Dime Community Bancshares, Inc. /NY/ Q3 FY2024 earnings call

• Dime continued executing on growth plan, with strong momentum in core deposits and business loans. Net interest margin improved due to growth in core deposits and cost reduction in deposits. - Expense levels were $57.4 million, with expectations to keep them flat in Q4 and 2025 through efficiency initiatives. - Business loans had a strong quarter with $125 million growth and a weighted average rate on new originations of ~8%. - Asset quality was solid with low net charge offs and controlled NPAs. - Capital ratios were building, and loan loss reserve was built by ~9% or 6 basis points. - Key themes included disruption in marketplaces, impact of declining rates on NIM, and growth in DDA (now ~30% of deposits). - Avi discussed NIM trajectory, loan loss provision details including model enhancements, and back book loan repricing opportunity in 2025-2026.

In the third quarter, Dime grew core deposits by over $500 million and the business loan portfolio by $125 million. The net interest margin increased to 250 basis points. Non-interest income for the third quarter was $7.6 million. Core cash operating expenses for the third quarter excluding intangible amortization were $57.4 million. The loan loss provision was $11.6 million. Asset quality remained solid with net charge offs at 15 basis points. Capital ratios were strong: total capital at 14.8% and common equity Tier 1 ratio at 10.2%. Core deposits contributed significantly, making up a notable portion of the balance sheet, and business loans showed strong growth with a robust pipeline in C&I and healthcare lending verticals.

• Expect NIM to continue expanding, with the potential to return to a 3% plus net interest margin and higher in 2026. - Over the next 9 to 12 months, expect loan loss reserve to be in the 90 basis points to 1% area. - Business loan portfolio expected to continue growing with a strong pipeline, aiming to end the year with ~$11 billion in total gross loans. - Anticipate NIM improvement from the impact of rate cuts and back book loan repricing.

• Uncertainties in the Federal Reserve's rate cutting decisions could impact swap fee revenue and overall NIM. - Competition in the market could affect deposit growth and loan origination. - Changes in the interest rate environment could impact the repricing of loans and deposits, affecting margins. - Potential risks associated with the performance of the loan portfolio, though asset quality was currently solid.

Q: Steve Moss asked about deposit trends and future growth.

A: Avi Reddy and Stuart Lubow discussed deposit growth from new hires, remixing the balance sheet by paying off FHLB and reducing broker deposits, with significant runway for deposit growth and plans for hiring in 2025.

Q: Manuel Navas inquired about loan growth pipeline and reserve levels.

A: Stuart Lubow and Avi Reddy talked about the strong loan pipeline in C&I, healthcare, and owner occupied CRE, and the plan to reach 90-100 basis points in loan loss reserves over 9-12 months with gradual build.

Q: Mark Fitzgibbon asked about non-performers and CRE risk-based capital ratio.

A: Avi Reddy confirmed the non-performer issue was due to a partnership dispute and no specific reserve, and discussed the target to be in the low-400s for risk-based capital ratio over 12 months.

Q: Matthew Breese asked about deposit and loan betas and percentage of floating rate loans.

A: Avi Reddy provided details on deposit beta (~55%) and loan beta (~20-25%), and mentioned ~35% of loans are pure floating rate.

Q: Christopher O'Connell asked about reserve commentary and new teams' deposit mix.

A: Avi Reddy explained the CECL model complexities and deposit mix from new teams being in line with expectations, around 35-40% DDA.