Dime Community Bancshares, Inc.

Good day, and thank you for standing by. Welcome to the DIME Community Bank Shares, Inc. First 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 risk, uncertainties, and other factors that may cause actual results that differ materially from those contained in any such statements, including as set forth in today's press release, and the companies following 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 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 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 automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stuart LeBeau, President and CEO. Please go ahead.

Good morning. Good morning. And thank you, Shannon. And thank you all for joining us this morning for our first quarter earnings call. With me this morning is Avi Reddy, our CFO. In my prepared remarks, I will touch upon key highlights for the first quarter of 2025. Avi will then provide some details on the quarter and thoughts for the remainder of the year. Core deposits were up $1.3 billion on a year-over-year basis. The deposit teams hired since 2023 have grown their deposit portfolios to $1.9 billion. This has allowed us to pay down our broker deposits to a fairly minimal level, as well as reduce our FHLB borrowing position. We have made significant progress in creating a core deposit-funded balance sheet. We reduced our cost of deposits to 2.09% in the first quarter. Our NIM has now increased for the fourth consecutive quarter to the 2.9% range. We continue to have several catalysts to continue to grow our NIM over the medium to long term, including a significant back book loan repricing opportunity. Even with the current uncertain rate environment, we remain very bullish on our continued NIM improvement over the medium and long term. Avi will get into that in more detail in his remarks. On the loan front, we continue to execute on our stated plan of growing business loans and reducing our CREE concentration. Business loans grew over $60 million in the first quarter and over $400 million on a year-over-year basis. Typically, our first quarter is our slowest growth quarter of the year. We have rebuilt our loan pipeline since year end, and the pipeline currently stands at approximately $1.1 billion with an average yield of 7.22. This compares to $750 million when we reported earnings in January. In addition, we have made several new hires who, once they find their feet, will contribute to the loan growth towards the year end. Our core earnings power has increased significantly over the past year. Core pre-tax provision income was $46 million in the first quarter of 2025 compared to $28 million a year ago. This translated into a core ROA of 77 basis points for the quarter. Finally, I will touch on our recruiting efforts. Disruption in our local marketplace remains very high, and our recruiting pipelines continue to be strong. As outlined in our earnings release, we have added numerous bankers across the organization. Our hiring efforts this year have been focused on growing both sides of the balance sheets. Many of you who are familiar with the New York City banking area are familiar with Tom Geisel, who was a key part of the growth and success of Sterling. We expect Tom to be an integral part of our continued transformation to a highly profitable commercial bank. I'd also like to note that we recently announced plans to expand into the Lakewood, New Jersey marketplace. In conclusion, the momentum in our business is extremely strong, and we continue to execute on our business plan of growing the business loans and core deposits. We have clearly differentiated our franchise from our local competitors as it relates to our growth trajectory and ability to attract talented bankers. I'm looking forward to the remainder of 2025 and want to again thank all our dedicated employees for their efforts in positioning the bank as the best business bank of New York. With that, I will turn the call over to Avi.

Thank you, Stu. Excluding the impact of the previously mentioned legacy Bridgehampton National Bank pension plan termination, adjusted EPS was 57 cents per share. This represents a 36% linked quarter increase and a 50% year over year increase. The reported NIM increased by 16 basis points and the NIM excluding purchase accounting accretion increased by 19 basis points to 294. NIM expansion was driven by a significant reduction in our cost of deposits. We did have around three to four basis points of prepayment fees in the first quarter NIM. Excluding prepayment fees and purchase accounting, the NIM would have been around 290 for the first quarter. Non-broker deposits were up approximately $65 million at March 31st versus year-end levels. As I mentioned on our fourth quarter earnings call, year-end 2024 deposits were inflated by approximately $200 million of title company-related deposits that were tied to a closing that left the bank in early January. Said differently, we grew non-broker deposits by approximately $250 million this quarter versus year-end levels if you exclude the title company deposits from year-end totals. We continue to manage expenses prudently. Core cash operating expenses for the first quarter, excluding intangible amortization, was $57.9 million. Non-core items for the first quarter included $7 million related to the previously disclosed termination of a legacy pension plan, which is now effectively complete. Non-interest income of $9.6 million for the first quarter reflected the full quarter impact of the BOLI repositioning transaction. We had a $9.6 million credit loss provision for the quarter. Net charge-offs to average loans decreased to 26 basis points, and the allowance to loans increased to 83 basis points. Capital levels continue to grow, and our common equity Tier 1 ratio increased 11.1%, and our total capital ratio grew to 15.7%. Having best-in-class capital ratios versus our local peer group allows us to take advantage of opportunities as they arise, and it speaks to dime strength and our ability to service our growing customer base. Next, I'll provide some thoughts on guidance for the remainder of 2025. As I mentioned previously, we had approximately three to four basis points of prepayment fee income in the first quarter NIM. Excluding this and purchase accounting accretion, the base NIM for the first quarter was closer to 290. We would use this as a starting point for modeling going forward as we don't expect the prepayment fees to repeat in that size in the coming quarter. We expect the second quarter NIM to remain range bound within a plus or minus three basis point range of the 290 base NIM. While we don't have a lot of low yielding repricing assets in the second quarter, starting in the second half of 2025, we have a meaningful increase in repricing assets and expect margin expansion to resume in the second half of the year. 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 25 and the full year 26, we have 1.95 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 4% 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 basis point increase in NIMS from the repricing of these loans. As we look into the back book for 2027, We have another 1.75 billion of loans at a weighted average rate of 425 that will lead to continued NIM expansion in 2027. Moving on to the short end of the curve. When the Federal Reserve cut short-term rates in 2024, our NIM benefited by approximately five basis points for each 25 basis point rate cut. Should the Federal Reserve cut rates in the second half of 2025, we expect this trend to repeat assuming the behavior and deposits in loans hold for each subsequent rate cut and competition remains rational. In summary, assuming the market consensus forward curve plays out, we have a path to a structurally higher NIM and enhanced earnings power over time. With respect to balance sheet growth, we expect net loans to remain relatively flat in the second quarter and growth to pick up in the back half of 2025. In the first quarter, attrition in Cree and multifamily masked the growth in our business loan portfolio. We expect this trend to moderate towards the end of 2025. In addition, as Stu mentioned, we have several new hires who, once they find their feet, will contribute to loan growth towards the end of the year. With respect to core cash non-interest expenses, our previous full-year 2025 guidance was between $234 to $235 million. The prior guidance was based on our existing employee base at the end of 2024. Given the hires we have outlined in the press release, we are increasing our full-year core cash non-interest expense guidance to $236.5 to $237.5 million. With that, I'll turn the call back to Shannon, and we'll be happy to take your questions.