UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10‑Q~~10-Q

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

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

For the quarterly period ended March 31, ~~2019~~2020

Commission file number 001‑34096

BRIDGE BANCORP, INC.

(Exact name of registrant as specified in its charter)

NEW YORK	11-2934195
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

2200 MONTAUK HIGHWAY, BRIDGEHAMPTON, NEW YORK	11932
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (631) 537‑1000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	BDGE	NASDAQ STOCK MARKET, LLC

Indicate by check mark whether the registrant (1) has filed all 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 [X] No [ ]

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

Yes [X] No [ ]

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


Large accelerated filer [ ]	Accelerated filer [X]
Non-accelerated filer [ ]	Smaller reporting company [ ]
	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes [ ] No [X]

~~Securities registered pursuant to Section 12(b) of the Act:~~


~~Title of each class~~	~~Trading Symbol~~	~~Name of each exchange on which registered~~
~~Common Stock~~	~~BDGE~~	~~NASDAQ STOCK MARKET, LLC~~

There were ~~19,853,386~~19,732,881 shares of common stock outstanding as of April 30, ~~2019.~~2020.

Table of Contents

BRIDGE BANCORP, INC.



PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Consolidated Statements of Income for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	5

	Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

	Condensed Notes to the Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3439

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4754

Item 4.	Controls and Procedures	4856

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	5057

Item 1A.	Risk Factors	5057

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5058

Item 3.	Defaults Upon Senior Securities	5058

Item 4.	Mine Safety Disclosures	5058

Item 5.	Other Information	5058

Item 6.	Exhibits	5159

Signatures		5159

Table of Contents

Item 1. Financial Statements

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share ~~amounts~~)amounts)


	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(unaudited)				(unaudited)
Assets
Cash and due from banks	$	68,773	$	142,145	$	61,352	$	77,693
Interest-bearing deposits with banks		31,684		153,223		172,830		39,501
Total cash and cash equivalents		100,457		295,368		234,182		117,194

Securities available for sale, at fair value		707,451		680,886		553,278		638,291
Securities held to maturity (fair value of $147,633 and $156,792, respectively)		149,512		160,163
Securities held to maturity (fair value of $127,653 and $135,027, respectively)						124,231		133,638
Total securities		856,963		841,049		677,509		771,929

Securities, restricted		28,068		24,028		26,354		32,879

Loans held for sale						12,643		12,643

Loans held for investment		3,391,104		3,275,811		3,762,130		3,680,285
Allowance for loan losses		(31,784)		(31,418)
Allowance for credit losses						(39,215)		(32,786)
Loans, net		3,359,320		3,244,393		3,722,915		3,647,499

Premises and equipment, net		34,478		35,008		34,521		34,062
Operating lease right-of-use assets		37,621		—		41,939		43,450
Accrued interest receivable		13,057		11,236		11,070		10,908
Goodwill		105,950		105,950		105,950		105,950
Other intangible assets		4,150		4,374		3,472		3,677
Prepaid pension		10,373		10,263		11,243		10,988
Bank owned life insurance		90,265		89,712		92,490		91,942
Other real estate owned		175		175
Other assets		34,332		39,188		86,584		38,399
Total assets	$	4,675,209	$	4,700,744	$	5,060,872	$	4,921,520

Liabilities
Demand deposits	$	1,313,947	$	1,448,605	$	1,481,552	$	1,518,958
Savings, NOW and money market deposits		2,130,808		2,108,297		2,264,106		1,987,712
Certificates of deposit of $100,000 or more		218,682		207,087		215,686		214,093
Other time deposits		62,027		122,404		94,391		93,884
Total deposits		3,725,464		3,886,393		4,055,735		3,814,647

Repurchase agreements		721		539		1,195		999
Federal Home Loan Bank ("FHLB") advances		330,217		240,433		290,000		435,000
Subordinated debentures, net		78,815		78,781		78,955		78,920
Operating lease liabilities		40,454		—		44,571		45,977
Other liabilities and accrued expenses		34,535		40,768		97,163		48,823
Total liabilities		4,210,206		4,246,914		4,567,619		4,424,366

Commitments and contingencies		—		—		—		—

Stockholders’ equity
Preferred stock, par value $.01 per share (2,000,000 shares authorized; none issued)		—		—		—		—
Common stock, par value $.01 per share (40,000,000 shares authorized; 19,871,469 and 19,815,680 shares issued, respectively; and 19,847,705 and 19,790,884 shares outstanding, respectively)		199		198
Common stock, par value $.01 per share (40,000,000 shares authorized; 19,907,217 and 19,898,022 shares issued, respectively; and 19,722,299 and 19,836,797 shares outstanding, respectively)						199		199
Surplus		352,454		352,093		355,014		356,436
Retained earnings		125,765		117,432		153,766		150,703
Treasury stock at cost, 23,764 and 24,796 shares, respectively		(786)		(781)
Treasury stock at cost, 184,918 and 61,225 shares, respectively						(4,800)		(1,843)
		477,632		468,942		504,179		505,495
Accumulated other comprehensive loss, net of income taxes		(12,629)		(15,112)		(10,926)		(8,341)
Total stockholders’ equity		465,003		453,830		493,253		497,154
Total liabilities and stockholders’ equity	$	4,675,209	$	4,700,744	$	5,060,872	$	4,921,520

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

Table of Contents

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
Interest income:
Loans (including fee income)	$	37,612	$	35,613	$	39,763	$	37,612
Mortgage-backed securities, CMOs and other asset-backed securities		4,789		3,724		3,040		4,789
U.S. GSE securities		192		279		337		192
State and municipal obligations		627		812		513		627
Corporate bonds		336		355		300		336
Deposits with banks		544		90		267		544
Other interest and dividend income		415		491		382		415
Total interest income		44,515		41,364		44,602		44,515

Interest expense:
Savings, NOW and money market deposits		6,369		2,514		4,255		6,369
Certificates of deposit of $100,000 or more		983		517		1,036		983
Other time deposits		562		195		415		562
Federal funds purchased and repurchase agreements		45		606		78		45
FHLB advances		1,098		1,858		1,033		1,098
Subordinated debentures		1,135		1,135		1,135		1,135
Total interest expense		10,192		6,825		7,952		10,192

Net interest income		34,323		34,539		36,650		34,323
Provision for loan losses		600		800
Net interest income after provision for loan losses		33,723		33,739
Provision for credit losses						5,000		600
Net interest income after provision for credit losses						31,650		33,723

Non-interest income:
Service charges and other fees		2,428		2,163		2,500		2,428
Title fee income		306		505
Net securities losses						(15)		—
Title fees						329		306
Gain on sale of Small Business Administration ("SBA") loans		217		371		371		217
BOLI income		553		546
Other operating income		1,714		528
Bank owned life insurance						548		553
Loan swap fees						1,231		1,115
Other						253		599
Total non-interest income		5,218		4,113		5,217		5,218

Non-interest expense:
Salaries and employee benefits		13,280		12,812		15,549		13,280
Occupancy and equipment		3,531		3,243		3,499		3,531
Technology and communications		1,789		1,643		2,217		1,789
Marketing and advertising		1,023		962		823		1,023
Professional services		757		1,212		956		757
FDIC assessments		238		464		1		238
Amortization of other intangible assets		213		246		181		213
Other operating expenses		1,768		2,016
Other						1,617		1,768
Total non-interest expense		22,599		22,598		24,843		22,599

Income before income taxes		16,342		15,254		12,024		16,342
Income tax expense		3,415		3,181		2,676		3,415
Net income	$	12,927	$	12,073	$	9,348	$	12,927
Basic earnings per share	$	0.65	$	0.61	$	0.47	$	0.65
Diluted earnings per share	$	0.65	$	0.61	$	0.47	$	0.65

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

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BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)

Three Months Ended

March 31,


2019

2018

Net income

$
12,927

$
12,073

Other comprehensive income (loss):







Change in unrealized net gains (losses) on securities available for sale, net of reclassifications and deferred income taxes

3,918

(6,088)

Adjustment to pension liability, net of reclassifications and deferred income taxes

90

67

Unrealized (losses) gains on cash flow hedges, net of reclassifications and deferred income taxes


(1,525)


2,051

Total other comprehensive income (loss)

2,483

(3,970)

Comprehensive income

$
15,410

$
8,103


	Three Months Ended
	March 31,
	2020		2019
Net income	$	9,348	$	12,927
Other comprehensive (loss) income:
Change in unrealized net gains on securities available for sale, net of reclassifications and deferred income taxes		4,124		3,918
Adjustment to pension liability, net of reclassifications and deferred income taxes		98		90
Unrealized losses on cash flow hedges, net of reclassifications and deferred income taxes		(6,807)		(1,525)
Total other comprehensive (loss) income		(2,585)		2,483
Comprehensive income	$	6,763	$	15,410

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

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BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (unaudited)

(In thousands, except per share amounts)

Accumulated

Other

Common

Retained

Treasury

Comprehensive


Stock

Surplus

Earnings

Stock

Loss

Total
Balance at January 1, 2019

$
198

$
352,093

$
117,432

$
(781)

$
(15,112)

$
453,830
Net income



12,927




12,927
Shares issued under the dividend reinvestment plan



198





198
Stock awards granted and distributed

1


(791)



790



—
Repurchase of surrendered stock from vesting of restricted stock awards





(795)



(795)
Share based compensation expense



954





954
Cash dividend declared, $0.23 per share



(4,594)




(4,594)
Other comprehensive income, net of deferred income taxes





2,483


2,483
Balance at March 31, 2019

$
199

$
352,454

$
125,765

$
(786)

$
(12,629)

$
465,003


									Accumulated
									Other
	Common				Retained		Treasury		Comprehensive
	Stock		Surplus		Earnings		Stock		Loss		Total
Balance at January 1, 2020	$	199	$	356,436	$	150,703	$	(1,843)	$	(8,341)	$	497,154
Cumulative change in accounting principle (Note 1)						(1,473)						(1,473)
Balance at January 1, 2020 (as adjusted for change in accounting principle)		199		356,436		149,230		(1,843)		(8,341)		495,681

Net income						9,348						9,348
Shares issued under the dividend reinvestment plan (6,275 shares)				240								240
Purchase of treasury stock (179,620 shares)								(4,633)				(4,633)
Stock awards granted and distributed (90,657 shares)				(2,668)				2,668				—
Stock awards forfeited (585 shares)				20				(20)				—
Repurchase of surrendered stock from vesting of stock plans (31,225 shares)				(36)				(972)				(1,008)
Share based compensation expense				1,022								1,022
Cash dividend declared, $0.24 per share						(4,812)						(4,812)
Other comprehensive loss, net of deferred income taxes										(2,585)		(2,585)
Balance at March 31, 2020	$	199	$	355,014	$	153,766	$	(4,800)	$	(10,926)	$	493,253

Accumulated

Other

Common

Retained

Treasury

Comprehensive


Stock

Surplus

Earnings

Stock

Loss

Total
Balance at January 1, 2018

$
197

$
347,691

$
96,547

$
(296)

$
(14,939)

$
429,200
Net income



12,073




12,073
Shares issued under the dividend reinvestment plan



232





232
Stock awards granted and distributed

1


(307)



306



—
Stock awards forfeited



20



(20)



—
Repurchase of surrendered stock from vesting of restricted stock awards





(426)



(426)
Share based compensation expense



784





784
Cash dividend declared, $0.23 per share



(4,570)




(4,570)
Other comprehensive loss, net of deferred income taxes





(3,970)


(3,970)
Balance at March 31, 2018

$
198

$
348,420

$
104,050

$
(436)

$
(18,909)

$
433,323


									Accumulated
									Other
	Common				Retained		Treasury		Comprehensive
	Stock		Surplus		Earnings		Stock		Loss		Total
Balance at January 1, 2019	$	198	$	352,093	$	117,432	$	(781)	$	(15,112)	$	453,830
Net income						12,927						12,927
Shares issued under the dividend reinvestment plan (5,864 shares)				198								198
Stock awards granted and distributed (76,274 shares)		1		(791)				790				—
Repurchase of surrendered stock from vesting of stock plans (24,132 shares)								(795)				(795)
Share based compensation expense				954								954
Cash dividend declared, $0.23 per share						(4,594)						(4,594)
Other comprehensive income, net of deferred income taxes										2,483		2,483
Balance at March 31, 2019	$	199	$	352,454	$	125,765	$	(786)	$	(12,629)	$	465,003

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

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BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
Cash flows from operating activities:
Net income	$	12,927	$	12,073	$	9,348	$	12,927
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600		800
Provision for credit losses						5,000		600
Depreciation and amortization of premises and equipment		1,048		933		1,003		1,048
Net (accretion) and other amortization		(287)		(1,033)		(218)		(287)
Net amortization on securities		648		1,302		654		648
Increase in cash surrender value of bank owned life insurance		(553)		(546)		(548)		(553)
Amortization of intangible assets		213		246
Amortization of other intangible assets						181		213
Share based compensation expense		954		784		1,022		954
Net securities losses						15		—
Increase in accrued interest receivable		(1,821)		(255)		(162)		(1,821)
SBA loans originated for sale		(3,188)		(4,281)		(5,888)		(3,188)
Proceeds from sale of the guaranteed portion of SBA loans		3,454		4,744		6,345		3,454
Gain on sale of the guaranteed portion of SBA loans		(217)		(371)		(371)		(217)
Decrease in other assets		4,006		1,253
(Increase) decrease in other assets						(3,979)		4,006
Decrease in accrued expenses and other liabilities		(5,619)		(479)		(4,137)		(5,619)
Net cash provided by operating activities		12,165		15,170		8,265		12,165

Cash flows from investing activities:
Purchases of securities available for sale		(40,771)		(525)		(91,098)		(40,771)
Purchases of securities, restricted		(14,850)		(342,405)		(14,130)		(14,850)
Proceeds from sales of securities available for sale						74,558		—
Redemption of securities, restricted		10,810		341,559		20,655		10,810
Maturities, calls and principal payments of securities available for sale		19,270		24,715		106,840		19,270
Maturities, calls and principal payments of securities held to maturity		10,470		4,558		9,280		10,470
Net increase in loans		(115,341)		(98,217)		(81,992)		(115,341)
Purchase of premises and equipment		(518)		(1,320)		(1,462)		(518)
Net cash used in investing activities		(130,930)		(71,635)
Net cash provided by (used in) investing activities						22,651		(130,930)

Cash flows from financing activities:
Net (decrease) increase in deposits		(160,921)		96,712
Net decrease in federal funds purchased		—		(50,000)
Net increase in FHLB advances		89,784		18,787
Net increase (decrease) in repurchase agreements		182		(5)
Net increase (decrease) in deposits						241,089		(160,921)
Net (decrease) increase in FHLB advances						(145,000)		89,784
Net increase in repurchase agreements						196		182
Net proceeds from issuance of common stock		198		232		240		198
Repurchase of surrendered stock from vesting of restricted stock awards		(795)		(426)
Purchase of treasury stock						(4,633)		—
Repurchase of surrendered stock from vesting of stock plans						(1,008)		(795)
Cash dividends paid		(4,594)		(4,570)		(4,812)		(4,594)
Net cash (used in) provided by financing activities		(76,146)		60,730
Net cash provided by (used in) financing activities						86,072		(76,146)

Net (decrease) increase in cash and cash equivalents		(194,911)		4,265
Net increase (decrease) in cash and cash equivalents						116,988		(194,911)
Cash and cash equivalents at beginning of period		295,368		94,747		117,194		295,368
Cash and cash equivalents at end of period	$	100,457	$	99,012	$	234,182	$	100,457

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	11,126	$	7,963	$	9,032	$	11,126
Income taxes	$	49	$	261	$	213	$	49

Non-cash investing and financing activities:
Transfers from portfolio loans to other real estate owned	$	—	$	175

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

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BRIDGE BANCORP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

Bridge Bancorp, Inc. (the “Holding Company”), is a bank holding company incorporated under the laws of the State of New York. The Holding Company’s business consists of the operations of its wholly-owned subsidiary, BNB Bank (the “Bank”). The Bank’s operations include its real estate investment trust subsidiary, Bridgehampton Community, Inc.; a financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”); and an investment services subsidiary, Bridge Financial Services, Inc. (“Bridge Financial Services”).

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. The unaudited consolidated financial statements included herein reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In preparing the interim financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods. Such estimates are subject to change in the future as additional information becomes available or previously existing circumstances are modified. Actual future results could differ significantly from those estimates. The annualized results of operations for the three months ended March 31, ~~2019~~2020 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain reclassifications have been made to prior year amounts, and the related discussion and analysis, to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10‑K for the year ended December 31, ~~2018.~~2019.

COVID-19 Risks

In December 2019, a novel coronavirus (“COVID-19”) was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic. On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment.

The Company’s unaudited consolidated financial statements reflect the impact of COVID-19 on the assumptions and estimates used. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on the Company’s business. The extent of such impact will depend on future developments, which are highly uncertain, including when COVID-19 can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company may be subject to the following risks, any of which could have a material, adverse effect on its business, financial condition, liquidity, and results of operations.

demand for the Company’s products and services may decline, making it difficult to grow assets and income;

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if the economy is unable to substantially reopen, and high levels of unemployment continue, for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

the Company’s allowance for credit losses (“ACL”) may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect the Company’s net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to the Company;

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on the Company’s assets may decline to a greater extent than the decline in its cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income;

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of the Company’s quarterly cash dividend;

the Company’s cyber security risks are increased as the result of an increase in the number of employees working remotely; and

the Company relies on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on the Company.

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326)

Effective for periods after December 31, 2019, the Company adopted Accounting Standards Update (“ASU”) No 2016-13, Financial Instruments – Credit Losses (Topic 326), which replaced the long-standing incurred loss model used in calculating the allowance for loan and lease losses with a more forward-looking, current expected credit loss model (“CECL” or the “CECL Standard”). Furthermore, the CECL Standard requires financial institutions to measure all expected credit losses for in-scope financial assets held at amortized cost at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, including estimates of prepayments. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Accordingly, financial institutions will now leverage forward-looking information to better inform their credit loss estimates. For the Company, this standard applies to loans held for investment, unfunded commitments, and securities held to maturity. In addition, the CECL Standard made changes to the accounting for available for sale debt securities. Credit losses on available for sale debt securities should be measured in a manner similar to current GAAP. However, the amendments in the CECL Standard require that credit losses be presented as an allowance for credit losses rather than as a write-down. This approach is an improvement to current GAAP because an entity will be able to record reversals of credit losses (in situations in which the estimate of credit losses declines) in current period net income, which in turn should align the income statement recognition of credit losses with the reporting period in which changes occur. Although the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) provided the option to delay the adoption of the CECL Standard until the earlier of December 31, 2020 or the termination of the current national emergency declaration related to the COVID-19 outbreak, the Company adopted the CECL Standard in the first quarter of 2020 as previously planned using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The adoption of the CECL Standard resulted in an initial increase of $1.6 million to the allowance for credit losses and $0.5 million to the reserve for unfunded commitments. The after-tax cumulative-effect adjustment of $1.5 million was recorded in retained earnings as of January 1, 2020. Based on the credit quality of the Company's securities portfolio, there was no initial adjustment to retained earnings for credit losses associated with debt securities held to maturity.

Results for reporting periods beginning after January 1, 2020 are presented under the CECL Standard while prior period amounts will continue to be reported in accordance with previously applicable GAAP.

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2. EARNINGS PER SHARE

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“~~FASB~~ ASC”) No. 260‑10‑45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”). The restricted stock awards (“RSAs”) and certain restricted stock units (“RSUs”) granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities. The two-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.

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The following table presents the computation of EPS for the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In thousands, except per share data)	2019		2018		2020		2019
Net income	$	12,927	$	12,073	$	9,348	$	12,927
Dividends paid on and earnings allocated to participating securities		(277)		(253)		(195)		(277)
Income attributable to common stock	$	12,650	$	11,820	$	9,153	$	12,650

Weighted average common shares outstanding, including participating securities		19,926		19,834		19,946		19,926
Weighted average participating securities		(426)		(421)		(414)		(426)
Weighted average common shares outstanding		19,500		19,413		19,532		19,500
Basic earnings per common share	$	0.65	$	0.61	$	0.47	$	0.65

Income attributable to common stock	$	12,650	$	11,820	$	9,153	$	12,650

Weighted average common shares outstanding		19,500		19,413		19,532		19,500
Incremental shares from assumed conversions of options and restricted stock units		26		25		34		26
Weighted average common and equivalent shares outstanding		19,526		19,438		19,566		19,526
Diluted earnings per common share	$	0.65	$	0.61	$	0.47	$	0.65

There were 180,020 stock options outstanding at March 31, 2020 that were not included in the computation of diluted earnings per share for the three months ended March 31, 2020 because the options' exercise prices were greater than the average market price of common stock and were, therefore, antidilutive. There were 110,660 stock options outstanding at March 31, 2019 that were not included in the computation of diluted earnings per share for the three months ended March 31, 2019 because the options' exercise prices were greater than the average market price of common stock and were, therefore, antidilutive. There were 47,393 stock options outstanding at March 31, 2018 that were not included in the computation of diluted earnings per share for the three months ended March 31, 2018 because the options' exercise prices were greater than the average market price of common stock and were, therefore, antidilutive.

There were ~~22,305~~26,556 and ~~21,693~~22,305 RSUs that were antidilutive for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

3. STOCK-BASED COMPENSATION PLANS

~~The~~In May 2019, the Company’s shareholders approved the Bridge Bancorp, Inc. ~~2012 Stock-Based~~2019 Equity Incentive Plan ~~(“2012 SBIP”~~(the “2019 Equity Incentive Plan”), which provides for the grant of stock-based and other incentive awards to officers, employees and directors of the Company. The ~~2012 SBIP~~2019 Equity Incentive Plan superseded the Bridge Bancorp, Inc. 2012 Stock-Based Incentive Plan (the “2012 Equity Incentive Plan”). The 2012 Equity Incentive Plan superseded the 2006 Stock-Based Incentive Plan. The maximum number of shares of stock, in the aggregate, that may be granted under the 2019 Equity Incentive Plan as stock options, restricted stock, or restricted stock units is 370,000 plus the number of shares of stock which have been reserved but not issued under the 2012 Equity Incentive Plan, and any awards that are forfeited under the 2012 Equity Incentive Plan after the effective date of the 2019 Equity Incentive Plan. No further grants will be made under the 2012 Equity Incentive Plan. Currently outstanding grants under the 2012 Equity Incentive Plan will not be affected.

The number of shares of common stock of Bridge Bancorp, Inc. available for stock-based awards under the ~~2012 SBIP~~2019 Equity Incentive Plan is ~~525,000~~370,000 plus ~~278,385~~162,738 shares that were remaining under the ~~2006 Stock-Based~~2012 Equity Incentive Plan. ~~Of the total 803,385 shares of common stock approved for issuance under the 2012 SBIP, 163,472~~At March 31, 2020, 382,166 shares remain available for issuance, ~~at March 31, 2019,~~ including shares that may be granted in the form of stock options, RSAs, or RSUs.

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The Compensation Committee of the Board of Directors determines awards under the ~~2012 SBIP.~~2019 Equity Incentive Plan. The Company accounts for the ~~2012 SBIP~~2019 Equity Incentive Plan under FASB ASC No. 718.

Stock Options

Stock options may be either incentive stock options, which bestow certain tax benefits on the optionee, or non-qualified stock options, not qualifying for such benefits. All options have an exercise price that is not less than the market value of the Company's common stock on the date of the grant.

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option-pricing model. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of the Company's common stock as of the exercise or reporting date.

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, in accordance with the Long Term Incentive Plan (“LTI Plan”) for Named Executive Officers (“NEOs”), the Company granted ~~63,267~~69,360 and ~~47,393~~63,267 stock options, respectively, with an exercise price set to equal a 10.0% premium over the grant date stock price. All of the stock options granted vest ratably over three years. The estimated weighted-average grant-date fair value of all stock options granted in the three months

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ended March 31, 2020 and 2019 was $4.10 and ~~2018 was~~ $5.05 ~~and $6.52~~ per stock option, respectively, using the Black-Scholes option-pricing model with assumptions as follows:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2019			2018			2020			2019
Dividend yield		2.86	%		2.80	%		3.03	%		2.86	%
Expected volatility		23.80			27.53			23.11			23.80
Risk-free interest rate		2.52			2.67			1.47			2.52
Expected option life		6.0	years		6.5	years		6.0	years		6.0	years

Compensation expense attributable to stock options was ~~$39~~$78 thousand and ~~$13~~$39 thousand for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. As of March 31, ~~2019,~~2020, there was ~~$499~~$548 thousand of total unrecognized compensation cost related to unvested stock options. The cost is expected to be recognized over a weighted-average period of ~~2.5~~2.2 years.

