What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 216 added, 124 removed, 326 unchanged (51% of the section changed)

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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.

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.

COVID-19 Pandemic Response

Following the March 2020 passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company participated in assisting its customers with applications for resources through the program.

Since the inception of the program, the consolidated PPP originations for the Company through December 31, 2021, including originations by both Legacy Dime and Bridge, 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.

Following the completion of the PPP, the Company sold its 2021 PPP loan 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 March 31, 2022, the Company had SBA PPP loans totaling $33.0 million, net of deferred fees.

As of June 30, 2022, the Company had SBA PPP loans totaling $18.9 million, net of deferred fees.

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

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.

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

Selected Financial Highlights and Other Data

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At or For the

Three Months Ended

Six Months Ended

Per Share Data:

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Non-performing assets

Net charge-offs (recoveries)

Net charge-offs

Non-performing assets/Total assets

Non-performing loans/Total loans

Allowance for credit loss/Total loans

Allowance for credit loss/Non-performing loans

Allowance for credit losses/Total loans

Allowance for credit losses/Non-performing loans

(1) Non-performing loans are defined as all loans on non-accrual status.

Critical Accounting Estimates

Note 1 Summary of Significant Accounting Policies, to the Company’s Audited Consolidated Financial Statements in its Annual Report on Form 10-K 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.

Summary of Significant Accounting Policies, to the Company’s Audited Consolidated Financial Statements in its Annual Report on Form 10-K 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 judgment 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.

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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.

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.

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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).

On February 1, 2021, Legacy Dime merged with and into Bridge in a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting (see Note 2.

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.

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

As of March 31, 2022, the Bank’s repurchase agreements totaled $2.9 million, included in other short-term borrowings on the consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, the Bank’s repurchase agreements totaling $2.2 million and $1.9 million, respectively, were included in other short-term borrowings on the consolidated balance sheets.

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

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

Total deposits decreased $28.9 million during the three months ended March 31, 2022 compared to an increase of $6.36 billion for the three months ended March 31, 2021.

Total deposits increased $107.0 million during the six months ended June 30, 2022 compared to an increase of $6.54 billion for the six months ended June 30, 2021.

The increase in total deposits during the 2021 period was primarily due to the acquisition of deposits in the Merger.

Within deposits, core deposits ( i.e., non-CDs) increased $42.6 million during the three months ended March 31, 2022 and increased $6.15 billion during the three months ended March 31, 2021.

CDs decreased $71.5 million during the three months ended March 31, 2022 compared to an increase of $217.7 million during the three months ended March 31, 2021.

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

Within deposits, core deposits ( i.e., non-CDs) increased $957 thousand during the six months ended June 30, 2022 and increased $6.56 billion during the six months ended June 30, 2021.

CDs increased $106.1 million during the six months ended June 30, 2022 compared to a decrease of $21.7 million during the six months ended June 30, 2021.

The increase in CDs during the current period was primarily due an $87.7 million increase in brokered CDs.

In the event that the Bank should require funds beyond its ability or desire to generate them internally, an additional source of funds is available through its borrowing line at the FHLBNY or borrowing capacity through AFX and lines of credit with unaffiliated correspondent banks.

At March 31, 2022, the Bank had an additional unused borrowing capacity of $3.00 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements ( i.e.

At June 30, 2022, the Bank had an additional unused borrowing capacity of $2.76 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 increased its outstanding FHLBNY advances by $25.0 million during the three months ended March 31, 2022, compared to a $670.1 million decrease during the three months ended March 31, 2021.

The Bank increased its outstanding FHLBNY advances by $75.0 million during the six months ended June 30, 2022, compared to a $1.18 billion decrease during the six months ended June 30, 2021.

The decrease in borrowings during the 2021 period was primarily due to a reduction of borrowings assumed in the Merger.

“FHLBNY Advances” for further information.

During the three months ended March 31, 2022 and 2021, real estate loan originations totaled $454.3 million and $308.7 million, respectively.

During the three months ended March 31, 2022 and 2021, C&I loan originations totaled $26.1 million and $599.1 million, respectively.

The decrease in C&I loan originations during the 2022 period was primarily due to PPP loan originations of $573.3 million during the three months ended March 31, 2021.

