Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Annual Report on Form 10-K, unless otherwise mentioned, the terms the “Company”, “we”, “us” and “our” refer to Dime Community Bancshares, Inc. and our wholly-owned subsidiary, Dime Community Bank (the “Bank”). We use the term “Holding Company” to refer solely to Dime Community Bancshares, Inc. and not to our consolidated subsidiary.
Overview
Dime Community Bancshares, Inc., a New York corporation previously known as “Bridge Bancorp, Inc.,” is a bank holding company formed in 1988. On a parent-only basis, the Holding Company has minimal operations, other than as owner of Dime Community Bank. The Holding Company is dependent on dividends from its wholly-owned subsidiary, Dime Community Bank, its own earnings, additional capital raised, and borrowings as sources of funds. The information in this report reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The Bank also generates non-interest income, such as fee income on deposit and loan accounts, merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans. The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank’s title insurance subsidiary, and income tax expense, further affects our net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity.
Completion of Merger of Equals
On February 1, 2021, Dime Community Bancshares, Inc., a Delaware corporation (“Legacy Dime”) merged with and into Bridge Bancorp, Inc., a New York corporation (“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.
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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”).
Recent Developments Relating to the COVID-19 Pandemic
As Banking was designated by New York State as an essential business, we remain committed to being a source of capital to businesses in our footprint. Over the past several years, we have taken numerous steps, including hiring personnel and adding new processes and systems, that have put us in a position to help our business customers, through programs such as the SBA Paycheck Protection Program (“PPP”). Our retail branch office locations remain open to conduct business. The locations are following the state and local guidance related to COVID vaccination mandates and Centers for Disease Control and Prevention guidance on safe practices and social distancing. All employees and customers must wear a mask when unable to socially distance. We also offer mobile and digital banking platforms. We also allow for a remote working environment for many of our back office personnel. We have not identified any material operational or internal control challenges.
We also prioritize the well-being of our employees, including the creation of the Safety and Wellness Committee. We adhere to the NY Health & Essential Rights (“HERO”) Act, under which we have adopted additional guidelines and safety measures to protect our employees against exposure.
Future government actions in response to the COVID-19 pandemic, including vaccination mandates, may affect our workforce, human capital resources, and infrastructure.
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 as a result of the COVID-19 pandemic.
Lending Operations and Accommodations to Borrowers
The Company’s business, financial condition and results of operations generally rely upon the ability of the Bank’s borrowers to repay their loans, the value of collateral underlying the Bank’s secured loans, and demand for loans and other products and services the Bank offers, which are highly dependent on the business environment in the Bank’s primary markets where it operates.
Consistent with regulatory guidance to work with borrowers during the unprecedented situation caused by the COVID-19 pandemic and as outlined in the CARES Act, the Company established a formal payment deferral program in April 2020 for borrowers that have been adversely affected by the pandemic. As of December 31, 2021, the Company had seven loans, representing outstanding loan balances of $5.7 million, that were deferring full principal and interest. In accordance with Section 4013 of the CARES Act, issued in March 2020, these deferrals are not considered troubled debt restructurings (“TDRs”). Risk-ratings on COVID-19 loan deferrals are evaluated on an ongoing basis. The loans will be subject to the Bank’s normal credit monitoring. The collectability of accrued interest is evaluated on a periodic basis.
With the passage of the PPP, administered by the SBA, the Company participated in assisting its customers with applications for resources through the program. Since the inception of the program, the consolidated PPP originations for the Company, including originations by both Legacy Dime and Bridge, through December 31, 2021 exceeded $1.90 billion. The Company’s ability to respond quickly to the SBA guidelines allowed the Company to be a source of funding for local businesses during the COVID-19 pandemic. The Company’s SBA PPP loans generally have a two-year or five-year term and earn interest at 1%. Following the completion of the PPP, the Company sold its 2021 originations in order to re-deploy funds into ongoing loan portfolio growth. The Company believes that the remainder of its SBA PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of December 31, 2021, the Company had SBA PPP loans totaling $66.0 million, net of deferred fees. It is the Company’s expectation that loans funded through the PPP are fully guaranteed by the U.S. government.
We continue to monitor unfunded commitments through the pandemic, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.
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Critical Accounting Estimates
Note 1 Summary of Significant Accounting Policies, to the Company’s Audited Consolidated Financial Statement for the year ended December 31, 2021 contains a summary of significant accounting policies. These accounting policies may require various levels of subjectivity, estimates or judgement by management. Policies with respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value of loans acquired in a business combinations are critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations. These critical accounting estimates involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions or estimates could result in material variations in the Company’s consolidated results of operations or financial condition.
Management has reviewed the following critical accounting estimates and related disclosures with its Audit Committee.
Allowance for Credit Losses on Loans Held for Investment
Methods and Assumptions Underlying the Estimate
On January 1, 2021, we adopted the CECL Standard, which requires that loans held for investment be accounted for under the current expected credit losses model. 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, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining the allowance for credit losses for loans that share similar risk characteristics, 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. 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. Management assesses the sensitivity of key assumptions at least annually by stressing the assumptions to understand the impact on the model.
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.
For loans that do not share risk characteristics, the Company evaluated the loan on an individual basis based on various factors. 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. The 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. For collateral dependent loans, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, less estimated costs to sell.
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Uncertainties Regarding the Estimate
Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed above and factors that are reflective of current or future expected conditions. These estimates depend on the duration of current overall economic conditions, industry, borrower, or portfolio specific conditions. Volatility in certain credit metrics and differences between expected and actual outcomes are to be expected.
Customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.
Impact on Financial Condition and Results of Operations
If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in the loan portfolio, resulting in additions to the allowance. 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 through charges to earnings would materially decrease our net income.
We may experience significant credit losses if borrowers experience financial difficulties, which could have a material adverse effect on our operating results.
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.
Fair value of loans acquired in a business combination
Methods and Assumptions Underlying the Estimate
On February 1, 2021, Legacy Dime merged with and into Bridge, Inc. in a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting (see Note 2 – Merger). As a result of the Merger, the Company recorded $100.2 million of goodwill, based on the fair value of acquired assets and liabilities of Bridge. The fair value often involved third-party estimates utilizing input assumptions by management which may be complex or uncertain. 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.
