Regional bank Dime Community Bancshares (NASDAQ: DCOM) announced better-than-expected revenue in Q3 CY2025, with sales up 33.3% year on year to $116.7 million. Its non-GAAP profit of $0.61 per share was 11.6% below analysts’ consensus estimates.

Is now the time to buy DCOM? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Dime Community Bancshares’ third quarter results were met with a significant negative market reaction, as non-GAAP earnings per share fell short of Wall Street expectations despite strong revenue growth. Management attributed the mixed performance to increased loan loss provisions tied to real estate charge-offs and elevated expenses from recent banker hires. CEO Stuart Lubow highlighted declining criticized loans and improved past-due metrics, stating, “Our core earnings power continues its significant upward trajectory,” while acknowledging that loan losses were concentrated in nonowner-occupied real estate and not multifamily segments.

Looking forward, management sees further margin expansion as a key driver, underpinned by deposit cost reductions and loan repricing opportunities. CFO Avinash Reddy emphasized a “structurally higher NIM and enhanced earnings power over time,” pointing to $1.35 billion in loans set to reprice in 2026 and an additional $1.7 billion in 2027. While expectations for noninterest income are tempered by one-time fraud recoveries not repeating, management remains optimistic that disciplined cost control and ongoing business loan growth will support profitability, even as the company navigates elevated credit reserves for new loan categories.

Key Insights from Management’s Remarks

Management credited loan growth in the business segment, deposit inflows, and disciplined cost of funds for the quarter’s revenue outperformance, but saw margin and profit pressure from credit provisions and higher expenses.

• Business loan growth: The company experienced robust business loan origination, adding over $160 million in new business loans during the quarter and surpassing $400 million in year-over-year growth. Management attributed this to strong pipelines and recent recruitment of commercial bankers, reinforcing a shift toward commercial and industrial (C&I) lending.

• Deposit franchise momentum: Dime Community Bancshares grew core deposits by $1 billion year-over-year, with cost of total deposits holding steady at 2.09%. Management highlighted success in attracting new deposits through expanded branch and private banking teams, supporting a core deposit-funded balance sheet.

• Net interest margin (NIM) expansion: The company’s NIM surpassed 3% for the first time in six quarters, aided by stable deposit costs and the ability to maintain loan yields. The spread between loans and deposits increased after the Federal Reserve rate cut, and management expects further NIM gains in the next quarter.

• Higher credit provisions: Elevated loan loss provisions were tied primarily to charge-offs in owner-occupied and nonowner-occupied real estate segments, not multifamily. Management described nonperforming assets as remaining low at 50 basis points of total assets and indicated that criticized loans and delinquencies both declined quarter-on-quarter.

• Expense pressures from hiring: Core cash operating expenses came in slightly above guidance due to additional hiring, as the company invested in expanding its commercial banking capabilities. Management expects expense growth to moderate in the coming quarters as new hires are absorbed and further large-scale additions are paused until 2026.

Drivers of Future Performance

Management expects continued NIM expansion and business loan growth to underpin future revenue and profitability, while credit provisioning and expense discipline remain key areas of focus.

• Loan repricing and margin gains: Approximately $1.35 billion in adjustable and fixed-rate loans are set to reprice or mature in 2026, with management estimating a potential 20 basis point NIM increase by the end of next year. An additional $1.7 billion will reprice in 2027, which could further boost margins.

• Deposit cost management: Management aims to continue reducing deposit costs in step with Federal Reserve rate cuts, leveraging new deposit inflows to keep funding costs competitive. They expect each 25 basis point rate cut to translate into roughly 5 basis points of NIM improvement, provided competitive dynamics remain favorable.

• Elevated reserve levels for new businesses: As Dime Community Bancshares builds out new lending verticals, particularly in C&I, management anticipates maintaining higher reserves relative to historical levels. This approach is intended to offset any potential losses while new portfolios season, even as the company expects actual charge-offs to normalize over time.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be closely monitoring (1) the impact of loan repricing on net interest margin expansion, (2) the rate of business loan origination and the contribution of recently recruited commercial bankers, and (3) the ability to maintain deposit growth and manage funding costs amid expected further Federal Reserve rate cuts. We will also track whether expense discipline is sustained as new hires are integrated.

Dime Community Bancshares currently trades at $28.19, down from $29.53 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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