Dime Community Bancshares Aktie

Good day, everyone, and thank you for standing by. Welcome to Dime Commercial Bancshares' second quarter earnings call. [Operator Instructions] Please be advised that today's conference is being recorded.

Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contained in such statements, including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission, to which we refer you.

During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release.

Now it's my pleasure to hand the conference over to Stuart Lubow, President and CEO. Please proceed.

Thank you, Carmen, and good morning. And thank you all for joining us this morning for our second quarter earnings call.

With me today, as usual, are Avi Reddy, our Chief Operating Officer and CFO; and Tom Geisel, our Chief Commercial Officer. In my prepared remarks, I will touch upon the progress we've made in the second quarter. Avi will then provide financial details for the second quarter.

Dime has differentiated our franchise from our local competitors as it relates to our organic growth trajectory, our ability to attract talented bankers, the quality of our deposit base, the progress we've made in diversifying our balance sheet, and our improving NIM and profitability.

Revenues for the second quarter were $126 million, which was a record for Dime. Core EPS was up 23% versus prior year. NIM was up 7 basis points versus the linked quarter as we were able to lower cost of deposits and improve our yield on loans. On the loan front, we continue to execute on our stated plan of growing business loans. Year-over-year growth in business loans is approximately $743 million, which represents a 26% year-over-year increase. Our loan pipeline continues to be very strong and is approximately $1.4 billion, with a weighted average rate of approximately 6.25%.

We were pleased to drive our core efficiency ratio below 50% in the second quarter. As you are aware, we have been very active on the hiring front over the past 3 years. And it's nice to see these investments paying for themselves and contributing to the improved profitability. To give you a sense of the scale of our transformation and hiring, we have added over 15 deposit teams in our private banking area, 6 new lending verticals and 3 new branch locations. Doing all this in a very short span of time and driving the efficiency ratio below 50% is especially noteworthy. We continue to believe that the hires that we have made have a long runway in front of them. The disruption in our local marketplace remains very high and the environment for our organic growth strategy as it relates to acquiring clients and bankers continues to be very attractive.

A common theme in our discussions with shareholders over the past year has been, when will Dime resume its share repurchase program? Given the significant long-term value we see in our shares, we are pleased to announce that we expect to begin repurchasing our shares in the third quarter. Avi will provide some color on our capital targets in his prepared remarks.

In June, we completed our rebrand to Dime Commercial Bank. This marked the culmination and logical next step in Dime's evolution. Over 70% of our deposit base is from commercial and municipal customers, and approximately 60% of our loan portfolio is business and commercial real estate. It has been a remarkable transformation over the past 10 years, away from the legacy multifamily thrift model, and we believe that our new brand truly represents the institution we have grown into.

In conclusion, we are positioned very favorably for organic growth and expect to benefit from a significant loan repricing opportunity over the next 18 months. I want to end by thanking all our dedicated employees for their efforts and positioning Dime as the best commercial bank in Metro New York.

With that, I will turn the call over to Avi to provide some color on the second quarter.

Thank you, Stu. Core EPS for the second quarter was $0.79 per share. Core pretax pre-provision net revenue of $64 million represented 173 basis points of average assets. By maintaining a strong focus on cost of funds management and the growth of our business loan portfolio, our NIM has now increased for 9 consecutive quarters. The reported second quarter NIM increased to 3.28%. Excluding the impact of day count and the benefits from purchase accounting and prepayment fees, the run rate NIM for the second quarter would have been closer to 3.22% compared to a 3.14% run rate NIM for the prior quarter. Average earning assets for the second quarter was approximately $14.1 billion.

Core cash operating expenses, excluding intangible amortization, was approximately $64 million, which was in line with our expectations. The loan loss provision was approximately $14 million and the allowance to loans increased to 98 basis points. The loan loss provision in the quarter was primarily to cover charge-offs on investor CRE loans, specific reserves on the multifamily portfolio and growth in the business loan portfolio. Criticized loans remained relatively flat and NPAs were down 28% on a linked-quarter basis. Our tangible equity ratio crossed 9%, our common equity Tier 1 ratio grew to 12% and our total capital ratio 16.3%.

As Stu mentioned, we are pleased to announce that we expect to resume share repurchases in the third quarter. Our stated position has been that when the CRE ratio was lowered to the mid-350 level, the buyback would be back on the table. In the near to medium term, we expect to operate with a CET1 ratio between 11.25% and 11.50%, which gives us room for both organic growth as well as buybacks.

Next, I'll provide some thoughts on the remainder of 2026. As I mentioned previously, excluding the day count convention, purchase accounting and prepayment fees, the run rate NIM for the second quarter would have been closer to 3.22% compared to 3.14% for the first quarter. We would use the 3.22% NIM as a starting point for modeling purposes going forward. We expect modest NIM expansion in the third quarter and more pronounced NIM expansion in the fourth quarter and in 2027. To give you a sense of the back book repricing opportunity in our adjustable and fixed rate loan portfolios over the next 18 months, we have approximately $2.5 billion of adjustable and fixed rate loans at a weighted average rate of 4.25% that either reprice or mature in that time frame. While it's hard to predict the NIM in individual quarters and the path may not be in a straight line on equal increments, we are focused on the ultimate destination by the fourth quarter of 2027, which we expect to be over 3.50%. This assumes the consensus forward curve plays out and competition remains rational.

We believe our large cash position is a competitive advantage that will allow us to take advantage of lending opportunities as they arise and will help us create a sustainable NIM that is not subject to cyclical moves based on the trajectory of short-term rates. Given our current cash position and assuming competition remains rational, any future 25 basis point increase in short-term rates will likely not have more than a 1 to 2 basis point impact on our NIM. In addition to the $1.9 billion of cash on the balance sheet, we have approximately $3.8 billion of floating rate loans and $350 million of hedges that will reprice if rates increase, and we believe this should offset any deposit cost increases from the $7.5 billion of non-maturity interest-bearing deposits on the balance sheet.

We are pleased to reduce our CRE ratio to approximately 350% at the end of the second quarter. We believe operating with a CRE ratio that is 350% or lower will set us apart from the other local banks, which are operating between 375% and 450%, and Dime will be rewarded in the medium to longer term with a higher valuation. We expect to reach an inflection point on investor CRE balances in the second half of this year, with multifamily continuing a downward trend until we get to around 25% of total loans for multifamily. As it relates to business loans, we believe we have the infrastructure and talent in place to grow that portfolio between $200 million to $250 million per quarter.

Next, I'll turn to expenses. We expect core cash operating expenses, excluding intangible amortization for the remainder of the year to be between $130 million and $131 million. Finally, we expect the tax rate for the remaining quarters of 2026 to be approximately 28.5%.

With that, I'll turn the call back to Carmen, and we'll be happy to take your questions.

[Operator Instructions] It comes from Peter Winter with D.A. Davidson.

I was wondering, can you provide an update on the multifamily portfolio and maybe some color on the increase in the multifamily non-performing loans this quarter?

Yes, sure. So we had around $26 million, $27 million, Peter, that was close to the 90-day past due bucket. At the end of the quarter, we took a $6 million specific provision on those loans. We're working with the operators on that. We think there's a long-term strategy to create value for us on that. So that was the increase over there, but actually NPAs were actually down because we disposed of $38 million that were held for sale in the prior quarter, right? So if you look at the aggregate of held for investment, held for sale, multifamily NPLs were actually down.

You know, in terms of the overall portfolio, we have $3.1 billion of multifamily. There's around $1 billion of, you know, majority rent-regulated, 100% rent-regulated, in that portfolio. The part that we've always said, you know, we're keeping a watch on is the pre-2019 bucket, because that was originated prior to the rule changes in New York City. That portfolio is actually down to around $300 million right now. It was probably around $400 million this time last year. So very granular portfolio. We're comfortable with what we have over there. We built some specific reserves this quarter, and we feel like we have the earnings power over time to deal with any issues that crop up in that portfolio.

Got it. Thank you. And then just on the ACL ratio, it increased to 99 basis points. I think last quarter you talked about a range of 90 to 100 basis points. So just how are you thinking about the ACL ratio going forward?

Yes, I don't think we're thinking about it any differently. So we said the range would be between 90 basis points and 1%. We're at 98 basis points, so we're within the range.

Okay. Just one more question. Just maybe could you give an update on the loan outlook in the second half of the year? Do you think -- I saw on a period end it was up a little bit. Just how are you thinking about it in the second half of the year?

Sure, Peter. It's Tom. Let me walk you through kind of how we think about the loan portfolio. I know Avi talked a little bit about this during his comments, but we look at it in kind of 3 different segments. First, business loans. Stu mentioned that year-over-year we're up 26%, so we're getting some pretty significant growth there. We saw $125 million in net growth in Q1 and $275 million in net growth in Q2. The new teams that we hired have been at the bank barely a year or so. They're just starting to hit their stride, and typically it takes a new team 12 to 15 months to really get in a good cadence. I think we announced last quarter that we brought an equipment finance team and a franchise vertical. We put them in place. They haven't really started contributing yet, so we should see them contributing to the back half of the year.

So if you think about business loans, we think we're on a real positive trend to do $200 million to $250 million of quarterly growth there. Then we take a look at the second segment, which is investor CRE. So we're back in the market doing relationship investor CRE and construction. We have about a $2.75 billion investment CRE book that probably, as Avi said, reaches an inflection point at some point in the second half of the year. And then, from there grows about $125 million to $150 million on an annualized basis. I'm thinking about it on a 5% growth rate.

And then multifamily, the third segment, Avi talked a little bit about that, trying to get that down to about 25% of total loans. And again, we've been proactively trying to work that down to 25%. I think we're somewhere around 28% right now. So we'll continue to do real strong relationship, you know, multifamily, but we'll stay away from the things rent-regulated or majority rent-regulated.

So as we look at the book through the balance of the year, we're looking at, you know, low single -- low-to-mid single-digit growth moving forward as we get towards the end of the year.

Our next question is from Steve Moss with Raymond James.

Maybe just on the deposit dynamics here, saw good non-interest-bearing deposit growth for the quarter, I'm just kind of curious about how you guys are feeling about the cadence and maybe just any color about the underlying dynamics in the quarter if there's some impact with tax payments or things of that nature?

Yes. So the first quarter and the first month or 6 weeks of the second quarter are always slow and tax payments, et cetera, always play into that. We have seen -- we did -- then we did see a significant pickup in growth on the deposit side. We hired 2 new teams in April. They're just starting to hit the ground. They have opened thousands of accounts at this point, and we're starting to see some real traction from them. And then the remaining existing private bankers are still opening accounts and bringing in new business and transitioning some of their old customers over to us.

So we still think there's a real upside on the growth side of the deposit with DDA over 31% at this point and cost of funds about 1.64%. We're very pleased on the deposit side, and we've been able to really hold our own in terms of actually reducing our cost of funds last quarter and holding steady even with a higher rate environment. So we're very comfortable where we are. We think there's more -- a lot more upside with the existing teams and, of course, with some of the new teams who had some significant books at their former homes. So we're pretty bullish on that.

Okay, that's helpful color there. And then, just in terms of the loan pipeline here, I don't think I heard a loan origination number or the rate on the pipeline. Just kind of curious where loans are going on the books these days?

6.25.

I'm sorry?

6.25% is the weighted average rate on the pipeline.

Okay, appreciate that. And then on capital here with repurchases and the 11.25%, 11.50% target, is that something you guys are going to seek to achieve in the second half? Or -- and just manage with that over, I think it was the medium term? Just kind of as we think about the strength of the buyback in the short term here.

Yes. I think, we're leaving ourselves some flexibility there, Steve. I mean, it's going to be a function of organic growth, where the stock price is. I mean, we're committed to getting the share count down, and we're committed to operating the bank between 11.25% and 11.50%. Like I said, it's something we talked about for a long period of time in terms of when the right time to restart it was. To us, the biggest marker was getting the CRE ratio very close to 350. So we're there, right?

So I would say, over the near to medium term, that's 2 quarters out, 3 quarters out, we should be there between 11.25% and 11.50%. But it's going to be part of the ongoing capital management plan of the bank basically, right? And as we generate more earnings as we hit 2027 and as the NIM repricing takes more hold at that point in time, there's going to be more earnings than to either distribute or grow the balance sheet as well.

So I don't -- I wouldn't view this as a onetime buyback. This is going to be part and parcel of organic growth, dividends and buyback as the bank used to do prior to wanting to reduce the CRE ratio.

Okay. Appreciate that color there, Avi. And then just on expenses here, that guide looks a little bit less than what I was thinking. Just kind of curious, are you guys just focused on containing expenses around this level? I know, we obviously had some hires this past quarter or maybe there just some efficiencies you guys are realizing at the current time?

Yes, sure. So typically, the guide at the start of the year doesn't include the hires. Then the guide -- the Q1 earnings includes all the hires, right? And so I think when I gave the guide in April, it was around $260 million, plus or minus. I think now we're probably closer to $258 million to $259 million, plus or minus. And so $130 million to $131 million, Steve, I mean, this quarter, we were at $64 million of core cash and obviously, excluding the intangible amortization from the number. So $130 million to $131 million is $65 million to $65.5 million.

I will say, as part of the team build-outs on the commercial banking side, we're in pretty much all the verticals that we want to be in at this point in time. So there's probably some backfilling over time, but there's not a substantial build-out, at least the next 3 or 6 months of adding a completely new vertical and all the costs that go with that. So if you marry that up with just ongoing efficiency improvements that we focus on every day at the bank, renegotiating contracts, things like that, it's there.

I think, as Stu said in his prepared remarks, we were pleased to get that number down to 49.9%. And the reason why expense-to-assets have grown in the last 2, 3 years is the substantial hiring in the March to April time frame. And then, after we added Tom, we had the opportunity to add a bunch of commercial banking teams in the middle of the year last year. So don't expect that to continue for the rest of this year. I mean we feel in a good spot with the people that we have and making sure the efficiency ratio stays below 50%.

Okay, maybe just put it this way, you know, I mean, I know you guys have had great efficiency ratio gains over the last couple of years, even with expense growth of what's called in the high single digits. Maybe as we look out a little further, is it possible that that expense growth starts to moderate towards the mid-single digits as we think about next year?

Absolutely. Well, that's absent hiring any new teams or building any new verticals, right? But I think, yes, I mean, the franchise we have, the people we have, again, everybody has been at the bank less than 3 years at this point, all the hires that we have. So they have a long runway. So we'd like to have that accrue to the bottom line at this point. I mean, there'll still be some team pickups here and individuals here and there, but not the substantial amount of new people. I think Stu said it in his remarks. I mean, we've added 16 teams, 6 new verticals, 3 new branches. I mean that's over 20% of the bank in terms of headcount, right? So that will slow. And I think using a moderate 3% to 4% growth rate on expenses for next year as you model 2027 would be very reasonable.

Our next question comes from Tyler Cacciator with Stephens.

This is Tyler, on for Matt Breese. Just the first one for me, and sorry if I missed it, but do you have the spot cost of deposits at quarter end? And then, I'm just curious on how you feel about your ability to maybe maintain or lower deposit costs from here?

Yes, it's pretty similar to the average cost, Tyler. It was probably 1.67 to 1.68, plus or minus. I mean, I think, Stu said it in his remarks, we've grown deposits, but at the same time, we've been focused on the cost of funds. The new teams that we have, the existing teams, they are very focused on DDA, right? I mean, that being said, if rates stay at where they are or if they go up, you're going to see a little bit of a deposit creep and not just with us, but with a lot of other banks here. But I wouldn't put that more than the 1 to 2 basis points in either direction. So we've got some visibility into the third quarter, but the longer rates stay at this level, you're going to have some customers come in and ask for higher rates. But I think with the new deposits coming in and the mix that we have, we feel pretty good at the overall deposit cost.

Great. And then just staying on the NIM, I hear you on the repricing benefits through 2027. And I know 2028 is still a ways out, but given the industry saw such a meaningful step in loan yields back in '23, should we expect some of the repricing benefits to begin tapering off as we get to late 2027 or early 2028?

No. So the dynamic at Dime was because we had -- and Bridge, because we did so much of PPP back in the '21, '22 time frame, the volume of loans that are repricing over the next 18 months is significant, right? So it's not just the rate. I mean, the rates is around 4.25% on that stuff. It's more the volume of what we originated in that '21, '22 time frame. We didn't originate that much in '23. So you're going to see less of a benefit in '28 potentially, but those loans are also at a rate below our current rate. So there'll be some pickup, but I think the big part of the pickup is between now and Q4 of 2027.

Our next question is from Manuel Navas with Piper Sandler.

This is Greg Zingone, on for Manuel. I was just wondering if you could provide some color into what competition looks like on loan and deposit pricing?

Competition on...

Yes. I mean, look, there is -- on the deposit side, there's certainly some competition. There's some irrational banks out there that are offering higher rates. But because of our -- the makeup of our deposit base with 31% DDA and really being business focused, we don't have a lot of consumer. We don't have CDs. We've never been in that market. We're able to really manage that. And that's why our cost of funds is where it is. And with the continued growth of bringing on new customers and new business relationships, including DDA, we're pretty comfortable that we can maintain our cost of funds within the range that we specified. But certainly, there is some competition out there, but just given the makeup of our deposit base and the fact that we are not highly relying on consumer deposits, we're somewhat isolated from swings on the deposit side.

On the loan side, I'll let Tom speak to that a little bit.

I mean, listen, there is definitely competition out there. The interesting thing when you take a look at our year-over-year growth and our quarter-over-quarter growth, it's been very diversified, which is exactly what we strive for. So I would say probably 40% of our growth has come from our traditional C&I businesses. So every day, the relationship-focused business. And I think to Stu's point about focusing on DDA, that's where we're getting the operating accounts, right, of everybody that we're involved with.

And then from there, I think the growth has been equal across our specialty finance groups like our health care, our lender finance, our fund finance and our sponsor group. So competition is tough out there. There's no doubt about it. People are doing some crazy things, but we're just going to stick to our knitting. We know what we do well and try to keep the growth as diversified as we can across the board. But right now, C&I is leading the way year-over-year as well as quarter-over-quarter, Q1 to Q2.

Appreciate it. And then switching over to NIM, I hear you with the ultimate goal for 2027. Is there any insight into what NIM could exit the year at?

No, we don't provide near-term guidance on the NIM. So we've always said where we're going to be at the end of the year, but we've historically not provided 2 quarters out in terms of NIM guidance. In my prepared remarks, I said we probably should see some modest NIM expansion in the third quarter and then more pronounced NIM expansion in the fourth quarter. So we'll leave it at that.

And this concludes our Q&A session for today. And I will pass it back to Stuart Lubow for closing comments.

Thank you, Carmen, and thank you to all our dedicated employees and our shareholders for their continued support, and we look forward to speaking with you after the third quarter.

This concludes our conference for today. Thank you for participating and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Dime Community Bancshares First Quarter Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission to which we refer you.

During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For more information about these non-GAAP financial measures and for reconciliation to GAAP, please refer to today's earnings release.

I would now like to hand it over to our first speaker, Stu Lubow, President and CEO. Please go ahead.

Good morning. Thank you, Victor, and thank you all for joining us this morning for our quarterly earnings call. With me today, as usual, are Avi Reddy, our Chief Operating Officer and CFO; and also Tom Geisel, our Chief Commercial Officer.

In my prepared remarks, I will touch upon the progress we are making as we continue to execute on all aspects of our strategic plan. Avi will then provide financial details for the first quarter. EPS for the first quarter was up 67% versus the prior year. The growth in EPS was driven by record total core revenues of $124 million. All of our revenue growth has been organic, built by our existing bankers and new hires.

NIM was up 10 basis points quarter-over-quarter as we were able to lower our cost of deposits. Year-over-year, our core deposit growth was $1 billion. On the loan front, we continue to execute on our stated plan of growing business loans and managing the CRE ratio lower. Year-over-year, growth in business loans were approximately $575 million, which represents a 21% increase. Our loan pipeline continues to be strong and is in excess of $1.5 billion with a weighted average rate of between 6.25% and 6.5%.

As you know, disruption in our local marketplace remains very high, and the environment for our organic growth strategy continues to be very attractive. As outlined in the press release, we had a very strong start to the year from a recruiting standpoint. In addition to fully building out our Lakewood branch with a strong group of bankers, we added management depth to our branch network, and we also hired 2 very strong deposit teams who had a strong track record at the former Signature Bank.

We are confident that these hires will be accretive to earnings in 2027. The teams we hired to date, as you know, have grown deposits to nearly $3 billion with $1.2 billion of DDA and a cost of funds of 1.6%. The new deposit teams have hit the ground running and will benefit from the path and platform that has been created over the past few years, and we are excited for their growth in the months and years ahead.

Finally, we will be adding a new equipment and franchise finance vertical starting May 1. This new vertical strengthens our core commercial bank offerings and enhances our competitive position. When the opportunity arose to hire this high-quality team of bankers, we capitalized on it. Keith Smith, who will lead this vertical for us previously worked with [ Tom Geisel ] externally and successfully built and scaled that vertical externally to more than $1 billion.

In conclusion, Dime is the bank of choice for talented bankers in our footprint, and we've continued to be the primary beneficiary of the disruption in our marketplace. Earlier in this year, we announced plans to rebrand Dime at Dime Commercial Bank. This marks the culmination and a logical next step in Dime's evolution. Over 70% of our deposit base is from commercial and municipal customers and approximately 60% of our loan portfolio is from the business and commercial real estate.

It's been a remarkable transformation over the past 10 years away from the legacy thrift and multifamily heritage, and we believe that Dime Commercial Bank brand truly represents the bank that we have grown into. In conclusion, Dime has differentiated our franchise from our local competitors as it relates to our organic growth trajectory. We continue to focus on diversifying our balance sheet, driving our efficiency ratio lower and attracting talented bankers. We are positioned very favorably with significant loan repricing over the next 2 years, and our organic growth prospects are strong. I want to end by thanking all our dedicated employees for their efforts in positioning Dime as the best commercial bank in the New York Metro area.

With that, I will turn over the call to Avi to provide some color on the first quarter.

Thank you, Stu. EPS for the first quarter was $0.75 per share, representing 10% linked quarter growth and 67% year-over-year growth. Core pretax pre-provision net revenue of $60.5 million represented 162 basis points of average assets. By maintaining a strong focus on cost of funds management, our NIM has now increased for 8 consecutive quarters.

The NIM expansion versus the prior quarter was driven by a reduction in deposit costs to 1.70%. We continue to have catalysts for growing our NIM over the medium to long term, including a significant back book loan repricing opportunity that I will talk about later. The reported first quarter NIM increased to 3.21%. Given the day count convention in the first quarter with February only having 28 days, the first quarter NIM is always seasonally elevated.

Excluding the impact of the day count and the benefits from purchase accounting, the run rate NIM for the first quarter would have been closer to 3.14%. As we mentioned on the fourth quarter earnings call, the fourth quarter balance sheet cash position and deposits were all elevated by approximately $400 million due to seasonality and municipal deposits. As expected, we saw some normalization in the balance sheet size over the first 2 months of the quarter.

Average earning assets for the first quarter was approximately $14.2 billion and average earning assets for the month of March was approximately $14 billion, which should serve as a good base for modeling purposes going forward. Core cash operating expenses, excluding intangible amortization, was $63 million, which was generally in line with our expectations. The loan loss provision was approximately $12 million and the allowance to loans increased to 95 basis points, which is at the midpoint of our 90 basis points to 1% operating range.

At the end of the first quarter, we transferred 4 loans totaling $38 million into held-for-sale status. This shows up on the March 31 balance sheet in the loans held-for-sale category with a nonaccrual designation. We successfully sold these loans earlier this week, generating $36 million in total proceeds. As a result, in the second quarter, we expect to have a modest $2 million negative impact in the gain on sale line item on the income statement.

Criticized loans remained relatively flat on a linked-quarter basis and capital levels continue to grow. Our tangible equity ratio crossed 9%. Our common equity Tier 1 ratio grew to 11.87%, and our total capital ratio is in excess of 16%. Having best-in-class capital ratios versus our local peer group is a competitive advantage. Maintaining strong capital ratios provides us the flexibility to execute on our business plan and provides us a cushion to continue growing client relationships regardless of the overall economic environment and any external shocks.

Next, I'll provide some thoughts on the remainder of 2026. As I mentioned previously, excluding the day count convention for the first quarter and purchase accounting, the run rate NIM for the first quarter would have been closer to 3.14%. We would use this as a starting point for modeling purposes going forward. In addition, and as I mentioned earlier, average earning assets for the month of March was approximately $14 billion.

We expect modest NIM expansion in the second quarter and more pronounced NIM expansion in the back half of the year and in 2027 as the pace of the back book loan repricing picks up. To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, for the remainder of 2026, we have approximately $1.3 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 4.10% that either reprice or mature in that time frame.

As we look into the back book for 2027, we have another $1.7 billion of loans at a weighted average rate of 4.30%. Assuming a 225 to 250 basis point spread to treasuries on these repricing and maturing loans over the next 7 quarters, we could see another 40 to 45 basis point increase in the quarterly NIM by the end of 2027 when starting from the base NIM of 3.14%.

While it's hard to predict the NIM in individual quarters and the path may not mean a straight line on equal increments, we are focused on the ultimate destination by the fourth quarter of 2027, which we expect to be over 3.50% assuming the consensus forward curve plays out and competition remains rational.

Given our current cash position, any future 25 basis point reduction or increase in short-term interest rates will likely not have more than a 1 to 2 basis point impact on our NIM. Our NIM expansion in future quarters will be entirely driven by the back book loan repricing as well as core deposit growth and business loan growth. We believe our large cash position is a competitive advantage that will allow us to take advantage of lending opportunities as they arise and will help us create a sustainable NIM that is not subject to cyclical moves based on the trajectory of short-term rates.

We expect to continue to reduce our CRE concentration ratio lower to 350% sometime between the second and third quarter of this year, primarily driven by a reduction in transactional multifamily and transactional investor CRE. At that point, we expect to reach an inflection point on investor CRE balances with multifamily continuing a downward trend until we get to around 25% of total loans for multifamily.

We believe operating with a CRE ratio that is 350% or lower will set us apart from all of the other local banks, which are operating between 375% and 450% and we will be rewarded in the medium to longer term with a higher valuation as well as more optionality to take advantage of opportunities regardless of the economic or regulatory environment.

Next, I'll turn to expenses. On our prior call, we had provided annual guidance for core cash operating expenses, excluding intangible amortization for 2026 of between $255 million and $257 million. This was based on the employee base we had in January. Given the significant hires we announced since that time, including the acquisition of 2 strong deposit teams from Signature and the build-out of a full equipment and franchise finance vertical, we are increasing the expense guidance for core cash operating expenses, excluding intangible amortization for the full year to approximately $260 million.

Like Stu said in his prepared remarks, we expect the hires to be accretive to EPS starting in 2027. Finally, we expect the tax rate for the remaining quarters of 2026 to be 28.5%.

With that, I'll turn the call back to Victor, and we'll be happy to take your questions.

[Operator Instructions] Our first question will come from the line of David Konrad from KBW.

Quick question on the $38 million loan that was sold in April. It looks like there's maybe a $2 million loss for next quarter. But was that in the nonperforming nonaccrual bucket at year-end? In other words, I'm trying to get a feel for the flow. Nonaccruals went from $52 million to $57 million. Was the $38 million in the $52 million and the buck was refilled? Or just kind of talk about the flows into the nonperforming bucket.

No, David, it wasn't. We made a decision to sell the loans at the end of the first -- towards the end of the first quarter here. So that was new at March 31. But in the prepared remarks, like I said, it's off the books right now. We got the cash in the bank last week. And look, I think we said this a couple of quarters back. We have the pre-provision earnings power of the bank, the capital to offload relationships and credits where we don't think it meets our long-term objectives here at the bank. So we made the decision and we moved on from the credit, and we're happy to be behind it at this point.

Great. Okay. And then I guess just on loan growth overall, really good commercial loan growth, which is kind of offset by the intentional kind of wind down of some of the real estate assets. In your guidance, do you expect total growth to start to occur in the back half of the year? When do we see an inflection that we'll see the loan portfolio start to increase?

Yes. I think, for example, this quarter, we had $170 million of multifamily payoff and $90 million of CRE investor CRE payoff. And as we get to that 3.5% total CRE ratio, we'll -- you'll start to see us maintain our overall CRE balances, not necessarily multifamily, but CRE overall and continued growth on the other business loan vertical. So yes, our view is towards the back 6 months of this year, you'll start to see nice growth on the loan portfolio.

Yes, David, I would just add, the way we're thinking about the loan portfolio is probably in 3 different segments. On the business loan front, we're seeing nice around, call it, $150 million-ish of net loan growth, including payoffs on that. A lot of the teams that Tom has hired, they've not been at the bank a full year yet. A lot of them have been here 6 to 9 months.

So they're just starting to hit that stride and typically takes 12 to 15 months to get into a good cadence, right? So that's going to help. The equipment finance and franchise vertical that we're bringing on board, they're starting in May. So they'll probably be online by the third quarter. So you add that up, we're probably trending towards $200 million-ish to a little bit more than that in terms of business loan growth.

The next part of the balance sheet is the Investor CRE side, and we're back in the market right now for Investor CRE. We're doing relationship deals on the Investor CRE side. We're back in the market for relationship construction. So I think once we get to that 350%, and we've got a $2.7 billion, $2.8 billion investor CRE portfolio, that probably grows at $200 million on an annual basis, just using a 5% to 6% growth rate, right?

So you got $800 million of business loan growth run rate. You've got $200 million of Investor CRE relationship run rate, including any payoffs and refinancings that we have in that. And then I said in my prepared remarks that multifamily is probably -- intentionally, we're trying to take that ratio down to around 25% of total loans. Again, we're doing relationship multifamily, but not transactional multifamily. So there's $1 billion in and $500 million out, and the residential portfolio is probably going to grow $50 million to $100 million. So you put that all together, it should be mid-single-digit growth starting in the third quarter of this year.

Our next question will come from the line of Steve Moss from Raymond James.

Maybe just starting on the Signature deposit team here, the team that you hired. Just curious if you could give us any color around the size of the teams and what their historical book was.

Yes. I'll first start off by saying these were significant teams that we've been talking to for 3 years. I mean it's been a long road. But these are teams that we said there weren't too many teams we were interested going forward on previous calls, but these were 2 teams that we somewhat coveted as we move forward. Avi can give you some of the details in terms of what we expect.

Yes. So Steve, I mean, collectively, all the hires that we had, including the Lakewood build-out, they manage well north of $1 billion of deposits currently. So this is after all the outflows in '23 and '24. So I think our expectation is in the medium to longer term, this is a $1 billion opportunity for us.

I think we have proof of concept. The teams that we did hire early on, they're over $3 billion at this point. And the thing that we like the most about the team that we've hired is that cost of funds is actually lower than the bank's overall cost of funds. It's actually at 160 right now, given the high proportion of DDAs that they have. And these teams that we hired, it's kind of the same profile where very high percentage of DDA tied to what they have.

It will take time. There's -- I think '23 and '24 were unique environments just given what was going on at the competition. It's probably going to be slow and steady relationship by relationship at this point. But these -- as Stu said, these were 2 teams that we wanted back in 2023, and it finally came to fruition now. So we're very happy with that.

Okay. Interesting. I appreciate that color there. And then just on the equipment finance side, just curious the type of equipment finance loans you guys are seeking to make here with the new setup.

Yes, sure. So this group is really going to focus on middle market to large ticket equipment finance deals. I would say we're looking companies with middle market credit quality of single B through investment grade. The focus is really on critical machinery and equipment for manufacturing and warehouses, and we'll continue to -- just like we do with all our businesses, we'll look for relationship kind of driven companies to help support there.

This is a credit-focused business. So yes, you have to take a look at the machinery and the equipment that you're financing, but it's credit focused. So I think what that's going to do is it's going to enable us to lend into most industries. We'll be looking at material handling, commercial, specialty vehicles, medical, waste management, things of that nature.

Okay. Appreciate that color there, Tom. And then just one more for me here. Just going back to the held for sale bucket. Just kind of curious, is this a one-off? Or do you guys think you'll maybe utilize the sale of select loans? It sounds like it was multifamily credits over the next 12 or 24 months just to accelerate maybe certain dispositions.

Yes. I think case-by-case basis, Steve, I think we've been very good at resolving stuff in an expeditious manner. It depends on the market for these credits as well. I mean, this particular instance, fairly low-yielding relationship. The yield on the loans is probably 3.25% to 3.30% plus or minus.

So at the end of the day, it's going to be accretive to NIM going forward. Obviously, it wasn't in the NIM numbers for Q1, right? But if you remove $40 million at a yield of 3.5%, you're earning money already on the NIM side. So I would say just given our pre-provision earnings power of 160 basis points, it just helps us resolve stuff more expeditiously going forward. But it's really done on a granular basis. We've never done bulk sales at this bank. You want to maximize the value relationship by relationship. So it's probably going to be one-offs and working through stuff as they may come up.

Our next question will come from the line of Manuel Navas from Piper Sandler.

I really appreciate the NIM trajectory, a lot of it based on the back book repricing. But with these teams that should bring a lot of deposits, what's kind of the opportunity for continued deposit declines or just improvement in the funding base from core deposit generation?

So I think, look, the Fed is going to stay steady in terms of rates and not drop rates, it's going to be challenging for any bank to continue to drop deposit costs, right? I mean there'll be a little bit of creep basis point or 2 every quarter, some customers come to us and ask for higher rates.

That said, the reason why I pointed out that the existing $3 billion that we have, the cost of funds on that is 150. So it's actually lower than our overall cost of funds, right? So I think with these new teams, it's going to be slow and steady over time. It gives us another avenue to grow deposits over time. And the existing teams are still opening accounts. So I would say, look, we're viewing this as a medium- to longer-term play, and it's going to help with making the deposit franchise even more valuable. It's going to -- like I also said, it's going to come with a lot of DDA basically, very DDA-heavy groups, which should aid in the cost of funds overall.

I think on the flip side, if the Fed does cut deposit -- does cut rates later this year by even 25 basis points, that will be a driver for reducing deposit costs, Manuel.

Yes. I mean these teams basically had 50% of their deposits in DDA. So we're very excited about the opportunity over time to have these deposits move to us and be part of our core deposit franchise.

I think the other thing, too, not to forget is that the commercial business is relationship focused, right? So that business will continue to also bring in deposits. We've got this great noncommercial private bank franchise that brings in these terrific core deposits, but the commercial team will also continue to support that.

That's great commentary. Can you speak to the continued kind of M&A opportunity for talent and further loans and deposit growth and speak to maybe pipelines for talent from here. You have a lot that came in this quarter. So I understand that you have to digest these teams, which are fantastic adds. But just what is the kind of the pipeline for talent? And how are you taking advantage of M&A disruption in your footprint?

Yes, Manuel, I'll start off and Tom, you might chip in. Look, I think the goal of the bank for the next 90 days here is to work really well with the teams that we have. I mean we have a handful with the number of people that we've onboarded. But like Stu said, some of these teams, we spent 3 years speaking to them, right? And the time was right for them to move eventually, and we capitalized on it.

So there are combinations like that with other teams on the deposit side, on the lending side as well. And sometimes we're not in control is the eventual timing of when people are ready to move. I would say on the commercial banking side, with the build-out of equipment and franchise finance, we're pretty much in every industry that we want to be in. So there's not going to be a build-out in terms of adding support staff and adding people behind that. It's probably going to be adding more depth to the existing verticals that we do have.

So when we brought Tom on a year back, we went through a business plan of these are the 5 or 6 areas that we want to be in. And I think right now, we are in all of those, right? So you're not going to see significant expansion in the number of verticals going forward. It's going to be more depth to the existing staff that we have.

Yes. I do think -- and I'll let Tom comment on this. There's going to be -- when you talk about the M&A disruption, there's going to be opportunity to -- for us to take advantage of client opportunities that might be displaced or have relationships with some of our competition that might change. And so I think that's going to be an opportunity.

The other thing I think is really important to understand that the verticals we brought on are really fledgling. I mean they've been with us less than a year, and they're just beginning to grow their pipeline and get loans closed. So there's a real opportunity as we move into the latter part of this year and certainly into '27, where you see much more strength, I think, in terms of origination on the business banking front.

I think the only thing that I'll add to that is that Dime has put itself in a pretty good position, right? So out in the market, people understand the growth mindset, the deposit franchise, the strength of the back office and a reputation being a place that people want to work. So we've kind of shifted over the last couple of years, trying to be proactive, which is good.

We've been very successful being proactive and the M&A dislocation is helping us. But now we're really in a great position where we can be reactive. We've got a lot of inbound calls, and we can be very selective in who we bring on and make sure it's matching the skill sets that we need to enhance the teams we currently have in place. So we feel really good about where we are right now, but we will be doing some kind of additive hiring over the next year.

I'm not showing any further questions in the queue at this time. I would now like to turn it back over to Stu for any closing remarks.

Thank you, Victor, and thank you all. Thank you to all our dedicated employees and our shareholders for their continued support, and we look forward to speaking to you after the second quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good day, and welcome to the Dime Community Bancshares, Inc. Q4 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded. Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements. Including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission, to which we refer you.

During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. for information about these non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release.

At this time, I would like to turn the call over to Stuart Lubow, President's CEO. You may begin.

Good morning. Thank you, Michelle, and thank you all for joining us this morning for our quarterly earnings call. With me this morning, as usual, our Avi Reddy, our Chief Operating Officer and CFO; and also Tom Gisel, our Chief Commercial Officer. Today, I will touch upon the progress we've made in 2025 as we executed on all aspects of our strategic plan. I will then touch upon some bank-wide goals for 2026. Tom will talk about the progress we've made in building out our commercial banking platform and industry verticals. Avi will then provide some details on the fourth quarter and guidance for 2026. Our core earnings power continues its upward trajectory. Core EPS was $0.79 for the fourth quarter, representing an 88% increase versus the prior year.

The growth in EPS was driven by record total revenues of $124 million for the fourth quarter. The NIM was up 10 basis points and average earning assets for up over $650 million on a linked quarter basis. All our growth has been organic, built by our existing bankers and new hires. As you know, we do not have any purchase accounting in our numbers that tends to inflate results at banks that have engaged in M&A. Core deposits were up $1.2 billion on a year-over-year basis. Deposit growth has been strong across all our channels, in addition, we have been successful in continuing to drive down our cost of funds and growing our noninterest-bearing DDA to 31% of deposits.

As such, we have a core funded balance sheet with a significant liquidity position, which will allow us to take advantage of lending opportunities as they arise. Speaking of loans, we continue to execute on our stated plan of growing business loans and managing our CRE concentration ratio, which is now below 400%. Business loans grew over $175 million on a linked quarter basis and over $500 million on a year-over-year basis. We were very happy to be able to bring Tom Gasoline in the first quarter of 2025 and have already made great progress in terms of building out various industry verticals that Tom will talk about more in his remarks.

Our loan pipeline continues to be strong and is more than $1.3 billion with a weighted average rate between 6.25% and 6.5 million, as we mentioned on last quarter's call, NPAs moved down nicely in the fourth quarter and now represent only 34 basis points of total assets. Multifamily credit continues to be very strong with 0 NPAs, our capital levels are best-in-class with a total capital ratio of more than 16%. Disruption in our marketplace remains very high. As you saw, there was another merger transaction where [indiscernible] bank won a local terrific year end.

We were not involved in this transaction in any way. We remain focused on our organic growth strategy and hiring teams. The environment for organic growth continues to be very strong with an extremely target-rich environment and the execution of our strategy is now showing up in our quarterly results. Our Manhattan branch is up and running, and we expect to save for our Lakewood and Locus Valley locations towards the end of the first year. As we look forward to 2026, the momentum in our business continues to be strong, and we're focused on the following: as we have discussed previously, and as Avi will mention in his remarks, we have a significant amount of repricing assets in the next 2 years, which provides a tailwind for revenue growth.

As the loan repricing story plays out, earnings power will be displayed. In 2025, we put in place a building box to create a more diversified balance sheet and loan portfolio. I expect to see significant growth in both in 2026. As we grow revenues faster than our expenses, we expect to operate at a sub-50% efficiency ratio. Being inefficient has always been a hallmark diameand we expect to return to the sub-50% level in 2026.

Lastly, we continue to attract talented bankers who could help us grow core deposits and grow business on. In conclusion, Dimas clearly differentiated our franchise from our local competitors as it relates to our organic growth. We have an outstanding deposit rate, strong liquidity and robust capital, which bodes well for the future, driven by significant loan repricing opportunities over the next 2 years.

I want to end to thank you all our dedicated employees for their efforts in 2025 and in positioning Dime is the best commercial bank in the New York Metro area.

With that, I will turn over the call to Tom.

Thank you, Stu, and good morning. In my prepared remarks, I'll provide some background and color on our commercial banking initiatives. As many of you know, I was part of the leadership team at Sterling that helped transform that balance sheet from $5 billion to $25 billion diversified commercial bank balance sheet. When I began speaking with Dime in the second half of 2024 it was apparent that Dime had a number of strengths that were attractive in recruiting talented bankers. First, an entrepreneurial and growth mindset, which is valued by commercial bankers. Second, the best deposit franchise in Metro New York, both from a cost perspective as well as a growth profile, which can be utilized for funding. Third, the back office was staffed with strong managers who had experience managing a larger and more diversified commercial portfolios.

And finally, Dime had developed a reputation in the marketplace as a company where talent wanted to work. It was perceived and it perceived as a winner. Even before I started, we outlined a strategy as to which industries and geographies we wanted to strengthen, build out and focus on. Our goal was to create a platform that had all the industry expertise of a $50 billion to $100 billion bank, but that operated nimbly like a $15 billion bank with access to senior management and quick decision-making. Of note, right around the time I joined, we added a new Chief Credit Officer, Rob Rowe, who is previously the Chief Credit Officer at Sterling.

Since I came on board in February, we have added the following capabilities. fund finance, which is exclusively focused on capital call lines, lender finance, our focus is on lending to institutions that are focused on business credit. We do not intend to be active on the consumer credit side. Mid-corporate, our focus is on companies that are larger than a typical middle market company. Sponsor Finance. Our focus is on noncyclical industries with good risk-adjusted returns, supporting sponsors and family offices. Syndications, we added a team to focus on syndicating self-originated loans, allowing us to service larger clients while staying within our established risk tolerances.

And lastly, geographic expansion. Dime has always had a dominant presence on Long Island, and we are focused on expanding that to Manhattan and New Jersey. For example, in the fourth quarter, we hired a well-known banker to cover middle-market relationships in New Jersey. All of our commercial bankers and industry specialists are focused on direct relationship lending with the occasional club deal to manage our exposure. We're not building a business based on SNCs or participations as many small- to medium-sized banks often do.

The bankers that we have hired have added significant industry knowledge and a high level of expertise to Dime's offerings. As we look to 2026, each of these new commercial banking teams will contribute to loan growth and operating leverage. We also have our eyes on 1 or 2 industries where we already have a presence, but where we could add some additional depth.

With that overview, I'll turn it over to Avi for his prepared remarks.

Thank you, Tom. Core EPS for the fourth quarter was $0.79 per share. This represents an 88% year-over-year increase. Core EPS excludes the impact of severance, which was approximately $2.4 million on a pretax basis, and a couple of discrete tax items, which were $2.7 million. These items have been described in the GAAP to non-GAAP reconciliation tables in our earnings release. Core pretax pre-provision net revenue of $61.5 million for the fourth quarter of 2025 represents approximately 162 basis points of average assets. The reported fourth quarter NIM increased to [indiscernible]. We had approximately 2 basis points of benefit from prepayment fees.

Excluding prepayment fees, the fourth quarter NIM would have been 309. As a reminder, the third quarter NIM, excluding prepayment fees was 298. Total deposits were up approximately $800 million versus the prior quarter. We saw strong inflows across all of our major channels. Deposit growth for the fourth quarter included approximately $100 million of seasonal tax receiver municipal deposits that typically arrive in the month of December and leave in mid-January and approximately $225 million of deposits from a municipality tied to a bond offering that we expect to leave the bank at the end of February.

Excluding these items and typical seasonality in our branch network on the East End of Long Island, core deposit growth for the fourth quarter would have been closer to $400 million. Similarly, the overall balance sheet size and cash position was elevated at quarter end by approximately $400 million due to the previously mentioned municipal deposits and seasonality. Our cost of total deposits was 185 in the fourth quarter down 24 basis points versus the prior quarter. By maintaining a strong focus on cost of funds management, our NIM has now increased for a seventh consecutive quarter and has surpassed the 3% mark.

We continue to have catalysts for growing our NIM over the medium to long term, including a significant back book loan repricing opportunity that I will talk about later. Core cash operating expenses, excluding intangible amortization of $62.3 million for the fourth quarter was below our guidance of approximately $63 million. Noninterest income of $11.5 million was above our fourth quarter guidance of approximately $10 million to $10.5 million. The loan loss provision declined to $10.9 million, and the allowance to loans increased to 91 basis points which is within our stated range of operating between 90 basis points and 1%.

Capital levels continue to grow, and our common equity Tier 1 ratio grew to 11.66%. Having best-in-class capital ratios versus our local peer group is a competitive advantage and will allow us to take advantage of opportunities as they arise and speaks to our strength and ability to service our growing customer base. Next, I'll provide some guidance for 2026. As I mentioned previously, excluding prepayment fees, the NIM for the fourth quarter would have been 3.09%. We would use this as a starting point for modeling services going forward. We expect modest NIM expansion in the first half of the year and more substantial NIM expansion in the back half of the year as the pace of the back book loan repricing picks up.

We believe our large cash position is a competitive advantage that will allow us to take advantage of lending opportunities as they arise and will help us create a sustainable NIM that is not subject to cyclical moves based on the trajectory of short-term rates. In our current cash position, every future 25 basis point reduction or increase in short-term interest rates will not have more than a 2 to 3 basis point impact on NIM.

Our NIM expansion in future quarters will be driven more by the back book loan repricing as well as core deposit growth and business loan growth. To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, for the full year 2026, we have approximately $1.4 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 4% that either reprice or mature in that time frame. Assuming a 250 basis point spread on those loans over the forward 5-year treasury, we could see a 20 basis point increase in the quarterly NIM by the end of 2026 from the repricing of these loans.

As we look into the back book for 2027, we have another $1.7 billion of loans at a weighted average rate of 4.25 that will lead to continued NIM expansion in 2027. Assuming a 250 basis point spread on those loans over the forward 5-year treasury, we could see another 20 to 25 basis point increase in the quarterly NIM by the end of 2027. In summary, assuming the market consensus forward curve plays out, we have a path to a structurally higher NIM and enhanced earnings power over time.

Now that our NIM is at the 310 level, the next marker in front of us in and after that 350. With respect to the balance sheet, we expect a relatively flat balance sheet for the first half of 2026. The first quarter of the year is typically seasonally slow, and there's always a rush to get loans closed by year-end. In addition, we expect to continue to reduce our preconcentration ratio lower to the mid 350% area, driven by a reduction in transactional multifamily and transactional cream. This will offset the strong growth we are seeing on the business loan side.

We expect to reach an inflection point on CRE balances probably in the third quarter of the year and once we reach this inflection point, the overall balance sheet should start growing again at a mid-single-digit growth rate. If we put that all together, a point-to-point total loan growth estimate for 2026 is in the low single digits with flattish balances in the first half of the year and growth in the second half of the year.

For 2027, we are internally modeling mid- to high single-digit end-of-period loan growth as business loans continue to grow and our industry verticals hit test ride. Next, I'll turn to expenses. We expect core cash operating expenses, excluding intangible amortization for 2026 to be between $255 million and $257 million. This includes the full year impact of our de novo locations in Manhattan, Lakewood and Locus Valley and all the private and commercial banking teams that we hired throughout 2025.

With respect to the provision for loan losses, we expect the next couple of quarters to be in the $10 million to $11 million area as we move towards the midpoint of our allowance range of between 90 basis points and 1% and and as we continue to aggressively work down NPAs and classified assets. For the second half of the year, we expect provisioning levels to trend down into the single digits and discover charge-offs. Turning to noninterest income. We expect full year 2026 to be between $45 million and $46 million.

Factors that will determine the individual quarters will be the timing of swap fee income, which can be hard to predict as well as SBA fees and title revenue. Finally, we expect the tax rate for the full year of 2026 of approximately 28%.

With that, I'll turn the call back to Michelle, and we'll be happy to take your questions.

[Operator Instructions] our first question comes from Mark Fitzgibbon with Piper Sandler.

Maybe first question is for Tom. Tom, could you share with us what industries accounted for the nice sequential quarter growth in the business loan balances this quarter? Just to give us a sense where that growth is coming from.

Yes. All of those verticals are pretty much new, so we started out at a base of 0, right? So I think Stu mentioned, we grew business loans about $500 million year-over-year. About $400 million of that came from the specialty groups that includes health care, lender finance, fund finance, sponsor and not-for-profit. The business that has probably most of the momentum in 2025 was health care. I think you know that Dime into health care probably about 2 years ago, and that portfolio is built over time. So I would say probably out of the $500 million, about $400 million was the new specialized industries and probably 50% of that was health care.

And then secondly, I was curious, how much business do you have today roughly, and I won't hold you to exact numbers, but roughly in New Jersey, loans and sort of the $10 billion of loans and call it $12 billion of deposits, how much of that is sort of Jersey domiciled.

Yes, Mark. So it's probably around somewhere between 8% to 10% of our portfolio is Northern New Jersey. A lot of clients that we followed over there. I'd say on the deposit side, it's less substantial than that. I mean we're probably running at a 15% to 20% deposit to loan ratio for New Jersey. But in terms of overall loans, I'd say somewhere between 8% and 10%. But that's something that's been consistent at the bank for the last 4 or 5 years since Steve got to the bank as you know, Stu a couple of banks in New Jersey and a lot of relationships have followed since he got to dim back in 2017. .

The last question I had, loan sale gains were -- SBA loan sale gains were strong this quarter. I would have expected maybe they'd be a bit less given the government shutdown in I guess I'm curious, are you sort of fully caught back up on the pipeline for these loans? Or maybe any thoughts you have on what 1Q activity levels might look like?

Yes. I'd say the latter mark we probably caught up at this point. We were very close to recognizing some of these gains in Q3. And then once the government opened up, we kind of did that. So it's kind of hard to predict that line. I think that 1 on the swap fee line. It's just up and down basically. So I wouldn't expect the first quarter to be as large as Q4. Q4 was probably 2 quarters into 1, basically, is how it characterized it. .

Our next question comes from Steve Moss with Raymond James.

Maybe just on the deposit growth here. Next quarter for deposit growth, and I hear you Avi, in terms of some of the some of the municipal deposits. Just curious how you guys are -- what the deposit pipeline kind of looks like? And kind of where are you pricing those deposits these days? .

Yes. So I'd say in terms of pricing, nothing has really changed there, Steve, where we got a lot of influx of new deposits coming into the bank. So I'd say, to get a new customer in the door, you probably got to offer high 2s to low 3s on the money market, but it's probably coming with 20%, 30% DDA. So the all-in cost is probably in the low 2s of stuff coming into the bank. The actual cost of deposits or the spot rate on deposits at the end of the year was 168. So that's lower than our overall cost of deposits, and that should help with the NIM going forward.

I'd say just if you look back at our history, we just wanted to point out the seasonality just because we have the municipal business. We have an Esen business. And then this quarter, we had the 1 transactional municipal deposits that did come in. And so the point of that guidance was more along the lines of don't use our average earning assets. So Q4 is a proxy for Q1 and grow it off of that base. You probably have to take out $300 million to $400 million. But over the course of the year and if you look at the year-over-year growth, we had $1 billion of core deposit growth last year, and I think Stu attested this as well that our teams haven't really matured yet, and we continue to see the pace of account opening pick up basically.

Yes. I mean just to give you a little little color. I mean those teams that we brought on that crossed at year-end across the $3 billion mark and opened up over in total, over 15,000 accounts and we're still seeing monthly and quarterly growth in all our teams. So we're still very bullish on on deposit growth. We just had a very outsized fourth quarter, very happy with it. All the channels for both the commercial group, the private banking group, our retail bank and our municipal group were all up. So we're excited about that and as I said, very bullish. But the teams have have really proven to be quite an asset, and we're still seeing quite a bit of new account opening. So we're expecting through this year continued growth in that market. .

Okay. Great. Really appreciate all that color there. My other question here, just on the 100% rent-regulated piece. I know that was about $500 million at the end of the third quarter. just and it came down pretty healthily at a pretty good pace in the third quarter. Just kind of wondering where that is now. And if you have any color around like the scheduled maturities over the next year or 2 for that book?

Yes. So Steve, we didn't have a lot of maturities in that book in Q4. So it was relatively stable linked quarter as it's kind of hard to go quarter-over-quarter for some of these items. The way we really look at it is the pre-2019 book and the post 2019 book just because the stuff that was originated pre-2019 was prior to the rent-regulated rule changes. And as you know, and so we look at that book, that books around $350 million at year-end 2025. That book used to be $450 million a year ago. And that work was $500 million 2 years ago, right? So that's the path that we had our eyes the most on. That book is fully reset at this point. I think in terms of maturities and repricings in the entire multifamily book that's ramp regulated, so both the 100% rent regulated and the majority rent-regulated book.

Maturities and repricings are around $250 million for 2026. That's probably split $150 million and $100 million between the 100% in the 50% to 99% bucket. So Look, we're not seeing any issues there. As loans come up for maturity, they're paying off. As loans come up for repricing, I'd say, a bigger proportion of them are staying with us and paying market rates basically. But I think you'll continue to see attrition in that book. The 1 thing we've always pointed out is it's a very granular book. We don't have any big loans in that portfolio. As opposed to the free market portfolio, where you could a few 10s and 15s in terms of size, in terms of credits. In terms of the rental book, it's very granular. So it's just going to take time for that to continue to wind down, but we're pretty comfortable with what we have right now.

Okay. Great. I appreciate all the color there, and I'll step back in the queue. Thank you very much.

Our next question comes from David Konrad with KBW.

Just a follow-up question on the deposits. I know you had a lot of the municipality and seasonality this quarter, but noninterest-bearing deposits were almost 31% mix. Like where do you think 2026 will look like in terms of the mix of deposits in terms of noninterest-bearing deposits?

Yes. Look, dave, they've if you go back in time, this company had a noninterest-bearing deposit base, somewhere between 35% and 40% when we completed our merger. Obviously, some of that was tied to PPP and then we came all the way back down to 25%, right? So I'd say the starting point really should be in 2023, once you saw deposits leave the system, we've built that up to 30% to 31% right now. I think we'd like to continue growing that over time. What we've really tried to do with the deposit base is focus on low-cost deposits. And so I think what we really try to manage to getting the overall cost of deposits down. And right now, like I said, it's 168 plus or minus is the spot cost over there. But we're not really bringing on new relationships to the bank unless they bring us their full operating accounts and have 20% to 30% DDA, right? So I think at a minimum, seeing a floor of around 30% is probably reasonable, and we'd like to have that ratio eke up slowly over time.

Yes. And you should note that, again, getting back to the teams, that $3 billion balance that they have, 38% of that balance is DDA. So I mean, they really focus on the DDA side. And obviously, while quarter end was slightly higher due to some municipal deposits, so those were not DDA deposits. those are money market and whatnot. So I think there's a good chance that we're going to see 31% move move up nicely during the year. And really, that's what we've been focusing on with our new team hires as well. .

And our next question comes from Matthew Breese with Stephens Inc. .

I wanted to focus first maybe on just the cash and then securities. Avi, I heard you in your opening comments, but could you give us just some better idea of what the time line and strategy is for deploying that cash? And what level do you think is kind of the normalized level.

Yes. So there's no specific time line, Matt, in terms of us rushing out to buy securities. We probably bought around $150 million in the fourth quarter. We're looking at rates consistently I think we like having the flexibility on the balance sheet, like I said, at the start. What it really does is it creates a neutral balance sheet that's not tied to short-term rates, right? Over time, as we make more business loans, have more floating rate assets that automatically will take care of the ALM profile of the bank.

But in the near term, it just helps us having cash in that we don't have to go out and hedge the balance sheet in different ways. So I don't see that cash balance coming down significantly in the near term, absent some of the seasonality that I talked about in Q4, I think if you read between the lines on the loan growth, we said loan growth is probably flat for the first half of the year and then start growing in the second half of the year. So, in terms of use of cash, in terms of loans, starting in the second half of the year, there will be a use of cash for loans.

But in the first half of the year, it's going to be in cash and we're going to look at the market for securities and whether there's an opportunity to add some we will, but we're not running out to put $500 million to work or $750 million to work overnight in something. This is -- we're building the balance sheet more for the longer term. And we're pretty happy with the liquidity position and our loan-to-deposit ratio means in the mid-80s at this point, which is very consistent with what a national bank operates at. Obviously, the banks are not in our local peer group are much more overlent in somewhere between 90% and 100%. But I think we're comparing ourselves really to a national bank, and we like the fact that we have this excess liquidity at this moment.

And then you had mentioned in there at in floating rate loans. Could you just give me -- update us on where sorry, where floating rate loans stand today as a percentage of total loans. These are loans priced off of SOFR prime and the expectation for a year from now? .

Sure. So look, I think in terms of the new business and Tom's verticals, a majority of that is floating rate. So if you think about fund finance business, that's the floating rate portfolio, and we're doing health care loans, those are priced off of sulfur. So anything coming on the books is likely more floating rates than fixed rate, right. Right now, floating rate is probably somewhere between 35% and 40% of the balance sheet. Fixed is probably around 25% and adjustable is probably the difference over there.

And then could you just comment -- prepayment activity in 2025 was a big headwind for commercial real estate multifamily growth. What did you see in the fourth quarter? And do you feel like we -- there's some light at the end of that tunnel should we see or expect prepayment activity to start to decline?

Look, I think it really depends on it's loan by loan, and it's whether we want to be in the market or not in the market for that type of asset, right? And I think our guidance was we're focused on getting the CRE ratio the mid-350s by maybe exiting some transactional multifamily and transactional free that doesn't have deposits, right? Third quarter, we probably saw payoff rates in the 20% to 25% area. In the fourth quarter, it was probably 15%, right? If you look over the cycle, it's somewhere between 15% to 20%. So I think rates -- short-term rates probably have to drop a little bit more for there to be a big payoff wave over there. Right now, it's kind of working in our favor because our goal is to get our fee ratio down to the mid-50s. That being said, for relationship Cree that has deposits, we're very competitive with our rates and we're able to retain them and their core customers at the bank. So I would delineate between transactional and relationship Cree. And on the relationship preside, I think we are seeing pretty strong retention.

Great. Appreciate it. Just last 1 for me. the muni deposit outflows you talked about, what categories deposits will that impact, that's all I have.

Yes. So the $225 million that I talked about in the Stu mentioned, that's an interest-bearing deposit. It's probably in the 3% area, plus or minus. So that's interest-bearing. Some of the tax receivable money that comes in, that's in the DDA piece. So that's probably, call it, $60 million to $70 million over there. So it's a split of categories, more of it in the interest-bearing side than on the noninterest-bearing side. .

I'm showing no further questions at this time. I'd like to turn the call back over to Stuart Lubow for closing remarks.

Thank you, Michelle, and thank you to all our dedicated employees and our shareholders for their continued support. We look forward to speaking with you at the end of the first quarter.

Thank you for your participation. You may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to the Dime Community Bancshares, Inc. Third Quarter Earnings Conference Call. Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission to which we refer you.

During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Stuart Lubow, President and CEO. Please go ahead.

Thank you, Diane, and thank you all for joining us this morning for our quarterly earnings call. With me today, as usual, is Avi Reddy, our CFO; and also Tom Geisel, who we hired earlier this year to continue growing our commercial bank. In my prepared remarks, I will touch upon key highlights for the third quarter of 2025. Avi will then provide some details on the quarter and thoughts for the remainder of 2025. Our core earnings power continues its significant upward trajectory.

Core pretax pre-provision income was $54.4 million for the third quarter of 2025 compared to $49.4 million in the second quarter of '25 and $29.8 million a year ago. We had an increase in loan loss provision in the third quarter, primarily tied to charge-offs on loans in the owner-occupied and nonowner-occupied real estate segments. While NPAs were up slightly on a linked quarter basis, they are up off a very small base and represent only 50 basis points of total assets, which compares favorably to commercial bank peers.

On a linked-quarter basis, we did see a decline in criticized loans in the third quarter of approximately $30 million and also saw a 33% decline in 30 to 89 days past due. Core deposits were up $1 billion on a year-over-year basis. The deposit teams hired since 2023 have grown their deposit portfolios to approximately $2.6 billion. We have a core deposit funded balance sheet with ample liquidity to take advantage of lending opportunities as they arise. Our cost of total deposits was 2.09% in the third quarter, which was unchanged versus the second quarter.

By maintaining a strong focus on cost of funds, our NIM has now increased for the sixth consecutive quarter and has surpassed the 3% mark. Following the Fed rate cut in September, we were able to meaningfully lower deposit costs while maintaining loan yields. As mentioned in the press release, since the Fed rate cut, the spread between loan and deposits has increased approximately 10 basis points, and this will continue to drive NIM expansion in the fourth quarter. Outside of rate cuts, we continue to have several additional catalysts to continue to grow our NIM over the medium to long term, including a significant back book loan repricing opportunity.

Avi will get into more details on the margin in his prepared remarks. On the loan front, we continue to execute our stated plan of growing business loans and managing our CRE concentration ratio, which is now 401. Business loans grew over $160 million in the third quarter compared to $110 million of business loan growth in the second. On a year-over-year basis, business loan growth was in excess of $400 million. Loan originations, including new lines of credit increased to $535 million.

The weighted average rate on new originations and lines was approximately 6.95%. Our loan pipelines continue to be strong and currently stand at $1.2 billion. The weighted average rate on the pipeline is between 6.50% and 6.75%. Next, I will touch on our recruiting efforts. Disruption in our local marketplace remains very high, and we continue to execute on our goals of building out our C&I businesses. As outlined in the press release, we hired a number of talented bankers in the third quarter. Once they settle in, we expect them to meaningfully contribute to our business loan growth.

In addition, we recently opened a branch location in Manhattan. The grand opening was actually yesterday, and we are on track to open our New Jersey location in Lakewood in the first quarter of 2026. Additionally, we have identified a new location in North Shore of Long Island that we expect to open in early 2026. In conclusion, the momentum in our business continues to be very strong, and we are executing our business plan of growing business loans and core deposits.

We have clearly differentiated our franchise from our local competitors as it relates to our growth trajectory, our ability to attract talented bankers. We have an outstanding deposit franchise, strong liquidity -- and a strong liquidity position and a robust capital base. We expect more meaningful NIM expansion in the fourth quarter and significant opportunities in 2026 based on loan pricing opportunities, organic growth across deposits and loans. I'm looking forward to closing out the year strong. I want to again thank all our dedicated employees for their efforts in positioning Dime as the best commercial bank in Europe. With that, I will turn the call over to Avi.

Thank you, Stu. Core EPS for the third quarter was $0.61 per share. This represents 110% year-over-year increase. Core pretax pre-provision net revenue of $54 million represents approximately 1.5% of average assets. The reported third quarter NIM increased to 3.01%. We had around 2 basis points of prepayment fees in the third quarter NIM. Excluding prepayment fees and purchase accounting, the third quarter NIM would have been 2.98% -- as a reminder, the second quarter NIM, excluding prepayment fees and purchase accounting was 2.95%. Total deposits were up approximately $320 million at September 30 versus the prior quarter. We continue to see strong inflows across our branch network and across the Private and Commercial Bank.

Core cash operating expenses, excluding intangible amortization, was $61.9 million, which was marginally above our prior guidance for the third quarter of $61.5 million. The variance versus the prior guidance was due to the additional hires we made in the third quarter. Noninterest income of $12.2 million was inclusive of a $1.5 million positive benefit tied to a fraud recovery that dates back to Legacy Bridge. We had a $13.3 million credit loss provision for the quarter, and the allowance to loans increased to 88 basis points. As Stu mentioned, criticized loans were down approximately $30 million linked quarter and loans 30 to 89 days past due were down approximately 33% on a linked-quarter basis. We continue to grow and our common equity Tier 1 ratio grew to over 11.5% and our total capital ratio grew to over 16%. Having best-in-class capital ratios versus our local peer group is a competitive advantage and will allow us to take advantage of opportunities as they arise and speaks to our strength and ability to service our growing customer base.

Next, I'll provide some thoughts on the fourth quarter. As I mentioned previously, excluding prepayment fees and purchase accounting, the NIM for the third quarter would have been 2.98%. We would use this as a starting point for modeling purposes going forward. As Stu mentioned, we expect more substantial NIM expansion in the fourth quarter as we have been successful in reducing deposit costs and maintaining our loan yield, which has been helped by the pace of new originations.

The spread between loans and deposits is approximately 10 basis points higher currently than what it was at September 15. While we have a larger cash position than we did in prior quarters that will eat into some of the NIM benefit from the spread differential between loans and deposits, we do expect more pronounced NIM expansion in the fourth quarter compared to the second and third quarters. In addition, we expect the asset repricing story that we've been talking about for a while to unfold with more vigor in 2026 and 2027.

To give you a sense of the significant back book repricing opportunity in our adjustable and fixed rate loan portfolios, in the full year 2026, we have approximately $1.35 billion of adjustable and fixed rate loans across the loan portfolio at a weighted average rate of 4% that either reprice or mature in that time frame. Assuming a 250 basis point spread on those loans over the forward 5-year treasury, we could see a 20 basis point increase in NIM by the end of 2026 from the repricing of these loans alone. As we look into the back book for 2027, we have another $1.7 billion of loans at a weighted average rate of 4.25% that will lead to continued NIM expansion in 2027. In summary, assuming the market consensus forward curve plays out, we continue to have a path to a structurally higher NIM and enhanced earnings power over time. Now that we've crossed 3% on the margin, the next marker in front of us is 3.25% and after that, 3.50%.

With respect to the balance sheet, we expect a relatively flat balance sheet for the remainder of this year as planned attrition in transactional CRE and multifamily masks the growth in our business loan portfolio. As we've typically done, we will only provide guidance for 2026 once we get into the new year. Next, I'll turn to expenses. As you are aware, we've added a significant amount of talented individuals to the organization, and we continue to have opportunities to selectively add more. We expect fourth quarter core cash operating expenses to be around $63 million. We don't expect any more wholesale additions of production staff until bonuses are paid in the first quarter, so we can treat the new fourth quarter expense run rate of $63 million as a good placeholder for now. Turning to noninterest income. For the fourth quarter, we do not expect a repeat of the fraud recovery item that we saw this quarter, meaning the run rate for noninterest income would be around $10 million to $10.5 million.

Factors that will determine the eventual outcome will be swap fee income, which can be hard to predict as well as SBA fees, which are being impacted by the government shutdown. As has been our typical practice, we won't be providing guidance on 2026 until we report earnings in January. Suffice to say, we are very positive on the NIM trajectory as we exit 2025. Our efficiency ratio continues to improve, and we expect to continue driving that down with NIM improvement. With that, I'll turn the call back to Diane, and we'll be happy to take your questions.

[Operator Instructions]. And our first question comes from Steve Moss of Raymond James.

Maybe just starting off on credit here. Just curious with regard to the NPA formations and the charge-offs. Were the charge-offs related to this quarter's new nonperforming loans? And then was it weighted more towards owner-occupied CRE or nonowner-occupied CRE? And maybe if any of it was multifamily related?

Yes. So none of it was multifamily related, Steve. It was owner-occupied and nonowner-occupied. The split was around 20% owner-occupied, around 80% nonowner occupied over there. Like Stu said, criticized were down around $30 billion linked quarter. The 30- to 89-day bucket got better. And we're pretty confident that we should see some resolution of legacy NPAs in the fourth quarter, probably amounting to around $15 million to $17 million that we have a good line of sight into. So I wouldn't characterize the formation as anything out of the ordinary course of business. We're operating at 50 basis points of NPAs. We probably could be range bound around that between now and the end of the year. And we're seeing a very strong credit overall on the multifamily side.

Okay. Appreciate that. And then maybe on the multifamily payoffs this quarter, those accelerated here. It kind of sounds like you're going to expect that similar pace into the fourth quarter. Is that kind of maybe how you guys are thinking about 2026 as you guys just have greater repricing and we're going to see just a continued step-up in the multifamily paydowns?

I think that I can see a continued paydowns in the multifamily. I think this quarter was a bit outsized, and we knew that we had some big prepayments or payoffs coming in. But I wouldn't expect it to be at this level of prepayment going forward, more normalized. But we are seeing maturities. When we do have maturities, there is a relatively high percentage that is refinancing out.

Our next question comes from Matthew Breese of Stephens Inc.

Avi, Stu, I wanted to follow up on the credit question just for a moment. On charge-offs specifically, Avi, I think in the past, you've discussed kind of, hey, look, we're building out a business bank. There's going to be some more normalized, call it, charge-offs than historical Dime, especially in the higher rate environment. Could you just reframe for us what you define as normalized? And I'm trying to kind of triangulate the comments. Is there a path back to normalized over the next couple of quarters?

Yes. No problem, Matt. I appreciate the question. So I think at the start of the year, our guidance for charge-offs was around 20 to 30 basis points. That's what we said before we start building out the specialty verticals, really. That was my comments back in January, right? So you look at on a year-to-date basis right now, we're basically at 31 basis points. So we're basically within the range of what we have. The new businesses that we're building out, fund finance, for example, we expect 0 losses in those new businesses, right? So I don't think the new businesses per se are going to add to the level of future charge-offs because we're making good loans and we're being very conservative in what we do.

What it may change, though, is the reserving methodology because for C&I loans, we are reserving somewhere between 125 and 150. So if you think about the model going forward, we do expect the reserve to build and us to be in that 90% to 1% area, and that could gradually build over time. It will be a function of what we're putting on. But in terms of charge-offs, I mean, we're in probably the late cycles of a high rate environment. And it's our goal with increased earnings power to exit some criticized assets here and there. So that's probably a couple more quarters of that probably that we see. But I would expect as we get into '26 to get to more of a historical Dime level, if that's what you're asking on the charge-off level. But I think on the provision level, it's going to be a function of the new business, right? And we're reserving at a higher level for the new business.

Great. And then going back to the multifamily reduction, I am curious, within that, was there any selection bias? -- stuff that's rolling off the book, was it more market rate multifamily versus rent regulated? And I would love just to hear what the market appetite is for those products refined away. Is it nondiscriminate and both are being refined away? Or are you seeing more of the market rate stuff get refined away than rent regulated?

Yes. So I think we're setting our new rates slightly above market, Matt. I think at a reprice, some of the customers are staying with us. But at maturities, we're not seeing any delineation between free market and historical rent-regulated items just because the LTVs are so low, and we've been pretty conservative in the underwriting. So I think there's a difference at the reprice. If something is repricing and still has 5 years left, you probably would see more of the rent-regulated stuff staying on with the books. But at maturity, we're seeing the same 80% to 90% of the loans are basically going away at this point. And there's really no delineation between that at this point in time, at least.

Okay. And then 2 others for me. Just one, we may be in the process of getting some short order successive rate cuts. It feels like 2 by the end of the year and then maybe 1 earlier next year, so call it, 3 or 4 -- another 3 or 4 25 bps cuts. Can you give us some idea for expectations on deposit betas as a lot has changed on year-end than previous cycles?

Yes. I'll start with this cut, Matt. So I think you asked the question last quarter, I mean, rate cuts obviously help us and gradual rate cuts help us more than probably big rate cuts because that's sometimes it's hard to cut depositors by the full amount. So we kept the deposit cost at 2.09% this quarter, consistent with the last quarter, but we continue to grow deposits, right? So we're bringing on new deposits in the low 2s. Right now, our cost of deposits is in the low 190s. Prior to this rate cut, it was 2.09%. And so we were pretty much able to pass the full 100% on. I mean we do have 30% DDA. So that is what it is.

So I'd say for this 25 basis points, we're very happy with where we ended up. So we started at 2.09%. We're at 1.90% right now. So we were able to cut and that's on total deposits. We're able to cut by 19 basis points. So I think for anything going forward for the next 2, we'd expect something similar, but it's going to depend on the competition. And look, the luxury that we have is we have a lot of new deposits coming in with -- from our branch network, from our municipal deposit bankers, from our private banking teams and from some of the commercial lending teams that we've built on. So we can be more aggressive with the existing deposit base that we have. And I don't think that's a luxury that a lot of other peers in our geography have.

So while I think the models would say 50%, 60% beta, I mean, we're trying to pass everything on going forward on the way down. And if you remember, when rates were at 0, our cost of deposits was 7 basis points back then, right? We're not getting back there, but we did pay up on the way up, and there was industry events with Signature and some of the other stuff that happened where there was a bit of retention going on. But I think on the way down, our goal is to benefit from that. And again, the NIM guidance that we gave going forward, I mean, that's absent any rate cuts, right? I mean -- so for every rate cut, we should have 5 basis points plus or minus over there, and that's kind of primarily from cutting the deposit side of the business.

Great. I appreciate all that. And then just my last one. There's been some larger banks that have identified Long Island as a market folks want to be in. And I know in prior calls, we've asked you about M&A as a buyer. And I'm curious your thoughts there. But I'm also curious to what extent you've thought about all strategic alternatives, including a potential sale if bids were to come in and some of these larger banks were to make a more pronounced effort in Long Island. That's all I had.

Yes. Thanks, Matt. Look, we're focused on organic growth. We have -- we've just brought on all these talented bankers and these teams on the loan side. We had already done that on the deposit side. We think we're really well positioned to deploy the excess liquidity that we have over the next 6 months to a year with all these teams coming on board. Our pipeline is very strong with very good yields. So I'm excited about the fact that we're going to start to see NIMs in the mid- to high 3s in a relatively mid- to long term, which is going to benefit the bottom line and our shareholder value. So really focused on that. As far as the other, look, everyone knows me. I've been around a long time. I'm always interested in maximizing shareholder value. But for now, we're really focused on organic growth.

And our next question comes from Mark Fitzgibbon of Piper Sandler.

I was wondering, with the capital ratios building nicely, and it sounds like no balance sheet growth in the fourth quarter. What are your thoughts on stock repurchases?

Yes, Mark, so we've started having those conversations in earnest at this point. I think last couple of quarters, we said early 2026, we will revisit it. I mean the common equity Tier 1 is over 11.5%. Total capital is over 16%. I mean the one thing we were trying to do is to get the CRE concentration ratio down to the low 400s, and we are there, right, at this point in time. I will say when you look at the peer groups, Mark, and more nationally because I mean, we've really broken out of the local peer group here. Our business model is completely different from a lot of the other banks here. And you look at TCE ratios or you look at common equity Tier 1 ratios, it's gone up industry-wide.

And so I don't think we're an outlier when you compare us to the rest of the industry. We obviously have a lot more capital than historical Dime used to run the balance sheet. So I think the first and best use of capital, obviously, is putting into work on all of the existing lending teams that we have, a lot of the new teams that Tom has hired and putting that to work. I mean you've seen in the press release a number of new verticals that we've brought on board. And each one of them should be a $0.5 billion business for us over 2 to 3 years, right? So we'd like to deploy that.

At the same time, the CRE runoff, the multifamily runoff is going to stop at some point relatively soon, and we'll be back in that market in a bigger way. So I think we're trying to balance a lot of those items, Mark. From a corporate finance perspective, obviously, we see the stock is very undervalued, especially as you start projecting out NIMs in '26 and '27. So from that perspective, we do want to be back in the market for that.

If you remember, after the merger, we returned around $100 million of capital to shareholders. So we have been aggressive on that. But I think the limiting factor was the CRE ratio more from an optics perspective. And I think as we get below $400 million, that will go away, and it will probably help us be back in the market. So hopefully, that provides you a bit of perspective on the different dynamics there.

It does. And also, I was curious, Avi, you mentioned there was a fraud recovery in the quarter. I guess I'm curious how much was that? And was that in other -- the other income line?

Yes, yes. So that was in other income, Mark. If you remember, this probably dating back to 2018 or 2019, Legacy Bridge had a fraud with a bus company. It was around an $8 million noninterest expense hit that they had more of an operational item. So we've been going through the legal process, and we were able to recover $1.5 million this quarter, and that's in the other -- other noninterest income line.

Okay. Great. And then I guess just sort of a bigger picture and maybe not even necessarily relating to Dime, but just industry-wide. Stu, you and I have been through a few credit cycles. I guess I'm curious where you feel like we are and what inning are we in? How does the cycle play out? Does it get markedly worse? Does it sort of just muddle along? Are we -- have we seen the worst of it? I guess I'm curious of high-level thoughts. And again, not specific to Dime per se.

Yes. No, I think we're kind of in the later innings at this point. I think we're going to muddle along a little bit going forward. Look, we -- the issues of 2023 and the 2 years thereafter kind of exacerbated some of the situations with the higher rate environment. So I think overall, the industry has done very well. And I think we're at the point now where you got a lower rate environment coming. And I think generally, at least locally, the economy remains relatively strong. So I think that the industry has kind of worked through the process and managed the credit issues very well. I think as some of the issues come up with improved earnings, there might be a little bit more aggressive approach to resolving items. But I think generally, I think the industry has done well. And I don't see us entering a significant stress environment in terms of credit.

I'm showing no further questions at this time. I'd like to turn it back to Stuart Lubow for closing remarks.

Thank you, operator, and Diane, and thank you all for -- thank all our dedicated employees and our shareholders for their continued support. We look forward to speaking to you in early 2026 after our fourth quarter.

This concludes today's conference call. Thank you for participating, and you may now disconnect.