DIME COMMUNITY BANCSHARES, INC. Overview
Dime Community Bancshares, Inc. , aNew York corporation previously known as "Bridge Bancorp, Inc. ," is a bank holding company formed in 1988. On a parent-only basis, the Holding Company has minimal operations, other than as owner ofDime Community Bank .The Holding Company is dependent on dividends from its wholly-owned subsidiary,Dime Community Bank , its own earnings, additional capital raised, and borrowings as sources of funds. The information in this report reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The Bank also generates non-interest income, such as fee income on deposit and loan accounts, merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans. The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank's title insurance subsidiary, and income tax expense, further affects our net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity.
Completion of Merger of Equals
OnFebruary 1, 2021 ,Dime Community Bancshares, Inc. , aDelaware corporation ("Legacy Dime") merged with and intoBridge Bancorp, Inc. , aNew York corporation ("Bridge") (the "Merger"), with Bridge as the surviving corporation under the name "Dime Community Bancshares, Inc. " (the "Holding Company"). At the effective time of the Merger (the "Effective Time"), each outstanding share of Legacy Dime common stock, par value$0.01 per share, was converted into the right to receive 0.6480 shares of the Holding Company's common stock, par value$0.01 per share. At the Effective Time, each outstanding share of Legacy Dime's Series A preferred stock, par value$0.01 (the "Dime Preferred Stock"), was converted into the right to receive one share of a newly created series of the Holding Company's preferred stock having the same powers, preferences and rights as the Dime Preferred Stock. Immediately following the Merger,Dime Community Bank , aNew York -chartered commercial bank and a wholly-owned subsidiary of Legacy Dime, merged with and intoBNB Bank , aNew York -chartered trust company and a wholly-owned subsidiary of Bridge, withBNB Bank as the surviving bank, under the name "Dime Community Bank " (the "Bank"). COVID-19 Pandemic Response Following theMarch 2020 passage of the Paycheck Protection Program ("PPP"), administered by the SBA, the Company participated in assisting its customers with applications for resources through the program. Since the inception of the program, the consolidated PPP originations for the Company throughDecember 31, 2021 , including originations by both Legacy Dime and Bridge, exceeded$1.90 billion . The Company's ability to respond quickly to the SBA guidelines allowed the Company to be a source of funding for local businesses during the COVID-19 pandemic. The Company's SBA PPP loans generally have a two-year or five-year term and earn interest at 1%. Following the completion of the PPP, the Company sold its 2021 PPP loan originations in order to re-deploy funds into ongoing loan portfolio growth. The Company believes that the remainder of its SBA PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As ofJune 30, 2022 , the Company had SBA PPP loans totaling$18.9 million , net of deferred fees. It is the Company's expectation that loans funded through the PPP are fully guaranteed by theU.S. government.
We continue to monitor unfunded commitments through the pandemic, including commercial and home equity lines of credit, for evidence of increased credit exposure as borrowers utilize these lines for liquidity purposes.
It is possible that there will be continued material, adverse impacts to
significant estimates, asset valuations, and business operations, including
intangible assets, investments, loans, deferred tax assets, and derivative
counter party risk, changes in consumer behavior, and supply chain interruptions
as a result of the COVID-19 pandemic. Future government actions in response to
the COVID-19 pandemic, including vaccination mandates, may also affect our
workforce, human capital resources, and infrastructure.
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Selected Financial Highlights and Other Data
(Dollars in Thousands Except Per Share Amounts)
At or For the At or For the
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Per Share Data:
Reported EPS (Diluted) $ 0.94 $ 1.19 $ 1.76 $ 0.70 Cash dividends paid per common share 0.24 0.24
0.48 0.48 Book value per common share 26.41 26.43 26.41 26.43 Dividend payout ratio 25.53 % 20.17 % 27.27 % 68.57 % Performance and Other Selected Ratios: Return on average assets 1.27 % 1.61 % 1.20 % 0.45 % Return on average equity 13.44 17.22 12.47 4.79 Net interest spread 3.12 2.99 3.09 2.98 Net interest margin 3.29 3.12 3.24 3.13 Average interest-earning assets to average interest-bearing liabilities 166.61 154.90 166.19 149.85 Non-interest expense to average assets 1.71 1.72 1.67 2.35 Efficiency ratio 49.1 44.7 50.4 71.2 Loan-to-deposit ratio at end of period 91.4 86.3
91.4 86.3 Effective tax rate 28.41 28.94 28.25 31.32 Asset Quality Summary: Non-performing loans (1)$ 36,301 $ 28,286 $ 36,301 $ 28,286 Non-performing assets 36,301 28,286 36,301 28,286 Net charge-offs 555 917 3,139 5,192
Non-performing assets/Total assets 0.29 % 0.22 % 0.29 % 0.22 % Non-performing loans/Total loans 0.38 0.30 0.38 0.30 Allowance for credit losses/Total loans 0.82 0.97
0.82 0.97 Allowance for credit losses/Non-performing loans 218.80 327.94 218.80 327.94
(1) Non-performing loans are defined as all loans on non-accrual status.
Critical Accounting Estimates
Note 1. Summary of Significant Accounting Policies, to the Company's Audited Consolidated Financial Statements in its Annual Report on Form 10-K for the year endedDecember 31, 2021 contains a summary of significant accounting policies. These accounting policies may require various levels of subjectivity, estimates or judgment by management. Policies with respect to the methodologies it uses to determine the allowance for credit losses on loans held for investment and fair value of loans acquired in a business combinations are critical accounting policies because they are important to the presentation of the Company's consolidated financial condition and results of operations. These critical accounting estimates involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions or estimates could result in material variations in the Company's consolidated results of operations or financial condition.
Management has reviewed the following critical accounting estimates and related disclosures with its Audit Committee.
