Dime Community Bancshares, Inc. /NY/ Q2 FY2024 earnings call

• Dime continued to execute on growth plan, with strong momentum in business, growing core deposits and business loans.
• Net interest margin increased by 20 basis points, with expectation of slow and steady NIM build absent rate cuts, and rate cuts/loan portfolio repricing to accelerate NIM expansion in later years.
• Successfully raised $75 million in subordinated debt. Total capital ratio was 14.5% at end of second quarter, ranking top in local peer group.
• Asset quality solid, with NPAs and classified assets down linked quarter.
• Received regulatory approval for new branch in Westchester. Onboarded additional deposit-gathering teams in May and June, including one in Williamsburg and one in Manhattan. Hired banker for not-for-profit lending vertical.
• Healthcare vertical has substantial loan pipeline at attractive yields, expected to meaningfully contribute to loan growth and balance sheet diversification.

In the second quarter, Dime grew core deposits by over $300 million and business loans by over $200 million. Net interest margin increased by 20 basis points. Non-interest income was $11.8 million. Core cash operating expenses (excluding intangible amortization) were $55.4 million. Asset quality remained solid with NPAs down 29% on a linked quarter basis. Classified assets were expected to be down approximately 14% on a linked quarter basis. Revenue contribution details weren't explicitly broken down by product segment beyond the general growth areas.

• Expect slow and steady improvement in NIM absent rate cuts; rate cuts and loan portfolio repricing in later half of 2025 and 2026 to accelerate NIM expansion.
• Q3 core cash operating expenses expected around $57 million, with plan to hold that run rate in 2025 with very nominal growth.
• Loan portfolio expected to be up low single-digits in second half of the year.
• Healthcare and middle market C&I loan pipelines significant, with $172 million in healthcare at 7.80% and $130 million in C&I at 8.5%.

• General risks related to economic conditions affecting loan provisions.
• Competition in deposit and lending markets could impact NIM and growth.
• Regulatory changes could affect operations and expansion plans.

Q: What was the spot NIM for June?

A: The June NIM was a little inflated due to a four basis point benefit from the payoff of a previous non-accrual loan. Backing that out, the spot NIM for June was probably around 2.36%-2.37% ex the sub-debt.

Q: Is the $5.5 million provision a good run rate for the remainder of the year?

A: The provision is evaluated every quarter based on economic conditions. It's a function of Moody's forecasts and ongoing shift in loan portfolio.

Q: How big of a push plan to make in Westchester?

A: Have two teams up there, just got approval for a branch, and plan to bring on more teams over time rather than many new bricks and mortar branch locations.

Q: Reiterate OpEx guide for next quarter and expense initiatives?

A: Expect Q3 core cash operating expenses to be approximately $57 million, plan to hold that run rate in 2025 with very nominal growth, with more details to come in January.

Q: Pipeline on hires and healthcare loan growth?

A: Still seeing talent on both deposit and lending sides, healthcare pipeline is $172 million at 7.80%, C&I pipeline is $130 million at 8.5%.

Q: Could NIM increases accelerate in fourth quarter with rate cut?

A: Yes, with rate cut in September and later, NIM increases could accelerate, with loan yields already up and expected to accelerate with new originations and repricing.

Q: Repricing opportunity details?

A: Repricing opportunity includes $2 billion of adjustable and fixed rate loans in back half of 2025 and 2026 at 3.9% weighted average rate, expected to add 35 basis points to NIM.

Q: Deposits growth and blended cost of funds?

A: Deposits expected to continue growing, with around 700-800 accounts opened this quarter, blended cost of funds from new deposits around 2.50%-2.75%.

Q: Rent-regulated loans maturity and qualitative data?

A: In Q3, around $10 million in rent-regulated loans mature, Q4 around $15-20 million. No significant issues with customers, debt service coverage generally positive.

Q: Impact of 25 basis point rate cut on margin?

A: Impact depends on competition, but deposit base skewed towards commercial customers with more money markets, expected to benefit from rate cuts, aiming for NIM back to 3% plus by later 2025/2026.

Q: Good tax rate going forward?

A: Around 27% going forward, considering discrete items in the quarter.