Dime Community Bancshares, Inc. Reports Strong Third Quarter 2020 Results

Revenues Increased 29% Year-over-Year

Earnings Per Share Increased 223% Year-over-Year

BROOKLYN, N.Y., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Dime Community Bancshares, Inc. (NASDAQ: DCOM) (the “Company” or “Dime” or “its”), the parent company of Dime Community Bank (the “Bank”), today reported net income to common stockholders of $14.0 million for the quarter ended September 30, 2020, or $0.42 per diluted common share, compared with net income to common stockholders of $11.8 million for the quarter ended June 30, 2020, or $0.35 per diluted common share, and net income to common stockholders of $4.7 million for the quarter ended September 30, 2019, or $0.13 per diluted common share.

Excluding the pre-tax impact of $0.8 million of merger related expenses and $0.2 million of income from gain on sale of securities, earnings per share (“EPS”) for the quarter ended September 30, 2020 would have been $0.44 per diluted share.

Mr. Kenneth J. Mahon, Chief Executive Officer (“CEO”) of the Company, stated, “Third quarter of 2020 EPS of $0.44 (on a core basis) represents a record for Dime in our history as a publicly traded company. We had solid growth in our loan portfolio and continued net interest margin expansion. In addition, expenses remained well controlled and non-performing assets declined. Our earnings profile and robust capital base helps position us well to serve our customers and communities, our employees and investors. Our merger integration teams are making good progress on the previously announced transaction with Bridge Bancorp, Inc. We are well on our way to create a foundational franchise that has the opportunity to become one of the elite regional bank competitors in New York and on Long Island.”

Highlights for the Third Quarter of 2020 Included:

• Linked quarter net interest margin (“NIM”) expansion of 6 basis points primarily driven by a 28 basis point linked quarter decrease in the cost of deposits;
• Strong growth in checking account balances. Compared to the third quarter of 2019, the sum of average non-interest-bearing checking account balances and average interest-bearing checking account balances for the third quarter of 2020 increased by 61.1% to $894.1 million;
• The efficiency ratio declined to 49.0% in the third quarter of 2020;
• Total non-interest income increased by 83% on a year-over-year basis to $6.1 million, driven by $1.5 million of customer-related loan level swap income, $0.8 million of income from the sale of Small Business Administration (“SBA”) loans, and $0.6 million from the sale of residential mortgage loans;
• Capital levels remain strong; our tangible equity to tangible assets ratio was 9.73% at September 30, 2020 (see “Non-GAAP Reconciliation” tables at the end of this news release). Excluding the impact of SBA Paycheck Protection Program (“PPP”) loans, the ratio would have been 10.22%; and
• Non-performing assets declined by 19.2% on a linked quarter basis and represent only 0.19% of total assets.

Loans with Payment Deferrals

The Company is seeing positive trends as an increasing number of loans exit deferment.

As of September 30, 2020, Principal and Interest (“P&I”) deferrals decreased to $272.0 million or 4.9% of the total loan portfolio. Furthermore, an additional 1.1% of our portfolio is currently comprised of loans that are paying full interest and escrow, and only deferring principal payments.

As of September 30, 2020, the Company had 15 loans aggregating $25.6 million to restaurants. As of September 30, 2020, there were no loans with P&I deferrals to restaurants. The Company does not have any exposure to the energy industry, airline industry, leveraged lending, shared national credits, credits card loans, or auto loans.

Mr. Mahon commented, “We are encouraged by the positive trends we are seeing across our loan portfolio. The multigenerational nature of our multifamily borrower base, coupled with the low loan-to-value (“LTV”) nature of our multifamily portfolio (weighted average LTV of approximately 51.7% at September 30, 2020) and our capital strength and earnings profile provides me confidence in our prospects.”

Management’s Discussion of Quarterly Operating Results

Net Interest Income

Net interest income in the third quarter of 2020 was $44.9 million, an increase of $1.4 million (3.2%) from the second quarter of 2020 and an increase of $8.7 million (24.2%) from the third quarter of 2019. The table below provides a reconciliation of the reported NIM and the NIM excluding the impact of loan prepayment fees.

Mr. Mahon commented, “Our NIM (excluding the impact of prepayment fees) has now increased for eight consecutive quarters. Our successful business model transformation (from thrift to commercial bank) continues to produce the expected trends on NIM.”

Average interest-earning assets were $6.16 billion for the third quarter of 2020, a 4.8% (annualized) increase from $6.09 billion for the second quarter of 2020, and a 0.4% decrease from $6.19 billion for the third quarter of 2019. For the third quarter of 2020, the average yield on interest-earning assets was 3.72%, a decrease of 13 basis points compared with the second quarter of 2020, and a decrease of 17 basis points compared to the third quarter of 2019. The linked quarter decline in yield was primarily attributable to a decline in income from loan prepayment activity.