For purchased financial loans with credit deterioration (“PCD”), 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.
Uncertainties Regarding the Estimate
Management relied on economic forecasts, internal valuations, or other relevant factors which were available at the time of the Merger in the determination of the assumptions used to calculate the fair value of the acquired loans. The estimates about discount rates, expected future cash flows, market conditions and other future events are subjective and may differ from estimates.
Impact on Financial Condition and Results of Operations
The estimate of fair values on acquired loans contributed to the recorded goodwill from the Merger. In future income statement periods, interest income on loans will include the amortization and accretion of any premiums and discounts
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resulting from the fair value of acquired loans. Additionally, the provision for credit losses on acquired individually analyzed PCD loans may be impacted due to changes in the assumptions used to calculated expected cash flows.
Comparison of Operating Results Years Ended December 31, 2021, 2020 and 2019
The Company’s results of operations for the year ended December 31, 2021 include income for the eleven months following the Merger and the results of Legacy Dime for the month ended January 31, 2021. While Bridge was the legal acquirer and surviving corporation following the Merger, Legacy Dime is considered the acquirer for accounting purposes. Accordingly, the Company’s historical operating results as of and for the years ended December 31, 2020 and 2019, as presented and discussed in this Annual Report on Form 10-K, do not include the historical results of Bridge.
General. Net income was $104.0 million in 2021, compared to $42.3 million in 2020, and $36.2 million in 2019. During 2021, net interest income increased by $179.9 million, provision for credit losses decreased by $20.0 million, and non-interest income increased by $20.8 million. These increases to net income were partially offset by a non-interest expense increase of $127.5 million and an income tax expense increase of $31.5 million. During 2020, net interest income increased by $30.3 million and non-interest income increased by $9.1 million. These increases to net income were partially offset by a non-interest expense increase of $22.4 million, a provision for credit losses increase of $8.8 million, and an income tax expense increase of $2.0 million.
The discussion of net interest income for the years ended December 31, 2021, 2020, and 2019 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. No tax-equivalent adjustments have been made for interest income exempt from Federal, state, and local taxation. The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields. Loan fees included in interest income were $12.5 million in 2021, $7.5 million in 2020, and $2.0 million in 2019. There are no out-of-period adjustments included in the rate/volume analysis in the following table.
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Average Balance Sheets
Year Ended December 31,
2021
2020
2019
Average
Average
Average
Average
Yield/
Average
Yield/
Average
Yield/
Balance
Interest
Cost
Balance
Interest
Cost
Balance
Interest
Cost
Assets:
Interest-earning assets:
Real estate loans (1)
$
7,969,344
$
298,682
3.75
%
$
4,916,204
$
196,144
3.99
%
$
5,167,130
$
202,110
3.91
%
Commercial and industrial ("C&I") loans (1)
832,152
44,460
5.34
327,330
14,454
4.42
292,534
15,980
5.46
SBA PPP loans (1)
662,818
14,449
2.18
207,672
5,918
2.85
—
—
—
Other loans (1)
19,891
1,425
7.16
958
50
5.22
1,370
70
5.11
Securities
1,295,439
22,634
1.75
520,279
14,159
2.72
506,676
14,518
2.87
Other short-term investments
574,467
2,976
0.52
150,200
3,282
2.19
155,546
5,590
3.59
Total interest-earning assets
11,354,111
384,626
3.39
6,122,643
234,007
3.82
6,123,256
238,268
3.89
Non-interest-earning assets
758,689
301,608
247,162
Total assets
$
12,112,800
$
6,424,251
$
6,370,418
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing checking
$
924,122
$
1,655
0.18
%
$
220,693
$
627
0.28
%
$
128,276
$
251
0.20
%
Money market
3,491,870
6,521
0.19
1,653,452
9,223
0.56
1,891,153
26,983
1.43
Savings
1,142,111
697
0.06
400,530
983
0.25
341,595
538
0.16
Certificates of deposit
1,247,425
7,654
0.61
1,463,613
22,205
1.52
1,585,172
34,307
2.16
Total interest-bearing deposits
6,805,528
16,527
0.24
3,738,288
33,038
0.88
3,946,196
62,079
1.57
FHLBNY advances
259,203
1,963
0.76
1,065,356
17,898
1.68
1,073,047
23,220
2.16
Subordinated debt, net
190,128
8,523
4.48
113,974
5,322
4.67
113,827
5,322
4.68
Other short-term borrowings
6,282
4
0.06
5,582
45
0.81
9,997
226
2.26
Total borrowings
455,613
10,490
2.30
1,184,912
23,265
1.96
1,196,871
28,768
2.40
Total interest-bearing liabilities
7,261,141
27,017
0.37
4,923,200
56,303
1.14
5,143,067
90,847
1.77
Non-interest-bearing checking
3,513,354
691,561
426,633
Other non-interest-bearing liabilities
177,057
137,860
193,769
Total liabilities
10,951,552
5,752,621
5,763,469
Stockholders' equity
1,161,248
671,630
606,949
Total liabilities and stockholders' equity
$
12,112,800
$
6,424,251
$
6,370,418
Net interest income
$
357,609
$
177,704
$
147,421
Net interest spread (2)
3.02
%
2.68
%
2.12
%
Net interest-earning assets
$
4,092,970
$
1,199,443
$
980,189
Net interest margin (3)
3.15
%
2.90
%
2.41
%
Ratio of interest-earning assets to interest-bearing liabilities
156.37
%
124.36
%
119.06
%
Deposits (including non-interest-bearing checking accounts)
$
10,318,882
$
16,527
0.16
%
$
4,429,849
$
33,038
0.75
%
$
4,372,829
$
62,079
1.42
%
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average-interest earning assets.
