Dime Community Bancshares, Inc. Price & Performance (DCOM)

You will then hear an automated message advising your hand is raised. Withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stuart Laboe, President and CEO. Please go ahead.

Good morning, and thank you, Shannon, thank you all for joining us this morning for our first quarter earnings call. With me this morning is Avi Reddy, our CFO. In my prepared remarks, I will touch upon key highlights for the first quarter of twenty twenty five. Avi will then provide some details on the quarter and thoughts for the remainder of of the year. Core deposits were up 1,300,000,000.0 on a year over year basis. The deposit teams hired since 2023 have grown their deposit portfolios to $1,900,000,000 This has allowed us to pay down our brokered deposits to a fairly minimal level as well as reduce our FHLB borrowing position. We have made significant progress in creating a core deposit funded balance sheet. We reduced our cost of deposits to 2.09% in the first quarter, Our NIM has now increased for the fourth consecutive quarter to the 2.9% range. We continue to have several catalysts to continue to grow our NIM over the medium to long term. Including a significant back book loan repricing opportunity. Even with the current uncertain rate environment, we remain very bullish on our continued NIM improvement over the medium and long term. Will Avi will get into that in more detail in his remarks.

On the loan front, we continue to execute on our stated plan of growing business loans and reducing our CRE concentration. Business loans grew over $60,000,000 in the first quarter and over $400,000,000 on a year over year basis. Typically, first quarter is our slowest growth quarter of the year. [indiscernible] We have rebuilt our loan pipeline since year end and the pipeline currently stands at approximately $1,100,000,000 with an average yield of seven point two two. This compares $750,000,000 when we reported earnings in January. In addition, we have made several new hires who once they find their feet will contribute to the loan growth towards the year end. Our core earnings power has increased significantly over the past year, Core pre tax provision income was $46,000,000 in the first quarter of twenty twenty five compared to 28,000,000 a year ago. This translated into a core ROA of 77 basis points for the quarter. Finally, I will touch on our recruiting efforts. Disruption in our local marketplace remains very high and our recruiting pipelines continue to be strong. As outlined in our earnings release, we have added numerous bankers across the organization Our hiring efforts this year have been focused on growing both sides of the balance sheets.

Many of you who are familiar with the New York City banking area are familiar with Tom Geisel, who was a key part of the growth and success of Sterling. We expect Tom to be an integral part of our continued transformation to a highly profitable commercial bank. I'd also like to note that we recently announced plans to expand into the Lakewood Jersey marketplace. In conclusion, the momentum in our business is extremely strong, and we continue to execute on our business plan of growing the business loans and core deposits. We have clearly differentiated our franchise from our local competitors competitors as it relates to our growth trajectory and ability to track talented bankers. I'm looking forward to the remainder of 2025 want to again thank all our dedicated employees for their efforts in positioning Bank the bank as the best business bank of New York. With that, I will turn the call over to Avi. Thank you, Stu. Excluding the impact of the previously mentioned legacy Bridgehampton National Bank pension plan termination, adjusted EPS was $0.57 per share. This represents a 36% linked quarter increase and a 50% year over year increase. The reported NIM increased by 16 basis points, and the NIM excluding purchase accounting accretion increased by 19 basis points to two ninety four.

NIM expansion was driven by a significant reduction in our cost of deposits. We did have around three to four basis points of prepayment fees in the first quarter NIM. Excluding prepayment fees and purchase accounting, the NIM would have been around two ninety for the first quarter. Non brokered deposits were up approximately $65,000,000 at March 31 versus year end levels. As I mentioned on our fourth quarter earnings call, year end twenty twenty four deposits were inflated by approximately $200,000,000 of title company related deposits that were tied to a closing that left the bank in early January. Said differently, we grew non brokered deposits by approximately $250,000,000 this quarter versus year end levels you exclude the title company deposits from year end totals. We continue to manage expenses prudently. Core cash operating expenses for the first quarter, excluding intangible amortization, was $57,900,000 Non core items for the first quarter included $7,000,000 related to the previously disclosed termination of a legacy pension plan is now effectively complete. Non interest income of $9,600,000 for the first quarter reflected the full quarter impact of the BOLI repositioning transaction. We had a $9,600,000 credit loss provision for the quarter. Net charge offs to average loans decreased to 26 basis points and the allowance to loans increased to 83 basis points.

