Dime Community Bancshares 10Q 2020 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-27782

DIME COMMUNITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

N/A

(Former name or former address, if changed since last report)

Delaware		11-3297463
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

300 Cadman Plaza West, 8^th Floor, Brooklyn, NY		11201
(Address of principal executive offices)		(Zip Code)

(718) 782-6200

(Registrant’s telephone number, including area code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	DCOM	The NASDAQ Stock Market
Preferred Stock, Series A, $0.01 Par Value	DCOMP	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

LARGE ACCELERATED FILER ☐	ACCELERATED FILER ☒
NON -ACCELERATED FILER ☐	SMALLER REPORTING COMPANY ☐
	EMERGING GROWTH COMPANY ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Classes of Common Stock	Number of shares outstanding at May 8, 2020
$0.01 Par Value	33,305,173

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Consolidated Statements of Financial Condition at March 31, 2020 and December 31, 2019	4
	Consolidated Statements of Income for the Three-Month Periods Ended March 31, 2020 and 2019	5
	Consolidated Statements of Comprehensive Income for the Three-Month Periods Ended March 31, 2020 and 2019	6
	Consolidated Statements of Changes in Stockholders’ Equity for the Three-Month Periods Ended March 31, 2020 and 2019	7
	Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2020 and 2019	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by use of words such as “annualized,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based upon various assumptions and analyses made by Dime Community Bancshares, Inc. together with its direct and indirect subsidiaries, the “Company”, in light of management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company’s control) that could cause actual conditions or results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on such statements. These factors include, without limitation, the following:

●

there may be increases in competitive pressure among financial institutions or from non-financial institutions;

●

the net interest margin is subject to material short-term fluctuation based upon market rates;

●

changes in deposit flows, loan demand or real estate values may affect the business of Dime Community Bank (the “Bank”);

●

changes in the quality and composition of our loan or investment portfolios;

●

changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently;

●

changes in corporate and/or individual income tax laws may adversely affect the Company’s business or financial condition or results of operations;

●

general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry, may different than the Company currently anticipates;

●

legislative, regulatory or policy changes may adversely affect the Company’s business or results of operations;

●

technological changes may be more difficult or expensive than the Company anticipates;

●

success or consummation of new business initiatives or the integration of any acquired entities may be more difficult or expensive than the Company anticipates;

●

litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates; and

●

the risks referred to in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 as updated by our Quarterly Reports on Form 10-Q.

Further, the COVID-19 pandemic has caused local and national economic disruption and has had an impact on the Company’s operations and financial results. Given its ongoing and dynamic nature, it is difficult to predict what effects the pandemic will have on our business and results of operations in the future. The pandemic and related local and national economic disruption may, among other effects, result in a decline in demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; branch closures, work stoppages and unavailability of personnel; and increased cybersecurity risks, as employees increasingly work remotely.

The Company has no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

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Item 1.

Condensed Consolidated Financial Statements

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(Dollars in thousands except share amounts)

	March 31, 2020			December 31, 2019
ASSETS:
Cash and due from banks	$	246,153		$	155,488
Total cash and cash equivalents		246,153			155,488
Securities available-for-sale, at fair value		557,825			550,995
Marketable equity securities, at fair value		5,398			5,894
Loans:
Real estate		4,874,502			5,002,354
Commercial and industrial (“C&I”) loans		331,816			336,412
Other loans		956			1,772
Less allowance for loan losses		(36,463	)		(28,441	)
Total loans, net		5,170,811			5,312,097
Premises and fixed assets, net		21,631			21,692
Premises held for sale		514			514
Loans held for sale		1,430			500
Federal Home Loan Bank of New York (“FHLBNY”) capital stock		57,146			56,019
Bank Owned Life Insurance (“BOLI”)		133,128			114,257
Goodwill		55,638			55,638
Operating lease assets		36,582			37,858
Other assets		61,569			43,508
Total Assets	$	6,347,825		$	6,354,460

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Due to depositors:
Interest-bearing deposits	$	3,760,450		$	3,804,076
Non-interest-bearing deposits		479,376			478,549
Total deposits		4,239,826			4,282,625
Escrow and other deposits		116,097			76,481
FHLBNY advances		1,117,300			1,092,250
Subordinated debt, net		113,942			113,906
Other borrowings		—			110,000
Operating lease liabilities		42,614			44,098
Other liabilities		72,398			38,342
Total Liabilities		5,702,177			5,757,702

Stockholders’ Equity:
Preferred stock, Series A ($0.01 par, $25.00 liquidation value, 9,000,000 shares authorized, 2,992,200 shares issued and outstanding at March 31, 2020, and none issued or outstanding at December 31, 2019)		72,224			—
Common stock ($0.01 par, 125,000,000 shares authorized, 53,721,189 shares and 53,721,189 shares issued at March 31, 2020 and December 31, 2019, respectively, and 33,875,386 shares and 35,154,642 shares outstanding at March 31, 2020 and December 31, 2019, respectively)		537			537
Additional paid-in capital		279,327			279,322
Retained earnings		585,294			581,817
Accumulated other comprehensive loss, net of deferred taxes		(12,632	)		(5,940	)
Unearned equity awards		(6,067	)		(6,731	)
Common stock held by the Benefit Maintenance Plan (“BMP”)		(1,496	)		(1,496	)
Treasury stock, at cost (19,845,803 shares and 18,566,547 shares at March 31, 2020 and December 31, 2019, respectively)		(271,539	)		(250,751	)
Total Stockholders’ Equity		645,648			596,758
Total Liabilities and Stockholders’ Equity	$	6,347,825		$	6,354,460

See notes to unaudited condensed consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

	Three Months Ended March 31,
	2020			2019
Interest income:
Loans secured by real estate	$	50,117		$	49,177
C&I loans		4,045			3,436
Other loans		15			18
Mortgage-backed securities (“MBS”)		3,305			3,197
Investment securities		421			420
Other short-term investments		1,002			1,447
Total interest income		58,905			57,695
Interest expense:
Deposits and escrow		11,926			15,017
Borrowed funds		6,455			7,354
Total interest expense		18,381			22,371
Net interest income		40,524			35,324
Provision for loan losses		8,012			321
Net interest income after provision for loan losses		32,512			35,003
Non-interest income:
Service charges and other fees		1,203			1,099
Mortgage banking income, net		66			68
Net (loss) gain on securities and other assets ⁽¹⁾		(464	)		192
Gain on sale of loans		315			255
Income from BOLI		1,887			694
Loan level derivative income		1,163			—
Other		66			52
Total non-interest income		4,236			2,360
Non-interest expense:
Salaries and employee benefits		14,916			11,884
Stock-based compensation		671			284
Occupancy and equipment		4,056			3,869
Data processing costs		2,024			2,066
Marketing		397			466
Federal deposit insurance premiums		477			454
Other		3,499			3,029
Total non-interest expense		26,040			22,052
Income before income taxes		10,708			15,311
Income tax expense		2,316			3,810
Net income		8,392			11,501
Preferred stock dividends		—			—
Net income available to common stockholders	$	8,392		$	11,501

Earnings per common share (“EPS”):
Basic	$	0.24		$	0.32
Diluted	$	0.24		$	0.32

(1)	Amount includes periodic valuation gains or losses on marketable equity securities.

See notes to unaudited condensed consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

	Three Months Ended March 31,
	2020			2019
Net Income	$	8,392		$	11,501
Other comprehensive income (loss):
Change in holding gain or loss on securities available-for-sale		10,252			4,687
Change in pension and other postretirement obligations		271			492
Change in gain or loss on derivatives		(20,377	)		(3,284	)
Other comprehensive gain (loss) before income taxes		(9,854	)		1,895
Deferred tax expense (benefit)		(3,162	)		627
Other comprehensive income (loss), net of tax		(6,692	)		1,268
Total comprehensive income	$	1,700		$	12,769

See notes to unaudited condensed consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands)

	Three Month Period Ended March 31, 2020
	Number of Shares of Common Stock			Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, Net of Deferred Taxes			Unearned Equity Awards			Common Stock Held by BMP			Treasury Stock, at cost			Total Stockholders’
Beginning balance as of January 1, 2020		35,154,642		$	—	$	537	$	279,322	$	581,817		$	(5,940	)	$	(6,731	)	$	(1,496	)	$	(250,751	)	$	596,758
Net income		—			—		—		—		8,392			—			—			—			—			8,392
Other comprehensive loss, net of tax		—			—		—		—		—			(6,692	)		—			—			—			(6,692	)
Release of shares, net of forfeitures		91			—		—		5		—			—			(7	)		—			2			—
Stock-based compensation		—			—		—		—		—			—			671			—			—			671
Proceeds from Preferred Stock issuance, net		—			72,224		—		—		—			—			—			—			—			72,224
Shares received related to tax withholding		(4,668	)		—		—		—		—			—			—			—			(79	)		(79	)
Cash dividends declared and paid		—			—		—		—		(4,915	)		—			—			—			—			(4,915	)
Repurchase of shares of Common Stock		(1,274,679	)		—		—		—		—			—			—			—			(20,711	)		(20,711	)
Ending balance as of March 31, 2020		33,875,386		$	72,224	$	537	$	279,327	$	585,294		$	(12,632	)	$	(6,067	)	$	(1,496	)	$	(271,539	)	$	645,648

	Three Month Period Ended March 31, 2019
	Number of Shares of Common Stock			Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, Net of Deferred Taxes			Unearned Equity Awards			Common Stock Held by BMP			Treasury stock, at cost			Total Stockholders’ Equity

