Q4 2021 Dime Community Bancshares Inc Earnings Call

Speaker 2: Hello, and welcome to the Diamond Community Bank Shares, Inc. 4th Quarter Earnings.

Hello, and welcome to the Dime Community Bancshares, Inc, fourth quarter earnings call.

Before we begin the company would like to remind you that discussions during this call contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.

Speaker 2: Before we begin, a company would like to remind you the discussions during this call contained forward-looking statements made into the safe harbor provisions of the U.S. for private securities litigation before the act of 1995.

Speaker 2: Such statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contained in any such statement, including as set forth in the company's filings with the U.S. Securities and Exchange Commission, to which we refer

Such statements are subject to risks uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in the company's filings with the U S Securities and Exchange Commission to which we refer you. During this call references we made to non-GAAP financial measures as supplemental measures to review and asked.

Speaker 2: During this call, reference will be made to non-GAAP financial measures and supplemental measures to review and assess operating...

So operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U S. GAAP.

Speaker 2: These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about the

For information about these non-GAAP measures.

Speaker 2: and for information about the non-GAAP measures and for reconciliation to the GAAP, please refer to the earnings release. As a reminder, this call is being recorded. I will now pass the call over to CEO , Kevin O'Connor.

At the firm or refreshing all of these non-GAAP measures and for reconciliation to GAAP. Please refer to the earnings release as a reminder, this call is being recorded are not pass call over to CEO , Kevin O'connor.

Good morning, and thank you Keith.

Speaker 3: And thank you all for joining us this morning on our fourth quarter earnings conference call.

Thank you all for joining us this morning on our fourth quarter earnings Conference call.

Speaker 3: With me again are Stu LeBeau, our President and Chief Operating Officer, and Avi Reddy, our CFO .

With me again, our stool, Lebow, President and Chief operating officer, and I'll be ready our CFO .

As we approach the one year anniversary of our M O.

Speaker 3: As we approach the one-year anniversary of our MOE, it is especially gratifying to discuss our fourth quarter results, if you indulge me a bit, the accomplishments of the new DIME team over the past 12 months.

It is especially gratifying to discuss our fourth quarter results. If you indulge me a bit the accomplishments of the new dawn team over the past 12 months.

Speaker 3: To begin, we had a strong quarter with reported net income of $33.5 million or $0.83 per share.

To begin.

We had a strong quarter with reported net income of $33 5 million or 83 per share.

Speaker 3: After adjusting for one-time expenses associated with the merger, branch closures, and asset sales.

After adjusting for onetime expenses associated with the merger branch closures and asset sales.

Speaker 3: Net income would have been 33.8 million or 84 cents.

Net income would have been $33 8 million or <unk> 84 per share.

Speaker 3: This translates to an adjusted ROA of 1.15% and a return on tangible common equity of 14.7%.

This translates to an adjusted ROA of 1.15% and a return on tangible common equity of 14, 7%.

Most importantly, we continue to operate the bank at a sub 50% efficiency ratio and have delivered on all of our stated merger goals.

Speaker 3: Most importantly, we continue to operate the bank at a sub 50% efficiency ratio and have delivered on all of our states.

As we look back on 2021, our employees spent a tremendous amount of time and effort building our new organization.

Speaker 3: As we look back on 2021, our employees spent a tremendous amount of time and effort building our new organization. Success of this is evidence in our organic growth metrics.

Success of this is evidenced in our organic growth metrics.

We are ahead of schedule and enhancing the quality of our deposit base and have grown noninterest bearing deposits to 37, 5% of total deposits.

Speaker 3: and have grown non-interest bearing deposits to 37.5% of total deposits. This is the highest percentage of any bank in our footprint.

This is the highest percentage of any bank in our footprint.

In the fourth quarter, we had record loan originations of over $500 million alright.

Speaker 3: In the fourth quarter, we had record loan originations of over $500 million for an annualized run rate of over $2 billion.

For an annualized run rate of over $2 billion.

Speaker 3: The velocity of rigidations has increased almost 10% each order since we've merged the

The velocity of originations has increased almost 10% each quarter since we merged the banks.

Speaker 3: If you recall, second quarter originations were $425 million, the third quarters were $465 million, and again in the fourth quarter it was $505 million at a weighted average rate of 3.52 percent.

If you recall second quarter originations were $425 million the third quarters of 465 and again in the fourth quarter was $505 million at a weighted average rate of 352%.

Speaker 3: Despite continued high payoff levels this quarter, especially on the multifamily front, where they're in excess of $35 billion.

Despite continued high payoff levels this quarter, especially on the multifamily front, where they are in excess of 35% or increased production resulted in core net loan growth for the quarter.

Speaker 3: Our increased production resulted in core net loan growth for the quarter.

Our loan pipeline remains strong as.

Speaker 3: As each quarter goes by, our lending teams become more familiar with each other, the process, and the new origination system we implemented, and are truly firing on all cylinders.

As each quarter goes by our lending teams become more familiar with each other.

Process and the new origination system in the Atlantic.

And our truly firing on all cylinders.

As interest rates rise over the course of the year, we pay off we expect payoff rates across the loan portfolio to moderate.

Speaker 3: We expect pay off rates across the long portfolio to moderate

Speaker 3: lower payoffs coupled with a 2 plus billion in origination capacity.

These lower payoffs coupled with a two plus billion in origination capacity will lead to stronger loan growth over the course of 2022.

Speaker 3: lead to stronger loan growth over the course of 2022.

Speaker 3: While we have produced strong return metrics in a low rate environment, our high level of DDA and core funded balance sheet positions us well for rising rates.