Capital levels continue to grow and our common equity Tier one ratio increased 11.1% and our total capital ratio grew to 15.7%. Having best in class capital ratios versus our local peer group allows us to take advantage of opportunities as they arise and it speaks to Dime's strength and our ability to service our growing customer base. Next, I'll provide some thoughts on guidance for the remainder of 2025. As I mentioned previously, we had approximately three to four basis points of prepayment fee income in the first quarter NIM. Excluding this and purchase accounting accretion, the base NIM for the first quarter was closer to $2.90. We would use this as a starting point for modeling going forward, as we don't expect the prepayment fees to repeat in that size in the coming quarter. We expect the second quarter NIM to remain range bound within a plus or minus three basis point range of the $2.90 base NIM. While we don't have a lot of low yielding repricing assets in the second quarter, starting in the second half of twenty twenty five, we have a meaningful increase in repricing assets. And expect margin expansion to resume in the second half of the year.

Give you a sense of the significant back book repricing opportunity in our Adjustable and Fixed rate loan portfolios, in the second half of 'twenty five and the full year 'twenty six, we have $1,950,000,000 of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 4%, that either reprice or mature in that timeframe. Assuming a two twenty five basis point spread on those loans of the forward five year treasury, we could see a 35 basis point increase in NIM from the repricing of these loans. As we look into the back book for 2027, we have another $1,750,000,000 of loans at a weighted average rate of 4.25 that will lead to continued NIM expansion in 2027. Moving on to the short end of the curve. When the Federal Reserve cut short term rates in 2024, our NIM benefited by approximately five basis points for each 25 basis point rate cut. Should the Federal Reserve cut rates in the second half of twenty twenty five, we expect this trend to repeat assuming the behavior in deposits and loans hold for each subsequent rate cut. And competition remains rational. In summary, assuming the market consensus forward curve plays out, we have a part to a structurally higher NIM and enhanced earnings power over time.

With respect to balance sheet growth, we expect net loans to remain relatively flat in the second quarter and growth to pick up in the back half of twenty twenty five. In the first quarter, attrition in CRE and multifamily masked the growth in our business loan portfolio. We expect this trend to moderate towards the end of twenty twenty five. In addition, as Stu mentioned, we have several new hires once they find their feet will contribute to loan growth towards the end of the year. With respect to core cash non interest expenses, our previous full year 2025 guidance was between $234,000,000 to $235,000,000 The prior guidance was based on our existing employee base at the end of twenty twenty four. Given the hires we have outlined in the press release, we are increasing our full year core cash noninterest expense guidance to $236,500,000 to $237,500,000 With that, I'll turn the call back to Shannon, and we'll be happy to take your questions.

Thank you. Our first question comes from the line of Steve Moss with Raymond James. Your line is now open. Good morning.

Hi, Steve. Good morning. Hey Steve. Maybe just starting on the loan pipeline, as you mentioned, nice pickup here. Relative to where was it at your end? Just curious the underlying mix within the loan pipeline.

The underlying mix of the loan pipeline.

Oh, yes. So again, it really continues the theme of C and I owner occupied CRE and healthcare. So at this point, we have $350,000,000 in C and I. Approximately $185,000,000 in owner occupied CRE and another $250,000,000 in healthcare That's making up the bulk of the of the pipeline. We actually have about $200,000,000 in loans approved, waiting to close. At a yield of about seven twenty five. [indiscernible] Great. Appreciate that. And then you know, you guys made a number of hires this quarter and obviously a year ago with the Signifor hires, just curious in terms of how you're thinking about the pace of deposit growth and any updates around the cost of new deposits you guys are bringing on these days?

Yes, Steve. So, you know, in terms of know, the teams Stu said, they're up to a billion 9 of deposits at this point. The total, you know, cost of deposits on them, including DDA is around $2.10 plus or minus. So they're bringing in stuff in the low twos. There's a very healthy mix of DDA in terms of what they're bringing in.

