What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 156 added, 152 removed, 325 unchanged (49% of the section changed)

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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, 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 and loan 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.

We believe the merger created the opportunity for the resulting company to leverage complementary and diversified revenue streams and to potentially have superior future earnings and prospects compared to our current earnings and prospects on a stand-alone basis.

Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation.

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Completion of Merger of Equals

On February 1, 2021, Dime Community Bancshares, Inc., a Delaware corporation (“Legacy Dime”) merged with and into Bridge Bancorp, Inc., a New York corporation (“Legacy Bridge”) (the “Merger”), with Legacy Bridge as the surviving corporation under the name “Dime Community Bancshares, Inc.” (the “Company”).

On February 1, 2021, Dime Community Bancshares, Inc., a Delaware corporation (“Legacy Dime”) merged with and into Bridge Bancorp, Inc., a New York corporation (“Bridge”) (the “Merger”), with Bridge as the surviving corporation under the name “Dime Community Bancshares, Inc.” (the “Company”).

At the effective time of the Merger (the “Effective Time”), each outstanding share of Legacy Dime common stock, par value $0.01 per share, was converted into the right to receive 0.6480 shares of the Company’s common stock, par value $0.01 per share.

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Recent Developments Relating to the COVID-19 Pandemic

The disruption to the economy and financial markets brought on by the COVID-19 pandemic will continue to have an impact on the Company’s operations and financial results.

As Banking was designated by New York State as an essential business, the Company remains committed to being a source of capital to businesses in its footprint.

Over the past several years, the Company has taken numerous steps, including hiring personnel and adding new processes and systems, that have put the Bank in a position to help its business customers, through programs such as the SBA Paycheck Protection Program (“PPP”).

Our retail branch office locations remain open to conduct business.

The locations are following the Centers for Disease Control and Prevention guidance on safe practices and social distancing, including social distancing signs and floor markings to guide employees and customers.

All employees and customers must wear masks and floor traffic is limited to three customers in a branch.

The Bank also offers mobile and digital banking platforms.

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

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

executive order, which began on March 22, 2020.

All non-branch staff have the ability to use remote desktop software to re-create their desktop environment in order to work from home.

The Company has not furloughed any of its employees.

The Company continues to follow the guidance of New York State in the reopening phases, 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.

Many of the Bank’s back office personnel are still working remotely.

Business Continuity Plan

When "New York State on PAUSE"

was initiated, the Company had already invoked its Board-approved Business Continuity Plan (“BCP”), that was updated earlier in the year, to address specific risks and operational concerns related to the COVID-19 pandemic.

The BCP includes a remote working environment for many of the Company’s back office personnel, strategic branch closures for locations that do not have plexiglass barriers, and other considerations.

No material operational or internal control challenges or risks have been identified to date.

The Company does not currently anticipate significant challenges to its ability to maintain its systems.

All employees and customers must wear masks when unable to socially distance .

The Company also allows for a remote working environment for many of the Company’s back office personnel.

The Company has not identified any material operational or internal control challenges.

The Company also prioritizes the well-being of employees, including the creation of the Safety and Wellness Committee.

The Bank adheres to the NY Health & Essential Rights (“HERO”) Act, under which the Company has adopted additional guidelines and safety measures to protect employees against exposure.

Future government actions in response to the COVID-19 pandemic, including vaccination mandates, may affect the Company’s workforce, human capital resources and infrastructure.

Lending operations and accommodations to borrowers

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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 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.

Risk-ratings on COVID-19 loan deferrals are evaluated as part of the deferral request approval process.

As of September 30, 2021, the Company had 17 loans, representing outstanding loan balances of $26.6 million, that were deferring full principal and interest.

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

Risk-ratings on COVID-19 loan deferrals are evaluated on an ongoing basis.

The loans will be subject to the Bank’s normal credit monitoring.

The collectability of accrued interest will be evaluated on a periodic basis.

The collectability of accrued interest is evaluated on a periodic basis.

The Bank is closely monitoring the developments and uncertainties regarding the pandemic, including various segments of our loan portfolio that may be disproportionately impacted by the pandemic.

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The Company does not have any hotel loans that are in full P&I deferral.

With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company participated in assisting its customers with applications for resources through the program.

Dime's PPP loans generally have a two-year or five-year term and earn interest at 1%.

The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As of June 30, 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.

Should those circumstances change, the Company could be required to establish additional allowance for loan losses through additional provision expense charged to earnings.

