Dime Community Bancshares, Inc.

Hello everyone and welcome to DIME Community Bancshares, Inc. Third Quarter Earnings Call. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypads. Before we begin, the company would like to remind you that discussions during this call contained forward-looking statements made under the safe harbor provisions of the U.S. Private Secretary's Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may cause actual results that differ materially from those contained in any such statements, including a set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission to which we refer to you. During this call, 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 US GAAP. For information about these non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release. I want to hand over to host, Kevin O'Connor, Chief Executive Officer to begin. Kevin, please go ahead.

Good morning. Thank you, Charlie, and thank you all for joining us this morning on our third quarter earnings call. With me again are Stu Lubow, our president and COO, and Avi Reddy, our CFO. We're proud to report this was another strong quarter for Dime Community Bank. We generated net income of almost $38 million, or EPS of 98 cents a share, an increase on both a linked quarter basis and year-over-year. The success was the result of another impressive quarter of strong net loan growth, Expanding Margins, and Prudent Cost Control. Our results further illustrate our execution capabilities and the quality and structure of our balance sheet in a rising rate environment. I have to again give full credit to each of our 800-plus employees on delivering record loan growth and 10% year-over-year EPS growth. Capitalizing on the strong long pipelines we have discussed on prior calls, we grew net loans in excess of $450 million. Loan growth this quarter was weighted towards multifamily, an asset class that has performed extremely well for us over many credit cycles. The quality of originations remain strong as our focus remains on the application of sustainable loan growth in the face of an uncertain economic environment. As we begin putting together our budgets for 2023 and beyond, I'm confident our team will continue servicing and growing our loan portfolio. Over the past year, We bolstered DIME by hires of revenue producers and support staff from banks in our footprint impacted by merger transactions. Still, I'm sure we'll provide more color on this as well as our current pipeline and the mix in the Q&A. Apart from strong loan growth, we've continued to execute well on each of our strategic plan priorities, managing our cost of funds and prioritizing NIM expansion, prudently managing expenses, and as always, maintaining solid asset quality. Our Q3 deposit costs were only 23 basis points as we continue to outperform the industry and certainly our Metro New York City competitors. Our cumulative total deposit beta for cycle-to-date tightening has been approximately 10%. Our relatively lower betas have been driven by the significant level of non-interest-bearing deposits on our balance sheet. This remains the clear differentiator versus other community banks in our footprint. While many banks across the country witnessed notable declines in DDA deposits this quarter, we were able to keep balances fairly stable. The improvement in our loan yields more than offset the increase in deposit costs and contributed to linked quarter margin expansion. Our core efficiency ratio this quarter was 44%, and on a year-to-date basis, we've operated at approximately 47%. well within our stated goal of operating at sub-50% regardless of the prevailing environment. Asset quality remains very strong, with NPAs representing only 34 basis points of total assets. Abhi will provide some detail on the loan loss provision in his comments. Suffice to say, we feel very comfortable with the level of reserve and the overall health of our balance sheet. Thus far, we have not seen any meaningful early warning indicators of credit deterioration. As you know, Dimes credit losses have been well below the bank index over multiple cycles. Underprinting our strong historical credit performance has been our bulletproof multifamily portfolio that comes through every cycle unscathed, including the pandemic-induced shutdown of New York City. The LTV on this portfolio, representing 39% of our entire loan portfolio, is less than 60%. We continue to believe this portfolio will outperform in any recessionary environment. Turning to capital, we continued to repurchase shares in the third quarter while still supporting significant balance sheet growth. Similar to the rest of the banking industry, rising rates did impact the fair value of our AFS portfolio, contributing to a $23 million decline in AOCI. Despite this, tangible book value per share increased 14 cents this quarter. Regulatory capital ratios remained strong, as our Tier 1 leverage stood at a healthy 861 for the third quarter. As we said before, our low-risk balance sheet performs favorably in stress testing relative to the industry, providing us with the opportunity to grow our balance sheet and be active on the capital return front. To conclude my prepared remarks, we had a strong quarter. Our balance sheet is well positioned to produce strong returns in any economic environment, as evidenced by our quarterly and year-to-date ROAs of over 1.2%, and this quarter's return on tangible equity of over 17%. The quarter's results and momentum make me even more excited for Dom's future. We are delivering on the opportunities in front of us as a true community commercial bank, highly focused on being responsive to market conditions and our customers' needs. As you can expect, we're well underway in our annual budgeting process and look forward to sharing our 2023 outlook with you on our next call in January. At this point, I'd like to turn the conference call over to Javi, who will provide some additional color on our quarterly results.

Thank you, Kevin. Our reported net income to common for the third quarter was $37.7 million. Excluding the impact of gain on sale of a branch property, adjusted net income to common would have been $36.7 or $0.95 per share. The reported NIM and the adjusted NIM for the quarter was $338. This represents approximately nine basis points of linked quarter margin expansion. A couple of housekeeping items. Net accretable balance from purchase accounting currently stands at approximately 1.8 million. While purchase accounting accretion was fairly immaterial this quarter, as mentioned previously, there could be lingering impacts on the income statement in future periods depending on payoff activity on premium and discount loans. Included in the 338 margin for this quarter was three basis points of prepayment-related income. Given the significant increase in market interest rates, we expect prepayment fees to dry up in the quarters ahead. We grew average deposits by over $300 million in the quarter while keeping our cost of deposits relatively well controlled. The average cost of deposits increased by only 23 basis points compared to the second quarter. The spot rate on deposits at quarter end was approximately 47 basis points. We were again pleased with our deposit beta significantly lagging the level of Fed Funds increases in the third quarter. That said, given the rapid pace of rate increases, we do expect deposit betas to increase from the low level seen cycle to date. Offsetting future increases in deposit costs is a repricing opportunity on our loan portfolio. As you'd expect, given the current interest rate environment, we continue to proactively manage our loan pricing. The rate on our total pipeline is approximately 525, and new additions to the pipeline are in the high 5% to low 6% area. This is significantly higher than our existing loan portfolio rate of 4.33%. While there'll be a lingering impact of deposit costs catch up even after the Fed stops hiking, the medium to longer term opportunity for us is to reprice our loan portfolio at new origination rates, which are approximately 150 to 200 basis points above the overall portfolio rate. Turning on, moving over to expenses. Core cash operating expense including intangible amortization for the third quarter came in at $47.9 million. Annualized expenses on a year to date basis have been below our expense guidance for the full year 2022. We remain highly focused on expense discipline while making necessary investments in our franchise and have built this into our culture on a very granular level. Non-interest income for the second quarter was approximately $9.4 million. Included in non-interest income was $1.4 million from the sale of a branch property. Of note, we expect revenue from the back-to-back loan swap program to pick up in the fourth quarter compared to third quarter levels. I would also note that this quarter was the first time the company was subject to the Durbin Amendment cap on interchange income, which reduced our interchange fees by approximately $600,000 for the quarter. This is the final material headwind we faced from crossing the $10 billion asset regulatory threshold. Moving on to credit quality, our provision for the quarter was $6.5 million. The provision for the quarter was primarily due to a change in Moody's economic forecasts that drive our loan loss reserve models. In addition, we had strong loan growth in the quarter of over $450 million. Needless to say, we are comfortable with the level of reserves on our balance sheet. Our existing allowance for credit losses of 81 basis points is still above the historical pre-pandemic combined levels of the legacy institutions. During the third quarter, we bought back approximately 200,000 shares at $30.97. We believe share repurchases continue to be attractive given our current trading levels. With that said, growing our balance sheet and supporting loan growth in our clients are the first and best use of our capital plays. As a reminder, our balance sheet performed very favorably under stress testing and provides us ample flexibility to continue growing the balance sheet and returning capital to shareholders. We will continue to manage our balance sheet efficiently and our tangible equity ratio of 770, including the full impact of AOCI, and 836, excluding the impact of AOCI, is within our comfort zone. To conclude, we look forward to ending the year strong and providing you our thoughts on 2023 during our earnings call in January. With that, I'll turn the call back to Charlie for questions.