What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-03-01 · 120 added, 157 removed, 389 unchanged (42% of the section changed)

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and not to our consolidated subsidiary.

Dime Community Bancshares, Inc., a New York corporation previously known as “Bridge Bancorp, Inc.,” is a bank holding company formed in 1988.

Dime Community Bancshares, Inc., a New York corporation, 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.

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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.

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.

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.

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.

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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.

We continue to monitor unfunded commitments, 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.

Critical Accounting Estimates

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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.

On January 1, 2021, we adopted the Current Expected Credit Losses (“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.

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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.

Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of a peer group of banks that operate in and around Dime’s footprint.

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.

Adjustments to the quantitative results are made using qualitative factors.

These factors include:

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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.

For loans that do not share risk characteristics, the Company evaluates these loans 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.

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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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.

On February 1, 2021, the Company completed a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting.

As a part of accounting for the Merger, fair value estimates were calculated with a combination of assumptions by management and by using a third party.

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.

The fair value of acquired loans was based on a discounted cash flow methodology that considers factors such as type of loan and related collateral, and requires management’s judgment 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.

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

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

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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.

The estimates about discount rates, expected future cash flows, market conditions and other future events were 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

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.

In future income statement periods, interest income on loans will include the amortization and accretion of any premiums and discounts 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 calculate expected cash flows.

Comparison of Operating Results Years Ended December 31, 2022, 2021 and 2020

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.

The Company’s historical operating results as of and for the year ended December 31, 2020, as presented and discussed in this Annual Report on Form 10-K, only include the historical results of Legacy Dime.

Accordingly, the Company’s historical operating results as of and for periods before February 1, 2021, including the year ended December 31, 2020, as presented and discussed in this Annual Report on Form 10-K, do not include the historical results of Bridge.

Net income was $152.6 million in 2022, compared to $104.0 million in 2021, and $42.3 million in 2020.

During 2022, net interest income increased by $22.3 million, provision for credit losses decreased by $0.8 million, and non-interest expense decreased by $44.6 million.

These items were partially offset by a non-interest income decrease of $3.9 million and an income tax expense increase of $15.2 million.

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.

These items were partially offset by a non-interest expense increase of $127.5 million and an income tax expense increase of $31.5 million.

The discussion of net interest income for the years ended December 31, 2022, 2021, and 2020 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated.

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Real estate loans (1)

Commercial and industrial ("C&I") loans (1)

SBA PPP loans (1)

Commercial and industrial loans (1)

Other loans (1)

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Total borrowings

Derivative cash collateral

Total interest-bearing liabilities

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Commercial and industrial (1)

SBA PPP loans (1)

Other loans (1)

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Other short-term borrowings

Derivative cash collateral

Total interest-bearing liabilities

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Net interest income was $379.9 million in 2022, $357.6 million in 2021, and $177.7 million in 2020.

Average interest-earning assets were $11.35 billion in 2021, $6.12 billion in 2020 and 2019.

Average interest-earning assets were $11.68 billion in 2022, $11.35 billion in 2021 and $6.12 billion in 2020.

Net interest margin was 3.25% in 2022, 3.15% in 2021, and 2.90% in 2020.

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Interest income was $439.2 million in 2022, $384.6 million in 2021, and $234.0 million in 2020.

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.

During 2022, interest income increased $54.6 million from 2021, primarily reflecting increases in interest income of $55.7 million on real estate loans, and $6.6 million on securities.

The increased interest income on real estate loans was primarily due to growth of $829.5 million in the average balances, and a 28-basis point increase in yield during the period due to the rising interest rate environment.

The increased interest income from securities was primarily due to the increase in the average balances of $392.4 million, offset in part by a 2-basis point decrease in the yield.

During 2021, interest income increased $150.6 million from 2020, primarily reflecting increases in interest income of $102.5 million on real estate loans, $38.5 million on commercial and industrial (“C&I”) 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.

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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.

The increased average balances in 2021 versus 2020 were related primarily to the Merger transaction.

Interest Expense.

Interest expense was $59.4 million in 2022, $27.0 million in 2021, and $56.3 million in 2020.

