Dime Community Bancshares Reports Earnings
Over $450 Million in Loans Closed During the Quarter, Representing a 22% Annualized Loan Growth Rate
(firmenpresse) - BROOKLYN, NY -- (Marketwire) -- 01/24/13 -- Dime Community Bancshares, Inc. (NASDAQ: DCOM) (the "Company" or "Dime"), the parent company of The Dime Savings Bank of Williamsburgh (the "Bank"), today reported financial results for the quarter and fiscal year ended December 31, 2012.
Consolidated net income for the quarter ended December 31, 2012 was $6.7 million, or 19 cents per diluted share, compared to $11.8 million, or 34 cents per diluted share, for the quarter ended September 30, 2012, and $12.7 million, or 38 cents per diluted share, for the quarter ended December 31, 2011.
During the quarter ended December 31, 2012, the Company recognized an after-tax charge of $14.0 million, or $0.40 per share, on the prepayment of borrowed funds, which was partially offset by after-tax gains of $7.5 million, or $0.22 per share, on the disposal of three real estate parcels. The Company also recognized an after tax gain of $487,000, or $0.01 per share, on the sale of an equity mutual fund investment. Excluding these three transactions, net income would have been $12.8 million, or $0.37 per diluted share, during the three months ended December 31, 2012.
Vincent F. Palagiano, Chairman and Chief Executive Officer of Dime, commented, "For those who tracked our loan pipeline at the end of last quarter, you know that we were anticipating a strong quarter for originations, and it is certainly reflected in this quarter's loan growth. It was also a very active quarter in other ways as well. In addition to growing the loan portfolio at a 22% annualized rate (supported by over $450 million of originations), $155 million of high cost, long-term borrowings were prepaid and three bank-owned properties were sold at a significant gain, offsetting a portion of the borrowing prepayment fee. The three parcels were comprised of vacant land in Williamsburg, Brooklyn, and two multi-tenant commercial parcels, each containing a Dime branch. As Dime will remain a tenant in only one of the parcels, by virtue of the deposits in the other branch being serviced in the future by a branch less than a quarter mile away, operating expenses will be reduced modestly. Absent these material transactions, earnings would have been 37 cents per diluted share, three cents ahead of the prior quarter."
Mr. Palagiano continued, "Once again, the Company reported a solid quarter, as elevated loan refinance activity contributed approximately six cents to diluted earnings per share via prepayment fee income, and virtually no credit costs were recognized, as our loan portfolio continued its remarkable performance."
Net income was $40.3 million, or $1.17 per diluted share, for the year ended December 31, 2012. Excluding the significant financial transactions that occurred during the fourth quarter, net income would have been $46.4 million, or $1.35 per diluted share. This would have represented the 3rd highest level achieved by the Company since its initial public offering in 1996.
Mr. Palagiano noted, "Late in 2012, Dime transitioned from a period of no-growth to more of a measured-growth strategy, with an expectation that the Fed will adhere to its projection for maintaining low short-term interest rates through the end of 2015, and that credit costs will remain at current levels. The leverage capital ratio at the Bank level was 9.98% as of year-end (with a total risk based capital ratio of 13.7%), which is well above both regulatory, and bank-defined, guidelines for remaining well-capitalized. This leaves plenty of room for traditional capital leverage, and enhanced revenues from an expanding balance sheet should help to mitigate some of the pressure on earnings from a contracting net interest margin. The Bank typically ranks among the top 5 multifamily lenders in its delineated lending market (primarily Manhattan, Brooklyn and Queens), and our expectation is that this will continue in 2013."
Mr. Palagiano concluded, "I want to once again thank our officers and staff for all of their efforts that contributed to the successful results achieved in 2012."
