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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Annual Report on Form 10-K, unless otherwise mentioned, the terms the “Company”, “we”, “us” and “our” refer to Dime Community Bancshares, Inc. and our wholly-owned subsidiary, Dime Community Bank (the “Bank”). We use the term “Holding Company” to refer solely to Dime Community Bancshares, Inc. and not to our consolidated subsidiary.

Overview

Dime Community Bancshares, Inc., a New York corporation, is a bank holding company formed in 1988. On a parent-only basis, the Holding Company has minimal operations, other than as owner of Dime Community Bank. The Holding Company is dependent on dividends from its wholly-owned subsidiary, Dime Community Bank, its own earnings, additional capital raised, and borrowings as sources of funds. The information in this report reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The Bank also generates non-interest income, such as fee income on deposit and loan accounts, merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans. The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank’s title insurance subsidiary, and income tax expense, further affects our net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity.

COVID-19 Pandemic Response

Following the March 2020 passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company participated in assisting its customers with applications for resources through the program. Since the inception of the program, the consolidated PPP originations for the Company through December 31, 2021, including originations by both Legacy Dime and Bridge, exceeded $1.90 billion. Following the completion of the PPP, the Company sold its 2021 PPP loan originations in order to re-deploy funds into ongoing loan portfolio growth. The Company believes that the remainder of its SBA PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of December 31, 2022, the Company had SBA PPP loans totaling $5.8 million, net of deferred fees. It is the Company’s expectation that loans funded through the PPP are fully guaranteed by the U.S. government.

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We continue to monitor unfunded commitments, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.

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It is possible that there will be continued material, adverse impacts to significant estimates, asset valuations, and business operations, including intangible assets, investments, loans, deferred tax assets, and derivative counter party risk, changes in consumer behavior, and supply chain interruptions as a result of the COVID-19 pandemic. Future government actions in response to the COVID-19 pandemic, including vaccination mandates, may also affect our workforce, human capital resources, and infrastructure.

Critical Accounting Estimates

Note 1 Summary of Significant Accounting Policies, to the Company’s Audited Consolidated Financial Statement for the year ended December 31, 2022 contains a summary of significant accounting policies. These accounting policies may require various levels of subjectivity, estimates or judgement by management. Policies with respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value of loans acquired in a business combinations are critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations. These critical accounting estimates 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.

Management has reviewed the following critical accounting estimates and related disclosures with its Audit Committee.

Allowance for Credit Losses on Loans Held for Investment

Methods and Assumptions Underlying the Estimate

On January 1, 2021, we adopted the Current Expected Credit Losses (“CECL”) Standard, which requires that loans held for investment be accounted for under the current expected credit losses model. The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in our loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining the allowance for credit losses for loans that share similar risk characteristics, the Company utilizes a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected. Expected credit losses are determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics. For a loan that does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Within the model, assumptions are made in the determination of probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods. Management assesses the sensitivity of key assumptions at least annually by stressing the assumptions to understand the impact on the model.

Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of a peer group of banks that operate in and around Dime’s footprint. These models are then utilized to forecast future expected loan losses based on expected future behavior of the same macro-economic variables. Adjustments to the quantitative results are made using qualitative factors. These factors include: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due loans; (6) the quality of our loan review system; (7) the value of underlying collateral for collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

For loans that do not share risk characteristics, the Company evaluates these loans on an individual basis based on various factors. Factors that may be considered are borrower delinquency trends and non-accrual status, probability of foreclosure or note sale, changes in the borrower’s circumstances or cash collections, borrower’s industry, or other facts and circumstances of the loan or collateral. The expected credit loss is measured based on net realizable value, that is, the

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difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For collateral dependent loans, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, less estimated costs to sell.

Uncertainties Regarding the Estimate

Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed above and factors that are reflective of current or future expected conditions. These estimates depend on the duration of current overall economic conditions, industry, borrower, or portfolio specific conditions. Volatility in certain credit metrics and differences between expected and actual outcomes are to be expected.

Customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.

Impact on Financial Condition and Results of Operations

If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in the loan portfolio, resulting in additions to the allowance. Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance through charges to earnings would materially decrease our net income.

We may experience significant credit losses if borrowers experience financial difficulties, which could have a material adverse effect on our operating results.

In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

Fair value of loans acquired in a business combination

Methods and Assumptions Underlying the Estimate

On February 1, 2021, the Company completed a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting. As a part of accounting for the Merger, fair value estimates were calculated with a combination of assumptions by management and by using a third party. The fair value often involved third-party estimates utilizing input assumptions by management which may be complex or uncertain. The fair value of acquired loans was based on a discounted cash flow methodology that considers factors such as type of loan and related collateral, and requires management’s judgment on estimates about discount rates, expected future cash flows, market conditions and other future events.

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For purchased financial loans with credit deterioration (“PCD”), an estimate of expected credit losses was made for loans with similar risk characteristics and was added to the purchase price to establish the initial amortized cost basis of the PCD loans. Any difference between the unpaid principal balance and the amortized cost basis is considered to relate to non-credit factors and resulted in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans.

Uncertainties Regarding the Estimate

Management relied on economic forecasts, internal valuations, or other relevant factors which were available at the time of the Merger in the determination of the assumptions used to calculate the fair value of the acquired loans. The estimates about discount rates, expected future cash flows, market conditions and other future events were subjective and may differ from estimates.

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Impact on Financial Condition and Results of Operations

The estimate of fair values on acquired loans contributed to the recorded goodwill from the Merger. In future income statement periods, interest income on loans will include the amortization and accretion of any premiums and discounts resulting from the fair value of acquired loans. Additionally, the provision for credit losses on acquired individually analyzed PCD loans may be impacted due to changes in the assumptions used to calculate expected cash flows.

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

The Company’s results of operations for the year ended December 31, 2021 include income for the eleven months following the Merger and the results of Legacy Dime for the month ended January 31, 2021. The Company’s historical operating results as of and for the year ended December 31, 2020, as presented and discussed in this Annual Report on Form 10-K, only include the historical results of Legacy Dime. Accordingly, the Company’s historical operating results as of and for periods before February 1, 2021, including the year ended December 31, 2020, as presented and discussed in this Annual Report on Form 10-K, do not include the historical results of Bridge.

General. Net income was $152.6 million in 2022, compared to $104.0 million in 2021, and $42.3 million in 2020. During 2022, net interest income increased by $22.3 million, provision for credit losses decreased by $0.8 million, and non-interest expense decreased by $44.6 million. These items were partially offset by a non-interest income decrease of $3.9 million and an income tax expense increase of $15.2 million. During 2021, net interest income increased by $179.9 million, provision for credit losses decreased by $20.0 million, and non-interest income increased by $20.8 million. These items were partially offset by a non-interest expense increase of $127.5 million and an income tax expense increase of $31.5 million.

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The discussion of net interest income for the years ended December 31, 2022, 2021, and 2020 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. No tax-equivalent adjustments have been made for interest income exempt from Federal, state, and local taxation. The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields. Loan fees included in interest income were $3.1 million in 2022, $12.5 million in 2021, and $7.5 million in 2020. There are no out-of-period adjustments included in the rate/volume analysis in the following table.

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Average Balance Sheets

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ Average

​ Balance Interest ​ Cost Balance Interest ​ Cost Balance Interest ​ Cost ​

Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Liabilities and Stockholders' Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net interest spread (2) ​ ​ ​ ​ ​ ​ ​ ​ 2.93 % ​ ​ ​ ​ ​ 3.02 % ​ ​ ​ ​ 2.68 %

Net interest margin (3) ​ ​ ​ ​ ​ 3.25 % ​ ​ ​ 3.15 % ​ ​ 2.90 %

(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average-interest earning assets.

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Rate/Volume Analysis

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

​ ​ Increase/(Decrease) Due to ​ Increase/(Decrease) Due to

​ ​ Volume Rate Total Volume Rate Total

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-earning assets: ​ (In thousands)

Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other short-term borrowings ​ ​ 654 ​ ​ 781 ​ ​ 1,435 ​ ​ 4 ​ ​ (45) ​ ​ (41)

Derivative cash collateral ​ ​ 888 ​ ​ 924 ​ ​ 1,812 ​ ​ — ​ ​ — ​ ​ —

(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.