During 2022, interest expense increased $32.3 million from 2021, primarily reflecting increases in interest expense of $15.2 million on savings accounts, $5.1 million on FHLBNY advances and $4.4 million on money market accounts.

The increase in interest expense on savings accounts was primarily due to increased rates offered on savings accounts and, an increase of $673.1 million in the average balances of such accounts.

The increase in interest expense on FHLB advances was primarily due to the increased cost of wholesale borrowings.

The increase in interest expense on money market accounts was primarily due to increased rates offered on money market accounts.

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.

The decrease in interest expense on CDs was primarily due to decreased rates offered on CD accounts and, a decrease of $216.2 million in the average balances of such accounts.

The decrease in interest expense on FHLBNY advances was primarily due to 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.

Provision for Credit Losses.

The Company recognized a provision for credit losses of $5.4 million in 2022, $6.2 million in 2021 and $26.2 million in 2020.

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.

The $5.4 million provision for credit losses recognized in 2022 was associated with growth in the loan portfolio and a deterioration of forecasted macroeconomic conditions, offset by a reduction in reserves on individually analyzed loans and unfunded commitments.

The $6.2 million provision for credit losses recognized in 2021 included a provision recorded on acquired non-PCD loans for the Day 2 accounting of acquired loans from the Merger, offset by improvements in forecasted macroeconomic conditions, and releases of reserves on individually analyzed loans.

The $26.2 million provision for credit losses recognized in 2020 resulted mainly from an increase in the general reserve allowance for credit losses due to an adjustment of qualitative factors to account for the effects of the COVID-19 pandemic and related economic disruption, and additional specific reserves on non-performing loans.

The provision for credit losses recognized in 2022 and 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 was calculated in accordance with prior GAAP, in accordance with ASC 310.

Non-Interest Income.

Non-interest income was $38.2 million in 2022, $42.1 million in 2021, and $21.3 million in 2020.

During 2022, non-interest income decreased $3.9 million from 2021, due primarily to a decrease in gains on the sales of SBA PPP loans, and a decrease in gain on sale of residential loans and other non-interest income of $1.3 million each.

Offsetting these declines was an increase in BOLI income of $3.3 million and no loss on termination of derivatives in 2022 (versus a $16.5 million loss on termination of derivatives in 2021).

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 $200.7 million in 2022, $245.3 million in 2021, and $117.8 million in 2020.

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.

During 2022, non-interest expense decreased $44.6 million from 2021, primarily due to not recognizing any merger expenses and transaction costs and branch restructuring costs in 2022 (versus $44.8 million in merger expenses and transaction costs and $5.1 million of branch restructuring costs in 2021).

These declines were offset by an increase of $11.8 million in salaries and employee benefits expenses.

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 1.61%, 2.03%, and 1.83% of average assets during 2022, 2021, and 2020, 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.

The increase in 2021 was primarily due to merger expenses and transaction costs.

Income Tax Expense.

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Income tax expense increased $15.2 million during 2022 compared to 2021, primarily as a result of $63.7 million of higher pre-tax income during 2022.

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.

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.

The Company’s consolidated tax rate was 28.0%, 29.8% and 23.0% in 2022, 2021, and 2020, 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.

The increase in the effective tax rate in 2022 and 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, 2022 and December 31, 2021

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.

Assets totaled $13.19 billion at December 31, 2022, $1.13 billion above their level at December 31, 2021, primarily due to an increase in the loan portfolio of $1.32 billion, partially offset by a decrease in cash and due from banks of $224.4 million, and a decrease in total securities of $206.6 million.

Total net loans held for investment increased $1.32 billion during the year ended December 31, 2022, to $10.48 billion at period end.

During the period, the Bank had originations of $2.83 billion.

Additionally, the allowance for credit losses increased by $42.4 million,

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.

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.

Total securities decreased $206.6 million during the year ended December 31, 2022, to $1.54 billion at period end, primarily due to proceeds from principal payments and calls of $195.3 million and an increase in unrealized losses of $109.7 million, offset in part by purchases of $102.4 million.

We transferred $372.2 million of securities available-for-sale to securities held-to-maturity during the year ended December 31, 2022.