Beginning balance as of January 1, 2019		36,081,455		$	537	$	277,512	$	565,713		$	(6,500	)	$	(3,623	)	$	(1,509	)	$	(230,049	)	$	602,081
Net Income		—			—		—		11,501			—			—			—			—			11,501
Other comprehensive income, net of tax		—			—		—		—			1,268			—			—			—			1,268
Release of shares, net of forfeitures		138,329			—		846		—			—			(2,729	)		—			1,883			—
Stock-based compensation		—			—		—		—			—			284			—			—			284
Shares received related to tax withholding		(418	)		—		—		—			—			—			—			(7	)		(7	)
Cash dividends declared and paid		—			—		—		(5,039	)		—			—			—			—			(5,039	)
Repurchase of shares of Common Stock		(199,254	)		—		—		—			—			—			—			(3,814	)		(3,814	)
Ending balance as of March 31, 2019		36,020,112		$	537	$	278,358	$	572,175		$	$(5,232	)	$	$(6,068	)	$	$(1,509	)	$	(231,987	)	$	606,274

See notes to unaudited condensed consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	8,392		$	11,501
Adjustments to reconcile net income to net cash provided by operating activities:
Net (gain) loss on sales of securities available-for-sale		(8	)		76
Net (gain) loss recognized on marketable equity securities		472			(268	)
Net gain on sale of loans held for sale		(315	)		(255	)
Net depreciation, amortization and accretion		1,294			1,255
Stock-based compensation		671			284
Provision for loan losses		8,012			321
Originations of loans held for sale		(6,217	)		(569	)
Proceeds from sale of loans originated for sale		8,103			618
Increase in cash surrender value of BOLI		(756	)		(694	)
Gain from death benefits in excess of cash surrender value of BOLI		(1,131	)		—
Deferred income tax benefit		(2,090	)		(807	)
Changes in assets and liabilities:
Decrease in other assets		1,530			978
Decrease (increase) in other liabilities		2,515			(2,255	)
Net cash provided by Operating Activities		20,472			10,185
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available-for-sale		4,199			15,499
Proceeds from sales of marketable equity securities		137			137
Purchases of securities available-for-sale		(33,244	)		(38,319	)
Acquisition of marketable equity securities		(113	)		(114	)
Proceeds from calls and principal repayments of securities available-for-sale		32,312			18,530
Purchase of BOLI		(20,000	)		—
Loans purchased		(892	)		—
Proceeds from the sale of portfolio loans transferred to held for sale		—			8,659
Net decrease (increase) in loans		131,569			(120,886	)
Purchases of fixed assets, net		(1,034	)		(50	)
Sale (purchase) of FHLBNY capital stock, net		(1,127	)		1,711
Net cash provided by (used in) Investing Activities		111,807			(114,833	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to depositors		(42,799	)		50,868
Increase in escrow and other deposits		39,616			51,882
Repayments of FHLBNY advances		(3,615,520	)		(1,030,150	)
Proceeds from FHLBNY advances		3,640,570			992,125
Proceeds (repayments) of other borrowings, net		(110,000	)		45,000
Proceeds from preferred stock issuance, net		72,224			—
Payments related to tax withholding for equity awards		(79	)		(7	)
Treasury shares repurchased		(20,711	)		(3,814	)
Cash dividends paid to stockholders, net		(4,915	)		(5,039	)
Net cash provided by (used in) Financing Activities		(41,614	)		100,865
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		90,665			(3,783	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		155,488			147,256
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	246,153		$	143,473

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	955		$	4,406
Cash paid for interest		16,881			24,013
Loans transferred to held for sale		2,509			2,329
Operating lease assets in exchange for operating lease liabilities		—			41,641
Transfer of cash surrender value for BOLI to other assets		3,016			—

See notes to unaudited condensed consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands Except Per Share Amounts)

1.	NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Delaware corporation organized by Dime Community Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank’s conversion to stock ownership on June 26, 1996. At March 31, 2020 the significant assets of the Holding Company were the capital stock of the Bank and investments retained by the Holding Company. The liabilities of the Holding Company were comprised primarily of $115,000 subordinated notes due in 2027, which become callable commencing in 2022. The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.

The Bank was originally founded in 1864 as a New York State-chartered mutual savings bank, and currently operates as a New York State-chartered commercial bank. Effective August 1, 2016, the Bank changed its name from The Dime Savings Bank of Williamsburgh to Dime Community Bank. The new name more accurately reflected the Bank’s evolving business model and emphasized its broader geographic and business reach while retaining the Bank’s mission to be in and of the communities it served, including the virtual online community. The Bank’s principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, mixed use, and, to an increasing extent, commercial and industrial (“C&I”) loans, and one-to-four family residential real estate loans, as well as mortgage-backed securities, obligations of the U.S. government and government-sponsored enterprises (“GSEs”), and corporate debt and equity securities.

The Holding Company neither owns nor leases any property, but instead uses the back office of the Bank, located in the Brooklyn Heights section of the borough of Brooklyn, New York. The Bank maintains its principal office in the Williamsburg section of the borough of Brooklyn, New York. As of March 31, 2020, the Bank had twenty-eight retail banking offices located throughout the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County and Suffolk County, New York.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which has spread to most countries, including the United States. The pandemic has adversely affected economic activity globally, nationally and locally.

In March 2020, the United States declared a National Public Health Emergency in response to the COVID-19 pandemic. In an effort to mitigate the spread of COVID-19, local state governments, including New York (in which the Bank has retail banking offices), have taken preventative or protective actions such as travel restrictions, advising or requiring individuals to limit or forego their time outside of their homes, and other forced closures for certain types of non-essential businesses. The impact of these actions is expected to continue to have an adverse impact on the economies and financial markets in the United States.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020. The CARES Act is intended to provide relief and prevent a severe economic downturn. The stimulus package includes direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and providers.

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

2.	SUMMARY OF ACCOUNTING POLICIES

Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the Company’s financial condition as of March 31, 2020 and December 31, 2019, the results of operations and statements of comprehensive income for the three-month periods ended March 31, 2020 and 2019, and the changes in stockholders’ equity and cash flows for the three-month periods ended March 31, 2020 and 2019. The results of operations for the three-month period ended March 31, 2020 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2020. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

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The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Please see “Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” for a discussion of areas in the accompanying unaudited condensed consolidated financial statements utilizing significant estimates.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2019 and notes thereto contained in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires that the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current condition, and reasonable and supportable forecasts. This standard requires financial institutions and other organizations to use forward-looking information to better inform their credit loss estimates.

In anticipation of adoption, the Company has established the Current Expected Credit Loss (“CECL”) Subcommittee, a subcommittee of the Loan Loss Reserve Committee, to oversee the adoption of ASU 2016-13 on its consolidated financial statements. The Company has engaged a third party software provider to use their model to measure the expected credit losses. The CECL Subcommittee has determined loan segments based on credit risk of the loan portfolio, completed data validation, and developed qualitative adjustments. The CECL Subcommittee is in the process of developing and updating internal policies, procedures, and key controls over the calculation of the allowance for credit losses (“ACL”). The Company has also engaged an independent third party vendor which is in the process of reviewing the regression models, assumptions utilized, and validating the model for measuring the expected credit losses. The model validation report has not yet been finalized.

ASU 2016-13 was effective for the Company as of January 1, 2020. Under Section 4014 of the recently enacted CARES Act, financial institutions required to adopt ASU 2016-13 as of January 1, 2020 were provided an option to delay the adoption of the CECL framework until the earlier of December 31, 2020 or when the national emergency is lifted. The Bank has elected to defer adoption of CECL and is utilizing the incurred loss framework as of March 31, 2020.

Upon completion of the aforementioned items, the Loan Loss Reserve Committee, who has oversight over the implementation of CECL, will adopt the standard at the earlier of December 31, 2020 or when the national emergency is lifted. Upon adoption, the Company will recognize a one-time cumulative effect change to the allowance for loan losses through retained earnings as of January 1, 2020. In the period of adoption, any year-to-date catch-up adjustments related to the period end CECL estimate will be adjusted through the income statement.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. The Company early adopted this ASU in January 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020. The Company adopted this ASU in January 2020. The adoption of ASU 2020-04 did not have a material impact on the Company’s consolidated financial statements.

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3.	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

	Securities Available-for-Sale			Defined Benefit Plans			Derivatives			Total Accumulated Other Comprehensive Loss
Balance as of January 1, 2020	$	4,621		$	(6,024	)	$	(4,537	)	$	(5,940	)
Other comprehensive income (loss) before reclassifications		7,049			120			(14,060	)		(6,891	)
Amounts reclassified from accumulated other comprehensive loss		(5	)		65			139			199
Net other comprehensive income during the period		7,044			185			(13,921	)		(6,692	)
Balance as of March 31, 2020	$	11,665		$	(5,839	)	$	(18,458	)	$	(12,632	)

Balance as of January 1, 2019	$	(1,957	)	$	(6,290	)	$	1,747		$	(6,500	)
Other comprehensive income (loss) before reclassifications		3,129			252			(2,007	)		1,374
Amounts reclassified from accumulated other comprehensive loss		51			82			(239	)		(106	)
Net other comprehensive income during the period		3,180			334			(2,246	)		1,268
Balance as of March 31, 2019	$	1,223		$	(5,956	)	$	(499	)	$	(5,232	)

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

	Three Months Ended March 31,
	2020			2019
Change in holding gain or loss on securities available-for-sale:
Change in net unrealized holding gain or loss during the period	$	10,260		$	4,611
Reclassification adjustment for net (gain) loss included in net gain (loss) on securities and other assets		(8	)		76
Net change		10,252			4,687
Tax expense		3,208			1,507
Net change in holding gain or loss on securities available-for-sale		7,044			3,180
Change in pension and other postretirement obligations:
Reclassification adjustment for expense included in other expense		95			122
Change in the net actuarial gain or loss		176			370
Net change		271			492
Tax expense		86			158
Net change in pension and other postretirement obligations		185			334
Change in gain or loss on derivatives:
Change in net unrealized gain or loss during the period		(20,581	)		(2,928	)
Reclassification adjustment for expense included in interest expense		204			(356	)
Net change		(20,377	)		(3,284	)
Tax benefit		(6,456	)		(1,038	)
Net change in unrealized gain or loss on derivatives		(13,921	)		(2,246	)
Other comprehensive income (loss)	$	(6,692	)	$	1,268

4.	EARNINGS PER COMMON SHARE (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding during the reporting period. Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if “in the money” stock options were exercised and converted into Common Stock, and if all likely aggregate Long-term Incentive Plan (“LTIP”) and Sales Incentive Plan (“SIP”) shares are issued. In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares are excluded. Vested restricted stock award (“RSA”) shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS. Unvested RSA and SIP shares not yet awarded are recognized as a special class of participating securities under ASC 260, and are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.