It's around 35 to 40%. Like I said on the last you know, earnings call, it takes teams probably three to four years to probably reach a steady state. Most of the teams that we have have been with us, you know, probably a year or two, you know, a couple of years at this point. I think on the last earnings call, Stuart mentioned that we'd opened around 11,000 accounts and 7,000 customers. We've grown that now to around 12,500 accounts and and 7,800 customers. So we'll continue to see steady growth in account opening as well. Like I said in my remarks, if you exclude the title company deposits that went out at the end at the beginning of the year, we would have grown core deposits by around $250,000,000 basically deposit ex broker would have grown them by $250,000,000 this quarter. So, Q1's typically slow for us. Q2 starts off with tax payments as well. And then it starts picking up once we get into May, June, July timeframe. So, we're pretty optimistic that, you know, we've got the right channels in place to fund, you know, a lot of the loan growth that we Yeah. And our pipelines are we review our deposit pipelines and our loan pipelines on deposit pipelines are very strong.

So we're we're very encouraged. Okay, great. And then just one on the credit front here. Reserve build was maybe a little bit less than I was thinking this quarter. Kind of curious, any updated thoughts and guidance around that?

Yeah, so I mean, Steve, we kept the CECL model relatively unchanged from your end levels. We kind of used Moody's forecast as of March. That's out there. I mean, total loans were flattish to down a little bit this quarter. So I think it's over time as Moody's adjust the forecast as we close more of these, C and I and business loans going forward, you'll see a natural uptick in the provision. Over time. Again, our medium to longer term target is that 90 basis points to 1% area. But overall, it's it's hard to predict the provision every individual quarter. Like I said, we're headed higher over time.

Okay, great. Nice quarter. Appreciate all the color here. Thanks.

You. Our next question comes from the line of Mark Fitzgibbon with Piper Sandler. Your line is now open.

Hey guys, good morning.

Hi Mark.

Avi, it strikes me that you guys are carrying a relatively large cash balance at a little over $1,000,000,000 Is that an opportunity for the margin as well? Do you think you could bring that cash level down over time? Is that the plan?

Yeah, I think that's fair Mark. However, I think [indiscernible] a lot of banks that had our profile two to three years back when rates went up 500 basis points. I think what we're trying to run the balance sheet for the medium to longer term and have have the right mix of floating rate assets and cash versus fixed rate assets. I know we're all gearing towards the Fed cutting rates, but we also just want to keep our ALM profile in check a little bit. And I think as we start putting on loans, some of that cash will get used up and also some of the loans that we're putting on our floating rate But in the interim, we don't want to rush out to buy securities and help the net interest income in the near term and hinder opportunities to grow loans in the longer term. But you're exactly right. Historically, we used to run the balance sheet with 200,000,000 to $300,000,000 of cash. We're running it with multiple of that at this point.

Okay. And then on the deposit front, I know you had some purposeful runoff for the broker deposits this quarter I think 137,000,000 Given that there isn't as much loan growth here in the first part of the year, was there a conscious decision to kind of put your foot on the brake a little bit on deposit growth here? Or just some seasonal patterns?

Yeah, no, a bit seasonal. First quarter is usually fairly weak. We have some seasonal tax receiver money as well go out And then April is also a little weak just because of tax payments. But what we've tried to do, Mark, is really make sure that we have a keen on the cost of deposits itself, right? So if there are new customers coming in at a rate in the mid fours, we're really not taking that at this point. We're really trying to keep it sub 4s on money market and making sure the overall cost is $2.25 to $2.50. I mean, over time, we're comfortable operating with a loan to deposit ratio between 9095% plus or minus. So you are right, as the loan growth picks up, we can put the pedal to the metal a little bit more on the deposit side.

Yes. Also purposely we can manage our I mean, this will portfolio a little bit more. So we had a significant municipal relationship that had in excess of $400,000,000 in deposits. They were relatively high cost [indiscernible] based on Fed funds rate, etcetera. And we basically asked them if they would move 100,000,000 to $150,000,000 out in terms of those deposits and those costs and we replace them with cheaper costs business deposits that we had brought in. So we do have some levers that we can push and pull to to manage cost of funds and deposit flows. And if we wanted that money back, we certainly could go get it. And it's a relationship we we've had for a very long time. So those are the kind of levers that we have today that we didn't always have.

Okay. And then lastly, Stu, I wondered if you could just share any color on the $8,700,000 uptick in non owner occupied real estate this quarter? Any was it one credit, couple credits? Anything special there?

Yeah. Yeah. It's just just one credit mark. So we we actually had exit of one credit that we previously identified, the legacy [indiscernible] loan that we exited this quarter. So we took that out, and then we had one previously identified classified loan that we have. We have a put and sale agreement on that. And we expect to exit that in second quarter. Nothing systemic. It was It was one item but we do expect that credit to be gone by the end of the second quarter.

Thank you.

Thank you. Our next question comes from the line of Christopher O'Connell with KBW. Your line is now open.

Hey, good morning. Hey, How are you? Hey, soup.

So just wanted to follow-up on the last question on the credit the purchase and sale agreement in place. Was that is that marked to the expected price in terms of either charge offs or a specific reserve at this point?

Yes.

Yes. Great.

And then I was hoping just to dig in. You you guys announced a number of hires over the course of the first quarter here. That were highlighted in the release. Hoping to dig in on just production calls on both the loan and deposit side from the various teams and hires here And I guess, the updated expense guidance, just kind of a breakeven timeline.

Yeah, I'll start with the the question here. I mean, typically, our experience Chris, on the on deposit side is that teams probably break even within six months. Just because the deposits come in fairly quickly. Generally teams have a couple of franchise clients that they're able to bring on. Early on and they pay for themselves pretty quickly. On the loan side, it's gonna take a little bit longer because it does take time to move loans over. You gotta wait for renewals, maturities, things like that. On the other side. I think we'll just leave it at, as Stu mentioned, it's going to help with the pace of pickup, especially on the C and I and business side. Going forward into next year. It's probably going to help us get closer to that mid single digits to high single digit growth that we want in 2026. It's obviously going to take a little bit of time for them to get going. Over here. So I'd say look for it to contribute to us starting in late 'twenty five into 'twenty six. Okay.

And I guess just, you know, without the production goals in place, just the breakdown percentage wise of the new hires of what you think is deposit versus loan hires? Out of those in the first quarter?

Yes, sure. So we hired one deposit team that's focused on the Queens market. So that one was specific just for deposits. We hired Jim Legato, who's focused on building out our presence in Manhattan. That's going to be on both the deposit and the loan side. We've Tom in a senior executive leadership role at the bank. Tom's focused on bringing on teams to help build out our C and I and and owner occupied franchises. So that's also on the loan side. And then Tony, came to us from M and T, so she's focused on the loan side. So I'd say it's probably 70% to 80% focused on the loan side, at least the hires to date. And I think that's consistent with what we said when we reported our last quarter earnings that focus on both sides of the balance sheet now as opposed to just the deposit side.

Understood. And and then just, you know, looking into the second quarter and some of the commentary on loans relatively flat. And NIM kind of core NIM being range bound around that $2.90. Just just hoping to flush out the dynamics there on why you're not a little bit more bullish even before the significant asset repricing begins in the second half of twenty five. Mostly just given, it sounds like the relatively strong pipeline at still give or take 200 basis points above the portfolio yield [indiscernible] there's not that much fixed asset repricing in q two, I guess I would think that that dynamic is kind of driving loan yields higher into the second quarter even without the fixed asset repricing beginning in the second half of the year.

Yeah, Chris. So what we said was, you know, two ninety is the base NIM, and we expect to be, you know, plus or minus three to four basis points. So there is wiggle room up and down from that. If I mean, just a math exercise, right? If you close $200,000,000 of loans in a quarter, you're probably to get three basis points of NIM expansion out of that. Just purely out of that piece, right? So we did take that into account. We only have around $100,000,000 of loans that are repricing in the second quarter. So it does come down to what's coming off the books versus what's coming on. Whereas you go to the second quarter of this year, sorry, the second half of this year, in the third quarter, for example, we have $400,000,000 of loans that are repricing. So it's a significant change in terms of that. And also these loans that are coming off the books, they're 3.5% to 4% plus. So it's kind of addition by subtraction from that. So we're focused on doing classic community commercial bank credits over here, within the bank, that's probably gonna be three to four basis points we think.

