DIME COMMUNITY BANCSHARES, INC. INCREASES QUARTERLY EARNINGS PER SHARE BY 30% ON A YEAR-OVER-YEAR BASIS

Brooklyn, NY – April 26, 2018 - Dime Community Bancshares, Inc. (NASDAQ: DCOM) (the “Company” or “Dime”), the parent company of Dime Community Bank (the “bank”), today reported net income of $14.7 million for the quarter ended March 31, 2018, or $0.39 per diluted common share, compared with net income of $15.4 million for the quarter ended December 31, 2017, or $0.41 per diluted common share, and net income of $11.2 million for the quarter ended March 31, 2017, or $0.30 per diluted common share.

Highlights for the first quarter of 2018 included:

 

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New loan originations for the first quarter were at generally higher rates than the overall loan portfolio; the weighted average rate (“WAR”) on new real estate originations was 4.17% and the WAR on new C&I originations was 4.81%, compared to the total loan portfolio WAR of 3.61% for the three months ended March 31, 2018;

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Continued the build out of the Business Banking division via the hire of a new team that will operate from the Company’s Borough Park branch location and the creation of an additional team from existing personnel. Pro forma for these two new teams, the Company’s Business Banking division has six teams in total;

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Consolidated  Company CRE concentration ratio declined to 748.6% at March 31, 2018, versus 906.5% at March 31, 2017;

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Total non-interest income was $3.2 million for the first quarter of 2018, driven by a $1.4 million gain from the sale of a portion of the securities the Company had previously retained from its Freddie Mac sponsored “Q-deal” securitization;

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Increase in the Company’s on-balance sheet liquidity levels, as average mortgage-backed securities and other short-term investments, as a percentage of average interest-earning assets increased to 9.1% for the quarter versus 4.0% for the prior quarter;

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Loan-to-deposit ratio declined to 124% at March 31, 2018, versus 128% at March 31, 2017; and

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Reported book value per share and tangible book value (common equity less goodwill, divided by number of shares outstanding) per share grew to $16.22 and $14.73, respectively, at March 31, 2018.

 

Kenneth J. Mahon, President and Chief Executive Officer of the Company, stated “We are on track to achieve our full year 2018 portfolio growth targets for the Business Banking division, as we have a strong pipeline in place. The Business Banking division ended the first quarter with approximately $61 million of low-cost relationship-based deposits at an average cost of 16 basis points. Across the organization, we are highly focused on improving the composition of our deposit base.”

 

Mr. Mahon concluded, “Our  employees are hard at work, ensuring our core systems conversion, which is scheduled to be completed in June, proceeds smoothly. The move to a new core platform will enable us to more effectively service our customers and is consistent with our stated goal of transitioning into a successful community commercial bank.”

Management’s Discussion of Quarterly Operating Results

Net interest income in the first quarter of 2018 was $38.0 million, a decrease of $0.7 million (-1.9%) from the fourth quarter of 2017 and an increase of $0.5 million (+1.4%) over the first quarter of 2017. Net interest margin (“NIM”) was 2.47% during the first quarter of 2018, compared to 2.50% in the fourth quarter of 2017, and 2.57% during the first quarter of 2017.  The linked quarter decrease in NIM was due to an increase in the level of on balance sheet liquidity levels and a 11 basis point increase in the average cost of funds, partially offset by a 13 basis point increase in the average yield on total real estate loans.

Average interest-earning assets were $6.15 billion for the first quarter of 2018, a 3.8% (annualized) decrease from $6.20 billion for the fourth quarter of 2017, and a 5.5% increase from $5.82 billion for the first quarter of 2017. The linked quarter decline in average interest-earnings assets was primarily driven by a decline in real estate loans, as the volume of loan payoffs exceeded new originations.

