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Section 1: 10-Q (10-Q)


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 June 30, 2019
OR

☐  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, 8th 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

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. As of August 9, 2019, there were 35,959,954 shares outstanding.



 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
3
  3
  4
  5
  6
  7
  8
Item 2.
28
Item 3.
39
Item 4.
41
 
PART II - OTHER INFORMATION
 
Item 1.
42
Item 1A.
42
Item 2.
42
Item 3.
42
Item 4.
42
Item 5.
42
Item 6.
43
  44


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 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, 2018 as updated by our Quarterly Reports on Form 10-Q.

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

2

Item 1.
Condensed Consolidated Financial Statements

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in thousands except share amounts)

   
June 30,
2019
   
December 31,
2018
 
ASSETS:
           
Cash and due from banks
 
$
172,418
   
$
147,256
 
Total cash and cash equivalents
   
172,418
     
147,256
 
Securities available-for-sale, at fair value
   
476,514
     
502,885
 
Marketable equity securities, at fair value
   
5,953
     
5,667
 
Loans:
               
Real estate
   
5,213,690
     
5,163,122
 
Commercial and industrial ("C&I") loans
   
316,061
     
229,504
 
Other loans
   
1,780
     
1,192
 
Less allowance for loan losses
   
(21,134
)
   
(21,782
)
Total loans, net
   
5,510,397
     
5,372,036
 
Premises and fixed assets, net
   
23,069
     
24,713
 
Loans held for sale
   
3,814
     
1,097
 
Federal Home Loan Bank of New York ("FHLBNY") capital stock
   
57,051
     
57,551
 
Bank Owned Life Insurance ("BOLI")
   
112,828
     
111,427
 
Goodwill
   
55,638
     
55,638
 
Operating lease assets
   
40,113
     
 
Other assets
   
40,567
     
42,308
 
Total Assets
 
$
6,498,362
   
$
6,320,578
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities:
               
Due to depositors:
               
Interest-bearing deposits
 
$
4,011,622
   
$
3,961,277
 
Non-interest-bearing deposits
   
423,914
     
395,477
 
Total deposits
   
4,435,536
     
4,356,754
 
Escrow and other deposits
   
85,811
     
85,234
 
FHLBNY advances
   
1,115,200
     
1,125,350
 
Subordinated debt, net
   
113,832
     
113,759
 
Other borrowings
   
58,000
     
 
Operating lease liabilities
   
46,480
     
 
Other liabilities
   
34,802
     
37,400
 
Total Liabilities
   
5,889,661
     
5,718,497
 
                 
Stockholders' Equity:
               
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at June 30, 2019 and December 31, 2018)
   
     
 
Common stock ($0.01 par, 125,000,000 shares authorized, 53,699,694 shares and 53,690,825 shares issued at June 30, 2019 and December 31, 2018, respectively, and 35,887,395 shares and 36,081,455 shares outstanding at June 30, 2019 and December 31, 2018, respectively)
   
537
     
537
 
Additional paid-in capital
   
279,327
     
277,512
 
Retained earnings
   
580,159
     
565,713
 
Accumulated other comprehensive loss, net of deferred taxes
   
(6,288
)
   
(6,500
)
Unearned Restricted Stock Award common stock
   
(8,165
)
   
(3,623
)
Common stock held by Benefit Maintenance Plan ("BMP")
   
(1,509
)
   
(1,509
)
Treasury stock, at cost (17,812,299 shares and 17,609,370 shares at June 30, 2019 and December 31, 2018, respectively)
   
(235,360
)
   
(230,049
)
Total Stockholders' Equity
   
608,701
     
602,081
 
Total Liabilities and Stockholders' Equity
 
$
6,498,362
   
$
6,320,578
 

See notes to unaudited consolidated financial statements.

3

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Interest income:
                       
Loans secured by real estate
 
$
50,811
   
$
47,828
   
$
99,988
   
$
97,403
 
C&I loans
   
4,134
     
2,156
     
7,570
     
3,812
 
Other loans
   
18
     
18
     
36
     
37
 
MBS
   
2,961
     
2,406
     
6,158
     
4,663
 
Investment securities
   
570
     
49
     
990
     
64
 
Other short-term investments
   
1,457
     
1,547
     
2,904
     
3,058
 
Total interest income
   
59,951
     
54,004
     
117,646
     
109,037
 
Interest expense:
                               
Deposits and escrow
   
16,271
     
11,988
     
31,288
     
22,739
 
Borrowed funds
   
7,176
     
5,882
     
14,530
     
12,149
 
Total interest expense
   
23,447
     
17,870
     
45,818
     
34,888
 
Net interest income
   
36,504
     
36,134
     
71,828
     
74,149
 
Provision (credit) for loan losses
   
(449
)
   
1,113
     
(128
)
   
1,306
 
Net interest income after provision for loan losses
   
36,953
     
35,021
     
71,956
     
72,843
 
Non-interest income:
                               
