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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-15 · 1680 added, 1557 removed, 299 unchanged (92% of the section changed)

Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

For the Company’s consolidated financial statements with the notes thereto, see pages hereafter.

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands except share amounts)

Cash and due from banks

Interest-bearing deposits with banks

Total cash and cash equivalents

Securities available-for-sale, at fair value

Securities held to maturity (fair value of $ 89,325 and $ 135,027 , respectively)

Total securities

Securities, restricted

Securities held-to-maturity

Marketable equity securities, at fair value

Loans held for sale

Loans held for investment

Loans held for investment, net:

Commercial and industrial ("C&I")

Allowance for credit losses

Premises and equipment, net

Operating lease right-of-use assets

Accrued interest receivable

Total loans held for investment, net

Premises and fixed assets, net

Premises held for sale

Restricted stock

Bank Owned Life Insurance ("BOLI")

Other intangible assets

Prepaid pension

Bank owned life insurance

Demand deposits

Savings, NOW and money market deposits

Certificates of deposit of $100,000 or more

Other time deposits

Operating lease assets

Derivative assets

Accrued interest receivable

Interest-bearing deposits

Non-interest-bearing deposits

Total deposits

Repurchase agreements

Federal Home Loan Bank ("FHLB") advances

Subordinated debentures, net

Federal Home Loan Bank of New York ("FHLBNY") advances

Other short-term borrowings

Subordinated debt, net

Operating lease liabilities

Other liabilities and accrued expenses

Derivative liabilities

Other liabilities

Total liabilities

Commitments and contingencies

Commitments and contingencies (See Note 23)

Stockholders' equity:

Preferred stock, par value $ .01 per share ( 2,000,000 shares authorized;

Common stock, par value $ .01 per share ( 40,000,000 shares authorized;

19,951,955 and 19,898,022 shares issued, respectively;

and 19,743,710 and 19,836,797 shares outstanding, respectively)

Preferred stock, Series A ($ 0.01 par, $ 25.00 liquidation value, 10,000,000 shares authorized and 5,299,200 shares issued and outstanding at December 31, 2021 and December 31, 2020)

Common stock ($ 0.01 par 80,000,000 shares authorized, 41,610,939 shares and 34,813,302 shares issued at December 31, 2021 and December 31, 2020, respectively, and 39,877,833 shares and 21,232,984 shares outstanding at December 31, 2021 and December 31, 2020, respectively)

Additional paid-in capital

Retained earnings

Treasury stock at cost, 208,245 and 61,225 shares, respectively

Accumulated other comprehensive loss, net of income taxes

Accumulated other comprehensive loss, net of deferred taxes

Unearned equity awards

Common stock held by the Benefit Maintenance Plan ("BMP")

Treasury stock, at cost ( 1,733,106 shares and 13,580,318 shares at December 31, 2021 and December 31, 2020, respectively)

Total stockholders' equity

Total liabilities and stockholders' equity

See accompanying Notes to the Consolidated Financial Statements.

See notes to consolidated financial statements.

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Dollars in thousands except per share amounts)

Year Ended December 31,

Interest income:

Loans (including fee income)

Mortgage-backed securities, CMOs and other asset-backed securities

GSE securities

State and municipal obligations

Corporate bonds

Deposits with banks

Other interest and dividend income

Other short-term investments

Total interest income

Interest expense:

Savings, NOW and money market deposits

Certificates of deposit of $100,000 or more

Other time deposits

Federal funds purchased and repurchase agreements

FHLB advances

Subordinated debentures

Deposits and escrow

Borrowed funds

Total interest expense

4 unchanged sentences

Service charges and other fees

Net securities gains (losses)

Loss on termination of swaps

Change in fair value of loans held for sale

Loan level derivative income

Gain on sale of Small Business Administration ("SBA") loans

Bank owned life insurance

Loan swap fees

Gain on sale of residential loans

Net gain on equity securities

Net gain on sale of securities and other assets

Loss on termination of derivatives

Total non-interest income

2 unchanged sentences

Occupancy and equipment

Technology and communications

Marketing and advertising

Data processing costs

Professional services

FDIC assessments

Merger expenses

Net fraud loss

Office relocation costs

Federal deposit insurance premiums

Loss from extinguishment of debt

Curtailment loss (gain)

Merger expenses and transaction costs

Branch restructuring costs

Amortization of other intangible assets

2 unchanged sentences

Income tax expense

Basic earnings per share

Diluted earnings per share

See accompanying Notes to the Consolidated Financial Statements .

Preferred stock dividends

Net income available to common stockholders

Earnings per common share:

See notes to consolidated financial statements .

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

( In thousands )

(Dollars in thousands except per share amounts)

Year Ended December 31,

Other comprehensive (loss) income:

Change in unrealized net gains (losses) on securities available for sale, net of reclassifications and deferred income taxes

Adjustment to pension liability, net of reclassifications and deferred income taxes

Unrealized (losses) gains on cash flow hedges, net of reclassifications and deferred income taxes

Total other comprehensive (loss) income

Comprehensive income

See accompanying Notes to the Consolidated Financial Statements .

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

( In thousands, except share and per share amounts )

Other comprehensive income (loss):

Change in unrealized holding gain or loss on securities:

Change in net unrealized gain or loss during the period

Reclassification adjustment for net gains included in net gain on securities and other assets

Change in pension and other postretirement obligations:

Reclassification adjustment for expense included in other expense

Reclassification adjustment for curtailment loss (gain)

Change in the net actuarial gain or loss

Change in unrealized gain or loss on derivatives:

Change in net unrealized gain or loss during the period

Reclassification adjustment for loss included in loss on termination of derivatives

Reclassification adjustment for expense included in interest expense

Other comprehensive (loss) income before income taxes

Deferred tax (benefit) expense

Total other comprehensive (loss) income, net of tax

Total comprehensive income

See notes to consolidated financial statements.

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

Comprehensive

Balance at January 1, 2018

Shares issued under the dividend reinvestment plan (“DRP”) ( 25,154 shares)

Shares issued under the Employee Stock Purchase Plan ("ESPP"), net of offering costs ( 3,758 shares)

Stock awards granted and distributed ( 84,910 shares)

Stock awards forfeited ( 15,225 shares)

Repurchase of surrendered stock from vesting of stock plans ( 17,073 shares)

Share based compensation expense

Cash dividend declared, $ 0.92 per share

Other comprehensive loss, net of deferred income taxes

Balance at December 31, 2018

Shares issued under the DRP ( 24,529 shares)

Shares issued under the ESPP ( 7,888 shares)

Purchase of treasury stock ( 22,600 shares)

Stock awards granted and distributed ( 82,210 shares)

Stock awards forfeited ( 19,531 shares)

Repurchase of surrendered stock from vesting of stock plans ( 26,583 shares)

Share based compensation expense

Cash dividend declared, $ 0.92 per share

Other comprehensive income, net of deferred income taxes

Balance at December 31, 2019

Net of Deferred

Stockholders’

Beginning balance as of January 1, 2019

Other comprehensive income, net of tax

Exercise of stock options

Release of shares, net of forfeitures

Stock-based compensation

Shares received to satisfy distribution of retirement benefits

Shares received related to tax withholding

Cash dividends declared and paid to common stockholders

Repurchase of shares of common stock

Ending balance as of December 31, 2019

Other comprehensive income, net of tax

Exercise of stock options, net

Release of shares, net of forfeitures

Stock-based compensation

Proceeds from preferred stock issuance, net

Shares received related to tax withholding

Cash dividends declared and paid to preferred stockholders

Cash dividends declared and paid to common stockholders

Repurchase of shares of common stock

( 1,477,029 )

Ending balance as of December 31, 2020

Cumulative change in accounting principle (Note 1)

Balance at January 1, 2020 (as adjusted for change in accounting principle)

Shares issued under the DRP ( 39,600 shares)

Shares issued under the ESPP ( 11,413 shares)

Purchase of treasury stock ( 179,620 shares)

Stock awards granted and distributed ( 136,662 shares)

Stock awards forfeited ( 6,593 shares)

Repurchase of surrendered stock from vesting of stock plans ( 95,892 shares)

Share based compensation expense

Cash dividend declared, $ 0.96 per share

Other comprehensive loss, net of deferred income taxes

Balance at December 31, 2020

See accompanying Notes to the Consolidated Financial Statements .

Adjusted balance on January 1, 2021

Other comprehensive loss, net of tax

Reverse merger with Bridge Bancorp Inc.

Exercise of stock options, net

Release of shares, net of forfeitures

Stock-based compensation

Shares received to satisfy distribution of retirement benefits

Shares received related to tax withholding

Cash dividends declared to preferred stockholders

Cash dividends declared to common stockholders

Redemption of real estate investment trust ("REIT") preferred stock

Repurchase of shares of common stock

( 1,755,061 )

Ending balance as of December 31, 2021

See notes to consolidated financial statements .

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

( In thousands )

(Dollars in thousands)

Year Ended December 31,

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses

Depreciation and amortization of premises and equipment

Net (accretion) and other amortization

Net amortization on securities

Increase in cash surrender value of bank owned life insurance

Net gain on sales of securities available-for-sale and other assets

Net gain on equity securities

Net gain on sale of loans held for sale

Loss on termination of derivatives

Net depreciation, amortization and accretion

Amortization of other intangible assets

Share based compensation expense

Net securities (gains) losses

Loss on termination of swaps

Change in fair value of loans held for sale

(Increase) decrease in accrued interest receivable

SBA loans originated for sale

Proceeds from sale of the guaranteed portion of SBA loans

Gain on sale of the guaranteed portion of SBA loans

Gain on sale of loans

(Increase) decrease in other assets

(Decrease) increase in accrued expenses and other liabilities

Stock-based compensation

Provision for credit losses

Originations of loans held for sale

Proceeds from sale of loans originated for sale

Increase in cash surrender value of BOLI

Gain from death benefits from BOLI

Deferred income tax benefit

Decrease (increase) in other assets

Decrease in other liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of securities available-for-sale

Proceeds from sales of marketable equity securities

Purchases of securities available-for-sale

Purchases of securities, restricted

( 1,095,028 )

Purchases of securities held-to-maturity

Proceeds from sales of securities available for sale

Redemption of securities, restricted

Maturities, calls and principal payments of securities available for sale

Maturities, calls and principal payments of securities held to maturity

Net increase in loans

Proceeds from loan sale

Proceeds from sales of other real estate owned ("OREO"), net

Purchase of premises and equipment

Net cash used in investing activities

Acquisition of marketable equity securities

Proceeds from calls and principal repayments of securities available-for-sale

Proceeds from calls and principal repayments of securities held-to-maturity

Purchase of BOLI

Proceeds received from cash surrender value of BOLI

Loans purchased

Proceeds from the sale of portfolio loans transferred to held for sale

Net decrease (increase) in loans

Sales (purchases) of fixed assets, net

Redemptions (purchases) of restricted stock, net

Net cash received in business combination

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in deposits

Net decrease in federal funds purchased

Net (decrease) increase in FHLB advances

Net increase (decrease) in repurchase agreements

Net proceeds from issuance of common stock

Purchase of treasury stock

Repurchase of surrendered stock from vesting of stock plans

Cash dividends paid

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Increase (decrease) in deposits

(Repayments) proceeds from FHLBNY advances, short-term, net

( 1,228,865 )

Repayments of FHLBNY advances, long-term

Proceeds from FHLBNY advances, long-term

(Repayments) proceeds of other short-term borrowings, net

Proceeds from preferred stock issuance, net

Proceeds from exercise of stock options

Release of stock for benefit plan awards

Payments related to tax withholding for equity awards

BMP ESOP shares received to satisfy distribution of retirement benefits

Treasury shares repurchased

Redemption of REIT preferred stock

Cash dividends paid to preferred stockholders

Cash dividends paid to common stockholders

Net cash (used in) provided by financing activities

( 1,099,029 )

Increase in cash and cash equivalents

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

Non-cash investing and financing activities:

Transfers from portfolio loans to loans held for sale

Transfers from portfolio loans to other real estate owned

See accompanying Notes to the Consolidated Financial Statements .

Cash paid for income taxes

Cash paid for interest

Securities transferred to held-to-maturity

Loans transferred to held for sale

Premises transferred to (from) held for sale

Operating lease assets in exchange for operating lease liabilities

Cumulative change due to Current Expected Credit Loss ("CECL") Standard adoption

Net non-cash liabilities assumed in Merger (See Note 2)

DIME COMMUNITY BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(Dollars In Thousands except for share amounts)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation

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

The consolidated financial statements include the Holding Company, which was known as “Bridge Bancorp, Inc.” prior to the Merger, a bank holding company incorporated under the laws of the State of New York, engaged in commercial banking and financial services through its wholly-owned subsidiary, Dime Community Bank, (the “Bank”), which was known as “BNB Bank” prior to the Merger, together referred to as the “Company.” The Bank’s operations include its real estate investment trust subsidiary, Bridgehampton Community, Inc.;

a financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”);

and an investment services subsidiary, Bridge Financial Services, Inc.

(“Bridge Financial Services”).

Intercompany transactions and balances are eliminated in consolidation.

The Company’s consolidated financial statements, including notes thereto, and accounting policies and practices are as of December 31, 2020, and do not include the operations of Legacy Dime.

The Company provides financial services through its branches in its primary market areas of Suffolk and Nassau Counties on Long Island and the New York City boroughs.

The Bank’s primary deposit products are time, savings and demand deposits from the consumers, businesses and local municipalities in its market area.

Its primary lending products are commercial real estate, multi-family, commercial and industrial, and residential mortgage loans.

There are no significant concentrations of loans to any one industry or customer.

However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the area.

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 “Holding 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 Holding Company’s common stock, par value $ 0.01 per share.

At the Effective Time, each outstanding share of Legacy Dime’s Series A preferred stock, par value $ 0.01 (the “Dime Preferred Stock”), was converted into the right to receive one share of a newly created series of the Holding Company’s preferred stock having the same powers, preferences and rights as the Dime Preferred Stock.

Immediately following the Merger, Dime Community Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of Legacy Dime, merged with and into BNB Bank, a New York-chartered trust company and a wholly-owned subsidiary of Bridge, with BNB Bank as the surviving bank, under the name “Dime Community Bank” (the “Bank”).

The audited consolidated financial statements presented in this Annual Report on Form 10-K include the collective results of the Holding Company and its wholly-owned subsidiary, the Bank, which are collectively herein referred to as “we”, “us”, “our” and the “Company.”

The financial statements have been prepared in accordance with U.S.

The Merger was accounted for as a reverse merger using the acquisition method of accounting, which means that for accounting and financial reporting purposes, Legacy Dime was deemed to have acquired Bridge in the Merger, even though Bridge was the legal acquirer.

Accordingly, Legacy Dime’s historical financial statements are the historical financial statements of the combined company for all periods before February 1, 2021 (the “Merger Date”).

The Company’s results of operations for 2021 include the results of operations of Bridge on and after the Merger Date.

Results for periods before the Merger Date reflect only those of Legacy Dime and do not include the results of operations of Bridge.

The number of shares issued and outstanding, earnings per share, additional paid-in capital, dividends paid and all references to share quantities of the Company have been retrospectively adjusted to reflect the equivalent number of shares issued to holders of Legacy Dime common stock in the Merger.

The assets and liabilities of Bridge as of the Merger Date have been recorded at their estimated fair value and added to those of Legacy Dime.

Merger for further information.

As of December 31, 2021, we operated 60 branch locations throughout Greater Long Island and Manhattan.

The Company is a bank holding company engaged in commercial banking and financial services through its wholly-owned subsidiary, Dime Community Bank.

The Bank was established in 1910 and is headquartered in Hauppauge, New York.

The Holding Company was incorporated under the laws of the State of New York in 1988 to serve as the holding company for the Bank.

The Company functions primarily as the holder of all of the Bank’s common stock.

Our bank operations include Dime Community Inc., a real estate investment trust subsidiary which was formerly known as Bridgehampton Community, Inc., as an operating subsidiary.

Our bank operations also include Bridge Abstract LLC (“Bridge Abstract”), a wholly-owned subsidiary of the Bank, which is a broker of title insurance services.

In September 2021, the Company dissolved two REITs, DSBW Preferred Funding Corporation and DSBW Residential Preferred Funding Corporation, which were wholly-owned subsidiaries of the Bank, and the preferred shares outstanding were redeemed by its shareholders.

The accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and general practices within the financial institution industry.

The accompanying consolidated financial statements include the accounts of the Holding Company and the Bank and its subsidiaries.

All inter-company accounts and transactions have been eliminated in consolidation.

The following is a description of the significant accounting policies that the Company follows in preparing its consolidated financial statements.

Use of Estimates

The preparation of financial statements, in conformity with U.S.

GAAP, requires management to make estimates and assumptions based on available information.

These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual future results could differ.

COVID-19 Risks

In December 2019, a novel coronavirus (“COVID-19”) was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic.

On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency.

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, ordered non-essential businesses to close and residents to shelter in place at home.

This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment.

The Company’s audited consolidated financial statements reflect the impact of COVID-19 on the assumptions and estimates used.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on the Company’s business.

The extent of such impact will depend on future developments, which are highly uncertain, including when COVID-19 can be controlled and abated and when and how the economy may be reopened.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences,

the Company is subject to the following risks, any of which could have a material, adverse effect on its business, financial condition, liquidity, and results of operations:

● demand for the Company’s products and services may decline, making it difficult to grow assets and income;

● if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue, for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

● collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

● the Company’s allowance for credit losses (“ACL”) may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect the Company’s net income;

● the Company may recognize impairment of its goodwill;

● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to the Company;

● as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on the Company’s assets may decline to a greater extent than the decline in its cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income;

● a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of the Company’s quarterly cash dividend;

● the Company’s cyber security risks are increased as the result of an increase in the number of employees working remotely;

● the Company relies on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on the Company.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest- earning deposits with banks, and federal funds sold, which mature overnight.

Net cash flows are reported for customer loan and deposit transactions, federal funds purchased, FHLB advances, and repurchase agreements.

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.

To prepare consolidated financial statements in conformity with GAAP, management makes judgments, estimates and assumptions based on available information.

These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which has spread to most countries, including the United States.

The pandemic has adversely affected economic activity globally, nationally and locally.

In March 2020, the United States declared a National Public Health Emergency in response to the COVID-19 pandemic.

In an effort to mitigate the spread of COVID-19, local state governments, including New York (in which the Bank has retail banking offices), have taken preventative or protective actions such as travel restrictions, advising or requiring individuals to limit or forego their time outside of their homes, and other forced closures for certain types of non-essential businesses.

The impact of these actions is expected to continue to have an adverse impact on the economies and financial markets in the United States.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020.

The CARES Act is intended to provide relief and lessen a severe economic downturn.

The stimulus package includes direct financial aid to American families and economic stimulus to significantly impacted industry sectors.

The package also includes extensive emergency funding for hospitals and healthcare providers.

In December 2020, the 2021 Consolidated Appropriations Act was signed into law to provide additional relief.

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

Summary of Significant Accounting Policies

Cash and Cash Equivalents - Cash and cash equivalents include cash and deposits with other financial institutions with maturities fewer than 90 days.

Net cash flows are reported for customer loan and deposit transactions, and interest bearing deposits in other financial institutions.

Securities - Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.

Debt securities are classified as available for sale when they might be sold before maturity.

9 unchanged sentences

Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

On January 1, 2020, the Company adopted the CECL Standard, which requires that debt securities held to maturity be accounted for under the current expected credit losses model, including historical loss experience and impact of current conditions and reasonable and supportable forecasts, with an associated allowance for credit losses.

In addition, while

credit losses on debt securities available for sale should be measured in accordance with the other-than-temporary impairment (“OTTI”) framework under current GAAP, the amendments in the CECL Standard require that these credit losses be presented as an allowance for credit losses.

For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis.

Held to maturity debt securities and the allowance for credit losses

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment.

That is, for pools of such debt securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities.

Expected credit loss on each debt security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

With respect to certain classes of debt securities, primarily U.S.

Treasuries and securities issued by Government Sponsored Entities, the Company considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S.

government were to technically default.

Therefore, for those securities, the Company does not record expected credit losses.

Accrued interest receivable is excluded from the estimate of credit losses.

Available for sale debt securities and the allowance for credit losses

Management evaluates available for sale debt securities for OTTI on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the near-term prospects of the issuer.

Impairment may result from credit deterioration of the issuer or collateral underlying the security.

In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level.

For asset-backed securities performance indicators considered related to the underlying assets include default rates, delinquency rates, percentage of non-performing assets, debt-to-collateral ratios, third party guarantees, current levels of subordination, vintage, geographic concentration, analyst reports and forecasts, credit ratings and other market data.

In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis.

Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are excluded from earnings and reported, net of tax, in other comprehensive income (“OCI”).

Management also assesses whether it intends to sell or is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.

Accrued interest receivable is excluded from the estimate of credit losses.

Securities, Restricted

Securities, restricted represents FHLB, Federal Reserve Bank (“FRB”) and bankers’ banks stock, which are reported at cost.

Restricted Stock – Restricted stock represents Federal Home Loan Bank of New York (“FHLB” or “FHLBNY”) capital stock, Federal Reserve Bank (“FRB”) capital stock, and Bankers’ Bank Capital Stock, which are reported at cost.

The Bank is a member of the FHLB system.

Members are required to own a particular amount of stock based on the

level of borrowings and other factors, and may invest in additional amounts.

Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.

FHLB stock is periodically evaluated for impairment based on ultimate recovery of par value.

The Bank is a member of the FRB.

Membership requires the purchase of shares of FRB capital stock.

The Bank has a relationship with Atlantic Community Bankers Bank (“ACBB”).

The relationship requires the purchase of shares of ACBB capital stock.

Both cash and stock dividends are reported as income.

Loans Held for Sale

Loans held for sale are carried at the lower of aggregate cost or estimated fair value.

Any subsequent declines in fair value below the initial carrying value are recorded as a valuation allowance, which is established through a charge to earnings.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of partial charge-offs, deferred origination costs and fees and purchase premiums and discounts.

Loans Held for Sale - Loans originated and intended for sale in the secondary market, as well as identified problem loans which are subject to an executed note sale agreement, are carried at the lower of aggregate cost or net realizable proceeds.

originated and intended for sale are generally sold with servicing rights retained.

Certain problematic loans in which the Company identified for sale were re-classified as held for sale and carried at the lower of cost or their expected net realizable proceeds when management had the intent to sell or there was a pending note sale agreement.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of partial charge-offs, deferred origination costs and fees and purchase premiums and discounts.

Loan origination and commitment fees and certain direct and indirect costs incurred in connection with loan originations are deferred and amortized to income over the life of the related loans as an adjustment to yield.

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Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans that were acquired through the acquisition of Community National Bank on June 19, 2015 and First National Bank of New York on February 14, 2014 were initially recorded at fair value with no carryover of the related allowance for loan losses.

After acquisition, losses are recognized through the allowance for loan losses.

Determining fair value of the loans involves estimating the amount and timing of expected principal and interest cash flows to be collected on the loans and discounting those cash flows at a market interest rate.

Some of the loans at the time of acquisition showed evidence of credit deterioration since origination.

These loans were considered purchased credit impaired (“PCI”) loans.

As of December 31, 2019, the remaining balance of PCI loans was immaterial to the Company’s financial condition and results of operations.