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Allowance for Credit Losses on Loans Held for Investment
Methods and Assumptions Underlying the Estimate
OnJanuary 1, 2021 , we adopted the CECL Standard, which requires that loans held for investment be accounted for under the current expected credit losses model. The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in our loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis, and additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining the allowance for credit losses for loans that share similar risk characteristics, the Company utilizes a model which compares the amortized cost basis of the loan to the net present value of expected cash flows to be collected. Expected credit losses are determined by aggregating the individual cash flows and calculating a loss percentage by loan segment, or pool, for loans that share similar risk characteristics. For a loan that does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Within the model, assumptions are made in the determination of probability of default, loss given default, reasonable and supportable economic forecasts, prepayment rate, curtailment rate, and recovery lag periods. Management assesses the sensitivity of key assumptions at least annually by stressing the assumptions to understand the impact on the model. Statistical regression is utilized to relate historical macro-economic variables to historical credit loss experience of the peer group. These models are then utilized to forecast future expected loan losses based on expected future behavior of the same macro-economic variables. Adjustments to the quantitative results are adjusted using qualitative factors. These factors include: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due loans; (6) the quality of our loan review system; (7) the value of underlying collateral for collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. For loans that do not share risk characteristics, the Company evaluated the loan on an individual basis based on various factors. Factors that may be considered are borrower delinquency trends and non-accrual status, probability of foreclosure or note sale, changes in the borrower's circumstances or cash collections, borrower's industry, or other facts and circumstances of the loan or collateral. The expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For collateral dependent loans, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, less estimated costs to sell.
Uncertainties Regarding the Estimate
Estimating the timing and amounts of future losses is subject to significant management judgment as these projected cash flows rely upon the estimates discussed above and factors that are reflective of current or future expected conditions. These estimates depend on the duration of current overall economic conditions, industry, borrower, or portfolio specific conditions. Volatility in certain credit metrics and differences between expected and actual outcomes are to be expected. Customers may not repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. Bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or loan charge-offs.
Impact on Financial Condition and Results of Operations
If our assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in the loan portfolio, resulting in additions to the allowance. Future additions or reductions to the allowance
may
be necessary
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based on changes in economic, market or other conditions. Changes in estimates
could result in a material change in the allowance through charges to earnings
would materially decrease our net income.
We may experience significant credit losses if borrowers experience financial difficulties, which could have a material adverse effect on our operating results.
In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.
Fair value of loans acquired in a business combination
Methods and Assumptions Underlying the Estimate
OnFebruary 1, 2021 , Legacy Dime merged with and into Bridge in a merger of equals business combination accounted for as a reverse merger using the acquisition method of accounting (see Note 2. Merger). As a result of the Merger, the Company recorded$100.2 million of goodwill, based on the fair value of acquired assets and liabilities of Bridge. The fair value often involved third-party estimates utilizing input assumptions by management which may be complex or uncertain. The fair value of acquired loans is based on a discounted cash flow methodology that considers factors such as type of loan and related collateral, and requires management's judgment on estimates about discount rates, expected future cash flows, market conditions and other future events. For purchased financial loans with credit deterioration ("PCD"), an estimate of expected credit losses was made for loans with similar risk characteristics and was added to the purchase price to establish the initial amortized cost basis of the PCD loans. Any difference between the unpaid principal balance and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans.
Uncertainties Regarding the Estimate
Management relied on economic forecasts, internal valuations, or other relevant factors which were available at the time of the Merger in the determination of the assumptions used to calculate the fair value of the acquired loans. The estimates about discount rates, expected future cash flows, market conditions and other future events are subjective and may differ from estimates.
Impact on Financial Condition and Results of Operations
The estimate of fair values on acquired loans contributed to the recorded goodwill from the Merger. In future income statement periods, interest income on loans will include the amortization and accretion of any premiums and discounts resulting from the fair value of acquired loans. Additionally, the provision for credit losses on acquired individually analyzed PCD loans may be impacted due to changes in the assumptions used to calculated expected cash flows.
Liquidity and Capital Resources
The Board of Directors of the Bank has approved a liquidity policy that it
reviews and updates at least annually. Senior management is responsible for
implementing the policy. The Bank's Asset Liability Committee ("ALCO") is
responsible for general oversight and strategic implementation of the policy and
management of the appropriate departments are designated responsibility for
implementing any strategies established by ALCO. On a daily basis, appropriate
senior management receives a current cash position report and one-week forecast
to ensure that all short-term obligations are timely satisfied and that adequate
liquidity exists to fund future activities. Reports detailing the Bank's
liquidity reserves are presented to appropriate senior management on a monthly
basis, and the Board of Directors at each of its meetings. In
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addition, a twelve-month liquidity forecast is presented to ALCO in order to assess potential future liquidity concerns. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis. Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise. The Bank's primary sources of funding for its lending and investment activities include deposits, loan and MBS payments, investment security principal and interest payments and advances from the FHLBNY. The Bank may also sell or securitize selected multifamily residential, mixed-use or one-to-four family residential real estate loans to private sector secondary market purchasers, and has in the past sold such loans toFNMA and FHLMC. The Company may additionally issue debt or equity under appropriate circumstances. Although maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and prepayments on real estate loans and MBS are influenced by interest rates, economic conditions and competition.
The Bank is a member of AFX, through which it may either borrow or lend funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily.