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The following is a reconciliation of the numerators and denominators of basic and diluted EPS for the periods presented:

	Three Months Ended March 31,
	2020			2019
Net income available to common stockholders	$	8,392		$	11,501
Less: Dividends paid and earnings allocated to participating securities		(67	)		(37	)
Net income allocated to common stockholders	$	8,325		$	11,464
Weighted average common shares outstanding, including participating securities		34,801,479			36,000,140
Less: weighted average participating securities		(269,114	)		(153,793	)
Weighted average common shares outstanding		34,532,365			35,846,347
Basic EPS	$	0.24		$	0.32
Net income allocated to common stockholders	$	8,325		$	11,464
Weighted average common shares outstanding		34,532,365			35,846,347
Weighted average common equivalent shares outstanding		99,600			130,568
Weighted average common and equivalent shares outstanding		34,631,965			35,976,915
Diluted EPS	$	0.24		$	0.32

Common and equivalent shares resulting from the dilutive effect of “in-the-money” outstanding stock options are calculated based upon the excess of the average market value of the common stock over the exercise price of outstanding in-the-money stock options during the period.

There were no “out-of-the-money” stock options during the three-month periods ended March 31, 2020 or 2019.

For information about the calculation of expected aggregate LTIP and SIP share payouts, see Note 13.

5.	PREFERRED STOCK

On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $74,980 in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Preferred Stock”), with a liquidation preference of $25.00 per share. The net proceeds received from the issuance of preferred stock at the time of closing was $72,224. The Company will pay dividends from the original date of issuance, when, as, and if declared by its board of directors, at a fixed rate of 5.50% per annum, payable quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2020. The Preferred Stock is perpetual and has no stated maturity. The Company may redeem the Preferred Stock at its option at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after February 15, 2025 or within 90 days following a regulatory capital treatment event, as described in the prospectus supplement and accompanying prospectus relating to the offering.

6.	REVENUE FROM CONTRACTS WITH CUSTOMERS

In accordance with ASC 606, certain in-scope revenues are recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company applies the following five steps to properly recognize revenue:

Identify the contract with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to performance obligations in the contract

Recognize revenue when (or as) the Company satisfies a performance obligation

The Company’s only in-scope revenue stream that is subject to the accounting standard is service fees on deposit accounts (including interchange fees), which is disclosed on the Consolidated Statements of Income within “Service charges and other fees.”

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Service Charges on Deposit Accounts. The Company earns fees from its deposits customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfied the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. For the three-month periods ended March 31, 2020 and 2019, service charges and other fees totaled $715 and $710, respectively.

Interchange Income. The Company earns interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provide to the cardholder. For the three-month periods ended March 31, 2020 and 2019, interchange income totaled $203 and $188, respectively.

7.	INVESTMENT AND MORTGAGE-BACKED SECURITIES

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

	At March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Agency Notes	$	10,000	$	36	$	—		$	10,036
Corporate Securities		47,111		465		(544	)		47,032
Pass-through MBS issued by GSEs		227,805		10,829		—			238,634
Agency Collateralized Mortgage Obligations (“CMOs”)		255,896		6,671		(444	)		262,123
Total securities available-for-sale	$	540,812	$	18,001	$	(988	)	$	557,825

	At December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Agency Notes	$	20,000	$	—	$	(65	)	$	19,935
Corporate Securities		28,086		510		—			28,596
Pass-through MBS issued by GSEs		241,695		5,788		—			247,483
Agency CMOs		254,453		1,105		(577	)		254,981
Total securities available-for-sale	$	544,234	$	7,403	$	(642	)	$	550,995

The carrying amount of securities pledged was $40,526 and $27,884 at March 31, 2020 and December 31, 2019, respectively.

At March 31, 2020, the available-for-sale agency notes possessed a weighted average contractual maturity of 6.4 years. At March 31, 2020, available-for-sale agency CMO and MBS securities possessed a weighted average contractual maturity of 17.0 years. At March 31, 2020, the corporate securities possessed a weighted average contractual maturity of 5.3 years.

	For the Three Months Ended March 31,
	2020		2019
Pass through MBS issued by GSEs:
Proceeds		—		6,117
Gross gains		—		—
Tax expense on gain		—		—
Gross losses		—		174
Tax benefit on loss		—		56
Agency CMOs:
Proceeds		4,199		9,382
Gross gains		8		98
Tax expense on gain		3		31
Gross losses		—		—
Tax benefit on loss		—		—

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The Company holds marketable equity securities as the underlying mutual fund investments of the BMP, held in a rabbi trust. The Company may sell these securities on a periodic basis in order to pay retirement benefits to plan retirees. There are no gains or losses recognized from the sales of marketable equity securities. A summary of the sales of marketable equity securities is listed below for the periods indicated:

	For the Three Months Ended March 31,
	2020		2019
Proceeds:
Marketable equity securities	$	137	$	137

The remaining gain or loss on securities shown in the unaudited condensed consolidated statements of income was due to market valuation changes. Net (loss) gain of $(472) and $268 were recognized on marketable equity securities for the three-month periods ended March 31, 2020 and 2019, respectively.

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

	March 31, 2020
	Less than 12 Consecutive Months				12 Consecutive Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale:
Corporate Notes	$	32,303	$	544	$	—	$	—	$	32,303	$	544
Agency CMOs		59,814		444		—		—		59,814		444

	December 31, 2019
	Less than 12 Consecutive Months				12 Consecutive Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale:
Agency Notes	$	9,935	$	65	$	—	$	—	$	9,935	$	65
Agency CMOs		107,150		548		4,304		29		111,454		577

The issuers of securities available-for-sale are primarily U.S. government-sponsored entities or agencies. The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. In accordance with the Company’s investment policy, corporate notes are rated “investment grade” at the time of purchase and the financials of the issuers are reviewed quarterly. It is likely that the Company will not be required to sell the securities before their anticipated recovery, and as such, the Company does not consider these securities to be other-than-temporarily-impaired at March 31, 2020.

LOANS

Loans are reported at the principal amount outstanding, net of unearned fees or costs. Interest income on loans is recorded using the level yield method. Under this method, discount accretion and premium amortization are included in interest income. Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms.

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

	Balance at
	March 31, 2020			December 31, 2019
One-to-four family residential, including condominium and cooperative apartment	$	176,755		$	148,429
Multifamily residential and residential mixed-use		3,160,248			3,385,375
Commercial real estate and commercial mixed-use		1,403,985			1,350,185
Acquisition, development, and construction (“ADC”)		133,514			118,365
Total Real Estate		4,874,502			5,002,354
C&I		331,816			336,412
Consumer		956			1,772
Total		5,207,274			5,340,538
Allowance for loans losses		(36,463	)		(28,441	)
Loans, net	$	5,170,811		$	5,312,097

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The allowance for loan losses consists of specific and general components. At March 31, 2020, the Bank’s periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) specific reserve on impaired loans and (2) general reserve on non-impaired loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses: (1) real estate loans; (2) C&I loans; and (3) consumer loans. Within these segments, the Bank analyzes the allowance for loan losses based upon the underlying collateral type (classes). Smaller balance homogeneous real estate loans, such as condominium or cooperative apartment and one-to-four family residential real estate loans with balances equal to or less than the Federal National Mortgage Association (“FNMA”) Limits, and consumer loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

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

	At or for the Three Months Ended March 31, 2020
	Real Estate Loans
	One-to-Four Family Residential, Including Condominium and Cooperative Apartment		Multifamily Residential and Residential Mixed-Use		Commercial Real Estate and Commercial Mixed-Use			ADC		Total Real Estate			C&I		Consumer Loans			Total
Beginning balance	$	269	$	10,142	$	3,900		$	1,244	$	15,555		$	12,870	$	16		$	28,441
Provision (credit) for loan losses		376		4,127		2,442			427		7,372			641		(1	)		8,012
Charge-offs		—		—		(6	)		—		(6	)		—		—			(6	)
Recoveries		—		14		—			—		14			2		—			16
Ending balance	$	645	$	14,283	$	6,336		$	1,671	$	22,935		$	13,513	$	15		$	36,463

	At or for the Three Months Ended March 31, 2019
	Real Estate Loans
	One- to Four Family Residential, Including Condominium and Cooperative Apartment			Multifamily Residential and Residential Mixed-Use			Commercial Real Estate and Commercial Mixed-Use			ADC		Total Real Estate			C&I			Consumer Loans			Total
Beginning balance	$	198		$	13,446		$	3,777		$	397	$	17,818		$	3,946		$	18		$	21,782
Provision (credit) for loan losses		4			(453	)		250			246		47			273			1			321
Charge-offs		(1	)		(5	)		(5	)		—		(11	)		(150	)		(1	)		(162	)
Recoveries		—			—			—			—		—			—			—			—
Ending balance	$	201		$	12,988		$	4,022		$	643	$	17,854		$	4,069		$	18		$	21,941

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

	At March 31, 2020
	Real Estate Loans
	One-to-Four Family Residential, Including Condominium and Cooperative Apartment		Multifamily Residential and Residential Mixed-Use		Commercial Real Estate and Commercial Mixed-Use		ADC		Total Real Estate		C&I		Consumer Loans		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	10,082	$	—	$	10,082
Collectively evaluated for impairment		645		14,283		6,336		1,671		22,935		3,431		15		26,381
Total ending allowance balance	$	645	$	14,283	$	6,336	$	1,671	$	22,935	$	13,513	$	15	$	36,463