The Bank did not have proceeds from sales of securities available-for-sale during the three months ended March 31, 2022.

Proceeds from sales of available-for-sale securities totaled $134.6 million during the three months ended March 31, 2021.

Purchases of available-for-sale securities totaled $3.0 million and $327.2 million during the three months ended March

During the six months ended June 30, 2022 and 2021, real estate loan originations totaled $1.34 billion and $762.0 million, respectively.

During the six months ended June 30, 2022 and 2021, C&I loan originations totaled $49.9 million and $641.1 million, respectively.

The decrease in C&I loan originations during the 2022 period was primarily due to PPP loan originations of $609.7 million during the six months ended June 30, 2021.

The PPP program ended on May 31, 2021.

The Bank did not have proceeds from sales of securities available-for-sale during the six months ended June 30, 2022.

Proceeds from sales of available-for-sale securities totaled $137.6 million during the six months ended June 30, 2021.

Purchases of available-for-sale securities totaled $6.2 million and $508.3 million during the six months ended June 30,

2022 and 2021, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $49.9 million and $214.0 million for the three months ended March 31, 2022 and 2021, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the three months ended March 31, 2022.

Purchases of held-to-maturity securities totaled $31.9 million during the three months ended March 31, 2022.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $2.7 million for the three months ended March 31, 2022.

The Bank did not have securities held-to-maturity during the three months ended March 31, 2021.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $112.2 million and $290.4 million for the six months ended June 30, 2022 and 2021, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the six months ended June 30, 2022.

Purchases of held-to-maturity securities totaled $41.6 million during the six months ended June 30, 2022.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $14.1 million for the six months ended June 30, 2022.

The Bank did not have securities held-to-maturity during the six months ended June 30, 2021.

The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator.

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

At March 31, 2022, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized"

At June 30, 2022, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized"

for all regulatory purposes.

The following table summarizes Company and Bank capital ratios calculated under the Basel III Capital Rules framework as of the period indicated:

Actual Ratios at March 31, 2022

Actual Ratios at June 30, 2022

To Be Categorized as

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

During the three months ended March 31, 2022, the Holding Company repurchased 505,005 shares of its common stock at an aggregate cost of $17.4 million.

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

As of March 31, 2022, up to 581,682 shares remained available for purchase under the authorized share repurchase programs.

During the six months ended June 30, 2022, the Holding Company repurchased 1,222,649 shares of its common stock at an aggregate cost of $40.3 million.

The Holding Company repurchased 424,121 shares of its common stock at an aggregate cost of $14.6 million during the six months ended June 30, 2021.

As of June 30, 2022, up to 1,812,352 shares remained available for purchase under the authorized share repurchase programs.

See "Part II - Item 2.

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for additional information about repurchases of common stock.

The Holding Company paid $1.8 million in cash dividends on its preferred stock during both the three months ended March 31, 2022 and 2021, respectively.

The Holding Company paid $9.4 million and $9.8 million in cash dividends on its common stock during the three months ended March 31, 2022 and 2021, respectively.

The Holding Company paid $3.6 million in cash dividends on its preferred stock during both the six months ended June 30, 2022 and 2021, respectively.

The Holding Company paid $18.7 million and $15.1 million in cash dividends on its common stock during the six months ended June 30, 2022 and 2021, respectively.

Contractual Obligations

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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 March 31, 2022, the

Bank had $378.7 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.

As of June 30, 2022, the Bank had $382.0 million of firm loan commitments that were accepted by the borrowers.

All of these commitments are expected to close during the remainder of 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.

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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.

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.

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.

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Non-accrual Loans

Within our held-for-investment loan portfolio, non-accrual loans totaled $36.0 million at March 31, 2022 and $40.3 million at December 31, 2021.

Our loan portfolio as of March 31, 2022 includes loans acquired as part of the Merger that were already on non-accrual status, or have since been placed on non-accrual status.

Within our held-for-investment loan portfolio, non-accrual loans totaled $36.3 million at June 30, 2022 and $40.3 million at December 31, 2021.

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

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In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.

During the three months ended March 31, 2022, we modified five loans in a manner that met the criteria for a TDR by granting payment deferrals to borrowers experiencing financial difficulties.