While we have produced strong return metrics and a low rate environment, our high level of DDA and core funded balance sheet positions us well for rising rates.

Speaker 3: Relative to other metro banks, New York banks, we believe the value of our deposit franchise will shine through in this expected rising rate environment.

Relative to other metro banks near banks, we believe the value of our deposit franchise will shine through with its expected rising rate environment.

Speaker 3: I'll leave it to Avi to dive into more detail on this and the impact of rising rates on the loan portfolio.

I'll leave it to all of you to dive into more detail on this and the impact of rising rates on the loan portfolio in this.

Speaker 3: As you're all aware, there have been several large merger transactions in our marketplace, none of which have closed yet, but we believe these transactions will provide us a chance to add talented bankers and create potential from a business perspective. We believe DIME is extremely well-positioned to capitalize on this disruption and leverage these opportunities to grow our customer service.

As you're all aware there have been several large merger transactions in our marketplace, none of which have closed yet.

But we believe these transactions will provide us a chance to add talented bankers and create potential from a business perspective, we believe dime is extremely well positioned to capitalize on this disruption and leverage these opportunities to grow our customer centric banking business.

Speaker 3: Our non-performing loans remain at low levels and loan deferrals have been reduced substantially.

Our nonperforming loans remained at low levels and loan deferrals have been reduced substantially.

Speaker 3: Capital ratios remain strong, and we enter the third quarter with an annual equity ratio of 8.645.

Capital ratios remained strong and we ended the third quarter with a tangible equity ratio of 864%.

Speaker 3: A low-risk balance sheet performs favorably in stress testing relative to the industry, has afforded us the opportunity to be very active on the capital return.

Our low risk balance sheet performance favorably and stress testing relative to the industry has afforded us the opportunity to be very active on the capital return front.

Speaker 3: During the fourth quarter, we stepped up the pace of repurchases and bought back $29 million of common stock.

During the fourth quarter, we stepped up the pace of repurchases and bought back $29 million of common stock.

Speaker 3: As we told you last quarter, we believe there was significant value in our stock, and given our trading levels and earnings trajectory and balance sheet profile, we doubled the level of our capital return to shareholders.

As we told you last quarter, we believed there was significant value in our stock and given our trading levels and earnings trajectory and balance sheet profile, we doubled the level of our capital returned to shareholders.

We have approximately 1 million shares left in the current authorization and expect to continue managing our capital levels efficiently overtime.

Speaker 3: We have approximately 1 million shares left in the current authorization and expect to continue managing our capital levels efficiently over time.

To conclude my prepared remarks, we had a strong quarter with improved margins record loan originations and continued improvement in our deposit franchise.

Speaker 3: To conclude my prepared remarks, we had a strong quarter with improved margins, record loan originations, and continued improvement in our deposit franchise. Taking a step back,

Taking a step back 2021 was an outstanding year for di we successfully integrated our merger transaction and we delivered on all of our stated merger goals were.

Speaker 3: We successfully integrated our merger transaction and we delivered on all of our stated mergers.

Speaker 3: We are again a leading provider of PPP loans, making over 2,000 loans totaling 600 million. And importantly, we organically grew DDA by over 950 million since the closing of our transact.

We were again, a leading provider of PPP loans, making over 2000 loans totaling $600 million and importantly, we organically grew DDA by over $950 million since the closing of our transactions.

Speaker 3: As we look forward to 2022, I and the board continue to believe that tremendous opportunity.

As we look forward to 2022, I and the board continue to believe the tremendous opportunity in front of US. We are a pure play community commercial bank highly focused on being responsive to our customers' needs and in a position to benefit from expected high rates.

Speaker 3: We are a pure play community commercial bank, highly focused on being responsive to our customers' needs, and in a position dependent from expected high-risk. We are a pure play community commercial bank, highly focused on being responsive to our customers' needs, and in a position dependent from expected high-risk.

Speaker 3: At this point, I'd like to turn the conference call over to Avi, who provides an additional color on our quarterly results as well as our expectations for 2022.

At this point I'd like to turn the conference call over to Avi, who will provide some additional color on our quarterly results as was our expectation for 2022.

Thank you Kevin our reported net income to common for the fourth quarter was 33 and a half million dollars included in this quarter's results or approximately half a million dollars in aggregate onetime items associated with merger related expenses branch closures and gain on sale of assets.

Speaker 4: Thank you, Kevin. Our reported net income to common for the fourth quarter was $33.5 million. Included in this quarter's results were approximately half a million dollars in aggregate one-time items associated with merger-related expenses, branch closures, and gain on sale of assets.

Speaker 4: If you recall, when we announced our merger transaction, we had committed to delivering an ROA of 110 in a 12 month timerized and after closing. And in this regard, we were happy to deliver an adjusted ROA of 115 for the fourth quarter.

If you recall, when we announced our merger transaction, we had committed to delivering an ROA of 110 in a 12 month time horizon. After closing and in this regard we were happy to deliver an adjusted ROA of $1 15 for the fourth quarter.

Speaker 4: We lowered our cost of deposits in the fourth quarter by another two basis points to 11 basis.

We lowered our cost of deposits in the fourth quarter by another two basis points to 11 basis points.

Speaker 4: The spot rate on the positive set your end was even lower at approximately 9 basis points.

The spot rate on deposits at year end was even lower at approximately nine basis points.

As outlined in the press release, we still have some opportunities on the CD front to lower deposit costs. In total we have approximately $700 million of Cds at a cost of approximately 50 basis points coming due in 2022.

Speaker 4: As outlined in the press release, we still have some opportunities on the CD front to lower deposit costs. In total, we have approximately $700 million of CDs at a cost of approximately 50 basis points coming to you in 2022.

Speaker 4: Importantly, we believe we have removed a significant amount of rate sensitivity from our deposit base, as we have not retained rate-sensitive accounts.

Importantly, we believe we have removed a significant amount of rate sensitivity from our deposit base as we have not retained rate sensitive accounts. These actions coupled with a higher percentage of noninterest bearing deposits than our Metro New York peers should result in our deposit betas lagging other banks in our footprint.

Speaker 4: These actions, coupled with a higher percentage of non-interest-bearing deposits than our Metro New York peers, should result in our deposit betas lagging other banks in our footprint.

The reported net interest margin was $3 14, as we've done previously we've provided details in the press release on the impact of purchase accounting and PPP.

Speaker 4: The reported net interest margin was 314. As we've done previously, we've provided details in the press release on the impact of purchase accounting and PPP.

Speaker 4: The sum of purchase accounting accretion on acquired loans and PPP income was effectively negative $86,000 for the fourth quarter. This compares to a positive $5 million contribution from these line items in the third quarter.

The sum of purchase accounting accretion on acquired loans and PPP income was effectively negative $86000 for the fourth quarter. This compares to a positive $5 million contribution from these line items in the third quarter.

As we've mentioned previously as part of purchase accounting some loans about quiet gross premiums and salmon gross discount and this quarter, we had more loans that were at a premium that paid off.

Speaker 4: As we mentioned previously, as part of purchase accounting, some loans were acquired at gross premiums and some at gross discounts. And this quarter, we had more loans that were at a premium that paid off.

Speaker 4: The net accretion balance from purchase accounting currently stands at approximately 1.85 million and is actually higher than the 1.2 million we had at the end of the third quarter, due to pay off of loans that were premium.

The net accretion balance from purchase accounting currently stands at approximately 1.85 million and is actually higher than the $1 2 million. We had at the end of the third quarter due to payoff of loans that were premium.

Speaker 4: As mentioned previously, there will be some lingering impact from purchase accounting on the income statement in 2022, depending on payoff activities.

As mentioned previously there'll be some lingering impact from purchase accounting on the income statement in 2022, depending on payoff activity.

Speaker 4: Excluding the impact of PPP and purchase accounting, the adjusted NIM of 317 was 7 basis points above the third quarter adjusted NIM of 310. We were pleased with the 7 basis points expansion as we continued to hold the line on loan pricing. We benefited from reductions in the cost of deposits and we also reduced our average cash position in the quarter coinciding with not retaining CD balance.

Excluding the impact of PPP in purchase accounting the adjusted NIM of 317 was seven basis points above the third quarter adjusted NIM of 310, and we were pleased with the seven basis points expansion as we continue to hold the line on loan pricing, we benefited from reductions in the cost of deposits and we also reduced our average cash position in the quarter.

Owen, citing would not retaining CD balances.

Speaker 4: Importantly, our average non-interest-paying deposits for the fourth quarter surpassed the $4 billion mark and were up approximately $300 million versus the linked quarter.

Importantly, our average noninterest bearing deposits for the fourth quarter surpassed $4 billion, Mark and were up approximately $300 million versus the linked quarter.

Speaker 4: Core cache operating expenses, including merger-related items, branch restructuring, and intangible amitization for the fourth quarter came in at $48.7 million, which was slightly below the previously telegraphed amounts for expenses for the fourth quarter of $49 million. Importantly, we have operated the company consistently at a sub-50% efficiency ratio.

Core cash operating expenses, excluding merger related items branch restructuring and intangible amortization for the fourth quarter came in at $48 7 million, which was slightly below the previously telegraphed amount for expenses for the fourth quarter of $49 million Importantly, we have operated the company consistently at a sub 50% efficiency ratio.

Noninterest income for the fourth quarter included approximately $900000 of gain on sale of the assets primarily related to the sale of an owned branch property.

Speaker 4: Non-interest income for the fourth quarter included approximately $900,000 of gain-on-sale on the process, primarily related to the sale of an owned branch property. Backing out this item, run rate non-interest income would have been closer to $9 million.

Backing out this item run rate noninterest income would have been closer to $9 million.

Speaker 4: Moving on to credit quality, we had a negative provision in the quarter of $132,000. All else equal in assuming no major changes in macroeconomic conditions, we expect provisioning levels in the future to be driven by trends and growth in our loan portfolio. Our existing allowance for credit losses of 91 basis points is still above the historical combined levels of the legacy institutions. We feel very comfortable with our current reserve levels based on current economic conditions.

Moving on to credit quality, we had a negative provision in the quarter of $132000 all else equal and assuming no major changes in macroeconomic conditions, we expect provisioning levels in the future to be driven by trends in growth in our loan portfolio, our existing allowance for credit losses of 91 basis points is still above that.

Historical combined levels of the legacy institutions, we feel very comfortable with our current reserve levels based on current economic conditions.

Speaker 4: During the fourth quarter, we ramped up our share repurchase activity and bought back over 850,000 shares at $34.44.

During the fourth quarter, we ramped up our share repurchase activity and bought back over 850000 shares at $34.44.

Speaker 4: We believe Sherry Purchases continue to be attractive given our trading levels, our organic growth prospects, and strong balance sheets that perform favourably in the stress test.

We believe share repurchases continue to be attractive given our trading levels, our organic growth prospects and strong balance sheet that the thumbs favorably in the stress testing.

Speaker 4: We will continue to manage our balance sheet efficiently and with a tangible equity ratio of 864, which is above our comfort zone of 8% to 8.5%. We will continue to be active on the Sherry Purchase Front in 2022.

We will continue to manage our balance sheet efficiently and with a tangible equity ratio of <unk> 64, which is above our comfort zone of 8% to eat in the half we will continue to be active on the share repurchase front in 2022.

Speaker 4: Attacks rate of 30.9% for the fourth quarter was higher than normal due to non-aductable expenses. Now let's turn over to guidance.

Our tax rate of 39% for the fourth quarter was higher than normal due to nondeductible expenses.

Now, let's turn over to guidance and targets for 2022.

Speaker 4: We expect loan growth for 2022, excluding PPP of approximately 4% to 6%.

We expect loan growth for 2022, excluding PPP of approximately 4% to 6%.

Speaker 4: We've clearly demonstrated strong loan originations with sequential growth every quarter. We look forward to building upon our existing $2 billion annualized run rate of loan originations in 2022 and believe that once loan paydowns moderate, loan growth will pick up in the back half of 2022.

We feel he demonstrated strong loan originations with sequential growth every quarter, we look forward to building upon our existing $2 billion annualized run rate of loan originations in 2022 and believe that once loan paydowns moderate loan growth will pick up in the back half of 2022.

As you know, we don't provide quarterly quantitative NIM guidance, we did want to provide you some directional perspective.

Speaker 4: As you know, we don't provide quarterly quantitative NIM guidance. We did want to provide you some directional perspectives. Our internal forecast assumed four rate hikes in 2022 and three more in 2023 with curve flattening, wherein the spread between the six-month and five-year compresses to approximately 15 basis points by the middle of next year.

Total forecast assumed four rate hikes in 2022, and three more in 2023 with car flattening wherein the spread between the six months and five your compressors to approximately 15 basis points by the middle of next year.

In this scenario, we see NIM gradually improving and reaching a level of approximately 330 by the middle of 2024 expansion will be more pronounced in 2023 and 2024 as the impact of rate increases work their way through our loan portfolio.

Speaker 4: In this scenario, we see NIM gradually improving and reaching a level of approximately 330 by the middle of 2024. Expansion will be more pronounced in 2023 and 2024 as the impact of rate increases work their way through our loan portfolio, and we reprice into a higher rate environment for origination.

Reprice into a higher rate environment for originations.

Speaker 4: Underlying these assumptions are cumulative total deposit betas of between 20% to 25% for the entire tightening cycle with the total deposit betas for the first 100 basis points of rate per phase, mortal.

Underlying these assumptions our cumulative total deposit betas of between 20% to 25% for the entire tightening cycle with a total deposit beta for the first 100 basis points of rate hikes being less than 20%.

Speaker 4: As a reminder, approximately 25% of our $9 billion loan portfolio is floating rate, off which approximately 1.2 billion will replace immediately with a single rate hike and an additional 900 million which have flows that are currently in the money will reprise with 100 basis points of rate.

As a reminder, approximately 25% about $9 billion loan portfolio is floating rate of which approximately $1 2 billion will replace immediately with a single rate hike and an additional 900 million, which have floors that are currently in the money will reprice with 100 basis points of rate hikes.

We expect core cash noninterest expenses, excluding intangible amortization to be between $197 million and $119 million for 2020 to the expense guidance takes into account wage inflation that you have all no doubt seen we remain committed to operating the company with a sub 50% efficiency ratio.

Speaker 4: We expect core cash non-interest expenses, excluding intangible amodization, to be between $197 million and $199 million for 2022. The expect guidance takes into account wage inflation that you have all no doubt seen. We remain committed to operating the company with a sub 50% efficiency ratio.

Speaker 4: We expect non-interest income to be within a range of $33 million to $34 million. This guidance takes into account adjustments we have made to NSF and overdraft fees, as well as the impact of the Durbin Amendment, which will kick in for us in the middle of 2022.

We expect noninterest income to be within a range of 33 million to $34 million.

This guidance takes into account adjustments, we have made to NSF and overdraft fees as well as the impact of the Durbin Amendment, which will kick in for us in the middle of 2022.

Speaker 4: We expect to manage our capital ratios efficiently and are very comfortable operating the company at an 8.5% tangible equity ratio, which translates to 7.5% on the TCE ratio.

We expect to manage our capital ratio as efficiently and are very comfortable operating the company at maiden to half the fantastical equity ratio, which translates to seven 5% on the TCE ratio.

Speaker 4: As such, we expect to be active on the share buyback front throughout 2022, keeping these capital ratios in mind.

As such we expect to be active on the share buyback front throughout 2022, keeping these capital ratios in mind.

Speaker 4: Finally, with respect to the tax rate for 2022, we expect it to be between 28.5% and 29%.

Finally, with respect to the tax rate for 2022, we expect it to be between 28.5% and 29%.

With respect our medium term goals, it's our intention to drive a return on assets to the 120 to 125 area by the back half of 2024 and operate with the DDA ratio in excess of 40%, having just crossed the 10 billion asset threshold. We believe we have the infrastructure in place for a larger organization and as such growth.

Speaker 4: With respect to medium-term goals, it's our intention to drive our return on assets to the 120 to 125 area by the back half of 2024 and operate with a DDA ratio in excess of 40%. Having just crossed the $10 billion asset threshold, we believe we have the infrastructure in place for larger organizations, and as such, growth in the coming years will be accretive to our ROAs. With that, I'll turn the call over.

In the coming years will be accretive to our iron.

With that I'll turn the call back to the operator for questions.

Yes. Thank you at this time, we will begin the question and answer session.

Speaker 2: Yes, thank you. At this time, we will begin the question and answer session.

Speaker 2: To ask a question, you may press star then 1 on your touch-tone phone.

I ask a question you May press Star then one on your Touchtone phone.

Speaker 2: If you are using a speaker phone, please pick up your hand that before pressing the keys. To enjoy your question, please press star 2. At this time, we'll pause momentarily to assemble the roster.

If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

And the first question comes from Mark Fitzgibbon with Piper Sandler.

Hey, guys good morning.

Mark.

Speaker 5: Mark. Two clarification points, Avi, on your guidance, which was very helpful. Did you say the effective tax rate would move back to sort of your previous, you know, expectations around 27.5%?

Two clarification points out of your on your guidance, which was very helpful. Did you say the effective tax rate would move back to sort of your previous.

You know expectations around 27, 5%.

Speaker 5: No, Mark, the guidance for 2022 was 28 and a half to 29 on the tax rate. We had some benefits, lingering benefits this year from a tax strategy associated with our REITs, and that's going to go away, some of it went away here in Q4. So next year, the guide is between 28 and a half and 29. Okay, great. And then you said the margin you think can get to around 330 by the middle of 24. Is that right?

No Mark the guidance for 2022 was 28th in the half to 29 on the tax rate, we had some benefits lingering benefits. This year from a tax strategy associated with our REIT and Thats going to go away something went away here in Q4. So for next year the guidance between 28 and a half in 'twenty nine.

Okay, Great and then you said that the margin you think can get to around 330 by the middle of 'twenty four is that right.

Yep Yep, that's right I mean again.

Speaker 4: Yep, yep, that's right. I mean, again, you know, we've, you know, our assumptions are based on seven rate hikes and curve flattening, you know, obviously, if you know, we have a steeper curve, we'll do we'll do better. But, you know, based on our base scenario, you know, that's kind of where we expect to be, you know, kind of, you know, 24 months out.

Assumptions are based on seven rate hikes and called flattening. Obviously, if we have a steeper curve will do we will do better but you know based on our base scenario, that's kind of where we expect to be kind of you know 24 months out.

Speaker 5: Okay. And then Kevin, you referenced the pipeline being strong. I wondered if you could quantify that and also maybe give us some sense of the mix.

And then Kevin you referenced the pipeline being strong I wondered if you could quantify that and also maybe give us some sense of the mix.

Sure So hi.

Speaker 3: Sure. So, hi, Mark. It's Stu Lubow. Currently, the pipeline is about $2.1 billion. It's the highest it's ever been. It continues to grow each quarter. The average yield on the portfolio is, or on the pipeline, is in the high threes at this point. The mix is $1.8 billion.

Hi, Mark its Stuart.

Currently the pipeline is about.

$2.1 billion.

Highest its ever been.

<unk> continues to grow each quarter.

Average yield on the portfolio is or on the pipeline is in the high threes at this point.

The mix is.

Speaker 6: is basically CRE at about 50%, multifamily at about 20%, and the remaining at, you know, in the CNI bucket.

Is basically CRE at about 50%.

<unk> family at about 20% and the remaining are.

As you know in the C&I bucket at this point.

Okay, Great and then.

Speaker 5: Great. And then I know you reference those CDs that you guys have maturing later this year at higher rates. Do you think it's likely we'll see more runoff of that CD book and maybe the balance sheet contracts a little bit more in the early part of 2022?

I know you referenced those Cds that you guys have maturing later this year at higher rates.

Do you think it's likely we will see more runoff of that CD book and maybe the balance sheet contract a little bit more in the early part of 2022.

Speaker 4: Yeah Mark so far we you know our retention rate and CDs has actually been a lot higher than we thought we've got you know really a low rate and we're still retaining 60 to 70 percent of that but you know as we get into our you know rising rate and

Yeah, Mark so far.

Retention rate in Cds has actually been a lot higher than we thought we've got really low rate and what's still retaining 60% to 70% of that but as we get into a rising rate environment. You know sure there'll be a little more attrition there on the Cds, but the key goal here is really growing DDA right and and so we've grown that ratio up to 37.

Speaker 4: Sure, there'll be a little more attrition there on the CDs, but the key goal here is really growing DDA, right? And so we've grown that ratio up to 37.5%. We grew average DDA by around 300 million in the fourth quarter. So I think we will have deposit growth next year. We're migrating the bank away from higher rate-sensitive consumer CDs.

5%, we grew average DDA by around $300 million in the fourth quarter. So.

We will have deposit growth next year, what migrating the bank away from higher rate sensitive consumer Cds, we've already got there on the money market side, there's really not much rate sensitivity left in that so I think by the middle half of this year, our transition away from the legacy basis, it's pretty much done.

Speaker 4: We've already got there on the money market side, there's really not much rate sensitivity left in that. So I think by the middle half of this year, our transition away from the legacy base is pretty much done and we're not going to have that headwind in terms of growing deposits over time.

And we're not going to have that headwind in terms of growing deposits overtime.

Okay, and then last question I guess I'd be curious when you all think.

Speaker 5: Okay. And then last question, I guess I'd be curious when you all think you'd be in a position to want to do another acquisition.

You'd be in a position to want to do another acquisition.

Thank you.

So I think it is.

Speaker 3: I think that, you know, as I said, I think that we've done all the things we needed to integrate this company. And so I think we stand ready at this moment, if there was an opportunity.

As I said I think that we've done all the things we needed to integrate this company.

And so.

We stand ready at this moment, if there was an opportunity but.

So yeah I think at this point you know, we're really focused on growing the bank organically building our franchise, creating more value for our shareholders, we think our deposit base.

Speaker 6: yeah i think at this point you know we're really focused on growing uh... the bank organically building our franchise creating more value for shareholders we think are

Speaker 6: And, you know, our high level of DDA creates a lot of franchise value as rates rise. And you know, so certainly, you know, we have the ability, we're fully integrated, but, you know, our real focus is on running, you know, what we feel is a very strong company that has a lot of future value.

Our high level of DDA creates a lot of franchise value as rates rise.

And so certainly.

We have the ability were fully integrated but our real focus is on running.

What we feel is a very strong company that has a lot of future value.

Speaker 4: And Mark, I'd be remiss if not pointing out we bought back $30 million of our shares in Q4. I mean, the best investment we can make right now is really, you know, putting it back in the company and organic growth. So we're going to stick with that.

Mark I'd be remiss in not pointing out we bought back $30 million of our shares in Q4, I mean, the best investment we can make right now is really putting it back in the company and organic growth. So we're going to stick with that.

Great. Thanks, guys.

Thank you and the next question comes from Matthew Breese with Stephens, Inc.

Speaker 2: Thank you. And the next question comes to Matthew Breed with Steven Zank. Good morning.

Good morning.

Okay.

Speaker 7: Hey, um, um, a couple of quick ones, you know, maybe just give us a sense for the outlook on liquidity. I mean, it's not as elevated as it once was, but you still have some access cash and along the same lines, you know, what the outlook is for securities growth.

Couple of quick ones, maybe just give us a sense for the outlook on liquidity I mean, it's not as elevated as it once was but you still have some excess cash and along the same lines what the outlook is for securities growth.

Speaker 4: So, you know, on the securities growth, we really don't expect to grow that portfolio, Matt. We'd like to see, you know, the cash flows from that being reinvested in the loan growth. You know, we probably have, you know, around, you know, somewhere between $150 and $200 million of cash flows from that portfolio. It's a pretty short duration portfolio. We're not really looking to add there apart from, you know, you know.

So you know.

On the securities growth, we generally don't expect to grow that portfolio, Matt we'd like to see the cash flows from that being reinvested into loan growth.

We probably have around somewhere between $150 and $200 million of cash flows from that portfolio. It's a pretty short duration portfolio, we're not really looking to add there apart from.

Just standard needs like buying securities for CRA purposes, and things like that you are right we have.

Speaker 4: standard needs, like buying securities for CRA purposes, things like that. You are right. We have, on our balance sheet, when we look at it, there's probably 300 to 400 basis points of excess liquidity. We're very comfortable managing the bank.

Our balance sheet when we look at it there's probably 300 to 400 basis points of excess liquidity, we're very comfortable managing the bank at eight 5% to 9% cash and unencumbered securities to total assets ratio.

Speaker 4: at an 8.5% to 9% cash and unencumbered securities to total assets ratio.

Speaker 4: We're higher than that right now. We're probably at 12 to 15 percent.

We're higher than that right now, we're probably 12% to 13% so over time over a three year forecast. We believe we're going to take that take that down and obviously as we put that excess liquidity into into loans, it's going to be attractive to the NIM going forward, we're not rushing to deploy that cash right. Now we're just we're just.

Speaker 4: So over time, over our three-year forecast, we believe we're going to take that down. And obviously, as we put that excess liquidity into loans, it's going to be attractive to the NIM going forward. We're not rushing to deploy that cash right now. We're just waiting. And obviously, we'd like to see it come through loan growth versus buying six months.

Waiting and obviously, we'd like to see it come through loan growth versus buying securities.

Got it Okay, and then going back to the loan growth Guide I was curious about the components and where do you expect to see it come from and I guess, I'm, particularly interested in where and how we see kind of multifamily trends you know, it's now down to about 36% of total loans I'm, just curious where you see that bottoming.

Speaker 7: I think going back to the loan growth guide, I was curious about the components and where you expect to see it come from. I guess I'm particularly interested in where and how we see kind of multi-family trends. It's now down to about 36% of total loans. I'm just curious where you see that bottoming or where you want it to be as a percent of total loans.

Or where you want it to be as a percentage of total loans.

You know, Matt we've always said, we wanted to be in that business, but not to the level that we are today, we do think it's a good a good ROI.

Speaker 6: You know, Matt, we've always said we want to be in that business, but not to the level that we we are today. We do think it's a good, a good, you know, risk adjusted asset, you know.

Risk adjusted asset.

No.

Speaker 6: We did do quite a bit of origination. In the fourth quarter, we did about $209 million of mobile family, but we had over $330 million in satisfaction. Pre-payments were in the 35, 37% range. So our average yield on that portfolio and new originations was in the mid-3s, about 340. So we're still in the business.

We did do quite a bit of origination in the fourth quarter, we did about $209 million of multifamily, but we had over $330 million.

And satisfaction, so prepayments, where we're in the 35, 37% range. So.

Our average yield on our portfolio and new originations was in the mid threes about 340.

So we're still in the business.

Speaker 6: but we do see over time that becoming a lower percentage of our total book. We booked about $250 million of CRE in total.

But we do see over time that.

That becoming.

A lower percentage of overall total book.

We booked about $250 million of of CRE in total, but about $91 million of that was owner occupied.

Speaker 6: but about 91 million of that was owner occupied and we still see that as kind of our niche in terms of growing the bank and very important in terms of building relationships and you know those owner occupied usually come with TNI credits as well so you know I think

And we still see that as kind of R. R.

Our niche in terms of growing the bank and very important in terms of building relationships.

No.

Owner occupied usually come with C&I credits as well so.

Think.

That's really where we're focusing multifamily will continue to be part of our business, but we didn't as you know it's a very.

Speaker 6: You know, that's really where we're focusing. Multifamily will continue to be part of our business, but, you know, we didn't, as you know, you know, it's a very rate-sensitive asset, and we didn't chase the assets over the last six months. As we entered into a rising rate environment with, you know, the really aggressive players being sub-3%, we were not in that market.

Rate sensitive asset.

We didn't chase.

Chase the chassis assets over the last six months says as we enter into a rising rate environment with.

The really aggressive players being sub 3% we were not in that market.

Yes.

Speaker 7: Got it. Okay. And then Avi, I appreciate the kind of financial outlook for 22. I'm curious if there's anything on the strategic front that you all would mention as well. Any new business lines or geographies you'd like to attack?

Got it Okay, and then Avi I appreciate the kind of financial outlook for 'twenty two I'm curious if there's anything on the strategic front that you all would mentioned as well any new business lines or geographies you'd like to attack.

Speaker 6: You know, at this point, we're really focusing on getting our treasury management, you know, really functioning on all cylinders. We've really come a long way, and that's been really, you know, what has helped us really grow our commercial DDA balance.

You know at this point, we're we're really focusing on getting our treasury management.

Really.

<unk> on all cylinders, we really come a long way and.

That's been really what has helped us really grow our commercial DDA balances.

Speaker 6: We're seeing the income in that business rising dramatically over the next couple of years. You know, certainly we're looking at all new tech, all the new tech that's out there, but there's nothing real specific in terms of new ventures at this point.

Being fee income in that business are rising dramatically over the next.

A couple of years.

Certainly we're looking at all new Tech all of the new technology, that's out there, but theres nothing real specific in terms of.

New ventures at this point.

Okay, and then last one from me credit quality feels very much.

Speaker 7: And the last one for me, you know, credit quality feels very much for yourselves and for the industry, you know, as a back burner type issue. The only real area I still get questions on is particularly, you know, New York City office.

For yourselves and for the industry as a back burner type issue. The only really are you I still get questions on is particularly New York City office.

Speaker 7: And I'm just curious, I don't think it's a huge concern for you, but just curious what your thoughts are on the health of that particular asset class and whether or not there's any differences between kind of what you see in the suburbs of Long Island versus the more metropolitan areas of the borough.

And I'm just curious I don't think its a huge concern for you, but just curious what your thoughts are on the on the health of that particular asset class and whether or not there's any differences between kind of what you see in the suburbs of long island versus the more metropolitan areas of the boroughs.

Speaker 6: Well, certainly, Long Island, Office Space, and the Stubberpev have picked up. There's been quite a bit of activity.

Well, certainly long island office space in the suburbs.

<unk> picked up theres been quite a bit of activity.

Speaker 6: out here in Nassau in Suffolk County turns a new lease, leasing activity. But the fourth quarter in New York City had, you know, a very good

Out here in Nassau and Suffolk County in terms of new leasing activity, but the fourth quarter in New York City at a very good quarter in terms of new leasing activity. So.

Speaker 6: quarter in terms of new leasing activity so it hasn't

It Hasnt.

Speaker 6: You know, it's starting to level out and stabilize, and we think, you know, we'll not get any

It is starting to level out and stabilize in and we think.

Well not get any worse from from where it is today. Our total Manhattan office exposure is $180 million I mean, it's not a big part of what we've been doing and I will tell you that the new originations.

Speaker 6: from where it is today. Our total Manhattan office exposure is $180 million. I mean, it's not a big part of what we've been doing. And I will tell you that the new originations

Speaker 6: are very minimal, off the top of my head I can't think of any office space that we've done in Manhattan in the last 12 months. So it's really not a big exposure for us, it's certainly a concern for the industry, but it's not something that we're concerned about.

Are very minimal.

Off the top of my head I can't think of any office space, though.

We've done in Manhattan.

The last 12 months so it's.

Really not a big exposure for us.

It's certainly a concern to the industry, but it's not something that we're concerned about.

Great. That's all I had I appreciate you taking my questions. Thank you.

Speaker 7: Great. That's all I had. I appreciate taking my questions. Thank you.

Thanks Pat.

Thank you and the next question comes from Chris O'connell with K B W.

Speaker 2: Thank you, and the next question, constant Chris O'Connor with KBW.

Good morning, gentlemen.

Speaker 8: I just wanted to start off on the fee, guys.

I just wanted to start off on the on the fee guide.

Yeah.

Speaker 8: The run rate from this quarter seemed to, you know, come in a little bit higher than the guide for next year, and I had the Durban impacted about, you know, $2 million annual, so $1 million in the back half of the year. You guys mentioned the NSFBs. I'm just wondering maybe what else was, you know, going into that guidance.

The run rate from this quarter seem to.

Come in a little bit higher than the guide for next year and I had the durbin impact at about.

$2 million annual $7 million in the back half of the year, you guys mentioned that NSF fees and I'm just wondering maybe what else was.

No.

Going into that guidance.

Yes, Chris I mean, we seasonally have higher fees in Q3 and Q4, you know there is a host of fees in terms of in a rental fees rollover fees inspection fees that typically go in.

Speaker 4: Yeah, Chris, I mean, we seasonally have, you know, higher, you know, fees in Q3 and Q4, you know, there's a host of, you know, fees in terms of, you know, rental fees, rollover fees, inspection fees that typically go in, in Q3 and Q4. I mean, we've taken a really hard.

In Q3, and Q4 and we've taken a really hard look.

Speaker 4: you know, look at, you know, all fee items at the bank. I mean, the biggest one is really, you know, NSF and overdraft. So, you know, a guide for that 33, 34, you've seen across the industry, you know, people changing their practices, you know, so have we. So that's the biggest delta between, you know, the 9 million annualized, you know, gets you to 36, down to 33 to 34.

Look at all fee items at the bank I mean, the biggest one is really NSF and overdraft. So our guide for that 33 34, you've seen across the industry people changing their practices. So have we so that's the biggest delta between the 9 million annualized you know get to the 36 down to 33 to 34.

Speaker 4: The residential business, you know, we had a million five to million seven of fee income this year We're probably assuming that's down, you know close to a million dollars So if you put all of that together, it's gonna come down We believe that some upside in that number based on you know our SBA team We don't have a lot of you know loan level swap income in there You know if we see some traction there that's gonna be an upside But we just wanted to provide a conservative number at the start of the oil You know given some of the headwinds especially on NSF and overdraft

Residential business, we had 1 million $5 seven of fee income. This year, we're probably assuming that's down close to $1 million. So if you put all of that together, it's going to come down we believe that some upside in that number based on our SBA team. We don't have a lot of loan level swap income in there if we see some traction there that's going to be in.

Upside, but we just wanted to provide a conservative number at the start of the given some of the headwinds, especially on NSF and overdraft fees.

Speaker 8: Understood. Appreciate the color there and we're going to circle back to the NIM guide. I know it's, you know, fairly long-term there to get to that 330 number and, you know, the curve's flattening in the guide. I was thinking, you know, more short-term, you know, how are you guys thinking about the, you know, progression here?

Understood I appreciate the color there.

Or circle back to the NIM.

Hi.

I know it's.

Fairly long term there to get to that.

<unk> 30 number and you know the curve flattening.

And the guide.

Speaking more short term.

<unk>.

How are you guys thinking about.

Progression here.

Speaker 8: over the course of 2022, you know, in that scenario.

Over the course of 2022.

In that scenario.

Yeah of course, we're going to stay away from quarterly guidance I was pretty clear on that upfront.

Speaker 4: Yeah, Chris, we're going to stay away from quarterly guidance. I was pretty clear on that upfront. I mean, the base number we're starting with is 317. We've given guidance. We're going to get into the 330s in mid-2024. We've given, in terms of where we are, we've given some guidance on the deposit betas. We also have $1.2 billion of loans that are going to reprice with the first 25 basis point rate hikes.

The base number was starting with the $3 17, we've given guidance, we're going to get into the three facilities in mid 2024.

Given in terms of where we are we've given some guidance on the deposit betas. We also have a $1 two of loans that are going to replace with the first 25 basis point rate hikes.

Speaker 4: Right now, the new origination rate that we had for Q4 was between 350 and 355.

Right now the new origination rate that we had for Q4 was around three between $3 50 and $3 55.

Speaker 4: Our payoff rate on the loan portfolio is around $375 at this point.

Hey off rate on the loan portfolio is around 375 at this point. So you have you know a few higher yielding loans paying off obviously entering a rising rate environment as those origination yields go go up you are not going to see any NIM compression associated with loans coming in and out of the portfolio. So I think we're comfortable with.

Speaker 4: So you have a few higher yielding loans paying off. Obviously entering a rising rate environment as those origination yields go up, you're not gonna see any nymph compression associated with loans coming in and out of the portfolio. So I think we're comfortable where we are. I think sometimes people get hung up a lot in terms of ramps and...

We are I think sometimes people get hung up a lot in terms of you know ramps in and in ramp scenarios and shock scenarios I think I'd point, you to our EV disclosures in our 10-Q.

Speaker 4: And in ramp scenarios and shock scenarios, I think I'd point you to our EVE disclosures and our 10Q. You look at us and you compare us to any other bank in the metro New York area. Our EVE with positive rates were up in the double digits in terms of what that is. And ultimately.

You look at Us and you compare that to any other bank in the Metro New York area RGB.

With positive rates were up in the double digits in terms of you know what that is and ultimately.

Speaker 4: You know, we believe we're growing the company for the medium to longer term. And you look at the, you know, the full repricing of the balance sheet, you know, cash flows and assets and liabilities, we feel, you know, we're going to do really well in that, you know, 37% DDA is really going to help us with.

We believe we're growing the company for the medium to longer term and you look at the the full repricing of the balance sheet cash flows and assets and liabilities. We feel you know we're going to do really well in that 37% DDA is really going to help us with that.

Got it I appreciate the color there.

Speaker 9: Got it. Appreciate the color there.

Sure.

And.

That's all I had for now thank you.

Yes.

Okay.

Thank you and this concludes our question and answer session I would like you were trying to Florida, Kevin O'connor for any closing comments.

Speaker 2: Thank you. And this concludes our question and answer session. I would like to turn it forward to Kevin O'Connor for any closing comments.

I just want to thank everyone, who participated today and for the great questions I would like to thank you. Thank <unk> team for their dedication and commitment to <unk> success. This year and I look forward to chatting with you about all through 2022.

Speaker 3: I'd like to thank the St. Dime team for their dedication and commitment to achieving our success this year. And I look forward to chatting with you all through 2022.

Speaker 2: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.