Average mortgage backed-securities and other short-term investments were $561.2 million for the first quarter of 2018, a 508.6% (annualized) increase from $247.1 million for the fourth quarter of 2017, and a 382.3% increase from $116.4 million for the first quarter of 2017. “In keeping with our strategic asset diversification objectives, and after reviewing the results of our numerous liquidity stress testing scenarios, we have significantly increased our on-balance sheet liquidity levels over the past few quarters,” stated Mr. Mahon.

For the first quarter of 2018, the average yield on interest-earning assets was 3.58%, an increase of 6 basis points compared with the fourth quarter of 2017, and an increase of 5 basis points compared to the first quarter of 2017.  The average cost of funds (which includes Federal Home Loan Bank advances) was 1.30% for the first quarter of 2018, an increase of 11 basis points versus the fourth quarter of 2017, and an increase of 17 basis points versus the first quarter of 2017.

The real estate loan portfolio declined by $103.5 million (7.6% annualized) during the first quarter of 2018 due primarily to an increase in the level of loan payoffs versus the fourth quarter of 2017. Real estate loan originations were $75.0 million during the first quarter of 2018, at a weighted average interest rate of 4.17%, compared to $70.6 million of originations for the prior quarter, at a weighted average interest rate of 4.36%. Real estate loan amortization and satisfactions totaled $183.1 million, or 13.6% (annualized) of the portfolio balance, at an average rate of 3.65%. The annualized loan payoff rate of 13.6% for the first quarter of 2018 was higher than both the fourth quarter of 2017 (10.2%) and the first quarter of 2017 (10.8%). Average real estate loans were $5.44 billion in the first quarter of 2018, a decrease of $388.4 million (26.7% annualized) from the fourth quarter of 2017, and a decrease of $252.2 million (4.4%) from the first quarter of 2017.

 

Included in total real estate loan originations during the first quarter of 2018 were $21.2 million of originations from the Business Banking division at a weighted average rate of 4.21%, compared to $24.1 million of originations at a weighted average rate of 4.78% during the fourth quarter of 2017.

Commercial and industrial (“C&I”) loan originations were $25.3 million during the first quarter of 2018, at a weighted average rate of 4.81%, compared to $27.5 million at a weighted average rate of 4.94% during the fourth quarter of 2017. Total C&I loan balances were $145.8 million at the end of the first quarter of 2018, compared to $136.7 million at the end of the fourth quarter of 2017.

The Company continues to focus on growing relationship-based deposits sourced from its retail branches and Business Banking division. On a year-over-year basis, the sum of average non-interest- bearing checking account balances and average interest-bearing checking account balances increased by 8.2% to $435.1 million for the first quarter of 2018.

The average cost of total deposits increased 9 basis points on a linked quarter basis to 1.00% as the bank increased rates on selective money market and certificates of deposit products in light of increased competition. Overall, total deposits increased by $27.0 million during the first quarter of 2018 from the linked quarter. Mr. Mahon commented, “We grew deposits in the first quarter despite approximately $83.0 million of net outflows from our DimeDirect internet channel, where our posted rate continues to lag our online competitors. Our funding focus remains on generating core business deposits, and as such we have maintained a less aggressive online deposit pricing posture. We intend to manage the balance sheet and the loan-to-deposit ratio with the goal of keeping deposit betas as low as possible.”

The loan-to-deposit ratio was 124.3% at March 31, 2018, compared to 127.2% at December 31, 2017 and 127.6% at March 31, 2017.

Reflecting deposit inflows and lower total assets, total borrowings were decreased by $159.6 million during the first quarter of 2018 as compared to the fourth quarter of 2017.  To better position the Company for rising interest rates, the Company reduced its level of short-term borrowings in the first quarter of 2018 and entered into $170.0 million of long-term borrowings (with terms of 2 years and more), at an average rate of 2.57%. This compares to $110.0 million of long-term borrowings at an average rate of 2.22% for the fourth quarter of 2017.