We did not modify any loans in a manner that met the criteria for a TDR during the three months ended March 31, 2021.

The Bank modified six loans and two loans in a manner that met the criteria for a TDR by granting payment deferrals to borrowers experiencing financial difficulties during the six months ended June 30, 2022 and 2021, respectively.

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.

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.

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.

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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 March 31, 2022 or December 31, 2021.

We did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2022 or 2021.

There was no carrying value of OREO properties on our consolidated balance sheets at June 30, 2022 or December 31, 2021.

We did not recognize any provisions for losses on OREO properties during the six months ended June 30, 2022 or 2021.

Past Due Loans

Our loan portfolio as of March 31, 2022 includes loans acquired from the Merger that were already delinquent, or have since become delinquent.

Loans Delinquent 30 to 59 Days

At March 31, 2022, we had loans totaling $27.1 million that were past due between 30 and 59 days.

At June 30, 2022, we had loans totaling $35.9 million that were past due between 30 and 59 days.

At December 31, 2021, we had loans totaling $61.2 million that were past due between 30 and 59 days.

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Loans Delinquent 60 to 89 Days

At March 31, 2022, we had loans totaling $924 thousand that were past due between 60 and 89 days.

At June 30, 2022, we had loans totaling $1.4 million that were past due between 60 and 89 days.

At December 31, 2021, we had loans totaling $12.1 million that were past due between 60 and 89 days.

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Accruing Loans 90 Days or More Past Due

We continued accruing interest on 13 loans with an aggregate outstanding balance of $1.2 million at March 31, 2022, and nine loans with an aggregate outstanding balance of $3.0 million at December 31, 2021, all of which were 90 days or more

We continued accruing interest on three loans with an aggregate outstanding balance of $365 thousand at June 30, 2022, and nine loans with an aggregate outstanding balance of $3.0 million at December 31, 2021, 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.

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We maintain an allowance, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower.

The amount of our allowance was $4.4 million at March 31, 2022 and $4.4 million at December 31, 2021.

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

The amount of our allowance was $4.1 million at June 30, 2022 and $4.4 million at December 31, 2021.

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

Any increases or reductions in this allowance are recognized in provision for credit losses.

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

We recognized a credit loss recovery of $1.6 million during the three months ended March 31, 2022, compared to a provision of $15.8 million for the three months ended March 31, 2021.

The $1.6 million credit loss recovery for the first quarter of 2022 was associated with the improvement in forecasted macroeconomic conditions as well as a reduction in reserves for individually evaluated loans.

The $15.8 million credit loss provision for the first quarter of 2021 was due to a provision for credit losses recorded on acquired non-PCD loans which totaled $20.3 million, and a provision for unfunded commitments which approximated $3.1 million for the first quarter of 2021, offset by a credit of $7.6 million primarily as a result of improvement in forecasted macroeconomic conditions .

For a further discussion of the allowance for credit losses and related activity during the three months ended March 31, 2022 and 2021, please see Note 8 to the condensed consolidated financial statements.

We recognized a credit loss recovery of $1.5 million during the six months ended June 30, 2022, compared to a provision of $11.5 million for the six months ended June 30, 2021.

The $1.5 million credit loss recovery for the six months ended June 30, 2022 was primarily due to releases of reserves on PCD loans.

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

We recognized a credit loss recovery of $12.2 million on the remainder of the portfolio for the six months ended June 30, 2021, primarily as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on PCD individually analyzed loans.

For a further discussion of the allowance for credit losses and related activity during the three and six months ended June 30, 2022 and 2021, please see Note 8 to the condensed 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.

March 31, 2022

June 30, 2022

December 31, 2021

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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 Three Months Ended March 31,

At or for the Six Months Ended June 30,

(Dollars in thousands)

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Allowance for credit losses to total non-performing loans at end of period

Ratio of net charge-offs (recoveries) to average loans outstanding during the period:

Ratio of net charge-offs to average loans outstanding during the period:

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

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(2) Total average loans represent gross loans (including loans held for sale), inclusive of deferred loan fees/costs and premiums/discounts.