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Net Interest Income. Net interest income was $379.9 million in 2022, $357.6 million in 2021, and $177.7 million in 2020. Average interest-earning assets were $11.68 billion in 2022, $11.35 billion in 2021 and $6.12 billion in 2020. Net interest margin was 3.25% in 2022, 3.15% in 2021, and 2.90% in 2020.

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Interest Income. Interest income was $439.2 million in 2022, $384.6 million in 2021, and $234.0 million in 2020. During 2022, interest income increased $54.6 million from 2021, primarily reflecting increases in interest income of $55.7 million on real estate loans, and $6.6 million on securities. The increased interest income on real estate loans was primarily due to growth of $829.5 million in the average balances, and a 28-basis point increase in yield during the period due to the rising interest rate environment. The increased interest income from securities was primarily due to the increase in the average balances of $392.4 million, offset in part by a 2-basis point decrease in the yield. During 2021, interest income increased $150.6 million from 2020, primarily reflecting increases in interest income of $102.5 million on real estate loans, $38.5 million on commercial and industrial (“C&I”) loans, $8.5 million on securities, and $1.4 million on other loans. The increased interest income on real estate loans was due to an increase of $3.05 billion in the average balance of such loans in the period, offset in part by a 24-basis point decrease in the yield. The increased interest income on C&I loans was primarily due to growth of $960.0 million in the average balances, and a 13-basis point increase in yield during the period. The increased interest income from securities was primarily due to the increase in the average balances of $775.2 million, offset in part by a 97-basis point decrease in the yield. The increased average balances in 2021 versus 2020 were related primarily to the Merger transaction.

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Interest Expense. Interest expense was $59.4 million in 2022, $27.0 million in 2021, and $56.3 million in 2020. During 2022, interest expense increased $32.3 million from 2021, primarily reflecting increases in interest expense of $15.2 million on savings accounts, $5.1 million on FHLBNY advances and $4.4 million on money market accounts. The increase in interest expense on savings accounts was primarily due to increased rates offered on savings accounts and, an increase of $673.1 million in the average balances of such accounts. The increase in interest expense on FHLB advances was primarily due to the increased cost of wholesale borrowings. The increase in interest expense on money market accounts was primarily due to increased rates offered on money market accounts. During 2021, interest expense decreased $29.3 million from 2020, primarily reflecting decreases in interest expense of $15.9 million on FHLBNY advances, and $14.6 million on CDs. The decrease in interest expense on CDs was primarily due to decreased rates offered on CD accounts and, a decrease of $216.2 million in the average balances of such accounts. The decrease in interest expense on FHLBNY advances was primarily due to a decrease of $806.2 million in the average balances of FHLBNY advances, and a decrease of 92 basis points in the cost of such borrowings.

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Provision for Credit Losses. The Company recognized a provision for credit losses of $5.4 million in 2022, $6.2 million in 2021 and $26.2 million in 2020. The $5.4 million provision for credit losses recognized in 2022 was associated with growth in the loan portfolio and a deterioration of forecasted macroeconomic conditions, offset by a reduction in reserves on individually analyzed loans and unfunded commitments. The $6.2 million provision for credit losses recognized in 2021 included a provision recorded on acquired non-PCD loans for the Day 2 accounting of acquired loans from the Merger, offset by improvements in forecasted macroeconomic conditions, and releases of reserves on individually analyzed loans. The $26.2 million provision for credit losses recognized in 2020 resulted mainly from an increase in the general reserve allowance for credit losses due to an adjustment of qualitative factors to account for the effects of the COVID-19 pandemic and related economic disruption, and additional specific reserves on non-performing loans. The provision for credit losses recognized in 2022 and 2021 was calculated in accordance with the CECL Standard adopted by the Company on January 1, 2021. The provision for credit losses recognized in 2020 was calculated in accordance with prior GAAP, in accordance with ASC 310.

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Non-Interest Income.Non-interest income was $38.2 million in 2022, $42.1 million in 2021, and $21.3 million in 2020. During 2022, non-interest income decreased $3.9 million from 2021, due primarily to a decrease in gains on the sales of SBA PPP loans, and a decrease in gain on sale of residential loans and other non-interest income of $1.3 million each. Offsetting these declines was an increase in BOLI income of $3.3 million and no loss on termination of derivatives in 2022 (versus a $16.5 million loss on termination of derivatives in 2021). During 2021, non-interest income increased $20.8 million from 2020, due primarily to a gain on the sale of SBA PPP loans of $20.7 million, an increase in service charges and other fees of $10.4 million, and an increase in other non-interest income of $3.0 million, partially offset by an increase in loss on termination of derivatives of $9.9 million, a decrease in loan level derivative income of $6.0 million, and a decrease in net gain on sale of securities and other assets of $2.9 million.

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Non-Interest Expense. Non-interest expense was $200.7 million in 2022, $245.3 million in 2021, and $117.8 million in 2020. During 2022, non-interest expense decreased $44.6 million from 2021, primarily due to not recognizing any merger expenses and transaction costs and branch restructuring costs in 2022 (versus $44.8 million in merger expenses and transaction costs and $5.1 million of branch restructuring costs in 2021). These declines were offset by an increase of $11.8 million in salaries and employee benefits expenses. During 2021, non-interest expense increased $127.5 million from 2020, reflecting an increase of $47.6 million in salaries and employee benefits expense, an increase of $29.6 million in merger expenses and transaction costs, an increase of $14.5 million in occupancy and equipment expense, an increase of $8.3 million in data processing costs, an increase of $7.2 million in other expenses, and an increase of $5.9 million in professional services expenses, all of which increased primarily due to the Merger. We also incurred branch restructuring costs of $5.1 million during the 2021 period.

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Non-interest expense was 1.61%, 2.03%, and 1.83% of average assets during 2022, 2021, and 2020, respectively. The increase in 2021 was primarily due to merger expenses and transaction costs.

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Income Tax Expense. Income tax expense was $59.4 million in 2022, $44.2 million in 2021, and $12.7 million in 2020. Income tax expense increased $15.2 million during 2022 compared to 2021, primarily as a result of $63.7 million of higher pre-tax income during 2022. Income tax expense increased $31.5 million during 2021 compared to 2020, primarily as a result of $93.2 million of higher pre-tax income during 2021.

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The Company’s consolidated tax rate was 28.0%, 29.8% and 23.0% in 2022, 2021, and 2020, respectively. The increase in the effective tax rate in 2022 and 2021 compared to 2020 was primarily the result of the loss of benefits from Legacy Dime’s REITs as the Company’s total assets exceeded $8 billion, and non-deductible expenses during 2021.

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

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

Total net loans held for investment increased $1.32 billion during the year ended December 31, 2022, to $10.48 billion at period end. During the period, the Bank had originations of $2.83 billion.

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Total securities decreased $206.6 million during the year ended December 31, 2022, to $1.54 billion at period end, primarily due to proceeds from principal payments and calls of $195.3 million and an increase in unrealized losses of $109.7 million, offset in part by purchases of $102.4 million. We transferred $372.2 million of securities available-for-sale to securities held-to-maturity during the year ended December 31, 2022.

Liabilities. Total liabilities increased $1.15 billion during the year ended December 31, 2022, to $12.02 billion at period end, primarily due to an increase of $1.11 billion in FHLBNY advances, and an increase of $148.5 million in derivative cash collateral. We maintained a higher level of borrowings to support loan growth and offset a $204.6 million decline in deposits.

During the year ended December 31, 2022, the Company did not terminate any derivatives. During the year ended December 31, 2021, the Company terminated 34 derivatives with notional values totaling $785.0 million, resulting in a termination value of $16.5 million which was recognized in loss on termination of derivatives in non-interest income.