Loans:
Individually evaluated for impairment		5,895		1,332		56		—		7,283		10,082		—		17,365
Collectively evaluated for impairment		170,860		3,158,916		1,403,929		133,514		4,867,219		321,734		956		5,189,909
Total ending loans balance	$	176,755	$	3,160,248	$	1,403,985	$	133,514	$	4,874,502	$	331,816	$	956	$	5,207,274

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	At December 31, 2019
	Real Estate Loans
	One-to-Four Family Residential, Including Condominium and Cooperative Apartment		Multifamily Residential and Residential Mixed-Use		Commercial Real Estate and Commercial Mixed-Use		ADC		Total Real Estate		C&I		Consumer Loans		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	10,082	$	—	$	10,082
Collectively evaluated for impairment		269		10,142		3,900		1,244		15,555		2,788		16		18,359
Total ending allowance balance	$	269	$	10,142	$	3,900	$	1,244	$	15,555	$	12,870	$	16	$	28,441

Loans:
Individually evaluated for impairment		—		153		60		—		213		10,082		—		10,295
Collectively evaluated for impairment		148,429		3,385,222		1,350,125		118,365		5,002,141		326,330		1,772		5,330,243
Total ending loans balance	$	148,429	$	3,385,375	$	1,350,185	$	118,365	$	5,002,354	$	336,412	$	1,772	$	5,340,538

Impaired Loans

A loan is considered impaired when, based on then current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired. Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

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

Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral; or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for certain performing TDRs). If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of the collateral is considered when measuring impairment. Measured impairment is either charged off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses.

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

	At March 31, 2020						At December 31, 2019
	Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Related Allowance

With no related allowance recorded:
One-to-four family residential, including condominium and cooperative apartment	$	5,895	$	5,895	$	—	$	—	$	—	$	—
Multifamily residential and residential mixed-use		1,332		1,332		—		153		153		—
Commercial real estate and commercial mixed-use		56		56		—		60		60		—
Total with no related allowance recorded		7,283		7,283		—		213		213		—

With an allowance recorded:
C&I		10,082		10,082		10,082		10,082		10,082		10,082
Total with an allowance recorded		10,082		10,082		10,082		10,082		10,082		10,082
Total	$	17,365	$	17,365	$	10,082	$	10,295	$	10,295	$	10,082

(1)	The recorded investment excludes accrued interest receivable and net deferred costs due to immateriality.

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

	Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
	Average Recorded Investment ⁽¹⁾		Interest Income Recognized ⁽²⁾		Average Recorded Investment ⁽¹⁾		Interest Income Recognized ⁽²⁾

With no related allowance recorded:
One-to-four family residential, including condominium and cooperative apartment	$	2,948	$	—	$	13	$	—
Multifamily residential and residential mixed-use		743		6		544		13
Commercial real estate and commercial mixed-use		58		1		6,695		99
Total with no related allowance recorded		3,749		7		7,252		112

With an allowance recorded:
C&I		10,082		—		271		6
Total	$	13,831	$	7	$	7,523	$	118

(1)	The recorded investment excludes accrued interest receivable and net deferred costs due to immateriality.

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

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The following tables summarize the past due status of the Company’s investment in loans (excluding deferred costs and accrued interest) as of the dates indicated:

	At March 31, 2020
	30 to 59 Days Past Due		60 to 89 Days Past Due		Loans 90 Days or More Past Due and Still Accruing Interest		Non- accrual ⁽¹⁾		Total Past Due		Current		Total Loans
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	—	$	6	$	—	$	6,685	$	6,691	$	170,064	$	176,755
Multifamily residential and residential mixed-use		—		—		—		1,332		1,332		3,158,916		3,160,248
Commercial real estate and commercial mixed-use		—		—		1,033		56		1,089		1,402,896		1,403,985
ADC		—		—		—		—		—		133,514		133,514
Total real estate		—		6		1,033		8,073		9,112		4,865,390		4,874,502
C&I		—		—		—		10,082		10,082		321,734		331,816
Consumer		6		1		—		2		9		947		956
Total	$	6	$	7	$	1,033	$	18,157	$	19,203	$	5,188,071	$	5,207,274

(1)	Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2020.

	At December 31, 2019
	30 to 59 Days Past Due		60 to 89 Days Past Due		Loans 90 Days or More Past Due and Still Accruing Interest		Non- accrual ⁽¹⁾		Total Past Due		Current		Total Loans
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	417	$	—	$	—	$	794	$	1,211	$	147,218	$	148,429
Multifamily residential and residential mixed-use		214		—		1,169		153		1,536		3,383,839		3,385,375
Commercial real estate and commercial mixed-use		—		—		364		60		424		1,349,761		1,350,185
ADC		—		—		—		—		—		118,365		118,365
Total real estate		631		—		1,533		1,007		3,171		4,999,183		5,002,354
C&I		44		—		—		10,082		10,126		326,286		336,412
Consumer		6		1		—		2		9		1,763		1,772
Total	$	681	$	1	$	1,533	$	11,091	$	13,306	$	5,327,232	$	5,340,538

(1)	Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2019.

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on one loan with an aggregate outstanding balance of $1,033 at March 31, 2020, and two real estate loans with an aggregate outstanding balance of $1,533 at December 31, 2019, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and therefore remained on accrual status and were deemed performing assets at the dates indicated above.

Troubled Debt Restructurings (“TDRs”)

A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:

•

A reduction of interest rate has been made for the remaining term of the loan

•

The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk

•

The outstanding principal amount and/or accrued interest have been reduced

However, pursuant to regulatory guidance, loan modifications or other temporary accommodations to borrowers affected by the COVID-19 outbreak are not considered TDRs.

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. There were no loans modified in a manner that met the criteria of a TDR during the three-month periods ended March 31, 2020 or 2019. There were no TDRs as of March 31, 2020 or December 31, 2019.

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Credit Quality Indicators

The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

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

All real estate and C&I loans not classified as Special Mention, Substandard, or Doubtful were deemed pass loans at both March 31, 2020 and December 31, 2019.

The following is a summary of the credit risk profile of real estate and C&I loans (including deferred costs) by internally assigned grade as of the dates indicated:

	Balance at March 31, 2020
	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	170,069	$	—	$	6,686	$	—	$	176,755
Multifamily residential and residential mixed-use		3,075,559		36,610		48,079		—		3,160,248
Commercial real estate and commercial mixed-use		1,388,414		4,812		10,759		—		1,403,985
ADC		133,514		—		—		—		133,514
Total real estate		4,767,556		41,422		65,524		—		4,874,502
C&I		318,727		2,072		935		10,082		331,816
Total Real Estate and C&I	$	5,086,283	$	43,494	$	66,459	$	10,082	$	5,206,318

	Balance at December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	147,635	$	—	$	794	$	—	$	148,429
Multifamily residential and residential mixed-use		3,319,226		14,606		51,543		—		3,385,375
Commercial real estate and commercial mixed-use		1,334,518		4,840		10,827		—		1,350,185
ADC		118,365		—		—		—		118,365
Total real estate		4,919,744		19,446		63,164		—		5,002,354
C&I		325,296		1,034		—		10,082		336,412
Total Real Estate and C&I	$	5,245,040	$	20,480	$	63,164	$	10,082	$	5,338,766

The following is a summary of the credit risk profile of consumer loans:

	Balance at
	March 31, 2020		December 31, 2019
Performing	$	954	$	1,770
Non-accrual		2		2
Total	$	956	$	1,772

LEASES

The Company recognizes operating lease assets and corresponding lease liabilities related to its office facilities and retail branches. The operating lease assets represent the Company’s right to use an underlying asset for the lease term, and the lease liability represents the Company’s obligation to make lease payments over the lease term.

The operating lease asset and lease liability are determined at the commencement date of the lease based on the present value of the lease payments. As most of our leases do not provide an implicit rate, the Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at the lease commencement date.

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The Company made a policy election to exclude the recognition requirements of ASU 2016-02 to short-term leases, those leases with original terms of 12 months or less. Short-term lease payments are recognized in the income statement on a straight-line basis over the lease term. Certain leases may include one or more options to renew. The exercise of lease renewal options is typically at the Company’s discretion and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised. Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not sublease any of its leased properties. The Company does not lease properties from any related parties.

Maturities of the Company’s operating lease liabilities at March 31, 2020 are as follows:

	Rent to be Capitalized
2020	$	5,061
2021		6,733
2022		6,519
2023		5,553
2024		5,663
Thereafter		18,981
Total undiscounted lease payments		48,510
Less amounts representing interest		5,896
Lease liability	$	42,614

Other information related to operating leases was as follows:

	Three Months Ended March 31,
	2020		2019
Operating lease cost	$	1,603	$	1,620

	At March 31,
	2020			2019
Weighted average remaining lease term	7.9 years			8.6 years
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,811			1,712
Weighted average discount rate		3.25	%		3.28	%

10.	DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loan portfolio.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. The Company engages in both cash flow hedges and freestanding derivatives.

Cash Flow Hedges

Cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company uses these types of derivatives to hedge the variable cash flows associated with existing or forecasted issuances of short-term borrowings debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that an additional $7,356 will be reclassified as an increase to interest expense.

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During the three month period ended March 31, 2020, the Company terminated two derivatives with notional values totaling $30,000, resulting in a termination value of $175 which will be recognized over the remaining term of the original derivative.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition as of the periods indicated.

	At March 31, 2020								At December 31, 2019
	Count		Notional Amount		Fair Value Assets		Fair Value Liabilities		Count		Notional Amount		Fair Value Assets		Fair Value Liabilities
Included in other assets/(liabilities):
Interest rate swaps related to FHLBNY advances		—	$	—	$	—	$	—		7	$	130,000	$	1,081	$	—
Interest rate swaps related to FHLBNY advances		34	$	600,000	$	—	$	27,014		19	$	315,000	$	—	$	7,718

The table below presents the effect of the cash flow hedge accounting on Accumulated Other Comprehensive Loss.

