What changed in this filing

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Item 1A. Risk Factors

2023-02-28 compared with 2022-03-01 · 105 added, 61 removed, 131 unchanged (56% of the section changed)

Risks Related to the COVID-19 Outbreak

The economic impact of the COVID-19 outbreak may continue to have an adverse impact on our business and results of operations.

The COVID-19 pandemic has caused significant economic dislocation in the United States.

Since March 2020, many state and local governments, including New York, have from time to time ordered non-essential businesses to close and residents to shelter in place at home, or placed other restrictions on businesses and individuals, resulting in a slow-down in economic activity and increases in unemployment.

Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry.

In response to the COVID-19 outbreak, the Federal Reserve reduced the benchmark federal funds rate to a target range of 0% to 0.25%.

Various state governments and federal agencies required lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees).

From time to time, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences.

Government actions and business practices continue to evolve in response to the advent of COVID-19 variants.

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

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

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

● demand for our products and services may decline, making it difficult to grow assets and income;

● if economic activity slows or high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

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

● our allowance for credit losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

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

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

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

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

● we rely on third-party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us;

● government actions in response to the pandemic, such as vaccination mandates, may affect our business and operations, workforce, human capital resources and infrastructure.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years.

The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy.

We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

Risks Related to our Loan Portfolio

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For example, on June 14, 2019, the State of New York enacted legislation increasing the restrictions on rent increases in a rent-regulated apartment building, including, among other provisions, (i) repealing the vacancy bonus and longevity bonus, which allowed a property owner to raise rents as much as 20% each time a rental unit became vacant, (ii) eliminating high rent vacancy deregulation and high-income deregulation, which allowed a rental unit to be removed from rent stabilization once it crossed a statutory high-rent threshold and became vacant, or the tenant’s income exceeded the statutory amount in the preceding two years, and (iii) eliminating an exception that allowed a property owner who offered preferential rents to tenants to raise the rent to the full legal rent upon renewal.

The new legislation still permits a property owner to charge up to the full legal rent once the tenant vacates.

As a result of this new legislation as well as previously existing laws and regulations, it is possible that rental income might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses ( e.g.

The legislation still permits a property owner to charge up to the full legal rent once the tenant vacates.

As a result of this legislation as well as previously existing laws and regulations, it is possible that rental income might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses ( e.g.

, utilities, taxes, etc.).

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Increases to the allowance for credit losses may cause our earnings to decrease.

The Financial Accounting Standards Board (“FASB”) has issued an accounting standard that we adopted in the first quarter of 2021.

This standard, referred to as ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“CECL” or the “CECL Standard”), requires that we determine periodic estimates of lifetime expected credit losses on loans, and recognize

the expected credit losses as allowances for credit losses.

This changed the previous method of providing allowances for loan losses that are probable, and greatly increases the types of data we need to collect and review to determine the appropriate level of the allowance for credit losses.

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.

Hence, we may experience significant credit losses, which could have a material adverse effect on its operating results.

Hence, we may experience significant credit losses, which could have a material adverse effect on our operating results.

Since the first quarter of 2021, we have been required to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses.

This method of loan loss accounting represents a change from the previous method of providing allowances for loan losses that are probable, and greatly increased the types of data we need to collect and review to determine the appropriate level of the allowance for credit losses.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.

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Material additions to the allowance for credit losses through charges to earnings would materially decrease our net income.

Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.

Additionally, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.

Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our results of operations and/or financial condition.

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Changes in interest rates could affect our profitability.

Our ability to earn a profit, like most financial institutions, depends primarily on net interest income, which is the difference between the interest income that we earn on our interest-earning assets, such as loans and investments, and the interest expense that we pay on our interest-bearing liabilities, such as deposits and borrowings.

expense that we pay on our interest-bearing liabilities, such as deposits and borrowings.

Our profitability depends on our ability to manage our assets and liabilities during periods of changing market interest rates.

During 2022, in response to accelerated inflation, the Federal Reserve implemented monetary tightening policies, resulting in significantly increased interest rates.

In a period of rising interest rates, the interest income earned on our assets may not increase as rapidly as the interest paid on our liabilities.

The FRB has indicated its intent to increase market interest rates beginning in 2022.

A sustained decrease in market interest rates could adversely affect our earnings.

A sustained decrease in market interest rates could also adversely affect our earnings.

When interest rates decline, borrowers tend to refinance higher-rate, fixed-rate loans at lower rates.

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We are required to transition from the use of LIBOR.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it intends to stop persuading or compelling banks to submit rates for the calibration of LIBOR to the administrator of LIBOR after 2021.

We have material contracts that are indexed to the London Interbank Offered Rate (“LIBOR”).

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulated LIBOR, announced that the publication of LIBOR would not be guaranteed after 2021.

LIBOR will be discontinued after June 2023.

At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based securities and variable rate loans, subordinated debentures, or other securities or financial arrangements, given LIBOR's role in determining market interest rates globally.

There have been ongoing efforts to establish an alternative reference rate to LIBOR.

Regulators, industry groups and certain committees (e.g.

the Alternative Reference Rates Committee) have published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for the LIBOR (e.g.

the Secured Overnight Financing Rate), and proposed implementations of the recommended alternatives in floating-rate financial instruments.

At this time, it is not possible to predict whether these specific recommendations and proposals will be broadly accepted.

Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely affect LIBOR rates and the value of LIBOR-based loans and securities in our portfolio and may impact the availability and cost of hedging instruments and borrowings.

We have material contracts that are indexed to LIBOR and are monitoring this activity and evaluating the related risks.

When LIBOR rates are no longer available and we are required to implement substitute indices for the calculation of interest rates, we may incur expenses in effecting the transition, and may be subject to disputes or litigation with customers and security holders over the appropriateness or comparability to LIBOR of the substitute indices, which could have an adverse effect on our results of operations.

the Alternative Reference Rates Committee) have published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for LIBOR (e.g.

the Secured Overnight Financing Rate, or “SOFR”), and proposed implementations of the recommended alternatives in floating-rate financial instruments.

The March 2022 enactment of the Adjustable Interest Rate (LIBOR) Act and the Federal Reserve’s proposed regulations addressed the discontinuation of LIBOR and established a replacement benchmark rate, based on SOFR, that will automatically apply to agreements that rely on LIBOR and do not have an alternative contractual fallback benchmark.

These SOFR-based replacement benchmarks may also apply automatically to contracts with fallback provisions that authorize a particular person to determine the replacement benchmark.

We have analyzed our LIBOR-indexed contracts, the significant majority of which already provided for a fallback rate.

Where the fallback rate is not specified or is no longer considered an economic equivalent to the LIBOR-derived rate previously used, we are working with counterparties to agree upon a replacement rate and have generally selected the rate recommended by the Federal Reserve.

While the LIBOR Act and implementing regulations will help to transition legacy LIBOR contracts to a new benchmark rate, the substitution of SOFR for LIBOR may have economic impacts on parties to affected contracts.

When LIBOR rates are no longer available and we are required to implement substitute indices for the calculation of interest rates, we may incur expenses in effecting the transition, and may be subject to disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute indices, which could have an adverse effect on our results of operations.

Additionally, since alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR.

The transition may change our market risk profile, requiring changes to risk and pricing models.

There may be changes in the rules or methodologies used to calculate SOFR or other benchmark rates, which may have an adverse effect on the value of or return on financial assets and liabilities that are based on or are linked to those rates.

Risks Related to Regulation

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The FRB and the NYSDFS periodically examine our business, including our compliance with laws and regulations.

If, as a result of an examination, a federal banking agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, we may take a number of different remedial actions as we deem appropriate.

If, as a result of an examination, a federal banking agency were to determine that our financial condition, capital resources, asset

quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, we may take a number of different remedial actions as we deem appropriate.

These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place it into receivership or conservatorship.

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Additionally, the CFPB has the authority to issue consumer finance regulations and is authorized, individually or jointly with bank regulatory agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates new and existing consumer financial laws or regulations.

Banks with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank and its implementing regulations, including the examination authority

of the CFPB to assess our compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

Banks with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implemented regulations, including the examination authority of the CFPB to assess our compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

In addition, in accordance with a memorandum of understanding entered into between the CFPB and U.S.

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Treasury Department’s Office of Foreign Assets Control.

If we violate these laws and regulations, or our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.

If we violate these laws and regulations, or our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the ability to obtain regulatory approvals to proceed with certain aspects of our business plan, including acquisitions.

Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

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The subordinated debentures that we issued have rights that are senior to those of our common shareholders.

In 2015, Bridge issued $40.0 million of 5.25% fixed-to-floating rate subordinated debentures due 2025 and $40.0 million of 5.75% fixed-to-floating rate subordinated debentures due 2030.

In 2017, Legacy Dime issued $115.0 million of 4.50% Fixed-to-Floating Rate Subordinated Debentures due 2027, which were assumed by the Company in the Merger.

Because these subordinated debentures rank senior to our common stock, if we fail to timely make principal and interest payments on the subordinated debentures, we may not pay any dividends on our common stock.

Further, if we declare bankruptcy, dissolve or liquidate, we must satisfy all of our subordinated debenture obligations before we may pay any distributions on our common stock.

In 2015, the Company issued $40.0 million of 5.75% Fixed-to-Floating Rate Subordinated Debentures due 2030.

In 2022, the Company issued $160.0 million of 5.00% Fixed-to-Floating Rate Subordinated Debentures due 2032.

Because these subordinated debentures rank senior to our common stock, if we fail to make timely principal and interest payments on the subordinated debentures, we may not pay any dividends on our common stock.

Further, if we declare bankruptcy, dissolve

or liquidate, we must satisfy all of our subordinated debenture obligations before we may pay any distributions on our common stock.

Strategic Risks

Expansion of our branch network may adversely affect our financial results.

We cannot be certain that the opening of new branches will be accretive to earnings or that it will be accretive to earnings within a reasonable period of time.

Numerous factors contribute to the performance of a new branch, such as suitable location, qualified personnel, and an effective marketing strategy.

Additionally, it takes time for a new branch to gather sufficient loans and deposits to generate income sufficient to cover its operating expenses.

Difficulties we experience in opening new branches may have a material adverse effect on our financial condition and results of operations.

Mergers and acquisitions involve numerous risks and uncertainties.

The Company has in the past and may in the future pursue mergers and acquisitions opportunities.

Mergers and acquisitions involve a number of risks and challenges, including the expenses involved;

potential diversion of management’s attention from other strategic matters;

integration of branches and operations acquired;

outflow of customers from the acquired branches;

retention of personnel from acquired companies or branches;

competing effectively in geographic areas not previously served;

managing growth resulting from the transaction;

and dilution in the acquirer's book and tangible book value per share.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.

While we anticipate that our capital resources will satisfy our capital requirements for the foreseeable future, we may at some point need to raise additional capital to support our operations or continued growth, both internally and through acquisitions.

Any capital we obtain may result in the dilution of the interests of existing holders of our common stock, or otherwise adversely affect your investment.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance.

Accordingly, we cannot make assurances of our ability to raise additional capital if needed, or if the terms will be acceptable to us.

If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and adversely affected.

Operational Risk Factors

Our business may be adversely affected by conditions in the financial markets and economic conditions generally.

A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, high business and investor confidence, and strong business earnings.

Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, declines in housing and real estate valuations, business activity or investor or business confidence;

limitations on the availability or increases in the cost of credit and capital;

increases in inflation or interest rates;

geopolitical conflicts;

natural disasters;

or a combination of these or other factors.

The Company's performance could be negatively affected to the extent there is deterioration in business and economic conditions, including persistent inflation, an inverted yield curve, rising prices, and supply chain issues or labor shortages, which have direct or indirect material adverse impacts on us, our customers, and our counterparties.

Recessionary conditions may significantly affect the markets in which we do business, the financial condition of our borrowers, the value of our loans and investments, and our ongoing operations, costs and profitability.

Declines in real estate values and sales volumes and increased unemployment levels may result in higher than expected loan delinquencies, increases in our

levels of nonperforming and classified assets and a decline in demand for our products and services.

Such events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

Strong competition within our market area may limit our growth and profitability.

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Therefore, our future profitability will depend on the success and growth of this subsidiary.

The continued and successful implementation

of our growth strategy will require, among other things that we increase our market share by attracting new customers that currently bank at other financial institutions in our market area.

The continued and successful implementation of our growth strategy will require, among other things that we increase our market share by attracting new customers that currently bank at other financial institutions in our market area.

In addition, our ability to successfully grow will depend on several factors, including favorable market conditions, the competitive responses from other financial institutions in our market area, and our ability to maintain good asset quality.

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Although we take numerous protective measures and otherwise endeavor to protect and maintain the privacy and security of confidential data, these systems may be vulnerable to unauthorized access, computer viruses, other malicious code, cyberattacks, including distributed denial of service attacks, cyber-theft and other events that could have a security impact.

If one or more of such events were to occur, this potentially could jeopardize confidential and other information processed and stored in, and transmitted through, our systems or otherwise cause interruptions or malfunctions in our or our customers' operations.

If one or more of such events were to occur, this

potentially could jeopardize confidential and other information processed and stored in, and transmitted through, our systems or otherwise cause interruptions or malfunctions in our operations or our customers' operations.

In addition, we maintain interfaces with certain third-party service providers.

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Distributed denial of service attacks are designed to saturate the targeted online network with excessive amounts of network traffic, resulting in slow response times, or in some cases, causing the site to be temporarily unavailable.

Hacking and identity

theft risks, in particular, could cause serious reputational harm.

Hacking and identity theft risks, in particular, could cause serious reputational harm.

Cyber threats are rapidly evolving, and we may not be able to anticipate or prevent all such attacks.

We may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss.

Public health emergencies like the COVID-19 outbreak may have an adverse impact on our business and results of operations

The COVID-19 pandemic caused significant economic dislocation in the United States.

Certain industries were particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry.

Additionally, the spread of COVID-19 temporarily caused us to modify our business practices, including placing restrictions on employee travel and implementing remote work practices.

As a result of the COVID-19 pandemic or any other public health emergency, and related governmental responses to any outbreak, we may be subject to the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, or results of operations:

demand for our products and services may decline;

if consumer and business activities are restricted, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

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

our allowance for credit losses may have to be increased if borrowers experience financial difficulties;

a material decrease in net income or a net loss over several quarters could affect our ability to pay cash dividends;

cyber security risks may be increased as the result of an increase in the number of employees working remotely;

critical services provided by third-party vendors may become unavailable;

and the Company may experience unanticipated unavailability or loss of key employees, harming our ability to execute our business strategy.

Severe weather, acts of terrorism and other external events could impact our ability to conduct business.

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Also, any sudden or prolonged market downturn in the U.S.

or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels.

abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels.

Damage to the Company’s reputation could adversely impact our business.

The Company's reputation is important to our success.

Our ability to attract and retain customers, investors, employees and advisors may depend upon external perceptions of the Company.

Damage to the Company's reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, compliance failures, customer services failures, or unethical behavior or misconduct of employees, advisors and counterparties.

Adverse developments with respect to the financial services industry may also, by association, negatively impact the Company's reputation or result in greater regulatory or legislative scrutiny of or litigation against the Company.

Furthermore, shareholders and other stakeholders have begun to consider how corporations are addressing environmental, social and governance (“ESG”) issues.

Governments, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing.

These shifts in investing priorities may result in adverse effects on the trading price of the Company’s common stock if investors determine that the Company has not made sufficient progress on ESG matters.

The Company could also face potential negative ESG-related publicity in traditional media or social media if shareholders or other stakeholders determine that we have not adequately considered or addressed ESG matters.

If the Company, or our relationships with certain customers, vendors or suppliers became the subject of negative publicity, our ability to attract and retain customers and employees, and our financial condition and results of operations, could be adversely impacted.

Accounting-Related Risks

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results.

Our accounting policies are fundamental to understanding our financial results and condition.

Some of these policies require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results.

Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.

From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements.

These changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition.

We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts.

If we determine our goodwill or other intangible assets to be impaired, the Company’s financial condition and results of operations would be negatively affected.

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The amount of the purchase price which is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired.

At least annually (or more frequently if indicators arise), the Company evaluates goodwill for impairment by comparing the fair value of its reporting entities against the carrying value.

At least annually (or more frequently if indicators arise), the Company evaluates goodwill for impairment.

If the Company determines goodwill or other intangible assets are impaired, the Company will be required to write down these assets.

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

What changed 10-K

Item 1A. Risk Factors