Dime Community Bancshares Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 26, 2024

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Dime Community Bancshares 4th Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Before we begin, the company would like to remind you that discussions during this contain forward looking statements made under the Safe Harbor provisions of the U. S.

Operator

Private Securities Litigation Reform Act of 1995. 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 today's press release and the company's filings with the U. S. Securities 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.

Operator

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 these non GAAP measures and for reconciliation to GAAP, please refer to today's earnings release. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Stuart Lebow, President and CEO. Please go ahead.

Speaker 1

Good morning. Thank you, Shannon. With me today is Avi Reddy, our CFO. And thank you all for joining us this morning for our Q4 earnings call. 2023 was an unprecedented year in many respects with the Federal Reserve taking interest rates to a multi decade high and 3 regional banks failing resulting in significant focus on liquidity and deposits.

Speaker 1

Throughout all of this uncertainty, Dime's business model remained resilient as demonstrated by year over year growth in deposits of over 275,000,000 and loans is over $200,000,000 Importantly, in 2023, we put in place several cornerstone investments that will serve as growth engines for the franchise in the years ahead. 1st, we rapidly assembled a cross functional team to attract productive deposit gathering bankers from Signature Bank. In the Q2, we were able to onboard 6 groups and at twelvethirty one, Their portfolio stands at approximately $350,000,000 with approximately 50% being in DDA. To provide some background, after I joined Dyme in 2017, we put in place the building blocks for a private and commercial bank deposit gathering operation. This existing operation provided us a solid foundation that helped us attract these new groups.

Speaker 1

We are proud of the fact was the only bank in New York that was able to attract these talented bankers, a testament to our client first business model and our state of the art technology and treasury management systems. Today, our overall private and commercial bank deposit portfolio stands at approximately $1,500,000,000 inclusive of the new groups hired in 2023. Over the course In the second half of the year, we made significant operational and technology related enhancements in this business and truly believe we now have the best in class private platform in the Metro New York area. As I have said, this segment will be the growth engine for Diamond in the years ahead as we build our portfolio via acquisition of new clients and new groups. Moving to the asset side of the balance sheet, We added to our business loan origination capacity by building out a brand new healthcare vertical in 2023.

Speaker 1

This follows on the heels of building out a middle market C and I lending operation in 2022. Our healthcare team is actively in the market And our pipeline in this new vertical is now over $100,000,000 and growing with an average rate of 9%. The healthcare vertical will add diversity to our balance sheet with solid margins. Once again, We continue to spend a significant amount of time on a recruiting front and believe we have the potential to add more groups of talented bankers in the future. We do believe there will be more fallout from larger local institutions as well as an opportunity to bring over individual clients who seek locally managed relationship based bank coupled with a strong technology and treasury management stack.

Speaker 1

In summary, as we look back on 2023, it was important for Dine to navigate the dynamic environment while playing strategic offense and take advantage of market opportunities. As we have just completed our year end strategic planning process, I wanted to lay out our medium and long term goals. We intend on creating more diversified balance sheet by focusing on growth in our business loan portfolio, which includes C and I and owner occupied CRE. While we have historically been very strong operators in the multifamily and investor CRE, our committed focus for the future is to remix this balance sheet such that business loans will have a greater weighting. Right now, business loans account for approximately 21% of loans and we envision growing that growing business loans to 30% and reducing multifamily to the 25% to 30% range over a 2 to 3 year timeframe.

Speaker 1

To provide you some context on how earnest we are about the balance sheet transformation, a look at our current loan pipeline indicates Approximately $780,000,000 in the pipeline with 70% in business loans. A year ago business loans accounted for only 35% of the pipeline. By the way, the average rate on our pipeline is 8.43%. Building on the success we have had on the deposit gathering front, growing our private and commercial bank will be a key focus. This will allow us to continue to grow the DDA balances as well as lower our loan to deposit ratio to a range between 90% 95% over medium term.

Speaker 1

As I've said, we are in discussions with numerous teams at the current time and expect to hire additional top quality bankers in the year ahead. Finally, I want to provide some thoughts on our profitability goals. While our asset book has limited maturities and repricings in 2024, In 2025 and 2026, we see increased repricings on the asset side. Returning to a $110,000,000 to $125,000,000 ROA is a key marker and we are highly focused on getting you there as the asset side of the balance sheet turns over. This will be accomplished by a significant improvement in NIM In the interim, we will continue to control the things that we can, including staying extremely disciplined on expenses.

Speaker 1

As I said in our last earnings call, our main focus is on providing our customers with outstanding service that only a locally managed community banking can provide, growing our financialized value and delivering shareholders our shareholders strong returns. Being a conservative underwriter of credit has always been a hallmark of DIME. We continue to have a very low level of non performing loans, including past dues, including no past dues in our $4,000,000,000 multifamily portfolio. With respect to the 4th quarter results, our core EPS was approximately $0.45 We were pleased to see NIM contraction continuing to slow, DDA balance is remaining steady, capital ratios continuing to grow and asset quality metrics remaining stable. In closing, I would like to thank all our outstanding employees for staying focused on our goals during these challenging times.

Speaker 1

Avi will now provide more details on the quarter.

Speaker 2

Thank you, Stu. Reported EPS was $0.37 per share. Excluding the impact of the special FDIC assessment and assuming a normalized tax rate of 27%, core EPS would have been approximately $0.45 The tax rate in the second half of the year was impacted by certain disallowed items related to executive severance. As mentioned in the press release, our expectation for the tax rate for 2024 is around 27%. As we expected, the pace of NIM compression slowed even further in the 4th quarter and the compression was only 5 basis points compared to 16 basis points in the prior quarter.

Speaker 2

At 29% of average total deposits, our noninterest bearing deposit percentage remains a clear differentiator for DIME versus other community banks in our footprint. We are cognizant of revenue environment and continue to manage expenses prudently. Our focus is being as efficient as possible. Expenses for the Q4 excluding the one time FDIC special assessment and intangible amortization was $52,500,000 For the full year, cash non interest expense excluding FDIC special assessment, intangible amortization and severance was approximately 202,000,000 Well below our annual guide for 2023 of $206,000,000 to $209,000,000 Notably, we were able to absorb the cost of new hires into our organization by rationalizing expenses across the organization, by using technology to automate manual processes and promoting and filling open roles from our talented employee base. Non interest income for the 3rd quarter was 8,500,000 We had a $3,700,000 provision in the 3rd quarter in the 4th quarter.

Speaker 2

The allowance to loans remained steady at 67 basis points. We're cognizant that there has been a lot of scrutiny on CRE concentration. In this regard, Dimes Investor Cree concentration excluding multifamily loans, which are really residential loans for 5 or more tenants is only 258 percent of total capital. This quarter, our concentration levels dropped as we continue to focus on growing business loans and building capital. In light of the overall environment, our posture as it relates to the balance sheet is to build capital methodically.

Speaker 2

This will in turn support our clients when they need it. This quarter, our risk based capital ratios increased by approximately 20 basis points. Now I will turn to some guidance for 2024. As you know, we don't provide quarterly quantitative NIM guidance. All else equal, we expect the NIM to remain within a few basis points of current levels until the Federal Reserve starts cutting rates.

Speaker 2

This is contingent on competition remaining rational and our loan originations, which help offset any deposit cost creep remaining at 4th quarter levels of approximately $200,000,000 at $785,000,000 Once the Fed cuts rates, we anticipate expansion And our medium to longer term goals and projections do envision the NIM getting back to historical levels in the low to mid-3s and potentially even higher. This will require more of our assets to reprice. And as mentioned earlier, 20252026 are significant years for us in terms of asset repricing. Of note, we have already begun to prepare for the Fed rate cuts By segmenting our deposit base into various buckets, it's important to note that our deposit base has less of a consumer weighting than national peer groups. And as such, we should see higher deposit betas on the way down.

Speaker 2

With respect to our positioning on lending, Our strategy is to ensure we continue to support our key clients through any operating environment. And as Stu mentioned, we continue to seek growth in our business loan portfolio. Growth in the business portfolio will offset declines in multifamily and Investor Cree, while we are still servicing existing solid relationships. On an aggregate basis, we expect loan growth in 2024 to be in the low single digits with a stable first half of the year and growth in the latter half of the year. With respect to core cash non interest expenses, if we take the Q4 cash operating expenses of $52,500,000 and annualized debt, we get to $210,000,000 We expect to be flat to up 1.5% on that base, which equates to $210,000,000 to $213,000,000 as a range for 20.24.

Speaker 2

As I mentioned earlier, the expectation for the core tax rate is around 27%. With that, I'll turn the call back to the operator and we will be happy to take your questions.

Operator

Thank you. Our first question comes from the line of Steve Moss with Raymond James. Your line is now open.

Speaker 3

Good morning. Hi.

Speaker 4

Hey, Steve.

Operator

Maybe just

Speaker 3

starting on the margin sensitivity here, Avi. Just curious how you think I hear you in terms of Fed cuts getting into the low threes on the margin. How many rate cuts do you think it will take to get to that level?

Speaker 2

Yes. Look, we're just following the forward curve, Steve. We don't give quantitative guidance. As I said, We're confident to get back into the low to mid-3s. I will say that if you follow the forward curve and you assume where 5 year where the 5 year ends up in a positive sloping yield curve with 29% to 30% DDA and growing with some of the New groups that we've hired, we do see the potential to be even above what we were historically, which was at the peak we were around 3.30 on the NIM.

Speaker 2

But if you follow the forward curve, we in our internal model, we should end up About that, as Stu said, 2024, we don't have a lot of assets repricing, but that really starts picking up in 20252026. So I'll just leave it at there.

Speaker 3

And could you just remind me how much do you have in assets repricing in 2025?

Speaker 2

Yes, sure. So we have on the real estate side, we have around $575,000,000 of assets in 2024. Then we probably have around $200,000,000 to $225,000,000 on the security side as well coming due.

Speaker 3

Okay. And then a meaningful step up in 2025 to from there?

Speaker 2

Yes. For 2025, a meaningful step up, right? So in 2025, On the asset side, we have around $900,000,000 in 2025 and then we have $250,000,000 of securities that year. And then if you roll forward 1 year to 2026, We have around $1,400,000,000 in 2026 of assets and around $200,000,000 of securities. Now that's contractual, right?

Speaker 2

But if the Fed cuts rates, you're going to see some of that some of those asset repricings from 2026 pull forward a year and happen in 2025.

Speaker 3

Okay. Appreciate that. And then, excuse me, Stu, you mentioned the healthcare vertical. I'm sorry, but you cut out on just how large the pipeline was there. Wondering if you could just if you could give that number.

Speaker 3

And also just curious, Are you looking to hire any additional teams in the upcoming year?

Speaker 1

So at this point, the pipeline is approximately $115,000,000 with a weighted average rate of 9%. And so We're very happy with the growth in the pipeline. We expected to have our first closings in the Q1. So things are going well. In terms of additional teams, yes, I mean, we're looking at there are a couple of other C and I related and healthcare related individuals and teams we're looking at that also have significant deposits as part of their book and we are looking at them.

Speaker 3

Okay. And does the expense guide contemplate additional hires for the year or would that be added into expenses?

Speaker 2

Yes. So I think, Steve, if you go back to last year, right, we gave guidance of $206,000,000 to $209,000,000 And we hired 6 groups, and we beat the expense guidance by 6,000,000 So I think we're very cognizant of expenses. We will hire groups and they're very profitable very quickly. I mean, right now, it's with the groups and teams that we do have. But I would just say that the payback period on the groups is very, very quick from a bottom line perspective.

Speaker 2

Yes. I mean, last year, we brought on in those groups, we brought on Yes.

Speaker 1

I mean, last year, we brought on in those groups, we brought on 21 individuals and we are able to cover those costs within our expense guide. I mean, we're very cognizant of managing both sides of that, both the income opportunity, bringing on new teams and the expense side.

Speaker 3

Okay, great. I appreciate that. And one last question, just on the I assume it's one commercial real estate non performing loan. Just curious any color you could give there on that credit?

Speaker 1

Yes. It's a fully tenanted Building that houses 2 schools, both tenants were paying. The borrower had some issues and did not remit payments to us. Since that time, 5 payments have been made. The loan is current.

Speaker 1

And our policy is that we need 6 payments in order to put a loan take a loan out of non accrual. We anticipate that loan coming actually coming out of non accrual this quarter.

Speaker 3

Okay, great. Appreciate all that color. I'll step back.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Mark Fitzgibbon with Piper Sandler. Your line is now open.

Speaker 5

Hey, guys. Good morning.

Speaker 3

Hey, Mark.

Speaker 5

Hey, just to clarify, Avi, on the tax rate was elevated in both the 3rd and 4th quarters. Could you just explain what the discrete items were? What they are and those will be fully out of the tax rate in the Q1?

Speaker 2

Yes. Mark, primarily it's related to 162M issues with the CEO succession that we had. It's obviously a cumulative number, so it picks up. And then there were some other true up items, return to provision type items. I mean, if you look back historically, our tax rates have been in the 27% to 28% area obviously depends upon the level of income at the bank.

Speaker 2

So next year, 27% is a reasonable rate to use for next year.

Speaker 5

Okay, great. And then Stu, your comments on hiring additional teams, are those presumably mostly from legacy Signature or Other large bags or where do you see those teams coming from?

Speaker 1

Yes. I would say all of the above. So there's some serious opportunities both within existing teams at Signature and other institutions that we're in conversation with.

Speaker 5

So of the teams that you've hired, those 6 teams that have brought in 300 and some odd 1000000 of deposits, what do you think those teams are capable of doing once they've their books have kind of fully matured and migrated over?

Speaker 2

Yes, sure Mark. So you go back to September 30, we were at $250,000,000 on the teams. At December 31, we were $33,000,000 Today, we're $375,000,000 So it seems like a steady build of $70,000,000 to $80,000,000 Per quarter at this point, I mean the good thing is we look at it on a client level and an account level basis and it's really not slowed down yet. So we expect to see continued growth in the quarters ahead over there. Again, they're very heavily focused on DDA.

Speaker 2

At this point, it does take time to move over clients. So I think so far, they're really meeting the expectations that we set out and they've become profitable very quick. And really the opportunity for us is continue to grow that. But now that they've been here for a while, hiring new groups and as Stu said, that's going to be additive as well pretty quickly overall.

Speaker 5

Okay. The last question I had, Stu, is there's been a lot of dislocation in the banking space and your balance sheet has obviously held up well. Are you thinking about M and A at all? Is that sort of a priority you think for Dime over the next several quarters?

Speaker 1

Look, obviously M and A has the talk about M and A has certainly picked up. There's still issues with marks and The balance sheets that are out there, I mean, certainly for the right transaction, we're certainly interested and would explore opportunities. So I do think over time and particularly in the next Several years, there's going to be much more activity in the M and A space. And once the Fed kind of levels out and has a direction, I think there's going to be much more discussion out there. And certainly, Given where we are in the marketplace and the strength of our balance sheet, I think there's certainly going to be an opportunity for us.

Speaker 5

Thank you.

Operator

Thank you. Our next question comes from the line of Manuel Navez with D. A. Davidson and Company. Your line is now open.

Speaker 3

Hey, good morning. Just thinking about the overall deposit base, it's great that you're having success with the new hires and those teams are adding a lot. When would we see kind of an inflection for the rest? And what's driving the trends that caused some of the deposit outflows recently? Just kind of comment on deposit growth next year.

Speaker 2

Yes. Look, I mean, Manuel, we grew deposits by $275,000,000 in a year that It was very challenging. I think for the industry overall, if you look at the overall groups that we brought on, they brought on around 330,000,000 So on a net net basis, we were flat in the rest of the bank. So I think if you look at that holistically, That's pretty reasonable in this environment. We've seen DDA really stabilize across the entire bank.

Speaker 2

And so I think when you start 2024, you're not Whatever is left behind is really core DDA. It's a bank operational DDA. So that gives us a lot of comfort going forward with that. I think the opportunity here to grow deposits is really building our private and commercial bankers to set. We have $1,500,000,000 of deposits in that business.

Speaker 2

The branch business is important as well. And so I think as rates Stabilize and normalize, we should be doing well over there. Obviously, over time, we've looked at our deposit base and conceptually where there are Higher rate, chunkier deposits, we've kind of tried to normalize our deposit base over there like everybody else. All that's behind us in 2023. The important part is also looking at the loan to deposit ratio, right?

Speaker 2

I mean, we're at 102 At the end of the year, we're actually close at 100% right now. So we feel pretty comfortable from that perspective that we have the deposit growth to fund the loan growth that we're projecting for 2024.

Speaker 1

Yes. And most importantly, you see quarter over quarter DDA is stable. So I think there are not a lot of banks that could say that Their DDA balances have remained stable over the last two quarters and we see opportunities to continue to grow That base.

Speaker 3

Okay. I appreciate that. Thank you.

Operator

Thank you. Our next question comes from the line of Chris O'Connell with KBW. Your line is now open.

Speaker 5

Hey, good morning.

Speaker 1

Hey, Chris.

Speaker 4

So I think in your opening comments, you talked about the ROA getting up to 110 to 125 over time. Is that assuming that to get there, that's the low 3s, NIM that you're talking about as well over the longer term?

Speaker 2

Yes, Chris. Correct. Yes.

Speaker 4

Got it. And how are you guys thinking about, I know no quantitative guidance, but the pace of NIM expansion, Once the Fed starts cutting and if it's in a methodical or kind of gradual way, does that accelerate over time? Are you guys getting the full benefit in the Q1 of Fed cuts? You talked a little bit about kind of preparing your deposit book for this process. I know you won't give the quantitative guide, but just thinking about The pace of the magnitude as the Fed's cutting would be helpful.

Speaker 2

Yes, I think we plan to be very aggressive on the deposit side in terms of cutting As I said, our book is weighted more to business and municipal customers. So that will allow us to be more aggressive on that front. That's on the liability side of the balance sheet, right? On the asset side of the balance sheet, as we mentioned, there's less repricings in 2024 And then that really starts to pick up in 2025 and 2026. So some of it will depend on the pace of which payoffs pick up On the asset side of the balance sheet, but I would say on the deposit side, if you split the 2 question up into how are you going to see deposit cost and what are you going to see on the asset side?

Speaker 2

I'd say on the deposit side, that's something we can control and we expect to be very aggressive around that. On the asset side, just take a little bit of time given the structure and nature of our assets. I think throughout all of this, Chris, it's just really important to keep in mind, Operating a bank with 30% DDA, right? It's just a matter of time before we get back to those margins over time given the repricing opportunity that we have. The other piece that I just wanted to add is we have around $1,000,000,000 of borrowings that are at Around $900,000,000 to $950,000,000 of borrowings that we've kept really short term, that's really going to reprice immediately as well.

Speaker 2

And we've intentionally kept that shot. We've been messaging that all across and really to position the balance sheet from rates drop. So we do have the benefit of that as well. Yes.

Speaker 1

And just anecdotally, if you look month over month, November December, we saw like 2 basis point increase in deposit rates each month. And in December, we saw an 8 basis point increase in loan rates. So hence, we do feel that as Avi said, we're expecting relatively flat NIM within a few basis points until the Fed cuts.

Speaker 4

Great. That's helpful. And kind of along the same lines, I know it really hasn't been much of The margin for the past, I don't know, 2 years or so. But I mean, when the Fed is cutting, I mean, what do you think that a normalized kind of prepayment impact would have on the margin?

Speaker 2

Yes. Look, it's going to be it has to be a whole lot better than what it is right now because right now the prepayment Fees on the margin is like 1 basis point or 2 basis points. I think if you go back to legacy Dime, we used to have between 10 basis points and 15 basis points on prepayment fees. Now obviously that's multifamily is going to be a smaller piece of the overall portfolio. So I would say Anywhere between 5 10 basis points when speeds really pick up, it's probably not a bad assumption.

Speaker 2

But I don't think that's going to happen in 2024 necessarily just given

Speaker 1

Yes, most likely if it does, it's going to be toward Late 2024.

Speaker 2

Yes.

Speaker 1

Assuming the Fed rate cuts.

Speaker 3

Yes. Great.

Speaker 4

And could you just provide a little bit of color on what the drivers of the net charge offs were for this quarter?

Speaker 2

Yes, sure. So we just fully charged off a loan that we had previously fully reserved for. So last quarter, we took a $4,000,000 charge, Stu mentioned that credit last quarter was still in the legal process on that loan, but we thought it was prudent to charge that fully off. It's something that we had put in non accrual status a couple of years back. So nothing really new over there.

Speaker 4

Got it. And then I assume given the reserve ratio and some of the comments in the release That you guys did like were reserving for a couple of other loans being individually analyzed, just any comments around those?

Speaker 2

Sure. So there was one net new addition to the C and I portfolio. It's a couple of $1,000,000 loan. We fully resolved against it. However, they too have started paying at this point in time.

Speaker 2

And so there's a potential for that coming out. Yes.

Speaker 1

That was a C and I loan Contractor loan that was had matured and we couldn't come to terms on a renewal. And so we were very conservative in our approach. We made it So we fully reserve for that. Since then, we have they have agreed on basic terms of renewal, brought it to the long current and we'll probably close that in the Q1 and put that back on accrual status.

Speaker 4

Great. Really helpful. Thanks, Stu and Savi.

Operator

Thank you. Our next question comes from the line of Matthew Breese with Stephens. Your line is now open.

Speaker 5

Hey, good morning.

Speaker 3

Hey, Matt.

Speaker 6

Just a couple of quick ones for me. Stu, just in light of your multifamily guidance, getting to 25% to 30% of loans over the next 2, 3 years, It feels like the pace of runoff needs to accelerate to get there. And so I was curious if this quarter's kind of 2% quarterly reduction in multifamily is a good run rate or a better representation of what we should be modeling in order to kind of achieve those goals?

Speaker 2

Yes, Matt, I think for the near term, yes. So like we said, we have a limited amount of repricings and maturities in 2024, which is specifically why our guide is over the course of 2 to 3 years, we're going to get there. So it's if you go back a couple of years, Our payoff speed on the multifamily portfolio was 37%. Right now, it's 6%, right? So I think what The Q4 and Q3 numbers are reasonable estimates for the next 6 months or so.

Speaker 2

But then as the Fed starts cutting rates, you're going to start seeing a pickup in that. And then eventually the loans do come up for maturity or repricing, which is again why this is a 2 to 3 year goal for us.

Speaker 1

Yes. I mean, we're looking at Sats and projected Sats each month, I mean for this month, we're probably going to have $40,000,000 to 45,000,000 in satisfaction and we're looking we're getting requests already for next month. So mean, there is some activity out there, some transactions happening. And so but it's very chunky. So It's hard to say exactly when you're going to see significant runoff, but suffice to say, we are seeing Some amount of satisfactions each month.

Speaker 6

I mean, can we just go back So one of the points you made there, I think you said historically the payoff activity was 30% to 35% for multifamily making it Secondly, a 3 year duration type product, but now it's in the

Speaker 2

same No, Matt. The comment there was 2 years back at the peak, the payoff rate was 37%. If you look at it over a multi decade horizon, you're probably between 15% percent is the true payoff rate on the multifamily side. Right now, it's 5% to 6%. So but as rates come down, they generally catch up.

Speaker 2

It's more of a timing issue, Matt. And again, we're pretty clear. We're trying to give 2 to 3 years What if a forward look in terms of where we want and see the balance sheet ending up? The thing that we can control is what we feed in into the bucket. And so right now, we really have no multifamily loans in the pipeline.

Speaker 1

Yes. For the first time, I think ever, we don't have any pipeline in multifamily.

Speaker 6

Got it. Okay. Just one more question on this topic. As the typical kind of multifamily borrower reaches the end of their kind of standard 5 year fixed, are they willfully rolling into the floating and waiting for lower rates? Are you seeing them refi into higher rates or go elsewhere?

Speaker 6

What is kind of the common behavior?

Speaker 2

Sure. So Matt, we went back and looked at our 2018 vintage rate. So that basically matured or reprised in 2023. So around 30% to 35% of that is satisfying at this point in time and is around 65% that's taking the repricing option. So It's basically 1 thirds, 2 thirds in terms of the mix.

Speaker 2

Now we will say that there are competitors in the market right now that are in the low 6s high fives. And as rates come down, you're going to see more of those loans not take the reprice. They're probably just going to satisfied away from us given where the market is trending towards.

Speaker 1

Yes. I mean, many of those Viewed it as a short term, even though they're taking a rollover, they view it as a short term rollover because They figure not why go through the expense of refinancing at these rates, but once rates do come down, they're going to they'll pull the trigger and prepay.

Speaker 6

Got it. I appreciate all that color. The last one for me is just Conceptually, as the focus continues on business banking and moves away from traditional multifamily, Should we start to see the reserve reflect that and start to increase a little bit? 67 bps On today's balance sheet makes sense, but if multifamily is 25% of loans, does it make sense for the reserve to be higher?

Speaker 2

Matt, yes, absolutely.

Speaker 1

Yes, I mean, our reserve methodology calls for At least 1% on C and I loans today. So as we put C and I loans on, we are significantly higher than what we're reserving for multifamily. So that transition will occur just naturally as part of our origination process.

Speaker 6

Got it. Okay. That's all I had. I'll leave it there. Thank you for taking my questions.

Operator

Thank

Speaker 2

you. Thanks,

Operator

And I'm currently showing no further questions at this time. I'd like to hand the call back over to Stuart Labeaux for

Speaker 1

Once again, I'd like to thank our dedicated employees who worked diligently through these challenges throughout the year and thank our shareholders for their continued support and we look forward to seeing you next quarter.

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Earnings Conference Call
Dime Community Bancshares Q4 2023
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