So I think we've we've we've provided a range on that. We just want to be thoughtful around the fact that April typically is is when people pay taxes as well. So it's gonna take a little of time to build back deposits. So we put all of that in there. I think the thing that I really focus on is really the destination on the NIM of where we think we're going to end up, If you factor in rate cuts, which may or may not happen, but if they do, we'll help us by five basis points. Then you take into account the volume of assets that are repricing, we're still as Stu said, pretty bullish about the medium to longer term getting to a NIM that's approaching the three fifty area in 2027. Yes.

And with the pipeline we have in the and the teams we brought on board, we're very, very excited about the opportunity. I think we are generally being somewhat conservative [indiscernible] the second quarter. It will be predicated upon our loan closings and how quickly these deals get through the pipeline. But we are excited about the second half of the year into 2026.

Understood.

Thanks, Avi. Thanks, Stu. That's all I had.

Thank you. Our next question comes from the line of Manuel Navis with D. A. Davidson. Your line is now open.

Hey, good morning. Just wanted to kind of expand and hear more color on what could the Lakeland, New Jersey branch kind of add and kind of how much more activity could there be around that branch, going forward? In terms of hiring and things like that?

Sure. So that's in Lakewood, Central Jersey. We've already hired a banker to to a private banker for that group in that area. It's an area I know very well very very attached to the Brooklyn community as well. And so it's natural jumping off point and our first foray into into New Jersey. I actually ran a bank in that area years back, so I know the area very well. And there's a significant amount of deposit and loan opportunity available, and we thought that as our first foray, it was the the appropriate location because there is such a dovetail so well with an existing deposit base and customer base that we have in Brooklyn.

Okay.

You talked a little bit about hiring pipeline staying high. It Is there any other color you can add to what parts of the footprint are kind of have the most activity and is it gonna continue to be lending focused like the first quarter? Or is there still kind of more deposit teams to come?

Yeah, think it's a mix of both Manuel. I mean, obviously, we've identified growing in Manhattan, growing in New Jersey, and then complementing some of the Long Island areas that we have. So everything's gonna be in our existing footprint or in a targeted footprint that we have. I think we've tried to be very surgical about what works for Dime. Over here, we We have a client base, and we've seen what's worked for us. So we're very focused focused on what works for us. Like I said, we're going to pick and choose what works for us, and and also it's important that the economics work for us. So we're very focused on making sure people that we bring on contribute to the bottom line. Within six to twelve months, and we wanna stay with that discipline. So that's what we're gonna do going forward.

Can you speak a bit to the levels of competition in the region on on those hires first, and then just kind of across pricing on loan and deposits?

Yeah. I I look. I think there are other banks that are interested in in doing what we've done. They've seen our success. I think we've been the most successful out of the at a cadre of institutions that have been somewhat more aggressive. Think we've done it in a much more surgical way. We have kept our our site on the profitability of these teams and and we've shown success. Obviously, can see it in our cost of funds, [indiscernible] core deposit growth, etcetera. Terms of pricing, I think today it's rational. And I think some of the players who have had problems, who have pushed some irrational deposit pricing are moderating. So that's certainly helpful. And so I mean, from a loan and deposit standpoint, I think pricing is rational. Although we're not in the market, I think multifamily pricing has come down dramatically. But I think overall, we're pretty happy with the current rate environment and the structure of our balance sheet will prove to be very very profitable for us as time moves on, as we continue to reprice reprice the book.

I appreciate that. Thank you for the commentary.

Thank you. Next question comes from the line of Matthew Breese with Stephens Inc. Your line is now open.

Hey, good morning.

Morning, Matt.

I wanted to excuse me. I wanted to start on deposit costs.

And the trajectory excluding additional Fed cuts So the last time we spoke in January, the spot cost and deposits was 2 to $2.00 5. Going cost for the quarter was $2.00 9, so a modest a little bit of a pickup. Should we read into that at all? Are are deposit cost reductions nearing the end without additional rate cuts?

