DCOM Q3 2025: Core Pre-Tax Income Rises 82% as NIM Expansion Targets 3.25%+

October 23, 2025 | By EarningsIQ Research

DIME Community Bank’s third quarter delivered a decisive inflection in core earnings power, with margin expansion now structurally underway and business loan origination momentum building. Management’s focus on core deposit growth and disciplined cost of funds is translating into a differentiated NIM trajectory versus peers. With capital ratios above industry averages and a robust loan pipeline, DCOM is positioned to leverage local market disruption for continued organic growth into 2026.

Summary

• Margin Expansion Accelerates: Net interest margin momentum is now structurally supported by deposit cost management and loan repricing tailwinds.
• Business Lending Shift: Commercial loan growth outpaces legacy CRE runoff, signaling an effective business mix transition.
• Capital Leverage Optionality: Elevated capital ratios set the stage for potential buybacks and strategic deployment as CRE concentration moderates.

Performance Analysis

DCOM’s Q3 results underscore a pronounced shift in the bank’s earnings profile, with core pre-tax, pre-provision income reaching $54.4 million, up sharply from both prior quarter and prior year levels. This improvement reflects not only higher net interest income but also a disciplined approach to deposit cost control, as core deposit costs held steady at 2.09% while deposit balances grew $1 billion year-over-year. The net interest margin (NIM) increased for the sixth straight quarter, now surpassing 3%, with management explicitly targeting 3.25% and higher as loan repricing unfolds in 2026.

Business loan origination remains the bank’s primary growth lever, with $160 million in net business loan growth during Q3 and a robust $1.2 billion loan pipeline at attractive rates. While loan loss provisions rose due to charge-offs in owner- and non-owner-occupied CRE, overall credit quality remains stable: criticized loans fell $30 million sequentially and 30–89 day delinquencies declined by 33%. Multifamily runoff was outsized in the quarter but is expected to normalize, with no material credit deterioration in that segment. Non-interest income was boosted by a $1.5 million legacy fraud recovery, providing a one-off benefit that will not recur in Q4.

• Deposit Franchise Strength: Core deposits up $1 billion YoY, with new teams contributing $2.6 billion since 2023.
• Cost Discipline: Core cash operating expenses rose to $61.9 million, narrowly above guidance due to new hires, but efficiency ratio continues to improve.
• Credit Quality Stabilizes: Charge-offs concentrated in CRE, but criticized and delinquent loans both declined sequentially; multifamily remains resilient.

Capital ratios are now best-in-class for the region, with common equity tier one above 11.5% and total capital over 16%, providing ample flexibility for organic growth and potential buybacks as CRE concentrations fall below target thresholds.

Executive Commentary

Strategic Positioning

1. Margin Expansion as Structural Differentiator

DCOM’s core margin story is now rooted in both cost discipline and repricing leverage. The bank’s ability to pass through deposit rate reductions following the Fed’s September cut, while maintaining loan yields, has widened the spread between loans and deposits by 10 basis points since quarter-end. Management expects further margin gains as $1.35 billion in loans reprice in 2026 at spreads over the five-year Treasury, with another $1.7 billion set for repricing in 2027. This sets up a multi-year runway for NIM improvement, distinguishing DCOM from regional peers still grappling with deposit cost stickiness.

2. Business Loan Growth Offsets Legacy CRE Runoff

The strategic pivot from CRE (Commercial Real Estate) to business lending is gaining traction. Net business loan growth of $160 million in Q3, atop $400 million YoY, is outpacing planned attrition in transactional CRE and multifamily. The new lending teams and verticals are expected to contribute meaningfully, with each targeted as a $500 million line of business over two to three years. This business mix shift reduces CRE concentration risk and aligns the bank with higher-yielding, relationship-driven lending.

3. Deposit Franchise and Liquidity Optionality

Core deposit growth remains a strategic asset, with $1 billion added YoY and a diversified funding base from newly hired teams. The ability to grow low-cost deposits supports both loan growth and margin expansion, while liquidity remains ample to capitalize on lending opportunities. DCOM’s branch expansion—recently opening in Manhattan and planning new sites in New Jersey and Long Island—further extends its deposit reach and competitive moat.

