DCOM Q1 Deep Dive: Deposit Growth and Loan Repricing Guide Outlook

Regional bank Dime Community Bancshares (NASDAQ:DCOM) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 26.6% year on year to $103.8 million. Its non-GAAP profit of $0.57 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Dime Community Bancshares saw a positive market reaction following its first-quarter results, despite missing Wall Street’s revenue expectations. Management credited the quarter’s momentum to successful core deposit growth and disciplined reduction of brokered funding. CEO Stuart Lubow highlighted that business loans increased, particularly in commercial and healthcare segments, while the net interest margin (NIM) expanded for a fourth consecutive quarter. Lubow stated, “We have made significant progress in creating a core deposit funded balance sheet,” noting both the deposit team’s contributions and a reduction in funding costs as key factors supporting earnings.

Looking ahead, management’s guidance centers on further NIM improvement, driven by a sizable pipeline of loans expected to reprice at higher yields in the second half of the year. CFO Avi Reddy explained that more than $1.9 billion in loans will reprice over the next 18 months, potentially lifting margins even if short-term rates remain stable. Lubow also pointed to new banker hires and expansion into Lakewood, New Jersey, as avenues to accelerate both deposit and business loan growth. Reddy added, “We have a path to a structurally higher NIM and enhanced earnings power over time,” emphasizing management’s focus on careful expense management and targeted market expansion.

Key Insights from Management’s Remarks

Management attributed first-quarter performance to a disciplined shift toward core deposit funding, active reduction of higher-cost brokered deposits, and targeted business loan growth, particularly in commercial and healthcare sectors.

• Core deposit growth focus: The bank’s emphasis on core deposit funding, supported by new deposit teams hired since 2023, enabled a significant reduction in reliance on brokered deposits and Federal Home Loan Bank (FHLB) borrowings. Management noted that core deposits rose by $1.3 billion year-over-year, helping lower overall funding costs.
• Net interest margin expansion: Dime Community Bancshares achieved a fourth consecutive quarter of NIM growth, reaching approximately 2.94% (excluding certain non-core items). This improvement was primarily driven by the declining cost of deposits and a disciplined approach to loan origination.
• Business loan growth and pipeline: The company continued to grow its business loan portfolio, particularly in commercial & industrial (C&I), owner-occupied commercial real estate, and healthcare, with $60 million in new business loans during the quarter and a year-over-year increase of $400 million. The current loan pipeline stands at $1.1 billion, with new loans carrying higher average yields compared to the existing portfolio.
• Strategic hiring and market entry: Several new bankers were added across the organization, with a strong focus on Manhattan, Long Island, and a new presence in Lakewood, New Jersey. Management highlighted that most recent hires are focused on loan growth, with some dedicated to both deposit and loan expansion.
• Prudent expense and credit management: Operating expenses were managed in line with updated guidance, reflecting increased investment in new teams. Credit quality remained stable, with management highlighting that reserve levels are expected to gradually increase as the business loan mix grows and as macroeconomic models are updated.

Drivers of Future Performance

Dime Community Bancshares’ outlook for the remainder of the year hinges on continued NIM expansion, effective execution of its loan pipeline, and disciplined cost control.

• Loan repricing opportunity: A large portion of the loan portfolio will reprice over the second half of 2025 and into 2026, with nearly $2 billion in loans currently yielding around 4%. Management estimates this could boost NIM by up to 35 basis points, assuming current market spreads hold.
• Deposit mix and funding cost discipline: The company aims to maintain its low-cost deposit base by balancing deposit growth with prudent pricing. Management is avoiding high-cost deposit inflows and focusing on expanding business relationships in targeted geographies. The ongoing repricing of certificates of deposit (CDs) at lower rates should further reduce funding costs.
• Expense and credit management: Increased hiring has led to a modest upward revision in expense guidance, but management expects new teams to become accretive within six to twelve months. Credit provisions are expected to rise gradually as the business loan mix grows, with a medium-term target reserve ratio of 90 basis points to 1%.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will closely monitor (1) the pace and yield of loan growth as new hires ramp up production, (2) the bank’s ability to maintain low-cost core deposit growth amidst regional competition and funding pressures, and (3) the realization of anticipated NIM expansion as significant loan repricing takes effect. Successful integration of new market entries and expense control will also be key signposts.

Dime Community Bancshares currently trades at $27.60, up from $25.09 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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