Service charges and other fees
   
1,264
     
1,299
     
2,363
     
2,210
 
Net mortgage banking income
   
61
     
102
     
129
     
213
 
Net gain on sale of securities and other assets(1)
   
91
     
19
     
283
     
1,385
 
Gain on sale of loans
   
339
     
35
     
594
     
125
 
Income from BOLI
   
707
     
720
     
1,401
     
1,432
 
Loan level derivative income, net
   
291
     
     
291
     
 
Other
   
67
     
62
     
119
     
116
 
Total non-interest income
   
2,820
     
2,237
     
5,180
     
5,481
 
Non-interest expense:
                               
Salaries and employee benefits
   
12,061
     
10,884
     
23,945
     
22,061
 
Stock benefit plan compensation expense
   
491
     
407
     
775
     
795
 
Occupancy and equipment
   
3,827
     
3,697
     
7,696
     
7,569
 
Data processing costs
   
1,908
     
1,797
     
3,974
     
3,551
 
Marketing
   
465
     
146
     
931
     
1,193
 
Federal deposit insurance premiums
   
586
     
474
     
1,040
     
1,139
 
Other
   
2,958
     
3,422
     
5,987
     
6,253
 
Total non-interest expense
   
22,296
     
20,827
     
44,348
     
42,561
 
Income before income taxes
   
17,477
     
16,431
     
32,788
     
35,763
 
Income tax expense
   
4,442
     
4,110
     
8,252
     
8,697
 
Net income
 
$
13,035
   
$
12,321
   
$
24,536
   
$
27,066
 
                                 
Earnings per Share:
                               
Basic
 
$
0.36
   
$
0.33
   
$
0.68
   
$
0.72
 
Diluted
 
$
0.36
   
$
0.33
   
$
0.68
   
$
0.72
 

(1) Amount includes periodic valuation gains or losses on marketable equity securities.
See notes to unaudited consolidated financial statements.

4

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Net Income
 
$
13,035
   
$
12,321
   
$
24,536
   
$
27,066
 
Other comprehensive income (loss):
                               
Change in unrealized holding gain (loss) on securities available-for-sale
   
4,261
     
(1,679
)
   
8,948
     
(4,237
)
Change in pension and other postretirement obligations
   
237
     
286
     
729
     
441
 
Change in unrealized gain (loss) on derivatives
   
(6,077
)
   
560
     
(9,361
)
   
2,576
 
Other comprehensive income (loss) before income taxes
   
(1,579
)
   
(833
)
   
316
     
(1,220
)
Deferred tax expense (benefit)
   
(523
)
   
(292
)
   
104
     
(404
)
Other comprehensive income (loss), net of tax
   
(1,056
)
   
(541
)
   
212
     
(816
)
Total comprehensive income
 
$
11,979
   
$
11,780
   
$
24,748
   
$
26,250
 

See notes to unaudited condensed consolidated financial statements.

5

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)

   
Six Month Period Ended June 30, 2019
 
   
Number
of Shares
   
Common
Stock
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss,
Net of Deferred
Taxes
   
Unearned
Stock
Award
Common
Stock
   
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
 
Payments related to tax withholding for stock-based compensation
   
(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
 
                                                                         
Net Income
   
     
     
     
13,035
     
     
     
     
     
13,035
 
Other comprehensive loss, net of tax
   
     
     
     
     
(1,056
)
   
     
     
     
(1,056
)
Exercise of stock options
   
8,869
     
     
73
     
     
     
     
     
     
73
 
Release of shares, net of forfeitures
   
133,451
     
     
896
     
     
     
(2,588
)
   
     
1,747
     
55
 
Stock-based compensation
   
     
     
     
     
     
491
     
     
     
491
 
Payments related to tax withholding for stock-based compensation
   
(4,901
)
   
     
     
     
     
     
     
(98
)
   
(98
)
Cash dividends declared and paid
   
     
     
     
(5,051
)
   
     
     
     
     
(5,051
)
Repurchase of shares of Common Stock
   
(270,136
)
   
     
     
     
     
     
     
(5,022
)
   
(5,022
)
Ending balance as of June 30, 2019
   
35,887,395
   
$
537
   
$
279,327
   
$
580,159
   
$
(6,288
)
 
$
(8,165
)
 
$
(1,509
)
 
$
(235,360
)
 
$
608,701
 

   
Six Month Period Ended June 30, 2018
 
   
Number
of Shares
   
Common
Stock
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss,
Net of Deferred
Taxes
   
Unearned
Stock Award
Common
Stock
   
Common
Stock
Held by
BMP
   
Treasury
Stock, at
cost
   
Total
Stockholders'
Equity
 
                                                       
Beginning balance as of January 1, 2018
   
37,419,070
   
$
536
   
$
276,730
   
$
535,130
   
$
(3,641
)
 
$
(2,894
)
 
$
(2,736
)
 
$
(204,558
)
 
$
598,567
 
Reclassification of unrealized gains and losses on marketable equity securities
   
     
     
     
153
     
(153
)
   
     
     
     
 
Adjusted beginning balance as of January 1, 2018
   
37,419,070
     
536
     
276,730
     
535,283
     
(3,794
)
   
(2,894
)
   
(2,736
)
   
(204,558
)
   
598,567
 
Net Income
   
     
     
     
14,745
     
     
     
     
     
14,745
 
Other comprehensive loss, net of tax
   
     
     
     
     
(275
)
   
     
     
     
(275
)
Exercise of stock options, net
   
19,726
     
1
     
454
     
     
     
     
     
(165
)
   
290
 
Release of shares, net of forfeitures
   
73,019
     
     
426
     
     
     
(1,349
)
   
     
923
     
 
Stock-based compensation
   
     
     
     
     
     
388
     
     
     
388
 
Shares received to satisfy distribution of retirement benefits
   
(27,545
)
   
     
(540
)
   
     
     
     
540
     
(524
)
   
(524
)
Reclassification of tax effects on other comprehensive income (loss)
   
     
     
     
(32
)
   
32
     
     
     
     
 
Cash dividends declared and paid
   
     
     
     
(5,234
)
   
     
     
     
     
(5,234
)
Ending balance as of March 31, 2018
   
37,484,270
     
537
     
277,070
     
544,762
     
(4,037
)
   
(3,855
)
   
(2,196
)
   
(204,324
)
   
607,957
 
                                                                         
Net Income
   
     
     
     
12,321
     
     
     
     
     
12,321
 
Other comprehensive loss, net of tax
   
     
     
     
     
(541
)
   
     
     
     
(541
)
Exercise of stock options, net
   
37,601
     
     
664
     
     
     
     
     
     
664
 
Release of shares, net of forfeitures
   
70,480
     
     
508
     
     
     
(1,373
)
   
     
874
     
9
 
Stock-based compensation
   
     
     
     
     
     
407
     
     
     
407
 
Shares received to satisfy distribution of retirement benefits
   
(1,090
)
   
     
(48
)
   
     
     
     
48
     
(20
)
   
(20
)
Cash dividends declared and paid
   
     
     
     
(5,265
)
   
     
     
     
     
(5,265
)
Ending balance as of June 30, 2018
   
37,591,261
   
$
537
   
$
278,194
   
$
551,818
   
$
(4,578
)
 
$
(4,821
)
 
$
(2,148
)
 
$
(203,470
)
 
$
615,532
 

See notes to unaudited condensed consolidated financial statements.

6

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

 
 
Six Months Ended June 30,
 
 
 
2019
   
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net Income
 
$
24,536
   
$
27,066
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Net (gain) loss on sales of securities available-for-sale
   
133
     
(1,370
)
Net gain recognized on marketable equity securities
   
(416
)
   
(15
)
Net gain on sale of loans held for sale
   
(594
)
   
(125
)
Net depreciation, amortization and accretion
   
2,495
     
1,862
 
Stock plan compensation
   
775
     
795
 
Provision (credit) for loan losses
   
(128
)
   
1,306
 
Originations of loans held for sale
   
(4,202
)
   
 
Proceeds from sale of loans held for sale
   
7,969
     
765
 
Increase in cash surrender value of BOLI
   
(1,401
)
   
(1,432
)
Deferred income tax provision (credit)
   
1,005
     
(1,455
)
Changes in assets and liabilities:
               
Decrease (Increase) in other assets
   
(237
)
   
4,076
 
Decrease in other liabilities
   
(3,940
)
   
(3,789
)
Net cash provided by Operating activities
   
25,995
     
27,684
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from sales securities available-for-sale
   
104,131
     
158,484
 
Proceeds from sales of marketable equity securities
   
273
     
529
 
Purchases of securities available-for-sale
   
(117,656
)
   
(258,707
)
Acquisition of marketable equity securities
   
(143
)
   
(161
)
Proceeds from calls and principal repayments of securities available-for-sale
   
48,399
     
28,371
 
Proceeds from the sale of portfolio loans
    8,282
       
Net decrease (increase) in loans
   
(152,459
)
   
195,314
 
Purchases of fixed assets, net
   
(466
)
   
(2,449
)
Sale of FHLBNY capital stock, net
   
500
     
5,822
 
Net cash provided by (used in) Investing Activities
   
(109,139
)
   
127,203
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Increase (decrease) in due to depositors
   
78,782
     
(44,054
)
Increase in escrow and other deposits
   
577
     
7,134
 
Repayments of FHLBNY advances
   
(1,657,650
)
   
(1,637,100
)
Proceeds from FHLBNY advances
   
1,647,500
     
1,510,750
 
Proceeds from other borrowings, net
   
58,000
     
 
Proceeds from exercise of stock options
   
73
     
954
 
Release of stock for benefit plan awards
   
55
     
9
 
Payments related to tax withholding for stock-based compensation
   
(105
)
   
 
BMP ESOP shares received to satisfy distribution of retirement benefits
   
     
(544
)
Treasury shares repurchased
   
(8,836
)
   
 
Cash dividends paid to stockholders, net
   
(10,090
)
   
(10,499
)
Net cash provided by (used in) financing activities
   
108,306
     
(173,350
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
25,162
     
(18,463
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
147,256
     
169,455
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
172,418
   
$
150,992
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid for income taxes
 
$
6,435
   
$
5,928
 
Cash paid for interest
   
46,407
     
34,206
 
Loans transferred to held for sale
   
5,778
     
1,061
 
Operating lease assets in exchange for operating lease liabilities
   
49,160
     
 

See notes to unaudited condensed consolidated financial statements.

