Dime Community Bancshares, Inc. Increases Earnings by 7.5% Over the Linked Quarter

BROOKLYN, N.Y., July 27, 2017 (GLOBE NEWSWIRE) -- Dime Community Bancshares, Inc. (NASDAQ:DCOM) (the “Company” or “Dime”), the parent company of Dime Community Bank (the “bank”), today reported net income of $12.0 million for the quarter ended June 30, 2017, or $0.32 per diluted common share, compared with net income of $11.2 million for the quarter ended March 31, 2017, or $0.30 per diluted common share, and net income of $11.2 million for the quarter ended June 30, 2016, or $0.30 per diluted common share.

Highlights for the second quarter of 2017 included:

• Successfully issued $115.0 million of subordinated debt in June 2017 at 4.50%, matching the lowest coupon with similar maturity for all community bank holding company subordinated debt issuances since 2016;
• Business Banking division, which includes commercial and industrial (“C&I”) and direct-sourced commercial real estate (“CRE”) loans, demonstrated continued momentum with second quarter originations of $64.7 million. In addition, we continued the expansion of Business Banking’s services by launching our Small Business Administration (“SBA”) lending program;
• Strong expense discipline, with an efficiency ratio of 49.0%, compared to 53.0% in the first quarter of 2017, and 47.8% in the second quarter of 2016;
• Net interest margin (“NIM”), adjusted for income related to prepayment activity and the subordinated debt issuance in June 2017, increased by 3 basis points on a linked quarter basis; and
• Reported book value (“BV”) per share and tangible book value (“TBV”) per share grew to $15.41 and $13.93, respectively; the sale of the Williamsburg branch office property, which is expected to close in the third quarter, will further benefit BV and TBV per share.

Kenneth J. Mahon, President and Chief Executive Officer of the Company, commented, “In the second quarter, we continued to prudently grow the balance sheet and saw ongoing strength from our relationship-lending Business Banking division. The Business Banking division originated $64.7 million in total loans during the second quarter, of which $28.8 million was CRE and $35.9 million was C&I. Given approximately 50% of the Business Banking division’s year-to-date originations are floating rate, we are also building up our level of asset sensitivity.”

Mr. Mahon continued, “Dime also remained dedicated to its key competitive strengths of managing expenses and pristine credit quality and is well positioned for the future.”

Management’s Discussion of Quarterly Operating Results

Net Interest Income

Net interest income in the second quarter of 2017 was $38.1 million, an increase of $566,000 (+1.5%) from the first quarter of 2017 and an increase of $2.4 million (6.9%) over the second quarter of 2016.  NIM was 2.57% during the second quarter of 2017, flat with the first quarter of 2017, and down from 2.68% during the second quarter of 2016.  During the second quarter of 2017, income from prepayment activity totaled $1.0 million, benefiting NIM by 7 basis points, compared to $1.4 million, or 9 basis points, during the first quarter of 2017, and $2.0 million, or 15 basis points, during the second quarter of 2016. Excluding the impact of income recognized from loan prepayment activity, which varies from quarter to quarter, NIM would have been 2 basis points higher during the second quarter of 2017 compared to the linked quarter. Additionally, the NIM for the second quarter of 2017 was negatively impacted by 1 basis point due to the issuance of the subordinated debt in June 2017. The Company used the proceeds from the subordinated debt issuance to redeem its existing trust preferred securities in July 2017.

Average earning assets were $5.92 billion for the second quarter of 2017, a 6.5% (annualized) increase from $5.82 billion for the first quarter of 2017, and an 11.5% increase from $5.31 billion for the second quarter of 2016.

For the second quarter of 2017, the average yield on interest earning assets (excluding prepayment income) was 3.47%, 3 basis points higher than the 3.44% yield for the first quarter of 2017 and 3 basis points lower than the 3.50% yield for the second quarter of 2016. The average cost of funds was 1.14% for the second quarter of 2017, up by 1 basis point compared with the first quarter 2017, and flat compared with the second quarter of 2016.

Loans

Real estate loan portfolio growth was $85.9 million (6.0% annualized) during the second quarter of 2017. Real estate loan originations were $238.4 million during the quarter, at a weighted average interest rate of 3.85%. Of this amount, $58.3 million represented loan refinances from the existing portfolio. Real estate loan amortization and satisfactions totaled $150.9 million, or 10.5% (annualized) of the portfolio balance, at an average rate of 4.0%. The annualized loan payoff rate of 10.5% for the second quarter of 2017 was lower than both the first quarter of 2017 (10.8%) and the second quarter of 2016 (16.1%). Average real estate loans were $5.76 billion in the second quarter of 2017, an increase of $72.0 million (5.1% annualized) from the first quarter of 2017 and an increase of $621.5 million (12.1%) from the second quarter of 2016. Included in total real estate loan originations during the second quarter of 2017 were $28.8 million of originations from the Business Banking division at a weighted average rate of 4.67%.

The Business Banking division originated $35.9 million of C&I loans at a weighted average rate of 4.77% during the second quarter of 2017. Total C&I loan balance at the end of the second quarter was $68.2 million.

Deposits

Deposits declined by $90.0 million from the first quarter of 2017, and increased by $23.1 million from the fourth quarter of 2016. Within deposits, core deposits declined $16.5 million from the first quarter of 2017, and increased by $174.9 million from the fourth quarter of 2016.  The decline in deposits during the second quarter of 2017 was primarily the result of a decrease in certificates of deposits as management elected not to offer higher rates in the quarter. The loan-to-deposit ratio was 133.0% at June 30, 2017 compared to 137.8% at June 30, 2016 and 127.6% at March 31, 2017. The average cost of total deposits decreased one basis point on a linked quarter basis to 0.85%.

