UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017March 31, 2018
OR

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

For the transition period from                 to

Commission file number 0-27782

DIME COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

DIME COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
N/A
(Former name or former address, if changed since last report)

Delaware
11-3297463
(State or other jurisdiction of incorporation or organization)
 
11-3297463
(I.R.S. employer identification number)
   
300 Cadman Plaza West, 8th Floor, Brooklyn, NY
11201
 (Address of principal executive offices)
 
11201
(Zip Code)

(718) 782-6200
(Registrant’sRegistrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  ☒
YES  ☒          NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  ☒
YES   ☒          NO  ☐

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

LARGE ACCELERATED FILER  ☐
ACCELERATED FILER  ☒
NON -ACCELERATED FILER  ☐(Do not check if a smaller reporting company)
 
SMALLER REPORTING COMPANY  ☐
 
EMERGING GROWTH COMPANY  ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  YES  ☐          NO  ☒
 NO  ☐

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

Classes of Common Stock
Number of Shares Outstanding at November 7, 2017May 9, 2018
$.01 Par Value37,422,88437,571,197
 
  Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
Unaudited Condensed Consolidated Financial Statements
 
 
Consolidated Statements of Financial Condition at September 30, 2017March 31, 2018 and December 31, 20162017
4
 
Consolidated Statements of Income for the Three-Month and Nine-Month Periods Ended September 30,March 31, 2018 and 2017 and 2016
5
 
Consolidated Statements of Comprehensive Income for the Three-Month and Nine-Month Periods Ended September 30,March 31, 2018 and 2017 and 2016
5
 
Consolidated Statements of Changes in Stockholders’Stockholders' Equity for the Nine-MonthThree-Month Periods Ended September 30,March 31, 2018 and 2017 and 2016
6
 
Consolidated Statements of Cash Flows for the Nine-MonthThree-Month Periods Ended September 30,March 31, 2018 and 2017 and 2016
7
 
Notes to Unaudited Condensed Consolidated Financial Statements
8-318-29
Item 2.
Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
31-4630-40
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
46-4840-41
Item 4.
Controls and Procedures
4842
 PART II - OTHER INFORMATION 
Item 1.
Legal Proceedings
4842
Item 1A.
Risk Factors
4842
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
4842
Item 3.
Defaults Upon Senior Securities
4842
Item 4.
Mine Safety Disclosures
 4942
Item 5.
Other Information
4942
Item 6.
Exhibits
49-5243
 
Signatures
5344
 
2
Table of Contents
Cautionary Note Regarding Forward-Looking Statements

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

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

·the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control;
·there may be increases in competitive pressure among financial institutions or from non-financial institutions;
·the net interest margin is subject to material short-term fluctuation based upon market rates;
·changes in deposit flows, loan demand or real estate values may adversely affect the business of Dime Community Bank (the “Bank”"Bank");
·changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently;
·changes in corporate and/or individual income tax laws may adversely affect the Company’sCompany's business or financial condition;
·general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates;
·legislative or regulatory changes may adversely affect the Company’s business;
·technological changes may be more difficult or expensive than the Company anticipates;
·our ability to successfully integrate acquired entities, if any;
·breaches, failures and interruptions in IT systems and IT security;
·ability to retain key employees/executive management team;
·success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates;
·litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates; and
·the risks referred to in the section entitled “Risk Factors”"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20162017 as updated by our Quarterly Reports on Form 10-Q.

The Company has no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.
 
3
Table of Contents
Item 1.
Item 1.
Condensed Consolidated Financial Statements

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

 
September 30,
2017
  
December 31,
2016
  
March 31,
2018
  
December 31,
2017
 
ASSETS:            
Cash and due from banks $173,060  $113,503  $188,826  $169,455 
Investment securities held-to-maturity (estimated fair value of $7,296 at December 31, 2016) (Fully unencumbered)  -   
5,378
 
Total cash and cash equivalents  188,826   169,455 
Mortgage-backed securities (“MBS”) available-for-sale, at fair value (See Note 7)  354,410   351,384 
Marketable equity securities, at fair value  6,433   - 
Investment securities available-for-sale, at fair value (Fully unencumbered)  4,034   3,895   -   4,006 
Mortgage-backed securities (“MBS”) available-for-sale, at fair value (Fully unencumbered)  27,381   3,558 
Trading securities  2,675   6,953   -   2,715 
Loans:                
Real estate, net  5,866,567   5,633,007 
Real estate  5,360,555   5,464,067 
Commercial and industrial (“C&I”) loans  111,099   2,058   145,818   136,671 
Other loans  1,092   1,357   1,053   1,379 
Less allowance for loan losses  (22,007)  (20,536)  (21,204)  (21,033)
Total loans, net  5,956,751   5,615,886   5,486,222   5,581,084 
Premises and fixed assets, net  22,968   18,405   25,276   24,326 
Premises held for sale  1,379   1,379 
Federal Home Loan Bank of New York (“FHLBNY”) capital stock  61,833   44,444 
Bank Owned Life Insurance (“BOLI”)  87,982   86,328 
Federal Home Loan Bank of New York ("FHLBNY") capital stock  52,514   59,696 
Bank Owned Life Insurance ("BOLI")  109,257   108,545 
Goodwill  55,638   55,638   55,638   55,638 
Other assets  50,728   50,063   47,341   46,611 
Total Assets $6,444,429  $6,005,430  $6,325,917  $6,403,460 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY        
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:                
Due to depositors:                
Interest bearing deposits $4,062,067  $4,097,992 
Non-interest bearing deposits  309,126   297,434 
Interest-bearing deposits $4,105,370  $4,095,701 
Non-interest-bearing deposits  325,071   307,746 
Total deposits  4,371,193   4,395,426   4,430,441   4,403,447 
Escrow and other deposits  117,765   103,001   131,953   82,168 
FHLBNY advances  1,217,500   831,125   1,010,400   1,170,000 
Subordinated notes payable, net  113,575   - 
Trust Preferred securities payable  -   70,680 
Subordinated debt, net  113,649   113,612 
Other liabilities  38,359   39,330   31,517   35,666 
Total Liabilities  5,858,392   5,439,562   5,717,960   5,804,893 
                
Stockholders’ Equity:        
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at September 30, 2017 and December 31, 2016)  
-
   
-
 
Common stock ($0.01 par, 125,000,000 shares authorized, 53,617,919 shares and 53,572,745 shares issued at September 30, 2017 and December 31, 2016, respectively, and 37,422,884 shares and 37,455,853 shares outstanding at September 30, 2017 and December 31, 2016, respectively)
  536   536 
Stockholders' Equity:        
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at March 31, 2018 and December 31, 2017)  
-
   
-
 
Common stock ($0.01 par, 125,000,000 shares authorized, 53,653,224 shares and 53,624,453 shares issued at March 31, 2018 and December 31, 2017, respectively, and 37,484,270 shares and 37,419,070 shares outstanding at March 31, 2018 and December 31, 2017, respectively)
  537   536 
Additional paid-in capital  276,674   278,356   277,070   276,730 
Retained earnings  524,237   503,539   544,762   535,130 
Accumulated other comprehensive loss, net of deferred taxes  (4,711)  (5,939)  (4,037)  (3,641)
Unearned stock award common stock  (3,536)  (1,932)
Holding Company common stock held by Benefit Maintenance Plan (“BMP”)  (2,736)  (6,859)
Treasury stock, at cost (16,195,035 shares and 16,116,892 shares at September 30, 2017 and December 31, 2016, respectively)
  (204,427)  (201,833)
Total Stockholders’ Equity  586,037   565,868 
Total Liabilities And Stockholders’ Equity $6,444,429  $6,005,430 
Unearned Restricted Stock Award common stock  (3,855)  (2,894)
Common stock held by Benefit Maintenance Plan ("BMP")  (2,196)  (2,736)
Treasury stock, at cost (16,168,954 shares and 16,205,383 shares at March 31, 2018 and December 31, 2017, respectively)
  (204,324)  (204,558)
Total Stockholders' Equity  607,957   598,567 
Total Liabilities and Stockholders' Equity $6,325,917  $6,403,460 

See notes to unaudited condensed consolidated financial statements.
 
4
Table of Contents
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2017  2016  2017  2016  2018 2017 
Interest income:                 
Loans secured by real estate $51,621  $48,090  $153,233  $141,099  $49,575 $50,475 
C&I loans  1,043   10   1,558   20 
C& I  1,656  41 
Other loans  19   18   55   56   19  18 
MBS  27   2   55   6   2,257  14 
Investment securities  108   129   462   567   15  190 
Other short-term investments  811   707   2,139   2,089   1,511  717 
Total interest income  53,629   48,956   157,502   143,837   55,033  51,455 
Interest expense:                       
Deposits and escrow  9,408   8,635   28,424   23,026   10,751  9,507 
Borrowed funds  5,763   4,974   15,080   15,223   6,267  4,461 
Total interest expense  15,171   13,609   43,504   38,249   17,018  13,968 
Net interest income  38,458   35,347   113,998   105,588   38,015  37,487 
Provision for loan losses  23   1,168   1,520   1,589   193  450 
Net interest income after provision for loan losses  38,435   34,179   112,478   103,999   37,822  37,037 
Non-interest income:                       
Service charges and other fees  948   1,123   2,661   2,566   911  794 
Net mortgage banking income  69   16   150   71 
Mortgage banking income, net  111  16 
Net gain on securities and other assets(1)  2,635   69   2,769   148   1,366  75 
Net gain on the sale of premises held for sale  -   -   -   68,183 
Gain on sale of loans  90  - 
Income from BOLI  558   570   1,654   2,173   712  545 
Other  73   293   574   976   54  348 
Total non-interest income  4,283   2,071   7,808   74,117   3,244  1,778 
Non-interest expense:                       
Salaries and employee benefits  8,593   8,616   27,577   26,132   11,177  9,926 
Employee Stock Option Plan ("ESOP") & restricted stock award (“RSA”) benefit expense  353   815   1,030   2,539 
Stock benefit plan compensation expense  388  394 
Occupancy and equipment  3,492   3,250   10,620   8,992   3,872  3,628 
Data processing costs  3,392   1,284   6,502   3,735   1,754  1,607 
Marketing  1,467   922   4,399   3,278   1,047  1,466 
Federal deposit insurance premiums  875   613   2,242   1,933   665  655 
Loss from extinguishment of debt  1,272   -   1,272   - 
Other  2,731   2,732   8,771   7,584   2,831  3,093 
Total non-interest expense  22,175   18,232   62,413   54,193   21,734  20,769 
Income before income taxes  20,543   18,018   57,873   123,923   19,332  18,046 
Income tax expense  7,230   7,481   21,414   52,141   4,587  6,889 
Net income $13,313  $10,537  $36,459  $71,782  $14,745 $11,157 
                       
Earnings per Share:                       
Basic $0.36  $0.29  $0.97  $1.95  $0.39 $0.30 
Diluted $0.35  $0.29  $0.97  $1.95  $0.39 $0.30 

(1)
Amount includes periodic valuation gains or losses on marketable equity and trading securities
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

  
Three Months Ended
March 31,
 
  2018  2017 
Net Income $14,745  $11,157 
Other comprehensive income (loss):        
Change in unrealized holding loss on securities held-to-maturity and transferred securities  -   34 
Change in unrealized holding loss on securities available-for-sale  (2,558)  120 
Change in pension and other postretirement obligations  155   302 
Change in unrealized gain on derivative asset  2,016   315 
Other comprehensive gain (loss) before income taxes  (387)  771 
Deferred tax expense (benefit)  (112)  346 
Other comprehensive income (loss), net of tax  (275)  425 
Total comprehensive income $14,470  $11,582 
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Net Income $13,313  $10,537  $36,459  $71,782 
Other comprehensive income:                
Change in unrealized holding loss on securities held-to-maturity and transferred securities  1,235   21   1,299   62 
Change in unrealized holding loss on securities available-for-sale  27   107   251   169 
Change in pension and other postretirement obligations  355   425   1,012   1,275 
Change in unrealized gain on derivatives  92   708   (326)  (249)
Other comprehensive gain before income taxes  1,709   1,261   2,236   1,257 
Deferred tax expense  773   568   1,008   566 
Other comprehensive income, net of tax  936   693   1,228   691 
Total comprehensive income $14,249  $11,230  $37,687  $72,473 
See notes to unaudited condensed consolidated financial statements.
 
5
Table of Contents
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
 (Dollars in thousands)

  Nine Months ended September 30, 2017 
  
Number of
Shares
  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
  
Unallocated
Common
Stock of
ESOP
  
Unearned
Stock
Award
Common
Stock
  
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  -   -   -   36,459   -   -   -   -   -   36,459 
Other comprehensive income, net of tax  -   -   -   -   1,228   -   -   -   -   1,228 
Exercise of stock options  45,174   -   680   -   -   -   -   -   -   680 
Release of shares, net of forfeitures  152,215   -   1,325   -   -   -   (2,874)  (170)  1,917   198 
Stock-based compensation  -   -   -   -   -   -   1,270   -   -   1,270 
Shares received to satisfy distribution of retirement benefits  (230,358)  -   (3,687)  -   -   -   -   4,293   (4,511)  (3,905)
Cash dividends declared and paid, net  -   -   -   (15,761)  -   -   -   -   -   (15,761)
Ending balance as of September 30, 2017  37,422,884  $536  $276,674  $524,237  $(4,711) $-  $(3,536) $(2,736) $(204,427) $586,037 
  Three Months ended March 31, 2018 
  
Number of
Shares
  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
  
Unearned
Stock
Award
Common
Stock
  
Common
Stock
Held by
BMP
  
Treasury
Stock, at
cost
  
Total
Stockholders’
Equity
 
                            
Beginning balance as of January 1, 2018  37,419,070  $536  $276,730  $535,130  $(3,641) $(2,894) $(2,736) $(204,558) $598,567 
Reclassification of unrealized gains and losses on marketable equity securities  -   -   -   153   (153)  -   -   -   - 
Adjusted beginning balance as of January 1, 2018  37,419,070   536   276,730   535,283   (3,794)  (2,894)  (2,736)  (204,558)  598,567 
Net Income  -   -   -   14,745   -   -   -   -   14,745 
Other comprehensive loss, net of tax  -   -   -   -   (275)  -   -   -   (275)
Exercise of stock options, net  19,726   1   454   -   -   -   -   (165)  290 
Release of shares, net of forfeitures  73,019   -   426   -   -   (1,349)  -   923   - 
Stock-based compensation  -   -   -   -   -   388   -   -   388 
Shares received to satisfy distribution of retirement benefits  (27,545)  -   (540)  -   -   -   540   (524)  (524)
Reclassification of tax effects on other comprehensive income (loss)  -   -   -   (32)  32   -   -   -   - 
                                    
Cash dividends declared and paid  -   -   -   (5,234)  -   -   -   -   (5,234)
Ending balance as of March 31, 2018  37,484,270  $537  $277,070  $544,762  $(4,037) $(3,855) $(2,196) $(204,324) $607,957 
 
  Nine Months ended September 30, 2016 
  
Number of
Shares
  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
  
Unallocated
Common
Stock of
ESOP
  
Unearned
Stock
Award
Common
Stock
  
Common
Stock
Held by
BMP
  
Treasury
Stock, at cost
  
Total
Stockholders’
Equity
 
                               
Beginning balance as of January 1, 2016  37,371,992  $533  $262,798  $451,606  $(8,801) $(2,313) $(2,271) $(9,354) $(198,251) $493,947 
Net Income  -   -   -   71,782   -   -   -   -   -   71,782 
Other comprehensive loss, net of tax  -   -   -   -   691   -   -   -   -   691 
Exercise of stock options, net of expired options  193,828   2   2,799   -   -   -   -   -   -   2,801 
Release of shares, net of forfeitures  85,040   -   650   -   -   -   (807)  (222)  707   328 
Stock-based compensation  -   -   980   -   -   173   775   -   349   2,277 
Shares received to satisfy distribution of retirement benefits  (107,008)  -   (2,717)  -   -   -   -   2,717   (1,820)  (1,820)
Tax benefit from market valuation adjustment on distribution of ESOP shares  -   -   717   -   -   -   -   -   -   717 
Cash dividends declared and paid, net  -   -   -   (15,432)  -   -   -   -   -   (15,432)
Ending balance as of September 30, 2016  37,543,852  $535  $265,227  $507,956  $(8,110) $(2,140) $(2,303) $(6,859) $(199,015) $555,291 
  Three Months ended March 31, 2017 
  
Number of
Shares
  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss, Net of
Deferred Taxes
  
Unearned
Stock
Award
Common
Stock
  
Common
Stock
Held by
BMP
  
Treasury
Stock, at
cost
  
Total
Stockholders’
Equity
 
                                     
Beginning balance as of January 1, 2017  37,455,853  $536  $278,356  $503,539  $(5,939) $(1,932) $(6,859) $(201,833) $565,868 
Net Income  -   -   -   11,157   -   -   -   -   11,157 
Other comprehensive income, net of tax  -   -   -   -   425   -   -   -   425 
Exercise of stock options  42,062   -   624   -   -   -   -   -   624 
Release of shares, net of forfeitures  71,433   -   573   -   -   (1,474)  -   901   - 
Stock-based compensation  -   -   -   -   -   394   -   -   394 
Cash dividends declared and paid  -   -   -   (5,243)  -   -   -   -   (5,243)
Ending balance as of March 31, 2017  37,569,348  $536  $279,553  $509,453  $(5,514) $(3,012) $(6,859) $(200,932) $573,225 
 
See notes to unaudited condensed consolidated financial statements.
 