7

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. On January 24, 2019, the Bank filed an application with the New York Department of Financial Services (“NYSDFS”) seeking approval to convert from a New York stock form savings bank to a New York commercial bank (the “Charter Conversion”).  Simultaneous with the Charter Conversion application to NYSDFS, the Company filed an application with the Federal Reserve Bank of Philadelphia to delist as a savings and loan holding company and elect to become a bank holding company.  Having received all applicable regulatory approvals, on April 25, 2019, the Bank completed the Charter Conversion, and began operating as a New York commercial bank. Simultaneously, the Company began operating as a bank holding company. At June 30, 2019 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 $113,832 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 operated as a New York State-chartered stock savings bank until April 2019.  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 June 30, 2019, the Bank had twenty-nine retail banking offices located throughout the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County and Suffolk County, New York.

2.
SUMMARY OF 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 June 30, 2019 and December 31, 2018, the results of operations and statements of comprehensive income for the three-month and six-month periods ended June 30, 2019 and 2018, and the changes in stockholders' equity and cash flows for the six-month periods ended June 30, 2019 and 2018.  The results of operations for the three-month and six-month periods ended June 30, 2019 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2019.  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").

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, 2018 and notes thereto contained in our Annual Report on Form 10-K.

8

3.
RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update "(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. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this guidance is effective for fiscal years and interim periods beginning after December 31, 2019. The Company has established a committee to oversee the adoption of ASU 2016-13 on its consolidated financial statements. The Company has engaged a third party software provider to assist with the credit loss estimate, and has recently completed the implementation of the software. The Company is working with the third party software provider to confirm segmentation of the loan portfolio, and is reviewing model assumptions. The Company expects to recognize a one-time cumulative effect change to the allowance for loan losses as of the beginning of the reporting period in which ASU 2016-13 takes effect. The Company is currently evaluating the magnitude of the impact on the consolidated financial statements, which is not expected to have a material impact.

4.
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
   
Derivative
Asset
   
Total
Accumulated Other
Comprehensive
Loss
 
Balance as of January 1, 2019
 
$
(1,957
)
 
$
(6,290
)
 
$
1,747
   
$
(6,500
)
Other comprehensive income (loss) before reclassifications
   
5,981
     
250
     
(5,890
)
   
341
 
Amounts reclassified from accumulated other comprehensive loss
   
89
     
245
     
(463
)
   
(129
)
Net other comprehensive income during the period
   
6,070
     
495
     
(6,353
)
   
212
 
Balance as of June 30, 2019
 
$
4,113
   
$
(5,795
)
 
$
(4,606
)
 
$
(6,288
)
                                 
Balance as of January 1, 2018
 
$
285
   
$
(6,633
)
 
$
2,707
   
$
(3,641
)
Reclassification for adoption of ASU 2016-01(1)
   
(153
)
   
     
     
(153
)
Adjusted balance as of January 1, 2018
   
132
     
(6,633
)
   
2,707
     
(3,794
)
Other comprehensive income (loss) before reclassifications
   
(1,931
)
   
80
     
1,908
     
57
 
Amounts reclassified from accumulated other comprehensive loss
   
(922
)
   
217
     
(168
)
   
(873
)
Net other comprehensive income during the period
   
(2,853
)
   
297
     
1,740
     
(816
)
Reclassification of tax effects on other comprehensive income (2)
   
     
32
     
     
32
 
Balance as of June 30, 2018
 
$
(2,721
)
 
$
(6,304
)
 
$
4,447
   
$
(4,578
)

(1)
Represents the impact of adopting ASU 2016-01 allowing the reclassification of unrealized gains and losses on available-for-sale equity securities from accumulated other comprehensive income to retained earnings.
(2)
Represents the impact of adopting ASU 2018-02 allowing the reclassification of certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act") from accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act (or portion thereof) is recorded. The amount of the reclassification is an adjustment for the difference between the historical corporate income tax rate (35%) and the newly enacted 21% corporate income tax rate.

9

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
June 30,
   
Six Months Ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Change in unrealized holding gain or loss on securities available-for-sale:
                       
Change in net unrealized gain or loss during the period
 
$
4,204
   
$
(1,679
)
   
8,815
   
$
(2,867
)
Reclassification adjustment for net (gains) losses included in net gain on securities and other assets
   
57
     
     
133
     
(1,370
)
Net change
   
4,261
     
(1,679
)
   
8,948
     
(4,237
)
Tax expense (benefit)
   
1,371
     
(534
)
   
2,878
     
(1,384
)
Net change in unrealized holding gain or loss on securities available-for-sale
   
2,890
     
(1,145
)
   
6,070
     
(2,853
)
Change in pension and other postretirement obligations:
                               
Reclassification adjustment for expense included in other expense
   
181
     
37
     
364
     
323
 
Change in the net actuarial gain or loss
   
56
     
249
     
365
     
118
 
Net change
   
237
     
286
     
729
     
441
 
Tax expense
   
76
     
93
     
234
     
144
 
Net change in pension and other postretirement obligations
   
161
     
193
     
495
     
297
 
Change in unrealized gain or loss on derivatives:
                               
Change in net unrealized gain or loss during the period
   
(5,745
)
   
745
     
(8,673
)
   
2,826
 
Reclassification adjustment for expense included in interest expense
   
(332
)
   
(185
)
   
(688
)
   
(250
)
Net change
   
(6,077
)
   
560
     
(9,361
)
   
2,576
 
Tax expense (benefit)
   
(1,970
)
   
149
     
(3,008
)
   
836
 
Net change in unrealized gain or loss on derivatives
   
(4,107
)
   
411
     
(6,353
)
   
1,740
 
Other comprehensive income (loss)
 
$
(1,056
)
 
$
(541
)
 
$
212
   
$
(816
)

5.
EARNINGS PER SHARE ("EPS")

Basic EPS is computed by dividing net income 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") share 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.

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

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Net income per the Consolidated Statements of Income
 
$
13,035
   
$
12,321
   
$
24,536
   
$
27,066
 
Less: Dividends paid and earnings allocated to participating securities
   
(63
)
   
(43
)
   
(100
)
   
(72
)
Income attributable to common stock
 
$
12,972
   
$
12,278
   
$
24,436
   
$
26,994
 
Weighted average common shares outstanding, including participating securities
   
35,891,341
     
37,569,085
     
35,951,257
     
37,533,994
 
Less: weighted average participating securities
   
(197,249
)
   
(164,867
)
   
(178,538
)
   
(156,938
)
Weighted average common shares outstanding
   
35,694,092
     
37,404,218
     
35,772,719
     
37,377,056
 
Basic EPS
 
$
0.36
   
$
0.33
   
$
0.68
   
$
0.72
 
Income attributable to common stock
 
$
12,972
   
$
12,278
   
$
24,436
   
$
26,994
 
Weighted average common shares outstanding
   
35,694,092
     
37,404,218
     
35,772,719
     
37,377,056
 
Weighted average common equivalent shares outstanding
   
170,297
     
111,155
     
171,642
     
119,926
 
Weighted average common and equivalent shares outstanding
   
35,864,389
     
37,515,373
     
35,944,361
     
37,496,982
 
Diluted EPS
 
$
0.36
   
$
0.33
   
$
0.68
   
$
0.72
 

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 or six-month periods ended June 30, 2019 or 2018.

For information about the calculation of expected aggregate LTIP and SIP share payouts, see Note 14.

10

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:


1.
Identify the contract with a customer
 

2.
Identify the performance obligations in the contract
 

3.
Determine the transaction price
 

4.
Allocate the transaction price to performance obligations in the contract
 

5
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 Operations as "Service charges and other fees."

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 June 30, 2019 and 2018, service charges and other fees totaled $1,054 and $1,119, respectively. For the six-month periods ended June 30, 2019 and 2018, service charges and other fees totaled $1,967 and $1,869, 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 June 30, 2019 and 2018, interchange income totaled $210 and $180, respectively. For the six-month periods ended June 30, 2019 and 2018, interchange totaled $396 and $341, 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 June 30, 2019
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
Securities available-for-sale:
                       
Agency Notes
 
$
40,488
   
$
64
   
$
   
$
40,552
 
Corporate Securities
   
26,118
     
345
     
(10
)
   
26,453
 
Pass-through MBS issued by GSEs
   
261,836
     
5,431
     
     
267,267
 
Agency CMOs
   
142,025
     
590
     
(373
)
   
142,242
 
Total securities available-for-sale
 
$
470,467
   
$
6,430
   
$
(383
)
 
$
476,514
 

   
At December 31, 2018
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
Securities available-for-sale:
                       
Agency Notes
 
$
25,110
   
$
45
   
$
(10
)
 
$
25,145
 
Corporate Securities
   
11,167
     
     
(32
)
   
11,135
 
Pass-through MBS issued by GSEs
   
356,039
     
574
     
(2,000
)
   
354,613
 
Agency CMOs
   
113,470
     
157
     
(1,635
)
   
111,992
 
Total securities available-for-sale
 
$
505,786
   
$
776
   
$
(3,677
)
 
$
502,885
 

The carrying amount of securities pledged as collateral for the Bank's first loss guarantee was $27,634 and $27,248 at June 30, 2019 and December 31, 2018, respectively.

