DIME COMMUNITY BANCSHARES REPORTS FIRST QUARTER EARNINGS
Diluted Earnings Per Share of 17 Cents; Annualized Deposit Growth of 32% in the Quarter
Brooklyn, NY - April 24, 2007 - Dime Community Bancshares, Inc. (NASDAQ: DCOM), (the "Company"), the parent company of The Dime Savings Bank of Williamsburgh (the "Bank"), today reported net income of $5.8 million, or 17 cents per diluted share, for the quarter ended March 31, 2007, compared to $8.4 million, or 24 cents per diluted share, for the quarter ended March 31, 2006 and $6.0 million, or 17 cents per diluted share, for the quarter ended December 31, 2006.
Core earnings were substantially the same as reported earnings during the quarters ended March 31, 2007 and December 31, 2006, and were $8.1 million, or $0.23 per diluted share, for the quarter ended March 31, 2006. Reported earnings exceeded core earnings during the quarter ended March 31, 2006 due to pre-tax gains of $478,000 recorded on the disposition of real estate obtained in the Company's 1999 acquisition of Financial Bancorp, Inc., and $43,000 from restructured borrowings.
According to Vincent F. Palagiano, Chairman and Chief Executive Officer of the Company, “The first quarter of 2007 basically met our expectations, with loan prepayment fee income exceeding our conservative estimate, and earnings therefore reaching the high end of our forecasted range."
Mr. Palagiano continued, "Despite the challenges posed by the shape of the yield curve, we believe that the tail end of the earnings drag from the tightening of monetary policy is approaching. Barring an increase in short term interest rates, we remain optimistic about the resumption of quarterly earnings growth beginning in the second half of the year."
First Quarter 2007 Highlights
| § | Real estate loan originations were $123.3 million at an average rate of 6.34%, compared to $123.8 million at an average interest rate of 6.50% during the fourth quarter of 2006. |
| § | Loans in the pipeline approximated $109.9 million at quarter-end, including commitments for sale to Fannie Mae of $21.3 million. |
| § | The annualized loan amortization rate was 11% compared to 9% during the previous quarter. Prepayment fee income was $1.2 million, compared to $561,000 in the December 2006 quarter and $768,000 in the March 2006 quarter. |
| § | Ending deposits increased by 32% annualized, and linked quarter average cost of deposits rose from 3.35% to 3.54%. |
| § | Net interest margin was 2.33%, relatively flat sequentially. |
| § | The Company repurchased 425,458 shares of its common stock, compared to 209,332 shares repurchased in the December 2006 quarter. The consolidated tangible equity ratio fell to 7.24% at March 31, 2007 from 7.74% at December 31, 2006. |
| § | Quarterly non-interest expense increased 8% both sequentially and year-over-year. |
OPERATING RESULTS
For the quarter ended March 31, 2007, the Company’s pre-tax income, excluding gains and losses on the sale of assets, was $8.8 million, compared to $12.2 million in the same quarter of the previous year. The $3.4 million decrease was due to a decline of $2.6 million in net interest income and an increase of $800,000 in non-interest expense experienced primarily in salary and benefits.
The net interest margin contracted 43 basis points, from 2.76% during the March 2006 quarter to 2.33% during the March 2007 quarter, due mainly to an increase of 109 basis points in the average cost of deposits during the period.
Pre-tax income, excluding gains and losses on the sale of assets was $8.8 million during the March 2007 quarter, compared to $9.4 million during the December 2006 quarter. The $600,000 decline from the December 2006 quarter was primarily due to an increase of $868,000 in non-interest expense that was partially offset by an increase of $414,000 in net interest income. The growth in non-interest expense resulted primarily from regular salary and benefit increases. The increase in net interest income resulted from both a $76.4 million increase in average interest earning assets and an increase of $673,000 in prepayment fee and late charge income during the comparative period. The net interest margin remained relatively flat during the same period.
During the quarter ended December 31, 2006, the Company received returns of approximately $500,000, or 27%, on its approximately $7.0 million in equity investments, which helped the overall yield on interest earning assets during the period. Excluding the effects of prepayment fee and late charge income and the equity returns received in the December 2006 quarter, net interest income would have increased $207,000 and the net interest margin would have declined 2 basis points during the quarter ended March 31, 2007 compared to the quarter ended December 31, 2006.
The average yield on portfolio real estate loans, excluding the effects of prepayment fee income, was 5.75% during the quarter ended March 31, 2007 and 5.72% during the quarter ended December 31, 2006. The interest rates on newly originated real estate loans averaged 6.34% during the first quarter of 2007, compared to an average rate on loans repaid of 6.23% during the period.
Non-interest income, excluding gains or losses on the sale of assets, totaled $2.2 million during the quarter ended March 31, 2007, relatively constant from both the March and December 2006 quarters.
The Company sold loans to Fannie Mae totaling $20.2 million, $27.1 million and $5.0 million, recording gains of $244,000, $399,000 and $84,000, during the quarters ended March 31, 2007, March 31, 2006 and December 31, 2006, respectively. Each of the loans sold during these periods was designated for sale upon origination. The loans sold during the quarter ended March 31, 2007 had a weighted average term to the earlier of maturity or next repricing of 10.9 years.
Non-interest expense totaled $11.2 million during the quarter ended March 31, 2007, up $800,000 from the March 2006 quarter and $868,000 from the December 2006 quarter. The growth in non-interest expense from both comparative periods reflected base salary and benefit increases and higher marketing costs. Higher benefit costs are the result of increases to payroll taxes and health insurance.
Non-interest expense to average assets was 1.40% in the March 2007 quarter, compared to 1.34% for the quarter ended March 31, 2006 and 1.32% for the quarter ended December 31, 2006.
The effective tax rate was 35.9% for the quarter ended March 31, 2007, 35.8% for the quarter ended March 31, 2006, and 36.8% for the quarter ended December 31, 2006. The effective tax rate is expected to approximate 36.0% for the year ending December 31, 2007.
REAL ESTATE LENDING AND CREDIT QUALITY
Real estate loan originations totaled $123.3 million during the quarter ended March 31, 2007. The average rate on total loan originations during the quarter was 6.34%, compared to 6.14% during the quarter ended March 31, 2006 and 6.50% during the quarter ended December 31, 2006. The decline in the average origination rate during the most recent quarter primarily reflects an increase in the ratio of FNMA originations to total originations, as the average FNMA loan origination rates consistently fell below the portfolio real estate origination rates from October 2006 through March 2007.
Real estate loan prepayments and amortization during the March 2007 quarter approximated 11% of the real estate loan portfolio on an annualized basis, compared to 10% during the March 2006 quarter and 9% during the December 2006 quarter. The weighted average interest rate on real estate loan prepayments and amortization during the most recent quarter was 6.22%.
Non-performing loans were $2.9 million at March 31, 2007, representing only 0.11% of total loans, down slightly from $3.6 million at December 31, 2006.
DEPOSITS
As a result of promotional activities during the first quarter of 2007, deposits increased $160.5 million, reflecting increases of $108.4 million in core (non-certificate) deposits and $52.1 million in certificates of deposit. The growth in core deposits was experienced primarily in money market accounts.
Average deposits per branch approximated $103 million at March 31, 2007, up from $93 million at March 31, 2006 and $96 million at December 31, 2006. The loan-to-deposit ratio was 126% at March 31, 2007, compared to 136% at March 31, 2006 and 135% at December 31, 2006. The increase in average deposits per branch and the decrease in the loan-to-deposit ratio at March 31, 2007 compared to December 31, 2006 resulted from the $160.5 million growth in deposits during the period. Core deposits comprised 49% of total deposits at March 31, 2007, up slightly from 48% at March 31, 2006, and up from 47% at December 31, 2006 (reflecting growth of $102.5 million in money markets from December 31, 2006 through March 31, 2007).
Commenting on the Company's deposit growth, Mr. Palagiano remarked, "There is a degree of seasonality to deposit flows, and the first quarter's deposit gains reflect our program to
capture a greater share of those seasonal flows. Although our marketing programs continue throughout the year, we do not anticipate such a similar robust rate of response until later in the year."
STOCKHOLDERS' EQUITY AND SHARE REPURCHASE PROGRAM
The Company’s total stockholders’ equity at March 31, 2007 was $285.2 million, or 8.64% of total assets, compared to $290.6 million, or 9.16% of total assets, at December 31, 2006. The majority of the decline during the first quarter resulted from $5.6 million in treasury stock repurchases during the period and a reduction in equity of $1.7 million related to the adoption of Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes." The majority of the reduction in stockholders' equity as a percentage of total assets from 9.16% to 8.64% resulted from the growth of $126.1 million in total assets during the quarter ended March 31, 2007.
After outlays for dividends paid to shareholders and share repurchases, by the end of the first quarter of 2007 the Company’s tangible equity had declined to $235.8 million, compared to $241.8 million at December 31, 2006. The quarterly cash dividend paid in February 2007 represented a payout ratio of 82% of first quarter 2007 earnings. At March 31, 2007, tangible stockholders’ equity was 7.24% of tangible assets and the tangible book value per share was $6.54.
For the quarter ended March 31, 2007, the return on average stockholders’ equity was 8.12%, the return on average tangible equity was 9.80%, and the cash return on average tangible equity was 10.35%.
During the first quarter of 2007, the Company repurchased into treasury 425,458 shares, or 1.2%, of its common stock outstanding at December 31, 2006. As of March 31, 2007, the Company had an additional 1,261,152 shares remaining eligible for repurchase under its eleventh stock repurchase program, approved in December 2005.
OUTLOOK
At present, the overall yield on the Company's interest-earning assets is rising. The average yield on interest earning assets, excluding the effects of prepayment fee income and fourth quarter 2006 equity returns, rose on a linked quarter basis, from 5.61% to 5.65%.
The average cost of deposits rose from 3.35% during the December 31, 2006 quarter to 3.54% during the March 2007 quarter. This trend is likely to diminish during the second quarter of 2007, as inflows from promotional activity are expected to decline from the first quarter level, and a large portion of the promotional deposits added during the first quarter are expected to reprice below their current promotional cost.
Prepayment and amortization rates, which approximated 12% during 2006, are expected to remain in the 10% to 12% range during 2007. At March 31, 2007, the real estate loan commitment pipeline approximated $109.9 million, with a weighted average interest rate of 6.3%, including $21.3 million of loan commitments intended for sale to Fannie Mae.
Operating expenses are expected to approximate $10.7 million in the second quarter of 2007. Share repurchases, which were somewhat accelerated in the first quarter, are likely to recede
to the 2006 quarterly levels. The Company is positioned, however, to be opportunistic in the purchase of its own shares should conditions warrant. Based on this outlook, the Company expects second quarter 2007 earnings per diluted share to again be in the range of $0.15 to $0.17.
Mr. Palagiano stated, “It appears that deposit costs are leveling off, barring any additional Fed tightening. With a strong capital base and a low level of nonperforming assets, we believe we have been able to sustain our profitability while positioning the balance sheet for growth and without accepting undue risk to our asset quality.”
ABOUT DIME COMMUNITY BANCSHARES
Dime Community Bancshares, Inc. (Nasdaq: DCOM) (the "Company") has $3.30 billion in consolidated assets as of March 31, 2007, and is the parent company of The Dime Savings Bank of Williamsburgh (the "Bank"). The Bank was founded in 1864, is headquartered in Brooklyn, New York, and currently has twenty-one branches located throughout Brooklyn, Queens, the Bronx and Nassau County, New York. More information on the Company and Bank can be found on the Bank's Internet website at www.dimedirect.com.
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 the Bank; 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.
- Tables to follow -
Contact: | Kenneth Ceonzo |
| | Director of Investor Relations |
| | 718-782-6200 extension 8279 |