The ending weighted average rate (“WAR”) on the total loan portfolio was 3.76% at September 30, 2020, a one basis point decline compared to the ending WAR on the total loan portfolio at June 30, 2020, and a 26 basis point decrease versus the ending WAR on the total loan portfolio at September 30, 2019. The WAR on the total loan portfolio as of September 30, 2020 was negatively impacted by PPP loans ($318.6 million of loans at September 30, 2020). Excluding the impact of PPP loans, the WAR on the loan portfolio was 3.94% at September 30, 2020, compared to 3.94% at June 30, 2020, and 4.02% at September 30, 2019.

The average cost of borrowed funds (which primarily consist of Federal Home Loan Bank advances) was 1.98% for the third quarter of 2020, a decrease of 2 basis points versus the second quarter of 2020, and a decrease of 41 basis points versus the third quarter of 2019.

Loans

The real estate loan portfolio increased by $122.1 million (10.2% annualized) during the third quarter of 2020. Total real estate loan originations were $277.7 million during the third quarter of 2020, at a weighted average interest rate of 3.53%. Real estate loan amortization and satisfactions totaled $113.9 million, or 9.4% (annualized) of the portfolio balance, at an average rate of 3.65%. The annualized real estate loan payoff rate of 9.4% for the third quarter of 2020 was lower than both the second quarter of 2020 (23.1% annualized) and the third quarter of 2019 (15.1% annualized).

Average real estate loans were $4.87 billion in the third quarter of 2020, flat compared to the second quarter of 2020, and a decrease of $314.2 million (6.1%) from the third quarter of 2019.

Average C&I loans were $643.4 million in the third quarter of 2020 (including average SBA PPP loans of $316.7 million), an increase of $124.4 million (95.9% annualized) from the second quarter of 2020, and an increase of $330.9 million (105.9%) from the third quarter of 2019.

Outlined below are the loan originations for the current quarter, linked quarter and prior year quarter.

Deposits and Borrowed Funds

The Company continues to focus on growing relationship-based business deposits. Mr. Mahon commented, “Importantly, we continue to improve the quality of our deposit base, as evidenced by the non-interest- bearing deposits to total deposits ratio increasing to approximately 15.1% at September 30, 2020, compared to 9.5% at September 30, 2019.”

Total deposits decreased by $65.9 million on a linked quarter basis to $4.37 billion at September 30, 2020. Mr. Mahon commented, “The decrease in total deposits was due to pro-active downward pricing adjustments on certain higher-cost deposit segments. We remain steadfast in our commitment to grow lower cost relationship based deposits.”

The cost of total deposits for the quarter ended September 30, 2020 decreased 28 basis points on a linked quarter basis. As of September 30, 2020, the Company had $483.3 million of certificates of deposits, with a weighted average rate of 1.03%, that were set to mature during the fourth quarter of 2020. Mr. Mahon commented, “Given the repricing opportunity for certificates of deposits in the fourth quarter of 2020, we expect our deposit costs to continue trending downwards.”

Total borrowings (excluding subordinated debt securities) increased to $1.20 billion at September 30, 2020, compared to $1.02 billion at the second quarter of 2020, and $1.20 billion at the third quarter of 2019.

Non-Interest Income

Non-interest income was $6.1 million during the third quarter of 2020, $8.4 million during the second quarter of 2020, and $3.4 million during the third quarter of 2019. Excluding gains and losses on equity securities and from sales of securities and other assets, non-interest income was $5.8 million during the third quarter of 2020 compared to $4.8 million during the second quarter of 2020 and $3.3 million during the third quarter of 2019.

Mr. Mahon commented, “Our commercial bank operation continues to produce the desired results on fee income growth, especially as it relates to gaining significant traction with our commercial customers on interest rate swap products. In addition, our business line diversification into SBA and residential lending produced strong gain-on-sale revenue.”

Non-Interest Expense Remains Well Controlled

Total non-interest expense was $24.9 million during the third quarter of 2020, $29.3 million during the second quarter of 2020, and $22.8 million during the third quarter of 2019. Excluding the impact of severance and merger-related expenses, non-interest expense was $24.1 million during the third quarter of 2020, $24.3 million during the second quarter of 2020, and $22.8 million during the third quarter of 2019.

The ratio of non-interest expense to average assets was 1.53% during the third quarter of 2020, compared to 1.84% during the linked quarter and 1.41% for the third quarter of 2019. Excluding the impact of severance and merger-related expenses, the ratio of non-interest expense to average assets was 1.48% during the third quarter of 2020, compared to 1.52% during the linked quarter and 1.41% for the third quarter of 2019.

The efficiency ratio was 49.0% during the third quarter of 2020, compared to 60.7% during the linked quarter and 57.7% during the third quarter of 2019. Excluding the impact of severance and merger-related expenses and gain on sale of securities, the efficiency ratio was 47.5% during the third quarter of 2020, compared to 50.3% during the linked quarter and 57.7% during the third quarter of 2019.

Income Tax Expense

The reported effective tax rate for the third quarter of 2020 was 21.9%, compared to 21.6% for the second quarter of 2020, and 15.3% for the third quarter of 2019.

Credit Quality

Non-performing loans at September 30, 2020 declined to $12.4 million, or 0.22% of total loans, compared to $15.4 million, or 0.28% of total loans, at June 30, 2020.

Under Section 4014 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act), financial institutions had the option to delay the adoption of the Current Expected Credit Loss (“CECL”) framework until the earlier of December 31, 2020 or when the national emergency is lifted. The Bank elected to defer adoption of CECL and is utilizing its existing incurred loss framework.

A loan loss provision of $5.9 million was recorded during the third quarter of 2020, compared to a loan loss provision of $6.1 million during the second quarter of 2020, and a loan loss provision of $11.2 million during the third quarter of 2019. The $5.9 million provision for the third quarter of 2020 was primarily associated with an increase in the general loan loss reserve due to the adjustment of qualitative factors tied to the Bank’s existing incurred loss framework, to account for the effects of the COVID-19 pandemic and related economic disruption.

The allowance for loan losses was 0.87% of total loans at September 30, 2020 as compared to 0.78% of total loans at June 30, 2020. Excluding $318.6 million of PPP loans, the ratio of allowance for losses to total loans at September 30, 2020 would have been 0.92%.

At September 30, 2020, non-performing assets represented 2.1% of the sum of tangible equity plus the allowance for loan losses and reserve for contingent liabilities (see “Problem Assets as a Percentage of Tangible Equity and Reserves” table and “Non-GAAP Reconciliation” table at the end of this news release).

Capital Management

The Company’s regulatory capital ratios continued to be in excess of all applicable regulatory requirements. At September 30, 2020, the Consolidated Tier 1 capital to average assets (“leverage ratio”) was 10.10%, while the Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 13.02% and 16.30%, respectively.

The Bank’s regulatory capital ratios continued to be in excess of all applicable regulatory requirements. At September 30, 2020, the Bank’s leverage ratio was 9.97%, while the Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 12.88% and 13.87%, respectively.

Mr. Mahon commented, “Excluding the impact of the PPP loans, our tangible equity to tangible assets ratio would have been 10.22% at September 30, 2020; this is well above the previously communicated 9.25% minimum target for this ratio that we disclosed during our first quarter earnings call.”

Diluted earnings per common share of $0.42 exceeded the quarterly $0.14 cash dividend per share by 200.0% during the third quarter of 2020, equating to a 33.3% dividend payout ratio.

Book value per common share increased to $17.48 and tangible common book value per share (common equity less goodwill divided by number of shares outstanding) (see “Non-GAAP Reconciliation” tables at the end of this news release) increased to $15.79 at September 30, 2020.

Earnings Call Information

The Company will conduct a conference call at 8:00 a.m. (ET) on October 28, 2020, during which Chief Executive Officer, Kenneth J. Mahon, will discuss the Company’s third quarter performance, with a Q&A session to follow. Dial-in information for the live call is 1-888-348-2672. Upon dialing in, request to be joined into Dime Community Bancshares, Inc. call with the conference operator.

The conference call will be simultaneously webcast (listen only), and archived for a period of one year, at . Dial-in information for the replay is 1-877-344-7529 using access code #10148582. Replay will be available October 28, 2020 (10:00 a.m.) through November 4, 2020 (11:59 p.m.).

ABOUT DIME COMMUNITY BANCSHARES, INC.

The Company had $6.62 billion in consolidated assets as of September 30, 2020. The Bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has 28 retail branches located throughout Brooklyn, Queens, the Bronx, Nassau and Suffolk Counties, New York. More information on the Company and the Bank can be found on Dime's website at

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 include statements regarding the proposed merger of the Company with Bridge Bancorp, Inc. (the “Merger”). 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. Accordingly, you should not place undue reliance on such statements. Factors that could affect our results 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; unanticipated or significant increases in loan losses may negatively affect the Company’s financial condition or results of operations; 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; there may be failures or breaches of information technology security systems; success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates; 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; we may incur unexpected expenses and delays related to the Merger; or we may be unable to obtain regulatory approvals or satisfy other closing conditions required to complete the Merger. Further, given its ongoing and dynamic nature, it is difficult to predict what effects the COVID-19 pandemic will have on our business and results of operations. The pandemic and related local and national economic disruption may, among other effects, result in a decline in demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; branch closures, work stoppages and unavailability of personnel; and increased cybersecurity risks, as employees increasingly work remotely.

Contact: Avinash Reddy

Senior Executive Vice President – Chief Financial Officer

718-782-6200 extension 5909