Q1 2025 Dime Community Bancshares Inc Earnings Call
Such statements are subject to risk, uncertainties and other factors that may cause actual results to different materialism those contained in any such statements, including a set force in today's press release and the company's balance of the U.S. Security and Exchange Commission to which we refer you.
During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess 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 the U.S. Gap. For information about these non-GAAP measures and for reconciliation to Gap, please refer to today's earnings release.
At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press Star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please first star one one again. Please be advised that today's conference is being recorded. I would now like to hand a conference over to your speaker today, Stuart Lubow, President and CEO . Please go ahead.
Stuart Lubow: Good morning and thank you Shannon and thank you all for joining us this morning for our first quarter earnings call. With me this morning is Avin Reddy, our CFO .
Speaker Change: In my prepared remarks, I will touch upon key highlights for the first quarter of 2025. Abbey will then provide some details on the quarter and thought for the remainder of the year.
Speaker Change: Court deposits were up 1.3 billion on a year-over-year basis. The deposit team's 2023 have grown their deposit portfolios to $1.9 billion.
Speaker Change: This has allowed us to pay down our broker deposits to a fairly minimal level as well as reduce our FHLB borrowing position.
Speaker Change: We reduced our cost of deposits to 2.09% in the first quarter. Our NIMM has now increased for the fourth consecutive quarter to the 2.9% range. We continue to have several catalysts to continue to grow our NIMM over the comedium.
to long-term, including a significant backbook loan repricy opportunity. Even with the current uncertain rate environment, we remain very bullish on our continued minimum improvement over the medium and long-term.
Speaker Change: I will, Abbey will get into that in more detail in his remarks. On the loan front, we continue to execute on our stated plan of growing business loans and reducing our creed concentration.
Speaker Change: The songs grew over $60 million in the first quarter and over $400 million on a year-over-year
Speaker Change: Typically, our first quarter is our slowest growth quarter of the year.
Speaker Change: We have rebuilt our loan pipeline since year end, and the pipeline currently stands at approximately $1.1 billion with an average yield of $7.22. This compares to $750 million when we reported earnings in January .
Speaker Change: In addition, we have made several new hires who, once they find their feet, will contribute to the long growth towards the year end.
Speaker Change: Our core earnings power has increased significantly over the past year. Core pre-tax provision in almost $46 million in the first quarter of 2025, compared to $28 million a year ago.
Speaker Change: This translated into a core ROA of 77 base points for the quarter.
Finally, I will touch on recruiting efforts
Disruption or a local marketplace remains very high.
and our recruiting pipelines continue to be strong.
Speaker Change: As outlined in our earnings release, we have added numerous bankers across the organization. Our hiring efforts this year have been focused on growing both sides of the balance sheets.
Speaker Change: Many of you who are familiar with the New York City Banking area are familiar with Tom Geisel, who was a key part of the growth and success of Sterling. We expect Tom to be an integral part of our continued transformation to a highly profitable commercial bank.
Speaker Change: I'd also like to note with that we recently announced plans to expand into the Lakewood, New Jersey Marketplace.
Speaker Change: In conclusion, the momentum in our business is extremely strong and we continue to execute on our business plan of the growing business loans and core deposits.
Avi Reddy: talented bankers. I'm looking forward to the remainder of 2025 and want to again thank all our dedicated employees for their efforts in positioning bank the bank as the best business bank of New York. With that, I will turn the call over to Avin.
Avi Reddy: Thank you, Stu. Excluding the impact of the previously mentioned Legacy Bridge Hampton National Bank pension plan termination, adjusted EPS was $0.57 per share. This represents a 36% linked quarter increase and a 50% year-over-year increase.
Avi Reddy: The reported NIM increased by 16 basis points and the NIM excluding purchase accounting accretion increased by 19 basis points to 294.
Avi Reddy: Nimic expansion was driven by a significant reduction in our cost of deposits.
Avi Reddy: We did have around three to four basis points of pre-payment fees in the first quarter NIM. Excluding pre-payment fees and purchase accounting, the NIM would have been around 290 for the first quarter.
Avi Reddy: Non-broker deposits were up approximately 65 million at March 31st, versus your end level.
Avi Reddy: As I mentioned on a fourth quarter earnings call, URN 2024 deposits were inflated by approximately $200 million as title company-related deposits that were tied to a closing that left the bank in early January .
Avi Reddy: Set differently, we grew non-broker deposits by approximately 250 million this quarter, versus your end levels if you exclude the title company deposits from your end totals.
Avi Reddy: We continue to manage expenses prudently. Core cash operating expenses for the first quarter, including intangible amortization was 57.9 million.
Avi Reddy: Non-core items for the first quarter included $7 million related to the previously disclosed domination of a legacy pension plan, which is now effectively complete.
Avi Reddy: Non-interest income of $9.6 million for the first quarter reflected the full quarter in the impact of the Bolly Repositioning Transaction.
Avi Reddy: We had a 9.6 million credit loss provision for the quarter, net charge off to average loans decreased to 26 basis points, and the allowance to loans increased to 83 basis points.
Avi Reddy: Capital levels continue to grow and a common equity T01 ratio increased 11.1% and a total capital ratio
Avi Reddy: Having best-in-class capital ratios versus our local peer group allows us to take advantage of opportunities as they arise and it speaks to dime strength and our ability to serve us our growing customer base.
Avi Reddy: Next, I'll provide some thoughts on guidance for the remainder of 2025.
Avi Reddy: As I mentioned previously, we had approximately three to four basis points of pre-payment fee income in the first quarter in him, excluding this and purchase accounting accretion, the base name for the first quarter was closer to $2.90.
Avi Reddy: We would use this as a starting point for modeling going forward as we don't expect the prepayment fees to repeat in that size in the coming quarter.
Avi Reddy: We expect the second quarter nim to remain range bound within a plus or minus three basis point range of the 290 base nim.
Avi Reddy: While we don't have a lot of low yielding repracing assets in the second quarter, starting in the second half of 2025, we have a meaningful increase in repracing assets, and expect margin expansion to resume in the second half of year.
Avi Reddy: To give you a sense of the significant backbook repricing opportunity in our adjustable and fixed-rate loan portfolios.
Avi Reddy: In the second half of 25 and the folio 26, we have 1.95 billion of adjustable and fixed rate loans across the loan portfolio and a weighted average rate of 4% that either reprise or mature in that timeframe.
Avi Reddy: Assuming a 225 basis point spread on those loans of the forward five-year treasury, we could see a 35 basis point increase in names from the repricing of these loans.
Avi Reddy: As we look into the back book for 2027, we have another 1.75 billion of loans at a weighted average rate of 425 that will lead to continued NIM expansion in 2027.
Avi Reddy: Moving on to the short end of the code, when the Federal Reserve cut short term rates in 2024 unem-benefitted by approximately five basis points for each 25 basis point rate cut.
Avi Reddy: Should the Federal Reserve cut rates in the second half of 2025, we expect this trend to repeat, assuming the behavior and deposits and loans hold for each subsequent rate cut and competition remains rational.
Avi Reddy: In summary, assuming the market consensus forward curve plays out, we have a path to a structurally higher name and enhanced earnings power over time.
Avi Reddy: With respect to balance sheet growth, we expect net loans to remain relatively flat in the second quarter and growth to pick up in the back half of 2025.
Avi Reddy: We expect this trend to moderate towards the end of 2025. In addition, as you mentioned, we have several new hires who once they find their feet will contribute to loan growth towards the end of the year.
Avi Reddy: With respect to core cash non-interest expenses, our previous Folio 2025 guidance was between 234 to 235 million. The prior guidance was based on our existing employee base at the end of 2024.
Avi Reddy: Given the hires we have outlined in the press release, we are increasing our fully-your-core cash non-entist expense guidance to 236.5 to 237.5 million.
Avi Reddy: With that, I'll turn the call back to Shannon and we'll be happy to take your questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star one one on your telephone away for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Steve Moss with Raymond James. Your line is now open.
Speaker Change: Good morning. Good morning. Hey Stu. They've just starting on the lone pipeline as you mentioned. Nice pick up here, relative to where it was at your end. Just curious the underlying mix within the lone pipeline.
Speaker Change: Oh yeah, so I mean again it really continues to the theme of C&I owner occupied Cree and
Healthcare Healthcare
Speaker Change: So, at this point, we have about 350 million in CNI, approximately 185 million in owner and another 250 million in healthcare, and that's making up the bulk of the...
Speaker Change: of the pipeline. We actually have about $200 million in loans approved waiting to close at a yield of about $7.25.
Okay. Great.
I appreciate that. And then...
Speaker Change: You know, you guys made a number of hires this quarter and you know, obviously a year ago with the signature hires just you know curious in terms of how you're thinking about the pace of deposit growth and any updates around the cost of new deposits you guys are bringing on these days.
Speaker Change: The total cost of deposits on them including DDA is around two hand plus or minus, so they're bringing in stuff in the low tools, there's a very healthy mix of DDA in terms of what they're bringing in and it's around 35% to 40%.
Speaker Change: Like I said on the last, you know, warnings call, you know, it takes teams probably three to four years to probably reach a steady state, you know, most of the teams that we have have been with us, you know, probably a year or two, you know, a couple of years at this point.
Speaker Change: I think on the last one, it's called Stuart Mention, in that ...
Stuart Lubow: We'd opened around 11,000 accounts and 7,000 customers. We've grown that now to around 12,500 accounts and 7,800 customers, so we're continuing to see steady growth in sound opening as well.
Thank you very much.
Stuart Lubow: Q1s typically slow for us, Q2 starts off with tax payments as well, and then it starts picking up once we get into May, June , July , timeframe. So we're pretty optimistic that we've got the right channels in place to fund a lot of the loan goals that we have. Yeah, and our pipelines, or we review our deposit pipelines and our loan pipelines, aren't the deposit pipelines are very strong, so we're very encouraged.
Speaker Change: Okay, great. And then just one on the credit front here, you know, reserve bill was maybe a little bit less than I was thinking this quarter, just kind of curious, any updated thoughts
Avinash Reddy
Okay, great. Nice quarter. Appreciate all the color here. Thanks.
Speaker Change: Thank you. Our next question comes from the line of Mark Fitzgibbon with Piper Sandler.
Hey guys, good morning.
Speaker Change: Hi, Mark. Avin, it strikes me that you guys are carrying a relatively large cash balance at a little over billion dollars. Is that an opportunity for the margin as well?
Speaker Change: You think you could bring that cast level down over time? Is that the point?
Speaker Change: Yeah, I think that's fair, Mark. However, I think, you know, like...
Speaker Change: A lot of banks that had our profiles, you know, two to three years back when rates went up.
Avinash Reddy, CEO Alphabet and Google
Speaker Change: Okay. And then on the deposit front, I know you had some purposeful runoff for the broker deposits this quarter, but I got 137 million.
Speaker Change: is given that there isn't as much long growth here in the first part of the year. Was there a conscious decision to kind of, you know, put your foot on the break a little bit on deposit growth here? Or just some seasonal patterns.
25-250
Speaker Change: I mean, over time, we're comfortable operating with a loaned deposit ratio between 90 and 95% plus or minus. So, you are right, you know, as the loan growth picks up, you know, we can put the pedal to the metal a little bit more on the deposits. Yeah, we, you know, we also purposely, we can manage our municipal portfolio a little bit more, so we had a significant municipal relationship that had...
You know, an excess of $400 million in deposits.
Speaker Change: They were relatively high cost funds based on Fed funds rate, et cetera, and we basically asked them if they would move $100,000, $150 million out.
Speaker Change: to manage cost of funds and deposit flows. And if we wanted that money back, we'd turn with you go get it. And it's a relationship we've had for a very long time. So those are the kind of levers that we have today that we didn't always have.
Okay.
Speaker Change: And then lastly Stu, I wondered if you could just share any color on the 8.7 million uptick and non-owner occupied commercial real estate this quarter. Any, was it one credit, couple credits, anything?
Speaker Change: Special there. Yeah, you know, this is just one credit mark. So we actually had an exit of one credit that we previously identified, the legacy bridge.
Avinash Reddy
Thank you
Christopher O'Connell: Thank you. Our next question comes from the line of Christopher O'Connell with KBW, Your Lana Smell Open.
Hey, good morning, Chris.
Christopher O'Connell: Is that Mark to, you know, the expected purchase price in terms of either charge or a specific reserve at this point?
Yes.
Great.
Speaker Change: And then it was hoping just to dig in, you know, you guys announced a number of hires over the course of the first quarter here, you know, that we're highlighted in the release.
Speaker Change: and hoping to dig in on just production on both the loan and deposit side from the various teams and hires here and I guess with the updated expense guidance, just kind of a break of giving timeline.
Christopher O'Connell: Yeah, I'll start with the second question here. I mean, typically, you know, our experience on the deposit side is that teams probably break even, you know, within six months just because the deposits come in, you know, fairly quickly.
Christopher O'Connell: Generally teams have a couple of franchise clients that they're able to bring on early on and they pay for themselves pretty quickly.
Christopher O'Connell: On the lawnside, it's going to take a little bit longer because it does take time to move loans over. You've got to wait for renewals, maturity, things like that on the other side.
Stuart Lubow: I think we'll just leave it at, you know, Stu mentioned, it's going to help with the pace of pickup, you know, especially on the CNI and business side going forward in the next year. It's probably going to help us, you know, get closer to that mid single digits to high single digits growth that we want in 2026.
Avinash Reddy
Okay. And I guess just, you know,
Stuart Lubow: Without, you know, the production goals in place, just, you know, the breakdown of percentage-wise of, you know, the new hires of what you think is, you know, deposit versus, you know, loan hires out of those in the first quarter.
Stuart Lubow: Yes, so we hired one deposit team that's focused on the Queen's market, so that one was specific, you know, just for deposits.
Stuart Lubow: We hired Jim Logato, who's focused on building out our presence in Manhattan. That's going to be on board to deposit and the loan side.
Stuart Lubow: We've hired Tom and a senior executive leadership role at the bank, you know, Tom's focused on bringing on teams to help build out our C&I and owner occupied franchises. So that's also on the loan side, and then Tony came to us from M&T, so she's focused on the loan side. So I'd say, you know, it's probably 70 to 80% focused on the loan side, at least the
Stuart Lubow: And I think that's consistent with what we said, you know, when we reported our last quarter earnings that, you know, focus on both sides of the balance sheet now, as opposed to just the deposit side.
Understood.
Stuart Lubow: And then just looking into the second quarter and some of the commentary on loans relatively flat.
Stuart Lubow: You know, and NIM, you know, kind of core NIM being, you know, a range around around that 290.
Stuart Lubow: Just hoping to flush out the dynamics there on why not a little bit more bullish even before the significant acts that repricing begins in the second half of 25.
Stuart Lubow: You know, still, you know, give or take 200 basis points above.
You know, the portfolio yield.
Stuart Lubow: and if there's not that much fixed asset repricing in Q2,
Stuart Lubow: You know, I guess I would think that, you know, that dynamic is kind of, you know, driving, you know, low and yield higher into the second quarter, even without, you know, the fixed asset repricing beginning in the second half of the year.
Avinash Reddy, CEO Alphabet and Google, Inc.
Stuart Lubow: I think the thing that I really focus on is really the destination on the name of where we think we're going to end up.
Stuart Lubow: If you factor in rate cuts, which may or may not happen, but if they do, we'll help us by five basis points.
Stuart Lubow: You know, getting to a limb that's approaching the 350 area in 2027.
Stuart Lubow: predicated upon, you know, our loan closings and how quickly these deals get through to the pipeline. But, you know, we are excited about the second half of the year into 26.
Understood. Thanks, Avin. Thanks, Stuart. So, I add.
Thank you.
Stuart Lubow: Thank you. Our next question comes from the line of Manuel Navas with D.A. Davidson. Your line is now open.
Manuel Navas: Hey, good morning. Just wanted to kind of expand and hear more color on what could the Lakeland New Jersey branch kind of add and kind of how much
More activity could there be around that branch going forward?
Speaker Change: in terms of hire. So that's in Lakewood, Central Jersey. You know, we very hired a banker to
Speaker Change: to a private bank group in that area. It's an area I know very well, very, very attached to the Brooklyn community as well, and so it's a natural jumping off point and our first
Avinash Reddy
Speaker Change: Okay. You talked a little bit about hiring pipeline stain. Hi, is there any other color you can add to?
Speaker Change: What parts of the footprint are kind of have the most activity, and is it going to continue to be lending focused, like the first quarter, or is there still some more deposit teams to come?
Speaker Change: You know, everything's going to be, you know, in our existing footprint or in a targeted footprint that we have...
Speaker Change: And I think we've tried to be very surgical about what works for Dime. We have a client base and we've seen what's worked for us, so we're very focused on what works for us.
Speaker Change: Like I said, we're going to pick and choose what works for us, and also it's important that the economics work for us, right? So we're very focused on making sure people that we bring on contribute to the bottom line within six to twelve months, and we want to stay with that discipline, so that's what we're going to do going forward.
Speaker Change: Can you speak a bit to the levels of competition in the region on those hires first and then just kind of across pricing on loan in the pivots.
Speaker Change: You know, been somewhat more aggressive. I think we've done it.
in a much more, as Avin said, surgical way, we've-
Speaker Change: and we've shown success. Obviously, you can see it on across the phones and core deposit growth, etc. In terms of pricing...
Speaker Change: I think today it's it's rational and I think some of the players who have had a problem to look.
Speaker Change: Push some irrational deposit pricing or moderating so you know it's certainly helpful and so I mean
Speaker Change: from a loan and deposit standpoint. I think price is rational. Although we're not in the market, I think multi-family pricing has come down dramatically. But...
Speaker Change: It's very profitable for us as time moves on as we continue to reprise the book.
I appreciate that. Thank you for the comment.
Thank you.
Speaker Change: Our next question comes from the line of Matthew Breese with Stephen Zing. Your line is open.
Hey, good morning.
Speaker Change: I wanted to start on deposit costs and the trajectory excluding additional set cuts, so the left time we spoke in January .
Speaker Change: The spot cost in deposits was 2 to 205. Going cost for the quarter was 209 so a modest, a little bit of a pickup.
Speaker Change: Should we read into that at all or deposit cross reductions near in the end without additional
Speaker Change: We do have some CDs on the balance sheet that are repricing lower, so you know, as that happens, we're probably retaining 80% to 90% of the CDs that we have at this point. We probably have around 750 million on CDs left.
Avinash Reddy: and the rates on those are probably 375ish plus or minus. Those are probably repricing in the low 3s at this point. So, there is some, but I would say the best environment for us is, you know, the Fed cuts 25 basis points every three months. We'll have an option, then to pass on that to customers on the other side. But I would say...
Avinash Reddy: Absent that, you know, given the set cuts that have happened, we still have a CD book that we're repracing down, but beyond that, you know, most of the cuts are in there.
Speaker Change: Got it, okay. And then with all the carif noise, have lending spreads, particularly on commercial real estate and CNI, have they changed it all to account for incremental risk?
Avinash Reddy: and what exposures on your book are you monitoring more carefully in lead-in tariffs?
Avinash Reddy: on the book at this point on commercial estate in particular.
Avinash Reddy: and generally we've done a deep dive into the portfolio, we don't have a lot of import
or manufacturing. We don't have a lot of retail.
Avinash Reddy: the things that you know or consumer for that matter that you would
typically be concerned with...
Avinash Reddy: And it's a little early to see how it all plays out within the general economy whether it's in the service industry or construction. Those are the areas that we're looking at very closely and monitoring. We're looking at line usage and things of that nature, but it's a little early yet.
Okay.
Avinash Reddy: Next one for me is just over the two-year mark for the signature failure. Is that a significant milestone in any way? I'm not thinking in terms of employee lockup agreements. Are there going to be more opportunities this year to hire teams and individuals?
in the wake of that.
Avinash Reddy: No, I don't think so, Matt, in terms of, you know, specific lock-up agreements. I mean, I can't comment on what, you know, the surviving bank there is doing. But, you know, I think for us, we identified early on, you know, what markets we want to do augment. You know, obviously, there was certain areas of Long Island that we wanted to expand and do, Staten Island Westchester. So, for us, it's more market-based and who works for, you know, the business model that we have.
Avinash Reddy: There's still a lot of talented people over there. There's talented people at other banks too. If you look at the Ohio's that we've had.
Avinash Reddy, CEO Alphabet and Google
Speaker Change: Understood. Okay. Two other quick ones for me. I don't know if I, if you address it in your opening comments, Avi, could you touch on the fiends and guide for the year? I think it was 40 to 42 million. Does that, does that still hold?
Speaker Change: Yeah, so this quarter mat, we didn't have any swap fee revenue, it was pretty close to zero. A lot of the deals got pushed to May and June type time frame, so if you took the Q1 number and you assumed there was some moderate level of swaps and we would have been pretty close to that 42 million guide for the full year, so we can still keep that for the full year at this point. [inaudible]
Speaker Change: Okay. And then you would mention just strong capital levels, particularly your C-P-1 ratio.
Speaker Change: Curious your thoughts on buybacks with the stock down where it is and potentially a slower growth environment. That's all I had. Thank you.
Speaker Change: Yeah, look, I mean, the corporate finance view is, you know, to be buying back stock at this point, significantly, however, I just think, given the overall environment, you know, on certain new tariffs, things like that,
Speaker Change: It's important to have that, you know, especially as we, you know, have this lone pipeline that we're looking to close. I mean, Tom's come on board.
Avinash Reddy, CEO Alphabet and Google, Inc.
Speaker Change: at the end of the quarter. So we'd like to see that decline a little bit as well. So you put that all together, we feel good with where we're at, you know, at some point, you know, in, you know, latter half of this year into 2026, we'll probably revisit the buyback piece, but it's more from an optics and, you know, managing the environment as opposed to the intrinsic value in the snow. And clearly with our pipeline and what and the teams we brought on board and the individual we brought on board work.
Speaker Change: We think there's going to be an opportunity to deploy that capital in meaningful way and improve earnings as well Thank you very much for your time.
That's all I had. Thank you
Thanks, Matt. Appreciate it.
Speaker Change: Thank you, and I'm currently shall know for the questions at this time. I like to try to call back over to Stuart Lubow for closing remarks.
Stuart Lubow: Thank you Shannon, and thank you all for joining us today and to our dedicated employees and share holders for the continued support. We look forward to speaking with you after the second quarter.
Stuart Lubow: This concludes today's conference call. Thank you for your participation. You may now disconnect.