	Three Months Ended March 31,
	2020			2019
Interest rate products
Amount of loss recognized in other comprehensive income	$	(20,578	)	$	(2,928	)
Amount of loss (gain) reclassified from other comprehensive income into interest expense		204			(356	)

All cash flow hedges are recorded gross on the balance sheet.

Freestanding Derivatives

During the second quarter of 2019, the Company began to offer loan level derivatives with certain borrowers as part of the Company’s interest-rate risk management strategy for its loan portfolio and to generate loan level derivative income. In general, this interest rate swap product is designed such that the borrower synthetically attains a fixed-rate loan, by entering into an interest rate swap contract with the Company, while the Company receives floating rate loan payments. The Company offsets the customer-level interest rate swap exposure by entering into an offsetting interest rate swap with an unaffiliated counterparty institution. These interest rate swaps do not qualify as designated hedges, under ASU 815; therefore, each interest rate swap is accounted for as a freestanding derivative. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The following table reflects freestanding derivatives included in the Consolidated Statements of Financial Condition as of the period indicated:

	At March 31, 2020
	Count		Notional Amount		Fair Value Assets		Fair Value Liabilities
Included in other assets/(liabilities):
Loan level interest rate swaps with borrower		15	$	132,742	$	12,379	$	—
Loan level interest rate swaps with third-party counterparties		15		132,742		—		12,379

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	At December 31, 2019
	Count		Notional Amount		Fair Value Assets		Fair Value Liabilities
Included in other assets/(liabilities):
Loan level interest rate swaps with borrower		7	$	61,038	$	1,347	$	—
Loan level interest rate swaps with borrower		1		7,205		—		15
Loan level interest rate swaps with third-party counterparties		7		61,038		—		1,347
Loan level interest rate swaps with third-party counterparties		1		7,205		15		—

These freestanding derivatives did not have a material impact on the Company’s results of operation or financial condition.

Loan level derivative income is recognized on the mark-to-market of the interest rate swap as a fair value adjustment at the time the transaction is closed. Total loan level derivative income for the three month period ended March 31, 2020 was $1,163. There was no loan level derivative income for the three-month period ended March 31, 2019 as the product was not offered until the second quarter 2019.

The interest rate swap product with the borrower is cross collateralized with the underlying loan and therefore there is no posted collateral. Certain interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. As of March 31, 2020, posted collateral was $13,180.

Credit Risk Related Contingent Features

The Company’s agreements with each of its derivative counterparties state that if the Company defaults on any of its indebtedness, it could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.

The Company’s agreements with certain of its derivative counterparties state that if the Bank fails to maintain its status as a well-capitalized institution, the Bank could be required to terminate its derivative positions with the counterparty.

As of March 31, 2020, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $27,173 for those related to FHLBNY advances and $12,379 for those related to loan level derivatives. If the Company had breached any of the above provisions at March 31, 2020, it could have been required to settle its obligations under the agreements at the termination value with the respective counterparty. There were no provisions breached for the period ended March 31, 2020.

11.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Significant other observable inputs such as any of the following: (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 Inputs – Significant unobservable inputs for the asset or liability. Significant unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Significant unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities

The Company’s marketable equity securities and available-for-sale securities are reported at fair value, which were determined utilizing prices obtained from independent parties. The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Prioritization of inputs may vary on any given day based on market conditions.

All MBS, CMO and agency notes available-for-sale are guaranteed either implicitly or explicitly by GSEs as of March 31, 2020 and December 31, 2019. In accordance with the Company’s investment policy, corporate securities are rated “investment grade” at the time of purchase and the financials of the issuers are reviewed quarterly. Obtaining market values as of March 31, 2020 and December 31, 2019 for these securities utilizing significant observable inputs was not difficult due to their liquid nature.

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Derivatives

Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.

The following tables present financial assets liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements at March 31, 2020 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds):
Domestic equity mutual funds	$	1,264	$	1,264	$	—	$	—
International equity mutual funds		331		331		—		—
Fixed income mutual funds		3,803		3,803		—		—
Securities available-for-sale:
Agency Notes		10,036		—		10,036		—
Corporate Securities		47,032		—		47,032		—
Pass-through MBS issued by GSEs		238,634		—		238,634		—
Agency CMOs		262,123		—		262,123		—
Derivative – freestanding derivatives		12,379		—		12,379		—

Financial Liabilities
Derivative – cash flow hedges		27,014		—		27,014		—
Derivative – freestanding derivatives		12,379		—		12,379		—

			Fair Value Measurements at December 31, 2019 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds)
Domestic equity mutual funds	$	1,657	$	1,657	$	—	$	—
International equity mutual funds		420		420		—		—
Fixed income mutual funds		3,817		3,817		—		—
Securities available-for-sale:
Agency Notes		19,935		—		19,935		—
Corporate Securities		28,596		—		28,596		—
Pass-through MBS issued by GSEs		247,483		—		247,483		—
Agency CMOs		254,981		—		254,981		—
Derivative – cash flow hedges		1,081		—		1,081		—
Derivative – freestanding derivatives		1,362		—		1,362		—

Financial Liabilities
Derivative – cash flow hedges		7,718		—		7,718		—
Derivative – freestanding derivatives		1,362		—		1,362		—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a nonrecurring basis include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. There were no impaired loans carried at fair value at March 31, 2020 or December 31, 2019.

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Financial Instruments Not Measured at Fair Value

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 24 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K.

The following tables present the carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or nonrecurring is as follows for the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements at March 31, 2020 Using
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total

Financial Assets
Cash and due from banks	$	246,153	$	246,153	$	—	$	—	$	246,153
Loans, net		5,170,811		—		—		5,128,047		5,128,047
Accrued interest receivable		18,812		—		1,795		17,017		18,812
Financial Liabilities
Savings, money market and checking accounts		2,598,329		2,598,329		—		—		2,598,329
Certificates of Deposits (“CDs”)		1,641,497		—		1,647,528		—		1,647,528
Escrow and other deposits		116,097		116,097		—		—		116,097
FHLBNY Advances		1,117,300		—		1,129,054		—		1,129,054
Subordinated debt, net		113,942		—		107,042		—		107,042
Accrued interest payable		6,071		—		6,071		—		6,071

			Fair Value Measurements at December 31, 2019 Using
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total
Financial Assets
Cash and due from banks	$	155,488	$	155,488	$	—	$	—	$	155,488
Loans, net		5,312,097		—		—		5,301,708		5,301,708
Accrued interest receivable		18,891		—		1,674		17,217		18,891
Financial Liabilities
Savings, money market and checking accounts		2,709,756		2,709,756		—		—		2,709,756
CDs		1,572,869		—		1,576,706		—		1,576,706
Escrow and other deposits		76,481		76,481		—		—		76,481
FHLBNY Advances		1,092,250		—		1,093,964		—		1,093,964
Subordinated debt, net		113,906		—		114,769		—		114,769
Other borrowings		110,000		110,000		—		—		110,000
Accrued interest payable		4,570		—		4,570		—		4,570

12.	RETIREMENT AND POSTRETIREMENT PLANS

The Holding Company or the Bank maintains the Retirement Plan of Dime Community Bank (the “Employee Retirement Plan”), the Retirement Plan for Board Members of Dime Community Bancshares, Inc. (the “Outside Director Retirement Plan”), the BMP, and the Postretirement Welfare Plan of Dime Community Bank (the “Postretirement Plan”).

The components of net periodic costs are included in other non-interest expense in the Consolidated Statements of Income. Net expenses associated with these plans were comprised of the following components:

	Three Months Ended March 31,
	2020						2019
	BMP, Employee and Outside Director Retirement Plans			Postretirement Plan			BMP, Employee and Outside Director Retirement Plans			Postretirement Plan

Service cost	$	—		$	—		$	—		$	—
Interest cost		241			10			313			14
Expected return on assets		(428	)		—			(382	)		—
Unrecognized past service liability		—			(2	)		—			(2	)
Amortization of unrealized loss (gain)		274			—			243			(3	)
Net periodic cost	$	87		$	8		$	174		$	$9

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The following table presents the Company’s planned contributions to, or benefit payments on behalf of each benefit plan as disclosed in its consolidated financial statements for the year ended December 31, 2019, as well as the actual contributions to, or benefit payments on behalf of each benefit plan during the period indicated:

	Planned Contributions/Benefit Payments for the Year Ended December 31, 2020		Actual Contributions/Benefit Payments for the Three Months Ended March 31, 2020

Employee Retirement Plan	$	58	$	—
Outside Director Retirement Plan		263		56
Post Retirement Plan		109		38
BMP		569		137

The Company expects to make the remainder of the contributions to, or benefit payments on behalf of, each benefit plan during the year ended December 31, 2020, except for the Employee Retirement Plan as there is a surplus and no contributions are required.

The BMP exists in order to compensate executive officers for any curtailments in benefits due to statutory limitations on qualifying benefit plans. There were no retirement distributions at March 31, 2020 or March 31, 2019.

13.	STOCK-BASED COMPENSATION

The Company maintains the Dime Community Bancshares, Inc. 2001 Stock Incentive Plan for Outside Directors, Officers and Employees, the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees, and the 2013 Equity and Incentive Plan (“2013 Equity Plan”) (collectively, the “Stock Plans”), which are discussed more fully in Note 22 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2019, and which are subject to the accounting requirements of ASC 505-50 and ASC 718.

Stock Option Awards

The following table presents a summary of activity related to stock options granted under the Stock Plans, and changes during the period then ended:

	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Years		Aggregate Intrinsic Value
Options outstanding at January 1, 2020		42,031	$	14.63
Options granted		—		—
Options expired		—		—
Options exercised		—		—
Options outstanding at March 31, 2020		42,031	$	14.63		1.1	$	7
Options vested and exercisable at March 31, 2020		42,031	$	14.63		1.1	$	7

There were no stock option exercises during the three-month periods ended March 31, 2020 or 2019.

Restricted Stock Awards

The Company has made restricted stock award grants to outside Directors and certain officers under the Stock Plans. Typically, awards to outside Directors fully vest on the first anniversary of the grant date, while awards to officers may vest in equal annual installments over a three or four-year period or at the end of the pre-determined requisite period. All awards were made at the fair value of Common Stock on the grant date. Compensation expense on all restricted stock awards are based upon the fair value of the shares on the respective dates of the grant.

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The following table presents a summary of activity related to the RSAs granted, and changes during the period then ended:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested allocated shares outstanding at January 1, 2020		256,575		$	19.79
Shares granted		2,467			20.67
Shares vested		(7,986	)		19.01
Shares forfeited		(168	)		17.24
Unvested allocated shares at March 31, 2020		250,888		$	19.82

Information related to RSAs during each period is as follows:

	For the Three Months Ended March 31,
	2020		2019
Compensation expense recognized	$	461	$	289
Income tax benefit (expense) recognized on vesting of awards		4		(3	)

As of March 31, 2020, there was $3,048 of total unrecognized compensation cost related to unvested restricted stock awards. The cost is expected to be recognized over a weighted-average period of 2.7 years.

Performance Based Equity Awards

The Company maintains the LTIP, a long term incentive award program for certain officers, which meets the criteria for equity-based accounting. For each award, threshold (50% of target), target (100% of target) and stretch (150% of target) opportunities are eligible to be earned over a three-year performance period based on the Company’s relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently. Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. Shares are issued at the stretch opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.

The following table presents a summary of activity related to performance-based equity awards, and changes during the period then ended:

	Number of Shares		Weighted-Average Grant-Date Fair Value
Maximum aggregate share payout at January 1, 2020		214,948	$	18.96
Shares granted		—		—
Shares vested		—		—
Shares forfeited		—		—
Maximum aggregate share payout at March 31, 2020		214,948	$	18.96
Minimum aggregate share payout		—		—
Expected aggregate share payout		92,373	$	19.18

Information related to LTIP share awards during each period is as follows:

	For the Three Months Ended March 31,
	2020		2019
Compensation expense recognized	$	155	$	(75	)
Income tax benefit (expense) recognized on vesting of awards		—		(3	)

Sales Incentive Awards

The Company established the SIP, a sales incentive award program for certain officers, which meets the criteria for equity-based accounting. For each quarter an individual can earn their shares based on their sales performance in that quarter. The shares then vest one year from the quarter in which they are earned. Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. They are issued at the maximum opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.

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The following table presents a summary of activity related to sales incentive equity awards, and changes during the period then ended:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Maximum aggregate share payout at January 1, 2020		19,396		$	19.15
Shares granted		—			—
Shares vested		(3,911	)		19.14
Shares forfeited		(2,208	)		19.14
Maximum aggregate share payout at March 31, 2020		13,277		$	—
Minimum aggregate share payout		—			—
Expected aggregate share payout		13,277		$	19.14

	For the Three Months Ended March 31,
	2020		2019
Compensation expense recognized	$	55	$	70
Income tax benefit recognized on vesting of awards		6		—

14.	OTHER BORROWINGS

Other borrowings consist of unsecured, overnight or short-term borrowings with member commercial banks within a network of financial institutions. The availability of funds changes daily. As of March 31, 2020, the Bank had no such borrowings outstanding. As of December 31, 2019, the Bank had $110,000 of such borrowings outstanding. Interest expense for the three month periods ended March 31, 2020 and 2019 was $40 and $65, respectively.

15.	INCOME TAXES

During the three months ended March 31, 2020 and 2019, the Company’s consolidated effective tax rates were 21.6% and 24.9%, respectively. There were no significant unusual income tax items during the three-month periods ended either March 31, 2020 or 2019.

16.	SUBSEQUENT EVENTS

The CARES Act, signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs, and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, (the “Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and provided practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The Agencies confirmed with the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (i.e., three-month or six-month) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

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. The modification programs, which formally began in the month of April 2020, primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan. As of April 30, 2020, the Company has formally approved 274 loans, representing outstanding loan balances of $947,447, for deferral. In accordance with issued interagency guidance, or as outlined in the CARES Act, these short-term deferrals are not considered troubled debt restructurings. These loans will continue to accrue interest and will not be considered past due so long as any required payments are made in accordance with the deferral terms. In addition, the risk-rating on COVID-19 modified loans did not change at the time the deferral was approved. The loans will be subject to the Bank’s normal credit monitoring, and will be re-evaluated after the deferral period ends. The collectability of accrued interest will be evaluated on a periodic basis.

During April 2020, the Bank sold two non-accrual loans, one cooperative apartment loan in the amount of $5,895 and one multifamily loan in the amount of $1,179. These loans had previously been included in the March 31, 2020 non-accrual, substandard, and impaired balances. As a result of the sales, the Bank was able to fully recover all amounts due to the Bank associated with these loans. Both loans had no specific allowance for loan loss reserves attributed to them.

During April 2020, the Holding Company repurchased $11,536 of its common stock (766,821 shares at a weighted average price of $15.04 per share).

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The Bank was originally founded in 1864 as a New York State-chartered mutual savings bank, and currently operates as a New York State-chartered commercial bank. Effective August 1, 2016, the Bank changed its name from “The Dime Savings Bank of Williamsburgh” to “Dime Community Bank.” The new name more accurately reflected the Bank’s evolving business model and emphasized its broader geographic and business reach while retaining the Bank’s mission to be in and of the communities it served, including the virtual online community. The Bank’s principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, mixed use, and, to an increasing extent, commercial and industrial (“C&I”) loans, and one-to-four family residential real estate loans, as well as mortgage-backed securities, obligations of the U.S. government and government-sponsored enterprises (“GSEs”), and corporate debt and equity securities.

In addition to the Bank, the Holding Company’s direct and indirect subsidiaries consist of six corporations and one limited liability company, which are wholly-owned by the Bank. The following table presents an overview of the Holding Company’s indirect subsidiaries, other than the Bank, as of March 31, 2020:

Direct Subsidiaries of the Bank	Year/ State of Incorporation	Primary Business Activities
Boulevard Funding Corp.	1981 / New York	Management and ownership of real estate.
DSBW Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in multifamily residential and commercial real estate loans.
DSBW Residential Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in one-to-four family residential loans.
Dime Insurance Agency Inc. (f/k/a Havemeyer Investments, Inc.)	1997 / New York	Sale of non-FDIC insured investment products.
Dime Reinvestment Corporation	2004 / Delaware	Community Development Entity. Currently inactive.
195 Havemeyer Corp.	2008 / New York	Management and ownership of real estate. Currently inactive.
DSB Holdings NY, LLC	2015 / New York	Management and ownership of real estate. Currently inactive.

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Executive Summary

The Holding Company’s primary business is the ownership of the Bank. The Company’s consolidated results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Bank additionally generates non-interest income such as service charges and other fees, mortgage banking related income, and income associated with bank owned life insurance (“BOLI”). Non-interest expense primarily consists of employee compensation and benefits, federal deposit insurance premiums, data processing costs, occupancy and equipment, marketing and other operating expenses. The Company’s consolidated results of operations are also significantly affected by general economic and competitive conditions (particularly fluctuations in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies.

The Bank’s primary deposit strategy is generally to increase its product and service utilization for each depositor, and to increase its household and deposit market shares in the communities that it serves. In recent years, particular emphasis has been placed upon growing individual and small business commercial checking account balances. The Bank also actively strives to obtain checking account balances affiliated with the operation of the collateral underlying its real estate and C&I loans, as well as personal deposit accounts from its borrowers. Historically, the Bank’s primary lending strategy included the origination of, and investment in, real estate loans secured by multifamily and mixed-use properties, and, to a lesser extent, real estate loans secured by commercial real estate properties, primarily located in the greater NYC metropolitan area. As part of the development of the Bank’s Business Banking division, which began in 2017, the Bank has been focused on products and services to serve both the credit and business banking needs in its footprint. Additionally, the Bank resumed offering one-to-four family loan products.

The Business Banking division is focused on total relationship banking and will enable the Bank to diversify its loan portfolio into areas such as C&I loans, Small Business Administration (“SBA”) loans (a portion of which is guaranteed by the SBA), ADC loans, finance loans and leases, one-to-four family loans and consumer loans. These business lines are intended to supplement core deposit growth and provide greater funding diversity. In the first quarter of 2017, the Bank hired seasoned executives, and bolstered its lending and credit and administrative staff. In the third quarter of 2017, the Bank was approved by the SBA as a lender, and in December 2018 the Bank received “Preferred Lender” status from the SBA, thus better positioning the Business Banking division for future expansion.

Recent Events

On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $75.0 million in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Preferred Stock”), with a liquidation preference of $25.00 per share. The Company will pay dividends from the original date of issuance, when, as, and if declared by its board of directors, at a fixed rate of 5.50% per annum, payable quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2020. The Preferred Stock is perpetual and has no stated maturity. The Company may redeem the Preferred Stock at its option at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after February 15, 2025, or within 90 days under certain circumstances.

Recent Developments Relating to the COVID-19 Pandemic

The disruption to the economy and financial markets brought on by the COVID-19 pandemic will continue to have an impact of the Company’s operations and financial results. As Banking was designated by New York State as an essential business, the Company remains committed to being a source of capital to businesses in its footprint. Over the past several years, the Company has taken numerous steps, including hiring personnel and adding new processes and systems, that have put the bank in a position to help our business customers, through programs such as the SBA Payroll Protection Program. Our retail branch office locations remain open to conduct business where plexiglass barriers exist. The Bank also offers mobile and digital banking platforms.