6
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
  Nine Months Ended September 30, 
  2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net Income $36,459  $71,782 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net gain recognized on trading securities  (162)  - 
Net gain on held-to-maturity securities  (2,607)  (108)
Net gain on the sale of other real estate owned (“OREO”)  -   (40)
Net gain on sale of premises held for sale  -   (68,183)
Net depreciation, amortization and accretion  2,697   1,611 
Stock plan compensation (excluding ESOP)  1,270   1,435 
ESOP compensation expense  -   842 
Provision for loan losses  1,520   1,589 
Loss from extinguishment of debt  1,272   - 
Increase in cash surrender value of BOLI  (1,654)  (1,689)
Income recognized from mortality benefit on BOLI  -   (484)
Deferred income tax provision (credit)  (2,869)  (1,993)
Reduction in credit related other than temporary impairment (“OTTI”) amortized through interest income  (60)  (78)
Excess tax benefit from stock benefit plans  -   (142)
Changes in assets and liabilities:        
Decrease (increase) in other assets  (351)  2,999 
Decrease in other liabilities  (10)  (1,220)
Net cash provided by Operating activities  35,505   6,321 
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of investment securities held to maturity  9,167   - 
Purchases of investment securities available-for-sale  (53)  (2)
Proceeds from sales of investment securities available-for-sale  240   - 
Purchases of MBS available-for-sale  (23,995)  (3,267)
Proceeds from calls and principal repayments of MBS available-for-sale  38   45 
Purchases of trading securities  (189)  (229)
Proceeds from the sales of trading securities  4,629   3,648 
Purchases of loans  -   (157,782)
Proceeds from the sale of loans  4,471   - 
Loans originated, net of repayments  (346,856)  (635,662)
Proceeds from sale of OREO  -   170 
Proceeds from surrender of cash surrender value of BOLI  -   1,425 
Net proceeds from the sale of premises held for sale  -   75,899 
Net purchases of fixed assets  (7,024)  (2,397)
Redemption (purchase) of FHLBNY capital stock, net  (17,345)  11,974 
Net cash used in Investing Activities  (376,917)  (706,178)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Increase (decrease) in due to depositors  (24,233)  974,954 
Increase in escrow and other deposits  14,764   40,179 
Repayments of FHLBNY advances  (3,044,575)  (2,892,500)
Proceeds from FHLBNY advances  3,430,950   2,607,900 
Proceeds from exercise of stock options  680   2,900 
Excess tax benefit from stock benefit plans  -   142 
Release of stock for benefit plan awards  198   250 
BMP ESOP shares received to satisfy distribution of retirement benefits  (3,905)  (1,820)
Cash dividends paid to stockholders  (15,761)  (15,432)
Repayments of Trust Preferred securities  (70,680)  - 
Proceeds from Subordinated debt issuance, net  113,531   - 
Net cash provided by Financing Activities  400,969   716,573 
INCREASE IN CASH AND CASH EQUIVALENTS  59,557   16,716 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  113,503   64,154 
CASH AND CASH EQUIVALENTS, END OF PERIOD $173,060  $80,870 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid for income taxes $26,415  $43,525 
Cash paid for interest  42,794   38,216 
Transfer of premises to held for sale  -   1,379 
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity  50   36 
Net decrease in non-credit component of OTTI  20   25 
Transfer of portfolio loans to loans held-for-sale  4,471   - 
Reductions for previous credit losses realized on securities sold  1,229   - 
  Three Months Ended March 31, 
  2018  2017 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net Income $14,745  $11,157 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net loss (gain) recognized on marketable equity and trading securities  4   (75)
Net gain on sale of loans held for sale  (90)  - 
Net gain on MBS available-for-sale sold  (1,370)  - 
Net depreciation, amortization and accretion  2,184   879 
Stock plan compensation  388   394 
Provision for loan losses  193   450 
Increase in cash surrender value of BOLI  (712)  (545)
Deferred income tax provision  (1,728)  688 
Reduction in credit related other than temporary impairment (“OTTI”) amortized through interest income  -   (26)
Changes in assets and liabilities:        
Decrease (Increase)  in other assets  3,204   (69)
Increase (Decrease) in other liabilities  (4,072)  4,413 
Net cash provided by Operating activities  12,746   17,266 
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sales of marketable equity securities  393   - 
Proceeds from sales of investment securities available-for-sale  -   35 
Proceeds from sales of MBS available-for-sale  158,484   - 
Purchases of investment securities available-for-sale  -   (16)
Purchases of marketable equity securities  (109)  - 
Purchases of MBS available-for-sale  (189,874)  - 
Acquisition of trading securities  -   (125)
Proceeds from calls and principal repayments of MBS available-for-sale  25,958   13 
Proceeds from sale of loans held for sale  765   - 
Net decrease (increase) in loans  93,994   (115,759)
Purchases of fixed assets, net  (1,879)  (3,969)
Sale of FHLBNY capital stock, net  7,182   3,033 
Net cash provided by (used in) Investing Activities  94,914   (116,788)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Increase in due to depositors  26,994   113,056 
Increase in escrow and other deposits  49,785   32,816 
Repayments of FHLBNY advances  (1,034,600)  (404,500)
Proceeds from FHLBNY advances  875,000   337,100 
Proceeds from exercise of stock options  290   624 
BMP ESOP shares received to satisfy distribution of retirement benefits  (524)  - 
Cash dividends paid to stockholders, net  (5,234)  (5,243)
Net cash provided by (used in) Financing Activities  (88,289)  73,853 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  19,371   (25,669)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  169,455   113,503 
CASH AND CASH EQUIVALENTS, END OF PERIOD $188,826  $87,834 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid for income taxes $2,928  $1,662 
Cash paid for interest  15,323   12,695 
Loans transferred to held for sale  675   - 
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity  -   25 
Net decrease in non-credit component of OTTI  -   8 

See notes to unaudited condensed consolidated financial statements.
 
7
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Per Share Amounts)

1.1.   NATURE OF OPERATIONS

Dime Community Bancshares, Inc. (the “Company” or"Holding Company" and together with its direct and indirect subsidiaries, the “Holding Company”"Company"), is a Delaware corporation headquartered in the Brooklyn Heights neighborhood of Brooklyn, New York. The Company was organized in 1996 and is registered as a savings and loan holding company with the Board of Governors of the Federal Reserve System pursuant to section 10(l) of the Home Owners’ Loan Act, as amended. As of September 30, 2017, the Holding Company’s only direct subsidiary wasby Dime Community Bank (f/k/a banking subsidiary that engages The Dime Savings Bank of Williamsburgh) (the "Bank") for the purpose of acquiring all of the capital stock of the Bank issued in commercial bankingthe Bank's conversion to stock ownership on June 26, 1996.  At March 31, 2018 the significant assets of the Holding Company were the capital stock of the Bank and financial services.  In 2004,investments retained by the Holding Company.  The liabilities of the Holding Company formed Dime Community Capital Trust Iwere comprised primarily of $113,649 subordinated notes due in 2027, which become callable commencing in 2022.  The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.

The Bank was originally founded in 1864 as a subsidiary, which issued $72,165 of 7.0% trust preferred securities. During the three-month period ended September 30, 2017, the Company fully redeemed the outstanding balance of $70,680,New York State-chartered mutual savings bank, and dissolved the trust.  The Company also dissolved 842 Manhattan Ave Corp. during the three-month period ended September 30, 2017currently operates as this subsidiary was inactive. The Company’s common stock is traded on the Nasdaq Global Market under the symbol “DCOM.”

Dime Community Bank, a New York-charteredYork State-chartered stock savings bank formerly known asbank.  Effective August 1, 2016, the Bank changed its name from The Dime Savings Bank of Williamsburgh was foundedto 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 1864 and operates 27 full service retail banking offices located inof the New York City boroughs of Brooklyn, Queens, andcommunities it serves, including the Bronx, and in Nassau County, New York.virtual online community.  The Bank’s principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, mixed use, and, to a lesseran increasing extent, commercial and industrial (“C&I”) loans, mortgage-backed securities, obligations of the U.S. government and government sponsored enterprises, (“GSEs”), and corporate debt and equity securities.

The substantial majorityHolding Company neither owns nor leases any property, but instead uses the administrative offices of the Bank’s lending occursBank, located in the greaterBrooklyn Heights section of the borough of Brooklyn, New York City metropolitan area.York. The Bank has four active subsidiaries, including two real estate investment trusts that hold one-to-four familymaintains its principal office in the Williamsburg section of the borough of Brooklyn, New York.  As of March 31, 2018, the Bank had twenty-nine retail banking offices located throughout the boroughs of Brooklyn, Queens, and multifamily residentialthe Bronx, and commercial real estate loans; Dime Insurance Agency, which engages in general insurance agency activities;Nassau County and Boulevard Funding Corporation, which holds and manages real estate.Suffolk County, New York.
 
2.2.   SUMMARY OF ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the Company’sCompany's financial condition as of September 30, 2017March 31, 2018 and December 31, 2016,2017, the results of operations and statements of comprehensive income for the three-month and nine-month periods ended September 30,March 31, 2018 and 2017, and 2016, and the changes in stockholders’stockholders' equity and cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2018 and 2016.2017.  The results of operations for the three-month and nine-month period ended September 30, 2017March 31, 2018 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2017.2018.  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") have been omitted pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (“("SEC”).

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

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 20162017 and notes thereto contained in our Annual Report on Form 10-K.
 
8
3.3.   RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606).  ASU 2014-09 impacts any entity that either enters into contracts with customers to transfer goods or services, or that enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance or lease contracts).  Under ASU 2014-09, an entity is required to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2014-09 also requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, as well as qualitative and quantitative disclosure related to contracts with certain customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Consideration - Reporting Revenue Gross Versus Net. The objective of the ASU is to align the recognition of revenue with the transfer of promised goods or services provided to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU affect the guidance in ASU 2014-09, which is not yet effective.  Both ASU 2014-09 and the amendment are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  We do not expect the new standard, or any of the amendments, to have a material impact to the consolidated financial statements as the majority of the Company’s revenue streams are not within the scope of Topic 606. The Company will continue evaluating the potential impact of ASU 2014-09 and the amendments on its consolidated financial statements and disclosures until its assessment has been finalized.
In January 2016, the FASB issued ASU 2016-01, an amendment to Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The objectives of the ASU are to: (1) require equity investments to be measured at fair value, with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values, (3) eliminate the requirement to disclose methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost on the balance sheet, (4) require the use of the exit price notion when measuring the fair value of financial instruments, and (5) clarify the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is evaluating the potential impact of ASU 2016-01 on its consolidated financial statements, however, it is not presently expected to have a material impact.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires companies that lease valuable assets to recognize on their balance sheets the assets and liabilities generated by contracts longer than a year. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, however, early adoption is permitted. The Company is evaluating the potential impact of ASU 2016-02 on its consolidated financial statements.

In June 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. Financial institutions and other organizations will now use forward-looking information to better informmeasure their credit loss estimates. This guidance also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this guidance is effective for fiscal years and interim periods beginning after December 31, 2019. The Company has established a committee that is assessing system requirements, gathering data, and evaluating the impact of the ASU on its consolidated financial statements. The Company expects to recognize a one-time cumulative effect increase to the allowance for loan losses as of the beginning of the reporting period in which the ASU takes effect, however, cannot yet determine the magnitude of the impact on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350).  ASU 2017-04 eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The standard is effective for the Company beginning January 1, 2020, with early adoption permitted for goodwill impairment tests performed after January 1, 2017. The Company expects to early adopt this standard in the next goodwill impairment test analysis for the year ended December 31, 2017. The adoption of ASU 2017-04 is currently not expected to have a material impact on the Company’s consolidated financial statements.
9
In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 requires companies that offer employee defined pension plans, other postretirement benefit plans, or other types of benefit plans accounted for under Topic 715 to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.  The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, however, early adoption is permitted. The adoption of ASU 2017-07 will not have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, however, early adoption is permitted. The adoption of ASU 2017-08 will not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The amendments in ASU 2017-09 provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, however, early adoption is permitted. The adoption of ASU 2017-09 is currently not expected to have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in ASU 2017-02 refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. The provisions in the amendment create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. The amendment also makes certain targeted improvements to simplify the application of hedge accounting guidance. provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, however, early adoption is permitted. The adoption of ASU 2017-12 is not expected to have a material impact on the Company’s consolidated financial statements.
4.4.   ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

 
Securities Held-
to-Maturity and
Transferred
Securities
  
Securities
Available-for-
Sale
  
Defined Benefit
Plans
  
Derivative
Asset
  
Total
Accumulated
Other
Comprehensive
Gain (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  -   (786)  (88)  1,373   499 
Amounts reclassified from accumulated other comprehensive loss  -   (922)  192   (44)  (744)
Net other comprehensive income during the period  -   (1,708)  104   1,329   (275)
Reclassification of tax effects on other comprehensive income (2)
  -   -   32   -   32 
Balance as of March 31, 2018 $-  $(1,576) $(6,497) $4,036  $(4,037)
 
Securities Held-
to-Maturity and
Transferred
Securities
  
Securities
Available-for-
Sale
  
Defined Benefit
Plans
  
Derivative
Asset
  
Total
Accumulated
Other
Comprehensive
Gain (Loss)
                     
Balance as of January 1, 2017 $(713) $(92) $(6,910) $1,776  $(5,939) $(713) $(92) $(6,910) $1,776  $(5,939)
Other comprehensive income (loss) before reclassifications  39   133   -   (313)  (141)
Other comprehensive income before reclassifications  18   65   -   124   207 
Amounts reclassified from accumulated other comprehensive loss  674   -   560   135   1,369    -   -   171   47   218 
Net other comprehensive income (loss) during the period  713   133   560   (178)  1,228 
Balance as of September 30, 2017 $-  $41  $(6,350) $1,598  $(4,711)
                    
Balance as of January 1, 2016 $(760) $(122) $(7,919) $-  $(8,801)
Other comprehensive income (loss) before reclassifications  36   98   702   (163)  673 
Amounts reclassified from accumulated other comprehensive loss  -   -   -   18   18 
Net other comprehensive income (loss) during the period  36   98   702   (145)  691 
Balance as of September 30, 2016 $(724) $(24) $(7,217) $(145) $(8,110)
Net other comprehensive income during the period  18   65   171   171   425 
Balance as of March 31, 2017 $(695) $(27) $(6,739) $1,947  $(5,514)
(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 an adjustment for the difference between the historical corporate income tax rate (35%) and the newly enacted 21% corporate income tax rate.
 
109
The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below.  Reclassification adjustments related to securities held-to-maturity are included inbelow for the line entitled net gain on securities and other assets in the accompanying condensed consolidated statements of income. Reclassification adjustments related to the defined benefit plan are included in the line entitled salaries and employee benefits. Reclassification adjustments related to the derivatives are included in the line entitled interest expense on borrowed funds.periods indicated.

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2017  2016  2017  2016  2018  2017 
Change in unrealized holding loss on securities held-to-maturity and transferred securities:                  
Accretion of previously recognized non-credit component of OTTI $3  $9  $20  $25  $-  $9 
Change in unrealized loss on securities transferred to held-to-maturity  3   12   50   37   -   25 
Reclassification adjustment for net gains included in net gain on securities and other assets  1,229   -   1,229   - 
Net change  1,235   21   1,299   62   -   34 
Tax expense  558   7   586   26   -   16 
Net change in unrealized holding loss on securities held-to-maturity and transferred securities  677   14   713   36   -   18 
Change in unrealized holding gain on securities available-for-sale:                        
Change in net unrealized gain during the period  27   107   251   169   (1,188)  120 
Tax expense  19   43   118   71 
Reclassification adjustment for net gains included in net gain on securities and other assets  (1,370)  - 
Net change  (2,558)  120 
Tax expense (benefit)  (850)  55 
Net change in unrealized holding gain on securities available-for-sale  8   64   133   98   (1,708)  65 
Change in pension and other postretirement obligations:                        
Reclassification adjustment for expense included in salaries and employee benefits expense  355   425   1,012   1,275   286   - 
Change in the net actuarial gain or loss  (131)  302 
Net change  155   302 
Tax expense  160   191   452   573   51   131 
Net change in pension and other postretirement obligations  195   234   560   702   104   171 
Change in unrealized loss on derivatives:                
Change in unrealized loss on derivative asset or liability:        
Change in net unrealized loss during the period  24   717   (573)  (281)  2,081   228 
Reclassification adjustment for expense included in interest expense  68   (9)  247   32   (65)  87 
Net change  92   708   (326)  (249)  2,016   315 
Tax expense (benefit)  36   327   (148)  (104)
Net change in unrealized loss on derivatives  56   381   (178)  (145)
Other comprehensive income $936  $693  $1,228  $691 
Tax expense  687   144 
Net change in unrealized loss on derivative asset or liability  1,329   171 
Other comprehensive income (loss) $(275) $425 
 
5.EARNINGS PER SHARE (“EPS”5.   EARNINGS PER SHARE ("EPS")

Basic EPS is computed by dividing net income by the weighted-average common shares outstanding during the reporting period.  Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if "in the money" stock options were exercised and converted into common stock,Common Stock, and likely aggregate Long-term Incentive Plan (“LTIP”) share payout.  In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares and (until the period ended September 30, 2016) unallocated ESOP shares, are excluded.  Vested RSArestricted stock award shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS.  Unvested RSA shares and LTIP shares not yet awarded are recognized as a special class of participating securities under ASC 260.

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

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
March 31,
 
 2017  2016  2017  2016  2018  2017 
Net income per the Consolidated Statements of Income $13,313  $10,537  $36,459  $71,782  $14,745  $11,157 
Less: Dividends paid and earnings allocated to participating securities  (34)  (26)  (97)  (85)  (29)  (25)
Income attributable to common stock $13,279  $10,511  $36,362  $71,697  $14,716  $11,132 
Weighted average common shares outstanding, including participating securities  37,528,933   36,910,594   37,627,568   36,904,324   37,495,317   37,603,628 
Less: weighted average participating securities  (162,074)  (168,767)  (169,797)  (209,152)  (145,725)  (150,423)
Weighted average common shares outstanding  37,366,859   36,741,827   37,457,771   36,695,172   37,349,592   37,453,205 
Basic EPS $0.36  $0.29  $0.97  $1.95  $0.39  $0.30 
Income attributable to common stock $13,279  $10,511  $36,362  $71,697  $14,716  $11,132 
Weighted average common shares outstanding  37,366,859   36,741,827   37,457,771   36,695,172   37,349,592   37,453,205 
Weighted average common equivalent shares outstanding  74,996   46,480   79,045   61,446   115,133   96,371 
Weighted average common and equivalent shares outstanding  37,441,855   36,788,307   37,536,816   36,756,618   37,464,725   37,549,576 
Diluted EPS $0.35  $0.29  $0.97  $1.95  $0.39  $0.30 
 
1110
Common and equivalent shares resulting from the dilutive effect of “in-the-money”"in-the-money" outstanding stock options are calculated based upon the excess of the average market value of the common stock over the exercise price of outstanding in-the-money stock options during the period.

There were no “out-of-the-money” stock options during the three-month or nine-month periods ended September 30,March 31, 2018 or 2017.  There were 79,783 and 79,927 weighted-average stock options outstanding for the three-month and nine-month periods ended September 30, 2016, respectively, which were not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period.

For information about the calculation of expected aggregate LTIP share payout, see Note 6.14.

6.ACCOUNTING FOR STOCK BASED COMPENSATION
6.    REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company maintainsadopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018. Under ASU 2014-09, an entity is required to recognize revenue for the Dime Community Bancshares, Inc. 2001 Stock Option Plantransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for Outside Directors, Officers and Employees, the 2004 Stock Incentive Plan and the 2013 Equity and Incentive Plan (“2013 Equity Plan”) (collectively, the “Stock Plans”), which are discussed more fully in Note 15those goods or services.  ASU 2014-09 also requires disclosure of sufficient information to the Company’s audited consolidatedenable users of financial statements forto understand the year ended December 31, 2016,nature, amount, timing and which are subjectuncertainty of revenue and cash flows arising from contracts with customers, as well as qualitative and quantitative disclosure related to contracts with certain customers, significant judgments and changes in judgments, and assets recognized from the accounting requirements of ASC 505-50 and ASC 718.costs to obtain or fulfill a contract.

Stock Option AwardsIn accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company applies the following five steps to properly recognize revenue:
1.Identify the contract with a customer
2.Identify the performance obligations in the contract
3.Determine the transaction price
4.Allocate the transaction price to performance obligations in the contract
5.Recognize revenue when (or as) the Company satisfies a performance obligation
The Company’s only in-scope revenue stream that is subject to Topic 606 is service fees on deposit accounts (including interchange fees), which is disclosed on the Consolidated Statements of Operations as “Service charges and other fees.”  For the three-month period ended March 31, 2018, total revenues from contracts with customers totaled $911.

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.

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.
11
7.   INVESTMENT AND MORTGAGE-BACKED SECURITIES

The Company adopted 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 during the three-month period ended March 31, 2018. Marketable equity securities are excluded from the tables for the period ended March 31, 2018.

The following table presents a summarytables summarize the major categories of activity related to stock options granted undersecurities owned by the Stock Plans, and changes duringCompany as of the nine-month period then ended:dates indicated:

  
Number of
Options
  
Weighted-Average
Exercise Price
  
Weighted-Average
Remaining
Contractual Years
  
Aggregate
Intrinsic Value
 
Options outstanding at January 1, 2017  209,254  $15.48       
Options granted  -   -       
Options exercised  (45,174)  15.09       
Options outstanding at September 30, 2017  164,080  $15.59   1.9  $969 
Options vested and exercisable at September 30, 2017  164,080  $15.59   1.9  $969 
  At March 31, 2018 
  
Amortized
Cost
  
Gross
Unrealized
 Gains
  
Gross
 Unrealized
Losses
  
Fair
Value
 
Debt securities available-for-sale:            
Pass-through MBS issued by Government-sponsored Enterprises (“GSEs”) $239,232  $22  $(1,889) $237,365 
Agency Collateralized Mortgage Obligation (“CMO”)  117,541   470   (966)  117,045 
Total debt securities available-for-sale $356,773  $492  $(2,855) $354,410 

  At December 31, 2017 
  
Amortized
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Fair
Value
 
Investment securities available-for-sale:            
Registered Mutual Funds $3,779  $311  $(84) $4,006 
Pass-through MBS issued by GSEs  72,938   16   (325)  72,629 
CMO  278,251   669   (165)  278,755 
Total investment securities available-for-sale $354,968  $996  $(574) $355,390 

Information related to stock options during each period isThe carrying amount of securities pledged as follows:collateral for the Bank’s first loss guarantee was $27,084 and $28,738 at March 31, 2018 and December 31, 2017, respectively (see Note 10).