The following table summarizes the status of the Company's stock options as of and for the three months ended March 31, ~~2019:~~2020:

Weighted

Weighted

Average

Number

Average

Remaining

Aggregate

of

Exercise

Contractual

Intrinsic
(Dollars in thousands, except per share amounts)

Options

Price

Life

Value
Outstanding, January 1, 2019

47,393

$
36.19

Granted

63,267

35.35

Outstanding, March 31, 2019

110,660

35.71

9.4
years
$
—
Vested and Exercisable, March 31, 2019

15,795

36.19

8.9
years

—

Weighted

Average

Number

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

(Dollars in thousands, except per share amounts)

Options

Price

Life

Value

Outstanding, January 1, 2020

110,660

35.71

Granted

69,360

34.87

Outstanding, March 31, 2020

180,020

35.39

9.0

years

—

Vested and Exercisable, March 31, 2020

52,681

35.85

8.3

years

—

Number of

Exercise
Range of Exercise Prices

Options

Price

63,267

$
35.35

47,393

$
36.19

110,660



	Number of	Exercise
Range of Exercise Prices	Options	Price
$34.87	69,360	$	34.87
35.35	63,267		35.35
36.19	47,393		36.19
	180,020

Restricted Stock Awards

The Company's RSAs are shares of the Company's common stock that are forfeitable and are subject to restrictions on transfer prior to the vesting date. RSAs are forfeited if the award holder departs the Company before vesting. RSAs carry dividend and voting rights from the date of grant. The vesting of time-vested RSAs depends upon the award holder

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continuing to render services to the Company. The Company's performance-based RSAs vest subject to the achievement of the Company's ~~2018~~ corporate goals.

The following table summarizes the unvested RSA activity for the three months ended March 31, ~~2019:~~2020:


		Weighted			Weighted
		Average Grant-Date			Average Grant-Date
	Shares	Fair Value		Shares	Fair Value
Unvested, January 1, 2019	324,882	$	29.13
Unvested, January 1, 2020				293,717	$	30.37
Granted	74,252		32.17	86,428		31.65
Vested	(83,184)		27.02	(100,020)		28.87
Forfeited	(1,185)		32.53	(585)		32.12
Unvested, March 31, 2019	314,765		30.39
Unvested, March 31, 2020				279,540		31.30

During the three months ended March 31, 2020, the Company granted a total of 86,428 RSAs. Of the 86,428 RSAs granted, 57,850 time-vested RSAs vest ratably over five years and 28,578 time-vested RSAs vest ratably over three years. During the three months ended March 31, 2019, the Company granted a total of 74,252 RSAs. Of the 74,252 RSAs granted, 49,925 time-vested RSAs vest ratably over five years, ~~and~~ 24,327 time-vested RSAs vest ratably over three years. During the three months ended March 31, 2018, the Company granted a total of 77,682 RSAs. Of the 77,682 RSAs granted, 39,750 time-vested RSAs vest ratably over five years, 12,815 time-vested RSAs vest ratably over three years, and 25,117 performance-based RSAs vest ratably over two years, subject to the achievement of the Company's 2018 corporate goals.

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As of March 31, ~~2019,~~2020, there were ~~314,765~~279,540 unvested RSAs, ~~consisting~~all of ~~303,114~~which were time-vested RSAs and ~~11,651~~there were no unvested performance-based RSAs.

Compensation expense attributable to RSAs was ~~$602~~$606 thousand and ~~$536~~$602 thousand for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. As of March 31, ~~2019,~~2020, there was ~~$6.7~~$6.8 million of total unrecognized compensation cost related to non-vested RSAs. The cost is expected to be recognized over a weighted-average period of ~~3.5~~3.4 years.

Restricted Stock Units

Long Term Incentive Plan

RSUs represent an obligation to deliver shares to ~~an employee~~a grantee at a future date if certain vesting conditions are met. RSUs are subject to a time-based vesting schedule, or the satisfaction of performance conditions, and are settled in shares of the Company's common stock. RSUs do not provide voting rights and RSUs may provide dividend equivalent rights from the date of grant.

The following table summarizes the unvested NEO RSU activity for the three months ended March 31, 2020:


		Weighted
		Average Grant-Date
	Shares	Fair Value
Unvested, January 1, 2020	85,342	$	29.59
Granted	26,556		32.13
Reinvested dividends	663		29.59
Forfeited	(6,623)		28.68
Vested	(15,106)		25.24
Unvested, March 31, 2020	90,832		31.12

During the three months ended March 31, ~~2019,~~2020, in accordance with the LTI Plan for NEOs, the Company granted ~~22,305~~26,556 RSUs. Of the ~~22,305~~26,556 RSUs granted, ~~13,255~~17,943 time-vested RSUs vest ratably over ~~five~~three years and ~~9,050~~8,613 performance-based RSUs vest subject to the achievement of the Company's three-year corporate goal for the three-year period ending December 31, ~~2021.~~

~~The following table summarizes the unvested NEO RSU activity for the three months ended March 31, 2019:~~

Weighted

Average Grant-Date

Shares

Fair Value
Unvested, January 1, 2019

79,238

$
27.36
Granted

22,305

33.42
Reinvested dividends

642

27.36
Forfeited

(16,184)

23.34
Vested

(2,573)

32.90
Unvested, March 31, 2019

83,428

29.59

2022.

Compensation expense attributable to LTI Plan RSUs was ~~$170~~$196 thousand and ~~$101~~$170 thousand for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. As of March 31, ~~2019,~~2020, there was ~~$1.9~~$2.0 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of ~~3.2~~2.6 years.

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Directors Plan

In April 2009, the Company adopted a Directors Deferred Compensation Plan (“Directors Plan”). Under the Directors Plan, independent directors may elect to defer all or a portion of their annual retainer fee in the form of RSUs. In addition, directors receive a non-election retainer in the form of RSUs. These RSUs vest ratably over one year and have dividend rights but no voting rights. In connection with the Directors Plan, the Company recorded expense of ~~$143~~$142 thousand and ~~$135~~$143 thousand for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Employee Stock Purchase Plan

In May 2018, the Board of Directors adopted, and stockholders approved the Employee Stock Purchase Plan (“ESPP”). A total of 1,000,000 shares of the Company’s common stock have been initially authorized for issuance under the ESPP. Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to $25 thousand for the purchase of the Company’s common stock at a discounted price per share for any calendar year. The current offering period is from January 1, ~~2019~~2020 through June 15, ~~2019.~~2020.

During the three months ended March 31, ~~2019 and 2018,~~2020, no shares of common stock were purchased, and no expense was recorded related to the ESPP.

4. SECURITIES

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

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in other assets in the consolidated balance sheet. A debt security is placed on non-accrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on non-accrual is reversed against interest income. There were no non-accrual debt securities at March 31, 2020 and there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2020. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

On January 1, 2020, the Company adopted the CECL Standard, which requires that debt securities held to maturity be accounted for under the current expected credit losses model, including historical loss experience and impact of current conditions and reasonable and supportable forecasts, with an associated allowance for credit losses. In addition, while credit losses on debt securities available for sale should be measured in accordance with the other-than-temporary impairment (“OTTI”) framework under current GAAP, the amendments in the CECL Standard require that these credit losses be presented as an allowance for credit losses. For AFS debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis.

Held to maturity debt securities and the allowance for credit losses

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such debt securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities.

Expected credit loss on each debt security in the held-to-maturity portfolio that do not share common risk characteristics with any of the pools of debt securities is individually measured based on net realizable value, or the difference between

1113

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the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

~~4. SECURITIES~~

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

Accrued interest receivable is excluded from the estimate of credit losses.

Available for sale debt securities and ~~estimated fair value of~~ the allowance for credit losses

Management evaluates available for sale ~~and held to maturity investment securities portfolio at March 31, 2019 and December 31, 2018 and the corresponding amounts of unrealized gains and losses therein:~~

March 31, 2019

Gross

Gross

Estimated

Amortized

Unrealized

Unrealized

Fair
(In thousands)

Cost

Gains

Losses

Value
Available for sale:

U.S. GSE securities

$
39,971

$
—

$
(496)

$
39,475
State and municipal obligations

42,699


538

(72)


43,165
U.S. GSE residential mortgage-backed securities

98,348


122

(1,858)


96,612
U.S. GSE residential collateralized mortgage obligations

367,763


1,291

(4,118)


364,936
U.S. GSE commercial mortgage-backed securities

7,050


5

—


7,055
U.S. GSE commercial collateralized mortgage obligations

92,334


—

(1,931)


90,403
Other asset backed securities

24,250


—

(1,152)


23,098
Corporate bonds

46,000


—

(3,293)


42,707
Total available for sale

718,415


1,956

(12,920)


707,451

Held to maturity:








State and municipal obligations

45,284


504

(35)


45,753
U.S. GSE residential mortgage-backed securities

9,309


—

(234)


9,075
U.S. GSE residential collateralized mortgage obligations

47,204


291

(746)


46,749
U.S. GSE commercial mortgage-backed securities

18,909


20

(393)


18,536
U.S. GSE commercial collateralized mortgage obligations

28,806


—

(1,286)


27,520
Total held to maturity

149,512


815

(2,694)


147,633
Total securities

$
867,927

$
2,771

$
(15,614)

$
855,084

December 31, 2018

Gross

Gross

Estimated

Amortized

Unrealized

Unrealized

Fair
(In thousands)

Cost

Gains

Losses

Value
Available for sale:

U.S. GSE securities

$
29,997

$
—

$
(947)

$
29,050
State and municipal obligations

40,980


105

(354)


40,731
U.S. GSE residential mortgage-backed securities

96,536


38

(3,036)


93,538
U.S. GSE residential collateralized mortgage obligations

362,905


826

(5,954)


357,777
U.S. GSE commercial mortgage-backed securities

3,536


—

(28)


3,508
U.S. GSE commercial collateralized mortgage obligations

93,177


—

(2,539)


90,638
Other asset-backed securities

24,250


—

(1,031)


23,219
Corporate bonds

46,000


—

(3,575)


42,425
Total available for sale

697,381


969

(17,464)


680,886

Held to maturity:








State and municipal obligations

53,540


290

(276)


53,554
U.S. GSE residential mortgage-backed securities

9,688


—

(336)


9,352
U.S. GSE residential collateralized mortgage obligations

48,244


163

(1,130)


47,277
U.S. GSE commercial mortgage-backed securities

19,098


4

(620)


18,482
U.S. GSE commercial collateralized mortgage obligations

29,593


—

(1,466)


28,127
Total held to maturity

160,163


457

(3,828)


156,792
Total securities

$
857,544

$
1,426

$
(21,292)

$
837,678

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The following table summarizes the amortized cost and estimated fair value by contractual maturity of the available for sale and held to maturity investment securities portfolio at March 31, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2019

Amortized

Estimated
(In thousands)

Cost

Fair Value
Maturity

Available for sale:

Within one year

$
12,166

$
12,160
One to five years

46,305

45,668
Five to ten years

78,788

76,090
Beyond ten years

581,156

573,533
Total

$
718,415

$
707,451

Held to maturity:

Within one year

$
9,035

$
9,028
One to five years

25,953

26,037
Five to ten years

34,673

34,700
Beyond ten years

79,851

77,868
Total

$
149,512

$
147,633

The following tables summarize securities with gross unrealized losses at March 31, 2019 and December 31, 2018, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:

March 31, 2019

Less than 12 months

Greater than 12 months

Estimated

Gross

Estimated

Gross

Fair

Unrealized

Fair

Unrealized
(In thousands)

Value

Losses

Value

Losses
Available for sale:

U.S. GSE securities

$
—

$
—

$
39,475

$
(496)
State and municipal obligations

—


—

10,061


(72)
U.S. GSE residential mortgage-backed securities

—


—

87,040


(1,858)
U.S. GSE residential collateralized mortgage obligations

67,391


(248)

166,790


(3,870)
U.S. GSE commercial collateralized mortgage obligations

47,013


(250)

43,390


(1,681)
Other asset backed securities

—


—

23,098


(1,152)
Corporate bonds

—


—

42,707


(3,293)
Total available for sale

$
114,404

$
(498)

$
412,561

$
(12,422)

Held to maturity:








State and municipal obligations

$
—

$
—

$
11,768

$
(35)
U.S. GSE residential mortgage-backed securities

—


—

9,075


(234)
U.S. GSE residential collateralized mortgage obligations

—


—

37,415


(746)
U.S. GSE commercial mortgage-backed securities

—


—

16,251


(393)
U.S. GSE commercial collateralized mortgage obligations

—


—

27,520


(1,286)
Total held to maturity

$
—

$
—

$
102,029

$
(2,694)

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December 31, 2018

Less than 12 months

Greater than 12 months

Estimated

Gross

Estimated

Gross

Fair

Unrealized

Fair

Unrealized
(In thousands)

Value

Losses

Value

Losses
Available for sale:

U.S. GSE securities

$
—

$
—

$
29,050

$
(947)
State and municipal obligations

6,655


(15)

21,273


(339)
U.S. GSE residential mortgage-backed securities

—


—

88,762


(3,036)
U.S. GSE residential collateralized mortgage obligations

46,452


(141)

172,468


(5,813)
U.S. GSE commercial mortgage-backed securities

—


—

3,508


(28)
U.S. GSE commercial collateralized mortgage obligations

46,705


(623)

43,933


(1,916)
Other asset-backed securities

—


—

23,219


(1,031)
Corporate bonds

—


—

42,425


(3,575)
Total available for sale

$
99,812

$
(779)

$
424,638

$
(16,685)

Held to maturity:








State and municipal obligations

$
8,286

$
(26)

$
22,142

$
(250)
U.S. GSE residential mortgage-backed securities

—


—

9,352


(336)
U.S. GSE residential collateralized mortgage obligations

—


—

40,665


(1,130)
U.S. GSE commercial mortgage-backed securities

—


—

16,205


(620)
U.S. GSE commercial collateralized mortgage obligations

—


—

28,127


(1,466)
Total held to maturity

$
8,286

$
(26)

$
116,491

$
(3,802)

~~Other-Than-Temporary Impairment~~

~~Management evaluates~~debt securities for ~~other-than-temporary impairment (“OTTI”)~~OTTI on at least a quarterly basis, and more frequently when economic or market conditions ~~warrant. The investment~~warrant such evaluation. For securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held to maturity are generally evaluated for OTTI under FASB ASC 320, “Accounting for Certain Investments in ~~Debt and Equity Securities”. In determining OTTI under the FASB ASC 320 model,~~an unrealized loss position, management considers ~~many factors, including: (1)~~ the ~~length~~extent and duration of ~~time~~the unrealized loss, and the ~~extent~~near-term prospects of the issuer. Impairment may result from credit deterioration of the issuer or collateral underlying the security. In performing an assessment of whether any decline in fair value is due to ~~which~~a credit loss, all relevant information is considered at the individual security level. For asset-backed securities performance indicators considered related to the underlying assets include default rates, delinquency rates, percentage of non-performing assets, debt-to-collateral ratios, third party guarantees, current levels of subordination, vintage, geographic concentration, analyst reports and forecasts, credit ratings and other market data. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount the fair value ~~has been~~is less than amortized cost ~~(2) the financial condition~~basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are excluded from earnings and ~~near term prospects~~reported, net of ~~the issuer, (3)~~tax, in other comprehensive income (“OCI”). Management also assesses whether ~~the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent~~it intends to sell ~~the debt security~~ or is more likely than not that it will be required to sell ~~the debt~~a security in an unrealized loss position before recovery of its ~~anticipated recovery.~~amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. ~~For debt securities that do not meet these criteria,~~

Accrued interest receivable is excluded from the ~~amount~~estimate of ~~impairment is split into two components: (1) OTTI related to~~ credit ~~loss, which must be recognized in~~losses.

Table of Contents

The following table summarizes the ~~income statement~~amortized cost and ~~(2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present~~estimated fair value of the ~~cash flows expected~~available for sale and held to ~~be collected~~maturity investment securities portfolio at March 31, 2020 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses, respectively:


	March 31, 2020
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
Available for sale:
U.S. Treasury securities	$	59,980	$	19	$	—	$	59,999
State and municipal obligations		37,233		805		(92)		37,946
U.S. GSE residential mortgage-backed securities		80,136		1,756		(238)		81,654
U.S. GSE residential collateralized mortgage obligations		200,029		5,463		—		205,492
U.S. GSE commercial mortgage-backed securities		16,683		366		—		17,049
U.S. GSE commercial collateralized mortgage obligations		81,310		2,148		(78)		83,380
Other asset backed securities		24,250		—		(1,698)		22,552
Corporate bonds		49,000		—		(3,794)		45,206
Total available for sale		548,621		10,557		(5,900)		553,278

			Gross		Gross		Estimated
	Amortized		Unrecognized		Unrecognized		Fair
(In thousands)	Cost		Gains		Losses		Value
Held to maturity:
State and municipal obligations		34,046		807		—		34,853
U.S. GSE residential mortgage-backed securities		7,737		141		—		7,878
U.S. GSE residential collateralized mortgage obligations		38,076		1,610		—		39,686
U.S. GSE commercial mortgage-backed securities		17,021		503		—		17,524
U.S. GSE commercial collateralized mortgage obligations		27,351		371		(10)		27,712
Total held to maturity		124,231		3,432		(10)		127,653
Total securities	$	672,852	$	13,989	$	(5,910)	$	680,931

As of March 31, 2020, none of the Company’s available for sale debt securities were in an unrealized loss position due to credit and therefore no allowance for credit losses on available for sale debt securities was required. Additionally, the calculated allowance for credit losses on held to maturity securities was inconsequential given the high quality composition of the Company’s held to maturity portfolio and therefore no allowance for credit losses was recorded. Accrued interest receivable on securities totaling $2.1 million at March 31, 2020 was included in other assets in the consolidated balance sheet and excluded from the amortized cost ~~basis.~~ and estimated fair value totals in the table above.

Table of Contents

The ~~assessment~~following table summarizes the amortized cost and estimated fair value of the available for sale and held to maturity investment securities portfolio at December 31, 2019 and the corresponding amounts of gross unrealized gains and losses therein:


	December 31, 2019
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
Available for sale:
U.S. Treasury securities	$	50,833	$	—	$	(11)	$	50,822
U.S. GSE securities		5,000		—		(5)		4,995
State and municipal obligations		34,303		704		(43)		34,964
U.S. GSE residential mortgage-backed securities		84,550		609		(468)		84,691
U.S. GSE residential collateralized mortgage obligations		278,149		1,166		(1,464)		277,851
U.S. GSE commercial mortgage-backed securities		13,656		23		(70)		13,609
U.S. GSE commercial collateralized mortgage obligations		102,722		1,723		(289)		104,156
Other asset-backed securities		24,250		—		(849)		23,401
Corporate bonds		46,000		—		(2,198)		43,802
Total available for sale		639,463		4,225		(5,397)		638,291

Held to maturity:
State and municipal obligations		41,008		809		—		41,817
U.S. GSE residential mortgage-backed securities		8,142		5		(54)		8,093
U.S. GSE residential collateralized mortgage obligations		39,936		624		(62)		40,498
U.S. GSE commercial mortgage-backed securities		17,215		102		(82)		17,235
U.S. GSE commercial collateralized mortgage obligations		27,337		191		(144)		27,384
Total held to maturity		133,638		1,731		(342)		135,027
Total securities	$	773,101	$	5,956	$	(5,739)	$	773,318

The following table summarizes available for sale debt securities with gross unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2020, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:


	March 31, 2020
	Less than 12 months				Greater than 12 months
	Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses
Available for sale:
State and municipal obligations	$	5,232	$	(92)	$	—	$	—
U.S. GSE residential mortgage-backed securities		17,934		(162)		4,219		(76)
U.S. GSE commercial collateralized mortgage obligations		6,616		(67)		2,020		(11)
Other asset backed securities		—		—		22,552		(1,698)
Corporate bonds		4,739		(261)		37,467		(3,533)
Total available for sale	$	34,521	$	(582)	$	66,258	$	(5,318)

Table of Contents

The following table summarizes securities with gross unrealized losses at December 31, 2019, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:


	December 31, 2019
	Less than 12 months				Greater than 12 months
	Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses
Available for sale:
U.S. Treasury securities	$	50,822	$	(11)	$	—	$	—
U.S. GSE securities		—		—		4,995		(5)
State and municipal obligations		4,982		(42)		76		(1)
U.S. GSE residential mortgage-backed securities		2,935		(30)		39,617		(438)
U.S. GSE residential collateralized mortgage obligations		81,377		(480)		93,403		(984)
U.S. GSE commercial mortgage-backed securities		6,648		(70)		—		—
U.S. GSE commercial collateralized mortgage obligations		28,710		(145)		9,614		(144)
Other asset-backed securities		—		—		23,401		(849)
Corporate bonds		—		—		43,802		(2,198)
Total available for sale	$	175,474	$	(778)	$	214,908	$	(4,619)

Held to maturity:
State and municipal obligations	$	—	$	—	$	—	$	—
U.S. GSE residential mortgage-backed securities		—		—		7,268		(54)
U.S. GSE residential collateralized mortgage obligations		6,750		(17)		6,105		(45)
U.S. GSE commercial mortgage-backed securities		—		—		5,034		(82)
U.S. GSE commercial collateralized mortgage obligations		13,038		(57)		4,300		(87)
Total held to maturity	$	19,788	$	(74)	$	22,707	$	(268)

Other-Than-Temporary Impairment

Management evaluates available for sale debt securities in unrealized loss positions to determine whether ~~an other-than-temporary decline exists involves~~the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a ~~high degree~~period of ~~subjectivity and judgment and is based on the information available~~time sufficient to ~~management at a point~~allow for any anticipated recovery in ~~time.~~fair value.

At March 31, ~~2019,~~2020, substantially all of the securities in an unrealized loss position had a ~~fixed~~variable interest rate and the cause of the temporary impairment was directly related to changes in interest rates. The Company generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with its experience. Other asset backed securities are comprised of student loan backed bonds which are guaranteed by the U.S. Department of Education for 97% to 100% of principal. Additionally, the bonds have credit support of 3% to 5% and have maintained their Aa3 Moody's rating during the time the Bank has owned them. The corporate bonds within the portfolio have all maintained an investment grade rating by either Moody's or Standard and Poor's. None of the unrealized losses is related to credit losses. The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. The issuers continue to make timely principal and interest payments on the debt. The fair value is expected to recover as the securities approach maturity. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at March 31, ~~2019.~~2020.

Sales and Calls of Securities

There were $74.6 million of proceeds from sale of securities for the three months ended March 31, 2020 with gross gains of approximately $0.8 million realized in 2020 and gross losses of approximately $0.8 million realized in 2020. There were no proceeds from sales of securities for the three months ended March 31, ~~2019 and 2018.~~2019. There were $5.3 million and $7.9 million of proceeds from calls of securities for the three months ended March 31, ~~2019. There were no proceeds from calls of securities for the three months ended March 31, 2018.~~2020 and 2019, respectively.

1417

Table of Contents

Pledged Securities

Securities having a fair value of ~~$402.9~~$402.6 million and ~~$354.3~~$402.2 million at March 31, ~~2019~~2020 and December 31, ~~2018~~2019, respectively, were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) overnight borrowings.

Trading Securities

The Company did not hold any trading securities during the three months ended March 31, ~~2019~~2020 or the year ended December 31, ~~2018.~~2019.

Restricted Securities

The Bank is a member of the FHLB of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors and may invest in additional amounts. The Bank is a member of the Atlantic Central Banker's Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the FRB system and required to own FRB stock. FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank owned ~~$28.1~~$26.4 million and ~~$24.0~~$32.9 million in FHLB, ACBB and FRB stock at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These amounts were reported as restricted securities in the consolidated balance sheets.

As of March 31, 2020 and 2019, there was no issuer, other than the U.S. Government and its sponsored entities, where the bank had invested holdings that exceeded 10% of consolidated stockholders’ equity.

The following table summarizes the amortized cost and estimated fair value by contractual maturity of the available for sale and held to maturity investment securities portfolio at March 31, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2020
	Amortized		Estimated
(In thousands)	Cost		Fair Value
Maturity
Available for sale:
Within one year	$	61,121	$	61,140
One to five years		44,986		44,668
Five to ten years		58,330		56,068
Beyond ten years		384,184		391,402
Total	$	548,621	$	553,278

Held to maturity:
Within one year	$	2,090	$	2,097
One to five years		27,816		28,373
Five to ten years		23,052		23,841
Beyond ten years		71,273		73,342
Total	$	124,231	$	127,653

Table of Contents

5. FAIR VALUE

The Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities during the first quarter of 2018. ~~The Company adopted the amended guidance that requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.~~

FASB ASC No. 820‑10 defines fair value as 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. FASB ASC 820‑10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

~~Table of Contents~~

The following tables summarize assets and liabilities measured at fair value on a recurring basis:


	March 31, 2019						March 31, 2020
			Fair Value Measurements Using:						Fair Value Measurements Using:
			Quoted Prices						Quoted Prices
			In Active	Significant					In Active	Significant
			Markets for	Other		Significant			Markets for	Other		Significant
			Identical	Observable		Unobservable			Identical	Observable		Unobservable
	Carrying		Assets	Inputs		Inputs	Carrying		Assets	Inputs		Inputs
(In thousands)	Value		(Level 1)	(Level 2)		(Level 3)	Value		(Level 1)	(Level 2)		(Level 3)
Financial assets:
Available for sale securities:
U.S. GSE securities	$	39,475		$	39,475
U.S. Treasury securities							$	59,999		$	59,999
State and municipal obligations		43,165			43,165			37,946			37,946
U.S. GSE residential mortgage-backed securities		96,612			96,612			81,654			81,654
U.S. GSE residential collateralized mortgage obligations		364,936			364,936			205,492			205,492
U.S. GSE commercial mortgage-backed securities		7,055			7,055			17,049			17,049
U.S. GSE commercial collateralized mortgage obligations		90,403			90,403			83,380			83,380
Other asset-backed securities		23,098			23,098			22,552			22,552
Corporate bonds		42,707			42,707			45,206			45,206
Total available for sale securities	$	707,451		$	707,451		$	553,278		$	553,278
Derivatives	$	7,663		$	7,663		$	57,874		$	57,874

Financial liabilities:
Derivatives	$	5,772		$	5,772		$	68,839		$	68,839

December 31, 2018

Fair Value Measurements Using:



Quoted Prices



In Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Assets

Inputs

Inputs
(In thousands)

Value

(Level 1)

(Level 2)

(Level 3)
Financial assets:




Available for sale securities:




U.S. GSE securities

$
29,050

$
29,050


State and municipal obligations

40,731



40,731


U.S. GSE residential mortgage-backed securities

93,538



93,538


U.S. GSE residential collateralized mortgage obligations

357,777



357,777


U.S. GSE commercial mortgage-backed securities

3,508



3,508


U.S. GSE commercial collateralized mortgage obligations

90,638



90,638


Other asset-backed securities

23,219



23,219


Corporate bonds

42,425



42,425


Total available for sale securities

$
680,886

$
680,886


Derivatives

$
6,363

$
6,363



Financial liabilities:




Derivatives

$
2,215

$
2,215

Table of Contents


	December 31, 2019
			Fair Value Measurements Using:
			Quoted Prices
			In Active	Significant
			Markets for	Other		Significant
			Identical	Observable		Unobservable
	Carrying		Assets	Inputs		Inputs
(In thousands)	Value		(Level 1)	(Level 2)		(Level 3)
Financial assets:
Available for sale securities:
U.S. Treasury securities	$	50,822		$	50,822
U.S. GSE securities		4,995			4,995
State and municipal obligations		34,964			34,964
U.S. GSE residential mortgage-backed securities		84,691			84,691
U.S. GSE residential collateralized mortgage obligations		277,851			277,851
U.S. GSE commercial mortgage-backed securities		13,609			13,609
U.S. GSE commercial collateralized mortgage obligations		104,156			104,156
Other asset-backed securities		23,401			23,401
Corporate bonds		43,802			43,802
Total available for sale securities	$	638,291		$	638,291
Derivatives	$	15,437		$	15,437

Financial liabilities:
Derivatives	$	16,645		$	16,645

The following tables summarize assets measured at fair value on a non-recurring basis:

March 31, 2019

Fair Value Measurements Using:



Quoted Prices



In Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Assets

Inputs

Inputs
(In thousands)

Value

(Level 1)

(Level 2)

(Level 3)
Impaired loans

$
3,960





$
3,960
Other real estate owned

$
175





$
175


	March 31, 2020
			Fair Value Measurements Using:
			Quoted Prices
			In Active	Significant
			Markets for	Other	Significant
			Identical	Observable	Unobservable
	Carrying		Assets	Inputs	Inputs
(In thousands)	Value		(Level 1)	(Level 2)	(Level 3)
Loans held for sale	$	12,643			$	12,643
Collateral dependent loans	$	2,902			$	2,902

~~Table of Contents~~

December 31, 2018

December 31, 2019

Fair Value Measurements Using:

Quoted Prices

In Active

Significant

In Active

Significant

Markets for

Other

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Identical

Observable

Unobservable

Carrying

Assets

Inputs

Carrying

Assets

Inputs

(In thousands)

Value

(Level 1)

(Level 2)

(Level 3)

Value

(Level 1)

(Level 2)

(Level 3)

Loans held for sale

12,643

Impaired loans

2,532

6,981

Other real estate owned

175

~~Impaired loans with an allocated allowance~~Loans held for ~~loan losses~~sale at March 31, 2020 and December 31, 2019 had a carrying amount of ~~$4.0~~$12.6 million with no valuation allowance recorded.

Collateral dependent loans with an allowance for credit losses at March 31, 2020 had a carrying amount of $2.9 million, which is made up of the outstanding balance of ~~$4.3~~$7.3 million, net of a valuation allowance of ~~$0.3~~$4.4 million. ~~This resulted in an additional provision for loan losses of $0.1 million that is included in the amount reported on the consolidated statements of income for the three months ended March 31, 2019.~~ Impaired loans (prior to the adoption of CECL standard) with an ~~allocated~~ allowance for ~~loan~~credit losses at December 31, ~~2018~~2019 had a carrying amount of ~~$2.5~~$7.0 million, which is made up of the outstanding balance of ~~$2.7~~$11.7 million, net of a valuation allowance of ~~$0.2~~$4.7 million. ~~This resulted in an additional provision for loan losses of $0.2 million that is included in the amount reported on the consolidated statements of income for the year ended December 31, 2018.~~

~~Other~~There was no other real estate owned at March 31, ~~2019~~2020 and December 31, ~~2018 had a carrying amount~~2019.

Table of ~~$0.2 million with no valuation allowance recorded. Accordingly, there was no additional provision for loan losses included in the amount reported on the Consolidated Statements of Income.~~Contents

The Company used the following methods and assumptions in estimating the fair value of its financial instruments:

Securities Available for Sale and Held to Maturity: If available, the estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges and are classified as Level 1. For securities where quoted prices are not available, fair value is based on matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities resulting in a Level 2 classification.

Derivatives: Represents interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

~~Impaired~~ Loans Held for Sale:Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is initially determined using the price we expect to receive for the loans based on commitments received from third-party investors. Thereafter, loans held for sale are re-evaluated quarterly to determine if a valuation allowance is required to adjust for a decline in fair value below the carrying amount, resulting in a Level 3 classification.

Collateral Dependent Loans with an ACL (Impaired Loans with and ACL prior to the adoption of the CECL Standard) and Other Real Estate Owned: For ~~impaired~~collateral dependent loans where the Company ~~evaluates~~has determined that foreclosure of the ~~fair value~~collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan ~~in accordance with current accounting guidance. For loans that are~~to be provided substantially through the operation or sale of the collateral, ~~dependent,~~the ACL is measured based on the difference between the fair value of the collateral ~~is used to determine~~and the ~~fair value~~amortized cost basis of the ~~loan.~~loan as of the measurement date. The fair value of ~~the~~real estate collateral is determined based on recent appraised values. The fair value of other real estate owned is also ~~evaluated in accordance with current accounting guidance and~~ determined based on recent appraised values less the estimated cost to sell. These appraisals may utilize a single 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. Adjustments may relate to location, square footage, condition, amenities, market rate of leases as well as timing of comparable sales. All appraisals undergo a second review process to ensure that the methodology employed and the values derived are reasonable. ~~The fair~~Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the ~~loan is compared to~~valuation and management’s expertise and knowledge of the ~~carrying value to determine if any write-down or specific reserve is required. Impaired loans are evaluated quarterly for additional impairment~~borrower and ~~adjusted accordingly.~~its business. These valuation methods result in a Level 3 classification.

Appraisals for collateral-dependent ~~impaired~~ loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, the Appraisal and Credit ~~Department reviews~~Departments review the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management also considers the appraisal values for commercial properties associated with current loan origination activity. Collectively, this information is reviewed to help assess current trends in commercial property values. For each collateral dependent ~~impaired~~ loan, management considers information that relates to the type of ~~commercial~~ property to determine if such properties may have appreciated or depreciated in value since the date of the most recent appraisal. Adjustments to fair value are made only when the analysis indicates a probable decline

~~Table of Contents~~

in collateral values. Adjustments made in the appraisal process are not deemed material to the overall consolidated financial statements given the level of ~~impaired~~collateral dependent loans measured at fair value on a ~~nonrecurring~~non-recurring basis.

Table of Contents

The following tables summarize the estimated fair values and recorded carrying amounts of the Company's financial instruments at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:


	March 31, 2019										March 31, 2020
			Fair Value Measurements Using:										Fair Value Measurements Using:
					Significant										Significant
			Quoted Prices In		Other		Significant						Quoted Prices In		Other		Significant
			Active Markets for		Observable		Unobservable						Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs		Total		Carrying		Identical Assets		Inputs		Inputs		Total
(In thousands)	Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value		Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value
Financial assets:
Cash and due from banks	$	68,773	$	68,773	$	—	$	—	$	68,773	$	61,352	$	61,352	$	—	$	—	$	61,352
Interest-bearing deposits with banks		31,684		31,684		—		—		31,684		172,830		172,830		—		—		172,830
Securities available for sale		707,451		—		707,451		—		707,451		553,278		—		553,278		—		553,278
Securities restricted		28,068		n/a		n/a		n/a		n/a		26,354		n/a		n/a		n/a		n/a
Securities held to maturity		149,512		—		147,633		—		147,633		124,231		—		127,653		—		127,653
Loans held for sale												12,643		—		—		12,643		12,643
Loans, net		3,359,320		—		—		3,346,699		3,346,699		3,722,915		—		—		3,755,669		3,755,669
Derivatives		7,663		—		7,663		—		7,663		57,874		—		57,874		—		57,874
Accrued interest receivable		13,057		—		2,980		10,077		13,057		11,070		—		2,105		8,965		11,070

Financial liabilities:
Certificates of deposit		280,709		—		279,236		—		279,236		310,077		—		312,965		—		312,965
Demand and other deposits		3,444,755		3,444,755		—		—		3,444,755		3,745,658		3,745,658		—		—		3,745,658
FHLB advances		330,217		90,000		237,499		—		327,499		290,000		—		300,760		—		300,760
Repurchase agreements		721		—		721		—		721		1,195		—		1,195		—		1,195
Subordinated debentures		78,815		—		78,058		—		78,058		78,955		—		89,678		—		89,678
Derivatives		5,772		—		5,772		—		5,772		68,839		—		68,839		—		68,839
Accrued interest payable		590		—		590		—		590		387		—		387		—		387


	December 31, 2018										December 31, 2019
			Fair Value Measurements Using:										Fair Value Measurements Using:
					Significant										Significant
			Quoted Prices In		Other		Significant						Quoted Prices In		Other		Significant
			Active Markets for		Observable		Unobservable						Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs		Total		Carrying		Identical Assets		Inputs		Inputs		Total
(In thousands)	Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value		Amount		(Level 1)		(Level 2)		(Level 3)		Fair Value
Financial assets:
Cash and due from banks	$	142,145	$	142,145	$	—	$	—	$	142,145	$	77,693	$	77,693	$	—	$	—	$	77,693
Interest-bearing deposits with banks		153,223		153,223		—		—		153,223		39,501		39,501		—		—		39,501
Securities available for sale		680,886		—		680,886		—		680,886		638,291		—		638,291		—		638,291
Securities restricted		24,028		n/a		n/a		n/a		n/a		32,879		n/a		n/a		n/a		n/a
Securities held to maturity		160,163		—		156,792		—		156,792		133,638		—		135,027		—		135,027
Loans held for sale												12,643		—		—		12,643		12,643
Loans, net		3,244,393		—		—		3,216,204		3,216,204		3,647,499		—		—		3,685,770		3,685,770
Derivatives		6,363		—		6,363		—		6,363		15,437		—		15,437		—		15,437
Accrued interest receivable		11,236		—		2,936		8,300		11,236		10,908		—		2,181		8,727		10,908

Financial liabilities:
Certificates of deposit		329,491		—		326,865		—		326,865		307,977		—		308,660		—		308,660
Demand and other deposits		3,556,902		3,556,902		—		—		3,556,902		3,506,670		3,506,670		—		—		3,506,670
FHLB advances		240,433		—		236,209		—		236,209		435,000		195,000		239,622		—		434,622
Repurchase agreements		539		—		539		—		539		999		—		999		—		999
Subordinated debentures		78,781		—		74,400		—		74,400		78,920		—		81,010		—		81,010
Derivatives		2,215		—		2,215		—		2,215		16,645		—		16,645		—		16,645
Accrued interest payable		1,524		—		1,524		—		1,524		1,467		—		1,467		—		1,467

1822

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6. LOANS

Loans

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

Loans that were acquired through the acquisition of Community National Bank on June 19, 2015 and First National Bank of New York on February 14, 2014, were initially recorded at fair value with no carryover of the related allowance for loan losses. After acquisition, losses are recognized through the allowance for loan losses. Determining fair value of the loans involves estimating the amount and timing of expected principal and interest cash flows to be collected on the loans and discounting those cash flows at a market interest rate. Some of the loans at the time of acquisition showed evidence of credit deterioration since origination. These loans were considered purchased credit impaired (“PCI”) loans. As of December 31, 2019, the remaining balance of PCI loans was immaterial to the Company’s financial condition and results of operations.

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

Allowance for Credit Losses

On January 1, 2020, the Company adopted the CECL Standard, which requires that loans held for investment be accounted for under the current expected credit losses model. The allowance for credit losses is established and maintained through a provision for credit losses based on expected losses inherent in the Company’s loan portfolio. Management evaluates the adequacy of the allowance on a quarterly basis. Management monitors its entire loan portfolio regularly, with consideration given to detailed analysis of classified loans, repayment patterns, past loss experience, various types of concentrations of credit, current economic conditions, and reasonable and supportable forecasts. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged against the allowance.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of the Company’s loan portfolio segments. These segments are further disaggregated into loan risk ratings, the level at which credit risk is monitored. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on expected loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit losses in those future periods.

Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in our process for estimation of expected credit losses. The allowance level is influenced by loan volumes, loan risk rating migration, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the

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allowance for credit losses has two basic components: (1) an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and (2) a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Loans that do not share similar credit risk characteristics

For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, the Company recognizes expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated costs to sell the loan if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

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

Loans that share similar credit risk characteristics

In determining the allowance for credit losses, the Company derives an estimated credit loss assumption from a model that categorizes loan pools based on loan type and further segmented by risk rating. This model is known as Probability of Default/Loss Given Default, utilizing a Transition Matrix approach. This model calculates an expected loss percentage for each loan pool by considering the probability of default, based upon the historical transition or migration of loans from performing (various pass ratings) to criticized, and classified risk ratings to default by risk rating buckets using life-of-loan analysis runout periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses (loss given default) per loan pool. The default trigger, which is defined as the earlier of ninety days past-due or non-accrual status, and severity factors used to calculate the allowance for credit losses for loans in pools that share similar risk characteristics with other loans, are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio. These factors include: (1) lending policies and procedures; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio including the terms of the loans; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due and adversely classified or graded loans and the volume of non-accrual loans; (6) the quality of our loan review system; (7) the value of underlying collateral for collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Such factors are used to adjust the historical probabilities of default and severity of loss for current conditions that are not reflective of the model results. In addition, the economic factor includes

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management expectation of future conditions based on a reasonable and supportable forecast of the economy. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (currently two years), the Bank reverts immediately back to the historical rates of default and severity of loss. Management believes that this transition approach to the Probability of Default/Loss Given Default is a relevant calculation of expected credit losses as there is sufficient volume as well as movement in the risk ratings due to the initial grading system as well as timely updates to risk ratings when necessary. Credit risk ratings are based on management’s evaluation of a credit’s cash flow, collateral, guarantor support, financial disclosures, industry trends and strength of borrowers’ management.

Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for credit losses. Such agencies may require the Bank to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

A loan is considered a potential charge-off when it is in default of either principal or interest for a period of 90, 120 or 180 days, depending upon the loan type, as of the end of the prior month. In addition to delinquency criteria, other triggering events may include, but are not limited to, notice of bankruptcy by the borrower or guarantor, death of the borrower, and deficiency balance from the sale of collateral.

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

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded on the balance sheet when they are funded. In accordance with the CECL Standard, the Company maintains a separate reserve for off-balance sheet credit instruments, which is included in other liabilities on the consolidated statements of financial condition. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors, current conditions and forecasting adjustments used in the allowance for credit loss methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company. At March 31, 2020, the reserve for off-balance sheet credit exposures was immaterial to the Company’s consolidated statements of financial condition and results of operations.

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The following table sets forth the major classifications of loans:



(In thousands)	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Commercial real estate mortgage loans	$	1,402,633	$	1,373,556
Commercial real estate mortgage loans:
Owner occupied					$	529,877	$	531,088
Non-owner occupied						1,053,901		1,034,599
Multi-family mortgage loans		624,114		585,827		800,556		812,174
Residential real estate mortgage loans		515,173		519,763		485,492		493,144
Commercial, industrial and agricultural loans		671,897		645,724		758,683		679,444
Real estate construction and land loans		147,116		123,393		100,643		97,311
Installment/consumer loans		22,781		20,509		25,051		24,836
Total loans		3,383,714		3,268,772		3,754,203		3,672,596
Net deferred loan costs and fees		7,390		7,039		7,927		7,689
Total loans held for investment		3,391,104		3,275,811		3,762,130		3,680,285
Allowance for loan losses		(31,784)		(31,418)
Allowance for credit losses						(39,215)		(32,786)
Loans, net	$	3,359,320	$	3,244,393	$	3,722,915	$	3,647,499

~~In June 2015, the Company completed the acquisition of Community National Bank (“CNB”) resulting~~Accrued interest receivable on loans totaling $9.0 million at March 31, 2020 and $8.7 million at December 31, 2019 was included in other assets in the ~~addition of $729.4 million of acquired loans recorded at their fair value. There were approximately $266.1 million~~consolidated balance sheet and ~~$275.0 million of acquired CNB loans remaining as~~excluded from the table above.

As of March 31, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019, one commercial real estate (“CRE”) mortgage loan totaling $12.6 million was classified as held for sale. The loan was reclassified from loans held for investment to loans held for sale and written down from $16.3 million to the loan’s estimated fair value of $12.6 million, through a $3.7 million charge-off during the 2019 second quarter.

Lending Risk

The principal business of the Bank is lending in ~~commercial real estate~~CRE mortgage loans, multi-family mortgage loans, residential real estate mortgage loans, construction loans, home equity loans, commercial, industrial and agricultural loans, land loans and consumer loans. The Bank considers its primary lending area to be Nassau and Suffolk Counties located on Long Island and the New York City boroughs. A substantial portion of the Bank's loans is secured by real estate in these areas. Accordingly, the ultimate collectability of the loan portfolio is susceptible to changes in market and economic conditions in this region.

Commercial Real Estate Mortgages

Loans in this classification include income producing investment properties and owner-occupied real estate used for business purposes. The underlying properties are located largely in the Bank's primary market area. The cash flows of the income producing investment properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on credit quality. Generally, management seeks to obtain annual financial information for borrowers with loans in excess of $1.0 million in this category. In the case of owner-occupied real estate used for business purposes, a weakened economy and resultant decreased consumer and/or business spending will have an adverse effect on credit quality.

Multi-Family Mortgages

Loans in this classification include income producing residential investment properties of five or more families. Loans are made to established owners with a proven and demonstrable record of strong performance. Loans are secured by a first mortgage lien on the subject property with a loan to value ratio generally not exceeding 75%. Repayment is derived generally from the rental income generated from the property and may be supplemented by the owners' personal cash flow. Credit risk arises with an increase in vacancy rates, property mismanagement and the predominance of non-recourse loans that are customary in the industry.

Residential Real Estate Mortgages and Home Equity Loans

Loans in these classifications are generally secured by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and

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housing prices, can have an effect on the credit quality in this loan class. The Bank generally does not originate loans with a loan-to-value ratio greater than 80% and does not grant subprime loans.

~~Table of Contents~~

Commercial, Industrial and Agricultural Loans

Loans in this classification are made to businesses and include term loans, lines of credit, senior secured loans to corporations, equipment financing and taxi medallion loans. Generally, these loans are secured by assets of the business and repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer and/or business spending, will have an effect on the credit quality in this loan class.

Real Estate Construction and Land Loans

Loans in this classification primarily include land loans to local individuals, contractors and developers for developing the land for sale or for the purpose of making improvements thereon. Repayment is derived primarily from sale of the lots/units including any pre-sold units. Credit risk is affected by market conditions, time to sell at an adequate price and cost overruns. To a lesser extent, this class includes commercial development projects that the Company finances, which in most cases require interest only during construction, and then convert to permanent financing. Construction delays, cost overruns, market conditions and the availability of permanent financing, to the extent such permanent financing is not being provided by the Bank, all affect the credit risk in this loan class.

Installment and Consumer Loans

Loans in this classification may be either secured or unsecured. Repayment is dependent on the credit quality of the individual borrower and, if applicable, sale of the collateral securing the loan, such as automobiles. Therefore, the overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this loan class.

Credit Quality Indicators

The Company categorizes loans into risk categories of pass, watch, special mention, substandard and doubtful based on relevant information about the ability of borrowers to service their debt including repayment patterns, probable incurred losses, past loss experience, current economic conditions, and various types of concentrations of credit. Assigned risk rating grades are continuously updated as new information is obtained. Loans risk rated special ~~mention;~~mention, substandard and doubtful are reviewed on a quarterly basis. The Company uses the following definitions for risk rating grades:

Pass: Loans classified as pass include current loans performing in accordance with contractual terms, pools of homogenous residential real estate and installment/consumer loans that are not individually risk rated and loans which do not exhibit certain risk factors that require greater than usual monitoring by management.

Watch: Loans classified as watch are considered pass rated loans. These loans carry additional risk factors above those of pass loans but do not have all the risk characteristics of loans classified special mention. Such risk factors require monitoring and if left uncorrected, could lead these loans to be downgraded.

Special mention: Loans classified as special mention, while generally not delinquent, have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank's credit position at some future date.

Substandard: Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a 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 a substandard loan, ~~and~~ may also be in delinquency status and have defined weaknesses based on currently existing facts, conditions and values making collection or liquidation in full highly questionable and improbable.

2027

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The following tables represent loans categorized by ~~class and~~ internally assigned risk grades as of March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:

March 31, 2019
(In thousands)

Pass

Special Mention

Substandard

Doubtful

Total
Commercial real estate:

Owner occupied

$
513,116

$
11,652

$
18,068

$
—

$
542,836
Non-owner occupied

845,486


10,564

3,747

—

859,797
Multi-family

623,699


415

—

—

624,114
Residential real estate:





Residential mortgage

436,967


8,278

1,304

—

446,549
Home equity

66,569


992

1,063

—

68,624
Commercial and industrial:





Secured

151,751


2,762

9,125

—

163,638
Unsecured

486,419


11,885

9,955

—

508,259
Real estate construction and land loans

146,816


—

300

—

147,116
Installment/consumer loans

21,994


757

30

—

22,781
Total loans

$
3,292,817

$
47,305

$
43,592

$
—

$
3,383,714


	March 31, 2020
(In thousands)	2020		2019		2018		2017		2016		2015 and Prior		Revolving		Revolving-Term		Total
Commercial real estate owner occupied:
Pass	$	33,372	$	93,641	$	52,959	$	74,288	$	28,317	$	183,452	$	—	$	—	$	466,029
Watch		—		1,395		6,894		5,502		1,277		29,560		—		—		44,628
Special mention		—		—		—		10,974		3,577		3,748		—		—		18,299
Substandard		—		—		607		—		—		314		—		—		921
Total commercial real estate owner occupied		33,372		95,036		60,460		90,764		33,171		217,074		—		—		529,877

Commercial real estate non-owner occupied:
Pass		39,000		255,073		131,679		197,225		83,651		302,905		—		—		1,009,533
Watch		—		4,000		2,949		2,367		8,563		15,560		—		—		33,439
Special mention		—		—		—		—		—		291		—		—		291
Substandard		—		—		—		9,518		—		1,120		—		—		10,638
Total commercial real estate non-owner occupied		39,000		259,073		134,628		209,110		92,214		319,876		-		—		1,053,901

Multi-family:
Pass		38,911		293,962		41,294		116,995		146,302		125,591		—		—		763,055
Watch		—		—		—		8,237		15,801		13,063		—		—		37,101
Special mention		—		—		—		—		—		400		—		—		400
Substandard		—		—		—		—		—		—		—		—		—
Total multi-family		38,911		293,962		41,294		125,232		162,103		139,054		—		—		800,556

Residential real estate:
Pass		8,964		34,254		83,491		109,387		29,478		133,888		55,145		8,085		462,692
Watch		—		465		412		326		588		2,566		399		1,446		6,202
Special mention		—		783		770		—		—		9,883		399		777		12,612
Substandard		—		334		308		483		—		2,158		—		703		3,986
Total residential real estate		8,964		35,836		84,981		110,196		30,066		148,495		55,943		11,011		485,492

Commercial, industrial and agricultural:
Pass		30,490		80,671		48,302		39,169		27,080		40,486		385,474		7,061		658,733
Watch		1,599		2,417		15,041		4,043		812		2,827		34,752		3,440		64,931
Special mention		—		384		813		590		604		573		7,752		3,507		14,223
Substandard		—		—		612		4,987		—		9,530		998		4,669		20,796
Total commercial, industrial and agricultural		32,089		83,472		64,768		48,789		28,496		53,416		428,976		18,677		758,683

Real estate construction and land loans:
Pass		7,153		41,664		23,069		17,292		—		4,763		—		—		93,941
Watch		—		—		3,200		1,728		—		283		—		—		5,211
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		1,370		—		121		—		—		1,491
Total real estate construction and land loans		7,153		41,664		26,269		20,390		—		5,167		—		—		100,643

Installment/consumer loans
Pass		103		955		254		145		14		875		21,334		460		24,140
Watch		—		—		—		—		—		—		—		45		45
Special mention		—		—		—		—		—		—		—		101		101
Substandard		—		—		—		16		—		—		—		749		765
Total installment/consumer loans		103		955		254		161		14		875		21,334		1,355		25,051

Total Loans	$	159,592	$	809,998	$	412,654	$	604,642	$	346,064	$	883,957	$	506,253	$	31,043	$	3,754,203


