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DATE

  • Thursday, July 24, 2025, at 8:30 a.m. EDT

CALL PARTICIPANTS

  • President and Chief Executive Officer — Stuart Lubow
  • Senior Executive Vice President and Chief Financial Officer — Avi Reddy

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TAKEAWAYS

  • Core Pretax Pre-Provision Income: Core pretax pre-provision income was $49 million for Q2 2025. This compares to $28 million in the second quarter of 2024.
  • Core Return on Assets (ROA): Core ROA was 0.85% for the second quarter of 2025.
  • Core EPS: Core EPS was $0.64 per share for Q2 2025. This represents a 12% increase on a linked quarter basis.
  • Net Interest Margin (NIM): Net interest margin was 2.98% for Q2 2025, or 2.95% excluding prepayment fees and purchase accounting.
  • Core Deposits: Core deposits increased by $1.2 billion year-over-year in the second quarter of 2025, reflecting effective deposit gathering.
  • Non-Broker Deposit Growth: Non-broker deposits were up approximately $210 million at June 30, 2025, versus the prior quarter. This increase would have been $335 million without a $125 million proactive municipal runoff in Q2 2025.
  • Deposit Teams' Contributions: $2.2 billion in deposit portfolios are attributed to hires since 2023 (as of Q2 2025).
  • Cost of Total Deposits: Cost of total deposits was 2.09% for Q2 2025, and remained stable, with incoming deposits in the low-to-mid 2% area.
  • Business Loan Growth: Business loans grew over $110 million in the second quarter of 2025, and year-over-year, business loans increased over $370 million, or 15%, compared to the second quarter of 2024.
  • Loan Origination Volume: $450 million in new originations and lines of credit for Q2 2025, with a weighted average origination rate of approximately 7%.
  • Loan Pipeline: The loan pipeline was compared to $1.1 billion last quarter and $750 million at the start of 2025. The pipeline weighted average rate is 6.85% for Q2 2025.
  • Credit Loss Provision: Credit loss provision was $9.2 million for the second quarter of 2025, reflecting updated reserve planning.
  • Core Cash Operating Expenses: Core cash operating expenses, excluding intangible amortization and severance expense, were $59.9 million for Q2 2025. The sequential increase in expenses was driven mainly by production staff hiring.
  • Capital Ratios: Common equity tier one ratio was 11.25% for Q2 2025 and total capital ratio was 15.8% for Q2 2025, described as "best-in-class" versus local peers.
  • Non-Interest Income: Non-interest income was $11.6 million for Q2 2025, led by increased loan swap income.
  • Guidance for Q3 2025 Operating Expenses: Expected core cash non-interest expense (excluding intangible amortization) is approximately $61.5 million for Q3 2025, with $250,000 additional amortization for an estimated total of $61.8 million.
  • Guidance for Q3 2025 Non-Interest Income: Approximately $10.5 million is anticipated for Q3 2025, including $0.5 million from swap fees.
  • Effective Tax Rate Guidance: The estimated effective tax rate range is 27%-27.5% for Q3 2025.
  • Loan Repricing Opportunity: $1.95 billion of loans at a weighted average of 4.1% are expected to reprice or mature in the second half of 2025 and throughout 2026, potentially adding 30 basis points to future NIM.

SUMMARY

Dime Community Bancshares (DCOM -0.11%) executives stated that Net interest margin is expected to show a "gradual upward bias" in Q3 2025, with more pronounced expansion anticipated in the fourth quarter as asset repricing accelerates. Management discussed targeting a structurally higher NIM, with an explicit milestone path from the current 2.98% in Q2 2025 toward 3.25% and then 3.50%. Liquidity and capital positions were framed as competitive advantages, providing capacity to increase lending and to be opportunistic in the market. Forecasts indicate that balance sheet growth will remain in the low single-digit range for the rest of 2025, with attrition in transactional CRE and multifamily offset by business loan expansion.