Unless otherwise noted, the above policy is applied consistently to all loan segments.

Allowance for Credit Losses

On January 1, 2020, we adopted the CECL Standard, which requires that loans held for investment be accounted for under the current expected credit losses model.

Although the CARES Act provided the option to delay the adoption of the current expected credit loss model until the earlier of December 31, 2020 or the termination of the current national emergency declaration related to the COVID-19 outbreak, we implemented the CECL Standard in the first quarter of 2020 as previously planned.

The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in our loan portfolio.

Management evaluates the adequacy of the allowance on a quarterly basis.

Management monitors its entire loan portfolio regularly, with consideration given to detailed analysis of classified loans, repayment patterns, past loss experience, various types of concentrations of credit, current economic conditions, and reasonable and supportable forecasts.

Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

The credit loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments.

These segments are further disaggregated into loan risk ratings, the level at which credit risk is monitored.

When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on expected loss history, delinquency status and other credit trends and risk characteristics, including current

conditions and reasonable and supportable forecasts about the future.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.

In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit losses in those future periods.

Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in our process for estimation of expected credit losses.

The allowance level is influenced by loan volumes, loan risk rating migration, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.

The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components:

(1) an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans;

and (2) a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Loans that do not share similar credit risk characteristics

Allowance for Credit Losses - On January 1, 2021, we adopted the CECL Standard, which requires that the measurement of all expected credit losses for financial assets at amortized cost, such as loans receivable, securities, and off-balance sheet credit exposures, held as of the reporting date be based on historical experience, current conditions, and reasonable and supportable forecasts to cover lifetime expected losses.

Accrued interest receivable is excluded from amortized cost basis.

The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent within the financial asset holdings.

Management evaluates the adequacy of the allowance on a quarterly basis, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

Allowance for credit losses on held-to-maturity securities – Management classifies its held-to-maturity portfolio into the following major security types:

Pass-through MBS issued by GSEs and Agency Collateralized Mortgage Obligations.

All of the securities in the held-to-maturity portfolio are issued by U.S.

government-sponsored entities or agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major rating agencies, and have a long history of no credit losses.

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated by pools of such debt securities.

The historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lifetime of the securities.

For a debt security in the held-to-maturity portfolio that does not share common risk characteristics with any of the pools of debt securities, expected credit loss on each security is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

With respect to certain classes of debt securities, primarily U.S.

Treasuries and securities issued by Government Sponsored Entities or agencies, the Company considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S.

government were to technically default.

Therefore, for those securities, the Company does not record expected credit losses.

Allowance for credit losses on available-for-sale securities - Management evaluates available-for-sale debt securities for OTTI on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

For securities in an unrealized loss position, management considers the extent of the unrealized loss, and the near-term prospects of the issuer.

Impairment may result from credit deterioration of the issuer or collateral underlying the security.

In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level.

In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the

amortized cost basis of the security.

Management also assesses whether it intends to sell or is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.

Allowance for credit losses on loans held for investment – The Company utilizes a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected.

Expected credit losses are determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics.

For a loan that does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis.

The methodology for determining the allowance for credit losses on loans held for investment is considered a critical accounting policy by management given the judgement required for determining assumptions used, uncertainty of economic forecasts, and subjectivity of any qualitative factors considered.

The Company evaluates its loan pooling methodology at least annually.

The Company has identified the following loan pools used to measure the allowance for credit losses as follows:

One-to-four family residential, including condominium and cooperative apartment loans - Loans in this classification consist of residential real estate and one-to-four family real estate properties, and may have a mixed-use commercial aspect.

Included in one-to-four family loans are also certain SBA loans in which the loan is secured by underlying real estate as collateral.

The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor.

Owner-occupied properties are generally underwritten based upon an appraisal performed by an independent, state licensed appraiser and the credit quality of the individual borrower.

Investment properties require:

(1) a maximum loan-to-value ratio of 75% based upon an appraisal performed by an independent, state licensed appraiser, and (2) sufficient rental income from the underlying property to adequately service the debt, represented by a minimum debt service ratio of 1.25x.

The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates and housing prices.

Multifamily residential and residential mixed-use loans - Loans in this classification consist of multifamily residential real estate with a minimum of five residential units, and may have a mixed-use commercial aspect of less than 50% of the property’s rental income.

The Bank’s underwriting standards for multifamily residential loans generally require:

Repayment of multifamily residential loans is dependent, in significant part, on cash flow from the collateral property sufficient to satisfy operating expenses and debt service.

Future increases in interest rates, increases in vacancy rates on multifamily residential or commercial buildings, and other economic events, such as unemployment rates, which are outside the control of the borrower or the Bank could negatively impact the future net operating income of such properties.

Similarly, government regulations, such as the existing New York City Rent Regulation and Rent Stabilization laws, could limit future increases in the revenue from these buildings.

Commercial real estate and commercial mixed-use loans - Loans in this classification consist of commercial real estate, both owner-occupied and non-owner occupied, and may have a residential aspect of less than 50% of the property’s rental income.

The Bank’s underwriting standards for commercial real estate loans generally require:

Included in commercial real estate loans are also certain SBA loans in which the loan is secured by underlying real estate as collateral.

The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor.

Repayment of commercial real estate loans is often dependent upon successful operation or management of the collateral properties, as well as the success of the business and retail tenants occupying the properties.

Repayment of such loans is generally more vulnerable to weak economic conditions, such as unemployment rates and commercial real estate prices.

Acquisition, development, and construction loans - Loans in this classification consist of loans to purchase land intended for further development, including single-family homes, multi-family housing, and commercial income properties.

In general, the maximum loan-to-value ratio for a land acquisition loan is 50% of the appraised value of the property.

The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates and commercial real estate prices.

Commercial, Industrial and Agricultural Loans - Loans in this classification consist of lines of credit, revolving lines of credit, and term loans, generally to businesses or high net worth individuals.

The owners of these businesses typically provide recourse such that they guarantee the debt.

The lines of credit are generally secured by the assets of the business, though they may at times be issued on an unsecured basis.

Generally speaking, they are subject to renewal on an annual basis based upon review of the borrower’s financial statements.

Term loans are generally secured by either specific or general asset liens of the borrower’s business.

These loans are granted based upon the strength of the cash generation ability of the borrower.

Included in C&I loans are also certain SBA loans in which the loan is secured by underlying assets of the business (excludes SBA Paycheck Protection Program (“PPP”) loans from allowance for credit losses as these loans carry a 100% guarantee from the SBA).

The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor.

The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates.

Other Loans – Loans in this classification consist of installment and consumer loans.

Repayment is dependent on the credit quality of the individual borrower.

The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates.

Troubled debt restructurings (“TDRs”) – As allowed by ASC 326, the Entity elected to maintain pools of loans accounted for under ASC 310-30.

In accordance with the standard, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption.

A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.

The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method.

When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.

The allowance for credit losses on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

Management estimates the allowance for credit losses on each loan pool using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historically observed credit loss experience of peer banks within our geography provide the basis for the estimation of expected credit losses on similar loan pools.

Within the model, assumptions are made in the determination of probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods.

Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of the peer group.

These models are then utilized to forecast future expected loan losses based on expected future behavior of the same macro-economic variables.

Adjustments to the quantitative results are adjusted using qualitative factors.

These factors include:

(1) lending policies and procedures;

(2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets;

(3) the nature and volume of the loan portfolio;

(4) the experience, ability, and depth of the lending management and other relevant staff;

(5) the volume and severity of past due loans;

(6) the quality of our loan review system;

(7) the value of underlying collateral for collateralized loans;

(8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

Collectively evaluated loans and the associated allowance for credit losses totaled $ 8.98 billion and $ 41.4 million at December 31, 2021, respectively.

Individually evaluated loans – Loans that do not share risk characteristics are evaluated on an individual basis based on various factors, and are not included in the collective pool evaluation.

Factors that may be considered are borrower delinquency trends and non-accrual status, probability of foreclosure or note sale, changes in the borrower’s circumstances or cash collections, borrower’s industry, or other facts and circumstances of the loan or collateral.

For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan.

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The fair value of the collateral is adjusted for the estimated costs to sell the loan if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

Individually evaluated loans and the associated allowance for credit losses totaled $ 51.4 million and $ 22.3 million at December 31, 2021, respectively.

The fair value of real estate collateral is determined based on recent appraised values.

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Pursuant to the Company’s policy, credit losses must be charged-off in the period the loans, or portions thereof, are deemed uncollectable.

Loans that share similar credit risk characteristics

In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segmented into loan types.

Loans are designated into loan pools with similar risk characteristics based on product type in conjunction with other homogeneous characteristics.

Loan types include commercial real estate mortgages, owner and non-owner occupied;

multi-family mortgage loans;

residential real estate mortgages and home equity loans;

commercial, industrial and agricultural loans, real estate construction and land loans;

and consumer loans.

In determining the allowance for credit losses, the Company derives an estimated credit loss assumption from a model that categorizes loan pools based on loan type and further segmented by risk rating.

This model is known as Probability of Default/Loss Given Default, utilizing a Transition Matrix approach.

This model calculates an expected loss percentage for each loan pool by considering the probability of default, based upon the historical transition or migration of loans from performing (various pass ratings) to criticized, and classified risk ratings to default by risk rating buckets using life-of-loan analysis runout periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses (loss given default) per loan pool.

The default trigger, which is defined as the earlier of ninety days past-due or non-accrual status, and severity factors used to calculate the allowance for credit losses for loans in pools that share similar risk characteristics with other loans, are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio.

These factors

(1) lending policies and procedures;

(2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets;

(3) the nature and volume of the loan portfolio including the terms of the loans;

(4) the experience, ability, and depth of the lending management and other relevant staff;

(5) the volume and severity of past due and adversely classified or graded loans and the volume of non-accrual loans;

(6) the quality of our loan review system;

(7) the value of underlying collateral for collateralized loans;

(8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

Such factors are used to adjust the historical probabilities of default and severity of loss for current conditions that are not reflective of the model results.

In addition, the economic factor includes management’s expectation of future conditions based on a reasonable and supportable forecast of the economy.

To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (currently two years ), the Bank reverts immediately back to the historical rates of default and severity of loss.

Management believes that this transition approach to the Probability of Default/Loss Given Default is a relevant calculation of expected credit losses as there is sufficient volume as well as movement in the risk ratings due to the initial grading system as well as timely updates to risk ratings when necessary.

Credit risk ratings are based on management’s evaluation of a credit’s cash flow, collateral, guarantor support, financial disclosures, industry trends and strength of borrowers’ management.

Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions.

Changes in estimates could result in a material change in the allowance.

In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses.

Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

A loan is considered a potential charge-off when it is in default of either principal or interest for a period of 90, 120 or 180 days, depending upon the loan type, as of the end of the prior month.

In addition to delinquency criteria, other triggering events may include, but are not limited to, notice of bankruptcy by the borrower or guarantor, death of the borrower, and deficiency balance from the sale of collateral.

Unless otherwise noted, the above policy is applied consistently to all loan portfolio segments.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial letters of credit, issued to meet customer financing needs.

The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.

Such financial instruments are recorded on the balance sheet when they are funded.

In accordance with the CECL Standard, the Company maintains a separate reserve for off-balance sheet credit instruments, which is included in other liabilities on the consolidated statements of financial condition.

Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors, current conditions and forecasting adjustments used in the allowance for credit loss methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type.

No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company.

At December 31, 2020, the reserve for off-balance sheet credit exposures was immaterial to the Company’s consolidated statements of financial condition and results of operations.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation.

Buildings and related components are depreciated using the straight-line method with a useful life of fifty years for buildings and a range of two to ten years for equipment, computer hardware and software, and furniture and fixtures.

Leasehold improvements are amortized over the lives of the respective leases or the service lives of the improvements, whichever is shorter.

Land is carried at cost.

Improvements and major repairs are capitalized, while the cost of ordinary maintenance, repairs and minor improvements are charged to expense.

Bank-Owned Life Insurance

The Bank is the owner and beneficiary of life insurance policies on certain employees.

Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell.

If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.

Operating costs after acquisition are expensed.

Goodwill and Other Intangible Assets

Goodwill resulting from business combinations is generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill and indefinite-lived intangible assets are not amortized, but tested for impairment at least annually, or more frequently if events and circumstances exist that indicate the carrying amount of the asset may be impaired.

The Company has selected November 30 as the date to perform the annual impairment test.

Goodwill and the BNB Bank trademark are intangible assets with indefinite lives on the Company’s balance sheet.

Other intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

Core deposit intangible assets are amortized on an accelerated method over their estimated useful lives of ten years .

Other intangible assets also include servicing rights, which result from the sale of SBA loans with servicing rights retained.

Servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans.

Fair value is based on market prices for comparable servicing contracts, when available or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.

Servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

The Company records cash flow hedges at the inception of the derivative contract based on the Company’s intentions and belief as to likely effectiveness as a hedge.

Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability.

For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (“OCI”) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings.

The changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures – The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The allowance for credit losses on off-balance sheet credit exposures, which is included in other liabilities on the consolidated statements of financial condition, is adjusted as a provision for credit loss expense.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which is the same as the expected loss factor as determined based on the corresponding portfolio segment.

Loans acquired in a business combination – The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, on January 1, 2021 which now requires the Company to record purchased financial loans with credit deterioration (“PCD loans”), defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition.

Under this method, there is no credit loss expense affecting net income on acquisition of PCD loans.

Changes in estimates of expected losses after acquisition were recognized as credit loss expense (or reversal of credit loss expense) in subsequent periods.

Any non-credit discount or premium resulting from the acquisition of purchased loans with credit deterioration was allocated to each individual loan.

The determination of PCD classification on acquired loans can have a significant impact on the accounting for these loans.

At the acquisition date, the initial allowance for credit losses on PCD loans that share similar risk characteristics, management determined the allowance for expected credit losses in a similar manner to loans held for investment.

That is, these loans were also segmented by loan pool and utilized a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected.

Expected credit losses were determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics, and considers assumptions such as probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods.

Management may consider adjustments to the quantitative results by using similar qualitative factors as those used for the determination of the estimated credit loss of loans held for investment.

The non-credit discount or premium, after the adjustment for the allowance for credit losses, shall be accreted to interest income using the interest method based on the effective interest rate determined after the adjustment for credit losses at the adoption date.

Pooled PCD loans and the associated allowance for credit losses totaled $ 138.3 million and $ 6.2 million at December 31, 2021, respectively.

At acquisition date, the initial allowance for PCD loans that do not share risk characteristics with pooled PCD loans, the Company evaluated the loan on an individual basis.

The expected credit loss was measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan.

For these loans, the Company recognizes expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

In these cases, expected credit loss was measured as the difference between the amortized cost basis of the loan and the fair value of the collateral.

Individually evaluated PCD loans and the associated allowance for credit losses totaled $ 75.2 million and $ 13.9 million at December 31, 2021, respectively.

A purchased financial asset that does not qualify as a PCD asset is accounted for similar to an originated financial asset.

Generally, this means that an entity recognizes the allowance for credit losses for non-PCD assets through net income at the time of acquisition.

In addition, both the credit discount and non-credit discount or premium resulting from acquiring a pool of purchased financial assets that do not qualify as PCD assets shall be allocated to each individual asset.

This combined discount or premium shall be accreted to interest income using the effective yield method.

The fair value of acquired loans involved third-party estimates utilizing input assumptions by management which may be complex or uncertain.

The determination of the fair value of acquired loans is based on a discounted cash flow methodology that considers factors such as type of loan and related collateral, and requires management’s judgement on estimates about discount rates, expected future cash flows, market conditions and other future events.

Management considers this to be a critical accounting estimate given the significant assumptions and judgement on uncertain factors.

For PCD loans, an estimate of expected credit losses was made for loans with similar risk characteristics and was added to the purchase price to establish the initial amortized cost basis of the PCD loans.

Any difference between the unpaid principal balance and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium.

Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans.

For further discussion of our loan accounting and acquisitions, see Note 2 – Merger and Note 5 – Loans.

Derivatives – The Company may engage in two types of derivatives depending on the Company’s intentions and belief as to the likely effectiveness as a hedge.

These two types are (1) a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”) or (2) an instrument with no hedging designation (“stand-alone derivative”).

For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings.

Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings as non-interest income.

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Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income.

Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

Cash flows on hedges are classified in the cash flow statement same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship.

This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions.

The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items.

The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or

terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

This documentation includes linking cash flow hedges to specific liabilities on the balance sheet.

The Company also formally assesses, both at the hedge’s inception and on an on-going basis, whether the derivative instruments that are used are highly effective in offsetting changes in or cash flows of the hedged items.

The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in cash flows of the hedged item, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income.

When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods in which the hedged transactions will affect earnings.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

Deferred tax assets and liabilities are the expected future tax amounts for temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

It is management’s position, as currently supported by the facts and circumstances, that no valuation allowance is necessary against any of the Company’s deferred tax assets at December 31, 2020.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

When a cash flow hedge is discontinued but the hedged cash flows are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transaction will affect earnings.

The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position.

The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements.

All the contracts to which the Company is a party settle monthly.

In addition, the Company obtains collateral above certain thresholds of the fair value of its hedges for each counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business.

OREO - Properties acquired as a result of foreclosure on a real estate loan or a deed in lieu of foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

Physical possession of residential real estate collateralizing a one-to-four family residential loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through execution of a deed in lieu of foreclosure or through a similar legal agreement.

These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell.

Declines in the recorded balance subsequent to acquisition by the Company are recorded through expense.

Operating costs after acquisition are expensed.

Premises and Fixed Assets, Net - Land is carried at cost.

Premises and equipment are stated at cost less accumulated depreciation.

Buildings and related components are depreciated using the straight-line method with useful lives generally ranging from forty to fifty years.

Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives generally ranging from three to ten years .

Leases - On January 1, 2019, the Company adopted ASU No.

2016-02 "Leases (Topic 842)"

and subsequent amendments thereto, which requires the Company to recognize most leases on the balance sheet.

The Company adopted the standard under a modified retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including:

● Carryover of historical lease determination and lease classification conclusions

● Carryover of historical initial direct cost balances for existing leases

● Accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component

Adoption of the leasing standard resulted in the recognition of operating right-of-use assets, and operating lease liabilities of $ 41.6 million as of January 1, 2019.

These amounts were determined based on the present value of remaining minimum lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption.

There was no material impact to the timing of expense or income recognition in the Company’s Consolidated Statements of Income.

Prior periods were not restated and continue to be presented under legacy GAAP.

Disclosures about the Company’s leasing activities are presented in Note 8.

The Company made a policy election to exclude the recognition requirements of ASU 2016-02 on short-term leases with original terms of 12 months or less.

Short-term lease payments are recognized in the income statement on a straight-line basis over the lease term.

Certain leases may include one or more options to renew.

The exercise of lease renewal options is typically at the Company’s discretion, and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised.

Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated.

The Company does not sublease any of its leased properties.

The Company does not lease properties from any related parties.

Goodwill and Other Intangible Assets - Goodwill resulting from business combinations is generally determined as the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

The Company performs its annual goodwill impairment test in the fourth quarter of every year, or more frequently if events or changes in circumstance indicate the asset might be impaired.

Other intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

Core deposit intangible assets are amortized on an accelerated method over their estimated useful lives of ten years .

Servicing Right Assets ("SRA") – When real estate or C&I loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans.

SRAs are carried at the lower of cost or fair value and are amortized in proportion to, and over the period of, anticipated net servicing income.

All separately recognized SRAs are required to be initially measured at fair value, if practicable.

The estimated fair value of loan servicing assets is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, servicing costs and discount rates derived based upon actual historical results for the Bank, or, in the absence of such data, from historical results for the Bank’s peers.

Capitalized loan servicing assets are stratified based on predominant risk characteristics of the underlying loans ( i.e., collateral, interest rate, servicing spread and maturity) for the purpose of evaluating impairment.

A valuation allowance is then established in the event the recorded value of an individual stratum exceeds its fair value.

The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds, default rates, and losses.

Transfers of Financial Assets – Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished.

Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

BOLI – BOLI is carried at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement.

Increases in the contract value are recorded as non-interest income in the consolidated statements of income and insurance proceeds received are recorded as a reduction of the contract value.

Income Taxes – Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.

A valuation allowance, if needed, reduces deferred tax assets to the amount deemed more likely than not to be realized.

A tax position is recognized as a benefit only if it is "more likely than not"

that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.

For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

There are no such tax positions in the Company’s financial statements at December 31, 2020 and 2019.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

The Company did not have any amounts accrued for interest and penalties at December 31, 2020 and 2019.

Treasury Stock

Repurchases of common stock are recorded as treasury stock at cost.

Treasury stock is reissued using the first in, first out method.

Earnings Per Share (“EPS”)

Basic EPS is net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the period.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.

Diluted EPS includes the dilutive effect of additional potential common shares issuable under stock options.

Dividend Restriction

Cash available for distribution of dividends to stockholders of the Company is primarily derived from cash and cash equivalents of the Company and dividends paid by the Bank to the Company.

Prior regulatory approval is required if the total of all dividends declared by the Bank in any calendar year exceeds the total of the Bank’s net income of that year combined with its retained net income of the preceding two years .

Dividends from the Bank to the Company at January 1, 2021 are limited to $ 49.8 million, which represents the Bank’s net retained earnings from the previous two years.

During 2020, the Bank paid $ 26.5 million in cash dividends to the Company.

Segment Reporting

While management monitors the revenue streams of the various products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Stock-Based Compensation

Compensation cost is recognized for stock options, restricted stock awards (“RSAs”), and restricted stock units (“RSUs”) issued to employees and independent directors, based on the fair value of these awards at the date of the grant.

A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used to estimate the fair value for RSAs and RSUs.

Compensation cost is recognized as expense over the required service period, generally defined as the vesting period.

For tax positions not satisfying the "more likely than not"

test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to tax matters in income tax expense.

The Company had no unrecorded tax positions at December 31, 2021 or 2020.

Employee Benefits – The Bank maintains two noncontributory pension plans that existed before the Merger:

(i) the Retirement Plan of Dime Community Bank (“Employee Retirement Plan”) and (ii) the BNB Bank Pension Plan, covering all eligible employees.

As the sponsor of a single employer defined benefit plan, the Company must do the following for the Employee Retirement Plan and BNB Bank Pension Plan:

(1) recognize the funded status of the benefit plans in its statements of financial condition, measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation.

For a pension plan, the benefit obligation is the projected benefit obligation;

for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation;

(2) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit or cost.

Amounts recognized in accumulated other comprehensive income, including the gains or losses, prior service costs or credits, and the transition asset or obligation are adjusted as they are subsequently recognized as components of net periodic benefit cost;

(3) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statements of financial condition (with limited exceptions);

and (4) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation.

The Dime Community Bank KSOP Plan (“Dime KSOP Plan”), Outside Director Retirement Plan, and the Benefit Maintenance Plan (“BMP”) were terminated by resolution of the Legacy Dime Board of Directors.

The effective date of the Dime terminations was February 1, 2021, the Merger Date.

The Company provides a 401(k) plan, which covers substantially all current employees.

Newly hired employees are automatically enrolled in the plan on the 60 th day of employment, unless they elect not to participate.

The Holding Company and Bank maintain the Dime Community Bancshares, Inc.