With the passage of the PPP, administered by the SBA, the Company participated in assisting its customers with applications for resources through the program.

Since the inception of the program, the consolidated PPP originations for the Company, including originations by Legacy Dime and Bridge, through September 30, 2021 exceeded $1.90 billion.

The Company’s ability to respond quickly to the SBA guidelines allowed the Company to be a source of funding for local businesses during the COVID-19 pandemic.

The Company’s SBA PPP loans generally have a two-year or five-year term and earn interest at 1%.

Following the completion of the PPP, the Company was able to sell $596.2 million of the SBA PPP loan portfolio in order to re-deploy funds to service ongoing loan portfolio growth.

The Company believes that the remainder of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As of September 30, 2021, the Company had SBA PPP loans totaling $134.1 million, net of deferred fees.

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

Should those circumstances change, the Company could be required to establish additional allowance for credit losses through additional provision expense charged to earnings.

We continue to monitor unfunded commitments through the pandemic, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Per Share Data:

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Non-performing assets

Net charge-offs

Net charge-offs (recoveries)

Non-performing assets/Total assets

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The availability of funds changes daily.

The Bank utilizes securities sold under agreements to repurchase (“repurchase agreements”) as part of its borrowing policy to add liquidity.

Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities.

As of September 30, 2021, the Bank’s repurchase agreements totaled $2.7 million, included in other short-term borrowings on the consolidated balance sheets.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation.

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

Total deposits increased $6.54 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.

Total deposits increased $6.15 billion during the nine months ended September 30, 2021, compared to an increase of $89.9 million for the nine months ended September 30, 2020.

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

Within deposits, core deposits ( i.e., non-CDs) increased $6.46 billion during the nine months ended September 30, 2021 and increased $305.3 million during the nine months ended September 30, 2020.

CDs decreased $306.4 million during the nine months ended September 30, 2021 compared to a decrease of $215.4 million during the nine months ended September 30, 2020.

The decrease in CDs during the current period was primarily due to higher-cost CDs not being renewed.

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 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.

At September 30, 2021, the Bank had an additional unused borrowing capacity of $3.25 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 $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.

The Bank decreased its outstanding FHLBNY advances by $1.18 billion during the nine months ended September 30, 2021, compared to a $36.2 million increase during the nine months ended September 30, 2020.

Federal Home Loan Bank Advances for further information.

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.

During the nine months ended September 30, 2021 and 2020, real estate loan originations totaled $1.24 billion and $681.6 million, respectively.

During the nine months ended September 30, 2021 and 2020, C&I loan originations totaled $631.3 million (including $579.9 million of PPP loans) and $442.4 million (including $334.3 million of PPP loans), respectively.

The increase in both real estate loan originations and C&I loan originations during the current period was primarily due to the Merger.

Sales of available-for-sale securities totaled $138.1 million and $68.8 million during the nine-month periods ended September 30, 2021 and 2020, respectively.

Purchases of available-for-sale securities totaled $1.03 billion and $149.4 million during the nine-month periods ended September 30, 2021 and 2020, respectively.

Proceeds from pay downs and

calls and maturities of available-for-sale securities were $350.6 million and $121.2 million for the nine-month periods ended September 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

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"

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

At September 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 June 30, 2021

Actual Ratios at September 30, 2021

To Be Categorized as

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Tier 1 common equity ratio

Tier 1 risk-based based capital ratio

Total risk-based based capital ratio

Tier 1 risk-based capital ratio

Total risk-based capital ratio

Tier 1 leverage ratio

(1) Only the Bank is subject to these requirements.

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.

The Holding Company repurchased 904,160 shares of its common stock during the nine months ended September 30, 2021.

Legacy Dime repurchased 1,477,030 shares of its common stock during the nine months ended September 30, 2020.

As of September 30, 2021, up to 1,937,588 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 $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.

The Holding Company paid $5.5 million in cash dividends on its preferred stock during the nine months ended September 30, 2021.

Legacy Dime paid $3.0 million in cash dividends on its preferred stock during the nine months ended September 30, 2020.

The Holding Company paid $29.6 million in cash dividends on its common stock during the nine months ended September 30, 2021.

Legacy Dime paid $14.2 million in cash dividends on its common stock during the nine months ended September 30, 2020.

Contractual Obligations

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Asset Quality

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.

who did not qualify for market interest rates because of problems with their income or credit history.

