Dime Community Bancshares Q3 2026 Earnings Call Transcript
Dime Community Bancshares (NASDAQ:DCOM) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Dime Community Bancshares reported a record third quarter with revenues of $135 million and EPS up 53% year-over-year.
The company announced the acquisition of Empire State Bank, a $600 million asset-sized commercial bank, to expand its presence in New York City and leverage its low-cost deposit base.
Dime’s loan portfolio saw significant growth, with business loans increasing by 30% year-over-year, and the loan pipeline remains strong at approximately $1.4 billion.
The company reported a 1.10% return on assets and a core efficiency ratio below 48%, highlighting improved profitability and operational efficiency.
Dime continues to focus on organic growth and has launched a dedicated affordable housing group, indicating a strategic move into new lending areas.
Net interest margin (NIM) increased for the tenth consecutive quarter to 3.35%, with expectations of further expansion driven by loan repricing and Federal Reserve rate increases.
Management highlighted a strong capital position, allowing for strategic acquisitions and share repurchases, with a focus on maintaining a CRE ratio below 350%.
Future guidance includes continued NIM expansion, core cash operating expenses expected to rise slightly, and a tax rate of 28.5% for the final quarter of 2026.
Full Transcript
OPERATOR
Good day, and thank you for standing by. Welcome to the Dime Community Bancshares, Inc. third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Please be advised that today’s conference is being recorded. Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in today’s press release and the company’s filings with the U.S. Securities and Exchange Commission, to which we refer you.
During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and for reconciliations to GAAP, please refer to today’s earnings release. I would now like to hand the conference over to your speaker today, Stuart Lubow, President and CEO. Please go ahead.
Stuart Lubow (Chief Executive Officer)
Good morning. Thank you, Shannon, and thank you all for joining us this morning for our third quarter earnings call. With me today are Avi Reddy, our Chief Operating Officer and CFO, and Tom Geisel, our Chief Commercial Officer. In my prepared remarks I will touch upon the progress we made in the third quarter. In addition, I will provide a summary of our acquisition of Empire State Bank. Avi will then provide financial details for the third quarter and the financial impact of the Empire transaction.
Suffice to say, Dime’s organic growth trajectory is very strong, and we have clearly differentiated our franchise from our local competitors as it relates to our ability to grow low-cost and best-in-class deposits, diversify our loan portfolio away from its historical CRE focus, attract talented bankers, and at the same time improve NIM and grow net interest income and overall profitability. Revenues for the third quarter were $135 million, which once again was a record for Dime.
EPS was up 53% versus prior year. The NIM was up 7 basis points versus the linked quarter as we were able to maintain our cost of deposits while improving our yield on loans. On the loan front, we are executing well and our growth plans are in place. Year over year, growth in business loans was approximately $929 million, which represents a 30% year-over-year increase. Our loan pipeline continues to be very strong and is approximately $1.4 billion with a weighted average rate of approximately 6.5%. We were pleased to report a return on assets of 1.10% for the third quarter and a core efficiency ratio of below 48%. As you know, we have been very active on the hiring front over the past three years, and it’s gratifying to see these investments contributing to the improved profitability.
We continue to believe that the hires we have made over the last few years have a long runway in front of them as we execute our clearly articulated growth plan. The disruption in our local marketplace remains very high, and the environment for our organic growth strategy as it relates to acquiring clients and bankers continues to be very attractive. In this regard, we are pleased to announce our entry into the affordable housing space with the launch of a dedicated group that will be led by Mike Kamoya.
Finally, as it relates to profitability, our significant loan repricing opportunity over the next five quarters will continue to serve as a catalyst for continued revenue growth in the quarters ahead. During the quarter, we reduced our CRE ratio to 338% while repurchasing approximately 1% of our shares outstanding. We continue to see significant long-term value in our shares underpinned by continued NIM expansion and net interest income growth. Avi will provide some color on capital in his prepared remarks.
This morning we announced that we signed a definitive agreement to acquire Empire State Bank. We are very pleased to welcome CEO Phil Guarneri and his team to Dime. By way of background, Empire is a $600 million asset-sized commercial bank with a very granular, low-cost deposit base that is headquartered in Staten Island. Dime has had our eye on having a greater ground-level branch presence in Staten Island for a long time, and we believe Empire is a very low-risk transaction for our shareholders given their granular deposit base and low-risk LTV loan portfolio.
The transaction expands Dime’s presence to all five boroughs of New York City, and we believe Empire’s granular deposit base will have real value in a higher-rate environment. Empire represented a unique opportunity for Dime and the transaction economics and strategic rationale make sense for both sets of shareholders. With that said, I will end by saying our focus remains on strong organic growth, as seen by our $1.1 billion year-over-year growth in core deposits. Our significant cash position, which stood at over $2 billion at quarter-end, positions us very favorably for organic growth, and we expect to benefit from meaningful loan pricing over the next five quarters. I want to end by thanking all our dedicated employees for their efforts and in positioning Dime as the best commercial bank in Metro New York.
With that, I will turn the call over to Avi.
Avinash Reddy (Chief Operating Officer and CFO)
Thank you, Stu. Core EPS for the third quarter was $0.91 per share. Core pre-tax, pre-provision net revenue of $70 million represented 186 basis points of average assets. By maintaining a strong focus on cost-of-funds management and the growth of our business loan portfolio, our NIM has now increased for 10 consecutive quarters. The reported third quarter NIM increased to 3.35%. Excluding the benefits from purchase accounting and prepayment fees, the run-rate NIM for the third quarter would have been closer to 3.32% compared to a 3.22% run rate for the prior quarter.
Average earning assets for the third quarter were approximately $14.36 billion. Core cash operating expenses of approximately $64.3 million were in line with our expectations. The loan loss provision was in line with the prior quarter at $13.8 million, and the allowance to loans increased to 99 basis points. The loan loss provision in the quarter was primarily to cover specific reserves on C&I loans, growth in the business loan portfolio, and charge-offs on multifamily loans.
While NPAs were up, substandard loans were down 7% on a linked-quarter basis, and in addition, 30- to 89-days past-due loans also declined on a linked-quarter basis. As Stu mentioned, we reduced our CRE concentration ratio to 338% while at the same time repurchasing approximately 1% of our shares outstanding. We believe that robust growth in our C&I businesses and operating with a CRE ratio that is lower than 350% will set us apart from the other local banks, which are operating between 375% to 450%, and Dime will be rewarded in the medium to longer term with a higher valuation.
Our strong capital position allowed us to structure the Empire transaction with a $30 million cash component, which represents a little more than 50% of the consideration mix for the transaction. The transaction’s return metrics for Dime are very strong, with an internal rate of return well in excess of 20%, which is above our cost of capital. The transaction is expected to be approximately 3.5% accretive to earnings on a run-rate basis. Once all synergies have been realized, we expect the impact on our capital ratios from the Empire deal to be approximately 35 basis points, factoring in the full impact of one-time deal costs and the interest rate marks in an elevated rate scenario. Finally, our pro forma capital levels provide us room for both organic growth as well as continued buybacks.
Turning next to forward guidance. As usual, while we will not provide any specific guidance on 2027 until our January earnings call, I will provide some thoughts on the remainder of 2026. As I mentioned previously, excluding purchase accounting and prepayment fees, the run-rate NIM for the third quarter would have been closer to 3.32%. We would use the 3.32% NIM as a starting point for modeling purposes. Going forward, we expect continued NIM expansion in the fourth quarter driven primarily by loan repricing and secondarily from the recent Federal Reserve rate increase.
With respect to rate hikes, we expect the September rate hike to benefit NIM by a couple of basis points, and any future rate hikes will likely be neutral to NIM as there will be a lagging effect on deposit costs. We have repeatedly said our large cash position is a competitive advantage that will allow us to take advantage of lending opportunities as they arise, and it will help us create a sustainable NIM that’s not subject to cyclical moves based on the trajectory of short-term rates. While it’s hard to predict the NIM in individual quarters and the path may not be in a straight line or equal increments, we are focused on the ultimate destination by the fourth quarter of 2027.
On our prior earnings call, we discussed a run-rate quarterly NIM of over 3.50% by the end of 2027. Based on our strong performance this quarter and our current pipelines, we believe there’s a clearer line of sight to a NIM on our existing balance sheet of over 3.60% by the end of 2027. Next, I’ll turn to expenses. We expect core cash operating expenses, excluding intangible amortization, for the final quarter of the year to be around $66 million. Finally, we expect the tax rate for the final quarter of 2026 to be 28.5%. With that, I’ll turn the call back to Shannon, and we’ll be happy to take your questions.
OPERATOR
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Steve Moss with Raymond James. Your line is now open.
Steve Moss (Analyst at Raymond James)
Good morning, and nice quarter. Hey, Steve. Doing well. Maybe just starting here on the margin, Avi, you know, with that 3.60% margin by the end of 2027, just kind of curious. I mean, obviously rates are higher here, we’ve seen some spread compression across the industry. Just maybe an updated thought in terms of dynamics here around your assumptions to that 3.60% margin.
Avinash Reddy (Chief Operating Officer and CFO)
Yes. So I just want to be clear, we’re actually increasing the NIM guidance here. So take your comment. While across the industry there has been some spread compression, we’re not seeing that here. We’ve been able to maintain our cost of deposits very close to that 1.68% area. As we are three weeks into the quarter here, there’s been a couple of basis points drift up in deposit costs, but it’s actually lower than what we thought. And then on the loan side, in our press release, the weighted average rate on loans was around 5.50%.
We’ve seen that expand to 5.58% right now sitting here today. So I think we’re even more confident sitting here today than we were three months back, which is why we increased the guidance both from a NIM perspective as well as from a NII perspective. And I think that’s just a testament to the quality of the deposit base that we have at the bank, the new deposits that are coming into the bank, as well as all of the new business lines that Tom’s put in place over the last year and a half, which are now coming to fruition.
Stuart Lubow (Chief Executive Officer)
You have to remember our core DDA, non-interest-bearing DDA, is now up to over 32% and it’s continuing to grow. The private bankers continue to bring in, you know, new customers, new clients, new relationships. So we’re very excited about where we are in terms of, you know, our core funding abilities. And then on the loan side, with all the teams in place now and the verticals in place, the pipeline is very strong, and they’re also bringing a nice, nice chunk of deposits in as well. So, you know, we’re very comfortable that, you know, we’re going to continue seeing NIM expansion, you know, at these levels.
Steve Moss (Analyst at Raymond James)
Right. And just to tie up the marginal further in terms of, if I recall correctly, it’s about two and a half billion of fixed-rate loans at around four and a quarter type percent that will reprice next year. Are you guys going to think of that like up 200 bps at this point?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah. No. So the two and a half billion was the number last quarter, Steve. So you have to roll that forward. We’ve had one quarter of, you know, one of those six quarters has gone away. So we’re closer to $2 billion right now. And the rate on those remaining loans is around 4.40% at this point. So, yeah, there’s still around 200 basis points off of that, you know, in terms of an improvement. You know, as Stu said early on, our pipeline rate right now has actually gone up to 6.50%. So there should be probably a 210 to 225 basis point increase on that $2 billion. Now, all of that’s not going to stay with us. Some of that’s going to refi out of the bank, some of it’s going to stay with us. But I think we showed this quarter that we’re able to grow overall loans, keeping in mind the reduction in the multifamily portfolio as well. So you should see the repricing benefit as well as continued growth in the overall loan portfolio at a low- to mid-single-digit growth rate that we talked about last time around.
Stuart Lubow (Chief Executive Officer)
Yeah, I mean, in the previous quarters you’ve been seeing about $150 to $175 million of commercial real estate move out. So you have to assume that that will continue most likely. And, you know, it’s been about $150 million a quarter of multifamily that has been prepaying or paying off and refinancing out. So we’re still seeing those same metrics, although in a higher-rate environment it might slow down a little bit.
Steve Moss (Analyst at Raymond James)
Okay, that’s helpful there. That was going to my next question. And then maybe just on the core deposit growth here, it was really strong this quarter. Just kind of curious how you’re thinking about the cadence here on growth and just any color you can give there.
Avinash Reddy (Chief Operating Officer and CFO)
Yep. I mean, Steve, typically the third and fourth quarters of the year are our best quarters just given seasonality, the East End, some of our private bankers in terms of the type of business mix that they have. So I would say there was nothing in the numbers in Q3 that we expect to go away in Q4. So it’s a good starting point, and then we’ve started the quarter reasonably here. So I would say it’s kind of hard to predict in individual quarters where we go. Q1 generally we do see some outflows, but I think Q4 should steadily build off of Q3.
