Dime Community Bancshares Q2 Earnings Call Highlights

Key Points

• Record Q2 results: Dime Community Bancshares posted record second-quarter revenue of $126 million, with core EPS up 23% year over year to $0.79. Net interest margin expanded to 3.28%, marking the bank’s ninth straight quarter of margin growth.
• Business lending is driving growth: Business loans grew 26% year over year, and management said the pipeline remains strong at about $1.4 billion. The bank expects low- to mid-single-digit loan growth in the second half while continuing to diversify away from multifamily exposure.
• Credit, capital and buybacks: Credit trends were mixed but manageable, with nonperforming assets down 28% sequentially and the allowance to loans rising to 98 basis points. Capital levels improved, and management said it expects to resume share repurchases in the third quarter.

Dime Community Bancshares NASDAQ: DCOM reported record second-quarter revenue and said it expects to resume share repurchases in the third quarter, as management pointed to continued net interest margin expansion, growth in business lending and a lower commercial real estate concentration.

President and CEO Stuart Lubow said revenue for the quarter was $126 million, a record for the company, while core earnings per share rose 23% from the prior year. Lubow said net interest margin increased seven basis points from the prior quarter as the bank lowered deposit costs and improved loan yields.

“Dime has differentiated our franchise from our local competitors as it relates to our organic growth trajectory, our ability to attract talented bankers, the quality of our deposit base, the progress we made in diversifying our balance sheet, and our improving NIM and profitability,” Lubow said.

Margin Expansion and Earnings Power

COO and CFO Avi Reddy said core EPS for the quarter was $0.79 per share. Core pre-tax, pre-provision net revenue was $64 million, equal to 173 basis points of average assets. Reported net interest margin rose to 3.28%, and Reddy said that excluding day-count effects, purchase accounting and prepayment fees, the run-rate margin would have been closer to 3.22%, compared with 3.14% in the prior quarter.

Reddy said the bank has now posted nine consecutive quarters of net interest margin expansion. He said management expects modest margin expansion in the third quarter, with more pronounced improvement in the fourth quarter and in 2027.

A key driver is expected to be loan repricing. Reddy said approximately $2.5 billion of adjustable and fixed-rate loans, with a weighted average rate of 4.25%, will either reprice or mature over the next 18 months. He said the company expects the margin to exceed 3.50% by the fourth quarter of 2027, assuming the consensus forward curve plays out and competition remains rational.

Business Loan Growth Remains a Focus

Lubow said Dime continued to execute on its plan to grow business loans, with year-over-year growth of about $743 million, or 26%. He said the loan pipeline was approximately $1.4 billion, with a weighted average rate of about 6.25%.

Chief Commercial Officer Tom Geisel said business loans increased by $125 million in the first quarter and $275 million in the second quarter. He said recently hired teams are beginning to build momentum, and that an equipment finance team and franchise vertical added earlier have not yet meaningfully contributed.

Geisel said management believes the bank can grow business loans by $200 million to $250 million per quarter. He described the overall loan outlook for the second half as “low to mid-single digit growth” as the bank balances growth in business lending, relationship investor commercial real estate and a planned reduction in multifamily exposure.

Credit Trends and CRE Exposure

Reddy said the loan loss provision was approximately $14 million, primarily reflecting charge-offs on investor commercial real estate loans, specific reserves on the multifamily portfolio and growth in the business loan portfolio. The allowance to loans increased to 98 basis points, within the 90-basis-point to 1% range management previously discussed.

Criticized loans were relatively flat, and nonperforming assets declined 28% from the prior quarter, Reddy said. In response to an analyst question about multifamily nonperforming loans, he said the bank had roughly $26 million to $27 million of loans near the 90-day past-due bucket at quarter-end and took a $6 million specific provision on those loans.

Reddy said the multifamily portfolio totaled $3.1 billion, including about $1 billion of majority rent-regulated or fully rent-regulated loans. He said the pre-2019 portion of the rent-regulated portfolio, which management is monitoring because it was originated before New York City rule changes, has declined to about $300 million from roughly $400 million a year earlier.

The bank’s commercial real estate ratio declined to about 350% at quarter-end. Reddy said operating at or below that level should distinguish Dime from local banks that he said are operating between 375% and 450%.

Deposits, Expenses and Capital

Management said the bank’s deposit base remains a strength. Lubow said more than 70% of deposits come from commercial and municipal customers. During the Q&A, Geisel said non-interest-bearing deposits represented more than 31% of deposits, while the cost of funds was about 1.64%. Reddy said spot deposit costs at quarter-end were similar to average costs, around 1.67% to 1.68%.

Reddy said core cash operating expenses, excluding intangible amortization, were approximately $64 million in the quarter, in line with expectations. The core efficiency ratio fell below 50%, which Lubow said reflected the payoff from investments in hiring. Lubow said the bank has added more than 15 deposit teams in private banking, six lending verticals and three branch locations over a short period.

For the remainder of 2026, Reddy said the bank expects core cash operating expenses, excluding intangible amortization, of $130 million to $131 million, and a tax rate of about 28.5%.

Reddy said the tangible equity ratio crossed 9%, the common equity Tier 1 ratio increased to 12%, and the total capital ratio was 16.3%. He said the bank expects to resume share repurchases in the third quarter and plans to operate with a CET1 ratio between 11.25% and 11.5% in the near to medium term, allowing room for both organic growth and buybacks.

Lubow also highlighted the company’s rebrand, saying Dime completed its transition to Dime Commercial Bank in June. He said the new brand reflects a decade-long shift away from a legacy multifamily thrift model toward a more commercial banking-oriented institution.

About Dime Community Bancshares (NASDAQ:DCOM)

Dime Community Bancshares, Inc is the bank holding company for Dime Community Bank, headquartered in Hauppauge, New York. Through its subsidiary, the company offers a comprehensive suite of banking and financial services to both individual and commercial customers. With a network of branches spanning the New York metropolitan area and South Florida, Dime Community Bancshares emphasizes relationship banking and local decision-making.

The company's core lending activities include commercial and multifamily real estate loans, construction and land development financing, and one-to-four-family residential mortgage lending.

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