The Company also prioritizes the well-being of employees. The Company has deployed its Business Continuity Plans and has shifted to a remote working environment. Over 200 associates, 100% of non-branch staff, are using remote desktop software to re-create their desktop environment in order to work from home. The Company has not furloughed any of its employees.

Financial position and results of operations

The impact of the COVID-19 pandemic is expected to continue to evolve and may negatively affect the Company’s operations and the operations of the Company’s clients in future periods. Additionally, certain provisions of the CARES Act and other regulatory relief efforts could also have a material impact on the Company’s operations.

•

On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points, followed by an additional reduction of 100 basis points on March 16, 2020. These reductions in interest rates may adversely affect the Company’s financial condition and results of operations.

•

The Company’s interest income could be reduced due to COVID-19. In adherence with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their interest and /or principal payments. 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 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.

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•

The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis.

•

The Company’s operating expenses could increase due to additional expenditures for salaries in effort to compensate employees who are working in the front lines of retail operations, supporting a remote work environment, information technology and cybersecurity costs, and facility maintenance and cleaning costs.

At this time, the Company is unable to project the materiality of the aforementioned items on the financial position and results of operations that could occur due to the uncertainties around the impact of COVID-19.

Capital and liquidity

As of March 31, 2020, the Company and Bank capital ratios were in excess of all regulatory requirements. While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by credit losses.

The Company relies on cash on hand as well as capital contributions from its subsidiary bank to service its debt and pay dividends to both its preferred and common stockholders. If its subsidiary bank is unable to make capital contributions to it for an extended period of time, the Company may not be able to service its debt or pay dividends.

The Company maintains access to multiple sources of liquidity, including borrowing capacity with the FHLBNY of $1.10 billion and access to borrow or lend funds through American Fund Exchange (“AFX”) on an overnight or short-term basis with other member institutions. The availability of funds with AFX changes daily. Wholesale funding markets have remained open to us, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

Asset valuation

Currently, the Company does not expect COVID-19 to affect its ability to timely account for the assets on its balance sheet. While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP. These assumptions could change in future periods.

Business Continuity Plan

The Company has invoked its Board approved Business Continuity Plan (“BCP”), that was updated earlier in the year to address specific risks and operational concerns related to the COVID-19 pandemic. The BCP includes a remote working environment for many of the Company’s back office personnel, strategic branch closures for locations that do not have plexiglass barriers, and other considerations. No material operational or internal control challenges or risks have been identified to date. The Company does not currently anticipate significant challenges to its ability to maintain its systems.

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. The modification programs, which formally began in the month of April 2020, primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan. As of April 30, 2020, the Company has formally approved 274 loans representing outstanding loan balances of $947.4 million. In accordance with issued interagency guidance, or as outlined in the CARES Act, these short-term deferrals are not considered troubled debt restructurings. These loans will continue to accrue interest and will not be considered past due so long as any required payments are made in accordance with the deferral terms. In addition, the risk-rating on COVID-19 modified loans did not change at the time the deferral was approved. The loans will be subject to the Bank’s normal credit monitoring, and will be re-evaluated after the deferral period ends. The collectability of accrued interest will be evaluated on a periodic basis.

With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company is actively participating in assisting its customers with applications for resources through the program. PPP loans have a two-year term and earn interest at 1%. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of April 30, 2020, the Company has closed or approved with the SBA 1,856 PPP loans representing $292.1 million in funding. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish additional allowance for credit loss through additional credit loss expense charged to earnings.

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The Bank is closely monitoring the rapid developments and uncertainties regarding the pandemic, including various segments of our loan portfolio that may be disproportionately impacted by the pandemic. As of March 31, 2020, the Company had eight loans aggregating $26.7 million to restaurants and 12 loans aggregating $172.8 million to hotels. The Company does not have any exposure to the Energy Industry, Airline Industry, Leveraged Lending, Shared National Credits, Credits Card Loans, or Auto Loans.

Further, in sensitivity and service to its borrowers during this unprecedented time, the Company is waiving late payment fees. These waivers are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis.

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.

Selected Financial Highlights and Other Data

(Dollars in Thousands Except Per Share Amounts)

	At or For the Three Months Ended March 31,
	2020			2019
Per Share Data:
Earnings per Common Share (“EPS”) (Diluted)	$	0.24		$	0.32
Cash dividends paid per share		0.14			0.14
Book value per share		16.93			16.83
Dividend payout ratio		58.33	%		43.75	%
Performance and Other Selected Ratios:
Return on average assets		0.54	%		0.72	%
Return on average equity		5.35			7.62
Net interest spread		2.46			2.02
Net interest margin		2.72			2.31
Average interest-earning assets to average interest-bearing liabilities		120.93			118.14
Non-interest expense to average assets		1.68			1.39
Efficiency ratio		57.58			59.22
Loan-to-deposit ratio at end of period		122.82			124.93
Effective tax rate		21.63			24.88
Asset Quality Summary:
Non-performing loans	$	18,157		$	5,425
Non-performing assets		18,157			5,425
Net (recoveries) charge-offs		(10	)		162
Non-performing loans/Total loans		0.35	%		0.10	%
Non-performing assets/Total assets		0.29			0.08
Allowance for loan loss/Total loans		0.70			0.40
Allowance for loan loss/Non-performing loans		200.82			404.44

Critical Accounting Policies

The Company’s policies with respect to the methodologies it uses to determine the allowance for loan losses (including reserves for loan commitments), are its most critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations, involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions or estimates could result in material variations in the Company’s consolidated results of operations or financial condition.

Allowance for Loan Losses. The Bank’s methods and assumptions utilized to periodically determine its allowance for loan losses are summarized in Note 8 to the Company’s condensed consolidated financial statements.

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Liquidity and Capital Resources

The Board of Directors of the Bank has approved a liquidity policy that it reviews and updates at least annually. Senior management is responsible for implementing the policy. The Bank’s ALCO is responsible for general oversight and strategic implementation of the policy and management of the appropriate departments are designated responsibility for implementing any strategies established by ALCO. On a daily basis, appropriate senior management receives a current cash position report and one-week forecast to ensure that all short-term obligations are timely satisfied and that adequate liquidity exists to fund future activities. Reports detailing the Bank’s liquidity reserves and forecasted cash flows are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings. In addition on a monthly basis, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.

The Bank’s primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers, and has in the past sold such loans to FNMA and FHLMC. The Company may additionally issue debt or equity under appropriate circumstances. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.

The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. As of March 31, 2020, the Bank had no borrowings through AFX.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. It must additionally compete for deposit monies against the stock and bond markets, especially during periods of strong performance in those arenas. The Bank’s deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general market increases or declines in interest rates, its deposit flows should not be materially impacted. However, favorable performance of the equity or bond markets could adversely impact the Bank’s deposit flows.

Total deposits decreased $42.8 million during the three months ended March 31, 2020, compared to an increase of $50.9 million for the three months ended March 31, 2019. Within deposits, core deposits (i.e., non-CDs) decreased $111.4 million during the three months ended March 31, 2020 and decreased $119.9 million during the three months ended March 31, 2019. CDs increased $68.6 million during the three months ended March 31, 2020 compared to an increase of $170.7 million during the three months ended March 31, 2019. The decrease in deposits during the current period was primarily due to managed deposit outflows of higher-cost, more rate sensitive deposit balances, as the Bank proactively adjusted pricing on various deposit categories.

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. At March 31, 2020, the Bank had an additional potential borrowing capacity of $1.10 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank’s outstanding FHLBNY borrowings).

The Bank increased its outstanding FHLBNY advances by $25.1 million during the three months ended March 31, 2020, compared to a $38.0 million reduction during the three months ended March 31, 2019, reflecting deposit outflows.

During the three months ended March 31, 2020, principal repayments on real estate loans (including refinanced loans) totaled $289.1 million compared to $150.5 million during the three months ended March 31, 2019. The increase resulted primarily from higher prepayment activity. During the three months ended March 31, 2020 and 2019, real estate loan originations totaled $166.8 million and $233.9 million, respectively.

During the three months ended March 31, 2020, principal repayments on C&I loans (including refinanced loans) totaled $53.7 million compared to $14.9 million during the three months ended March 31, 2019. During the three months ended March 31, 2020 and 2019, C&I loan originations totaled $51.9 million and $52.6 million, respectively.

Sales of available-for-sale securities totaled $4.2 million and $15.5 million during the three-month periods ended March 31, 2020 and 2019, respectively. Purchases of available-for-sale securities totaled $33.2 million and $38.3 million during the three-month periods ended March 31, 2020 and 2019 respectively. Proceeds from pay downs and calls of available-for-sale securities were $32.3 million and $18.5 million for the three-month periods ended March 31, 2020 and 2019, respectively.

The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator. As a general matter, these capital requirements are based on the amount and composition of an institution’s assets. At March 31, 2020, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered “well capitalized” for all regulatory purposes.

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

	Actual Ratios at March 31, 2020
	Bank			Consolidated Company			Basel III Minimum Requirement			To Be Categorized as “Well Capitalized” ⁽¹⁾
Tier 1 common equity ratio		12.72	%		10.69	%		4.5	%		6.5	%
Tier 1 risk-based based capital ratio		12.72			12.15			6.0			8.0
Total risk-based based capital ratio		13.47			15.21			8.0			10.0
Tier 1 leverage ratio		9.93			9.80			4.0			5.0

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

In accordance with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, will be eligible to opt into a “Community Bank Leverage Ratio” framework. The leverage ratio was temporarily lowered to 8% by the Federal Reserve Board in March 2020, gradually increasing back to 9% by 2022. The framework will first be available for use in the Bank’s March 31, 2020 Call Report. Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules and will be considered to have met the “well capitalized” ratio requirements under the Prompt Corrective Action statutes. The agencies reserved the authority to disallow the use of the Community Bank Leverage Ratio by a financial institution or holding company based on the risk profile of the organization. As of March 31, 2020, the Bank has not opted into the Community Bank Leverage Ratio framework.

The Holding Company repurchased 1,274,679 and 199,254 shares of its common stock during the three months ended March 31, 2020 and March 31, 2019, respectively. As of March 31, 2020, up to 1,594,469 shares remained available for purchase under the authorized share repurchase programs. During April 2020, the Holding Company repurchased 766,821 shares of its common stock. As of April 30, 2020, up to 827,648 shares remained available for purchase under the authorized share repurchase program. See “Part II - Item 2. Other Information - Unregistered Sales of Equity Securities and Use of Proceeds” for additional information about repurchases of common stock.

The Holding Company paid $4.9 million and $5.0 million in cash dividends on common stock during the three months ended March 31, 2020 and 2019, respectively.

Contractual Obligations

The Bank is obligated to make rental payments under leases on certain of its branches and equipment. In addition, the Bank generally has outstanding at any time significant borrowings in the form of FHLBNY advances, or overnight or short-term borrowings, as well as customer CDs with fixed contractual interest rates.

Off-Balance Sheet Arrangements

As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to third parties, which are granted pursuant to its regular underwriting standards. Since these loan commitments may expire prior to funding, in whole or in part, the contract amounts are not estimates of future cash flows.

The following table presents off-balance sheet arrangements as of March 31, 2020:

	Less than One Year		One Year to Three Years		Over Three Years to Five Years		Over Five Years		Total
	(Dollars in thousands)
Credit Commitments:
Available lines of credit	$	1,631	$	203,710	$	—	$	—	$	205,341
Other loan commitments		48,765		—		—		—		48,765
Stand-by letters of credit		2,145		—		—		—		2,145
Total Off-Balance Sheet Arrangements	$	52,541	$	203,710	$	—	$	—	$	256,251

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Asset Quality

General

The Bank does not originate or purchase loans, either whole loans or loans underlying mortgage-backed securities (“MBS”), which would have been considered subprime loans at origination, i.e., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history. See Note 7 to the Company’s Unaudited Condensed Consolidated Financial Statements for a discussion of evaluation for impaired securities.

COVID-19 Related Loan Modifications

The COVID-19 pandemic has caused substantial disruptions to the global economy and the communities in which the Bank serves. In response to the pandemic, the Bank has focused on supporting borrowers that have been adversely affected by the pandemic, including making loan modifications as needed. The modification programs, which formally began in the month of April 2020, primarily consist of short-term (i.e. three-month or six-month) deferrals of interest and/or principal payments to be collected at the maturity of the loan. The Bank formally approved the following loans for deferral as of the period indicated:

	April 30, 2020
	Number of Loans		Balance
(Dollars in thousands)
One-to-four family residential, including condominium and cooperative apartment		21	$	23,970
Multifamily residential and residential mixed-use real estate		125		475,570
Commercial real estate and commercial mixed-use		114		423,217
C&I		14		24,690
Total		274	$	947,447

Loans modified under COVID-19 deferral programs will not be considered delinquent during the deferral period. 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.

In accordance with issued interagency guidance, or as outlined in the CARES Act, these short-term deferrals are not considered troubled debt restructurings. These loans will continue to accrue interest and will not be considered past due so long as any required payments are made in accordance with the deferral terms. In addition, the risk-rating on COVID-19 modified loans did not change at the time the deferral was approved. The loans will be subject to the Bank’s normal credit monitoring, and will be re-evaluated after the deferral period ends. The collectability of accrued interest will be evaluated on a periodic basis.

Monitoring and Collection of Delinquent Loans

Management of the Bank reviews delinquent loans on a monthly basis and reports to its Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in the Bank’s portfolio.

The Bank’s loan servicing policies and procedures require that an automated late notice be sent to a delinquent borrower as soon as possible after a payment is ten days late in the case of multifamily residential, commercial real estate loans, and C&I loans, or fifteen days late in connection with one-to-four family or consumer loans. A second letter is sent to the borrower if payment has not been received within 30 days of the due date, or 32 days for one-to-four family loans serviced by the subservicer. Thereafter, periodic letters are mailed and phone calls placed to the borrower until payment is received. When contact is made with the borrower at any time prior to foreclosure, the Bank will attempt to obtain the full payment due or negotiate a repayment schedule with the borrower to avoid foreclosure.

Accrual of interest is generally discontinued on a loan that meets any of the following three criteria: (i) full payment of principal or interest is not expected; (ii) principal or interest has been in default for a period of 90 days or more (unless the loan is both deemed to be well secured and in the process of collection); or (iii) an election has otherwise been made to maintain the loan on a cash basis due to deterioration in the financial condition of the borrower. Such non-accrual determination practices are applied consistently to all loans regardless of their internal classification or designation. Upon entering non-accrual status, the Bank reverses all outstanding accrued interest receivable.

The Bank generally initiates foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, and typically does not accept partial payments once foreclosure proceedings have commenced. At some point during foreclosure proceedings, the Bank procures current appraisal information in order to prepare an estimate of the fair value of the underlying collateral. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure action is completed, the property securing the loan is transferred to Other Real Estate Owned (“OREO”) status. The Bank generally attempts to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a period of at least six months.

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The C&I portfolio is actively managed by the Bank’s lenders and underwriters. All credit facilities at a minimum require an annual review of the exposure and typically terms of the loan require annual and interim financial reporting and have financial covenants to indicate expected performance levels. Guarantors are also required to, at a minimum, annually update their financial reporting. All exposures are risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny. Measures taken typically include amendments to the amount of the available credit facility, requirements for increased collateral, a request for a capital infusion, additional guarantor support or a material enhancement to the frequency and quality of financial reporting. Loans determined to reach adverse risk rating standards are subject to quarterly updating to Credit Administration and executive management. When warranted, loans reaching a Substandard rating could be reassigned to Credit Administration for direct handling.

Non-accrual Loans

Within the Bank’s held-for-investment loan portfolio (excluding consumer loans), fourteen non-accrual loans totaled $18.2 million at March 31, 2020, and eleven non-accrual loans totaled $11.1 million at December 31, 2019. During the three months ended March 31, 2020, three loans totaling $7.1 million were placed on non-accrual status and principal amortization of $0.01 million was recognized on five non-accrual loans. There were no changes on the remaining six non-accrual loans during the three-month period ended March 31, 2020.

Impaired Loans

The recorded investment in loans deemed impaired (as defined in Note 8 to the condensed consolidated financial statements) totaled $17.4 million, consisting of six loans, at March 31, 2020, compared to $10.3 million, consisting of four loans, at December 31, 2019. During the three months ended March 31, 2020, two loans totaling $7.1 million were added to impaired status.

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

	March 31, 2020			December 31, 2019			March 31, 2019
	(Dollars in thousands)
Non-accrual loans⁽¹⁾:
One-to-four family residential, including condominium and cooperative apartment	$	6,685		$	794		$	706
Multifamily residential and residential mixed-use real estate		1,332			153			276
Commercial real estate and commercial mixed-use		56			60			4,205
C&I		10,082			10,082			232
Consumer		2			2			6
Total non-accrual loans		18,157			11,091			5,425
Non-accrual one-to-four family residential and consumer loans deemed homogeneous loans		(792	)		(796	)		(712	)
TDRs:
One-to-four family residential, including condominium and cooperative apartment		—			—			12
Multifamily residential and residential mixed-use real estate		—			—			261
Commercial real estate and commercial mixed-use		—			—			4,061
Total TDRs		—			—			4,334
Impaired loans	$	17,365		$	10,295		$	9,047
Ratios:
Total non-accrual loans to total loans		0.35	%		0.21	%		0.10	%
Total non-performing assets to total assets⁽²⁾		0.29			0.17			0.08

(1)	There were no non-accruing TDRs for the periods indicated.

(2)	Non-performing assets includes non-accrual loans.

See “Non-accrual Loans” above for explanation of increase to impaired loans during the three month period ended March 31, 2020.

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TDRs

Under ASC 310-40-15, the Bank is required to recognize loans for which certain modifications or concessions have been made as TDRs. A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:

●

A reduction of interest rate has been made for the remaining term of the loan

●

The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk

●

The outstanding principal amount and/or accrued interest have been reduced

In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors. The Bank did not modify any loans in a manner that met the criteria for a TDR during the three months ended March 31, 2020 or 2019.

Accrual status for TDRs is determined separately for each TDR in accordance with the Bank’s policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in the Bank’s determination that a TDR has been created, the loan can be on either accrual or non-accrual status. If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least three 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 the Bank’s policy and agency regulations.

The Bank does not accept receivables or equity interests in satisfaction of TDRs.

For TDRs that demonstrated conditions sufficient to warrant accrual status, the present value of the expected net cash flows of the underlying property was utilized as the primary means of determining impairment. Any shortfall in the present value of the expected cash flows calculated at each measurement period (typically quarter-end) compared to the present value of the expected cash flows at the time of the original loan agreement was recognized as either an allocated reserve (in the event that it related to lower expected interest payments) or a charge-off (if related to lower expected principal payments). For TDRs on non-accrual status, an appraisal of the underlying real estate collateral is deemed the most appropriate measure to utilize when evaluating impairment and any shortfall in valuation from the recorded balance is accounted for through a charge-off. In the event that either an allocated reserve or a charge-off is recognized on TDRs, the periodic loan loss provision is impacted.

OREO

Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO. Upon entering OREO status, the Bank obtains a current appraisal on the property and reassesses the likely realizable value (a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period. The Bank typically seeks to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.

The Bank had no OREO properties at March 31, 2020 or December 31, 2019. The Bank did not recognize any provisions for losses on OREO properties during the three months ended March 31, 2020 or 2019.

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Dime Community Bancshares 10-Q2020 Q1 Quarterly report

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