	December 31, 2018										December 31, 2019
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Doubtful		Total
Commercial real estate:
Owner occupied	$	480,503	$	12,045	$	17,850	$	—	$	510,398	$	511,444	$	18,426	$	1,218	$	—	$	531,088
Non-owner occupied		858,069		2,188		2,901		—		863,158		1,022,208		—		12,391		—		1,034,599
Multi-family		585,409		418		—		—		585,827		811,770		404		—		—		812,174
Residential real estate:
Residential mortgage		438,891		8,510		1,114		—		448,515
Home equity		68,480		1,594		1,174		—		71,248
Commercial and industrial:
Secured		147,474		5,536		15,530		—		168,540
Unsecured		458,526		12,886		5,772		—		477,184
Residential real estate												475,949		12,400		4,795		—		493,144
Commercial, industrial and agricultural												643,413		15,670		20,361		—		679,444
Real estate construction and land loans		123,089		—		304		—		123,393		95,530		—		1,781		—		97,311
Installment/consumer loans		20,464		9		36		—		20,509		23,976		103		757		—		24,836
Total loans	$	3,180,905	$	43,186	$	44,681	$	—	$	3,268,772	$	3,584,290	$	47,003	$	41,303	$	—	$	3,672,596

~~Past Due and Non-accrual Loans~~

~~The following tables represent the aging of the recorded investment in past due loans as of March 31, 2019 and December 31, 2018 by class of loans, as defined by FASB ASC 310‑10:~~

March 31, 2019

>90 Days

Non-accrual

30-59

60-89

Past Due

Including 90

Total Past

Days

Days

And

Days or More

Due and

(In thousands)

Past Due

Past Due

Accruing

Past Due

Non-accrual

Current

Total Loans
Commercial real estate:

Owner occupied

$
1,190

$
—

$
—

$
580

$
1,770

$
541,066

$
542,836
Non-owner occupied

—


9,292

—


878

10,170


849,627

859,797
Multi-family

—


—

—


—

—


624,114

624,114
Residential real estate:







Residential mortgages

1,934


—

—


422

2,356


444,193

446,549
Home equity

1,017


—

318


622

1,957


66,667

68,624
Commercial and industrial:







Secured

1,137


50

—


197

1,384


162,254

163,638
Unsecured

2,361


956

—


342

3,659


504,600

508,259
Real estate construction and land loans

—


—

—


—

—


147,116

147,116
Installment/consumer loans

—


—

—


30

30


22,751

22,781
Total loans

$
7,639

$
10,298

$
318

$
3,071

$
21,326

$
3,362,388

$
3,383,714

~~Table of Contents~~

December 31, 2018

>90 Days

Non-accrual

30-59

60-89

Past Due

Including 90

Total Past

Days

Days

And

Days or More

Due and

(In thousands)

Past Due

Past Due

Accruing

Past Due

Non-accrual

Current

Total Loans
Commercial real estate:

Owner occupied

$
333

$
194

$
—

$
253

$
780

$
509,618

$
510,398
Non-owner occupied

—


—

—


885

885


862,273

863,158
Multi-family

—


—

—


—

—


585,827

585,827
Residential real estate:







Residential mortgages

892


230

—


199

1,321


447,194

448,515
Home equity

1,033


—

308


624

1,965


69,283

71,248
Commercial and industrial:







Secured

330


196

—


174

700


167,840

168,540
Unsecured

1,108


—

—


621

1,729


475,455

477,184
Real estate construction and land loans

—


—

—


—

—


123,393

123,393
Installment/consumer loans

84


—

—


52

136


20,373

20,509
Total loans

$
3,780

$
620

$
308

$
2,808

$
7,516

$
3,261,256

$
3,268,772

~~Impaired Loans~~

At March 31, 2019 and December 31, 2018, the Company had individually impaired loans as defined by FASB ASC No. 310, “Receivables” of $16.1 million and $19.4 million, respectively. The decrease in impaired loans was attributable to the payoff of certain troubled debt restructurings ("TDRs”) and other impaired performing loans, partially offset by new TDRs during the three months ended March 31, 2019. During the three months ended March 31, 2019, the Bank modified certain loans as TDRs totaling $3.2 million. For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures in making these judgments. Impaired loans include individually classified non-accrual loans and TDRs and at December 31, 2018 included $2.7 million in other impaired performing loans related to three taxi medallion loans which paid off in January 2019. For impaired loans, the Bank evaluates the impairment of the loan in accordance with FASB ASC 310‑10‑35‑22. Impairment is determined based on the present value of expected future cash flows discounted at the loan's effective interest rate. For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required.

The following tables set forth the recorded investment, unpaid principal balance and related allowance by class of loans at March 31, 2019 and December 31, 2018 for individually impaired loans. The tables also set forth the average recorded

2228

Table of Contents

~~investment~~

Past Due and Non-accrual Loans

The following tables represents the aging of ~~individually impaired~~past due loans as of March 31, 2020 and ~~interest income recognized while the loans were impaired during~~December 31, 2019:


	March 31, 2020
					90+ Days		Non-accrual
	30-59		60-89		Past Due		Including 90		Total Past
	Days		Days		And		Days or More		Due and
(In thousands)	Past Due		Past Due		Accruing		Past Due		Non-accrual		Current		Total Loans
Commercial real estate:
Owner occupied	$	586	$	—	$	—	$	215	$	801	$	529,076	$	529,877
Non-owner occupied		603		771		—		512		1,886		1,052,015		1,053,901
Multi-family		—		—		—		—		—		800,556		800,556
Residential real estate		6,067		80		343		2,433		8,923		476,569		485,492
Commercial, industrial and agricultural		1,727		1,618		—		1,312		4,657		754,026		758,683
Real estate construction and land loans		—		1,370		—		121		1,491		99,152		100,643
Installment/consumer loans		114		5		—		16		135		24,916		25,051
Total loans	$	9,097	$	3,844	$	343	$	4,609	$	17,893	$	3,736,310	$	3,754,203

During the three months ended March 31, ~~2019~~2020, there was no interest earned on non-accrual loans and ~~2018:~~$15 thousand in accrued interest on non-accrual loans was reversed through interest income.

Three Months Ended

March 31, 2019

March 31, 2019

Unpaid

Related

Average

Interest

Recorded

Principal

Allocated

Recorded

Income
(In thousands)

Investment

Balance

Allowance

Investment

Recognized
With no related allowance recorded:

Commercial real estate:











Owner occupied

$
595

$
608

$
—

$
483

$
—
Non-owner occupied


2,777


2,781


—


2,786


25
Residential real estate:







Residential mortgages

—


—

—


—


—
Home equity

—


—

—


—


—
Commercial and industrial:







Secured

1,644


1,644

—


1,482


16
Unsecured

6,869


6,870

—


5,617


85
Total with no related allowance recorded

11,885


11,903

—


10,368

126

With an allowance recorded:













Commercial real estate:













Owner occupied

—


—

—


—

—
Non-owner occupied


—


—


—


—


—
Residential real estate:





Residential mortgages

—


—

—


—

—
Home equity

—


—

—


—

—
Commercial and industrial:





Secured

4,259


4,259

299


3,942

36
Unsecured

—


—

—


—

—
Total with an allowance recorded

4,259


4,259

299


3,942

36

Total:













Commercial real estate:













Owner occupied

595


608

—


483

—
Non-owner occupied

2,777


2,781

—


2,786


25
Residential real estate:







Residential mortgages

—


—

—


—


—
Home equity

—


—

—


—


—
Commercial and industrial:







Secured

5,903


5,903

299


5,424


52
Unsecured

6,869


6,870

—


5,617


85
Total

$
16,144

$
16,162

$
299

$
14,310

$
162

~~Table of Contents~~

Three Months Ended

December 31, 2018

March 31, 2018

Unpaid

Related

Average

Interest

Recorded

Principal

Allocated

Recorded

Income
(In thousands)

Investment

Balance

Allowance

Investment

Recognized
With no related allowance recorded:

Commercial real estate:









Owner occupied

$
268

$
278

$
—

$
2,073

$
—
Non-owner occupied


2,816


2,816


—


8,973


76
Residential real estate:







Residential mortgages

—


—

—


—


—
Home equity

—


—

—


100


—
Commercial and industrial:







Secured

8,234


8,234

—


8,744


56
Unsecured

5,316


5,316

—


4,932


37
Total with no related allowance recorded

16,634

16,644

—


24,822

169

With an allowance recorded:






Commercial real estate:






Owner occupied

—


—

—


—

—
Non-owner occupied


—


—


—


—


—
Residential real estate:





Residential mortgages

—


—

—


—

—
Home equity

—


—

—


—

—
Commercial and industrial:





Secured

2,721


2,721

189


—

—
Unsecured

—


—

—


1,708

—
Total with an allowance recorded

2,721

2,721

189


1,708

—

Total:






Commercial real estate:






Owner occupied

268


278

—


2,073

—
Non-owner occupied

2,816


2,816

—


8,973


76
Residential real estate:







Residential mortgages

—


—

—


—


—
Home equity

—


—

—


100


—
Commercial and industrial:







Secured

10,955


10,955

189


8,744


56
Unsecured

5,316


5,316

—


6,640


37
Total

$
19,355

$
19,365

$
189

$
26,530

$
169


	December 31, 2019
					90+ Days		Non-accrual
	30-59		60-89		Past Due		Including 90		Total Past
	Days		Days		And		Days or More		Due and
(In thousands)	Past Due		Past Due		Accruing		Past Due		Non-accrual		Current		Total Loans
Commercial real estate:
Owner occupied	$	917	$	433	$	—	$	225	$	1,575	$	529,513	$	531,088
Non-owner occupied		98		—		—		512		610		1,033,989		1,034,599
Multi-family		—		—		—		—		—		812,174		812,174
Residential real estate		3,053		747		343		2,743		6,886		486,258		493,144
Commercial, industrial and agricultural		273		721		—		736		1,730		677,714		679,444
Real estate construction and land loans		—		—		—		123		123		97,188		97,311
Installment/consumer loans		124		—		—		30		154		24,682		24,836
Total loans	$	4,465	$	1,901	$	343	$	4,369	$	11,078	$	3,661,518	$	3,672,596

~~The Bank’s~~There was no other real estate owned ~~totaled $0.2 million~~ at March 31, ~~2019~~2020 and December 31, ~~2018 and consisted of one property.~~2019.

Troubled Debt Restructurings

The terms of certain loans were modified and are considered TDRs. The modification of the terms of such loans generally includes one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. The modification of these loans involved loans to borrowers who were experiencing financial difficulties.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed to determine if that borrower is currently in payment default under any of its obligations or whether there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Table of Contents

The following table presents loans modified as TDRs during the periods indicated:


	Modifications During the Three Months Ended March 31,
	2020					2019
		Pre-		Post-			Pre-		Post-
		Modification		Modification			Modification		Modification
		Outstanding		Outstanding			Outstanding		Outstanding
	Number of	Recorded		Recorded		Number of	Recorded		Recorded
(Dollars in thousands)	Loans	Investment		Investment		Loans	Investment		Investment
Commercial real estate:
Owner occupied	—	$	—	$	—	—	$	—	$	—
Non-owner occupied	—		—		—	—		—		—
Residential real estate	—		—		—	—		—		—
Commercial, industrial and agricultural	1		1,037		1,037	3		3,209		3,209
Installment/consumer loans	—		—		—	—		—		—
Total	1	$	1,037	$	1,037	3	$	3,209	$	3,209

During the three months ended March 31, ~~2019, the Bank modified three commercial~~2020, there were no charge-offs relating to TDRs and ~~industrial~~there were no loans ~~including one taxi medallion loan, totaling $3.2 million as TDRs compared to six commercial and industrial loans totaling $6.7 million~~ modified as TDRs ~~during~~for which there was a payment default within twelve months following the ~~three months ended March 31, 2018. These modifications did not result in a change to the recorded investment of the loans and did not increase the allowance for loan losses for those periods.~~modification. During the three months ended March 31, 2019, there was one charge-off totaling $6 thousand relating to TDRs and there was one loan modified as a TDR for which there was a payment default within twelve months following the modification. ~~During the~~

~~Table of Contents~~

three months ended March 31, 2018, there were no charge-offs relating to TDRs and there were no loans modified as TDRs for which there was a payment default within twelve months following the modification. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$119~~$635 thousand and ~~$133~~$405 thousand, respectively, of non-accrual TDRs and ~~$16.3~~$26.9 million and ~~$16.9~~$26.3 million, respectively, of performing TDRs. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, non-accrual TDRs were unsecured. The Bank has no commitment to lend additional funds to these debtors.

The terms of certain other loans were modified during the three months ended March 31, ~~2019~~2020 that did not meet the definition of a TDR. These loans have a total recorded investment at March 31, ~~2019~~2020 of ~~$10.9~~$26.8 million. These loans were to borrowers who were not experiencing financial difficulties.

~~Purchased Credit~~ In connection with the COVID-19 relief provided by the CARES Act, the Company is supporting its customers who may experience financial difficulty due to COVID-19 through loan moratoriums and forbearance programs. The Company began offering 90-day payment modifications on a case-by-case basis to those customers whose income was adversely impacted by COVID-19. The loan modifications in this program primarily consist of three-month deferrals of interest and principal payments, which subsequent to March 31, 2020, resulted in loan modifications to approximately 10% of the loan portfolio. These deferrals are not considered TDRs based on interagency guidance issued in March 2020.

Collateral Dependent Loans

At March 31, 2020, the Company had collateral dependent commercial, industrial and agricultural loans which were individually evaluated to determine expected credit losses. These loans totaled $7.3 million and had a related allowance for credit losses totaling $4.4 million at March 31, 2020. The loans were secured by inventory and other assets.

Impaired Loans (prior to the adoption of the CECL Standard)

~~Loans acquired~~At December 31, 2019 the Company had individually impaired loans as defined by FASB ASC 310, “Receivables” of $27.0 million. For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures in ~~a business combination~~making these judgments. Impaired loans include individually classified non-accrual loans and TDRs. At December 31, 2019, impaired loans also included $1.1 million in other impaired performing loans which were related to borrowers with other performing TDRs. For impaired loans, the Bank evaluates the impairment of the loan in accordance with FASB ASC 310‑10‑35‑22. Impairment is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For loans that are ~~recorded at their~~collateral dependent, the fair value ~~at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.~~

~~At the acquisition date, the purchased credit impaired (“PCI”) loans acquired as part~~ of the ~~FNBNY acquisition had contractually required principal and interest payments receivable~~collateral is used to determine the fair value of ~~$40.3 million,~~the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral or present value of expected cash flows ~~of $28.4 million, and a fair~~is compared to the carrying value (initial carrying amount) of $21.8 million. The difference between the contractually required principal and interest payments receivable and the expected cash flows of $11.9 million represented the non-accretable difference. The difference between the expected cash flows and fair value of $6.6 million represented the initial accretable yield. At March 31, 2019, the contractually required principal and interest payments receivable and carrying amount of the PCI loans was $1.1 million and $0.5 million, respectively, with a remaining non-accretable difference of $0.5 million. At December 31, 2018, the contractually required principal and interest payments receivable and carrying amount of the PCI loans was $1.1 million and $0.5 million, respectively, with a remaining non-accretable difference of $0.5 million.

At the acquisition date, the PCI loans acquired as part of the CNB acquisition had contractually required principal and interest payments receivable of $23.4 million, expected cash flows of $10.1 million, and a fair value (initial carrying amount) of $8.7 million. The difference between the contractually required principal and interest payments receivable and the expected cash flows of $13.3 million represented the non-accretable difference. The difference between the expected cash flows and fair value of $1.4 million represented the initial accretable yield. At March 31, 2019, the contractually required principal and interest payments receivable and carrying amount of the PCI loans was $0.9 million and $0.1 million, respectively, with a remaining non-accretable difference of $0.6 million. At December 31, 2018, the contractually required principal and interest payments receivable and carrying amount of the PCI loans was $1.2 million and $0.1 million, respectively, with a remaining non-accretable difference of $0.8 million.

~~The following table summarizes the activity in the accretable yield for the PCI loans:~~

Three Months Ended

March 31,

(In thousands)

2019

2018

Balance at beginning of period

$
460

$
2,151

Accretion

(108)

(1,033)

Reclassification from (to) nonaccretable difference during the period

11

(161)

Accretable discount at end of period

$
363

$
957

to determine if any write-down or specific loan loss allowance allocation is required.

2530

Table of Contents

~~7. ALLOWANCE FOR LOAN LOSSES~~

The following table sets forth the recorded investment, unpaid principal balance and related allowance for individually impaired loans at December 31, 2019. The table also sets forth the average recorded investment of individually impaired loans and interest income recognized while the loans were impaired during the period ended March 31, 2019:


							Three Months Ended
	December 31, 2019						March 31, 2019
			Unpaid		Related		Average		Interest
	Recorded		Principal		Allocated		Recorded		Income
(In thousands)	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial real estate:
Owner occupied	$	3,379	$	3,401	$	—	$	483	$	—
Non-owner occupied		2,296		2,296		—		2,786		25
Residential real estate:
Residential mortgages		—		—		—		—		—
Home equity		294		300		—		—		—
Commercial, industrial and agricultural:
Secured		494		494		—		1,482		16
Unsecured		8,863		8,863		—		5,617		85
Total with no related allowance recorded		15,326		15,354		—		10,368		126

With an allowance recorded:
Commercial real estate:
Owner occupied		—		—		—		—		—
Non-owner occupied		—		—		—		—		—
Residential real estate:
Residential mortgages		—		—		—		—		—
Home equity		—		—		—		—		—
Commercial, industrial and agricultural:
Secured		9,612		9,612		3,435		3,942		36
Unsecured		2,045		2,051		1,241		—		—
Total with an allowance recorded		11,657		11,663		4,676		3,942		36

Total:
Commercial real estate:
Owner occupied		3,379		3,401		—		483		—
Non-owner occupied		2,296		2,296		—		2,786		25
Residential real estate:
Residential mortgages		—		—		—		—		—
Home equity		294		300		—		—		—
Commercial, industrial and agricultural:
Secured		10,106		10,106		3,435		5,424		52
Unsecured		10,908		10,914		1,241		5,617		85
Total	$	26,983	$	27,017	$	4,676	$	14,310	$	162

The following tables represent the changes in the allowance for credit losses for the three months ended March 31, 2020 and 2019.


	Three Months Ended March 31, 2020
					Residential		Commercial,		Real Estate
	Commercial				Real Estate		Industrial and		Construction		Installment/
	Real Estate		Multi-family		Mortgage		Agricultural		and Land		Consumer
(In thousands)	Mortgage Loans		Loans		Loans		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance, prior to adoption of CECL	$	12,150	$	4,829	$	1,882	$	12,583	$	1,066	$	276	$	32,786
Impact of adopting CECL		(7,712)		(3,589)		2,182		8,699		1,274		771		1,625
Charge-offs		(1)		—		—		(215)		—		—		(216)
Recoveries		—		—		1		19		—		—		20
Provision (credit) for credit losses		531		83		(40)		3,459		842		125		5,000
Ending balance	$	4,968	$	1,323	$	4,025	$	24,545	$	3,182	$	1,172	$	39,215

Table of Contents


	Three Months Ended March 31, 2019
					Residential		Commercial,		Real Estate
	Commercial				Real Estate		Industrial and		Construction		Installment/
	Real Estate		Multi-family		Mortgage		Agricultural		and Land		Consumer
(In thousands)	Mortgage Loans		Loans		Loans		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance	$	10,792	$	2,566	$	3,935	$	12,722	$	1,297	$	106	$	31,418
Charge-offs		—		—		—		(242)		—		(4)		(246)
Recoveries		—		—		1		11		—		—		12
Provision (credit) for credit losses		307		(9)		(562)		582		229		53		600
Ending balance	$	11,099	$	2,557	$	3,374	$	13,073	$	1,526	$	155	$	31,784

The increase in the first-quarter ACL in 2020 is primarily related to the reasonable and supportable forecast component of the newly adopted CECL Standard. Management believes, based on all of the evidence gathered to date, that COVID-19 will continue to have a meaningful negative impact on economic conditions in 2020, but will be shorter-term in nature, and expects to see an economic recovery begin in 2021 during the second year of the Company’s CECL forecast time horizon.

The following table represents the balance in the allowance for loan losses and the recorded investment in loans, ~~by portfolio segment,~~ as defined under FASB ASC ~~310‑10,~~310-10 (prior to adoption of the CECL Standard), and based on impairment method as of ~~March 31, 2019 and~~ December 31, ~~2018. The tables include loans acquired from CNB and FNBNY.~~2019.

March 31, 2019

Residential

Commercial,

Real Estate

Commercial

Real Estate

Industrial and

Construction

Installment/

Real Estate

Multi-family

Mortgage

Agricultural

and Land

Consumer

(In thousands)

Mortgage Loans

Loans

Loans

Loans

Loans

Loans

Total
Allowance for loan losses:

Individually evaluated for impairment

$
—

$
—

$
—

$
299

$
—

$
—

$
299
Collectively evaluated for impairment

11,099

2,557

3,374

12,774

1,526

155

31,485
Loans acquired with deteriorated credit quality

—

—

—

—

—

—

—
Total allowance for loan losses

$
11,099

$
2,557

$
3,374

$
13,073

$
1,526

$
155

$
31,784

Loans:














Individually evaluated for impairment

$
3,372

$
—

$
—

$
12,772

$
—

$
—

$
16,144
Collectively evaluated for impairment

1,399,261

624,114

514,855

658,887

147,116

22,781

3,367,014
Loans acquired with deteriorated credit quality

—

—

318

238

—

—

556
Total loans

$
1,402,633

$
624,114

$
515,173

$
671,897

$
147,116

$
22,781

$
3,383,714

December 31, 2018

Residential

Commercial,

Real Estate

Commercial

Real Estate

Industrial and

Construction

Installment/

Real Estate

Multi-family

Mortgage

Agricultural

and Land

Consumer

(In thousands)

Mortgage Loans

Loans

Loans

Loans

Loans

Loans

Total
Allowance for loan losses:

Individually evaluated for impairment

$
—

$
—

$
—

$
189

$
—

$
—

$
189
Collectively evaluated for impairment

10,792

2,566

3,935

12,533

1,297

106

31,229
Loans acquired with deteriorated credit quality

—

—

—

—

—

—

—
Total allowance for loan losses

$
10,792

$
2,566

$
3,935

$
12,722

$
1,297

$
106

$
31,418

Loans:














Individually evaluated for impairment

$
3,084

$
—

$
—

$
16,271

$
—

$
—

$
19,355
Collectively evaluated for impairment

1,370,472

585,827

519,455

629,229

123,393

20,509

3,248,885
Loans acquired with deteriorated credit quality

—

—

308

224

—

—

532
Total loans

$
1,373,556

$
585,827

$
519,763

$
645,724

$
123,393

$
20,509

$
3,268,772

The following tables represent the changes in the allowance for loan losses for the three months ended March 31, 2019, and 2018, by portfolio segment, as defined under FASB ASC 310‑10. The portfolio segments represent the categories that the Bank uses to determine its allowance for loan losses.

Three Months Ended March 31, 2019

Residential

Commercial,

Real Estate

Commercial

Real Estate

Industrial and

Construction

Installment/

Real Estate

Multi-family

Mortgage

Agricultural

and Land

Consumer

(In thousands)

Mortgage Loans

Loans

Loans

Loans

Loans

Loans

Total

Allowance for loan losses:

Beginning balance

$
10,792

$
2,566

$
3,935

$
12,722

$
1,297

$
106

$
31,418

Charge-offs

—

—

—

(242)

—

(4)

(246)

Recoveries

—

—

1

11

—

—

12

Provision (Credit)

307

(9)

(562)

582

229

53

600

Ending balance

$
11,099

$
2,557

$
3,374

$
13,073

$
1,526

$
155

$
31,784

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Three Months Ended March 31, 2018

Residential

Commercial,

Real Estate



Commercial

Real Estate

Industrial and

Construction

Installment/

Real Estate

Multi-family

Mortgage

Agricultural

and Land

Consumer

(In thousands)

Mortgage Loans

Loans

Loans

Loans

Loans

Loans

Total

Allowance for loan losses:















Beginning balance

$
11,048

$
4,521

$
2,438

$
12,838

$
740

$
122

$
31,707

Charge-offs

—

—

—

—

—

—

—

Recoveries

—

—

1

304

—

—

305

Provision (Credit)

286

(1,519)

1,056

913

81

(17)

800

Ending balance

$
11,334

$
3,002

$
3,495

$
14,055

$
821

$
105

$
32,812


	December 31, 2019
					Residential		Commercial,		Real Estate
	Commercial				Real Estate		Industrial and		Construction		Installment/
	Real Estate		Multi-family		Mortgage		Agricultural		and Land		Consumer
(In thousands)	Mortgage Loans		Loans		Loans		Loans		Loans		Loans		Total
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	4,676	$	—	$	—	$	4,676
Collectively evaluated for impairment		12,150		4,829		1,882		7,907		1,066		276		28,110
Loans acquired with deteriorated credit quality		—		—		—		—		—		—		—
Total allowance for loan losses	$	12,150	$	4,829	$	1,882	$	12,583	$	1,066	$	276	$	32,786

Loans:
Individually evaluated for impairment	$	5,675	$	—	$	294	$	21,014	$	—	$	—	$	26,983
Collectively evaluated for impairment		1,560,012		812,174		492,507		658,430		97,311		24,836		3,645,270
Loans acquired with deteriorated credit quality		—		—		343		—		—		—		343
Total loans	$	1,565,687	$	812,174	$	493,144	$	679,444	$	97,311	$	24,836	$	3,672,596

8.7. PENSION AND POSTRETIREMENT PLANS

The Bank maintains a noncontributory pension plan (the “Pension Plan”) covering all eligible employees. The Bank uses a December 31 measurement date for this plan in accordance with FASB ASC 715‑30 “Compensation – Retirement Benefits – Defined Benefit Plans – Pension.” During 2012, the Company amended the Pension Plan by revising the formula for determining benefits effective January 1, 2013, except for certain grandfathered employees. Additionally, new employees hired on or after October 1, 2012 are not eligible for the Pension Plan.