2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”), the Dime Community Bancshares, Inc.

2019 Equity Incentive Plan, (the “2019 Equity Incentive Plan”), and the 2012 Stock-Based Compensation Plan (the “2012 Equity Incentive Plan”), (collectively the “Stock Plans”);

which are discussed more fully in Note 20 Stock-Based Compensation.

Under the Stock Plans, compensation cost is recognized for stock options and restricted stock awards issued to employees based on the fair value of the awards at the date of grant.

A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Holding Company’s common stock (“Common Stock”) at the date of grant is used for restricted stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period.

For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

The Company’s accounting policy is to recognize forfeitures as they occur.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income.

Basic and Diluted EPS - Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average common shares outstanding during the reporting period.

Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if "in the money"

stock options were exercised and converted into common stock, and prior to 2021, if all likely aggregate Long Term Incentive Plan ("LTIP") performance-based share awards (“PSA”) were issued.

In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares are excluded.

Vested restricted stock award ("RSA") shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

Unvested RSA and PSA shares are recognized as a special class of participating securities under ASC 260, and are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

Comprehensive Income – Comprehensive income consists of net income and other comprehensive income.

Other comprehensive income includes unrealized gains and losses on available-for-sale securities, unrealized gains and losses on cash flow hedges, and changes in the funded status of the pension plan, which are also recognized as separate components of equity.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Standards Effective in 2020

Comprehensive and accumulated comprehensive income are summarized in Note 3.

Disclosures about Segments of an Enterprise and Related Information - The Company has one reportable segment, "Community Banking."

All of the Company’s activities are interrelated, and each activity is dependent and assessed based on the manner in which it supports the other activities of the Company.

For example, lending is dependent upon the ability of the Bank to fund

itself with retail deposits and other borrowings and to manage interest rate and credit risk.

Accordingly, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.

For the years ended December 31, 2021, 2020 and 2019, there was no customer that accounted for more than 10% of the Company's consolidated revenue.

Reclassifications – There have been no material reclassifications to prior year amounts to conform to their current presentation.

Adoption of New Accounting Standards

Standards Adopted in 2021

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326)

Effective for periods after December 31, 2019, the Company adopted Accounting Standards Update (“ASU”) No 2016-13, Financial Instruments – Credit Losses (Topic 326), which replaced the long-standing incurred loss model used in calculating the allowance for loan and lease losses with a more forward-looking, current expected credit loss model (“CECL” or the “CECL Standard”).

Furthermore, the CECL Standard requires financial institutions to measure all expected credit losses for in-scope financial assets held at amortized cost at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, including estimates of prepayments.

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.

Accordingly, financial institutions will now leverage forward-looking information to better inform their credit loss estimates.

For the Company, this standard applies to loans held for investment, unfunded commitments, and securities held to maturity.

In addition, the CECL Standard made changes to the accounting for available for sale debt securities.

Credit losses on available for sale debt securities under the CECL Standard should be measured in a manner similar to legacy GAAP.

However, the amendments in the CECL Standard require that credit losses be presented as an allowance for credit losses rather than as a write-down.

The CECL Standard approach is an improvement because an entity is able to record reversals of credit losses (in situations in which the estimate of credit losses declines) in current period net income, which in turn should align the income statement recognition of credit losses with the reporting period in which changes occur.

Although the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) provided the option to delay the adoption of the CECL Standard until the earlier of December 31, 2020 or the termination of the current national emergency declaration related to the COVID-19 outbreak, the Company adopted the CECL Standard in the first quarter of 2020 as previously planned using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

The adoption of the CECL Standard resulted in an initial increase of $ 1.6 million to the allowance for credit losses and $ 0.5 million to the reserve for unfunded commitments.

The after-tax cumulative-effect adjustment of $ 1.5 million was recorded in retained earnings as of January 1, 2020.

Based on the credit quality of the Company's securities portfolio, there was no initial adjustment to retained earnings for credit losses associated with debt securities held to maturity.

The Company adopted ASU No.

2016-13 on January 1, 2021 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

ASU 2016-13 was effective for the Company as of January 1, 2020.

Under Section 4014 of the CARES Act, financial institutions required to adopt ASU 2016-13 as of January 1, 2020 were provided an option to delay the adoption of the CECL Standard framework.

The Company elected to defer adoption of the CECL Standard until January 1, 2021.

The CECL Standard requires that the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current conditions, and reasonable and supportable forecasts.

This standard requires financial institutions and other organizations to use forward-looking information to better inform their credit loss estimates.

Results for reporting periods beginning after January 1, 2021 are presented under the CECL Standard while prior period amounts will continue to be reported in accordance with previously applicable GAAP.

ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB amended existing guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The amendments also eliminate the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

The amendments are effective for public business entities that are an SEC filer, like the Company, for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The amendments should be applied prospectively.

An entity is required to disclose the nature of and reason for the change in accounting principle upon transition in the first annual period when the entity initially adopts the amendments.

The adoption of ASU 2017-04 did not have an effect on the Company's consolidated financial statements.

ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU 2018-15 to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The amendments in this ASU are effective for public business entities, like the Company, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption of the amendments in this ASU is permitted, including adoption in any interim period.

The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The adoption of ASU 2018-15 did not have a material effect on the Company's consolidated financial statements.

The following table summarizes the amortized cost and estimated fair value of the available for sale and held to maturity investment securities portfolio at December 31, 2020 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses, respectively:

December 31, 2020

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 in other liabilities.

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

There were no held-to-maturity securities as of January 1, 2021 and, therefore, no impact from the adoption of the CECL Standard.

Standards That Have Not Yet Been Adopted

ASU 2020-04, Reference Rate Reform (Topic 848)

ASU 2020-04 provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks.

ASU 2020-04 also provides numerous optional expedients for derivative accounting.

ASU 2020-04 is effective March 12, 2020 through December 31, 2022.

Once optional expedients are elected, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic within the Codification.

We are evaluating the impact of ASU 2020-04 and expect the LIBOR transition will not have a material effect on the Company's consolidated financial statements.

ASU 2021-01, Reference Rate Reform (Topic 848):

ASU 2021-01 clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining, or contract price alignment due to reference rate reform are in the scope of ASC 848.

Entities may apply certain optional expedients in ASC 848 to derivative instruments that do not reference LIBOR or another rate expected to be discontinued as a result of reference rate reform if there is a change to the interest rate used for discounting, margining or contract price alignment.

ASU 2020-01 is effective upon issuance and generally can be applied through December 31, 2022.

The adoption of ASU 2021-01 is not expected to have a material effect on the Company's consolidated financial statements.

As described in Note 1.

Summary of Significant Accounting Policies, on February 1, 2021, we completed our Merger with Legacy Dime.

Pursuant to the merger agreement, Legacy Dime merged with and into Bridge with Bridge as the surviving corporation under the name “Dime Community Bancshares, Inc.” At the effective time of the Merger, each outstanding share of Legacy Dime common stock, par value $ 0.01 per share, was converted into 0.6480 shares of the Company’s common stock, par value $ 0.01 per share.

At the Effective Time, each outstanding share of Legacy Dime’s Series A preferred stock, par value $ 0.01 was converted into one share of a newly created series of the Company’s preferred stock having the same powers, preferences and rights as the Dime Preferred Stock.

In connection with the Merger, the Company assumed $ 115.0 million in aggregate principal amount of the 4.50 % Fixed-to-Floating Rate Subordinated Debentures due 2027 of Legacy Dime.

The Merger constituted a business combination and was accounted for as a reverse merger using the acquisition method of accounting.

As a result, Legacy Dime was the accounting acquirer and Bridge was the legal acquirer and the accounting acquiree.

Accordingly, the historical financial statements of Legacy Dime became the historical financial statements of the combined company.

In addition, the assets and liabilities of Bridge have been recorded at their estimated fair values and added to those of Legacy Dime as of the Merger Date.

The determination of fair value required management to make estimates about discount rates, expected future cash flows, market conditions and other future events that are subjective and subject to change.

The Company issued 21.2 million shares of its common stock to Legacy Dime stockholders in connection with the Merger, which represented 51.5 % of the voting interests in the Company upon completion of the Merger.

In accordance with FASB ASC 805-40-30-2, the purchase price in a reverse acquisition is determined based on the number of equity interests the legal acquiree would have had to issue to give the owners of the legal acquirer the same percentage equity interest in the combined entity that results from the reverse acquisition.

The table below summarizes the ownership of the combined company following the Merger, for each shareholder group, as well as the market capitalization of the combined company using shares of Bridge and Legacy Dime common stock outstanding at January 31, 2021 and Bridge’s closing price on January 31, 2021.

Dime Community Bancshares, Inc.

Ownership and Market Value

Market Value at

$ 24.43 Bridge

(Dollars and shares in thousands)

Outstanding Shares

Bridge shareholders

Legacy Dime shareholders

The table below summarizes the hypothetical number of shares as of January 31, 2021 that Legacy Dime would have to issue to give Bridge owners the same percentage ownership in the combined company.

Hypothetical Legacy Dime Ownership

(Shares in thousands)

Outstanding Shares

Bridge shareholders

Legacy Dime shareholders

The purchase price is calculated based on the number of hypothetical shares of Legacy Dime common stock issued to Bridge shareholders multiplied by the share price as demonstrated in the table below.

(Dollars and shares in thousands)

Number of hypothetical Legacy Dime shares issued to Bridge shareholders

Legacy Dime market price per share as of February 1, 2021

Purchase price determination of hypothetical Legacy Dime shares issued to Bridge shareholders

Value of Bridge stock options hypothetically converted to options to acquire shares of Legacy Dime common stock

Cash in lieu of fractional shares

Purchase price consideration

The following table provides the purchase price allocation as of the Merger Date and the Bridge assets acquired and liabilities assumed at their estimated fair value as of the Merger Date as recorded by Dime Community Bancshares.

We recorded the estimate of fair value based on initial valuations available at the Merger Date.

We finalized all valuations and recorded final adjustments during the fourth quarter of 2021.

In the fourth quarter of 2021, we obtained additional information and evidence that resulted in a subsequent adjustment to decrease the estimated fair value of our acquired BNB Bank Pension Plan assets, which resulted in an increase to goodwill resulting from the Merger of $ 458 thousand, net of tax.

The subsequent adjustment to assets acquired was recorded in other assets in the consolidated balance sheet.

(In thousands)

Available for sale:

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset backed securities

Corporate bonds

Total available for sale

Purchase price consideration

Fair value of assets acquired:

Cash and due from banks

Securities available-for-sale

Loans held for sale

Loans held for investment

Premises and fixed assets

Restricted stock

Other intangible assets

Operating lease assets

Total assets acquired

Fair value of liabilities assumed:

Other short-term borrowings

Subordinated debt

Operating lease liabilities

Other liabilities

Total liabilities assumed

Fair value of net identifiable assets

Goodwill resulting from Merger

As a result of the Merger, we recorded $ 100.2 million of goodwill.

The goodwill recorded is not deductible for income tax purposes.

The Company is required to record PCD assets, defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition.

Under this method, there is no credit loss expense affecting net income on acquisition of PCD assets.

Changes in estimates of expected losses after acquisition are recognized as credit loss expense (or reversal of credit loss expense) in subsequent periods as they arise.

Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration shall be allocated to each individual asset.

At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any non-credit discount or premium.

Information regarding loans acquired at the Merger Date are as follows:

(In thousands)

Held to maturity:

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Total held to maturity

Total securities

As of December 31, 2020, none of the Company’s available for sale debt securities were in an unrealized loss position due to credit and therefore no allowance for credit losses on available for sale debt securities was required.

Additionally, the calculated allowance for credit losses on held to maturity securities was inconsequential given the high quality composition of the Company’s held to maturity portfolio and therefore no allowance for credit losses was recorded.

Accrued interest receivable on securities totaling $ 1.4 million at December 31, 2020 was included in accrued interest receivable in the consolidated balance sheet and excluded from the amortized cost and estimated fair value totals in the table above.

The following table summarizes the amortized cost and estimated fair value of the available for sale and held to maturity investment securities portfolio at December 31, 2019 and the corresponding amounts of gross unrealized gains and losses therein:

Unpaid principal balance

Non-credit discount at acquisition

Unpaid principal balance, net

Allowance for credit losses at acquisition

Fair value at acquisition

Non-PCD loans:

Unpaid principal balance

Premium at acquisition

Fair value at acquisition

Total fair value at acquisition

Supplemental disclosures of cash flow information related to investing and financing activities regarding the Merger are as follows for the year ended December 31, 2021:

(In thousands)

Business combination:

Fair value of tangible assets acquired

Goodwill, core deposit intangible and other intangible assets acquired

Liabilities assumed

Purchase price consideration

Other intangible assets consisted of core deposit intangibles and a non-compete agreement with estimated fair values at the Merger Date of $ 10.2 million and $ 780 thousand, respectively.

Core deposit intangibles are being amortized over a life of 10 years on an accelerated basis.

The non-compete agreement is being amortized over a life of 13 months .

Pro Forma Combined Results of Operations

The following pro forma financial information presents the consolidated results of operations of Legacy Dime and Bridge as if the Merger occurred as of January 1, 2019 with pro forma adjustments.

The pro forma adjustments give effect to any change in interest income due to the accretion of discounts (premiums) associated with the fair value adjustments of acquired loans, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustments to acquired time deposits and other debt, and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2019.

Merger related expenses incurred by the Company during the year ended December 31, 2021 are not reflected in the pro forma amounts.

The pro forma information does not necessarily reflect the results of operations that would have occurred had Legacy Dime merged with Bridge at the beginning of 2019.

Year Ended December 31,

(Dollars in thousands except per share amounts)

Net interest income

Non-interest income

Net income available to common shareholders

Earnings per share:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Comprehensive

(In thousands)

Income (Loss)

Balance as of January 1, 2020

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss) during the period

Balance as of December 31, 2020

Other comprehensive (loss) income before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive (loss) income during the period

Balance as of December 31, 2021

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below for the periods indicated.

Year Ended December 31,

(In thousands)

Change in unrealized holding gain or loss on securities:

Change in net unrealized gain or loss during the period

Reclassification adjustment for net gains included in net gain on securities and other assets

Tax (benefit) expense

Net change in unrealized holding gain or loss on securities, net of reclassification adjustments and tax

Change in pension and other postretirement obligations:

Reclassification adjustment for expense included in other expense

Reclassification adjustment for curtailment loss (gain)

Change in the net actuarial gain or loss

Net change in pension and other postretirement obligations

Change in unrealized gain or loss on derivatives:

Change in net unrealized gain or loss during the period

Reclassification adjustment for loss included in loss on termination of derivatives

Reclassification adjustment for expense included in interest expense

Tax expense (benefit)

Net change in unrealized gain or loss on derivatives, net of reclassification adjustments and tax

Other comprehensive (loss) income, net of tax

The following tables summarize the major categories of securities as of the dates indicated:

December 31, 2021

(In thousands)

Available for sale:

Securities available-for-sale:

Treasury securities

GSE securities

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset-backed securities

Corporate bonds

Total available for sale

Held to maturity:

Corporate securities

Pass-through mortgage-backed securities ("MBS") issued by government sponsored entities ("GSEs")

Agency collateralized mortgage obligations ("CMOs")

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Total held to maturity

Total securities

The following table summarizes available for sale debt securities with gross unrealized losses for which an allowance for credit losses has not been recorded at December 31, 2020, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:

Total securities available-for-sale

December 31, 2021

Less than 12 months

Greater than 12 months

(In thousands)

Available for sale:

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset backed securities

Corporate bonds

Total available for sale

The following table summarizes securities with gross unrealized losses at December 31, 2019, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:

Securities held-to-maturity:

Pass-through MBS issued by GSEs

Total securities held-to-maturity

December 31, 2020

Less than 12 months

Greater than 12 months

(In thousands)

Securities available-for-sale:

Corporate securities

Pass-through MBS issued by GSEs

Total securities available-for-sale

As a result of the Merger, the Company acquired $ 652.0 million of securities available-for-sale on the Merger Date.

As of December 31, 2020, there were no securities held-to-maturity.

The Company transferred $ 140.4 million of securities available-for-sale to securities held-to-maturity during the year ended December 31, 2021.

There were no transfers from securities held-to-maturity during the year ended December 31, 2021.

There were no transfers to or from securities held-to-maturity during years ended December 31, 2020 and 2019.

The carrying amount of securities pledged at December 31, 2021 and 2020 was $ 726.4 million and $ 99.4 million, respectively.

At December 31, 2021 and 2020, there were no holdings of securities of any one issuer, other than the U.S.

Government and its agencies, in an amount greater than 10 % of stockholders’ equity.

The amortized cost and fair value of securities are shown by contractual maturity.

Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Securities not due at a single maturity date are shown separately.

December 31, 2021

(In thousands)

Available-for-sale

Within one year

One to five years

Five to ten years

Beyond ten years

Pass-through MBS issued by GSEs and agency CMO

Held-to-maturity

Pass-through MBS issued by GSEs and agency CMO

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

Year Ended December 31,

(In thousands)

Securities available-for-sale

Tax expense on gains

Tax benefit on losses

Marketable equity securities were fully liquidated in connection with the termination of the BMP.

Prior to termination, the Company held marketable equity securities as the underlying mutual fund investments of the BMP, held in a rabbi trust.

A summary of the sales of marketable equity securities is listed below for the periods indicated:

Year Ended December 31,

(In thousands)

Marketable equity securities

The remaining gain or loss on securities shown in the consolidated statements of income was due to market valuation changes.

Net gains on marketable equity securities of $ 131 thousand, $ 361 thousand and $ 531 thousand were recognized for the years ended December 31, 2021, 2020 and 2019, respectively.

There were no sales of securities held-to-maturity during the years ended December 31, 2021, 2020, and 2019.

The following table summarizes the gross unrealized losses and fair value of securities aggregated by investment category and the length of time the securities were in a continuous unrealized loss position for the periods indicated:

December 31, 2021

12 Consecutive

Consecutive Months

Months or Longer

(In thousands)

Securities available-for-sale:

Treasury securities

GSE securities

Corporate securities

Pass-through MBS issued by GSEs

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset-backed securities

Corporate bonds

Total available for sale

Held to maturity:

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Total held to maturity

Other-Than-Temporary Impairment

Securities held-to-maturity

Pass-through MBS issued by GSEs

December 31, 2020

12 Consecutive

Consecutive Months

Months or Longer

(In thousands)

Securities available-for-sale:

Pass-through MBS issued by GSEs

As of December 31, 2021, none of the Company’s available-for-sale debt securities were in an unrealized loss position due to credit and therefore no allowance for credit losses on available-for-sale debt securities was required.

Additionally, the calculated allowance for credit losses on held-to-maturity securities was inconsequential given the high-quality composition of the Company’s held-to-maturity portfolio and therefore no allowance for credit losses was recorded.

With respect to certain classes of debt securities, primarily U.S.

government were to technically default.

Accrued interest receivable on securities totaling $ 4.4 million at December 31, 2021 was included in other assets in the consolidated balance sheet and excluded from the amortized cost and estimated fair value totals in the table above.

Management evaluates available-for-sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors.

Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2020, substantially all of the securities in an unrealized loss position had a variable interest rate and the cause of the temporary impairment was directly related to changes in interest rates.

At December 31, 2021, substantially all of the securities in an unrealized loss position had a fixed interest rate and the cause of the temporary impairment was directly related to changes in interest rates.

The Company generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with its experience.

Other asset backed securities are comprised of student loan backed bonds, which are guaranteed by the U.S.

Department of Education for 97% to 100% of principal .

Additionally, the bonds have credit support of 3% to 5% and have maintained their Aa3 Moody’s rating during the time the Bank has owned them.

The corporate bonds within the portfolio have all maintained an investment grade rating by either Moody’s or Standard and Poor’s.

None of the unrealized losses is related to credit losses.

The following major security types held by the Company are all issued by U.S.

government entities and agencies and therefore either explicitly or implicitly guaranteed by the U.S.

Agency Notes, Treasury Securities, Pass-through MBS issued by GSEs, Agency Collateralized Mortgage Obligations.

The corporate bonds within the portfolio have maintained an investment grade rating by either Kroll, Egan-Jones, Fitch, Moody’s or Standard and Poor’s.

None of the unrealized losses are related to credit losses.

The state and municipal obligations within the portfolio have all maintained an investment grade rating by either Moody’s or Standard and Poor’s.

The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery.

1 unchanged sentence

The fair value is expected to recover as the securities approach maturity.

Therefore, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2020.

Sales and Calls of Securities

There were $ 153.0 million of proceeds on sales of available for sale securities with gross gains of approximately $ 4.3 million and gross losses of approximately $ 0.8 million realized in 2020.

There were $ 46.5 million of proceeds on sales of available for sale securities with gross gains of approximately $ 0.2 million realized in 2019.

There were $ 230.4 million of proceeds on sales of available for sale securities with gross losses of approximately $ 7.9 million realized in 2018.

There were $ 14.9 million, $ 20.3 million and $ 3.3 million of proceeds from calls of securities in 2020, 2019 and 2018, respectively.

Pledged Securities

Securities having a fair value of $ 402.8 million and $ 402.2 million at December 31, 2020 and 2019, respectively, were pledged to secure public deposits and FHLB and FRB overnight borrowings.

Trading Securities

The Company did not hold any trading securities during the years ended December 31, 2020 and 2019.

Restricted Securities

The Bank is a member of the FHLB of New York.

Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.

The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock.

The Bank is also a member of the FRB system and required to own FRB stock.

FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.

Both cash and stock dividends are reported as income.

The Bank owned $ 23.4 million and $ 32.9 million in FHLB, ACBB and FRB stock at December 31, 2020 and 2019, respectively.

These amounts were reported as restricted securities in the consolidated balance sheets.

As of December 31, 2020 and 2019, there was no issuer, other than the U.S.

Government and its sponsored entities, where the Bank had invested holdings that exceeded 10 % of consolidated stockholders’ equity.

The following table summarizes the amortized cost and estimated fair value by contractual maturity of the available for sale and held to maturity investment securities portfolio at December 31, 2020.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

December 31, 2020

LOANS HELD FOR INVESTMENT, NET

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

(In thousands)

Available for sale:

Within one year

One to five years

Five to ten years

Beyond ten years

Held to maturity:

Within one year

One to five years

Five to ten years

Beyond ten years

The Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities , during the first quarter of 2018.

FASB ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

FASB ASC 820-10 also establishes a fair value hierarchy, which requires an entity

to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair values:

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following tables summarize assets and liabilities measured at fair value on a recurring basis:

December 31, 2021

Fair Value Measurements Using:

Quoted Prices

December 31, 2020

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

Multifamily residential and residential mixed-use

Commercial real estate ("CRE")

Acquisition, development, and construction ("ADC")

Total real estate loans

Allowance for credit losses

Loans held for investment, net

As a result of the Merger, the Company recorded $ 4.53 billion of loans held for investment on the Merger Date.

Included in C&I loans was Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans totaling $ 66.0 million and $ 313.4 million at December 31, 2021 and 2020, respectively.

SBA PPP loans carry a 100 % guarantee from the SBA.

The Company may hold an allowance for credit losses as a result of individual loan analysis.

In June 2021, the Company sold $ 596.2 million of SBA PPP loans and recorded a gain of $ 20.7 million in Gain on sale of SBA loans in the consolidated statements of income.

The following tables present data regarding the allowance for credit losses activity for the periods indicated:

Real Estate Loans

Residential and

(In thousands)

Financial assets:

Available for sale securities:

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset-backed securities

Corporate bonds

Total available for sale securities

Financial liabilities:

Beginning balance as of January 1, 2019

Provision (credit) for credit losses

Ending balance as of December 31, 2019

Provision for credit losses

Ending balance as of December 31, 2020

Impact of adopting CECL as of January 1, 2021

Adjusted beginning balance as of January 1, 2021

Provision (credit) for credit losses

Ending balance as of December 31, 2021

The following table presents the amortized cost basis of loans on non-accrual status as of the period indicated:

December 31, 2021

Fair Value Measurements Using:

Quoted Prices

Non-accrual with

(In thousands)

Financial assets:

Available for sale securities:

Treasury securities

GSE securities

State and municipal obligations

GSE residential mortgage-backed securities

GSE residential collateralized mortgage obligations

GSE commercial mortgage-backed securities

GSE commercial collateralized mortgage obligations

Other asset-backed securities

Corporate bonds

Total available for sale securities

Financial liabilities:

The following tables summarize assets measured at fair value on a non-recurring basis:

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

The Company did not recognize interest income on non-accrual loans during the year ended December 31, 2021.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method of ASC 326 as of the dates indicated:

December 31, 2020

Fair Value Measurements Using:

Quoted Prices

Real Estate Loans

Residential and

(In thousands)

Loans held for sale

Individually evaluated loans

Allowance for loan losses:

Individually evaluated for impairment

Collectively evaluated for impairment

Total ending allowance balance

Individually evaluated for impairment

Collectively evaluated for impairment

Total ending loans balance

Impaired Loans (prior to the adoption of ASC 326)

A loan is considered impaired when, based on then current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Bank considers TDRs and all non-accrual loans, except non-accrual one-to-four family loans in less than the Federal National Mortgage Association (“FNMA”) Limits, to be impaired.

Non-accrual one-to-four family loans equal to or less than the FNMA Limits, as well as all consumer loans, are considered homogeneous loan pools and are not required to be evaluated individually for impairment unless considered a TDR.

Impairment is typically measured using the difference between the outstanding loan principal balance and either:

1) the likely realizable value of a note sale;

2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral;

or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for certain performing TDRs).

If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances).

If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of the collateral is considered when measuring impairment.

Measured impairment is either charged off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses.

The following tables summarize impaired loans with no related allowance recorded and with related allowance recorded as of the periods indicated (by collateral type within the real estate loan segment):

December 31, 2020

Fair Value Measurements Using:

Quoted Prices

(In thousands)

Loans held for sale

Impaired loans

Loans held for sale at December 31, 2020 had a carrying amount of $ 52.8 million which is net of a $ 2.9 million valuation allowance.

Loans held for sale at December 31, 2019 had a carrying amount of $ 12.6 million with no valuation allowance recorded.

Individually evaluated commercial and industrial loans with an allowance for credit losses at December 31, 2020 had a carrying amount of $ 2.9 million, which is made up of the outstanding balance of $ 9.6 million, net of a valuation allowance of $ 6.7 million.

This resulted in an additional provision for credit losses of $ 2.6 million that is included in the amount reported on the consolidated statements of income for the year ended December 31, 2020.

Impaired loans (prior to the adoption of the CECL standard) with an allocated allowance for loan losses at December 31, 2019 had a carrying amount of $ 7.0 million, which is made up of the outstanding balance of $ 11.7 million, net of a valuation allowance of $ 4.7 million.

There was no other real estate owned at December 31, 2020 and 2019.

Accordingly, there was no additional provision for credit losses included in the amount reported on the consolidated statements of income.

The Company used the following methods and assumptions in estimating the fair value of its financial instruments:

Securities Available for Sale and Held to Maturity:

If available, the estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges and are classified as Level 1.

For securities where quoted prices are not available, fair value is based on matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities resulting in a Level 2 classification.

Represents interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

Loans Held for Sale:

Loans held for sale are carried at the lower of cost or fair value.

The fair value of loans held for sale is initially determined using the price we expect to receive for the loans based on commitments received from third-party investors.

Thereafter, loans held for sale are re-evaluated quarterly to determine if a valuation allowance is required to adjust for a decline in fair value below the carrying amount.

Subsequent fair value determinations are based on commitments received from third party investors and/or through appraisals using a single valuation approach or a combination of approaches including comparable sales and the income approach.

Appraisals may be discounted for changes in market conditions.

These valuation methods result in a Level 3 classification.

At December 31, 2020 the leveraged lending portfolio was reclassified to held for sale and sold in January 2021.The estimated fair values at December 31, 2020 were based on the observable market prices for the loans, resulting in a Level 1 classification.

Individually Evaluated Loans with an ACL (Impaired Loans with an ACL prior to the adoption of the CECL Standard) and Other Real Estate Owned:

For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

The fair value of real estate collateral is determined based on recent appraised values.

The fair value of other real estate owned is also determined based on recent appraised values less the estimated cost to sell.

These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.

Adjustments may relate to location, square footage, condition, amenities, market rate of leases as well as timing of comparable sales.

All appraisals undergo a second review process to ensure that the methodology employed and the values derived are reasonable.

Non-real estate collateral, which includes inventory and taxi medallions, may be valued using an appraisal, net book value per the borrower’s financial statements, aging reports, or by reference to market activity, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the borrower and its business.

These valuation methods result in a Level 3 classification.

Appraisals for collateral-dependent loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.

Once received, the Appraisal and Credit Departments review the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Management also considers the appraisal values for commercial properties associated with current loan origination activity.

Collectively, this information is reviewed to help assess current trends in commercial property values.

For each collateral dependent loan, management considers information that relates to the type of property to determine if such properties may have appreciated or depreciated in value since the date of the most recent appraisal.

Adjustments to fair value are made only when the analysis indicates a probable decline in collateral values.

Adjustments made in the appraisal process are not deemed material to the overall consolidated financial statements given the level of collateral dependent loans measured at fair value on a non-recurring basis.

The following tables summarize the estimated fair values and recorded carrying amounts of the Company’s financial instruments at December 31, 2020 and 2019:

Investment (1)

With no related allowance recorded:

Multifamily residential and residential mixed-use

Total with no related allowance recorded

With an allowance recorded:

Total with an allowance recorded

(1) The recorded investment excludes net deferred costs, due to immateriality.

The following table presents information for impaired loans for the periods indicated:

December 31, 2020

Fair Value Measurements Using:

Quoted Prices In

Active Markets for

Identical Assets

December 31, 2019

(In thousands)

Financial assets:

Cash and due from banks

Interest-bearing deposits with banks

Securities available for sale

Securities restricted

Securities held to maturity

Loans held for sale

Accrued interest receivable

Financial liabilities:

Certificates of deposit

Demand and other deposits

FHLB advances

Repurchase agreements

Subordinated debentures

Accrued interest payable

Investment (1)

Recognized (2)

Investment (1)

Recognized (2)

With no related allowance recorded:

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

Multifamily residential and residential mixed-use

Total with no related allowance recorded

With an allowance recorded:

(1) The recorded investment excludes net deferred costs, due to immateriality.

(2) Cash basis interest and interest income recognized on accrual basis approximate each other.

The following tables summarize the past due status of the Company’s investment in loans as of the dates indicated:

December 31, 2021

Fair Value Measurements Using:

Quoted Prices In

Active Markets for

Identical Assets

More Past Due

(In thousands)

Financial assets:

Cash and due from banks

Interest-bearing deposits with banks

Securities available for sale

Securities restricted

Securities held to maturity

Loans held for sale

Accrued interest receivable

Financial liabilities:

Certificates of deposit

Demand and other deposits

FHLB advances

Repurchase agreements

Subordinated debentures

Accrued interest payable

The following table sets forth the major classifications of loans:

Accruing Interest

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

Multifamily residential and residential mixed-use

Total real estate

December 31, 2020

More Past Due

(In thousands)

Accruing Interest

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

Multifamily residential and residential mixed-use

Total real estate

Accruing Loans 90 Days or More Past Due:

The Company continued accruing interest on loans with an outstanding balance of $ 3.0 million at December 31, 2021, and loans with an outstanding balance of $ 3.3 million at December 31, 2020, all of which were 90 days or more past due.

These loans were either well secured, awaiting a forbearance extension or formal payment deferral, or will likely be forgiven through the PPP or repurchased by the SBA, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.

Collateral Dependent Loans:

At December 31, 2021, the Company had collateral dependent loans which were individually evaluated to determine expected credit losses.

December 31, 2021

Associated Allowance

(In thousands)

Collateral Dependent

for Credit Losses

Related Party Loans

Certain directors, executive officers, and their related parties, including their immediate families and companies in which they are principal owners, were loan customers of the Bank during 2021.

The following table sets forth selected information about related party loans for the year ended December 31, 2021:

(In thousands)

Beginning balance

Acquired in Merger

Effect of changes in composition of related parties

Balance at end of period

As of December 31, 2021, the Company had TDRs totaling $ 942 thousand.

The Company has allocated $ 483 thousand of allowance for those loans at December 31, 2021, with no commitments to lend additional amounts.

There were no outstanding TDRs at December 31, 2020.

During the year ended December 31, 2021, TDR modifications included reduction of outstanding principal, extensions of maturity dates, or favorable interest rates and loan terms than the prevailing market interest rates and loan terms.

During the year ended December 31, 2021, the Company modified one CRE loan as a TDR, which subsequently paid off during the year.

The following table presents the loans by category modified as TDRs that occurred during the year ended December 31, 2021:

Modifications During the Year Ended December 31, 2021

(Dollars in thousands)

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

There were no loans modified in a manner that met the criteria of a TDR during the year ended December 31, 2020 or 2019.

As of December 31, 2020 and 2019, the Bank had no loan commitments to borrowers with outstanding TDRs.

There were no TDR charge-offs during the year ended December 31, 2021.

TDRs did not have a material impact to the allowance for credit losses.

There were no TDRs that subsequently defaulted.

Loan payment deferrals due to COVID-19

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 had been adversely affected by the pandemic.

As of December 31, 2021, the Company had seven loans, representing outstanding loan balances of $ 5.7 million, that were deferring full principal and interest (“P&I” deferrals).

The table below presents the full P&I deferrals as of December 31, 2021:

December 31, 2021

Commercial real estate mortgage loans:

Owner occupied

Non-owner occupied

Multi-family mortgage loans

Residential real estate mortgage loans

Commercial, industrial and agricultural loans

Real estate construction and land loans

Installment/consumer loans

Net deferred loan (fees) costs

Total loans held for investment

Allowance for credit losses

Included in commercial, industrial and agricultural loans at December 31, 2020 was $ 844.7 million of Paycheck Protection Program (“PPP”) loans.

These loans are expected to be fully guaranteed by the SBA and have a nominal allowance for credit losses allocated to them based on the nature of the guarantee.

The shift from net deferred loan costs at December 31, 2019 to net deferred loan fees at December 31, 2020 was the result of the net deferred loan fees associated with the PPP loans.

Accrued interest receivable on loans totaling $ 15.1 million at December 31, 2020 and $ 8.7 million at December 31, 2019 was included in accrued interest receivable in the consolidated balance sheet and excluded from the table above.

The increase in accrued interest receivable from December 31, 2019 relates primarily to accrued interest on PPP loans.

Loans held for sale, which are not included in the table above, totaled $ 52.8 million at December 31, 2020 and $ 12.6 million at December 31, 2019.

In December 2020, the Company made a decision to dispose of its $ 43.0 million leveraged lending portfolio which was previously included in commercial, industrial and agricultural loans.

As of December 31, 2020, the leveraged lending portfolio was reclassified from loans held for investment to loans held for sale and written down by $ 234 thousand to the estimated fair value of the loans in this portfolio of $ 42.8 million through a valuation allowance which was charged against non-interest income in the consolidated statements of income.

As of December 31, 2020 and 2019, one commercial real estate (“CRE”) mortgage loan totaling $ 10.0 million and $ 12.6 million, respectively, was classified as held for sale.

The loan was reclassified from loans held for investment to loans held for sale and written down from $ 16.3 million to the loan’s estimated fair value of $ 12.6 million as of June 30, 2019, through a $ 3.7 million charge-off during the 2019 second quarter.

During the 2020 second quarter, an additional write-down was recognized for the decrease in the estimated fair value of the loan by $ 2.6 million to $ 10.0 million through a valuation allowance which was charged against non-interest income in the consolidated statements of income.

The principal business of the Bank is lending in CRE mortgage loans, multi-family mortgage loans, residential real estate mortgage loans, construction loans, home equity loans, commercial, industrial and agricultural loans, land loans and consumer loans.

The Bank considers its primary lending area to be Nassau and Suffolk Counties located on Long Island and the New York City boroughs.

A substantial portion of the Bank’s loans is secured by real estate in these areas.

Accordingly, the ultimate collectability of the loan portfolio is susceptible to changes in market and economic conditions in this region.

Commercial Real Estate Mortgages

Loans in this classification include income producing investment properties and owner-occupied real estate used for business purposes.

The underlying properties are located largely in the Bank’s primary market area.

The cash flows of the income producing investment properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on credit quality.

Generally, management seeks to obtain annual financial

information for borrowers with loans in excess of $ 1.0 million in this category.

In the case of owner-occupied real estate used for business purposes, a weakened economy and resultant decreased consumer and/or business spending will have an adverse effect on credit quality.

Multi-Family Mortgages

Loans in this classification include income producing residential investment properties of five or more families.

Loans are made to established owners with a proven and demonstrable record of strong performance.

Loans are secured by a first mortgage lien on the subject property with a loan to value ratio generally not exceeding 75 %.

Repayment is derived generally from the rental income generated from the property and may be supplemented by the owners’ personal cash flow.

Credit risk arises with an increase in vacancy rates, property mismanagement and the predominance of non-recourse loans that are customary in the industry.

Residential Real Estate Mortgages and Home Equity Loans

Loans in these classifications are generally secured by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower.

The overall health of the economy, including unemployment rates and housing prices, can have an effect on the credit quality in this loan class.

The Bank generally does not originate loans with a loan-to-value ratio greater than 80 % and does not grant subprime loans.

Commercial, Industrial and Agricultural Loans

Loans in this classification are made to businesses and include term loans, lines of credit, senior secured loans to corporations, equipment financing and taxi medallion loans.

Generally, these loans are secured by assets of the business and repayment is expected from the cash flows of the business.

A weakened economy, and resultant decreased consumer and/or business spending, will have an effect on the credit quality in this loan class.

Real Estate Construction and Land Loans

Loans in this classification primarily include land loans to local individuals, contractors and developers for developing the land for sale or for the purpose of making improvements thereon.

Repayment is derived primarily from sale of the lots/units including any pre-sold units.

Credit risk is affected by market conditions, time to sell at an adequate price and cost overruns.

To a lesser extent, this class includes commercial development projects that the Company finances, which in most cases require interest only during construction, and then convert to permanent financing.

Construction delays, cost overruns, market conditions and the availability of permanent financing, to the extent such permanent financing is not being provided by the Bank, all affect the credit risk in this loan class.

Installment and Consumer Loans

Loans in this classification may be either secured or unsecured.

Repayment is dependent on the credit quality of the individual borrower and, if applicable, sale of the collateral securing the loan, such as automobiles.

Therefore, the overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan class.

% of Portfolio

(Dollars in thousands)

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

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.

This provision expired on January 1, 2022 and, therefore, the Company will not have additional loans modified under this exemption going forward.

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

Credit Quality Indicators

The Company categorizes loans into risk categories of pass, watch, special mention, substandard and doubtful based on relevant information about the ability of borrowers to service their debt including repayment patterns, past loss experience, current economic conditions, and various types of concentrations of credit.

Assigned risk rating grades are continuously updated as new information is obtained.

Loans risk rated special mention, substandard and doubtful are reviewed on a quarterly basis.

The Company uses the following definitions for risk rating grades:

Loans classified as pass include current loans performing in accordance with contractual terms, pools of homogenous residential real estate and installment/consumer loans that are not individually risk rated and loans which do not exhibit certain risk factors that require greater than usual monitoring by management.

Loans classified as watch are considered pass rated loans.

These loans carry additional risk factors above those of pass loans but do not have all the risk characteristics of loans classified as special mention.

Such risk factors require monitoring and if left uncorrected, could lead these loans to be downgraded.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information, historical payment experience, credit structure, loan documentation, public information, and current economic trends, among other factors.

The Company analyzes loans individually by classifying them as to credit risk.

The Company uses the following definitions for risk ratings:

Special Mention.

Loans classified as special mention, while generally not delinquent, have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date.

Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified as doubtful have all the weaknesses inherent in a substandard loan, may also be in delinquency status and have defined weaknesses based on currently existing facts, conditions and values making collection or liquidation in full highly questionable and improbable.

The following tables represent loans categorized by internally assigned risk grades as of December 31, 2020 and December 31, 2019.

In the December 31, 2020 table, the years noted represent the year of origination for non-revolving loans.

Loans classified as special mention have a potential weakness that deserves management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of then existing facts, conditions, and values, highly questionable and improbable.

The following is a summary of the credit risk profile of loans by internally assigned grade as of the periods indicated, the years represent the year of origination for non-revolving loans:

December 31, 2021

2 unchanged sentences

Revolving-Term

Commercial real estate owner occupied:

Special mention

Total commercial real estate owner occupied

Commercial real estate non-owner occupied:

Special mention

Total commercial real estate non-owner occupied

Multi-family:

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

Special mention

Total multi-family

Residential real estate:

Total one-to-four family residential, and condominium/cooperative apartment

Multifamily residential and residential mixed-use:

Special mention

Total residential real estate

Commercial, industrial and agricultural:

Total multifamily residential and residential mixed-use

Special mention

Total commercial, industrial and agricultural

Real estate construction and land loans:

Special mention

Total real estate construction and land loans

Installment/consumer loans

Special mention

Total installment/consumer loans

December 31, 2019

(In thousands)

Special mention

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate

Commercial, industrial and agricultural

Real estate construction and land loans

Installment/consumer loans

Past Due and Non-accrual Loans

The following tables represent the aging of past due loans as of December 31, 2020 and 2019:

December 31, 2020

(In thousands)

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate

Commercial, industrial and agricultural

Real estate construction and land loans

Installment/consumer loans

In the absence of other intervening factors, loans granted payment deferrals related to COVID-19 are not reported as past due or placed on non-accrual status provided the borrowers have met the criteria in the CARES Act or otherwise have met the criteria included in an interagency statement issued by bank regulatory agencies.

During the year ended December 31, 2020, there was $ 93 thousand in interest earned on non-accrual loans and $ 406 thousand in accrued interest on non-accrual loans was reversed through interest income.

December 31, 2019

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

Multifamily residential and residential mixed-use

Total real estate

Total Real Estate and C&I

For other loans, the Company evaluates credit quality based on payment activity.

Other loans that are 90 days or more past due are placed on non-accrual status, while all remaining other loans are classified and evaluated as performing.

The following is a summary of the credit risk profile of other loans by internally assigned grade:

(In thousands)

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate

Commercial, industrial and agricultural

Real estate construction and land loans

Installment/consumer loans

There was no other real estate owned at December 31, 2020 and 2019.

Troubled Debt Restructurings

The terms of certain loans were modified and are considered TDRs.

The modification of the terms of such loans generally includes one or a combination of the following:

a reduction of the stated interest rate of the loan;

an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk;

or a permanent reduction of the recorded investment in the loan.

The modification of these loans involved loans to borrowers who were experiencing financial difficulties.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine if that borrower is currently in payment default under any of its obligations or whether there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

The following table presents loans modified as troubled debt restructurings during the years indicated:

Modifications During the Year Ended December 31,

(Dollars in thousands)

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate

Commercial, industrial and agricultural

Installment/consumer loans

There were $ 1.7 million, $ 0.1 million and $ 0.4 million of charge-offs related to TDRs during the years ended December 31, 2020, 2019 and 2018, respectively.

During the year ended December 31, 2020 there was one loan modified as a TDR for which there was a payment default within twelve months following the modification.

There were two loans modified as TDRs during 2019 and one loan modified as a TDR during 2018 for which there was a payment default within twelve months following the modification.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

At December 31, 2020 and 2019, the Company had $ 346 thousand and $ 405 thousand, respectively, of non-accrual TDRs and $ 22.2 million and $ 26.3 million, respectively, of performing TDRs.

The decrease in performing TDRs is primarily due to one TDR relationship which became non-accrual during the 2020 second quarter and totaled $ 2.7 million at June 30, 2020.

In the 2020 third quarter, a settlement agreement was entered into resulting in $ 1.4 million in payments and a charge-off totaling $ 1.3 million.

At December 31, 2020, three non-accrual TDRs totaling $ 130 thousand were unsecured and one non-accrual TDR totaling $ 216 thousand was secured and at December 31, 2019, the non-accrual TDRs were unsecured.

The Bank has no commitment to lend additional funds to these debtors.

The terms of certain other loans were modified during the year ended December 31, 2020 that did not meet the definition of a TDR.

These loans have a total recorded investment at December 31, 2020 of $ 191.1 million.

These loans were to borrowers who were not experiencing financial difficulties.

In connection with the COVID-19 relief provided by the CARES Act and interagency guidance issued in March 2020, the Company is supporting its customers who may experience financial difficulty due to COVID-19 through loan moratoriums and forbearance programs.

The Company began offering 90-day payment modifications on a case-by-case basis to those customers whose income was adversely impacted by COVID-19.

The loan modifications in this program primarily consist of three-month deferrals of interest and principal payments.

Extensions may be granted on a case by case basis.

As of December 31, 2020, approximately 500 loans totaling $ 635 million were granted payment moratoriums during 2020.

T hese deferrals are not considered TDRs based on the CARES Act and/or the interagency guidance.

As of January 21, 2021, $ 76.1 million in moratoriums were outstanding.

Collateral Dependent Loans

At December 31, 2020, the Company had collateral dependent loans which were individually evaluated to determine expected credit losses.

Collateral dependent commercial, industrial and agricultural loans totaled $ 9.6 million and had a related allowance for credit losses totaling $ 6.7 million.

The loans were secured by taxi medallions.

Collateral dependent commercial real estate loans totaled $ 10.8 million and had no related allowance for credit losses.

Impaired Loans (prior to the adoption of the CECL Standard)

At December 31, 2019 the Company had individually impaired loans as defined by FASB ASC 310, “Receivables” of $ 27.0 million.

For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement.

Management applies its normal loan review procedures in making these judgments.

Impaired loans include individually classified non-

accrual loans and TDRs.

At December 31, 2019 impaired loans included $ 1.1 million in other impaired performing loans related to borrowers with other performing TDRs.

For impaired loans, the Bank evaluates the impairment of the loan in accordance with FASB ASC 310-10-35-22.

Impairment is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate.

For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan.

The fair value of the collateral is determined based on recent appraised values.

The fair value of the collateral or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required.

The following tables set forth the recorded investment, unpaid principal balance and related allowance for individually impaired loans at December 31, 2019 and 2018.