Borrowed Funds

Total borrowings, excluding the subordinated debt issued in June 2017, increased $180.9 million during the second quarter of 2017 as compared to the first quarter of 2017.

On June 8, 2017, the Company announced that it priced an underwritten public offering of $115.0 million of fixed-to-floating rate subordinated notes due June 15, 2027 (the “Notes”). The Notes will initially bear a fixed interest rate of 4.50% per year for the first five years. The Company used part of the net proceeds from the offering to redeem its $70.7 million of trust preferred securities which had a 7% annual coupon on July 17, 2017.

Non-Interest Income

Non-interest income was $1.7 million during the second quarter of 2017, which was flat compared to the first quarter of 2017 and down by $558,000 compared to second quarter 2016, which included mortality proceeds from bank owned life insurance assets. 

Non-Interest Expense

Non-interest expense was $19.5 million during the second quarter of 2017, lower than the first quarter of 2017 by $1.3 million primarily related to salaries expense and related employee benefits, and higher than the second quarter of 2016 by $1.4 million related to occupancy and equipment, data processing, and marketing costs.

The ratio of non-interest expense to average assets was 1.27% during the second quarter of 2017, compared to 1.38% during the first quarter of 2017, and 1.31% during the second quarter of 2016. The efficiency ratio was 49.0% during the second quarter of 2017, lower than the 53.0% during the first quarter of 2017, and above the 47.8% during the second quarter of 2016.

Income Tax Expense

The effective income tax rate was 37.8% during the June 2017 quarter, slightly below the March 2017 quarter tax rate of 38.2%.

Credit Quality

Non-performing loans were $3.4 million, or 0.06% of total loans, at June 30, 2017, a slight decrease from $3.8 million, or 0.07% of total loans, at March 31, 2017. The allowance for loan losses was 0.37% of total loans at June 30, 2017, consistent with March 31, 2017. At June 30, 2017, non-performing assets represented 1.0% of the sum of tangible capital plus the allowance for loan losses (this non-GAAP statistic is otherwise known as the "Texas Ratio") (see “Problem Assets as a Percentage of Tangible Capital and Reserves” table at the end of this news release), which is comparable to 1.1% at March 31, 2017.  A loan loss provision of $1.0 million was recorded during the second quarter of 2017, compared to a provision of $450,000 during the first quarter of 2017, and $442,000 during the second quarter of 2016.

Capital Management

The Company’s consolidated Tier 1 capital to average assets (“leverage ratio”) was 9.86% at June 30, 2017, in excess of regulatory requirements.

The bank’s regulatory capital ratios continued to be in excess of regulatory requirements as well, inclusive of conservation buffer amounts. Additionally, during the second quarter of 2017, the Company contributed $20.0 million of capital to the bank from proceeds of the subordinated debt issuance. At June 30, 2017, the bank’s leverage ratio was 9.25%, while Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 11.44% and 11.88%, respectively.

Diluted earnings per common share, exceeded the quarterly $0.14 cash dividend per share by 128.6% during the second quarter of 2017, equating to a 43.8% dividend payout ratio.

Tangible book value per share was $13.93 at June 30, 2017.

Outlook for the Quarter Ending September 30, 2017

At June 30, 2017, the bank had outstanding real estate loan commitments totaling $85.2 million, at an average interest rate approximating 3.79%, all of which are likely to close during the quarter ending September 30, 2017.  Loan commitments at June 30, 2017 are lower than previous quarters reflective of lower loan prepayment and refinance activity. Loan prepayments and amortization are expected to fall within a projected annualized range of 10% - 15% during the quarter.

Loan loss provision for the third quarter of 2017 is expected to be driven by loan portfolio growth, subject to management’s assessment of the adequacy of the allowance for loan losses.

The third quarter of 2017 will include two weeks of interest expense related to the trust preferred securities that were redeemed on July 17, 2017.

Non‐interest expense is expected to be approximately $20 million during the September 2017 quarter.

The previously announced sale of the Williamsburg branch office property is expected to close in the third quarter of 2017 and generate an after-tax gain of approximately $5-6 million.

The Company projects that the consolidated effective tax rate will approximate 38.5% in the September 2017 quarter.

ABOUT DIME COMMUNITY BANCSHARES, INC.

The Company had $6.26 billion in consolidated assets as of June 30, 2017. The bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has twenty-seven branches located throughout Brooklyn, Queens, the Bronx and Nassau County, New York. More information on the Company and the bank can be found on Dime's website at www.dime.com. 

This news release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may be identified by use of words such as "anticipate," "believe," “continue,” "could," "estimate," "expect," "intend," “likely,” "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would" and similar terms and phrases, including references to assumptions.

Forward-looking statements are based upon various assumptions and analyses made by the Company in light of management's experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company's control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins; changes in deposit flows, loan demand or real estate values may adversely affect the business of the Company and/or the Bank; changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently; changes in corporate and/or individual income tax laws may adversely affect the Company's financial condition or results of operations; general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates; legislation or regulatory changes may adversely affect the Company’s business; technological changes may be more difficult or expensive than the Company anticipates; success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates; or litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates.