 million primarily as a result of improvement in forecasted macroeconomic conditions.

The Company recognized a credit loss recovery of $4.2 million during the three months ended June 30, 2021, compared to a provision of $6.1 million for the three months ended June 30, 2020.

The $4.2 million credit loss recovery for the second quarter of 2021 was primarily associated with the improvement in forecasted macroeconomic conditions, as well as releases of reserves on PCD individually analyzed loans .

Non-Interest Income.

Non-interest loss was $7.4 million during the three months ended March 31, 2021, compared to non-interest income of $4.2 million during the three months ended March 31, 2020, primarily due to loss on termination of derivatives of $16.5 million, offset by an increase of service charges and other fees of $1.7 million, an increase of $0.6 million of loan level derivative income, and an increase of $0.6 million in gains on sale of loans for the three months ended March 31, 2021.

Non-interest income was $29.5 million during the three months ended June 30, 2021, compared to non-interest income of $8.4 million during the three months ended June 30, 2020, primarily due to one-time gain on sale of SBA PPP loans of $20.7 million, an increase of service charges and other fees of $2.8 million, offset by a decrease of

$1.9 million of loan level derivative income, and a decrease of $3.6 million in gains on sales of securities and other investments for the three months ended June 30, 2021.

Non-Interest Expense.

Non-interest expense was $82.8 million during the three months ended March 31, 2021, an increase of $56.8 million from $26.0 million during the three months ended March 31, 2020, primarily the result of merger expenses of $25.8 million during the quarter, an increase in salaries and employee benefit expense of $9.1 million, and an increase in severance of $12.0 million.

Non-interest expense was 1.61% and 1.68% of average assets during the three-month periods ended March 31, 2021 and 2020, respectively.

Non-interest expense was $54.9 million during the three months ended June 30, 2021, an increase of $25.6 million from $29.3 million during the three months ended June 30, 2020, primarily the result of an increase in merger expenses of $0.8 million during the quarter, an increase in salaries and employee benefit expense of $12.4 million, an increase in occupancy and equipment of $4.2 million, an increase in data processing costs of $3.0 million, an increase in professional services of $2.3 million, branch restructuring costs of $1.7 million, and offset by a decrease in severance of $1.9 million.

Non-interest expense was 1.72% and 1.84% of average assets during the three-month periods ended June 30, 2021 and 2020, respectively.

Income Tax Expense.

Income tax benefit was $7.1 million during the three months ended March 31, 2021, compared to tax expense of $2.3 million during the three months ended March 31, 2020.

The Company’s consolidated tax rate was 25.2% during the three months ended March 31, 2021, compared to 21.6% during the three months ended March 31, 2020.

The higher tax rate for the three months ended March 31, 2021 was primarily the result of non-deductible merger expenses and salary expenses during the period.

Income tax expense was $20.9 million during the three months ended June 30, 2021, compared to tax expense of $3.6 million during the three months ended June 30, 2020.

The reported effective tax rate for the second quarter of 2021 was 28.9%, and 21.6% for the second quarter of 2020.

The increase in the effective tax rate during the second quarter of 2021 compared to the year ago quarter was primarily the result of the loss of benefits from the Company’s REITs and non-deductible expenses during the period.

Comparison of Operating Results for the Six Months Ended June 30, 2021 and 2020

Net income was $30.2 million during the six months ended June 30, 2021, an increase of $8.9 million from net income of $21.4 million during the six months ended June 30, 2020.

During the six months ended June 30, 2021, non-interest expense increased by $82.3 million and income tax expense increased by $7.9 million.

This was offset by a provision for credit losses decrease of $2.5 million, an increase in net interest income of $87.0 million, and an increase in non-interest income of $9.5 million.

Net Interest Income.

The discussion of net interest income for the six months ended June 30, 2021 and 2020 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented.

Average balances were derived from average daily balances.

The yields include fees that are considered adjustments to yields.

