Image source: The Motley Fool.
DATE
Thursday, October 23, 2025 at 8:00 a.m. ET
CALL PARTICIPANTS
President & Chief Executive Officer — Stuart Lubow
Chief Financial Officer — Avinash Reddy
President, Commercial Banking — Tom Geisel
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
Pretax Pre-Provision Income -- $54.4 million in the third quarter of 2025 and $29.8 million in the third quarter of 2024.
Core EPS -- Core EPS was $0.61 per share, representing a 110% year-over-year increase.
Net Interest Margin (NIM) -- Increased to 3.1% in the third quarter, marking a sixth consecutive quarter of NIM expansion.
Core Deposits -- Core deposits grew by $1 billion year over year. Total deposits increased by $320 million as of September 30, 2025, compared to the prior quarter.
Business Loan Growth -- Increased by over $160 million, compared to $110 million in the second quarter. Business loan growth exceeded $400 million year over year.
Loan Originations -- Totaled $535 million in the third quarter, with a weighted average rate of approximately 6.95% on new originations and lines of credit.
Loan Pipeline -- Currently stands at $1.2 billion, with a weighted average rate between 6.56% and 6.75%.
Nonperforming Assets (NPAs) -- Represent 0.50% of total assets, described as favorable compared to peers, with a linked-quarter increase from a small base.
Criticized Loans -- Decreased by approximately $30 million sequentially. Loans 30 to 89 days past due declined by 33% on a linked-quarter basis.
Provision for Credit Losses -- $13.3 million in the third quarter, with allowance to loans increasing to 0.88%.
CRE Concentration Ratio -- CRE concentration ratio is now 401%, reducing a previous limitation to capital deployment and stock-repurchase activities.
Cost of Total Deposits -- 2.09% in the third quarter, unchanged from the second quarter, while loan yields were maintained.
NIM Spread Following Rate Cut -- Spread between loan and deposit costs increased by approximately 10 basis points following the Fed rate cut in September 2025 and is expected to further drive NIM expansion in the fourth quarter.
Core Cash Operating Expenses -- $61.9 million excluding intangible amortization, slightly above prior guidance due to new hires. Core cash operating expense guidance for the fourth quarter is set at $63 million.
Non-Interest Income -- $12.2 million in non-interest income, including a $1 million fraud recovery from Legacy Bridge. Guidance for a run rate of $10 million to $10.5 million in non-interest income for the fourth quarter, excluding this item.
Capital Ratios -- Common equity Tier 1 ratio grew to over 11.5%. Total capital ratio is now over 16%.
Efficiency Ratio -- Management indicated continued improvement, linked to NIM expansion.
Branch Expansion -- One new branch opened in Manhattan, another planned for Lakewood, New Jersey, in 2026, and a planned North Shore Long Island location in early 2026.
Loan Repricing Opportunity -- $1.35 billion of adjustable and fixed-rate loans at a weighted average 4% are expected to reprice or mature in 2026, with another $1.7 billion at 4.25% repricing in 2027.
Guidance on Stock Repurchase -- Executive management stated that active discussions are underway, with capital ratios and CRE concentration being determining factors for potential buybacks.
SUMMARY
Dime Community (DCOM 7.25%) management provided explicit details on a structurally higher earnings trajectory, pinpointing pathways for NIM expansion as a direct result of spread widening from recent rate cuts and ongoing loan repricing. The company reported a favorable credit environment outside non-owner-occupied CRE charge-offs, with management confirming no abnormalities in nonperforming asset formation and a path to lower charge-offs into 2026. New banker recruitment and branch openings in key New York and New Jersey markets signal an ongoing strategy of organic growth rather than M&A. Guidance for fourth-quarter non-interest income excludes nonrecurring items and incorporates potential SBA fee headwinds attributed to the government shutdown. Deployment of capital remains a focus, with repurchase activity closely linked to further reductions in the CRE ratio. No explicit guidance was provided for 2026, but margin expansion and efficiency improvements remain clear priorities.
Chief Financial Officer Reddy commented, "the next marker in front of us is 3.25%, and after that 3.5%."
Core deposits increased by $1 billion year over year, attributed to the effectiveness of new deposit teams hired since 2023.
Recruitment of business bankers is expected to generate "meaningful" contributions to business loan growth, per Stuart Lubow.
Allowance for credit losses is expected to gradually build; management is targeting a reserve level of 0.90% to 1% going forward.
CRE and multifamily loan runoff will offset business loan growth in the near term, resulting in a relatively flat overall balance sheet entering year-end.
Management indicated that "at maturity, we're seeing the same 80% to 90% of the loans are basically going away at this point," with no noted difference in runoff between market-rate and rent-regulated properties.
"We expect more meaningful NIM expansion in the fourth quarter," Lubow stated, emphasizing the ongoing benefit from recent rate cuts, which are lowering deposit costs faster than loan yields reset, as discussed after the September Fed rate cut.
INDUSTRY GLOSSARY
CRE Concentration Ratio: Commercial real estate (CRE) loans as a percentage of total capital, a regulatory focus metric guiding loan and capital deployment.
Criticized Loans: Loans with identified weaknesses that may jeopardize full repayment, excluding those already classified as nonperforming.
Allowance to Loans: Ratio of the balance sheet reserve for credit losses to total loans outstanding, indicating adequacy of capital set aside for potential future loan loss.
DDA: Demand deposit account; a checking account used primarily for business or personal transactional deposit needs.
NIM: Net interest margin; a measure of the difference between interest income generated and interest paid relative to interest-earning assets.
Full Conference Call Transcript
Stuart Lubow: Thank you, Diane, and thank you all for joining us this morning for our quarterly earnings call. With me today as usual is Avinash 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 2025. Avi will then provide some details on the quarter and thoughts for the remainder of 2025. Our core earnings power continues its significant upward trajectory. Quarter pretax pre-provision income was $54.4 million for 2025 compared to $49.4 million in 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 NPAs were up slightly on a linked quarter basis, they were 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 thirty to eighty-nine 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 2.09% in the third quarter, which was unchanged 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%. Following the Fed rate cut in September, we were able to meaningfully lower deposits 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 the 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 6.56% and 6.75%. 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 C&I 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 2026. Additionally, we have identified a new location in 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 and our ability to attract talented bankers. We have an outstanding deposit franchise, strong liquidity, and a robust capital base.
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 Europe. With that, I will turn the call over to Avi.
Avinash Reddy: Thank you, Stu. Core EPS for the third quarter was $0.61 per share. This represents a 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 3.1%. 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 million. As a reminder, the second quarter NIM excluding prepayment fees and purchase accounting was $2.95 million. Total deposits were up approximately $320 million at September 30 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 thirty to eighty-nine days past due were down approximately 33% on a linked quarter basis.
We continue to grow, and our common equity Tier one ratio grew to over 11.5%, and our total capital ratio grew to over 16%. 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 the fourth quarter. As I mentioned previously, excluding prepayment fees and purchase accounting, the NIM for the third quarter would have been $298 million. We would use this as a starting point for modeling purposes going forward.
As 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 yield, 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 15. 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 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 4.25% 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 3.25%, and after that 3.5%. With respect to the balance sheet, we expect a relatively flat balance sheet for the remainder of this year as planned attrition in transactional CRE 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 are 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 do 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 million to $10.5 million. Factors that will determine the eventual outcome will be swap fee 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.
Operator: Thank you. And our first question comes from Steve Moss of Raymond James. Your line is open.
Steve Moss: Good morning, guys. Hi, Steve.
Stuart Lubow: Hi, Steve.
Steve Moss: Hey, Steve, Avi. Maybe just starting off on credit here. Just curious with regard to the NPA formations and the charge-offs. Were the charge-offs related to this quarter's new non-performing loans? And then was it weighted more towards owner-occupied CRE or non-owner-occupied CRE? And maybe if any of it was multifamily related?
Avinash Reddy: Yes. So none of it was multifamily related, Steve. It was owner-occupied and non-owner-occupied. The split was around 20% owner-occupied, around 80% non-owner-occupied over there. Like Stu said, criticized were down around $30 million linked quarter, the thirty to eighty-nine day bucket got better. And we're pretty confident that we should see some resolution of legacy NPAs in the fourth quarter, probably amounting to around $15 million to $17 million that we have a good line of sight into. So I wouldn't characterize the formation as anything out of the ordinary course of business. We're operating at 50 basis points of NPAs. We probably could be range-bound around that between now and the end of the year.
And we're seeing a very strong credit overall on the multifamily side.
Steve Moss: Okay. Appreciate that. And then maybe on the multifamily payoffs this quarter, those accelerated here. It kind of sounds like you're going to expect that similar pace into the fourth quarter. Is that kind of maybe how you guys are thinking about 2026 as you guys just have greater repricing and we're going to see just a continued step up in the multifamily paydowns?
Stuart Lubow: I think you can see continued paydowns in the multifamily. I think this quarter was a bit outsized, and we knew that we had some big prepayments or payoffs coming in. But I wouldn't expect it to be at this level of prepayment going forward more normalized. But we are seeing maturities when we do have maturities, there is a relatively high percentage that is refinancing out.
Steve Moss: Okay, great. I'll step back in the queue here. Appreciate all the color. Thank you.
Operator: Thank you. Our next question comes from Matthew Breese of Stephens Inc. Your line is open.
Matthew Breese: Hey, thank you and good morning.
Stuart Lubow: Hi, Matt.