See Note 7 to the Company’s Unaudited Condensed Consolidated Financial Statements for a discussion of evaluation for impaired securities.

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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

As of September 30, 2021, the Company had 17 loans, representing outstanding loan balances of $26.6 million, that were P&I deferrals.

The table below presents the loans with P&I deferrals as of the period indicated:

September 30, 2021

(Dollars in thousands)

One-to-four family residential and cooperative/condominium apartment

Multifamily residential and residential mixed-use

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

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(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);

(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.

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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 $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.

Within the Bank’s held-for-investment loan portfolio, non-accrual loans totaled $34.0 million at September 30, 2021, and $17.9 million at December 31, 2020.

Compared to June 30, 2021, non-accrual loans as of September 30, 2021 included $14.3 million of additional loans placed on non-accrual status.

There were no non-accrual loan sales during the three months ended September 30, 2021.

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

September 30,

(Dollars in thousands)

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Total non-accrual loans

One-to-four family residential, including condominium and cooperative apartment

Total non-accrual loans to total loans

Total non-performing assets to total assets

(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.

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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.

The Bank modified three loans in a manner that met the criteria for a TDR during the nine months ended September 30, 2021.

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

Accrual status for TDRs is determined separately for each TDR in accordance with the Bank's policies for determining accrual or non-accrual status.

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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

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.

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

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.

There was no carrying value of OREO properties on the Bank’s consolidated balance sheets at September 30, 2021 or December 31, 2020.

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

Other Potential Problem Loans

The delinquencies noted below as of December 31, 2020 reflect those for Legacy Dime prior to the Merger with Bridge on February 1, 2021.

See Note 2 for further information regarding the Merger.

Loans Delinquent 30 to 59 Days

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 September 30, 2021, the Company had loans totaling $51.1 million that were past due between 30 and 59 days.

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

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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 September 30, 2021, the Company had loans totaling $7.5 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.

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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.

The Bank continued accruing interest on ten loans with an aggregate outstanding balance of $6.3 million at September 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 $4.9 million, recorded in other liabilities, at June 30, 2021 and $25 thousand at December 31, 2020.

The Bank maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower.

The amount of reserve was $7.0 million at September 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 $3.5 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.

An additional $5.6 million increase in the reserve was recorded as a provision for credit losses primarily attributable to acquired loan commitments during the nine months ended September 30, 2021.

Allowance for Credit Losses

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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.

A provision of $6.3 million and $20.0 million were recorded during the nine-month periods ended September 30, 2021 and 2020, respectively.

The $6.3 million credit loss provision for the nine months ended September 30, 2021 was due to a 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 approximated $5.5 million, offset by a credit of $19.5 million as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on individually analyzed loans.

Durin g the nine mont hs ende d September 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 September 30, 2021 and 2020, a credit of $5.2 million and a provision of $5.9 million were recorded, respectively.

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

Durin g the three mont hs ende d September 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 nine-month periods ended September 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 September 30, 2021 and December 31, 2020

Assets totaled $12.36 billion at September 30, 2021, $5.58 billion above their level at December 31, 2020, primarily due to an increase in the loan portfolio of $3.62 billion, an increase in securities of $1.20 billion, and an increase in cash and due from banks of $385.4 million.

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

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

Total loans increased $3.62 billion during the nine months ended September 30, 2021, to $9.20 billion at period end.

During the period, the Bank had originations of $1.87 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.

Additionally, the allowance for credit losses increased by $39.8 million, which was due to the Merger (credit mark on PCD loans plus provision on non-PCD), offset by CECL adoption, improvements in forecasted macroeconomic conditions, and releases of reserves on individually analyzed loans during the nine months ended September 30, 2021.

The $137.8 million increase in BOLI was mainly due to purchases of $40.0 million during the nine months ended September 30, 2021, and acquisition of $94.1 million in BOLI as a result of the Merger.

Total liabilities increased $5.08 billion during the nine months ended September 30, 2021, to $11.16 billion at period end, primarily due to an increase of $6.15 billion in deposits, an increase of $83.1 million in subordinated debt, an increase of $23.0 million in lease liability for operating leases, and an increase of $1.5 million in derivative liabilities.

The increases in total liabilities in the current year were mainly due to the assumption of liabilities due to the Merger.

The increases due to the Merger were partially offset by a decrease of $1.18 billion in FHLBNY advances and a decrease of $118.2 million in other short-term borrowings.