The Bank utilizes repurchase agreements as part of its borrowing policy to add liquidity. Repurchase agreements represent funds received from customers, generally on an overnight basis, which are collateralized by investment securities. As ofJune 30, 2022 andDecember 31, 2021 , the Bank's repurchase agreements totaling$2.2 million and$1.9 million , respectively, were included in other short-term borrowings on the consolidated balance sheets. The Bank gathers deposits in direct competition with commercial banks, savings banks and brokerage firms, many among the largest in the nation. It must additionally compete for deposit monies against the stock and bond markets, especially during periods of strong performance in those arenas. The Bank's deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as theU.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 increased$107.0 million during the six months endedJune 30, 2022 compared to an increase of$6.54 billion for the six months endedJune 30, 2021 . The increase in total deposits during the 2021 period was primarily due to the acquisition of deposits in the Merger. Within deposits, core deposits (i.e., non-CDs) increased$957 thousand during the six months endedJune 30, 2022 and increased$6.56 billion during the six months endedJune 30, 2021 . CDs increased$106.1 million during the six months endedJune 30, 2022 compared to a decrease of$21.7 million during the six months endedJune 30, 2021 . The increase in CDs during the current period was primarily due an$87.7 million increase in brokered CDs. In the event that the Bank should require funds beyond its ability or desire to generate them internally, an additional source of funds is available through its borrowing line at the FHLBNY or borrowing capacity through AFX and lines of credit with unaffiliated correspondent banks. AtJune 30, 2022 , the Bank had an additional unused borrowing capacity of$2.76 billion through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank's outstanding FHLBNY borrowings). The Bank increased its outstanding FHLBNY advances by$75.0 million during the six months endedJune 30, 2022 , compared to a$1.18 billion decrease during the six months endedJune 30, 2021 . The decrease in borrowings during the 2021 period was primarily due to a reduction of borrowings assumed in the Merger. See Note 13. "FHLBNY Advances" for further information. During the six months endedJune 30, 2022 and 2021, real estate loan originations totaled$1.34 billion and$762.0 million , respectively. During the six months endedJune 30, 2022 and 2021, C&I loan originations totaled$49.9 million and$641.1 million , respectively. The decrease in C&I loan originations during the 2022 period was primarily due to PPP loan originations of$609.7 million during the six months endedJune 30, 2021 . The PPP program ended onMay 31, 2021 . The Bank did not have proceeds from sales of securities available-for-sale during the six months endedJune 30, 2022 . Proceeds from sales of available-for-sale securities totaled$137.6 million during the six months endedJune 30, 2021 . Purchases of available-for-sale securities totaled$6.2 million and$508.3 million during the six months endedJune 30 , 43
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2022 and 2021, respectively. Proceeds from pay downs and calls and maturities of available-for-sale securities were$112.2 million and$290.4 million for the six months endedJune 30, 2022 and 2021, respectively. The Bank did not have proceeds from sales of held-to-maturity securities during the six months endedJune 30, 2022 . Purchases of held-to-maturity securities totaled$41.6 million during the six months endedJune 30, 2022 . Proceeds from pay downs and calls and maturities of held-to-maturity securities were$14.1 million for the six months endedJune 30, 2022 . The Bank did not have securities held-to-maturity during the six months endedJune 30, 2021 . The Company and the Bank are subject to minimum regulatory capital requirements imposed by its primary federal regulator. As a general matter, these capital requirements are based on the amount and composition of an institution's assets. AtJune 30, 2022 , each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered "well capitalized" for all regulatory purposes.
The following table summarizes Company and Bank capital ratios calculated under the Basel III Capital Rules framework as of the period indicated:
Actual Ratios at June 30, 2022
Basel III
Consolidated Minimum To Be Categorized as
Bank Company Requirement "Well Capitalized" (1)Tier 1 common equity ratio 12.4 % 9.3 % 4.5 % 6.5 % Tier 1 risk-based capital ratio 12.4 10.4 6.0 8.0 Total risk-based capital ratio 13.2 13.3
8.0 10.0
Tier 1 leverage ratio 10.3 8.7 4.0 5.0
(1) Only the Bank is subject to these requirements.
During the six months endedJune 30, 2022 , the Holding Company repurchased 1,222,649 shares of its common stock at an aggregate cost of$40.3 million .The Holding Company repurchased 424,121 shares of its common stock at an aggregate cost of$14.6 million during the six months endedJune 30, 2021 . As ofJune 30, 2022 , up to 1,812,352 shares remained available for purchase under the authorized share repurchase programs. See "Part II - Item 2. Other Information - Unregistered Sales ofEquity Securities and Use of Proceeds" for additional information about repurchases of common stock.
Contractual Obligations
The Bank generally has outstanding at any time borrowings in the form of FHLBNY advances, short-term or overnight borrowings, subordinated debt, as well as customer CDs with fixed contractual interest rates. In addition, the Bank is obligated to make rental payments under leases on certain of its branches and equipment.
Off-Balance Sheet Arrangements
As part of its loan origination business, the Bank generally has outstanding commitments to extend credit to borrowers, which are originated pursuant to its regular underwriting standards. Available lines of credit may not be drawn on or may expire prior to funding, in whole or in part, and amounts are not estimates of future cash flows. As ofJune 30, 2022 , the Bank had$382.0 million of firm loan commitments that were accepted by the borrowers. All of these commitments are expected to close during the remainder of the year endedDecember 31, 2022 . 44 Table of Contents
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$28.1 million of available-for-sale pass-through MBS issued by GSEs as collateral. Asset Quality General We do not originate or purchase loans, either whole loans or loans underlying mortgage-backed securities ("MBS"), which would have been considered subprime loans at origination, i.e., real estate loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history. See Note 7 to our unaudited condensed consolidated financial statements for a discussion of evaluation for impaired securities.
Monitoring and Collection of Delinquent Loans
Our management reviews delinquent loans on a monthly basis and reports to our Board of Directors at each regularly scheduled Board meeting regarding the status of all non-performing and otherwise delinquent loans in our loan portfolio.
Our loan servicing policies and procedures require that an automated late notice
be sent to a delinquent borrower as soon as possible after a payment is ten days
late in the case of multifamily residential, commercial real estate loans, and
C&I loans, or fifteen days late in connection with one-to-four family or
consumer loans. Thereafter, periodic letters are mailed and phone calls placed
to the borrower until payment is received. When contact is made with the
borrower at any time prior to foreclosure, we will attempt to obtain the full
payment due or negotiate a repayment schedule with the borrower to avoid
foreclosure.
Accrual of interest is generally discontinued on a loan that meets any of the
following three criteria: (i) full payment of principal or interest is not
expected; (ii) principal or interest has been in default for a period of 90 days
or more (unless the loan is both deemed to be well secured and in the process of
collection); or (iii) an election has otherwise been made to maintain the loan
on a cash basis due to deterioration in the financial condition of the borrower.
Such non-accrual determination practices are applied consistently to all loans
regardless of their internal classification or designation. Upon entering
non-accrual status, we reverse all outstanding accrued interest receivable.
We generally initiate foreclosure proceedings on real estate loans when a loan
enters non-accrual status based upon non-payment, unless the borrower is paying
in accordance with an agreed upon modified payment agreement. We obtain an
updated appraisal upon the commencement of legal action to calculate a potential
collateral shortfall and to reserve appropriately for the potential loss. If a
foreclosure action is instituted and the loan is not brought current, paid in
full, or refinanced before the foreclosure action is completed, the property
securing the loan is transferred to Other Real Estate Owned ("OREO") status. We
generally attempt to utilize all available remedies, such as note sales in lieu
of foreclosure, in an effort to resolve non-accrual loans and OREO properties as
quickly and prudently as possible in consideration of market conditions, the
physical condition of the property and any other mitigating circumstances. We
have not initiated any expected or imminent foreclosure proceedings that are
likely to have a material adverse impact on our consolidated financial
statements. In the event that a non-accrual loan is subsequently brought
current, it is returned to accrual status once the doubt concerning
collectability has been removed and the borrower has demonstrated performance in
accordance with the loan terms and conditions for a period of generally at least
six months.