  
At or for the Three Months
Ended September 30,
  
At or for the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Cash received for option exercise cost $54  $2,900  $680  $2,900 
Income tax benefit recognized on stock option exercises(1)
  -   64   69   64 
Intrinsic value of options exercised  10   -   286   732 
(1)Effective January 1, 2017, income tax benefits were recognized as discrete items in income tax expense in accordance to ASU 2016-09. Prior to January, 1, 2017, income tax benefits were recognized through additional paid in capital.
At March 31, 2018, available-for-sale pass-through MBS issued by GSEs possessed a weighted average contractual maturity of 14.6 years and a weighted average estimated duration of 4.2 years.  As of March 31, 2018, the available-for-sale agency CMO securities had a weighted average term to maturity of 10.7 years.

During the three-month period ended September 30, 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 Company does not intend to classify any securities as held-to-maturity for the foreseeable future. During the three-month period ended March 31, 2017, the Company recognized amortization of $25 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), and $8 on the unamortized portion of previous credit losses recognized in accumulated other comprehensive loss.

There were no grantssales of stock optionsavailable-for-sale pass-through MBS issued by GSEs during the three-month or nine-month periods ended September 30, 2017March 31, 2018 or 2016. All stock options are fully vested at both September 30, 2017 and 2016.2017.

Restricted Stock Awards

Proceeds from the sales of available-for-sale CMOs totaled $158,484 during the three-month period ended March 31, 2018. Gross gains of $1,370 were recognized on these sales. There were no sales of available-for-sale CMOs during the three-month period ended March 31, 2017. The Company has made RSA grantstax expense related to outside Directors and certain officers under the 2004 Stock Incentive Plan or 2013 Equity and Incentive Plan. Typically, awards to outside Directors fully vestgain on sales of available for sale CMOs recognized during the first anniversary of the grant date, while awards to officers may vest in equal annual installments over a four-year period or at the end of the four-year requisite period.quarter ended March 31, 2018 was $440.
 
12
The following table presentsCompany holds marketable equity securities (both investment securities available-for-sale and trading securities as of 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 activity related to the RSAs granted, and changes duringsales of marketable equity securities is listed below for the nine-month period then ended:periods indicated:

  Number of Shares  
Weighted-Average
 Grant-Date Fair
Value
 
Unvested allocated shares outstanding at January 1, 2017  152,409  $16.56 
Shares granted  121,857   19.60 
Shares vested  (84,019)  16.36 
Shares forfeited  (30,578)  17.56 
Unvested allocated shares at September 30, 2017  159,669  $18.80 

All awards were made at the fair value of the Holding Company’s common stock (i.e., the closing price on the NASDAQ market as of the close of business) on the award date. Compensation expense is based upon the fair value of the shares on the respective dates of the grant.

Information related to RSAs during each period is as follows:

  
At or for the Three Months
Ended September 30,
  
At or for the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Compensation expense recognized $353  $366  $1,019  $1,195 
Income tax benefit recognized on vesting of RSA(1)
  3   -   119   78 
(1)Effective January 1, 2017, income tax benefits were recognized as discrete items in income tax expense in accordance to ASU 2016-09. Prior to January, 1, 2017, income tax benefits were recognized through additional paid in capital.

As of September 30, 2017, unrecognized compensation cost relating to unvested restricted shares totaled $2,403. This amount will be recognized over a remaining weighted average period of 2.8 years.

Performance Based Equity Awards
  
For the Three Months
Ended March 31,
 
  2018  2017 
Proceeds:      
Marketable equity securities $393  $- 
Investment securities available-for-sale  -   35 
Trading securities  -   - 

The Company establishedremaining gain or loss on securities shown in the LTIP,unaudited condensed consolidated statements of income was due to market valuation changes resulting in a long term incentive award programloss of $4 on marketable equity securities and a gain of $75 on trading securities for certain officers, which meets the criteria for equity-based accounting.  For each award, threshold (50% of target), target (100% of target)three-month period ended March 31, 2018 and maximum (150% of target) opportunities are eligible to be earned over a three-year performance period based on the Company’s relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently.  Shares of the Holding Company’s 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.2017, respectively.

The following table presentssummarizes the gross unrealized losses and fair value of investment securities aggregated by investment category and the length of time the securities were in a summarycontinuous unrealized loss position as of activity related to performance based equity awards, and changes during the three-month period then ended:dates indicated:

  
Number of
Shares
  
Weighted-Average
Grant-Date Fair Value
 
Maximum aggregate share payout at January 1, 2017  24,730  $17.35 
Shares granted  71,976   19.75 
Shares forfeited  (21,012)  18.94 
Maximum aggregate share payout at September 30, 2017  75,694  $19.19 
Minimum aggregate share payout  -   - 
Expected aggregate share payout  45,039  $19.43 
  March 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:                  
Pass through MBS issued by GSEs $215,028  $1,889  $-  $-  $215,028  $1,889 
Agency CMO  45,534   881   3,063   85   48,597   966 
  December 31, 2017 
  
Less than 12
Consecutive Months
  
12 Consecutive
Months or Longer
  Total 
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
 
Investment securities available-for-sale:
                  
Registered Mutual Funds $-  $-  $2,591  $84  $2,591  $84 
Pass through MBS issued by GSEs  55,819   325   -   -   55,819   325 
Agency CMO  86,746   96   3,168   69   89,914   165 

Compensation expense recorded for performance based equity awards was $79The 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 $19 forilliquidity, and not credit quality. It is likely that the three-month periods ended September 30, 2017Company will not be required to sell the securities before their anticipated recovery, and 2016, respectively.  Compensation expense recorded for performance based equity awards was $251 and $67 foras such, the nine-month periods ended September 30, 2017 and 2016, respectively.Company does not consider these securities to be other-than-temporarily-impaired at March 31, 2018.
 
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7.8.   LOANS RECEIVABLE AND CREDIT QUALITY

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

Credit Quality Indicators:

On a quarterly basis, the Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying them as to credit risk.  This analysis includes all loans, such as multifamily residential, mixed use residential (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the residential units), mixed use commercial real estate (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the commercial units), commercial real estate loans, acquisition, development, and construction (“ADC”) loans (which includes land loans), C&I loans, as well as one-to-four family residential and cooperative and condominium apartment loans. Prior to April 1, 2016, the analysis
13
The Company uses the following definitions for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management’smanagement's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’sBank'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 Bank had no loans classified as doubtful as of September 30, 2017March 31, 2018 or December 31, 2016.2017. All real estate and C&I loans not classified as Special Mention or Substandard were deemed pass loans at both September 30, 2017March 31, 2018 and December 31, 2016.2017.

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

  Balance at September 30, 2017 
  Pass  
Special
Mention
  Substandard  Doubtful  Total 
Real Estate:               
One-to-four family residential, including condominium and cooperative apartment $65,182  $180  $1,157  $-  $66,519 
Multifamily residential and residential mixed use  4,781,016   3,403   2,872   -   4,787,291 
Commercial mixed use real estate  410,363   -   4,936   -   415,299 
Commercial real estate  582,766   848   4,729   -   588,343 
ADC  9,115   -   -   -   9,115 
Total real estate  5,848,442   4,431   13,694   -   5,866,567 
C&I  111,099   -   -   -   111,099 
Total Real Estate and C&I $5,959,541  $4,431  $13,694  $-  $5,977,666 
 Balance at December 31, 2016  Balance at March 31, 2018 
 Pass  
Special
Mention
  Substandard  Doubtful  Total  Pass  
Special
Mention
  Substandard  Doubtful  Total 
Real Estate:                              
One-to-four family residential, including condominium and cooperative apartment $72,325  $212  $1,485  $-  $74,022  $61,586  $176  $834  $-  $62,596 
Multifamily residential and residential mixed use  4,589,838   3,488   7,200   -   4,600,526 
Commercial mixed use real estate  398,139   535   5,465   -   404,139 
Multifamily residential and residential mixed-use  4,275,143   2,409   3,399   -   4,280,951 
Commercial mixed-use real estate  396,584   1,343   4,242   -   402,169 
Commercial real estate  546,568   525   7,227   -   554,320   598,871   1,879   4,676   -   605,426 
Total Real Estate $5,606,870  $4,760  $21,377  $-  $5,633,007 
ADC  9,413   -   -   -   9,413 
Total real estate  5,341,597   5,807   13,151   -   5,360,555 
C&I  144,639   -   1,179   -   145,818 
Total Real Estate and C&I $5,486,236  $5,807  $14,330  $-  $5,506,373 

The credit risk profile of C&I loans as of December 31, 2016 was included in the analysis of consumer loans. 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.
  Balance at December 31, 2017 
  Pass  
Special
Mention
  Substandard  Doubtful  Total 
Real Estate:               
One-to-four family residential, including condominium and cooperative apartment $62,042  $178  $875  $-  $63,095 
Multifamily residential and residential mixed-use  4,374,388   6,326   466   -   4,381,180 
Commercial mixed-use real estate  396,647   -   4,908   -   401,555 
Commercial real estate  602,448   1,897   4,703   -   609,048 
ADC  9,189   -   -   -   9,189 
Total real estate  5,444,714   8,401   10,952   -   5,464,067 
C&I  136,671   -   -   -   136,671 
Total Real Estate and C&I $5,581,385  $8,401  $10,952  $-  $5,600,738 

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

Grade 
Balance at
September 30,
2017
  
Balance at
December 31,
2016(1)
  
Balance at
March 31,
2018
  
Balance at
December 31,
2017
 
Performing $1,090  $3,414  $1,052  $1,375 
Non-accrual  2   1   1   4 
Total $1,092  $3,415  $1,053  $1,379 
(1)Included in the balance of consumer loans at December 31, 2016 are $2,058 of C&I loans. Subsequent to December 31, 2016, C&I loans were evaluated based on risk ratings and included in the preceding credit risk profile table.
The following is a breakdown of the past due status of the Company’sCompany's investment in loans (excluding accrued interest) as of the dates indicated:

 At September 30, 2017  At March 31, 2018 
 
30 to 59 Days
Past Due
  
60 to 89 Days
Past Due
  
Loans 90
Days or More
Past Due and
Still Accruing
Interest
  
Non-accrual (1)
  
Total Past
Due
  Current  Total Loans  
30 to 59 Days
Past Due
  
60 to 89 Days
Past Due
  
Loans 90
Days or More
Past Due and
Still Accruing
 Interest
  
Non-accrual (1)
  
Total Past
Due
  Current  Total Loans 
Real Estate:                                          
One-to-four family residential, including condominium and cooperative apartment $-  $81  $371  $708  $1,160  $65,359  $66,519  $-  $9  $6,150  $449  $6,608  $55,988  $62,596 
Multifamily residential and residential mixed use  -   -   -   -   -   4,787,291   4,787,291 
Commercial mixed use real estate  -   -   523   96   619   414,680   415,299 
Multifamily residential and residential mixed-use  2,946   -   2,625   -   5,571   4,275,380   4,280,951 
Commercial mixed-use real estate  -   -   669   90   759   401,410   402,169 
Commercial real estate  -   -   2,412   -   2,412   585,931   588,343   -   -   4,372   -   4,372   601,054   605,426 
ADC  -   -   -   -   -   9,115   9,115   -   -   -   -   -   9,413   9,413 
Total real estate $-  $81  $3,306  $804  $4,191  $5,862,376  $5,866,567  $2,946  $9  $13,816  $539  $17,310  $5,343,245  $5,360,555 
C&I $-  $-  $160  $-  $160  $110,939  $111,099  $-  $-  $-  $1,179  $1,179  $144,639  $145,818 
Consumer $3  $-  $-  $2  $5  $1,087  $1,092  $1  $1  $-  $1  $3  $1,050  $1,053 
(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of September 30, 2017.
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2018.

   At December 31, 2016 
    
30 to 59 Days
Past Due
  
60 to 89 Days
Past Due
  
Loans 90
Days or More
Past Due and
Still Accruing
Interest
  
Non-accrual (1)
  
Total Past
Due
  Current  Total Loans 
Real Estate:                       
One-to-four family residential, including condominium and cooperative apartment  $188  $-  $1,513  $1,012  $2,713  $71,309  $74,022 
Multifamily residential and residential mixed use   -   -   1,557   2,675   4,232   4,596,294   4,600,526 
Commercial mixed use real estate   -   -   -   549   549   403,590   404,139 
Commercial real estate   1,732   -   -   -   1,732   552,588   554,320 
Total real estate  $1,920  $-  $3,070  $4,236  $9,226  $5,623,781  $5,633,007 
C&I $-  $-  $-  $-  $-  $2,058  $2,058 
Consumer  $-  $-  $-  $1  $1  $1,356  $1,357 
(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2016.
  At December 31, 2017 
  
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 $10  $23  $6,397  $436  $6,866  $56,229  $63,095 
Multifamily residential and residential mixed-use  -   -   1,669   -   1,669   4,379,511   4,381,180 
Commercial mixed-use real estate  -   -   520   93   613   400,942   401,555 
Commercial real estate  -   -   11,349   -   11,349   597,699   609,048 
ADC  -   -   -   -   -   9,189   9,189 
Total real estate $10  $23  $19,935  $529  $20,497  $5,443,570  $5,464,067 
C&I $-  $-  $-  $-  $-  $136,671  $136,671 
Consumer $4  $-  $-  $4  $8  $1,371  $1,379 
 
15
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2017.

Accruing Loans 90 Days or More Past Due

The Bank continued accruing interest on nine real estate and C&I loans with an aggregate outstanding balance of $3,466 at September 30, 2017, and fourfourteen real estate loans with an aggregate outstanding balance of $3,070$13,816 at March 31, 2018, and fourteen real estate loans with an aggregate outstanding balance of $19,935 at December 31, 2016,2017, 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 wererepayment or refinance is expected, to be refinanced, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.

Troubled Debt Restructurings (“TDRs”("TDRs")

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

 As of September 30, 2017  As of December 31, 2016  As of March 31, 2018  As of December 31, 2017 
 No. of Loans  Balance  No. of Loans  Balance  No. of Loans  Balance  No. of Loans  Balance 
One-to-four family residential, including condominium and cooperative apartment  2  $395   2  $407   1  $20   1  $22 
Multifamily residential and residential mixed use  3   629   3   658 
Commercial mixed use real estate  1   4,197   1   4,261 
Multifamily residential and residential mixed-use  3   604   3   619 
Commercial mixed-use real estate  1   4,152   1   4,174 
Commercial real estate  1   3,313   1   3,363   1   3,279   1   3,296 
Total real estate  7  $8,534   7  $8,689   6  $8,055   6  $8,111 

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’sBank'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 September 30, 2017March 31, 2018 or December 31, 2016.2017.

The Company has not restructured any C&I or consumer loans, as these loan portfolios have not experienced any problem issues warranting restructuring. Therefore, all TDRs were collateralized by real estate at both September 30, 2017March 31, 2018 and December 31, 2016.2017.

There were no loans modified in a manner that met the criteria of a TDR during the three-month periods ended September 30, 2017March 31, 2018 or 2016, respectively, or the nine-month period ended September 30, 2017.  The Company modified one one-to-four family residential loan in a manner that met the criteria of a TDR during the nine-month period ended September 30, 2016.

The Bank’s allowance for loan losses at September 30, 2017 and December 31, 2016 did not reflect any allocated reserve associated with TDRs.

As of September 30, 2017March 31, 2018 and December 31, 2016,2017, the Bank had no loan commitments to borrowers with outstanding TDRs.

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

There were no TDRs which defaulted within twelve months following the modification during the three-month or nine-month periods ended September 30,March 31, 2018 or 2017 or 2016 (thus no impact to the allowance for loan losses during those periods).

Impaired Loans

A loan is considered impaired when, based on then current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The Bank considers TDRs and all non-accrual multifamily residential, commercial real estate, and C&I loans, along with non-accrualexcept one-to-four family loans in excess ofequal to or less than the FNMA Limits,conforming loan limits for high-cost areas, such as the Bank's primary lending area, (“FNMA Limits”) and consumer loans, to be impaired.  Non-accrual one-to-four family loans equal to or less than the FNMA Limits as well asand all consumer loans, are considered homogeneous loan pools and are not required to be evaluated individually for impairment unless considered a TDR.

Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral; or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for some of the performing TDRs).  If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral or the present value of the expected cash flows from the debt service in measuring impairment (whichever is deemed most appropriate under the circumstances).  If a TDR has 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.

Please refer to Note 8 for tabular information related to impaired loans.
 
8.
16
9.   ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses may consist of specific and general components. At September 30, 2017,March 31, 2018, the Bank’s periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) impaired loans and (2) non-impaired pass graded loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses: (1) real estate loans; (2) C&I loans; and (3) consumer loans.  Within these segments, the Bank analyzes the allowance for loan losses based upon the underlying collateral type (classes). DueSmaller balance homogeneous real estate loans, such as condominium or cooperative apartment and one-to-four family residential real estate loans with balances equal to their small homogeneous balances,or less than the FNMA Limits, and consumer loans were not individuallyare collectively evaluated for impairment, as of either September 30, 2017 or December 31, 2016.and accordingly, are not separately identified for impairment disclosures.

Impaired Loan Component

All multifamily residential, mixed use, commercial real estate, ADC and C&I loans that are deemed to meet the definition of impaired are individually evaluated for impairment.  In addition, all condominium or cooperative apartment and one-to-four family residential real estate loans in excess of the FNMA Limits are individually evaluated for impairment. Impairment is typically measured using the difference between the outstanding loan principal balance and either: (1) the likely realizable value of a note sale; (2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected to come from liquidation of the collateral; or (3) the present value of estimated future cash flows (using the loan’sloan's pre-modification rate in the case of somecertain performing TDRs).  For impaired loans on non-accrual status, either of the initial two measurements is utilized.

All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.  If a TDR is substantially performing in accordance with its restructured terms, management will look to either the present value of the expected cash flows from the debt service or the potential net liquidation proceeds of the underlying collateral in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, the likely realizable net proceeds from either a note sale or the liquidation of the collateral are generally considered when measuring impairment.  While measured impairment is generally charged off immediately, impairment attributed to a reduction in the present value of expected cash flows of a performing TDR is generally reflected as an allocated reserve within the allowance for loan losses. At September 30, 2017March 31, 2018 and December 31, 2016,2017, there were no allocated reserves related to TDRs within the allowance for loan losses.

Smaller balance homogeneous real estate loans, such as condominium or cooperative apartment and one-to four-family residential real estate loans with balances equal to or less than the FNMA Limits, are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

Non-Impaired Loan Component

During the nine month period ended September 30, 2016, the Bank refined the calculation of the allowance for loan losses associated with non-impaired loans using third party software purchased by the Bank. The software model is substantially similar to the previous model used by the Bank whereby the primary drivers of the calculation are historical charge-offs by loan type and certain qualitative elements. The historical loss look-back period for Substandard and Special Mention non-impaired loans was expanded from the previous twelve month period to a forty-eight month period, which is aligned with the same historical loss look-back period used for all Pass-graded loans.  Management has evaluated the impact of these changes and concluded that they are not material to the overall allowance for non-impaired loans.
The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with non-impaired real estate loans.  The following underlying collateral types are analyzed separately: 1) one-to-four family residential and condominium or cooperative apartment; 2) multifamily residential and residential mixed use; 3) commercial mixed use real estate, 4) commercial real estate; 5) ADC; and 6) C&I.  Within the analysis of each underlying collateral type, the following elements are additionally considered and provided weighting in determining the allowance for loan losses for non-impaired real estate loans:

(i)Charge-off experience (including peer charge-off experience)
(ii)Economic conditions
(iii)Underwriting standards or experience
(iv)Loan concentrations
(v)Regulatory climate
(vi)Nature and volume of the portfolio
(vii)Changes in the quality and scope of the loan review function

The following is a brief synopsis of the manner in which each element is considered:

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

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

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

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

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

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

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

All non-impaired Substandard loans were deemed sufficiently well secured and performing to have remained on accrual status both prior and subsequent to their downgrade to the Substandard internal loan grade at September 30, 2017.

Consumer Loans

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

18
Reserve for Loan Commitments

At both September 30, 2017March 31, 2018 and December 30, 2016,2017, respectively, the Bank maintained a reserve of $25,000$25 associated with unfunded loan commitments accepted by the borrower.  This reserve is determined based upon the outstanding volume of loan commitments at each period end.  Any increases or reductions in this reserve are recognized in periodic non-interest expense.