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Rate/Volume Analysis
Years Ended December 31,
2021 over 2020
2020 over 2019
Increase/(Decrease) Due to
Increase/(Decrease) Due to
Volume
Rate
Total
Volume
Rate
Total
Interest-earning assets:
(In thousands)
Real estate loans (1)
$
118,075
$
(15,537)
$
102,538
$
(9,958)
$
3,992
$
(5,966)
Commercial and industrial (1)
24,644
5,362
30,006
1,709
(3,235)
(1,526)
SBA PPP loans (1)
11,446
(2,915)
8,531
2,959
2,959
5,918
Other loans (1)
1,172
203
1,375
(22)
2
(20)
Securities
17,309
(8,834)
8,475
396
(755)
(359)
Other short-term investments
5,737
(6,043)
(306)
(161)
(2,147)
(2,308)
Total interest-earning assets
178,383
(27,764)
150,619
(5,077)
816
(4,261)
Interest-bearing liabilities:
Interest-bearing checking
1,624
(596)
1,028
227
149
376
Money market
6,836
(9,538)
(2,702)
(2,350)
(15,410)
(17,760)
Savings
1,148
(1,434)
(286)
116
329
445
Certificates of deposit
(2,256)
(12,295)
(14,551)
(2,294)
(9,808)
(12,102)
FHLBNY advances
(9,839)
(6,096)
(15,935)
(169)
(5,153)
(5,322)
Subordinated debt, net
3,487
(286)
3,201
9
(9)
—
Other short-term borrowings
4
(45)
(41)
(68)
(113)
(181)
Total interest-bearing liabilities
1,004
(30,290)
(29,286)
(4,529)
(30,015)
(34,544)
Net change in net interest income
$
177,379
$
2,526
$
179,905
$
(548)
$
30,831
$
30,283
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
Net Interest Income. Net interest income was $357.6 million in 2021, $177.7 million in 2020, and $147.4 million in 2019. Average interest-earning assets were $11.35 billion in 2021, $6.12 billion in 2020 and 2019. Net interest margin was 3.15% in 2021, 2.90% in 2020, and 2.41% in 2019.
Interest Income. Interest income was $384.6 million in 2021, $234.0 million in 2020, and $238.3 million in 2019. During 2021, interest income increased $150.6 million from 2020, primarily reflecting increases in interest income of $102.5 million on real estate loans, $30.0 million on commercial and industrial (“C&I”) loans, $8.5 million on SBA PPP loans, $8.5 million on securities, and $1.4 million on other loans. The increased interest income on real estate loans was due to an increase of $3.05 billion in the average balance of such loans in the period, offset in part by a 24-basis point decrease in the yield. The increased interest income on C&I loans was primarily due to growth of $504.8 million in the average balances, and a 92-basis point increase in yield during the period. The increased interest income from securities was primarily due to the increase in the average balances of $775.2 million, offset in part by a 97-basis point decrease in the yield. The increased average balances were related to increased balances from the Merger. During 2020, interest income decreased $4.3 million from 2019, primarily reflecting decreases in interest income of $6.0 million on real estate loans, $2.3 million on other short-term investments, $1.5 million on C&I loans, partially offset by an increase in interest income of $5.9 million on SBA PPP loans. The decreased interest income on real estate loans was primarily due to a decrease of $250.9 million in the average balance of such loans in the period, offset in part by an 8-basis point increase in the average yield. The decreased interest income on other short-term investments was primarily due to the 140-basis point decrease in average yield on such securities. The increased interest income on SBA PPP loans was due to the addition of $207.7 million in the average balances of such loans during the period.
Interest Expense. Interest expense was $27.0 million in 2021, $56.3 million in 2020, and $90.8 million in 2019. During 2021, interest expense decreased $29.3 million from 2020, primarily reflecting decreases in interest expense of $15.9 million on FHLBNY advances, and $14.6 million on CDs. The decrease in interest expense was primarily due to decreased rates offered on CD accounts, a decrease of $216.2 million in the average balances of such accounts, a decrease of $806.2 million in the average balances of FHLBNY advances, and a decrease of 92 basis points in the cost of such borrowings. During 2020, interest expense decreased $34.5 million from 2019, primarily reflecting decreases in interest expense of $17.8 million on money market accounts, $12.1 million on CDs, and $5.3 million on FHLBNY advances. The decrease in interest expense was primarily due to decreased rates offered on money market accounts, CDs, and FHLBNY advances, and decreases of $237.7 million in the average balances of money market accounts and $121.6 million in the average balances of CDs.
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Provision for Credit Losses. The Company recognized a provision for credit losses of $6.2 million in 2021, $26.2 million in 2020, and $17.3 million in 2019. The $6.2 million provision for credit losses recognized in 2021 included a provision recorded on acquired non-PCD loans which totaled $20.3 million for the Day 2 accounting of acquired loans from the Merger and a provision for unfunded commitments of $2.9 million, offset by a credit of $17.0 million as a result of improvement in forecasted macroeconomic conditions, and releases of reserves on individually analyzed loans. The $26.2 million provision for credit losses recognized during 2020 resulted mainly from a n increas e i n th e genera l reserve allowance for credit losse s due t o th e adjustmen t o f qualitativ e factors t o accoun t fo r th e effect s o f th e COVID - 1 9 pandemi c an d relate d economi c disruption, and additional specific reserves of $6.0 million on non-performing loans. The $17.3 million provision for credit losses recognized during 2019 resulted mainly from charge-offs of $10.0 million and a $10.0 million specific reserve on one non-performing C&I relationship, partially offset by a release of reserves due to a reduction of $481.4 million in multifamily real estate loans. The provision for credit losses recognized in 2021 was calculated in accordance with the CECL Standard adopted by the Company on January 1, 2021. The provision for credit losses recognized in 2020 and 2019 was calculated in accordance with prior GAAP, including ASC 310.
Non-Interest Income. Non-interest income was $42.1 million in 2021, $21.3 million in 2020, and $12.2 million in 2019. During 2021, non-interest income increased $20.8 million from 2020, due primarily to a gain on the sale of SBA PPP loans of $20.7 million, an increase in service charges and other fees of $10.4 million, and an increase in other non-interest income of $3.0 million, partially offset by an increase in loss on termination of derivatives of $9.9 million, a decrease in loan level derivative income of $6.0 million, and a decrease in net gain on sale of securities and other assets of $2.9 million. During 2020, non-interest income increased $9.1 million from 2019, due primarily to an increase in loan level derivative income of $8.0 million, an increase in gains on sales of securities and other assets of $4.6 million, an increase in BOLI income of $2.0 million, and an increase in gain on sale of residential loans of $1.4 million, partially offset by a loss on termination of derivatives in 2020 of $6.6 million.