Total liabilities increased $1.15 billion during the year ended December 31, 2022, to $12.02 billion at period end, primarily due to an increase of $1.11 billion in FHLBNY advances, and an increase of $148.5 million in derivative cash collateral.

We maintained a higher level of borrowings to support loan growth and offset a $204.6 million decline in deposits.

During the year ended December 31, 2022, the Company did not terminate any derivatives.

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.

Stockholders’ equity decreased $23.0 million during the year ended December 31, 2022 to $1.17 billion at period end, primarily due to an increase in accumulated other comprehensive loss of $88.2 million, repurchases of shares of common stock of $46.8 million, common stock dividends of $37.2 million and preferred stock dividends of $7.3 million, offset in part by net income for the period of $152.6 million.

Loan Portfolio Composition

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Loans held for investment, net

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.

During the year ended December 31, 2022, our real estate loans and C&I loans increased $1.19 billion and $138.2 million, respectively.

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

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.

Servicing fees are typically derived based upon the difference between the actual origination rate and contractual pass-through rate of the loans at the time of sale.

At December 31, 2022 and 2021, the Bank had recorded servicing right assets ("SRAs") of $3.1 million and $3.8 million, respectively, 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.

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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.

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

(Dollars in thousands)

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

(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

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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.

We have not initiated any expected or imminent foreclosure proceedings that are likely to have a material adverse impact on our consolidated financial statements.

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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Within our held-for-investment loan portfolio, non-accrual loans totaled $34.2 million at December 31, 2022 and $40.3 million at December 31, 2021.

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.

We are required to recognize loans for which certain modifications or concessions have been made as TDRs.

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

We modified twelve loans in a manner that met the criteria for a TDR during the year ended December 31, 2022.

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.

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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.

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 as 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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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.

See Note 5 to our consolidated financial statements for a further discussion of TDRs.

Please refer to Note 5 to our condensed consolidated financial statements for a further discussion of TDRs.

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.

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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

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At December 31, 2022, we had loans totaling $0.7 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.

At December 31, 2021, we had loans totaling $12.1 million 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.

At December 31, 2022, there were no accruing loans 90 days or more past due.

At December 31, 2021, we had nine loans with an aggregate outstanding balance of $3.0 million, all of which were 90 days or more past due.

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.

The amount of reserve was $2.8 million at December 31, 2022 and $4.4 million at December 31, 2021.

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.

Allowance for Credit Losses

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A provision of $5.4 million and $6.2 million were recorded during the twelve-month periods ended December 31, 2022 and 2021, 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 $5.4 million provision for credit losses recognized in 2022 was associated with growth in the loan portfolio and a deterioration of forecased economic conditions, offset by a reduction in reserves on individually analyzed loans and unfunded commitments.

The $6.2 million provision for credit losses recognized in 2021 included a provision recorded on acquired non-PCD loans for the Day 2 accounting of acquired loans from the Merger offset by improvements in forecasted macroeconomic conditions, and release of reserves on individually analyzed loans.

For further discussion of the allowance for credit losses and related activity during the years ended December 31, 2022, 2021 and 2020, 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.

(In thousands)

December 31, 2022

December 31, 2021

December 31, 2020

(Dollars in thousands)

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

Multifamily residential and residential mixed-use

Acquisition, development, and construction

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,

(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

Multifamily residential and residential mixed-use

Acquisition, development, and construction

(1) Total loans represent gross loans (excluding loans held for sale), inclusive of deferred fees/costs and premiums/discounts.

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Securities available-for-sale

Our consolidated investment in securities available-for-sale totaled $1.56 billion at December 31, 2021.

Our consolidated investment in securities available-for-sale totaled $950.6 million at December 31, 2022.

The average duration of these securities was 3.5 years as of December 31, 2022.

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, 2022, categorized by remaining period to contractual maturity:

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Weighted average contractual maturity (years) - Held-to-maturity:

Corporate securities

Pass-through MBS issued by GSEs and agency CMOs

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Non-interest-bearing checking accounts

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, 2022 was 7.6 months, compared to 7.7 months at December 31, 2021.

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Over twelve months

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.

As of December 31, 2022, the portion of uninsured time deposits in excess of the $250,000 FDIC insurance limit was $420.4 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, 2022, brokered deposits totaled $538.9 million, which included purchased CDs from the CDARS program, purchased MMAs from the ICS program and purchased CDs through a broker.

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.

The Bank’s total borrowing line with FHLBNY equaled $4.13 billion at December 31, 2022.

The Bank had $25.0 million of FHLBNY advances outstanding at December 31, 2021, and $1.20 billion at December 31, 2020.

The Bank had $1.13 billion of FHLBNY advances outstanding at December 31, 2022, and $25.0 million at December 31, 2021.

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 $1.4 million outstanding of securities sold under agreements to repurchase (“repurchase agreements”) at December 31, 2022.

The Company had no securities sold under agreements to repurchase at December 31, 2020.

The Company had $1.9 million outstanding of securities sold under agreements to repurchase at December 31, 2021.

Liquidity and Capital Resources

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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.

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.

Total deposits decreased $204.6 million during the year ended December 31, 2022 compared to an increase of $5.93 billion during the year ended December 31, 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) decreased $466.7 million during the year ended December 31, 2022 and increased $6.40 billion during the year ended December 31.

CDs increased $262.1 million during the year ended December 31, 2022 compared to a decrease of $469.4 million during the year ended December 31, 2021.

The increase in CDs during the current period was primarily due to a $294.1 million increase in brokered CDs.

The Bank increased its outstanding FHLBNY advances by $1.11 billion during the year ended December 31, 2022, compared to a $1.18 billion decrease during the year ended December 31, 2021.

“Federal Home Loan Bank Advances” to our consolidated financial statements for further information.

Subordinated debentures totaled $200.3 million at December 31, 2022 and $197.1 million at December 31, 2021.

“Subordinated Debentures” to our consolidated financial statements for further information.

with unaffiliated correspondent banks.

At December 31, 2022, the Bank had an additional unused borrowing capacity of $1.57 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.

“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

$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.

During the year ended December 31, 2022 and 2021, real estate loan originations totaled $2.67 billion and $1.67 billion, respectively.

During the year ended December 31, 2022 and 2021, C&I loan originations totaled $160.1 million and $647.6 million, respectively.

Included in the 2021 period was PPP loan originations of $579.9 million.

The PPP program ended on May 31, 2021.

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

Proceeds from sales of available-for-sale securities totaled $138.1 million during the year ended December 31, 2021.

Purchases of available-for-sale securities totaled $39.2 million and $1.10 billion during the years ended December 31, 2022 and 2021, respectively.

Proceeds from pay downs and calls and maturities of available-for-sale securities were $165.1 million and $411.0 million for the years ended December 31, 2022 and 2021, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the years ended December 31, 2022 and 2021.

Purchases of held-to-maturity securities totaled $63.2 million and $40.2 million during the year ended December 31, 2022 and 2021, respectively.

Proceeds from pay downs and calls and maturities of held-to-maturity securities were $31.7 million and $1.4 million for the year ended December 31, 2022 and 2021, respectively.

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

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The Holding Company repurchased 1,431,241 shares of its common stock during the year ended December 31, 2022.

Legacy Dime repurchased 1,477,029 shares of its common stock during the year ended December 31, 2020.

The Holding Company repurchased 1,755,061 shares of its common stock during the year ended December 31, 2021.

As of December 31, 2022, up to 1,603,760 shares remained available for purchase under the authorized share repurchase programs.

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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.

The Holding Company paid $7.3 million in cash dividends on its preferred stock during the years ended December 31, 2022 and 2021, respectively.

The Holding Company paid $36.8 million and $39.4 million in cash dividends on its common stock during the years ended December 31, 2022 and 2021, respectively.

Contractual Obligations

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As of December 31, 2022, the Bank had $271.6 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.

Additionally, in connection with a loan securitization transaction that was completed in 2017, 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.

The Bank has pledged $28.0 million of pass-through MBS issued by GSEs as collateral.

Recently Issued Accounting Standards

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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 7. Management’s Discussion and Analysis