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

 At or for the Three Months Ended September 30, 2017  At or for the Three Months Ended March 31, 2018 
    Real Estate Loans     
Consumer
Loans
     Real Estate Loans     
Consumer
Loans
 
 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  ADC  
Total
Real Estate
  C&I 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
 Residential and
Residential
Mixed-Use
  
Commercial
Mixed-Use
Real Estate
  
Commercial
Real Estate
  ADC  
Total
Real Estate
   C&I 
Beginning balance $122  $17,372  $1,411  $2,034  $6  $20,945  $1,023  $17  $116  $15,219  $1,388  $2,147  $123  $18,993  $2,021  $19 
Provision (credit) for loan losses  (7)  (709)  37   49   8   (622)  643   2   -   (223)  6   (19)  3   (233)  424   2 
Charge-offs  (2)  (12)  -   -   -   (14)  -   -   (15)  -   (4)  -   -   (19)  -   (4)
Recoveries  2   11   -   -   -   13   -   -   1   -   -   -   -   1   -   - 
Ending balance $115  $16,662  $1,448  $2,083  $14  $20,322  $1,666  $19  $102  $14,996  $1,390  $2,128  $126  $18,742  $2,445  $17 

 At or for the Three Months Ended September 30, 2016  At or for the Three Months Ended March 31, 2017 
 Real Estate Loans  
Consumer
Loans
  Real Estate Loans     
Consumer
Loans
 
 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  
Total
Real Estate
  
One- to Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed- Use
  
Commercial
Mixed-Use
Real Estate
  
Commercial
Real Estate
  
Total
Real Estate
   C&I 
Beginning balance $192  $14,826  $1,684  $2,187  $18,889  $20  $145  $16,555  $1,698  $2,118  $20,516  $-  $20 
Provision (credit) for loan losses  (48)  1,293   36   (115)  1,166   2   (4)  134   (109)  (23)  (2)  453   (1)
Charge-offs  (4)  (14)  (8)  -   (26)  (2)  (13)  (69)  -   -   (82)  -   - 
Recoveries  -   -   -   -   -   -   1   45   -   4   50   -   - 
Ending balance $140  $16,105  $1,712  $2,072  $20,029  $20  $129  $16,665  $1,589  $2,099  $20,482  $453  $19 
 
  At or for the Nine Months Ended September 30, 2017 
     Real Estate Loans     
Consumer
Loans
 
  
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  ADC  
Total
Real Estate
   C&I
Beginning balance $145  $16,555  $1,698  $2,118  $-  $20,516  $-  $20 
Provision (credit) for loan losses  (30)  155   (254)  (35)  14   (150)  1,666   4 
Charge-offs  (15)  (104)  -   -   -   (119)  -   (5)
Recoveries  15   56   4   -   -   75   -   - 
Ending balance $115  $16,662  $1,448  $2,083  $14  $20,322  $1,666  $19 

  At or for the Nine Months Ended September 30, 2016 
  Real Estate Loans  
Consumer
Loans
 
  
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  
Total
Real Estate
 
Beginning balance $263  $14,118  $1,652  $2,461  $18,494  $20 
Provision (credit) for loan losses  (94)  2,024   70   (412)  1,588   1 
Charge-offs  (31)  (74)  (10)  -   (115)  (2)
Recoveries  2   37   -   23   62   1 
Ending balance $140  $16,105  $1,712  $2,072  $20,029  $20 
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment evaluation method as of the dates indicated:

 At September 30, 2017  At March 31, 2018 
    Real Estate Loans   C&I 
Consumer
Loans
     Real Estate Loans   C&I  
Consumer
Loans
 
 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  ADC  
Total
Real Estate
  
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed-Use
  
Commercial
Mixed-Use
Real Estate
  
Commercial
Real Estate
  ADC  
Total
Real Estate
 
Allowance for loan losses:                                                  
Individually evaluated for impairment $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $294  $- 
Collectively evaluated for impairment  115   16,662   1,448   2,083   14   20,322   1,666   19   102   14,996   1,390   2,128   126   18,742   2,151   17 
Total ending allowance balance $115  $16,662  $1,448  $2,083  $14  $20,322  $1,666  $19  $102  $14,996  $1,390  $2,128  $126  $18,742  $2,445  $17 
                                                                
Loans:                                                                
Individually evaluated for impairment $395  $629  $4,293  $3,313  $-  $8,630  $-  $-  $20  $604  $4,242  $3,279  $-  $8,145  $1,179  $- 
Collectively evaluated for impairment  66,124   4,786,662   411,006   585,030   9,115   5,857,937   111,099   1,092   62,576   4,280,347   397,927   602,147   9,413   5,352,410   144,639   1,053 
Total ending loans balance $66,519  $4,787,291  $415,299  $588,343  $9,115  $5,866,567  $111,099  $1,092  $62,596  $4,280,951  $402,169  $605,426  $9,413  $5,360,555  $145,818  $1,053 

 At December 31, 2016  At December 31, 2017 
 Real Estate Loans     
Consumer
Loans
     Real Estate Loans     
Consumer
Loans
 
 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed Use
  
Commercial
Mixed Use
Real Estate
  
Commercial
Real Estate
  
Total
Real Estate
   C&I 
One-to-Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
  
Multifamily
Residential and
Residential
Mixed-Use
  
Commercial
Mixed-Use
Real Estate
  
Commercial
Real Estate
  ADC  Total Real Estate   C&I 
Allowance for loan losses:                                               
Individually evaluated for impairment $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $-  $- 
Collectively evaluated for impairment  145   16,555   1,698   2,118   20,516   -   20   116   15,219   1,388   2,147   123   18,993   2,021   19 
Total ending allowance balance $145  $16,555  $1,698  $2,118  $20,516  $-  $20  $116  $15,219  $1,388  $2,147  $123  $18,993  $2,021  $19 
                                                            
Loans:                                                            
Individually evaluated for impairment $407  $3,333  $4,810  $3,363  $11,913  $-  $-  $22  $619  $4,267  $3,296  $-  $8,204  $-  $- 
Collectively evaluated for impairment  73,615   4,597,193   399,329   550,957   5,621,094   2,058   1,357   63,073   4,380,561   397,288   605,752   9,189   5,455,863   136,671   1,379 
Total ending loans balance $74,022  $4,600,526  $404,139  $554,320  $5,633,007  $2,058  $1,357  $63,095  $4,381,180  $401,555  $609,048  $9,189  $5,464,067  $136,671  $1,379 
 
There were no impaired real estate loans with a related allowance recorded as of September 30, 2017 or December 31, 2016.  The following tables summarize impaired real estate loans with no related allowance recorded as of the dates indicated (by collateral type within the real estate loan segment):

  At September 30, 2017  At December 31, 2016 
  
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 $395  $395  $-  $407  $407  $- 
Multifamily Residential and Residential Mixed Use  629   629   -   3,333   3,333   - 
Commercial Mixed Use Real Estate  4,293   4,293   -   4,810   4,810   - 
Commercial Real Estate  3,313   3,313   -   3,363   3,363   - 
Total with no related allowance recorded $8,630  $8,630  $-  $11,913  $11,913  $- 
  At March 31, 2018  At December 31, 2017 
  
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 $20  $20  $-  $22  $22  $- 
Multifamily residential and residential mixed-use  604   604   -   619   619   - 
Commercial mixed-use real estate  4,242   4,242   -   4,267   4,267   - 
Commercial real estate  3,279   3,279   -   3,296   3,296   - 
Total with no related allowance recorded  8,145   8,145   -   8,204   8,204   - 
                         
With an allowance recorded:                        
C&I  1,179   1,179   294   -   -   - 
Total with an allowance recorded  1,179   1,179   294   -   -   - 
Total $9,324  $9,324  $294  $8,204  $8,204  $- 
(1)
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

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

  Three Months Ended September 30,  Nine Months Ended September 30, 
  2017  2016  2017  2016 
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
 
With no related allowance recorded:                        
One-to-Four Family Residential, Including Condominium and Cooperative Apartment $397  $7  $412  $6  $400  $21  $452  $47 
Multifamily Residential and Residential Mixed Use  1,943   13   3,643   99   2,623   75   2,310   138 
Commercial Mixed Use Real Estate  4,306   43   4,404   43   4,539   131   4,383   131 
Commercial Real Estate  3,321   33   3,388   34   3,339   100   3,456   102 
Ending balance $9,967  $96  $11,847  $182  $10,901  $327  $10,601  $418 
  
Three Months Ended
March 31, 2018
  
Three Months Ended
March 31, 2017
 
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
  
Average
Recorded
 Investment(1)
  
Interest
Income
Recognized
 
             
With no related allowance recorded:            
One-to-four family residential, including condominium and cooperative apartment $21  $-  $404  $7 
Multifamily residential and residential mixed-use  611   12   3,302   46 
Commercial mixed-use real estate  4,255   43   4,773   45 
Commercial real estate  3,287   33   3,355   34 
Total with no related allowance recorded  8,174   88   11,834   132 
                 
With an allowance recorded:                
C&I  589   -   -   - 
Total with no related allowance recorded $8,763  $88  $11,834  $132 
(1)
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

9.   INVESTMENT AND MORTGAGE-BACKED SECURITIES10.   LOAN SECURITIZATION

The following tables summarizeDuring the major categoriesyear ended December 31, 2017, the Bank completed a securitization of securities owned$280,186 of its multifamily loans through a Federal Home Loan Mortgage Corporation (“FHLMC”) sponsored “Q-deal” securitization completed in December 2017. Four classes of FHLMC guaranteed structured pass-through certificates were issued and purchased entirely by the Company (excluding trading securities) as of the dates indicated:

  At September 30, 2017 
  
Amortized
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Fair
Value
 
Investment securities available-for-sale:            
Registered Mutual Funds $3,824  $262  $(52) $4,034 
Pass-through MBS issued by GSEs  16,739   12   (67)  16,684 
Agency Collateralized Mortgage Obligation (“CMO”)  10,766   1   (70)  10,697 
Total investment securities available for sale $31,329  $275  $(189) $31,415 
  At December 31, 2016 
  
Amortized
Cost (1)
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Fair
Value
 
Investment securities held-to-maturity:            
TRUP CDOs $5,378  $2,221  $(303) $7,296 
                 
Investment securities available-for-sale:                
Registered Mutual Funds  4,011   62   (178)  3,895 
Pass-through MBS issued by GSEs  360   12   -   372 
CMO  3,247   -   (61)  3,186 
Total investment securities available-for-sale  7,618   74   (239)  7,453 
Total investment securities $12,996  $2,295  $(542) $14,749 
(1) Amount represents the purchase amortized / historical cost less any OTTI charges (credit or non-credit related) previously recognized.  For the TRUP CDOs, amount is also net of the $755 unamortized portion of the unrealized loss that was 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).

At September 30, 2017, available-for-sale pass-through MBS issued by GSEs possessed a weighted average contractual maturity of 19.7 years and a weighted average estimated duration of 3.2 years.Bank. As of September 30, 2017, the available-for-sale agency CMO securities had a weighted average term to maturity of 16.7 years and a weighted average estimated duration of 2.3 years.
During the three-month period ended September 30, 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 strategysecuritization transaction, the Bank entered into a Servicing Agreement, which included general representations and warranties, and reimbursement obligations.

Servicing responsibilities on loan sales generally include obligations to diversifycollect 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 Company’s balance sheet and take advantage of investment opportunities. The Company does not intent to classify any securities as held-to-maturity for the foreseeable future. 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 $705master servicer and the unamortized portion of previous credit losses of $524 were reclassified out of accumulated comprehensive loss duringCompany. The master servicer has the threeright to terminate the Company in its role as sub-servicer and nine month periods ended September 30, 2017.  Gross proceeds from the sale of the TRUP CDOs were $9,167 for the three and nine month periods ended September 30, 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 three or nine month periods ended September 30, 2016.
There were no sales of pass-through MBS issued by GSEs during the three-month or nine-month periods ended September 30, 2017 or 2016.  There were no sales of agency collateralized mortgage obligation securities during the three-month or nine-month periods ended September 30, 2017 or 2016.

The Company holds both registered mutual funds (as investment securities available-for-sale) and trading securities as the underlying investments of the BMP, held in a rabbi trust. The Company may sell either registered mutual funds or trading 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 registered mutual funds.  A summary of the sales of registered mutual funds and trading securities is listed below for the periods indicated:

  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Investment securities available-for-sale (Registered Mutual Funds):            
Proceeds $137  $-  $240  $- 
Trading securities:                
Proceeds $85  $-  $4,629  $3,648 
Gross gains  3   -   66   3 
Gross losses  -   -   25   45 

The remaining gain or loss on securities shown in the unaudited condensed consolidated statements of income during those periods resulted from market valuation changes or sales of trading securities.direct such responsibilities accordingly.
 
The following table summarizesGeneral representations and warranties associated with loan sales and securitization sales require the gross unrealized losses and fair value of investment securities aggregated by investment category andCompany to uphold various assertions that pertain to the length ofunderlying loans at the time the securities were in a continuous unrealized loss position as of the dates indicated:

  September 30, 2017 
  
Less than 12
Consecutive Months
  
12 Consecutive
Months or Longer
  Total 
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
 
Investment securities available-for-sale:                  
Registered Mutual Funds $1,074  $21  $1,574  $31  $2,648  $52 
Pass through MBS issued by GSEs  16,349   67   -   -   16,349   67 
Agency CMO  5,064   15   3,133   55   8,197   70 
                         
  December 31, 2016 
  
Less than 12
Consecutive Months
  
12 Consecutive
Months or Longer
  Total 
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
  
Fair
Value
  
Unrealized
Losses
 
Investment securities held-to-maturity:                        
TRUP CDOs $-  $-  $2,439  $303  $2,439  $303 
                         
Investment securities available-for-sale:                        
Registered Mutual Funds  1,308   47   1,747   131   3,055   178 
Agency CMO  3,186   61   -   -   3,186   61 

TRUP CDOs That Maintained an Unrealized Holding Loss for 12transaction, 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 More Consecutive Monthsfuture 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).

TheWith respect to the securitization transaction, the Company sold its TRUP CDOs portfolio duringalso has continuing involvement through a reimbursement agreement executed with Freddie Mac. To the three-month period ended September 30, 2017.  At December 31, 2016, there were two TRUP CDOs with unrealized holding lossesextent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse FHLMC for 12 or more consecutive months. The impairment of one of those TRUP CDOs was deemed temporary, as management believed that the full recorded balancesuch amounts, not to exceed 10% of the investments would be realized.  In makingoriginal principal amount of the loans comprising the securitization pool at the closing date.  At both March 31, 2018 and December 30, 2017, respectively, the Bank maintained a liability of $420 for the exposure to the reimbursement agreement with FHLMC, the first loss guarantee. Any increases or reductions in this determination, management considered the following:liability are recognized in periodic non-interest expense.

·Based upon an internal review of the collateral backing the TRUP CDO portfolio, which accounted for current and prospective deferrals, the securities could reasonably be expected to continue making all contractual payments
·There were no cash or working capital requirements nor contractual or regulatory obligations that would compel the Company to sell these securities prior to their forecasted recovery or maturity
·The securities have a pool of underlying issuers comprised primarily of banks
·None of the securities have exposure to real estate investment trust issued debt (which has experienced high default rates)
·The securities feature either a mandatory auction or a de-leveraging mechanism that could result in principal repayments to the Bank prior to the stated maturity of the security
·The securities are adequately collateralized

The unrealized loss on the second TRUP with unrealized holding losses for 12 or more consecutive months was considered to be other than temporary. See below for a discussion of other than temporary impairment.

TRUP CDOs with Other than Temporary Impairment

As of each reporting period through June 30, 2017, the Company applied the protocol established by ASC 320-10-65 in order to determine whether OTTI existed for its TRUPs and/or to measure, for TRUP CDOs that were determined to be other than temporarily impaired, the credit related and non-credit related components of OTTI.  The Company sold its entire TRUP CDO portfolio during the three-month period ended September 30, 2017. As of the date of the sale of the TRUP CDO portfolio, five TRUP CDOs were determined to meet the criteria for OTTI based upon this analysis, and no additional OTTI charges were recognized.
The following table provides a reconciliation of the pre-tax OTTI charges recognized on the Company’s TRUP CDOs, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income for the period ended:

  Three Months Ended September 30, 
  2017  2016 
  
Credit
Related
OTTI
Recognized
in Earnings
  
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
  
Total
OTTI
Charge
  
Credit
Related
OTTI
Recognized
in Earnings
  
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
  
Total
OTTI
Charge
 
Cumulative pre-tax balance at the beginning of the period $8,561  $527  $9,088  $8,665  $562  $9,227 
Amortization of previously recognized OTTI  (8)  (3)  (11)  (26)  (9)  (35)
Reductions for previous credit losses realized on securities sold during the year  (8,553)  (524)  (9,077)  -   -   - 
Cumulative pre-tax balance at end of the period $-  $-  $-  $8,639  $553  $9,192 

  Nine Months Ended September 30, 
  2017  2016 
  
Credit
Related
OTTI
Recognized
in Earnings
  
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
  
Total
OTTI
Charge
  
Credit
Related
OTTI
Recognized
in Earnings
  
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
  
Total
OTTI
Charge
 
Cumulative pre-tax balance at the beginning of the period $8,613  $544  $9,157  $8,717  $578  $9,295 
Amortization of previously recognized OTTI  (60)  (20)  (80)  (78)  (25)  (103)
Reductions for previous credit losses realized on securities sold during the year  (8,553)  (524)  (9,077)  -   -   - 
Cumulative pre-tax balance at end of the period $-  $-  $-  $8,639  $553  $9,192 
10.11.   DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow HedgesThe 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 Interest Rate Riskbusiness 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.   During 2018, such derivatives were used to hedge the variable cash flows associated with existing or forecasted issuances of short term borrowings debt.

The effective portion of changes in the fair value ofFor 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 LossIncome and is subsequently reclassified into earningsinterest expense in the period thatsame period(s) during which the hedged forecasted transaction affects earnings. During the three-month and nine-month periods ended September 30, 2017 and 2016, such derivatives were used to hedge the variability in cash flows associated with wholesale borrowings, i.e., FHLBNY advances.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company did not record any hedge ineffectiveness during the three-month or nine-month periods ended September 30, 2017 or 2016.

Amounts reported in accumulated other comprehensive lossincome related to derivatives will be reclassified to interest expense as interest payments are paidmade on the Company’s liabilities.debt.  During the next twelve months, the Company estimates that $107an additional $1,132 will be reclassified as an increasea reduction 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 StatementsBalance Sheet as of Financial Condition:the periods indicated.

  At September 30, 2017  At December 31, 2016 
  
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  $135,000  $2,973  $(50)  4  $90,000  $3,228  $- 
                                 
Weighted average pay rates      1.46%              1.24%        
Weighted average receive rates      1.32%              0.95%        
Weighted average maturity     4.54 years              5.32 years         
  At March 31, 2018  At December 31, 2017 
  
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  8  $150,000  $6,117  $(78)  7  $135,000  $4,041  $- 

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

  
Three months ended
March 31,
 
  2018  2017 
Interest rate products
      
Amount of gain recognized in other comprehensive income $2,081  $228 
Amount of gain or (loss) reclassified from other comprehensive income into interest expense  (65)  87 
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2018 and December 31, 2017. The net amounts of derivative financial instruments asassets or liabilities can be reconciled to the amounttabular disclosure of gain or (loss)fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Statements of Income for the periods indicated:Balance Sheet.

  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Interest rate products
            
Effective portion:            
Amount of gain (loss) recognized in other comprehensive income $24  $717  $(573) $(281)
Amount of gain or (loss) reclassified from other comprehensive income into interest expense  (68)  (9)  (247)  32 
Ineffective Portion:                
Amount of gain or (loss) recognized in other non-interest expense  -   -   -   - 
At March 31, 2018
Offsetting of Derivative Assets

           
Gross Amounts Not Offset in the Statement
of Financial Position
    
  
Gross Amounts
of Recognized
Assets
  
Gross Amounts
Offset in the
Consolidated
Statement of
Financial
Condition
  
Net Amounts of
Assets presented
in the Statement
of Financial
Position
  Financial Instruments  
Cash Collateral
Received
  
Net
Amount
 
FHLB Advances $6,117  $(78) $6,039  $-  $-  $6,039 

At December 31, 2017
Offsetting of Derivative Assets

           
Gross Amounts Not Offset in the Statement
of Financial Position
    
  
Gross Amounts
of Recognized
Assets
  
Gross Amounts
Offset in the
Statement of
Financial
Position
  
Net Amounts of
Assets presented
in the Statement of
Financial
Position
  Financial Instruments  
Cash Collateral
Received
  
Net
Amount
 
                   
FHLB Advances $4,041  $-  $4,041  $-  $-  $4,041 

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 September 30, 2017,March 31, 2018, the termination value of derivatives in a net assetliability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $2,894.$6,100. If the Company had breached any of the above provisions at September 30, 2017,March 31, 2018, 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 September 30, 2017.March 31, 2018.
 
11.
23
12.   FAIR VALUE OF FINANCIAL INSTRUMENTS

TheFair 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 value hierarchy established under ASC 820-10 is summarized as follows: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).

26
Level 3 Inputs – Significant unobservable inputs for the asset or liability.  Significant unobservable inputs reflect the reporting entity’sentity'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.

The following tables present the assetsAssets and liabilities measuredLiabilities Measured at fair valueFair 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.Recurring Basis

     
Fair Value Measurements at
September 30, 2017 Using
 
  Total  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
 
Financial Assets            
Trading securities (Registered Mutual Funds):            
Domestic Equity Mutual Funds $435  $435  $-  $- 
International Equity Mutual Funds  115   115   -   - 
Fixed Income Mutual Funds  2,125   2,125   -   - 
Investment securities available-for-sale:                
Registered Mutual Funds:                
Domestic Equity Mutual Funds  1,479   1,479   -   - 
International Equity Mutual Funds  441   441   -   - 
Fixed Income Mutual Funds  2,114   2,114   -   - 
Pass-through MBS issued by GSEs  16,684   -   16,684   - 
Agency CMOs  10,697   -   10,697   - 
Derivative – interest rate product  2,973   -   2,973   - 
                 
Financial Liabilities                
Derivative – interest rate product $50  $-  $50  $- 

Securities
     
Fair Value Measurements at
December 31, 2016 Using
 
  Total  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
 
Financial Assets            
Trading securities (Registered Mutual Funds):            
Domestic Equity Mutual Funds $873  $873  $-  $- 
International Equity Mutual Funds  213   213   -   - 
Fixed Income Mutual Funds  5,867   5,867   -   - 
Investment securities available-for-sale:                
Registered Mutual Funds:                
Domestic Equity Mutual Funds  1,356   1,356   -   - 
International Equity Mutual Funds  377   377   -   - 
Fixed Income Mutual Funds  2,162   2,162   -   - 
Pass-through MBS issued by GSEs  372   -   372   - 
Agency CMOs  3,186   -   3,186   - 
Derivative – interest rate product  3,228   -   3,228   - 

The Company’s available-for-sale investmentmarketable equity securities and MBSavailable-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.

The pass-through MBS issued by GSEs all possessed the highest possible credit rating published by at least one established credit rating agency as of September 30, 2017March 31, 2018 and December 31, 2016.2017. Obtaining market values as of September 30, 2017March 31, 2018 and December 31, 20162017 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
March 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 $1,863  $1,863   -   - 
International Equity Mutual Funds  538   538   -   - 
Fixed Income Mutual Funds  4,032   4,032   -   - 
Debt securities available-for-sale:                
Pass-through MBS issued by GSEs  237,365   -   237,365   - 
Agency CMOs  117,045   -   117,045   - 
Derivative – interest rate product  6,117   -   6,117   - 
Financial Liabilities                
Derivative – interest rate product $78  $-  $78  $- 
 
2724
     
Fair Value Measurements at
December 31, 2017 Using
 
  Total  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
 
Financial Assets            
Trading securities (Registered Mutual Funds):            
Domestic Equity Mutual Funds $460  $460  $-  $- 
International Equity Mutual Funds  120   120   -   - 
Fixed Income Mutual Funds  2,135   2,135   -   - 
Investment securities available-for-sale:                
Registered Mutual Funds:                
Domestic Equity Mutual Funds  1,512   1,512   -   - 
International Equity Mutual Funds  445   445   -   - 
Fixed Income Mutual Funds  2,049   2,049   -   - 
Pass-through MBS issued by GSEs  72,629   -   72,629   - 
Agency CMOs  278,755   -   278,755   - 
Derivative – interest rate product  4,041   -   4,041   - 
There were no
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 asinclude certain impaired loans reported at the fair value of September 30, 2017 or December 31, 2016.the underlying collateral if repayment is expected solely from the collateral.
 
Impaired Loans -

Loans with certain characteristics are evaluated individually for impairment. A loan is considered impaired under ASC 310-10-35 when, based upon existing information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Bank’s impaired loans at September 30, 2017 and December 31, 2016 were collateralized by real estate and accounts receivable at March 31, 2018, and real estate at December 31, 2017, and were thus carried at the lower of the outstanding principal balance or the estimated fair value of the collateral.  Fair value is estimated through either a negotiated note sale price (Level 3 input), or, more commonly, a recent real estate appraisal (Level 3 input).  The appraisals may utilize a single or discounted valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classificationunderlying collateral, such as accounts receivable. Types of discounts considered include aging of receivables, condition of the inputscollateral, potential market for determining fair value.the collateral and estimated disposal costs. These discounts will vary from loan to loan and may be discounted based on management's opinions concerning market developments or the client's business.

An appraisal is generally ordered for all impaired multifamily residential, mixed use and commercial real estate loans for which the most recent appraisal is more than one year old.  The Bank never adjusts independent appraisal data upward.  Occasionally, management will adjust independent appraisal data downward based upon its own lending expertise and/or experience with the subject property, utilizing such factors as potential note sale values, or a more refined estimate of costs to repair and time to lease the property.  Adjustments for potential disposal costs are also considered when determining the final appraised value.

As of September 30, 2017 andAt December 31, 2016,2017, there were no impaired loans measured at fair value.The following table presents impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral during the reported period.

 
        
Fair Value Measurements
at March 31, 2018 Using
 
   
Carrying
Amount Before
Allocation
  
Specific
Valuation
Allowance
Allocation
  Fair Value  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
 
Impaired Loans                   
C&I $1,179  $294  $885  $-  $-  $885 
25
Financial Instruments Not Measured at Fair Value

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 20 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K, except for the valuation of loans which was impacted by the adoption of ASU 2016-01. 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.

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 basis at September 30, 2017 and December 31, 2016 wereis as follows:

     
Fair Value Measurements
at September 30, 2017 Using
 
  
Carrying
Amount
  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
  Total 
Financial Assets               
Cash and due from banks $173,060  $173,060  $-  $-  $173,060 
Loans, net  5,956,751   -   -   5,946,931   5,946,931 
Accrued interest receivable  16,793   -   58 �� 16,735   16,793 
FHLBNY capital stock  61,833   N/A   N/A   N/A   N/A 
Financial Liabilities                    
Savings, money market and checking accounts  3,345,693   3,345,693   -   -   3,345,693 
Certificates of Deposits (“CDs”)  1,025,500   -   1,027,592   -   1,027,592 
Escrow and other deposits  117,765   117,765   -   -   117,765 
FHLBNY Advances  1,217,500   -   1,215,706   -   1,215,706 
Subordinated debt, net  113,575   -   115,875   -   115,875 
Accrued interest payable  2,759   -   2,759   -   2,759 

     
Fair Value Measurements at
December 31, 2016 Using
 
  
Carrying
Amount
  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
  Total 
Financial Assets               
Cash and due from banks $113,503  $113,503  $-  $-  $113,503 
TRUP CDOs  5,378   -   -   7,296   7,296 
Loans, net  5,615,886   -   -   5,609,034   5,609,034 
Accrued interest receivable  15,647   -   11   15,636   15,647 
FHLBNY capital stock  44,444   N/A   N/A   N/A   N/A 
Financial Liabilities                    
Savings, money market and checking accounts  3,346,961   3,346,961   -   -   3,346,961 
CDs  1,048,465   -   1,054,131   -   1,054,131 
Escrow and other deposits  103,001   103,001   -   -   103,001 
FHLBNY Advances  831,125   -   831,951   -   831,951 
Trust Preferred securities payable  70,680   -   69,973   -   69,973 
Accrued interest payable  2,080   -   2,080   -   2,080 

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).

TRUP CDOs Held to Maturity – At December 31, 2016follows for the Company owned seven TRUP CDOs classified as held-to-maturity. As a result of improved marketplace stability and enhanced trading activity, broker quotations became the sole valuation source utilized to estimatedates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of TRUP CDOs as of December 31, 2016. Despite improvement ininput that is significant to the overall marketplace conditions, unobservable data was still deemed to have been utilized in the broker quotation pricing, warranting a determination of Level 3 valuation for these securities at December 31, 2016.  The Company sold its TRUP CDO portfolio as of September 30, 2017.fair value measurement.

     
Fair Value Measurements
at March 31, 2018 Using
 
  
Carrying
Amount
  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
  Total 
Financial Assets               
Cash and due from banks $188,826  $188,826  $-  $-  $188,826 
Loans, net (excluding impaired loans carried at fair value)  5,485,337   -   -   5,454,038   5,454,038 
Accrued interest receivable  16,535   -   768   15,767   16,535 
FHLBNY capital stock  52,514   N/A   N/A   N/A   N/A 
Financial Liabilities                    
Savings, money market and checking accounts  3,205,950   3,205,950   -   -   3,205,950 
Certificates of Deposits (“CDs”)  1,224,491   -   1,221,036   -   1,221,036 
Escrow and other deposits  131,953   131,953   -   -   131,953 
FHLBNY Advances  1,010,400   -   1,001,841   -   1,001,841 
Subordinated debt, net  113,649   -   113,793   -   113,793 
Accrued interest payable  3,318   -   3,318   -   3,318 

     
Fair Value Measurements at
December 31, 2017 Using
 
  
Carrying
Amount
  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
Inputs
  Total 
Financial Assets               
Cash and due from banks $169,455  $169,455  $-  $-  $169,455 
Loans, net  5,581,084   -   -   5,519,746   5,519,746 
Accrued interest receivable  16,543   -   751   15,792   16,543 
FHLBNY capital stock  59,696   N/A   N/A   N/A   N/A 
Financial Liabilities                    
Savings, money market and checking accounts  3,311,560   3,311,560   -   -   3,311,560 
CDs  1,091,887   -   1,192,964   -   1,192,964 
Escrow and other deposits  82,168   82,168   -   -   82,168 
FHLBNY Advances  1,170,000   -   1,164,947   -   1,164,947 
Subordinated debt, net  113,612   -   115,337   -   115,337 
Accrued interest payable  1,623   -   1,623   -   1,623 
 
2826
Loans, Net (Excluding Impaired Loans Carried at Fair Value) – For adjustable rate loans repricing monthly or quarterly, and with no significant change in credit risk, fair values are based on carrying values.  The fair value of all remaining loans receivable is determined by discounting anticipated future cash flows of the loans, net of anticipated prepayments, using a discount rate reflecting current market rates for loans with similar terms to borrowers of similar credit quality.  The valuation method used for loans does not necessarily represent an exit price valuation methodology as defined under ASC 820.  However, since the valuation methodology is deemed to be comparable to a Level 3 input, the fair value of loans receivable other than impaired loans measured at fair value, is shown under the Level 3 valuation column.

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.

FHLBNY Capital Stock – It is not practicable to determine the fair value of FHLBNY capital stock due to restrictions placed on transferability.

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.

Trust Preferred Securities Payable – At December 31, 2016, the fair value of trust preferred securities payable 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 Company redeemed its trust preferred securities as of September 30, 2017.

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.
29
12.13.   RETIREMENT AND POSTRETIREMENT PLANS

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

The Company adopted ASU 2017-07, Compensation-Retirement Benefits (Topic 715), on January 1, 2018.  The components of net periodic costs are included in other non-interest expense in the Consolidated Statements of Operations.  Net expenses associated with these plans were comprised of the following components:

  Three Months Ended September 30, 
  2017  2016 
  
BMP, Employee
and Outside
Director
Retirement Plans
  
Postretirement
Plan
  
BMP, Employee
and Outside
Director
Retirement Plans
  
Postretirement
Plan
 
             
Service cost $-  $-  $-  $- 
Interest cost  329   14   343   16 
Expected return on assets  (395)  -   (383)  - 
Unrecognized past service liability  -   (2)  -   (2)
Amortization of unrealized loss (gain)  358   (1)  428   (1)
Net periodic cost $292  $11  $388  $13 

 Nine Months Ended September 30,  Three Months Ended March 31, 
 2017  2016  2018  2017 
 
BMP, Employee
and Outside
Director
Retirement Plans
  
Postretirement
Plan
  
BMP, Employee
and Outside
Director
Retirement Plans
  
Postretirement
Plan
  
BMP, Employee and
Outside Director
Retirement Plans
  
Postretirement
Plan
  
BMP, Employee and
Outside Director
Retirement Plans
  
Postretirement
Plan
 
                        
Service cost $-  $-  $-  $-  $-  $-  $-  $- 
Interest cost  987   42   1,028   47   292   14   329   14 
Expected return on assets  (1,185)  -   (1,149)  -   (430)  -   (395)  - 
Unrecognized past service liability  -   (6)  -   (6)  -   (2)  -   (2)
Amortization of unrealized loss (gain)  1,076   (3)  1,284   (3)  289   -   359   (1)
Net periodic cost $878  $33  $1,163  $38  $151  $12  $293  $11 

The Company disclosed in its consolidated financial statements for the year ended December 31, 20162017 that it expected to make contributions to, or benefit payments on behalf of, benefit plans during 20172018 as follows: Employee Retirement Plan - $15,$17, Outside Director Retirement Plan - $208,$226, Postretirement Plan - $113,$121, and BMP - $725.$564.  The Company made contributions of $5$4 to the Employee Retirement Plan during the three months ended September 30, 2017,March 31, 2018 and $17 duringexpects to make the nine months ended September 30, 2017, which completesremainder of the anticipated contributions during 2017.2018.  The Company made benefit payments of $64$56 on behalf of the Outside Director Retirement Plan during the three months ended September 30, 2017, and $161 during the nine months ended September 30, 2017,March 31, 2018 and expects to make the remainder of the estimated net contributions or benefit payments during 2017.2018. The Company made benefit payments totaling $48$17 on behalf of the Postretirement Plan during the three months ended September 30, 2017, and $125 during the nine months ended September 30, 2017,March 31, 2018 and expects to make any additional contributions or benefit payments required for 2017.2018.  The Company made benefit payments totaling $136$137 on behalf of the BMP during the three month period ended September 30, 2017, and $240 during nine months ended September 30, 2017,March 31, 2018 and expects to make $137 of the remaining anticipated benefit payments during 2017.2018.

The BMP exists in order to compensate executive officers for any curtailments in benefits due to statutory limitations on qualifying benefit plans.  During the three-month period ended September 30, 2017,March 31, 2018, in addition to benefit payments from the defined benefit plan component of the BMP discussed above, two retired participants elected gross lump-sum distributions of $11,708.  The$1,199 were made to retired participants.  One distribution was satisfied by 360,82222,051 shares of common stockCommon Stock (market value of $7,068)$942) held by the ESOPprevious Employee Stock Ownership Plan component of the BMP and cash of $4,591$257 held by the defined contribution plan components of the BMP.  As a result of the distribution, a non-cash tax benefit of $1,322$285 was recognized for the difference between market value and cost basis of the common stockCommon Stock held by the BMP. Effective January 1, 2017, income tax benefits were recognized as discrete items in income tax expense in accordance to ASU 2016-09.
 
14.    ACCOUNTING FOR STOCK BASED COMPENSATION

The Company maintains the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees, the 2004 Stock Incentive Plan and the 2013 Equity and Incentive Plan (“2013 Equity Plan”) (collectively, the "Stock Plans"), which are discussed more fully in Note 18 to the Company's Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2017, and which are subject to the accounting requirements of ASC 505-50 and ASC 718.

Stock Option Awards

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

  
Number of
Options
  
Weighted-Average
Exercise Price
  
Weighted-Average
Remaining
Contractual Years
  
Aggregate
Intrinsic Value
 
Options outstanding at January 1, 2018  157,546  $15.53       
Options granted  -   -       
Options exercised  (28,771) $16.38       
Options outstanding at March 31, 2018  128,775  $15.34   1.6  $394 
Options vested and exercisable at March 31, 2018  128,775  $15.34   1.6  $394 

During the three-month period ended March 31, 2018, the cost of one exercise of 10,000 stock options was satisfied by 9,045 shares of Common Stock at an exercise price of $18.18.  These shares were returned to Treasury Stock.
13.Information related to stock options during each period is as follows:

  
At or for the Three Months
Ended March 31,
 
  2018  2017 
Cash received for option exercise cost $290  $624 
Income tax benefit recognized on stock option exercises  4   69 
Intrinsic value of options exercised  97   275 

There were no grants of stock options during the three-month periods ended March 31, 2018 or 2017. All stock options are fully vested at both March 31, 2018 and 2017.

Restricted Stock Awards

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

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

  Number of Shares  
Weighted-Average
Grant-Date Fair
Value
 
Unvested allocated shares outstanding at January 1, 2018  150,567  $18.85 
Shares granted  -   - 
Shares vested  (4,752)  20.13 
Shares forfeited  (2,014)  19.39 
Unvested allocated shares at March 31, 2018  143,801  $18.80 

Information related to restricted stock awards during each period is as follows:

  
At or for the Three Months
Ended March 31,
 
  2018  2017 
Compensation expense recognized $304  $297 
Income tax benefit (expense) recognized on vesting of restricted stock awards  (2)  2 
Weighted average remaining years for which compensation expense is to be recognized  2.7   1.6 

Performance Based Equity Awards

The Company established the LTIP, a long term incentive award program for certain officers, which meets the criteria for equity-based accounting.  For each award, threshold (50% of target), target (100% of target) and maximum (150% of target) opportunities are eligible to be earned over a three-year performance period based on the Company's relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently.  Shares of Common Stock are issued on the grant date and held as unvested stock awards until the end of the performance period. 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 three-month period then ended:

  
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  (6,320)  19.19 
Maximum aggregate share payout at March 31, 2018  140,721  $18.83 
Minimum aggregate share payout  -   - 
Expected aggregate share payout  93,813  $18.83 

Compensation expense recorded for performance based equity awards was $84 and $97 for the three-month periods ended March 31, 2018 and 2017, respectively.
15.   SUBORDINATED NOTES PAYABLE

During the nine monthsyear ended September 30,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 $1,330 and $0 during the three months ended March 31, 2018 and March 31, 2017.
 
14.16.   TRUST PREFERRED SECURITIES PAYABLE

On March 19, 2004, the Holding Company completed an offering of $72,165 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 ofInterest expense related to the trust preferred securities payable was $70,680 at December$1,256 during the three months ended March 31, 2016.2017.

During the three months ended September 30, 2017, the Company fully 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.
 
15.17.   INCOME TAXES

During the three months ended September 30,March 31, 2018 and 2017, and 2016, the Company’sCompany's consolidated effective tax rates were 35.2%23.7% and 41.5%, respectively.  During the nine months ended September 30, 2017 and 2016, the Company’s consolidated effective tax rates were 37.0% and 42.1%38.2%, respectively. The higher consolidatedlower effective tax rate during the three-month and nine-month periodsthree months ended September 30, 2016March 31, 2018 compared to March 31, 2017 was primarily the result of the Tax Act, which took effect January 1, 2018, and reduced the corporate federal tax rate from a $68,183 gain on salemaximum rate of real estate transaction during the nine month period ended September 30, 2016.  Additionally, during the three-month period ended September 30, 2017, the Company recognized an income tax benefit35% to a flat rate of $1,322 from the distribution of retirement benefits from the BMP taken as discrete items.  The income tax benefit was partially offset by deferred tax expense of $476 to adjust the Company’s deferred tax asset during the three-month period ended September 30, 2017.21%.  There were no other significant unusual income tax items during the three-month or nine-month periods ended either September 30, 2017March 31, 2018 or 2016.2017.
 