The C&I portfolio is actively managed by our lenders and underwriters. Most
credit facilities typically require an annual review of the exposure and
borrowers are required to submit annual financial reporting and loans are
structured with financial covenants to indicate expected performance levels.
Smaller C&I loans are monitored based on performance and the ability to draw
against a credit line is curtailed if there are any indications of credit
deterioration. Guarantors are also required to update their financial reporting.
All exposures are risk rated and those entering adverse ratings due to financial
performance concerns of the borrower or material delinquency of any payments or
financial reporting are subjected to added management scrutiny. Measures taken
typically include amendments to the amount of the available credit facility,
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requirements for increased collateral, additional guarantor support or a
material enhancement to the frequency and quality of financial reporting. Loans
determined to reach adverse risk rating standards are monitored closely by
Credit Administration to identify any potential credit losses. When warranted,
loans reaching a Substandard rating could be reassigned to the Workout Group for
direct handling.
Non-accrual Loans
Within our held-for-investment loan portfolio, non-accrual loans totaled
The following is a reconciliation of non-accrual loans as of the dates
indicated:
June 30, December 31, June 30,
2022 2021 2021
(Dollars in thousands)
Non-accrual loans:
One-to-four family residential, including
condominium and cooperative apartment $ 3,128 $ 7,623 $ 4,933
Multifamily residential and residential
mixed-use real estate - - -
CRE 5,020 5,053 9,152
Acquisition, development, and construction 657 - - C&I 27,365 27,266 14,109 Other 131 365 92 Total non-accrual loans$ 36,301 $ 40,307 $ 28,286 Ratios:
Total non-accrual loans to total loans 0.38 % 0.44 % 0.30 % Total non-performing assets to total assets 0.29
0.33 0.22 TDRs We are required to recognize loans for which certain modifications or concessions have been made as TDRs. A TDR has been created in the event that, for economic or legal reasons, any of the following concessions has been granted that would not have otherwise been considered to a debtor experiencing financial difficulties. The following criteria are considered concessions:
? A reduction of interest rate has been made for the remaining term of the loan
? The maturity date of the loan has been extended with a stated interest rate
lower than the current market rate for new debt with similar risk
? The outstanding principal amount and/or accrued interest have been reduced
In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.
The Bank modified six loans and two loans in a manner that met the criteria for
a TDR by granting payment deferrals to borrowers experiencing financial
difficulties during the six months ended
Accrual status for TDRs is determined separately for each TDR in accordance with
our policies for determining accrual or non-accrual status. At the time an
agreement is entered into between the Bank and the borrower that results in our
determination that a TDR has been created, the loan can be on either accrual or
non-accrual status. If a loan is on non-accrual status at the time it is
restructured, it continues to be classified as non-accrual until the borrower
has demonstrated compliance with the modified loan terms for a period of at
least six months. Conversely, if at the time of restructuring the loan is
performing (and accruing) it will remain accruing throughout its restructured
period, unless the loan subsequently meets any of the criteria for non-accrual
status under our policy and agency regulations. Within the allowance for credit
losses, losses are estimated for TDRs on accrual status and well as TDRs on
non-accrual status that are one-to-four family
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loans or consumer loans, on a pooled basis with loans that share similar risk
characteristics. TDRs on non-accrual status excluding one-to-four family and
consumer loans are individually evaluated to determine expected credit losses.
For collateral-dependent TDRs where we have determined that foreclosure of the
collateral is probable, or where the borrower is experiencing financial
difficulty and we expect repayment of the loan to be provided substantially
through the operation or sale of the collateral, the allowance for credit losses
("ACL") is measured based on the difference between the fair value of
collateral, less the estimated costs to sell, and the amortized cost basis of
the loan as of the measurement date. For non-collateral-dependent loans, the ACL
is measured based on the difference between the present value of expected cash
flows and the amortized cost basis of the loan as of the measurement date.Please refer to Note 8 to the condensed consolidated financial statements for a further discussion of TDRs.
OREO Property acquired by the Bank, or a subsidiary, as a result of foreclosure on a mortgage loan or a deed in lieu of foreclosure is classified as OREO. Upon entering OREO status, we obtain a current appraisal on the property and reassesses the likely realizable value (a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period. We typically seek to dispose of OREO properties in a timely manner. As a result, OREO properties have generally not warranted subsequent independent appraisals.
There was no carrying value of OREO properties on our consolidated balance
sheets at
Past Due Loans
Loans Delinquent 30 to 59 Days
AtJune 30, 2022 , we had loans totaling$35.9 million that were past due between 30 and 59 days. AtDecember 31, 2021 , we had loans totaling$61.2 million that were past due between 30 and 59 days. The 30 to 59-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.
Loans Delinquent 60 to 89 Days
AtJune 30, 2022 , we had loans totaling$1.4 million that were past due between 60 and 89 days. AtDecember 31, 2021 , we had loans totaling$12.1 million that were past due between 60 and 89 days. The 60 to 89-day delinquency levels fluctuate monthly, and are generally considered a less accurate indicator of near-term credit quality trends than non-accrual loans.
Accruing Loans 90 Days or More Past Due
We continued accruing interest on three loans with an aggregate outstanding balance of$365 thousand atJune 30, 2022 , and nine loans with an aggregate outstanding balance of$3.0 million atDecember 31, 2021 , all of which were 90 days or more past due. These loans were either well secured, awaiting a forbearance extension or formal payment deferral, or will likely be forgiven through the PPP or repurchased by the SBA, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.
Allowance for Off-Balance Sheet Exposures
We maintain an allowance, recorded in other liabilities, associated with
unfunded loan commitments accepted by the borrower. The amount of our allowance
was
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allowance is determined based upon the outstanding volume of loan commitments at
each period end. Any increases or reductions in this allowance are recognized in
provision for credit losses.