Non-Interest Expense. Non-interest expense was $245.3 million in 2021, $117.8 million in 2020, and $95.4 million in 2019. During 2021, non-interest expense increased $127.5 million from 2020, reflecting an increase of $47.6 million in salaries and employee benefits expense, an increase of $29.6 million in merger expenses and transaction costs, an increase of $14.5 million in occupancy and equipment expense, an increase of $8.3 million in data processing costs, an increase of $7.2 million in other expenses, and an increase of $5.9 million in professional services expenses, primarily due to the Merger. We also incurred branch restructuring costs of $5.1 million during the 2021 period. During 2020, non-interest expense increased $22.4 million from 2019, reflecting $15.3 million in merger expenses and transaction costs and $4.0 million in severance expense during the 2020 period, and an increase of $8.7 million in salaries and employee benefits expense, partially offset by a decrease of $2.7 million in loss from extinguishment of debt.
Non-interest expense was 2.03%, 1.83%, and 1.50% of average assets during 2021, 2020, and 2019, respectively. The increase in 2021 compared to 2020 was primarily due to the Merger. The increase in 2020 compared to 2019 was primarily due to merger and transaction costs in 2020.
Income Tax Expense. Income tax expense was $44.2 million in 2021, $12.7 million in 2020, and $10.7 million in 2019. Income tax expense increased $31.5 million during 2021 compared to 2020, primarily as a result of $93.2 million of higher pre-tax income during 2021. During 2020, income tax expense increased $2.0 million compared to 2019, primarily as a result of $8.1 million of higher pre-tax income in 2020.
The Company’s consolidated tax rate was 29.8%, 23.0% and 22.8% in 2021, 2020, and 2019, respectively. The increase in the effective tax rate in 2021 compared to 2020 was primarily the result of the loss of benefits from Legacy Dime’s REITs as the Company’s total assets exceeded $8 billion, and non-deductible expenses during 2021.
Comparison of Financial Condition at December 31, 2021 and December 31, 2020
Assets. Assets totaled $12.07 billion at December 31, 2021, $5.28 billion above their level at December 31, 2020, primarily due to an increase in the loan portfolio of $3.58 billion, an increase in securities of $1.20 billion, and an increase in cash and due from banks of $150.1 million. These changes were mainly due to the acquisition of assets due to the Merger.
Total loans increased $3.58 billion during the year ended December 31, 2021, to $9.16 billion at period end. During the period, the Bank had originations of $2.32 billion. Additionally, the allowance for credit losses increased by $42.4 million,
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which was due to the Merger (credit mark on PCD loans plus provision on non-PCD loans), offset by CECL adoption, improvements in forecasted macroeconomic conditions, and releases of reserves on individually analyzed loans during the year ended December 31, 2021.
The $139.7 million increase in BOLI was mainly due to purchases of $40.0 million during the year ended December 31, 2021, and acquisition of $94.1 million in BOLI as a result of the Merger.
Liabilities. Total liabilities increased $4.79 billion during the year ended December 31, 2021, to $10.87 billion at period end, primarily due to an increase of $5.93 billion in deposits, an increase of $83.0 million in subordinated debt, and an increase of $26.2 million in lease liability for operating leases. The increases in total liabilities in the current year were mainly due to the assumption of liabilities due to the Merger. The increases due to the Merger were partially offset by a decrease of $1.18 billion in FHLBNY advances and a decrease of $118.1 million in other short-term borrowings. We used excess liquidity on the balance sheet to pay down FHLBNY advances and other short-term borrowings in the current year.
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.
Stockholders’ Equity. Stockholders’ equity increased $491.5 million during the year ended December 31, 2021 to $1.19 billion at period end, primarily due to share issuances associated with the Merger of $491.2 million and net income for the period of $104.0 million, offset in part by repurchases of shares of common stock of $59.3 million, common stock dividends of $44.3 million and preferred stock dividends of $7.3 million.
Loan Portfolio Composition
The following table presents an analysis of outstanding loans by loan type, excluding loans held for sale, net of unearned discounts and premiums and deferred origination fees and costs, at the dates presented:
(In thousands)
December 31, 2021
December 31, 2020
December 31, 2019
One-to-four family, including condominium and cooperative apartment
$
669,282
7.2
%
$
184,989
3.3
%
$
148,429
2.8
%
Multifamily residential and residential mixed-use
3,356,346
36.3
2,758,743
49.1
3,385,375
63.4
Commercial real estate ("CRE")
3,945,948
42.7
1,878,167
33.4
1,350,185
25.3
Acquisition, development, and construction ("ADC")
322,628
3.5
156,296
2.8
118,365
2.2
Total real estate loans
8,294,204
89.7
4,978,195
88.6
5,002,354
93.7
C&I loans
933,559
10.1
641,533
11.4
336,412
6.3
Other loans
16,898
0.2
2,316
-
1,772
-
Total
9,244,661
100.0
%
5,622,044
100.0
%
5,340,538
100.0
%
Allowance for credit losses
(83,853)
(41,461)
(28,441)
Loans held for investment, net
$
9,160,808
$
5,580,583
$
5,312,097
During the year ended December 31, 2021, our real estate loans and C&I loans increased $3.32 billion and $292.0 million, respectively, primarily due to the acquisition of loans from the Merger.
Loan Purchases, Sales and Servicing
In the event that the Bank were to sell loans in the secondary market or through securitization, it generally retains servicing rights on the loans sold. These fees are typically derived based upon the difference between the actual origination rate and
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contractual pass-through rate of the loans at the time of sale. At December 31, 2021, the Bank had recorded servicing right assets ("SRAs") of $3.8 million associated with the sale of loans to third-party institutions in which the Bank retained the servicing of the loan. The Bank outsources the servicing of a portion of our one-to-four family mortgage loan portfolio to an unrelated third-party under a sub-servicing agreement. Fees paid under the sub-servicing agreement are reported as a component of other non-interest expense in the consolidated statements of income.