The interest (or "make whole") fee to prepay borrowings caused a 278 basis point drag on net interest margin ("NIM") during the quarter, which led to a reported NIM of 0.93% during the December 2012 quarter, compared to a reported NIM of 3.59% during the September 2012 quarter. For forecasting purposes, the "core" NIM, excluding both the effect of loan prepayment fees and borrowing prepayment charges, increased from 3.24% during the September 2012 quarter to 3.30% during the December 2012 quarter, reflecting a decline of 15 basis points in the average cost of interest bearing liabilities that was partially offset by a decline of 8 basis points in the average yield on interest earning assets (primarily reflecting a reduction of 27 basis points in the average yield on real estate loans exclusive of the effects of prepayment fee income).
The reduction in the average cost of interest bearing liabilities primarily reflected the benefits of the prepayment of the $155.0 million of higher cost borrowed funds that occurred early in the quarter ended December 31, 2012. In addition, the average cost of deposits declined by 2 basis points as the Company continued to avail itself of the beneficially low deposit offering rates in its market.
A reduction of $114.9 million in the combined average balance of investment securities and other short-term investments also contributed favorably to the increase in the adjusted NIM, as the average yield on a substantial portion of these assets approximated 0.50% and had a negative carrying cost (asset yield below the cost of funding) to the Company.
Because the Company utilized $155.0 million of its liquid cash balances to prepay borrowings, cash balances ended the year at $79.1 million, down from $194.7 million at September 30, 2012.
The 27 basis point decline in the average yield on real estate loans (excluding the effects of prepayment fee income) on a linked quarter basis resulted from portfolio refinance and amortization activities, and reflected marketplace competition which produced tighter spreads on multifamily loans, as U.S. Treasury yields continued to hover at historically low levels.
Net interest income was $8.6 million in the quarter ended December 31, 2012, down $24.8 million from the September 2012 quarter and down $25.6 million from the $34.1 million reported in the December 2011 quarter. These reductions resulted primarily from the $25.6 million pre-tax charge on the borrowing prepayment. Prepayment fee income on loans totaled $3.7 million during the December 2012 quarter, compared to $3.3 million recognized in the September 2012 quarter and $1.9 million during the December 2011 quarter. Absent the impact of loan prepayment fee income and borrowing prepayment costs, net interest income was $30.4 million during the December 31, 2012 quarter, up $359,000 from the September 2012 quarter and down $1.8 million from the December 31, 2011 quarter. The decline in net interest income (absent the impact of loan prepayment fee income and borrowing prepayment costs) from the December 2011 quarter resulted primarily from a decline of 35 basis points in the average yield earned on the Company's interest earning assets, reflecting the ongoing asset repricing throughout this prolonged period of accommodative monetary policy.
The Company recognized net charge-offs of $207,000 on real estate loans during the December 2012 quarter, and determined that only a minor provision for loan losses of $63,000 was warranted during the same period. This led to a net decrease of $144,000 in the allowance for loan losses during the quarter ended December 31, 2012.
At December 31, 2012, the allowance for loan losses as a percentage of total loans stood at 0.59%, down from 0.62% at the close of the prior quarter, primarily attributable to the growth in the loan portfolio and a small reduction in the allowance for loan losses during the December 2012 quarter.
Non-interest income was $16.5 million for the quarter ended December 31, 2012, an increase of $13.9 million from the previous quarter, primarily reflecting the pre-tax gains of $13.7 million on the sales of the three real estate parcels and $887,000 on the sale of an equity mutual fund investment. Mortgage banking income increased $34,000 due to a larger recovery recognized on the liability for the first loss position on loans sold with recourse to Fannie Mae during the comparative period. Partially offsetting the increase in mortgage banking income was a reduction related to loan servicing fees totaling $375,000. Excluding these non-recurring items, normalized non-interest income declined by approximately $439,000 on a linked quarter basis due primarily to lower fee income associated with ATM activities and loan commitments.
Non-interest expense was $14.7 million in the quarter ended December 31, 2012, down $1.1 million from the prior quarter, and $1.3 million below the forecasted level of $16.0 million, due primarily to an aggregate reduction in marketing and legal expenses of $708,000.
Non-interest expense was 1.51% of average assets during the most recent quarter. The efficiency ratio, excluding the impact of both the $25.6 million pre-tax borrowing prepayment charge and the gains recognized on the sales of both real estate and the equity mutual fund, approximated 40.9%. This remains among the lowest efficiency ratios in the industry, and is a longstanding hallmark of Dime.
Due to tax benefits recognized as a result of the significant financial transactions that occurred during the period, the effective tax rate approximated 34% during the most recent quarter. Excluding those, the effective tax rate approximated 40% during the December 2012 quarter, slightly below the 41% forecasted level.
Total assets were $3.91 billion at December 31, 2012, down $49.0 million from September 30, 2012. Cash and due from banks and federal funds sold and other short-term investments declined by $115.6 million and $60.0 million respectively, as these liquid funds were utilized to both prepay $155.0 million of borrowings and pay semi-annual real estate tax payments out of escrow deposits.
Real estate loans increased approximately $180.0 million during the most recent quarter. Deposits also increased $60.3 million during the same period.
Real estate loan originations were $454.5 million during the December 2012 quarter, at an average rate of 3.42%. Of this amount, $102.2 million represented loan refinances from the existing portfolio. Loan amortization and satisfactions, also including the $102.2 million of refinances of existing loans, totaled $253.3 million during the quarter, or 29.7% of the average portfolio balance on an annualized basis. The average rate on amortized or satisfied loan balances during the most recent quarter was 5.74%. Total loan commitments stood at $138.8 million at December 31, 2012, with a weighted average rate of 3.73%. The average yield on the loan portfolio (excluding prepayment fee income) during the quarter ended December 31, 2012 was 4.85%, compared to 5.12% during the September 2012 quarter and 5.39% during the December 2011 quarter.
Non-performing loans (excluding loans held for sale) were $8.9 million, or 0.25% of total loans, at December 31, 2012, down from $10.7 million, or 0.32% of total loans, at September 30, 2012. Loans delinquent between 30 and 89 days and accruing interest were $7.2 million, or approximately 0.20% of total loans, at December 31, 2012, compared to $4.3 million, or 0.13% of total loans, at September 30, 2012.
The sum of non-performing assets represented 2.6% of tangible capital plus the allowance for loan losses (a statistic otherwise known as the "Texas Ratio") at December 31, 2012 (see table at the end of this release). This number compares very favorably to both industry and regional averages.
Within the pool of serviced loans previously sold to Fannie Mae with recourse exposure, total loans delinquent 30 days or more approximated $703,000 at December 31, 2012, down from $2.0 million at September 30, 2012. The remaining pool of loans serviced for Fannie Mae totaled $256.7 million as of December 31, 2012, down from $279.8 million as of September 30, 2012. Due to both ongoing amortization and stabilization of problem loans within the Fannie Mae portfolio, the Company determined that its liability for the first loss position could be reduced by $178,000, which was recognized during the quarter ended December 31, 2012.
As of December 31, 2012, the Company's loan portfolio had experienced only minor performance issues stemming from Hurricane Sandy, which, on October 28 and 29, 2012, caused extensive damage to real estate properties throughout its market area.
Deposits increased $60.3 million from September 30, 2012 to December 31, 2012, due primarily to net inflows of $76.0 million in money market deposits. The Bank is being somewhat more aggressive in its promotional deposit pricing as part of its long-term strategy to emphasize deposits to fund growth rather than borrowings. At December 31, 2012, average deposit balances approximated $95.4 million per branch. The Bank remains selective in the products, rates and terms on which it competes for deposits, focusing on products that encourage long-term customer retention, and discouraging renewals of promotional deposits in cases where customer relationships have not proved durable.
During the December 2012 quarter, the Company prepaid its entire $155.0 million balance of securities sold under agreements to repurchase borrowings and increased its Federal Home Loan Bank of New York ("FHLBNY") advances by $75.0 million. Despite the long-term goal to emphasize deposits to fund growth, the Company will continue to use FHLBNY advances to supplement deposit funding when appropriate.