Allowance for Credit Losses
On January 1, 2021 , the Company adopted ASU No. 2016-13 "Financial Instruments -
Credit Losses (Topic 326)". ASU 2016-13 was effective for the Company as of
January 1, 2020 . Under Section 4014 of the CARES Act, financial institutions
required to adopt ASU 2016-13 as of January 1, 2020 were provided an option to
delay the adoption of the CECL framework. The Company elected to defer adoption
of CECL until January 1, 2021 . This standard requires that the measurement of
all expected credit losses for financial assets held at the reporting date be
based on historical experience, current conditions, and reasonable and
supportable forecasts. This standard requires financial institutions and other
organizations to use forward-looking information to better inform their credit
loss estimates.
The adoption of the CECL Standard resulted in an initial decrease of $3.9
million to the allowance for credit losses and an increase of $1.4 million to
the reserve for unfunded commitments. The after-tax cumulative-effect adjustment
of $1.7 million was recorded as an increase to retained earnings as of January
1, 2021 .
We recognized a credit loss recovery of $1.5 million during the six months ended
June 30, 2022 , compared to a provision of $11.5 million for the six months ended
June 30, 2021 . The $1.5 million credit loss recovery for the six months ended
June 30, 2022 was primarily due to releases of reserves on PCD loans. The change
in provision for the six months ended June 30, 2021 was primarily associated
with the provision for credit losses recorded on acquired non-PCD loans which
totaled $20.3 million for the Day 2 accounting of acquired loans from the
Merger. We recognized a credit loss recovery of $12.2 million on the remainder
of the portfolio for the six months ended June 30, 2021 , primarily as a result
of improvement in forecasted macroeconomic conditions, as well as releases of
reserves on PCD individually analyzed loans.
For a further discussion of the allowance for credit losses and related activity
during the three and six months ended June 30, 2022 and 2021, please see Note 8
to the condensed consolidated financial statements.
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The following table presents our allowance for credit losses allocated by loan type and the percent of each to total loans at the dates indicated.
June 30, 2022 December 31, 2021
Percent Percent
of Loans of Loans
in Each in Each
Category Category
Allocated to Total Allocated to Total
Amount Loans Amount Loans
(Dollars in thousands)
One-to-four family residential and
cooperative/condominium apartment $ 4,514 0.65 % $ 5,932 0.89 %
Multifamily residential and residential
mixed-use 7,003 0.19 7,816 0.23
CRE 26,246 0.64 29,166 0.74
Acquisition, development, and
construction 3,788 1.50 4,857 1.51
C&I 37,589 3.91 35,331 3.78
Other loans 286 2.65 751 4.44
Total $ 79,426 0.82 % $ 83,853 0.91 %
The following table sets forth information about our allowance for credit losses at or for the dates indicated:
At or for the Six Months Ended June 30,
2022 2021
(Dollars in thousands)
Total loans outstanding at end of period (1) $ 9,660,907 $ 9,546,631
Average total loans outstanding during the period(2) 9,355,118 9,606,638
Allowance for credit losses balance at end of period 79,426 92,760
Allowance for credit losses to total loans at end of period
0.82 % 0.97 %
Non-performing loans to total loans at end of period 0.38 0.30
Allowance for credit losses to total non-performing loans at end of period
218.80 327.94
Ratio of net charge-offs to average loans
outstanding during the period:
One-to-four family residential and
cooperative/condominium apartment - % 0.01 %
Multifamily residential and residential mixed-use - 0.02
CRE - 0.02
Acquisition, development, and construction - - C&I 0.69 0.46 Other loans 0.03 0.02 Total 0.07 0.11
(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.
Comparison of Financial Condition at
Assets. Assets totaled$12.35 billion atJune 30, 2022 ,$280.7 million above their level atDecember 31, 2021 , primarily due to an increase of$420.7 million in our loan portfolio and an increase of$61.8 million in derivative assets, partially offset by a decrease of$155.3 million in securities and a decrease of$112.2 million in cash and due from banks. Total loans increased$420.7 million during the six months endedJune 30, 2022 , to$9.58 billion at period end. During the period, we had loan originations of$1.39 billion . Additionally, our allowance for credit losses decreased by$4.4 million . Total securities decreased$155.3 million during the six months endedJune 30, 2022 , to$1.59 billion at period end, primarily due to proceeds from principal payments and calls of$126.4 million and an increase in unrealized losses of$75.5 million , offset in part by purchases of$47.8 million . We transferred$372.2 million of securities available-to-sale to securities held-to-maturity during the six months endedJune 30, 2022 . 49
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Liabilities. Total liabilities increased$332.8 million during the six months endedJune 30, 2022 , to$11.21 billion at period end, primarily due to an increase of$111.2 million in derivative cash collateral, an increase of$107.0 million in deposits, an increase of$75.0 million in FHLBNY advances, and an increase of$52.7 million in derivative liabilities. Stockholders' Equity. Stockholders' equity decreased$52.1 million during the six months endedJune 30, 2022 to$1.14 billion at period end, primarily due to other comprehensive loss of$63.8 million , repurchases of shares of common stock of$40.3 million , common stock dividends of$18.4 million , and preferred stock dividends of$3.6 million , offset in part by net income for the period of$73.0 million .
