Dime Community Bancshares Q4 2024 Earnings Report

Dime Community Bancshares EPS Results

• Actual EPS: $0.42
• Consensus EPS: $0.44
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Dime Community Bancshares Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $62.63 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dime Community Bancshares Announcement Details

• Quarter: Q4 2024
• Date: 1/23/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 8:30AM ET

Dime Community Bancshares (NASDAQ:DCOM) operates as the holding company for Dime Community Bank that engages in the provision of various commercial banking and financial services. The company accepts time, savings, and demand deposits from the businesses, consumers, and local municipalities. It also offers commercial real estate loans; multi-family mortgage loans; residential mortgage loans; letters of credit; secured and unsecured commercial and consumer loans; lines of credit; home equity loans; and construction and land loans. In addition, the company invests in Federal Home Loan Bank, Federal National Mortgage Association, Government National Mortgage Association, and Federal Home Loan Mortgage Corporation mortgage-backed securities, collateralized mortgage obligations, and other asset backed securities; U.S. Treasury securities; New York state and local municipal obligations; U.S. government-sponsored enterprise securities; and corporate bonds. Further, it offers certificate of deposit account registry services and insured cash sweep programs; federal deposit insurance corporation insurance; merchant credit and debit card processing, automated teller machines, cash management services, lockbox processing, online banking services, remote deposit capture, safe deposit boxes, and individual retirement accounts; investment products and services through a third-party broker dealer; and title insurance broker services for small and medium sized businesses, and municipal and consumer relationships. The company was founded in 1910 and is headquartered in Hauppauge, New York.

Dime Community Bancshares Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day. Thank you for standing by. Welcome to Time Community Bancshares Inc. 4th Quarter Earnings Conference 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.

[Operator]

S. 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.

[Operator]

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. GAAP. For information about these non GAAP measures and for reconciliation to GAAP, please refer to today's earnings release.

[Operator]

At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please note that today's conference may be recorded. I will now hand the conference over to your speaker, Mr. Stulabaugh, President and CEO.

[Operator]

Please go ahead, sir.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Thank you, Olivia, and thank you all for joining us this morning for our quarterly earnings call. With me today is Avi Reddy, our CFO. Today, I will touch upon the progress we've made in 2024 as we execute our business plan. Avi will then provide some details on the Q4 and guidance for 2025. We began 2024 by hiring a number of deposit gathering teams from the former Signature Bank.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

These teams came to Dime given the positive results achieved and the performance of the 2023 teams we hired earlier had hired previously. Collectively, the deposit groups have raised approximately $1,800,000,000 of core deposits with approximately 40% in non interest bearing deposits. In fact, we've opened up over 11,000 accounts and 7,000 individual customer relationships, clearly a home run for Dime. The successful build out of our private and commercial bank has been a company wide initiative, a true team effort. The growth and stabilization of the branch based deposits, especially in consumer and DDA consumer DDA resulted in substantial year over year growth in core deposits.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

In fact, we ended the year with a loan to deposit ratio of less than 95% and we have reduced our wholesale borrowings and brokered deposits by approximately $1,200,000,000 in the past year. On the loan front, we continue to execute our stated plan of growing business loans and managing our CRE ratio lower. Business loans were up over $70,000,000 in the 4th quarter and $400,000,000 for the full year. This was driven by strong growth in our C and I and our healthcare verticals. Our loan pipeline remains very strong with over $750,000,000 of loans at a weighted average rate of 7.75%.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

These are weighted towards C and I and healthcare loans as well, continuing to execute on our plan. We ended the year with CRE concentration of approximately 45 and we expect to continue to reduce this ratio over time to the low 400s. Despite all the deposit and loan teams we brought on over the last 2 years, we've had we've been able to keep core operating expenses to assets well contained and in a 165 basis point range. We have achieved this by using technology to drive operational efficiencies and keeping a very close watch on discretionary expenses. As we guided to on the last call, 4th quarter expenses were relatively flat versus the 3rd quarter.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Post the election and given the improved investor sentiment towards bank stocks, we raised approximately $136,000,000 of net proceeds from a significantly oversubscribed common equity offering. The transaction was accretive to tangible book value. We used a portion of proceeds to reposition our securities and BOLI portfolios. As a result, the capital we raised, we ended the year with a common equity Tier 1 ratio in excess of 11% and a total capital ratio in excess of 15.5%. Having a best in class capital ratios versus a peer will allow us to take advantage of opportunities as they may arise and continue to support our organic growth.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

In addition, over the course of the year, we increased our loan loss reserves of 67 basis points to 82 basis points. This is within striking distance of our medium term target of 90 to 100 basis points. During the Q4, we received our 2nd consecutive outstanding CRA rating. Apart from the overall rating of outstanding, we received outstanding on the 3 component CRA tests, including the lending test, the investment test and the service test. Receiving a perfect score on all three components set us apart from our competitors and a testament to Dimes' commitment to community and the hard work of our dedicated employees.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

In conclusion, we continue to execute on our growth plan and we have differentiated our franchise from competition as it relates to our growth and ability to attract talented bankers. We have solid momentum and we continue to grow the business loans and core deposits. Our net interest margin continues to expand with the 4th quarter NIM increasing to $2.79 Importantly, we have substantial opportunity to continue to increase our net interest margin in the years ahead given the significant back book repricing we have in our portfolio. Avi will provide more details in the remarks, but suffice to say, we have a clear line of sight to returning to a 3 plus net interest margin. Our DDA levels are back to 30% and we believe the value of this DDA base will shine through in the current rate environment.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Corruption in our marketplace remains very high and we are very active on the hiring front. And our recruiting pipelines are very strong. More to come on this over the next 90 days as bonus season comes to an end. I'm looking forward to a strong 2025 and I want to again thank all our dedicated employees for their efforts in positioning Dime as the best business bank in New York. With that, I will turn the call over to Avi.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Thank you, Stu. During the Q4, we completed a repositioning of our available for sale securities portfolio and our bank owned life insurance portfolio. Securities restructuring was completed towards the end of November. The BOLI transaction took place in 2 stages. A surrender of legacy BOLI was completed in the month of December and an equivalent amount of replacement BOLI is being purchased in the month of January.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Excluding the impact of these two transactions as well as severance and costs associated with pension termination and other one time items, adjusted EPS increased by 45% versus the prior quarter. We saw a meaningful expansion in the net interest margin this quarter. Reported NIM was up 29 basis points and the core NIM excluding purchase accounting accretion was up 26 basis points. NIM expansion was driven by a significant reduction in our cost of deposits. Given the timing of the Federal Reserve rate cut in December, we adjusted deposit rates towards the end of the month.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

The full impact of the rate cut will flow through into our Q1 net interest margin. Given that the securities repositioning was completed towards the end of November, the Q4 NIM reflects only 1 month of benefit from the repositioning. Core deposits were up approximately $500,000,000 in the 4th quarter. This included approximately $150,000,000 of seasonal tax receiver municipal deposits typically arrive in the month of December and leave in mid January and $200,000,000 of title company related deposits that were tied to a closing at year end and that left the bank in early January. Excluding the seasonal tax receiver deposits and the title company related deposits, period end co deposit growth for the Q4 was approximately $150,000,000 Similarly, the overall balance sheet size and cash position was elevated at quarter end by approximately $350,000,000 dollars due to the seasonal municipal deposits and title company deposits.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Core cash operating expenses for the 4th quarter, excluding intangible amortization, was $57,700,000 This was consistent with our previous core cash expense guidance of between $57,500,000 $58,000,000 Non core items for the 4th quarter included severance, additional FDIC special assessment related to the failure of the Signature and Silicon Valley and $1,200,000 related to the previously disclosed termination of a legacy pension plan. Please note, we're in the final stages of termination of this pension plan and expect an additional $4,500,000 pretax termination expense in the Q1 of 2025. This additional $4,500,000 is already captured in the AOCI line item at year end and as such will have no material impact on tangible book value per share as it is simply a realization of the underwriting loss that is already in our equity account. We had a $13,700,000 loan loss provision this quarter. Consistent with our commentary during the Q3 earnings call, our allowance to loans increased to 82 basis points.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