Loan Maturity and Repricing
As of December 31, 2021, $7.57 billion, or 81.8% of the loan portfolio was scheduled to mature or reprice within five years.
The following table distributes our loans held for investment portfolio at December 31, 2021 by the earlier of the maturity or next repricing date. ARMs are included in the period during which their interest rates are next scheduled to adjust. The table does not include scheduled principal amortization.
Less than 1 year
1 to 5 years
5 to 15 years
Over 15 years
Total
Amount
Amount
Amount
Amount
Amount
(In thousands)
One-to-four family residential and cooperative/condominium apartment
$
142,694
$
219,651
$
199,241
$
107,696
$
669,282
Multifamily residential and residential mixed-use
892,730
1,859,039
603,506
1,071
3,356,346
CRE
1,364,070
1,850,971
724,887
6,020
3,945,948
ADC
300,739
17,550
1,488
2,851
322,628
Total real estate loans
2,700,233
3,947,211
1,529,122
117,638
8,294,204
C&I
711,657
191,639
30,262
1
933,559
Other loans
14,970
345
228
1,355
16,898
Total
$
3,426,860
$
4,139,195
$
1,559,612
$
118,994
$
9,244,661
The following table presents our loans held for investment with maturity or next repricing due after December 31, 2022:
Due after December 31, 2022
Fixed
Adjustable
Total
(In thousands)
One-to-four family residential and cooperative/condominium apartment
$
178,949
$
347,639
$
526,588
Multifamily residential and residential mixed-use
591,908
1,871,708
2,463,616
CRE
893,182
1,688,696
2,581,878
ADC
10,520
11,369
21,889
Total real estate loans
1,674,559
3,919,412
5,593,971
C&I
204,275
17,627
221,902
Other loans
1,928
—
1,928
Total
$
1,880,762
$
3,937,039
$
5,817,801
Asset Quality
General
We do not originate or purchase loans, either whole loans or loans underlying mortgage-backed securities (“MBS”), which would have been considered subprime loans at origination, i.e ., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history. See Note 4 to our consolidated financial statements for a discussion of evaluation for impaired securities.
COVID-19 Related Loan Deferrals
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, we established a formal payment deferral program in April 2020 for borrowers that have been adversely affected by the pandemic.
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As of December 31, 2021, we had seven loans, representing outstanding loan balances of $5.7 million, that were full principal and interest (“P&I”) deferrals.
The table below presents the loans with full P&I deferrals as of the period indicated:
December 31, 2021
Number
(Dollars in thousands)
of Loans
Balance (1)
One-to-four family residential and cooperative/condominium apartment
5
$
1,922
CRE
1
3,487
C&I
1
251
Total
7
$
5,660
(1) Amount excludes net deferred costs due to immateriality.
Pursuant to guidance under Section 4013 of the CARES Act, a COVID-19 related qualified loan modification, such as a payment deferral, was exempt from classification as a TDR as defined by GAAP. This applied if the loan was current as of December 31, 2019 and the modifications were related to arrangements that deferred or delayed the payment of principal or interest, or changed the interest rate of the loan. This provision expired on January 1, 2022 and therefore we will not have additional loans modified under this exemption going forward.
Risk-ratings on COVID-19 loan deferrals are evaluated on an ongoing basis.
While interest is expected to still accrue to income during the deferral period, should deterioration in the financial condition of the borrowers that would not support the ultimate repayment of interest emerge, interest income accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted.
Monitoring and Collection of Delinquent Loans
Our management reviews delinquent loans on a monthly basis and reports to our Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in our loan portfolio.
Our loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of multifamily residential, commercial real estate loans, and C&I loans, or fifteen days late in connection with one-to-four family or consumer loans. Thereafter, periodic letters are mailed and phone calls placed to the borrower until payment is received. When contact is made with the borrower at any time prior to foreclosure, we will attempt to obtain the full payment due or negotiate a repayment schedule with the borrower to avoid foreclosure.
Accrual of interest is generally discontinued on a loan that meets any of the following three criteria: (i) full payment of principal or interest is not expected; (ii) principal or interest has been in default for a period of 90 days or more (unless the loan is both deemed to be well secured and in the process of collection); or (iii) an election has otherwise been made to maintain the loan on a cash basis due to deterioration in the financial condition of the borrower. Such non-accrual determination practices are applied consistently to all loans regardless of their internal classification or designation. Upon entering non-accrual status, we reverse all outstanding accrued interest receivable.
We generally initiate foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement. We obtain an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”) status. We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a period of generally at least six months.
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The C&I portfolio is actively managed by our lenders and underwriters. Most credit facilities typically require an annual review of the exposure and borrowers are required to submit annual financial reporting and loans are structured with financial covenants to indicate expected performance levels. Smaller C&I loans are monitored based on performance and the ability to draw against a credit line is curtailed if there are any indications of credit deterioration. Guarantors are also required to update their financial reporting. All exposures are risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny. Measures taken typically include amendments to the amount of the available credit facility, requirements for increased collateral, additional guarantor support or a material enhancement to the frequency and quality of financial reporting. Loans determined to reach adverse risk rating standards are monitored closely by Credit Administration to identify any potential credit losses. When warranted, loans reaching a Substandard rating could be reassigned to the Workout Group for direct handling.
Non-accrual Loans
Within our held-for-investment loan portfolio, non-accrual loans totaled $40.3 million at December 31, 2021 and $17.9 million at December 31, 2020. Our loan portfolio as of December 31, 2021 includes loans acquired from the Merger that were already on non-accrual status, or have since been placed on non-accrual status.
TDRs
We are required to recognize loans for which certain modifications or concessions have been made as TDRs. A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:
● A reduction of interest rate has been made for the remaining term of the loan
● The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk
● The outstanding principal amount and/or accrued interest have been reduced
In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.