Comparison of Financial Condition at March 31, 2022 and December 31, 2021

Assets totaled $12.08 billion at March 31, 2022, $11.9 million above their level at December 31, 2021, primarily due to an increase of $39.3 million in cash and due from banks, an increase of $26.7 million in derivative assets, and an increase of $9.4 million in our loan portfolio, partially offset by a decrease of $82.1 million in securities.

Total loans increased $9.4 million during the three months ended March 31, 2022, to $9.17 billion at period end.

During the period, we had loan originations of $480.4 million.

Comparison of Financial Condition at June 30, 2022 and December 31, 2021

Assets totaled $12.35 billion at June 30, 2022, $280.7 million above their level at December 31, 2021, primarily due to an increase of $420.7 million in our loan portfolio and an increase of $61.8 million in derivative assets, partially offset by a decrease of $155.3 million in securities and a decrease of $112.2 million in cash and due from banks.

Total loans increased $420.7 million during the six months ended June 30, 2022, to $9.58 billion at period end.

During the period, we had loan originations of $1.39 billion.

Additionally, our allowance for credit losses decreased by $4.4 million.

Total securities decreased $82.1 million during the three months ended March 21, 2022, to $1.66 billion at period end, primarily due to unrealized losses of $63.3 million and proceeds from principal payments and calls of $52.6 million, offset

in part by purchases of $34.9 million.

We transferred $175.3 million of securities available-to-sale to securities held-to-maturity during the three months ended March 31, 2022.

Total liabilities increased $49.2 million during the three months ended March 31, 2022, to $10.92 billion at period end, primarily due to an increase of $64.5 million in derivative cash collateral, and an increase of $25.0 million in FHLBNY advances, partially offset by a decrease of $29.7 million in other liabilities and a decrease of $28.9 million in deposits.

Total securities decreased $155.3 million during the six months ended June 30, 2022, to $1.59 billion at period end, primarily due to proceeds from principal payments and calls of $126.4 million and an increase in unrealized losses of $75.5 million, offset in part by purchases of $47.8 million.

We transferred $372.2 million of securities available-to-sale to securities held-to-maturity during the six months ended June 30, 2022.

Total liabilities increased $332.8 million during the six months ended June 30, 2022, to $11.21 billion at period end, primarily due to an increase of $111.2 million in derivative cash collateral, an increase of $107.0 million in deposits, an increase of $75.0 million in FHLBNY advances, and an increase of $52.7 million in derivative liabilities.

Stockholders’ Equity.

Stockholders’ equity decreased $37.3 million during the three months ended March 31, 2022 to $1.16 billion at period end, primarily due to other comprehensive loss of $43.2 million, repurchases of shares of common stock of $17.4 million, common stock dividends of $9.3 million, and preferred stock dividends of $1.8 million, offset in part by net income for the period of $34.5 million.

Comparison of Operating Results for the Three Months Ended March 31, 2022 and 2021

The Company’s results of operations for the three months ended March 31, 2021 include income for the two months following the Merger and the results of Legacy Dime for the month ended January 31, 2021.

Stockholders’ equity decreased $52.1 million during the six months ended June 30, 2022 to $1.14 billion at period end, primarily due to other comprehensive loss of $63.8 million, repurchases of shares of common stock of $40.3 million, common stock dividends of $18.4 million, and preferred stock dividends of $3.6 million, offset in part by net income for the period of $73.0 million.

Comparison of Operating Results for the Three Months Ended June 30, 2022 and 2021

Net income was $38.5 million during the three months ended June 30, 2022, lower than the net income of $51.3 million for the three months ended June 30, 2021.

During the three months ended June 30, 2022, net interest income increased by $258 thousand, non-interest income decreased by $17.4 million, non-interest expense decreased by $3.0 million, income tax expense decreased by $5.6 million, and the credit loss provision increased by $4.3 million, compared to the three months ended June 30, 2021.

Please see "Provision for Credit Losses"

for a discussion of the credit loss provision for the three months ended June 30, 2021.

The discussion of net interest income for the three months ended June 30, 2022 and 2021 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 $455 thousand and $3.8 million during the three months ended June 30, 2022 and 2021, respectively.

The decrease in loan fees was primarily due to a decrease in amortization of SBA PPP loan origination fees in 2022.

There are no out-of-period adjustments included in the rate/volume analysis in the following table.

Analysis of Net Interest Income

Three Months Ended June 30,

(Dollars in thousands)

Interest-earning assets:

Real estate loans (1)

Commercial and industrial loans (1)

Other loans (1)

Other short-term investments

Total interest-earning assets

Non-interest earning assets

Liabilities and Stockholders' Equity:

Interest-bearing liabilities:

Interest-bearing checking

Certificates of deposit

Total interest-bearing deposits

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Total borrowings

Derivative cash collateral

Total interest-bearing liabilities

Non-interest-bearing checking

Other non-interest-bearing liabilities

Total liabilities

Stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest spread (2)

Net interest-earning assets

Net interest margin (3)

Ratio of interest-earning assets to interest-bearing liabilities

Deposits (including non-interest-bearing checking accounts)

(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.

Rate/Volume Analysis

Three Months Ended June 30, 2022

Compared to Three Months Ended June 30, 2021

Increase / (Decrease) Due to:

(Dollars in thousands)

Interest-earning assets:

Real estate loans (1)

Commercial and industrial (1)

Other loans (1)

Other short-term investments

Total interest-earning assets

Interest-bearing liabilities:

Interest-bearing checking

Certificates of deposit

FHLBNY advances

Subordinated debt, net

Other short-term borrowings

Derivative cash collateral

Total interest-bearing liabilities

Net change in net interest income

(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 $93.5 million during the three months ended June 30, 2022, an increase of $258 thousand from the three months ended June 30, 2021.

Average interest-earning assets were $11.41 billion for the three months ended June 30, 2022, a decrease of $577.8 million from $11.99 billion for the three months ended June 30, 2021.

Net interest margin (“NIM”) was 3.29% during the three months ended June 30, 2022, up from 3.12% during the three months ended June 30, 2021.

Interest Income.

Interest income was $100.9 million during the three months ended June 30, 2022, compared to $100.4 million during the three months ended June 30, 2021.

During the second quarter of 2022, interest income increased $509 thousand from the second quarter of 2021, primarily reflecting increases in interest income of $6.4 million on real estate loans and $1.9 million on securities, partially offset by decreases in interest income of $7.3 million on C&I loans, $255 thousand on other loans, and $245 thousand on other short-term investments.

The increased interest income on real estate loans was related to an increase of $324.6 million in the average balance of such loans in the 2022 period, and a 16-basis point increase in the average yield.

The increased interest income on securities was due to an increase of $557.7 million in the average balance of such securities during the period, offset in part by a 14-basis point decrease in the average yield.

The decreased interest income on C&I loans was related to a decrease of $1.23 billion in the average balance of such loans in the period, offset in part by a 144-basis point increase in the average yield.

The decreased average balance of C&I loans was related to lower SBA PPP balances in the 2022 period.

Interest Expense.

Interest expense was $7.4 million during the three months ended June 30, 2022, compared to $7.1 million during the three months ended June 30, 2021, primarily reflecting increases in interest expense of $1.1 million on subordinated debt and $647 thousand on savings accounts, offset in part by decreases in interest expense of $1.1 million on CDs and $701 thousand on money market accounts.

The increased interest expense on subordinated debt was primarily due to our issuance of subordinated debt during the second quarter of 2022.

The increased interest expense on savings accounts was related to a 16-basis point increase in the average cost and a $320.3 million increase in average balance of such deposits.

The decreases in interest expenses on CDs and money market accounts were primarily due to decreased rates offered on CDs and money market accounts and decreases of $594.2 million in the average balances of CDs and $563.9 million in the average balances of money market accounts.

Provision for Credit Losses.

We recognized a credit loss provision of $44 thousand during the three months ended June 30, 2022, compared to a credit loss recovery of $4.2 million for the three months ended June 30, 2021.

The $44 thousand credit loss provision for the second quarter of 2022 was due to a $366 thousand credit loss provision on the loan portfolio primarily due to growth, partially offset by a $323 thousand credit loss recovery in reserves for unfunded loan commitments primarily due to lower balances.

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

Non-Interest Income.

Non-interest income was $12.1 million during the three months ended June 30, 2022, compared to $29.5 million during the three months ended June 30, 2021.

During the second quarter of 2022, non-interest income decreased $17.4 million from the second quarter of 2021, reflecting a decrease of $20.9 million in gain on sale of SBA loans and a decrease of $315 thousand in gain on sale of residential loans, partially offset by an increase of $2.6 million in BOLI income, an increase of $1.1 million in loan level derivative income, and an increase of $461 thousand in service charges and other fees during the 2022 period.

Included in BOLI income for the second quarter of 2022 was $2.2 million of income related to mortality proceeds from a death claim.

Included in gain on sale of SBA loans for the second quarter of 2021 was a $20.7 million gain on sale of PPP loans.

Non-Interest Expense.

Non-interest expense was $51.8 million during the three months ended June 30, 2022, compared $54.9 million during the three months ended June 30, 2021.

During the second quarter of 2022, non-interest expense decreased $3.0 million from the second quarter of 2021, reflecting merger expenses and transaction costs of $1.8 million during the 2021 period due to the Merger and branch restructuring costs of $1.7 million during the 2021 period, a decrease of $1.1 million in data processing costs and a decrease of $726 thousand in occupancy and equipment expense during the 2022 period, partially offset by an increase during the 2022 period of $856 thousand in salaries and employee benefits expenses, an increase in $727 thousand in marketing expense, and a loss on extinguishment of debt of $740 thousand during the 2022 period due to the write-off of subordinated debt issuance costs.

Non-interest expense was 1.71% and 1.72% of average assets during the three months ended June 30, 2022 and 2021, respectively.

Income Tax Expense.

Income tax expense was $15.3 million during the three months ended June 30, 2022, compared to income tax expense of $20.9 million during the three months ended June 30, 2021.

The reported effective tax rate for the second quarter of 2022 was 28.4%, comparable to 28.9% for the second quarter of 2021.

Comparison of Operating Results for the Six Months Ended June 30, 2022 and 2021

The Company’s results of operations for the six months ended June 30, 2021 include income for the five 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.

Net income was $34.5 million during the three months ended March 31, 2022, higher than the net loss of $21.0 million for the three months ended March 31, 2021.

During the three months ended March 31, 2022, net interest income increased by $11.3 million, non-interest income increased by $14.6 million, non-interest expense decreased by $32.9 million, income tax expense increased by $20.6 million, and the credit loss provision decreased by $17.4 million, compared to the three months ended March 31, 2021.

Net income was $73.0 million during the six months ended June 30, 2022, higher than the net income of $30.2 million for the six months ended June 30, 2021.

During the six months ended June 30, 2022, net interest income increased by $11.5 million, non-interest income decreased by $2.8 million, non-interest expense decreased by $36.0 million, income tax expense increased by $15.0 million, and the credit loss provision decreased by $13.1 million, compared to the six months ended June 30, 2021.

Please see "Provision for Credit Losses"

for a discussion of the credit loss provision for the three months ended March 31, 2021.

The discussion of net interest income for the three months ended March 31, 2022 and 2021 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.

for a discussion of the credit loss provision for the six months ended June 30, 2021.

The discussion of net interest income for the six months ended June 30, 2022 and 2021 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

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

2 unchanged sentences

Loan fees included in interest income were $834 thousand and $2.8 million during the three months ended March 31, 2022 and 2021, respectively.

Loan fees included in interest income were $1.3 million and

$6.5 million during the six months ended June 30, 2022 and 2021, respectively.

The decrease in loan fees was primarily due to a decrease in amortization of SBA PPP loan origination fees in 2022.

There are no out-of-period adjustments included in the rate/volume analysis in the following table.

Analysis of Net Interest Income

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in thousands)

2 unchanged sentences

Commercial and industrial loans (1)

SBA PPP loans (1)

Other loans (1)

28 unchanged sentences

Rate/Volume Analysis

Three Months Ended March 31, 2022

Compared to Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Compared to Six Months Ended June 30, 2021

Increase / (Decrease) Due to:

3 unchanged sentences

Commercial and industrial (1)

SBA PPP loans (1)

Other loans (1)

12 unchanged sentences

Net interest income.

Net interest income was $89.1 million during the three months ended March 31, 2022, an increase of $11.3 million from the three months ended March 31, 2021.

Average interest-earning assets were $11.33 billion for the three months ended March 31, 2022, an increase of $1.27 billion from $10.06 billion for the three months ended March 31, 2021.

