Dime Community Bancshares, Inc.

Good day. Thank you for standing by. Welcome to Time Community Bank Shares, Inc. Fourth 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. Privacy Securities Delegation Reform Act of 1995. Such statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those containing any such statements, including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission to which we refer you. During this call, references will be made to non-GAAP financial measures as supplemental measures to reviews 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 present an occurrence of the U.S. GAAP. For information about these 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to your speaker, Mr. Stulibo, President and CEO. Please go ahead, sir.

Thank you, Olivia, and thank you all for joining us this morning for our quarterly earnings call. With me today is Avi Reddy, our CFO. Today I will touch upon the progress we've made in 2024 as we execute our business plan. Avi will then provide some details on the fourth quarter, and guidance for 2025. We began 2024 by hiring a number of deposit gathering teams from the former signature bank. These teams came to DIME given the positive results achieved and the performance of the 2023 teams we had hired previously. Collectively, the deposit groups have raised approximately $1.8 billion of core deposits with approximately 40% in non-interest-bearing deposits. In fact, we've opened up over 11,000 accounts and 7,000 individual customer relationships, clearly a home run for Dime. The successful build out of our private and commercial bank has been a company-wide initiative, a true team effort. The growth and stabilization of the branch-based deposits, especially in consumer and DDA consumer DDA resulted in substantial year-over-year growth in core deposits. In fact, we ended the year with a loan-to-deposit ratio of less than 95%, and we have reduced our wholesale borrowings and broker deposits by approximately $1.2 billion in the past year. On the loan front, we continue to execute our stated plan of growing business loans and managing our CRE ratio lower. Business loans were up over $70 million in the fourth quarter and $400 million for the full year. This was driven by strong growth in our C&I and our healthcare verticals. Our loan pipeline remains very strong with over $750 million of loans at a weighted average rate of 7.75%. These are weighted towards C&I and healthcare loans as well, continuing to execute on our plan. We ended the year with CRE concentration of approximately 445, and we expect to continue to reduce this ratio over time to the low 400s. Despite all the deposit and loan teams we've brought on over the last two years, we've been able to keep core operating expenses to assets well-contained and in a 165 basis point range. We have achieved this by using technology to drive operational efficiencies, and keeping a very close watch on discretionary expenses. As we guided to on the last call, fourth quarter expenses were relatively flat versus the third quarter. Post the election, and given the improved investor sentiment towards bank stocks, we raised approximately $136 million of net proceeds from a significantly oversubscribed common equity offering. The transaction was accretive to tangible book value, We used a portion of our proceeds to reposition our securities and BOLI portfolios. As a result, the capital we raised, we ended the year with a common equity Tier 1 ratio in excess of 11% and a total capital ratio in excess of 15.5%. Having a best-in-class capital ratio versus a peer will allow us to take advantage of opportunities as they may arise and continue to support our organic growth. In addition, over the course of the year, we increased our loan loss reserves from 67 basis points to 82 basis points. This is within striking distance of our medium-term target of 90 to 100 basis points. During the fourth quarter, we received our second consecutive outstanding CRA rating. Apart from the overall rating of outstanding, we received outstanding on the three component CRA tests, including the lending test, the investment test, and the service test. Receiving a perfect score on all three components set us apart from our competitors and a testament to DIME's commitment to community and the hard work of our dedicated employees. In conclusion, we continue to execute on our growth plan, and we have differentiated our franchise from competition as it relates to our growth and ability to attract talented bankers. We have solid momentum and we continue to grow the business loans and core deposits. Our net interest margin continues to expand with the fourth quarter NIM increasing to 279. Importantly, we have substantial opportunity to continue to increase our net interest margin in the years ahead given the significant back book repricing we have in our portfolio. Avi will provide more details and remarks, but suffice to say we have a clear line of sight to returning to a 3-plus net interest margin. Our DDA levels are back to 30%, and we believe the value of this DDA base will shine through in the current rate environment. Disruption in our marketplace remains very high, and we are very active on the hiring front. and our recruiting pipelines are very strong. More to come on this over the next 90 days as bonus season comes to an end. I'm looking forward to a strong 2025, and I want to again thank all our dedicated employees for their efforts in positioning DIME as the best business bank in New York. With that, I will turn the call over to Avi.

Thank you, Stu. During the fourth quarter, we completed a repositioning of our available for sale securities portfolio and our bank-owned life insurance portfolio. Securities restructuring was completed towards the end of November. The BOLI transaction took place in two stages. A surrender of legacy BOLI was completed in the month of December, and an equivalent amount of replacement BOLI is being purchased in the month of January. Excluding the impact of these two transactions, as well as severance and costs associated with pension termination and other one-time items, adjusted EPS increased by 45% versus the prior quarter. We saw a meaningful expansion in the net interest margin this quarter. Reported NIM was up 29 basis points, and the core NIM excluding purchase accounting accretion was up 26 basis points. NIM expansion was driven by a significant reduction in our cost of deposits. Given the timing of the Federal Reserve rate cut in December, we adjusted deposit rates towards the end of the month. The full impact of the rate cut will flow through into our Q1 net interest margin. Given that the securities repositioning was completed towards the end of November, the fourth quarter NIM reflects only one month of benefit from the repositioning. Core deposits were up approximately $500 million in the fourth quarter. This included approximately $150 million of seasonal tax receiver municipal deposits that typically arrive in the month of December and leave in mid-January, and $200 million of title company-related deposits that were tied to a closing at year-end and that left the bank in early January. Excluding the seasonal tax receiver deposits and the title company-related deposits, period-end co-deposit growth for the fourth quarter was approximately $150 million. Similarly, the overall balance sheet size and cash position was elevated at quarter end by approximately $350 million due to the seasonal municipal deposits and title company deposits. Core cash operating expenses for the fourth quarter, excluding intangible amortization, was $57.7 million. This was consistent with our previous core cash expense guidance of between $57.5 and $58 million. Non-core items for the fourth quarter included severance, additional FDIC special assessment related to the failure of the signature in Silicon Valley, and $1.2 million related to the previously disclosed termination of a legacy pension plan. Please note we're in the final stages of termination of this pension plan and expect an additional $4.5 million pre-tax termination expense in the first quarter of 2025. This additional $4.5 million is already captured in the AOCI line item at year end, and as such, will have no material impact on tangible book value per share, as it is simply a realization of the unrealized loss that is already in our equity account. We had a $13.7 million loan loss provision this quarter. Consistent with our commentary during the third quarter earnings call, our allowance to loans increased to 82 basis points. As Stu mentioned, we're within striking distance of the 90 basis points to 100 basis points medium-term target, which we expect to reach over the next six to nine months. Next, I'll provide some thoughts on the NIM trajectory and guidance for 2025. As I mentioned previously, given the timing of the securities repositioning, there was only a partial quarter benefit from the repositioning in the fourth quarter's NIMs. In addition, the timing of the rate cuts in the fourth quarter was such that the full quarter impact of the November rate cut was not fully realized in the fourth quarter margin. As such, we thought it would be helpful to provide the core NIM for the month of December, which includes the full benefit of the Federal Reserve rate cut in November, as well as the full impact of the securities repositioning. The monthly December core NIM was approximately 284. This is a good base NIM to use as you build out your models for 2025. The 25 basis point Federal Reserve rate cut in December should result in a 5 to 6 basis point NIM improvement for the first quarter of 2025. So, starting with the 284 core NIM for the month of December and adding the full impact of the December rate cut should get us close to 290 for the first quarter. Additional core deposit growth and loan repricing could add a few more basis points of upside to the first quarter NIM. As Stu mentioned, we have a line of sight towards the 3% net interest margin. Should the Federal Reserve cut rates again this year, we expect another five to six basis points in quarterly NIM improvement per 25 basis point rate cut. This assumes the behavior and deposits and loans hold for each subsequent rate cut and competition remains rational. Should the Federal Reserve not cut rates in 2025, we still have a pathway to increase NIM over time given the significant amount of back book repricing. To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, in the second half of 2025 and the full year 2026, we have 1.9 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 395 that either reprice or mature in that timeframe. Assuming a 225 basis point spread on those loans over the forward five-year treasury, we could see a 35 to 40 basis point increase in NIM from the repricing of these loans. Finally, and while we've previously only provided information on the back half of 25 and full year 26, as we look into the back book for 2027, we have another 1.75 billion of loans that are a weighted average rate of 425 that will lead to continued NIM expansion in 2027. In summary, we see a pathway to a 3% NIM in 2025 and a NIM greater than 325 in 2026, with continued expansion in 2027 and approaching the 350 area. The impact of this enhanced NIM will no doubt increase our earnings power as time progresses. With respect to non-interest income guidance for 2025, we expect between 40 and 42 million. Individual quarters may be impacted by the level of customer-related loan swap income. With respect to balance sheet growth, we expect period-end loan balances to grow in the low single-digit area in 2025, with growth more weighted towards the back half of 2025. As we mentioned previously, we are focused on gradually reducing our CREE concentration to the low 400s. Attrition in CREE and multifamily may mask some of the growth in our business loan portfolio in 2025 as it did in 2024. However, we expect this trend to moderate by the end of 2025 and expect to return to a mid-single digit growth profile in 2026. With respect to core cash non-interest expenses, our full year 2025 guidance is between $234 and $235 million. This guidance takes into account our existing employee base. To the extent we add additional client-facing bankers after year-end bonuses are paid out, we could see an increase in expenses starting in the second quarter. But as we've demonstrated previously, we expect these bankers to pay for themselves and contribute to pre-tax income growth in a relatively short period of time. Finally, we expect a tax rate for the full year between 27% and 28%. With that, I'll turn the call back to Livia, and we'll be happy to take your questions.