We modified four loans in a manner that met the criteria for a TDR during the year ended December 31, 2021. We did not modify any loans in a manner that met the criteria for a TDR during the year ended December 31, 2020.
Accrual status for TDRs is determined separately for each TDR in accordance with our policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in our determination that a TDR has been created, the loan can be on either accrual or non-accrual status. If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least six months. Conversely, if at the time of restructuring the loan is performing (and accruing) it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under our policy and agency regulations. Within the allowance for credit losses, losses are estimated for TDRs on accrual status and well as TDRs on non-accrual status that are one-to-four family loans or consumer loans, on a pooled basis with loans that share similar risk characteristics. TDRs on non-accrual status excluding one-to-four family and consumer loans are individually evaluated to determine expected credit losses. For collateral-dependent TDRs where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses (“ACL”) is measured based on the difference between the fair value of collateral, less the estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. For non-collateral-dependent loans, the ACL is measured based on the difference between the present value of expected cash flows and the amortized cost basis of the loan as of the measurement date.
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See Note 5 to our consolidated financial statements for a further discussion of TDRs.
OREO
Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO. Upon entering OREO status, we obtain a current appraisal on the property and reassesses the likely realizable value ( a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period. We typically seek to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.
There was no carrying value of OREO properties on our consolidated balance sheets at December 31, 2021 or December 31, 2020. We did not recognize any provisions for losses on OREO properties during the years ended December 31, 2021, 2020 or 2019.
Past Due Loans
Our loan portfolio as of December 31, 2021 includes loans acquired from the Merger that were already delinquent, or have since become delinquent.
Loans Delinquent 30 to 59 Days
At December 31, 2021, we had loans totaling $61.2 million that were past due between 30 and 59 days. At December 31, 2020, we had loans totaling $15.4 million that were past due between 30 and 59 days. The 30 to 59-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.
Loans Delinquent 60 to 89 Days
At December 31, 2021, we had loans totaling $12.1 million that were past due between 60 and 89 days. At December 31, 2020, we had loans totaling $918 thousand that were past due between 60 and 89 days. The 60 to 89-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.
Accruing Loans 90 Days or More Past Due
We continued accruing interest on nine loans with an aggregate outstanding balance of $3.0 million at December 31, 2021, and three loans with an aggregate outstanding balance of $3.3 million at December 31, 2020, all of which were 90 days or more past due. 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.
Reserve for Loan Commitments
We maintain a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower. The amount of reserve was $4.4 million at December 31, 2021 and $25 thousand at December 31, 2020. This reserve is determined based upon the outstanding volume of loan commitments at each period end. Any increases or reductions in this reserve are recognized in provision for credit losses. The adoption of the CECL Standard resulted in a $1.4 million increase in the reserve. The remaining provision of $3.0 million was primarily the result of additional required reserves attributable to acquired loan commitments from the Merger during the year ended December 31, 2021.
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Allowance for Credit Losses
On January 1, 2021, the Company adopted ASU No. 2016-13 "Financial Instruments – Credit Losses (Topic 326)". ASU 2016-13 was effective for the Company as of January 1, 2020. Under Section 4014 of the CARES Act, financial institutions required to adopt ASU 2016-13 as of January 1, 2020 were provided an option to delay the adoption of the CECL framework. The Company elected to defer adoption of CECL until January 1, 2021. This 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.
The adoption of the CECL Standard resulted in an initial decrease of $3.9 million to the allowance for credit losses and an increase of $1.4 million to the reserve for unfunded commitments. The after-tax cumulative-effect adjustment of $1.7 million was recorded as an increase to retained earnings as of January 1, 2021.
A provision of $6.2 million and $26.2 million were recorded during the twelve-month periods ended December 31, 2021 and 2020, respectively. The $6.2 million credit loss provision for the twelve months ended December 31, 2021 was due to a provision for credit losses recorded on acquired non-PCD loans which totaled $20.3 million for the Day 2 accounting of acquired loans from the Merger, and a provision for unfunded commitments which approximated $2.9 million, offset by a credit of $17.0 million as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on individually analyzed loans. Durin g the twelve mont hs ende d December 31, 2020 , th e credit los s provisio n wa s drive n mainl y from a n increas e i n th e genera l reserve allowanc e fo r credit losse s due t o th e adjustmen t o f qualitativ e factors t o accoun t fo r th e effect s o f th e COVID - 1 9 pandemi c an d relate d economi c disruption, and additional specific reserves of $6.0 million on non-performing loans.
For a further discussion of the allowance for credit losses and related activity during the years ended December 31, 2021, 2020 and 2019, please see Note 5 to the consolidated financial statements.
The following table presents our allowance for credit losses allocated by loan type and the percent of each to total loans at the dates indicated.
December 31,
2021
2020
2019
Percent
Percent
Percent
of Loans
of Loans
of Loans
in Each
in Each
in Each
Category
Category
Category
Allocated
to Total
Allocated
to Total
Allocated
to Total
Amount
Loans
Amount
Loans
Amount
Loans
(In thousands)
One-to-four family residential and cooperative/condominium apartment
$
5,932
0.89
%
$
644
0.35
%
$
269
0.00
%
Multifamily residential and residential mixed-use
7,816
0.23
17,016
0.62
10,142
0.30
CRE
29,166
0.74
9,059
0.48
3,900
0.29
ADC
4,857
1.51
1,993
1.28
1,244
1.05
C&I
35,331
3.78
12,737
1.99
12,870
3.83
Other loans
751
4.44
12
0.52
16
0.90
Total
$
83,853
0.91
%
$
41,461
0.74
%
$
28,441
0.01
%
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The following table sets forth information about our allowance for credit losses at or for the dates indicated:
At or for the Year Ended December 31,
2021
2020
2019
(Dollars in Thousands)
Total loans outstanding at end of period (1)
$
9,244,661
$
5,622,044
$
5,340,538
Average total loans outstanding during the period (2)
9,484,205
5,452,165
5,461,034
Allowance for credit losses balance at end of period
83,853
41,461
28,441
Allowance for credit losses to total loans at end of period
0.91
%
0.74
%
0.53
%
Non-performing loans to total loans at end of period
0.44
0.32
0.21
Allowance for credit losses to total non-performing loans at end of period
208.04
231.26
256.43
Ratio of net charge-offs (recoveries) to average loans outstanding during the period:
One-to-four family residential and cooperative/condominium apartment
(0.01)
%
0.01
%
0.01
%
Multifamily residential and residential mixed-use
0.01
0.10
—
CRE
0.09
—
0.01
ADC
—
—
—
C&I
0.33
1.95
3.58
Other loans
3.89
0.44
0.55
Total
0.10
0.24
0.20
(1) Total loans represent gross loans (excluding loans held for sale), inclusive of deferred fees/costs and premiums/discounts.