11

At June 30, 2019, the available-for-sale agency notes possessed a weighted average contractual maturity of 6.0 years.  At June 30, 2019, available-for-sale agency CMO and MBS securities possessed a weighted average contractual maturity of 15.4 years.  At June 30, 2019, the corporate securities possessed a weighted average contractual maturity of 6.0 years.

   
For the Three Months
Ended June 30,
   
For the Six Months
Ended June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Agency Notes:
                       
Proceeds
 
$
3,038
    $
    $
3,038
    $
 
Gross gains
   
39
     
     
39
     
 
Tax expense on gain
   
12
     
     
12
     
 
Gross losses
   
     
     
     
 
Tax benefit on loss
   
     
     
     
 
Pass through MBS issued by GSEs:
                               
Proceeds
   
85,594
     
     
91,711
     
 
Gross gains
   
248
     
     
248
     
 
Tax expense on gain
   
79
     
     
79
     
 
Gross losses
   
344
     
     
518
     
 
Tax benefit on loss
   
(110
)
   
     
(166
)
   
 
Agency CMOs:
                               
Proceeds
   
     
     
9,382
     
158,484
 
Gross gains
   
     
     
98
     
1,370
 
Tax expense on gain
   
     
     
31
     
440
 
Gross losses
   
     
     
     
 
Tax benefit on loss
   
     
     
     
 

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 June 30,
 
For the Six Months
Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
Proceeds:
                       
Marketable equity securities
 
$
136
   
$
136
   
$
273
   
$
529
 

The remaining gain or loss on securities shown in the unaudited condensed consolidated statements of income was due to market valuation changes. Net gains of $148 and $19 were recognized on marketable equity securities for the three-month period ended June 30, 2019 and 2018, respectively. Net gains of $416 and $15 were recognized on marketable equity securities for the six-month period ended June 30, 2019 and 2018, 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:

 
June 30, 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:
                                   
Corporate Securities
 
$
5,138
   
$
10
   
$
   
$
   
$
5,138
   
$
10
 
Agency CMOs
   
60,412
     
185
     
39,052
     
188
     
99,464
     
373
 

 
December 31, 2018
 
 
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
 
$
5,100
   
$
10
   
$
   
$
   
$
5,100
   
$
10
 
Corporate Securities
   
11,135
     
32
     
     
     
11,135
     
32
 
Pass through MBS issued by GSEs
   
216,451
     
1,049
     
45,489
     
951
     
261,940
     
2,000
 
Agency CMOs
   
52,605
     
439
     
39,833
     
1,196
     
92,438
     
1,635
 

The issuers of securities available-for-sale are 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. 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 June 30, 2019.

12

8.
LOANS RECEIVABLE AND CREDIT QUALITY

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.

Credit Quality Indicators:

On a quarterly basis, the Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying them as to credit risk.  This analysis includes all loans, such as multifamily residential, mixed-use residential (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the residential units), mixed-use commercial real estate (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the commercial units), commercial real estate loans, acquisition, development, and construction ("ADC") loans (which includes land loans), C&I loans, as well as one-to-four family residential and cooperative and condominium apartment loans.

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 or Substandard were deemed pass loans at both June 30, 2019 and December 31, 2018.

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 June 30, 2019
 
   
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Real Estate:
                             
One-to-four family residential, including condominium and cooperative apartment
 
$
119,351
   
$
   
$
1,172
   
$
   
$
120,523
 
Multifamily residential and residential mixed-use
   
3,690,388
     
17,441
     
28,671
     
     
3,736,500
 
Commercial real estate and commercial mixed-use
   
1,270,638
     
     
8,550
     
     
1,279,188
 
ADC
   
77,479
     
     
     
     
77,479
 
Total real estate
   
5,157,856
     
17,441
     
38,393
     
     
5,213,690
 
C&I
   
315,912
     
     
149
     
     
316,061
 
Total Real Estate and C&I
 
$
5,473,768
   
$
17,441
   
$
38,542
   
$
   
$
5,529,751
 

   
Balance at December 31, 2018
 
   
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Real Estate:
                             
One-to-four family residential, including condominium and cooperative apartment
 
$
95,782
   
$
   
$
1,065
   
$
   
$
96,847
 
Multifamily residential and residential mixed-use
   
3,829,643
     
32,682
     
4,463
     
     
3,866,788
 
Commercial real estate and commercial mixed-use
   
1,162,429
     
1,209
     
6,447
     
     
1,170,085
 
ADC
   
29,402
     
     
     
     
29,402
 
Total real estate
   
5,117,256
     
33,891
     
11,975
     
     
5,163,122
 
C&I
   
228,924
     
     
580
     
     
229,504
 
Total Real Estate and C&I
 
$
5,346,180
   
$
33,891
   
$
12,555
   
$
   
$
5,392,626
 

13

The following is a summary of the credit risk profile of consumer loans by internally assigned grade:

 
Balance at
 
Grade
June 30, 2019
 
December 31, 2018
 
Performing
 
$
1,776
   
$
1,189
 
Non-accrual
   
4
     
3
 
Total
 
$
1,780
   
$
1,192
 

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 June 30, 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
 
$
51
   
$
   
$
521
   
$
832
   
$
1,404
   
$
119,119
   
$
120,523
 
Multifamily residential and residential mixed-use
   
     
     
377
     
847
     
1,224
     
3,735,276
     
3,736,500
 
Commercial real estate and commercial mixed-use
   
     
     
484
     
855
     
1,339
     
1,277,849
     
1,279,188
 
ADC
   
     
     
     
     
     
77,479
     
77,479
 
Total real estate
 
$
51
   
$
   
$
1,382
   
$
2,534
   
$
3,967
   
$
5,209,723
   
$
5,213,690
 
C&I
 
$
   
$
47
   
$
149
   
$
   
$
196
   
$
315,865
   
$
316,061
 
Consumer
 
$
4
   
$
3
   
$
   
$
4
   
$
11
   
$
1,769
   
$
1,780
 

(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of June 30, 2019.

   
At December 31, 2018
 
   
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
 
$
312
   
$
   
$
   
$
712
   
$
1,024
   
$
95,823
   
$
96,847
 
Multifamily residential and residential mixed-use
   
     
     
100
     
280
     
380
     
3,866,408
     
3,866,788
 
Commercial real estate and commercial mixed-use
   
     
     
     
1,041
     
1,041
     
1,169,044
     
1,170,085
 
ADC
   
     
     
     
     
     
29,402
     
29,402
 
Total real estate
 
$
312
   
$
   
$
100
   
$
2,033
   
$
2,445
   
$
5,160,677
   
$
5,163,122
 
C&I
 
$
50
   
$
49
   
$
   
$
309
   
$
408
   
$
229,096
   
$
229,504
 
Consumer
 
$
12
   
$
1
   
$
   
$
3
   
$
16
   
$
1,176
   
$
1,192
 

(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2018.

14

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on six loans with an aggregate outstanding balance of $1,531 at June 30, 2019, and one real estate loan with an aggregate outstanding balance of $100 at December 31, 2018, 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

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 following table summarizes outstanding TDRs by underlying collateral types as of the dates indicated:

   
As of June 30, 2019
   
As of December 31, 2018
 
   
No. of
Loans
   
Balance
   
No. of
Loans
   
Balance
 
One-to-four family residential, including condominium and cooperative apartment
   
1
   
$
11
     
1
   
$
14
 
Multifamily residential and residential mixed-use
   
2
     
252
     
2
     
271
 
Commercial real estate and commercial mixed-use
   
1
     
4,037
     
1
     
4,084
 
Total real estate
   
4
   
$
4,300
     
4
   
$
4,369
 

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 six months.  Conversely, if at the time of restructuring the loan is performing (and accruing), it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under the Bank's policy and agency regulations. There were no TDRs on non-accrual status at June 30, 2019 or at December 31, 2018.

The Company has not restructured any C&I or consumer loans, as these loan portfolios have not experienced any problem issues warranting restructuring. Therefore, all TDRs were collateralized by real estate at both June 30, 2019 and December 31, 2018.

There were no loans modified in a manner that met the criteria of a TDR during the three-month or six-month periods ended June 30, 2019 or 2018.

As of June 30, 2019 and December 31, 2018, the Bank had no loan commitments to borrowers with outstanding TDRs.

A TDR is considered to be in payment default once it is 90 days contractually past due under the modified terms. All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.

There were no TDRs which defaulted within twelve months following the modification during the three-month or six-month periods ended June 30, 2019 or 2018 (thus no impact to the allowance for loan losses during those periods).

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.

15

The Bank considers TDRs and all non-accrual loans, except one-to-four family loans equal to or less than the FNMA conforming loan limits for high-cost areas, such as the Bank's primary lending area, ("FNMA Limits") and consumer loans, to be impaired.  Non-accrual one-to-four family loans equal to or less than the FNMA Limits and 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 some of the 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 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.

Please refer to Note 9 for tabular information related to impaired loans.

9.
ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses consists of specific and general components. At June 30, 2019, the Bank's periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) impaired loans and (2) pass graded 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 FNMA Limits, and consumer loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

Impaired Loan Component

All loans that are deemed to meet the definition of impaired are individually evaluated for impairment. 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 in the case of certain performing TDRs).  For impaired loans on non-accrual status, either of the initial two measurements is utilized.

All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.  If a TDR is substantially performing in accordance with its restructured terms, management will look to either the present value of the expected cash flows from the debt service or the potential net liquidation proceeds of the underlying collateral in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, the likely realizable net proceeds from either a note sale or the liquidation of the collateral are generally considered when measuring impairment.  While measured impairment is generally charged off immediately, impairment attributed to a reduction in the present value of expected cash flows of a performing TDR is generally reflected as an allocated reserve within the allowance for loan losses. At June 30, 2019 and December 31, 2018, there were no allocated reserves related to TDRs within the allowance for loan losses.