Steve Moss (Analyst at Raymond James)
Okay, I appreciate all the color here and I’ll step back in the queue, guys. Thank you very much.
Stuart Lubow (Chief Executive Officer)
Thanks, Steve.
OPERATOR
Our next question comes from the line of Manuel Navis with Piper Sandler. Your line is now open.
Manuel Navis (Analyst at Piper Sandler)
Hey, good morning. I hear you. On the low single digits, mid-single digits growth pace, it was really strong this quarter. Can you talk a little bit about the mix this quarter, how it accelerated a bit, and I guess the pace should maybe slow a little bit in the fourth quarter. But can you just talk about the growth trajectory and what businesses drove it most?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, sure. So a couple of things. So if you go back and take a look at the year, right, on the business-loan side, Q1 net loan growth was about $125 million. Q2 was $275 million and Q3 was $350 million. So nice, nice chronology of growth across, you know, across the year and across the quarters. The fourth quarter I think is probably going to be flat to where we were in this quarter. Q1 tends to be lower just by the nature of the business. Q2 and Q3 tend to be stronger, as you know, in banking.
And Q4 just depends on the overall economic environment and the momentum. So we feel pretty good about where we think we’ll end the year, to Stu’s point, about the $925 million or so growth year over year. What we’re really happy about is the diversity of that growth. Our C&I business, our traditional C&I business, led the way at about 25%. And then when you start to add in some of the new specialty finance businesses we put in place like lender finance, fund finance, sponsor finance, and healthcare, they all came in at about 20%.
So we’re really happy we didn’t have one business that pretty much outshined the others. And when you look at the quarter, the quarter had about one-third growth from C&I, followed by fund finance, and then the balance of the other specialty groups fell behind. So real diverse business growth across the year and across the quarter.
Stuart Lubow (Chief Executive Officer)
Manuel, I’d just add a couple of things, right? I think our guidance still, when you go back to last quarter, is think about the balance sheet in three different pieces. So on the business-loan front, really somewhere between $200 and $250 million every quarter. This quarter we were at $350 million, so probably a little bit higher in terms of the run rate. The multifamily piece, we still expect around $500 million of runoff on that piece. And then what changed this quarter, which is why overall loans grew, is we’re back in the commercial real estate market doing relationship CRE.
Balances were down only $10 or $15 million this quarter. We probably originated $100 million this quarter. Nice spreads, nice LTVs, nice debt service. So that should continue going forward. So where the variable is going to be going forward is business loans. Some quarters it may be closer to $200 million, some quarters may be closer to $250 million, some it may be closer to $300 million over there. But when you put all of that together, you come back to that low- to mid-single digits for the next probably six to nine months.
Manuel Navis (Analyst at Piper Sandler)
Great. And that $500 million multifamily decline, that gets you towards that 25% longer-term target. No shift there in essence on the mix projected going forward?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, I mean it’s probably a little bit less than 25%. I mean right now we’re at 27%. So, you know, I would use $500 million off of the current numbers basically.
Manuel Navis (Analyst at Piper Sandler)
I appreciate that. And is there any other color you could add on kind of the deposit growth, which was so strong, kind of what areas that came from most? I know you talk a little bit about the private banker business mix and you talk a little bit about the trajectory over the course of the year, but just what businesses led it most and where there might be some competition?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, I mean where we’re really growing deposits is just business deposits, right. So if you look at our base right now, it’s probably 70% to 75% of the base is business deposits and consumer deposits are 25%. The consumer piece this time last year was 30%. This time two years back was probably 35%. So we’re actually seeing small declines on the consumer side because we’re not the highest rate payers out there for consumer deposits, which really means business deposits are growing at an even faster pace.
We did hire three teams earlier this year in April. They’re doing really well in line with our projections. So it takes a little bit of time for teams to get going, but they were a good contributor to third-quarter growth. Our municipal business did really well in the third quarter. Our branches did well. So I would say, look, we think we’ve got the best footprint in our area. We’ve got the best bankers, we’ve got the best branch network, we’ve hired the best private bankers.