  • Chief Financial Officer Avi Reddy said, "for every 25 basis point rate cut [by the Federal Reserve], we historically see around five basis points of NIM expansion," assuming deposit and loan behavior holds consistent through the rate cycle.
  • Chief Executive Officer Stuart Lubow said, "we are looking at options and are certainly interested" regarding M&A, but emphasized ongoing prioritization of organic balance sheet growth.
  • No non-performing multifamily loans were reported, and rent-regulated portfolio balances subject to 2019 law changes have fully repriced and are performing, according to management commentary.
  • Recent lending vertical hires are expected to quickly reach breakeven or profitability, based on observed loan growth pipelines.
  • Cash deployment will focus principally on funding new lending verticals, with management comfortable maintaining a 91%-92% loan-to-deposit ratio in the near term.
  • The current reserve ratio stands at 0.86% as of Q2 2025. Management has set a medium-term goal to reach the 0.90%-1% range as the loan portfolio mix continues to shift toward business lending.

INDUSTRY GLOSSARY

  • Net Interest Margin (NIM): The percentage difference between interest income generated and interest paid out, reflecting a bank's core lending profitability.
  • Core Pretax Pre-Provision Income: Earnings before taxes and loan loss provisions, excluding non-core items, indicating underlying profit trends.
  • Fund Finance: Lending facilities, such as subscription lines, provided to investment funds and secured by investor capital commitments.
  • SOFR: Secured Overnight Financing Rate, a benchmark interest rate for floating-rate loans and derivatives in the United States.
  • CRE Ratio: The ratio of commercial real estate loans to total risk-based capital or overall portfolio, used to monitor concentration risk.

Full Conference Call Transcript

Stuart Lubow: Good morning. Thank you, Steven. And thank you all for joining us this morning for our quarterly earnings call. With me this morning is Avi Reddy, our CFO. In my prepared remarks, I will touch upon key highlights for the second quarter of 2025. Avi will then provide some details on the quarter and thoughts on the remainder of the year. Our core earnings power has increased significantly over the past year. Core pretax pre-provision income was $49 million in the second quarter of 2025, compared to $28 million a year ago. This translated into a core ROA of 85 basis points for the second quarter. Core deposits were up $1.2 billion on a year-over-year basis.

Deposit teams hired since 2023 have grown their deposit portfolios to approximately $2.2 billion. This has allowed us to continue to pay down our broker deposits to a fairly minimal level. We have made significant progress in creating a core deposit-funded balance sheet with ample liquidity to take advantage of lending opportunities as they arise. Our cost of total deposits was 2.09% in the second quarter. By maintaining a strong focus on cost of funds management, our NIM has now increased for the fifth consecutive quarter and is approaching the 3% mark. We continue to have several catalysts to continue to grow our NIM over the medium to long term, including a significant back book repricing opportunity.

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 managing our CRE ratio lower. Business loans grew over $110 million in the second quarter and over $370 million or 15% on a year-over-year basis. We are starting to see the benefit of the new hires we have made over the past couple of years. Loan origination, including new lines of credit, increased to $450 million for the quarter. The weighted average rate on new origination was approximately 7%.

Our loan pipelines continue to be strong and currently stand at $1.2 billion compared to approximately $1.1 billion at quarter-end in March and $750 million when we reported early in January. The weighted average rate on the pipeline is approximately 6.85%. On our recruiting efforts, disruption in the local market remains very high. In the second quarter, we executed on a commercial lending diversification strategy. After hiring Tom Geisel in the first quarter, we identified several verticals that are complementary to our existing businesses and made a number of senior hires. Once they settle in, we expect these verticals to contribute to our growth in the fourth quarter and beyond.

While hiring does cause an increase in near-term operating expenses, we expect all these verticals to meaningfully contribute to the execution of our strategic goals. In addition to the new lending verticals, we made progress on getting regulatory approvals to open a new location in Lakewood, New Jersey. Additionally, we expect to open a new branch in Manhattan in the fourth quarter. In conclusion, the momentum in our business is extremely strong, and we continue to execute on 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 and the ability to attract talented bankers.

We have an outstanding deposit franchise, a strong liquidity position, and a robust capital base. It is important to note that our full earnings power, which is underpinned by a 30% non-interest-bearing deposit base, is not yet shining through as the asset side of the balance sheet has not yet repriced. Ongoing NIM improvement is supported by loan repricing opportunities and coupled with organic growth across deposit and business zones. That will aid in unlocking the inherent earnings of Dime. I am looking forward to the remainder of 2025 and 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.