Non-interest income was $3.2 million during the first quarter of 2018, which was $10.5 million lower compared to the fourth quarter of 2017, and an increase of $1.5 million compared to the first quarter of 2017.  The linked quarter decrease in non-interest income was primarily the result of gains of $10.4 million from the sale of real estate property and $1.5 million from the sale of loans in the fourth quarter of 2017, offset by $1.4 million of gains during the first quarter of 2018 from the sale of securities that the bank had retained from its Freddie Mac sponsored Q-deal securitization.

 

Total non-interest expense was $21.7 million during the first quarter of 2018, $22.6 million during the fourth quarter of 2017, and $20.8 million during the first quarter of 2017. The year-over-year increase in non-interest expense was primarily the result of a $1.3 million increase in salaries and employee benefits.

The ratio of non-interest expense to average assets was 1.36% during the first quarter of 2018, lower than both 1.41% during the fourth quarter of 2017, and 1.38% during the first quarter of 2017.

The efficiency ratio was 54.6% during the first quarter of 2018, lower than the 55.63% during the fourth quarter of 2017, and higher than the 53.0% during the first quarter of 2017.

The reported effective tax rate for the first quarter of 2018 declined to 23.7%. The lower tax rate was the result of recently enacted corporate tax reform.

Non-performing loans were $1.7 million, or 0.03% of total loans, at March 31, 2018, an increase from $0.5 million, or 0.01% of total loans, at December 31, 2017.  The allowance for loan losses was 0.39% of total loans at March 31, 2018, versus 0.38% at December 31, 2017. At March 31, 2018, non-performing assets represented 2.5% of the sum of the bank’s tangible common equity plus the allowance for loan losses and reserve for contingent liabilities (this non-Generally Accepted Accounting Principle (“GAAP”) statistic is otherwise known as the “Texas Ratio”) (see “Problem Assets as a Percentage of Tangible Capital and Reserves” table and “Non-GAAP Reconciliation” table at the end of this news release), which is lower than the ratio of 3.4% at December 31, 2017.  A loan loss provision of $0.2 million was recorded during the first quarter of 2018, compared to a credit for loan losses of $1.0 million during the fourth quarter of 2017, and a provision for loan losses of $0.5 million during the first quarter of 2017.

The Company’s consolidated Tier 1 capital to average assets (“leverage ratio”), which was 8.79% at March 31, 2018, was in excess of all applicable regulatory requirements.

The bank’s regulatory capital ratios continued to be in excess of all applicable regulatory requirements inclusive of conservation buffer amounts.  At March 31, 2018, the bank’s leverage ratio was 9.59%, while Tier 1 capital to risk-weighted assets and Total capital to risk-weighted assets ratios were 12.97% and 13.43%, respectively.

Diluted earnings per common share of $0.39 exceeded the quarterly $0.14 cash dividend per share by 179% during the first quarter of 2018, equating to a 35.9% dividend payout ratio.

Book value per share was $16.22 and tangible book value (common equity less goodwill divided by number of shares outstanding) per share was $14.73 at March 31, 2018.

 

The Company will conduct a conference call at 5:30 p.m. (ET) on Thursday, April 26, 2018, during which President and Chief Executive Officer, Kenneth J. Mahon, will discuss the Company’s first quarter financial performance.  There will be a question and answer period after the CEO remarks. Dial-in information for the live call is 1-888-317-6016. 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 https://services.choruscall.com/links/dcom180426.html. Dial-in information for the replay is 1-877-344-7529 using access code #10119608. Replay will be available April 26, 2018 (7:30 p.m.) through May 3, 2018 (11:59 p.m.)

ABOUT DIME COMMUNITY BANCSHARES, INC.

The Company had $6.33 billion in consolidated assets as of March 31, 2018. The bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has twenty-nine branches located throughout Brooklyn, Queens, the Bronx, Nassau County and Suffolk 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. 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; 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; 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.

Contact: Avinash Reddy

Senior Vice President – Corporate Development and Treasurer

718-782-6200 extension 5909

 

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