Dime Community Bancshares, Inc. Q1 FY2025 earnings call

• Core deposits up $1.3B y-o-y, deposit teams hired since 2023 grew portfolios to $1.9B, paid down brokered deposits and reduced FHLB borrowing. Cost of deposits at 2.09%, NIM up for 4th consecutive quarter to 2.9% range with catalysts for continued improvement. - Business loans grew over $60M in Q1 and over $400M y-o-y, loan pipeline at ~$1.1B with average yield 7.22% (up from $750M in Jan), made new hires for loan growth. - Core pre-tax provision income $46M in Q1 2025 vs. $28M y-o-y, core ROA 77 basis points. - Recruiting efforts strong, added numerous bankers, focused on growing both sides of balance sheet, expect Tom Geisel to be integral to transformation, announced expansion into Lakewood, NJ marketplace.

Core deposits were up $1.3 billion year-over-year, with deposit teams hired since 2023 growing deposit portfolios to $1.9 billion. Cost of deposits reduced to 2.09% in Q1. NIM increased for the fourth consecutive quarter to the 2.9% range. Business loans grew over $60 million in Q1 and over $400 million year-over-year. Core pre-tax provision income was $46 million in Q1 2025 vs. $28 million a year ago, translating to a core ROA of 77 basis points. Non-brokered deposits were up approximately $65 million at March 31st vs. year-end levels. Net charge-offs to average loans decreased to 26 basis points and allowance to loans increased to 83 basis points. Capital levels grew with common equity Tier 1 ratio at 11.1% and total capital ratio at 15.7%.

• Second quarter NIM expected to remain range bound within plus or minus 3 basis point range of 2.90% base NIM. - Margin expansion expected to resume in second half of 2025 with $1.95B of adjustable and fixed rate loans repricing or maturing in second half 2025 and full year 2026 with weighted average rate 4%, potentially increasing NIM by 35 basis points. - If Fed cuts rates in second half of 2025, NIM expected to benefit similarly to 2024 when each 25 basis point cut benefited NIM by ~5 basis points. - Net loans expected to be relatively flat in second quarter, growth to pick up in back half of 2025. - Core cash non-interest expense guidance increased to $236.5M to $237.5M from previous $234M to $235M due to hires outlined in press release.

• Uncertain rate environment could impact NIM improvement. - Tariffs and related economic uncertainties could affect lending spreads and overall business environment. - Competition in the region could impact hiring efforts and deposit/lending pricing. - Potential impact of legacy issues and market disruptions on the bank's operations.

Q: Good morning. Maybe just starting on the loan pipeline, as you mentioned, nice pickup here relative to where it was at year-end. Just curious the underlying mix within the loan pipeline?

A: The underlying mix of the loan really continues the theme of C&I, owner-occupied CRE and healthcare. At this point, we have about $350 million in C&I, approximately $185 million in owner-occupied CRE and another $250 million in healthcare. That's making up the bulk of the pipeline. We actually have about $200 million in loans approved waiting to close at a yield of about 725.

Q: Good morning. It strikes me that you guys are carrying a relatively large cash balance at a little over $1 billion. Is that an opportunity for the margin as well? Do you think you could bring that cash level down over time? Is that the plan?

A: Yes. I think that's fair, Mark. However, I think like a lot of banks that had our profile two to three years back when rates went up 500 basis points. I think we're trying to run the balance sheet for the medium to longer term and have a – have the right mix of floating rate assets and cash versus fixed rate assets. I know we're all gearing towards the Fed cutting rates. But we also just want to keep our ALM profile in check a little bit. And I think as we start putting on loans, some of that cash will get used up and also some of the loans that we're putting on are floating rate. But in the interim, we don't want to rush out to buy securities and help the net interest income in the near-term and hinder opportunities to grow loans in the longer-term. But you're exactly right. Historically, we used to run the balance sheet with $200 million to $300 million of cash. We're running it with a multiple of that at this point.

Q: 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 in terms of hiring, things like that?

A: Sure. So, that's in Lakewood, Central Jersey. We've already hired a banker to -- a private banker for that group in that area. It's an area I know very well, very attached to the Brooklyn community as well. And so, it's a natural jumping off point and our first foray into New Jersey. I actually ran a bank in that area years back. So, I know the area very well. And there's a significant amount of deposit and loan opportunity available. And we thought that as our first foray, it was the appropriate location because there's such -- it dovetails so well with an existing deposit base and customer base that we have in Brooklyn.

Q: Hey, good morning. I wanted to start on deposit costs and the trajectory, excluding additional Fed cuts. So the last time we spoke in January, the spot cost of deposits was 2 to 205. The all-in cost for the quarter was 209. So a modest -- a little bit of a pickup. Should we read into that at all? Are deposit cost reductions nearing the end without additional rate cuts?

A: No. So Matt, the way we typically operate with the deposit costs is we initially start by passing on the full amount to a lot of customers. And then over time, you have some customers that come back and say, hey, I got this other eight from other bank, can you match it, right? And we never match it, but sometimes you meet in between, right? So there's other banks that follow different strategies where they wait a month or two and cut differently. So I would say, look, as we bring in DDA into the bank, our goal is to keep deposit costs in that low 2% area. We do have some CDs on the balance sheet that are repricing lower. So as that happens, we will probably retaining 80% to 90% of the CDs that we have at this point. We probably have around $750 million of CDs left and the rates on those are probably 375-ish 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 if the Fed cuts 25 basis points every three months, we'll have an opportunity then to pass on that to customers on the other side. But I would say, absent that, given the Fed cuts that have happened, we still have a CD book that we're repricing down. But beyond that, most of the cuts are in there.