Non-Impaired Loan Component

The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with non-impaired real estate loans.  The following underlying collateral types are analyzed separately: 1) one-to-four family residential and condominium or cooperative apartment; 2) multifamily residential and residential mixed-use; 3) commercial mixed-use real estate; 4) commercial real estate; 5) ADC; and 6) C&I.  Within the analysis of each underlying collateral type, the following elements are additionally considered and provided weighting in determining the allowance for loan losses for non-impaired real estate loans:


(i)
Charge-off experience – Loans within the non-impaired loan portfolio are segmented by significant common characteristics, against which historical loss rates are applied to reflect probable incurred loss percentages.  The Bank also reviews and considers the charge-off experience of peer banks in its lending marketplace in order to determine whether probable incurred losses that could take a longer period to flow through its allowance for loan losses possibly exist.

(ii)
Economic conditions – The Bank assigned a loss allocation to its entire non-impaired real estate loan portfolio based, in part, upon a review of economic conditions affecting the local real estate market. Specifically, the Bank considered both the level of, and recent trends in: 1) the local and national unemployment rate, 2) residential and commercial vacancy rates, 3) real estate sales and pricing, and 4) delinquencies in the Bank's loan portfolio.

16


(iii)
Underwriting standards or experience – Underwriting standards are reviewed to ensure that changes in the Bank's lending policies and practices are adequately evaluated for risk and reflected in its analysis of potential credit losses.  Loss expectations associated with changes in the Bank's lending policies and practices, if any, are then incorporated into the methodology.

(iv)
Loan concentrations – The Bank regularly reviews its loan concentrations (borrower, collateral type, location, etc.) in order to ensure that heightened risk has not evolved that has not been captured through other factors.  The risk component of loan concentrations is regularly evaluated for reserve adequacy.

(v)
Regulatory climate – Consideration is given to public statements made by the banking regulatory agencies that have a potential impact on the Bank's loan portfolio and allowance for loan losses.

(vi)
Nature and volume of the portfolio – The Bank considers any significant changes in the overall nature and volume of its loan portfolio.

(vii)
Changes in the quality and scope of the loan review function – The Bank considers the potential impact upon its allowance for loan losses of any adverse change in the quality and scope of the loan review function.

Consumer Loans

Due to their small individual balances, the Bank does not evaluate individual consumer loans for impairment.  Loss percentages are applied to aggregate consumer loans based upon both their delinquency status and loan type.  These loss percentages are derived from a combination of the Company's historical loss experience and/or nationally published loss data on such loans.  Consumer loans in excess of 120 days delinquent are typically fully charged off against the allowance for loan losses.

Reserve for Loan Commitments

At both June 30, 2019 and December 31, 2018, respectively, the Bank maintained a reserve of $25 associated with unfunded loan commitments accepted by the borrower.  This reserve is determined based upon the outstanding volume of loan commitments at each period end.  Any increases or reductions in this reserve are recognized in periodic non-interest expense.

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

   
At or for the Three Months Ended June 30, 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
 
Beginning balance
 
$
201
   
$
12,988
   
$
4,022
   
$
643
   
$
17,854
   
$
4,069
   
$
18
 
Provision (credit) for loan losses
   
8
     
(1,136
)
   
(36
)
   
337
     
(827
)
   
379
     
(1
)
Charge-offs
   
(5
)
   
(35
)
   
(140
)
   
     
(180
)
   
(182
)
   
 
Recoveries
   
3
     
     
     
     
3
     
1
     
 
Ending balance
 
$
207
   
$
11,817
   
$
3,846
   
$
980
   
$
16,850
   
$
4,267
   
$
17
 

   
At or for the Three Months Ended June 30, 2018
 
   
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
 
Beginning balance
 
$
102
   
$
14,996
   
$
3,518
   
$
126
   
$
18,742
   
$
2,445
   
$
17
 
Provision (credit) for loan losses
   
173
     
(697
)
   
151
     
15
     
(358
)
   
1,471
     
 
Charge-offs
   
(153
)
   
     
(2
)
   
     
(155
)
   
(1,179
)
   
 
Recoveries
   
1
     
     
     
     
1
     
     
 
Ending balance
 
$
123
   
$
14,299
   
$
3,667
   
$
141
   
$
18,230
   
$
2,737
   
$
17
 

17

   
At or for the Six Months Ended June 30, 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
 
Beginning balance
 
$
198
   
$
13,446
   
$
3,777
   
$
397
   
$
17,818
   
$
3,946
   
$
18
 
Provision (credit) for loan losses
   
12
     
(1,589
)
   
214
     
583
     
(780
)
   
652
     
 
Charge-offs
   
(6
)
   
(40
)
   
(145
)
   
     
(191
)
   
(332
)
   
(1
)
Recoveries
   
3
     
     
     
     
3
     
1
     
 
Ending balance
 
$
207
   
$
11,817
   
$
3,846