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

Loan Portfolio Composition

The following table presents an analysis of outstanding loans by loan type, excluding loans held for sale, net of unearned discounts and premiums and deferred origination fees and costs, at the dates presented:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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

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Loan Purchases, Sales and Servicing

In the event that the Bank were to sell loans in the secondary market or through securitization, it generally retains servicing rights on the loans sold. Servicing fees are typically derived based upon the difference between the actual origination rate and contractual pass-through rate of the loans at the time of sale. At December 31, 2022 and 2021, the Bank had recorded servicing right assets ("SRAs") of $3.1 million and $3.8 million, respectively, associated with the sale of loans to third-party institutions in which the Bank retained the servicing of the loan. The Bank outsources the servicing of a portion of our one-to-four family mortgage loan portfolio to an unrelated third-party under a sub-servicing agreement. Fees paid under the sub-servicing agreement are reported as a component of other non-interest expense in the consolidated statements of income.

Loan Maturity and Repricing

As of December 31, 2022, $8.21 billion, or 77.7% of the loan portfolio was scheduled to mature or reprice within five years.

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The following table distributes our loans held for investment portfolio at December 31, 2022 by the earlier of the maturity or next repricing date. ARMs are included in the period during which their interest rates are next scheduled to adjust. The table does not include scheduled principal amortization.

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Less than 1 year ​ 1 to 5 years ​ 5 to 15 years ​ Over 15 years ​ ​ Total

​ Amount ​ Amount ​ Amount ​ Amount ​ ​ ​ Amount

(In thousands) ​ ​ ​ ​ ​

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The following table presents our loans held for investment with maturity or next repricing due after December 31, 2023:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Due after December 31, 2023

​ Fixed ​ Adjustable ​ Total

(In thousands) ​ ​

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Asset Quality

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General

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We do 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 4 to our consolidated financial statements for a discussion of evaluation for impaired securities.

Monitoring and Collection of Delinquent Loans

Our management reviews delinquent loans on a monthly basis and reports to our Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in our loan portfolio.

Our 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. 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, we 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, we reverse all outstanding accrued interest receivable.

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We generally initiate foreclosure proceedings on real estate loans when a loan enters non-accrual status based upon non-payment, unless the borrower is paying in accordance with an agreed upon modified payment agreement. We obtain an updated appraisal upon the commencement of legal action to calculate a potential collateral shortfall and to reserve appropriately for the potential loss. 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. We generally attempt to utilize all available remedies, such as note sales in lieu of foreclosure, in an effort to resolve non-accrual loans and OREO properties as quickly and prudently as possible in consideration of market conditions, the physical condition of the property and any other mitigating circumstances. We have not initiated any expected or imminent foreclosure proceedings that are likely to have a material adverse impact on our consolidated financial statements. In the event that a non-accrual loan is subsequently brought current, it is returned to accrual status once the doubt concerning collectability has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions for a period of generally at least six months.

The C&I portfolio is actively managed by our lenders and underwriters. Most credit facilities typically require an annual review of the exposure and borrowers are required to submit annual financial reporting and loans are structured with financial covenants to indicate expected performance levels. Smaller C&I loans are monitored based on performance and the ability to draw against a credit line is curtailed if there are any indications of credit deterioration. Guarantors are also required to update their financial reporting. All exposures are risk rated and those entering adverse ratings due to financial performance concerns of the borrower or material delinquency of any payments or financial reporting are subjected to added management scrutiny. Measures taken typically include amendments to the amount of the available credit facility, requirements for increased collateral, additional guarantor support or a material enhancement to the frequency and quality of financial reporting. Loans determined to reach adverse risk rating standards are monitored closely by Credit Administration to identify any potential credit losses. When warranted, loans reaching a Substandard rating could be reassigned to the Workout Group for direct handling.

Non-accrual Loans

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

TDRs

We are 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 outstanding principal amount and/or accrued interest have been reduced

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

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We modified twelve loans in a manner that met the criteria for a TDR during the year ended December 31, 2022. We modified four loans in a manner that met the criteria for a TDR during the year ended December 31, 2021.

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Accrual status for TDRs is determined separately for each TDR in accordance with our policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in our determination that a TDR has been created, the loan can be on either accrual or non-accrual status. 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

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loan is performing (and accruing) it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under our policy and agency regulations. Within the allowance for credit losses, losses are estimated for TDRs on accrual status as well as TDRs on non-accrual status that are one-to-four family loans or consumer loans, on a pooled basis with loans that share similar risk characteristics. TDRs on non-accrual status excluding one-to-four family and consumer loans are individually evaluated to determine expected credit losses. For collateral-dependent TDRs where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses (“ACL”) is measured based on the difference between the fair value of collateral, less the estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. For non-collateral-dependent loans, the ACL is measured based on the difference between the present value of expected cash flows and the amortized cost basis of the loan as of the measurement date.

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

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, we obtain 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. We typically seek to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.

There was no carrying value of OREO properties on our consolidated balance sheets at December 31, 2022 or December 31, 2021. We did not recognize any provisions for losses on OREO properties during the years ended December 31, 2022, 2021 or 2020.

Past Due Loans

Loans Delinquent 30 to 59 Days

At December 31, 2022, we had loans totaling $23.5 million that were past due between 30 and 59 days. At December 31, 2021, we had loans totaling $61.2 million that were past due between 30 and 59 days. The 30 to 59-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Loans Delinquent 60 to 89 Days

At December 31, 2022, we had loans totaling $0.7 million that were past due between 60 and 89 days. At December 31, 2021, we had loans totaling $12.1 million that were past due between 60 and 89 days. The 60 to 89-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.

Accruing Loans 90 Days or More Past Due

At December 31, 2022, there were no accruing loans 90 days or more past due. At December 31, 2021, we had nine loans with an aggregate outstanding balance of $3.0 million, all of which were 90 days or more past due. These loans were either well secured, awaiting a forbearance extension or formal payment deferral, or will likely be forgiven through the PPP or repurchased by the SBA, and, therefore, remained on accrual status and were deemed performing assets.

Reserve for Loan Commitments

We maintain a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by the borrower. The amount of reserve was $2.8 million at December 31, 2022 and $4.4 million at December 31, 2021. This reserve is

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determined based upon the outstanding volume of loan commitments at each period end. Any increases or reductions in this reserve are recognized in provision for credit losses.

Allowance for Credit Losses

On January 1, 2021, the Company adopted ASU No. 2016-13 "Financial Instruments – Credit Losses (Topic 326)". ASU 2016-13 was effective for the Company as of January 1, 2020. Under Section 4014 of the 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. The Company elected to defer adoption of CECL until January 1, 2021. This standard requires that the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current conditions, 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.

​

The adoption of the CECL Standard resulted in an initial decrease of $3.9 million to the allowance for credit losses and an increase of $1.4 million to the reserve for unfunded commitments. The after-tax cumulative-effect adjustment of $1.7 million was recorded as an increase to retained earnings as of January 1, 2021.

​

A provision of $5.4 million and $6.2 million were recorded during the twelve-month periods ended December 31, 2022 and 2021, respectively. The $5.4 million provision for credit losses recognized in 2022 was associated with growth in the loan portfolio and a deterioration of forecased economic conditions, offset by a reduction in reserves on individually analyzed loans and unfunded commitments. The $6.2 million provision for credit losses recognized in 2021 included a provision recorded on acquired non-PCD loans for the Day 2 accounting of acquired loans from the Merger offset by improvements in forecasted macroeconomic conditions, and release of reserves on individually analyzed loans.

For further discussion of the allowance for credit losses and related activity during the years ended December 31, 2022, 2021 and 2020, please see Note 5 to the consolidated financial statements.

The following table presents our allowance for credit losses allocated by loan type and the percent of each to total loans at the dates indicated.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ Percent ​ ​ ​ ​ Percent ​ ​ ​ ​ Percent ​

​ ​ ​ ​ ​ of Loans ​ ​ ​ ​ of Loans ​ ​ ​ ​ of Loans ​

​ ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​ ​ ​ ​ in Each ​

​ ​ ​ ​ ​ Category ​ ​ ​ ​ Category ​ ​ ​ ​ Category ​

​ ​ Allocated ​ to Total ​ Allocated ​ to Total ​ Allocated ​ to Total ​

​ ​ Amount Loans Amount Loans Amount Loans

(Dollars in thousands) ​ ​ ​ ​ ​ ​ ​

​

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The following table sets forth information about our allowance for credit losses at or for the dates indicated:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ (Dollars in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Multifamily residential and residential mixed-use ​ ​ — ​ ​ 0.01 ​ ​ 0.10 ​

CRE ​ ​ — ​ ​ 0.09 ​ ​ — ​

Acquisition, development, and construction ​ ​ — ​ ​ — ​ ​ — ​

Investment Activities

Securities available-for-sale

Our consolidated investment in securities available-for-sale totaled $950.6 million at December 31, 2022. The average duration of these securities was 3.5 years as of December 31, 2022.

