Dime Community Bancshares Earnings Call Highlights Margin Upside

Dime Community Bancshares, Inc. ((DCOM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Dime Community Bancshares Charts Profitable Course With Margin Tailwinds Building

Dime Community Bancshares’ latest earnings call struck an upbeat tone, underscoring a bank that is translating prior restructuring into tangible profit growth while maintaining conservative balance sheet discipline. Management highlighted sharply higher core earnings, record revenues, and seven straight quarters of net interest margin expansion, all supported by robust deposit growth and a solid capital and asset-quality base. While some headwinds remain—such as temporary deposit swings, elevated cash balances, and a still-elevated CRE concentration—the overall narrative was one of controlled risk, improving profitability, and a clearer path to higher margins and better efficiency over the next two years.

Strong Core EPS Growth Signals Earnings Momentum

Core earnings power stepped up meaningfully in the quarter. Core EPS reached $0.79 in Q4, an 88% increase from a year earlier, even after excluding roughly $2.4 million in severance charges and about $2.7 million of discrete tax items. This acceleration shows that the bank’s underlying profitability is improving, not simply benefiting from one-time items. The strong core EPS performance sets a higher base heading into 2026, giving investors more confidence that recent strategic changes are flowing through the income statement.

Record Revenue and Sustained NIM Improvement

Total revenue hit a record $124 million in Q4, driven in large part by improving net interest income. Reported net interest margin rose to 3.11%, or 3.09% excluding about 2 basis points of prepayment fees, marking the seventh straight quarter of NIM expansion and roughly a 10 basis point improvement referenced in management’s remarks. This sustained margin climb is notable in a still-competitive deposit environment and suggests that asset yields and funding costs are both moving in Dime’s favor, positioning the bank for further earnings growth as repricing tailwinds build.

Core Deposit Growth and Attractive Mix Support Funding Strength

Deposit performance was another bright spot. Core deposits increased by $1.2 billion year over year, while total deposits were up about $800 million versus the prior quarter. Adjusting for seasonal and municipal inflows, core Q4 growth was still a solid ~$400 million. Importantly, non-interest-bearing demand deposits now account for roughly 31% of total deposits, providing a meaningful low-cost funding base. This deposit mix is a key competitive advantage, allowing Dime to support loan growth and margin expansion without relying excessively on high-cost funding.

Cost of Funds Trending Lower

The bank’s funding costs showed clear improvement. The cost of total deposits declined to 1.85% in Q4, a 24 basis point drop from the prior quarter, and spot deposit costs at year-end were around 1.68%. This downward trend in deposit costs, paired with steady loan yields, is a key driver of net interest margin expansion. For investors, lower and stabilizing funding costs suggest the bank is not simply “buying” growth but improving profitability through a better funding mix and careful rate management.

Robust Business Loan Growth and Healthy Pipeline

On the asset side, business lending remains a central growth engine. Business loans rose more than $1.075 billion on a linked-quarter basis and over $500 million year over year, underscoring strong demand and new client wins. The current loan pipeline exceeds $1.3 billion, with a weighted-average expected rate between 6.25% and 6.5%, which is attractive relative to funding costs. While management is balancing this growth with concentration and capital considerations, the pipeline suggests Dime has plenty of opportunity to deploy liquidity into higher-yielding assets over time.

Capital, Liquidity and Asset Quality Remain Solid

Dime reported strong capital and asset-quality metrics that underpin its growth strategy. The total capital ratio is above 16%, and CET1 stands at 11.66%, providing a solid buffer for balance sheet expansion and regulatory scrutiny. Nonperforming assets improved to just 34 basis points of total assets, with the multifamily portfolio showing zero NPAs, a key positive given broader industry concerns around commercial real estate. The allowance for loan losses increased to 91 basis points of loans, within the targeted 90–100 basis point range, signaling a cautious but comfortable credit posture.

Operational Discipline and Tight Expense Control

Management emphasized cost discipline as a core part of the story. Core cash operating expenses (excluding intangible amortization) were $62.3 million in Q4, below guidance of roughly $63 million. This outperformance helps drive better operating leverage as revenues grow. Looking longer term, the company is targeting full-year 2026 core cash operating expenses of $255–$257 million, aiming to support a return to a sub-50% efficiency ratio. For investors focused on profitability metrics, this commitment to expense control is central to the bank’s earnings and valuation thesis.

Commercial Banking Expansion and Talent Investments

Dime is actively building out a more diversified commercial banking franchise. The bank launched several specialized verticals, including fund finance, lender finance, mid-corporate, sponsor finance, and syndications, which can generate higher-yielding assets and fee income. It also hired experienced commercial bankers and a new Chief Credit Officer to support prudent growth. On the distribution side, a Manhattan branch has opened, and two new branches in Lakewood and Locust Valley are targeted to open this year, enhancing market presence and deposit-gathering capacity. These investments are intended to deepen client relationships and support long-term growth.

