On Wednesday, Keefe, Bruyette & Woods, a financial services company, upgraded its price target for Dime Community Bancshares, Inc. (NASDAQ:DCOM) to $28.00, up from the previous $25.50. The firm maintained an Outperform rating on the stock. The upgrade follows Dime Community's second-quarter performance, which exceeded expectations and showed promising underlying trends.
The bank's second-quarter results were highlighted by several positive developments, including the success of the deposit team and net interest margin (NIM) expansion, as well as improvements in credit. Notably, the bank maintained zero multifamily non-performing loans (NPLs), a 29% quarter-over-quarter decrease in non-performing assets (NPAs), and a 14% reduction in classified assets.
The new deposit team's contributions have reached $1 billion, with non-interest income increasing by 27% compared to the last quarter annually and core NIM growing by 16 basis points quarter-over-quarter. Dime Community also reported strong deposit pipelines, which are expected to remain robust into the second half of 2024.
The firm anticipates that a shift in the balance sheet mix will continue to drive NIM improvement and that this will accelerate once federal funds rate cuts begin. Keefe, Bruyette & Woods projects that Dime Community's earnings power will more than double by the second half of 2025, with a return on tangible common equity (ROTCE) reaching 12% and return on assets (ROA) nearing 1.0%.
The financial services company expects the valuation gap for Dime Community to continue to narrow, supporting its decision to raise the price target to $28. This new target is equivalent to 107% of forward tangible book value and 10 times the estimated earnings for 2025.
In other recent news, Dime Community Bancshares has reported substantial growth in their Q2 performance, with a notable increase in both core deposits and business loans. The company also experienced a 20 basis point rise in net interest margin (NIM), and with an optimistic outlook, anticipates further improvements in NIM due to rate cuts and loan portfolio repricing.
In an effort to bolster its financial position, Dime successfully raised $75 million in subordinated debt and has plans to open a new branch in Westchester County. The company has set its sights on recruiting revenue-generating bankers, anticipating continued growth in their business lending portfolio.
Recent developments include nearly $1.1 billion in new deposits, with a focus on diversification, and expectations for steady growth in deposits. Additionally, loan yields are projected to increase by 4-5 basis points each quarter.
Looking ahead, Dime Community Bancshares is preparing for anticipated rate cuts by segregating the loan portfolio and remains cautiously optimistic. The company expects to file their 10-Q next week and is currently going through a budgeting process, with more details on expenses to be provided in the future.
InvestingPro Insights
As Dime Community Bancshares, Inc. (NASDAQ:DCOM) garners attention with its upgraded price target from Keefe, Bruyette & Woods, insights from InvestingPro provide additional context for investors. With a market capitalization of $953.6M and a P/E ratio standing at a reasonable 16.05, the company's financial health appears stable. Importantly, the adjusted P/E ratio for the last twelve months as of Q1 2024 is even more attractive at 12.9, suggesting that the stock might be undervalued compared to its earnings.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, indicating potential optimism in Dime Community's financial trajectory. Moreover, the company has consistently maintained dividend payments for 28 consecutive years, which could be a sign of financial resilience and commitment to shareholder returns. The current dividend yield stands at 4.04%, a notable return for income-focused investors.
However, it's important to note that the company's gross profit margins are considered weak, and net income is expected to drop this year. On a positive note, Dime Community has experienced strong returns over the last month and three months, with price total returns of 33.32% and 28.92%, respectively. These metrics could suggest a short-term bullish trend in the market sentiment towards the stock.
For those looking to delve deeper into Dime Community's performance and potential, InvestingPro offers additional tips and metrics. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to the full suite of insights that InvestingPro has to offer, including several more analyst predictions and detailed financial data.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.