The following table presents the amortized cost, fair value and weighted average yield of our securities available-for-sale at December 31, 2022, categorized by remaining period to contractual maturity:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ Weighted

​ ​ Amortized ​ Fair ​ Average

​ Cost Value Yield

​ ​ (Dollars in Thousands) ​

​

The entire carrying amount of each security at December 31, 2022 is reflected in the above table in the maturity period that includes the final security payment date and, accordingly, no effect has been given to periodic repayments or possible prepayments. The weighted average duration of our securities available-for-sale approximated 3.5 years as of December 31, 2022 when giving consideration to anticipated repayments or possible prepayments, which is significantly less than their weighted average maturity.

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The following table presents the weighted average contractual maturity of our securities available-for-sale:

​ ​ ​

​ ​ December 31,

Weighted average contractual maturity (years) - Available-for-sale: ​ ​

Treasury securities ​ 2.33

Corporate securities ​ 7.88

Pass-through MBS issued by GSEs and agency CMOs ​ 17.35

State and municipal obligations ​ 4.21

​

Securities held-to-maturity

​

Our investment in securities held-to-maturity totaled $585.8 million at December 31, 2022. The average duration of these securities was 6.1 years as of December 31, 2022.

The following table presents the amortized cost, fair value and weighted average yield of our securities held-to-maturity at December 31, 2022, categorized by remaining period to contractual maturity:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ Weighted

​ ​ Amortized ​ Fair ​ Average

​ Cost Value Yield

​ ​ (Dollars in Thousands) ​

Due within 1 year ​ $ — ​ $ — — %

​

The entire carrying amount of each security at December 31, 2022 is reflected in the above table in the maturity period that includes the final security payment date and, accordingly, no effect has been given to periodic repayments or possible prepayments. The weighted average duration of our securities held-to-maturity approximated 6.1 years as of December 31, 2022 when giving consideration to anticipated repayments or possible prepayments, which is significantly less than their weighted average maturity.

​

The following table presents the weighted average contractual maturity of our securities held-to-maturity:

​

​ ​ ​

​ ​ December 31,

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

Agency notes ​ 7.26

Corporate securities ​ 9.59

Pass-through MBS issued by GSEs and agency CMOs ​ 22.16

​

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Sources of Funds

​

Deposits

​

The following table presents our deposit accounts and the related weighted average interest rates at the dates indicated:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Percent ​ ​ ​ Percent ​ ​ ​ Percent ​

​ ​ ​ ​ ​ of ​ Weighted ​ ​ ​ ​ Of ​ Weighted ​ ​ ​ ​ Of ​ Weighted

​ ​ ​ ​ ​ Total ​ Average ​ ​ ​ ​ Total ​ Average ​ ​ ​ ​ Total ​ Average

​ Amount Deposits Rate Amount Deposits Rate Amount ​ Deposits ​ Rate

​ (Dollars in Thousands) ​

​

The weighted average maturity of our CDs at December 31, 2022 was 7.6 months, compared to 7.7 months at December 31, 2021.

​

As of December 31, 2022 and 2021, the portion of deposit accounts in excess of the $250,000 FDIC insurance limit was $5.73 billion and $5.83 billion, respectively.

​

The following table sets forth the amount of time deposits in uninsured accounts by maturity, all of which are CDs:

​

​ ​ ​ ​

(In thousands) ​ December 31, 2022

Maturity Period ​ ​ ​

Three months or less ​ $ 132,925

Over three through six months ​ ​ 241,143

Over six through twelve months ​ ​ 125,971

Over twelve months ​ ​ 41,901

​

As of December 31, 2022, the portion of uninsured time deposits in excess of the $250,000 FDIC insurance limit was $420.4 million.

​

Our Board of Directors authorized the Bank to accept brokered deposits up to an aggregate limit of 10.0% of total assets. At December 31, 2022, brokered deposits totaled $538.9 million, which included purchased CDs from the CDARS program, purchased MMAs from the ICS program and purchased CDs through a broker. At December 31, 2021, brokered deposits totaled $200.0 million, which included purchased MMAs from the ICS program. At December 31, 2020, brokered deposits totaled $343.0 million, which included purchased CDs from the CDARS program, purchased MMAs from the ICS program and purchased CDs through a broker.

Borrowings

The Bank’s total borrowing line with FHLBNY equaled $4.13 billion at December 31, 2022. The Bank had $1.13 billion of FHLBNY advances outstanding at December 31, 2022, and $25.0 million at December 31, 2021. The Bank maintained sufficient collateral, as defined by the FHLBNY (principally in the form of real estate loans), to secure such advances.

The Company had $1.4 million outstanding of securities sold under agreements to repurchase (“repurchase agreements”) at December 31, 2022. The Company had $1.9 million outstanding of securities sold under agreements to repurchase at December 31, 2021.

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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 Asset Liability Committee (“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 are presented to appropriate senior management on a monthly basis, and the Board of Directors at each of its meetings. In addition, 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.

​

Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise. 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.

The Bank utilizes repurchase agreements as part of its borrowing policy to add liquidity. Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities. As of December 31, 2022, the Bank’s repurchase agreements totaled $1.4 million, included in other short-term borrowings on the consolidated balance sheets.

The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. 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 $204.6 million during the year ended December 31, 2022 compared to an increase of $5.93 billion during the year ended December 31, 2021. The increase in total deposits during the 2021 period was primarily due to the acquisition of deposits in the Merger. Within deposits, core deposits (i.e., non-CDs) decreased $466.7 million during the year ended December 31, 2022 and increased $6.40 billion during the year ended December 31. 2021. CDs increased $262.1 million during the year ended December 31, 2022 compared to a decrease of $469.4 million during the year ended December 31, 2021. The increase in CDs during the current period was primarily due to a $294.1 million increase in brokered CDs.

The Bank increased its outstanding FHLBNY advances by $1.11 billion during the year ended December 31, 2022, compared to a $1.18 billion decrease during the year ended December 31, 2021. See Note 13. “Federal Home Loan Bank Advances” to our consolidated financial statements for further information.

Subordinated debentures totaled $200.3 million at December 31, 2022 and $197.1 million at December 31, 2021. See Note 14. “Subordinated Debentures” to our consolidated financial statements for further information.

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

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with unaffiliated correspondent banks. At December 31, 2022, the Bank had an additional unused borrowing capacity of $1.57 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank’s outstanding FHLBNY borrowings).

During the year ended December 31, 2022 and 2021, real estate loan originations totaled $2.67 billion and $1.67 billion, respectively. During the year ended December 31, 2022 and 2021, C&I loan originations totaled $160.1 million and $647.6 million, respectively. Included in the 2021 period was PPP loan originations of $579.9 million. The PPP program ended on May 31, 2021.

The Bank did not have proceeds from sales of securities available-for-sale during the year ended December 31, 2022. Proceeds from sales of available-for-sale securities totaled $138.1 million during the year ended December 31, 2021. Purchases of available-for-sale securities totaled $39.2 million and $1.10 billion during the years ended December 31, 2022 and 2021, respectively. Proceeds from pay downs and calls and maturities of available-for-sale securities were $165.1 million and $411.0 million for the years ended December 31, 2022 and 2021, respectively.

The Bank did not have proceeds from sales of held-to-maturity securities during the years ended December 31, 2022 and 2021. Purchases of held-to-maturity securities totaled $63.2 million and $40.2 million during the year ended December 31, 2022 and 2021, respectively. Proceeds from pay downs and calls and maturities of held-to-maturity securities were $31.7 million and $1.4 million for the year ended December 31, 2022 and 2021, respectively.

​

The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator. As a general matter, these capital requirements are based on the amount and composition of an institution’s assets. At December 31, 2022, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized" for all regulatory purposes.

The Holding Company repurchased 1,431,241 shares of its common stock during the year ended December 31, 2022. The Holding Company repurchased 1,755,061 shares of its common stock during the year ended December 31, 2021. As of December 31, 2022, up to 1,603,760 shares remained available for purchase under the authorized share repurchase programs. See "Part II - Item 5. Issuer Purchases of Equity Securities" for additional information about repurchases of common stock.

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

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

Contractual Obligations

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

Off-Balance Sheet Arrangements

As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to borrowers, which are originated pursuant to its regular underwriting standards. Available lines of credit may not be drawn on or may expire prior to funding, in whole or in part, and amounts are not estimates of future cash flows. As of December 31, 2022, the Bank had $271.6 million of firm loan commitments that were accepted by the borrowers.

Additionally, in connection with a loan securitization transaction that was completed in 2017, the Bank executed a reimbursement agreement with FHLMC that obligates the Company to reimburse FHLMC for any contractual principal and interest payments on defaulted loans, not to exceed 10% of the original principal amount of the loans comprising the aggregate balance of the loan pool at securitization. The maximum exposure under this reimbursement obligation is $28.0 million. The Bank has pledged $28.0 million of pass-through MBS issued by GSEs as collateral.

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Recently Issued Accounting Standards

For a discussion of the impact of recently issued accounting standards, please see Note 1 to the Company’s consolidated financial statements.

​

​

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

General

The Company’s largest component of market risk remains interest rate risk. The Company is not subject to foreign currency exchange or commodity price risk. During the year ended December 31, 2022, we conducted zero transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Asset/Liability Management

Management considers interest rate risk to be the most significant market risk for the Company. Market risk is the risk of losses from adverse changes in market prices and rates. Interest rate risk is the exposure to adverse changes in net income as a result of changes in interest rates.

The Company’s primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and liabilities, and the credit quality of earning assets. Our asset and liability management objectives are to maintain a strong, stable net interest margin, to utilize its capital effectively without taking undue risks, to maintain adequate liquidity, and to reduce vulnerability of our operations to changes in interest rates.

Our Asset and Liability Committee evaluates periodically, but no less than four times annually, the impact of changes in market interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits established by senior management, which are reviewed and approved by the Board of Directors at least annually. The economic environment continually presents uncertainties as to future interest rate trends. The Asset and Liability Committee regularly utilizes a model that projects net interest income based on increasing or decreasing interest rates, in order to be better able to respond to changes in interest rates.

At December 31, 2022, $1.31 billion, or 85.2%, of our available-for-sale and held-to-maturity securities had fixed interest rates. At December 31, 2022, $7.70 billion, or 72.9%, of our loan portfolio had adjustable or floating interest rates. Changes in interest rates affect the value of interest-earning assets and, in particular, the securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. Increases in interest rates could result in decreases in the market value of interest-earning assets, which could adversely affect stockholders’ equity and the results of operations if sold. The Company is also subject to reinvestment risk associated with changes in interest rates. Changes in market interest rates also could affect the type (fixed-rate or adjustable-rate) and amount of loans originated and the average life of loans and securities, which can impact the yields earned on loans and securities. In periods of decreasing interest rates, the average life of loans and securities held may be shortened to the extent increased prepayment activity occurs during such periods which, in turn, may result in the investment of funds from such prepayments in lower yielding assets. Under these circumstances, the Company is subject to reinvestment risk to the extent that management is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may result in decreasing loan prepayments with respect to fixed rate loans (and, therefore, an increase in the average life of such loans), may result in a decrease in loan demand, and may make it more difficult for borrowers to repay adjustable rate loans. In addition, increases in interest rates may result in the extensions of the average life of securities which may result in lower cash flows to the Bank.

Interest Rate Risk Exposure Analysis

Economic Value of Equity ("EVE") Analysis. In accordance with agency regulatory guidelines, the Company simulates the impact of interest rate volatility upon EVE using several interest rate scenarios. EVE is the difference between the present value of the expected future cash flows of the Company’s assets and liabilities and the value of any off-balance sheet items, such as derivatives, if applicable.

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Traditionally, the fair value of fixed-rate instruments fluctuates inversely with changes in interest rates. Increases in interest rates thus result in decreases in the fair value of interest-earning assets, which could adversely affect the Company’s consolidated results of operations in the event they were to be sold, or, in the case of interest-earning assets classified as available-for-sale, reduce the Company’s consolidated stockholders’ equity, if retained. The changes in the value of assets and liabilities due to fluctuations in interest rates measure the interest rate sensitivity of those assets and liabilities.

In order to measure the Company’s sensitivity to changes in interest rates, EVE is calculated under market interest rates prevailing at a given quarter-end ("Pre-Shock Scenario"), and under various other interest rate scenarios ("Rate Shock Scenarios") representing immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed in the Pre-Shock Scenario. An increase in the EVE is considered favorable, while a decline is considered unfavorable. The changes in EVE between the Pre-Shock Scenario and various Rate Shock Scenarios due to fluctuations in interest rates reflect the interest rate sensitivity of the Company’s assets, liabilities, and off-balance sheet items that are included in the EVE. Management reports the EVE results to the Board of Directors on a quarterly basis. The report compares the Company’s estimated Pre-Shock Scenario EVE to the estimated EVE calculated under the various Rate Shock Scenarios.

The Company’s valuation model makes various estimates regarding cash flows from principal repayments on loans and deposit decay rates at each level of interest rate change. The Company’s estimates for loan repayment levels are influenced by the recent history of prepayment activity in its loan portfolio, as well as the interest rate composition of the existing portfolio, especially in relation to the existing interest rate environment. In addition, the Company considers the amount of fee protection inherent in the loan portfolio when estimating future repayment cash flows. Regarding deposit decay rates, the Company tracks and analyzes the decay rate of its deposits over time, with the assistance of a reputable third-party, and over various interest rate scenarios. Such results are utilized in determining estimates of deposit decay rates in the valuation model. The Company also generates a series of spot discount rates that are integral to the valuation of the projected monthly cash flows of its assets and liabilities. The valuation model employs discount rates that it considers representative of prevailing market rates of interest with appropriate adjustments it believes are suited to the heterogeneous characteristics of the Company’s various asset and liability portfolios. No matter the care and precision with which the estimates are derived, actual cash flows could differ significantly from the Company’s estimates resulting in significantly different EVE calculations.

The analysis that follows presents, as of December 31, 2022 and 2021, the estimated EVE at both the Pre-Shock Scenario and the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Dollar Percentage ​ ​ Dollar Percentage

(Dollars in thousands) ​ EVE ​ Change ​ Change ​ EVE ​ Change ​ Change

Rate Shock Scenarios ​ ​

​

The Company’s Pre-Shock Scenario EVE increased from $1.22 billion at December 31, 2021 to $1.64 billion at December 31, 2022. The primary factor contributing to the increase in EVE at December 31, 2022, was the increase in value of the Bank’s low-cost deposit base relative to the current rate environment. Throughout 2022, market interest rates utilized in the calculation of economic value increased materially across all yield curve points. However, the Bank continued to maintain a relatively low-cost funding base during this time even as market rates have risen measurably, resulting in additional economic value.

​

The Company’s EVE in the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios increased from $1.33 billion and $1.41 billion, respectively, at December 31, 2021, to $1.70 billion and $1.72 billion, respectively, at December 31, 2022.

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Income Simulation Analysis. As of the end of each quarterly period, the Company also monitors the impact of interest rate changes through a net interest income simulation model. This model estimates the impact of interest rate changes on the Company’s net interest income over forward-looking periods typically not exceeding 36 months (a considerably shorter period than measured through the EVE analysis). Management reports the net interest income simulation results to the Company’s Board of Directors on a quarterly basis. The following table discloses the estimated changes to the Company’s net interest income in various time periods assuming gradual changes in interest rates over a 12-month period beginning December 31, 2022, for the given rate scenarios:

​ ​ ​ ​ ​

​ ​ Percentage Change in Net Interest Income

Gradual Change in Interest rates of: ​ Year-One ​ Year-Two

​

Management also examines the potential impact to net interest income by simulating the impact of instantaneous changes to interest rates. The following table discloses the estimated changes to the Company’s net interest income in various time periods associated with the given interest rate shock scenarios:

​ ​ ​ ​ ​

​ ​ Percentage Change in Net Interest Income

Instantaneous Rate Shock Scenarios ​ Year-One ​ Year-Two

- 100 Basis Points ​ (1.2)% ​ (4.9)%

​

​

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​

Item 8. Financial Statements and Supplementary Data

For the Company’s consolidated financial statements with the notes thereto, see pages hereafter.

​

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands except share amounts)

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Assets: ​ ​

Securities available-for-sale, at fair value ​ ​ 950,587 ​ ​ 1,563,711

Loans held for sale ​ — ​ 5,493

Loans held for investment, net of fees and costs ​ ​ 10,566,831 ​ ​ 9,244,661

Premises held for sale ​ ​ — ​ ​ 556

Other intangible assets ​ ​ 6,484 ​ ​ 8,362

​ ​ ​ ​ ​ ​ ​

Liabilities: ​ ​

Federal Home Loan Bank of New York ("FHLBNY") advances ​ 1,131,000 ​ 25,000

Other short-term borrowings ​ ​ 1,360 ​ ​ 1,862

​ ​ ​

Commitments and contingencies ​ ​

​ ​ ​ ​ ​ ​ ​

Stockholders' equity: ​ ​

Accumulated other comprehensive loss, net of deferred taxes ​ (94,379) ​ (6,181)

Unearned equity awards ​ (8,078) ​ (7,842)

​

See notes to consolidated financial statements.

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Interest income: ​ ​ ​

Interest expense: ​ ​ ​

Derivative cash collateral ​ ​ 1,812 ​ ​ — ​ ​ —

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-interest income: ​ ​ ​

Gain on sale of residential loans ​ ​ 448 ​ ​ 1,758 ​ ​ 1,884

Net gain on equity securities ​ ​ — ​ ​ 131 ​ ​ 361

Net gain on sale of securities and other assets ​ ​ 1,397 ​ ​ 1,705 ​ ​ 4,592

Loss on termination of derivatives ​ ​ — ​ ​ (16,505) ​ ​ (6,596)

Non-interest expense: ​ ​ ​

Curtailment loss (gain) ​ ​ — ​ ​ 1,543 ​ ​ (1,651)

Merger expenses and transaction costs ​ ​ — ​ ​ 44,824 ​ ​ 15,256

Branch restructuring costs ​ ​ — ​ ​ 5,059 ​ ​ —

Amortization of other intangible assets ​ ​ 1,878 ​ ​ 2,622 ​ ​ —

Earnings per common share: ​ ​ ​

​

See notes to consolidated financial statements.

​

​

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands except per share amounts)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Other comprehensive income (loss): ​ ​ ​

Change in unrealized gain (loss) on securities: ​ ​ ​ ​ ​ ​ ​ ​ ​

Change in pension and other postretirement obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​

Reclassification adjustment for curtailment loss ​ ​ — ​ ​ 1,543 ​ ​ (1,651)

Change in the net actuarial gain ​ ​ (2,062) ​ ​ 6,563 ​ ​ 2,817

Change in unrealized gain (loss) on derivatives: ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive (loss) income before income taxes ​ (128,663) ​ (336) ​ 8

Deferred tax benefit ​ (40,465) ​ (79) ​ (8)

Total other comprehensive (loss) income, net of tax ​ (88,198) ​ (257) ​ 16

​

See notes to consolidated financial statements.

​

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​

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ Held by ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive ​ ​ ​ ​ Benefit ​ ​ ​ ​ ​ ​

​ Common Stock Stock Stock Capital Earnings Taxes Awards ("BMP") at cost Equity

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net income — ​ — ​ — ​ — ​ 42,318 ​ — ​ — ​ — ​ — ​ 42,318

Other comprehensive income, net of tax — ​ — ​ — ​ — ​ — ​ 16 ​ — ​ — ​ — ​ 16

Exercise of stock options, net 1,972 ​ — ​ — ​ 38 ​ — ​ — ​ — ​ — ​ — ​ 38

Stock-based compensation — ​ — ​ — ​ — ​ — ​ — ​ 7,223 ​ — ​ — ​ 7,223

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 103,996 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ 103,996

Exercise of stock options, net 20,629 ​ — ​ — ​ 258 ​ — ​ — ​ — ​ — ​ 173 ​ 431

Stock-based compensation ​ — ​ — ​ — ​ — ​ — ​ — ​ 5,407 ​ — ​ — ​ ​ 5,407

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 152,556 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 152,556

Stock-based compensation — ​ — ​ — ​ — ​ — ​ — ​ 4,278 ​ — ​ — ​ 4,278

See notes to consolidated financial statements.

​

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​

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​

Net gain on equity securities ​ — ​ (131) ​ (361)

Net gain on sale of loans held for sale ​ (2,245) ​ (24,791) ​ (3,002)

Loss on termination of derivatives ​ ​ — ​ ​ 16,505 ​ ​ 6,596

Net depreciation, amortization and accretion ​ 8,314 ​ 7,805 ​ 5,069

Amortization of other intangible assets ​ ​ 1,878 ​ ​ 2,622 ​ ​ —

Loss on extinguishment of debt ​ ​ 740 ​ ​ 1,751 ​ ​ 1,104

Increase in cash surrender value of BOLI ​ (8,190) ​ (6,721) ​ (3,725)

Gain from death benefits from BOLI ​ ​ (2,156) ​ ​ (350) ​ ​ (1,134)

CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​

Proceeds from sales of securities available-for-sale ​ — ​ 138,077 ​ 94,252

Proceeds from sales of marketable equity securities ​ — ​ 6,101 ​ 546

Purchases of securities held-to-maturity ​ ​ (63,210) ​ ​ (40,249) ​ ​ —

Acquisition of marketable equity securities ​ ​ — ​ ​ — ​ ​ (261)

(Purchases) sales of fixed assets, net ​ (3,745) ​ 14 ​ (954)

(Purchases) redemptions of restricted stock, net ​ (51,013) ​ 46,337 ​ (4,688)

Net cash received in business combination ​ ​ — ​ ​ 715,988 ​ ​ —

CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​

Repayments of FHLBNY advances, long-term ​ ​ — ​ ​ (190,150) ​ ​ (113,190)

Proceeds from subordinated debentures issuance, net ​ ​ 157,559 ​ ​ — ​ ​ —

Redemption of subordinated debentures ​ ​ (155,000) ​ ​ — ​ ​ —

Proceeds from preferred stock issuance, net ​ ​ — ​ ​ — ​ ​ 116,569

Proceeds from exercise of stock options ​ — ​ 431 ​ 38

Release of stock for benefit plan awards ​ 1,167 ​ 1,153 ​ 84

Redemption of REIT preferred stock ​ — ​ (121) ​ —

​ ​ ​ ​

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: ​ ​ ​

Loans transferred to held for investment ​ ​ 4,051 ​ ​ — ​ ​ —

Premises transferred to (from) held for sale ​ ​ — ​ ​ 2,799 ​ ​ (514)

Net non-cash liabilities assumed in Merger (See Note 2) ​ — ​ 324,937 ​ —

​

​

​

​

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars In Thousands except for share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation

On February 1, 2021, Dime Community Bancshares, Inc., a Delaware corporation (“Legacy Dime”) merged with and into Bridge Bancorp, Inc., a New York corporation (“Bridge”) (the “Merger”), with Bridge as the surviving corporation under the name “Dime Community Bancshares, Inc.” (the “Holding Company”). At the effective time of the Merger (the “Effective Time”), each outstanding share of Legacy Dime common stock, par value $0.01 per share, was converted into the right to receive 0.6480 shares of the Holding Company’s common stock, par value $0.01 per share.

At the Effective Time, each outstanding share of Legacy Dime’s Series A preferred stock, par value $0.01 (the “Dime Preferred Stock”), was converted into the right to receive one share of a newly created series of the Holding Company’s preferred stock having the same powers, preferences and rights as the Dime Preferred Stock.

Immediately following the Merger, Dime Community Bank, a New York-chartered commercial bank and a wholly-owned subsidiary of Legacy Dime, merged with and into BNB Bank, a New York-chartered trust company and a wholly-owned subsidiary of Bridge, with BNB Bank as the surviving bank, under the name “Dime Community Bank” (the “Bank”).

The audited consolidated financial statements presented in this Annual Report on Form 10-K include the collective results of the Holding Company and its wholly-owned subsidiary, the Bank, which are collectively herein referred to as “we”, “us”, “our” and the “Company.”

The Merger was accounted for as a reverse merger using the acquisition method of accounting, which means that for accounting and financial reporting purposes, Legacy Dime was deemed to have acquired Bridge in the Merger, even though Bridge was the legal acquirer. Accordingly, Legacy Dime’s historical financial statements are the historical financial statements of the combined company for all periods before February 1, 2021 (the “Merger Date”).

The Company’s results of operations for 2021 include the results of operations of Bridge on and after the Merger Date. Results for periods before the Merger Date reflect only those of Legacy Dime and do not include the results of operations of Bridge. The number of shares issued and outstanding, earnings per share, additional paid-in capital, dividends paid and all references to share quantities of the Company have been retrospectively adjusted to reflect the equivalent number of shares issued to holders of Legacy Dime common stock in the Merger. The assets and liabilities of Bridge as of the Merger Date were recorded at their estimated fair values and added to those of Legacy Dime. See Note 2. Merger for further information.

As of December 31, 2022, we operated 59 branch locations throughout Long Island and New York City boroughs of Brooklyn, Queens, Manhattan and the Bronx.

The Company is a bank holding company engaged in commercial banking and financial services through its wholly-owned subsidiary, Dime Community Bank. The Bank was established in 1910 and is headquartered in Hauppauge, New York. The Holding Company was incorporated under the laws of the State of New York in 1988 to serve as the holding company for the Bank. The Company functions primarily as the holder of all of the Bank’s common stock. Our bank operations include Dime Community Inc., a real estate investment trust subsidiary which was formerly known as Bridgehampton Community, Inc., as an operating subsidiary. Our bank operations also include Dime Abstract LLC (“Dime Abstract”), a wholly-owned subsidiary of the Bank, which is a broker of title insurance services. In September 2021, the Company dissolved two REITs, DSBW Preferred Funding Corporation and DSBW Residential Preferred Funding Corporation, which were wholly-owned subsidiaries of the Bank, and the preferred shares outstanding were redeemed by its shareholders.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and general practices within the financial institution industry. The accompanying consolidated financial statements include the accounts of the Holding Company and the Bank and its subsidiaries. Inter-company accounts and transactions have been eliminated in consolidation.

The following is a description of the significant accounting policies that the Company follows in preparing its consolidated financial statements.

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Use of Estimates

To prepare consolidated financial statements in conformity with GAAP, management makes judgments, estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

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. The outbreak of COVID-19 has materially, adversely impacted labor supply, supply chains, and certain industries in which our customers and vendors operate, and could continue to materially impair their ability to fulfill their obligations to us. Further additional outbreaks of COVID-19 variants could lead to economic recession and other severe disruptions in the U.S. economy, may disrupt banking and other financial activity in the areas in which we operate, and could potentially create widespread business continuity issues for us. Future government actions in response to the COVID-19 pandemic, including vaccination mandates, may also affect our workforce, human capital resources, and infrastructure.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020. The CARES Act was intended to provide relief and lessen a severe economic downturn. The stimulus package included direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also included extensive emergency funding for hospitals and healthcare providers. Subsequently, the 2021 Consolidated Appropriations Act was enacted to provide supplemental relief.

It is possible that there will be continued material, adverse impacts to significant estimates, asset valuations, and business operations, including intangible assets, investments, loans, deferred tax assets, derivative counterparty risk, changes in consumer behavior, and supply chain interruptions.

Summary of Significant Accounting Policies

Cash and Cash Equivalents - Cash and cash equivalents include cash and deposits with other financial institutions with maturities fewer than 90 days. Net cash flows are reported for customer loan and deposit transactions, and interest bearing deposits in other financial institutions.

Securities - Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting in observable price changes in orderly transactions for the identical or a similar investment.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in accrued interest receivable in the consolidated balance sheet. A debt security is placed on non-accrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on non-accrual is reversed against interest income. There were no non-accrual debt securities at December 31, 2022 and 2021, and there was no accrued interest related to debt securities reversed against interest income for the year ended December 31, 2022 and 2021. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Restricted Stock – Restricted stock represents Federal Home Loan Bank of New York (“FHLB” or “FHLBNY”) capital stock, Federal Reserve Bank (“FRB”) capital stock, and Bankers’ Bank capital stock, which are reported at cost. The Bank is a member of the FHLB system. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is periodically evaluated for impairment based on ultimate recovery of par value. The Bank is a member of the FRB. Membership requires the purchase of shares of FRB capital stock. The Bank has a relationship with Atlantic Community Bankers Bank (“ACBB”). The relationship requires the purchase of shares of ACBB capital stock. Both cash and stock dividends are reported as income.

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​

Loans Held for Sale - Loans originated and intended for sale in the secondary market, as well as identified problem loans which are subject to an executed note sale agreement, are carried at the lower of aggregate cost or net realizable proceeds. Loans originated and intended for sale are generally sold with servicing rights retained. Certain loans in which the borrower does not adhere to all of the terms and conditions of the legal contract were best resolved through the sale of the asset rather than through litigation through our workout department. These loans were reclassified.

​

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of partial charge-offs, deferred origination costs and fees and purchase premiums and discounts. Loan origination, commitment fees and certain direct and indirect costs incurred in connection with loan originations are deferred and amortized to income over the life of the related loans as adjustments to yield. When a loan prepays, the remaining unamortized net deferred origination fees or costs are recognized in the current year. Interest on loans is credited to income based on the principal outstanding during the period. The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and report accrued interest separately from the related loan balance in accrued interest receivable on the consolidated balance sheet. Past due status is based on the contractual terms of the loan. Loans that are 90 days past due are automatically placed on non-accrual and previously accrued interest is reversed and charged against interest income. However, if the loan is in the process of collection and the Bank has reasonable assurance that the loan will be fully collectable based upon an individual loan evaluation assessing such factors as collateral and collectability, accrued interest will be recognized as earned. If a payment is received when a loan is non-accrual or is a troubled debt restructuring (“TDR”), the payment is applied to the principal balance. A TDR loan performing in accordance with its modified terms is maintained on accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

​

Unless otherwise noted, the above policy is applied consistently to all loan segments.

​

Allowance for Credit Losses - On January 1, 2021, the Company adopted the CECL Standard, which requires that the measurement of all expected credit losses for financial assets at amortized cost, such as loans receivable, securities, and off-balance sheet credit exposures, held as of the reporting date be based on historical experience, current conditions, and reasonable and supportable forecasts to cover lifetime expected credit losses. Accrued interest receivable is excluded from amortized cost basis. The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent within the financial asset holdings. Management evaluates the adequacy of the allowance on a quarterly basis, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

Allowance for credit losses on held-to-maturity securities – Management classifies its held-to-maturity portfolio into the following major security types: Pass-through MBS issued by GSEs, Agency Collateralized Mortgage Obligations, Agency Notes and Corporate Securities. The majority of the securities in the held-to-maturity portfolio are issued by U.S. government-sponsored entities or agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, expected credit losses are calculated by pools of such debt securities. The historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lifetime of the securities.

For a debt security in the held-to-maturity portfolio that does not share common risk characteristics with any of the pools of debt securities, expected credit loss on each security is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

With respect to certain classes of debt securities, primarily U.S. Treasuries and securities issued by Government Sponsored Entities or agencies, the Company considers the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero, even if the U.S. government were to technically default. Therefore, for those securities, the Company does not record expected credit losses.

Allowance for credit losses on available-for-sale securities - Management evaluates available-for-sale debt securities in an unrealized loss position on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. For securities in an unrealized loss position, management considers the extent of the unrealized loss, and the near-term prospects of the issuer. Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level. For asset-backed securities performance indicators considered related to the underlying assets include default rates, delinquency rates, percentage of non-performing assets, debt-to-collateral ratios, third party guarantees,

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current levels of subordination, vintage, geographic concentration, analyst reports and forecasts, credit ratings and other market data. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are excluded from earnings and reported, net of tax, in other comprehensive income (“OCI”). Management also assesses whether it intends to sell or is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.

Allowance for credit losses on loans held for investment – The Company utilizes a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected. Expected credit losses are determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics. For a loan that does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The methodology for determining the allowance for credit losses on loans held for investment is considered a critical accounting policy by management given the judgement required for determining assumptions used, uncertainty of economic forecasts, and subjectivity of any qualitative factors considered.

The Company evaluates its loan pooling methodology at least annually. The Company has identified the following loan pools used to measure the allowance for credit losses as follows:

​

One-to-four family residential, including condominium and cooperative apartment loans - Loans in this classification consist of residential real estate and one-to-four family real estate properties, and may have a mixed-use commercial aspect. Included in one-to-four family loans are also certain SBA loans in which the loan is secured by underlying real estate as collateral. The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor. Owner-occupied properties are generally underwritten based upon an appraisal performed by an independent, state licensed appraiser and the credit quality of the individual borrower. Investment properties require: (1) a maximum loan-to-value ratio of 75% based upon an appraisal performed by an independent, state licensed appraiser, and (2) sufficient rental income from the underlying property to adequately service the debt, represented by a minimum debt service ratio of 1.25x. The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates and housing prices.

​

Multifamily residential and residential mixed-use loans - Loans in this classification consist of multifamily residential real estate with a minimum of five residential units, and may have a mixed-use commercial aspect of less than 50% of the property’s rental income. The Bank’s underwriting standards for multifamily residential loans generally require: (1) a maximum loan-to-value ratio of 75% based upon an appraisal performed by an independent, state licensed appraiser, and (2) sufficient rental income from the underlying property to adequately service the debt, represented by a minimum debt service ratio of 1.20x. Repayment of multifamily residential loans is dependent, in significant part, on cash flow from the collateral property sufficient to satisfy operating expenses and debt service. Future increases in interest rates, increases in vacancy rates on multifamily residential or commercial buildings, and other economic events, such as unemployment rates, which are outside the control of the borrower or the Bank could negatively impact the future net operating income of such properties. Similarly, government regulations, such as the existing New York City Rent Regulation and Rent Stabilization laws, could limit future increases in the revenue from these buildings.

​

Commercial real estate and commercial mixed-use loans - Loans in this classification consist of commercial real estate, both owner-occupied and non-owner occupied, and may have a residential aspect of less than 50% of the property’s rental income. The Bank’s underwriting standards for commercial real estate loans generally require: (1) a maximum loan-to-value ratio of 75% based upon an appraisal performed by an independent, state licensed appraiser, and (2) sufficient rental income from the underlying property to adequately service the debt, represented by a minimum debt service ratio of 1.25x. Included in commercial real estate loans are also certain SBA loans in which the loan is secured by underlying real estate as collateral. The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor. Repayment of commercial real estate loans is often dependent upon successful operation or management of the collateral properties, as well as the success of the business and retail tenants occupying the properties. Repayment of such loans is generally more vulnerable to weak economic conditions, such as unemployment rates and commercial real estate prices.

​

Acquisition, development, and construction loans - Loans in this classification consist of loans to purchase land intended for further development, including single-family homes, multi-family housing, and commercial income properties. In general, the maximum loan-to-value ratio for a land acquisition loan is 50% of the appraised value of the

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property. The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates and commercial real estate prices.

​

Commercial, Industrial and Agricultural Loans - Loans in this classification consist of lines of credit, revolving lines of credit, and term loans, generally to businesses or high net worth individuals. The owners of these businesses typically provide recourse such that they guarantee the debt. The lines of credit are generally secured by the assets of the business, though they may at times be issued on an unsecured basis. Generally speaking, they are subject to renewal on an annual basis based upon review of the borrower’s financial statements. Term loans are generally secured by either specific or general asset liens of the borrower’s business. These loans are granted based upon the strength of the cash generation ability of the borrower. Included in Commercial and Industrial (“C&I”) loans are also certain SBA loans in which the loan is secured by underlying assets of the business (excludes SBA Paycheck Protection Program (“PPP”) loans from allowance for credit losses as these loans carry a 100% guarantee from the SBA). The Bank may sell a portion of the loan, guaranteed by the SBA, to a third-party investor. The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates.

​

Other Loans – Loans in this classification consist of installment and consumer loans. Repayment is dependent on the credit quality of the individual borrower. The credit quality of this portfolio is largely dependent on economic factors, such as unemployment rates.

​

Troubled debt restructurings (“TDRs”) – As allowed by ASC 326, the Company elected to maintain pools of loans accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption. A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan. The allowance for credit losses on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

Management estimates the allowance for credit losses on each loan pool using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historically observed credit loss experience of peer banks within our geography provide the basis for the estimation of expected credit losses on similar loan pools. Within the model, assumptions are made in the determination of probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods. Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of the peer group. These models are then utilized to forecast future expected loan losses based on expected future behavior of the same macro-economic variables. Adjustments to the quantitative results are adjusted using qualitative factors. These factors include: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due loans; (6) the quality of our loan review system; (7) the value of underlying collateral for collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Collectively evaluated loans and the associated allowance for credit losses totaled $10.52 billion and $57.1 million at December 31, 2022, respectively.

​

Individually evaluated loans – Loans that do not share risk characteristics are evaluated on an individual basis based on various factors, and are not included in the collective pool evaluation. Factors that may be considered are borrower delinquency trends and non-accrual status, probability of foreclosure or note sale, changes in the borrower’s circumstances or cash collections, borrower’s industry, or other facts and circumstances of the loan or collateral.For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, the Company recognizes expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated costs to sell the collateral if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

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Individually evaluated loans and the associated allowance for credit losses totaled $47.6 million and $26.4 million at December 31, 2022, respectively.

​

The fair value of real estate collateral is determined based on recent appraised values. Appraisals are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Appraisals undergo a second review process to ensure that the methodology employed and the values derived are reasonable. Generally, collateral values for real estate loans for which measurement of expected losses is dependent on collateral values are updated every twelve months. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the borrower and its business. Once the expected credit loss amount is determined, an allowance is provided for equal to the calculated expected credit loss and included in the allowance for credit losses. Pursuant to the Company’s policy, credit losses must be charged-off in the period the loans, or portions thereof, are deemed uncollectable.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures – The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures, which is included in other liabilities on the consolidated statements of financial condition, is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which is the same as the expected loss factor as determined based on the corresponding portfolio segment.

​

For further discussion of our loan accounting and acquisitions, see Note 2 – Merger and Note 5 – Loans.

​

Derivatives – The Company may engage in two types of derivatives depending on the Company’s intentions and belief as to the likely effectiveness as a hedge. These two types are (1) a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”) or (2) an instrument with no hedging designation (“freestanding derivatives”). For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings as non-interest income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking cash flow hedges to specific liabilities on the balance sheet. The Company also formally assesses, both at the hedge’s inception and on an on-going basis, whether the derivative instruments that are used are highly effective in offsetting changes in cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in cash flows of the hedged item, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a cash flow hedge is discontinued but the hedged cash flows are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transaction will affect earnings.

The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All the contracts to which the Company is a party settle monthly. In addition, the Company obtains collateral above certain thresholds of the fair value of its hedges from each counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business.

Other Real Estate Owned (‘OREO”) - Properties acquired as a result of foreclosure on a real estate loan or a deed in lieu of foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate collateralizing a one-to-four family residential loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through execution of a deed in lieu of foreclosure or through a similar legal agreement. These assets are subsequently accounted for at the lower of cost or fair value

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less estimated costs to sell. Declines in the recorded balance subsequent to acquisition by the Company are recorded through expense. Operating costs after acquisition are expensed.

Premises and Fixed Assets, Net - Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives generally ranging from forty to fifty years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives generally ranging from three to ten years.