As Stu mentioned, we're within striking distance of the 90 basis points to 100 basis points medium term target, which we expect to reach over the next 6 to 9 months. Next, I'll provide some thoughts on the NIM trajectory and guidance for 2025. As I mentioned previously, given the timing of the securities repositioning, there was only a partial quarter benefit from the repositioning in the 4th quarter's NIM. In addition, the timing of the rate cuts in the 4th quarter was such that the full quarter impact of the November rate cut was not fully realized in the 4th quarter margin. As such, we thought it would be helpful to provide the core NIM for the month of December, which includes the full benefit of the Federal Reserve rate cut in November as well as the full impact of the securities repositioning.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

The monthly December core NIM was approximately 2.84. This is a good base NIM to use as you build out your models for 2025. The 25 basis point Federal Reserve rate cut in December should result in a 5 basis point to 6 basis point NIM improvement for the Q1 of 2025. So starting with the 2.84% core NIM for the month of December and adding the full impact of the December rate cut should get us close to 2.90% for the Q1. Additional co deposit growth and loan repricing could add a few more basis points of upside to the Q1 NIM.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

As Stu mentioned, we have a line of sight towards a 3% net interest margin. Should the Federal Reserve cut rates again this year, we expect another 5 to 6 basis points in quarterly NIM improvement per 25 basis point rate cut. This assumes the behavior in deposits and loans hold for each subsequent rate cut and competition remains rational. Should the Federal Reserve not cut rates in 2025, we still have a pathway to increase NIM over time given the significant amount of back book repricing. To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, in the second half of twenty twenty five and the full year twenty twenty six, we have $1,900,000,000 of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of $3.95 that either reprice or mature in that timeframe.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Assuming a 2.25 basis point spread on those loans over the forward 5 year treasury, we could see a 35 to 40 basis point increase in NIM from the repricing of these loans. Finally, and while we previously only provided information on the back half of 'twenty five and full year 'twenty six, as we look into the back book for 2027, we have another $1,750,000,000 of loans that are at a weighted average rate of $425,000,000 that will lead to continued NIM expansion in 2027. In summary, we see a pathway to a 3% NIM in 2025 and a NIM greater than 3.25% in 2026 with continued expansion in 2027 and approaching the 3.50% area. The impact of this enhanced NIM will no doubt increase our earnings power as time progresses. With respect to non interest income guidance for 2025, we expect between $40,000,000 $42,000,000 Individual quarters may be impacted by the level of customer related loan swap income.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

With respect to balance sheet growth, we expect period end loan balances to grow in the low single digit area in 2025, with growth more weighted towards the back half of twenty twenty five. As we mentioned previously, we are focused on gradually reducing our CRE concentration to the low 400s. Attrition in CRE and multifamily may mask some of the growth in our business loan portfolio in 2025 as it did in 2024. However, we expect this trend to moderate by the end of 2025 and expect to return to a mid single digit growth profile in 2026. With respect to core cash non interest expenses, our full year 2025 guidance is between $234,000,000 $235,000,000 This guidance takes into account our existing employee base.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

To the extent we add additional client facing bankers after year end bonuses are paid out, we could see an increase in expenses starting in the Q2. But as we've demonstrated previously, we expect these bankers to pay for themselves and contribute to pretax income growth in a relatively short period of time. Finally, we expect the tax rate for the full year between 27% 28%. With that, I'll turn the call back to Olivia and we'll be happy to take your questions.

[Operator]

Thank you. And our first question coming from the line of Mark Fitzgibbon with Piper Sandler. Your line is now open.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Hey guys, good morning.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Good morning.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

First question I had, Avi, just to follow-up on one of the guidance numbers that you gave for non interest income. I think you had said $40,000,000 to $42,000,000 for the full year 2025. Is that correct?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes, yes, Mark. So we did the BOLI restructuring in the month of December. So what happened there was we took the tax charge in Q4. We're purchasing around $85,000,000 to $90,000,000 of BOLI in the month of January. So the additional income that comes in on the BOLI side will be around $5,000,000 to $5,500,000 plus or minus.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So that's why the non interest income is higher. We also factor that into the tax rate of 27% to 28% given the BOLI income is tax free. So we gave a range, the range was 40 to 42 And obviously, the individual quarters may be impacted by the level of loan swap income in there.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay, got you. So the big delta is the BOLI income number, goes from sort of $2,800,000 to up to $5,000,000 Got you. Okay. And then secondly, I think your guidance for loan growth was sort of low single digits. I mean, you is that because the pipeline, you expect a bunch of that to fall out or you just feel like there'll be a fair amount of refinancing activity?

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

I guess I'm curious.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. I think that what we're seeing in there is more volume transaction volume occurring in the marketplace. For example, in the month of in the Q4, we closed over $150,000,000 to $175,000,000 of new business related loans. Yes, we saw a higher level of payoffs and refinances, which resulted in not quite the growth we had expected. So we are seeing some more activity.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

And clearly, I think in the CRE world and the multifamily world where we are seeing some more transactions and since we are not as active as we once were, that's the offset to the growth.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes, Mark, if you look at 2024, we grew the business loan portfolio $425,000,000 for the year. So we're pretty happy with that, looking to build on that. And then on the CRE side, we were down around $350,000,000 multifamily and CRE together. So and we're focused on getting the CRE ratio down to the low 400s, right? So some of that's going to the multifamily CRE is going to offset some of the business stuff in the first half of the year.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

But as we exit 2025 and into 2026, maintaining that level of CRE, you should see the overall loan growth pick up at that point in 2026.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Okay. And then lastly, given your outstanding CRA rating, it strikes me that you're really well positioned to do acquisitions. Is that something that you think is in the cards for Diamond in the coming quarters? And if so, where and what might you be most focused on in potential partners?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. I mean, look, we're always interested in strategic opportunities that enhance franchise value, certainly within Tri State area, in the metropolitan area. And we'll look at opportunities as they may arise. We also have significant and expect significant organic growth and with some of the new teams that have come on board and that we're talking to, and that capital is going to support that as well. But suffice to say, if opportunities arise given valuations and given our positioning at this point, we're certainly interested if they make sense.

[Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies]

Thank you.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Thanks, Paul.

[Operator]

Thank you. And our next question coming from the line of Steve Moss with Raymond James. Your line is now open.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Good morning.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Hi, Steve.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Thanks, Stu. Starting with the following up on the margin guidance here. Avi, you mentioned the $1,900,000,000 fixed rate for the second half of twenty twenty five and twenty twenty six. Just wondering, could you break that out between what's going to mature in the second half twenty twenty five versus the total for 2026?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes, sure. So the second half of twenty twenty five, it's around $600,000,000 at a rate of $425,000,000 and the remaining piece is in 2026. So it looks like there's a 1,000,000,000 dollars 3 plus or minus in 2026 and the rate on that is around $385,000,000

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay, great. Appreciate that color.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

And then in terms of just kind of you mentioned rational deposit competition here. Just kind of curious, you had a very healthy move on deposit pricing lower. Just kind of where are your marginal deposits coming on these days?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes,

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

it's a mix, Steve. I mean, we're starting with plan needs to have DDA. If you have DDA, we're willing to pay a competitive rate on the money market side. As Stu said, we're tracking account activity. The difference with us is versus a lot of banks in our footprint is there's a lot of new activity coming into the bank and new customers coming in, which helps us be more aggressive on existing customer rates and looking at them 1 by 1.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I think I mentioned on our Q3 earnings call, we had a large municipal customer that we were paying a very high rate due and we rationalized the size of that deposit over time because it didn't make sense for the bank. Same with the broker deposits. So I would say it's coming in between 2% and 2.5% plus or minus on a blended basis in terms of deposits coming in because the new groups are bringing in DDA at a rate of around 40%. And if you're paying a money market rate of plus or minus 4% to be competitive, you're looking at somewhere between 2% and 2.5% in terms of the marginal cost coming in.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. And overall cost deposits overall cost deposits are in the 2% to 2% to 2 0.5% range at this point.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Right. Okay, great. No, really appreciate that color there. And then just on credit here, just curious if you could give some color around the charge offs that occurred this quarter, that would be helpful?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes, sure. Just kind of across the board, Steve, there's a mix across C and I, commercial real estate and multifamily. No large credits in there. I think a lot of other banks have said this. I mean, it's important to look at charge offs over an extended period of time.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I think our charge offs for 2024 was 17 basis points or 18 basis points. So all stuff that we've identified are classified assets. So when we report our 10 ks will be down, 30 to 90 days pretty flat basically. So not seeing any concerning trends at this point. And so I'll just leave it at that for now.

[Steve Moss, Director - Banking & Arlington at Raymond James Financial]

Okay, great. Well, really appreciate the color and nice quarter. Thank you guys.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Thanks, Steve.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Thanks.

[Operator]

Thank you. And our next question coming from the line of Chris O'Connell with KBW. Your line is now open.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Hi, Chris.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Hi. Good morning. How are you, Stu?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Hi, Chris.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

So I was just wondering on the fact that the cash you guys mentioned was elevated at the end of the year here, but there's not the low single digit loan growth isn't putting too much out there, especially it sounds like in the first half of the year. I guess what's the plan or the timing that you guys think on the deployment of that?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. Look, I think what we said, Chris, and we communicated this when we did the equity offering, we've pretty much paid off most of our wholesale funding at this point. The FHLB position is around $500,000,000 to $600,000,000 plus or minus of that $500,000,000 is medium to longer term, which we don't expect to pay off at this point. The broker deposits are probably around $300,000,000 to $400,000,000 plus or minus. So there's not a lot of room to continue to pay off wholesale deposits and borrowings over the course of the year.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Q4 was a bit of anomaly. As I said, we had some municipal deposits come in every year at the end of the year. In addition, we had a couple of large title companies put in deposits then. So the normalized cash position is probably $350,000,000 to $400,000,000 lower than that. Look, I think we're being judicious on securities purchases.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

We did do a repositioning in the Q4 obviously on securities where we restructured on $400,000,000 I think look having a little bit more cash is not a bad thing. It helps position the bank to the extent that the Fed doesn't cut rates or the Fed goes in another direction. So I think we're trying to manage our asset sensitivity with the cash position. And over time, we'll put it to work on the loan side. We're not rushing in to do anything all at once.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So it does have a little bit of drag on the margin, obviously, but I think we're willing to live with that just given the additional flexibility it provides the bank over time.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Great. It sounds like that might stick around for a little bit. And then on the loans, just curious, it seems like there's a bigger headwind for the multifamily and CRE repricing and maturities in the second half of twenty twenty five, but you guys are indicating that their growth might be more impacted in the first half. Just curious on kind of the dynamics there.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes, Chris, this is more management of our balance sheet, right? So we want to get the CRE ratio into the low 400s. So right now, we're not at a market rate to retain some of these credits. But as the year progresses and we get closer to the 400s, we have the option to keep some of these credits and have very solid credits in the low to mid-6s on the balance sheet. So I think once we get to the level of CRE that we're comfortable with, we'll have more flexibility at that point in terms of retaining some stuff.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

The volume is higher, but at the same time, it's the option is with us in terms of keeping some of these credits with us. So I think, again, the headwind is going to be in the first half of this year due later in this year. And after that, we'll be able to retain items and manage the balance sheet as appropriate.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Okay. Got it. And then just as you guys are moving into the March, April, I guess, bonus season for competitor bankers, I know that things are still in flux, but is there any way to quantify perhaps on either a percentage of what you guys would be there already added from the prior teams or the size, just how big that opportunity is?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. I think it's still a bit early, Chris. We've got number of teams, multiple teams that were very close. Some have committed to coming on, some are in very late stages. So it's a little early at this point.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I think as we get into March April, it will be easier. For some banks, bonus season ends in January, so you could see some announcements in February. So it's going to be a mix, but I think this will all shake out. And I think the one difference this year is that the opportunities on both sides of the balance sheet, not just on the deposit side. And so I think the last couple of years, we probably spent 80% to 90% of our energy on the deposit side.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I think this time around probably going to be more balanced in terms of how we look at the opportunity.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

I would expect that in the next 30 to 45 days you'll see a couple of announcements and then as we get into the end of March there'll be additional.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Great. Appreciate it. Thank you.

[Operator]

Thank you. And our next question coming from the line of Manuel Neves with D. A. Davidson. Your line is now open.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Hi, Manuel.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Hey, good morning. I just wanted to build on some of the commentary on kind of the customer reaction to recent Fed rate cuts. Has there been really this is more like an industry wide question too. Has there been any difference in reaction to deposit costs pushing out for the December cut versus the November cuts? Like has there have you seen any real difference yet?

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Or is most kind of expected at this point?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

No, I mean pretty similar, Manuel. I mean obviously customers speaking from personal experience and because we're involved in the day on the deposit rate movements, Customers have some optical thresholds that they care about. If you were at 5%, you wanted 5% of the customer. And then if you're at 4%, you want 4%. I mean if you're at 4.35%, you may be okay with 4.15%, right?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So it's more I think customer psychology depending on where each one is. But the way we manage our basis, it's very segmented based on balances that they have and the weighted average rate. I will say the best environment for banks is that gradual 25 basis point cuts over every 90 days, right? We had 100 basis points swing pretty quickly, so customers were impacted fairly significantly, but they also got it on the way up, right? So I think the best environment for all of us would be the Fed takes a pause and then comes back at some point in May or June and cuts 25 at that point and then you'll be able to cut the rates again.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

If you continuously have a significant amount of cuts, you'll probably see more sticker price reaction from some. But I think us individually, it's a relationship bank and we did pay on the way up and we've been able to reduce costs on the way down.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. We've been very diligent in our on the way down and looking at individual customers and making the rate changes, including on the municipal side where we told everyone that you want 100% beta on the way up and we told them early on that on the way down expect 100% beta as well. So look, there are most banks have been fairly rational through this most recent cycle. And I think we've been able to take advantage of that and hold to our guns. As Avi said earlier, the fact that we are every month opening hundreds of new accounts and bringing on new customers gives us a lot more flexibility, right?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

So we don't have to fight and pay up for every last dollar where a customer says, look, I can get extra from this place or that place. And we basically can hold to our guns and they can make a decision. And for the most part, they stay. And so we really haven't seen that much in the way of disintermediation as far as deposits under rates.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

I appreciate that commentary. And it's obviously a relationship business. How I don't think I heard and it's probably harder to pin down is how much more deposit growth do you get from the current teams you've had? Is there a thought process on what we should expect on the deposit side across this year? Just kind of thoughts on where that deposit growth could go?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. So I think what we've said previously on this is, it probably will take every team 3 to 4 years to get to some type of steady state and they're continuously opening accounts. Look, every quarter we've grown accounts and we've grown deposits. And when we look at the forward pipeline, we think there's additional room. I think it's hard to predict, Manuel exactly where they're going to end up.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

But what we're trying to do is look at accounts and account opening activity and they continue to make progress. Obviously, they've built a substantial book. It's $1,800,000,000 right now. I think over time as our name gets out and our technology platform and some of the things we do for customers gets out, they may bring in additional new customers as well not part of their existing book. So I think we're in a good spot.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

As Stu said, branch based deposits have stabilized, our consumer deposits have stabilized and we're looking at other teams as well. So I think we have a long runway on the deposit side in terms of growing that over time.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

But just to give you an idea, Amit, if I look at our reports even today, we've opened up over 300 accounts and 200 relationships just since December 31. So that kind of gives you an idea. They're still very active and moving relationships over and developing new relationships. So I still think there's a fairly long runway. But again, that's going to happen over time.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

There are a lot of accounts get opened. It takes some several months to fully fund. So there's still upside in terms of the pipeline.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

I love the sense of activity there. If deposit growth comes in better than expected, if it's could that drive stronger loan growth? Like how should we think of those together? And I know that you have a build in the back half of the year and you have a lot of repricing, but just how do those work together in your thought process?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

I think credit is credit and we're always looking for good solid loans, but I don't think deposits are going to drive the credit side. I think we want to put on profitable relationships with good credits, focusing on business loans obviously. And so I think to some degree there one won't drive the other. But as we continue and we said earlier, as we continue to build out the C and I, the healthcare and with some of the impending announcements we think on new teams focused on the loan side that will certainly take up the excess

[Stuart Lubow, President & CEO at Dime Community Bancshares]

liquidity.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

That makes a lot of sense. I appreciate that. One last question on the asset side is with the repricing that you're having over the next 3 years, are you still kind of thinking that the loan portfolio ends with multifamily in the 30% range? Or could there be a wider range of outcomes there?

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

You spoke a little bit about flexibility that you might keep some of those more than you maybe thought if the pricing is right. Just kind of talk through that a bit of where to end.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. I think our range was 25% to 30%. So we don't want to be pinned down to one number. I think that's really trying to get us down to that the low 400s over there. On the Investor Crease side, we have a lot of very solid relationships with good deposits as well in that business.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So I think 25% to 30% is probably a good medium to longer term number there that gets us into the 4.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

You have to remember, I mean, the multifamily book has been a very solid book from a credit perspective. But it's the lowest yielding loan asset that we have on the books. It's even at $4.49 which is the average yield on our multifamily book. It's even lower than our adjustable rate mortgage portfolio, 1 to 4 family portfolio. So I mean, so there's a good risk adjusted asset there, but we also are looking at maximizing returns.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

So we think that 25% to 30% is the right place to be. Although in this marketplace, obviously, rates have gone up quite a bit on the multifamily side and it's a much more profitable asset than it was several years ago when it was commoditized pricing.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Thank you both. Thank you for the commentary.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Thanks, Emmanuel.

[Operator]

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

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

Good morning. Just a few follow ups for me.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

I was hoping first you could discuss new loan yields and spreads across C and I and kind of your focus relationship commercial real estate. And then secondly, just discuss payoff activity on the back book and whether or not the slowest pace of payoff activity if anything has changed there?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Sure. So on the pipeline right now, the average rate on the pipeline is $7.75 The C and I portfolio is at a weighted average rate of about $7.60 and the owner occupied CRE is about $7.20 and the healthcare is right around $7.50 as well. We only have in the entire pipeline, we only have $9,000,000 of multifamily and about $60,000,000 in an investor CRE. So the $750,000,000 pipeline is really weighted towards the C and I owner occupied CRE in the healthcare.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

And then, Matt, just on the payoff speeds, look, we track this every single quarter. The multifamily payoff speeds in Q4 were a little higher actually. It was around 10%. The prior quarters, we're probably averaging closer to 6% to 7% plus or minus. On the investor accrete, it's probably around 6% to 7%.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

The payoff speeds at this point, pretty consistent with what the prior quarters were. We did see some elevated payoffs in our business loans at your end, customer selling businesses, just normal activity. That was actually 20% in Q4. That's a bit higher than what we traditionally see because in that business portfolio, it's probably closer to 8% to 10% because those are just customers that we're retaining over time. So if we didn't have that 20% payoff in that portfolio in Q4, loans would have ended up close at $11,000,000,000 at the end of the year.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. We had a couple of large customers who sold their companies to private equity firms or whatnot and we did have some payoffs there, which were unanticipated.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

One thing from an industry perspective is a lot of banks are pulling out of commercial real estate somewhere to you trying to lower CRE concentrations. I was hoping you could talk about what you're seeing on the non bank side, and whether or not they are taking market share and keeping lower than you would normally see?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. I think we are seeing a little bit more activity on the non bank side in terms of financing CRE and other multifamily opportunities. I do think that over time and today with today's yield curve and where rates are that I think banks will eventually get back into the CRE business as they get to the levels that they'd like in terms of their CRE ratios. Because again given the yield curve and where rates are, there is money to be made in that business and it's a good risk adjusted asset.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

All right. And then 2 more for me. The first one is just I was hoping for some the rent regulated multifamily book and the office book are still kind of the 2 areas for everybody, areas of most concern. Just talk about the health of those portfolios, any changes in underlying characteristics? And then maybe some thoughts around charge off activity for next year, if you have some insights there?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Sure. Yes, nothing significant, Matt, on both. Look, we track our classifieds very closely. Like I said in the prepared remarks, classifieds are down. We don't have a lot of maturities in the first half of this year.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I think maturities pick up in a stair step approach starting the second half of the year. But really not seeing anything. Nobody is really coming in and asking for new deferrals or modifications at this point. Those levels are pretty steady at this point. I think we know what we have.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I would just say for the charge off item, look, it's hard to predict charge offs over time. I think we've done a good job identifying what loans are substandard. So we know where we have issues over time. In an individual quarter, it may be up or down. It could also be, look, you may reach a decision point on certain credits saying, look, it's better for us to exit these credits at this point, especially as you have 3rd party investors and non banks stepping up in those markets.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So I'd say probably entering the point in the cycle that charge offs are not going to be 0 basically. I mean for the full year our charge offs were I think 17 basis points last year. So a range between 20 30 basis points is a reasonable range for a commercial bank, and that's probably where we expect to be for next year. So hopefully that helps in terms of color, but not really seeing anything out of the ordinary at this point.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Yes. And on the rent regulated, we're really getting down to we separate between pre-twenty 19 and after and the pre-twenty 19 portfolio continues to wind down. They've all repriced at this point. We have no non performers. So we continue to monitor it.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

We're still doing our annual review. So we got a pretty good handle on what we're seeing in terms of debt service coverage. And we are seeing a good percentage of improvement in debt service coverage ratios as we go through our annual review. So I think the inflation issue has moderated somewhat. Rents are slowly increasing and landlords most of our loans are relatively small.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

So most of our average size on our rent regulators is about $2,800,000 So they're managing their properties very tightly and maintaining their profitability.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

Great. And then last one for me. Avi, I was hoping you could discuss deposit growth for 2025 a little bit. I'm sorry if I missed that. The composition is also important.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

And so I was hoping you could just touch on how you think non interest bearing deposit growth will look next year?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. So one thing we've seen, Matt, is just a stabilization in consumer deposits at the bank. We probably have around 30% to 35% of our book is consumer. I'd say 20222023 and even the first half of twenty twenty four, we saw outflows on that and we saw outflows on the DDA side as consumers wanted to get a higher rate, right? So I think that should help because that was masking some of the business growth that we saw.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

I mean, look, this in 2024, we grew business deposits by I think $1,700,000,000 plus or minus as the teams really started to ramp up. So I would say we continue to see new accounts coming in, new deposits. We expect to grow the deposit base this year. We've got back up to 30% in terms of the DDA percentage and we'd like to keep it at that level and maybe grow it over time. I mean, still a high rate environment, so it's very hard to grow DDA.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So I wouldn't project the DDA base to getting to 35% at the end of 1 year, but we'd like to continue to see that creeping up slowly over time. And the stuff that's coming in has a nice component of DDA. So I'd say, the DDA percentage, stable to up from here, hopefully. And in terms of overall deposit growth, I think we should see pretty solid growth in 2025, at least based on accounts that we've opened and the pipelines that we have.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

Sorry, just last one is thoughts on deposit betas in 2025?

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes. So what we've done on the interest bearing side is, we've probably dropped rates on the interest bearing piece around 80 basis points for the 100 basis point cut in rates. And so probably at an 80% beta on interest bearing, but given we've got 30% DDA, the total deposit beta was around I think 55% plus or minus. So I think that should hold, Matt, going forward if there's additional rate cuts. I mean, as of right now, our cost our weighted average rate on deposits are around 205 and that's fully reflective of the December rate cuts.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

So we've made all those changes for December. So I would say, if we get an additional 25 basis points, the behavior should pretty much mirror what we had for the last 25 basis points or even the last 100 basis points basically. So we don't expect any substantial change. Obviously, if the Fed does not cut rates, it's going to be harder for banks to cut rates additionally going forward.

[Matt Breese, Managing Director & Research Analyst at Stephens Inc]

I appreciate you taking all my questions. Thank you.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Thanks, Matt.

[Operator]

Thank you. And I see we have a follow-up question from Emmanuel Neves. Your line is open.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Hi, Emmanuel.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Hey, sorry.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Did I hear correctly that your end of period is that total deposit cost is 2.05 percent?

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Is that December?

[Stuart Lubow, President & CEO at Dime Community Bancshares]

That's current.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

That's the current weighted average rate as of January 22.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

That's very helpful. I appreciate that. That's excellent push out of deposit cost cuts.

[Avinash Reddy, Senior EVP & CFO at Dime Community Bancshares]

Yes.

[Operator]

Thank you. And there are no further questions in the queue at this time. I will now turn the call back over to Mr. Zulubo for any closing remarks.

[Stuart Lubow, President & CEO at Dime Community Bancshares]

Thank you, Olivia, and thank you all for joining us today and thank you to our dedicated employees and our shareholders for their continued support. We look forward to speaking with you all after the Q1.

[Operator]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and you may now disconnect.

Participants

Executives

• Stuart Lubow, President & CEO
• Avinash Reddy, Senior EVP & CFO

Analysts

• Mark Fitzgibbon, Head of FSG Research at Piper Sandler Companies
• Steve Moss, Director - Banking & Arlington at Raymond James Financial
• Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Manuel Navas, MD & Senior Research Analyst at D.A. Davidson
• Matt Breese, Managing Director & Research Analyst at Stephens Inc