During 2001, the Bank adopted the Bridgehampton National Bank Supplemental Executive Retirement Plan (“SERP”). As recommended by the Compensation Committee of the Board of Directors and approved by the full Board of Directors, the SERP provides benefits to certain employees, whose benefits under the Pension Plan are limited by the applicable provisions of the Internal Revenue Code. The benefit under the SERP is equal to the additional amount the employee would be entitled to under the Pension Plan and the 401(k) Plan in the absence of such Internal Revenue Code limitations. The assets of the SERP are held in a rabbi trust to maintain the tax-deferred status of the plan and are subject to the general, unsecured creditors of the Company. As a result, the assets of the rabbi trust are reflected on the Company’s consolidated balance sheets.

There were no contributions to the Pension Plan during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. There were no contributions to the SERP during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. In accordance with the SERP, a retired executive received a distribution totaling $28 thousand during each of the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

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The Company's funding policy with respect to its benefit plans is to contribute at least the minimum amounts required by applicable laws and regulations.

The following table presents the components of net periodic benefit ~~cost~~ (credit): cost:


	Three Months Ended March 31,								Three Months Ended March 31,
	Pension Benefits				SERP Benefits				Pension Benefits				SERP Benefits
(In thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Components of net periodic benefit cost and other amounts recognized in other comprehensive income:
Components of net periodic benefit (credit) cost and other amounts recognized in other comprehensive income:
Service cost	$	273	$	325	$	65	$	73	$	265	$	273	$	93	$	65
Interest cost		225		197		37		32		193		225		37		37
Expected return on plan assets		(608)		(625)		—		—		(713)		(608)		—		—
Amortization of net loss		130		83		18		30		100		130		57		18
Amortization of prior service credit		(19)		(19)		—		—		(19)		(19)		—		—
Amortization of transition obligation		—		—		—		1
Net periodic benefit cost (credit)	$	1	$	(39)	$	120	$	136
Net periodic benefit (credit) cost									$	(174)	$	1	$	187	$	120

9.8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase totaled ~~$0.7~~$1.2 million at March 31, ~~2019~~2020 and ~~$0.5~~$1.0 million at December 31, ~~2018.~~2019. The repurchase agreements were collateralized by investment securities, of which ~~18%~~17% were U.S. GSE residential collateralized mortgage obligations and ~~82%~~83% were U.S. GSE residential mortgage-backed securities with a carrying amount of ~~$2.4~~$2.1 million at March 31, ~~2019~~2020 and ~~18%~~17% were U.S. GSE residential collateralized mortgage obligations and ~~82%~~83% were U.S. GSE residential mortgage-backed securities with a carrying amount of ~~$2.4~~$2.1 million at December 31, ~~2018.~~

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2019.

Securities sold under agreements to repurchase are financing arrangements with ~~$0.7~~$1.2 million maturing during the second quarter of ~~2019.~~2020. At maturity, the securities underlying the agreements are returned to the Company. The primary risk associated with these secured borrowings is the requirement to pledge a market value-based balance of collateral in excess of the borrowed amount. The excess collateral pledged represents an unsecured exposure to the lending counterparty. As the market value of the collateral changes, both through changes in discount rates and spreads as well as related cash flows, additional collateral may need to be pledged. In accordance with the Company's policies, eligible counterparties are defined and monitored to minimize exposure.

~~10.~~9. FEDERAL HOME LOAN BANK ADVANCES

The following tables present the contractual maturities and weighted average interest rates of FHLB advances for each of the next five years. There are no FHLB advances with contractual maturities after ~~2019:~~2020.


	March 31, 2019				March 31, 2020
(Dollars in thousands)			Weighted				Weighted
Contractual Maturity	Amount		Average Rate		Amount		Average Rate
Overnight	$	90,000	2.66	%	$	—	—	%

2019		240,217	2.68
2020						290,000	0.81
Total FHLB advances	$	330,217	2.67	%	$	290,000	0.81	%


	December 31, 2018				December 31, 2019
(Dollars in thousands)			Weighted				Weighted
Contractual Maturity	Amount		Average Rate		Amount		Average Rate
Overnight	$	—	—	%	$	195,000	1.81	%

2019		240,433	2.72
2020						240,000	1.84
Total FHLB advances	$	240,433	2.72	%	$	435,000	1.82	%

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by ~~$1.3~~$1.4 billion of residential and commercial mortgage loans under a blanket lien arrangement at March 31, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019. Based on this collateral and the Company's holdings of FHLB stock, the Company is eligible to borrow up to a total of ~~$1.4~~$1.5 billion at March 31, ~~2019~~2020.

~~11.~~

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10. SUBORDINATED DEBENTURES

In September 2015, the Company issued $80.0 million in aggregate principal amount of fixed-to-floating rate subordinated debentures. $40.0 million of the subordinated debentures are callable at par after five years, have a stated maturity of September 30, 2025 and bear interest at a fixed annual rate of 5.25% per year, from and including September 21, 2015 until but excluding September 30, 2020. From and including September 30, 2020 to the maturity date or early redemption date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR plus 360 basis points. The remaining $40.0 million of the subordinated debentures are callable at par after ten years, have a stated maturity of September 30, 2030 and bear interest at a fixed annual rate of 5.75% per year, from and including September 21, 2015 until but excluding September 30, 2025. From and including September 30, 2025 to the maturity date or early redemption date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR plus 345 basis points. The subordinated debentures totaled ~~$78.8~~$79.0 million at March 31, ~~2019~~2020 and $78.9 million at December 31, ~~2018, respectively.~~2019.

The subordinated debentures are included in tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

~~12.~~11. DERIVATIVES

During the first quarter of 2019 the Company adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company has adopted the standard in 2019 with minimal impact to its financial position upon transition.

The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Funding Rate ("SOFR") replace USD-LIBOR. ARRC has proposed that the transition to SOFR from USD-LIBOR will take place by the end of 2021. The Company has material contracts that are indexed to USD-LIBOR. Industry organizations are currently working on the transition plan. The Company is currently monitoring this activity and evaluating the risks involved.

Cash Flow Hedges of Interest Rate Risk

As part of its asset liability management, the Company utilizes interest rate swap agreements to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent the amount exchanged by the parties.

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The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest rate swaps with notional amounts totaling ~~$315.0~~$305.0 million and ~~$240.0~~$290.0 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, were designated as cash flow hedges of certain FHLB advances. The swaps were determined to be fully effective during the periods ~~presented and therefore no amount of ineffectiveness has been included in net income.~~presented. The aggregate fair value of the swaps is recorded in other ~~assets/ (other liabilities),~~assets or other liabilities, with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

The following table summarizes information about the interest rate swaps designated as cash flow hedges at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:



(Dollars in thousands)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Notional amounts	$	315,000		$	240,000		$	305,000		$	290,000
Weighted average pay rates		1.84	%		1.84	%		1.84	%		1.84	%
Weighted average receive rates		2.61	%		2.77	%		1.38	%		1.94	%
Weighted average maturity		2.37	years		2.03	years		4.10	years		2.91	years

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Interest income recorded on these swap transactions totaled $~~556~~110 thousand and $556 thousand for the three months ended March 31, 2020 and 2019, ~~and~~ ~~interest expense recorded on these swap transactions totaled~~ ~~$65 thousand for the three months ended March 31, 2018, and~~respectively, which is reported as a component of interest expense on FHLB advances. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income/expense as interest payments are made/received on the Company's variable-rate assets/liabilities. During the three months ended March 31, ~~2019,~~2020, the Company had ~~$556~~$110 thousand of reclassifications as a reduction to interest expense. During the next twelve months, the Company estimates that ~~$1.7~~an additional $3.0 million will be reclassified as ~~a decrease in~~an increase to interest expense.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:


											Amount of gain (loss)		Amount of gain
					Amount of loss						reclassified from		reclassified from
	Amount of (loss) gain		Amount of gain (loss)		recognized in other		Amount of (loss) gain		Amount of (loss) gain		Accumulated OCI		Accumulated OCI
(In thousands)	recognized in OCI		reclassified from OCI		non-interest income		recognized in OCI		recognized in OCI		into income		into income
Interest rate contracts	(Effective Portion)		to interest expense		(Ineffective Portion)		included component		excluded component		included component		excluded component
Three months ended March 31, 2020							$	(9,510)	$	—	$	110	$	—
Three months ended March 31, 2019	$	(1,597)	$	556	$	—	$	(1,597)	$	—	$	556	$	—
Three months ended March 31, 2018	$	2,827	$	(65)	$	—

The following table reflects the cash flow hedges included in the consolidated balance sheets at the dates indicated:



	March 31, 2019						December 31, 2018						March 31, 2020						December 31, 2019
			Fair		Fair				Fair		Fair				Fair		Fair				Fair		Fair
(In thousands)	Notional		Value		Value		Notional		Value		Value		Notional		Value		Value		Notional		Value		Value
Included in other assets/(liabilities):	Amount		Asset		Liability		Amount		Asset		Liability		Amount		Asset		Liability		Amount		Asset		Liability
Interest rate swaps related to FHLB advances	$	240,000	$	2,767	$	(24)	$	240,000	$	4,239	$	(4)	$	240,000	$	—	$	(10,603)	$	240,000	$	1,233	$	(978)
Forward starting interest rate swaps related to FHLB advances		75,000		—		(771)		—		—		—		65,000		—		(360)		50,000		—		(1,427)

Non-Designated Hedges

Derivatives not designated as hedges may be used to manage the Company's exposure to interest rate movements or to provide service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. The Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Company executes with a third party in order to minimize the net risk exposure resulting from such transactions. These interest-rate swap

~~Table of Contents~~

agreements do not qualify for hedge accounting treatment, and therefore changes in fair value are reported in current period earnings.

Interest rate swaps with notional amounts totaled $918.8 million at March 31, 2020. Of the $918.8 million notional amounts, $459.4 million were from loan customers and $459.4 million were from bank counterparties. Interest rate swaps with notional amounts totaled $823.9 million at December 31, 2019. Of the $823.9 million notional amounts, $411.9 million were from loan customers and $411.9 million were from bank counterparties.

The following table presents summary information about the interest rate swaps at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:



(Dollars in thousands)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Notional amounts	$	279,974		$	193,401		$	918,770		$	823,894
Weighted average pay rates		4.48	%		4.52	%		3.36	%		3.75	%
Weighted average receive rates		4.48	%		4.52	%		3.36	%		3.75	%
Weighted average maturity		12.46	years		12.25	years		10.49	years		10.77	years
Fair value of combined interest rate swaps	$	—		$	—		$	—		$	—

Loan swap fees recorded on these swap transactions, which is reported as a component of non-interest income, totaled $1.2 million and $1.1 million for the three months ended March 31, 2020 and 2019.

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Credit-Risk-Related Contingent Features

As of March 31, ~~2019,~~2020, the termination value of derivatives in a net ~~asset~~liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$1.7~~$69.2 million, ~~and termination value of~~while there were no derivatives in a net ~~liability position was $4.3 million.~~asset position. The Company has minimum collateral posting thresholds with certain of its derivative counterparties. If the termination value of derivatives is a net ~~asset~~liability position, the ~~counterparty~~Company is required to post collateral ~~against~~ its obligations to the Company under the agreements. However, if the termination value of derivatives is a net liability position, the Company is required to post collateral to the counterparty. At March 31, ~~2019,~~2020, the Company ~~received collateral of $1.6 million from its counterparties under the agreements in a net asset position and~~ posted collateral of ~~$4.0~~$70.8 million to its counterparties under the agreements in a net liability position and received no collateral from its counterparties under the agreements in a net asset position. If the Company had breached any of these provisions at March 31, ~~2019,~~2020, it could have been required to settle its obligations under the agreements at the termination value.

~~13.~~12. LEASES

The Company has operating leases for certain branch locations, corporate offices and equipment. Certain leases contain rent escalation clauses, which are reflected in the Company’s operating lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants.

The components of lease cost were as follows:


	Three Months Ended		Three Months Ended
(In thousands)	March 31, 2019		March 31, 2020		March 31, 2019
Lease cost
Operating lease cost	$	1,663	$	1,938	$	1,663
Sublease income		(24)		(11)		(24)
Total lease cost	$	1,639	$	1,927	$	1,639

The Company reports lease cost in occupancy and equipment expense in the consolidated statements of income. The Company subleases a portion of its leased properties to commercial sublessees. Sublease income is included in other operating income in the consolidated statements of income.

~~Table of Contents~~

Supplemental cash flow and balance sheet information related to operating leases were as follows:



	Three Months Ended			Three Months Ended
(Dollars in thousands)	March 31, 2019			March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,669		$	1,794	$	1,669
Operating right-of-use assets obtained in exchange for lease liabilities	$	—		$	—	$	—
Weighted-average remaining lease term-operating leases		8.4	years
Weighted-average discount rate-operating leases (1)		3.41	%


	March 31, 2020			December 31, 2019
Weighted-average remaining lease term-operating leases		7.9	years	7.8	years
Weighted-average discount rate-operating leases (1)		3.20	%	3.20	%

~~(1)~~1)

The Company computes the present value of operating lease liabilities using its incremental borrowing rate as the discount rate.

Certain leases contain renewal options which are not reflected in the tables below. The exercise of renewal options, which extend the lease term from five to ten years, is at the Company’s discretion.

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The maturities of operating lease liabilities were as follows:

(In thousands)

March 31, 2019
2019

$
4,532
2020

5,927
2021

5,824
2022

5,617
2023

4,630
Thereafter

20,566
Total operating lease payments

$
47,096
Less: Interest

(6,642)
Present value of operating lease liabilities

$
40,454



(In thousands)	December 31, 2018		March 31, 2020		December 31, 2019
2019	$	7,248
2020		6,504	$	5,170	$	7,011
2021		6,185		6,878		6,974
2022		5,903		6,753		6,802
2023		4,695		5,853		5,853
2024				5,594		5,595
Thereafter		18,687		20,577		20,324
Total operating lease payments	$	49,222	$	50,825	$	52,559
Less: Interest				(6,254)		(6,582)
Present value of operating lease liabilities			$	44,571	$	45,977

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~~14.~~13. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table summarizes the components of other comprehensive income (loss) and related income tax effects:


					Three Months Ended
	Three Months Ended				March 31,		March 31,
(In thousands)	March 31, 2019		March 31, 2018		2020		2019
Unrealized holding gains (losses) on available for sale securities	$	5,531	$	(8,587)
Unrealized holding gains on available for sale securities					$	5,813	$	5,531
Reclassification adjustments for losses realized in income						15		—
Income tax effect		(1,613)		2,499		(1,704)		(1,613)
Net change in unrealized gains (losses) on available for sale securities		3,918		(6,088)
Net change in unrealized gains on available for sale securities						4,124		3,918

Reclassification adjustment for amortization realized in income		128		95
Reclassification adjustments for amortization realized in income						138		128
Income tax effect		(38)		(28)		(40)		(38)
Net change in post-retirement obligation		90		67		98		90

Change in fair value of derivatives used for cash flow hedges		(1,597)		2,827		(9,510)		(1,597)
Reclassification adjustment for (gains) losses realized in income		(556)		65
Reclassification adjustments for gains realized in income						(110)		(556)
Income tax effect		628		(841)		2,813		628
Net change in unrealized (losses) gains on cash flow hedges		(1,525)		2,051
Net change in unrealized losses on cash flow hedges						(6,807)		(1,525)

Other comprehensive income (loss)	$	2,483	$	(3,970)
Other comprehensive (loss) income					$	(2,585)	$	2,483

The following is a summary of the accumulated other comprehensive loss balances, net of income taxes, at the dates indicated:


			Other						Other
	December 31,		Comprehensive			March 31,	December 31,		Comprehensive			March 31,
(In thousands)	2018		Income			2019	2019		Income			2020
Unrealized (losses) gains on available for sale securities	$	(11,685)	$	3,918	$	(7,767)	$	(829)	$	4,124	$	3,295
Unrealized (losses) gains on pension benefits		(6,365)		90		(6,275)		(6,775)		98		(6,677)
Unrealized gains (losses) on cash flow hedges		2,938		(1,525)		1,413
Accumulated other comprehensive (loss) gain, net of income taxes	$	(15,112)	$	2,483	$	(12,629)
Unrealized losses on cash flow hedges								(737)		(6,807)		(7,544)
Accumulated other comprehensive loss, net of income taxes							$	(8,341)	$	(2,585)	$	(10,926)

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The following represents the reclassifications out of accumulated other comprehensive (loss) income for the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended				Affected Line Item	Three Months Ended				Affected Line Item
	March 31,		March 31,		in the Consolidated	March 31,		March 31,		in the Consolidated
(In thousands)	2019		2018		Statements of Income	2020		2019		Statements of Income
Realized losses on sale of available for sale securities						$	(15)	$	—	Net securities gains (losses)
Amortization of defined benefit pension plan and defined benefit plan component of the SERP:
Prior service credit		19		19	Other operating expenses		19		19	Other operating expenses
Transition obligation		—		(1)	Other operating expenses
Actuarial losses		(148)		(113)	Other operating expenses		(157)		(148)	Other operating expenses
Realized gains (losses) on cash flow hedges		556		(65)	Interest expense
Realized gains on cash flow hedges							110		556	Interest expense
Total reclassifications, before income tax	$	427	$	(160)		$	(43)	$	427
Income tax (expense) benefit		(125)		47	Income tax expense
Income tax expense (benefit)							13		(125)	Income tax expense
Total reclassifications, net of income tax	$	302	$	(113)		$	(30)	$	302

~~15.~~

14. RECENT ACCOUNTING PRONOUNCEMENTS

~~Standards Effective in 2019~~

~~ASU 2016-02, Leases (Topic 842)~~

In February 2016, the FASB amended existing guidance that requires lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date (1) A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The new guidance also requires enhanced disclosure about an entity’s leasing arrangements. The Company adopted Topic 842 using the transition approach of applying the new leases standard at the beginning of the period of adoption on January 1, 2019. The new guidance includes a number of optional transition-related

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practical expedients that must be elected as a package and applied by a reporting entity to all of its leases consistently. The Company has elected to apply the package of practical expedients to all of its existing leases, which among other things, allowed the Company to carry forward the historical lease classification as operating leases in accordance with previous GAAP. The effect of adopting this standard in the Company’s consolidated balance sheets was a $39 million increase in operating right-of-use assets and operating lease liabilities as of January 1, 2019. Refer to Note 13. “Leases” for further details of Leases.

~~ASU 2017‑12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~

In August 2017, the FASB provided guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. The amendments also simplify the application of the hedge accounting guidance. The amendments in the ASU better align an entity's risk management activities and financial reporting for hedging relationships through changes in both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. For cash flow and net investment hedges existing at the date of adoption, an entity shall apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this ASU. The amended presentation and disclosure guidance is required only prospectively. The adoption of this standard did not have an effect on the Company's consolidated financial statements.

Standards Effective in 2020

ASU 2016‑13, Financial Instruments – Credit Losses (Topic 326)

In June 2016, FASB issued guidance to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held to maturity debt securities. It also applies to off-balance sheet credit exposures not accountedEffective for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases recognized by a lessor. In addition, the amendments in this ASU require credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities. For public business entities that meet the definition of an SEC filer, likeperiods after December 31, 2019, the Company adopted the ~~standard is effective~~CECL Standard. Refer to Note 1. “Basis of Presentation” for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For calendar year-end SEC filers, like the Company, the standard is effective for March 31, 2020 interim financial statements. For debt securities with other-than-temporary impairment (“OTTI”), the guidance will be applied prospectively. Existing PCI assets will be grandfathered and classified as purchase credit deteriorated (“PCD”) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets asfurther details of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company has created a cross-functional CECL committee that is assessing datarecent accounting pronouncement and system needs and implementing required changes to loss estimation methods under the CECL model. The Company plans to adopt ASU 2016‑13 in the first quarter of 2020 using the required modified retrospective method with a cumulative effect adjustment to the allowance for loan losses as of the beginning of the reporting period. The Company expects the adoption will result in an increase to the allowance for loan losses balance. Theits effect on the Company’s consolidated financial ~~statements is being evaluated.~~statements.

ASU 2017‑04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

In January 2017, the FASB amended existing guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, or interim, goodwill

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impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments are effective for public business entities that are an SEC filer, like the Company, for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendments should be applied prospectively. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition in the first annual period when the entity initially adopts the amendments. The adoption of ASU 2017‑04 isdid not ~~expected to~~ have ~~a material~~an effect on the Company's consolidated financial ~~statements.~~statements.

ASU 2018‑15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU 2018-15 to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments in this ASU are effective for public business entities, like the Company, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The adoption of ASU 2018‑15 isdid not ~~expected to~~ have a material effect on the Company's consolidated financial ~~statements.~~statements.

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

In this Quarterly Report on Form 10-Q, unless otherwise mentioned, the terms the “Company”, “we”, “us” and “our” refer to Bridge Bancorp, Inc. and its ~~wholly owned~~wholly-owned subsidiary, BNB Bank (the “Bank”). We use the term “Holding Company” to refer solely to Bridge Bancorp, Inc. and not to its consolidated subsidiary.

Private Securities Litigation Reform Act Safe Harbor Statement

This report may contain statements relating to our future results (including certain projections and business trends) that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). Such forward-looking statements, in addition to historical information, which involve risk and uncertainties, are based on the beliefs, assumptions and expectations of our management. Words such as “expects,” “believes,” “should,” “plans,” “anticipates,” “will,” “potential,” “could,” “intend,” “may,” “outlook,” “predict,” “project,” “would,” “estimated,” “assumes,” “likely,” and variations of such similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, possible or assumed estimates with respect to the financial condition, expected or anticipated revenue, and results of operations and our business, including earnings growth; revenue growth in retail banking, lending and other areas; origination volume in the consumer, commercial and other lending businesses; current and future capital management programs; non-interest income levels, including fees from the title insurance subsidiary and banking services as well as product sales; tangible capital generation; market share; expense levels; and other business operations and strategies. We claim the protection of the safe harbor for forward-looking statements contained in the PSLRA.

Factors that could cause future results to vary from current management expectations include, but are not limited to, changing economic conditions; legislative and regulatory changes, including increases in FDIC insurance rates; monetary and fiscal policies of the federal government; changes in tax policies; rates and regulations of federal, state and local tax authorities; changes in interest rates; deposit flows; the cost of funds; demand for loan products; demand for financial services; competition; our ability to successfully integrate acquired entities; changes in the quality and composition of our loan and investment portfolios; changes in management's business strategies; changes in accounting principles, policies or guidelines; changes in real estate values; expanded regulatory requirements, ~~as a result of the Dodd-Frank Act,~~ which could adversely affect operating results; and the “Risk Factors” discussed in the our Annual Report on Form 10‑K for the year ended December 31, ~~2018.~~2019 as updated by our Quarterly Reports on Form 10-Q. In addition, the novel coronavirus (“COVID-19”) pandemic is having an adverse impact on us, our customers and the communities we serve. The adverse effect of the COVID-19 pandemic on us, our customers and the communities where we operate may adversely affect our business, results of operations and financial condition for an indefinite period of time. The forward-looking statements are made as of the date of this report, and we assume no

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obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

Overview

Who We Are and How We Generate Income

Bridge Bancorp, Inc., ~~(the “Holding Company”)~~ a New York corporation, is a bank holding company formed in 1989. On a parent-only basis, the Holding Company has had minimal results of operations. The Holding Company is dependent on dividends from its wholly-owned subsidiary, BNB Bank, its own earnings, additional capital raised, and borrowings as sources of funds. The information in this report reflects principally the financial condition and results of operations of the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income on loans and investments and interest expense on deposits and borrowings. The Bank also generates non-interest income, such as fee income on deposit accounts and merchant credit and debit card processing programs, loan swap fees, investment services, income from its title insurance subsidiary, and net gains on sales of securities and loans. The level of non-interest expenses, such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses, expenses from the Bank’s title insurance subsidiary, and income tax expense, further affects our net income. Certain reclassifications have been made to prior year amounts and the related discussion and analysis to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders' equity.

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Our Principal Products and Services and Locations of Operations

The Bank was established in 1910 and is headquartered in Bridgehampton, New York. We operate 39 ~~branches~~branch locations in the primary market areas of Suffolk and Nassau Counties on Long Island and the New York City boroughs, including 3635 in Suffolk and Nassau Counties, two in Queens and ~~one~~two in Manhattan. For over a century, we have maintained our focus on building customer relationships in ~~its~~our market area. Our mission is to grow through the provision of exceptional service to our customers, our employees, and the community. We strive to achieve excellence in financial performance and build long-term shareholder value. We engage in full service commercial and consumer banking business, including accepting time, savings and demand deposits from the consumers, businesses and local municipalities in our market area. These deposits, together with funds generated from operations and borrowings, are invested primarily in: (1) commercial real estate loans; (2) multi-family mortgage loans; (3) residential mortgage loans; (4) secured and unsecured commercial and consumer loans; (5) home equity loans; (6) construction and land loans; (7) Federal Home Loan Bank (“FHLB”), Federal National Mortgage Association (“Fannie Mae”), Government National Mortgage Association (“Ginnie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage-backed securities, collateralized mortgage obligations and other asset backed securities; (8) New York State and local municipal obligations; (9) U.S. government-sponsored enterprise (“U.S. GSE”) securities; and (10) corporate bonds. We also offer the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) programs, providing multi-millions of dollars of Federal Deposit Insurance Corporation (“FDIC”) insurance on deposits to our customers. In addition, we offer merchant credit and debit card processing, automated teller machines, cash management services, lockbox processing, online banking services, remote deposit capture, safe deposit boxes, and individual retirement accounts as well as investment services through Bridge Financial Services LLC, which offers a full range of investment products and services through a third-party broker dealer. Through its title insurance abstract subsidiary, the Bank acts as a broker for title insurance services. Our customer base is comprised principally of small businesses, municipal relationships and consumer relationships.

