Dime Community Bancshares, Inc. /NY/ Q1 FY2024 earnings call

• Dime began 2024 on solid footing, with core deposits up 19% y/y and FHLB borrowings paid down by 41%.
• Hired over 30 revenue-producing bankers since mid-March; 2023 hires have grown deposit portfolios to ~$600 million.
• Technology and treasury management systems are state-of-the-art; brand reputation as a strong community bank with 60 branches from Montauk to Manhattan.
• Entered Westchester County, closed first healthcare loan; healthcare pipeline at $150 million with 8% weighted average yield.
• NIM bottomed in January, expanded to 2.23% in March; exit NIM would have been higher without excess liquidity in February/March.
• Core cash operating expenses down 3% q/q; non-interest income $10.5 million including branch sale gain.
• Allowance to loans at 71 basis points; common equity Tier 1 ratio improved to 10%, total capital ratio 13.8%.
• Expense guide for 2024 increased to $214 million-$216 million; new groups expected to be cumulatively breakeven in Q4 2024, accretive in 2025.
• Loans expected to be up low single-digits y/y, with growth in business lending offsetting declines in multifamily and CRE.

In the first quarter, Dime grew core deposits by 19% annually. The net interest margin (NIM) bottomed in January and expanded to 2.23% in March. Core cash operating expenses (excluding intangible amortization and extinguishment of debt) for the first quarter were $51.7 million, down 3% versus the prior quarter. Non-interest income was $10.5 million, including a gain on the sale of a branch. The loan loss provision was $5 million, and the allowance to loans increased to 71 basis points. Reported EPS was $0.41 per share, in line with expectations.

• Expense guide for 2024 revised to $214 million-$216 million, reflecting new hires and efficiency initiatives.
• New deposit groups expected to be cumulatively breakeven in Q4 2024, with accretive earnings starting in 2025.
• Loans projected to increase low single-digits y/y.
• NIM expected to have an upward bias due to stabilization in deposit costs, no liquidity drag, more loan originations, and treasury maturities.

• Impact of regional bank disruption in Q1 causing excess liquidity in February/March, affecting NIM.
• Macro environment uncertainties posing risks to balance sheet and NIM.
• Potential challenges related to CRE and multifamily loan repricings and maturities.

Q: Steve Moss of Raymond James asked about the deposit potential and specialties of new hires from Signature.

A: Avinash Reddy stated the group managed several billion in deposits, fits the community commercial banking model, with teams based in Brooklyn, Five Towns, and Westchester; teams are slightly bigger than 2023 hires, and over 1,000 accounts opened in first 3 weeks of new hires.

Q: Gregory Zingone of Piper Sandler inquired about additional hirings and capital needs.

A: Stuart Lubow said they're talking to several teams, expect at least one more soon; Avinash Reddy noted capital is strong (common equity Tier 1 10%, total capital 13.8%) and confident in remixing balance sheet by paying down borrowings and growing business portfolio.

Q: Manuel Navas of D.A. Davidson & Co. asked about reserve level and NIM improvement.

A: Avinash Reddy said comfortable with 71 basis points for allowance to loans; criticized and classified down y/y; NIM expected to have upward bias due to deposit cost stabilization, no liquidity drag, and more loan originations.

Q: Christopher O'Connell of KBW asked about deposit team breakeven and margin impact.

A: Avinash Reddy said new teams expected to breakeven in Q4 2024 at ~$350M-$400M deposits; margin expected to trend up with upward bias due to various factors including deposit cost stabilization, no liquidity drag, and loan originations.