Dime Community Bancshares, Inc.

Thank you for standing by, and welcome to DIME Community Bank Shares, Inc. Second 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.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and factors that may cause actual results to differ materially for those contained in any such statements, including as set forth in today's press release and the company's filings with the U.S. Security and Exchange Commission, to which we refer you. 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 coordinates with the U.S. GAAP. For information about non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Stuart LeBeau, President and CEO. Please go ahead.

Good morning. Thank you, Lisa, and thank you all for joining us this morning for our quarterly earnings call. With me today is Avi Reddy, our CFO. In the second quarter, DIME continued to execute on our growth plan. The momentum in our business is strong, and we grew core deposits by over $300 million and business loans by over $200 million. The strong growth in core deposits has enabled us to reduce our wholesale funding positions substantially since year end. As a result, the net interest margin increased by 20 basis points in the quarter. We were pleased with the increase in the margin and believe the first quarter of 2024 was a trough for this cycle in terms of both net interest income and NIM. Our cost of deposits declined on a linked quarter basis, and since the end of the second quarter, deposits have continued to remain stable to down. Going forward, we expect a slow and steady build in NIM, absent any rate cuts. Rate cuts and the eventual repricing of our legacy lower coupon fixed and adjustable rate loan portfolios should accelerate NIM expansion as we get into the latter half of 2025 and 2026. And this will drive a structurally higher NIM. Over the past month, we have successfully raised $75 million in subordinated debt. At the end of the second quarter, our total capital ratio was 14.5%, and we now rank at the absolute top end of our local peer group in terms of total capital. Capital is obviously important in executing our growth strategy. Asset quality continues to remain solid with NPAs down 29% on a linked quarter basis. We plan to file our 10-Q next week and expect to report that classified assets will also be down approximately 14% on a linked quarter basis. We recently received regulatory approval for a new branch location in Westchester County. In fact, I was in White Plains just last week for a business reception we hosted with many important new and prospective clients and am proud of our ability to expand Dines Franchise into this new, attractive new market. Subsequent to our first quarter earnings call where we announced the onboarding of six deposit gathering teams, we've onboarded another two deposit gathering teams in May and June. One of these teams is based in Williamsburg, a market that is very familiar to DIME and where we were founded. The second team is based in Manhattan. Additionally, we hired an exceptional banker to build out our not-for-profit lending vertical. I am proud of the company-wide effort in terms of recruiting and integrating all these bankers into the DIME umbrella. Clearly, our recruiting efforts over the past year have been successful. Our deposit gathering groups are up over $1 billion of total deposits, and our middle market CNI group helped drive strong business loan growth this quarter. In the quarters ahead, we expect the healthcare vertical to begin to meaningfully contribute to the loan growth and the diversification of our balance sheet as they have built a substantial loan pipeline and attractive yields. In summary, I am very optimistic about the trajectory that DIME is on. Our market continues to be significantly disrupted, and the strategic offense that we've been playing is paying off in the numbers. With that, I will turn it over to Avi.

Thank you, Stu. Reported EPS was 43 cents per share, an increase of 5% over the linked quarter. In line with the mid-quarter update we provided in June, We saw meaningful NIM expansion to the tune of 20 basis points. NIM expansion was driven by the strong Euro rate growth in core deposits and our business loan portfolio, as well as the proactive reduction in higher cost wholesale funding. Non-interest income for the second quarter was $11.8 million. This included a gain on the sale of a branch that we executed a sale lease back on. Core cash operating expenses for the second quarter, excluding intangible amortization, was $55.4 million. We have recruited approximately 65 revenue-generating bankers over the course of the past five quarters, including 15 deposit-gathering teams, a fully built-out healthcare vertical, and most recently, a not-for-profit vertical. We expect the revenue generation from these hires to far outweigh the startup expenses associated with the organic build-out of all these groups in the years ahead. We had a $5.6 million loan loss provision this quarter. The allowance to loans increased to 72 basis points. Our CET1 ratio is above 10%, and our total capital ratio of 14.5% is now best in class amongst our local peer groups. Next, I'll provide some thoughts on the NIM, expenses, and balance sheet growth. With respect to the NIM, we called out in the earnings release that there was a four basis point benefit from the payoff of a loan that was previously on non-accrual status. In addition, the subnet offering which closed on the last day of the quarter is expected to have a three basis point downward impact on the NIM going forward. As such, the base NIM to work from for modeling purposes for future quarters is closer to 234. As Stu said, we expect a slow and steady improvement in the NIM until the impact of rate cuts kick in. We also have a significant repricing opportunity in our adjustable and fixed rate loan portfolios that's expected to kick in in the second half of 25 and 26. To give you a sense of the repricing opportunity, in the second half of 2025 and in 2026, we have approximately $2 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 3.9% that either reprice or mature in that timeframe. Assuming a conservative 225 basis point spread for those loans over the forward five-year treasury, we should see a substantial 35 basis point increase in the NIM as these loans reset to higher rates in 25 and 26. With respect to expenses, we expect core cash operating expenses for the third quarter to be approximately $57 million, and we expect to hold that quarterly run rate with very nominal growth in 2025. We are working on a few company-wide initiatives that should drop to the bottom line in 2025, and this should result in very nominal expense growth for 2025. With respect to our positioning on lending, we anticipate continued growth in our business lending portfolio. Growth in the business portfolio will offset declines in multifamily and CREE, while we are still servicing existing relationships. On an aggregate basis, we expect the loan portfolio to be up low single digits for the second half of the year. With that, I'll turn the call back to Lisa, and we'll be happy to take all your questions.