16.   PREMISES HELD FOR SALE

On March 16, 2016, the Bank completed the sale of premises held for sale with an aggregate recorded balance of $8,799 at December 31, 2015.  A gain of $68,183 was recognized on this sale.29

Item 2.
Item 2.
Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations

General

Dime Community Bancshares (the “Company”), is a Delaware corporation headquartered in the Brooklyn Heights neighborhood of Brooklyn, New York. The Company was organized in 1996 and is registered as a savings and loan holding company with the Board of Governors of the Federal Reserve System pursuant to section 10(l) of the Home Owners’ Loan Act, as amended. As of September 30, 2017,March 31, 2018, the Holding Company's direct subsidiary was Dime Community Bank, a banking subsidiary that engages in commercial banking and financial services.  In 2004, the Company formed Dime Community Capital Trust I as a subsidiary, which issued $72.2 million of 7.0% trust preferred securities. During the three-month periodyear ended September 30,December 31, 2017, the Company fully redeemed the outstanding balance of $70.7 million, and dissolved the trust.  The Company also dissolved 842 Manhattan Ave Corp. during the three-month periodyear ended September 30,December 31, 2017 as this subsidiary was inactive. The Company’s common stock is traded on the Nasdaq Global Market under the symbol “DCOM.”
Dime Community Bank, a New York-chartered stock savings bank formerly known as The“The Dime Savings Bank of Williamsburgh,” was founded in 1864 and operates 2729 full service retail banking offices located in the New York City boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County and Suffolk County, New York. The Bank’s principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate, mixed use, and, to a lesseran increasing extent, commercial and industrial (“C&I”) loans, mortgage-backed securities, obligations of the U.S. government and government sponsored enterprises, and corporate debt and equity securities. The substantial majority of the Bank’s lending occurs in the greater New York City metropolitan area. The Bank has four active subsidiaries, including two real estate investment trusts that hold one-to-four family and multifamily residential and commercial real estate loans; Dime Insurance Agency, which engages in general insurance agency activities; and Boulevard Funding Corporation, which holds and manages real estate.

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 mortgage and C&I loans, as well as personal deposit accounts from its borrowers. The Bank launched an internet banking initiative, “DimeDirect,” in the second half of 2015. To date, deposits gathered through DimeDirect have primarily been money markets. The DimeDirect deposits are anticipated to carry lower administrative servicing costs than the Bank’s traditional retail deposits. Historically, the Bank’s primary lending strategy included the origination of, and investment in, mortgage loans secured by multifamily and mixed usemixed-use properties, and, to a lesseran increasing extent, mortgage loans secured by commercial real estate properties, primarily located in the greater New York CityNYC metropolitan area. As part of its strategic plan for 2017 and beyond,2018, 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. Beginning in mid-2018, the Bank intends to once again begin to offer one-to-four family loan products.

The Business Banking division is focused on total relationship banking and will enable the Bank to diversify its loan portfolio into areas such as C&I loans, Small Business Administration (“SBA”) loans (a portion of which is guaranteed by the SBA), small business loans, acquisition, land development and constructionADC loans, finance loans and leases, one-to-four family loans and consumer loans. These business lines are intended to supplement core deposit growth and provide greater funding diversity. In the first quarter ofDuring 2017, the Bank hired seasoned commercial lenders,executives, and bolstered its C&I lending and credit and administrative staff. During the three month period ended September 30,Additionally in 2017, the Bank was approved by the SBA as an SBAa lender, better positioning the Business Banking division for future expansion. Since January 1, 2017,As of March 31, 2018, the Bank has grown its C&I portfolio to $111.1balance was $145.8 million and direct-sourced CRE portfolio was $100.6 million.
 
The Bank also purchases investment grade securities primarily for liquidity purposes. 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 an initiala 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 “Part I - Item 1. CondensedNotes 13 and 14 to the Company’s Consolidated Financial Statements – Note 13” and “Note 14”included in the 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 $280.2 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 6 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for details of the loan securitization.

Selected Financial Highlights and Other Data
(Dollars in Thousands Except Per Share Amounts)

 
At or For the Three
Months Ended
September 30,
  
At or For the Nine
Months Ended
September 30,
  
At or For the Three
Months Ended March 31,
 
 2017  2016  2017  2016  2018  2017 
Per Share Data:                  
EPS (Diluted) $0.35  $0.29  $0.97  $1.95  $0.39  $0.30 
Cash dividends paid per share  0.14   0.14   0.42   0.42   0.14   0.14 
Book value per share  15.66   14.79   15.66   14.79   16.22   15.26 
Dividend Payout Ratio  40.00%  48.28%  43.30%  21.54%
Dividend payout ratio  35.90%  46.67%
Performance and Other Selected Ratios:                        
Return on average assets  0.85%  0.75%  0.79%  1.76%  0.93%  0.74%
Return on average common equity  9.14   7.63   8.43   17.89   9.77   7.83 
Net interest spread  2.38   2.44   2.39   2.52   2.28   2.40 
Net interest margin  2.53   2.59   2.56   2.69   2.47   2.57 
Average interest earning assets to average interest bearing liabilities  115.62   116.14   116.38   116.87 
Average interest earning assets to average interest-bearing liabilities  115.84   116.36 
Non-interest expense to average assets  1.41   1.29   1.35   1.33   1.36   1.38 
Efficiency Ratio  55.29   48.82   52.43   48.66 
Loan-to-Deposit ratio at End of Period  136.78   132.00   136.78   132.00 
Effective Tax Rate  35.19   41.52   37.00   42.08 
Efficiency ratio  54.60   53.00 
Loan-to-deposit ratio at end of period  124.31   127.59 
Effective tax rate  23.73   38.17 
Asset Quality Summary:                        
Non-performing loans $806  $3,875  $806  $3,875  $1,719  $3,801 
Non-performing assets  806   5,155   806   5,155   1,719   5,080 
Net charge-offs (recoveries)  1   29   49   54   23   32 
Non-performing loans/Total loans  0.01%  0.07%  0.01%  0.07%  0.03%  0.07%
Non-performing assets/Total assets  0.01   0.09   0.01   0.09   0.03   0.08 
Allowance for loan loss/Total loans  0.37   0.37   0.37   0.37   0.39   0.36 
Allowance for loan loss/Non-performing loans  2730.40   517.39   2730.40   517.39   1,233.51   551.28 
Earnings to Fixed Charges Ratios (1)
                        
Including interest on deposits  2.31x  2.29x  2.28x  4.14x  2.10x  2.26x
Excluding interest on deposits  4.26   4.35   4.45   8.55   3.82   4.71 

(1)
Please refer to Exhibit 12.1 for further detail on the calculation of these ratios.
31
Critical Accounting Policies

The Company’s policies with respect to: (1) the methodologies it uses to determine the allowance for loan losses (including reserves for loan commitments), and (2) accounting for defined benefit plans, are its most critical accounting policies because they are important to the presentation of the Company’s consolidated financial condition and results of operations, involve a significant degree of complexity and require management to make difficult and subjective judgments which often necessitate assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions or estimates could result in material variations in the Company’sCompany's consolidated results of operations or financial condition.

Allowance for Loan Losses. The Bank’sBank's methods and assumptions utilized to periodically determine its allowance for loan losses are summarized in Note 89 to the Company’sCompany's condensed consolidated financial statements.

Accounting for Defined Benefit Plans.  Defined benefit plans are accounted for in accordance with ASC 715, which requires an employer sponsoring a single employer defined benefit plan to recognize the funded status of such benefit plan in its statements of financial condition, measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation.  The Company utilizes the services of trained actuaries employed at an independent benefits plan administration entity in order to assist in measuring the funded status of its defined benefit plans.

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’sBank's Asset Liability Committee (“ALCO”("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 aLiquidity is managed daily basis, appropriate seniorand through periodic reporting to 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.Directors. A forecast of cash flow data for the upcoming 12 months is presented to the Board of Directors on an annual basis.

The Bank’sBank'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 selected multifamily residential or mixed use real estate loans to private sector secondary market purchasers, and has in the past sold such loans and one-to-four family residential loans to FNMA.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 mortgage loans and MBS are influenced by interest rates, economic conditions and competition.

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’sBank'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 retail deposits (due to depositors) decreased $24.2increased $27.0 million during the ninethree months ended September 30, 2017,March 31, 2018, compared to an increase of $975.0$113.1 million during the ninethree months ended September 30, 2016.March 31, 2017. Within deposits, core deposits (i.e., non-CDs) decreased $1.3$105.6 million during the ninethree months ended September 30, 2017March 31, 2018 and increased $765.9$191.4 million during the ninethree months ended September 30, 2016. The growth of core depositsMarch 31, 2017. CDs increased $132.6 million during the nine-monththree months ended March 31, 2018 compared to a decrease of $78.3 million during the three months ended March 31, 2017. The increase in growth during the current period ended September 30, 2016 was due primarily to successful gathering efforts tied to promotional internetCD products, offset by outflows from the Bank’s online money market offerings in line with the Company’s growth strategy.  During the nine-month period ended September 30, 2017, deposits from internet money market accounts began to outflowaccount channel, DimeDirect, as management elected not to increase posted rates on DimeDirect, the Bank’s internet channel.  CDs decreased $23.0 million during the nine months ended September 30, 2017, compared to an increaseposted rate lagged behind many of $209.1 million during the nine months ended September 30, 2016. The decrease in growth of CDs was due to the attrition of maturing CDs from successful CD promotional activities during 2016.its online competitors.

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. At September 30, 2017,March 31, 2018, the Bank had an additional potential borrowing capacity of $803.3$638.8 million through the FHLBNY, subject to customary minimum FHLBNY common stock ownership requirements (i.e., 4.5% of the Bank’sBank's outstanding FHLBNY borrowings).

The Bank increaseddecreased its outstanding FHLBNY advances by $386.4$159.6 million during the ninethree months ended September 30, 2017 to fund loan growth,March 31, 2018, compared to a $284.6$67.4 million decrease during the ninethree months ended September 30, 2016March 31, 2017, reflecting deposit inflows and lower total assets.

The Company generally utilizes its liquidity and capital resources primarily to fund the origination of real estate and, recently, C&I loans, the purchase of real estate loans, 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 trust preferred debt. During the ninethree months ended September 30, 2017,March 31, 2018, principal repayments on real estate loans (including refinanced loans) totaled $452.3$183.1 million compared to $544.6$153.4 million during the ninethree months ended September 30, 2016.March 31, 2017. The decreaseincrease resulted primarily from lowerhigher prepayment volume. During the three months ended March 31, 2018 and 2017, real estate loan originations totaled $75.0 million and $240.5 million, respectively. The decrease was due to the rack rates on the Company’s multifamily loans being higher than competitors.

Total investmentSales of mortgage-back securities increased by $18.6totaled $158.5 million during the nine monthsthree-month period ended September 30, 2017, as the Bank grew its on-balance sheet liquidity. The Bank purchased $24.0 million MBS, which was offset by the sale of the Bank’s $5.3 million TRUPS CDO portfolio.March 31, 2018. There were no sales of pass-through MBS issued by GSEs during the nine-month periods ended September 30, 2017 or 2016. There were no sales of agency collateralized mortgage obligationmortgage-backed securities during the nine-month periodsthree-month period ended September 30,March 31, 2017. Purchases of mortgage-backed securities totaled $189.9 million during the three-month period ended March 31, 2018. Security purchases were de-emphasized during the three-month period ended March 31, 2017, or 2016.as the yield offered in highly graded investment securities was not deemed sufficiently attractive.
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’sinstitution's assets. At September 30, 2017,March 31, 2018, each of the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was considered “well-capitalized”"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 September 30, 2017:March 31, 2018:

 
Actual Ratios at
September 30, 2017
     Basel III     
Well
Capitalized
Requirement
Under FDIC
Prompt
Corrective
Action
Framework(3)
  
Actual Ratios at
March 31, 2018
     Basel III       
 Bank  
Consolidated
Company
  
Minimum
Requirement
  
 
 
Minimum
Requirement
Plus 1.25%
Buffer(1)
  
 
 
Minimum
Requirement
Plus 2.5%
Buffer(2)
    Bank  
Consolidated
Company
  
Minimum
Requirement
  
Minimum
Requirement
Plus 1.875%
Buffer(1)
  
Minimum
Requirement
Plus 2.5%
Buffer(2)
  
Well
Capitalized
Requirement
Under FDIC
Prompt
Corrective
Action
Framework(3)
 
Tier 1 common equity ratio  11.47%  10.65%  4.5%  5.75%  7.0%  6.5%  12.97%  11.87%  4.5%  6.38%  7.0%  6.5%
Tier 1 risk-based based capital ratio  11.47   10.65   6.0   7.25   8.5   8.0   12.97   11.87   6.0   7.88   8.5   8.0 
Total risk-based based capital ratio  11.91   13.38   8.0   9.25   10.5   10.0   13.43   14.79   8.0   9.88   10.5   10.0 
Tier 1 leverage ratio  9.23   8.58   4.0   n/a   n/a   5.0   9.59   8.79   4.0   n/a   n/a   5.0 
(1)
The 1.25%1.875% buffer percentage represents the phased-in requirement as of September 30, 2017.March 31, 2018.
(2)The 2.5% buffer percentage represents the fully phased-in requirement as of January 1, 2019.
(3)Only the Bank is subject to these requirements.

Implementation of the initial phase capital conservation buffer under the Basel III Capital Rules on January 1, 2016 did not have a material impact upon the operations of the Bank or Holding Company. Management believes that, as of September 30, 2017,March 31, 2018, the Bank and the Holding Company would satisfy all capital categories requirements under the Basel III Capital Rules on a fully phased in basis as if such requirement had been in effect on that date.

The Company generally utilizes its liquidity and capital resources primarily to fund the origination of real estate and, recently, C&I loans, the purchase of real estate loans, 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 trust preferred debt.  During the nine months ended September 30, 2017 and 2016, real estate loan originations totaled $687.3 million and $1.18 billion, respectively.  The decrease reflected the Company’s election to steady the growth of the real estate portfolio and focus efforts on developing and growing the C&I loan portfolio, which totaled $111.1 million in originations during the nine months ended September 30, 2017, as a result of the build out of the Business Banking division during 2017. Additionally, real estate originations included $157.8 million of purchased loan participations during the nine months ended September 30, 2016 in order to deploy liquidity from deposit inflows more profitably.  During the nine-month period ended September 30, 2017, purchases of MBS totaled $24.0 million to grow the Bank’s on-balance sheet liquidity. Security purchases were de-emphasized during the nine-month period ended September 30, 2016, as the yield offered in highly graded investment securities was not deemed sufficiently attractive.

The Holding Company did not repurchase any shares of its common stock during the ninethree months ended September 30, 2017March 31, 2018 or 2016.2017. As of September 30, 2017,March 31, 2018, up to 1,104,549 shares remained available for purchase under authorized share purchase programs.

The Holding Company paid $15.8$5.2 million in cash dividends on common stock during both the ninethree months ended September 30, 2017, up from $15.4 million during the nine months ended September 30, 2016, reflecting an increase of 762,599 average outstanding shares from October 1, 2016 to September 30,March 31, 2018 and 2017. The increase in average outstanding shares was primarily the result of issuances of common stock for equity awards and stock option exercises.

Contractual Obligations

The Bank is obligated to make rental payments under leases on certain of its branches and equipment.  In addition, the Bank generally has outstanding at any time significant borrowings in the form of FHLBNY advances, as well as customer CDs with fixed contractual interest rates.  During the nine months ended September 30, 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 $70.7 million of callable trust preferred borrowings from third parties outstanding in July 2017.
Off-Balance Sheet Arrangements

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

The following table presents off-balance sheet arrangements as of September 30, 2017:March 31, 2018:

 
Less than
One Year
  
One Year
to Three
Years
  
Over Three
Years to
Five Years
  
Over Five
Years
  
Total
   
Less than
One Year
 
One Year
to Three
Years
 
Over Three
Years to
Five Years
 
Over Five
Years
 Total 
 (Dollars in thousands)    (Dollars in thousands)   
Credit Commitments:                         
Available lines of credit $66,788  $-  $-  $-  $66,788  $78,076  $-  $-  $-  $78,076 
Other loan commitments  53,281   -   -   -   53,281   64,696   -   -   -   64,696 
Stand-by letters of credit  927   -   -   -   927   927   -   -   -   927 
Total Off-Balance Sheet Arrangements $120,996  $-  $-  $-  $120,996  $143,699  $-  $-  $-  $143,699 

Asset Quality
 
General

At both September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company had neither whole loans nor loans underlying MBS that would have been considered subprime loans at origination, i.e., mortgage loans advanced to borrowers who did not qualify for market interest rates because of problems with their income or credit history.  See Note 9 to the condensed consolidated financial statements for a discussion of impaired investment securities and MBS.

Monitoring and Collection of Delinquent Loans

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

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

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

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

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

Within the Bank’sBank's held-to-maturity portfolio nine(excluding consumer loans), twelve non-accrual loans (excluding consumer loans) totaled $804,000$1.7 million at September 30, 2017,March 31, 2018, and sixteeneight non-accrual loans (excluding consumer loans) totaled $4.2$0.5 million at December 31, 2016.2017.  During the ninethree months ended September 30, 2017, one loanMarch 31, 2018, four loans totaling $72,000 was$1.2 million were placed on non-accrual status, four non-accrual loans totaling $398,000 were fully satisfied according to their contractual terms, one non-accrual loan totaling $250,000 with a partial charge-off of $37,000 was fully satisfied, three non-accrual loans totaling $2.8 million were sold, and principal amortization of $59,000$0.01 million was recognized on fourfive non-accrual loans. There were no changes on the remaining fourthree non-accrual loans during the ninethree month period ended September 30, 2017.March 31, 2018.

Impaired Loans

The recorded investment in loans deemed impaired (as defined in Note 79 to the condensed consolidated financial statements) totaled $8.6$9.3 million, consisting of eightnine loans, at September 30, 2017,March 31, 2018, compared to $11.9$8.2 million, consisting of thirteenseven loans, at December 31, 2016.2017.  During the ninethree months ended September 30, 2017, one impaired loan totaling $287,000 with a partial charge-off of $37,000 was fully satisfied, one impaired loans totaling $47,000 was fully satisfied according to its contractual terms, three impaired loans totaling $2.8 million were sold, andMarch 31, 2018, principal amortization totaling $190,000$0.06 million was recognized on eightseven impaired loans.

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

 
September 30,
2017
  
December 31,
2016
   
March 31,
2018
  
December 31,
2017
 
 (Dollars in Thousands)   (Dollars in Thousands) 
Non-accrual loans (1):
             
One-to-four family residential, including condominium and cooperative apartment $708  $1,012   $449  $436 
Multifamily residential and residential mixed use real estate  -   2,675 
Commercial mixed use real estate  96   549    90   93 
C&I  1,179   - 
Consumer  2   1    1   4 
Total non-accrual loans  806   4,237    1,719   533 
Non-accrual one-to-four family and consumer loans deemed homogeneous loans  (710)  (1,013)   (450)  (440)
TDRs:                 
One-to-four family residential, including condominium and cooperative apartment  395   407    20   22 
Multifamily residential and residential mixed use real estate  629   658 
Commercial mixed use real estate  4,197   4,261 
Multifamily residential and residential mixed-use real estate   604   619 
Commercial mixed-use real estate   4,152   4,174 
Commercial real estate  3,313   3,363    3,279   3,296 
Total TDRs  8,534   8,689    8,055   8,111 
Impaired loans $8,630  $11,913   $9,324  $8,204 
(1) There were no non-accruing TDRs for the periods indicated.
(1)
There were no non-accruing TDRs for the periods indicated.

Ratios:      
Total non-accrual loans to total loans  0.03%  0.01%
Total non-performing assets to total assets  0.03   0.01 

TDRs

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

·A reduction of interest rate has been made for the remaining term of the loan
·The maturity date of the loan has been extended with a stated interest rate lower than the current market rate for new debt with similar risk
·The outstanding principal amount and/or accrued interest have been reduced

In instances in which the interest rate has been reduced, management would not deem the modification a TDR in the event that the reduction in interest rate reflected either a general decline in market interest rates or an effort to maintain a relationship with a borrower who could readily obtain funds from other sources at the current market interest rate, and the terms of the restructured loan are comparable to the terms offered by the Bank to non-troubled debtors.  The Bank did not modify any loans in a manner that met the criteria for a TDR during the ninethree months ended September 30,March 31, 2018 or 2017.  The Bank modified one one-to-four family residential loan in a manner that met the criteria of a TDR during the nine months ended September 30, 2016.
 
Accrual status for TDRs is determined separately for each TDR in accordance with the Bank’s policies for determining accrual or non-accrual status that are outlined on page 37.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 as disclosed on page 37 and agency regulations.

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

At September 30, 2017March 31, 2018 and December 31, 2016,2017, all TDRs but one 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 cash flows calculated at each measurement period (typically quarter-end) compared to the present value of the expected cash flows at the time of the original loan agreement was recognized as either an allocated reserve (in the event that it related to lower expected interest payments) or a charge-off (if related to lower expected principal payments).  For TDRs on non-accrual status, an appraisal of the underlying real estate collateral is deemed the most appropriate measure to utilize when evaluating impairment, and any shortfall in valuation from the recorded balance is accounted for through a charge-off.  In the event that either an allocated reserve or a charge-off is recognized on TDRs, the periodic loan loss provision is impacted.

Please refer to Note 78 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, the Bank obtains a current appraisal on the property and reassesses the likely realizable value (a/k/a fair value) of the property quarterly thereafter. OREO is carried at the lower of the fair value or book balance, with any write downs recognized through a provision recorded in non-interest expense. Only the appraised value, or either a contractual or formal marketed value that falls below the appraised value, is used when determining the likely realizable value of OREO at each reporting period.  The Bank typically seeks to dispose of OREO properties in a timely manner.  As a result, OREO properties have generally not warranted subsequent independent appraisals.

The Bank had no OREO properties at September 30, 2017March 31, 2018 or December 31, 2016.2017. The Bank did not recognize any provisions for losses on OREO properties during the three or nine months ended September 30, 2017March 31, 2018 or 2016.2017.

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

  
September 30,
2017
  
December 31,
2016
 
  (Dollars in Thousands) 
Non-accrual loans $806  $4,237 
Non-performing assets:        
Non-performing TRUP CDOs  -   1,270 
Total non-performing assets $806  $5,507 
Ratios:        
Total non-accrual loans to total loans  0.01%  0.08%
Total non-performing assets to total assets  0.01   0.09 
Other Potential Problem Loans

Loans Delinquent 30 to 89 Days

The Bank had one real estate loan, totaling $81,000$2.9 million that was delinquent between 30 and 89 days at September 30, 2017,March 31, 2018, and three real estate loans totaling $1.9$0.03 million at December 31, 2016.2017. 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.

Reserve for Loan Commitments

The Bank maintains a reserve associated with unfunded loan commitments accepted by the borrower. The amount of reserve was $25,000$0.03 million at both September 30, 2017March 31, 2018 and December 31, 2016.2017. 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.

Allowance for Loan Losses

The methodology utilized to determine the Company’sCompany's allowance for loan losses on real estate, C&I, and consumer loans, along with periodic associated activity, remained constant during the periods ended September 30, 2017, June 30, 2017March 31, 2018 and December 31, 2016.2017.  The following is a summary of the components of the allowance for loan losses as of the following dates:

 
September 30,
2017
  
June 30,
2017
  
December 31,
2016
  
March 31,
2018
  
December 31,
2017
  
March 31,
2017
 
 (Dollars in Thousands)  (Dollars in Thousands) 
Impaired loans $-  $-  $-  $294  $-  $- 
Pass graded loans:                        
Real estate loans  20,322   20,945   20,516   18,742   18,993   20,482 
C&I loans  1,666   1,023   -   2,151   2,021   453 
Consumer loans  19   17   20   17   19   19 
Total $22,007  $21,985  $20,536  $21,204  $21,033  $21,954 

The allowance for loan losses increased $22,000 and $1.5$0.2 million during the three-month period ended March 31, 2018 compared to the three-month period ended December 31, 2017, and nine-month periodsdecreased $0.8 million compared to the three-month period ended September 30, 2017, respectively. ProvisionsMarch 31, 2017. A provision of $23,000 and $1.5$0.2 million werewas recorded during the three-month period ended March 31, 2018 compared to a credit for loan losses of $1.0 million during the three-month period ended December 31, 2017, and nine-month periodsa provision of $0.5 million during the three-month period ended September 30, 2017, respectively.March 31, 2017. During the three-month period ended September 30, 2017, whileMarch 31, 2018, the loan loss provision was driven mainly fromby a provision for specific reserves on two impaired C&I loans and growth in the C&I loan portfolio, the provision was offset by continued improvementa decrease in the overall credit quality of the real estate loan portfolio.  The increase in the provision during the nine-month period ended September 30, 2017 was primarily from growth in both the real estate and C&I loans within the pass graded portion of the loan portfolio.

For a further discussion of the allowance for loan losses and related activity during the three-month and nine-month periods ended September 30,March 31, 2018 and 2017, and 2016, and as of December 31, 2016,2017, please see Note 8 to the condensed consolidated financial statements.  Period-end balances of all Substandard, Special Mention and pass graded real estate loans are summarized in Note 79 to the condensed consolidated financial statements.

Comparison of Financial Condition at September 30, 2017March 31, 2018 and December 31, 20162017

Assets.  Assets totaled $6.44$6.33 billion at September 30, 2017, $439.0March 31, 2018, $77.5 million abovebelow their level at December 31, 2016.2017, primarily due to a decrease in the loan portfolio, offset by an increase in cash and due from banks.

Total loans increased $342.3decreased $94.9 million during the ninethree months ended September 30, 2017.March 31, 2018. During the period, the Bank originated $687.3recognized $194.3 million of aggregate amortization on loans (also including refinancing of existing loans), which exceeded originations of $75.0 million of real estate loans (including refinancing of existing loans) and $111.1$25.3 million of C&I loans, which exceeded the $455.2 million of aggregate amortization on loans (also including refinancing of existing loans) during the period.  As a result of the growth in loans, the allowance for loan losses increased $1.5 million during the nine-month period ended September 30, 2017.loans.

Cash and due from banks increased by $59.6$19.4 million and total mortgage-backed securities increased by $3.0 million during the ninethree months ended September 30, 2017,March 31, 2018, as a result of holding increased on-balance sheet liquidity while management monitors the appropriate level of investment liquidity, which will be based on monetary policy, interest rates, and the Bank’s funding needs.needs, and periodic stress testing analysis.

Total investment securities increased by $18.6 million during the nine months ended September 30, 2017, as the Bank grew its on-balance sheet liquidity. The Bank purchased $24.0 million MBS, which was offset by the sale of the Bank’s $5.3 million TRUPS CDO portfolio.
Liabilities.  Total liabilities increased $418.8decreased $86.9 million during the ninethree months ended September 30, 2017,March 31, 2018, primarily due to an increasea decrease of $386.4$159.6 million in FHLBNY advances, the net issuance of $113.5partially offset by a $49.8 million of subordinated debt, and a $14.8 million decreaseincrease in mortgagor escrow and other deposits, offset by the $70.7 million redemptionand an increase of trust preferred securities and a decrease of $24.2$27.0 million in retail deposits (due to depositors).deposits. Please refer to “Part"Part I – Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”Resources" for a discussion of the increases in retail deposits and increase in FHLBNY advances during the ninethree months ended September 30, 2017.  Please refer to “Part I – Item 2. Recent Events” for a discussion of the redemption of trust preferred securities.March 31, 2018.  The decreaseincrease in mortgagor escrow and other deposits was in part due to the semi-annual real estate tax payments made fromannual reassessment of borrower escrow accounts.

Stockholders’Stockholders' Equity.  Stockholders’Stockholders' equity increased $20.2$9.4 million during the ninethree months ended September 30, 2017,March 31, 2018, due primarily to net income of $36.5$14.7 million, $1.3 million aggregate increase related to expense amortization, $1.2 million decrease in accumulated other comprehensive loss, $680,000 of equity added from stock option exercises, and $198,000 of equity added as a result of issuances of equity awards.  Partially offsetting these items were $15.8offset by $5.2 million in cash dividends paid during the period, and $3.9 millionperiod.
37
Comparison of Operating Results for the Three Months Ended September 30,March 31, 2018 and 2017 and 2016

General.  Net income was $13.3$14.7 million during the three months ended September 30, 2017,March 31, 2018, an increase of $2.8$3.6 million from net income of $10.5$11.2 million during the three months ended September 30, 2016.March 31, 2017.  During the comparative period,three months ended March 31, 2018, net interest income increased by $3.1$0.5 million, non-interest income increased by $2.2$1.5 million, and the provision for loan losses decreased by $1.1$0.3 million, offset by an increase in non-interest expense by $3.9of $1.0 million during the period. Income tax expense was $7.2$4.6 million during the three months ended September 30, 2017,March 31, 2018, lower than the comparative period by $251,000.$2.3 million, due to the tax law change enacted in December 2017.

Net Interest Income.  The discussion of net interest income for the three months ended September 30,March 31, 2018 and 2017 and 2016 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. The yields include fees that are considered adjustments to yields.

Analysis of Net Interest Income

  Three Months Ended March 31, 
     2018        2017    
  
Average
Balance
  Interest  
Average
Yield/
Cost
  
Average
Balance
  Interest  
Average
Yield/
Cost
 
Assets: 
(Dollars in Thousands)
 
Interest-earning assets:                  
Real estate loans $5,435,400  $49,575   3.65% $5,687,557  $50,475   3.55%
C&I loans  140,720   1,656   4.71   2,474   41   6.63 
Other loans  1,189   19   6.39   1,067   18   6.75 
MBS  351,196   2,257   2.57   3,489   14   1.61 
Investment securities  6,492   15   0.92   16,841   190   4.51 
Other  210,016   1,511   2.88   112,881   717   2.54 
Total interest-earning assets  6,145,013   55,033   3.58%  5,824,309  $51,455   3.53%
Non-interest earning assets  224,297           202,605         
Total assets $6,369,310          $6,026,914         
                         
Liabilities and Stockholders' Equity:                        
Interest-bearing liabilities:                        
Interest-bearing checking accounts $124,440  $54   0.18% $110,797  $58   0.21%
Money Market accounts  2,432,242   6,318   1.05   2,693,219   5,780   0.87 
Savings accounts  359,638   59   0.07   368,087   45   0.05 
CDs  1,151,146   4,320   1.52   1,022,155   3,624   1.44 
Borrowed Funds  1,237,094   6,267   2.05   811,288   4,461   2.23 
Total interest-bearing liabilities  5,304,560   17,018   1.30%  5,005,546  $13,968   1.13%
Non-interest-bearing checking accounts  310,651           291,252         
Other non-interest-bearing liabilities  150,544           160,393         
Total liabilities  5,765,755           5,457,191         
Stockholders' equity  603,555           569,723         
Total liabilities and stockholders' equity $6,369,310          $6,026,914         
Net interest income     $38,015          $37,487     
Net interest spread          2.28%          2.40%
Net interest-earning assets $840,453          $818,763         
Net interest margin          2.47%          2.57%
Ratio of interest-earning assets to interest-bearing liabilities          115.84%          116.36%
                         
Deposits $4,378,117  $10,751   1.00% $4,485,510  $9,507   0.86%
 
Rate/Volume Analysis of Net Interest Income

  Three Months Ended September 30, 
     2017        2016    
        Average        Average 
  Average     Yield/  Average     Yield/ 
  Balance  Interest  Cost  Balance  Interest  Cost 
Assets: 
(Dollars In Thousands)
 
Interest-earning assets:                  
Real estate loans $5,842,921  $51,621   3.53% $5,328,712  $48,090   3.61%
C&I loans  86,014   1,043   4.85   555   10   7.21 
Other loans  1,230   19   6.18   1,175   18   6.13 
MBS  5,631   27   1.92   456   2   1.75 
Investment securities  9,304   108   4.64   16,718   129   3.09 
Other  139,153   811   2.33   105,454   707   2.68 
Total interest-earning assets  6,084,253  $53,629   3.53%  5,453,070  $48,956   3.59%
Non-interest earning assets  206,315           200,033         
Total assets $6,290,568          $5,653,103         
                         
Liabilities and Stockholders’ Equity:                        
Interest-bearing liabilities:                        
Interest bearing checking accounts $110,384  $58   0.21% $91,979  $55   0.24%
Money Market accounts  2,643,537   5,961   0.89   2,196,387   4,702   0.85 
Savings accounts  362,423   45   0.05   366,921   46   0.05 
CDs  932,208   3,344   1.42   1,056,346   3,832   1.44 
Borrowed Funds  1,213,786   5,763   1.88   983,756   4,974   2.01 
Total interest-bearing liabilities  5,262,338  $15,171   1.14%  4,695,389  $13,609   1.15%
Non-interest bearing checking accounts  307,218           262,120         
Other non-interest-bearing liabilities  138,467           143,224         
Total liabilities  5,708,023           5,100,733         
Stockholders’ equity  582,545           552,370         
Total liabilities and stockholders’ equity $6,290,568          $5,653,103         
Net interest income     $38,458          $35,347     
Net interest spread          2.39%          2.44%
Net interest-earning assets $821,915          $757,681         
Net interest margin          2.53%          2.59%
Ratio of interest-earning assets to interest-bearing liabilities          115.62%          116.14%
                         
Deposits $4,355,770  $9,408   0.86% $3,973,753  $8,635   0.86%
  
Three Months Ended March 31, 2018
Compared to Three Months Ended March 31, 2017
Increase/ (Decrease) Due to:
 
  Volume  Rate  Total 
  (Dollars In thousands) 
Interest-earning assets:         
Real estate loans $ (2,280) $1,380  $ (900)
C&I loans  1,959   (344)  1,615 
Other loans  2   (1)  1 
MBS  1,815   428   2,243 
Investment securities  (71)  (104)  (175)
Other  658   136   794 
Total $2,083  $1,495  $3,578 
             
Interest-bearing liabilities:            
Interest-bearing checking accounts $6  $ (10) $ (4)
Money market accounts  (609)  1,147   538 
Savings accounts  (3)  17   14 
CDs  476   220   696 
Borrowed funds  2,254   (448)  1,806 
Total $2,124  $926  $3,050 
Net change in net interest income $ (41) $570  $528 
Rate/Volume Analysis
  
Three Months Ended September 30, 2017
Compared to Three Months Ended September 30, 2016
Increase/ (Decrease) Due to:
 
  Volume  Rate  Total 
  (Dollars In thousands) 
Interest-earning assets:         
Real estate loans $4,619  $(1,088) $3,531 
C&I loans  1,288   (255)  1,033 
Other loans  1   -   1 
MBS  24   1   25 
Investment securities  (72)  51   (21)
Other  211   (107)  104 
Total $6,071  $(1,398) $4,673 
             
Interest-bearing liabilities:            
Interest bearing checking accounts $11  $(8) $3 
Money market accounts  998   261   1,259 
Savings accounts  (1)  -   (1)
CDs  (444)  (44)  (488)
Borrowed funds  1,138   (349)  789 
Total $1,702  $ (140) $1,562 
Net change in net interest income $4,369  $(1,258) $3,111 
The Company’s net interest income and net interest margin (“NIM”) during the three months ended September 30,March 31, 2018 and 2017 and 2016 were impacted by the following factors:

·During the period January 1, 2009 through September 30, 2017,March 31, 2018, Federal Open Market Committee monetary policies resulted in the maintenance of the overnight federal funds rate in a range of 0.0% to 1.25%1.75%, helping deposit and borrowing costs remain at historically low levels.

·Continued marketplace competition and refinancing activity on real estate loans particularly during the period January 1, 2012 through September 30, 2017, resulted in an ongoing reduction in the average yield on real estate loans.

Net Interest Income.  Net interest income was $38.5$38.0 million during the three months ended September 30, 2017,March 31, 2018, an increase of $3.1$0.5 million from the three months ended September 30, 2016.March 31, 2017.  Average interest-earning assets were $6.08$6.15 billion at September 30, 2017,March 31, 2018, an increase of $631.2$320.7 million from $5.45$5.82 billion at September 30, 2016.March 31, 2017. NIM was 2.53%2.47% during the three months ended September 30 2017,March 31, 2018, down from 2.59%2.57% during the three months ended September 30, 2016,March 31, 2017, primarily due to lower yields on real estate loans.higher costs of deposits.

Interest Income.  Interest income was $53.6$55.0 million during the three months ended September 30, 2017,March 31, 2018, an increase of $4.7$3.6 million from the three months ended September 30, 2016,March 31, 2017, primarily reflecting an increase of $3.5$1.6 million and $1.0$2.2 million in interest income on real estateC&I loans and C&I loans,mortgage-backed securities, respectively. The increased interest income on real estate loans was attributable to growth of $514.2 million in their average balance during the comparative period, as, pursuant to the Company’s growth strategy, new originations significantly exceeded amortization and satisfactions during the period October 1, 2016 through September 30, 2017. The increased interest income on C&I loans reflected the build out of the Business Banking division and growth of $85.5$138.2 million in the average balances during the comparative period. Partially offsetting the higherThe increased interest income on real estate loansfrom mortgage-backed securities was due to the increased average balance of $347.7 million resulting from the growthsecuritization of $280.2 million of multifamily loans in their average balance was a reduction of 8 basis points in their average yield, resulting from both continued low benchmark lending rates and heightened market competition.December 2017.

Interest Expense.  Interest expense increased $1.6$3.1 million, to $15.2$17.0 million, during the three months ended September 30, 2017,March 31, 2018, from $13.6$14.0 million during the three months ended September 30, 2016.March 31, 2017. The increased interest expense was mainly attributable to growth in money market deposits average balance of $447.2 million, and higher borrowings resulting in an increase in average balances of $230.0 million. The increaseborrowings of $425.8 million, growth in the money marketcertificates of deposits average balances wasbalance of $129.0 million due to successful promotional activities in connection with the Company’s growth strategy. Offsetting this increase was a decline in interest expense of $488,000increased offering rates on CDs, as their average balances decreased $124.1 million during the comparative period as the result of successful gathering efforts tied to promotional internet money offerings outpaced attrition of maturing CDs from prior successful CD promotional activities in 2016.products.

Provision for Loan Losses. The Company recognized a provision for loan losses of $23,000$0.2 million during the three months ended September 30, 2017,March 31, 2018, compared to a provision for loan losses of $1.2$0.5 million during the three months ended September 30, 2016.March 31, 2017.   The decrease in loan loss provision resulted mainly from continued improvementa decrease in the overall credit quality of the real estate loan portfolio, offset by growth in the C&I loan portfolio.portfolio and a specific reserve on two impaired C&I loans.

Non-Interest Income.  Non-interest income was $4.3$3.2 million during the three months ended September 30, 2017,March 31, 2018, an increase of $2.2$1.5 million from $2.1$1.8 million during the three months ended September 30, 2016,March 31, 2017, primarily due to a $2.6$1.4 million gain from theon sale of the TRUP CDO portfolio during the three months ended September 30, 2017, offset by decreases in services charges and other fees and other miscellaneous income.securities.
 
Non-Interest Expense.  Non-interest expense was $22.2 million during the three months ended September 30, 2017, an increase of $3.9 million from $18.2 million during the three months ended September 30, 2016, reflecting increases of $242,000 in occupancy and equipment expense, $2.1 million in data processing costs, $545,000 in marketing expense, $262,000 in FDIC premiums, and $1.3 million in losses from extinguishment of debt, offset by a decrease of $462,000 in ESOP and RSA benefit expense during the comparative period. The $242,000 increase in occupancy expense was attributable to new leases related to de novo retail branches. The $2.1 million increase in data processing costs was primarily the result of $1.7 million of de-conversion costs associated with the planned change in the Bank’s core processor which is expected to occur in 2018, and various technology enhancement initiatives related to customer banking services. The $545,000 increase in marketing expense was attributable to higher volume of marketing promotions. The $1.3 million loss from the extinguishment in debt was due to the acceleration of the remaining unamortized deferred origination costs from the redemption of $70.7 million of trust preferred securities borrowings at par from third parties during the third quarter of 2017. The $462,000 decrease in ESOP and RSA amortization expense resulted from the payoff of the ESOP share acquisition loan during the quarter ended December 31, 2016 and a lower number of vesting RSAs during the quarter ended September 30, 2017.
Non-interest expense was 1.41% and 1.29% of average assets during the three-month periods ended September 30, 2017 and 2016, respectively, as the result of the increase in non-interest expense, which was partially offset by the increase in average assets of $637.5 million.

Income Tax Expense.   Income tax expense approximated $7.2 million during the three months ended September 30, 2017, down $251,000 from $7.5 million during the three months ended September 30, 2016.  The Company’s consolidated tax rate was 35.2% during the three months ended September 30, 2017, down from 41.5% during the three months ended September 30, 2016.  The lower tax rate during the three-month period ended September 30, 2017 was primarily the result of a an income tax benefit of $1.3 million recognized from the distribution of retirement benefits from the BMP taken as discrete items partially offset by deferred tax expense of $476,000 to adjust the Company’s deferred tax asset.

