What Dime Community Bancshares (DCOM) Said on Its Q3 Earnings Call

Key Points

• Record growth and profitability: Dime reported $135 million in record third-quarter revenue, a 53% year-over-year increase in EPS, a 1.10% return on assets and a core efficiency ratio below 48%. Business loans grew 30% year over year, while core deposits increased by $1.1 billion.
• Margins expected to keep expanding: Reported net interest margin rose to 3.35%, marking 10 consecutive quarters of expansion. Management raised its longer-term outlook, expecting balance-sheet NIM to exceed 3.60% by the end of 2027 as roughly $2 billion of loans reprice at higher rates.
• Empire State Bank acquisition: Dime agreed to acquire the Staten Island-based bank, adding approximately $600 million in assets and extending its branch presence across all five New York City boroughs. The deal is expected to be about 3.5% accretive to earnings after synergies, with an internal rate of return above 20%.

Dime Community Bancshares NASDAQ: DCOM reported record third-quarter revenue of $135 million and said earnings per share increased 53% from a year earlier, as the company continued to expand its business-lending platform, grow core deposits and improve its net interest margin.

President and CEO Stuart Lubow said the bank’s third-quarter return on assets was 1.10% and its core efficiency ratio fell below 48%. Net interest margin, or NIM, increased 7 basis points sequentially as Dime maintained its deposit costs while improving loan yields.

“Dime’s organic growth trajectory is very strong,” Lubow said, pointing to growth in low-cost deposits, diversification beyond commercial real estate lending and investments in hiring bankers and specialized lending teams.

Business lending and deposits drive growth

Dime said business loans increased approximately $929 million, or 30%, from the prior year. Its loan pipeline stood at about $1.4 billion with a weighted average rate of approximately 6.5%.

Chief Commercial Officer Tom Geisel said business-loan growth accelerated throughout the year, with net growth of roughly $125 million in the first quarter, $275 million in the second quarter and $350 million in the third quarter. Traditional commercial and industrial lending led year-to-date business-loan growth, rising about 25%, while newer specialty finance businesses—including lender finance, fund finance, sponsor finance and healthcare—collectively contributed about 20%.

Management expects business-loan growth of roughly $200 million to $250 million per quarter under its broader outlook, though quarterly results may vary. The bank also resumed selectively originating relationship commercial real estate loans during the quarter, producing about $100 million of originations with what CFO and COO Avi Reddy described as favorable spreads, loan-to-value ratios and debt-service characteristics.

Core deposits grew $1.1 billion year over year. Reddy said approximately 70% to 75% of Dime’s deposit base is now business deposits, while consumer deposits represent about 25%. The company opened more than 6,000 accounts during the year and said recently hired banking teams, its municipal business and branches contributed to third-quarter deposit growth.

Lubow said noninterest-bearing demand deposits now account for more than 32% of core deposits. Dime’s cash position exceeded $2 billion at quarter-end, which management views as a competitive advantage for future lending opportunities.

Margin outlook raised as loans reprice

Core EPS was $0.91 in the third quarter, while core pre-tax, pre-provision net revenue was $70 million, or 186 basis points of average assets, Reddy said. Reported NIM was 3.35%; excluding purchase-accounting benefits and prepayment fees, the company said run-rate NIM was approximately 3.32%, compared with 3.22% in the prior quarter.

Dime has now posted 10 consecutive quarters of NIM expansion, according to Reddy. The bank expects further expansion in the fourth quarter, driven mainly by loan repricing and, to a lesser extent, the September Federal Reserve rate increase.

Management raised its longer-term outlook and now expects NIM on the existing balance sheet to exceed 3.60% by the end of 2027, compared with its previous expectation of more than 3.50%. Reddy said deposit costs remained close to 1.68% early in the fourth quarter, with a modest increase to roughly 1.72% at the time of the call, while weighted average loan yields had risen to approximately 5.58%.

The company has about $2 billion of loans remaining to reprice over the coming quarters at an average rate around 4.40%. Reddy said those loans could reprice 210 to 225 basis points higher, although some borrowers may refinance elsewhere. Management expects overall loan growth in the low- to mid-single digits over the next six to nine months.

Empire State Bank acquisition expands New York footprint

Dime announced a definitive agreement to acquire Empire State Bank, a Staten Island-based commercial bank with approximately $600 million in assets. Lubow said the transaction will give Dime a ground-level branch presence in Staten Island and extend its footprint across all five boroughs of New York City.

Empire has a granular, low-cost deposit base and a loan portfolio with low loan-to-value ratios, according to management. Dime plans to use $30 million of cash in the transaction, representing slightly more than half of the consideration.

Reddy said the transaction is expected to be about 3.5% accretive to earnings on a run-rate basis after all anticipated synergies are realized. The company expects the deal to reduce capital ratios by approximately 35 basis points after accounting for deal costs and interest-rate marks under an elevated-rate scenario. Pre-tax deal costs are expected to be approximately $12 million to $13 million.

Management said the acquisition’s internal rate of return is expected to exceed 20% and that Dime’s pro forma capital levels should continue to support organic growth and share repurchases.

Credit costs, expenses and portfolio mix

Dime recorded a $13.8 million loan-loss provision, unchanged from the prior quarter, and increased its allowance for credit losses to 99 basis points of loans. The provision reflected specific reserves on commercial and industrial loans, business-loan growth and charge-offs on multifamily loans.

Reddy said nonperforming assets increased during the quarter, including one commercial and industrial relationship that had been substandard for several years and received a $6 million specific reserve. On the multifamily side, the company charged down a long-standing slow-paying relationship after receiving an updated appraisal.

All multifamily nonperforming assets are in rent-regulated properties, Reddy said, while the company has no nonperforming loans in its free-market multifamily portfolio. Substandard loans declined 7% sequentially, and 30- to 89-day past-due loans also declined. Management expects provisions to remain near recent levels for the next couple of quarters while it works through certain credits.

The company reduced its commercial real estate concentration ratio to 338% while repurchasing about 1% of shares outstanding. Dime expects core cash operating expenses, excluding intangible amortization, of about $66 million in the fourth quarter and cited that figure as a reasonable run-rate starting point for 2027. Management’s longer-term objective is to reduce the efficiency ratio toward 45% and ultimately below that level, primarily through revenue growth and operating scale.

About Dime Community Bancshares (NASDAQ:DCOM)

Dime Community Bancshares, Inc is the parent company of Dime Community Bank, a community-focused commercial bank serving businesses, individuals and local organizations. The bank provides deposit accounts, commercial and residential real estate lending, multifamily and small-business financing, consumer loans, treasury and cash-management services, and wealth-management solutions.

Dime Community Bank's market is concentrated primarily in Long Island and the New York City metropolitan area, including Brooklyn, Queens, and Manhattan.

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