Dime Community Bancshares Inc. (NASDAQ:DCOM) Q4 2018 Earnings Conference Call Transcript

Jan 24, 2019 • 05:30 pm ET


Dime Community Bancshares Inc. (NASDAQ:DCOM) Q4 2018 Earnings Conference Call Transcript


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Good day, and welcome to the Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Kenneth Mahon, President and CEO. Please go ahead.

Kenneth Mahon

Thank you, Sean; and thanks, everyone, for joining us this evening. On the call with me today are our newly minted CFO, Avi Reddy, you may have seen the announcement the other day; and also Chief Accounting Officer, Leslie Veluswamy. So I'm really starting today at 4:30. So in our prepared remarks I'm going to pick up some of the broad themes that underline the earnings release and also our outlook for fiscal year 2019. I'll keep my opening remarks brief, and then we'll leave some time for questions at the end.

As many of you who follow us know at the beginning of 2017, two years ago, this month, upon the retirement of our long-serving CEO, Vinny Palagiano, we undertook the strategy of transforming the Company's monoline multi-family business model. We chose the Company's vision that of becoming a robust community commercial bank. Primary impetus for the change was because we believe the community commercial bank model provides the possibility of better returns for shareholders in the future, given changes in the operating landscape over time in the form of better returns in equity and better trading multiples to book values into earnings.

Dime's business model transformation has been focused on producing a higher-quality balance sheet structure summarizing these four financial metrics: First, growing our checking account balances; growing relationship-based commercial loans that have good risk-adjusted returns; increasing low-cost business deposit sourced both from our commercial customers and from our branches; and continuing to reduce our CRE concentration ratio.

So let's first start with growing our checking account balances. On a year-over-year basis, the sum of non-interest-bearing and interest-bearing checking accounts increased by 18.5% to $502 million at the end of December. Every dollar of low-cost deposits that we raise increases the franchise value of the Company. One of my favorite Tom Brown expressions is Fearless Focus. So from the CEO to our entire customer-facing staff, our incentive plans are designed around incenting low-cost deposit growth.

Second, our second objective, financial objective is growing relationship-based commercial loans. The Business Banking division's portfolio grew to $648 million at the end of the year compared to $236 million at year-end 2017. Portfolio now represents 12% of total loans. Our net portfolio growth target for our first year in business was $250 million, which we came close to achieving. We weren't really sure at that point what our capabilities were going to be.

For 2018, however, we established a net portfolio growth target of approximately $315 million and actually achieved $412 million of net portfolio growth for the year, surpassing our own internal target by over $90 million, 30% of the -- higher than the beginning portfolio objective. We doubled the number of teams in the year and now have