Comparison of Operating Results for the Three Months Ended
General. Net income was$38.5 million during the three months endedJune 30, 2022 , lower than the net income of$51.3 million for the three months endedJune 30, 2021 . During the three months endedJune 30, 2022 , net interest income increased by$258 thousand , non-interest income decreased by$17.4 million , non-interest expense decreased by$3.0 million , income tax expense decreased by$5.6 million , and the credit loss provision increased by$4.3 million , compared to the three months endedJune 30, 2021 . Please see "Provision for Credit Losses" for a discussion of the credit loss provision for the three months endedJune 30, 2021 . The discussion of net interest income for the three months endedJune 30, 2022 and 2021 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. No tax-equivalent adjustments have been made for interest income exempt from Federal, state, and local taxation. The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields. Loan fees included in interest income were$455 thousand and$3.8 million during the three months endedJune 30, 2022 and 2021, respectively. The decrease in loan fees was primarily due to a decrease in amortization of SBA PPP loan origination fees in 2022. There are no out-of-period adjustments included in the rate/volume analysis in the following table. 50
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Analysis of Net Interest Income
Three Months Ended June 30,
2022 2021
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
Assets: (Dollars in thousands)
Interest-earning assets:
Real estate loans (1) $ 8,532,979 $ 81,454 3.83 % $ 8,208,378 $ 75,083 3.67 %
Commercial and industrial loans
(1) 935,813 11,503 4.93 2,163,837 18,805 3.49
Other loans (1) 11,571 145 5.03 23,147 400 6.93
Securities 1,695,702 7,067 1.67 1,137,961 5,127 1.81
Other short-term investments 236,285 741 1.26 456,785 986 0.87
Total interest-earning assets 11,412,350 100,910 3.55 % 11,990,108 100,401 3.36 %
Non-interest earning assets 709,599 766,851
Total assets $ 12,121,949 $ 12,756,959
Liabilities and Stockholders'
Equity:
Interest-bearing liabilities:
Interest-bearing checking $ 858,402 $ 604 0.28 % $ 1,067,043 $ 501 0.19 %
Money market 3,148,472 1,240 0.16 3,712,344 1,941 0.21
Savings 1,509,776 859 0.23 1,189,460 212 0.07
Certificates of deposit 827,286 1,028 0.50 1,421,480 2,149 0.61Total interest-bearing deposits 6,343,936 3,731 0.24
7,390,327 4,803 0.26
FHLBNY advances 79,176 172 0.87 145,324 132 0.36
Subordinated debt, net 273,470 3,309 4.85 197,218 2,211 4.50
Other short-term borrowings 54,229 92 0.68 5,514 1 0.07
Total borrowings 406,875 3,573 3.52 348,056 2,344 2.70
Derivative cash collateral 98,995 94 0.38 2,353 - -
Total interest-bearing liabilities 6,849,806 7,398 0.43 % 7,740,736 7,147 0.37 %
Non-interest-bearing checking 3,935,765 3,652,482
Other non-interest-bearing
liabilities 191,066 172,678
Total liabilities 10,976,637 11,565,896
Stockholders' equity 1,145,312 1,191,063
Total liabilities and
stockholders' equity $ 12,121,949 $ 12,756,959
Net interest income $ 93,512 $ 93,254
Net interest spread (2) 3.12 % 2.99 %
Net interest-earning assets $ 4,562,544 $ 4,249,372
Net interest margin (3) 3.29 % 3.12 %
Ratio of interest-earning assets
to interest-bearing liabilities 166.61% 154.90 % Deposits (including non-interest-bearing checking accounts)$ 10,279,701 $ 3,731 0.15 %$ 11,042,809 $ 4,803 0.17 %
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average-interest earning assets.
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Rate/Volume Analysis
Three Months Ended June 30, 2022
Compared to Three Months Ended June 30, 2021
Increase / (Decrease) Due to:
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Real estate loans (1) $ 3,664 $ 2,707 $ 6,371
Commercial and industrial (1) (16,160) 8,858 (7,302)
Other loans (1) (182) (73) (255)
Securities 2,352 (412) 1,940
Other short-term investments (466) 221 (245)
Total interest-earning assets $ (10,792) $ 11,301 $ 509
Interest-bearing liabilities:
Interest-bearing checking $ (102) $ 205 $ 103
Money market (260) (441) (701)
Savings 109 538 647
Certificates of deposit (817) (304) (1,121)
FHLBNY advances (38) 78 40
Subordinated debt, net 883 215 1,098
Other short-term borrowings 34 57 91
Derivative cash collateral 46 48 94Total interest-bearing liabilities $ (145)$ 396 $ 251 Net change in net interest income $ (10,647)
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
Net interest income. Net interest income was$93.5 million during the three months endedJune 30, 2022 , an increase of$258 thousand from the three months endedJune 30, 2021 . Average interest-earning assets were$11.41 billion for the three months endedJune 30, 2022 , a decrease of$577.8 million from$11.99 billion for the three months endedJune 30, 2021 . Net interest margin ("NIM") was 3.29% during the three months endedJune 30, 2022 , up from 3.12% during the three months endedJune 30, 2021 . Interest Income. Interest income was$100.9 million during the three months endedJune 30, 2022 , compared to$100.4 million during the three months endedJune 30, 2021 . During the second quarter of 2022, interest income increased$509 thousand from the second quarter of 2021, primarily reflecting increases in interest income of$6.4 million on real estate loans and$1.9 million on securities, partially offset by decreases in interest income of$7.3 million on C&I loans,$255 thousand on other loans, and$245 thousand on other short-term investments. The increased interest income on real estate loans was related to an increase of$324.6 million in the average balance of such loans in the 2022 period, and a 16-basis point increase in the average yield. The increased interest income on securities was due to an increase of$557.7 million in the average balance of such securities during the period, offset in part by a 14-basis point decrease in the average yield. The decreased interest income on C&I loans was related to a decrease of$1.23 billion in the average balance of such loans in the period, offset in part by a 144-basis point increase in the average yield. The decreased average balance of C&I loans was related to lower SBA PPP balances in the 2022 period. Interest Expense. Interest expense was$7.4 million during the three months endedJune 30, 2022 , compared to$7.1 million during the three months endedJune 30, 2021 , primarily reflecting increases in interest expense of$1.1 million on subordinated debt and$647 thousand on savings accounts, offset in part by decreases in interest expense of$1.1 million on CDs and$701 thousand on money market accounts. The increased interest expense on subordinated debt was primarily due to our issuance of subordinated debt during the second quarter of 2022. The increased interest expense on savings accounts was related to a 16-basis point increase in the average cost and a$320.3 million increase in average balance of such deposits. The decreases in interest expenses on CDs and money market accounts were primarily due to decreased rates offered on CDs and money market accounts and decreases of$594.2 million in the average balances of CDs and$563.9 million in the average balances of money market accounts. 52
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Provision for Credit Losses. We recognized a credit loss provision of$44 thousand during the three months endedJune 30, 2022 , compared to a credit loss recovery of$4.2 million for the three months endedJune 30, 2021 . The$44 thousand credit loss provision for the second quarter of 2022 was due to a$366 thousand credit loss provision on the loan portfolio primarily due to growth, partially offset by a$323 thousand credit loss recovery in reserves for unfunded loan commitments primarily due to lower balances. The$4.2 million credit loss recovery for the second quarter of 2021 was primarily associated with the improvement in forecasted macroeconomic conditions, as well as releases of reserves on PCD individually analyzed loans. Non-Interest Income. Non-interest income was$12.1 million during the three months endedJune 30, 2022 , compared to$29.5 million during the three months endedJune 30, 2021 . During the second quarter of 2022, non-interest income decreased$17.4 million from the second quarter of 2021, reflecting a decrease of$20.9 million in gain on sale of SBA loans and a decrease of$315 thousand in gain on sale of residential loans, partially offset by an increase of$2.6 million in BOLI income, an increase of$1.1 million in loan level derivative income, and an increase of$461 thousand in service charges and other fees during the 2022 period. Included in BOLI income for the second quarter of 2022 was$2.2 million of income related to mortality proceeds from a death claim. Included in gain on sale of SBA loans for the second quarter of 2021 was a$20.7 million gain on sale of PPP loans. Non-Interest Expense. Non-interest expense was$51.8 million during the three months endedJune 30, 2022 , compared$54.9 million during the three months endedJune 30, 2021 . During the second quarter of 2022, non-interest expense decreased$3.0 million from the second quarter of 2021, reflecting merger expenses and transaction costs of$1.8 million during the 2021 period due to the Merger and branch restructuring costs of$1.7 million during the 2021 period, a decrease of$1.1 million in data processing costs and a decrease of$726 thousand in occupancy and equipment expense during the 2022 period, partially offset by an increase during the 2022 period of$856 thousand in salaries and employee benefits expenses, an increase in$727 thousand in marketing expense, and a loss on extinguishment of debt of$740 thousand during the 2022 period due to the write-off of subordinated debt issuance costs.