The tables also set forth the average recorded investment of individually impaired loans and interest income recognized while the loans were impaired during the years ended December 31, 2019 and 2018:

December 31, 2021

Year Ended December 31, 2019

(In thousands)

With no related allowance recorded:

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

Total with no related allowance recorded

With an allowance recorded:

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

Total with an allowance recorded

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

December 31, 2020

LOAN SERVICING ACTIVITIES

The Bank services real estate and C&I loans for others having principal balances outstanding of approximately $ 471.9 million and $ 377.7 million at December 31, 2021 and 2020, respectively.

Loans serviced for others are not reported as assets.

Servicing loans for others generally consists of collecting loan payments, maintaining escrow accounts, disbursing payments to investors, paying taxes and insurance and processing foreclosure.

In connection with loans serviced for others, the Bank held borrowers’ escrow balances of $ 2.9 million and $ 3.9 million at December 31, 2021 and 2020, respectively.

There are no restrictions on the Company’s consolidated assets or liabilities related to loans sold with servicing rights retained.

Upon sale of these loans, the Company recorded an SRA in other assets, and has elected to account for the SRA under the "amortization method"

prescribed under GAAP.

The activity for SRAs for the periods indicated are as follows:

Year Ended December 31,

(In thousands)

With no related allowance recorded:

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

Total with no related allowance recorded

With an allowance recorded:

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

Total with an allowance recorded

Commercial real estate:

Owner occupied

Non-owner occupied

Residential real estate:

Residential mortgages

Commercial, industrial and agricultural:

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

Related Party Loans

Certain directors, executive officers, and their related parties, including their immediate families and companies in which they are principal owners, were loan customers of the Bank during 2020 and 2019.

The following table sets forth selected information about related party loans for the year ended December 31, 2020:

Servicing right assets:

Beginning of year

Acquired in the Merger

Amortized to expense

Valuation allowance:

Beginning of year

Additions expensed

Servicing right assets, net

The fair value of SRAs was $ 3.9 million and $ 1.7 million, at December 31, 2021 and 2020, respectively.

The fair value at December 31, 2021 was determined using discount rates ranging from 7.8 % to 12.0 %, prepayment speeds ranging from 5 % to 38 %, depending on the stratification of the specific servicing right, and a weighted average default rate of 1.24 %.

The fair value at December 31, 2020 was determined using discount rates ranging from 4.0 % to 17.0 %, prepayment speeds ranging from 5 % to 20 %, depending on the stratification of the specific servicing right, and a weighted average default rate of 1.30 %.

PREMISES AND FIXED ASSETS, NET AND PREMISES HELD FOR SALE

Premises and Fixed Assets, Net

As a result of the Merger, the Company acquired $ 37.9 million of premises and fixed assets, net on the Merger Date.

The following is a summary of premises and fixed assets, net:

(In thousands)

Balance at beginning of period

Balance at end of period

The following tables represent the changes in the allowance for credit losses for the years ended December 31, 2020, 2019 and 2018:

Year Ended December 31, 2020

Industrial and

Leasehold improvements

Furniture, fixtures and equipment

Premises and fixed assets, gross

accumulated depreciation and amortization

Premises and fixed assets, net

Depreciation and amortization expense amounted to $ 6.5 million, $ 4.1 million and $ 4.7 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Premises Held for Sale

The aggregate recorded balance of the Company’s premises held for sale was $ 556 thousand at December 31, 2021.

There were no premises held for sale as of December 31, 2020.

During the year ended December 31, 2021, the Company transferred two real estate properties utilized as retail branches to premises held for sale totaling $ 2.8 million.

During the year ended December 31, 2021, the Company sold one real estate property utilized as a retail branch totaling $ 2.2 million and recorded a gain of $ 550 thousand in Gain on sale of securities and other assets in the consolidated financial statements.

There were no sales of premises held for sale during the years ended December 31, 2020 or 2019.

As a result of the Merger, the Company acquired $ 45.6 million of operating lease assets and $ 45.3 million of operating lease liabilities on the Merger Date

During the year ended December 31, 2021, the Company elected to terminate one if its corporate headquarters office space leases, which resulted in a decrease to the Company’s operating lease liabilities of $ 11.6 million, and an early termination fee of $ 12.0 million.

The early termination fee is reported in merger expenses and transaction costs in the consolidated statements of income.

During the year ended December 31, 2021, the Company elected to terminate three leases in connection with the combination of three branches into other locations, which resulted in a decrease to the Company’s operating lease liabilities of $ 3.7 million, and an early termination fee of $ 4.0 million.

The early termination fee is reported in branch restructuring costs in the consolidated statements of income.

Maturities of the Company’s operating lease liabilities at December 31, 2021 are as follows:

(In thousands)

Mortgage Loans

Allowance for credit losses:

Beginning balance, prior to adoption of CECL

Impact of adopting CECL

Provision (credit) for credit losses

Ending balance

Year Ended December 31, 2019

Industrial and

Total undiscounted lease payments

Less amounts representing interest

Operating lease liabilities

Other information related to our operating leases was as follows:

(In thousands)

Mortgage Loans

Allowance for credit losses:

Beginning balance

Provision (credit) for credit losses

Ending balance

Operating lease cost

Cash paid for amounts included in the measurement of operating lease liabilities

Weighted average remaining lease term

Weighted average discount rate

GOODWILL AND OTHER INTANGIBLE ASSETS

At December 31, 2021 and 2020, the carrying amount of the Company’s goodwill was $ 155.8 million and $ 55.6 million, respectively.

The Company performs its annual goodwill impairment test in the fourth quarter of every year, or more frequently if events or changes in circumstance indicate the asset might be impaired.

It was determined during the annual impairment testing that no impairment was needed for the years ended December 31, 2021, 2020 and 2019 as the fair value of the Company’s single reporting unit was determined to exceed the carrying amount of the reporting unit.

The following table presents the change in Goodwill for the years ended December 31, 2021, 2020 and 2019:

Year Ended December 31,

Industrial and

(In thousands)

Mortgage Loans

Allowance for credit losses:

Beginning balance

(Credit) provision for credit losses

Ending balance

The increase in allowance for credit losses in the first half of 2020 was primarily related to the reasonable and supportable forecast component of the newly adopted CECL Standard which includes the impact of the COVID-19 pandemic.

The COVID-19 pandemic continues to have a profound impact on economic activity.

While there have been some signs of economic improvement during the latter half of 2020, significant uncertainty remains.

Management still believes that the economic recovery will continue during 2021 and 2022, however, based on the aforementioned uncertainty and negative impact the virus has had to date, the decision was made to maintain the current risk level for the reasonable and supportable forecast component of the allowance for credit losses as of December 31, 2020.

The following table represents the balance in the allowance for loan losses and the recorded investment in loans, as defined under FASB ASC 310-10 (prior to adoption of the CECL Standard), and based on impairment method as of December 31, 2019:

Beginning of year

Acquired goodwill 1

(1) See Note 2.

Merger for additional information regarding the acquired goodwill

Other Intangible Assets

As a result of the Merger, the Company recorded $ 10.2 million of core deposit intangible assets and a $ 780 thousand non-compete agreement intangible asset on the Merger Date.

The following table presents the carrying amount and accumulated amortization of intangible assets that are amortizable and arose from the Merger.

There were no intangible assets at December 31, 2020.

December 31, 2021

Industrial and

(In thousands)

Mortgage Loans

Allowance for loan losses:

Individually evaluated for impairment

Collectively evaluated for impairment

Loans acquired with deteriorated credit quality

Total allowance for loan losses

Individually evaluated for impairment

Collectively evaluated for impairment

Loans acquired with deteriorated credit quality

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

PREMISES AND EQUIPMENT, NET

The following table details the components of premises and equipment:

Gross carrying value

Accumulated amortization

Net carrying amount

Amortization expense recognized on intangible assets was $ 2.6 million for the year ended December 31, 2021.

There was no amortization expense recognized on intangible assets for the years ended December 31, 2020 and 2019.

Estimated amortization expense for 2022 through 2025 and thereafter is as follows:

(In thousands)

Building and improvements

Furniture, fixtures and equipment

Leasehold improvements

Accumulated depreciation and amortization

Total premises and equipment, net

Depreciation and amortization amounted to $ 4.3 million, $ 4.3 million and $ 3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company has operating leases for certain branch locations, corporate offices and equipment.

Certain leases contain rent escalation clauses, which are reflected in the Company’s operating lease liabilities.

The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants.

The components of lease cost were as follows:

Year Ended December 31,

RESTRICTED STOCK

The following is a summary of restricted stock:

(In thousands)

Operating lease cost

Sublease income

Total lease cost

The Company reports lease cost in occupancy and equipment expense in the consolidated statements of income.

The Company subleases a portion of its leased properties to commercial sublessees.

Sublease income is included in other operating income in the consolidated statements of income.

Supplemental cash flow and balance sheet information related to operating leases were as follows:

Year Ended December 31,

December 31, 2021

December 31, 2020

FHLBNY capital stock

FRB capital stock

Bankers' Bank capital stock

Restricted stock

FHLBNY Capital Stock

The Bank is a member of the FHLBNY.

Membership requires the purchase of shares of FHLBNY capital stock at $ 100 per share.

Members are required to own a particular amount of stock based on the level of borrowings and other factors.

As a result of the Merger, the Bank acquired $ 13.9 million of FHLBNY capital stock on the Merger Date.

The Bank decreased its outstanding FHLBNY advances by $ 1.18 billion during the year ended December 31, 2021, resulting in a reduction of required FHLBNY stock.

The Bank owned 128,184 shares and 607,074 shares at December 31, 2021 and 2020, respectively.

The Bank recorded dividend income on the FHLBNY capital stock of $ 1.9 million, $ 3.0 million and $ 3.6 million during the years ended December 31, 2021, 2020 and 2019, respectively.

FRB Capital Stock

The Bank is a member of the FRB.

Membership requires the purchase of shares of FRB capital stock at $ 50 per share.

As a result of the Merger, the Bank acquired $ 9.3 million of FRB capital stock on the Merger Date.

The Bank owned 494,965 shares at December 31, 2021 and no shares at December 31, 2020.

The Bank recorded dividend income on the FRB capital stock of $ 442 thousand during the year ended December 31, 2021 and no dividend income for the years ended December 31, 2020 and 2019.

Bankers’ Bank Capital Stock

The Bank has a relationship with Atlantic Community Bankers Bank.

The relationship requires the purchase of shares of ACBB capital stock between $ 2,500 and $ 3,250 per share.

As a result of the Merger, the Bank acquired $ 165 thousand of ACBB capital stock on the Merger Date.

The Bank owned 60 shares at December 31, 2021 and no shares at December 31, 2020.

The Bank recorded dividend income on the ACBB capital stock of $ 1 thousand during the year ended December 31, 2021 and no dividend income during the years ended December 31, 2020 and 2019.

Deposits are summarized as follows:

December 31, 2021

December 31, 2020

(Dollars in thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating right-of-use assets obtained in exchange for lease liabilities

Certificates of deposit ("CDs")

Interest-bearing checking

Non-interest-bearing checking

As a result of the Merger, the Company acquired $ 5.41 billion of deposits on the Merger Date.

The following table presents a summary of scheduled maturities of CDs outstanding at December 31, 2021:

Weighted Average

(Dollars in thousands)

Interest Rate

2027 and beyond

CDs that met or exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250 thousand were $ 200.1 million and $ 279.0 million December 31, 2021 and 2020, respectively.

DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risks arising from both its business operations and economic conditions.

The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.

The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loan portfolio.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

The Company engages in both cash flow hedges and freestanding derivatives.

Cash Flow Hedges

Cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company uses these types of derivatives to hedge the variable cash flows associated with existing or forecasted issuances of short-term borrowings.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt.

During the next twelve months, the Company estimates that an additional $ 57 thousand will be reclassified as an increase to interest expense.

During the year ended December 31, 2021, the Company terminated 34 derivatives with notional values totaling $ 785.0 million, resulting in a termination value of $ 16.5 million which was recognized in loss on termination of derivatives in non-interest income.

During the year ended December 31, 2020, the Company terminated two derivatives with notional values totaling $ 30.0 million, resulting in a termination value of $ 175 thousand, which was expected to be recognized in interest expense over the remaining term of the original derivative.

Due to the terminations during the year ended December 31, 2021, the remaining termination value was recognized as part of the loss on terminations during the year ended December 31, 2021.

Additionally, during the year ended December 31, 2020, the Company terminated six derivatives with notional values totaling $ 95.0 million, resulting in a termination value of $ 6.6 million, which was recognized as losses on termination of derivatives within non-interest income.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated statements of financial condition as of the periods indicated.

December 31, 2021

December 31, 2020

Weighted-average remaining lease term-operating leases

Weighted-average discount rate-operating leases (1)

(1) The Company computes the present value of operating lease liabilities using its incremental borrowing rate as the discount rate.

Certain leases contain renewal options which are not reflected in the tables below.

The exercise of renewal options, which extend the lease term from five to ten years , is at the Company’s discretion.

The maturities of operating lease liabilities were as follows:

(Dollars in thousands)

Included in derivative assets/(liabilities):

Interest rate swaps related to FHLBNY advances

The table below presents the effect of the cash flow hedge accounting on accumulated other comprehensive loss as of December 31, 2021, 2020 and 2019.

Year Ended December 31,

(In thousands)

Gain (loss) recognized in other comprehensive income

Gain recognized on termination of derivatives

(Loss) gain reclassified from other comprehensive income into interest expense

All cash flow hedges are recorded gross on the balance sheet.

The cash flow hedges involve derivative agreements with third-party counterparties that contain provisions requiring the Bank to post cash collateral if the derivative exposure exceeds a threshold amount.

As of December 31, 2021, the Bank did not post collateral to the third-party counterparties.

As of December 31, 2020, posted collateral to the other third-party counterparties was $ 5.4 million.

Freestanding Derivatives

The Company maintains an interest-rate risk protection program for its loan portfolio in order to offer loan level derivatives with certain borrowers and to generate loan level derivative income.

The Company enters into interest rate swap or interest rate floor agreements with borrowers.

These interest rate derivatives are designed such that the borrower synthetically attains a fixed-rate loan, while the Company receives floating rate loan payments.

The Company offsets the loan level interest rate swap exposure by entering into an offsetting interest rate swap or interest rate floor with an unaffiliated and reputable bank counterparty.

These interest rate derivatives do not qualify as designated hedges, under ASU 815;

therefore, each interest rate derivative is accounted for as a freestanding derivative.

The notional amounts of the interest rate derivatives do not represent amounts exchanged by the parties.

The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate derivative agreements.

The following tables reflect freestanding derivatives included in the consolidated statements of financial condition as of the dates indicated

December 31, 2021

Total operating lease payments

Present value of operating lease liabilities

GOODWILL AND OTHER INTANGIBLE ASSETS

FASB ASC 350, Intangibles — Goodwill and Other, requires a company to perform an impairment test on goodwill annually, or more frequently if events or changes in circumstance indicate that the asset might be impaired, by comparing the fair value of such goodwill to its recorded or carrying amount.

If the carrying amount of goodwill exceeds the fair value, an impairment charge must be recorded in an amount equal to the excess.

The FASB issued ASU No.

2011-08, “Testing Goodwill for Impairment,” which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350.

The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent.

At December 31, 2020 and 2019, the carrying amount of the Company’s goodwill was $ 106.0 million.

The Company tested goodwill for impairment during the fourth quarter of 2020.

The Company has one reporting unit, Dime Community Bancshares, Inc., and evaluated goodwill at that reporting unit level.

The Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill.

The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value and no further testing was required.

The results of this assessment indicated that goodwill was not impaired.

Other Intangible Assets

The Company’s other intangible assets consist of core deposit intangibles, a trademark, and servicing assets.

At December 31, 2020 and 2019, the carrying amount of the Company’s servicing assets was $ 1.7 million and $ 1.3 million, respectively.

Acquired Intangible Assets

The following table reflects acquired intangible assets:

(In thousands)

Intangible assets subject to amortization:

Core deposit intangibles

Intangible assets not subject to amortization:

Total intangible assets

Aggregate amortization expense for intangible assets with finite lives for the years ended December 31, 2020, 2019, and 2018 was $ 0.7 million, $ 0.8 million, and $ 0.9 million, respectively.

The Company acquired a trademark related to the Bank’s name change from “Bridgehampton National Bank” to “BNB Bank” during the year ended December 31, 2017.

At December 31, 2020 and 2019, the carrying amount of the Company’s trademark was $ 259 thousand.

The following table reflects estimated amortization expense for each of the next five years:

(In thousands)

Time Deposits

The following table presents the remaining maturities of the Bank’s time deposits at December 31, 2020:

Included in derivative assets/(liabilities):

Loan level interest rate swaps with borrower

Loan level interest rate floors with borrower

Loan level interest rate swaps with third-party counterparties

Loan level interest rate floors with third-party counterparties

December 31, 2020

(In thousands)

The deposits that met or exceeded the FDIC insurance limit of $250,000 at December 31, 2020 and 2019 were $ 121.8 million and $ 129.6 million, respectively.

Deposits from principal officers, directors and their affiliates at December 31, 2020 and 2019 were approximately $ 25.0 million and $ 16.7 million, respectively.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase totaled $ 1.2 million at December 31, 2020 and $ 1.0 million at December 31, 2019.

The repurchase agreements were collateralized by investment securities, of which 34 % were U.S.

GSE residential collateralized mortgage obligations and 66 % were U.S.

GSE residential mortgage-backed securities with a carrying amount of $ 2.2 million at December 31, 2020 and 17 % were U.S.

GSE residential collateralized mortgage obligations and 83 % were U.S.

GSE residential mortgage-backed securities with a carrying amount of $ 2.1 million at December 31, 2019.

Securities sold under agreements to repurchase are financing arrangements with $ 1.2 million maturing during the first quarter of 2021.

At maturity, the securities underlying the agreements are returned to the Company.

The primary risk associated with these secured borrowings is the requirement to pledge a market value-based balance of collateral in excess of the borrowed amount.

The excess collateral pledged represents an unsecured exposure to the lending counterparty.

As the market value of the collateral changes, both through changes in discount rates and spreads as well as related cash flows, additional collateral may need to be pledged.

In accordance with the Company’s policies, eligible counterparties are defined and monitored to minimize exposure.

The following table summarizes information concerning securities sold under agreements to repurchase:

Included in derivative assets/(liabilities):

Loan level interest rate swaps with borrower

Loan level interest rate floors with borrower

Loan level interest rate swaps with third-party counterparties

Loan level interest rate floors with third-party counterparties

Loan level derivative income is recognized on the mark-to-market of the interest rate swap as a fair value adjustment at the time the transaction is closed.

Total loan level derivative income is included in non-interest income as follows:

Year Ended December 31,

(Dollars in thousands)

Average daily balance during the year

Average interest rate during the year

Maximum month-end balance during the year

Weighted average interest rate at year-end

FEDERAL HOME LOAN BANK ADVANCES

The following table summarizes information concerning FHLB advances:

(In thousands)

Loan level derivative income

The interest rate swap product with the borrower is cross collateralized with the underlying loan and, therefore, there is no posted collateral.

Certain interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount.

As of December 31, 2021, posted collateral was $ 14.0 million.

Credit Risk Related Contingent Features

The Company’s agreements with each of its derivative counterparties state that if the Company defaults on any of its indebtedness, it could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.

The Company’s agreements with certain of its derivative counterparties state that if the Bank fails to maintain its status as a well-capitalized institution, the Bank could be required to terminate its derivative positions with the counterparty.

As of December 31, 2021, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 16.5 million for those related to loan level derivatives.

If the Company had breached any of the above provisions at December 31, 2021, it could have been required to settle its obligations under the agreements at the termination value with the respective counterparty.

There were no provisions breached for the year ended December 31, 2021.

FHLBNY ADVANCES

The Bank had borrowings from the FHLBNY (“Advances”) totaling $ 25.0 million and $ 1.20 billion at December 31, 2021 and 2020, respectively, all of which were fixed rate.

The average interest rate on outstanding FHLBNY Advances was 0.35 % and 0.53 % at December 31, 2021 and 2020, respectively.

In accordance with its Advances, Collateral Pledge and Security Agreement with the FHLBNY, the Bank was eligible to borrow up to $ 4.19 billion as of December 31, 2021 and $ 2.11 billion as of December 31, 2020, and maintained sufficient qualifying collateral, as defined by the FHLBNY.

Certain FHLBNY Advances may contain call features that may be exercised by the FHLBNY.

At December 31, 2021 there were no callable Advances.

During the years ended December 2021, 2020, and 2019, the Company’s prepayment penalty expense was recognized as a loss on extinguishment of debt.

The following table is a summary of FHLBNY extinguishments for the periods presented:

Year Ended December 31,

(Dollars in thousands)

Average daily balance during the year

Average interest rate during the year

Maximum month-end balance during the year

Weighted average interest rate at year-end

The following tables present the contractual maturities and weighted average interest rates of FHLB advances for each of the next five years.

There are no FHLB advances with contractual maturities after 2021.

FHLBNY advances extinguished

Weighted average rate

Loss on extinguishment of debt

The following tables present the contractual maturities and weighted average interest rates of FHLBNY advances for each of the next five years.

There were no FHLBNY advances with an overnight contractual maturity at December 31, 2021 and December 31, 2020.

There are no FHLBNY advances with contractual maturities after 2022 at December 31, 2021 and December 31, 2020:

December 31, 2021

1 unchanged sentence

Contractual Maturity

Total FHLB advances

2022, fixed rate at 0.35 %

Total FHLBNY advances

December 31, 2020

1 unchanged sentence

Contractual Maturity

Total FHLB advances

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances.

The advances were collateralized by $ 1.7 billion and $ 1.4 billion of residential and commercial mortgage loans under a blanket lien arrangement at December 31, 2020 and 2019, respectively.

Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to a total of $ 1.9 billion at December 31, 2020.

2021, fixed rate at rates from 0.24 % to 2.09 %

2022, fixed rate at rates from 0.33 % to 1.79 %

Total FHLBNY advances

SUBORDINATED DEBENTURES

In connection with the Merger, the Company assumed $ 115.0 million in aggregate principal amount of the 4.50 % Fixed-to-Floating Rate Subordinated Debentures due 2027 of Legacy Dime on the Merger Date.

During the year ended December 31, 2017, Legacy Dime issued $ 115.0 million of fixed-to-floating rate subordinated notes due June 2027, which become callable commencing on June 15, 2022.

The notes will mature on June 15, 2027 (the “Maturity Date”).

From and including June 13, 2017 until but excluding June 15, 2022, interest will be paid semi-annually in arrears on each June 15 and December 15 at a fixed annual interest rate equal to 4.50 %.

From and including June 15, 2022 to, but excluding, the Maturity Date or earlier redemption date, the interest rate shall reset quarterly to an annual interest rate equal to the then-current three-month LIBOR plus 266 basis points, payable quarterly in arrears.

Debt issuance cost directly associated with subordinated debt offering was capitalized and netted with subordinated notes payable on the consolidated statements of financial condition.

In September 2015, the Company issued $ 80.0 million in aggregate principal amount of fixed-to-floating rate subordinated debentures.

4 unchanged sentences

The subordinated debentures totaled $ 197.1 million at December 31, 2021 and $ 114.1 million at December 31, 2020.

Interest expense related to the subordinated debt was $ 8.5 million, $ 5.3 million and $ 5.3 million during the years ended December 31, 2021, 2020 and 2019, respectively.

The subordinated debentures are included in tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

During the first quarter of 2019 the Company adopted ASU 2017-12, Derivatives and Hedging:

Targeted Improvements to Accounting for Hedging Activities .

The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities.

ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted.

ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption.

The Company has adopted the standard in 2019 with minimal impact to its financial position upon transition.

The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Funding Rate ("SOFR") replace USD-LIBOR.

ARRC has proposed that the transition to SOFR from USD-LIBOR will take place by the end of 2021.

The Company has material contracts that are indexed to USD-LIBOR.

Industry organizations are currently working on the transition plan.

The Company is currently monitoring this activity and evaluating the risks involved.

Cash Flow Hedges of Interest Rate Risk

As part of its asset liability management, the Company utilizes interest rate swap agreements to help manage its interest rate risk position.

The notional amount of the interest rate swap does not represent the amount exchanged by the parties.

The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest rate swaps with notional amounts totaling $ 280.0 million and $ 290.0 million as of December 31, 2020 and 2019, respectively, were designated as cash flow hedges of certain FHLB advances.

The swaps were determined to be fully effective during the periods presented.

The aggregate fair value of the swaps is recorded in other assets or other liabilities with changes in fair value recorded in other comprehensive income (loss).

The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective.

The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The following table summarizes information about the interest rate swaps designated as cash flow hedges at December 31, 2020 and 2019:

(Dollars in thousands)

Notional amounts

Weighted average pay rates

Weighted average receive rates

Weighted average maturity

Four interest rate swaps, with notional amounts totaling $ 125.0 million, were terminated resulting in $ 3.4 million in loss on termination of swaps, which is reported as a component of non-interest income, for the year ended December 31, 2020.

Interest expense recorded on these swap transactions totaled $ 1.7 million during the year ended December 31, 2020.

Interest income recorded on these swap transactions totaled $ 1.6 million and $ 1.1 million during the years ended December 31, 2019 and 2018, respectively.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income/expense as interest payments are made/received on the Company’s variable-rate assets/liabilities.

During the year ended December 31, 2020, the Company had $ 1.7 million of reclassifications as a reduction to interest expense.

During the year ended December 31, 2020, the Company accelerated the reclassification of $ 3.4 million loss from other comprehensive income to earnings as a result of hedged forecasted transactions becoming probable not to occur.

During the next twelve months, the Company estimates that $ 2.1 million will be reclassified as an increase in interest expense.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the years ended December 31, 2020, 2019 and 2018:

Amount of gain (loss)

Amount of gain

reclassified from

Amount of (loss) gain

Accumulated OCI

OTHER SHORT-TERM BORROWINGS

The following is a summary of other short-term borrowings:

(In thousands)

recognized in OCI

Interest rate contracts

included component

excluded component

included component

excluded component

Year ended December 31, 2020

December 31, 2021

December 31, 2020

Repurchase agreements

Other short-term borrowings

Repurchase Agreements

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, of which 100 % were pass-through MBS issued by GSEs with a carrying amount of $ 3.8 million at December 31, 2021.

Repurchase agreements are financing arrangements with $ 1.9 million maturing during the first quarter of 2022.

At maturity, the securities underlying the agreements are returned to the Bank.

The primary risk associated with these secured borrowings is the requirement to pledge a market value-based balance of collateral in excess of the borrowed amount.

The excess collateral pledged represents an unsecured exposure to the lending counterparty.

As the market value of the collateral changes, both through changes in discount rates and spreads as well as related cash flows, additional collateral may need to be pledged.

In accordance with the Bank’s policies, eligible counterparties are defined and monitored to minimize exposure.

Interest expense on repurchase agreements for the year ended December 31, 2021 was $ 3 thousand.

There was no interest expense on repurchase agreements for the years ended December 31, 2020 and 2019.

The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions.

The availability of funds changes daily.

Interest expense on AFX borrowings for the years ended December 31, 2021, 2020 and 2019 was $ 1 thousand, $ 45 thousand, and $ 226 thousand, respectively.

The Company’s consolidated Federal, State and City income tax provisions were comprised of the following:

Year Ended December 31, 2021

Year Ended December 31, 2020

The following table reflects the cash flow hedges included in the consolidated balance sheets at the dates indicated:

(In thousands)

Included in other assets/(liabilities):

Interest rate swaps related to FHLB advances

Forward starting interest rate swaps related to FHLB advances

Non-Designated Hedges

Derivatives not designated as hedges may be used to manage the Company’s exposure to interest rate movements or to provide service to customers but do not meet the requirements for hedge accounting under U.S.

The Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies.

These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Company executes with a third party in order to minimize the net risk exposure resulting from such transactions.

These interest-rate swap agreements do not qualify for hedge accounting treatment, and therefore changes in fair value are reported in current period earnings.

The Company’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans.

Interest rate swaps with notional amounts totaled $ 1.1 billion at December 31, 2020.

Of the $ 1.1 billion notional amounts, $ 548.5 million were from loan customers and $ 548.5 million were from bank counterparties.

Interest rate swaps with notional amounts totaled $ 823.9 million at December 31, 2019.

Of the $ 823.9 million notional amounts, $ 411.9 million were from loan customers and $ 411.9 million were from bank counterparties.

The following table presents summary information about the interest rate swaps at December 31, 2020 and 2019:

(Dollars in thousands)

Notional amounts

Weighted average pay rates

Weighted average receive rates

Weighted average maturity

Fair value of combined interest rate swaps

Loan swap fees recorded on these swap transactions, which is reported as a component of non-interest income, totaled $ 3.7 million, $ 7.5 million, and $ 716 thousand for the years ended December 31, 2020, 2019, and 2018, respectively.

Credit-Risk-Related Contingent Features

As of December 31, 2020, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 57.1 million, while there were no derivatives in a net asset position.

The Company has minimum collateral posting thresholds with certain of its derivative counterparties.

If the termination value of derivatives is a net liability position, the Company is required to post collateral against its obligations under the agreements.

However, if the termination value of derivatives is a net asset position, the counterparty is required to post collateral to the Company.

At December 31, 2020, the Company posted collateral of $ 57.9 million to its counterparties under the agreements in a net liability position and received no collateral from its counterparties under the agreements in a net asset position.

If the Company had breached any of these provisions at December 31, 2020, it could have been required to settle its obligations under the agreements at the termination value.

The following table details the components of income tax expense:

Year Ended December 31, 2019

(In thousands)

Total current

Total deferred

Total income tax expense

The following table is a reconciliation of the expected federal income tax expense at the statutory tax rate to the actual provision:

The preceding table excludes tax effects recorded directly to stockholders’ equity in connection with unrealized gains and losses on securities available-for-sale (including losses on such securities upon their transfer to held-to-maturity), interest rate derivatives, and adjustments to other comprehensive income relating to the minimum pension liability, unrecognized gains of pension and other postretirement obligations and changes in the non-credit component of OTTI.

These tax effects are disclosed as part of the presentation of the consolidated statements of changes in stockholders’ equity and comprehensive income.

The provision for income taxes differed from that computed at the Federal statutory rate as follows:

Year Ended December 31,

(Dollars in thousands)

Federal income tax expense computed by applying the statutory rate to income before income taxes

Tax-exempt income

State taxes, net of federal income tax benefit

Income tax expense

The following table summarizes the composition of deferred tax assets and liabilities:

Tax at federal statutory rate

State and local taxes, net of federal income tax benefit

Benefit plan differences

Adjustments for prior period returns and tax items

Investment in BOLI

Equity based compensation

Salaries deduction limitation

Transaction costs

Effective tax rate

The increase in the effective tax rate in 2021 compared to 2020 was primarily the result of the loss of benefits from the Company’s REIT due to the increase in the Company’s total assets, and non-deductible expenses during 2021.

Deferred tax assets and liabilities are recorded for temporary differences between the book and tax bases of assets and liabilities.

The components of Federal, State and City deferred income tax assets and liabilities were as follows:

(In thousands)

Deferred tax assets:

Allowance for credit losses and off-balance sheet credit exposure

Net unrealized losses on securities

Compensation and related benefit obligations

Net deferred loan costs and fees

Purchase accounting fair value adjustments

Net change in pension and other post-retirement benefits plans

Net operating loss carryforward

Net loss on cash flow hedges

Operating lease liabilities

Allowance for credit losses and other contingent liabilities

Employee benefit plans

Tax effect of purchase accounting fair value adjustments

Tax effect of other components of income on derivatives

Tax effect of other components of income on securities available-for-sale

Operating lease liability

Total deferred tax assets

Deferred tax liabilities:

Pension and SERP expense

Net unrealized gains on securities

REIT undistributed net income

Net deferred loan costs and fees

State and local taxes

Operating lease right-of-use assets

Tax effect of other components of income on derivatives

Tax effect of other components of income on securities available-for-sale

Employee benefit plans

Tax effect of purchase accounting fair value adjustments

Difference in book and tax carrying value of fixed assets

Difference in book and tax basis of unearned loan fees

Operating lease asset

Total deferred tax liabilities

Net deferred tax asset

The Company and its subsidiaries are subject to U.S.

federal income tax as well as income tax of the State and City of New York and the State of New Jersey.

The Company is no longer subject to examination by taxing authorities for years

There are no unrecorded tax benefits, and the Company does not expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months.

In connection with the acquisition of FNBNY, the Company acquired a federal net operating loss (“NOL”) carryforward subject to Internal Revenue Code Section 382.

Net deferred tax asset (recorded in other assets)

The Company and its subsidiary are subject to U.S.

federal income tax as well as income tax of the State, City of New York and the State of New Jersey.

Under generally accepted accounting principles, the Company uses the asset and liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled.

No valuation allowances were recognized on deferred tax assets during the years ended December 31, 2021 or 2020, since, at each period end, it was deemed more likely than not that the deferred tax assets would be fully realized.

In connection with the Merger, the Company acquired a federal net operating loss (“NOL”) carryforward subject to Internal Revenue Code Section 382.

The Company recorded a deferred tax asset that it expects to realize within the carryforward period.

2 unchanged sentences

At December 31, 2021, the Company had New York City NOL carryforward of zero .

The New York State and New York City NOLs at December 31, 2020 included NOLs acquired in connection with the CNB and FNBNY acquisitions.

PENSION AND OTHER POSTRETIREMENT PLANS

Pension Plan and Supplemental Executive Retirement Plan

The Bank maintains a noncontributory pension plan (the “Pension Plan”) covering all eligible employees.

The Bank uses a December 31 measurement date for this plan in accordance with FASB ASC 715-30 “Compensation – Retirement Benefits – Defined Benefit Plans – Pension.” During 2012, the Company amended the Pension Plan by revising the formula for determining benefits effective January 1, 2013, except for certain grandfathered employees.

Additionally, new employees hired on or after October 1, 2012 are not eligible for the Pension Plan.

During 2001, the Bank adopted the Bridgehampton National Bank Supplemental Executive Retirement Plan (“SERP”).

As recommended by the Compensation Committee of the Board of Directors and approved by the full Board of Directors, the SERP provides benefits to certain employees, whose benefits under the Pension Plan are limited by the applicable provisions of the Internal Revenue Code.

The benefit under the SERP is equal to the additional amount the employee would be entitled to under the Pension Plan and the 401(k) Plan in the absence of such Internal Revenue Code limitations.

The assets of the SERP are held in a rabbi trust to maintain the tax-deferred status of the plan and are subject to the general, unsecured creditors of the Company.

As a result, the assets of the rabbi trust are reflected on the Company’s consolidated balance sheets.

The following table provides information about changes in obligations and plan assets of the defined benefit Pension Plan and the defined benefit plan component of the SERP:

Pension Benefits

SERP Benefits

Year Ended December 31,

The New York State NOLs at December 31, 2021 included NOLs acquired in connection with the Merger.

At December 31, 2021 and 2020, the Bank had accumulated bad debt reserves totaling $ 15.1 million for which no provision for income tax was required to be recorded.

These bad debt reserves could be subject to recapture into taxable income under certain circumstances, including a distribution of the bad debt benefits to the Holding Company or the failure of the Bank to qualify as a bank for federal income tax purposes.

Should the reserves as of December 31, 2021 be fully recaptured, the Bank would recognize $ 4.8 million in additional income tax expense.

The Company expects to take no action in the foreseeable future that would require the establishment of a tax liability associated with these bad debt reserves.

The Company is subject to regular examination by various tax authorities in jurisdictions in which it conducts significant business operations.

The Company regularly assesses the likelihood of additional examinations in each of the tax jurisdictions resulting from ongoing assessments.

Under current accounting rules, all tax positions adopted are subjected to two levels of evaluation.

Initially, a determination is made, based on the technical merits of the position, as to whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes.

In conducting this evaluation, management is required to presume that the position will be examined by the appropriate taxing authority possessing full knowledge of all

relevant information.

The second level of evaluation is the measurement of a tax position that satisfies the more-likely-than-not recognition threshold.

This measurement is performed in order to determine the amount of benefit to recognize in the financial statements.

The tax position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement.

The Company had no unrecognized tax benefits as of December 31, 2021 or 2020.

The Company does not anticipate any material change to unrecognized tax benefits during the year ended December 31, 2022.

As of December 31, 2021, the tax years ended December 31, 2021, 2020, 2019, and 2018, remained subject to examination by all of the Company's relevant tax jurisdictions.

The Company is currently not under audit in any taxing jurisdictions.

MERGER RELATED EXPENSES

Merger-related expenses were recorded in the consolidated statements of income as a component of non-interest expense and include costs relating to the Merger, as described in Note 2.

These charges represent one-time costs associated with merger activities and do not represent ongoing costs of the fully integrated combined organization.

Accounting guidance requires that merger-related transactional and restructuring costs incurred by the Company be charged to expense as incurred.

Costs associated with employee severance and other merger-related compensation expense incurred in connection with the Merger totaled $ 15.9 million for the year ended December 31, 2021 and were recorded in merger expenses and transaction costs expense in the consolidated statements of income.

Transaction costs (inclusive of costs to terminate leases) in connection with the Merger totaled $ 28.9 million and $ 4.7 million, respectively, for the years ended December 31, 2021 and 2020, and were recorded in merger expenses and transaction costs in the consolidated statements of income.

There were no costs associated with merger expenses and transaction costs for the year ended December 31, 2019.

BRANCH RESTRUCTURING COSTS

On June 29, 2021, the Company issued a press release announcing that the Bank planned to combine five branch locations into other existing branches.

The combinations took place in October 2021.

Costs associated with early lease terminations and accelerated depreciation of fixed assets totaled $ 5.1 million for the year ended December 31, 2021 and were recorded in branch restructuring costs in the consolidated statements of income.

There were no branch restructuring costs for the years ended December 31, 2020 and 2019.

RETIREMENT AND POSTRETIREMENT PLANS

The Bank maintains two noncontributory pension plans that existed before the Merger:

(i) the Retirement Plan of Dime Community Bank (“Employee Retirement Plan”) and (ii) the BNB Bank Pension Plan, covering all eligible employees.

Bank of America, N.A.

(“BANA”) was the Trustee for the Employee Retirement Plan and BNB Bank Pension Plan assets as of December 31, 2021.

Pentegra Retirement Trust was the trustee for the Employee Retirement Plan prior to the transfer to BANA during the year ended December 31, 2021.

The assets of both plans are overseen by the Retirement Committee (“Committee”), comprised of management, who meet quarterly and set investment policy guidelines.

Merrill Lynch, Pierce, Fenner & Smith, Inc.

(MLPF&S) and Blackrock are the investment managers of the assets of both plans.

The Committee meets with representatives of MLPF&S and reviews the performance of the plan assets.

Pension plan assets include cash and cash equivalents, equities and fixed income securities.

Employee Retirement Plan

The Bank sponsors the Employee Retirement Plan, a tax-qualified, noncontributory, defined-benefit retirement plan.

Prior to April 1, 2000, substantially all full-time employees of at least 21 years of age were eligible for participation after one year of service.

Effective April 1, 2000, the Bank froze all participant benefits under the Employee Retirement Plan.

For the years ended December 31, 2021 and 2020, the Bank used December 31 as its measurement date for the Employee Retirement Plan.

The funded status of the Employee Retirement Plan was as follows:

Year Ended December 31,

(In thousands)

Change in benefit obligation:

Benefit obligation at beginning of year

Reconciliation of projected benefit obligation:

Projected benefit obligation at beginning of year

Interest cost

Benefits paid and expected expenses

Assumption changes and other

Benefit obligation at end of year

Change in plan assets:

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contribution

Benefits paid and actual expenses

Fair value of plan assets at end of year

Actuarial (gain) loss

Benefit payments

Projected benefit obligation at end of year

Plan assets at fair value (investments in trust funds managed by trustee)

Balance at beginning of year

Return on plan assets

Benefit payments

Balance at end of year

Funded status at end of year

The following table presents amounts recognized in accumulated other comprehensive income at December 31:

Pension Benefits

SERP Benefits

(In thousands)

Net actuarial loss

Prior service cost

Net amount recognized

As of December 31, 2020, the accumulated benefit obligation was $ 32.3 million for the Pension Plan and $ 6.0 million for the SERP.

As of December 31, 2019, the accumulated benefit obligation was $ 27.4 million for the Pension Plan and $ 3.6 million for the SERP.

The following table summarizes the components of net periodic benefit (credit) cost and other amounts recognized in other comprehensive income:

Pension Benefits

SERP Benefits

Year Ended December 31,

The net periodic cost for the Employee Retirement Plan included the following components:

Year Ended December 31,

(In thousands)

Components of net periodic benefit (credit) cost and other amounts recognized in other comprehensive income:

Interest cost

Expected return on plan assets

Amortization of net loss

Amortization of prior service credit

Amortization of transition obligation

Amortization of unrealized loss

Net periodic benefit (credit) cost

Net loss (gain)

Amortization of net loss

Amortization of prior service credit

Amortization of transition obligation

Total recognized in other comprehensive income

The Company's service cost component is reported in the Company's income statement in salaries and employee benefits, which is the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.

All other components of net periodic benefit (credit) cost are reported in the other operating expenses income statement line.

The estimated net loss and prior service credit for the defined benefit Pension Plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $ 650 thousand and $ 77 thousand, respectively.

The estimated net loss for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $ 257 thousand.

Expected Long-Term Rate of Return

The Company’s expected long-term rate of return on Pension Plan assets is a long-term rate based on anticipated Pension Plan asset returns over an extended period of time, taking into account market conditions and broad asset mix considerations.

The expected rate of return is a long-term assumption and generally does not change annually.

Pension Benefits

SERP Benefits

Weighted average assumptions used to determine benefit obligations:

Discount rate

Rate of compensation increase

Weighted average assumptions used to determine net periodic benefit cost:

Discount rate

Rate of compensation increase

Expected long-term rate of return

Pension Plan Assets

The Pension Plan seeks to provide retirement benefits to the employees of the Bank who are entitled to receive benefits under the Pension Plan.

The Pension Plan assets are overseen by a committee comprised of management, who meet semi-annually, and sets the investment policy guidelines.

The Pension Plan’s overall investment strategy is to achieve a mix of approximately 97 % of investments for long‐term growth and 3 % for near‐term benefit payments with a wide diversification of asset types, fund strategies, and fund managers.

The change in accumulated other comprehensive loss that resulted from the Employee Retirement Plan is summarized as follows:

Year Ended December 31,

(In thousands)

Balance at beginning of period

Amortization of unrealized loss

Gain (loss) recognized during the year

Balance at the end of the period

Period end component of accumulated other comprehensive loss, net of tax

Major assumptions utilized to determine the net periodic cost of the Employee Retirement Plan benefit obligations were as follows:

At or for the Year Ended December 31,

Discount rate used for net periodic benefit cost

Discount rate used to determine benefit obligation at period end

Expected long-term return on plan assets used for net periodic benefit cost

Expected long-term return on plan assets used to determine benefit obligation at period end

The Employee Retirement Plan’s overall investment strategy is to achieve a mix of approximately 97 % of investments for long ‐ term growth and 3 % for near‐term benefit payments with a wide diversification of asset types, fund strategies, and fund managers.

Cash equivalents consist primarily of short-term investment funds.

1 unchanged sentence

Fixed income securities include corporate bonds, government issues, mortgage-backed securities, high yield securities and mutual funds.

The weighted average expected long-term rate of return is estimated based on current trends in Pension Plan assets, as well as projected future rates of return on those assets and reasonable actuarial assumptions based on the guidance provided by Actuarial Standard of Practice No.

The weighted average expected long-term rate of return is estimated based on current trends in Employee Retirement Plan assets, as well as projected future rates of return on those assets and reasonable actuarial assumptions based on the guidance provided by Actuarial Standard of Practice No.

27 for the real and nominal rate of investment return for a specific mix of asset classes.

1 unchanged sentence

These returns were considered along with the target allocations of asset categories.

The following table indicates the target allocations for Plan assets:

Weighted-Average-

Percentage of Plan Assets

Expected Long-

At December 31,

When these overall return expectations were applied to the Employee Retirement Plan’s target allocation, the expected annual rate of return was determined to be 7.00 % at both December 31, 2021 and 2020.

The Bank did not make any contributions to the Employee Retirement Plan during the year ended December 31, 2021.

The Bank does not expect to make contributions to the Employee Retirement Plan during the year ending December 31, 2022.

The weighted-average allocation by asset category of the assets of the Employee Retirement Plan was summarized as follows:

Asset category

Cash equivalents

Equity securities

Fixed income securities

Except for pooled vehicles and mutual funds, which are governed by the prospectus, and unless expressly authorized by management, the Pension Plan and its investment managers are prohibited from purchasing the following investments:

letter stock, private placements, or direct payments;

securities not readily marketable;

Bridge Bancorp, Inc.

pledging or hypothecating securities, except for loans of securities that are fully collateralized;

purchasing or selling derivative securities for speculation or leverage;

and investments by the investment managers in their own securities, their affiliates or subsidiaries (excluding money market funds).

Fair value is defined under FASB ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair

value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

These levels are described in Note 3 “Fair Value.”

In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Investments valued using the Net Asset Value (“NAV”) are classified as level 2 if the Pension Plan can redeem its investment with the investee at the NAV at the measurement date.

If the Pension Plan can never redeem the investment with the investee at the NAV, it is considered as level 3.

If the Pension Plan can redeem the investment at the NAV at a future date, the Pension Plan’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset.

In accordance with FASB ASC 715-20, the following table represents the Pension Plan’s fair value hierarchy for its financial assets measured at fair value on a recurring basis as of December 31, 2020 and 2019:

Debt securities (bond mutual funds)

Cash equivalents

The allocation percentages in the above table were consistent with future planned allocation percentages as of December 31, 2021 and 2020, respectively.

The following tables present a summary of the Employee Retirement Plan’s investments measured at fair value on a recurring basis by level within the fair value hierarchy, as of the dates indicated.

(See Note 24 for a discussion of the fair value hierarchy).

December 31, 2021

Fair Value Measurements Using:

Quoted Prices

Identical Assets

(Dollars in thousands)

Active Markets for

(In thousands)

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

Cash and cash equivalents

2 unchanged sentences

Equities blend

Total equities

Fixed income securities:

1 unchanged sentence

High yield bonds and bond funds

Total fixed income securities

Total Plan Assets

1 unchanged sentence

Fair Value Measurements Using:

Quoted Prices

Identical Assets

(Dollars in thousands)

Active Markets for

(In thousands)

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

Cash and cash equivalents

Mutual Funds (all registered and publicly traded) :

International Equity

Common collective investment funds:

Total Plan Assets

Benefit payments are anticipated to be made as follows:

Year Ended December 31,

BNB Bank Pension Plan

During 2012, Bridge amended the BNB Bank Pension Plan by revising the formula for determining benefits effective January 1, 2013, except for certain grandfathered Bridge employees.

Additionally, new Bridge employees hired on or after October 1, 2012 were not eligible for the BNB Bank Pension Plan.

For the year ended December 31, 2021, the Bank used December 31 as its measurement date for the BNB Bank Pension Plan.

The funded status of the BNB Bank Pension Plan was as follows:

Year Ended December 31,

(In thousands)

Reconciliation of projected benefit obligation:

Projected benefit obligation at beginning of year

Acquired in the Merger

Interest cost

Actuarial gain

Benefit payments

Projected benefit obligation at end of year

Plan assets at fair value (investments in trust funds managed by trustee)

Balance at beginning of year

Acquired in the Merger

Return on plan assets

Benefit payments

Balance at end of year

Funded status at end of year

The net periodic cost for the BNB Bank Pension Plan included the following components:

Year Ended December 31,

(In thousands)

Interest cost

Expected return on plan assets

Net periodic benefit credit

The change in accumulated other comprehensive income that resulted from the BNB Bank Pension Plan is summarized as follows:

Year Ended December 31,

(In thousands)

Balance at beginning of period

Gain recognized during the year

Balance at the end of the period

Period end component of accumulated other comprehensive income, net of tax

Major assumptions utilized to determine the net periodic cost of the BNB Bank Pension Plan benefit obligations were as follows:

At or for the Year Ended December 31,

Discount rate used for net periodic benefit cost

Discount rate used to determine benefit obligation at period end

Expected long-term return on plan assets used for net periodic benefit cost

Expected long-term return on plan assets used to determine benefit obligation at period end

The BNB Bank Pension Plan’s overall investment strategy is to achieve a mix of approximately 97 % of investments for long ‐ term growth and 3 % for near‐term benefit payments with a wide diversification of asset types, fund strategies, and fund managers.

Cash equivalents consist primarily of short-term investment funds.

Equity securities primarily include investments in common stock, mutual funds, depository receipts and exchange traded funds.

Fixed income securities include corporate bonds, government issues, mortgage-backed securities, high yield securities and mutual funds.

The weighted average expected long-term rate of return is estimated based on current trends in BNB Bank Pension Plan assets, as well as projected future rates of return on those assets and reasonable actuarial assumptions based on the guidance provided by Actuarial Standard of Practice No.

27 for the real and nominal rate of investment return for a specific mix of asset classes.

The long-term rate of return considers historical returns for the S&P 500 index and corporate bonds representing cumulative returns of approximately 9.0 % and 5.0 %, respectively.

These returns were considered along with the target allocations of asset categories.

When these overall return expectations were applied to the BNB Bank Pension Plan’s target allocation, the expected annual rate of return was determined to be 7.25 % at December 31, 2021.

The Bank did not make any contributions to the BNB Bank Pension Plan during the year ended December 31, 2021.

The Bank does not expect to make contributions to the BNB Bank Pension Plan during the year ending December 31, 2022.

The weighted-average allocation by asset category of the assets of the BNB Bank Pension Plan was summarized as follows:

Asset category

Equity securities

Debt securities (bond mutual funds)

Cash equivalents

The following tables present a summary of the BNB Bank Pension Plan’s investments measured at fair value on a recurring basis by level within the fair value hierarchy, as of the dates indicated.

(See Note 24 for a discussion of the fair value hierarchy).

December 31, 2021

Fair Value Measurements Using:

Active Markets for

(In thousands)

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

Cash and cash equivalents

mid cap/small cap

1 unchanged sentence

Equities blend

Total equities

Fixed income securities:

1 unchanged sentence

High yield bonds and bond funds

Total fixed income securities

Total Plan Assets

The Company has no minimum required pension contribution due to the overfunded status of the plan.

Estimated Future Payments

The following table summarizes benefits expected to be paid under the Pension Plan and the SERP as of December 31, 2020, which reflect expected future service:

Pension and SERP

(in thousands)

The Company provides a 401(k) plan, which covers substantially all current employees.

Newly hired employees are automatically enrolled in the plan on the 60 th day of employment, unless they elect not to participate.

Benefit payments are anticipated to be made as follows:

Year Ended December 31,

The Company maintains a 401(k) Plan (the “401(k) Plan”) that existed before the Merger.

The 401(k) Plan covers substantially all current employees.

Legacy Dime employees that continued to be employed following the Merger Date, that met eligibility requirements, were automatically enrolled in the plan unless they elected not to participate.

Newly hired employees are automatically enrolled in the plan on the first day of the month following the 60 th day of employment, unless they elect not to participate.

Participants may contribute a portion of their pre-tax base salary, generally not to exceed $ 19,500 for the calendar year ended December 31, 2021.

3 unchanged sentences

The 401(k) plan does not allow for investment in the Company’s common stock.

During the years ended December 31, 2020, 2019 and 2018 the Company made cash contributions of $ 1.4 million, $ 1.1 million, and $ 1.0 million, respectively.

The 401(k) plan also includes a discretionary profit-sharing component.

During the years ended December 31, 2020, 2019 and 2018, the Company made discretionary profit-sharing contributions of $ 546 thousand, $ 583 thousand, and $ 497 thousand, respectively.

STOCK-BASED COMPENSATION PLANS

In May 2019, the Company’s shareholders approved the Bridge Bancorp, Inc.

2019 Equity Incentive Plan (the “2019 Equity Incentive Plan”), which provides for the grant of stock-based and other incentive awards to officers, employees and directors of the Company.

The 2019 Equity Incentive Plan superseded the Bridge Bancorp, Inc.

2012 Stock-Based Incentive Plan (the “2012 Equity Incentive Plan”).

The 2012 Equity Incentive Plan superseded the 2006 Stock-Based Incentive Plan.

The maximum number of shares of stock, in the aggregate, that may be granted under the 2019 Equity Incentive Plan as stock options, restricted stock, or restricted stock units is 370,000 plus the number of shares of stock which have been reserved but not issued under the 2012 Equity Incentive Plan, and any awards that are forfeited under the 2012 Equity Incentive Plan after the effective date of the 2019 Equity Incentive Plan.

No further grants will be made under the 2012 Equity Incentive Plan.

Currently outstanding grants under the 2012 Equity Incentive Plan will not be affected.

The number of shares of the Company’s common stock available for stock-based awards under the 2019 Equity Incentive Plan is 370,000 plus 162,738 shares that were remaining under the 2012 Equity Incentive Plan.

At December 31, 2020, 436,953 shares remain available for issuance, including shares that may be granted in the form of stock options, RSAs, or RSUs.

The Compensation Committee of the Board of Directors determines awards under the 2019 Equity Incentive Plan.

The Company accounts for the 2019 Equity Incentive Plan under FASB ASC 718.

Stock Options

Stock options may be either incentive stock options, which bestow certain tax benefits on the optionee, or non-qualified stock options, not qualifying for such benefits.

All options have an exercise price that is not less than the market value of the Company's common stock on the date of the grant.

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option-pricing model.

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of the Company's common stock as of the exercise or reporting date.

During the years ended December 31, 2020, 2019 and 2018, in accordance with the Long Term Incentive Plan (“LTI Plan”) for Named Executive Officers (“NEOs”), the Company granted 69,360 , 63,267 and 47,393 stock options, respectively, with an exercise price set to equal a 10.0 % premium over the grant date stock price.

All of the stock options granted vest ratably over three years .

The estimated weighted-average grant-date fair value of all stock options granted in the years ended December 31, 2020, 2019 and 2018 was $ 4.10 , $ 5.05 and $ 6.52 per stock option, respectively, using the Black-Scholes option-pricing model with assumptions as follows:

Legacy Dime employees were allowed to rollover Company common stock shares in-kind held in the former Dime Community Bank KSOP Plan (“Dime KSOP Plan”) and hold in the 401(k) Plan.

The 401(k) held Company common stock within the accounts of participants totaling $ 9.7 million at December 31, 2021.

During the year ended December 31, 2021, total expense recognized as a component of salaries and employee benefits expense for the 401(k) Plan was $ 2.0 million.

Dime KSOP Plan

The Dime Community Bank KSOP Plan (“Dime KSOP Plan”) was terminated by resolution of the Legacy Dime Board of Directors.

The effective date of the Dime KSOP Plan termination was February 1, 2021, the date of the Merger.

As such, all participants were required to transfer their assets out of the Dime KSOP Plan.

The KSOP held Legacy Dime common stock within the accounts of participants totaling $ 40 thousand and $ 33.7 million at December 31, 2021 and 2020.

During the years

ended December 31, 2021, 2020 and 2019, total expense recognized as a component of salaries and employee benefits expense for the Dime KSOP Plan was $ 0.3 million, $ 1.9 million and $ 1.9 million, respectively.

BMP and Outside Director Retirement Plan

The Holding Company and Bank maintained the BMP, which existed in order to compensate executive officers for any curtailments in benefits due to statutory limitations on benefit plans.

As of December 31, 2020, the BMP had investments, held in a rabbi trust, in the Common Stock of $ 2.2 million.

Benefit accruals under the defined benefit portion of the BMP were suspended on April 1, 2000, when they were suspended under the Employee Retirement Plan.

Effective July 1, 1996, the Company established the Outside Director Retirement Plan to provide benefits to each eligible outside director commencing upon the earlier of termination of Board service or at age 75 .

The Outside Director Retirement Plan was frozen on March 31, 2005, and only outside directors serving prior to that date are eligible for benefits.

As of December 31, 2021 and 2020, the Bank used December 31 as its measurement date for both the BMP and Outside Director Retirement Plan.

In connection with the Merger, the Outside Director Retirement Plan and the BMP were terminated, resulting in lump sum payments to the participants in the amounts of $ 2.8 million for the Outside Director Retirement Plan and $ 6.2 million for the BMP.

The total expense recognized as a curtailment loss during the three months ended March 31, 2021 was $ 1.5 million.

The combined funded status of the defined benefit portions of the BMP and the Director Retirement Plan was as follows:

Year Ended December 31,

Dividend yield

Expected volatility

Risk-free interest rate

Expected option life

Compensation expense attributable to stock options was $ 425 thousand, $ 197 thousand and $ 91 thousand for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was $ 201 thousand of total unrecognized compensation cost related to unvested stock options.

The cost is expected to be recognized over a weighted-average period of 0.1 years.

The following table summarizes the status of the Company's stock options:

(Dollars in thousands, except per share amounts)

Outstanding, January 1, 2020

Outstanding, December 31, 2020

Vested and Exercisable, December 31, 2020

(In thousands)

Reconciliation of projected benefit obligation:

Projected benefit obligation at beginning of year

Interest cost

Benefit payments

Actuarial (gain) loss

Projected benefit obligation at end of year

Plan assets at fair value:

Balance at beginning of year

Contributions

Benefit payments

Balance at end of period

Funded status at end of year

The combined net periodic cost for the defined benefit portions of the BMP and the Director Retirement Plan included the following components:

Year Ended December 31,

(In thousands)

Interest cost

Curtailment loss

Amortization of unrealized loss

Net periodic benefit cost

The combined change in accumulated other comprehensive loss that resulted from the BMP and Director Retirement Plan is summarized as follows:

Year Ended December 31,

(In thousands)

Balance at beginning of year

Amortization of unrealized loss

Gain (loss) recognized during the year

Curtailment credit

Balance at the end of year

Period end component of accumulated other comprehensive loss, net of tax

Major assumptions utilized to determine the net periodic cost and benefit obligations for both the BMP and Director Retirement Plan were as follows:

At or For the Year Ended December 31,

Discount rate used for net periodic benefit cost – BMP

Discount rate used for net periodic benefit cost – Director Retirement Plan

Discount rate used to determine BMP benefit obligation at year end

Discount rate used to determine Director Retirement Plan benefit obligation at year end

Postretirement Benefit Plan

The Bank offered the Postretirement Benefit Plan to its retired employees who provided at least five consecutive years of credited service and were active employees prior to April 1, 1991.

Postretirement Benefit Plan benefits were available only to full-time employees who commence or commenced collecting retirement benefits from the Retirement Plan immediately upon termination of service from the Bank.

The Postretirement Benefit Plan was amended effective March 31, 2015 to eliminate plan participation for post-amendment retirees.

During the year ended December 31, 2020, Legacy Dime approved the termination of the Postretirement Benefit Plan in anticipation of the Merger.

As a result of the decision to terminate the plan, no additional benefits will be paid after January 31, 2021, and a curtailment gain of $ 1.6 million was recognized through net periodic cost during the year ended December 31, 2020.

The funded status of the Postretirement Benefit Plan was as follows:

Year Ended December 31,

(In thousands)

Reconciliation of projected benefit obligation:

Projected benefit obligation at beginning of year

Interest cost

Actuarial loss

Curtailment gain

Benefit payments

Projected benefit obligation at end of year

Plan assets at fair value:

Balance at beginning of year

Contributions

Benefit payments

Balance at end of period

Funded status at end of year

The Postretirement Benefit Plan net periodic cost included the following components:

Year Ended December 31,

(In thousands)

Interest cost

Curtailment gain

Amortization of unrealized loss

Net periodic benefit cost

The change in accumulated other comprehensive loss that resulted from the Postretirement Benefit Plan is summarized as follows:

Year Ended December 31,

(In thousands)

Balance at beginning of period

Amortization of unrealized loss

Recognition of prior service cost

Loss recognized during the year

Balance at the end of the period

Period end component of accumulated other comprehensive loss, net of tax

Major assumptions utilized to determine the net periodic cost were as follows:

At or For the Year Ended December 31,

Discount rate used for net periodic benefit cost

Discount rate used to determine benefit obligation at period end

STOCK-BASED COMPENSATION

Before the Merger, Bridge and Legacy Dime granted share-based awards under their respective share-based compensation plans, (collectively, the “Legacy Stock Plans”), which are both subject to the accounting requirements of ASC 718.

In May 2021, the Company’s shareholders approved the Dime Community Bancshares, Inc.

2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”) to provide the Company with sufficient equity compensation to meet the objectives of appropriately incentivizing its officers, other employees, and directors to execute our strategic plan to build shareholder value, while providing appropriate shareholder protections.

The Company no longer makes grants under the Legacy Stock Plans.

Awards outstanding under the Legacy Stock Plans will continue to remain outstanding and subject to the terms and conditions of the Legacy Stock Plans.

At December 31, 2021, there were 1,123,844 shares reserved for issuance under the 2021 Equity Incentive Plan.

In anticipation of the Merger, Legacy Dime accelerated and vested all unvested and outstanding share-based awards such that there were no outstanding awards as of December 31, 2020.

In connection with the Merger, all outstanding stock options granted under Legacy Dime’s equity plans, were legally assumed by the combined company and adjusted so that its holder is entitled to receive a number of shares of Dime’s common stock equal to the product of (a) the number of shares of Legacy Dime common stock subject to such award multiplied by (b) the Exchange Ratio and (c) rounded, as applicable, to the nearest whole share, and otherwise subject to the same terms and conditions (including, without limitation, with respect to vesting conditions (taking into account any vesting that occurred at the Merger Date)).

In connection with the Merger, all outstanding stock options and time-vesting restricted stock units of Bridge, which we refer to as the Bridge equity awards, which were outstanding immediately before the Merger Date continue to be awards in respect of Dime common stock following the Merger, subject to the same terms and conditions that were applicable to such awards before the Merger Date.

Stock Option Activity

The following table presents a summary of activity related to stock options granted under the Legacy Stock Plans, and changes during the period then ended:

Average Exercise

(In thousands)

Options outstanding at January 1, 2021 as adjusted for conversion

Options acquired

Options exercised

Options forfeited

Options outstanding at December 31, 2021

Options vested and exercisable at December 31, 2021

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

Year Ended December 31,

(In thousands)

Cash received for option exercise cost

Income tax (expense) benefit recognized on stock option exercises

Intrinsic value of options exercised

The range of exercise prices and weighted-average remaining contractual lives of both outstanding and vested options (by option exercise cost) as of December 31, 2021 were as follows:

Outstanding Options

Vested Options

Exercise Prices:

Restricted Stock Awards

The Company's RSAs are shares of the Company's common stock that are forfeitable and are subject to restrictions on transfer prior to the vesting date.

RSAs are forfeited if the award holder departs the Company before vesting.

RSAs carry dividend and voting rights from the date of grant.

The vesting of time-vested RSAs depends upon the award holder continuing to render services to the Company.

The Company's performance-based RSAs vest subject to the achievement of the Company's corporate goals.

The following table summarizes the unvested RSA activity for the year ended December 31, 2020:

Average Grant-Date

Unvested, January 1, 2020

Unvested, December 31, 2020

During the year ended December 31, 2020, the Company granted a total of 91,428 RSAs.

Of the 91,428 RSAs granted, 57,850 time-vested RSAs vest ratably over five years and 33,578 time-vested RSAs vest ratably over three years .

During the year ended December 31, 2019, the Company granted RSAs of 78,952 shares.

Of the 78,952 shares granted, 49,925 shares vest over five years and 29,027 shares vest over three years .

During the year ended December 31, 2018, the Company granted RSAs of 83,782 shares.

Of the 83,782 shares granted, 44,750 shares vest over five years , 13,915 shares vest over three years and 25,117 performance-based RSAs vest ratably over two years , subject to the achievement of the Company’s 2018 corporate goals.

As of December 31, 2020, there were 89,043 unvested RSAs, all of which were time-vested RSAs and there were no performance-based RSAs.

Compensation expense attributable to RSAs was $ 5.1 million, $ 2.2 million and $ 2.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The total fair value of shares vested during the years ended December 31, 2020, 2019 and 2018, was $ 8.8 million, $ 2.5 million and $ 1.5 million, respectively.

As of December 31, 2020, there was $ 2.2 million of total unrecognized compensation costs related to non-vested RSAs.

The cost is expected to be recognized over a weighted-average period of 0.1 years.

Restricted Stock Units

Long Term Incentive Plan

RSUs represent an obligation to deliver shares to an employee at a future date if certain vesting conditions are met.

RSUs are subject to a time-based vesting schedule, or the satisfaction of performance conditions, and are settled in shares of the Company's common stock.

RSUs do not provide voting rights and RSUs may provide dividend equivalent rights from the date of grant.

The following table summarizes the unvested NEO RSU activity for the year ended December 31, 2020:

Average Grant-Date

Unvested, January 1, 2020

Reinvested dividends

Added by performance factor

Unvested, December 31, 2020

During the year ended December 31, 2020 in accordance with the LTI plan for NEOs, the Company granted 26,556 RSUs.

Of the 26,556 RSUs granted, 17,943 time-vested RSUs vest ratably over three years and 8,613 performance-based RSUs vest subject to the achievement of the Company’s three-year corporate goal for the three-year period ending December 31, 2022.

During the year ended December 31, 2019 in accordance with the LTI plan for NEOs, the Company granted 22,305 RSUs.

Of the 22,305 RSUs granted, 13,255 time-vested RSUs vest ratably over five years and 9,050 performance-based RSUs vest subject to the achievement of the Company’s three-year corporate goal for the three-year period ending December 31, 2021.

Compensation expense attributable to LTI plan RSUs was $ 1.6 million, $ 693 thousand and $ 462 thousand in connection with these awards for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was $ 0.6 million of total unrecognized compensation cost related to non-vested RSUs.

The cost is expected to be recognized over a weighted-average period of 0.1 years.

Directors Plan

In April 2009, the Company adopted a Directors Deferred Compensation Plan (“Directors Plan”).

Under the Directors Plan, independent directors may elect to defer all or a portion of their annual retainer fee in the form of RSUs.

In addition, directors receive a non-election retainer in the form of RSUs.

These RSUs vest ratably over one year and have dividend rights but no voting rights.

In connection with the Directors Plan, the Company recorded expense of $ 553 thousand, $ 570 thousand and $ 560 thousand for the years ended December 31, 2020, 2019 and 2018, respectively.

Employee Stock Purchase Plan

In May 2018, the Board of Directors adopted, and stockholders approved the Employee Stock Purchase Plan (“ESPP”).

A total of 1,000,000 shares of the Company’s common stock have been initially authorized for issuance under the ESPP.

Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to $ 25 thousand for the purchase of the Company’s common stock at a discounted price per share for any calendar year.

Eligible employees purchased 11,413 shares, 7,888 shares and 3,758 shares of the Company’s common stock under the ESPP during the years ended December 31, 2020, 2019 and 2018, respectively.

No expense was recorded related to ESPP for the years ended December 31, 2020, 2019 and 2018.

The Company has made RSA grants to outside Directors and certain officers under the Legacy Stock Plans and the 2021 Equity Incentive Plan.

Typically, awards to outside Directors fully vest on the first anniversary of the grant date, while awards to officers vest over a pre-determined requisite period.

All awards were made at the fair value of the Company’s common stock on the grant date.

Compensation expense on all RSAs is based upon the fair value of the shares on the respective dates of the grant.

During the year ended December 31, 2020, Legacy Dime modified certain RSAs to accelerate the vesting of all outstanding awards in connection with the Merger.

Total expense recognized as part of the acceleration was approximately $ 2.5 million.

The following table presents a summary of activity related to the RSAs granted, and changes during the period then ended:

Unvested allocated shares outstanding at January 1, 2021

Shares acquired in the Merger

Shares granted

Shares vested

Shares forfeited

Unvested allocated shares at December 31, 2021

Information related to RSAs during each period is as follows:

Year Ended December 31,

(Dollars in thousands)

Compensation expense recognized

Income tax benefit (expense) recognized on vesting of RSAs

As of December 31, 2021, there was $ 6.8 million of total unrecognized compensation cost related to unvested RSAs to be recognized over a weighted-average period of 2.8 years.

Performance-Based Share Awards

The Company maintains a LTIP for certain officers, which meets the criteria for equity-based accounting.

For each award, threshold ( 50 % of target), target ( 100 % of target) and stretch ( 150 % of target) opportunities are eligible to be earned over a three-year performance period based on the Company’s relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently.

Shares of common stock are issued on the grant date and held as unvested stock awards until the end of the performance period.

Shares are issued at the stretch opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.

Compensation expense on PSAs is based upon the fair value of the shares on the date of the grant for the expected aggregate share payout as of the period end.

During the year ended December 31, 2020, Legacy Dime modified certain PSAs to accelerate the vesting of all outstanding awards in connection with the Merger.

Total expense recognized as part of the acceleration was approximately $ 1.7 million.

There were no outstanding PSAs at December 31, 2020.

This plan continued into 2021, and as of December 31, 2021, 38,948 shares have been granted.

The following table presents a summary of activity related to the PSAs granted, and changes during the period then ended:

Maximum aggregate share payout at January 1, 2021

Shares granted

Maximum aggregate share payout at December 31, 2021

Minimum aggregate share payout

Expected aggregate share payout

Information related to PSAs during each period is as follows:

Year Ended December 31,

(In thousands)

Compensation expense recognized

Income tax benefit recognized on vesting of PSAs

As of December 31, 2021, there was $ 765 thousand of total unrecognized compensation cost related to unvested PSAs based on the expected aggregate share payout to be recognized over a weighted-average period of 2.5 years.

Sales Incentive Awards

Legacy Dime maintained a sales incentive award program for certain officers, which meets the criteria for equity-based accounting.

For each quarter an individual earned their shares based on their sales performance in that quarter.

The shares then vested one year from the quarter in which they are earned.

Shares of common stock were issued on the grant date and held as unvested stock awards until the end of the performance period.

They were issued at the maximum opportunity in order to ensure that an adequate number of shares were allocated for shares expected to vest at the end of the performance period.

During the year ended December 31, 2020, Legacy Dime modified certain performance-based share awards to accelerate the vesting of all outstanding awards in connection with the Merger.

Total compensation expense recognized as part of the acceleration was approximately $ 341 thousand.

There were no outstanding sales incentive share awards at December 31, 2020.

Total compensation expenses of $ 727 thousand and $ 171 thousand were recognized during the years ended December 31, 2020 and 2019.

There was no sales incentive awards compensation expense recognized during the year ended December 31, 2021.

There was no activity related to sales incentive awards during the year ended December 31, 2021.

EARNINGS PER SHARE

FASB ASC 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing EPS.

The RSAs and certain RSUs granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities.

The two-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.

The following table presents the computation of EPS for the years ended December 31, 2020, 2019 and 2018:

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding during the reporting period.

Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if "in the money"

stock options were exercised and converted into common stock, and prior to 2021, if all likely aggregate PSAs were issued.

In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares are excluded.

Vested RSA shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

Unvested RSA and PSA shares not yet awarded are recognized as a special class of participating securities under ASC 260, and are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

The following is a reconciliation of the numerators and denominators of basic and diluted EPS for the periods presented:

Year Ended December 31,

(In thousands, except per share data)

Dividends paid on and earnings allocated to participating securities

(In thousands except share and per share amounts)

Net income available to common stockholders

Dividends paid and earnings allocated to participating securities

Income attributable to common stock

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Weighted average common shares outstanding

Basic earnings per common share

Income attributable to common stock

Weighted average common shares outstanding

Incremental shares from assumed conversions of options and restricted stock units

Weighted average common equivalent shares outstanding

Weighted average common and equivalent shares outstanding

Diluted earnings per common share

There were 180,020 , 110,660 and 47,393 stock options outstanding at December 31, 2020, 2019 and 2018, respectively, that were not included in the computation of diluted earnings per share for the years ended December 31, 2020, 2019 and 2018 because the options’ exercise prices were greater than the average market price of common stock and were, therefore, antidilutive.

There were 8,941 RSUs that were antidilutive for the year ended December 31, 2020.

There were no RSUs that were antidilutive for the year ended December 31, 2019.

There were 3,156 RSUs that were antidilutive for the year ended December 31, 2018.

COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS

In the normal course of business, there are various outstanding commitments and contingent liabilities, such as claims and legal actions, guarantees and commitments to extend credit, which are not reflected in the accompanying consolidated financial statements.

No material losses are anticipated as a result of these commitments and contingencies.

Loan Commitments and Related Financial Instruments

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer-financing needs.

These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.

Commitments may expire without being used.

Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated.

The same credit policies are used to make such commitments as are used for loans, often including obtaining collateral at exercise of the commitment.

The following represents commitments outstanding:

Common and equivalent shares resulting from the dilutive effect of "in-the-money"

outstanding stock options are calculated based upon the excess of the average market value of the common stock over the exercise price of outstanding in-the-money stock options during the period.

There were 167,053 and 15,498 weighted-average stock options outstanding for the years ended December 31, 2021 and 2020, respectively, which were not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period.

There were no "out-of-the-money"

stock options for the year ended December 31, 2019.

PREFERRED STOCK

On February 5, 2020, Legacy Dime completed an underwritten public offering of 2,999,200 shares, or $ 75.0 million in aggregate liquidation preference, of its 5.50 % Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $ 0.01 per share, with a liquidation preference of $ 25.00 per share (the “Legacy Dime Preferred Stock”).

The net proceeds received from the issuance of preferred stock at the time of closing were $ 72.2 million.

On June 10, 2020, Legacy Dime completed an underwritten public offering, a reopening of the February 5, 2020 original issuance, of 2,300,000 shares, or $ 57.5 million in aggregate liquidation preference, of the Legacy Dime Preferred Stock.

The net proceeds received from the issuance of preferred stock at the time of closing were $ 44.3 million.

At the Effective Time of the Merger, each outstanding share of the Legacy Dime Preferred Stock was converted into the right to receive one share of a newly created series of the Company’s preferred stock having the same powers, preferences and rights as the Legacy Dime Preferred Stock.

The Company expects to pay dividends when, as, and if declared by its board of directors, at a fixed rate of 5.50 % per annum, payable quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year.

The Preferred Stock is perpetual and has no stated maturity.

The Company may redeem the Preferred Stock at its option at a redemption price equal to $ 25.00 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after June 15, 2025 or within 90 days following a regulatory capital treatment event, as described in the prospectus supplement and accompanying prospectus relating to the offering.

COMMITMENTS AND CONTINGENCIES

Loan Commitments and Lines of Credit

The contractual amounts of financial instruments with off-balance sheet risk at year-end were as follows:

(In thousands)

Standby letters of credit

Loan commitments outstanding (1)

Unused lines of credit

Total commitments outstanding

(1) Of the $ 150.5 million of loan commitments outstanding at December 31, 2020, $ 5.1 million are fixed rate commitments and $ 145.4 million are variable rate commitments.

Of the $ 117.0 million of loan commitments outstanding at December 31, 2019, $ 5.9 million are fixed rate commitments and $ 111.1 million are variable rate commitments.

The Company and its subsidiaries are subject to certain pending and threatened legal actions that arise out of the normal course of business.

In the opinion of management, the resolution of any such pending or threatened litigation is not expected to have a material adverse effect on the Company’s consolidated financial statements.

Effective March 26, 2020, the FRB Board reduced the reserve requirement ratios to zero percent, which eliminated reserve requirements for all depository institutions.

During 2020, the Bank invested overnight with the FRB and the average balance maintained during 2020 was $ 342.4 million.

During 2020, the Bank maintained an overnight line of credit with the FHLB.

The Bank has the ability to borrow against its unencumbered residential and commercial mortgages and investment securities owned by the Bank.

At December 31, 2020, the Bank had aggregate lines of credit of $ 418.0 million with unaffiliated correspondent banks to provide short-term credit for liquidity requirements.

Of these aggregate lines of credit, $ 398.0 million is available on an unsecured basis.

As of December 31, 2020, the Bank had no such borrowings outstanding.

In March 2001, the Bank entered into a Master Repurchase Agreement with the FHLB whereby the FHLB agrees to purchase securities from the Bank, upon the Bank’s request, with the simultaneous agreement to sell the same or similar securities back to the Bank at a future date.

Securities are limited, under the agreement, to government securities, securities issued, guaranteed or collateralized by any agency or instrumentality of the U.S.

Government or any government sponsored enterprise, and non-agency AA and AAA rated mortgage-backed securities.

At December 31, 2020, there was up to $ 1.9 billion available for transactions under this agreement, assuming availability of required collateral.

REGULATORY CAPITAL REQUIREMENTS

Variable Rate

Available lines of credit

Other loan commitments

Stand-by letters of credit

At December 31, 2021 and 2020, the Bank had outstanding firm loan commitments that were accepted by the borrower aggregating $ 226.1 million and $ 82.9 million, respectively.

The year-over-year increase in loan commitments was related to the Merger.

Substantially all of the Bank’s commitments expire within three months of their acceptance by the prospective borrower.

The credit risk associated with these commitments is based on the loan type which is comprised of multifamily residential, residential mixed-use, commercial real estate, commercial mixed-use, C&I, and one-to-four family residential loans.

At December 31, 2021, the Bank had an available line of credit with the FHLBNY equal to its excess borrowing capacity.

At December 31, 2021, this amount approximated $ 3.2 billion.

During the year ended December 31, 2017, the Bank completed a securitization of $ 280.2 million of its multifamily loans through a Federal Home Loan Mortgage Corporation (“FHLMC”) sponsored “Q-deal” securitization completed in December 2017.

With respect to the securitization transaction, the Company also has continuing involvement through a reimbursement agreement executed with Freddie Mac.

To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse FHLMC for such amounts, not to exceed 10 % of the original principal amount of the loans comprising the securitization pool at the closing date.

The Company is subject to certain pending and threatened legal actions which arise out of the normal course of business.

Litigation is inherently unpredictable, particularly in proceedings where claimants seek substantial or indeterminate damages, or which are in their early stages.

The Company cannot predict with certainty the actual loss or range of loss related to such legal proceedings, the manner in which they will be resolved, the timing of final resolution or the ultimate settlement.

Consequently, the Company cannot estimate losses or ranges of losses related to such legal matters, even in instances where it is reasonably possible that a loss will be incurred.

In the opinion of management, after consultation with counsel, the resolution of all ongoing legal proceedings will not have a material adverse effect on the consolidated financial condition or results of operations of the Company.

The Company accounts for potential losses related to litigation in accordance with GAAP.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

There are three levels of inputs that may be used to measure fair values:

Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Significant other observable inputs such as any of the following:

(1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability ( e.g.

, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 Inputs – Significant unobservable inputs for the asset or liability.

Significant unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Significant unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s marketable equity securities and available-for-sale securities are reported at fair value, which were determined utilizing prices obtained from independent parties.

The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information.

For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing.

The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained

only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

For certain securities, additional inputs may be used or some market inputs may not be applicable.

Prioritization of inputs may vary on any given day based on market conditions.

All MBS, CMOs, treasury securities, and agency notes are guaranteed either implicitly or explicitly by GSEs as of December 31, 2021 and December 31, 2020.

In accordance with the Company’s investment policy, corporate securities are rated "investment grade"

at the time of purchase and the financials of the issuers are reviewed quarterly.

Obtaining market values as of December 31, 2021 and December 31, 2020 for these securities utilizing significant observable inputs was not difficult due to their liquid nature.

Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.

The following tables present financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Fair Value Measurements

at December 31, 2021 Using

(In thousands)

Financial Assets:

Securities available-for-sale:

Treasury securities

Corporate securities

Pass-through MBS issued by GSEs

State and municipal obligations

Derivative – cash flow hedges

Derivative – freestanding derivatives, net

Financial Liabilities:

Derivative – freestanding derivatives, net

Fair Value Measurements

at December 31, 2020 Using

(In thousands)

Financial Assets:

Marketable equity securities (Registered mutual funds)

Domestic equity mutual funds

International equity mutual funds

Fixed income mutual funds

Securities available-for-sale:

Corporate securities

Pass-through MBS issued by GSEs

Derivative – freestanding derivatives, net

Financial Liabilities:

Derivative – cash flow hedges

Derivative – freestanding derivatives, net

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis.

That is, they are subject to fair value adjustments in certain circumstances.

Financial assets measured at fair value on a non-recurring basis include certain individually evaluated loans (or impaired loans prior to the adoption of ASC 326) reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.

December 31, 2021

Fair Value Measurements Using:

Quoted Prices

(In thousands)

Individually evaluated loans

Individually evaluated loans with an allowance for credit losses at December 31, 2021 had a carrying amount of $ 1.9 million, which is made up of the outstanding balance of $ 2.5 million, net of a valuation allowance of $ 600 thousand.

Collateral dependent individually analyzed loans as of December 31, 2021 resulted in a credit loss provision of $ 600 thousand, which is included in the amounts reported in the consolidated statements of income for the year ended December 31, 2021.

There were no collateral dependent impaired loans (prior to the adoption of the CECL Standard) with an allowance for credit losses at December 31, 2020.

Financial Instruments Not Measured at Fair Value

The following tables present the carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or nonrecurring basis for the dates indicated, segmented by level within the fair value hierarchy.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Fair Value Measurements

at December 31, 2021 Using

(In thousands)

Financial Assets:

Cash and due from banks

Securities held-to-maturity

Loans held for investment, net

Accrued interest receivable

Financial Liabilities:

Savings, money market and checking accounts

Certificates of Deposits ("CDs")

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Accrued interest payable

Fair Value Measurements

at December 31, 2020 Using

(In thousands)

Financial Assets:

Cash and due from banks

Loans held for investment, net

Accrued interest receivable

Financial Liabilities:

Savings, money market and checking accounts

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Accrued interest payable

REGULATORY CAPITAL MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.

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The following tables present actual capital levels and minimum required levels for the Company and the Bank under Basel III rules at December 31, 2021 and 2020:

December 31, 2020

Minimum Capital

Minimum To Be Well

Minimum Capital

Adequacy Requirement with

Capitalized Under Prompt

Actual Capital

Adequacy Requirement

Capital Conservation Buffer

Corrective Action Provisions

To Be Categorized

(Dollars in thousands)

Common equity tier 1 capital to risk-weighted assets:

Total capital to risk-weighted assets:

Tier 1 capital to risk-weighted assets:

Tier 1 capital to average assets:

Adequacy Purposes (1)

as “Well Capitalized” (1)

December 31, 2021

Minimum Capital

Minimum To Be Well

Minimum Capital

Adequacy Requirement with

Capitalized Under Prompt

Actual Capital

Adequacy Requirement

Capital Conservation Buffer

Corrective Action Provisions

Tier 1 capital / % of average total assets

Consolidated Company

Common equity Tier 1 capital / % of risk-weighted assets

Consolidated Company

Tier 1 capital / % of risk-weighted assets

Consolidated Company

Total capital / % of risk-weighted assets

Consolidated Company

(1) In accordance with the Basel III rules.

To Be Categorized

(Dollars in thousands)

Common equity tier 1 capital to risk-weighted assets:

Total capital to risk-weighted assets:

Tier 1 capital to risk-weighted assets:

Tier 1 capital to average assets:

PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Dime Community Bancshares, Inc.

(Parent Company only) follows:

Condensed Balance Sheets

Adequacy Purposes (1)

as “Well Capitalized” (1)

December 31, 2020

Tier 1 capital / % of average total assets

Consolidated Company

Common equity Tier 1 capital / % of risk-weighted assets

Consolidated Company

Tier 1 capital / % of risk-weighted assets

Consolidated Company

Total capital / % of risk-weighted assets

Consolidated Company

(1) In accordance with the Basel III rules.

CONDENSED HOLDING COMPANY ONLY FINANCIAL STATEMENTS

The following statements of condition as of December 31, 2021 and 2020, and the related statements of income and cash flows for the years ended December 31, 2021, 2020 and 2019, reflect the Holding Company’s investment in its wholly-owned subsidiary, the Bank, using, as deemed appropriate, the equity method of accounting:

DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF FINANCIAL CONDITION

(In thousands)

Cash and cash equivalents

Investment in the Bank

Cash and due from banks

Securities available-for-sale, at fair value

Marketable equity securities, at fair value

Investment in subsidiaries

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Subordinated debentures

Subordinated debt, net

Other liabilities

Total liabilities

Total stockholders’ equity

Stockholders’ equity

Total liabilities and stockholders’ equity

Condensed Statements of Income

DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (1)

Year Ended December 31,

(In thousands)

Dividends from the Bank

Interest expense

Net interest loss

Dividends received from Bank

Non-interest income

Non-interest expense

Income before income taxes and equity in undistributed earnings of the Bank

Income tax benefit

Income before equity in undistributed earnings of the Bank

Equity in undistributed earnings of the Bank

Income before income taxes and equity in undistributed earnings of direct subsidiaries

Income tax credit

Income before equity in undistributed earnings of direct subsidiaries

Equity in undistributed earnings of subsidiaries

(1) Other comprehensive income for the Holding Company approximated other comprehensive income for the consolidated Company during the years ended December 31, 2021, 2020 and 2019.

DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(In thousands)

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed earnings of the Bank

(Increase) decrease in other assets

(Decrease) increase in other liabilities

Equity in undistributed earnings of direct subsidiaries

Net gain on marketable equity securities

Net accretion

Decrease (increase) in other assets

Increase in other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds sales of marketable equity securities

Purchases of securities available-for-sale and marketable equity securities

Reimbursement from subsidiary, including purchases of securities available-for-sale

Net cash received in business combination

Net cash provided by investing activities

Cash flows from financing activities:

Net proceeds from issuance of common stock

Purchase of treasury stock

Repurchase of surrendered stock from vesting of stock plans

Cash dividends paid

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the components of other comprehensive (loss) income and related income tax effects:

Year Ended December 31,

(In thousands)

Unrealized holding gains (losses) on available for sale securities

Reclassification adjustments for (gains) losses realized in income

Income tax effect

Net change in unrealized gains (losses) on available for sale securities

Unrealized net losses arising during the period

Reclassification adjustments for amortization realized in income

Income tax effect

Net change in post-retirement obligation

Change in fair value of derivatives used for cash flow hedges

Reclassification adjustments for losses (gains) realized in income

Income tax effect

Net change in unrealized (losses) gains on cash flow hedges

Other comprehensive (loss) income

The following is a summary of the accumulated other comprehensive (loss) income balances, net of income taxes, at the dates indicated:

Comprehensive

(In thousands)

Income (Loss)

Unrealized (losses) gains on available for sale securities

Unrealized losses on pension benefits

Unrealized losses on cash flow hedges

Accumulated other comprehensive loss, net of income taxes

The following represents the reclassifications out of accumulated other comprehensive (loss) income:

Year Ended December 31,

Affected Line Item in the

(In thousands)

Consolidated Statements of Income

Realized gains (losses) on sale of available for sale securities

Net securities gains (losses)

Amortization of defined benefit pension plan and defined benefit plan component of the SERP:

Prior service credit

Other operating expenses

Transition obligation

Other operating expenses

Actuarial losses

Other operating expenses

Realized (losses) gains on cash flow hedges

Interest expense

Realized loss on the termination of swaps

Loss on termination of swaps

Total reclassifications, before income tax

Income tax benefit (expense)

Income tax expense

Total reclassifications, net of income tax

QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected Consolidated Quarterly Financial Data follows:

2020 Quarter Ended

(In thousands, except per share amounts)

September 30,

Interest income

Interest expense

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income

Non-interest expense

Income before income taxes

Income tax expense

Basic earnings per share

Diluted earnings per share

2019 Quarter Ended

(In thousands, except per share amounts)

September 30,

Interest income

Interest expense

Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Non-interest income

Non-interest expense

Income before income taxes

Income tax expense

Basic earnings per share

Diluted earnings per share

(1) 2020 amount includes pre-tax merger expenses of $ 2.4 million.

(2) 2020 amount includes pre-tax merger expenses of $ 2.1 million.

NET FRAUD LOSS

The Company incurred a pre-tax charge of $ 8.9 million in the year ended December 31, 2018 relating to the fraudulent conduct of a business customer through its deposit accounts at the Bank.

The Company continues to work with the appropriate law enforcement authorities in connection with this matter.

The customer has filed a petition pursuant to Chapter 11 of the bankruptcy code.

In September 2020, the Company resolved its claim for the loss with its insurance carrier to the full extent of the available coverage.

SUBSEQUENT EVENT

Merger Agreement with Dime Community Bancshares, Inc.

On July 1, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legacy Dime.

Pursuant to the Merger Agreement, on February 1, 2021, Legacy Dime merged with and into Bridge, with Bridge as the surviving corporation under the name “Dime Community Bancshares, Inc.”

At 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.

The Company issued 21,232,920 shares of its common stock to Legacy Dime shareholders in connection with the Merger.

At the Effective Time, each outstanding share of Legacy Dime’s Series A preferred stock, par value $ 0.01 (the “Dime Preferred Stock”) was converted into the right to receive one share of a newly created series of Company preferred stock having the same powers, preferences and rights as the Dime Preferred Stock.

The Company issued 5,299,200 shares of its 5.50 % Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A to Dime Preferred Stock holders in connection with the Merger.

Immediately following the Merger, Dime Community Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of Legacy Dime, merged with and into BNB Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of the Company, with BNB Bank as the surviving bank, under the name “Dime Community Bank.”

In connection with the Merger, the Company assumed $ 115.0 million in aggregate principal amount of 4.50 % Fixed-to-Floating Rate Subordinated Debentures due 2027 of Legacy Dime.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Audit Committee

Dime Community Bancshares, Inc.

Hauppauge, New York

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dime Community Bancshares, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively referred to as “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework:

(2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020, due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses – Loans:

Qualitative Factors

As described in Note 1 to the consolidated financial statements, the Company adopted Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (the “CECL Standard”) as of January 1, 2020.

See change in accounting principle explanatory paragraph above.

The adoption of the CECL Standard resulted in an after-tax cumulative-effect adjustment of $1.5 million recorded in retained earnings as of January 1, 2020.

As of December 31, 2020, the allowance for credit losses was $44.2 million and the provision for credit losses was $11.5 million for the year then ended;

see Notes 1 and 4 to the consolidated financial statements.

The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses includes a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

The Company employs a loss-rate model based on probability of default and loss given default estimates, utilizing a transition matrix approach.

Loans are pooled by loan risk ratings based loan product type and other homogeneous characteristics.

Credit loss assumptions are applied to the loan pools using life-of-loan analysis runout periods and the historical severity of loss, based on the aggregate net lifetime losses (loss given default) per loan pool.

The Company adjusts for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio.

These adjustment factors (qualitative factors) include:

(1) lending policies and procedures;

(2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets;

(3) the nature and volume of the loan portfolio including the terms of the loans;

(4) the experience, ability, and depth of the lending management and other relevant staff;

(5) the volume and severity of past due and adversely classified or graded loans and the volume of non-accrual loans;

(6) the quality of the Company’s loan review system;

(7) the value of underlying collateral for collateralized loans;

(8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

The factors above include management’s expectation of future conditions based on a reasonable and supportable forecasts of the economic conditions.

We determined that auditing management’s implementation and subsequent application of the qualitative factors used to reflect current and forecasted conditions in the allowance for credit losses for loans to be a critical audit matter due to the extent of audit effort and degree of auditor judgment required to evaluate the qualitative factors, given the volume and nature of inputs and the significant management judgment required.

To address this critical audit matter, we tested the operating effectiveness of the Company's controls related to the qualitative factors, including the following:

Management’s implementation and subsequent application of significant judgments related to the qualitative factors and the resulting allocation to the allowance for credit losses

• Management's review over the completeness and accuracy of the data used as the basis for the qualitative factors

• Management's testing over the mathematical accuracy of the allowance for credit losses

• An internal committee’s review of the allowance for credit losses and provision for credit losses

Our substantive procedures related to the qualitative factors included the following:

• Performing analytical procedures over the current and forecast qualitative factors

Evaluating the reasonableness of management’s initial selection and subsequent application of qualitative factors and the resulting allocation to the allowance for credit losses

• Testing the completeness and accuracy of certain data used in the qualitative factor calculations

• Testing the mathematical accuracy of the allowance for credit loss calculation

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

We have served as the Company’s auditor since 2002.

New York, New York

March 15, 2021

Redemption of preferred stock

Proceeds from preferred stock issuance, net

Proceeds from exercise of stock options

Release of stock for benefit plan awards

Payments related to tax withholding for equity awards

BMP ESOP shares received to satisfy distribution of retirement benefits

Treasury shares repurchased

Cash dividends paid to preferred stockholders

Cash dividends paid to common stockholders

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and due from banks

Cash and due from banks, beginning of period

Cash and due from banks, end of period

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data