Dime Community Bancshares, Inc.

Good day and thank you for standing by. Welcome to the DIME Community Bank Shares, Inc. Third 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 other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in today's press release and the company's filings with the US 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 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Stuart LeBeau, President and CEO. Please go ahead.

Thank you, Diane, and thank you all for joining us this morning for our quarterly earnings call. With me today, as usual, is Avi Reddy, our CFO, and also Tom Geisel, who we hired earlier this year to continue growing our commercial bank. In my prepared remarks, I will touch upon key highlights for the third quarter of 2025. Avi will then provide some details on the quarter and thoughts for the remainder of 2025. Our core earnings power continues a significant upward trajectory. Core pre-tax, pre-provision income was $54.4 million for the third quarter of 2025, compared to $49.4 million in the second quarter of 2025 and $29.8 million a year ago. We had an increase in loan loss provision in the third quarter, primarily tied to charge-offs on loans in the owner-occupied and non-owner-occupied real estate segments. While MPAs were up Slightly on a linked quarter basis, they are up off a very small base and represent only 50 basis points of total assets, which compares favorably to commercial bank peers. On a linked quarter basis, we did see a decline in criticized loans in the third quarter of approximately $30 million and also saw a 33% decline in 30 to 89 days past due. Core deposits were up $1 billion on a year-over-year basis. The deposit teams hired since 2023 have grown their deposit portfolios to approximately $2.6 billion. We have a core deposit-funded balance sheet with ample liquidity to take advantage of lending opportunities as they arise. Our cost of total deposits was $209 in the third quarter, which was untrained versus the second quarter. By maintaining a strong focus on cost of funds, our NIM has now increased for the sixth consecutive quarter and has surpassed 3% more. Following the Fed rate cut in September, we were able to meaningfully lower deposit costs while maintaining loan yields. As mentioned in the press release, since the Fed rate cut, the spread between loan and deposits has increased approximately 10 basis points, and this will continue to drive NIM expansion in the fourth quarter. Outside of rate cuts, we continue to have several additional catalysts to continue to grow our NIM over the medium to long term, including a significant back book loan repricing opportunity. Avi will get into more details on the margin in his prepared remarks. On a loan front, we continue to execute our stated plan of growing business loans and managing our CRE concentration ratio, which is now 401. Business loans grew over $160 million in the third quarter compared to $110 million of business loan growth in the second. On a year-over-year basis, business loan growth was in excess of $400 million. Loan originations, including new lines of credit, increased to $535 million. The weighted average rate on new originations and lines was approximately 6.95%. Our loan pipelines continue to be strong and currently stand at 1.2 billion. The weighted average rate on the pipeline is between 650 and 675. Next, I will touch on our recruiting efforts. Disruption in our local marketplace remains very high, and we continue to execute on our goals of building out our CNI businesses. As outlined in the press release, we hired a number of talented bankers in the third quarter, Once they settle in, we expect them to meaningfully contribute to our business loan growth. In addition, we recently opened a branch location in Manhattan. The grand opening was actually yesterday. And we are on track to open our New Jersey location in Lakewood in the first quarter of 2026. Additionally, we have identified a new location on the North Shore of Long Island that we expect to open in early 2026. In conclusion, the momentum in our business continues to be very strong, and we are executing our business plan of growing business loans and core deposits. We have clearly differentiated our franchise from our local competitors as it relates to our growth trajectory, our ability to attract talented bankers. We have an outstanding deposit franchise, a strong liquidity position, and a robust capital basis. We expect more meaningful NIM expansion in the fourth quarter and significant opportunities in 2026 based on loan pricing opportunities, organic growth across deposits and loans. I am looking forward to closing out the year strong. I want to again thank all our dedicated employees for their efforts in positioning DIME as the best commercial bank in New York. With that, I will turn the call over to Avi.

Thank you, Stu. Core EPS for the third quarter was 61 cents per share. This represents 110% year-over-year increase. Core pre-tax, pre-provision net revenue of $54 million represents approximately 1.5% of average assets. The reported third quarter NIM increased to $301. We had around two basis points of prepayment fees in the third quarter NIM. Excluding prepayment fees and purchase accounting, the third quarter NIM would have been $298. As a reminder, the second quarter NIM excluding prepayment fees and purchase accounting was 295. Total deposits were up approximately 320 million at September 30th versus the prior quarter. We continue to see strong inflows across our branch network and across the private and commercial bank. Core cash operating expenses excluding intangible amortization was 61.9 million which was marginally above our prior guidance for the third quarter of 61.5 million. The variance versus the prior guidance was due to the additional hires we made in the third quarter. Non-interest income of 12.2 million was inclusive of a 1.5 million positive benefit tied to a fraud recovery that dates back to Legacy Bridge. We had a 13.3 million credit loss provision for the quarter and the allowance to loans increased to 88 basis points. As Stu mentioned, criticized loans were down approximately 30 million linked quarter and loans 30 to 89 days past due were down approximately 33% on a linked quarter basis. We continued to grow and our common equity tier one ratio grew to over 11 and a half percent and our total capital ratio grew to over 16%. Having best in class capital ratios versus our local tier group is a competitive advantage and will allow us to take advantage of opportunities as they arise and speaks to our strength and ability to service our growing customer base. Next, I'll provide some thoughts on the fourth quarter. As I mentioned previously, excluding prepayment fees and purchase accounting, the NIM for the third quarter would have been 298. We would use this as a starting point for modeling purposes going forward. Stu mentioned we expect more substantial NIM expansion in the fourth quarter as we have been successful in reducing deposit costs and maintaining our loan yields, which has been helped by the pace of new originations. The spread between loans and deposits is approximately 10 basis points higher currently than what it was at September 15th. While we have a larger cash position than we did in prior quarters that will eat into some of the NIM benefit from the spread differential between loans and deposits, we do expect more pronounced NIM expansion in the fourth quarter compared to the second and third quarters. In addition, we expect the asset repricing story that we've been talking about for a while to unfold with more vigor in 2026 and 2027. To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, in the full year 2026, we have approximately 1.35 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 250 basis point spread on those loans over the forward five-year treasury, we could see a 20 basis point increase in NIM by the end of 2026 from the repricing of these loans alone. As we look into the back book for 2027, we have another 1.7 billion of loans at a weighted average rate of 425 that will lead to continued NIM expansion in 2027. In summary, assuming the market consensus forward curve plays out, we continue to have a path to a structurally higher NIM and enhanced earnings power over time. Now that we've crossed 3% on the margin, the next marker in front of us is 325 and after that 350. With respect to the balance sheet, we expect a relatively flat balance sheet for the remainder of this year as planned attrition in transactional CREE and multifamily masks the growth in our business loan portfolio. As we've typically done, we will only provide guidance for 2026 once we get into the new year. Next, I'll turn to expenses. As you're aware, we've added a significant amount of talented individuals to the organization and we continue to have opportunities to selectively add more. We expect fourth quarter core cash operating expenses to be around 63 million. We don't expect any more wholesale additions of production staff until bonuses are paid in the first quarter, so we can treat the new fourth quarter expense run rate of 63 million as a good placeholder for now. Turning to non-interest income, for the fourth quarter, we did not expect a repeat of the fraud recovery item that we saw this quarter, meaning the run rate for non-interest income would be around 10 to 10.5 million. Factors that will determine the eventual outcome will be swap-free income, which can be hard to predict, as well as SBA fees, which are being impacted by the government shutdown. As has been our typical practice, we won't be providing guidance on 2026 until we report earnings in January. Suffice to say, we are very positive on the NIM trajectory as we exit 2025. Our efficiency ratio continues to improve, and we expect to continue driving that down with NIM improvement. With that, I'll turn the call back to Diane, and we'll be happy to take your questions.