The Company used excess liquidity on the balance sheet to pay down FHLBNY advances and other short-term borrowings in the current year.

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

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

Stockholders’ Equity.

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.

Stockholders’ equity increased $500.0 million during the nine months ended September 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 $38.4 million, and income from other comprehensive income of $4.9 million, offset in part by common stock dividends of $34.8 million and preferred stock dividends of $5.5 million.

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

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

(“Bridge”), compared to the Company’s historical information for the third quarter of 2020, which does not include the historical GAAP results of Bridge.

Net income was $38.4 million during the three months ended September 30, 2021, higher than net income of $15.9 million for the three months ended September 30, 2020.

During the three months ended September 30, 2021, net interest income increased by $49.9 million, non-interest income increased by $3.6 million, non-interest expense increased by $31.9 million, income tax expense increased by $10.1 million and the credit loss provision decreased by $11.1 million, compared to the three months ended September 30, 2020.

Please see "Provision for Credit Losses"

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

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

Net Interest Income.

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 discussion of net interest income for the three months ended September 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.

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Analysis of Net Interest Income

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in Thousands)

30 unchanged sentences

Rate/Volume Analysis

Three Months Ended June 30, 2021

Compared to Three Months Ended June 30, 2020

Three Months Ended September 30, 2021

Compared to Three Months Ended September 30, 2020

Increase / (Decrease) Due to:

16 unchanged sentences

Net change in net interest income

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.

Net interest income was $94.8 million during the three months ended September 30, 2021, an increase of $49.9 million from the three months ended September 30, 2020.

Average interest-earning assets were $11.77 billion for the three months ended September 30, 2021, an increase of $5.60 billion from $6.16 billion for the three months ended September 30, 2020.

Net interest margin (“NIM”) was 3.20% during the three months ended September 30, 2021, up from 2.92% during the three months ended September 30, 2020.

Interest Income.

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.

Interest income was $100.7 million during the three months ended September 30, 2021, an increase of $43.3 million from the three months ended September 30, 2020, primarily reflecting increases in interest income of $31.1 million on real estate loans, $8.8 million on C&I loans, $0.5 million on SBA PPP loans, $0.4 million on other loans, $1.3 million on investment securities, and $1.3 million on mortgage-backed securities.

The increased interest income on real estate loans was related to an increase of $3.36 billion in the average balance of such loans in the period, offset by an 11-basis point decrease in the yield.

The increased interest income on C&I loans was due to an increase of $597.1 million in the average balance of such loans during the period.

1 unchanged sentence

Interest Expense.

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.

Interest expense decreased $6.6 million, to $5.8 million, during the three months ended September 30, 2021, from $12.5 million during the three months ended September 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 $286.2 million in CD products, and a decrease in average balances of $1.02 billion in FHLBNY advances.

Provision for Credit Losses.

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 .

The Company recognized a credit loss recovery of $5.2 million during the three months ended September 30, 2021, compared to a provision of $5.9 million for the three months ended September 30, 2020.

The $5.2 million credit loss recovery for the third quarter of 2021 was primarily associated with the improvement in forecasted macroeconomic conditions, as well as releases of reserves on individually analyzed loans.

Non-Interest Income.

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 income was $9.7 million during the three months ended September 30, 2021, compared to non-interest income of $6.1 million during the three months ended September 30, 2020, primarily due to an increase of service charges and other fees of $2.9 million, and an increase in BOLI income of $1.2 million, offset by a decrease of $1.1 million of loan level derivative income for the three months ended September 30, 2021.

Non-Interest Expense.

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.

Non-interest expense was $56.8 million during the three months ended September 30, 2021, an increase of $31.9 million from $24.9 million during the three months ended September 30, 2020, as a result of an increase in salaries and employee benefits expenses of $14.0 million, an increase in occupancy and equipment expense of $3.8 million, an increase in professional services of $1.8 million, an increase in merger expense and transaction costs of $1.7 million, and an increase in data processing costs of $1.4 million, primarily due to the Merger.

The Company also incurred branch restructuring costs of $4.5 million during the third quarter of 2021.

Non-interest expense was 1.80% and 1.53% of average assets during the three-month periods ended September 30, 2021 and 2020, respectively.

Income Tax Expense.

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.

Income tax expense was $14.6 million during the three months ended September 30, 2021, compared to tax expense of $4.4 million during the three months ended September 30, 2020.

The reported effective tax rate for the third quarter of 2021 was 27.5%, and 21.9% for the third quarter of 2020.

The increase in the effective tax rate during the third 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 current period.

Comparison of Operating Results for the Nine Months Ended September 30, 2021 and 2020

The Company’s results of operations for the nine months ended September 30, 2021 include income for the eight months following the Merger with Bridge on February 1, 2021.

The Company’s historical operating results for the nine months ended September 30, 2020 do not include the historical results of Bridge.

Net income was $68.6 million during the nine months ended September 30, 2021, an increase of $31.4 million from net income of $37.2 million during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, net interest income increased by $136.9 million, provision for credit losses decreased by $13.7 million, and non-interest income increased by $13.1 million.

These increases to net income were partially offset by a non-interest expense increase of $114.2 million and an income tax expense increase of $18.0 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 discussion of net interest income for the nine months ended September 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

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in Thousands)

30 unchanged sentences

Rate/Volume Analysis

Six Months Ended June 30, 2021

Compared to Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021

Compared to Nine Months Ended September 30, 2020

Increase / (Decrease) Due to:

17 unchanged sentences

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.

Net interest income was $265.9 million during the nine months ended September 30, 2021, an increase of $136.9 million from $129.0 million during the nine months ended September 30, 2021.

Average interest-earning assets were $11.28 billion for the nine months ended September 30, 2021, an increase of $5.21 billion compared to $6.07 billion for the nine months ended September 30, 2020.

Net interest margin was 3.15% during the nine months ended September 30, 2021, up from 2.83% during the nine months ended September 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.

Interest income was $287.8 million during the nine months ended September 30, 2021, an increase of $112.9 million from the nine months ended September 30, 2020, primarily reflecting increases in interest income of $72.6 million on real estate loans, $24.2 million on C&I loans, $10.2 million on SBA PPP loans, $1.2 million on other loans, $1.5 million on mortgage-backed securities, and $3.3 million on investment securities.

The increased interest income on real estate loans was due to an increase of $2.95 billion in the average balance of such loans in the period, offset in part by a 25-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 interest income on C&I loans was primarily due to growth of $536.1 million in the average balances, and a 92-basis point increase in yield during the period.

The increased interest income from mortgage-backed securities was primarily due to the increase in the average balances of $359.9 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.

Interest expense decreased $24.0 million, to $21.9 million, during the nine months ended September 30, 2021, from $45.9 million during the nine months ended September 30, 2020.

The decrease in interest expense was due to decreased rates offered on CD accounts, a decrease of $148.1 million in the average balances of such accounts, a decrease of $691.4 million in the average balances of FHLBNY advances, and a decrease of 101 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.

The Company recognized a provision for credit losses of $6.3 million during the nine months ended September 30, 2021, compared to $20.0 million for the nine months ended September 30, 2020.

The change in provision for the nine months ended September 30, 2021 was due to a 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.

Excluding acquired non-PCD loans, the provision on the remainder of the portfolio for the nine months ended September 30, 2021 was a credit loss recovery of $19.5 million primarily as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on individually analyzed loans.

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 income was $31.9 million during the nine months ended September 30, 2021, an increase of $13.1 million from $18.8 million during the nine months ended September 30, 2020, primarily due to increases in gains on the sales of SBA loans of $21.2 million and increases in service charges and other fees of $7.5 million, partially offset by a loss on termination of derivatives of $16.5 million in the 2021 period, a decrease in gains on sales of securities and other assets of $2.6 million, and a decrease in loan level derivative income of $2.4 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.

Non-interest expense was $194.5 million during the nine months ended September 30, 2021, an increase of $114.3 million from $80.2 million during the nine months ended September 30, 2020, reflecting an increase of $39.8 million in merger expenses and transaction costs, an increase of $35.7 million in salaries and employee benefits expense, an increase of $10.9 million in occupancy and equipment expense, an increase of $6.0 million in data processing costs, and an increase of $4.4 million in professional services expenses, primarily due to the Merger.

The Company also incurred branch restructuring costs of $6.2 million during the 2021 period.

Non-interest expense was 2.16% and 1.68% of average assets during the nine-month periods ended September 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.

Income tax expense was $28.4 million during the nine months ended September 30, 2021, an increase of $18.0 million from $10.3 million during the nine months ended September 30, 2020.

The Company's consolidated tax rate was 29.2% during the nine months ended September 30, 2021, an increase from 21.7% during the nine months ended September 30, 2020.

The increase in the effective tax rate during the nine months ended September 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