COVID-19 Operational Update

In December 2019, a novel coronavirus was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic. On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States, as many state and local governments, including New York, have ordered non-essential businesses to close and residents to shelter in place at home.

In response to the COVID-19 outbreak, we implemented our contingency plans to ensure the health and safety of our employees and customers. We modified access to our workplace to promote stay-at-home and social distancing mandates. Approximately 300 of our non-branch employees are working remotely. Our branch network continues to operate well, with drive-up, appointment banking, and reduced hours. Our branch employees receive 100% weekly pay, regardless of the number of hours worked. All front-line employees received special payments for work performed during the COVID-19 outbreak. In addition, we provided additional paid time off for employees required to quarantine. We enhanced facility cleaning protocols and took additional safety measures at all of our locations.

Paycheck Protection Program

We are an active participant in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) for small business customers. As of April 30, 2020, we had received over 3,500 loan applications and registered $926 million in total funding requests with the SBA. The top five industries were construction, professional, manufacturing, accommodation/food, and administrative. The mean and median PPP loan amounts were $83 thousand and $248 thousand, respectively.

PPP loans have a two-year term and a 1% interest rate. The SBA pays us fees ranging from 1% to 5% per loan depending on the loan principal amount. Fee income from processing PPP loans is amortized as a yield adjustment over the life of the loan. PPP loans are fully guaranteed by the SBA.

Prior to the commencement of the PPP program, we funded 79 loans totaling $4.2 million with an average loan size of $53 thousand. These streamlined loans were our initial response to the COVID-19 pandemic to quickly provide customers with

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small loans to bridge short term cash flow. We terminated this program and focused our efforts on developing a process to accept PPP loans when the PPP program commenced on April 3, 2020.

COVID-19 Loan Moratoriums and Forbearance Programs

We are supporting our customers who may experience financial difficulty due to COVID-19 through loan moratoriums and forbearance programs. We began offering 90-day payment modifications on a case-by-case basis to those customers whose income was adversely impacted by COVID-19. The loan modifications in this program primarily consist of three-month deferrals of interest and principal payments. As of April 30, 2020, we have approved 275 loan moratoriums totaling $371.6 million, or 9.9% of total loan balances.


	Number of		Carrying	Percentage of
(Dollars in millions)	Loans		Amount	Loans category
Commercial real estate mortgage loans	82	$	219.7	13.0	%
Multi-family mortgage loans	16		76.4	9.6
Commercial and industrial loans	110		37.7	5.0
Residential real estate mortgage loans/Consumer loans	67		37.8	7.4
Total	275	$	371.6	9.9

The industries we identified as most significantly impacted by the COVID-19 pandemic based on the potential risk to cash flows are hotels, restaurants, passenger transportation, leisure, museums and catering.

Community Support

We continue to support our communities during the COVID-19 pandemic by providing $260 thousand in grants to non-profit partners working on the COVID-19 relief effort in our footprint. These grants are focused on organizations working to address meeting the basic needs of the vulnerable populations, providing emergency food, and health services. We have partnered with local governments to help coordinate emergency relief. The PPP loans we funded also benefitted hundreds of non-profit partners. A portion of the fees generated by the PPP will be set aside to increase funding for local organizations.

Quarterly Highlights

Net income for the 2020 first quarter of ~~2019 was~~$9.3 million, or $0.47 per diluted share, compared to $12.9 million, or $0.65 per diluted share ~~compared to~~ ~~$12.1 million and $0.61 per diluted share~~ for the 2019 first ~~quarter of 2018~~.quarter.

Net interest income ~~decreased~~increased to $36.7 million for the first quarter of 2020 compared to $34.3 million ~~for the~~ ~~first quarter~~ ~~of 2019 compared to $34.5 million~~ in ~~2018.~~2019.

Tax-equivalent net interest margin was ~~3.29%~~3.26% for the first quarter of ~~2019~~2020 compared to ~~3.42%~~3.29% for the ~~2018~~2019 period.

Total assets of ~~$4.7~~$5.1 billion at March 31, ~~2019, decreased $25.5~~2020, increased $139.4 million compared to December 31, ~~2018~~2019 and increased ~~$174.6~~$385.7 million compared to March 31, ~~2018.~~2019.

Total loans held for investment at March 31, 2020 totaled $3.8 billion, an increase of $81.8 million, or 2.2%, from December 31, 2019 and an increase of $371.0 million, or 10.9%, over March 31, 2019.

Total deposits of $4.1 billion at March 31, 2020, increased $241.1 million from December 31, 2019 and increased $330.3 million compared to March 31, 2019.

We adopted the current expected credit loss model (“CECL” or the “CECL Standard”) on January 1, 2020, which resulted in a charge to retained earnings and reduction to stockholders’ equity of $1.5 million.

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~~Total loans held~~Provision for ~~investment at March 31, 2019 totaled $3.4 billion, an increase~~credit losses of ~~$115.3~~$5.0 million ~~or 3.5%, from December 31, 2018 and an increase~~included approximately $4.0 million related to our initial estimate of ~~$189.2 million, or 5.9%, over March 31, 2018.~~

~~Total deposits~~the economic impact of ~~$3.7 billion at March 31, 2019, decreased $160.9 million from December 31, 2018 and increased $294.2 million compared to March 31, 2018.~~the COVID-19 pandemic.

Allowance for ~~loan~~credit losses to total loans was ~~0.94% of loans~~1.04% at March 31, ~~2019~~2020 compared to ~~0.96%~~0.89% at December 31, ~~2018.~~2019.

A cash dividend of ~~$0.23~~$0.24 per share was declared in April ~~2019~~2020 for the first quarter.

Challenges and Opportunities

~~In March 2019,~~The COVID-19 pandemic has caused us to modify our business practices, including employee travel and employee work locations, as many employees are working remotely. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers, such as waiving late payment and other fees. Given the ~~Federal Open Market Committee (“FOMC”) decided~~ongoing and dynamic nature of the circumstances, it is difficult to ~~maintain~~predict the target range for the federal funds rate at 2.25 to 2.50 percent. Information received since the FOMC met in January indicated that the labor market remained strong, but that growth of economic activity has slowed from its solid rate in the fourth quarter. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent. The FOMC continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the FOMC’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the FOMCchallenges our business will ~~be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.~~ In determining the timing and size of future adjustments to the target range for the federal funds rate, the FOMC will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Interest rates have been at or near historic lows for an extended period of time. Growth and service strategies have the potential to offset the compression on the net interest margin with volume as the customer base grows through expanding our banking footprint, while maintaining and developing existing relationships. Since 2010, we have opened fifteen Bank branches, including one in November 2018 in Melville, New York. We have also grown the Bank through acquisitions including the June 2015 acquisition of Community National Bank (“CNB”), the February 2014 acquisition of First National Bank of New York (“FNBNY”),face and the ~~May 2011 acquisition~~full impact of ~~Hamptons State Bank (“HSB”). We will continue to seek opportunities to expand~~the COVID-19 outbreak on our reach into other contiguous markets by network expansion, or through the addition of professionals with established customer relationships. Recent and pending acquisitions of local competitors may also provide additional growth opportunities.business.

We continue to face challenges associated with ever-increasing banking regulations and the current low interest rate environment. ~~Over time, additional rate increases should provide some relief~~A prolonged inverted or flat yield curve presents a challenge to a bank, like us, that derives most of its revenue from net interest ~~margin compression as new~~margin. A sustained decrease in market interest rates could adversely affect our earnings. When interest rates decline, borrowers tend to refinance higher-rate, fixed-rate loans at lower rates. In addition, the majority of our loans are ~~funded~~at variable interest rates, which would adjust to lower rates. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark federal funds rate to a target range of 0% to 0.25% during the 2020 first quarter. We took this opportunity to lower our funding costs and ~~securities are reinvested at higher rates. However, in the short term, the fair value of available for sale securities declines when rates increase, resulting in~~stabilize our net unrealized losses and a reduction in stockholders’ equity. Strategies for managing for the eventuality of higher rates have a cost. Extending liability maturities or shortening the term of assets increases interest expense and reduces interest income. An additional method for managing in a higher rate environment is to grow stable core deposits, requiring continued investment in people, technology and branches. Over time, these strategies should provide long-term benefits.margin.

We established five strategic objectives to achieve our vision: (1) acquire new customers in growth markets; (2) build new sales and marketing disciplines; (3) deepen customer relationships; (4) expand use of automation; and (5) improve talent management. We believe there remain opportunities to grow our franchise and that continued investments to generate core funding, quality loans and new sources of revenue remain keys to continue creating long-term shareholder value. Our ability to attract, retain, train and cultivate employees at all levels of our Company remains significant to meeting our corporate objectives. In particular, we are focused on expanding and retaining our loan team as we continue to grow the loan portfolio. We have capitalized on opportunities presented by the market and diligently seek opportunities to grow and strengthen the franchise. We recognize the potential risks of the current economic environment and will monitor the impact of market events as we evaluate loans and investments and consider growth initiatives. Our management and Board of

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Directors have built a solid foundation for growth, and we are positioned to adapt to anticipated changes in the industry resulting from new regulations and legislative initiatives.

Critical Accounting Policies

Allowance for ~~Loan~~Credit Losses

~~We consider~~On January 1, 2020, we adopted the ~~allowance~~CECL Standard, which requires that loans held for ~~loan~~investment be accounted for under the current expected credit losses ~~accounting policy~~model. Although the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) provided the option to bedelay the ~~most critical and requires complex management judgment. The judgments made regarding~~adoption of the ~~allowance for loan losses can have a material effect on our results~~current expected credit loss model until the earlier of ~~operations.~~

December 31, 2020 or the termination of the current national emergency declaration related to the COVID-19 outbreak, we implemented the CECL Standard in the first quarter of 2020 as previously planned. The allowance for ~~loan~~credit losses is established and maintained through a provision for ~~loan~~credit losses based on ~~probable incurred~~expected losses inherent in our loan portfolio. ~~We evaluate~~Management evaluates the adequacy of the allowance ~~for loan losses~~ on a quarterly basis. ~~The allowance is comprised of both individual valuation allowances and loan pool valuation allowances. We monitor our~~Management monitors its entire loan portfolio ~~on a regular basis,~~regularly, with consideration given to detailed analysis of classified loans, repayment patterns, ~~probable incurred losses,~~ past loss experience, ~~current economic conditions, and~~ various types of concentrations of ~~credit.~~credit, current economic conditions, and reasonable and supportable forecasts. Additions to the allowance are charged to expense and realized losses, net of recoveries, are charged toagainst the allowance.

~~Individual valuation allowances~~The loan loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments. These segments are ~~established~~further disaggregated into loan risk ratings, the level at which credit risk is monitored. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on expected loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is

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complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in ~~connection with specific loan reviews~~light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit losses in those future periods.

Credit quality is assessed and monitored by evaluating various attributes and the ~~asset classification~~results of those evaluations are utilized in our process ~~including~~for estimation of expected credit losses. The allowance level is influenced by loan volumes, loan risk rating migration, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the ~~procedures~~amount of expected credit losses reported in the allowance for ~~impairment testing under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) No. 310, “Receivables”. Such valuation, which includes~~credit losses has two basic components: (1) an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and (2) a ~~review~~pooled component for estimated expected credit losses for pools of loans ~~for~~that share similar risk characteristics.

Loans that do not share similar credit risk characteristics

For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, we recognize expected credit loss equal to the amount by which ~~full collectability in accordance with contractual terms~~the net realizable value of the loan is ~~not reasonably assured, considers~~less than the ~~estimated~~amortized cost basis of the loan (which is net of previous charge-offs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the ~~underlying~~collateral. The fair value of the collateral ~~less~~is adjusted for the estimated costs to sell the loan if ~~any,~~repayment or satisfaction of a loan is dependent on the ~~present~~sale (rather than only on the operation) of the collateral.

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

Loans that share similar credit risk characteristics

In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segmented into loan types. Loans are designated into loan pools with similar risk characteristics based on product type in conjunction with outside sources, are used to determine whether full collectability of a loan is not reasonably assured. These assumptions and judgments are also used to determine the estimates of the fair value of the underlying collateral or the present value of expected future cash flows or the loan’s observable market value. Individual loan analyses are periodically performed on specific loans considered impaired. Individual valuation allowances could differ materially as a result of changes in these assumptions and judgments. The results of the individual valuation allowances are aggregated and included in the overall allowance for loan losses.

other homogeneous characteristics. Loan pool valuation allowances represent loss allowances that have been established to recognize the inherent risks associated with our lending activities, but which, unlike individual allowances, have not been allocated to particular problem assets. Pool evaluations are broken down into loans with homogenous characteristics by loan type andtypes include commercial real estate mortgages, owner and non-owner occupied; multi-family mortgage loans; residential real estate mortgages and home equity loans; commercial, industrial and agricultural loans, ~~secured and unsecured;~~ real estate construction and land loans; and consumer loans. ~~We consider a variety of factors in~~

In determining the ~~adequacy~~allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and further segmented by risk rating. This model is known as Probability of Default/Loss Given Default, utilizing a Transition Matrix approach. This model calculates an expected loss percentage for each loan pool by considering the probability of default, based upon the historical transition or migration of loans from performing (various pass ratings) to criticized, and classified risk ratings to default by risk rating buckets using life-of-loan analysis runout periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses (loss given default) per loan pool. The default trigger, which is defined as the earlier of ninety days past-due or non-accrual status, and severity factors used to calculate the allowance for credit losses for loans in pools that share similar risk characteristics with other loans, are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the ~~valuation allowance~~loans in the portfolio. These factors include: (1) lending policies and ~~have developed a range~~procedures; (2) international, national, regional and local economic business conditions

Table of ~~valuation allowances necessary to adequately provide~~Contents

and developments that affect the collectability of the portfolio, including the condition of various markets; (3) the nature and volume of the loan portfolio including the terms of the loans; (4) the experience, ability, and depth of the lending management and other relevant staff; (5) the volume and severity of past due and adversely classified or graded loans and the volume of non-accrual loans; (6) the quality of our loan review system; (7) the value of underlying collateral for ~~probable incurred~~collateralized loans; (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in ~~each pool~~the existing portfolio. Such factors are used to adjust the historical probabilities of ~~loans. We consider our charge-off history along with~~default and severity of loss for current conditions that are not reflective of the ~~growth~~model results. In addition, the economic factor includes management expectation of future conditions based on a reasonable and supportable forecast of the economy. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (currently two years), the Bank immediately reverts back to the historical rates of default and severity of loss. Management believes that this transition approach to the Probability of Default/Loss Given Default is a relevant calculation of expected credit losses as there is sufficient volume as well as ~~our credit administration and asset management philosophies and procedures when determining~~movement in the ~~allowances for each pool. In addition, we evaluate and consider credit~~ risk ratings ~~which includes our~~due to the initial grading system as well as timely updates to risk ratings when necessary. Credit risk ratings are based on management’s evaluation ~~of:~~of a credit’s cash flow, collateral, guarantor support, financial disclosures, industry trends and strength of borrowers’ management.

Finally, management ~~the impact that economic~~evaluates and ~~market conditions may have on the portfolio as well as known and inherent risks in the portfolio. Finally, we evaluate and consider~~considers the allowance ratios and coverage percentages of both peer group and regulatory agency data. These evaluations are inherently subjective because, even though they are based on objective data, it is ~~our~~management’s interpretation of that data that determines the amount of the appropriate allowance. If ~~our~~the evaluations prove to be incorrect, the allowance for ~~loan~~credit losses may not be sufficient to cover expected losses inherent in the loan portfolio, resulting in additions to the allowance for ~~loan~~credit losses.

For Purchased Credit Impaired (“PCI”) loans, a valuation allowance is established when it is probable that we will be unable to collect all the cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimate after acquisition. A specific allowance is established when subsequent evaluations of expected cash flows from PCI loans reflect a decrease in those estimates. The allowance established represents the excess of the recorded

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~~investment in those loans over the present value of the currently estimated future cash flow, discounted at the last effective accounting yield.~~

We use assumptions and methodologies that are relevant to estimating the level of impairment and probable losses in the loan portfolio. To the extent that the data supporting such assumptions has limitations, management's judgment and experience play a key role in recording the allowance estimates. Additions to the allowance for loan losses are made by provisions charged to earnings. Furthermore, an improvement in the expected cash flows related to PCI loans would result in a reduction of the required specific allowance with a corresponding credit to the provision.

The Credit Risk Management Committee (“CRMC”) is comprised of management. The adequacy of the allowance is analyzed quarterly, with any adjustment to a level deemed appropriate by the CRMC, based on its risk assessment of the entire portfolio. Each quarter, members of the CRMC meet with the Credit Risk Committee of our Board of Directors to review credit risk trends and the adequacy of the allowance for ~~loan~~credit losses. Based on the CRMC’s review of the classified loans, delinquency and charge-off trends,current economic conditions, reasonable and supportable forecasts, and the overall allowance levels as they relate to the entire loan portfolio at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we believe the allowance for ~~loan~~credit losses has been established at levels sufficient to cover the ~~probable incurred~~expected losses inherent in our loan portfolio. Future additions or reductions to the allowance may be necessary based on changes in economic, market or other conditions. Changes in estimates could result in a material change in the allowance. In addition, various regulatory agencies, as an integral part of the examination process, periodically review the allowance for ~~loan~~credit losses. Such agencies may require us to recognize adjustments to the allowance based on their judgments of the information available to them at the time of their examination.

For additional information regarding the allowance for ~~loan~~credit losses, see Note 76 of the Notes to the Consolidated Financial Statements.

Net Income

Net income for the three months ended March 31, ~~2019~~2020 was ~~$12.9~~$9.3 million and ~~$0.65~~$0.47 per diluted share as compared to ~~$12.1~~$12.9 million and ~~$0.61~~$0.65 per diluted share for the same period in ~~2018.~~2019. Changes in net income for the three months ended March 31, ~~2019~~2020 compared to March 31, ~~2018~~2019 include: (i) a ~~$0.2~~$2.3 million, or ~~0.6%~~6.8%, ~~decrease~~increase in net interest income; (ii) a ~~$0.2~~$4.4 million, or ~~25.0%~~733.3%, ~~decrease~~increase in the provision for ~~loan~~credit losses; (iii) a ~~$1.1~~$2.2 million, or ~~26.9%~~9.9%, increase in non-interest ~~income~~expense; and (iv) a ~~$0.2~~$0.7 million, or ~~7.4%~~21.6%, ~~increase~~decrease in income tax expense.

Net Interest Income

Net interest income, the primary contributor to earnings, represents the difference between income on interest-earning assets and expenses on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

The following ~~table presents~~tables present certain information relating to our average consolidated balance sheets and our consolidated statements of income for the periods indicated and reflects the average yield on assets and average cost of liabilities for

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those periods on a tax-equivalent basis based on the U.S. federal statutory tax rate. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily average balances and include non-accrual loans. The yields and costs include fees and costs, which are considered adjustments to yields. Interest on non-accrual loans has been included only to the extent reflected in the consolidated statements of income. For purposes of this table, the average balances for investments in debt

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and equity securities exclude unrealized appreciation/depreciation due to the application of ~~FASB ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, “Investments - Debt and Equity Securities.”


	Three Months Ended March 31,												Three Months Ended March 31,
	2019						2018						2020						2019
					Average						Average						Average						Average
	Average				Yield/		Average				Yield/		Average				Yield/		Average				Yield/
(Dollars in thousands)	Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost		Balance		Interest		Cost
Interest-earning assets:
Loans, net (1)(2)	$	3,275,828	$	37,659	4.66	%	$	3,127,900	$	35,660	4.62	%	$	3,677,017	$	39,810	4.35	%	$	3,275,828	$	37,659	4.66	%
Mortgage-backed securities, CMOs and other asset-backed securities		688,398		4,789	2.82			686,539		3,724	2.20			530,742		3,040	2.30			688,398		4,789	2.82
Taxable securities		153,515		1,264	3.34			199,688		1,492	3.03			205,565		1,328	2.60			153,515		1,264	3.34
Tax-exempt securities (2)		43,921		389	3.59			83,065		564	2.75			27,587		260	3.79			43,921		389	3.59
Deposits with banks		91,682		544	2.41			23,108		90	1.58			91,884		267	1.17			91,682		544	2.41
Total interest-earning assets (2)		4,253,344		44,645	4.26			4,120,300		41,530	4.09			4,532,795		44,705	3.97			4,253,344		44,645	4.26
Non-interest-earning assets:
Cash and due from banks		79,608						67,222						87,694						79,608
Other assets		312,675						287,671						358,564						312,675
Total assets	$	4,645,627					$	4,475,193					$	4,979,053					$	4,645,627

Interest-bearing liabilities:
Savings, NOW and money market deposits	$	2,120,067	$	6,369	1.22	%	$	1,843,025	$	2,514	0.55	%	$	2,220,625	$	4,255	0.77	%	$	2,120,067	$	6,369	1.22	%
Certificates of deposit of $100,000 or more		204,476		983	1.95			155,649		517	1.35			214,500		1,036	1.94			204,476		983	1.95
Other time deposits		119,290		562	1.91			66,371		195	1.19			93,927		415	1.78			119,290		562	1.91
Federal funds purchased and repurchase agreements		7,691		45	2.37			151,647		606	1.62			29,575		78	1.06			7,691		45	2.37
FHLB advances		243,290		1,098	1.83			428,247		1,858	1.76			253,374		1,033	1.64			243,290		1,098	1.83
Subordinated debentures		78,793		1,135	5.84			78,653		1,135	5.85			78,932		1,135	5.78			78,793		1,135	5.84
Total interest-bearing liabilities		2,773,607		10,192	1.49			2,723,592		6,825	1.02			2,890,933		7,952	1.11			2,773,607		10,192	1.49
Non-interest-bearing liabilities:
Demand deposits		1,333,498						1,262,989						1,473,962						1,333,498
Other liabilities		79,083						37,838						112,582						79,083
Total liabilities		4,186,188						4,024,419						4,477,477						4,186,188
Stockholders' equity		459,439						450,774						501,576						459,439
Total liabilities and stockholders' equity	$	4,645,627					$	4,475,193					$	4,979,053					$	4,645,627

Net interest income/net interest rate spread (2) (3)				34,453	2.77	%				34,705	3.07	%				36,753	2.86	%				34,453	2.77	%
Net interest-earning assets													$	1,641,862					$	1,479,737
Net interest margin (2) (4)	$	1,479,737			3.29	%	$	1,396,708			3.42	%					3.26	%					3.29	%
Tax-equivalent adjustment				(130)	(0.02)					(166)	(0.02)					(103)	(0.01)					(130)	(0.02)
Net interest income			$	34,323					$	34,539					$	36,650					$	34,323
Net interest margin (4)					3.27	%					3.40	%					3.25	%					3.27	%

Ratio of interest-earning assets to interest-bearing liabilities					153.35	%					151.28	%					156.79	%					153.35	%

(1)

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

(2)

Presented on a tax-equivalent basis based on the U.S. federal statutory tax rate of 21%.

(3)

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

(4)

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

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Rate/Volume Analysis

Net interest income can be analyzed in terms of the impact of changes in rates and volumes. The following table illustrates the extent to which changes in interest rates and in the volume of average interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume); and (iii) the net changes. For purposes of this table, changes that are not due solely to volume or rate changes have been allocated to these categories based on the respective percentage changes in average volume and rate. Due to the numerous simultaneous volume and

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rate changes during the periods analyzed, it is not possible to precisely allocate changes between volume and rate. In addition, average interest-earning assets include non-accrual loans.


	Three Months Ended March 31,						Three Months Ended March 31,
	2019 Over 2018						2020 Over 2019
	Changes Due To						Changes Due To
					Net						Net
(In thousands)	Volume		Rate		Change		Volume		Rate		Change
Interest income on interest-earning assets:
Loans, net (1) (2)	$	1,690	$	309	$	1,999	$	14,555	$	(12,404)	$	2,151
Mortgage-backed securities, CMOs and other asset-backed securities		10		1,055		1,065		(969)		(780)		(1,749)
Taxable securities		(1,016)		788		(228)		1,413		(1,349)		64
Tax-exempt securities (2)		(953)		778		(175)		(265)		136		(129)
Deposits with banks		386		68		454		9		(286)		(277)
Total interest income on interest-earning assets (2)		117		2,998		3,115		14,743		(14,683)		60

Interest expense on interest-bearing liabilities:
Savings, NOW and money market deposits		423		3,432		3,855		1,933		(4,047)		(2,114)
Certificates of deposit of $100,000 or more		193		273		466		85		(32)		53
Other time deposits		209		158		367		(111)		(36)		(147)
Federal funds purchased and repurchase agreements		(1,906)		1,345		(561)		196		(163)		33
FHLB advances		(1,245)		485		(760)		245		(310)		(65)
Subordinated debentures		8		(8)		—		14		(14)		—
Total interest expense on interest-bearing liabilities		(2,318)		5,685		3,367		2,362		(4,602)		(2,240)
Net interest income (2)	$	2,435	$	(2,687)	$	(252)	$	12,381	$	(10,081)	$	2,300

(1)

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

(2)

Presented on a tax-equivalent basis based on the U.S. federal statutory tax rate of 21%.

