Executive Summary / Key Takeaways

• Accelerated Profitability Trajectory: Dime Community Bancshares (DCOM) is demonstrating significant core earnings power, with its Net Interest Margin (NIM) surpassing 3% in Q3 2025 and projected to expand further, driven by strategic deposit cost management and substantial loan repricing opportunities in 2026 and 2027.
• Robust Core Deposit Growth: The company has successfully transformed its funding base through aggressive hiring of deposit-gathering teams, leading to a $1 billion year-over-year increase in core deposits by Q3 2025 and a stable 30% non-interest-bearing deposit (DDA) base, providing ample, low-cost liquidity.
• Strategic Loan Portfolio Shift: DCOM is actively diversifying its loan portfolio by growing business loans (C&I, owner-occupied CRE, healthcare, new specialty finance verticals) while prudently managing down its commercial real estate (CRE) concentration, aiming for a mid-single-digit overall loan growth profile by 2026.
• Strong Capital and Disciplined Risk Management: With best-in-class capital ratios (CET1 over 11.5%, Total Capital over 16%) and a disciplined approach to credit quality, including a rising allowance for credit losses, DCOM is well-positioned to capitalize on organic growth opportunities and maintain resilience.
• Strategic Market Expansion and Talent Acquisition: Ongoing recruitment of experienced bankers and planned branch expansions into key markets like Manhattan, Lakewood, New Jersey, and North Shore Long Island underscore DCOM's commitment to deepening its regional presence and driving future growth.

Introduction: A Community Bank's Commercial Evolution

Dime Community Bancshares, Inc. (NASDAQ:DCOM) stands as a pivotal regional banking institution, deeply rooted in the New York metropolitan area since its subsidiary, Dime Community Bank, was established in 1910. The company's core business revolves around community banking, offering a comprehensive suite of commercial and consumer lending, personal and business banking, treasury management, and merchant services to individuals, businesses, and municipalities across Long Island and New York City boroughs. DCOM's overarching strategy is to evolve into a highly profitable commercial bank, characterized by robust business loan growth, a strong core deposit base, and a disciplined management of its commercial real estate (CRE) concentration.

The competitive landscape for DCOM is dynamic, populated by a mix of larger regional banks like New York Community Bancorp , Webster Financial Corporation , Citizens Financial Group , and KeyCorp , as well as indirect competitors such as fintech companies and online lenders. DCOM differentiates itself through its strong local brand, deep-seated relationships within its communities, and specialized regulatory licenses that grant access to niche lending markets. These advantages foster customer loyalty and can lead to lower customer acquisition costs, enhancing profitability. However, DCOM's smaller scale compared to its larger regional peers can present vulnerabilities, potentially leading to higher operational costs and a slower pace of technological innovation.

DCOM's technological approach, while not centered on a proprietary "core technology" in the manufacturing sense, is strategically focused on leveraging digital tools to enhance operational efficiencies and improve the customer experience. The company utilizes technology to streamline internal processes, support its growing branch network, and facilitate its private and commercial banking services. This commitment to technological enablement, rather than a unique technological product, is crucial for maintaining competitiveness against rivals who often boast more advanced digital platforms and greater R&D investments. The broader industry trend towards digital banking and the emergence of AI-driven data centers also underscore the importance of continuous technological investment for all financial institutions, influencing lending demands in commercial real estate and construction.

Strategic Transformation: Building a Differentiated Franchise

DCOM's recent history is defined by a deliberate and successful strategic transformation aimed at solidifying its position as a leading business bank in New York. A cornerstone of this strategy has been an aggressive talent acquisition drive, particularly for deposit-gathering teams. Since 2023, DCOM has successfully recruited numerous teams, including those from the former Signature Bank, which collectively grew their deposit portfolios to approximately $2.6 billion by Q3 2025. This influx of talent has been instrumental in increasing core deposits by $1 billion year-over-year and establishing a stable 30% non-interest-bearing deposit (DDA) base, significantly reducing reliance on wholesale borrowings and brokered deposits.

Complementing its deposit strategy, DCOM has actively reshaped its loan portfolio. The company is prioritizing growth in higher-yielding business loans, including Commercial & Industrial (C&I), owner-occupied CRE, and specialized verticals such as healthcare. Business loans expanded by over $160 million in Q3 2025 alone, contributing to a year-over-year growth exceeding $400 million. The company's loan pipeline remains robust, standing at $1.2 billion with a weighted average rate between 6.50% and 6.75%. To further drive this diversification, DCOM has brought on key personnel, including Tom Geisel, to build out new lending verticals like corporate/specialty finance, lender finance, and fund finance. These new areas are expected to be significant contributors, with each projected to become a $0.5 billion business over the next three to four years, offering floating rate assets with spreads typically ranging from 225 to 300 basis points over SOFR.

DCOM's strategic expansion also includes a physical footprint. The company recently opened a branch in Manhattan and is on track to open a new location in Lakewood, New Jersey, in Q1 2026, followed by another on the North Shore of Long Island in early 2026. The Lakewood expansion is particularly strategic, leveraging existing customer relationships in Brooklyn and tapping into a market with significant deposit and loan opportunities. These initiatives collectively underscore DCOM's commitment to deepening its regional presence and enhancing its capacity for organic growth.

Financial Performance: Momentum Towards Enhanced Profitability

Dime Community Bancshares has demonstrated a compelling upward trajectory in its financial performance, driven by its strategic initiatives. The company's Net Interest Margin (NIM) has shown consistent expansion, marking its sixth consecutive quarterly increase to reach 3.01% in Q3 2025. Excluding prepayment fees and purchase accounting, the core NIM was 2.98%. This improvement is largely attributable to disciplined deposit cost management; the cost of total deposits remained unchanged at 2.09% in Q3 2025, and management successfully reduced this to the low 190s following the September Fed rate cut.

Net interest income reflects this positive trend, increasing by $23.50 million to $103.40 million in Q3 2025 compared to the prior year, and rising by $68.80 million to $295.70 million for the nine months ended September 30, 2025. While interest income from business loans increased due to higher average balances, partially offset by a slight yield decrease, interest income from non-owner-occupied commercial real estate and multifamily loans saw decreases, reflecting strategic portfolio adjustments. Interest expense decreased significantly by $12.20 million in Q3 2025, primarily due to lower rates paid on deposits and reduced costs associated with derivative cash collateral and FHLBNY advances.

Non-interest income for Q3 2025 totaled $12.20 million, an increase from $7.60 million in Q3 2024, bolstered by a $2.40 million increase in Bank Owned Life Insurance (BOLI) income and a $1.5 million positive benefit from a fraud recovery related to a legacy merger. Core cash operating expenses, excluding intangible amortization, were $61.9 million in Q3 2025, slightly above previous guidance due to strategic new hires. The company's core pretax pre-provision income reached $54.4 million in Q3 2025, a significant increase from $29.8 million a year ago, translating into a core Return on Average Assets (ROA) of 85 basis points in Q2 2025 and 77 basis points in Q1 2025. This demonstrates a clear path towards enhanced profitability and operational efficiency.

Asset Quality and Disciplined Risk Management

DCOM maintains a disciplined approach to asset quality and risk management, crucial for its long-term stability. While non-performing assets (NPAs) increased slightly on a linked-quarter basis to 0.50% of total assets in Q3 2025, this remains a relatively small base and compares favorably to commercial bank peers. The provision for credit losses was $13.30 million in Q3 2025, primarily tied to charge-offs in owner-occupied and non-owner-occupied real estate segments, with no multifamily-related charge-offs. Notably, criticized loans decreased by approximately $30 million on a linked-quarter basis, and loans 30 to 89 days past due saw a 33% reduction.

The allowance for credit losses as a percentage of total loans increased to 0.88% at September 30, 2025, from 0.78% at December 31, 2024. Management targets a medium- to longer-term allowance for credit losses in the 90 basis points to 1% range, anticipating a natural build as the portfolio shifts towards more C&I loans. Charge-offs for 2024 were 17-18 basis points, and a range of 20-30 basis points is considered reasonable for a commercial bank in 2025, with expectations to return to historical Dime levels by 2026.

The company's concentration in non-owner-occupied commercial real estate and multifamily residential loans, which collectively represented 61% of total loans held for investment in Q3 2025, is actively managed through diversified property types and geographic locations to mitigate adverse economic events. DCOM has also enhanced its stress testing and loan review activities to address interest rate reset risk, particularly focusing on borrowers' ability to absorb higher interest rates. The rent-regulated multifamily portfolio, despite market changes, is considered strong, with repriced pre-2019 loans being current and improving debt service coverage ratios.

Outlook and Guidance: A Clear Path to Higher Margins

Dime Community Bancshares' outlook is characterized by a strong conviction in continued Net Interest Margin (NIM) expansion and enhanced earnings power. Management anticipates "more substantial NIM expansion" in Q4 2025, driven by the increased spread between loans and deposits following recent Fed rate cuts. The company projects a "structurally higher NIM" over time, with a clear path to 3.25% and then 3.50% in the medium to longer term. A significant catalyst for this is the "back book" loan repricing opportunity: approximately $1.35 billion of adjustable and fixed-rate loans at a weighted average rate of 4% are set to reprice or mature in 2026, potentially adding 20 basis points to NIM by year-end. Another $1.7 billion of loans at 4.25% will contribute to NIM expansion in 2027. Furthermore, each 25 basis point Fed rate cut is expected to yield approximately 5 basis points of NIM improvement, primarily from deposit cost reductions.

Regarding balance sheet growth, DCOM expects a relatively flat balance sheet for the remainder of 2025, as planned attrition in transactional CRE and multifamily loans will temporarily offset growth in the business loan portfolio. The strategic goal is to reduce the CRE concentration ratio to the "low 400s" by year-end. Beyond 2025, the company anticipates returning to a mid-to-high single-digit loan growth profile in 2026, fueled by its expanding business lending verticals.

Expense guidance reflects ongoing investments in talent. Core cash operating expenses for Q4 2025 are projected to be around $63 million, with the full-year 2025 guidance set between $236.5 million and $237.5 million, accounting for recent hires. Non-interest income for Q4 2025 is expected to be around $10 million to $10.5 million, excluding the one-time fraud recovery from Q3 2025, with the full-year guidance remaining at $40 million to $42 million. The effective tax rate is expected to be between 27% and 27.5% for Q3 2025 and 27% to 28% for the full year. DCOM's "best-in-class capital ratios" (CET1 over 11.5%, Total Capital over 16%) provide a strong foundation for organic growth, with potential stock repurchases to be revisited in early 2026 once the CRE concentration target is met.

Competitive Positioning and Industry Dynamics

Dime Community Bancshares occupies a distinct position within the competitive New York banking landscape. The company has "clearly differentiated" its franchise from local competitors through its growth trajectory and ability to attract talented bankers. Its "best-in-class capital ratios" are a significant competitive advantage, enabling DCOM to pursue opportunities and service its growing customer base effectively. Management asserts that DCOM has "broken out of the local peer group" due to its differentiated business model.

When compared to larger regional players, DCOM leverages its deep local expertise and established relationships, particularly in the commercial and real estate sectors. While competitors like New York Community Bancorp (NYCB) may offer greater operational scale and broader geographic reach, DCOM's community-focused approach fosters stronger customer loyalty, especially with local municipalities and long-standing real estate clients. NYCB's recent financial performance has included challenges in profitability margins, whereas DCOM is demonstrating consistent NIM expansion.

Against technologically advanced competitors like Webster Financial Corporation (WBS) and KeyCorp (KEY), DCOM's technological strategy focuses on operational efficiencies and enhancing customer experience rather than proprietary innovation. While WBS and KEY may lead in digital platforms and fintech investments, DCOM's strength lies in its personalized service model, which appeals to customers valuing local expertise. Citizens Financial Group (CFG), with its national presence, offers a wider array of services, but DCOM's niche lending, such as construction and home equity loans, provides a focused competitive edge in specific real estate segments.

The broader industry is experiencing significant trends, including technological disruptions from AI and data centers. While these trends create opportunities for DCOM in real estate lending, they also necessitate continuous investment in technology, potentially straining DCOM's cost structure compared to rivals with larger R&D budgets. The influx of fintech companies and online lenders also presents indirect competition, potentially impacting DCOM's market share in consumer and small business lending. However, DCOM's ability to attract new deposits at competitive rates, particularly from its branch network and specialized banking teams, provides a "luxury" that many peers in its geography lack, enabling it to be more aggressive in managing deposit costs. The current rational pricing environment in both loans and deposits further supports DCOM's competitive standing.

Conclusion

Dime Community Bancshares is executing a compelling strategic transformation, successfully shifting its focus towards a more profitable commercial banking model. The company's relentless pursuit of core deposit growth, coupled with a disciplined approach to loan portfolio diversification and risk management, is yielding tangible financial benefits, most notably a consistently expanding Net Interest Margin. With a clear roadmap for further NIM expansion driven by significant loan repricing opportunities and a strong capital base, DCOM is well-positioned for enhanced earnings power in the coming years. The company's strategic talent acquisition and targeted market expansions underscore its commitment to building a differentiated franchise. While facing competitive pressures and the need for ongoing technological investment, DCOM's deep local relationships and disciplined execution provide a solid foundation for continued growth and value creation for discerning investors.