Matthew Breese: Avi, Stu, I wanted to follow-up on the credit question just for a moment. On Charter specifically, Avi, I think in the past you've discussed kind of, hey, look, we're building out a business bank. There's going to be some more normalized, call it, charge-offs than historical Dime and Bridge, especially in the higher rate environment. Could you just reframe for us, what you define as normalized? And I'm trying to kind of triangulate the comments. Is there a path to go back to normalized over the next couple of quarters?
Avinash Reddy: Yes. No problem. Appreciate the question. So I think at the start of the year, our guidance for charge-offs was around 20 to 30 basis points. That's what we said before we started building out the specialty verticals really. That was my comments back in January, right? So you look at on a year-to-date basis right now, we're basically at 31 basis points. So we're basically within the range of what we have. The new businesses that we're building out, Fund Finance, for example, we expect zero losses in those new businesses, right?
So I don't think the new businesses per se are going to add to the level of future charge-offs because we're making good loans and we're being very conservative in what we do. What it may change though is the reserving methodology because for C&I loans we are reserving somewhere between $125 million and $150 million. So if you think about the model going forward, we do expect the reserve to build and us to be in that 90 to 1% area and that could gradually build over time. It will be a function of what we're putting on.
But in terms of charge-offs, I mean, we're in probably the late cycles of a high rate environment and it's our goal with increased earnings power to exit some criticized assets beyond there. So that's probably a couple more quarters of that probably that we see. But I would expect as we get into 2026 to get to a more of a historical Dime level if that's what you're asking on the charge-off level. But I think on the provision level, it's going to be a function of the new business, right? And we're reserving at a higher level for the new business.
Matthew Breese: Great. Thank you. And then going back to the multifamily reduction, I am curious within that was there any selection bias? Stuff that's rolling off the book, was it more market rate multifamily versus rent regulated? And I would love just to hear what the market appetite is for those products, refying away? Is it non-discriminate and both are being refied away? Or are you seeing more so the market rate stuff get refied away than rent regulated?
Avinash Reddy: Yes. So I think we're setting our new rates slightly above market, Matt. I think at a reprice, some of the customers are staying with us. But at maturities, we're not seeing any delineation between free market and historical rent regulated items just because the LTVs are so low and we've been pretty conservative in the underwriting. So I think there's a difference at the reprice. If something is repricing and still has five years left, you probably would see more of the rent regulated stuff staying on with the books. But at maturity, we're seeing the same 80% to 90% of the loans are basically going away at this point.
And there's really no delineation between that at this point in time at least.
Matthew Breese: Okay. And then, two others for me. Just one, we may be in the process of getting some short order successive rate cuts, feels like two by the end of the year and then maybe one earlier next year, so call it three or four another three or four twenty-five bps cuts. Can you give us some idea for expectations on deposit betas as a lot has changed on year end than previous cycles?
Avinash Reddy: Yes. I'll start with this cut, Matt. So I think you asked the question last quarter. I mean, rate cuts obviously help us and gradual rate cuts help us more than probably big rate cuts because that's sometimes hard depositors by the full amount. So we kept the deposit cost at 2.9% this quarter consistent with the last quarter, but we continue to grow deposits, right? So we're bringing on new deposits in the low 2s. Right now our cost of deposits is in the low 190s. Prior to this rate cut, it was 2.9%. And so we were pretty much able to pass the full 100% on.
I mean we do have 30% DDA, so that is what it is. So I'd say, for this 25 basis points, we're very happy with where we ended up. So we started 2.9%, we're at 1.9 right now. So we were able to cut and that's on total deposits, we're able to cut by 19 basis points. So I think for anything going forward for the next two, we'd expect something similar, but it's going to depend on the competition.
And look, the luxury that we have is we have a lot of new deposits coming in with from our branch network, from our municipal deposit bankers, from our private banking teams and from some of the commercial lending teams that we've built on. So we can be more aggressive with the existing deposit base that we have. And I don't think that's a luxury that a lot of other peers in our geography have. So while I think the models would say 50%, 60% beta, I mean, we're trying to pass everything on going forward on the way down.
And if you remember, when rates went rates were at zero, our cost of deposits was seven basis points back then, right? We're not getting back there, but we did pay up on the way up and there was industry events with Signature and some of the other stuff that happened where there was a bit of retention going on. But I think on the way down, our goal is to benefit from that. And again, the NIM guidance that we gave going forward, I mean, that's absent any rate cuts, right?
I mean, so for every rate cut, we should have five basis points plus or minus over there and that's kind of primarily from cutting the deposit side of the business.
Matthew Breese: Great. Appreciate all that. And then just my last There's been some larger banks that have identified Long Island as a market folks want to be in. And I know in prior calls, we've asked you about M&A as a buyer, and I'm curious your thoughts there. But I'm also curious to what extent you've thought about all strategic alternatives including a potential sale if bids were to come in and some of these larger banks were to make a more pronounced effort into Long Island? That's all I had.
Stuart Lubow: Yes. Thanks, Matt. Look, we're focused on organic growth. We have we've just brought on all these talented bankers and these teams on the loan side. We had already done that on the deposit side. We think we're really well positioned to deploy that excess liquidity that we have over the next six months to a year with all these teams coming on board. Our pipeline is very strong with very good yields. So I'm excited about the fact that we're going to start to see NIMs in the mid to high 3s in a relatively mid to long term, which is going to benefit the bottom line and our shareholder value. So really focused on that.
As far as the other look, everyone knows me. I've been around a long time. I'm always interested in maximizing shareholder value. But for now, we're really focused on organic growth.
Matthew Breese: Appreciate it. Thank you.
Operator: Thank you. And our next question comes from Mark Fitzgibbon of Piper Sandler. Your line is open.
Mark Fitzgibbon: Hey guys, good morning.
Avinash Reddy: Hey, Mark. Good morning.
Mark Fitzgibbon: I was wondering with the capital ratios building nicely and it sounds like no balance sheet growth in the fourth quarter, what are your thoughts on stock repurchases?
Avinash Reddy: Mark. So we've started having those conversations in earnest at this point. I think last couple of quarters, we said early 2026, we'll revisit it. I mean, the common equity Tier one is over 11.5%, total capital is over 16%. I mean the one thing we were trying to do is to get the CRE concentration ratio down to the low 400s and we are there, right, at this point in time. I will say when you look at the peer groups Mark and more nationally because I mean we've really broken out of the local peer group here. Our business model is completely different from a lot of the other banks here.
And you look at TCE ratios or you look at common equity Tier one ratio that's gone up industry wide. And so I don't think we're an outlier when you compare us to the rest of the industry. We obviously have a lot more capital than historical Dime used to run the balance sheet. So I think the first and best use of capital obviously is putting into work on all of the existing lending teams that we have, a lot of the new teams that Tom has hired and putting that to work. I mean you'll see in the press release a number of new verticals that we brought on board.
And each one of them should be a $500 million business for us over two to three years, right? So we'd like to deploy that. At the same time, the CRE runoff, the multifamily runoff is going to stop at some point relatively soon and we'll be back in that market in a bigger way. So I think we're trying to balance a lot of those items, Mark. From a corporate finance perspective, obviously, we see the stock as very undervalued, especially as you start projecting out NIMs in 2026 and 2027. So from that perspective, we do want to be back in the market for that.
If you remember after the merger, we returned around $100 million of capital to shareholders. So we have been aggressive on that. But I think the limiting factor was the CRE ratio more from an optics perspective. And I think as we get below 400 that will go away and it will probably help us be back in the market. So hopefully that provides you a bit of perspective on the different dynamics there.
Mark Fitzgibbon: It does. Thank you. And also I was curious, Avi, you mentioned there was a fraud recovery in the quarter. I guess I'm curious how much was that? And was that in other the other income line?
Avinash Reddy: Yes, yes. So that was in other income, Mark. If you remember, this is probably dating back to 2018 or 2019, Legacy Bridge had a fraud with a bus company, was around an $8 million non-interest expense that they had more of an operational item. So we've been going through the legal process and we were able to recover $1 million this quarter and that's in the other non-interest income line.
Mark Fitzgibbon: Okay, great. And then I guess just sort of a bigger picture and maybe not even necessarily relating to Dime, just industry wide. Stu, you and I have been through a few credit cycles. I guess I'm curious where you feel like we are and what inning are we in? How does this cycle play out? Does it get markedly worse? Does it sort of just muddle along? Have we seen the worst of it? I guess I'm curious of high-level thoughts. And again, those are not specific to Dime per se.
Stuart Lubow: Yes. No, I think we're kind of in the later innings at this point. I think we're going to muddle along a little bit going forward. Look, we the issues of 2023 and the two years thereafter kind of exacerbated some of the situations with the higher rate environment. So I think overall the industry has done very well. And I think we're at the point now where you got a lower rate environment coming. And I think generally, at least locally, the economy remains relatively strong. So I think that the industry has kind of worked through the process and managed the credit issues very well.
I think as some of the issues come up with improved earnings, there might be a little bit more aggressive approach to resolving items. But I think generally, I think the industry has done well and I don't see us entering a significant stress environment in terms of credit.
Mark Fitzgibbon: Thank you.
Operator: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Stuart Lubow for closing remarks.
Stuart Lubow: Thank you, operator and Diane, and thank you all for our thank all our dedicated employees for our and our shareholders for their continued support. We look forward to speaking to you in early 2026 after our fourth quarter.
Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.