Analysis of Net Interest Income for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019

Net interest income was $36.7 million for the three months ended March 31, 2020 compared to $34.3 million for the three months ended March 31, ~~2019 compared~~2019. Average net interest-earning assets increased $162.1 million to ~~$34.5 million~~$1.6 billion for the three months ended March 31, ~~2018. Average net interest-earning assets increased $83.0 million~~2020 compared to $1.5 billion for the three months ended March 31, ~~2019 compared to $1.4 billion for the three months ended March 31, 2018.~~2019. The increase in average net interest-earning assets reflects organic growth in loans, ~~and a decrease~~partially offset by increases in average borrowings ~~partially offset by an increase in~~and average deposits, and a decrease in average investment securities. Tax-equivalent net interest margin decreased to 3.26% for the three months ended March 31, 2020 compared to 3.29% for the three months ended March 31, ~~2019 compared to 3.42% for the three months ended March 31, 2018.~~2019. The decrease in tax-equivalent net interest margin for ~~2019~~2020 compared to ~~2018~~2019 reflects the ~~higher~~lower average yield on investment securities and loans, partially offset by lower overall funding costs, due in part to federal funds rate decreases during the ~~Fed Funds~~third and fourth quarter of 2019 and the first quarter of 2020. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark federal funds rate ~~increases in 2018, partially offset by~~to a ~~higher average yield on investment securities~~target range of 0% to 0.25% during the 2020 first quarter. We took this opportunity to lower our funding costs and ~~loans, coupled with a lower volume of borrowings in 2018.~~stabilize our net interest margin.

Total interest income increased ~~$3.1~~$0.1 million, or ~~7.6%~~0.2%, to ~~$44.5~~$44.6 million for the three months ended March 31, ~~2019~~2020 from ~~$41.4~~$44.5 million for the same period in ~~2018,~~2019, as average interest-earning assets increased ~~$133.0~~$279.5 million, or ~~3.2%~~6.6%, to ~~$4.3~~$4.5 billion for the three months ended March 31, ~~2019~~2020 compared to ~~$4.1~~$4.3 billion for the same period in ~~2018.~~2019. The increase in

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average interest-earning assets for the three months ended March 31, ~~2019~~2020 compared to ~~2018~~2019 reflects organic growth in loans, partially offset by a decrease in average investment securities. The tax-equivalent average yield on interest-earning assets was 3.97% for the quarter ended March 31, 2020 compared to 4.26% for the quarter ended March 31, ~~2019 compared to 4.09% for the quarter ended March 31, 2018.~~2019.

Interest income on loans increased ~~$2.0~~$2.2 million to ~~$37.6~~$39.8 million for the three months ended March 31, ~~2019~~2020 over ~~2018,~~2019, primarily due to growth in the loan ~~portfolio.~~portfolio, partially offset by a decrease in yield on loans. For the three months ended March 31, ~~2019,~~2020, average loans grew by ~~$147.9~~$401.2 million, or ~~4.7%~~12.2%, to ~~$3.3~~$3.7 billion as compared to ~~$3.1~~$3.3 billion for the same period in ~~2018.~~2019. The increase in average loans was the result of organic growth in multi-family mortgage loans, commercial real estate mortgage loans, ~~residential mortgage loans, multi-family mortgage loans,~~and commercial and industrial loans, ~~and~~partially offset by a decrease in real estate construction and land loans and residential mortgage loans. The tax-equivalent yield on average loans was ~~4.66%~~4.35% for the first quarter of ~~2019~~2020 and ~~4.62%~~4.66% for the same period in ~~2018.~~2019. We remain committed to growing loans with prudent underwriting, sensible pricing, and limited credit and extension risk.

Interest income on investment securities ~~was $6.4~~decreased $1.8 million to $4.6 million for the three months ended March 31, ~~2019~~2020 compared to ~~$5.7~~$6.4 million for the same period in ~~2018.~~2019, primarily due to a decrease in the average balance of investment securities and a lower average yield on investment securities. Interest income on securities included net amortization of premiums on securities of ~~$0.6~~$0.7 million for the three months ended March 31, ~~2019~~2020 compared to ~~$1.3~~$0.6 million for the same period in ~~2018.~~2019. For the

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three months ended March 31, ~~2019,~~2020, average total investment securities decreased by ~~$83.5~~$121.9 million, or ~~8.6%~~13.8%, to ~~$885.8~~$763.9 million as compared to ~~$1.0 billion~~$885.8 million for the same period in ~~2018.~~2019. The tax-equivalent average yield on total investment securities was 2.44% for the three months ended March 31, 2020 and 2.95% for the three months ended March 31, ~~2019 and 2.42% for the three months ended March 31, 2018.~~2019.

Total interest expense ~~increased~~decreased to ~~$10.2~~$8.0 million for the three months ended March 31, ~~2019~~2020 as compared to ~~$6.8~~$10.2 million for the same period in ~~2018.~~2019. The ~~increase~~decrease in interest expense for the three months ended March 31, ~~2019~~2020 is a result of the ~~increase~~decrease in the cost of average interest-bearing liabilities, ~~coupled with~~partially offset by an increase in average deposits ~~partially offset by a decrease in~~and average borrowings. The cost of average interest-bearing liabilities was 1.11% for the three months ended March 31, 2020 and 1.49% for the three months ended March 31, ~~2019 and 1.02% for the three months ended March 31, 2018.~~2019. The ~~increase~~decrease in the cost of average interest-bearing liabilities is primarily due to ~~higher overall funding costs due in part to~~federal funds rate decreases during the ~~Fed Funds rate increases in 2018. Since~~third and fourth quarter of 2019 and the Company's interest-bearing liabilities generally reprice or mature more quickly than its interest-earning assets, in a rising rate environment the cost of funds increases faster than the yields on assets. We began extending the terms of certain matured borrowings at the end of the 2017 first quarter ~~in anticipation~~ of further Fed Funds rate increases. Additionally, the large percentages of deposits in money market accounts reprice at short-term market rates, making the balance sheet more liability sensitive. We continue our prudent management of deposit pricing.2020. Average total interest-bearing liabilities were ~~$2.8~~$2.9 billion for the three months ended March 31, ~~2019~~2020 and ~~$2.7~~$2.8 billion for the same period in ~~2018~~2019 due to ~~an increase~~increases in average deposits ~~partially offset by a decrease in~~and average borrowings.

~~For the three months ended March 31, 2019, average~~Average total deposits increased ~~by $449.3 million~~ to ~~$3.8 billion as compared to $3.3~~$4.0 billion for the three months ended March 31, ~~2018~~2020, compared to $3.8 billion for the three months ended March 31, 2019 due to increases in average savings, NOW and money market accounts, and average demand deposits, ~~and~~partially offset by a decrease in average certificates of deposit. The average balance of savings, NOW and money market accounts increased ~~$277.0~~$100.6 million, or ~~15.0%~~4.7%, to $2.2 billion for the three months ended March 31, 2020 compared to $2.1 billion for the three months ended March 31, ~~2019 compared to $1.8 billion for the three months ended March 31, 2018.~~2019. The cost of average savings, NOW and money market deposits was ~~1.22%~~0.77% for the ~~2019~~2020 first quarter compared to ~~0.55%~~1.22% for the ~~2018~~2019 first quarter. Average demand deposits totaled $1.5 billion for the three months ended March 31, 2020 compared to $1.3 billion for the three months ended March 31, ~~2019 and 2018, respectively.~~2019. Average balances in certificates of deposit ~~increased $101.8~~decreased $15.3 million, or ~~45.8%~~4.7%, to $308.4 million for the three months ended March 31, 2020 compared to $323.8 million for the three months ended March 31, ~~2019 compared~~2019. The cost of average certificates of deposit decreased to ~~$222.0 million~~1.89% for the three months ended March 31, ~~2018. The cost of average certificates of deposit increased~~2020 compared to 1.94% ~~for the three months ended March 31, 2019 compared to 1.30%~~ for the same period in ~~2018.~~2019. Average public fund deposits comprised ~~16.3%~~19.1% of total average deposits during the ~~2019~~2020 first quarter and ~~18.0%~~16.3% for the ~~2018~~2019 first quarter.

Average federal funds purchased and repurchase agreements ~~decreased $144.0~~increased $21.9 million, ~~or 94.9%,~~ to ~~$7.7~~$29.6 million for the three months ended March 31, ~~2019~~2020 compared to ~~$151.6~~$7.7 million for the same period in ~~2018.~~2019. The cost of average federal funds purchased and repurchase agreements was 1.06% for the 2020 first quarter compared to 2.37% for the 2019 first ~~quarter compared to 1.62% for the 2018 first~~ quarter. Average FHLB advances ~~decreased $185.0~~increased $10.1 million, or ~~43.2%~~4.1%, to $253.4 million for the three months ended March 31, 2020 compared to $243.3 million for the three months ended March 31, ~~2019 compared to $428.2 million for the three months ended March 31, 2018.~~2019.

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Provision and Allowance for ~~Loan~~Credit Losses

Our loan portfolio consists primarily of real estate loans secured by commercial, multi-family and residential real estate properties located in our principal lending areas of Nassau and Suffolk Counties on Long Island and the New York City boroughs. The interest rates we charge on loans are affected primarily by the demand for such loans, the supply of money available for lending purposes, the rates offered by our competitors, our relationship with the customer, and the related credit risks of the transaction. These factors are affected by general and economic conditions including, but not limited to, monetary policies of the federal government, including the Federal Reserve Board, legislative policies and governmental budgetary matters.

Based on our adoption of the CECL Standard on January 1, 2020, our continuing review of the overall loan portfolio, the current asset quality of the portfolio, the growth in the loan portfolio and the net charge-offs, and current and forecasted economic conditions, a provision for ~~loan~~credit losses of ~~$0.6~~$5.0 million was recorded during the three months ended March 31, ~~2019,~~2020, compared to a provision for ~~loan~~credit losses of ~~$0.8~~$0.6 million during the same period in ~~2018.~~2019. The increase in the first-quarter 2020 allowance for credit losses is primarily related to the reasonable and supportable forecast component of the newly adopted CECL standard. We believe, based on all of the evidence gathered to date, that COVID-19 will continue to have a meaningful negative impact on economic conditions in 2020 but will be shorter-term in nature and expect to see an economic recovery begin in 2021 during the second year of our CECL forecast time horizon. Net charge-offs were $0.2 million for the quarter ended March 31, ~~2019 compared to net recoveries of $0.3 million for the quarter ended March 31, 2018.~~2020 and 2019. The ratio of the allowance for ~~loan~~credit losses to non-accrual loans was ~~1,035%~~851%, ~~1,119%~~750% and ~~540%~~1,035%, at March 31, ~~2019,~~2020, December 31, ~~2018,~~2019, and March 31, ~~2018,~~2019, respectively. The allowance for ~~loan~~credit losses totaled $39.2 million at March 31, 2020 as compared to $32.8 million at December 31, 2019 and $31.8 million at March 31, ~~2019 as compared to $31.4 million at December 31, 2018 and $32.8 million at March 31, 2018.~~2019. The allowance as a percentage of total loans was 1.04% at March 31, 2020, compared to 0.89% at December 31, 2019 and 0.94% at March 31, ~~2019, compared to 0.96% at December 31, 2018 and~~

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~~1.02% at March 31, 2018.~~2019. We continue to carefully monitor the loan portfolio ~~as well as~~ real estate trends in Nassau and Suffolk Counties and the New York City ~~boroughs.~~boroughs, and current and forecasted economic condition.

Loans totaling ~~$90.9~~$84.5 million, or ~~2.7%~~2.3%, of total loans at March 31, ~~2019~~2020 were categorized as classified loans compared to ~~$87.9~~$88.3 million, or 2.4%, at December 31, 2019 and $90.9 million, or 2.7%, at ~~December 31, 2018 and $90.3 million, or 2.8%, at~~ March 31, ~~2018.~~2019. Classified loans include loans with credit quality indicators with the internally assigned grades of special mention, substandard and doubtful. These loans are categorized as classified loans because we have information that indicates the borrower may not be able to comply with the present repayment terms. These loans are subject to increased management attention and their classification is reviewed at least quarterly.

At March 31, ~~2019, $44.0~~2020, $30.1 million of classified loans were commercial real estate (“CRE”) loans. Of the ~~$44.0~~$30.1 million of CRE loans, ~~$32.8~~$28.6 million were current and ~~$11.2~~$1.5 million were past due. At March 31, ~~2019, $11.6~~2020, $16.6 million of classified loans were residential real estate loans, with ~~$10.2~~$13.4 million current and ~~$1.4~~$3.2 million past due. Commercial, industrial, and agricultural loans represented ~~$33.7~~$35.0 million of classified loans, with ~~$32.5~~$33.3 million current and ~~$1.2~~$1.7 million past due. Taxi medallion loans represented ~~$9.9~~$9.6 million of the classified commercial, industrial and agricultural loans at March 31, ~~2019.~~2020. All of our taxi medallion loans are collateralized by New York City medallions and have personal guarantees. All taxi medallion loans were current as of March 31, ~~2019.~~2020. No new originations of taxi medallion loans are currently planned and we expect these balances to continue to decline through amortization and pay-offs. In January 2019, seven taxi medallion loans totaling $6.2 million, net of charge-offs, were paid off under settlements we accepted. The charge-offs related to these settlements were recognized in the 2018 fourth quarter. At March 31, ~~2019,~~2020, there was ~~$0.8~~$1.5 million of classified real estate construction and land loans, which were past due; $0.9 million of classified consumer loans substantially all of which were current; and $0.4 million of classified multi-family loans which were ~~current; and $0.3 million of classified real estate construction and land loans which were~~ current.

CRE loans, including multi-family loans, represented ~~$2.0~~$2.4 billion, or ~~59.9%~~63.5%, of the total loan portfolio at March 31, ~~2019~~2020 compared to ~~$2.0~~$2.4 billion, or ~~59.9%~~64.8%, at December 31, ~~2018~~2019 and ~~$1.9~~$2.0 billion, or ~~60.7%~~59.9%, at March 31, ~~2018.~~2019. Our underwriting standards for CRE loans require an evaluation of the cash flow of the property, the overall cash flow of the borrower and related guarantors as well as the value of the real estate securing the loan. In addition, our underwriting standards for CRE loans are consistent with regulatory requirements with original loan to value ratios generally less than or equal to 75%. We consider charge-off history, delinquency trends, cash flow analysis, and the impact of the local economy on CRE values when evaluating the appropriate level of the allowance for ~~loan~~credit losses.

As of March 31, ~~2019 and~~2020, we had $7.3 million in collateral dependent loans individually evaluated for impairment, with a specific reserve of $4.4 million. As of December 31, ~~2018,~~2019, we had individually impaired loans as defined by FASB ASC No. 310, “Receivables” ~~of $16.1 million and $19.4 million, respectively. For a loan~~(prior to ~~be considered impaired, we determine after review whether it is probable that we will not be able to collect all amounts due according to the contractual terms~~adoption of the ~~loan agreement. We apply our normal loan review procedures in making these judgments.~~CECL Standard) of $27.0 million, with a specific reserve totaling $4.7 million. Impaired loans include individually classified non-accrual loans and troubled debt restructuring loans (“TDRs”) and at December 31, 2018 included $2.7 million in other impaired performing loans related to three taxi medallion loans which paid off in January 2019. For impaired loans, we evaluate the impairment of the loan in accordance with FASB ASC 310‑10‑35‑22. Impairment is determined based on the present value of expected future cash flows discounted at the loan's effective interest rate. For loans that are collateral dependent, the fair value of the collateral less costs to sell is used to determine the fair value of the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral less costs to sell or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required. The decrease in impaired loans from December 31, 2018 was attributable to the payoff of certain TDRs and other impaired performing loans, partially offset by new TDRs during the three months ended March 31, 2019. During the three months ended March 31, 2019, we modified certain loans as TDRs totaling $3.2 million.

Non-accrual loans were $3.1 million, or 0.09%, of total loans at March 31, 2019, and $2.8 million, or 0.09%, of total loans at December 31, 2018. TDRs represent $0.1 million of the non-accrual loans at March 31, 2019 and December 31, 2018.

~~At March 31, 2019 and December 31, 2018, our other real estate owned totaled $0.2 million.~~

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At December 31, 2019, impaired loans also included $1.1 million in other impaired performing loans which were related to borrowers with other performing TDRs. Upon adoption of the CECL Standard on January 1, 2020, we re-evaluated our impaired loans to determine which loans should be evaluated on a collective (pooled) basis and which loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis and therefore should be individually evaluated. The majority of our impaired loans at December 31, 2019 were performing TDRs where there was no write-off of principal as a result of the restructure and interest was at a market rate. We concluded the risks associated with these loans were consistent with the other pooled loans and therefore they were appropriately evaluated on a collective (pooled) basis under the CECL Standard.

Non-accrual loans were $4.6 million, or 0.12%, of total loans at March 31, 2020, and $4.4 million, or 0.12%, of total loans at December 31, 2019. TDRs represent $635 thousand of the non-accrual loans at March 31, 2020 and $405 thousand of the non-accrual loans at December 31, 2019.

There was no other real estate owned at March 31, 2020 and December 31, 2019.

The following table presents changes in the allowance for ~~loan~~credit losses:


	Three Months Ended				Three Months Ended
(In thousands)	March 31, 2019		March 31, 2018		March 31, 2020		March 31, 2019
Beginning balance	$	31,418	$	31,707	$	32,786	$	31,418
Impact of adopting CECL						1,625		—
Charge-offs:
Commercial real estate mortgage loans		—		—		(1)		—
Residential real estate mortgage loans		—		—		—		—
Commercial, industrial and agricultural loans		(242)		—		(215)		(242)
Installment/consumer loans		(4)		—		—		(4)
Total		(246)		—		(216)		(246)
Recoveries:
Commercial real estate mortgage loans		—		—		—		—
Residential real estate mortgage loans		1		1		1		1
Commercial, industrial and agricultural loans		11		304		19		11
Installment/consumer loans		—		—		—		—
Total		12		305		20		12
Net (charge-offs) recoveries		(234)		305
Provision for loan losses charged to operations		600		800
Net charge-offs						(196)		(234)
Provision for credit losses charged to operations						5,000		600
Ending balance	$	31,784	$	32,812	$	39,215	$	31,784

Allocation of Allowance for ~~Loan~~Credit Losses

The following table presents the allocation of the total allowance for ~~loan~~credit losses by loan classification:



	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
			Percentage of Loans				Percentage of Loans				Percentage of Loans				Percentage of Loans
(Dollars in thousands)	Amount		to Total Loans		Amount		to Total Loans		Amount		to Total Loans		Amount		to Total Loans
Commercial real estate mortgage loans	$	11,099	41.5	%	$	10,792	42.0	%	$	4,968	42.2	%	$	12,150	42.7	%
Multi-family mortgage loans		2,557	18.4			2,566	17.9			1,323	21.3			4,829	22.1
Residential real estate mortgage loans		3,374	15.2			3,935	15.9			4,025	12.9			1,882	13.4
Commercial, industrial and agricultural loans		13,073	19.9			12,722	19.8			24,545	20.2			12,583	18.5
Real estate construction and land loans		1,526	4.3			1,297	3.8			3,182	2.7			1,066	2.6
Installment/consumer loans		155	0.7			106	0.6			1,172	0.7			276	0.7
Total	$	31,784	100.0	%	$	31,418	100.0	%	$	39,215	100.0	%	$	32,786	100.0	%

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Non-Interest Income

Total non-interest income ~~increased $1.1 million to $5.2 million~~ during the three months ended March 31, 2020 and 2019 ~~compared~~was $5.2 million. The change in non-interest income is attributable to ~~$4.1~~a $0.2 million increase in gain on sales of SBA loans and a $0.1 million increase in loan swap fees, partially offset by a $0.3 million decrease in other operating income.

Loan swap fees recorded on interest rate swaps increased to $1.2 million for the three months ended March 31, ~~2018.~~2020, compared to $1.1 million for the three months ended March 31, 2019. We increased the notional amount of interest rate swaps to $918.8 million at March 31, 2020, compared to $823.8 million at December 31, 2019. The ~~increase~~loan swap program allows us to deliver fixed rate exposure to our customers while we retain a floating rate asset and generate fee income. These interest rate swap agreements do not qualify for hedge accounting treatment, and therefore changes in ~~total~~fair value are reported in non-interest income ~~reflects a $1.2 million increase~~ in ~~other operating income, primarily due to a rise in loan swap fee income, and a 0.3 million increase in service charges and other fees,~~ ~~partially offset by a $0.2 million decrease in title fee income and a $0.2 million decrease in gain on sale~~the consolidated statement of ~~Small Business Administration (“SBA”) loans.~~income.

Non-Interest Expense

Total non-interest expense was ~~$22.6~~$24.8 million during the three months ended March 31, 2019 and 2018, respectively, reflecting higher salaries and benefits, occupancy and equipment and technology and communications expenses, partially offset by lower professional services, other operating expenses and FDIC assessments.

~~Salaries and benefits increased $0.5 million~~2020 compared to ~~$13.3~~$22.6 million for the three months ended March 31, ~~2019 compared to the same period in 2018.~~2019. The increase inwas primarily due to higher salaries and benefits, ~~in the first quarter of 2019 versus the first quarter of 2018 is primarily due to additional staff related to business development~~ and ~~risk management. Occupancy~~technology and ~~equipment~~communications, partially offset by lower FDIC assessments.

Salaries and benefits increased ~~$0.3~~$2.3 million to ~~$3.5~~$15.5 million for the three months ended March 31, ~~2019~~2020 compared to the same period in ~~2018.~~ 2019. The rise in salaries and employee benefits reflects our objective to attract, retain, train and cultivate employees at all levels of the Company. In particular, we are focused on expanding and retaining our loan team as we continue to grow our loan portfolio.

Technology and communications increased ~~$0.1~~$0.4 million to ~~$1.8~~$2.2 million for the three months ended March 31, ~~2019~~2020 compared to the same period in the prior year. ~~Professional~~The rise in technology and communications expenses reflects higher software maintenance and system services expenses as we increased our investment in technology and expanded our use of automation in the 2020 period.

FDIC assessments decreased ~~$0.5~~to $1 thousand for the three months ended March 31, 2020, compared to $0.2 million for the same period in 2019, primarily due to FDIC assessment credits totaling $0.3 million in the 2020 period.

Marketing and advertising decreased $0.2 million to $0.8 million for the three months ended March 31, ~~2019,~~2020, compared to the same period in ~~2018.~~2019. Professional services increased to $1.0 million in the first quarter of 2020 compared to $0.8 million in the first quarter of 2019. Other operating expenses decreased $0.2 million to ~~$1.8~~$1.6 million for the three months ended March 31, ~~2019~~2020 compared to the same period in ~~2018.~~

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2019.

Income Taxes

Income tax expense was $2.7 million for the three months ended March 31, 2020 compared to $3.4 million for the three months ended March 31, 2019, ~~compared to $3.2 million~~reflecting lower income before income taxes, partially offset by a higher effective tax rate in the 2020 period. The effective tax rate was 22.3% for the three months ended March 31, ~~2018, reflecting higher income before income taxes. The effective tax rate was~~2020 compared to 20.9% for the ~~three months ended March 31, 2019 and 2018, respectively.~~same period in 2019. We estimate we will record income tax at an effective tax rate of approximately ~~22%~~22.5% for the remainder of ~~2019.~~2020.

Financial Condition

Total assets were ~~$4.7~~$5.1 billion at March 31, ~~2019, $25.5~~2020, $139.4 million, ~~lower~~or 2.8%, higher than December 31, ~~2018.~~ 2019. The rise in total assets in 2020 reflects increases in cash and cash equivalents, and loans held for investment, partially offset by a decrease in securities.

Cash and cash equivalents ~~decreased $194.9~~increased $117.0 million, or ~~66.0%~~99.8%, to ~~$100.5~~$234.2 million at March 31, ~~2019~~2020 compared to December 31, ~~2018.~~2019. Total securities ~~increased $19.9~~decreased $100.9 million, or ~~2.3%~~12.5%, to ~~$885.0~~$703.9 million at March 31, ~~2019~~2020 compared to December 31, ~~2018.~~2019. Total loans held for investment, net, increased ~~$115.3~~$75.4 million, or ~~3.5%~~2.1%, to ~~$3.4~~$3.7 billion at March 31, ~~2019~~2020 compared to December 31, ~~2018.~~2019. Our focus is on our ability to grow the loan portfolio, while minimizing interest rate risk sensitivity and maintaining credit quality.

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Total liabilities ~~decreased $36.7 million, or 0.9%, to $4.2~~were $4.6 billion at March 31, ~~2019~~2020, $143.3 million higher than December 31, 2019. The increase in total liabilities in 2020 was mainly due to deposit growth, partially offset by a decrease in FHLB advances.