The Company's consolidated tangible common equity ratio (Tier 1 core leverage) grew this quarter as a result of both retained earnings and a reduction in tangible assets. Consolidated tangible capital was 8.97% of tangible assets at December 31, 2012, an increase of 21 basis points from September 30, 2012. The Company also had approximately $70.7 million of trust preferred debt securities outstanding at December 31, 2012, which, when added to Tier 1 (tangible) capital, increased its consolidated Tier 1 (tangible) capital ratio to approximately 10.4%.
The Bank's tangible capital ratio was 9.98% at December 31, 2012, up from 9.83% at September 30, 2012. The Bank's Total Risk-Based Capital Ratio was 13.67% at December 31, 2012, compared to 14.33% at September 30, 2012.
Reported earnings per share exceeded the quarterly cash dividend rate per share by 36%. Excluding the effects of the significant financial transactions that occurred during the most recent quarter, earnings per share exceeded the quarterly cash dividend rate per share by 164%, a 38% payout ratio. Despite the charge on the borrowing prepayment, additions to capital from earnings and stock option exercises during the most recent quarterly period caused tangible book value per share to increase $0.09 sequentially during the most recent quarter, to $9.67 at December 31, 2012.
At December 31, 2012, Dime had outstanding loan commitments accepted totaling $138.8 million (of which $66 million related to loan refinances from the current portfolio), all of which are likely to close during the quarter ending March 31, 2013. Total loan originations for the first quarter of 2013 are expected to approximate $225 million at an average interest rate expected to approximate 3.5%.
As discussed earlier in the release, the Company has transitioned into a period of measured loan portfolio and balance sheet growth, in part to utilize capital efficiently and in part to mitigate the effects of a contracting margin. For the year ending December 31, 2013, balance sheet growth is targeted to approximate 5.0%, subject to change to reflect market conditions. Loan prepayments and amortization remained elevated during the most recent quarter, however, are currently anticipated to fall below their 30% annualized 2012 level during the year ending December 2013, and are expected to approximate 25% - 30% during the March 2013 quarter.
On the liability side, deposit funding costs are expected to remain near current historically low levels through the first quarter of 2013. The Bank has $146.0 million of CDs maturing at an average cost of 0.86% during the quarter ending March 31, 2013. Offering rates on 12-month term CDs currently approximate 50 basis points. The Company has $95.0 million of borrowings (predominantly short-term in nature) due to mature during the quarter ending March 31, 2013. The Company currently anticipates they will be replaced with deposits. Beginning this month, the Bank initiated a deposit campaign, using promotional rates, which is receiving a successful response. Through this release date, over $60 million of deposits have been raised. As a result, there should be some slight increase in cost of deposits, as measured on a linked quarter basis.
If current positive credit trends continue, as expected, loan loss provisioning will continue to be a function only of loan portfolio growth.
Absent any unforeseen items, non-interest expense is expected to approximate $15.5 million during the March 2013 quarter.
The Company projects that the consolidated effective tax rate will approximate 41.0% in the March 2013 quarter.
The Company (NASDAQ: DCOM) had $3.91 billion in consolidated assets as of December 31, 2012, and is the parent company of the Bank. The Bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has twenty-six branches located throughout Brooklyn, Queens, the Bronx and Nassau County, New York. More information on the Company and Dime can be found on the Dime's Internet website at .
This News Release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may be identified by use of words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would" and similar terms and phrases, including references to assumptions.
Forward-looking statements are based upon various assumptions and analyses made by the Company in light of management's experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company's control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company's control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins; changes in deposit flows, loan demand or real estate values may adversely affect the business of Dime; changes in accounting principles, policies or guidelines may cause the Company's financial condition to be perceived differently; changes in corporate and/or individual income tax laws may adversely affect the Company's financial condition or results of operations; general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates; legislation or regulatory changes may adversely affect the Company's business; technological changes may be more difficult or expensive than the Company anticipates; success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates; or litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates.
Kenneth Ceonzo
Director of Investor Relations
718-782-6200 extension 8279
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