(2) Total average loans represent gross loans (including loans held for sale), inclusive of deferred loan fees/costs and premiums/discounts.
Investment Activities
Securities available-for-sale
Our consolidated investment in securities available-for-sale totaled $1.56 billion at December 31, 2021. The average duration of these securities was 4.3 years as of December 31, 2021. The increase in our securities available-for-sale portfolio during the year ended December 31, 2021 was primarily due to the acquisition of investments due to the Merger.
The following table presents the amortized cost, fair value and weighted average yield of our securities available-for-sale at December 31, 2021, categorized by remaining period to contractual maturity:
Weighted
Amortized
Fair
Average
Cost
Value
Yield
(Dollars in Thousands)
Due within 1 year
$
852
$
858
2.01
%
Due after 1 year but within 5 years
324,464
321,009
0.78
Due after 5 years but within 10 years
486,697
489,704
2.34
Due after ten years
762,081
752,140
1.57
Total
$
1,574,094
$
1,563,711
1.65
%
The entire carrying amount of each security at December 31, 2021 is reflected in the above table in the maturity period that includes the final security payment date and, accordingly, no effect has been given to periodic repayments or possible prepayments. The weighted average duration of our securities available-for-sale approximated 4.3 years as of December 31, 2021 when giving consideration to anticipated repayments or possible prepayments, which is significantly less than their weighted average maturity.
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The following table presents the weighted average contractual maturity of our securities available-for-sale:
December 31,
2021
Weighted average contractual maturity (years) - Available-for-sale:
Agency notes
8.6
Treasury securities
3.3
Corporate securities
8.8
Pass-through MBS issued by GSEs and agency CMOs
18.8
State and municipal obligations
5.1
Securities held-to-maturity
Our investment in securities held-to-maturity totaled $179.3 million at December 31, 2021. The average duration of these securities was 5.4 years as of December 31, 2021.
The following table presents the amortized cost, fair value and weighted average yield of our securities held-to-maturity at December 31, 2021, categorized by remaining period to contractual maturity:
Weighted
Amortized
Fair
Average
Cost
Value
Yield
(Dollars in Thousands)
Due within 1 year
$
—
$
—
—
%
Due after 1 year but within 5 years
—
—
—
Due after 5 years but within 10 years
10,740
10,566
1.58
Due after ten years
168,569
166,788
1.89
Total
$
179,309
$
177,354
1.87
%
The entire carrying amount of each security at December 31, 2021 is reflected in the above table in the maturity period that includes the final security payment date and, accordingly, no effect has been given to periodic repayments or possible prepayments. The weighted average duration of our securities held-to-maturity approximated 5.4 years as of December 31, 2021 when giving consideration to anticipated repayments or possible prepayments, which is significantly less than their weighted average maturity.
The following table presents the weighted average contractual maturity of our securities held-to-maturity:
December 31,
2021
Weighted average contractual maturity (years) - Held-to-maturity:
Pass-through MBS issued by GSEs and agency CMOs
28.2
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Sources of Funds
Deposits
The following table presents our deposit accounts and the related weighted average interest rates at the dates indicated:
December 31, 2021
December 31, 2020
December 31, 2019
Percent
Percent
Percent
of
Weighted
Of
Weighted
Of
Weighted
Total
Average
Total
Average
Total
Average
Amount
Deposits
Rate
Amount
Deposits
Rate
Amount
Deposits
Rate
(Dollars in Thousands)
Savings accounts
$
1,158,040
11.1
%
0.03
%
$
414,809
9.2
%
0.12
%
$
374,265
8.7
%
0.35
%
CDs
853,242
8.2
0.58
1,322,638
29.2
0.84
1,572,869
36.7
2.05
Money market accounts
3,621,552
34.6
0.07
1,716,624
37.9
0.24
1,705,451
39.8
1.03
Interest-bearing checking accounts
905,717
8.7
0.18
290,300
6.4
0.10
151,491
3.5
0.08
Non-interest-bearing checking accounts
3,920,423
37.5
—
780,751
17.3
—
478,549
11.2
—
Totals
$
10,458,974
100.00
%
0.09
%
$
4,525,122
100.00
%
0.36
%
$
4,282,625
100.00
%
1.19
%
As a result of the Merger, we acquired $5.41 billion of deposits on the Merger Date.
The weighted average maturity of our CDs at December 31, 2021 was 7.7 months, compared to 7.4 months at December 31, 2020.
As of December 31, 2021 and 2020, the portion of deposit accounts in excess of the $250,000 FDIC insurance limit was $5.83 billion and $2.04 billion, respectively.
The following table sets forth the amount of time deposits in uninsured accounts by maturity, all of which are CDs:
(In thousands)
December 31, 2021
Maturity Period
Three months or less
$
79,289
Over three through six months
62,766
Over six through twelve months
27,834
Over twelve months
30,224
Total
$
200,113
As of December 31, 2021, total uninsured CDs totaled $200.1 million, of which the portion of uninsured CDs in excess of the $250,000 FDIC insurance limit was $73.6 million.
Our Board of Directors authorized the Bank to accept brokered deposits up to an aggregate limit of 10.0% of total assets. At December 31, 2021, brokered deposits totaled $200.0 million, which included purchased MMAs from the ICS program. At December 31, 2020, brokered deposits totaled $343.0 million, which included purchased CDs from the CDARS program, purchased MMAs from the ICS program and purchased CDs through a broker. At December 31, 2019, brokered deposits totaled $458.7 million, which included purchased CDs from the CDARS program and purchased MMAs from the ICS program.