NIM Repricing Tailwinds Provide Visibility

A key theme of the call was the built-in margin upside from loan repricing. Management highlighted about $1.4 billion of adjustable and fixed loans set to reprice or mature in 2026, carrying a weighted-average coupon around 4%. Replacing or repricing these loans at spreads of roughly 250 basis points over the 5-year Treasury could add around 20 basis points to quarterly NIM in 2026. Another ~$1.7 billion of loans with a weighted-average rate near 4.25% are slated for 2027, potentially contributing an additional 20–25 basis points of NIM expansion. This “back-book” repricing creates a structural tailwind for margin, somewhat independent of near-term rate moves.

Seasonal and Temporary Deposit Volatility Clouds Comparisons

Management cautioned that some of the recent deposit growth is temporary and seasonal. Q4 included about $100 million of seasonal tax receivable deposits expected to leave in mid-January and roughly $225 million of municipal deposits linked to a bond offering that should exit in February. Together, these items temporarily boosted deposits and cash balances by around $400 million, making quarter-to-quarter comparisons less straightforward. Investors are encouraged to focus on underlying core deposit trends, which remain solid, rather than these short-lived swings.

Elevated Cash Levels a Near-Term Drag on Earnings

The bank entered Q4 with a sizeable cash position to preserve balance sheet flexibility. Only about $150 million of securities were purchased in the quarter, and management does not plan to rapidly deploy the excess cash. While this conservative stance provides liquidity and optionality, it also acts as a short-term drag on earning-asset utilization and NIM until loan growth or securities purchases pick up. The strategy reflects a trade-off between near-term earnings and maintaining dry powder to deploy into attractive opportunities as they arise.

Managing CRE Concentration and Portfolio Transition

Commercial real estate concentration remains an area of active management. While Dime’s CRE concentration has moved below 400%, it is still elevated, and management is targeting a reduction into the mid-350% range. This will be driven largely by shrinking transactional multifamily and CRE exposures over time. The bank expects a meaningful inflection point around Q3 2026 as maturities, paydowns, and selective originations reshape the portfolio. For investors wary of CRE risk, the call underscored that Dime is intentionally steering its exposure lower while maintaining strong asset quality today.

Prepayments and Payoffs Restrain CRE Growth

Prepayment and payoff activity is another factor weighing on reported CRE balances. Management pointed to payoff rates of roughly 20–25% in Q3 2025 and about 15% in Q4 2025, which have moderated growth in CRE and multifamily loans. This dynamic contributes to guidance for relatively flat loan balances in the first half of 2026 and slower growth in CRE segments. While this tempers near-term loan growth, it also supports the bank’s goal of rebalancing its portfolio mix and reducing concentration risk.

Lumpy Noninterest Income Adds Variability

Noninterest income remains an important but inherently volatile earnings lever. Q4 noninterest income came in $11.5 million above guidance, helped by items such as swap fees, SBA fees, and title-related income. However, management stressed that these sources are timing-sensitive and can vary significantly from quarter to quarter, cautioning that Q1 could be lower. For shareholders, this underscores that the core story is driven more by net interest income and cost discipline, with fee income acting as a bonus rather than a consistently growing driver.

Gradual Attrition in Rent-Regulated Multifamily

The bank continues to shrink its exposure to rent-regulated multifamily properties originated before 2019, a segment that has drawn heightened regulatory and market attention. This book has declined to about $350 million from approximately $450 million a year ago, and management expects continued, gradual attrition. Around $250 million of multifamily loans, including rent-regulated cohorts, are scheduled to mature or reprice in 2026. This steady runoff supports risk reduction while freeing capacity to redeploy into higher-yielding, less constrained categories.

Guidance: Flat Balance Sheet Near Term, Margin and Earnings Building

Management’s guidance points to a year of controlled balance sheet growth but improving profitability. Net interest margin is expected to start around 3.09–3.11 and expand modestly in the first half of 2026, with more pronounced improvement in the second half as roughly $1.4 billion of lower-rate loans reprice or roll off. The bank is targeting NIM of about 3.25%, then 3.50% as additional $1.7 billion of loans reprice in 2027, and noted that each 25 basis point move in short-term rates should impact NIM by only 2–3 basis points thanks to its large cash position. The balance sheet is projected to be roughly flat in 2026—flattish in the first half, with growth in the back half—yielding low single-digit loan growth for 2026 and mid- to high single-digit growth for 2027. CRE concentration is targeted down to the mid-350% range with a key inflection around Q3. Core cash operating expenses are guided to $255–$257 million, noninterest income to $45–$46 million, and provision expense around $10–$11 million near term, trending to single digits in the second half. The allowance ratio is expected to stay around 91 basis points (within the 90–100 basis point band), with a tax rate near 28%. Together, these guideposts outline a plan for moderate growth but steadily improving margins and efficiency.

In summary, Dime Community Bancshares’ earnings call painted a picture of a bank that has shifted from restructuring to execution, delivering strong core EPS and record revenues while maintaining a conservative risk profile. Margin expansion, strong core deposit growth, and disciplined expense management form the backbone of its near-term earnings outlook, complemented by a growing commercial franchise and carefully managed CRE exposure. While temporary deposit swings, elevated cash, and lumpy fee income may create some quarterly noise, the underlying trajectory—toward higher NIM, better efficiency, and controlled loan growth into 2027—remains favorable for investors watching the story unfold.