Total deposits increased $241.1 million, or 6.3%, to $4.1 billion at March 31, 2020, compared to December 31, ~~2018. Total~~2019. The increase in total deposits ~~decreased $160.9 million, or 4.1%,~~in 2020 was largely attributable to ~~$3.7 billion at March 31, 2019, compared to December 31, 2018.~~higher Savings, NOW and money market deposits, ~~were $2.1~~partially offset by lower demand deposits. Savings, NOW and money market deposits increased $276.4 million, or 13.9%, to $2.3 billion at March 31, ~~2019 and~~2020 compared to December 31, ~~2018, respectively.~~2019. Demand deposits decreased $37.4 million, or 2.5%, to $1.5 billion at March 31, 2020 compared to December 31, 2019. Certificates of deposit ~~decreased $48.8~~increased $2.1 million, or ~~14.8%~~0.7%, to ~~$280.7~~$310.1 million at March 31, ~~2019~~2020 compared to December 31, ~~2018. Demand deposits~~2019. FHLB advances decreased ~~$134.7~~$145.0 million ~~or 9.3%,~~ to ~~$1.3 billion~~$290.0 million at March 31, ~~2019~~2020 compared to December 31, ~~2018. Federal Home Loan Bank advances increased $89.8~~2019.

Total stockholders' equity decreased $3.9 million to ~~$330.2~~$493.3 million at March 31, ~~2019~~2020 compared to $497.2 million at December 31, ~~2018.~~

~~Total stockholders'~~2019. We adopted the CECL Standard on January 1, 2020, which resulted in a charge to retained earnings and reduction to stockholders’ equity of $1.5 million. The decrease in stockholders’ equity was ~~$465.0~~largely attributable to $4.8 million ~~at March 31, 2019, an increase~~in dividends, $4.6 million in purchases of ~~$11.2 million, or 2.5%, from December 31, 2018, primarily due to net income of $12.9 million, a decrease in accumulated~~treasury stock, and other comprehensive loss, net of deferred income taxes, of ~~$2.5 million and share based compensation of $1.0~~$2.6 million, partially offset by net income of $9.3 million. During the three months ended March 31, 2020, there were 179,620 shares purchased under the 2019 Stock Repurchase Program at a cost of $4.6 ~~million in dividends.~~million.

Liquidity

Our liquidity management objectives are to ensure the sufficiency of funds available to respond to the needs of depositors and borrowers, and to take advantage of unanticipated opportunities for our growth or earnings enhancement. Liquidity management addresses our ability to meet financial obligations that arise in the normal course of business. Liquidity is primarily needed to meet customer borrowing commitments and deposit withdrawals, either on demand or on contractual maturity, to repay borrowings as they mature, to fund current and planned expenditures and to make new loans and investments as opportunities arise.

The Holding Company’s principal sources of liquidity included cash and cash equivalents of ~~$0.3~~$6.4 million as of March 31, ~~2019,~~2020, and dividend capabilities from the Bank. Cash available for distribution of dividends to our shareholders is primarily derived from dividends paid by the Bank to the ~~Holding~~ Company. For the three months ended March 31, ~~2019,~~2020, the Bank paid ~~$6.0~~$15.0 million in cash dividends to the Holding Company. Prior regulatory approval is required if the total of all dividends declared by the Bank in any calendar year exceeds the total of the Bank's net income of that year combined with its retained net income of the preceding two years. As of March 31, ~~2019,~~2020, the Bank ~~has $59.2~~had $54.0 million of retained net income available for dividends to the Holding Company. In the event the Holding Company subsequently expands its current operations, in addition to dividends from the Bank, it will need to rely on its own earnings, additional capital raised and other borrowings to meet liquidity needs. The Holding Company did not make any capital contributions to the Bank during the three months ended March 31, ~~2019.~~2020.

The Bank's most liquid assets are cash and cash equivalents, securities available for sale and securities held to maturity due within one year. The levels of these assets are dependent on the Bank's operating, financing, lending and investing activities during any given period. Other sources of liquidity include loan and investment securities principal repayments and maturities, lines of credit with other financial institutions including the FHLB and FRB, growth in core deposits and sources of wholesale funding such as brokered deposits. While scheduled loan amortization, maturing securities and short-term investments are a relatively predictable source of funds, deposit flows and loan and mortgage-backed securities prepayments are greatly influenced by general interest rates, economic conditions and competition. The Bank adjusts its

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liquidity levels as appropriate to meet funding needs such as seasonal deposit outflows, loans, and asset and liability management objectives. Historically, the Bank has relied on its deposit base, drawn through its full-service branches that serve its market area and local municipal deposits, as its principal source of funding. The Bank seeks to retain existing deposits and loans and maintain customer relationships by offering quality service and competitive interest rates to its customers, while managing the overall cost of funds needed to finance its strategies.

The Bank's Asset/Liability and Funds Management Policy allows for wholesale borrowings of up to 25% of total assets. At March 31, ~~2019,~~2020, the Bank had aggregate lines of credit of $373.0 million with unaffiliated correspondent banks to provide short-term credit for liquidity requirements. Of these aggregate lines of credit, $353.0 million is available on an unsecured basis. As of March 31, ~~2019,~~2020, the Bank had no overnight borrowings outstanding under these lines. The Bank

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also has the ability, as a member of the FHLB system, to borrow against unencumbered residential and commercial mortgages owned by the Bank. The Bank also has a master repurchase agreement with the FHLB, which increases its borrowing capacity. As of March 31, ~~2019,~~2020, the Bank had ~~$90.0 million~~no FHLB overnight borrowings outstanding and ~~$240.2~~$290.0 million outstanding in FHLB term borrowings. As of December 31, ~~2018,~~2019, the Bank had no$195.0 million FHLB overnight borrowings outstanding and ~~$240.4~~$240.0 million outstanding in FHLB term borrowings. The Bank had ~~$0.7~~$1.2 million and ~~$0.5~~$1.0 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, of securities sold under agreements to repurchase outstanding with customers and ~~nothing~~no such agreements outstanding with brokers. In addition, the Bank has approved broker relationships for the purpose of issuing brokered deposits. As of March 31, ~~2019,~~2020, the Bank had ~~$61.8~~$77.5 million outstanding in brokered certificates of deposit and ~~$100.3~~$120.3 million outstanding in brokered money market accounts. As of December 31, ~~2018,~~2019, the Bank had ~~$101.6~~$77.3 million outstanding in brokered certificates of deposit and ~~$150.2~~$85.1 million outstanding in brokered money market accounts.

Liquidity policies are established by senior management and reviewed and approved by the full Board of Directors at least annually. Management continually monitors the liquidity position and believes that sufficient liquidity exists to meet all of the Company’s operating requirements. The Bank’s liquidity levels are affected by the use of short-term and wholesale borrowings and the amount of public funds in the deposit mix. Excess short-term liquidity is invested in overnight federal funds sold or in an interest-earning account at the FRB.

Capital Resources

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital requirements that involve quantitative measures of the Company's and Bank's assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The Company's and Bank's capital amounts and classifications also are subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total, tier 1 and common equity tier 1 capital to ~~risk weighted~~risk-weighted assets and of tier 1 capital to average assets. Tier 1 capital, ~~risk weighted~~risk-weighted assets and average assets are as defined by regulation. The required minimums for the Company and Bank are set forth in the tables that follow. The Company and the Bank met all capital adequacy requirements at March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

On January 1, 2015, the Basel III Capital Rules became effective and include transition provisions through January 1, 2019. These rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based on common equity tier 1 capital ("CET1"); b) 6.0% based on tier 1 capital; and c) 8.0% based on total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of total average assets) of 4.0% is also required under the Basel III Capital Rules. The Basel III Capital Rules additionally require institutions to retain a capital conservation buffer, composed of CET1, of 2.5% above these required minimum capital ratio levels. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increased by 0.625% each subsequent January 1, until fully implemented at 2.5% on January 1, 2019. Including the capital conservation buffer, the Company and the Bank effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based on CET1; b) 8.5% based on tier 1 capital; and c) 10.5% based on total regulatory capital.

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The Company and the Bank made the one-time, permanent election to continue to exclude the effects of accumulated other comprehensive income or loss items included in stockholders' equity for the purposes of determining the regulatory capital ratios.

As of March 31, ~~2019,~~2020, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must maintain minimum total risk-based, tier 1 risk-based, common equity tier 1 risk-based and tier 1 leverage ratios as set forth in the tables below. Since that notification, there are no conditions or events that management believes have changed the institution's category.

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In accordance with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies ~~are required to develop~~have adopted, effective January 1, 2020, a ~~“Community Bank Leverage Ratio” (the ratio of a bank's tangible equity capital to average total consolidated assets) for~~final rule whereby financial institutions ~~with assets of~~and financial institution holding companies that have less than $10 ~~billion. A “qualifying community bank” that exceeds this~~billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, will be ~~deemed~~eligible to opt into a community bank leverage ratio framework (“qualifying community banking organizations”). Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9% will be ~~in compliance with all other capital~~considered to have satisfied the generally applicable risk-based and leverage ~~requirements, including the~~ capital requirements toin the agencies’ capital rules and will be considered ~~“well capitalized”~~to have met the well-capitalized ratio requirements under the Prompt Corrective Action statutes. The ~~federal banking~~ agencies ~~may consider a financial institution's risk profile when evaluating whether it qualifies as a~~reserved the authority to disallow the use of the community bank ~~for purposes of the capital~~leverage ratio ~~requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%, and~~framework by a financial institution ~~will be able~~or holding company, based on the risk profile of the organization. The CARES Act and implementing rules temporarily reduced the community bank leverage ratio to ~~elect~~8%, to be ~~subject~~gradually increased back to ~~this new definition.~~9% by 2022. The ~~agencies~~CARES Act also provides that, during the same time period, if a qualifying community banking organization falls no more than 1% below the community bank leverage ratio, it will have ~~issued~~ a ~~proposed rule that, if finalized, would set~~two-quarter grace period to satisfy the ~~minimum Community Bank Leverage Ratio at 9%.~~community bank leverage ratio.

The following tables present actual capital levels and minimum required levels for the Company and the Bank under Basel III rules at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:


	March 31, 2019																March 31, 2020
									Minimum Capital				Minimum To Be Well												Minimum Capital				Minimum To Be Well
					Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt								Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt
	Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions				Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets:
Consolidated	$	369,529	10.2	%	$	162,360	4.5	%	$	252,561	7.0	%		n/a	n/a		$	399,290	10.0	%	$	180,119	4.5	%	$	280,185	7.0	%		n/a	n/a
Bank		447,912	12.4			162,354	4.5			252,551	7.0		$	234,511	6.5	%		471,664	11.8			180,106	4.5			280,165	7.0		$	260,153	6.5	%
Total capital to risk-weighted assets:
Consolidated		481,589	13.3			288,641	8.0			378,841	10.5			n/a	n/a			516,562	12.9			320,212	8.0			420,278	10.5			n/a	n/a
Bank		479,972	13.3			288,629	8.0			378,826	10.5			360,787	10.0			508,936	12.7			320,188	8.0			420,247	10.5			400,236	10.0
Tier 1 capital to risk-weighted assets:
Consolidated		369,529	10.2			216,481	6.0			306,681	8.5			n/a	n/a			399,290	10.0			240,159	6.0			340,225	8.5			n/a	n/a
Bank		447,912	12.4			216,472	6.0			306,669	8.5			288,629	8.0			471,664	11.8			240,141	6.0			340,200	8.5			320,188	8.0
Tier 1 capital to average assets:
Consolidated		369,529	8.1			182,344	4.0			n/a	n/a			n/a	n/a			399,290	8.2			195,100	4.0			n/a	n/a			n/a	n/a
Bank		447,912	9.8			182,346	4.0			n/a	n/a			227,933	5.0			471,664	9.7			195,116	4.0			n/a	n/a			243,895	5.0


	December 31, 2018																December 31, 2019
									Minimum Capital				Minimum To Be Well												Minimum Capital				Minimum To Be Well
					Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt								Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt
	Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions				Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets:
Consolidated	$	360,688	10.4	%	$	155,836	4.5	%	$	220,767	6.375	%		n/a	n/a		$	397,800	10.2	%	$	176,121	4.5	%	$	273,967	7.0	%		n/a	n/a
Bank		438,963	12.7			155,831	4.5			220,761	6.375		$	225,089	6.5	%		474,056	12.1			176,114	4.5			273,954	7.0		$	254,386	6.5	%
Total capital to risk-weighted assets:
Consolidated		472,382	13.6			277,041	8.0			341,973	9.875			n/a	n/a			510,862	13.1			313,105	8.0			410,950	10.5			n/a	n/a
Bank		470,657	13.6			277,033	8.0			341,963	9.875			346,291	10.0			507,118	13.0			313,091	8.0			410,932	10.5			391,363	10.0
Tier 1 capital to risk-weighted assets:
Consolidated		360,688	10.4			207,781	6.0			272,712	7.875			n/a	n/a			397,800	10.2			234,828	6.0			332,674	8.5			n/a	n/a
Bank		438,963	12.7			207,775	6.0			272,704	7.875			277,033	8.0			474,056	12.1			234,818	6.0			332,659	8.5			313,091	8.0
Tier 1 capital to average assets:
Consolidated		360,688	8.1			177,782	4.0			n/a	n/a			n/a	n/a			397,800	8.5			187,386	4.0			n/a	n/a			n/a	n/a
Bank		438,963	9.9			177,776	4.0			n/a	n/a			222,220	5.0			474,056	10.1			187,377	4.0			n/a	n/a			234,222	5.0

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

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

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

~~The Company's~~Our Asset and Liability Committee evaluates periodically, but at least four times a year, the impact of changes in market interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits established by senior management, which are reviewed and approved by the full Board of Directors at least annually. The economic environment continually presents uncertainties as to future interest rate trends. The Asset and Liability Committee regularly utilizes a model that projects net interest income based on increasing or decreasing interest rates, in order to be better able to respond to changes in interest rates.

At March 31, ~~2019, $760.5~~2020, $587.6 million, or ~~88.8%~~86.7%, of ~~the Company's~~our available for sale and held to maturity securities had fixed interest rates. At March 31, ~~2019, $2.6~~2020, $3.0 billion, or ~~76.6%~~79.7%, of ~~the Company's~~our loan portfolio had adjustable or floating interest rates. Changes in interest rates affect the value of ~~the Company's interest earning~~our interest-earning assets and, in particular, ~~its~~our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. Increases in interest rates could result in decreases in the market value of ~~interest earning~~interest-earning assets, which could adversely affect ~~the Company's~~our stockholders' equity and ~~its~~ results of operations if sold. ~~The Company is~~We are also subject to reinvestment risk associated with changes in interest rates. Changes in market interest rates also could affect the type (fixed-rate or adjustable-rate) and amount of loans ~~originated by the Company~~we originate and the average life of loans and securities, which can impact the yields earned on ~~the Company's~~our loans and securities. In periods of decreasing interest rates, the average life of loans and securities ~~held by the Company~~we hold may be shortened to the extent increased prepayment activity occurs during such periods which, in turn, may result in the investment of funds from such prepayments in lower yielding assets. Under these circumstances, ~~the Company is~~we are subject to reinvestment risk to the extent that ~~it is~~we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may result in decreasing loan prepayments with respect to fixed rate loans (and therefore an increase in the average life of such loans), may result in a decrease in loan demand, and may make it more difficult for borrowers to repay adjustable rate loans.

~~The Company utilizes~~We utilize the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. Management routinely monitors simulated net interest income sensitivity over a rolling two-year horizon. The simulation model captures the impact of changing interest rates on the interest income received and the interest expense paid on all assets and liabilities reflected on ~~the Company's~~our consolidated balance sheet. This sensitivity analysis is compared to the asset and liability policy limits that specify a maximum tolerance level for net interest income exposure over a one-year horizon given 100 and ~~200 basis~~200-basis point upward shifts in interest rates and a ~~100 basis~~100-basis point downward shift in interest rates. A parallel and pro-rata shift in rates over a twelve-month period is assumed.

In addition to the above scenarios, ~~the Company considers~~we consider other non-parallel rate shifts that would also exert pressure on earnings. The current low interest rate environment presents the possibility for a flattening of the yield ~~curve. This could happen if~~curve, which presents a challenge to a bank, like us, that derives most of its revenue from net interest margin. During the ~~FOMC began~~three months ended March 31, 2020, the yield on U.S. Treasury 5-year notes decreased 132 basis points from 1.69% to ~~raise short-term~~0.37%, while the yield on 3-month Treasury bills decreased 144 basis points from 1.55% to 0.11%. While the 3-month/5-year Treasury spread increased from 14 basis points at December 31, 2019 to 26 basis points at March 31, 2020, the yield curve continues to be considerably flat compared to the 3-month/5-year Treasury spread of 81 basis points at December 31, 2017. A continued flat or inverted yield curve in 2020 may adversely affect net interest income as borrowers tend to refinance higher-rate fixed rate loans at lower rates and we may not be able to reinvest those prepayments in assets earning interest rates ~~without there being a corresponding rise in long-term rates. This would have~~as high as the ~~effect of raising short-term borrowing costs without allowing longer-term assets to reprice higher.~~rates on those prepaid assets.

4754

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The following reflects ~~the Company's~~our net interest income sensitivity analysis at March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:


	March 31, 2019								March 31, 2020
	Potential Change								Potential Change
	in Future Net								in Future Net
Change in Interest	Interest Income								Interest Income
Rates in Basis Points	Year 1				Year 2				Year 1				Year 2
(Dollars in thousands)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
200	$	(2,355)	(1.68)	%	$	7,903	5.65	%	$	3,643	2.48	%	$	11,543	7.87	%
100		(847)	(0.61)			6,387	4.57			1,741	1.19			3,858	2.63
Static		—	—			—	—			—	—			—	—
(100)		(164)	(0.12)			(1,274)	(0.91)			187	0.13			(6,658)	(4.54)


	December 31, 2018								December 31, 2019
	Potential Change								Potential Change
	in Future Net								in Future Net
Change in Interest	Interest Income								Interest Income
Rates in Basis Points	Year 1				Year 2				Year 1				Year 2
(Dollars in thousands)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
200	$	(2,212)	(1.57)	%	$	8,767	6.23	%	$	1,028	0.70	%	$	12,075	8.21	%
100		(898)	(0.64)			7,355	5.23			520	0.35			6,787	4.62
Static		—	—			—	—			—	—			—	—
(100)		(435)	(0.31)			(266)	(0.19)			(574)	(0.39)			(3,586)	(2.44)

As noted in the table above, a ~~200 basis~~200-basis point increase in interest rates is projected to ~~decrease~~increase net interest income by ~~1.68 percent~~2.48% in year 1 and increase net interest income by ~~5.65 percent~~7.87% in year 2. ~~The Company's~~Our balance sheet sensitivity to such a move in interest rates at March 31, ~~2019~~ 2020~~increased~~ increased as compared to December 31, ~~2018~~2019 (which was ~~a decrease~~an increase of ~~1.57 percent~~0.70% in net interest income over a twelve-month period). This ~~slight~~ increase is the result of a ~~decrease in cash balances in the form of cyclical public deposits coupled with an increase in overnight borrowings partially offset by a~~ higher portion of ~~the Company’s~~our loans repricing to market rates. ~~The Company~~We also ~~continues~~continue to show the ability to hold the costs of interest-bearing deposits to below market rates. Overall, ~~the~~our strategy ~~for the Bank remains focused~~is shifting to a focus on reducing ~~its~~our exposure to ~~rising~~falling rates. Over the intervening year, the effective duration (a measure of price sensitivity to interest rates) of the bond portfolio decreased from ~~3.05~~2.35 years at December 31, ~~2018~~2019 to ~~2.68~~2.02 years at March 31, 2019. Additionally, the Bank has increased its use of swaps to extend liabilities. The Company believes that its strong core funding profile also provides protection from rising rates due to the ability of the Bank to lag increases in the rates paid to on these accounts to market rates.2020.

The preceding sensitivity analysis does not represent a Company forecast and should not be relied on as being indicative of expected operating results. These hypothetical estimates are based on numerous assumptions including, but not limited to, the nature and timing of interest rate levels and yield curve shapes, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows. While assumptions are developed based on perceived current economic and local market conditions, ~~the Company~~we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences may change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to prepayment and refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals, prepayment penalties and product preference changes and other internal and external variables. Furthermore, the sensitivity analysis does not reflect actions that management might take in responding to, or anticipating, changes in interest rates and market conditions.

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Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company's management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a‑15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, ~~2019.~~2020. The Company adopted new internal controls and modified existing internal controls upon the adoption of the CECL Standard for its allowance for credit losses which are substantially similar in nature to the internal controls used prior to the adoption of the CECL Standard for its allowance for loan losses. Based on that evaluation, the Company's Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective

~~Table of Contents~~

as of the end of the period covered by this quarterly report. There has been no change in the Company's internal control over financial reporting during the quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

4956

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are subject to certain pending and threatened legal actions that arise out of the normal course of business. In the opinion of management, the resolution of any such pending or threatened litigation is not expected to have a material adverse effect on the Company's consolidated financial statements.

Item 1A. Risk Factors

~~There have been no~~In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material ~~changes~~update and addition to the risk factors previously disclosed in ~~Item 1A., Risk Factors, in the Company's~~our Annual Report on Form ~~10‑~~10- K for the fiscal year ended December 31, ~~2018.~~2019 as filed with the Securities and Exchange Commission. To the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

The economic impact of the COVID-19 outbreak may have an adverse impact on our business and results of operations.

In December 2019, a novel coronavirus was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic. On March 12, 2020 the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 30 million people nationwide have filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in value. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our products and services may decline, making it difficult to grow assets and income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for credit losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

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the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

our cyber security risks are increased as the result of an increase in the number of employees working remotely; and

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability. Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

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

The following table presents information in connection with repurchases of our shares of common stock during the three months ended March 31, ~~2019:~~2020:

Total Number of

Shares Purchased

Maximum Number

as Part of

of Shares That May

Total Number of

Publicly

Yet Be Purchased

Shares

Average Price

Announced Plans

Under the Plans or


Purchased (1)

Paid per Share

or Programs

Programs (2)
January 1, 2019 through January 31, 2019

530

$
27.91

—

167,041
February 1, 2019 through February 28, 2019

22,926

33.13

—

167,041
March 1, 2019 through March 31, 2019

676

30.35

—

167,041
Total

24,132

32.93

—

167,041


				Total Number of
				Shares Purchased	Maximum Number
				as Part of	of Shares That May
	Total Number of			Publicly	Yet Be Purchased
	Shares	Average Price		Announced Plans	Under the Plans or
	Purchased (1)	Paid per Share		or Programs	Programs (2)
January 1, 2020 through January 31, 2020	163	$	33.25	—	977,400
February 1, 2020 through February 29, 2020	89,750		30.95	59,620	917,780
March 1, 2020 through March 31, 2020	120,932		23.33	120,000	797,780
Total	210,845		26.58	179,620

(1)

~~Represents~~Includes shares withheld by the Company to pay the taxes associated with the vesting of restricted stock awards.

(2)

The Board of Directors approved a stock repurchase plan in March 2006 that authorized the repurchase of 309,000 shares. In February 2019, the Company announced the adoption of a new stock repurchase plan for up to 1,000,000 shares, replacing the previous plan. There is no expiration date for the stock repurchase plan. No179,620 shares were purchased under athe repurchase program during the ~~quarter~~three months ended March 31, ~~2019.~~2020.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

5058

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Item 6. Exhibits




31.1		Certification of Principal Executive Officer pursuant to Rule 13a‑14(a)
31.2		Certification of Principal Financial Officer pursuant to Rule 13a‑14(a)
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a‑14(b) and 18 U.S.C. Section 1350
101		The following financial statements from Bridge Bancorp, Inc.'s Quarterly Report on Form 10‑Q for the Quarter Ended March 31, ~~2019,~~2020, filed on May ~~9, 2019,~~8, 2020, formatted in XBRL: (i) Consolidated Balance Sheets as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, (ii) Consolidated Statements of Income for the Three Months Ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iii) Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iv) Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, ~~2019~~2020 and ~~2018,~~2019, (v) Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2019~~2020 and ~~2018,~~2019, and (vi) the Condensed Notes to Consolidated Financial Statements.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document

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.

		BRIDGE BANCORP, INC.
		Registrant


May ~~9, 2019~~8, 2020		/s/ Kevin M. O'Connor
		Kevin M. O'Connor
		President and Chief Executive Officer

May ~~9, 2019~~8, 2020		/s/ John M. McCaffery
		John M. McCaffery
		Executive Vice President and Chief Financial Officer

5159


	March 31, 2019
					>90 Days		Non-accrual
	30-59		60-89		Past Due		Including 90		Total Past
	Days		Days		And		Days or More		Due and
(In thousands)	Past Due		Past Due		Accruing		Past Due		Non-accrual		Current		Total Loans
Commercial real estate:
Owner occupied	$	1,190	$	—	$	—	$	580	$	1,770	$	541,066	$	542,836
Non-owner occupied		—		9,292		—		878		10,170		849,627		859,797
Multi-family		—		—		—		—		—		624,114		624,114
Residential real estate:
Residential mortgages		1,934		—		—		422		2,356		444,193		446,549
Home equity		1,017		—		318		622		1,957		66,667		68,624
Commercial and industrial:
Secured		1,137		50		—		197		1,384		162,254		163,638
Unsecured		2,361		956		—		342		3,659		504,600		508,259
Real estate construction and land loans		—		—		—		—		—		147,116		147,116
Installment/consumer loans		—		—		—		30		30		22,751		22,781
Total loans	$	7,639	$	10,298	$	318	$	3,071	$	21,326	$	3,362,388	$	3,383,714