Borrowings
The Bank’s total borrowing line with FHLBNY equaled $4.19 billion at December 31, 2021. The Bank had $25.0 million of FHLBNY advances outstanding at December 31, 2021, and $1.20 billion at December 31, 2020. The Bank maintained sufficient collateral, as defined by the FHLBNY (principally in the form of real estate loans), to secure such advances.
The Company had $1.9 million outstanding of securities sold under agreements to repurchase (“repurchase agreements”) at December 31, 2021. The Company had no securities sold under agreements to repurchase at December 31, 2020.
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Liquidity and Capital Resources
The Board of Directors of the Bank has approved a liquidity policy that it reviews and updates at least annually. Senior management is responsible for implementing the policy. The Bank’s Asset Liability Committee (“ALCO”) is responsible for general oversight and strategic implementation of the policy and management of the appropriate departments are designated responsibility for implementing any strategies established by ALCO. On a daily basis, appropriate senior management receives a current cash position report and one-week forecast to ensure that all short-term obligations are timely satisfied and that adequate liquidity exists to fund future activities. Reports detailing the Bank’s liquidity reserves are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings. In addition, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.
Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise. The Bank’s primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers, and has in the past sold such loans to FNMA and FHLMC. The Company may additionally issue debt or equity under appropriate circumstances. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.
The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily.
The Bank utilizes repurchase agreements as part of its borrowing policy to add liquidity. Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities. As of December 31, 2021, the Bank’s repurchase agreements totaled $1.9 million, included in other short-term borrowings on the consolidated balance sheets.
The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. It must additionally compete for deposit monies against the stock and bond markets, especially during periods of strong performance in those arenas. The Bank’s deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general market increases or declines in interest rates, its deposit flows should not be materially impacted. However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.
Total deposits increased $5.93 billion during the year ended December 31, 2021 compared to an increase of $180.8 million for the year ended December 31, 2020. The increase in total deposits during the current period was primarily due to the acquisition of deposits in the Merger. Within deposits, core deposits ( i.e., non-CDs) increased $6.40 billion during the year ended December 31, 2021 and increased $431.1 million during the year ended December 31. 2020. CDs decreased $469.4 million during the year ended December 31, 2021 compared to a decrease of $250.2 million during the year ended December 31, 2020. The decrease in CDs during the current period was primarily due to higher-cost CDs not being renewed. In the event that the Bank should require funds beyond its ability or desire to generate them internally, an additional source of funds is available through its borrowing line at the FHLBNY or borrowing capacity through AFX and lines of credit with unaffiliated correspondent banks. At December 31, 2021, the Bank had an additional unused borrowing capacity of $3.18 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e. , 4.5% of the Bank’s outstanding FHLBNY borrowings).
The Bank decreased its outstanding FHLBNY advances by $1.18 billion during the year ended December 31, 2021, compared to a $111.8 million increase during the year ended December 31, 2020. See Note 13. “Federal Home Loan Bank Advances” to our consolidated financial statements for further information.
During the year ended December 31, 2021 and 2020, real estate loan originations totaled $1.67 billion and $975.3 million, respectively. During the year ended December 31, 2021 and 2020, C&I loan originations totaled $647.6 million (including
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$579.9 million of PPP loans) and $494.9 million (including $334.4 million of PPP loans), respectively. The increase in both real estate loan originations and C&I loan originations during the current period was primarily due to the Merger.
Proceeds from sales of available-for-sale securities totaled $138.1 million and $94.3 million during the years ended December 31, 2021 and 2020, respectively. Purchases of available-for-sale securities totaled $1.10 billion and $219.6 million during the years ended December 31, 2021 and 2020, respectively. Proceeds from pay downs and calls and maturities of available-for-sale securities were $412.4 million and $153.1 million for the years ended December 31, 2021 and 2020, respectively.
The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator. As a general matter, these capital requirements are based on the amount and composition of an institution’s assets. At December 31, 2021, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized" for all regulatory purposes.
The Holding Company repurchased 1,755,061 shares of its common stock during the year ended December 31, 2021. Legacy Dime repurchased 1,477,029 shares of its common stock during the year ended December 31, 2020. As of December 31, 2021, up to 1,086,687 shares remained available for purchase under the authorized share repurchase programs. See "Part II - Item 5. Issuer Purchases of Equity Securities" for additional information about repurchases of common stock.
The Holding Company paid $7.3 million in cash dividends on its preferred stock during the year ended December 31, 2021. Legacy Dime paid $4.8 million in cash dividends on its preferred stock during the year ended December 31, 2020.
The Holding Company paid $39.4 million in cash dividends on its common stock during the year ended December 31, 2021. Legacy Dime paid $18.7 million in cash dividends on its common stock during the year ended December 31, 2020.
Contractual Obligations
The Bank generally has outstanding at any time borrowings in the form of FHLBNY advances, short-term or overnight borrowings, subordinated debt, as well as customer CDs with fixed contractual interest rates. In addition, the Bank is obligated to make rental payments under leases on certain of its branches and equipment.
Off-Balance Sheet Arrangements
As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to borrowers, which are originated pursuant to its regular underwriting standards. Available lines of credit may not be drawn on or may expire prior to funding, in whole or in part, and amounts are not estimates of future cash flows. As of December 31, 2021, the Bank had $226.0 million of firm loan commitments that were accepted by the borrowers. All of these commitments are expected to close during the year ended December 31, 2022.
Additionally, in connection with the Loan Securitization, the Bank executed a reimbursement agreement with FHLMC that obligates the Company to reimburse FHLMC for any contractual principal and interest payments on defaulted loans, not to exceed 10% of the original principal amount of the loans comprising the aggregate balance of the loan pool at securitization. The maximum exposure under this reimbursement obligation is $28.0 million. The Bank has pledged $26.6 million of available-for-sale pass-through MBS issued by GSEs as collateral.
Recently Issued Accounting Standards
For a discussion of the impact of recently issued accounting standards, please see Note 1 to the Company’s consolidated financial statements.
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