Non-interest expense was 1.71% and 1.72% of average assets during the three
months ended
Income Tax Expense. Income tax expense was$15.3 million during the three months endedJune 30, 2022 , compared to income tax expense of$20.9 million during the three months endedJune 30, 2021 . The reported effective tax rate for the second quarter of 2022 was 28.4%, comparable to 28.9% for the second quarter of 2021.
Comparison of Operating Results for the Six Months Ended
The Company's results of operations for the six months ended
General. Net income was$73.0 million during the six months endedJune 30, 2022 , higher than the net income of$30.2 million for the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , net interest income increased by$11.5 million , non-interest income decreased by$2.8 million , non-interest expense decreased by$36.0 million , income tax expense increased by$15.0 million , and the credit loss provision decreased by$13.1 million , compared to the six months endedJune 30, 2021 . Please see "Provision for Credit Losses" for a discussion of the credit loss provision for the six months endedJune 30, 2021 . The discussion of net interest income for the six months endedJune 30, 2022 and 2021 should be read in conjunction with the following tables, which set forth certain information related to the consolidated statements of income for those periods, and which also present the average yield on assets and average cost of liabilities for the periods indicated. The average yields and costs were derived by dividing income or expense by the average balance of their related assets or liabilities during the periods represented. Average balances were derived from average daily balances. No tax-equivalent adjustments have been made for interest income exempt from Federal, state, and local taxation. The yields include loan fees consisting of amortization of loan origination and commitment fees and certain direct and indirect origination costs, prepayment fees, and late charges that are considered adjustments to yields. Loan fees included in interest income were$1.3 million and 53
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$6.5 million during the six months endedJune 30, 2022 and 2021, respectively. The decrease in loan fees was primarily due to a decrease in amortization of SBA PPP loan origination fees in 2022. There are no out-of-period adjustments included in the rate/volume analysis in the following table.
Analysis of Net Interest Income
Six Months Ended June 30,
2022 2021
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
Assets: (Dollars in thousands)
Interest-earning assets:
Real estate loans (1) $ 8,415,508 $ 157,891 3.78 % $ 7,617,029 $ 141,495 3.75 %
Commercial and industrial loans
(1) 926,006 21,289 4.64 1,969,716 33,421 3.42
Other loans (1) 13,603 342 5.07 19,893 754 7.64
Securities 1,710,862 14,198 1.67 1,002,288 9,507 1.91
Other short-term investments 307,315 1,109 0.73 420,266 1,979 0.95
Total interest-earning assets 11,373,294 194,829 3.45 % 11,029,192 187,156 3.42 %
Non-interest earning assets 787,326 688,144
Total assets $ 12,160,620 $ 11,717,336
Liabilities and Stockholders'
Equity:
Interest-bearing liabilities:
Interest-bearing checking $ 864,611 $ 970 0.23 % $ 865,776 $ 813 0.19 %
Money market 3,389,118 2,214 0.13 3,305,295 3,967 0.24
Savings 1,383,938 1,066 0.16 1,027,335 419 0.08
Certificates of deposit 826,091 2,012 0.49 1,471,471 4,902 0.67Total interest-bearing deposits 6,463,758 6,262 0.20
6,669,877 10,101 0.31
FHLBNY advances 56,657 249 0.89 497,288 1,843 0.75
Subordinated debt, net 235,486 5,510 4.72 182,991 4,113 4.53
Other short-term borrowings 28,487 92 0.65 10,241 4 0.08
Total borrowings 320,630 5,851 3.68 690,520 5,960 1.74
Derivative cash collateral 59,218 95 0.32 1,183 - -
Total interest-bearing liabilities 6,843,606 12,208 0.36 % 7,360,397 16,061 0.44 %
Non-interest-bearing checking 3,957,631 3,076,754
Other non-interest-bearing
liabilities 188,140 169,973
Total liabilities 10,989,376 10,607,124
Stockholders' equity 1,171,243 1,110,212
Total liabilities and
stockholders' equity $ 12,160,620 $ 11,717,336
Net interest income $ 182,621 $ 171,095
Net interest spread (2) 3.09 % 2.98 %
Net interest-earning assets $ 4,529,688 $ 3,668,795
Net interest margin (3) 3.24 % 3.13 %
Ratio of interest-earning assets
to interest-bearing liabilities 166.19% 149.85 % Deposits (including non-interest-bearing checking accounts)$ 10,421,389 $ 6,262 0.12 %$ 9,746,631 $ 10,101 0.21 %
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average-interest earning assets.
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Rate/Volume Analysis
Six Months Ended June 30, 2022
Compared to Six Months Ended June 30, 2021
Increase / (Decrease) Due to:
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Real estate loans (1) $ 15,056 $ 1,340 $ 16,396
Commercial and industrial (1) (20,875) 8,743 (12,132)
Other loans (1) (198) (214) (412)
Securities 6,298 (1,607) 4,691
Other short-term investments (472) (398) (870)
Total interest-earning assets $ (191) $ 7,864 $ 7,673
Interest-bearing liabilities:
Interest-bearing checking $ (8) $ 165 $ 157
Money market 75 (1,828) (1,753)
Savings 190 457 647
Certificates of deposit (1,861) (1,029) (2,890)
FHLBNY advances (1,789) 195 (1,594)
Subordinated debt, net 1,202 195 1,397
Other short-term borrowings 33 55 88
Derivative cash collateral 47 48 95
Total interest-bearing liabilities
(1) Amounts are net of deferred origination costs/ (fees) and allowance for credit losses, and include loans held for sale.
Net interest income. Net interest income was$182.6 million during the six months endedJune 30, 2022 , an increase of$11.5 million from the six months endedJune 30, 2021 . Average interest-earning assets were$11.37 billion for the six months endedJune 30, 2022 , an increase of$344.1 million from$11.03 billion for the six months endedJune 30, 2021 . Net interest margin ("NIM") was 3.24% during the six months endedJune 30, 2022 , up from 3.13% during the six months endedJune 30, 2021 . Interest Income. Interest income was$194.8 million during the six months endedJune 30, 2022 , compared to$187.2 million during the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , interest income increased$7.7 million from the same period in 2021, reflecting increases in interest income of$16.4 million on real estate loans and$4.7 million on securities, partially offset by decreases in interest income of$12.1 million on C&I loans,$870 thousand on other short-term investments, and$412 thousand on other loans. The increased interest income on real estate loans was related to an increase of$798.5 million in the average balance of such loans in the 2022 period, and a 3-basis point increase in the average yield. The increased interest income on securities was due to an increase of$708.6 million in the average balance of such securities during the period, offset in part by a 24-basis point decrease in the average yield. The increased average balances were related to increased balances from the Merger. The decreased interest income on C&I loans was related to a decrease of$1.04 billion in the average balance of such loans in the period, offset in part by a 122-basis point increase in the average yield. The decreased average balance of C&I loans and the increase in the average yield of such loans were related to lower SBA PPP balances in the 2022 period. Interest Expense. Interest expense was$12.2 million during the six months endedJune 30, 2022 , compared to$16.1 million during the six months endedJune 30, 2021 , primarily reflecting decreases in interest expense of$2.9 million on CDs,$1.8 million on money market accounts, and$1.6 million on FHLBNY advances, offset in part by increases in interest expense of$1.4 million on subordinated debt and$647 thousand on savings accounts. The decrease in interest expense was primarily due decreases of$645.4 million in the average balances of CDs and$440.6 million in the average balances of FHLBNY advances, and decreases in rates offered on CDs and money market accounts. The increased interest expense on subordinated debt was primarily due to our issuance of subordinated debt during the second quarter of 2022. Provision for Credit Losses. We recognized a credit loss recovery of$1.5 million during the six months endedJune 30, 2022 , compared to a provision for credit losses of$11.5 million for the six months endedJune 30, 2021 . The$1.5 million credit loss recovery for the six months endedJune 30, 2022 was primarily due to releases of reserves on PCD loans. The 55
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change in provision for the six months endedJune 30, 2021 was primarily associated with the provision for credit losses recorded on acquired non-PCD loans which totaled$20.3 million for the Day 2 accounting of acquired loans from the Merger. We recognized a credit loss recovery of$12.2 million on the remainder of the portfolio for the six months endedJune 30, 2021 , primarily as a result of improvement in forecasted macroeconomic conditions, as well as releases of reserves on PCD individually analyzed loans. Non-Interest Income. Non-interest income was$19.3 million during the six months endedJune 30, 2022 , compared to$22.2 million during the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , non-interest income decreased$2.8 million from the six months endedJune 30, 2021 , reflecting a decrease during the 2022 period of$20.9 million in gain on sale of SBA loans, a decrease of$890 thousand in gain on sale of residential loans, and a$730 thousand net gain on sale of securities and other assets during the 2021 period, partially offset by losses on loan swap terminations of$16.5 million during the 2021 period, an increase of$3.1 million in BOLI income, and an increase of$1.6 million in service charges and other fees during the 2022 period. Included in BOLI income for the 2022 period was$2.2 million of income related to mortality proceeds from a death claim. Included in gain on sale of SBA loans for the 2021 period was a$20.7 million gain on sale of PPP loans. During the six months endedJune 30, 2021 , the Company terminated 34 derivatives with notional values totaling$785.0 million , resulting in a termination value of$16.5 million which was recognized in loss on termination of derivatives in non-interest income. Non-Interest Expense. Non-interest expense was$101.7 million during the six months endedJune 30, 2022 , compared to$137.7 million during the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , non-interest expense decreased$36.0 million from the same period in 2021, reflecting merger expenses and transaction costs of$39.8 million , loss on extinguishment of debt of$1.8 million , and curtailment loss of$1.5 million during the 2021 period due to the Merger, and branch restructuring costs of$1.7 million during the 2021 period, partially offset by an increase during the 2022 period of$6.9 million in salaries and employee benefits expenses, an increase of$1.2 million in marketing expense, and a loss on extinguishment of debt of$740 thousand during the 2022 period due to the write-off of subordinated debt issuance costs.
Non-interest expense was 1.67% and 2.35% of average assets during the six months
ended
Income Tax Expense. Income tax expense was$28.8 million during the six months endedJune 30, 2022 , compared to income tax expense of$13.8 million during the six months endedJune 30, 2021 . Income tax expense increased in 2022 primarily due to higher income before income taxes in the 2022 period compared to the 2021 period. The reported effective tax rate for the six months endedJune 30, 2022 was 28.3%, and 31.3% for the six months endedJune 30, 2021 . The decrease in the effective tax rate during the six months endedJune 30, 2022 compared to a year ago was primarily the result of higher non-deductible expenses during the 2021 period.
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