Comparison of Operating Results for the Nine months Ended September 30, 2017 and 2016

General.  Net income was $36.5 million during the nine months ended September 30, 2017, a decrease of $35.3 million from net income of $71.8 million during the nine months ended September 30, 2016.  During the comparative period, non-interest income decreased by $66.3 million, and non-interest expense increased $8.2 million, offset by an increase of $8.4 million in net interest income. Income tax expense decreased by $30.7 million during the comparative period, as a result of $66.1 million lower pre-tax income, resulting primarily from a $68.2 million gain on the sale of property in 2016.

Net Interest Income.  The discussion of net interest income for the nine months ended September 30, 2017 and 2016 presented below 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. The yields include fees that are considered adjustments to yields.
Analysis of Net Interest Income

  Nine Months Ended September 30, 
     2017        2016    
        Average        Average 
  Average     Yield/  Average     Yield/ 
  Balance  Interest  Cost  Balance  Interest  Cost 
Assets: 
(Dollars In Thousands)
 
Interest-earning assets:                  
Real estate loans $5,763,348  $153,233   3.54% $5,094,620  $141,099   3.69%
C&I loans  43,421   1,558   4.78   404   20   6.60 
Other loans  1,124   55   6.52   1,150   56   6.49 
MBS  4,193   55   1.75   423   6   1.89 
Investment securities  14,372   462   4.29   19,046   567   3.97 
Other  115,787   2,139   2.46   123,406   2,089   2.26 
Total interest-earning assets  5,942,245  $157,502   3.53%  5,239,049  $143,837   3.66%
Non-interest earning assets  206,375           205,624         
Total assets $6,148,620          $5,444,673         
                         
Liabilities and Stockholders’ Equity:                        
Interest-bearing liabilities:                        
Interest bearing checking accounts $111,813  $181   0.22% $85,551  $172   0.27%
Money Market accounts  2,701,404   17,880   0.88   1,926,112   11,946   0.83 
Savings accounts  366,168   136   0.05   367,965   136   0.05 
CDs  959,966   10,227   1.42   999,406   10,772   1.44 
Borrowed Funds  966,710   15,080   2.09   1,103,643   15,223   1.84 
Total interest-bearing liabilities  5,106,061  $43,504   1.14%  4,482,677  $38,249   1.14%
Non-interest bearing checking accounts  299,744           259,673         
Other non-interest-bearing liabilities  166,496           167,472         
Total liabilities  5,572,301           4,909,822         
Stockholders’ equity  576,319           534,851         
Total liabilities and stockholders’ equity $6,148,620          $5,444,673         
Net interest income     $113,998          $105,588     
Net interest spread          2.39%          2.52%
Net interest-earning assets $836,184          $756,372         
Net interest margin          2.56%          2.69%
Ratio of interest-earning assets to interest-bearing liabilities          116.38%          116.87%
                         
Deposits $4,439,095  $28,424   0.86% $3,638,707  $23,026   0.85%

Rate/Volume Analysis

  
Nine Months Ended September 30, 2017
Compared to Nine Months Ended September 30, 2016
Increase/ (Decrease) Due to:
 
  Volume  Rate  Total 
  (Dollars In thousands) 
Interest-earning assets:         
Real estate loans $14,147  $(2,013) $12,134 
C&I loans  1,481   57   1,538 
Other loans  (1)  -   (1)
MBS  43   6   49 
Investment securities  (114)  9   (105)
Other  (80)  130   50 
Total $15,476  $(1,811) $13,665 
             
Interest-bearing liabilities:            
Interest bearing checking accounts $47  $(38) $9 
Money market accounts  5,013   921   5,934 
Savings accounts  (1)  1   - 
CDs  (410)  (135)  (545)
Borrowed funds  (2,045)  1,903   (142)
Total $2,604  $2,652  $5,256 
Net change in net interest income $12,872  $(4,463) $8,409 
The Company’s net interest income and NIM during the nine months ended September 30, 2017 and 2016 were impacted by the following factors:

·During the period January 1, 2009 through September 30, 2017, Federal Open Market Committee monetary policies resulted in the maintenance of the overnight federal funds rate in a range of 0.0% to 1.25%, helping deposit and borrowing costs remain at historically low levels.

·Continued marketplace competition and refinancing activity on real estate loans, particularly during the period January 1, 2012 through September 30, 2017, has resulted in an ongoing reduction in the average yield on real estate loans.

Net Interest Income.  Net interest income was $114.0 million during the nine months ended September 30, 2017, an increase of an increase of $8.4 million from the nine months ended September 30, 2016.  Average interest-earning assets were $5.94 billion at September 30, 2017, an increase from $703.2 million from September 30, 2016. NIM was 2.56% during the nine months ended September 30, 2017, down from 2.69% during the three months ended September 30, 2016, primarily due to lower yields on real estate loans.

Interest Income.  Interest income was $157.5 million during the nine months ended September 30, 2017, an increase of $13.7 million from the nine months ended September 30, 2016, primarily reflecting increases in interest income of $12.1 million and $1.5 million on real estate loans and C&I loans, respectively. The increased interest income on real estate loans reflected growth of $668.7 million in their average balance during the comparative period, as new originations significantly exceeded amortization and satisfactions during the period October 1, 2016 through September 30, 2017. The increased interest income on C&I loans reflected the build out of the Business Banking division and growth of $43.0 million in the average balances during the comparative period.  Partially offsetting the higher interest income on real estate loans from the growth in their average balance was a reduction of 15 basis points in their average yield, resulting from both continued low benchmark lending rates and heightened marketplace competition.

Interest Expense.  Interest expense approximated $43.5 million during the nine months ended September 30, 2017, an increase of $5.3 million from the nine months ended September 30, 2016, primarily reflecting increases in interest expense of $5.9 million on money market accounts, offset by a reduction of $545,000 and $142,000 in interest expense on CDs and borrowed funds, respectively. The increase of $5.9 million in interest expense on money market deposits reflected successful promotional activities that increased their average balance by $775.3 million and their average cost by 5 basis points from the nine months ended September 30, 2016 to the nine months ended September 30, 2017.  Interest expense on CDs declined $545,000 due to a decrease of $39.4 million in their average balance during the comparative period as a result of attrition of maturing CDs from prior CD promotional products.  Interest expense on borrowings declined $142,000 due to a decrease of $136.9 million in their average balance during the comparative period, which outweighed the increase in their average cost by 25 basis points.

Provision for Loan Losses. The Company recognized a provision for loan losses of $1.5 million during the nine months ended September 30, 2017, compared to a provision for loan losses of $1.6 million during the nine months ended September 30, 2016.  The loan loss provision is driven mainly from continued improvement in the overall credit quality of the real estate loan portfolio, offset by growth in the real estate and C&I loan portfolio.

Non-Interest Income.  Total non-interest income decreased $66.3 million during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, due primarily to a gain of $68.2 million recognized on the sale of real estate and $484,000 of additional income from BOLI related to the receipt of a mortality benefit due to the passing of an insured officer during the nine months ended September 30, 2016, offset by $2.6 million of gains from the sale of the TRUP CDO portfolio. Also partially offsetting the decrease was an increase in service charges and other fees during the comparative period as a result of higher transaction volume.

Non-Interest Expense.  Non-interest expense was $62.4$21.7 million during the ninethree months ended September 30, 2017,March 31, 2018, an increase of $8.2$1.0 million from $54.2$20.8 million during the ninethree months ended September 30, 2016,March 31, 2017, reflecting increases of $1.4$1.3 million in salaries and employee benefits, $1.6$0.2 million in occupancy and equipment expense, $2.8and $0.1 million in data processing costs, $1.1offset by decreases of $0.4 million in marketing expense and $309,000 in FDIC insurance premiums, and $1.3 million of losses from extinguished debt, offset by a decrease of $1.5$0.3 million in ESOP and RSA amortization expenseother operating expenses during the comparative period. The remaining increase in non-interest expense was experienced in other operating expenses. The $1.4$1.3 million increase in salaries and employee benefits expenseincrease was primarily driven by thedue to hiring of new employees and their associated employee benefits expense. The $1.6expense, $0.2 million increase in occupancy expense was attributable to new leases related to de novo retail branches. The $2.8branches, and the $0.1 million increase in data processing costs was primarily the result of $1.7 million of de-conversion costs associated with the planned change in the bank’s core processor which is expected to occur in 2018, and various technology enhancement initiatives related to customer banking services. The $1.1 million increase in marketing expense was attributable to higher volume of marketing promotions. The $1.3 million loss from the extinguishment in debt was due to the acceleration of the remaining unamortized deferred origination costs from the redemption of $70.7 million of trust preferred securities borrowings at par from third parties during the third quarter of 2017. The $1.5 million decreasevarious increases in ESOP and RSA amortization expense resulted from the payoff of the ESOP share acquisition loan during the quarter ended December 31, 2016.technology expenses.

Non-interest expense was 1.35%1.36% and 1.33%1.38% of average assets during the nine-monththree-month periods ended September 30,March 31, 2018 and 2017, and 2016, respectively, as the result of the growth in non-interest expense, which was partially offset by the increase in average assets of $703.9 million.respectively.

Income Tax Expense.   Income tax expense approximated $21.4was $4.6 million during the ninethree months ended September 30, 2017,March 31, 2018, down $2.3 million from $52.1$6.9 million during the ninethree months ended September 30, 2016, due to a decrease of $66.1 million in pre-tax income during the comparative period.March 31, 2017.  The $66.1 million decrease in pre-tax income was primarily attributable to the $68.2 million gain on sale of real estate that occurred during the nine month period ended September 30, 2016.  The Company’sCompany's consolidated tax rate was 37.0%23.7% during the ninethree months ended September 30, 2017,March 31, 2018, down from 42.1%38.2% during the ninethree months ended September 30, 2016,March 31, 2017.  The lower tax rate during the three-month period ended March 31, 2018 was primarily due to the additionalresult of the tax related to the $68.2 million gain on sale of real estate.law change enacted in December 2017.
 
Item 3.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk were presented at December 31, 20162017 in Item 7A of the Holding Company’sCompany's Annual Report on Form 10-K, filed with the SEC on March 15, 2017.14, 2018.  The following is an update of the discussion provided therein.

General.  Virtually all of the Company’sCompany's market risk continues to reside at the Bank level.  The Bank’sBank's largest component of market risk remains interest rate risk.  The Company is not subject to foreign currency exchange or commodity price risk.  At September 30, 2017,March 31, 2018, the Company owned thirteen mutual fund investments totaling $2.7marketable equity securities carried at a fair value of $6.4 million, that were designated as trading.in which market value adjustments are recorded through the statement of income.  During the ninethree months ended September 30, 2017,March 31, 2018, the Company conducted seveneight transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.

Assets, Deposit Liabilities and Wholesale Funds.  There was no material change in the composition of assets, deposit liabilities or wholesale funds from December 31, 20162017 to September 30, 2017.March 31, 2018.  See “Part"Part I - Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”Resources" for a discussion of deposit and borrowing activity during the period.

Interest Rate Risk Exposure Analysis
 
Economic Value of Equity (“EVE”("EVE") Analysis.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 firm commitments to originate loans, or 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’sCompany'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’sCompany's consolidated stockholders’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”Scenario"), and under various other interest rate scenarios (“("Rate Shock Scenarios”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’sBank's Board of Directors on a quarterly basis. The report compares the Bank’sBank's estimated Pre-Shock Scenario EVE to the estimated EVEs calculated under the various Rate Shock Scenarios.

The calculated EVEs incorporate some asset and liability values derived from the Bank’s valuation model, such as those for real estate and C&I loans and time deposits, and some asset and liability values provided by reputable independent sources, such as values for the Bank’sBank's MBS portfolio, as well as all borrowings. The Bank’sBank'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’sBank'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’sBank'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, however, actual cash flows could differ significantly from the Bank’sBank's estimates, resulting in significantly different EVE calculations.

The analysis that follows presents, as of September 30, 2017March 31, 2018 and December 31, 2016,2017, 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 rate, 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 September 30, 2017March 31, 2018 and December 31, 2016.2017.

 At September 30, 2017  At December 31, 2016  At March 31, 2018  At December 31, 2017 
 EVE  
Dollar
Change
  
Percentage
Change
  EVE  
Dollar
Change
  
Percentage
Change
  EVE  
Dollar
Change
  
Percentage
Change
  EVE  
Dollar
Change
  
Percentage
Change
 
Rate Shock Scenario (Dollars in Thousands)  (Dollars in Thousands) 
+ 200 Basis Points $547,343  $(83,196)  -13.2% $508,155  $(66,494)  -11.6% $608,057  $(72,519)  -10.7% $572,782  $(93,677)  -14.1%
Pre-Shock Scenario  630,539   -   -   574,649   -   -   680,576   -   -   666,459   -   - 

The Bank’s Pre-Shock Scenario EVE increased from $574.6$666.5 million at December 31, 20162017 to $630.5$680.6 million at September 30, 2017.March 31, 2018. The factors contributing to the more favorable valuation at September 30, 2017March 31, 2018 included an increase in the value of the Bank's securitiesloan portfolio and a decrease in the value of the Bank’s CDs, and borrowings. Partially offsetting the favorable valuation at March 31, 2018 was a decrease in the value of the Company’s investment portfolio and core deposit liability CDs, and borrowings.. The more favorable valuation of the securitiesloan portfolio resulted primarily from a slight reduction in the replacement overall duration of the Company’s impaired trust preferred investment portfolio, which were sold during the nine month period ended September 30, 2017, with high quality, shorter duration agency MBS and CMO securities.portfolio. The decrease in the value of the Bank's core deposit liability,Company’s CDs, and borrowings resulted primarily from an increase in market interest rates from December 31, 20162017 to September 30, 2017.March 31, 2018. The decrease in value of the Company’s core deposit liability resulted primarily from an increase in the rates paid from December 31, 2017 to March 31, 2018.

The Bank’s EVE in the +200 basis point Rate Shock Scenario increased from $508.2$572.8 million at December 31, 20162017 to $547.3$608.1 million at September 30, 2017. March 31, 2018.  The factors contributing to the more favorable valuation includeincluded the previously discussednoted increase in the value of the Bank’s securitiesCompany’s loan portfolio and decrease in the value of the Company’s core deposit liability, CDs, and borrowings, and CDs, as well as an increase in real estate and C&I loans resulting primarily frompartially offset by a slight decrease in durationless favorable valuation of the portfolio at September 30, 2017 compared to December 31, 2016. OffsettingCompany’s security portfolio. Additionally, partially offsetting the favorable valuation is an increase in the core deposit liability as modeled durations decreased slightly from prior quarters.value of the Company’s CD portfolio.

Income Simulation AnalysisAnalysis..  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’sBank'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’sBank's Board of Directors on a quarterly basis. The following table discloses the estimated changes to the Bank’sBank's net interest income over the 12-month period ending September 30, 2017beginning March 31, 2018 assuming instantaneousgradual changes in interest rates for the given Rate Shock Scenarios:
 
Instantaneous Change in Interest rate of: 
Percentage
Change in Net
Interest
Income(1)
 
+ 200 Basis Points  (15.65.6)%
+ 100 Basis Points  (8.81.1)
– 100 Basis Points
10.6
 
(1)
The impact of 100 and 200 basis point reductions in interest rates are not presented in view of the current level of the federal funds rate and other short-term interest rates.
Item 4.
Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness as of September 30, 2017,March 31, 2018, of the Company’sCompany'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’sCompany's disclosure controls and procedures were effective as of September 30, 2017March 31, 2018 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’sSEC'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’sCompany's internal control over financial reporting that occurred during the Company’sCompany's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.
 
PART II – OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, the Company is routinely named as a defendant in or party to various pending or threatened legal actions or proceedings.  Certain of these matters may seek substantial monetary damages.  In the opinion of management, the Company is involved in no actions or proceedings that are likely to have a material adverse impact on its financial condition and results of operations.

Item 1A.Risk Factors

There were no material changes from the risks disclosed in the Risk Factors section of the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2016.2017.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

(a)Not applicable.

(b)Not applicable.

(c)The Holding Company did not repurchase any shares of common stock into treasury during the three-month or nine-month periodsperiod ended September 30, 2017.March 31, 2018.  No existing repurchase programs expired during the three months ended September 30, 2017,March 31, 2018, nor did the Company terminate any repurchase programs prior to expiration during the period.  As of September 30, 2017,March 31, 2018, the Holding Company had an additional 1,104,549 shares remaining eligible for repurchase under its twelfth stock repurchase program, which was publicly announced in September 2007.

Item 3.
Defaults Upon Senior Securities

None.

Item 4.
Mine Safety Disclosures

Not Applicable.

Item 5.
Other Information

None.
 
Item 4.
Mine Safety Disclosures

Not Applicable.
Item 5.Other Information

None.
Item 6.Exhibits

Exhibit Number
Exhibit Number
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(ii) to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 4, 2017 (File No. 000-27782))
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]
4.3Draft 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))
4.74.2
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))
4.84.3
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))
10.3
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))
10.6
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))
10.7
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))
10.8
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))
10.9
Severance Pay Plan of The Dime Savings Bank of Williamsburgh (incorporated by reference to Exhibit 10.9 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))
10.10
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))
10.12
Recognition and Retention Plan for Outside Directors, Officers and Employees of Dime Community Bancorp, Inc., as amended by amendments number 1 and 2 (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1997, filed with the SEC on September 26, 1997 (File No. 000-27782))
10.13(i)
Form of stock option agreement for Outside Directors under Dime Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1997, filed with the SEC on September 26, 1997 (File No. 000-27782))
10.13(ii)
Form of stock option agreement for Outside Directors under Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-8, filed with the SEC on January 24, 2003 (File No. 333-102690))
10.13(iii)
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))
10.14(i)
Form of stock option agreement for officers and employees under Dime Community Bancshares, Inc. 1996 Stock Option Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1997, filed with the SEC on September 26, 1997 (File No. 000-27782))
10.14(ii)
Form of stock option agreement for officers and employees under Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-8, filed with the SEC on January 24, 2003 (File No. 333-102690))
10.14(iii)
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))
10.20
Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees (incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011 (File No. 000-27782))
10.21
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))
10.24
Waiver executed by Kenneth J. Mahon (incorporated by reference to Exhibit 10.24 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, filed with the SEC on May 10, 2005 (File No. 000-27782))
10.25
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))
10.27
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))
10.30
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))
10.31
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))
10.32
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))
10.33
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))
10.34
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))
10.35
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))
10.36
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))
10.37
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))
10.38
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))
10.39
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))
10.40
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))
10.41
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))
10.42
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))
10.43
Employment and Change in Control Agreement between Dime Community Bank and Stuart Lubow (incorporated by reference to Exhibit 10.43 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))
10.44
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))
10.45
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, 2016, filed with the SEC on March 15, 2017 (File No. 000-27782))
10.46
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, 2016, filed with the SEC on March 15, 2017 (File No. 000-27782))
10.47
Amendment Number Five to the Employee Stock OwnershipBenefit Maintenance 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))

10.48
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))
10.49
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))
12.1
Computation of ratio of earnings to fixed charges
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
31.2
Certification of Principal 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 Principal 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 Quarterly Report on Form 10-Q for the period ended September 30, 2017March 31, 2018 is formatted in XBRL (Extensible Business Reporting Language) interactive data files: (i) the Consolidated Statements of Financial Condition (Unaudited), (ii) the Consolidated Statements of Income f(Unaudited), (iii) the Consolidated Statements of Comprehensive Income (Unaudited), (iv) the Consolidated Statements of Changes in Stockholders’Stockholders' Equity (Unaudited), (v) the Consolidated Statements of Cash Flows (Unaudited), and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements **

**
**Furnished, not filed, herewith.
 
SIGNATURES

Pursuant to the requirements 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.

Dime Community Bancshares, Inc.
  
Dated: November 7, 2017May 9, 2018
By: /s/ KENNETH J. MAHON
 Kenneth J. Mahon
 President and Chief Executive Officer

Dated: November 7, 2017May 9, 2018
By: /s/ JAMES L. RIZZO
 James L. Rizzo
 Senior Vice President and Comptroller (Principal Financial Officer)

 
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