Avi Reddy: Thank you, Stu. Core EPS was $0.64 per share. This represents increases of 12% on a linked quarter basis and 49% on a year-over-year basis. The reported NIM increased to 2.98%. We had around three basis points of prepayment fees in the second quarter NIM. Excluding prepayment fees and purchase accounting, the second quarter NIM would have been 2.95%. As a reminder, the first quarter NIM excluding prepayment fees and purchase accounting was 2.91%. Non-broker deposits were up approximately $210 million at June 30th versus the prior quarter.

As we continue to see strong inflows across our branch network and across the private and commercial bank, we proactively reduced the higher-cost municipal relationship by approximately $125 million in the second quarter. Said differently, had we not proactively reduced this municipal relationship, we would have grown non-broker deposits by approximately $335 million in the second quarter. Core cash operating expenses excluding intangible amortization and severance expense was $59.9 million. The linked quarter increase in expenses was primarily due to the hiring of production staff. Non-interest income of $11.6 million reflected increased loan swap income. We had a $9.2 million credit loss provision.

The capital levels continue to grow and our common equity tier one ratio increased to 11.25% and our total capital ratio grew to 15.8%. Having best-in-class capital ratios versus our local peer 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 guidance for the remainder of 2025. As I mentioned previously, excluding prepayment fees, the NIM for the second quarter would have been 2.95%.

We would use this as a starting point for modeling purposes going forward as we do not expect the prepayment fees to repeat in that size in the upcoming quarters. In the near term, we expect a gradual upward bias in the NIM for the third quarter with more pronounced expansion in the fourth quarter as the asset repricing story will start to unfold with more vigor towards the end 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 2025, and the full year 2026, we have approximately $1.95 billion of adjustable and fixed-rate loans across the loan portfolio at a weighted average rate of approximately 4.1% that either reprice or mature in that time frame. Assuming a 225 basis point spread on those loans over the forward five-year treasury, we could see a 30 basis points increase in NIM from the repricing of these loans.

As we look into the back book for 2027, we have another $1.7 billion of loans at a weighted average rate of 4.25% that will lead to continued NIM expansion in 2027. Moving to the short end of the curve, should the Federal Reserve cut rates, we expect our previous trend of approximately five basis points of NIM expansion for every 25 basis point rate cut to repeat assuming the behavior on deposits and 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.

As we approach a 3% margin, the next marker in front of us is 3.25% and after that, 3.50%. It's important to note that while the destination to us is clear, the near to medium-term NIM is going to be a function of business loan growth. We believe we have the people and verticals in place to drive strong medium to long-term business loan growth. Along the journey, if there's a quarter of subdued growth and less remixing, it does not change the ending NIM destination in our mind.

With respect to balance sheet growth, we expect low single-digit growth for the remainder of the year with the planned attrition in transactional CRE and multifamily masked by 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 outlined in the press release, we have organically built out several new lending verticals. As a result, we are updating our core cash non-interest expense guidance which excludes intangible amortization to approximately $61.5 million for the third quarter of 2025. This updated guidance is based on our existing employee base as of the time of the earnings release.

For the third quarter, we anticipate swap fee income to be approximately $0.5 million and total non-interest income to be in the $10.5 million area. Finally, on the tax rate, we expect the effective tax rate to be between 27% and 27.5% for the third quarter. With that, I'll turn the call back to the operator and we'll be happy to take your questions.

Operator: Thank you. At this time, we will conduct the question and answer session. And as a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Our first question comes from the line of Thomas Reid of Raymond James. Your line is now open.

Thomas Reid: Hey, guys. Hi, Thomas. Sorry. Thomas onvers.

Steve Moss: Thanks for taking my question. So wanna start it off. So pretty healthy bump in DDA balances here based relative to the prior trend. Was there anything one time in nature or, you know, can we expect a similar trajectory there going forward?

Avi Reddy: Yeah. Not nothing one time, Thomas. Yeah. No. We have had a, you know, nice continued strength in our retail network as well as our private banking groups. I mean, if you look at quarter over quarter, we're still seeing, you know, a significant amount of new accounts opened or about fifteen hundred new accounts opened in our private banking group quarter over quarter. And, obviously, you know, three and a half three hundred and fifty million dollars to four hundred million dollars in growth quarter over quarter. We're still seeing significant positive trends in both the retail group as well as our private banking group.

Thomas Reid: Okay. Good. That's good to hear. And then it looks like the weighted average rate on the loan pipeline is down about forty basis points. Is that largely driven by rate movements or are you maybe seeing a little bit more competition fighting the spread there?

Avi Reddy: No. So the origination rate this quarter was around seven ten. And as Stu mentioned in his prepared remarks, that new pipeline was around six eighty five. So it's probably around twenty to twenty five basis points. You know, some of it is, you know, just, you know, we're doing floating rate loans. We're getting a good spread over it. You know, it's a little bit of, you know, mix shift, things like that. So nothing substantial in there, but, you know, we're still pretty much there, you know, very high sixes to close to seven, basically.

Thomas Reid: Okay. Okay. That's great. I'll step back in the queue. Thank you for taking my questions.

Avi Reddy: Thank you. Thanks.

Operator: Our next question comes from the line of Mark Fitzgibbon Piper Sandler. Your line is now open.

Mark Fitzgibbon: Hey, guys. Good morning. First question, Avi, just to clarify, you did say sixty one point five million dollars for operating expenses for the third quarter. Is that correct?

Avi Reddy: Yeah. So but excluding the intangible amortization mark, so sixty one and a half plus the two hundred two hundred fifty k odd for the intangible amortization, so all in probably sixty one point eight.

Mark Fitzgibbon: Okay. Great. And then secondly, I wonder if you could remind us you know, what the impact of a twenty five basis point rate cut means to NII or the margin Any color on that?

Avi Reddy: Yep. Sure. It's historically been around five basis points, Mark, so we'd expect that to continue. I mean, obviously, if we get, you know, a bunch of gradual twenty five basis point rate cuts with some time lag in between them, that's the most favorable environment for us to realize the full five basis points. So I would use around five basis points.

Mark Fitzgibbon: Okay. Great. And then sort of at a high level, I guess, I'm curious how you all are thinking about sort of hiring. You've done a lot of hiring, had some really good success in the deposit front and growing business. Are we getting to the point do you think where expense growth and hiring start to flatten out a little bit here, or is there still, you know, a steep trajectory there?

Avi Reddy: Yeah. So I'd say, Mark, we put the word verticals in place on the lending side. The second quarter was, you know, big hiring quarter for us in terms of, you know, who we put in place and the infrastructure behind it. I would say as we get closer to the end of the year, it's harder to move people, basically. I mean, there could be some singles and doubles where we add some people on. But I think, you know, any substantial hiring, you know, as you get into August and September, you then start getting into next year at that point.

So I think using the Q3 run rate ish plus or minus for the fourth quarter is not unreasonable. I mean, maybe up a little bit. And then once again, next year, we're gonna have to reevaluate. I mean, we're still in touch with you know, some substantial deposit teams and some substantial people on the lending side, but it takes time to move some of these and we're also trying to stage these where we keep OpEx in check and, you know, we can show that we're driving the efficiency ratio down every quarter.

Stuart Lubow: Yeah. I'd say that generally we're where we wanna be. You know, we had concentrated on bringing deposit teams on for the last eighteen months, and then we really focused on building up the remainder of these verticals in the first part of this year. And I think we're pretty comfortable where we are today. In meeting our goals and strategic goals in terms of the verticals we're looking at. And the pipelines are starting to really build in those verticals. So we're very pleased. And I think those new hires are gonna be at breakeven or profitable very quickly based on the pipeline we're seeing.

Mark Fitzgibbon: Okay. And then, Stu, I'm curious at a high level, It feels like M&A is starting to pick back up. You know, do you see that as an opportunity for Dime or are you still more internally focused right now? Any comments around M&A?

Stuart Lubow: Look, guys. You know, if there are opportunities out there, we're certainly interested. And as you know, the market is not, you know, a target-rich environment. So, you know, we are looking at options and are certainly interested. But you know, just as important or more importantly, you know, we've been able to significantly grow the balance sheet and think we can continue to do that organically. But if opportunity presents themselves, well, you know, we will certainly take a look.

Mark Fitzgibbon: Okay. And then lastly, I guess I'm curious your thoughts on how Amam Donny Merrill win, you know, might impact your New York City multifamily rent regulated book. You know. And, obviously, I know you're deemphasizing that business, but any thoughts on sort of how you might handle that?

Stuart Lubow: Well, look. You know, there's no guarantee he's gonna win. Obviously, the rent guidelines board have just announced new rent increases that go into effect in October. So there's not a lot of near-term concern, but, obviously, if he were to be elected and were to affect the rent guidelines board in such a way that rent freezes were put in place. You know, we're taking a look at that. Look, we've been through this before. We've had, you know, several years of rent freezes in New York City before. Our portfolio remains very strong. As you can see and as we reported, we still have no non-performing multifamilies. The other thing is our rent-regulated portfolio is very granular.

The average loan size is about $2.8 million. And also important, all those the pre-2019 portfolio that were subject to the changes in the law regarding passing on capital expenses and increasing rents. All those homes, what remains of them, which is in the $400 million range, have all repriced at this point. And are current. So we're monitoring it. We've, you know, we've looked at what it might mean to the portfolio. But we think we have a pretty strong portfolio. Good debt service coverage, and, you know, and good borrowers, a very granular portfolio with generational owners. So we're gonna continue to monitor it.

We'll see what happens in the election, and you know, we'll manage through it as the market has managed through it in the past.

Mark Fitzgibbon: Thank you.

Avi Reddy: Thanks, Bob.

Mark Fitzgibbon: Thank you.

Operator: Our next question comes from the line of Matt Deubrese of Stephens Inc. Your line is now open.

Matt Deubrese: Hey. Good morning. I was hoping you could touch a little bit on, you know, cost of deposits. There was, you know, obviously, demand deposit growth quarter was really solid, and we continue to make gains there. But the overall cost deposits was flat. Can you just talk about, you know, the absence of rate cuts? Is there room to reduce costs, or are we about done?

Avi Reddy: Yeah. My same answer is last quarter. You know, we're bringing in new deposits, you know, probably in the low to mid two percent area. We don't have a very large CD base at the bank. Probably around three hundred to three hundred fifty million of CDs that are maturing in the third quarter. The rate on that is probably, you know, three six five or three seventy. We're probably retaining ninety percent of that at three percent. So the CD book probably gives us, you know, a basis point or two. There's probably, you know, a basis point or two that we can, you know, shave off.

And but that'll probably be offset by, you know, new deposits coming in. So I think, you know, growing deposits is important for us. I think absent rate cuts, you know, I think this is a reasonable level for us on deposit costs. And more of the NIM expansion story for us is on the asset repricing side going forward.

Matt Deubrese: Great. And then on the new verticals, I think in the press release and just know, quickly, was, you know, corporate slash special fashion finance, lender finance, fund finance. Could you just give us some flavor for how those how loans are priced on those verticals, spreads over SOFR, and some sense for historical loss content?

Avi Reddy: Yeah. Go ahead. Yeah. No. I think these are, you know, primarily floating rate assets, Matt, you know, for us. So it's gonna help with the, you know, asset liability management profile. I would say on the I'll start with the health care, which you didn't ask about, but which we've been in the business. I mean, that's probably a SOFR plus three hundred ish business on the health care side. I think some of these other verticals are, you know, anywhere between two fifty to three hundred over SOFR, basically. You know, I'd say Fund Finance historically has really not had any, you know, asset quality issues. So we're time.

We're really just doing subscription lines, basically, which is the safest part of that business. And I think, you know, in some of the other verticals as well, you know, we're not really seeing a lot of historical loss content, and we're gonna do it, you know, carefully and appropriately like we did, you know, with the build-out of health care over time. So you know, we don't expect lost content. We're getting to see, you know, new transactions coming in and, you know, we've built a number of different businesses. Right? So, you know, that's gonna give us flexibility over time to, you know, pace loan growth over time.

Stuart Lubow: Yeah. So I'd say generally that, you know, the spreads are two twenty-five to three hundred in all the verticals. And what we're seeing as I said, some pretty strong pipeline activity. So we're excited about that. All of it's basically floating rate.

Matt Deubrese: And then in terms of balances, you know, if everything goes according to plan or if you wanna reference, you know, the folks you've hired at prior books, you know, twelve or twenty-four months from now, to what extent do you think this might impact loan growth? What could be the potential kind of loan balances here?

Avi Reddy: Yes. I think we'd use health care as a template, Matt, for this. So we started that business probably two and a half years back at this point. We're probably at around three hundred to three hundred and fifty million of balances on the health care side. I think that's a good template, you know, for a twenty-four month ish period. I think over the slightly longer term of that, if you think about thirty-six to forty-eight months, we'd like each of these businesses to be a half a billion dollar vertical for us, basically. That's how we think about it.

Matt Deubrese: Appreciate that. Last one is just Avi, could you update us on kind of reserve plans? I think the loan most reserve is up to eighty-six basis points. I think there's a push to get it higher. Could you just kinda update us on where you wanna be by year-end?

Avi Reddy: Yeah. So when we, you know, I think we started talking about this probably a year back this time, Matt, or maybe, you know, nine months back. And I think the, you know, the goal was over the medium to longer term, you know, getting to ninety basis points to one percent plus or minus. It's hard to know, intro you know, every quarter, you know, know what the quarter is gonna do because it depends on the CCL model, depends on stuff coming in and out. I think going forward, you know, as we transition the balance sheet, and do more, you know, C&I, naturally, the ratio is gonna go up.

We don't it's not a hot and fast, you know, number we need to get to by any circumstances, but just as we run our models internally and look at doing more, you know, in some of these verticals over time, I think you're gonna get to that ninety basis points to one percent area. We're at eighty-six basis points right now. So happy it's trended up. We're getting more in line with the, you know, a local PO group, national PO group type given the risk profile of our assets.

So I would say hard to predict, you know, every quarter if it's gonna go up from here on out, but it's definitely directionally, you know, we'd like it to be in the ninety one percent area.

Matt Deubrese: That's all I had. Thanks for taking my questions.

Avi Reddy: Thanks, Matt. Appreciate it.

Stuart Lubow: Thank you.

Operator: A reminder, to ask a question, you will need to press star one on your telephone. Our next question comes from the line of Manuel Navas of DA Davidson and Company. Please go ahead.

Manuel Navas: Hey. Appreciate the color on the loan repricing outlook. Do you have the balances just in the second half of the year?

Avi Reddy: Yeah. Yeah. So we have, in the third quarter manual, there's probably around four hundred million dollars at a rate of around four percent. And then in the fourth quarter, there's around two hundred million dollars at a rate of around four thirty. But, you know, it's important even that four hundred million dollars, right, a lot of them are towards the end of the quarter, which is why when we give our NIM guidance, it was, you know, look, we're probably gonna see more pronounced NIM expansion in the fourth quarter because, you know, we don't have to actually replace for you to get the benefit of it.

So the total quantum is around six hundred and split four hundred and two hundred third and fourth quarter.

Manuel Navas: That's great. That's really helpful. Where do you know, Stu discuss that the private banking group has, like, fifteen hundred accounts. What do balances stand right now there?

Avi Reddy: Two point two billion.

Manuel Navas: And our pipeline is as strong as ever, I mean, with those new accounts. Just kind of you're gonna be doing some remix of the balance sheet that keeps the balance sheet in the low single digits growth. But this deposit group still has plenty of runway to go forward. Correct?

Avi Reddy: Yeah. We think so. I mean, look, same thing we've said historically that think, you know, each of these groups, it's gonna take three to four years for them to reach a steadier state. And, you know, Stu said it has remarks, you know, account openings are very strong. Similar to the pace of prior quarters, basically. And so you know, in an individual quarter here or there, it may be up or down, but you know, we really track it from an account opening and customer opening perspective, and that's not slowed down yet.

Stuart Lubow: Yeah. And, you know, on top of that, the verticals that we've brought on and the pipeline that's out there, we're seeing significant deposit balance opportunity as well. So it's just not, you know, one-sided balance sheet on these new verticals. So we're pretty bullish on continued growth there.

Avi Reddy: Yeah. Just one other thing I would add is, you know, Abhiran network has had a really, really solid first six months of the year. You know, they've made up a lot of balances, you know, especially from stuff that we've lost. In 2023. So you're really seeing three different avenues for deposit growth of the private banking groups we hired, the new lending verticals as well as the branch network.

Manuel Navas: That's great. As you're getting more and more funding and more opportunities where could low growth get to especially with all the with all the verticals? Like, in twenty-six and twenty-seven? You do have some of the repricing come at the same time, but, like, where could loan growth get longer term?

Avi Reddy: Yeah. If this is an indirect way of asking us for guidance for twenty-six, we're gonna stay away from that. Sure. Look, I think, you know, Matt asked the question where do we think these verticals could be over time. Right? And each of these, you know, in the medium to long run, we'd want them to be three hundred to five hundred million dollar verticals. You know, we're gonna see some attrition on the transactional CRE side, but you know, there's no reason we should not be a mid to high single digits growth bank once, you know, the pre ratio gets to a level that you know, we wanted to be at.

The near term, as we said earlier, we're managing the pre ratio to get down to around four hundred percent by year-end, and, you know, we're pretty much there at this point. Right? So it's really a tale of two balance sheets with the CRE that we're reducing. But then medium to longer term, I think mid to high single digits is a good number for the bank.

Manuel Navas: Okay. I appreciate that. Thank you very much.

Avi Reddy: Thanks, Manuel. Thank you.

Operator: Our next question comes from the line of David Conrad of KBW. Your line is now open.

David Conrad: Yeah. Good morning. Thanks for all the detailed guidance. Just want to talk a little bit about capital really strong here north of eleven percent CET1. You got an improving profitability coming next year, but I guess still sounds like the number one priority is the organic growth of the business rather than anything year term in terms of capital deployment. Or return to shareholders.

Avi Reddy: Yeah, David. That's fair. You know, in our last earnings call, we got a similar question and, you know, responses pretty similar right now. I mean, this means, obviously, still a little bit of uncertainty with tariffs. You know, we've hired a lot of productive, you know, teams right now. We said is, you know, when we get to the end of the year, you know, early twenty-six, we're gonna reevaluate, you know, the buyback, things like that. From a pure corporate finance perspective, you know, it we feel our stock is very undervalued at this point.

But at the same time, we do think having capital ratios higher than, you know, pretty much everybody in our local PO group is a big competitive advantage, you know, as we go after new verticals. So I'd say in the near term, you know, we'd like we're, you know, happy to be accreting capital. I think in the medium to longer term, we as we shown in the past, we've distributed capital to shareholders when we can.

David Conrad: Thank you.

Operator: Alright. I'm showing no further questions at this time. Actually, we do have one more in the queue here. Alright. We have Matthew Breeze returning from Stevens Inc. Please go ahead.

Matthew Breeze: Hey, guys. I just one more. Obviously, you helped me out with cash, cash equivalents, liquidity, deployment strategy? You know, you're sitting on know, just a lot of cash here. Curious you feel comfortable bringing it down to and some sense for timing. Thanks.

Avi Reddy: Yeah. I think in the near term, we're not focused on buying securities, Matt. You know, if we did decide to do so, there certainly would be a boost to NIM and a boost to, you know, net interest income. But, you know, what? We're trying to run the balance sheet for the more medium to longer term. I think over the medium to longer term, a lot of the cash would probably be redeployed into some of the new lending verticals. That we're in. Our loan to deposit ratios are ninety-one to ninety-two percent. We're very comfortable between that ninety to ninety-five.

So I'd say in the medium to longer term, we'd like a lot of that to go into, you know, some of the C&I items that we're focused on, which are floating rate assets. But I say in the near to medium term, we're not out there buying securities and, you know, changing the ALM profile is something different than what we wanna do. So we are giving up some earnings in the near term, I think we're creating a balance sheet that, you know, will have a structurally higher NIM over time and set us up for different great environments. By keeping the cash position where it is.

Stuart Lubow: Yeah. And what we're seeing in the pipeline with the existing verticals and the teams we brought on plus with the new verticals, we think that we can quickly deploy over the next six to nine months excess liquidity. So at meaningful NIM improvement. So you know, that's our view as to our current cash position.

Matthew Breeze: Great. Appreciate it. Thanks for taking all my questions.

Avi Reddy: Thanks, Matt.

Operator: Thank you. I am showing no further questions at this time. I'll now like to turn it back to Stuart Lubow for closing remarks.

Stuart Lubow: Thank you, Steven, and thank you all to our dedicated employees, our shareholders for their continued support and we look forward to speaking with you after our third quarter.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.