4. Capital Flexibility and Buyback Readiness

With capital ratios now above peer averages and CRE concentration at target, management is openly considering stock repurchases in early 2026. The immediate priority remains deploying capital into new lending verticals, but the board sees buybacks as a viable option should organic growth opportunities moderate. This capital flexibility is a key differentiator versus local competitors constrained by regulatory optics or capital shortfalls.

Key Considerations

DCOM’s Q3 results highlight a bank at an operational and strategic inflection, with margin tailwinds, business mix evolution, and capital leverage all converging. The next phase will test management’s ability to sustain growth and manage credit as new verticals scale.

Key Considerations:

• Loan Repricing Leverage: Over $3 billion in loans set to reprice by 2027, supporting a structurally higher NIM trajectory.
• Deposit Beta Advantage: Ability to pass through 100% of Fed rate cuts to depositors, lowering funding costs faster than peers.
• Credit Cycle Navigation: Charge-offs remain within guided range, but ongoing monitoring is warranted as business lending expands.
• Expense Management: New hiring drives near-term expense upticks, but future headcount additions are now paused until 2026 bonuses are paid.
• Capital Deployment Optionality: Buybacks are under active review, contingent on sustaining current capital and CRE mix levels.

Risks

Key risks include potential credit deterioration from rapid business loan growth, especially as new verticals scale and reserving methodologies evolve. Deposit competition may intensify if rate cuts accelerate or local market disruption abates, pressuring the pace of margin expansion. Additionally, normalization of multifamily paydowns and non-recurring non-interest income could create earnings volatility in coming quarters. Management’s ability to manage expense growth as new teams are onboarded will be critical to sustaining efficiency gains.

Forward Outlook

For Q4 2025, DCOM guided to:

• Core cash operating expenses of approximately $63 million
• Non-interest income run rate of $10–10.5 million, excluding one-time fraud recovery

For full-year 2025, management reiterated confidence in ongoing NIM expansion and a flat balance sheet, with 2026 guidance to be provided in January. Margin improvement is expected to accelerate, supported by loan repricing and continued deposit cost reductions. Key dialogue points:

• “We expect more substantial NIM expansion in the fourth quarter as we have been successful in reducing deposit costs and maintaining our loan yields.”
• “We are very positive on the NIM trajectory as we exit 2025. Our efficiency ratio continues to improve.”

Takeaways

DCOM’s Q3 marks a turning point, with margin expansion and business loan growth now translating into tangible earnings power. The bank’s disciplined approach to deposit cost management and capital allocation sets a differentiated path among New York commercial banks.

• Margin Story Strengthens: NIM expansion is now structurally underpinned by loan repricing and deposit cost leverage, with a clear path to 3.25% and beyond.
• Business Mix Evolution: Commercial lending is now the growth engine, with new verticals and teams poised to further reduce legacy CRE concentration risks.
• 2026 Watchpoint: Investors should monitor the scalability of new lending teams, credit quality in expanding business lines, and management’s capital deployment decisions as margin tailwinds persist.

Conclusion

DCOM’s third quarter demonstrates a bank executing on its margin and business mix transformation, with capital flexibility and organic growth opportunities now in clear focus. The coming quarters will reveal the sustainability of these gains as new lending initiatives and capital actions come into play.

Industry Read-Through

DCOM’s results signal a broader margin recovery opportunity for regional banks that can control deposit betas and redeploy capital into higher-yielding business loans. The ability to pass through rate cuts and sustain core deposit growth is emerging as a key competitive differentiator in the Northeast banking market. As CRE runoff normalizes and business lending scales, peers with similar capital and funding profiles may look to replicate DCOM’s proactive hiring and vertical expansion strategies. The quarter also illustrates the importance of capital flexibility, with buyback readiness likely to become a theme for well-capitalized banks as regulatory optics evolve.

DCOM Financials Banking Net Interest Margin Commercial Lending Deposits Capital CRE