Dime Community Bancshares, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. Unaudited results cover the quarter and six months ended June 30, 2021. The company completed its merger with Bridge Bancorp on February 1, 2021; 2021 results include Bridge from the merger date, while 2020 historical results reflect Legacy Dime only. Accordingly, year-over-year comparisons are not directly comparable. The combined bank operated 67 branches across Long Island and New York City.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net interest income | $93.3 million | $43.6 million | $171.1 million | $84.1 million |
| Net interest margin | 3.12% | 2.86% | 3.13% | 2.79% |
| Net income | $51.3 million | $13.0 million | $30.2 million | $21.4 million |
| Net income available to common | $49.5 million | $11.8 million | $26.6 million | $20.2 million |
| Diluted EPS | $1.19 | $0.55 | $0.70 | $0.91 |
| Credit loss provision (recovery) | $(4.2) million | $6.1 million | $11.5 million | $14.1 million |
Balance sheet at June 30, 2021: Total assets were $12.70 billion, loans held for investment, net, were $9.45 billion, and deposits were $11.07 billion. Cash and due from banks totaled $1.18 billion. FHLB advances were $25.0 million, other short-term borrowings $1.8 million, and subordinated debt, net, $197.2 million. Stockholders’ equity was $1.20 billion. Compared with December 31, 2020, assets increased $5.92 billion, deposits increased $6.54 billion, and FHLB advances and other borrowings fell substantially as excess liquidity was used to repay borrowings.
Cash flow and capital: For the first half, operating cash flow was $57.7 million, investing cash flow was $1.31 billion (including $716.0 million net cash acquired in the merger), and financing cash flow was $(423.7) million. Cash increased $940.6 million to $1.18 billion. At June 30, the Bank met all applicable capital requirements and was classified as well capitalized; its total risk-based capital ratio was 13.7% and Tier 1 leverage ratio was 9.2%.
Material changes and notable items
- Q2 net interest income rose $49.7 million year over year, reflecting the larger post-merger balance sheet and lower funding costs. Q2 net interest margin increased to 3.12% from 2.86%.
- Q2 non-interest income included a $20.7 million gain on SBA PPP loan sales. The company sold $596.2 million of PPP loans during the quarter. The six-month results also included a $16.5 million loss on termination of derivatives.
- Six-month non-interest expense rose to $137.7 million from $55.4 million, including $39.8 million of merger expenses and $1.7 million of branch restructuring costs. The company characterized merger costs as one-time transaction and integration-related expenses.
- The company adopted CECL on January 1, 2021. Adoption reduced the allowance for credit losses by $3.9 million and increased the reserve for unfunded commitments by $1.4 million; the after-tax cumulative adjustment increased retained earnings by $1.7 million.
- At June 30, non-accrual loans were $28.3 million, or 0.30% of loans, compared with $17.9 million at year-end. Loans 30–59 days past due were $147.7 million at quarter-end, declining to $38 million by July 22. Twenty-five loans totaling $44.5 million remained on COVID-related principal-and-interest deferrals.
Outlook, commentary, and risks
Management said the merger offers an opportunity to combine complementary businesses and improve future earnings prospects, but the filing provides no specific earnings or financial guidance. The company planned to combine five branches into existing locations in October 2021. It reported no material operational or internal-control challenges identified to date from its pandemic response, while noting that COVID-19 and related economic disruption could affect loan demand, delinquencies, collateral values, operations, and results.
Key exposures include interest-rate movements, competition for deposits, real estate values and loan performance, merger integration and execution, and the uncertain effects of COVID-19. Management reported no legal proceedings expected to have a material adverse effect and no changes to the risk factors in its 2020 Form 10-K. Merger purchase-price fair values remained provisional and subject to measurement-period adjustments. The company’s +100-basis-point EVE scenario showed a 16.12% increase, while its 12-month net interest income simulation estimated increases of 0.72% under a gradual +100-basis-point scenario and 1.76% under +200 basis points; actual outcomes may differ.
Important facts for investors to verify
- Assess earnings on a comparable, pro forma basis given the February merger and the inclusion of a substantial, nonrecurring PPP loan-sale gain in Q2.
- Track whether merger costs, branch consolidation expenses, and expected integration benefits develop as management anticipates.
- Review loan credit trends, including non-accruals, past-due balances, COVID-related deferrals, criticized loans, and allowance adequacy under CECL.
- Monitor deposit composition, liquidity, funding costs, and the effect of interest-rate changes on net interest income and securities values.
- Confirm final merger fair-value adjustments and the sustainability of reported capital, margins, and per-share earnings.