Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dime Community Bancshares Inc (DCOM, Financial) reported strong growth in core deposits, increasing by over $500 million in the third quarter.
- The net interest margin (NIM) improved significantly, rising to 250 basis points, with expectations to exceed 3% in the near future.
- Business loans grew by approximately $125 million, with a strong pipeline in C&I and healthcare lending verticals.
- Asset quality remains solid with net charge-offs contained at 15 basis points and early-stage delinquencies down 28% on a linked quarter basis.
- Capital ratios are robust, with total capital at 14.8% and common equity Tier 1 ratio at 10.2%, indicating financial strength and capacity to support growth.
Negative Points
- Non-interest income decreased in the third quarter, partly due to lower swap fee revenue amid uncertainty with Federal Reserve rate decisions.
- Cash and non-interest expenses increased to $57.4 million, with expectations to remain flat, indicating potential pressure on cost management.
- Loan loss provisions increased to $11.6 million, driven by enhancements to the CECL model, which may indicate a cautious outlook on credit risk.
- Non-performing assets (NPAs) ticked up slightly, although from a low base, suggesting some areas of concern in asset quality.
- The CRE to risk-based capital ratio remains relatively high at 487%, with a target to reduce it to the low-400s over the next 12 months.
Q & A Highlights
Q: Can you provide insights on the growth trends for core deposits and expectations for the upcoming quarters?
A: We are excited about the hires made over the last year and a half, which have brought in around $1.5 billion in deposits. We continue to see strong account opening activity. The teams are still in the early stages, and we expect significant growth over the next three to four years. While the fourth quarter may be slower due to year-end transitions, we anticipate continued positive flows and new relationships.
Q: Could you clarify the impact of the $1.9 billion backlog on the margin outlook?
A: The $1.9 billion backlog refers to loans that will reprice or mature between the second half of 2025 and 2026. This presents a significant opportunity for margin expansion as these loans reset to higher rates. We expect a 25 to 35 basis point increase in NIM from this repricing.
Q: What is the current status and outlook for credit quality, particularly regarding non-performing assets?
A: We had a small uptick in non-performing assets due to a partnership dispute on a CRE loan. However, we believe we are well-secured and do not expect additional provisioning. Overall, asset quality remains solid, with net charge-offs stable and early-stage delinquencies down 28%.
Q: How are you managing expenses, and what are your expectations for cost control in the coming quarters?
A: We aim to keep core cash operating expenses flat between $57.5 million and $58 million into 2025. While we are interviewing potential hires, any significant additions will be self-funding. We continue to look for efficiency savings across the bank to maintain cost control.
Q: What is your strategy regarding potential acquisitions, and how does it align with your growth plans?
A: While we are open to exploring acquisition opportunities, our primary focus is on organic growth, particularly through talent acquisition from larger banks. We have been successful in growing deposits and relationships organically, and we believe there is significant runway for continued growth in this area.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