Net interest margin (“NIM”) was 3.19% during the three months ended March 31, 2022, up from 3.14% during the three months ended March 31, 2021.

Net interest income was $182.6 million during the six months ended June 30, 2022, an increase of $11.5 million from the six months ended June 30, 2021.

Average interest-earning assets were $11.37 billion for the six months ended June 30, 2022, an increase of $344.1 million from $11.03 billion for the six months ended June 30, 2021.

Net interest margin (“NIM”) was 3.24% during the six months ended June 30, 2022, up from 3.13% during the six months ended June 30, 2021.

Interest Income.

Interest income was $93.9 million during the three months ended March 31, 2022, compared to $86.8 million during the three months ended March 31, 2021.

During the first quarter of 2022, interest income increased $7.2 million from the first quarter of 2021, primarily reflecting increases in interest income of $10.0 million on real estate loans and $2.8 million on securities, partially offset by decreases in interest income of $4.6 million on SBA PPP loans and $625 thousand on other short-term investments.

The increased interest income on real estate loans was related to an increase of $1.23 billion in the average balance of such loans in the 2022 period, offset in part by a 7-basis point decrease in the average yield.

Interest income was $194.8 million during the six months ended June 30, 2022, compared to $187.2 million during the six months ended June 30, 2021.

During the six months ended June 30, 2022, interest income increased $7.7 million from the same period in 2021, reflecting increases in interest income of $16.4 million on real estate loans and $4.7 million on securities, partially offset by decreases in interest income of $12.1 million on C&I loans, $870 thousand on other short-term investments, and $412 thousand on other loans.

The increased interest income on real estate loans was related to an increase of $798.5 million in the average balance of such loans in the 2022 period, and a 3-basis point increase in the average yield.

The increased interest income on securities was due to an increase of $708.6 million in the average balance of such securities during the period, offset in part by a 24-basis point decrease in the average yield.

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

The decreased interest income on SBA PPP loans was related to a decrease of $974.1 million in the average balance of such loans in the period, offset in part by a 160-basis point increase in the average yield.

The decreased interest income on C&I loans was related to a decrease of $1.04 billion in the average balance of such loans in the period, offset in part by a 122-basis point increase in the average yield.

The decreased average balance of C&I loans and the increase in the average yield of such loans were related to lower SBA PPP balances in the 2022 period.

Interest Expense.

Interest expense was $4.8 million during the three months ended March 31, 2022, compared to $8.9 million during the three months ended March 31, 2021, primarily reflecting decreases in interest expense of $1.8 million on CDs, $1.6 million on FHLBNY advances, and $1.1 million on money market accounts, offset in part by a $299 thousand increase in interest expense on subordinated debt.

The decrease in interest expense was primarily due to decreased rates offered on CDs and money market accounts and decreases of $819.3 million in the average balances of FHLBNY advances and $697.1 million in the average balances of CDs.

Interest expense was $12.2 million during the six months ended June 30, 2022, compared to $16.1 million during the six months ended June 30, 2021, primarily reflecting decreases in interest expense of $2.9 million on CDs, $1.8 million on money market accounts, and $1.6 million on FHLBNY advances, offset in part by increases in interest expense of $1.4 million on subordinated debt and $647 thousand on savings accounts.

The decrease in interest expense was primarily due decreases of $645.4 million in the average balances of CDs and $440.6 million in the average balances of FHLBNY advances, and decreases in rates offered on CDs and money market accounts.

The increased interest expense on subordinated debt was primarily due to our issuance of subordinated debt during the second quarter of 2022.

Provision for Credit Losses.

The Company recognized a credit loss recovery of $1.6 million during the three months ended March 31, 2022, compared to a provision of $15.8 million for the three months ended March 31, 2021.

The $1.6 million credit loss recovery for the first quarter of 2022 was due to an improvement in forecasted macroeconomic conditions as well as a reduction in reserves for individually evaluated loans.

We recognized a credit loss recovery of $1.5 million during the six months ended June 30, 2022, compared to a provision for credit losses of $11.5 million for the six months ended June 30, 2021.

The $1.5 million credit loss recovery for the six months ended June 30, 2022 was primarily due to releases of reserves on PCD loans.

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

Non-Interest Income.

Non-interest income was $7.2 million during the three months ended March 31, 2022, compared to non-interest loss of $7.4 million during the three months ended March 31, 2021.

During the first quarter of 2022, non-interest income increased $14.6 million from the first quarter of 2021, reflecting a $16.5 million loss on termination of derivatives during the 2021 period due to the Merger, an increase of $1.1 million in service charges and other fees, and an increase of $500 thousand in BOLI income during the 2022 period, partially offset by a $710 thousand net gain on sale of securities and other assets during the 2021 period, a decrease of $1.8 million in loan level derivative income, and a decrease of $575 thousand in gain on sale of residential loans during the 2022 period.

During the three months ended March 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.

Due to the terminations during the three months ended March 31, 2021, the remaining termination value was recognized as part of the loss on terminations during the three months ended March 31, 2021.

Non-interest income was $19.3 million during the six months ended June 30, 2022, compared to $22.2 million during the six months ended June 30, 2021.

During the six months ended June 30, 2022, non-interest income decreased $2.8 million from the six months ended June 30, 2021, reflecting a decrease during the 2022 period of $20.9 million in gain on sale of SBA loans, a decrease of $890 thousand in gain on sale of residential loans, and a $730 thousand net gain on sale of securities and other assets during the 2021 period, partially offset by losses on loan swap terminations of $16.5 million during the 2021 period, an increase of $3.1 million in BOLI income, and an increase of $1.6 million in service charges and other fees during the 2022 period.

Included in BOLI income for the 2022 period was $2.2 million of income related to mortality proceeds from a death claim.

Included in gain on sale of SBA loans for the 2021 period was a $20.7 million gain on sale of PPP loans.

During the six months ended June 30, 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.

Non-Interest Expense.

Non-interest expense was $49.9 million during the three months ended March 31, 2022, compared $82.8 million during the three months ended March 31, 2021.

During the first quarter of 2022, non-interest expense decreased $32.9 million from the first quarter of 2021, reflecting merger expenses and transaction costs of $37.9 million, loss on extinguishment of debt of $1.6 million, and curtailment loss of $1.5 million during the 2021 period due to the Merger, partially offset by an increase during the 2022 period of $6.0 million in salaries and employee benefits expenses, and an increase in $607 thousand in occupancy and equipment expense, primarily due to the Merger.

Non-interest expense was 1.64% and 3.11% of average assets during the three months ended March 31, 2022 and 2021, respectively.

Non-interest expense was $101.7 million during the six months ended June 30, 2022, compared to $137.7 million during the six months ended June 30, 2021.

During the six months ended June 30, 2022, non-interest expense decreased $36.0 million from the same period in 2021, reflecting merger expenses and transaction costs of $39.8 million, loss on extinguishment of debt of $1.8 million, and curtailment loss of $1.5 million during the 2021 period due to the Merger, and branch restructuring costs of $1.7 million during the 2021 period, partially offset by an increase during the 2022 period of $6.9 million in salaries and employee benefits expenses, an increase of $1.2 million in marketing expense, and a loss on extinguishment of debt of $740 thousand during the 2022 period due to the write-off of subordinated debt issuance costs.

Non-interest expense was 1.67% and 2.35% of average assets during the six months ended June 30, 2022 and 2021, respectively.

Income Tax Expense.

Income tax expense was $13.5 million during the three months ended March 31, 2022, compared to income tax benefit of $7.1 million during the three months ended March 31, 2021.

The reported effective tax rate for the first quarter of 2022 was 28.1%, and 25.2% for the first quarter of 2021.

The increase in the effective tax rate during the first quarter of 2022 compared to the year ago quarter was primarily the result of the loss of benefits from the Company’s REITs.

Income tax expense was $28.8 million during the six months ended June 30, 2022, compared to income tax expense of $13.8 million during the six months ended June 30, 2021.

Income tax expense increased in 2022 primarily due to higher income before income taxes in the 2022 period compared to the 2021 period.

The reported effective tax rate for the six months ended June 30, 2022 was 28.3%, and 31.3% for the six months ended June 30, 2021.

The decrease in the effective tax rate during the six months ended June 30, 2022 compared to a year ago was primarily the result of higher non-deductible expenses during the 2021 period.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis