DIME COMMUNITY BANCSHARES INC (Form: 10-K, Received: 03/12/2020 17:26:35)

	Year Ended December 31,
Index	2014		2015		2016		2017		2018		2019
Dime Community Bancshares, Inc.		100.00		111.18		132.08		141.52		118.36		149.78
NASDAQ Composite		100.00		106.96		116.45		150.96		146.67		200.49
SNL Thrift Index		100.00		112.45		137.74		136.74		115.17		141.80

Item 6.

Selected Financial Data

The consolidated financial and other data of the Company as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 set forth below is derived in part from, and should be read in conjunction with, the Company’s audited Consolidated Financial Statements and Notes thereto. Certain amounts as of and for the years ended December 31, 2015 have been reclassified to conform to the December 31, 2019, 2018, 2017 and 2016 presentation. These reclassifications were not material.

	At or for the Year Ended December 31,
	2019		2018		2017		2016		2015
	(Dollars in thousands, except per share data)
Selected Financial Condition Data:
Total assets	$	6,354,460	$	6,320,578	$	6,403,460	$	6,005,430	$	5,032,872
Loans and loans held for sale (net of deferred costs or fees and the allowance for loan losses)		5,312,597		5,373,133		5,581,084		5,615,886		4,678,262
MBS		502,464		466,605		351,384		3,558		431
Investment securities (including FHLBNY capital stock)		110,444		99,498		66,417		60,670		77,912
Goodwill		55,638		55,638		55,638		55,638		55,638
Deposits		4,282,625		4,356,754		4,403,447		4,395,426		3,184,310
Borrowings		1,316,156		1,239,109		1,283,612		901,805		1,237,405
Stockholders’ equity		596,758		602,081		598,567		565,868		493,947
Selected Operating Data:
Interest income	$	238,268	$	221,710	$	212,096	$	195,627	$	174,791
Interest expense		90,847		75,384		59,366		52,141		46,227
Net interest income		147,421		146,326		152,730		143,486		128,564
Provision (credit) for loan losses		17,340		2,244		520		2,118		(1,330	)
Net interest income after provision (credit) for loan losses		130,081		144,082		152,210		141,368		129,894
Non-interest income		12,168		9,523		21,514		75,934		8,616
Non-interest expense		95,387		86,890		84,986		83,831		62,493
Income before income tax		46,862		66,715		88,738		133,471		76,017
Income tax expense		10,676		15,427		36,856		60,957		31,245
Net income	$	36,186	$	51,288	$	51,882	$	72,514	$	44,772

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	At or for the Year Ended December 31,
	2019			2018			2017			2016			2015
SELECTED FINANCIAL RATIOS AND OTHER DATA ^(1):
Return on average assets		0.57	%		0.82	%		0.84	%		1.31	%		0.96	%
Return on average stockholders’ equity		5.96			8.44			8.94			13.40			9.40
Stockholders’ equity to total assets at end of period		9.39			9.53			9.35			9.42			9.81
Loans to deposits at end of period		124.70			123.80			127.22			128.23			147.50
Loans to interest-earning assets at end of period		85.98			87.01			89.20			95.92			95.98
Net interest spread ⁽²⁾		2.12			2.20			2.38			2.52			2.72
Net interest margin ⁽³⁾		2.41			2.41			2.54			2.68			2.89
Average interest-earning assets to average interest-bearing liabilities		119.06			117.47			116.55			116.85			116.64
Non-interest expense to average assets		1.50			1.38			1.37			1.51			1.34
Efficiency ratio⁽⁴⁾		59.98			56.14			53.24			55.48			45.98
Effective tax rate		22.78			23.12			41.53			45.67			41.10
Dividend payout ratio		55.45			40.58			40.58			28.43			45.53
Per Share Data:
Diluted earnings per share	$	1.01		$	1.38		$	1.38		$	1.97		$	1.23
Cash dividends paid per share		0.56			0.56			0.56			0.56			0.56
Book value per share ⁽⁵⁾		16.98			16.68			16.00			15.11			13.22
Asset Quality Ratios and Other Data^(1):
Net charge-offs (recoveries)	$	10,681		$	1,495		$	23		$	97		$	(1,351	)
Total non-performing loans		11,091			2,345			533			4,237			1,611
OREO		—			—			—			—			148
Non-performing pooled trust preferred securities (“TRUP CDOs”)		—			—			—			1,270			1,236
Total non-performing assets		11,091			2,345			533			5,507			2,995
Non-performing loans to total loans		0.21	%		0.04	%		0.01	%		0.08	%		0.03	%
Non-performing assets to total assets		0.17			0.04			0.01			0.09			0.06
Allowance for Loan Losses to:
Non-performing loans		256.43	%		928.87	%		3,946.15	%		484.68	%		1,149.22	%
Total loans⁽⁶⁾		0.53			0.40			0.38			0.36			0.39
Regulatory Capital Ratios: (Bank only) ⁽¹⁾⁽⁷⁾
Tier 1 common equity ratio		12.85	%		13.34	%		12.38	%		11.60	%		11.55	%
Tier 1 capital ratio		12.85			13.34			12.38			11.60			11.55
Total risk-based ratio		13.44			13.80			12.83			12.05			12.03
Tier 1 leverage ratio		10.15			10.31			9.32			8.95			9.17
Full Service Branches		29			29			28			25			25

(1)	With the exception of end of period ratios, all ratios are based on average daily balances during the indicated periods. Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.

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

(3)	The net interest margin represents net interest income as a percentage of average interest-earning assets.

(4)	The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income and non-interest income, excluding any gains or losses from the sales of securities and other assets, loan notes, and loan securitization.

(5)	Book value per share equals total stockholders’ equity divided by shares outstanding at each period end.

(6)	Total loans represent loans, net of deferred fees and costs and unamortized premiums, and excluding (thus not reducing the aggregate balance by) the allowance for loan losses.

(7)	Regulatory capital ratios are calculated based upon the Basel III capital rules that became effective on January 1, 2015.

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Item 7.

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

Executive Summary

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

The Bank’s primary deposit strategy is generally to increase its product and service utilization for each depositor, and to increase its household and deposit market shares in the communities that it serves. In recent years, particular emphasis has been placed upon growing individual and small business commercial checking account balances. The Bank also actively strives to obtain checking account balances affiliated with the operation of the collateral underlying its real estate and C&I loans, as well as personal deposit accounts from its borrowers. Historically, the Bank’s primary lending strategy included the origination of, and investment in, real estate loans secured by multifamily and mixed-use properties, and, to a lesser extent, real estate loans secured by commercial real estate properties, primarily located in the greater NYC metropolitan area. As part of its strategic plan for 2020 and beyond, the Bank is investing in the development of its Business Banking division, by adding products and services to serve both the credit and business banking needs in its footprint.

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

Additionally, during the year ended December 31, 2018, the Bank resumed offering one-to-four family loan products.

The Bank also purchases securities primarily for liquidity purposes as defined by the Bank’s investment policy. The Bank seeks to maintain the asset quality of its loans and other investments, and uses portfolio and asset/liability management techniques in an effort to manage the effects of interest rate volatility on its profitability and capital.

Recent Events

In June 2017, the Company issued $115.0 million of fixed-to-floating rate subordinated notes due June 2027, which will become callable commencing in June 2022. Interest will be paid semi-annually in arrears on each June 15 and December 15 at a fixed annual interest rate equal to 4.50%, until June 2022, at which point the interest rate will reset quarterly to an annual interest rate equal to the then current three-month LIBOR plus 266 basis points. The notes will mature on June 15, 2027. The Company used part of the net proceeds from the offering to redeem its $70.7 million of trust preferred securities, which had a 7.00% annual coupon, in July 2017. See Notes 16 and 17 to the Company’s Condensed Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for details of the subordinated notes payable and trust preferred securities payable, respectively.

In December 2017, the Bank completed a securitization of $280.0 million of its multifamily loans through a Freddie Mac sponsored “Q-deal” securitization (“Loan Securitization”). The Structured Pass-Through Certificates that were issued by Freddie Mac were purchased by the Bank as available-for-sale securities to enhance balance sheet liquidity. The Bank will continue to maintain the borrower relationships as the sub-servicer of the loans. See Note 9 to the Company’s Condensed Consolidated Financial Statements for details of the transaction.

In January 2019, the Bank filed an application with the NYSDFS seeking approval to convert from a New York stock form savings bank to a New York commercial bank. Simultaneous with the Charter Conversion application to NYSDFS, the Company filed an application with the Federal Reserve Bank of Philadelphia to delist as a savings and loan holding company and elect to become a bank holding company. Having received all applicable regulatory approvals, on April 25, 2019, the Bank completed the Charter Conversion, and began operating as a New York commercial bank. Simultaneously, the Company began operating as a bank holding company.

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

Critical Accounting Policies

The Company’s accounting and reporting policies are prepared in accordance with GAAP and conform to general practices within the banking industry. See Note 2 to the Company’s Consolidated Financial Statements for the year ended December 31, 2019, which contains the Company’s significant accounting policies.

The Company’s policies with respect to the methodologies it uses to determine the allowance for loan losses (including reserves for loan commitments) is its most critical accounting policy because it is important to the presentation of the Company’s consolidated financial condition and results of operations, involves a significant degree of complexity and requires 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.

The following are descriptions of the Company’s critical accounting policies and explanations of the methods and assumptions underlying their application.

Allowance for Loan Losses

The allowance for loan losses is provided to reflect probable incurred losses inherent in the loan portfolio. Management reviews the adequacy of the allowance for loan losses by reviewing all impaired loans on an individual basis. The remaining portfolio is segmented and evaluated on a pooled basis. Factors considered in determining the appropriateness of the allowance for loan losses include the Bank’s past loan loss experience, known and inherent risks in the portfolio, existing adverse situations which may affect a borrower’s ability to repay, the estimated value of underlying collateral and current economic conditions in the Bank’s lending area. Judgment is required to determine the appropriate historical loss experience period, as well as the manner in which to quantify probable losses associated with the additional factors noted above. This evaluation is inherently subjective, as estimates are susceptible to significant revisions as more information becomes available.

Although management uses available information to estimate losses on loans, future additions to, or reductions in, the allowance may be necessary based on changes in economic conditions or other factors beyond management’s control. In addition, the Bank’s regulators, as an integral part of their examination processes, periodically review the Bank’s allowance for loan losses, and may require the Bank to recognize additions to, or reductions in, the allowance based upon judgments different from those of management.

The Bank’s methods and assumptions utilized to periodically determine its allowance for loan losses are summarized in Note 7 to the Company’s Consolidated Financial Statements.

Analysis of Net Interest Income

The Company’s profitability, like that of most banking institutions, is dependent primarily upon net interest income. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities, and the interest rate earned or paid on them. The following tables set forth certain information relating to the Company’s consolidated statements of income for the years ended December 31, 2019, 2018 and 2017, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing interest income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods indicated. Average balances are derived from daily balances. The yields and costs include fees and charges that are considered adjustments to yields and costs. All material changes in average balances and interest income or expense are discussed in the section entitled “Net Interest Income” in the comparisons of operating results.

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	For the Year Ended December 31,
	2019								2018								2017
	(Dollars in Thousands)
	Average Balance		Interest			Average Yield/ Cost			Average Balance		Interest			Average Yield/ Cost			Average Balance		Interest			Average Yield/ Cost
Assets:
Interest-earning assets:
Real estate loans ^{(1) (2)}	$	5,167,130	$	202,110			3.91	%	$	5,280,735	$	194,842			3.69	%	$	5,778,459	$	204,487			3.54	%
C&I Loans ⁽¹⁾		292,534		15,980			5.46			172,231		9,741			5.66			63,840		3,072			4.81
Other loans		1,370		70			5.11			1,162		74			6.37			1,110		75			6.76
MBS		443,536		12,266			2.77			411,437		10,794			2.62			24,381		542			2.22
Investment securities		63,140		2,252			3.57			11,905		363			3.05			12,404		577			4.64
Other		155,546		5,590			3.59			182,820		5,896			3.23			127,368		3,343			2.62
Total interest-earning assets		6,123,256	$	238,268			3.89	%		6,060,290	$	221,710			3.66	%		6,007,562	$	212,096			3.53	%
Non-interest earning assets		247,162								219,192								204,083
Total assets	$	6,370,418							$	6,279,482							$	6,211,645

Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing checking accounts	$	128,276	$	251			0.20	%	$	120,094	$	226			0.19	%	$	113,226	$	237			0.21	%
Money Market accounts		1,891,153		26,983			1.43			2,294,883		28,383			1.24			2,648,909		23,866			0.90
Savings accounts		341,595		538			0.16			349,989		212			0.06			364,341		187			0.05
CDs		1,585,172		34,307			2.16			1,263,256		21,568			1.71			989,319		14,101			1.43
Borrowed Funds		1,196,871		28,768			2.40			1,130,904		24,995			2.21			1,038,497		20,975			2.02
Total interest-bearing liabilities		5,143,067	$	90,847			1.77	%		5,159,126	$	75,384			1.46	%		5,154,292	$	59,366			1.15	%
Non-interest-bearing checking accounts		426,633								349,217								301,492
Other non-interest-bearing liabilities		193,769								163,787								175,431
Total liabilities		5,763,469								5,672,130								5,631,215
Stockholders’ equity		606,949								607,352								580,430
Total liabilities and stockholders’ equity	$	6,370,418							$	6,279,482							$	6,211,645
Net interest income			$	147,421							$	146,326							$	152,730
Net interest spread ⁽³⁾							2.12	%							2.20	%							2.38	%
Net interest-earning assets	$	980,189							$	901,164							$	853,270
Net interest margin ⁽⁴⁾							2.41	%							2.41	%							2.54	%
Ratio of interest-earning assets to interest-bearing liabilities				119.06	%							117.47	%							116.55	%

(1)	In computing the average balance of loans, non-performing loans have been included.

(2)	Interest income on real estate loans includes loan fees. Interest income on real estate loans also includes applicable prepayment fees and late charges totaling $5.2 million, $8.2 million and $5.0 million during the years ended December 31, 2019, 2018 and 2017, respectively.

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

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

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Rate/Volume Analysis

The following table represents the extent to which variations in interest rates and the volume of interest-earning assets and interest-bearing liabilities have affected interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) variances attributable to fluctuations in volume (change in volume multiplied by prior rate), (ii) variances attributable to rate (changes in rate multiplied by prior volume), and (iii) the net change. Variances attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Years Ended December 31,
	2019 over 2018 Increase/(Decrease) Due to									2018 over 2017 Increase/(Decrease) Due to
	Volume			Rate			Total			Volume			Rate			Total
Interest-earning assets:	(Dollars in Thousands)
Real Estate Loans	$	(4,271	)	$	11,539		$	7,268		$	(17,963	)	$	8,318		$	(9,645	)
C&I loans		6,694			(455	)		6,239			5,672			996			6,668
Other loans		12			(16	)		(4	)		4			(5	)		(1	)
MBS		849			623			1,472			9,379			873			10,252
Investment securities		1,695			194			1,889			(20	)		(193	)		(213	)
Other		(922	)		616			(306	)		1,615			938			2,553
Total	$	4,057		$	12,501		$	16,558		$	(1,313	)	$	10,927		$	9,614
Interest-bearing liabilities:
Interest-bearing checking accounts	$	14		$	11		$	25		$	13		$	(24	)	$	(11	)
Money market accounts		(5,377	)		3,977			(1,400	)		(3,840	)		8,357			4,517
Savings accounts		(15	)		341			326			(9	)		34			25
CDs		6,275			6,464			12,739			4,301			3,166			7,467
Borrowed funds		1,541			2,232			3,773			1,957			2,063			4,020
Total	$	2,438		$	13,025		$	15,463		$	2,422		$	13,596		$	16,018
Net change in net interest income	$	1,619		$	(524	)	$	1,095		$	(3,735	)	$	(2,669	)	$	(6,404	)

Comparison of Operating Results for the Years Ended December 31, 2019, 2018, and 2017

Net income was $36.2 million in 2019, compared to $51.3 million in 2018, and $51.9 million in 2017. During 2019, net interest income increased $1.1 million, the provision for loan losses increased by $15.1 million, non-interest income increased by $2.6 million and non-interest expense increased by $8.5 million. Income tax expense decreased $4.8 million in 2019, as a result of $19.9 million of lower pre-tax income. During 2018, net interest income decreased $6.4 million, the provision for loan losses increased by $1.7 million, non-interest income decreased by $12.0 million and non-interest expense increased by $1.9 million. Income tax expense decreased $21.4 million in 2018, as a result of $22.0 million of lower pre-tax income and the result of the lower tax rates for 2018 from the Tax Act enacted in December 2017.

Net Interest Income

The discussion of net interest income for 2019, 2018, and 2017 below should be read in conjunction with the tables presented on in the section titled “Analysis of Net Interest Income” on the preceding pages, 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.

Net interest margin (“NIM”) was 2.41% during both 2019 and 2018, and 2.54% in 2017. While NIM was flat in 2019 compared to 2018, NIM was positively impacted by remixing of the Bank’s loan portfolio towards more business banking loans, offset by the Company’s decision to increase rates on deposit products in order to remain competitive. NIM was negatively impacted in 2018 compared to 2017 primarily as a result of the Company’s decision to increase rates in order to remain competitive on its deposit product offerings.

Interest income was $238.3 million in 2019, $221.7 million in 2018, and $212.1 million in 2017. During 2019, interest income increased $16.6 million from 2018, primarily reflecting increases in interest income of $7.3 million on real estate loans, $6.2 million on C&I loans and $3.4 million on available-for-sale securities. The growth in interest income was driven by an increase of $63.0 million in average interest-earning assets and a 23 basis point increase in average yield. The increased interest income on real estate loans was driven by a 22 basis point increase in average yield offset by declines of $113.6 million in their average balance during the comparative period. The increased interest income on C&I loans reflected growth of $120.3 million in their average balance during the comparative period as a result of the Company’s Business Banking initiative to shift the loan portfolio mix and grow the C&I loan portfolio. The increased interest income on available-for-sale securities reflected growth of $83.3 million in their average balance during the comparative period. During 2018, interest income increased $9.6 million from 2017, primarily reflecting increases in interest income of $6.7 million on C&I loans and $10.3 million on MBS, offset by a decrease in interest income of $9.6 million on real estate loans. The growth in interest income was driven by an increase of $52.7 million in average interest-earning assets and a 13 basis point increase in average yield. The increased interest income on C&I loans reflected growth of $108.4 million in their average balance during the 2018 period as a result of the Company’s Business Banking initiative to shift the loan portfolio mix and grow the C&I loan portfolio. The increased interest income on MBS reflected growth of $387.1 million in their average balance during the 2018 period primarily as a result of the Loan Securitization that was completed in December 2017.

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Interest expense was $90.8 million in 2019, $75.4 million in 2018, and $59.4 million in 2017. During 2019, interest expense increased $15.5 million from 2018, primarily reflecting increases in expense of $12.7 million on CDs and $3.8 million in interest expense on borrowed funds, offset by decreases of interest expense of $1.4 million on money market accounts. The increases of $12.7 million in interest expense on CDs was the result of the Company’s decision to increase rates in order to remain competitive on its CD product offerings. The average balance of money market accounts decreased by $403.7 million, primarily due to outflows from the DimeDirect internet channel. Interest expense on borrowings increased $3.8 million due to an increase in their average balance of $66.0 million and an increase of 19 basis points in their average cost. During 2018, interest expense increased $16.0 million from 2017, primarily reflecting increases in expense of $4.5 million on money market accounts, $7.5 million on CDs, and $4.0 million in interest expense on borrowed funds. The increases of $4.5 million and $7.5 million in interest expense on money market deposits and CDs, respectively, was the result of the Company’s decision to increase rates in order to remain competitive on its deposit product offerings. Interest expense on borrowings increased $4.0 million due to an increase in their average balance of $92.4 million and an increase of 19 basis points in their average cost, as the Company increased the borrowings portfolio to include longer term advances, greater than 2 years.

Provision (Credit) for Loan Losses

The Company recognized a provision for loan losses of $17.3 million, $2.2 million and $0.5 million in 2019, 2018, and 2017, respectively. The $17.3 million provision for loan losses recognized during 2019 resulted mainly from charge-offs of $10.0 million and a $10.0 million specific reserve on one non-performing C&I relationship, partially offset by a release of reserves due to a reduction of $481.4 million in multifamily real estate loans. The $2.2 million provision for loan losses recognized during 2018 resulted mainly from growth in the C&I portfolio in connection with the Company’s growth strategy and charge-offs of $1.2 million on two C&I loans, partially offset by a release of reserves due to a reduction of $148.6 million of multifamily real estate loans. The $0.5 million provision for loan losses recognized during 2017 resulted mainly from growth in the real estate and C&I portfolio in connection with the Company’s growth strategy, partially offset by a release of reserves due to a reduction of $280.0 million multifamily real estate loans due to the Loan Securitization in December 2017, and continued improvement in the overall credit quality of the loan portfolio.

The following table sets forth activity in the Bank’s allowance for loan losses at or for the dates indicated:

	At or for the Year Ended December 31,
	2019			2018			2017			2016			2015
Allowance for loan losses:	(Dollars in Thousands)
Balance at beginning of period	$	21,782		$	21,033		$	20,536		$	18,514		$	18,493
Provision (credit) for loan losses		17,340			2,244			520			2,118			(1,330	)
Charge-offs:
Multifamily residential		(83	)		(1	)		(104	)		(92	)		(48	)
Commercial real estate		(145	)		(7	)		—			(12	)		(44	)
One-to-four family including condominium and cooperative apartment		(22	)		(169	)		(16	)		(79	)		(115	)
Construction		—			—			—			—			—
C&I		(10,447	)		(1,329	)		—			—			—
Consumer		(8	)		(5	)		(4	)		(3	)		(2	)
Total charge-offs		(10,705	)		(1,511	)		(124	)		(186	)		(209	)
Recoveries		24			16			101			90			1,560
Balance at end of period	$	28,441		$	21,782		$	21,033		$	20,536		$	18,514

Non-Interest Income

Total non-interest income was $12.2 million in 2019, $9.5 million in 2018, and $21.5 million in 2017. During 2019, non-interest income increased $2.6 million from 2018 due primarily to increases in gains on sales of loans by $1.2 million, service charges and other fees by $1.2 million and loan level derivative income by $0.9 million. During 2018, non-interest income decreased $12.0 million from 2017 due primarily to a gain of $10.4 million recognized on the sale of real estate during the year ended December 31, 2017.

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Non-Interest Expense

Non-interest expense was $95.4 million in 2019, $86.9 million in 2018, and $85.0 million in 2017. During 2019, the Company recognized non-recurring expenses of $3.8 million for loss of extinguishment of debt, related to the prepayment of higher-cost FHLBNY borrowings, and $0.2 million related to a branch consolidation. During 2018, the Company recognized non-recurring expenses of $0.7 million for expenses related to a workforce reduction. During 2017, the Company recognized non-recurring expenses of $1.3 million for loss on extinguishment of debt related to the redemption of trust preferred securities and $1.7 million related to de-conversion costs associated with the planned change in the Bank’s core processor. Excluding these items, non-interest expense was $91.4 million in 2019, $86.2 million in 2018, and $82.0 million in 2017. The increase of $5.3 million during 2019 compared to 2018 was primarily the result of increases of salaries and benefits expense of $5.9 million, occupancy expense of $0.7 million, and data processing expense of $0.8 million, offset by decreases in FDIC insurance premiums of $1.4 million and marketing expense of $1.2 million. The $5.9 million increase in salaries and benefits expense was attributable to the continued build out of the Business Banking division. The $0.7 million increase in occupancy expense was attributable to additional office space during 2019. The $1.2 million of lower marketing expense was related to reduced marketing initiatives. The decrease in FDIC insurance premiums of $1.4 million was mainly the result of the application of an assessment credit from the FDIC as the FDIC’s Deposit Insurance Fund Ratio Reserve reached a pre-determined threshold. The increase of $4.2 million during 2018 compared to 2017 was primarily the result of increases of salaries and benefits expense of $7.1 million and occupancy expense of $1.0 million, offset by a decrease in marketing expense of $2.6 million and a decrease in FDIC insurance premiums of $1.0 million. The remaining decrease was experienced in other operating expenses. The $7.1 million increase in salaries and benefits expense was attributable to the continued build out of the Business Banking division, and the Residential Lending group. The $1.0 million increase in occupancy expense was attributable to a full year of expense related to two additional office locations opened during 2017. The $2.6 million of lower marketing expense was related to reduced marketing initiatives for DimeDirect, our internet banking channel. The lower FDIC insurance premiums of $1.0 million was mainly the result of lower FDIC assessment rates.

Non-interest expense as a percentage of average assets was 1.50%, 1.38%, and 1.37% in 2019, 2018, and 2017, respectively. Excluding the non-recurring items mentioned above, the ratio was 1.44% in 2019, higher than 1.37% in 2018, and 1.32% in 2017. The increase during 2019 compared to 2018 was primarily due to the growth in non-interest expense outweighing $90.9 million of growth in average assets.

Income Tax Expense

Income tax expense was $10.7 million in 2019, $15.4 million in 2018, and $36.9 million in 2017. Income tax expense decreased $4.8 million during 2019 compared to 2018 primarily as a result of $19.9 million of lower pre-tax income during 2019. During 2018, income tax expense decreased $21.4 million compared to 2017, primarily as a result of $22.0 million of lower pre-tax income during 2018, and lower tax rates as a result of the passage of the Tax Act.

The Company’s consolidated tax rate was 22.8%, 23.1%, and 41.5% in 2019, 2018, and 2017, respectively.

Comparison of Financial Condition at December 31, 2019 and December 31, 2018

Assets totaled $6.35 billion at December 31, 2019, $33.9 million above their level at December 31, 2018.

Real estate loans decreased $160.8 million during the year ended December 31, 2019, primarily due to $923.1 million of aggregate amortization of real estate loans (including refinancing of existing loans) and $36.1 million of loan sales. These decreases exceeded the $798.9 million of originations of such loans (also including refinancing of existing loans). Originations of C&I loans totaled $229.9 million during the year ended December 31, 2019 exceeding $103.1 million of aggregate amortization and $10.0 million of loan sales, in line with the Bank’s strategic plans to grow the C&I loan portfolio.

Total securities increased $48.3 million during the year ended December 31, 2019, as a result of holding increased on-balance sheet liquidity, which will be based on monetary policy, interest rates, the Bank’s funding needs, and periodic stress testing analysis.

Total liabilities increased $39.2 million during the year ended December 31, 2019, primarily as a result of an increase of $110.0 million in other borrowings and $44.1 million of operating lease liabilities from the adoption of ASU 2016-02, offset by decreases in deposits of $74.1 million and FHLBNY advances of $33.1 million. Please refer to “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of the changes in borrowings during the year ended December 31, 2019.

Stockholders’ equity decreased $5.3 million during the year ended December 31, 2019, due primarily to $20.1 million in cash dividends paid during the period and $24.2 million of repurchases of Common Stock. Offsetting these items were net income of $36.2 million and $1.8 million of stock-based compensation which added to the cumulative balance of stockholders’ equity.

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Loan Portfolio Composition

The following table sets forth the composition of the Bank’s loan portfolio (excluding loans held for sale) in dollar amounts and percentages at the dates indicated:

	At December 31,
	2019			Percent of Total			2018			Percent of Total			2017			Percent of Total			2016			Percent of Total			2015			Percent of Total
Real Estate loans:	(Dollars in Thousands)
Multifamily residential	$	3,379,864			63.41	%	$	3,859,996			71.71	%	$	4,374,073			78.23	%	$	4,592,282			81.59	%	$	3,752,328			80.02	%
Commercial real estate		1,347,521			25.28			1,167,415			21.68			1,008,299			18.03			958,459			17.03			863,184			18.41
One-to-four family, including condominium and cooperative apartment		146,667			2.75			96,092			1.79			62,709			1.12			74,022			1.32			72,095			1.54
Construction and land acquisition		118,459			2.22			29,386			0.55			9,115			0.16			—			—			—			—
Total real estate loans		4,992,511			93.67			5,152,889			95.73			5,454,196			97.54			5,624,763			99.94			4,687,607			99.97
C&I loans		335,822			6.30			228,793			4.25			135,660			2.43			2,058			0.03			—			—
Consumer loans:
Depositor loans		416			0.01			556			0.01			489			0.01			445			0.01			557			0.01
Consumer installment and other		1,356			0.03			636			0.01			890			0.02			912			0.02			1,033			0.02
Total consumer loans		1,772			0.03			1,192			0.02			1,379			0.03			1,357			0.03			1,590			0.03
Gross loans		5,330,105			100.00	%		5,382,874			100.00	%		5,591,235			100.00	%		5,628,178			100.00	%		4,689,197			100.00	%
Net unearned costs		10,433						10,944						10,882						8,244						7,579
Allowance for loan losses		(28,441	)					(21,782	)					(21,033	)					(20,536	)					(18,514	)
Loans, net	$	5,312,097					$	5,372,036					$	5,581,084					$	5,615,886					$	4,678,262
Loans serviced for others:
One-to-four family, including condominium and cooperative apartment	$	27,143					$	5,277					$	2,664					$	3,453					$	4,374
Multifamily residential		255,757						306,508						334,819						17,625						18,735
Commercial real estate		36,571						912						—						—						—
C&I loans		11,538						887						—						—						—
Total loans serviced for others	$	331,009					$	313,584					$	337,483					$	21,079					$	23,109

The following table sets forth the composition of the Bank’s loan portfolios (excluding loans held for sale and consumer loans) by ARM or fixed-rate repayment type:

	For the Year Ended December 31,
	2019		Percent of Total			2018		Percent of Total			2017		Percent of Total			2016		Percent of Total			2015		Percent of Total
	(Dollars in Thousands)
Real Estate loans:
ARM	$	4,124,759		77.41	%	$	4,328,268		80.43	%	$	4,691,101		83.92	%	$	4,746,112		84.35	%	$	3,690,424		78.73	%
Fixed-rate		867,752		16.29			824,621		15.32			763,095		13.65			878,651		15.62			997,183		21.27
Total real estate loans		4,992,511		93.70			5,152,889		95.75			5,454,196		97.57			5,624,763		99.97			4,687,607		100.00
C&I loans:
ARM		258,490		4.85			173,624		3.23			93,330		1.67			2,058		0.03			—		—
Fixed-rate		77,332		1.45			55,169		1.02			42,330		0.76			—		—			—		—
Total C&I loans		335,822		6.30			228,793		4.25			135,660		2.43			2,058		0.03			—		—
Total real estate and C&I loans	$	5,328,333		100.00	%	$	5,381,682		100.00	%	$	5,589,856		100.00	%	$	5,626,821		100.00	%	$	4,687,607		100.00	%

At December 31, 2019, the Bank had $36.9 million of firm loan commitments that were accepted by the borrowers. All of these commitments are expected to close during the year ending December 31, 2020.

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At December 31, 2019, the Bank’s portfolio of whole loans or loan participations that it originated and sold to other financial institutions with servicing retained totaled $331.0 million.

Loan Originations, Purchases, Sales and Servicing

The following table sets forth the Bank’s loan originations (including loans held for sale), sales, purchases and principal repayments for the periods indicated:

	For the Year Ended December 31,
	2019		2018		2017		2016		2015
Gross loans:	(Dollars in Thousands)
At beginning of period	$	5,383,971	$	5,591,235	$	5,628,178	$	4,689,197	$	4,113,545
Real estate loans originated:
Multifamily residential		289,076		262,527		558,764		1,321,242		1,098,841
Commercial real estate		300,737		247,815		183,701		204,720		236,320
One-to-four family, including condominium and cooperative apartment⁽¹⁾		87,875		39,985		1,268		2,468		5,316
Equity lines of credit on multifamily residential or commercial properties		18,913		7,491		5,034		5,547		3,389
Construction and land acquisition		102,271		21,883		9,115		—		—
Total real estate loans originated		798,872		579,701		757,882		1,533,977		1,343,866
C&I loans originated		229,908		174,042		138,643		—		—
Other loans originated		1,999		845		1,070		3,073		1,334
Total loans originated		1,030,779		754,588		897,595		1,537,050		1,345,200
Loans purchased		—		7,800		—		157,782		99,745
Less:
Principal repayments (including satisfactions and refinances)		1,027,355		962,083		602,052		755,665		859,512
Loans sold⁽²⁾		46,085		6,058		332,362		—		9,572
Write-down of principal balance for expected loss		10,705		1,511		124		186		209
Gross loans at end of period	$	5,330,605	$	5,383,971	$	5,591,235	$	5,628,178	$	4,689,197

(1)	Includes one-to-four family home equity and home improvement loans.

(2)	Includes $1.4 million, $1.5 million, $4.5 million and $9.6 million of note sales on problem loans from portfolio during the years ended December 31, 2019, 2018, 2017 and 2015, respectively. There were no note sales on problem loans during the year ended December 31, 2016.

In the event that the Bank were to sell loans in the secondary market or through securitization, it generally retains servicing rights on the loans sold. These fees are typically derived based upon the difference between the actual origination rate and contractual pass-through rate of the loans at the time of sale. At December 31, 2019, the Bank had recorded servicing right assets (“SRAs”) of $1.5 million 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 occupancy, equipment and systems expense in the consolidated statements of income.

At December 31, 2019, the Bank had $136.4 million in unfunded construction loan commitments.

Loan Maturity and Repricing

As of December 31, 2019, $4.77 billion, or 87.1% of the loan portfolio was scheduled to mature or reprice within five years. In addition at December 31, 2019, loans totaling $612.1 million were required to make only monthly interest payments on their outstanding principal balance. The great majority of these loans commence principal amortization prior to their contractual maturity date.

The following table distributes the Bank’s real estate, C&I, and consumer loan portfolios at December 31, 2019 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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	Real Estate Loans		C&I Loans		Consumer Loans		Total
Amount due to Mature or Reprice During the Year Ending:	(Dollars in Thousands)
December 31, 2020	$	690,275	$	263,854	$	1,772	$	955,901
December 31, 2021		1,014,091		1,091		—		1,015,182
December 31, 2022		1,156,438		25,851		—		1,182,289
December 31, 2023		746,914		13,062		—		759,976
December 31, 2024		714,254		15,846		—		730,100
Sub-total (within 5 years)		4,321,972		319,704		1,772		4,643,448
December 31, 2025 and beyond		670,539		16,118		—		686,657
Total	$	4,992,511	$	335,822	$	1,772	$	5,330,105

Asset Quality

Non-accrual Loans

Within the Bank’s loan portfolio (excluding deposit overdraft loans), eleven non-accrual loans totaled $11.1 million at December 31, 2019 and sixteen non-accrual loans totaled $2.3 million December 31, 2018. During the year ended December 31, 2019, twelve loans totaling $24.5 million were placed on non-accrual status, five non-accrual loans totaling $1.0 million were returned to accrual status, three non-accrual loans totaling $2.9 million were fully satisfied according to their contractual terms (one of which incurred a partial charge-off of $0.1 million), four non-accrual loan totaling $10.3 million were fully or partially charged-off, three non-accrual loans totaling $1.4 million were sold and principal amortization of $0.1 million was recognized on five non-accrual loans. The remaining two non-accrual loans had no activity.

TDRs

There were no TDRs at December 31, 2019. At December 31, 2018, all TDRs were collateralized by real estate that generated rental income. For TDRs that demonstrated conditions sufficient to warrant accrual status, the present value of the expected net cash flows of the underlying property was utilized as the primary means of determining impairment. Any shortfall in the present value of the expected net cash flows calculated at each measurement period (typically quarter-end) compared to the present value of the expected net cash flows at the time of the original loan agreement was recognized as either an allocated reserve (in the event that it related to lower expected interest payments) or a charge-off (if related to lower expected principal payments). For TDRs on non-accrual status, an appraisal of the underlying real estate collateral is deemed the most appropriate measure to utilize when evaluating impairment and any shortfall in valuation from the recorded balance is accounted for through a charge-off. In the event that either an allocated reserve or a charge-off is recognized on TDRs, the periodic loan loss provision is impacted. There were no TDRs on non-accrual status at December 31, 2018.

There were no loans modified in a manner that met the criteria of a TDR during the twelve-month period ended December 31, 2019 or 2018.

Impaired Loans

The recorded investment in loans deemed impaired (as defined in Note 7 to the Company’s Consolidated Financial Statements) was $10.3 million, consisting of four loans, at December 31, 2019, compared to $6.0 million, consisting of thirteen loans, at December 31, 2018. During the year ended December 31, 2019, ten loans totaling $24.0 million were added to impaired loans, six impaired loans totaling $6.8 million were fully satisfied according to their contractual terms (one of which incurred a partial charge-off of $0.1 million), seven impaired loans totaling $10.3 million were fully or partially charged-off, three impaired loans totaling $1.4 million were sold, and principal amortization totaling $0.2 million was recognized.

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

	At December 31,
	2019			2018			2017			2016			2015
Non-accrual loans⁽¹⁾:	(Dollars in Thousands)
One-to-four family residential, including condominium and cooperative apartment	$	794		$	712		$	436		$	1,012		$	1,113
Multifamily residential and residential mixed-use		153			280			—			2,675			287
Commercial real estate and commercial mixed-use		60			1,041			93			549			207
C&I		10,082			309			—			—			—
Consumer		2			3			4			1			4
Total non-accrual loans		11,091			2,345			533			4,237			1,611
Non-accrual one-to-four family and consumer loans deemed homogeneous loans ⁽²⁾		(796	)		(715	)		(440	)		(1,013	)		(1,116	)
TDRs⁽¹⁾:
One-to-four family residential, including condominium and cooperative apartment		—			14			22			407			598
Multifamily residential and residential mixed-use		—			271			619			658			696
Commercial real estate and commercial mixed-use		—			4,084			7,470			7,624			7,772
Total TDRs		—			4,369			8,111			8,689			9,066
Impaired loans	$	10,295		$	5,999		$	8,204		$	11,913		$	9,561

(1)

Total non-accrual loans include some loans that were modified in a manner that met the criteria for a TDR. There were no non-accruing TDRs at December 31, 2019, 2018, 2017 or 2016. There were non-accruing TDRs which totaled $0.2 million at December 31, 2015 which are included in the non-accrual loans total.

(2)

Smaller balance homogeneous loans, such as condominium or cooperative apartment and one-to-four family residential real estate loans with balances less than or equal to the FNMA conforming loan limits for high-cost areas such as the Bank’s primary lending area (“FNMA Limits”) and consumer loans, are collectively evaluated for impairment, and accordingly, not separately identified for impairment disclosures.

OREO

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

There were no OREO properties as of December 31, 2019 or 2018. The Bank did not recognize any provisions for losses on OREO properties during the years ended December 31, 2019 or 2018.

The following table sets forth information regarding non-accrual loans and certain other non-performing assets (including OREO) at the dates indicated:

	At December 31,
	2019			2018			2017			2016			2015
	(Dollars in Thousands)
Total non-accrual loans	$	11,091		$	2,345		$	533		$	4,237		$	1,611
Non-performing assets:
TRUP CDOs		—			—			—			1,270			1,236
OREO		—			—			—			—			148
Total non-performing assets		11,091			2,345			533			5,507			2,995
Ratios:
Total non-accrual loans to total loans		0.21	%		0.04	%		0.01	%		0.08	%		0.03	%
Total non-performing assets to total assets		0.17			0.04			0.01			0.09			0.06

Other Potential Problem Loans

(i) Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on two loans with an aggregate outstanding balance of $1.5 million at December 31, 2019, and one loan with an aggregate outstanding balance of $0.1 million at December 31, 2018, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.

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(ii) Loans Delinquent 30 to 89 Days

The Bank had real estate loans totaling $0.6 million that were delinquent between 30 and 89 days at December 31, 2019, compared to $0.3 million at December 31, 2018. There were C&I loans totaling $0.04 million that were delinquent between 30 and 89 days at December 31, 2019, compared to loans totaling $0.1 million at December 31, 2018. The 30 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.

(iii) Temporary Loan Modifications

There were no temporary modifications (modifications that were either sufficiently minor or temporary in nature so as to not meet the criteria of a TDR) entered into during the years ended December 31, 2019 or 2018. Temporary modifications previously entered into performed according to their contractual terms during the years ended December 31, 2019 and 2018.

Allowance for Loan Losses

The following table sets forth the Bank’s allowance for loan losses allocated by underlying collateral type and the percent of each to total loans at the dates indicated. Prior to December 31, 2016, any allocated allowance associated with loans both deemed impaired and internally graded as Special Mention or Substandard was reflected on the impaired loan line. Please refer to Note 7 to the Company’s Consolidated Financial Statements for a description of impaired, substandard, special mention and pass graded loans.

	At December 31,
	2019					2018					2017					2016					2015
	Allocated Amount		Percent of Loans in Each Category to Total Loans			Allocated Amount		Percent of Loans in Each Category to Total Loans			Allocated Amount		Percent of Loans in Each Category to Total Loans			Allocated Amount		Percent of Loans in Each Category to Total Loans			Allocated Amount		Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
Impaired loans	$	10,082		0.21	%	$	230		0.11	%	$	—		0.15	%	$	—		0.21	%	$	—		0.20	%
Substandard loans not deemed impaired⁽¹⁾		n/a		n/a			n/a		n/a			n/a		n/a			n/a		n/a			348		0.37
Special Mention loans⁽¹⁾		n/a		n/a			n/a		n/a			n/a		n/a			n/a		n/a			88		0.37
Pass graded loans:
Multifamily residential		10,142		63.39			13,446		71.67			15,219		78.20			16,555		81.56			13,942		79.69
Commercial real estate		3,900		25.28			3,777		21.60			3,535		17.90			3,816		16.86			3,902		17.88
One-to-four family including condominium and cooperative apartment		269		2.76			198		1.80			116		1.13			145		1.31			214		1.46
Construction and land acquisition		1,244		2.22			397		0.55			123		0.16			—		—			—		—
C&I		2,788		6.11			3,716		4.25			2,021		2.44			—		—			—		—
Consumer		16		0.03			18		0.02			19		0.02			20		0.06			20		0.03
Total	$	28,441		100.00	%	$	21,782		100.00	%	$	21,033		100.00	%	$	20,536		100.00	%	$	18,514		100.00	%

(1) During the year ended December 31, 2016, the allowance methodology was refined such that there was not a component for Substandard and Special Mention loans. All non-impaired loans as of December 31, 2019, 2018, 2017, and 2016 were considered Pass graded loans.

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The following table sets forth information about the Bank’s allowance for loan losses at or for the dates indicated:

	At or for the Year Ended December 31,
	2019			2018			2017			2016			2015
	(Dollars in Thousands)
Total loans outstanding at end of period ⁽¹⁾	$	5,341,038		$	5,383,818		$	5,602,117		$	5,636,422		$	4,696,776
Average total loans outstanding during the period⁽²⁾		5,461,034			5,454,128			5,843,409			5,212,729			4,328,977
Allowance balance at end of period		28,441			21,782			21,033			20,536			18,514
Allowance for loan losses to total loans at end of period		0.53	%		0.40	%		0.38	%		0.36	%		0.39	%
Allowance for loan losses to total non-performing loans at end of period		256.43			928.87			3,946.15			484.68			1,149.22
Allowance for loan losses to total non-performing loans and TDRs at end of period		256.43			363.09			243.32			158.87			170.10
Ratio of net charge-offs to average loans outstanding during the period		0.20			0.03		NM			NM				(0.03	)

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

(2) Total average loans represent gross loans (including loans held for sale), inclusive of deferred loan fees/costs and premiums/discounts.

NM = not meaningful

Reserve for Loan Commitments

At December 31, 2019, the Bank maintained a reserve of $0.03 million associated with unfunded loan commitments accepted by the borrower. This reserve is determined based upon the outstanding volume of loan commitments at each period end. Any increases or reductions in this reserve are recognized in periodic non-interest expense.

Investment Activities

The following table sets forth the amortized/historical cost and fair value of the total portfolio of investment securities and MBS by accounting classification and type of security that were owned by either the Bank or Holding Company at the dates indicated:

	At December 31,
	2019				2018				2017
	Amortized/ Historical Cost		Fair Value		Amortized/ Historical Cost		Fair Value		Amortized/ Historical Cost		Fair Value
	(Dollars in Thousands)
MARKETABLE EQUITY SECURITIES
Mutual funds	$	5,470	$	5,894	$	5,713	$	5,667	$	—	$	—
Total marketable equity securities		5,470		5,894		5,713		5,667		—		—

DEBT SECURITIES
Available-for-Sale:
Agency notes		20,000		19,935		25,110		25,145		—		—
Corporate securities		28,086		28,596		11,167		11,135		—		—
MBS
FHLMC pass through certificates		79,936		81,966		95,683		95,347		8,969		8,968
FNMA pass through certificates		140,868		144,421		208,582		208,081		30,693		30,516
Government National Mortgage Association (“GNMA”) pass through certificates		20,891		21,096		51,774		51,185		33,276		33,145
Agency issued CMOs		254,453		254,981		113,470		111,992		278,251		278,755
Total debt securities available-for-sale		544,234		550,995		505,786		502,885		351,189		351,384

INVESTMENT SECURITIES
Available-for-Sale:
Mutual funds		—		—		—		—		3,779		4,006
Total investment securities available-for-sale		—		—		—		—		3,779		4,006
Trading:
Mutual funds		—		—		—		—		2,648		2,715
Total trading securities		—		—		—		—		2,648		2,715
TOTAL SECURITIES	$	549,704	$	556,889	$	511,499	$	508,552	$	357,616	$	358,105

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MBS

The Company’s consolidated investment in MBS totaled $502.5 million at December 31, 2019. The average duration of these securities was 3.8 years as of December 31, 2019.

The Company typically classifies MBS as available-for-sale. The fair value of MBS available-for-sale was $6.3 million above their amortized cost at December 31, 2019.

The following table sets forth activity in the MBS portfolio for the periods indicated:

	For the Year Ended December 31,
	2019				2018			2017
	(Dollars in Thousands)
Amortized cost at beginning of period		$	469,509		$	351,189		$	3,607
Purchases, net			116,498			195,481			348,644
Principal repayments			(89,188	)		(76,217	)		(957	)
Premium amortization, net			(671	)		(944	)		(105	)
Amortized cost at end of period		$	496,148		$	469,509		$	351,189

The increase in the MBS portfolio during the year ended December 31, 2017 was primarily due to the purchase of FHLMC guaranteed structured pass-through certificates that were issued in connection with the Loan Securitization transaction that closed in December 2017 and purchased entirely by the Bank.

The following table presents the amortized cost, fair value and weighted average yield of the Company’s consolidated MBS at December 31, 2019, categorized by remaining period to contractual maturity:

	Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in Thousands)
Due within 1 year	$	—	$	—		—	%
Due after 1 year but within 5 years		21,276		21,315		2.56
Due after 5 years but within 10 years		160,638		162,905		2.78
Due after ten years		314,234		318,244		2.97
Total	$	496,148	$	502,464		2.89	%

With respect to MBS, the entire carrying amount of each security at December 31, 2019 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. As mentioned previously, the investment policies of both the Holding Company and the Bank call for the purchase of only priority tranches when investing in MBS. As a result, the weighted average duration of the Company’s MBS approximated 3.8 years as of December 31, 2019 when giving consideration to anticipated repayments or possible prepayments, which is significantly less than their weighted average maturity.

Equity Investments

The Holding Company’s investment in mutual funds totaled $5.7 million at December 31, 2019, $0.05 million below their cost basis.

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Sources of Funds

Deposits

The following table sets forth the Bank’s deposit accounts and the related weighted average interest rates at the dates indicated:

	At December 31, 2019								At December 31, 2018								At December 31, 2017
	Amount		Percent of Total Deposits			Weighted Average Rate			Amount		Percent of Total Deposits			Weighted Average Rate			Amount		Percent of Total Deposits			Weighted Average Rate
	(Dollars in Thousands)
Savings accounts	$	374,265		8.7	%		0.35	%	$	336,669		7.7	%		0.06	%	$	362,092		8.2	%		0.07	%
CDs		1,572,869		36.7			2.05			1,410,037		32.4			1.97			1,091,887		24.8			1.47
Money market accounts		1,705,451		39.8			1.03			2,098,599		48.2			1.43			2,517,439		57.2			0.96
Interest-bearing checking accounts		151,491		3.5			0.08			115,972		2.7			0.08			124,283		2.8			0.08
Non-interest-bearing checking accounts		478,549		11.2			—			395,477		9.1			—			307,746		7.0			—
Totals	$	4,282,625		100.00	%		1.19	%	$	4,356,754		100.00	%		1.33	%	$	4,403,447		100.00	%		0.91	%

The weighted average maturity of the Bank’s CDs at December 31, 2019 was 8.1 months, compared to 10.0 months at December 31, 2018. The following table presents, by interest rate ranges, the dollar amount of CDs outstanding at the dates indicated and the period to maturity of the CDs outstanding at December 31, 2019:

	Period to Maturity at December 31, 2019									Total at December 31,
Interest Rate Range	One Year or Less			Over One Year to Three Years		Over Three Years to Five Years		Over Five Years		2019			2018		2017
	(Dollars in Thousands)									(Dollars in Thousands)
1.00% and below		$	81,712	$	13,222	$	—	$	—		$	94,934	$	60,223	$	155,360
1.01% to 2.00%			396,764		118,390		20,812		4,641			540,607		474,982		805,344
2.01% to 3.00%			834,884		95,186		7,211		—			937,281		874,787		111,322
3.01% and above			—		47		—		—			47		45		19,861
Total		$	1,313,360	$	226,845	$	28,022	$	4,641		$	1,572,869	$	1,410,037	$	1,091,887

At December 31, 2019, the Bank had $1.10 billion in CDs with a minimum denomination of $100,000 as follows:

Maturity Date	Amount		Weighted Average Rate
	(Dollars in Thousands)
Within three months	$	325,359		2.25	%
After three but within six months		375,032		2.02
After six but within twelve months		262,193		2.16
After 12 months		140,548		2.02
Total	$	1,103,132		2.12	%

The Bank is authorized to accept brokered deposits up to an aggregate limit of 10.0% of total assets. At December 31, 2019, brokered deposits consisted of $458.7 million, which include purchased CDs from the CDARS program and purchased MMAs from the ICS program. At December 31, 2018, total brokered deposits consisted of $243.7 million, which include purchased CDs from the CDARS program and also purchased MMAs from the ICS program.

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Borrowings

The Bank’s total borrowing line with FHLBNY equaled $1.81 billion at December 31, 2019. The Bank had $1.09 billion of FHLBNY advances outstanding at December 31, 2019, and $1.13 billion at December 31, 2018. The Bank maintained sufficient collateral, as defined by the FHLBNY (principally in the form of real estate loans), to secure such advances.

The following table presents information for FHLBNY advances as of the periods indicated:

	At or for the Year Ended December 31,
	2019						2018						2017
	Amount			Average Cost			Amount			Average Cost			Amount			Average Cost
	(Dollars in Thousands)
Balance outstanding at end of period		$	1,092,250		1.98	%		$	1,125,350		2.27	%		$	1,170,000		1.67	%
Weighted average balance outstanding during the period			1,072,919		2.16				1,016,812		1.93				939,185		1.63
Maximum balance outstanding at month end during period			1,174,200						1,177,450						1,222,500

The Company had no securities sold under agreements to repurchase at December 31, 2019 or 2018.

Liquidity and Capital Resources

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

The Bank’s primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers, and has in the past sold such loans to FNMA and FHLMC. The Company may additionally issue debt 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.

In December 2018, the Bank became a member of the American Financial Exchange, 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. At December 31, 2018, the Bank did not utilize funds available through the American Financial Exchange. At December 31, 2019, the Bank had $110.0 million of such borrowings outstanding.

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 $74.1 million during the year ended December 31, 2019, compared to a decrease of $46.7 million during the year ended December 31, 2018. Within deposits, core deposits (i.e., non-CDs) decreased $237.0 million during the year ended December 31, 2019 and decreased $364.8 million during the year ended December 31, 2018. The decrease during 2019 and 2018 was primarily driven by of outflows from the bank’s online channel, DimeDirect, as the bank’s posted rate during both years lagged many of its online competitors, which was offset by an increase of $162.8 million and $318.2 million in CDs during 2019 and 2018, respectively.

The Bank decreased its outstanding FHLBNY advances by $33.1 million and $44.7 million during the year ended December 31, 2019 and 2018, respectively, as the Bank reduced its reliance on FHLBNY advances.

During the year ended December 31, 2019, principal repayments totaled $923.1 million on real estate loans (including refinanced loans) compared to $885.7 million during the year ended December 31, 2018.

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Proceeds from the sales of available-for-sale pass-through MBS issued by GSEs and CMOs totaled $145.8 million during the year ended December 31, 2019. Proceeds from the sales of available-for-sale pass-through MBS issued by GSEs and CMOs totaled $158.8 million during the year ended December 31, 2018, resulting in a net gain of $1.4 million.

The Company holds registered mutual funds (as marketable equity securities) as the underlying investments of the BMP, held in a rabbi trust. The Company may sell registered mutual funds on a periodic basis in order to pay retirement benefits to plan retirees. Aggregate proceeds from the sales of registered mutual funds totaled $0.6 million and $1.1 million during the years ended December 31, 2019 and 2018, respectively. There are no gains or losses recognized from the sales of registered mutual funds.

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 use of its borrowing line at the FHLBNY. At December 31, 2019, the Bank had an additional potential borrowing capacity of $714.4 million through the FHLBNY, subject to customary minimum common stock ownership requirements imposed by the FHLBNY (i.e., 4.5% of the Bank’s outstanding FHLBNY borrowings).

The Bank is 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, 2019, the Bank was in compliance with all applicable regulatory capital requirements and was considered “well-capitalized” for all regulatory purposes.

The Company generally utilizes its liquidity and capital resources primarily to fund the origination of real estate loans, the purchase of mortgage-backed and other securities, the repurchase of Common Stock into treasury, the payment of quarterly cash dividends to holders of the Common Stock and the payment of quarterly interest to holders of its outstanding subordinated debt. During the years ended December 31, 2019 and 2018, real estate loan originations totaled $798.9 million and $579.7 million, respectively. C&I originations totaled $229.9 million during the year ended December 31, 2019, compared to $174.0 million during the year ended December 31, 2018, reflecting the Company’s strategy to grow the C&I portfolio. Purchases of available-for-sale securities totaled $317.7 million and $389.1 million during the year ended December 31, 2019 and 2018, respectively, as the Company grew its on-balance sheet liquidity.

The Holding Company repurchased 1,228,590 and 1,467,449 shares of its Common Stock, at a weighted average price of $19.69 and $17.64, during the year ended December 31, 2019 and 2018, respectively. As of December 31, 2019, up to 232,550 shares remained available for purchase under authorized share purchase programs.

During the year ended December 31, 2019, the Holding Company paid $20.1 million in cash dividends on its Common Stock, down from $20.8 million during the year ended December 31, 2018, reflecting a decrease of 926,813 common shares outstanding shares from January 1, 2019 to December 31, 2019.

Contractual Obligations

The Bank generally has outstanding at any time significant borrowings in the form of FHLBNY advances, short-term or overnight borrowings, as well as customer CDs with fixed contractual interest rates. During the year ended December 31, 2017, the Holding Company issued $115.0 million of fixed-to-floating rate subordinated notes due June 2027, which become callable at any time commencing in June 2022. Proceeds from the issuance of subordinated debt were used to redeem the Company’s $70.7 million of callable trust preferred securities outstanding in July 2017. In addition, the Bank is obligated to make rental payments under leases on certain of its branches and equipment.

The table below summarizes contractual obligations for CDs, borrowings and lease obligations at December 31, 2019:

	Payments Due By Period
	CDs		Weighted Average Rate			Borrowings		Weighted Average Rate			Operating Lease Obligations
Less than one year	$	1,313,361		2.06	%	$	1,043,800		1.86	%	$	6,852
One year to three years		226,844		2.00			158,450		2.49			13,293
Over three years to five years		28,023		2.08			—		—			11,216
Over five years		4,641		1.59			115,000		4.50			18,981
Total	$	1,572,869		2.05	%	$	1,317,250		2.17	%	$	50,342

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Off-Balance Sheet Arrangements

As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to third parties, which are granted pursuant to its regular underwriting standards. 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.

The following table presents off-balance sheet arrangements as of December 31, 2019:

	Less than One Year		One Year to Three Years		Over Three Years to Five Years		Over Five Years		Total
Credit Commitments:
Available lines of credit	$	1,628	$	184,548	$	—	$	—	$	186,176
Other loan commitments		36,890		—		—		—		36,890
Stand-by letters of credit		2,145		—		—		—		2,145
Total Off-Balance Sheet Arrangements	$	40,663	$	184,548	$	—	$	—	$	225,211

Additionally, in connection with the Loan Securitization, the Bank executed a reimbursement agreement with FHLMC that obligates the Company to reimburse FHLMC for any contractual principal and interest payments on defaulted loans, not to exceed 10% of the original principal amount of the loans comprising the aggregate balance of the loan pool at securitization. The maximum exposure under this reimbursement obligation is $28.0 million. The Bank has pledged $27.9 million of available-for-sale pass-through MBS issued by GSEs as collateral.

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased costs of operations. Unlike industrial companies, nearly all of the Company’s consolidated assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on the Company’s consolidated performance than do the effects of general levels of inflation. Interest rates do not necessarily fluctuate in the same direction or to the same extent as the price of goods and services.

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

As a depository financial institution, the Bank’s primary source of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact the level of interest income recorded on, and the market value of, a significant portion of the Bank’s assets. Fluctuations in interest rates will also ultimately impact the level of interest expense recorded on, and the market value of, a significant portion of the Bank’s liabilities. In addition, the Bank’s real estate and C&I loan portfolios, concentrated primarily within the NYC metropolitan area, are subject to risks associated with the local economy.

Real estate loans, the largest component of the Bank’s interest-earning assets, traditionally derive their interest rates primarily from either the five- or seven-year constant maturity Treasury index. As a result, the Bank’s interest-earning assets are most sensitive to these benchmark interest rates. Since the majority of the Bank’s interest-bearing liabilities mature within one year, its interest-bearing liabilities are most sensitive to fluctuations in short-term interest rates.

Neither the Holding Company nor the Bank is subject to foreign currency exchange or commodity price risk. In addition, the Company did not engage in hedging transactions utilizing derivative instruments (such as interest rate swaps and caps) or embedded derivative instruments that required bifurcation during the years ended December 31, 2019 or 2018. In the future, the Company may, with appropriate Board approval, engage in hedging transactions utilizing derivative instruments. Marketable equity and trading securities owned by the Company were nominal at both December 31, 2019 and 2018.

Since a majority of the Company’s consolidated interest-earning assets and interest-bearing liabilities are located at the Bank, virtually all of the interest rate risk exposure exists at the Bank level. As a result, all of the significant interest rate risk management procedures are performed at the Bank level. The Bank’s interest rate risk management strategy is designed to limit the volatility of net interest income and preserve capital over a broad range of interest rate movements and has the following three primary components:

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Assets. The Bank’s largest single asset type is the adjustable-rate multifamily residential loan. Multifamily residential loans typically carry shorter average terms to maturity than one-to-four family residential loans, thus significantly reducing the overall level of interest rate risk. Approximately 73% and 99% of multifamily residential loans originated by the Bank during years ended December 31, 2019 and 2018, respectively, were adjustable-rate, with repricing typically occurring after five or seven years. In addition, at December 31, 2019, the Bank has sought to include in its portfolio various types of adjustable-rate one-to-four family loans with annual repricing terms after a fixed period of one to three years. At December 31, 2019, adjustable-rate real estate loans totaled $4.97 billion, or 78.3% of total assets. At December 31, 2018, adjustable-rate real estate loans totaled $4.33 billion, or 68.5% of total assets.

Deposit Liabilities. As a traditional community-based bank, the Bank is largely dependent upon its base of competitively priced core deposits to provide stability on the liability side of the balance sheet. The Bank has retained many loyal customers over the years through a combination of quality service, convenience, and a stable and experienced staff. Core deposits at December 31, 2019 were $2.71 billion, or 63.3% of total deposits. The balance of CDs as of December 31, 2019 was $1.57 billion, or 36.7% of total deposits, of which $1.31 billion, or 83.5% of total CDs, was to mature within one year. The weighted average maturity of the Bank’s CDs at December 31, 2019 was 8.1 months, compared to 10.0 months at December 31, 2018. During the years ended December 31, 2019 and 2018, the Bank generally priced its CDs in an effort to stay competitive within the overall market.

Wholesale Funds. The Bank is a member of the FHLBNY, which provided the Bank with a borrowing line of up to $1.81 billion at December 31, 2019. The Bank borrows from the FHLBNY for various purposes. At December 31, 2019, the Bank had outstanding advances of $1.09 billion from the FHLBNY, all of which were secured by a blanket lien on the Bank’s loan portfolio, and none of which were callable. Wholesale funding provides the Bank opportunities to extend the overall duration of its interest bearing liabilities, thus helping manage interest rate risk.

Interest Rate Risk Exposure Analysis

Economic Value of Equity (“EVE”) Analysis. In accordance with agency regulatory guidelines, the Bank 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 Bank’s assets and liabilities and the value of any off-balance sheet items, such as derivatives, if applicable.

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 Bank’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 Bank’s assets, liabilities, and off-balance sheet items that are included in the EVE. Management reports the EVE results to the Bank’s Board of Directors on a quarterly basis. The report compares the Bank’s estimated Pre-Shock Scenario EVE to the estimated EVE calculated under the various Rate Shock Scenarios.

The Bank’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 Bank’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 Bank considers the amount of fee protection inherent in the loan portfolio when estimating future repayment cash flows. Regarding deposit decay rates, the Bank 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 Bank 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 Bank’s 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 Bank’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 Bank’s estimates resulting in significantly different EVE calculations.

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The analysis that follows presents, as of December 31, 2019 and 2018, the estimated EVE at both the Pre-Shock Scenario and the +200 Basis Point Rate Shock Scenario. The +200 scenario models the majority of any balance sheet optionality affected by interest rates, which may not be true in the +100 scenario. The analysis additionally presents the percentage change in EVE from the Pre-Shock Scenario to the +200 Basis Point Rate Shock Scenario at both December 31, 2019 and 2018.

	At December 31, 2019								At December 31, 2018
	EVE		Dollar Change			Percentage Change			EVE		Dollar Change			Percentage Change
Rate Shock Scenario	(Dollars in Thousands)
+ 200 Basis Points	$	595,201	$	(41,682	)		(7.0	)%	$	643,531	$	(27,967	)		(4.3	)%
Pre-Shock Scenario		636,883		—			—			671,498		—			—

The Bank’s Pre-Shock Scenario EVE decreased from $671.5 million at December 31, 2018 to $636.9 million at December 31, 2019. The primary factors contributing to the lower EVE at December 31, 2019 were the payments of $52.5 million of dividends from the Bank to the Holding Company and an increase in the value of the Bank’s core deposit liability and borrowings. These factors were partially offset by an increase in the value of the Bank’s loan portfolio due to a slightly lower duration.

The Bank’s EVE in the +200 basis point Rate Shock Scenario decreased from $643.5 million at December 31, 2018 to $595.2 million at December 31, 2019.

Income Simulation Analysis. As of the end of each quarterly period, the Bank 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 Bank’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 Bank’s Board of Directors on a quarterly basis. The following table discloses the estimated changes to the Bank’s net interest income over the 12-month period beginning December 31, 2019 assuming gradual changes in interest rates for the given rate scenarios:

Gradual Change in Interest rates of:	Percentage Change in Net Interest Income
+ 200 Basis Points		(3.29	)%
+ 100 Basis Points		(1.68	)%

Item 8.

Financial Statements and Supplementary Data

For the Company’s Consolidated Financial Statements, see pages commencing after signatures.

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness as of December 31, 2019, of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2019 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management of the Company as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.

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Management’s Report On Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, utilizing the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Controls – Integrated Framework (2013 Framework).” Based upon its assessment, management believes that, as of December 31, 2019, the Company’s internal control over financial reporting is effective.

Crowe LLP, the independent registered public accounting firm that audited the consolidated financial statements included in the Annual Report, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019.

Item 9B.

Other Information

None.

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PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Information regarding directors and executive officers of the Company is presented under the headings, “Proposal 1 - Election of Directors,” “Delinquent Section 16(a) Reports” and “Executive Officers” in the Holding Company’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held on May 28, 2020 (the “Proxy Statement”) which will be filed with the SEC within 120 days of December 31, 2019, and is incorporated herein by reference.

Information regarding the audit committee of the Holding Company’s Board of Directors, including information regarding audit committee financial experts serving on the audit committee, is presented under the headings, “Meetings and Committees of the Company’s Board of Directors,” and “Report of the Audit Committee” in the Proxy Statement and is incorporated herein by reference.

The Holding Company has adopted a written Code of Business Ethics that applies to all officers, including its principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. The Code of Business Ethics is published on the Company’s website, www.dime.com. The Company will provide to any person, without charge, upon request, a copy of such Code of Business Ethics. Such request should be made in writing to: Dime Community Bancshares, Inc., 300 Cadman Plaza West, 8^th Floor, Brooklyn, New York 11201, attention Secretary.

Item 11.

Executive Compensation

Information regarding executive and director compensation and the Compensation Committee of the Holding Company’s Board of Directors is presented under the headings, “Directors’ Compensation,” “Compensation - Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement and is incorporated herein by reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management is included under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated herein by reference.

Set forth below is certain information as of December 31, 2019 regarding the Company’s equity compensation plans.

	Number of securities to be issued upon exercise of outstanding options and rights ⁽¹⁾		Weighted average exercise price with respect to outstanding stock options and rights ⁽²⁾		Number of securities remaining available for issuance under the equity compensation plans (excluding securities reflected in column (a)) ⁽³⁾
Plan Category
Equity compensation plans approved by security holders		42,031	$	14.63		262,114
Equity compensation plans not approved by security holders		—		—		—
Total		42,031	$	14.63		262,114

(1)	Includes stock options, restricted stock and shares issuable in connection with awards with performance conditions pursuant to the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees and the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan.

(2)	The weighted average exercise price includes the weighted average exercise price of stock options only. Restricted stock and performance shares do not have an exercise price.

(3)	Represents the shares remaining under the Dime Community Bancshares, Inc. 2013 Equity and Incentive Plan.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions is included under the heading, “Transactions with Certain Related Persons” in the Proxy Statement and is incorporated herein by reference. Information regarding director independence is included under the heading, “Information as to Nominees and Continuing Directors” in the Proxy Statement and is incorporated herein by reference.

Item 14.

Principal Accounting Fees and Services

Information regarding principal accounting fees and services, as well as the Audit Committee’s pre-approval policies and procedures, is included under the heading, “Proposal 2 – Ratification of Appointment of Independent Auditors” in the Proxy Statement and is incorporated herein by reference.

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PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)

(1)

Financial Statements

For the Company’s Consolidated Financial Statements, see pages commencing after signatures.

(2)

Financial Statement Schedules

Financial statement schedules have been omitted because they are not applicable or not required or the required information is shown in the Consolidated Financial Statements or Notes thereto under “Part II - Item 8. Financial Statements and Supplementary Data.”

(3)

Exhibits Required by Item 601 of SEC Regulation S-K

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Transition Report on Form 10-K for the transition period ended December 31, 2002, filed with the SEC on March 28, 2003 (File No. 000-27782))

3.2		Amended and Restated Bylaws of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 24, 2019 (File No. 000-27782))

3.3		Certificate of Designations, Preferences and Rights of 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-A Registration of Certain Classes of Securities pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed with the Commission on February 5, 2020 (File No. 333-220175)

4.1		Amended and Restated Certificate of Incorporation of Dime Community Bancshares, Inc. [see Exhibit 3.1 hereto]

4.2		Amended and Restated Bylaws of Dime Community Bancshares, Inc. [see Exhibit 3.2 hereto]

4.3		Draft Stock Certificate of Dime Community Bancshares, Inc. (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998, filed with the SEC on September 28, 1998 (File No. 000-27782))

4.4		Second Amended and Restated Declaration of Trust, dated as of July 29, 2004, by and among Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Dime Community Bancshares, Inc., as Sponsor, the Administrators of Dime Community Capital Trust I, and the holders from time to time of undivided beneficial interests in the assets of Dime Community Capital Trust I (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-4, filed with the SEC on July 29, 2004 (File No. 333-117743))

4.5		Indenture, dated as of March 19, 2004, between Dime Community Bancshares, Inc. and Wilmington Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-4, filed with the SEC on July 29, 2004 (File No. 333-117743))

4.6		Series B Guarantee Agreement, dated as of July 29, 2004, executed and delivered by Dime Community Bancshares, Inc., as Guarantor and Wilmington Trust Company, as Guarantee Trustee, for the benefit of the holders from time to time of the Series B Capital Securities of Dime Community Capital Trust I (incorporated by reference to Exhibit 4.9 to the Registrant’s Registration Statement on Form S-4, filed with the SEC on July 29, 2004 (File No. 333-117743))

4.7		Indenture, dated as of June 13, 2017, by and between Dime Community Bancshares, Inc. and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 13, 2017 (File No. 000-27782))

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4.8		First Supplemental Indenture, dated as of June 13, 2017, by and between Dime Community Bancshares, Inc. and Wilmington Trust, National Association, as Trustee, including the form of 4.50% fixed-to-floating rate subordinated debentures due 2027 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 13, 2017 (File No. 000-27782))

4.9		Certificate of Designations, Preferences and Rights of 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A [see Exhibit 3.3 hereto]

4.10		Specimen Certificate for 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.4 to the Registrant’s Form 8-A Registration of Certain Classes of Securities pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed with the Commission on February 5, 2020 (File No. 333-220175))

4.11		Description of Dime Community Bancshares, Inc. Securities

10.1		Amended and Restated Employment Agreement between The Dime Savings Bank of Williamsburgh and Kenneth J. Mahon (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the SEC on May 10, 2011 (File No. 000-27782))

10.2		Employment Agreement between Dime Community Bancshares, Inc. and Kenneth J. Mahon (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the SEC on May 10, 2011 (File No. 000-27782))

10.3		Form of Employee Retention Agreement by and among The Dime Savings Bank of Williamsburgh, Dime Community Bancorp, Inc. and certain officers (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 9, 2012 (File No. 000-27782))

10.4		The Benefit Maintenance Plan of Dime Community Bancorp, Inc. (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 4, 2011 (File No. 000-27782))

10.5		Dime Community Bank Severance Benefits Plan (incorporate by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 14, 2018 (File No. 000-27782)

10.6		Retirement Plan for Board Members of Dime Community Bancorp, Inc. (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 16, 2009 (File No. 000-27782))

10.7		Form of stock option agreement for Outside Directors under Dime Community Bancshares, Inc. 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 29, 2005 (File No. 000-27782))

10.9		Form of stock option agreement for officers and employees under Dime Community Bancshares, Inc. 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 22, 2005 (File No. 000-27782))

10.10		Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed with the SEC on August 8, 2008 (File No. 000-27782))

10.11		Form of restricted stock award notice for officers and employees under the 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 22, 2005) (File No. 000-27782))

10.12		Form of restricted stock award notice for outside directors under the 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 22, 2005) (File No. 000-27782))

10.13		Adoption Agreement for Pentegra Services, Inc. Volume Submitter 401(K) Profit Sharing Plan (incorporated by reference to Exhibit 10.30 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 7, 2015) (File No. 000-27782))

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10.14		Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 16, 2009) (File No. 000-27782))

10.15		Amendment to the Benefit Maintenance Plan (incorporated by reference to Exhibit 10.32 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed with the SEC on November 13, 2012) (File No. 000-27782))

10.16		Fourth Amendment to the Benefit Maintenance Plan (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 14, 2019 (File No. 000-27782))

10.17		Amendments One, Two and Three to the Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.33 the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on March 15, 2013 (File No. 000-27782))

10.18		Dime Community Bancshares, Inc. 2013 Equity and Incentive Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed with the SEC on August 9, 2013 (File No. 000-27782))

10.19		Form of restricted stock award notice for officers and employees under the 2013 Equity and Incentive Plan (incorporated by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with the SEC on August 5, 2014 (File No. 000-27782))

10.20		Form of restricted stock award notice for outside directors under the 2013 Equity and Incentive Plan (incorporated by reference to Exhibit 10.36 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with the SEC on August 5, 2014 (File No. 000-27782))

10.21		The Dime Savings Bank of Williamsburgh 401(K) Savings Plan (incorporated by reference to Exhibit 10.37 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 7, 2015 (File No. 000-27782))

10.22		Amendment Number Four to the Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015 (File No. 000-27782))

10.23		Amendment Number One to the Dime Savings Bank of Williamsburgh 401(K) Savings Plan (incorporated by reference to Exhibit 10.39 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on May 7, 2015 (File No. 000-27782))

10.24		Retirement and Consulting Agreement between Dime Community Bancshares, Inc. and Michael P. Devine (incorporated by reference to Exhibit 10.40 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the SEC on November 6, 2015 (File No. 000-27782))

10.25		Retirement and Consulting Agreement between Dime Community Bancshares, Inc. and Vincent F. Palagiano (incorporated by reference to Exhibit 10.41 to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 30, 2016) (File No. 000-27782))

10.26		Form of performance share award notice for 2016 grants to officers under 2013 Equity and Incentive Plan (incorporated by reference to Exhibit 10.42 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the SEC on August 9, 2016 (File No. 000-27782))

10.27		Change in Control Employment Agreement between Dime Community Bancshares, Inc. and Stuart Lubow (incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 8-K filed with the SEC on February 4, 2019 (File No. 000-27782))

10.28		Employment and Change in Control Agreement between Dime Community Bank and Conrad Gunther (incorporated by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 15, 2017 (File No. 000-27782))

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10.29		Purchase and Sale Agreement between The Dime Savings Bank of Williamsburgh and Tarvos Capital Partners USA LLC (incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 15, 2017 (File No. 000-27782))

10.30		Purchase and Sale Agreement between The Dime Savings Bank of Williamsburgh and Havemeyer Owner BB LLC (incorporated by reference to Exhibit 10.46 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 15, 2017 (File No. 000-27782))

10.31		Amendment Number Five to the Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.47 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017 (File No. 000-27782))

10.32		Amendment Number Six to the Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates (incorporated by reference to Exhibit 10.48 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017 (File No. 000-27782))

10.33		Dime Community Bank KSOP, as amended and restated effective July 1, 2017 (incorporated by reference to Exhibit 10.49 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 7, 2017 (File No. 000-27782))

10.34		Amendment Number One to the Dime Community Bank KSOP (incorporated by reference to Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 14, 2018 (File No. 000-27782))

10.35		Dime Community Bank KSOP, as amended and restated effective January 1, 2019 (incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 14, 2019))

10.36		Change in Control Employment Agreement between Dime Community Bancshares, Inc. and Roberto Volino (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 8-K filed with the SEC on February 4, 2019 (File No. 000-27782))

10.37		Change in Control Employment Agreement between Dime Community Bancshares, Inc. and Avinash Reddy (incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 8-K filed with the SEC on February 4, 2019 (File No. 000-27782))

23.1		Consent of Independent Registered Public Accounting Firm

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350

101		Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Annual Report on Form 10-K for the period ended December 31, 2019 is formatted in XBRL (Extensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements

Item 16.

Form 10-K Summary

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 12, 2020.

	DIME COMMUNITY BANCSHARES, INC.

Date:	By: /s/ KENNETH J. MAHON
	Kenneth J. Mahon
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 12, 2020 by the following persons on behalf of the registrant and in the capacities indicated.

Name	Title	Date
		March 12, 2020
/s/ VINCENT F. PALAGIANO	Chairman of the Board
Vincent F. Palagiano
		March 12, 2020
/s/ MICHAEL P. DEVINE	Vice Chairman of the Board
Michael P. Devine
		March 12, 2020
/s/ KENNETH J. MAHON	President, Chief Executive Officer and Director
Kenneth J. Mahon	(Principal Executive Officer)
		March 12, 2020
/s/ AVINASH REDDY	Executive Vice President and Chief Financial Officer
Avinash Reddy	(Principal Financial Officer)
		March 12, 2020
/s/ LESLIE VELUSWAMY	Senior Vice President and Chief Accounting Officer
Leslie Veluswamy
		March 12, 2020
/s/ ROSEMARIE CHEN	Director
Rosemarie Chen
		March 12, 2020
/s/ STEVEN D. COHN	Director
Steven D. Cohn
		March 12, 2020
/s/ PATRICK E. CURTIN	Director
Patrick E. Curtin
		March 12, 2020
/s/ BARBARA M. KOSTER	Director
Barbara M. Koster
		March 12, 2020
/s/ KATHLEEN M. NELSON	Director
Kathleen M. Nelson
		March 12, 2020
/s/ JOSEPH J. PERRY	Director
Joseph J. Perry
		March 12, 2020
/s/ KEVIN STEIN	Director
Kevin Stein
		March 12, 2020
/s/ OMER S. J. WILLIAMS	Director
Omer S. J. Williams

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CONSOLIDATED FINANCIAL STATEMENTS OF

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

INDEX

	Page
Report of Independent Registered Public Accounting Firm	59
Consolidated Statements of Financial Condition at December 31, 2019 and 2018	60
Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017	61
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017	62
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017	63
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017	64
Notes to Consolidated Financial Statements	65-105

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of Dime Community Bancshares, Inc. and Subsidiaries

Brooklyn, New York

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of Dime Community Bancshares, Inc. and Subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Crowe LLP

We have served as the Company’s auditor since 2009.

Livingston, New Jersey

March 12, 2020

DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands except share amounts)

	December 31,
	2019			2018
ASSETS:
Cash and due from banks	$	155,488		$	147,256
Total cash and cash equivalents		155,488			147,256
Debt securities available-for-sale, at fair value		550,995			502,885
Marketable equity securities, at fair value		5,894			5,667
Loans:
Loans secured by real estate		5,002,354			5,163,122
Commercial and industrial (“C&I”) loans		336,412			229,504
Other loans		1,772			1,192
Allowance for loan losses		(28,441	)		(21,782	)
Loans, net		5,312,097			5,372,036
Premises and fixed assets, net		21,692			24,713
Premises held for sale		514			—
Loans held for sale		500			1,097
Federal Home Loan Bank of New York (“FHLBNY”) capital stock		56,019			57,551
Bank Owned Life Insurance (“BOLI”)		114,257			111,427
Goodwill		55,638			55,638
Operating lease assets		37,858			—
Other assets		43,508			42,308
Total Assets	$	6,354,460		$	6,320,578

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Interest-bearing deposits	$	3,804,076		$	3,961,277
Non-interest-bearing deposits		478,549			395,477
Due to depositors		4,282,625			4,356,754
Escrow and other deposits		76,481			85,234
FHLBNY Advances		1,092,250			1,125,350
Subordinated notes payable, net		113,906			113,759
Other borrowings		110,000			—
Operating lease liabilities		44,098			—
Other liabilities		38,342			37,400
Total Liabilities		5,757,702			5,718,497

COMMITMENTS AND CONTINGENCIES (See Note 23)

Stockholders’ Equity:
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at December 31, 2019 and December 31, 2018)		—			—
Common stock ($0.01 par, 125,000,000 shares authorized, 53,721,189 shares and 53,690,825 shares issued at December 31, 2019 and December 31, 2018, respectively, and 35,154,642 shares and 36,081,455 shares outstanding at December 31, 2019 and December 31, 2018, respectively)		537			537
Additional paid-in capital		279,322			277,512
Retained earnings		581,817			565,713
Accumulated other comprehensive loss, net of deferred taxes		(5,940	)		(6,500	)
Unearned equity awards		(6,731	)		(3,623	)
Common Stock held by Benefit Maintenance Plan (“BMP”)		(1,496	)		(1,509	)
Treasury stock, at cost (18,566,547 shares and 17,609,370 shares at December 31, 2019 and December 31, 2018, respectively)		(250,751	)		(230,049	)
Total Stockholders’ Equity		596,758			602,081
Total Liabilities and Stockholders’ Equity	$	6,354,460		$	6,320,578

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,
	2019		2018		2017
Interest income:
Loans secured by real estate	$	202,110	$	194,842	$	204,487
C&I loans		15,980		9,741		3,072
Other loans		70		74		75
Mortgage-backed securities (“MBS”)		12,266		10,794		542
Investment securities		2,252		363		577
Other short-term investments		5,590		5,896		3,343
Total interest income		238,268		221,710		212,096
Interest expense:
Deposits and escrow		62,079		50,389		38,391
Borrowed funds		28,768		24,995		20,975
Total interest expense		90,847		75,384		59,366
Net interest income		147,421		146,326		152,730
Provision for loan losses		17,340		2,244		520
Net interest income after provision for loan losses		130,081		144,082		152,210
Non-interest income:
Service charges and other fees		5,805		4,642		3,828
Mortgage banking income, net		286		367		201
Net gain on sale of securities and other assets ⁽¹⁾		562		1,068		2,740
Gain on sale of loans		1,540		302		1,475
Gain on sale of premises held for sale		—		—		10,412
Income from BOLI		2,830		2,882		2,217
Loan level derivative income		910		—		—
Other		235		262		641
Total non-interest income		12,168		9,523		21,514
Non-interest expense:
Salaries and employee benefits		50,254		45,066		37,036
Stock-based compensation		1,843		1,524		1,687
Occupancy and equipment		16,175		15,250		14,201
Data processing costs		7,816		7,009		8,280
Marketing		1,992		3,198		5,774
Federal deposit insurance premiums		609		1,969		2,966
Loss from extinguishment of debt		3,780		—		1,272
Other		12,918		12,874		13,770
Total non-interest expense		95,387		86,890		84,986
Income before income taxes		46,862		66,715		88,738
Periodic income tax expense		10,676		15,427		36,856
Net income	$	36,186	$	51,288	$	51,882
Earnings per Share (“EPS”):
Basic	$	1.01	$	1.38	$	1.38
Diluted	$	1.01	$	1.38	$	1.38

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

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands except per share amounts)

	Year Ended December 31,
	2019			2018			2017
Net Income	$	36,186		$	51,288		$	51,882
Other comprehensive income (loss):
Change in unrealized holding loss on securities held-to-maturity and transferred securities		—			—			1,299
Change in unrealized holding gain (loss) on debt securities available-for-sale		9,662			(3,096	)		587
Change in pension and other postretirement obligations		433			548			2,758
Change in unrealized (loss) gain on derivatives		(9,209	)		(1,450	)		794
Other comprehensive gain (loss) before income taxes		886			(3,998	)		5,438
Deferred tax expense (benefit)		326			(1,260	)		2,427
Other comprehensive income (loss), net of tax		560			(2,738	)		3,011
Total comprehensive income	$	36,746		$	48,550		$	54,893

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)

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

Beginning balance as of January 1, 2017		37,455,853		$	536	$	278,356		$	503,539		$	(5,939	)	$	(1,932	)	$	(6,859	)	$	(201,833	)	$	565,868

Net Income		—			—		—			51,882			—			—			—			—			51,882
Other comprehensive income, net of tax		—			—		—			—			3,011			—			—			—			3,011
Exercise of stock options		51,708			—		792			—			—			—			—			—			792
Release of shares, net of forfeitures		141,867			—		1,269			—			—			(2,649	)		(170	)		1,786			236
Stock-based compensation		—			—		—			—			—			1,687			—			—			1,687
Shares received to satisfy distribution of retirement benefits		(230,358	)		—		(3,687	)		—			—			—			4,293			(4,511	)		(3,905	)
Reclassification of tax effects on other comprehensive income		—			—		—			713			(713	)		—			—			—			—
Cash dividends declared and paid		—			—		—			(21,004	)		—			—			—			—			(21,004	)
Ending balance as of December 31, 2017		37,419,070			536		276,730			535,130			(3,641	)		(2,894	)		(2,736	)		(204,558	)		598,567

Reclassification of unrealized gains and losses on marketable equity securities		—			—		—			153			(153	)		—			—			—			—
Adjusted beginning balance as of January 1, 2018		37,419,070			536		276,730			535,283			(3,794	)		(2,894	)		(2,736	)		(204,558	)		598,567
Net Income		—			—		—			51,288			—			—			—			—			51,288
Other comprehensive loss, net of tax		—			—		—			—			(2,738	)		—			—			—			(2,738	)
Exercise of stock options, net		57,327			1		1,118			—			—			—			—			(165	)		954
Release of shares, net of forfeitures		122,402			—		816			—			—			(2,253	)		—			1,513			76
Stock-based compensation		—			—		—			—			—			1,524			—			—			1,524
Shares received to satisfy distribution of retirement benefits		(49,895	)		—		(1,152	)		—			—			—			1,227			(958	)		(883	)
Reclassification of tax effects on other comprehensive income (loss)		—			—		—			(32	)		32			—			—			—			—
Cash dividends declared and paid		—			—		—			(20,826	)		—			—			—			—			(20,826	)
Repurchases of shares of Common Stock		(1,467,449	)		—		—			—			—			—			—			(25,881	)		(25,881	)
Ending Balance as of December 31, 2018		36,081,455			537		277,512			565,713			(6,500	)		(3,623	)		(1,509	)		(230,049	)		602,081

Net Income		—			—		—			36,186			—			—			—			—			36,186
Other comprehensive income, net of tax		—			—		—			—			560			—			—			—			560
Exercise of stock options		30,364			—		367			—			—			—			—			—			367
Release of shares, net of forfeitures		277,819			—		1,456			—			—			(4,951	)		—			3,626			131
Stock-based compensation		—			—		—			—			—			1,843			—			—			1,843
Shares received to satisfy distribution of retirement benefits		(189	)		—		(13	)		—			—			—			13			(4	)		(4	)
Shares received related to tax withholding		(6,217	)		—		—			—			—			—			—			(133	)		(133	)
Cash dividends declared and paid		—			—		—			(20,082	)		—			—			—			—			(20,082	)
Repurchase of shares of Common Stock		(1,228,590	)		—		—			—			—			—			—			(24,191	)		(24,191	)
Ending balance as of December 31, 2019		35,154,642		$	537	$	279,322		$	581,817		$	(5,940	)	$	(6,731	)	$	(1,496	)	$	(250,751	)	$	596,758

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,
	2019			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	36,186		$	51,288		$	51,882
Adjustments to reconcile net income to net cash provided by operating activities:
Net gain on sale of investment securities held-to-maturity		—			—			(2,607	)
Net (gain) loss on sales of securities available-for-sale		(31	)		(1,370	)		36
Net (gain) loss recognized on marketable equity securities and trading securities		(531	)		302			(169	)
Net gain on sale of loans held for sale		(1,540	)		(302	)		(1,475	)
Net gain on sale of premises		—			—			(10,412	)
Net depreciation, amortization and accretion		5,075			4,965			3,673
Stock-based compensation		1,843			1,524			1,687
Provision for loan losses		17,340			2,244			520
Originations of loans held for sale		(23,154	)		(3,228	)		—
Proceeds from sale of loans originated for sale		38,666			5,297			—
Increase in cash surrender value of BOLI		(2,830	)		(2,882	)		(2,217	)
Deferred income tax provision (benefit)		(2,383	)		(807	)		10,515
Reduction in credit related other than temporary impairment (“OTTI”) amortized through interest income		—			—			(60	)
Changes in assets and liabilities:
Decrease (Increase) in other assets		3,186			7,089			(7,205	)
(Increase) Decrease in other liabilities		(3,336	)		185			(906	)
Net cash provided by Operating activities		68,491			64,305			43,262
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities held-to-maturity		—			—			9,167
Proceeds from sales of securities available-for-sale		148,857			158,758			15,377
Proceeds from sales of marketable equity securities and trading securities		570			1,059			4,629
Purchases of securities available-for-sale		(317,656	)		(389,117	)		(363,825	)
Acquisition of marketable equity securities and trading securities		(266	)		(307	)		(222	)
Proceeds from calls and principal repayments of securities available-for-sale		129,680			76,217			957
Purchase of BOLI		—			—			(20,000	)
Purchases of loans		—			(7,800	)		—
Proceeds from the sale of portfolio loans transferred to held for sale		9,684			—			333,176
Net decrease (increase) in loans		18,953			211,668			(298,910	)
Proceeds from the sale of fixed assets and premises held for sale		—			—			11,791
Purchases of fixed assets, net		(1,719	)		(4,290	)		(9,231	)
Sale (Purchase) of FHLBNY capital stock, net		1,532			2,145			(15,252	)
Net cash provided by (used in) Investing Activities		(10,365	)		48,333			(332,343	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to depositors		(74,129	)		(46,693	)		8,021
Increase (decrease) in escrow and other deposits		(8,753	)		3,066			(20,833	)
Repayments of FHLBNY advances		(4,517,550	)		(3,651,600	)		(4,602,075	)
Proceeds from FHLBNY advances		4,484,450			3,606,950			4,940,950
Proceeds from Subordinated Debt issuance, net		—			—			113,531
Repayments of Trust Preferred Securities		—			—			(70,680	)
Proceeds from other borrowings, net		110,000			—			—
Proceeds from exercise of stock options		367			954			792
Release of Common Stock for equity awards		131			76			236
Payments related to tax withholding for equity awards		(133	)		—			—
BMP shares of Common Stock received to satisfy distribution of retirement benefits		(4	)		(883	)		(3,905	)
Treasury shares repurchased		(24,191	)		(25,881	)		—
Cash dividends paid to stockholders, net		(20,082	)		(20,826	)		(21,004	)
Net cash provided by (used in) Financing Activities		(49,894	)		(134,837	)		345,033
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		8,232			(22,199	)		55,952
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		147,256			169,455			113,503
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	155,488			147,256			169,455

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	11,944			8,428			36,515
Cash paid for interest		92,707			74,297			59,823
Loans transferred to held for sale		22,921			2,829			333,192
Premises transferred to held for sale		514			—			—
Operating lease assets in exchange for operating lease liabilities		49,747			—			—
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity		—			—			50
Net decrease in non-credit component of OTTI		—			—			(20	)
Reductions for previous credit losses realized on securities sold		—			—			1,229

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DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars In Thousands except for share amounts)

1. NATURE OF OPERATIONS

Nature of Operations - Dime Community Bancshares, Inc. (the “Holding Company” and together with its direct and indirect subsidiaries, the “Company”) is a Delaware corporation organized by Dime Community Bank (the “Bank”) for the purpose of acquiring all of the capital stock of the Bank issued in the Bank’s conversion to stock ownership on June 26, 1996. At December 31, 2019, the significant assets of the Holding Company were the capital stock of the Bank and investments retained by the Holding Company. The liabilities of the Holding Company were comprised primarily of $115,000 subordinated notes payable maturing in 2027, and become callable commencing 2022. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended.

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

The Holding Company neither owns nor leases any property, but instead uses the back office of the Bank, located in the Brooklyn Heights section of the borough of Brooklyn, New York. The Bank maintains its principal office in the Williamsburg section of the borough of Brooklyn, New York. As of December 31, 2019, the Bank had twenty-nine retail banking offices located throughout the boroughs of Brooklyn, Queens, and the Bronx, and in Nassau and Suffolk counties, New York.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Policies – Management believes that the accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). The following is a description of the significant policies.

Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Holding Company and the Bank and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

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.

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 that have readily determinable fair values are carried at fair value unless they are held-to-maturity. Debt securities are classified as held-to-maturity and carried at amortized cost only if the Company has a positive intent and ability to hold them to maturity. If not classified as held-to-maturity, such securities are classified as securities available-for-sale or trading. Equity securities and mutual fund investments (fixed income or equity in nature) are carried at fair value, with changes in fair value reported in net income. Unrealized holding gains or losses on securities available-for-sale that are deemed temporary are excluded from net income and reported net of income taxes as other comprehensive income or loss. Neither the Holding Company nor the Bank actively acquires securities for the purpose of engaging in trading activities.

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 MBS where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

The Company adopted Accounting Standards Update (“ASU”) 2016-01 on January 1, 2018. As a result of adoption all registered mutual funds and trading securities were reclassified as marketable equity securities on the Consolidated Statement of Financial Conditions and are recorded at fair value with changes in fair value recorded through the income statement. Additionally, $153 of unrealized gains, net of taxes, was reclassified from accumulated other comprehensive income to beginning retained earnings on January 1, 2018.

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The Company evaluates securities for OTTI at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. In making its evaluation of OTTI for debt securities, the Company initially considers whether: (1) it intends to sell the security, or (2) it is more likely than not that it will be required to sell the security prior to recovery of its amortized cost basis. If either of these criteria is satisfied, an OTTI charge is recognized in the statement of income equal to the full amount of the decline in fair value below amortized cost. For debt securities, if neither of these criteria is satisfied, however, the Company does not expect to recover the entire amortized cost basis, an OTTI loss has occurred that must be separated into two categories: (a) the amount related to credit loss, and (b) the amount related to other factors. In assessing the level of OTTI attributable to credit loss, the Company compares the present value of expected cash flows to the amortized cost basis of the security. The portion of OTTI determined to result from credit-related factors is recognized through earnings, while the portion of the OTTI related to other factors is recognized in other comprehensive income. When OTTI is recognized on a debt security, its amortized cost basis is reduced to reflect the credit-related component.

Loans - Loans that the Bank has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding (as adjusted for any amounts charged-off), net of unearned fees or costs, unamortized premiums and the allowance for loan losses. Interest income on loans is recorded using the level yield method. Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms. Past due status is based upon the contractual terms of the loan.

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 and the loan is not both deemed to be well secured and in the process of collection; or (iii) an election has otherwise been made to maintain the loan on a cash basis due to deterioration in the financial condition of the borrower. Such non-accrual determination practices are applied consistently to all loans regardless of their internal classification or designation. Upon entering non-accrual status, the Bank reverses all outstanding accrued interest receivable.

Management may elect to continue the accrual of interest when a loan that otherwise meets the criteria for non-accrual status is in the process of collection and the estimated fair value and cash flows of the underlying collateral property are sufficient to satisfy the outstanding principal balance (including any outstanding advances related to the loan) and accrued interest. Management may also elect to continue the accrual of interest on a loan that would otherwise meet the criteria for non-accrual status when its delinquency relates solely to principal amounts due, it is well secured and refinancing activities have commenced on the loan. Such elections have not been commonplace.

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

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

Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral; or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for some performing troubled debt restructurings (“TDRs”)). If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral property or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of the collateral is considered when measuring impairment. Measured impairment is either charged-off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses. See Note 7 for a discussion of TDRs.

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Allowance for Loan Losses and Reserve for Loan Commitments - The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

Measured impairment is either charged off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses. All loans that are deemed to meet the definition of impaired are individually evaluated for impairment. Smaller balance homogeneous loans, such as condominium or cooperative apartment and one-to-four family residential real estate loans with balances less than or equal to the Fannie Mae (“FNMA”) conforming loan limits for high-cost areas such as the Bank’s primary lending area (“FNMA Limits”) and consumer loans, are collectively evaluated for impairment, and accordingly, not separately identified for impairment disclosures.

Loans for which the terms have been modified in a manner that meets the criteria of a TDR are deemed to be impaired and individually evaluated for impairment. If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral property or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has defaulted, the likely realizable net proceeds from either a note sale or the liquidation of collateral is generally considered when measuring impairment.

In determining both the specific and the general components of the allowance for loan losses, the Company has identified the following portfolio segments: 1) real estate; 2) C&I loans; and 3) consumer loans. Consumer loans represent a nominal portion of the Company’s loan portfolio. Within these segments, the Bank analyzes the allowance based upon the underlying collateral type.

The underlying methodology utilized to assess the adequacy of the allowance for loan losses is summarized in Note 7.

The Company maintains a separate reserve within other liabilities associated with commitments to fund future loans that have been accepted by the borrower. This reserve is determined based upon the historical loss experience of similar loans owned by the Bank at each period end. Any changes in this reserve amount are recognized through earnings as a component of non-interest expense.

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 problematic loans in which the Company has identified for sale during the year in which a pending note sale agreement has been executed will be re-classified as held for sale and carried at the lower of cost or their expected net realizable proceeds.

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 (“stand-alone derivative”). 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 the 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 or 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.

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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 for each counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business.

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 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 of thirty-nine and a half years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from three to ten years.

Leases - On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and subsequent amendments thereto, which requires the Company to recognize most leases on the balance sheet. The Company adopted the standard under a modified retrospective approach as of the date of adoption and elected to apply several of the available practical expedients, including:

•

Carryover of historical lease determination and lease classification conclusions

•

Carryover of historical initial direct cost balances for existing leases

•

Accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component

Adoption of the leasing standard resulted in the recognition of operating right-of-use assets, and operating lease liabilities of $41,641 as of January 1, 2019. These amounts were determined based on the present value of remaining minimum lease payments, discounted using the Company’s incremental borrowing rate as of the date of adoption. There was no material impact to the timing of expense or income recognition in the Company’s Consolidated Statements of Income. Prior periods were not restated and continue to be presented under legacy GAAP. Disclosures about the Company’s leasing activities are presented in Note 11.

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

Accounting for Goodwill and Other Intangible Assets – In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, which eliminates step 2 of the impairment analysis. While this guidance is not effective until January 1, 2020, the Company elected to early adopt this guidance as of January 1, 2018. Based upon one reporting unit (see disclosures about “Segments of an Enterprise and Related Information” below), the goodwill impairment test was performed on a consolidated basis by comparing the fair value of the reporting unit, calculated as the market capitalization of the Company, with its carrying amount (including goodwill). To the extent that the carrying amount of goodwill exceeds the implied fair value, an impairment charge must be recognized in an amount equal to the excess carrying amount over fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. As of December 31, 2019 and 2018, the Company concluded that no impairment of goodwill existed.

Servicing Right Assets (“SRA”) – When real estate or C&I loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. SRAs are carried at the lower of cost or fair value and are amortized in proportion to, and over the period of, anticipated net servicing income. All separately recognized SRAs are required to be initially measured at fair value, if practicable. The estimated fair value of loan servicing assets is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, servicing costs and discount rates derived based upon actual historical results for the Bank, or, in the absence of such data, from historical results for the Bank’s peers. Capitalized loan servicing assets are stratified based on predominant risk characteristics of the underlying loans (i.e., collateral, interest rate, servicing spread and maturity) for the purpose of evaluating impairment. A valuation allowance is then established in the event the recorded value of an individual stratum exceeds its fair value. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds, default rates, and losses.

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Transfers of Financial Assets – Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

BOLI – BOLI is carried at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement. Increases in the contract value are recorded as non-interest income in the consolidated statements of income and insurance proceeds received are recorded as a reduction of the contract value.

Income Taxes – Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount deemed more likely than not to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not satisfying the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to tax matters in income tax expense. The Company had no unrecorded tax positions at December 31, 2019 or 2018.

Employee Benefits – The Bank maintains the Dime Community Bank KSOP Plan (the “KSOP”) for substantially all of its employees, and the Retirement Plan of Dime Community Bank (the “Employee Retirement Plan”), both of which are tax qualified under the Internal Revenue Code.

The Bank also maintains the Postretirement Welfare Plan of Dime Community Bank (the “Postretirement Benefit Plan”), providing additional postretirement benefits to certain retirees, which requires accrual of postretirement benefits (such as health care benefits) during the years an employee provides services, a Retirement Plan for its outside Directors (the “Director Retirement Plan”), and the BMP that provides additional benefits to certain of its officers.

As the sponsor of a single employer defined benefit plan, the Company must do the following for the Employee Retirement Plan, a portion of the BMP, the Director Retirement Plan and the Postretirement Benefit Plan: (1) recognize the funded status of the benefit plans in its statements of financial condition, measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation; (2) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit or cost. Amounts recognized in accumulated other comprehensive income, including the gains or losses, prior service costs or credits, and the transition asset or obligation are adjusted as they are subsequently recognized as components of net periodic benefit cost; (3) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statements of financial condition (with limited exceptions); and (4) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation.

The Holding Company and Bank maintain the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees, the Dime Community Bancshares, Inc. 2004 Stock Incentive Plan for Outside Directors, Officers and Employees and the Dime Community Bancshares, Inc. 2013 Equity and Incentive Plan (collectively the “Stock Plans”); which are discussed more fully in Note 22. Under the Stock Plans, compensation cost is recognized for stock options and restricted stock awards issued to employees based on the fair value of the awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Holding Company’s common stock (“Common Stock”) at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

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

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The following is a reconciliation of the numerator and denominator of basic EPS and diluted EPS for the periods indicated:

	Year Ended December 31,
	2019			2018			2017
Numerator:
Net Income per the Consolidated Statements of Income	$	36,186		$	51,288		$	51,882
Less: Dividends paid on earnings allocated to participating securities		(184	)		(160	)		(131	)
Income attributable to Common Stock	$	36,002		$	51,128		$	51,751
Weighted average common shares outstanding, including participating securities		35,865,078			37,163,023			37,593,715
Less: weighted average participating securities		(212,289	)		(155,553	)		(163,056	)
Weighted average common shares outstanding		35,652,789			37,007,470			37,430,659
Basic EPS	$	1.01		$	1.38		$	1.38

Income attributable to Common Stock	$	36,002		$	51,128		$	51,751
Weighted average common shares outstanding		35,652,789			37,007,470			37,430,659
Weighted average common equivalent shares outstanding		127,936			80,292			79,790
Weighted average common and equivalent shares outstanding		35,780,725			37,087,762			37,510,449
Diluted EPS	$	1.01		$	1.38		$	1.38

Common stock equivalents resulting from the dilutive effect of “in-the-money” stock options are calculated based upon the excess of the average market value of the Common Stock over the exercise price of outstanding options.

There were no “out-of-the-money” stock options for the year ended December 31, 2019, 2018, or 2017.

For information about the calculation of likely aggregate LTIP and SIP share payout, see Note 22.

Comprehensive Income - Comprehensive income for the years ended December 31, 2019, 2018 and 2017 included some or all of the following: changes in the unrealized gain or loss on available-for-sale securities; changes in the unfunded status of defined benefit plans, the non-credit component of OTTI; a transfer loss related to securities transferred from available-for-sale to held-to-maturity; and changes in the unrealized gain or loss on derivatives. Under GAAP, all of these items bypass net income and are typically reported as components of stockholders’ equity. All comprehensive income adjustment items are presented net of applicable tax effect.

Comprehensive and accumulated comprehensive income are summarized in Note 4.

Disclosures about Segments of an Enterprise and Related Information - The Company has one reportable segment, “Community Banking.” All of the Company’s activities are interrelated, and each activity is dependent and assessed based on the manner in which it supports the other activities of the Company. For example, lending is dependent upon the ability of the Bank to fund itself with retail deposits and other borrowings and to manage interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.

For the years ended December 31, 2019, 2018 and 2017, there was no customer that accounted for more than 10% of the Company’s consolidated revenue.

Reclassification – There have been no material reclassifications to prior year amounts to conform to their current presentation.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

Upon adoption, the Company expects to recognize a one-time cumulative effect change to the allowance for loan losses through retained earnings in equity. Upon completion of the aforementioned items, the Loan Loss Reserve Committee, who has oversight over the implementation of CECL, is expected to finalize and approve the adoption of the standard during the first quarter of 2020.

4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

	Securities Available- for-Sale			Defined Benefit Plans			Derivatives			Total Accumulated Other Comprehensive Loss
Balance as of January 1, 2018	$	285		$	(6,633	)	$	2,707		$	(3,641	)
Reclassification of unrealized gains and losses on available-for-sale equity securities ⁽¹⁾		(153	)		—			—			(153	)
Adjusted balance as of January 1, 2018		132			(6,633	)		2,707			(3,794	)
Other comprehensive income (loss) before reclassifications		(1,159	)		311			(490	)		(1,338	)
Amounts reclassified from accumulated other comprehensive loss		(930	)		—			(470	)		(1,400	)
Net other comprehensive income (loss) during the period		(2,089	)		311			(960	)		(2,738	)
Reclassification of tax effects on other comprehensive income ⁽²⁾		—			32			—			32
Balance as of December 31, 2018	$	(1,957	)	$	(6,290	)	$	1,747		$	(6,500	)
Other comprehensive income (loss) before reclassifications		6,600			(229	)		(5,636	)		735
Amounts reclassified from accumulated other comprehensive loss		(22	)		495			(648	)		(175	)
Net other comprehensive income during the period		6,578			266			(6,284	)		560
Balance as of December 31, 2019	$	4,621		$	(6,024	)	$	(4,537	)	$	(5,940	)

(1)	Represents the impact of adopting ASU 2016-01 allowing the reclassification of unrealized gains and losses on available-for-sale equity securities from accumulated other comprehensive income to Retained Earnings.

(2)

Represents the impact of adopting ASU 2018-02 allowing the reclassification of certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) (or portion thereof) is recorded. The amount of the reclassification is the difference between the historical corporate income tax rate (35%) and the newly enacted 21% corporate income tax rate. The reclassification is as of and for the year ended December 31, 2017; no prior period information has been retroactively adjusted as a result of implementing the ASU.

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

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	Year Ended December 31,
	2019			2018			2017
Change in unrealized holding loss on securities held-to-maturity and transferred securities:
Accretion of previously recognized non-credit component of OTTI	$	—		$	—		$	20
Change in unrealized loss on securities transferred to held-to-maturity		—			—			50
Reclassification adjustment for net gains included in net gain on securities and other assets		—			—			1,229
Net change		—			—			1,299
Tax expense		—			—			586
Net change in unrealized holding loss on securities held-to-maturity and transferred securities		—			—			713
Change in unrealized holding gain on securities available-for-sale:
Change in net unrealized (loss) gain during the period		9,693			(1,726	)		551
Reclassification adjustment for net (losses) gains included in net gain on securities and other assets		(31	)		(1,370	)		36
Net change		9,662			(3,096	)		587
Tax expense (benefit)		3,084			(1,007	)		260
Net change in unrealized holding gain on securities available-for-sale		6,578			(2,089	)		327
Change in pension and other postretirement obligations:
Reclassification adjustment for expense included in other expense		729			514			1,421
Change in the net actuarial gain		(296	)		34			1,337
Net change		433			548			2,758
Tax expense		167			237			1,239
Net change in pension and other postretirement obligations		266			311			1,519
Change in unrealized loss on derivatives:
Change in net unrealized (gain) loss during the period		(8,254	)		(758	)		511
Reclassification adjustment for expense included in interest expense		(955	)		(692	)		283
Net change		(9,209	)		(1,450	)		794
Tax expense (benefit)		(2,925	)		(490	)		342
Net change in unrealized loss on derivatives		(6,284	)		(960	)		452
Other comprehensive income (loss)	$	560		$	(2,738	)	$	3,011

5. REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Identify the contract with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to performance obligations in the contract

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

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

Service Charges on Deposit Accounts. The Company earns fees from its deposits customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfied the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. For the years ended December 31, 2019, 2018, and 2017, service charges and other fees totaled $4,972, $3,935, and $3,368, respectively.

Interchange Income. The Company earns interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provide to the cardholder. For the years ended December 31, 2019, 2018, and 2017, interchange fees totaled $833, $738, and $578, respectively.

6. INVESTMENT AND MORTGAGE-BACKED SECURITIES

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

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

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

The carrying amount of securities pledged as collateral for the Bank’s first loss guarantee (see Note 8) at December 31, 2019 and 2018 was $27,884 and $27,248, respectively.

At year-end 2019 and 2018, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

At December 31, 2019, agency notes possessed a weighted average contractual maturity of 7.1 years. As of December 31, 2019, the available-for-sale agency CMO and MBS securities had a weighted average term to maturity of 17.1 years. At December 31, 2019, corporate securities possessed a weighted average contractual maturity of 5.8 years.

During the year ended December 31, 2017, the Company sold its entire portfolio of investment securities held-to-maturity consisting of six TRUP CDO securities, of which five were deemed to be OTTI. The TRUP CDO portfolio was sold as part of the Company’s strategy to take advantage of investment opportunities. The amortized cost of the TRUP CDO portfolio was $5,331 at the time of the sale. The amortized cost represents the purchase amortized/historical cost less $8,553 of OTTI charges previously recognized and $705 of the unamortized portion of unrealized losses that were recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity). As a result of the sale, the pre-tax balances of both the unamortized portion of the unrealized losses at transfer to held-to-maturity of $705 and the unamortized portion of previous credit losses of $524 were reclassified out of accumulated comprehensive loss during the year ended December 31, 2017. Gross proceeds from the sale of the TRUP CDOs were $9,167 for the year ended December 31, 2017. Gross gains of $3,048 and gross losses of $441 were recognized on these sales. There were no sales of held-to-maturity securities during the year ended December 31, 2019 or 2018.

	For the Year Ended December 31,
	2019		2018		2017
Available-for-sale pass-through MBS issued by GSEs:
Proceeds	$	136,436	$	274	$	15,000
Gross gains		414		4		—
Tax expense on gain		132		1		—
Gross losses		520		—		36
Tax benefit on losses		166		—		16
Available-for-sale CMOs:
Proceeds		9,383		158,484		—
Gross gains		98		1,366		—
Tax expense on gain		31		437		—
Corporate Securities:
Proceeds		3,038		—		—
Gross gains		39		—		—
Tax expense on gain		12		—		—

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The Company holds marketable equity securities (disclosed as both investment securities available-for-sale and trading securities during the year ended December 31, 2017) as the underlying mutual fund investments of the BMP, held in a rabbi trust. The Company may sell these securities on a periodic basis in order to pay retirement benefits to plan retirees. There are no gains or losses recognized from the sales of marketable equity securities. A summary of the sales of marketable equity securities is listed below for the periods indicated:

	Year Ended December 31,
	2019		2018		2017
Proceeds:
Marketable equity securities	$	570	$	1,059	$	—
Investment securities available-for-sale		—		—		377
Trading securities		—		—		4,629

The remaining gain or loss on securities shown in the consolidated statements of income was due to market valuation changes. Net gains of $531 were recognized on marketable equity securities for the year ended December 31, 2019. Net losses of $302 were recognized on marketable equity securities during year ended December 31, 2018. Net gains of $169 were recognized on trading securities during year ended December 31, 2017.

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

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

	December 31, 2018
	Less than 12 Consecutive Months				12 Consecutive Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Debt securities available-for-sale:
Agency Notes	$	5,100	$	10	$	—	$	—	$	5,100	$	10
Corporate Securities		11,135		32		—		—		11,135		32
Pass-through MBS issued by GSEs		216,451		1,049		45,489		951		261,940		2,000
Agency CMO		52,605		439		39,833		1,196		92,438		1,635

The issuers of debt securities available-for-sale are U.S. government-sponsored entities or agencies. The decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality. It is likely that the Company will not be required to sell the securities before their anticipated recovery, and as such, the Company does not consider these securities to be other-than-temporarily-impaired at December 31, 2019.

There was no activity related to OTTI charges recognized on the Company’s registered mutual funds during the year ended December 31, 2019, 2018, or 2017.

7. LOANS

Loans are reported at the principal amount outstanding (as adjusted for any amounts charged-off), net of unearned fees or costs, unamortized premiums or discounts, and the allowance for loan losses. Interest income on loans is recorded using the level yield method. Under this method, discount accretion and premium amortization are included in interest income. Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms.

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Loans at year-end (including deferred costs) were as follows:

	At December 31,
	2019			2018
One-to-four family residential, including condominium and cooperative apartment	$	148,429		$	96,847
Multifamily residential and residential mixed-use		3,385,375			3,866,788
Commercial real estate and commercial mixed-use		1,350,185			1,170,085
Acquisition, development, and construction (“ADC”)		118,365			29,402
Total real estate loans		5,002,354			5,163,122
C&I		336,412			229,504
Consumer		1,772			1,192
Total		5,340,538			5,393,818
Allowance for loans losses		(28,441	)		(21,782	)
Loans, net	$	5,312,097		$	5,372,036

The following table presents data regarding the allowance for loan losses activity for the periods indicated:

	Real Estate Loans
	One-to-Four Family Residential, Including Condominium and Cooperative Apartment			Multifamily Residential and Residential Mixed-Use			Commercial Real Estate and Commercial Mixed-Use			ADC		Total Real Estate			C&I			Consumer Loans			Total
Beginning balance as of January 1, 2017	$	145		$	16,555		$	3,816		$	—	$	20,516		$	—		$	20		$	20,536
Provision (credit) for loan losses		(28	)		(1,313	)		(285	)		123		(1,503	)		2,021			2			520
Charge-offs		(16	)		(104	)		—			—		(120	)		—			(4	)		(124	)
Recoveries		15			81			4			—		100			—			1			101
Ending balance as of December 31, 2017	$	116		$	15,219		$	3,535		$	123	$	18,993		$	2,021		$	19		$	21,033

Provision (credit) for loan losses		239			(1,773	)		246			274		(1,014	)		3,254			4			2,244
Charge-offs		(169	)		(1	)		(7	)		—		(177	)		(1,329	)		(5	)		(1,511	)
Recoveries		12			1			3			—		16			—			—			16
Ending balance as of December 31, 2018	$	198		$	13,446		$	3,777		$	397	$	17,818		$	3,946		$	18		$	21,782

Provision (credit) for loan losses		86			(3,233	)		266			847		(2,034	)		19,368			6			17,340
Charge-offs		(22	)		(83	)		(145	)		—		(250	)		(10,447	)		(8	)		(10,705	)
Recoveries		7			12			2			—		21			3			—			24
Ending balance as of December 31, 2019	$	269		$	10,142		$	3,900		$	1,244	$	15,555		$	12,870		$	16		$	28,441

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

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

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

	At or for the Year Ended December 31, 2018
	Real Estate Loans
	One-to-Four Family Residential, Including Condominium and Cooperative Apartment		Multifamily Residential and Residential Mixed-Use		Commercial Real Estate and Commercial Mixed-Use		ADC		Total Real Estate		C&I		Consumer Loans		Total
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	230	$	—		230
Collectively evaluated for impairment		198		13,446		3,777		397		17,818		3,716		18		21,552
Total ending allowance balance	$	198	$	13,446	$	3,777	$	397	$	17,818	$	3,946	$	18		21,782

Loans:
Individually evaluated for impairment	$	14	$	551	$	5,125	$	—	$	5,690	$	309	$	—		5,999
Collectively evaluated for impairment		96,833		3,866,237		1,164,960		29,402		5,157,432		229,195		1,192		5,387,819
Total ending loans balance	$	96,847	$	3,866,788	$	1,170,085	$	29,402	$	5,163,122	$	229,504	$	1,192		5,393,818

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Impaired Loans

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

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

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

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

	For the Year Ended December 31, 2019						For the Year Ended December 31, 2018
	Unpaid Principal Balance		Recorded Investment⁽¹⁾		Related Allowance		Unpaid Principal Balance		Recorded Investment⁽¹⁾		Related Allowance

With no related allowance recorded:
One-to-four Family Residential, Including Condominium and Cooperative Apartment	$	—	$	—	$	—	$	14	$	14	$	—
Multifamily Residential and Residential Mixed-Use		153		153		—		551		551		—
Commercial Real Estate and Commercial Mixed-Use		60		60		—		5,125		5,125		—
Total with no related allowance recorded		213		213		—		5,690		5,690		—

With related allowance recorded:
C&I		10,082		10,082		10,082		309		309		230
Total with related allowance recorded		10,082		10,082		10,082		309		309		230
Total	$	10,295	$	10,295	$	10,082	$	5,999	$	5,999	$	230

⁽¹⁾The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

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

	For the Year Ended December 31, 2019				For the Year Ended December 31, 2018				For the Year Ended December 31, 2017
	Average Recorded Investment⁽¹⁾		Interest Income Recognized⁽²⁾		Average Recorded Investment⁽¹⁾		Interest Income Recognized⁽²⁾		Average Recorded Investment⁽¹⁾		Interest Income Recognized⁽²⁾

With no related allowance recorded:
One-to-four Family Residential, Including Condominium and Cooperative Apartment	$	9	$	9	$	18	$	—	$	325	$	30
Multifamily Residential and Residential Mixed-Use		415		29		824		53		2,222		85
Commercial Real Estate and Commercial Mixed-Use		3,765		244		6,150		349		7,815		307
Total with no related allowance recorded		4,189		282		6,992		402		10,362		422

With related allowance recorded:
C&I		5,125		13		298		3		—		—
Total with related allowance recorded		5,125		13		298		3		—		—
Ending balance	$	9,314	$	295	$	7,290	$	405	$	10,362	$	422

(1)	The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

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

The following is a summary of the past due status of the Company’s investment in loans (excluding accrued interest) as of the dates indicated:

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

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

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	At December 31, 2018
	30 to 59 Days Past Due		60 to 89 Days Past Due		Accruing Loans 90 Days or More Past Due		Non- accrual ⁽¹⁾		Total Past Due		Current		Total Loans
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	312	$	—	$	—	$	712	$	1,024	$	95,823	$	96,847
Multifamily residential and residential mixed-use		—		—		100		280		380		3,866,408		3,866,788
Commercial real estate and commercial mixed-use		—		—		—		1,041		1,041		1,169,044		1,170,085
ADC		—		—		—		—		—		29,402		29,402
Total real estate		312		—		100		2,033		2,445		5,160,677		5,163,122
C&I		50		49		—		309		408		229,096		229,504
Consumer		12		1		—		3		16		1,176		1,192
Total	$	374	$	50	$	100	$	2,345	$	2,869	$	5,390,949	$	5,393,818

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

Accruing Loans 90 Days or More Past Due:

The Bank continued accruing interest on two real estate loans with an outstanding balance of $1,533 at December 31, 2019, and one real estate loan with an aggregate outstanding balance of $100 at December 31, 2018, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.

TDRs

There were no outstanding TDRs at December 31, 2019. The following table summarizes outstanding TDRs by underlying collateral type as of the dates indicated:

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

Accrual status for TDRs is determined separately for each TDR in accordance with the Bank’s policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in the Bank’s determination that a TDR has been created, the loan can be on either accrual or non-accrual status. If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least six months. Conversely, if at the time of restructuring the loan is performing (and accruing); it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under the Bank’s policy and agency regulations. There were no TDRs on non-accrual status at December 31, 2018.

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

There were no loans modified in a manner that met the criteria of a TDR during the year ended December 31, 2019, 2018 or 2017.

The Bank’s allowance for loan losses at December 31, 2019 and 2018 included no allocated reserve associated with TDRs. Activity related to reserves associated with TDRs was immaterial during the years ended December 31, 2019 and 2018.

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

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

There were no TDRs which defaulted within twelve months following the modification during the years ended December 31, 2019, 2018 or 2017 (thus no significant impact to the allowance for loan losses during those periods).

The Bank may grant short term extensions ranging from 6 to 12 months on certain loans to borrowers. These loans do not meet the definition of a TDR as they are modifications to borrowers who are not experiencing financial difficulty.

Credit Quality Indicators

On a quarterly basis, the Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit structure, loan documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying them as to credit risk. This analysis includes all loans, such as multifamily residential, mixed-use residential (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but 50% or more of such income is generated from the residential units), commercial real estate, mixed-use commercial real estate (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but over 50% of such income is generated from the commercial units), ADC, C&I, as well as all one-to- four family residential and cooperative and condominium apartment loans. The Company uses the following definitions for risk ratings:

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

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

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

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

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

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	Balance at December 31, 2,018
	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate:
One-to-four family residential, including condominium and cooperative apartment	$	95,782	$	—	$	1,065	$	—	$	96,847
Multifamily residential and residential mixed-use		3,829,643		32,682		4,463		—		3,866,788
Commercial real estate and commercial mixed-use		1,162,429		1,209		6,447		—		1,170,085
ADC		29,402		—		—		—		29,402
Total real estate		5,117,256		33,891		11,975		—		5,163,122
C&I		228,924		—		580		—		229,504
Total Real Estate and C&I	$	5,346,180	$	33,891	$	12,555	$	—	$	5,392,626

For consumer loans, the Company evaluates credit quality based on payment activity. Consumer loans that are 90 days or more past due are placed on non-accrual status, while all remaining consumer loans are classified and evaluated as performing. The following is a summary of the credit risk profile of consumer loans by internally assigned grade:

	At December 31,
	2019		2018
Performing	$	1,770	$	$1,189
Non-accrual		2		3
Total	$	$1,772	$	$1,192

8. LOAN SECURITIZATION

During the year ended December 31, 2017, the Bank completed a securitization of $280,186 of its multifamily loans through a Federal Home Loan Mortgage Corporation (“FHLMC”) sponsored “Q-deal” securitization completed in December 2017. As a result of the securitization, the Company recognized a gain of $1,261 from the sale of loans. Four classes of FHLMC guaranteed structured pass-through certificates were issued and purchased entirely by the Bank. As part of the securitization transaction, the Bank entered into a Servicing Agreement, general representations and warranties, and reimbursement obligations.

Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of tax and insurance, and otherwise administer the underlying loans. In connection with the securitization transaction, FHLMC was designated as the master servicer and appointed the Company to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with exception to the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third party institution that is independent of the master servicer and the Company. The master servicer has the right to terminate the Company in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Company to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Company breaches its representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution of the subject loan(s).

With respect to the securitization transaction, the Company also has continuing involvement through a reimbursement agreement executed with Freddie Mac. To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse FHLMC for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date. The Bank carried a liability of $420 as of both December 31, 2019 and December 31, 2018 for the exposure to the reimbursement agreement with FHLMC.

9. LOAN SERVICING ACTIVITIES

The Bank services real estate and C&I loans for others having principal balances outstanding of approximately $331,009 and $313,584 at December 31, 2019 and 2018, respectively. Loans serviced for others are not reported as assets. Servicing loans for others generally consists of collecting loan payments, maintaining escrow accounts, disbursing payments to investors, paying taxes and insurance and processing foreclosure. In connection with loans serviced for others, the Bank held borrowers’ escrow balances of $3,295 and $3,022 at December 31, 2019 and 2018, respectively.

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There are no restrictions on the Company’s consolidated assets or liabilities related to loans sold with servicing rights retained. Upon sale of these loans, the Company recorded an SRA in other assets, and has elected to account for the SRA under the “amortization method” prescribed under GAAP. At December 31, 2019, there is no associated valuation allowance for SRAs. The activity for SRAs for the periods indicated are as follows:

	Year Ended December 31,
	2019			2018			2017
Beginning of the year	$	1,315		$	1,594		$	152
Additions		509			72			1,491
Amortized to expense		(365	)		(351	)		(49	)
End of year	$	1,459		$	1,315		$	1,594

The fair-value of servicing rights approximates carrying value as of December 31, 2019. Fair value at December 31, 2019 was determined using a discount rates ranging from 5.0% to 12.0%, prepayment speeds ranging from 5% to 20%, depending on the stratification of the specific servicing right, and a weighted average default rate of 1.30%.

10. PREMISES AND FIXED ASSETS, NET AND PREMISES HELD FOR SALE

The following is a summary of premises and fixed assets, net:

	At December 31,
	2019			2018
Land	$	1,424		$	1,600
Buildings		10,630			10,934
Leasehold improvements		23,687			23,154
Furniture, fixtures and equipment		25,068			23,834
Premises and fixed assets, gross	$	60,809		$	59,522
Less: accumulated depreciation and amortization		(39,117	)		(34,809	)
Premises and fixed assets, net	$	21,692		$	24,713

Depreciation and amortization expense amounted to approximately $4,740, $3,903 and $3,310 during the years ended December 31, 2019, 2018 and 2017, respectively.

There were no sales of premises and fixed assets during the year ended December 31, 2019 or 2018. During the year ended December 31, 2017, the Company completed the sale of premises held for sale with an aggregate recorded balance of $1,379 at December 31, 2016. Net proceeds from the sale were $11,791, and a gain of $10,412 was recognized on the sale.

During the year ended December 31, 2019, the Company re-classified certain real estate utilized as a retail branch to premises held for sale. The aggregate recorded balance of the premises held for sale was $514 at December 31, 2019, the outstanding balance upon transfer. The net proceeds from the sale are expected to exceed the current book value.

11. LEASES

Maturities of the Company’s operating lease liabilities at December 31, 2019 are as follows:

	Rent to be Capitalized
2020	$	6,852
2021		6,774
2022		6,519
2023		5,553
2024		5,663
Thereafter		18,981
Total undiscounted lease payments		50,342
Less amounts representing interest		6,244
Lease liability	$	44,098

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Other information related to our operating leases was as follows:

		Year Ended December 31, 2019
Operating lease cost			6,588

	At December 31, 2019
Weighted average remaining lease term	8.08 years
Weighted average discount rate		3.25	%

The cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2019, was $6,907. During the year ended December 31, 2019, the Company obtained $1,547 of additional right-of-use assets in exchange for new operating lease liabilities.

12. FHLBNY CAPITAL STOCK

The Bank is a member of the FHLBNY. Membership requires the purchase of shares of FHLBNY capital stock at $100 per share. The Bank owned 560,186 shares and 575,508 shares at December 31, 2019 and 2018, respectively. The Bank recorded dividend income on the FHLBNY capital stock of $3,574, $3,610 and $2,555 during the years ended December 31, 2019, 2018 and 2017, respectively.

13. DUE TO DEPOSITORS

Deposits are summarized as follows:

	At December 31, 2019					At December 31, 2018
	Weighted Average Rate			Liability		Weighted Average Rate			Liability
Savings accounts		0.35	%	$	374,265		0.06	%	$	336,669
Certificates of deposit (“CDs”)		2.05			1,572,869		1.97			1,410,037
Money market accounts		1.03			1,705,451		1.43			2,098,599
Interest-bearing checking accounts		0.08			151,491		0.08			115,972
Non-interest bearing checking accounts		—			478,549		—			395,477
TOTAL		1.19	%	$	4,282,625		1.33	%	$	4,356,754

The following table presents a summary of scheduled maturities of CDs outstanding at December 31, 2019:

	Maturing Balance		Weighted Average Interest Rate
2020	$	1,313,361		2.06	%
2021		134,810		1.71
2022		92,034		2.43
2023		16,196		2.25
2024		11,827		1.85
2025 and beyond		4,641		1.59
TOTAL	$	1,572,869		2.05	%

CDs that met or exceeded the Federal Deposit Insurance Corporation (“FDIC”) Insurance limit of $250 were $317,650 and $287,834 December 31, 2019 and 2018, respectively.

14. DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

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

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company uses such derivatives to hedge the variable cash flows associated with existing or forecasted issuances of short term borrowings debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Loss and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in Accumulated Other Comprehensive Loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that an additional $1,421 will be reclassified as an increase to interest expense.

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

	At December 31, 2019									At December 31, 2018
	Count		Notional Amount		Fair Value Assets		Fair Value Liabilities			Count		Notional Amount		Fair Value Assets		Fair Value Liabilities
Included in other assets/(liabilities):
Interest rate swaps related to FHLBNY advances		7	$	130,000	$	1,081	$	—			7	$	135,000	$	4,669	$	—
Interest rate swaps related to FHLBNY advances		19		315,000		—		(7,718	)		7		110,000		—		(2,097	)

The table below presents the effect of the cash flow hedge accounting on Accumulated Other Comprehensive Loss as of December 31, 2019, 2018 and 2017.

	Year Ended December 31,
	2019			2018			2017
Interest rate products
Amount of gain (loss) recognized in other comprehensive income	$	(8,254	)	$	(758	)	$	511
Amount of (gain) loss reclassified from other comprehensive income into interest expense		(955	)		(692	)		283

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

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

As of December 31, 2019, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $6,747. If the Company had breached any of the above provisions at December 31, 2019, it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. There were no provisions breached for the period ended December 31, 2019.

Freestanding Derivatives

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

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

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

Loan level derivative income is recognized on the mark-to-market of the interest rate swap as a fair value adjustment at the time the transaction is closed. Total loan level derivative income for the year ended December 31, 2019 was $910.

The interest rate swap product with the borrower is cross collateralized with the underlying loan and therefore there is no posted collateral. Certain interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. As of December 31, 2019, posted collateral was $1,050.

15. FHLBNY ADVANCES

The Bank had borrowings from the FHLBNY (“Advances”) totaling $1,092,250 and $1,125,350 at December 31, 2019 and 2018, respectively, all of which were fixed rate. The average interest cost of FHLBNY Advances on a gross basis was 2.25%, 2.00%, and 1.60% during the years ended December 31, 2019, 2018 and 2017, respectively. The average interest cost of FHLBNY Advances on a net of swap impact basis was 2.16%, 1.93%, and 1.63% during the years ended December 31, 2019, 2018 and 2017, respectively. The average interest rate on outstanding FHLBNY Advances was 1.98% and 2.27% at December 31, 2019 and 2018, respectively. In accordance with its Advances, Collateral Pledge and Security Agreement with the FHLBNY, the Bank was eligible to borrow up to $1,806,604 as of December 31, 2019 and $2,145,563 as of December 31, 2018, and maintained sufficient qualifying collateral, as defined by the FHLBNY, with the FHLBNY (principally real estate loans), to secure Advances in excess of its borrowing limit at both December 31, 2019 and 2018. Certain FHLBNY Advances may contain call features that may be exercised by the FHLBNY. At December 31, 2019 there were no callable Advances. Prepayment penalties were associated with all fixed-rate Advances outstanding as of December 31, 2019 and 2018.

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During the year ended December 31, 2019, the Bank extinguished $313,900 of FHLBNY Advances that had a weighted average rate of 2.35%. The prepayment penalty expense was $3,780, recognized as a loss on the extinguishment of debt. There were no prepayments of FHLBNY Advances during the years ended December 31, 2018 or 2017.

The following table presents a summary of scheduled maturities of FHLBNY Advances outstanding at December 31, 2019:

	Maturing Balance		Weighted Average Interest Rate
2020		933,800		1.89	%
2021		130,150		2.39	%
2022		28,300		2.93	%
TOTAL	$	1,092,250		1.98	%

16. SUBORDINATED NOTES PAYABLE

During the year ended December 31, 2017, the Holding Company issued $115,000 of fixed-to-floating rate subordinated notes due June 2027, which become callable commencing on June 15, 2022. The notes will mature on June 15, 2027 (the “Maturity Date”). From and including June 13, 2017 until but excluding June 15, 2022, interest will be paid semi-annually in arrears on each June 15 and December 15 at a fixed annual interest rate equal to 4.50%. From and including June 15, 2022 to, but excluding, the Maturity Date or earlier redemption date, the interest rate shall reset quarterly to an annual interest rate equal to the then-current three-month LIBOR plus 266 basis points, payable quarterly in arrears. Debt issuance cost directly associated with subordinated debt offering was capitalized and netted with subordinated notes payable on the Consolidated Statements of Financial Condition. Interest expense related to the subordinated debt was $5,322, $5,322 and $2,937 during the years ended December 31, 2019, 2018, and 2017, respectively.

17. TRUST PREFERRED SECURITIES PAYABLE

On March 19, 2004, the Holding Company completed an offering of trust preferred securities through Dime Community Capital Trust I, an unconsolidated special purpose entity formed for the purpose of the offering. The trust preferred securities bear a fixed interest rate of 7.0%, mature on April 14, 2034, and became callable without penalty at any time on or after April 15, 2009. The outstanding balance of the trust preferred securities was $70,680 at December 31, 2016.

During the year ended December 31, 2017, the Company redeemed its $70,680 of trust preferred securities borrowings at par from third parties. The Company recognized a $1,272 loss from extinguishment of debt from the acceleration of the remaining unamortized deferred origination costs.

There was no interest expenses recorded on the trust preferred securities during the year ended December 31, 2019 or 2018. Interest expense recorded on the trust preferred securities totaled $2,708 during the year ended December 31, 2017.

18. OTHER BORROWINGS

Other borrowings consists of unsecured, overnight or short-term borrowings with member commercial banks within a network of financial institutions. The availability of funds changes daily. As of December 31, 2019, the Bank had $110,000 of such borrowings outstanding. Interest expense for the year ended December 31, 2019 was $226. There were no such borrowings during 2018 or 2017.

19. INCOME TAXES

The Company’s consolidated Federal, State and City income tax provisions were comprised of the following:

	Year Ended December 31, 2019									Year Ended December 31, 2018									Year Ended December 31, 2017
	Federal			State and City			Total			Federal			State and City			Total			Federal		State and City		Total
Current	$	10,129		$	2,930		$	13,059		$	12,226		$	4,008		$	16,234		$	20,818	$	5,523	$	26,341
Deferred		(1,437	)		(946	)		(2,383	)		(554	)		(253	)		(807	)		8,334		2,181		10,515
TOTAL	$	8,692		$	1,984		$	10,676		$	11,672		$	3,755		$	15,427		$	29,152	$	7,704	$	36,856

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The preceding table excludes tax effects recorded directly to stockholders’ equity in connection with unrealized gains and losses on securities available-for-sale (including losses on such securities upon their transfer to held-to-maturity), interest rate derivatives, and adjustments to other comprehensive income relating to the minimum pension liability, unrecognized gains of pension and other postretirement obligations and changes in the non-credit component of OTTI. These tax effects are disclosed as part of the presentation of the consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income.

The provision for income taxes differed from that computed at the Federal statutory rate as follows:

	Year Ended December 31,
	2019			2018			2017
Tax at Federal statutory rate	$	9,841		$	14,010		$	31,058
State and local taxes, net of federal income tax benefit		1,567			2,967			5,008
Benefit plan differences		(261	)		(312	)		(535	)
Adjustments for prior period returns and tax items		19			(693	)		84
Investment in BOLI		(594	)		(605	)		(776	)
Enactment of federal tax reform		—			—			3,135
Equity based compensation		(33	)		(128	)		(1,283	)
Other, net		137			188			165
TOTAL	$	10,676		$	15,427		$	36,856
Effective tax rate		22.78	%		23.12	%		41.53	%

Deferred tax assets and liabilities are recorded for temporary differences between the book and tax bases of assets and liabilities. The components of Federal, State and City deferred income tax assets and liabilities were as follows:

	At December 31,
	2019		2018
Deferred tax assets:
Allowance for loan losses		9,083		7,071
Employee benefit plans		6,988		6,809
Tax effect of purchase accounting fair value adjustments		270		291
Tax effect of other components of income on securities available-for-sale and derivatives		2,100		948
Operating lease liability		13,958		—
Other		3		2,112
Total deferred tax assets		32,402		17,231
Deferred tax liabilities:
Tax effect of other components of income on securities available-for-sale and derivatives		2,283		827
Difference in book and tax carrying value of fixed assets		1,486		1,497
Difference in book and tax basis of unearned loan fees		2,787		2,986
Operating lease asset		11,983		—
Other		571		527
Total deferred tax liabilities		19,110		5,837
Net deferred tax asset (recorded in other assets)	$	13,292	$	11,394

On December 22, 2017, the President signed into law the Tax Act. The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate federal tax rate from a maximum rate of 35% to a flat rate of 21%. The rate reduction took effect January 1, 2018.

Under generally accepted accounting principles, the Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. As a result of the reduction in the corporate income tax rate from 35% to 21%, the Company recorded tax expense of $3,135 during the year ended December 31, 2017.

Also on December 22, 2017, the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 118 (“SAB 118”) to address any uncertainty or diversity of views in practice in accounting for the income tax effects of the Act in situations where a registrant did not have the necessary information available, prepared, or analyzed in reasonable detail to complete this accounting in the reporting period that included the enactment date. SAB 118 allowed for a measurement period not to extend beyond one year from the Tax Act’s enactment date to complete the necessary accounting.

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As of December 31, 2017, the Company recorded provisional adjustments of income tax effects of certain elements of the Tax Act, such as the accelerated depreciation which allows for full expensing of qualified property purchased and placed into service after September 27, 2017 and the Company has made no adjustments to deferred tax assets representing future deductions for accrued compensation that may be subject to new limitations under Internal Revenue Code 162(m) which, generally, limits the annual deduction for certain compensation paid to certain employees to $1 million. The accounting for these items was finalized in 2018 with no material impact on income tax expense.

No valuation allowances were recognized on deferred tax assets during the years ended December 31, 2019 or 2018, since, at each period end, it was deemed more likely than not that the deferred tax assets would be fully realized.

At December 31, 2019 and 2018, the Bank had accumulated bad debt reserves totaling $15,158 for which no provision for income tax was required to be recorded. These bad debt reserves could be subject to recapture into taxable income under certain circumstances, including a distribution of the bad debt benefits to the Holding Company or the failure of the Bank to qualify as a bank for federal income tax purposes. Should the reserves as of December 31, 2019 be fully recaptured, the Bank would recognize $5,042 in additional income tax expense. The Company expects to take no action in the foreseeable future that would require the establishment of a tax liability associated with these bad debt reserves.

The Company is subject to regular examination by various tax authorities in jurisdictions in which it conducts significant business operations. The Company regularly assesses the likelihood of additional examinations in each of the tax jurisdictions resulting from ongoing assessments.

Under current accounting rules, all tax positions adopted are subjected to two levels of evaluation. Initially, a determination is made, based on the technical merits of the position, as to whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. In conducting this evaluation, management is required to presume that the position will be examined by the appropriate taxing authority possessing full knowledge of all relevant information. The second level of evaluation is the measurement of a tax position that satisfies the more-likely-than-not recognition threshold. This measurement is performed in order to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. The Company had no unrecognized tax benefits as of December 31, 2019 or 2018. The Company does not anticipate any material change to unrecognized tax benefits during the year ending December 31, 2020.

As of December 31, 2019, the tax years ended December 31, 2016, 2017, 2018, and 2019 remained subject to examination by all of the Company’s relevant tax jurisdictions. The 2015 tax year is subject to examination for New Jersey only. The Company is currently not under audit in any taxing jurisdictions.

20. KSOP

The Bank maintains the Dime Community Bank KSOP, which covers substantially all of its employees. The KSOP owned participant investments in Common Stock for the accounts of participants totaling $42,971 at December 31, 2019 and $41,863 at December 31, 2018.

The Bank made discretionary contributions totaling $1,900, $1,743 and $1,689 to eligible KSOP participants during the years ended December 31, 2019, 2018 and 2017, respectively. In 2019, this included safe harbor contributions of 3% made to eligible employees as well as an additional 2% discretionary contribution made to eligible employees. In 2018 and 2017, this included safe harbor contributions of 3% made to eligible employees as well as an additional 3% discretionary contribution made to eligible employees. These contributions were recognized as a component of salaries and employee benefits expense.

21. EMPLOYEE BENEFIT PLANS

Employee Retirement Plan

The Bank sponsors the Employee Retirement Plan, a tax-qualified, noncontributory, defined-benefit retirement plan. Prior to April 1, 2000, substantially all full-time employees of at least 21 years of age were eligible for participation after one year of service. Effective April 1, 2000, the Bank froze all participant benefits under the Employee Retirement Plan. For the years ended December 31, 2019 and 2018, the Bank used December 31^st as its measurement date for the Employee Retirement Plan.

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The funded status of the Employee Retirement Plan was as follows:

	At December 31,
	2019			2018
Accumulated benefit obligation at end of period	$	25,405		$	23,047
Reconciliation of Projected benefit obligation:
Projected benefit obligation at beginning of period	$	23,047		$	26,029
Interest cost		901			852
Actuarial (gain) loss		2,921			(2,293	)
Benefit payments		(1,464	)		(1,486	)
Settlements		—			(55	)
Projected benefit obligation at end of period		25,405			23,047

Plan assets at fair value (investments in trust funds managed by trustee)
Balance at beginning of period		22,557			25,361
Return on plan assets		4,048			(1,296	)
Contributions		61			33
Benefit payments		(1,464	)		(1,486	)
Settlements		—			(55	)
Balance at end of period		25,202			22,557
Funded status at end of year	$	(203	)	$	(490	)

The net periodic cost for the Employee Retirement Plan included the following components:

	Year Ended December 31,
	2019			2018			2017
Interest cost	$	901		$	852		$	936
Expected return on plan assets		(1,528	)		(1,719	)		(1,579	)
Amortization of unrealized loss		913			1,045			1,287
Net periodic cost	$	286		$	178		$	644

The change in Accumulated Other Comprehensive Loss that resulted from the Employee Retirement Plan is summarized as follows:

	At December 31,
	2019			2018
Balance at beginning of period	$	(8,018	)	$	(8,340	)
Amortization of unrealized loss		913			1,045
Loss recognized during the year		(401	)		(723	)
Balance at the end of the period	$	(7,506	)	$	(8,018	)
Period end component of accumulated other comprehensive loss, net of tax	$	5,131		$	5,456

Major assumptions utilized to determine the net periodic cost of the Employee Retirement Plan benefit obligations were as follows:

	At or for the Year Ended December 31,
	2019			2018			2017
Discount rate used for net periodic cost		4.04	%		3.38	%		3.82	%
Discount rate used to determine benefit obligation at period end		2.97			4.04			3.38
Expected long-term return on plan assets used for net periodic cost		7.00			7.00			7.00
Expected long-term return on plan assets used to determine benefit obligation at period end		7.00			7.00			7.00

The Employee Retirement Plan assets are invested in two diversified investment portfolios of the Pentegra Retirement Trust (the “Trust”). The Trust, a private placement investment trust, has been granted discretion by the Bank to determine the appropriate strategic asset allocations (as governed by its Investment Policy Statement) to meet estimated plan liabilities.

The Employee Retirement Plan’s asset allocation targets holding 65% of assets in equity securities via investment in the Long-Term Growth Equity Portfolio (“LTGE”), 34% in intermediate-term bonds via investment in the Long-Term Growth Fixed-Income Portfolio (“LTGFI”), and 1% in a cash equivalents portfolio (for liquidity). Asset rebalancing is performed at least annually, with interim adjustments when the investment mix varies in excess of 10% from the target.

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The LTGE is a diversified portfolio of seven registered mutual funds and five common collective trust funds. The LTGE holds a diversified mix of equity funds in order to gain exposure to the U.S. and non-U.S. equity markets. The common collective investment funds held by the LTGE were privately offered, and the Employee Retirement Plan’s investment in these common collective investment funds was therefore valued by the fund managers of each respective fund based on the Employee Retirement Plan’s proportionate share of units of beneficial interest in the respective funds. All of the common collective investment funds are audited, and the overwhelming majority of assets held in these funds (which derive the unit value of the common collective investment funds) are actively traded in established marketplaces. The seven registered mutual funds held by the LTGE are all actively traded on national securities exchanges and are valued at their quoted market prices.

The LTGFI is a diversified portfolio that invests in four intermediate-term bond funds, all of which are registered mutual funds. These mutual funds are actively traded on national securities exchanges and are valued at their quoted market prices.

The investment goal is to achieve investment results that will contribute to the proper funding of the Employee Retirement Plan by exceeding the rate of inflation over the long-term. In addition, investment managers for the trust function managing the assets of the Employee Retirement Plan are expected to provide a reasonable return on investment. Performance volatility is also monitored. Risk and volatility are further managed by the distinct investment objectives of each of the trust funds and the diversification within each fund.

The weighted average allocation by asset category of the assets of the Employee Retirement Plan was summarized as follows:

	At December 31,
	2019			2018
Asset Category
Equity securities		62	%		58	%
Debt securities (bond mutual funds)		35			39
Cash equivalents		3			3
Total		100	%		100	%

The allocation percentages in the above table were consistent with future planned allocation percentages as of December 31, 2019 and 2018, respectively.

The following tables present a summary of the Employee Retirement Plan’s investments measured at fair value on a recurring basis by level within the fair value hierarchy, as of the dates indicated. (See Note 24 for a discussion of the fair value hierarchy).

	Fair Value Measurements at December 31, 2019
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Mutual Funds (all registered and publicly traded) :
Domestic Large Cap	$	3,058	$	—	$	—	$	3,058
Domestic Mid Cap		1,320		—		—		1,320
Domestic Small Cap		933		—		—		933
International Equity		3,605		—		—		3,605
Fixed Income		8,874		—		—		8,874
Cash equivalents		612		—		—		612
Common collective investment funds:
Domestic Large Cap		—		5,214		—		5,214
Domestic Mid Cap		—		653		—		653
Domestic Small Cap		—		933		—		933
Total Plan Assets							$	25,202

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	Fair Value Measurements at December 31, 2018
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Mutual Funds (all registered and publicly traded) :
Domestic Large Cap	$	2,546	$	—	$	—	$	2,546
Domestic Mid Cap		1,080		—		—		1,080
Domestic Small Cap		737		—		—		737
International Equity		2,507		—		—		2,507
Fixed Income		8,756		—		—		8,756
Cash equivalents		650		—		—		650
Common collective investment funds:
Domestic Large Cap		—		4,295		—		4,295
Domestic Mid Cap		—		550		—		550
Domestic Small Cap		—		844		—		844
International Equity		—		592		—		592
Total Plan Assets							$	22,557

The expected long-term rate of return assumptions on Employee Retirement Plan assets were established based upon historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the Employee Retirement Plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn real annual rates of return in the ranges of 2.5% to 9.5% and (1.0)% to 6.0%, respectively. The long-term inflation rate was estimated to be 2.0%. When these overall return expectations were applied to the Employee Retirement Plan’s target allocation, the expected annual rate of return was determined to be 7.00% at both December 31, 2019 and 2018.

The Bank contributed $61 to the Employee Retirement Plan during the year ended December 31, 2019. The Bank expects to make contributions in the amount of $58 to the Employee Retirement Plan during the year ending December 31, 2020. During the year ending December 31, 2020, actuarial losses of $914 related to the Employee Retirement Plan are anticipated to be recognized as a component of net periodic cost.

Benefit payments are anticipated to be made as follows:

Year Ending December 31,	Amount
2020	$	1,508
2021		1,531
2022		1,509
2023		1,501
2024		1,508
2025 to 2029		7,027

BMP and Director Retirement Plan

The Holding Company and Bank maintain the BMP, which exists in order to compensate executive officers for any curtailments in benefits due to statutory limitations on benefit plans. As of December 31, 2019 and 2018, the BMP had investments, held in a rabbi trust, in the Common Stock of $2,860 and $2,334, respectively. Benefit accruals under the defined benefit portion of the BMP were suspended on April 1, 2000, when they were suspended under the Employee Retirement Plan.

Effective July 1, 1996, the Company established the Director Retirement Plan to provide benefits to each eligible outside director commencing upon the earlier of termination of Board service or at age 75. The Director Retirement Plan was frozen on March 31, 2005, and only outside directors serving prior to that date are eligible for benefits.

As of December 31, 2019 and 2018, the Bank used December 31^st as its measurement date for both the BMP and Director Retirement Plan.

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The combined funded status of the defined benefit portions of the BMP and the Director Retirement Plan was as follows:

	At December 31,
	2019			2018
Accumulated benefit obligation at end of period	$	9,360		$	9,596
Reconciliation of projected benefit obligation:
Projected benefit obligation at beginning of period	$	9,596		$	10,364
Interest cost		351			313
Benefit payments		(771	)		(770	)
Actuarial (gain) loss		184			(311	)
Projected benefit obligation at end of period		9,360			9,596
Plan assets at fair value:
Balance at beginning of period		—			—
Contributions		771			770
Benefit payments		(771	)		(770	)
Balance at end of period		—			—
Funded status at end of the year	$	(9,360	)	$	(9,596	)

The combined net periodic cost for the defined benefit portions of the BMP and the Director Retirement Plan included the following components:

	Year Ended December 31,
	2019		2018		2017
Interest cost	$	351	$	313	$	379
Amortization of unrealized loss		59		109		147
Net periodic cost	$	410	$	422	$	526

The combined change in Accumulated Other Comprehensive Loss that resulted from the BMP and Director Retirement Plan is summarized as follows:

	At December 31,
	2019			2018
Balance at beginning of period	$	(1,369	)	$	(1,789	)
Amortization of unrealized loss		59			109
Gain (Loss) recognized during the year		(184	)		311
Balance at the end of the period	$	(1,494	)	$	(1,369	)
Period end component of accumulated other comprehensive loss, net of tax	$	1,021		$	1,089

Major assumptions utilized to determine the net periodic cost and benefit obligations for both the BMP and Director Retirement Plan were as follows:

	At or For the Year Ended December 31,
	2019			2018			2017
Discount rate used for net periodic cost – BMP		3.80	%		3.13	%		3.46	%
Discount rate used for net periodic cost – Director Retirement Plan		3.84			3.17			3.53
Discount rate used to determine BMP benefit obligation at period end		2.60			3.80			3.13
Discount rate used to determine Director Retirement Plan benefit obligation at period end		2.68			3.84			3.17

Both the BMP and Director Retirement Plan are unfunded non-qualified benefit plans that are not anticipated to ever hold assets for investment. Any contributions made to either the BMP or Director Retirement Plan are expected to be used immediately to pay benefits that accrue. The Bank contributed and made benefit payments in the amount of $546 on behalf of the BMP and $224 on behalf of the Directors Retirement Plan during the year ending December 31, 2019.

In addition to benefit payments from the defined benefit plan component of the BMP discussed above, retired participants are eligible for distributions from the plan.

	For the Year Ended December 31,
	2019		2018		2017

Cash	$	24	$	514	$	4,629
Market value of Common Stock from Employee Stock Ownership Plan of BMP (685 shares, 102,074 shares, and 365,104 shares for December 31, 2019, 2018, and 2017, respectively)		13		1,963		7,151
Gross lump-sum distribution	$	37	$	2,477	$	11,828
Non-cash tax benefit	$	—	$	619	$	1,454

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Actuarial projections performed as of December 31, 2019 assumed the Bank will contribute $569 to the BMP and $263 to the Director Retirement Plan during the year ending December 31, 2020 in order to pay benefits due under the respective plans. During the year ending December 31, 2020, actuarial losses of $23 related to the BMP and $156 related to the Director Retirement Plan are anticipated to be recognized as a component of net periodic cost.

Combined benefit payments under the BMP and Director Retirement Plan, which reflect expected future service (as appropriate), are anticipated to be made as follows:

Year Ending December 31,	Amount

2020	$	832
2021		821
2022		808
2023		794
2024		809
2025 to 2029		3,688

There is no defined contribution cost incurred by the Holding Company or the Bank under the Director Retirement Plan. Defined contribution costs incurred by the Company related to the BMP were $230, $59, and $336 for the years ended December 31, 2019, 2018 and 2017, respectively.

Postretirement Benefit Plan

The Bank offers the Postretirement Benefit Plan to its retired employees who provided at least five consecutive years of credited service and were active employees prior to April 1, 1991, as follows:

(1)

Qualified employees who retired prior to April 1, 1991 receive the full medical coverage in effect at the time of retirement until their death at no cost to such retirees;

(2)

Qualified employees retiring on or after April 1, 1991 are eligible for medical benefits. Throughout retirement, the Bank will continue to pay the premiums for the coverage not to exceed the premium amount paid for the first year of retirement coverage. Should the premiums increase, the employee is required to pay the differential to maintain full medical coverage.

Postretirement Benefit Plan benefits are available only to full-time employees who commence or commenced collecting retirement benefits from the Retirement Plan immediately upon termination of service from the Bank. The Bank reserves the right at any time, to the extent permitted by law, to change, terminate or discontinue any of the group benefits, and can exercise the maximum discretion permitted by law in administering, interpreting, modifying or taking any other action with respect to the plan or benefits.

The Postretirement Plan was amended effective March 31, 2015 to eliminate plan participation for post-amendment retirees.

The funded status of the Postretirement Benefit Plan was as follows:

	At December 31,
	2019			2018
Accumulated benefit obligation at end of period	$	1,608		$	1,532
Reconciliation of projected benefit obligation:
Projected benefit obligation at beginning of period	$	1,532		$	1,768
Interest cost		56			54
Actuarial (gain) loss		186			(200	)
Benefit payments		(166	)		(90	)
Projected benefit obligation at end of period		1,608			1,532
Plan assets at fair value:
Balance at beginning of period		—			—
Contributions		166			90
Benefit payments		(166	)		(90	)
Balance at end of period		—			—
Funded status at end of year	$	(1,608	)	$	(1,532	)

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The Postretirement Benefit Plan net periodic cost included the following components:

	Year Ended December 31,
	2019			2018			2017
Interest cost	$	56		$	54		$	59
Amortization of unrealized loss		(20	)		(9	)		(14	)
Net periodic cost	$	36		$	45		$	45

The change in Accumulated Other Comprehensive Loss that resulted from the Postretirement Benefit Plan is summarized as follows:

	At December 31,
	2019			2018
Balance at beginning of period	$	394		$	203
Amortization of unrealized loss		(20	)		(9	)
Gain (loss) recognized during the year		(186	)		200
Balance at the end of the period	$	188		$	394
Period end component of accumulated other comprehensive loss, net of tax	$	(128	)	$	(255	)

Major assumptions utilized to determine the net periodic cost were as follows:

	At or for the Year Ended December 31,
	2019			2018			2017
Discount rate used for net periodic cost		3.82	%		3.16	%		3.48	%
Discount rate used to determine benefit obligation at period end		2.69			3.82			3.16

As of December 31, 2019, an escalation in the assumed medical care cost trend rates by 1% in each year would increase the net periodic cost by approximately $1. A decline in the assumed medical care cost trend rates by 1% in each year would decrease the net periodic cost by approximately $1.

As of December 31, 2019 and 2018, the Bank used December 31^st as its measurement date for the Postretirement Benefit Plan. The assumed medical care cost trend rate used in computing the accumulated Postretirement Benefit Plan obligation was 6.5% for 2019 and was assumed to decrease gradually to 5.0% in 2026 and remain at that level thereafter. An escalation in the assumed medical care cost trend rates by 1% in each year would increase the accumulated Postretirement Benefit Plan obligation by approximately $21. A decline in the assumed medical care cost trend rates by 1% in each year would reduce the accumulated Postretirement Benefit Plan obligation by approximately $20.

GAAP provides guidance on both accounting for the effects of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the “Modernization Act”) to employers that sponsor postretirement health care plans which provide prescription drug benefits, and measuring the accumulated postretirement benefit obligation (“APBO”) and net periodic postretirement benefit cost, and the effects of the Modernization Act on the APBO. The Company determined that the benefits provided by the Postretirement Benefit Plan are actuarially equivalent to Medicare Part D under the Modernization Act. The effects of an expected subsidy on payments made under the Postretirement Benefit Plan were treated as an actuarial gain for purposes of calculating the APBO as of December 31, 2019 and 2018. The Company remains in the process of claiming this subsidy from the government, and, as a result, the Bank cannot determine the amount of subsidy it will ultimately receive.

The Postretirement Benefit Plan is an unfunded non-qualified benefit plan that is not anticipated to ever hold assets for investment. Any contributions made to the Postretirement Benefit Plan are expected to be used immediately to pay benefits that accrue.

Benefit payments under the Postretirement Benefit Plan, which reflect expected future service (as appropriate), are expected to be made as follows:

Year Ending December 31,	Amount
2020	$	109
2021		102
2022		95
2023		85
2024		75
2025 to 2029		280

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22. STOCK-BASED COMPENSATION

Stock Option Activity

The Company has made stock option grants to outside Directors and certain officers under the Stock Plans. All option shares granted have a ten-year life. The option shares granted to the outside Directors vest over one year, while the option shares granted to officers vest ratably over four years. The exercise price of each option award was determined based upon the fair market value of the Common Stock on the respective grant dates. Compensation expense is determined based upon the fair value of the option shares on the respective dates of grant, as determined utilizing a recognized option pricing methodology. There was no compensation expense recorded during the years ended December 31, 2019, 2018, or 2017 as all options are fully vested.

There were no stock options granted during the years ended December 31, 2019, 2018 and 2017.

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

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Years		Aggregate Intrinsic Value
Options outstanding at January 1, 2018		157,546		$	15.53
Options granted		—			—
Options expired		(66,372	)		17.10
Options exercised		(18,779	)		17.50
Options outstanding at December 31, 2018		72,395		$	13.58		2.0	$	246

Options granted		—			—
Options exercised		(30,364	)		12.12
Options outstanding at December 31, 2019		42,031		$	14.63		1.4		263
Options vested and exercisable at December 31, 2019		42,031		$	14.63		1.4	$	263

Information related to stock options under the Stock Plans during each period is as follows:

	For the Year Ended December 31,
	2019		2018		2017
Cash received for option exercise cost	$	367	$	954	$	792
Income tax benefit recognized on options exercised		39		44		52
Intrinsic value of options exercised		229		167		314

The range of exercise prices and weighted-average remaining contractual lives of both outstanding and vested options (by option exercise cost) as of December 31, 2019 were as follows:

		Outstanding Options				Vested Options
		Amount		Weighted Average Contractual Years Remaining		Amount		Weighted Average Contractual Years Remaining
Exercise Prices:
$	12.75		7,121		0.3		7,121		0.3
$	13.86		9,776		2.3		9,776		2.3
$	15.46		25,134		1.3		25,134		1.3
Total			42,031		1.4		42,031		1.4

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Restricted Stock Awards

The Company has made restricted stock award grants to outside Directors and certain officers under the Stock Plans. Typically awards to outside Directors fully vest on the first anniversary of the grant date, while awards to officers may vest in equal installments over a three or four-year period or at the end of the four-year requisite period. All awards were made at the fair value of the Common Stock on the award date. Compensation expense on all restricted stock awards was thus recorded during the years ended December 31, 2019, 2018 and 2017 based upon the fair value of the shares on the respective dates of grant.

The following table presents a summary of activity related to the restricted stock awards granted under the Stock Plans, and changes during the periods indicated:

	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested allocated shares outstanding at January 1, 2018		150,567		$	18.85
Shares granted		63,612			19.72
Shares vested		(56,742	)		18.19
Shares forfeited		(9,202	)		18.84
Unvested allocated shares at December 31, 2018		148,235			19.48

Shares granted		171,163			19.89
Shares vested		(52,683	)		19.31
Shares forfeited		(10,140	)		19.47
Unvested allocated shares at December 31, 2019		256,575		$	19.79

Information related to restricted stock awards under the Stock Plans during each period is as follows:

	For the Year Ended December 31,
	2019		2018		2017
Compensation expense recognized	$	1,540	$	1,240	$	1,358
Income tax benefit recognized on vesting of awards		11		22		95
Weighted average remaining years for which compensation expense is to be recognized		2.8		2.4		2.7

LTIP

During the years ended December 31, 2019, 2018 and 2017, the Company established long term incentive award programs to certain officers that will ultimately be settled in performance shares.

For each award, threshold (50% of target), target (100% of target) and maximum (150% of target) payment opportunities are eligible to be earned over a three-year performance period based on the Company’s performance on certain measurement goals. Both the measurement goals and the peer group utilized to determine the Company’s performance are established at the onset of the measurement period and cannot be altered subsequently.

Performance based shares awarded to certain officers meet the criteria for equity-based accounting. The following table presents a summary of activity related to performance based equity awards and changes during the period:

	Number of Shares			Weighted- Average Grant-Date Fair Value
Maximum aggregate share payout at January 1, 2018		69,224		$	19.19
Shares granted		81,353			18.55
Shares vested		(3,536	)		18.83
Shares forfeited		(26,161	)		18.62
Maximum aggregate share payout at December 31, 2018		120,880			18.90

Shares granted		138,562			19.18
Shares vested		(2,276	)		17.35
Shares forfeited		(42,218	)		19.60
Maximum aggregate share payout at December 31, 2019		214,948		$	18.96
Minimum aggregate share payout		—		$	—
Likely aggregate share payout		92,373		$	19.18

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Information related to LTIP share awards under the Stock Plans during each period is as follows:

	For the Year Ended December 31,
	2019		2018		2017
Compensation expense recognized	$	132	$	207	$	329
Income tax benefit recognized on vesting of awards		—		2		—

Sales Incentive Awards

During the year ended December 31, 2018, the Company established the SIP, a sales incentive award program for certain officers, which meets the criteria for equity-based accounting. For each quarter an individual can earn their shares based on their sales performance in that quarter. The shares then vest one year from the quarter in which they are earned. Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. They are issued at the maximum opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.

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

	Number of Shares			Weighted- Average Grant-Date Fair Value
Maximum aggregate share payout at January 1, 2018		—		$	—
Shares granted		21,736			18.40
Shares vested		—			—
Shares forfeited		(13,585	)		18.40
Maximum aggregate share payout at December 31, 2018		8,151		$	18.40
Shares granted		45,682			19.15
Shares vested		(2,651	)		20.53
Shares forfeited		(31,786	)		19.02
Maximum aggregate share payout at December 31, 2019		19,396			19.15
Minimum aggregate share payout		—			—
Expected aggregate share payout		17,188		$	19.15

Information related to SIP share awards under the Stock Plans during each period is as follows:

	For the Year Ended
	2019		2018
Compensation expense recognized	$	171	$	77
Income tax benefit recognized on vesting of awards		1		—

23. COMMITMENTS AND CONTINGENCIES

Loan Commitments and Lines of Credit

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The contractual amounts of financial instruments with off-balance sheet risk at year-end were as follows:

	2019				2018
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Available lines of credit	$	—	$	186,176	$	—	$	102,110
Other loan commitments		3,803		33,086		16,450		133,608
Stand-by letters of credit		2,145		—		1,968		—

At December 31, 2019 and 2018, the Bank had outstanding firm loan commitments that were accepted by the borrower aggregating $36,890 and $150,058 respectively. Substantially all of the Bank’s commitments expire within three months of their acceptance by the prospective borrower. The credit risk associated with these commitments is based on the loan type which is comprised of multifamily residential, residential mixed use, commercial real estate, commercial mixed-use, C&I, and one-to-four family residential loans.

At December 31, 2019, the Bank had an available line of credit with the FHLBNY equal to its excess borrowing capacity. At December 31, 2019, this amount approximated $714,354.

Additionally, in connection with the Loan Securitization (see Note 8), 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 $28,000.

Litigation

The Company is subject to certain pending and threatened legal actions which arise out of the normal course of business. Litigation is inherently unpredictable, particularly in proceedings where claimants seek substantial or indeterminate damages, or which are in their early stages. The Company cannot predict with certainty the actual loss or range of loss related to such legal proceedings, the manner in which they will be resolved, the timing of final resolution or the ultimate settlement. Consequently, the Company cannot estimate losses or ranges of losses related to such legal matters, even in instances where it is reasonably possible that a loss will be incurred. In the opinion of management, after consultation with counsel, the resolution of all ongoing legal proceedings will not have a material adverse effect on the consolidated financial condition or results of operations of the Company. The Company accounts for potential losses related to litigation in accordance with GAAP.

24. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities

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

All MBS and agency notes available-for-sale are guaranteed either implicitly or explicitly by GSEs as of December 31, 2019 or 2018. In accordance with the Company’s investment policy, corporate securities are rated "investment grade" at the time of purchase and the financials of the issuers are reviewed annually. Obtaining market values as of December 31, 2019 or 2018 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.

Derivatives

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

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

			Fair Value Measurements at December 31, 2019 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds):
Domestic Equity Mutual Funds	$	1,657	$	1,657	$	—	$	—
International Equity Mutual Funds		420		420		—		—
Fixed Income Mutual Funds		3,817		3,817		—		—
Debt securities available-for-sale:
Agency Notes		19,935		—		19,935		—
Corporate Securities		28,596		—		28,596		—
Pass-through MBS issued by GSEs		247,483		—		247,483		—
Agency CMOs		254,981		—		254,981		—
Derivative – cash flow hedges		1,081		—		1,081		—
Derivative – freestanding derivatives		1,362		—		1,362		—
Financial Liabilities
Derivative – cash flow hedges		7,718		—		7,718		—
Derivative – freestanding derivatives		1,362		—		1,362		—

			Fair Value Measurements at December 31, 2018 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds):
Domestic Equity Mutual Funds	$	1,420	$	1,420	$	—	$	—
International Equity Mutual Funds		377		377		—		—
Fixed Income Mutual Funds		3,870		3,870		—		—
Debt securities available-for-sale:
Agency Notes		25,145		—		25,145
Corporate Securities		11,135		—		11,135		—
Pass-through MBS issued by GSEs		354,613		—		354,613		—
Agency CMOs		111,992		—		111,992		—
Derivative – cash flow hedges		4,669		—		4,669		—
Financial Liabilities
Derivative – cash flow hedges		2,097		—		2,097		—

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment), and are subject to fair value adjustments. Financial assets measured at fair value on a non-recurring basis include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. There were no impaired loans carried at fair value at December 31, 2019 or December 31, 2018.

Financial Instruments Not Measured at Fair Value

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

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

			Fair Value Measurements at December 31, 2018 Using
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total
Financial Assets:
Cash and due from banks	$	147,256	$	147,256	$	—	$	—	$	147,256
Loans, net		5,372,036		—		—		5,301,281		5,301,281
Accrued interest receivable		17,875		—		1,296		16,579		17,875
Financial Liabilities:
Savings, money market and checking accounts		2,946,717		2,946,717		—		—		2,946,717
CDs		1,410,037		—		1,407,747		—		1,407,747
Escrow and other deposits		85,234		85,234		—		—		85,234
FHLBNY Advances		1,125,350		—		1,119,548		—		1,119,548
Subordinated debt, net		113,759		—		110,346		—		110,346
Accrued interest payable		2,710		—		2,710		—		2,710

The methods and assumptions used to estimate fair values are described as follows:

Cash and Due From Banks

The fair value is assumed to be equal to their carrying value as these amounts are due upon demand (deemed a Level 1 valuation).

Loans, Net

In accordance with ASU 2016-01, the fair value of loans held for investment, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are considered a Level 3 classification.

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Accrued Interest Receivable

The estimated fair value of accrued interest receivable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial asset.

Deposits

The fair value of savings, money market, and checking accounts is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount), which has been deemed a Level 1 valuation. The fair value of CDs is based upon the present value of contractual cash flows using current interest rates for instruments of the same remaining maturity (deemed a Level 2 valuation).

Escrow and Other Deposits

The fair value of escrow and other deposits is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount), which has been deemed a Level 1 valuation.

FHLBNY Advances

The fair value of FHLBNY Advances is measured by the discounted anticipated cash flows through contractual maturity or next interest repricing date, or an earlier call date if, as of the valuation date, the borrowing is expected to be called (deemed a Level 2 valuation). The carrying amount of accrued interest payable on FHLBNY Advances is its fair value and is deemed a Level 2 valuation.

Subordinated Debt

The fair value of subordinated debt is estimated using discounted cash flow analyses based on then current borrowing rates for similar types of borrowing arrangements (deemed a Level 2 valuation), and is provided to the Company quarterly independently by a market maker in the underlying security. The fair value is shown net of capitalized issuance costs.

Other Borrowings

Other borrowings consists of overnight or short-term borrowings carried at amortized cost; equal to the amount payable on demand at the reporting date (deemed a level 1 valuation).

Accrued Interest Payable

The estimated fair value of accrued interest payable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial liability.

25. REGULATORY MATTERS

The Bank is subject to regulation, examination, and supervision by the New York State Department of Financial Services and the FDIC. The Holding Company is subject to regulation, examination, and supervision by the Board of Governors of the Federal Reserve System.

The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (the “Basel III Capital Rules”) became effective for the Holding Company and Bank on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based upon common equity tier 1 capital (“CET1”); b) 6.0% based upon tier 1 capital; and c) 8.0% based upon total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of average consolidated assets) of 4.0% is also required under the Basel III Capital Rules.

The Basel III Capital Rules additionally require institutions to retain a capital conservation buffer, composed entirely of CET1, of 2.5% above these required minimum capital ratio levels. Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers. Restrictions would begin phasing in where the banking organization’s capital conservation buffer was below 2.5% at the beginning of a quarter, and distributions and discretionary bonus payments would be completely prohibited if no capital conservation buffer exists. The implementation of the capital conservation buffer began on January 1, 2016 at 0.625% and increased by 0.625% each subsequent January 1, until it reached 2.5% on January 1, 2019. The capital conservation buffer was 1.875% and 1.25% at December 31, 2018 and 2017, respectively. Beginning on January 1, 2019, the Holding Company and the Bank effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based upon CET1; b) 8.5% based upon tier 1 capital; and c) 10.5% based upon total regulatory capital. In accordance with the Basel III Capital Rules, the Holding Company and the Bank have elected to exclude all permissible components of accumulated other comprehensive income from computing regulatory capital. Management believes, as of December 31, 2019 and 2018, the Holding Company and Bank met all capital requirements to which they were subject.

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The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from well capitalized to critically undercapitalized (although these items are not utilized to represent overall financial condition). The FDIC utilizes these categories of capital adequacy to determine various matters, including, but not limited to, prompt corrective action and deposit insurance premium assessment levels. Capital levels and adequacy classifications may also be subject to qualitative judgments by the Bank’s regulators regarding, among other factors, the components of capital and risk weighting. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions and asset growth are limited, and capital restoration plans are required. As of December 31, 2019 and 2018, the Bank satisfied all criteria necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. There have been no conditions or events since December 31, 2019 that management believes have changed the “well capitalized” categorization.

Actual and required capital amounts and ratios as of the dates indicated are presented below:

	Actual					For Capital Adequacy Purposes⁽¹⁾					To Be Categorized as “Well Capitalized”⁽¹⁾
As of December 31, 2019	Amount		Ratio			Amount		Minimum Ratio			Amount		Minimum Ratio
Tier 1 Capital / % of average total assets
Bank	$	629,723		10.15	%	$	248,093		4.0	%	$	310,116		5.0	%
Consolidated Company		547,060		8.79			248,963		4.0			N/A		N/A
Common equity Tier 1 capital / % of risk weighted assets
Bank		629,723		12.85			220,243		4.5			318,503		6.5	%
Consolidated Company		547,060		11.15			220,767		4.5			N/A		N/A
Tier 1 Capital / % of risk weighted assets
Bank		629,723		12.85			294,002		6.0			392,003		8.0
Consolidated Company		547,060		11.15			294,356		6.0			N/A		N/A
Total Capital / % of risk weighted assets
Bank		658,610		13.44			392,003		8.0			490,004		10.0
Consolidated Company		690,947		14.08			392,474		8.0			N/A		N/A

(1)	In accordance with the Basel III rules.

	Actual					For Capital Adequacy Purposes⁽¹⁾					To Be Categorized as “Well Capitalized”⁽¹⁾
As of December 31, 2018	Amount		Ratio			Amount		Minimum Ratio			Amount		Minimum Ratio
Tier 1 Capital / % of average total assets
Bank	$	640,386		10.31	%	$	248,447		4.0	%	$	310,559		5.0	%
Consolidated Company		552,943		8.92			247,842		4.0			N/A		N/A
Common equity Tier 1 capital / % of risk weighted assets
Bank		640,386		13.34			216,103		4.5			312,149		6.5
Consolidated Company		552,943		11.50			216,361		4.5			N/A		N/A
Tier 1 Capital / % of risk weighted assets
Bank		640,386		13.34			288,137		6.0			384,183		8.0
Consolidated Company		552,943		11.50			288,481		6.0			N/A		N/A
Total Capital / % of risk weighted assets
Bank		662,613		13.80			384,183		8.0			480,229		10.0
Consolidated Company		690,170		14.35			384,642		8.0			N/A		N/A

(1)	In accordance with the Basel III rules.

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26. UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following tables summarize the unaudited condensed consolidated results of operations for each of the quarters during the fiscal years ended December 31, 2019 and 2018:

	For the Three Months Ended
	March 31, 2019		June 30, 2019			September 30, 2019		December 31, 2019
Net interest income	$	35,324	$	36,504		$	36,196	$	39,397
Provision (credit) for loan losses		321		(449	)		11,228		6,240
Net interest income after provision for loan losses		35,003		36,953			24,968		33,157
Non-interest income		2,360		2,820			3,361		3,627
Non-interest expense		22,052		22,296			22,774		28,265
Income before income taxes		15,311		17,477			5,555		8,519
Income tax expense		3,810		4,442			850		1,574
Net income	$	11,501	$	13,035		$	4,705	$	6,945
EPS⁽¹⁾:
Basic	$	0.32	$	0.36		$	0.13	$	0.20
Diluted	$	0.32	$	0.36		$	0.13	$	0.19

(1)	The quarterly EPS amounts, when added, may not coincide with the full fiscal year EPS reported on the Consolidated Statements of Income due to differences in the computed weighted average shares outstanding as well as rounding differences.

	For the Three Months Ended
	March 31, 2018		June 30, 2018		September 30, 2018		December 31, 2018
Net interest income	$	38,015	$	36,134	$	35,028	$	37,150
Provision for loan losses		193		1,113		335		603
Net interest income after provision for loan losses		37,822		35,021		34,693		36,547
Non-interest income		3,244		2,237		2,221		1,821
Non-interest expense		21,734		20,827		21,585		22,745
Income before income taxes		19,332		16,431		15,329		15,623
Income tax expense		4,587		4,110		3,547		3,183
Net income	$	14,745	$	12,321	$	11,782	$	12,440
EPS ⁽¹⁾:
Basic	$	0.39	$	0.33	$	0.32	$	0.34
Diluted	$	0.39	$	0.33	$	0.32	$	0.34

(1)	The quarterly EPS amounts, when added, may not coincide with the full fiscal year EPS reported on the Consolidated Statements of Income due to differences in the computed weighted average shares outstanding as well as rounding differences.

27. CONDENSED HOLDING COMPANY ONLY FINANCIAL STATEMENTS

The following statements of condition as of December 31, 2019 and 2018, and the related statements of income and cash flows for the years ended December 31, 2019, 2018 and 2017, reflect the Holding Company’s investment in its wholly-owned subsidiary, the Bank, using, as deemed appropriate, the equity method of accounting:

DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF FINANCIAL CONDITION

	At December 31,
	2019		2018
ASSETS:
Cash and due from banks	$	25,580	$	20,467
Marketable equity securities at fair value		5,894		5,667
Investment in subsidiaries		679,421		689,523
Other assets		516		542
Total assets	$	711,411	$	716,199

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Subordinated debt, net	$	113,906	$	113,759
Other liabilities		747		359
Stockholders’ equity		596,758		602,081
Total liabilities and stockholders’ equity	$	711,411	$	716,199

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DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME⁽¹⁾

	Year Ended December 31,
	2019			2018			2017
Net interest loss	$	(5,147	)	$	(5,151	)	$	(5,427	)
Dividends received from Bank		52,500			8,000			8,000
Non-interest income (loss)		531			(302	)		249
Non-interest expense		(1,003	)		(814	)		(2,002	)
Income before income taxes and equity in undistributed earnings of direct subsidiaries		46,881			1,733			820
Income tax credit		1,785			2,021			3,274
Income before equity in undistributed earnings of direct subsidiaries		48,666			3,754			4,094
Equity in undistributed earnings of subsidiaries		(12,480	)		47,534			47,788
Net income	$	36,186		$	51,288		$	51,882

(1)	Other comprehensive income for the Holding Company approximated other comprehensive income for the consolidated Company during the years ended December 31, 2019, 2018 and 2017.

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DIME COMMUNITY BANCSHARES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2019			2018			2017
Cash flows from Operating Activities:
Net income	$	36,186		$	51,288		$	51,882
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of direct subsidiaries		12,480			(47,534	)		(47,788	)
Net (gain) loss on marketable equity and trading securities		(531	)		302			(169	)
Net accretion		147			147			81
Decrease in other assets		26			2,621			2,714
(Decrease) Increase in other liabilities		388			359			(994	)
Net cash provided by operating activities		48,696			7,183			5,726

Cash flows from Investing Activities:
Proceeds from sale of investment securities available-for-sale		—			274			377
Proceeds from the sale of marketable equity and trading securities		570			1,059			4,629
Purchases of investment securities available-for-sale and marketable equity securities		(266	)		(311	)		(145	)
Reimbursement from subsidiary, including purchases of investment securities available-for-sale		26			44			175
Net purchases of trading securities		—			—			(222	)
Principal collected on investment securities available-for-sale		—			42			49
Net cash provided by investing activities		330			1,108			4,863

Cash flows from Financing Activities:
Redemption of preferred stock		(1	)		—			(1	)
Proceeds from exercise of stock options		367			954			792
Repayment of Trust Preferred Securities		—			—			(70,680	)
Proceeds from subordinated debt issuance, net		—			—			113,531
Treasury shares repurchased		(24,191	)		(25,881	)		—
Release of Common Stock for equity awards		131			76			236
BMP shares of Common Stock received to satisfy distribution of retirement benefits		(133	)		(883	)		(3,905	)
Payments related to tax withholdings for equity awards		(4	)		—			—
Capital contribution to subsidiary		—			—			(20,000	)
Cash dividends paid to stockholders, net		(20,082	)		(20,813	)		(20,991	)
Net cash used in financing activities		(43,913	)		(46,547	)		(1,018	)

Net (decrease) increase in cash and due from banks		5,113			(38,256	)		9,571
Cash and due from banks, beginning of period		20,467			58,723			49,152
Cash and due from banks, end of period	$	25,580		$	20,467		$	58,723

28. SUBSEQUENT EVENTS

On February 5, 2020, the Company completed an underwritten public offering of 2,999,200 shares, or $74,980 in aggregate liquidation preference, of its 5.50% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Preferred Stock”), with a liquidation preference of $25.00 per share. The net proceeds received at the time of closing was $72,588. The Company will pay dividends from the original date of issuance, when, as, and if declared by its board of directors, at a fixed rate of 5.50% per annum, payable quarterly, in arrears, on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2020. The Preferred Stock is perpetual and has no stated maturity. The Company may redeem the Preferred Stock at its option at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after February 15, 2025 or within 90 days following a regulatory capital treatment event, as described in the prospectus supplement and accompanying prospectus relating to the offering.

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

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

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.01 per share	DCOM	The Nasdaq Stock Market, LLC
Preferred Stock, Series A, par value $0.01 per share	DCOMP	The Nasdaq Stock Market, LLC

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

Classes of Common Stock		Number of shares outstanding at March 12, 2020
$0.01 Par Value		34,406,513

Direct Subsidiaries of the Bank	Year / State of Incorporation	Primary Business Activities
Boulevard Funding Corp.	1981 / New York	Management and ownership of real estate.

DSBW Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in multifamily residential and commercial real estate loans.

DSBW Residential Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in one-to-four family real estate loans.

Dime Insurance Agency Inc. (f/k/a Havemeyer Investments, Inc.)	1997 / New York	Sale of non-FDIC insured investment products. Currently inactive.

Dime Reinvestment Corporation	2004 / Delaware	Community Development Entity. Currently inactive.

195 Havemeyer Corp.	2008 / New York	Management and ownership of real estate. Currently inactive.

DSB Holdings NY, LLC	2015 / New York	Management and ownership of real estate. Currently inactive.

		Page
	PART I
Item 1.	Business	4
	General	4
	Market Area and Competition	4
	Lending Activities	5
	Asset Quality	7
	Allowance for Loan Losses	9
	Investment Activities	10
	Sources of Funds	12
	Subsidiary Activities	12
	Personnel	13
	Federal, State and Local Taxation	13
	Regulation	14
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Mine Safety Disclosures	28
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements and Supplementary Data	50
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	50
Item 9A.	Controls and Procedures	50
Item 9B.	Other Information	51
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	52
Item 11.	Executive Compensation	52
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52
Item 13.	Certain Relationships and Related Transactions, and Director Independence	52
Item 14.	Principal Accounting Fees and Services	52
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	53
Item 16.	Form 10-K Summary	56
	Signatures	57

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs⁽¹⁾		Maximum Number of Shares that may Yet be Purchased Under the Programs ⁽¹⁾
October 2019		60,000	$	19.19		60,000		931,750
November 2019		165,500	$	19.74		165,500		766,250
December 2019		533,700	$	20.49		533,700		232,550