No. So, Matt, the way we typically operate with the deposit costs is we initially start by passing on the full amount to a lot of customers. And then over time, you have some customers that come back and say, hey, I got this other aid from this other bank, can you match it? And we never match it, but sometimes you meet in between. So there's other banks that follow different strategies where they wait a month or two and cut differently. So I would say look, as we bring in DDA into the bank, our goal is to keep deposit costs in that low 2% area. We do have some CDs on the balance sheet that are repricing lowers. So as that happens, we're probably retaining 80% to 90% of the CDs that we have at this point. Probably have around seven fifty million of CDs left. And the rates on those are probably three seventy five ish plus or minus. Those are probably repricing in the low threes at this point. So there is some, but I would say the best environment for us is if the Fed cuts 25 basis points every three months, we'll have an opportunity then to pass on that to customers on the other side.

But I would say, absent that, given the Fed cuts that have happened, we still have a CD book that we're repricing down But beyond that, most of the cuts are in there.

Got it. Okay.

And then with all the tariff noise, have lending spreads, particularly on on commercial real estate and C and I have they changed at all to account for incremental risk And and what exposures on your book are you monitoring more carefully in light of the tariffs?

Yeah, look, it's a little too early. We haven't seen a lot of [indiscernible] spreads on the on the book at this point on commercial real estate in particular, And generally, we've done a deep dive into the portfolio. Look, we don't have a lot of importexport or manufacturing. We don't have a lot of retail The things that or consumer, for that matter, that you would typically be concerned with. It's a little early to see how it all plays out within the general economy, whether it's in the service industry or construction. Those are the areas that we're looking at [indiscernible] very closely and monitoring. We're looking at line usage and things of that nature. But it's a little early yet.

Okay.

Next one for me is just that we're we're just over the two year mark for the signature failure. Is that a significant milestone in any way? I'm not thinking in terms of employee lockup agreements, Are there going to be more opportunities this year to hire teams and individuals in the wake of that.

No. I don't I don't think so, Matt, in terms of specific lockup agreements. I mean, I can't comment on what the surviving bank there is doing. But I think for us, we identified early on what markets we want to do. [indiscernible] Obviously, was certain areas of Long Island that we wanted to expand into. Staten Island, Westchester. So for us, it's more market based and who works for the business model that we have. There's still a lot of talented people over there. There's talented people at other banks too. If you look at the hires that we've had year to date, they've come from multiple banks, right? It's not been just from one bank. So I think that the opportunity that was there two years back doesn't exist anymore. But there are talented people across the board here. I think as they see the success that we've had, we're getting a lot of incoming calls going forward, not just from that bank, but from other banks as well.

Understood. Okay.

Two other quick ones for me. Don't know if I if you addressed it in your opening comments, Avi. Could you touch on the fee income guide for the year? I think it was 40,000,000 to $42,000,000 Does that that still hold?

Yes. So this quarter, Matt, we didn't have any swap fee revenue. It was pretty pretty close to zero. A lot of the deals got pushed to May and June type time frame. So if you took the Q1 number and you assume there was some moderate level of swaps in there, we would have been pretty close to that 40,000,000 to $42,000,000 guide for the full year. So we can still keep that for the full year at this point.

Okay. And then you had mentioned just strong capital levels, particularly your CET one ratio. Curious your thoughts on buybacks. With the stock down, where it is and potentially a slower growth environment? That's all I have. Thank you. Yeah.

Yeah. Look, mean, the corporate finance view is to be buying back stock at this point. Significantly. However, I just think given the overall environment [indiscernible] certain new tariffs, things like that, it's important to have that especially as we have this loan pipeline that we're looking to close. I mean, Tom's come on board. To help us build out the C and I portfolio. So I think that little bit of excess capital is helpful right now. The other marker that we've set out there is to get our CRE ratio into the low 400s. So we made further progress this quarter. We're probably at four forty at the end of the quarter. So we'd like to see that decline a little bit as well. So you put that all together, we feel good with where we're at. At some point, in latter half of this year, under 2026, we'll probably revisit the buyback piece, but it's more from an optics and managing the environment as opposed to the intrinsic value in the And clearly, our pipeline and the teams we brought on board and the individual we brought on board, we're we think there's going to be an opportunity to deploy that capital in a meaningful way and improve earnings as well.

That's all I had. Thank you.

Thanks, Matt. Appreciate it.

Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to Stuart LeBeau for closing remarks.

Thank you, Shannon, and thank you all for joining us today and to our dedicated employees and shareholders for their continued support. We look forward to speaking with you after the second quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.