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

• Dime continued to execute on growth plan, growing core deposits by over $300M and business loans by over $200M. - Net interest margin increased by 20 basis points, with expectation of slow and steady NIM improvement absent rate cuts, and rate cuts/legacy loan repricing to accelerate NIM in later years. - Successfully raised $75M in subordinated debt. - Asset quality solid, with NPAs down 29% QoQ and classified assets expected to be down ~14% QoQ. - Received regulatory approval for a new branch in Westchester County. - Onboarded two 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.

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. Loan loss provision was $5.6 million. The CET1 ratio was above 10% and the total capital ratio was 14.5%. Core deposits contributed significantly to the growth, with business loans also showing strong growth. Non-interest income included a gain on the sale of a branch. Expenses were managed, and the loan loss provision was based on economic conditions.

• Expect slow and steady build in NIM absent rate cuts; rate cuts and legacy loan repricing to accelerate NIM expansion in 2025-2026. - Core cash operating expenses expected to be ~$57M in Q3 and hold with nominal growth in 2025. - Loan portfolio expected to grow low single-digits in second half of the year. - Successfully raised $75M in subordinated debt.

Q: What was the spot NIM for June?

A: June NIM was a little inflated due to payoff of previous non-accrual loan, but backing that out, spot NIM would have been around 2.36%-2.37% for June ex sub-debt.

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

A: Provision is evaluated every quarter based on economic conditions, function of Moody's forecasts, and will change with ongoing shift in loan portfolio.

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

A: Have two teams up there, got approval for a branch, not looking to open many retail locations, but will bring on more teams over time.

Q: OpEx guide for next quarter?

A: Expect core cash operating expenses to be approximately $57 million in Q3 and hold with very nominal growth in 2025.

Q: Pipeline on hires?

A: Still talking to folks, talent available on both deposit and lending sides, healthcare and C&I pipelines significant.

Q: NIM with rate cut in September?

A: Slow and steady NIM increases could accelerate in fourth quarter with rate cut, loan yields already up and expected to accelerate with new originations and repricing.

Q: Repricing opportunity includes loan side only?

A: Repricing opportunity is just off the forward curve for $2B in back half of 2025-2026 at 3.90% rate, remixing loan portfolio adds to NIM, and deposit growth helps offset broker deposits.

Q: Rent-regulated loans maturing in second half?

A: In Q3 around $10M, Q4 around $15M-$20M, very modest this year, no issues with satisfied/repriced loans.

Q: Expense discussion and savings opportunities?

A: Merit increase impacts in Q1 2025, working on company-wide initiatives for nominal expense growth in 2025, expense to asset ratio expected to come down as balance sheet grows.

Q: Customer service fees drop?

A: Due to rollover fees on loans repricing, with seasonal items, nothing material.

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

A: Depends on competition, deposit base skewed towards commercial customers with more money markets, goal to get margin back to over 3%, internal model shows getting there latter part of 2025-2026.

Q: Good tax rate going forward?

A: Around 27% going forward.