Analysis of Net Interest Income

Six Months Ended June 30,

(Dollars in Thousands)

Interest-earning assets:

Real estate loans

Commercial and industrial loans

SBA PPP loans

Mortgage-backed securities

Investment securities

Other short-term investments

Total interest-earning assets

Non-interest earning assets

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Interest-bearing checking

Certificates of deposit

Total interest-bearing deposits

FHLBNY Advances

Subordinated debt, net

Other short-term borrowings

Total borrowings

Total interest-bearing liabilities

Non-interest-bearing checking

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest spread

Net interest-earning assets

Net interest margin

Ratio of interest-earning assets to interest-bearing liabilities

Deposits (including non-interest-bearing checking accounts)

Rate/Volume Analysis

Six Months Ended June 30, 2021

Compared to Six Months Ended June 30, 2020

Increase / (Decrease) Due to:

(Dollars In thousands)

Interest-earning assets:

Real estate loans

Commercial and industrial loans

SBA PPP loans

Mortgage-backed securities

Investment securities

Other short-term investments

Total interest-earning assets

Interest-bearing liabilities:

Interest-bearing checking

Certificates of deposit

FHLBNY Advances

Subordinated debt, net

Other short-term borrowings

Total interest-bearing liabilities

Net change in net interest income

Net Interest Income.

Net interest income was $171.1 million during the six months ended June 30, 2021, an increase of $87.0 million from $84.1 million during the six months ended June 30, 2021.

Average interest-earning assets were $11.03 billion for the six months ended June 30, 2021, an increase of $5.01 billion compared to $6.02 billion for the six months ended June 30, 2020.

Net interest margin was 3.13% during the six months ended June 30, 2021, up from 2.79% during the six months ended June 30, 2020.

Interest Income.

Interest income was $187.2 million during the six months ended June 30, 2021, an increase of $69.6 million from the six months ended June 30, 2020, primarily reflecting increases in interest income of $41.4 million on real estate loans, $15.5 million on C&I loans, $9.7 million on SBA PPP loans, $0.7 million on other loans, $0.2 million on mortgage-backed securities, $1.9 million on investment securities, and $0.1 million on other short-term investments.

The increased interest income on real estate loans was due to an increase of $2.74 billion in the average balance of such loans in the period, offset in part by a 33 basis point decrease in the yield.

The increased interest income on other interest-earning assets was due to the increase in average balances versus the year-ago time period.

The increased interest income on C&I loans was due to growth of $505.2 million in the average balances of C&I loans during the period.

The increased interest income from mortgage-backed securities was due to the increase in the average balances of $268.3 million.

The increased average balances were related to increased balances from the merger.

Interest Expense.

Interest expense decreased $17.4 million, to $16.1 million, during the six months ended June 30, 2021, from $33.5 million during the six months ended June 30, 2020.

The decrease in interest expense was due to decreased rates offered on CD accounts, and a decrease of $77.7 million in the average balances of such accounts, and a decrease of $526.8 million in the average balances of FHLBNY advances and a decrease of 104 basis points in the cost of such borrowings.

Provision for Credit Losses.

The Company recognized a provision for credit losses of $11.5 million during the six months ended June 30, 2021, compared to $14.1 million for the six months ended June 30, 2020.

The change in provision for the six months ended June 30, 2021 primarily associated with the provision for credit losses recorded on acquired non-PCD loans which totaled $20.3 million for the Day 2 accounting of acquired loans from the Merger.

Non-Interest Income.

Non-interest income was $22.2 million during the six months ended June 30, 2021, an increase of $9.6 million from $12.6 million during the six months ended June 30, 2020, due to increases in gains on the sales of SBA loans of $21.6 million and service charges and other fees of $4.5 million, offset by losses on loan swap terminations of $16.5 million, and decreases in gains on sales of securities and other assets of $2.4 million and decreases in loan level derivative income of $1.3 million.

Non-Interest Expense.

Non-interest expense was $137.7 million during the six months ended June 30, 2021 an increase of $82.3 million from $55.4 million during the six months ended June 30, 2020, reflecting an increase of $21.7 million in salaries and employee benefits expense, an increase of $7.1 million in occupancy and equipment expense, an increase of $0.8 million in marketing expense, an increase of $4.5 million in data processing costs, an increase of $2.6 million in professional services expense, an increase of $0.9 million in federal deposit insurance premiums, and an increase of $38.1 million of merger related expenses.

Non-interest expense was 2.35% and 1.76% of average assets during the six-month periods ended June 30, 2021 and 2020, respectively.

Income Tax Expense.

Income tax expense was $13.8 million during the six months ended June 30, 2021, an increase of $7.9 million from $5.9 million during the six months ended June 30, 2020.

The Company's consolidated tax rate was 28.9% during the six months ended June 30, 2021, an increase from 21.6% during the six months ended June 30, 2020.

The increase in the effective tax rate during the six months ended June 30, 2021 compared to the year ago period was primarily the result of the loss of benefits from the Company’s REIT and non-deductible expenses during the period.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis