Dime Community Bancshares, Inc.

Good day, everyone, and thank you for standing by. Welcome to DIME Commercial Bancshares' second quarter earnings call. 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, you will need to press star 1-1 on your telephone. You will then hear a message. Advice in your hand is raised. To withdraw your question, please press star 1-1 again. Thank you for joining us today. Such statements are subject to risk, uncertainties, and other factors that may cause actual results to differ materially from those contained in 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 review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as 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. Now it's my pleasure to hand the conference over to Stuart Lubow, President and CEO. Please proceed.

Thank you, Carmen, and good morning. And thank you all for joining us this morning for our second quarter earnings call. With me today, as usual, are Avi Reddy, our Chief Operating Officer and CFO, and Tom Geisel, our Chief Commercial Officer. In my prepared remarks, I will touch upon the progress we've made in the second quarter. Avi will then provide financial details for the second quarter. Dime has differentiated our franchise from our local competitors as it relates to our organic growth trajectory, our ability to attract talented bankers, the quality of our deposit base, the progress we made in diversifying our balance sheet, and our improving NIM and profitability. Revenues for the second quarter were $126 million, which was a record for Dime. Core EPS was up 23% versus prior year, NIM was up seven basis points versus the linked quarter as we were able to lower cost of deposits and improve our yield on loans. On the loan front, we continued to execute on our stated plan of growing business loans. Year-over-year, growth in business loans was approximately $743 million, which represents a 26% year-over-year increase. Our loan pipeline continues to be very strong and is approximately $1.4 billion with an weighted average rate of approximately 6.25%. We were pleased to drive our core efficiency ratio below 50% in the second quarter. As you are aware, we have been very active on the hiring front over the past three years. And it's nice to see these investments paying for themselves and contributing to the improved profitability. To give you a sense of the scale of our transformation and hiring, we have added over 15 deposit teams in our private banking area, six new lending verticals, and three new branch locations. Doing all this in a very short span of time and driving the efficiency ratio below 50% is especially noteworthy. We continue to believe that the hires that we have made have a long runway in front of them. The disruption in our local marketplace remains very high, and the environment for our organic growth strategy as it relates to acquiring clients and bankers continues to be very attractive. A common theme in our discussions with shareholders over the past year has been, when will DIME resume its share repurchase program? Given the significant long-term value We are pleased to announce that we expect to begin repurchasing our shares in the third quarter. Avi will provide some color on our capital targets in his prepared remarks. In June, we completed our rebrand to Dime Commercial Bank. This marked the culmination and logical next step in Dime's evolution. Over 70% of our deposit base is from commercial and municipal customers, and approximately 60% of our loan portfolio is business and commercial real estate. It has been a remarkable transformation over the past 10 years, away from the legacy multifamily thrift model, and we believe that our new brand truly represents the institution we have grown into. In conclusion, we are positioned very favorably for organic growth and expect to benefit from a significant loan repricing opportunity over the next 18 months. I want to end by thanking all our dedicated employees for their efforts and positioning Dime as the best commercial bank in Metro New York. With that, I will turn the call over to Avi to provide some color on the second quarter.

Thank you, Stu. Core EPS for the second quarter was 79 cents per share. Core pre-tax, pre-provision net revenue of $64 million represented 173 basis points of average assets. By maintaining a strong focus on cost of funds management and the growth of our business loan portfolio, our NIM has now increased for nine consecutive quarters. The reported second quarter NIM increased to 328. Excluding the impact of day count and the benefits from purchase accounting and prepayment fees, the run rate NIM for the second quarter would have been closer to 322 compared to a 314 run rate NIM for the prior quarter. Average earning assets for the second quarter was approximately 14.1 billion. Core cash operating expenses, excluding intangible amortization, was approximately 64 million, which was in line with our expectations. The loan loss provision was approximately 14 million, and the allowance to loans increased to 98 basis points. The loan loss provision in the quarter was primarily to cover charge-offs on investor CREE loans, specific reserves on the multifamily portfolio and growth in the business loan portfolio. Criticized loans remained relatively flat and NPAs were down 28% on a linked quarter basis. A tangible equity ratio crossed 9%, a common equity tier one ratio grew to 12% and our total capital ratio is 16.3%. As Stu mentioned, we're pleased to announce that we expect to resume share repurchases in the third quarter. Our stated position has been that when the CREE ratio was lowered to the mid-350 level, the buyback would be back on the table. In the near to medium term, we expect to operate with a CET1 ratio between 11.25% and 11.5%, which gives us room for both organic growth as well as buybacks. Next, I'll provide some thoughts on the remainder of 2026. As I mentioned previously, excluding the day count convention, purchase accounting, and prepayment fees, the run rate NIM for the second quarter would have been closer to 322 compared to 314 for the first quarter. We would use the 322 NIM as a starting point for modeling purposes going forward. We expect modest NIM expansion in the third quarter and more pronounced NIM expansion in the fourth quarter and in 2027. To give you a sense of the back book repricing opportunity in our adjustable and fixed rate loan portfolios of the next 18 months, we have approximately $2.5 billion of adjustable and fixed rate loans at a weighted average rate of $4.25 that either reprice or mature on that time frame. While it's hard to predict the NIM in individual quarters and the path may not be in a straight line on equal increments, we are focused on the ultimate destination by the fourth quarter of 2027, which we expect to be over $3.50. This assumes a consensus forward curve plays out and competition remains rational. We believe our large cash position is a competitive advantage that will allow us to take advantage of lending opportunities as they arise and will help us create a sustainable NIM that is not subject to cyclical moves based on the trajectory of short-term rates. Given our current cash position, and assuming competition remains rational, any future 25 basis point increase in short-term rates will likely not have more than a one to two basis point impact on our NIM. In addition to the 1.9 billion of cash on the balance sheet, we have approximately 3.8 billion of floating rate loans and 350 million of hedges that will reprice if rates increase. And we believe this should offset any deposit cost increases from the seven and a half billion of non-maturity interest-bearing deposits on the balance sheet. We are pleased to reduce our CRE ratio to approximately 350% at the end of the second quarter. We believe operating with a CRE ratio that is 350 or lower will set us apart from the other local banks, which are operating between 375 and 450%, and DIME will be rewarded in the medium to longer term with a higher valuation. We expect to reach an inflection point on investor Cree balances in the second half of this year, with multifamily continuing a downward trend till we get to around 25% of total loans for multifamily. As it relates to business loans, we believe we have the infrastructure and talent in place to grow that portfolio between $200 to $250 million per quarter. Next, I'll turn to expenses. We expect core cash operating expenses, excluding intangible amortization, for the remainder of the year to be between $130 and $131 million. Finally, we expect the tax rate for the remaining quarters of 2026 to be approximately 28.5%. With that, I'll turn the call back to Carmen, and we'll be happy to take your questions.