So it’s really the people that we have. And as Stu said, we’re able to do this with, you know, growing DDA, right. So you bring in core operating accounts. I mean we’ve opened, you know, over the course of this year we’ve opened over 6,000 accounts basically. So a lot of what’s coming in now is, you know, the work that was done over the last three to six months and we continue to see that account-opening process not stop. So I think, you know, this quarter was, you know, especially strong in the third quarter, but, you know, fourth quarter, we’ll have to see where we end up at. I will say we have been able to manage the cost of funds really well and we’re not really seeing a creep up in that yet.
Manuel Navis (Analyst at Piper Sandler)
Yeah, that does bode well. And my last question is, you’ve added now Staten Island with the transaction today. You’ve grown in the affordable business vertical. What is remaining for where you’d like to add density? Perhaps another team by next April. What is it you’re looking at next as, like, to have in terms of a new lending vertical or a new geographic area you’d like to invest in?
Stuart Lubow (Chief Executive Officer)
Look, I think we’ve kind of accomplished what we were set out to do in terms of verticals and business lines. You know, we’ve been opportunistic. When the opportunity arises and talented people become available, we’ve taken the opportunity to bring them on board and we’ve been successful at it. The same thing with private banking teams. There are probably still a few out there that we’d be interested in. But I think overall, strategically, I think it’s really now, you know, we need to operate on all cylinders and get things cranking, and I think we’re really about there.
You know, a lot of these teams have been on for quite a while and their pipelines are growing, and that’s why you’re seeing the results in terms of loan originations and closings. So strategically, I think we’re really in a spot where we really got to execute and grow the business, and I think we have the horses and the manpower to do that now. So, I mean, I don’t see any significant moves away from that. We will be opportunistic if an opportunity arises in terms of teams or verticals.
I think one thing to think about is when we bring a new team on, it takes them anywhere from a year to 18 months to really get their footing. And you can tell by the loan growth results, many of those teams are just starting to get there now. So it’s nice to see that the investment that we put into the business a year or so ago is starting to come to fruition. And we just want to keep pushing that for now and focusing on the organic side.
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, Manuel, I’d just round it out by saying we’re very focused on getting our profitability to a level by the back half of ’27 where you’re talking about an ROA in excess of 1.30% at that point. And so you saw this quarter with the efficiency ratio sub-48% at this point. We’ve updated our NIM guidance where we think NIM is going to be over 3.60% at that point. So we’ve made all the investments. Anything going forward is probably marginal and pays for itself pretty quick.
But as Stu said, right now it’s about execution and driving the profitability to reflect the value in our deposit base, which is still not in there in terms of the overall profitability because there’s so much repricing assets that we have over the next five quarters.
Manuel Navis (Analyst at Piper Sandler)
I really appreciate the commentary. Thank you.
OPERATOR
Thank you. Our next question comes from the line of David Conrad with KBW. Your line is now open.
David Conrad (Analyst at KBW)
Great, thanks. Good morning. Just want to talk about credit for a little bit. You know, you mentioned criticized and special mention was down high single digits. But you also mentioned the NPA growth was pretty strong this quarter, looks like partially in business loans and multifamily. So maybe a little bit of color on the NPA moves and then maybe expectations in the fourth quarter for provisions and maybe NPAs as well.
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, sure, I’ll take that, David. So on the C&I side we had one relationship; this had been substandard for a couple of years with us. We took a $6 million specific reserve on this. We have some collateral behind it as well, so we feel pretty well secured over there. The person was involved in property management, kind of tied to the real estate space over there. On the multifamily side, one relationship; this had been in the 60 to 89 day bucket for the last two years. Slow paying relationship. And so we kind of charged that down. Got an updated appraisal on that. So I’d say, look, it’s part and parcel of the business that we have. Substandard loans were down 7%. The 30 to 89 day bucket was down substantially. You’ll see those disclosures in the 10-Q when we put that out.
Look, I would just say overall, in terms of provisioning levels, we’d probably expect something similar to the last couple of quarters for the next couple of quarters. Our goal really is to get the earnings stream of this company to 1.30%+ ROA by the back half of 2027. So I don’t think we should be operating at a $13 to $15 million provision level for more than a couple of quarters. But I think for the next couple of quarters that’s not unreasonable, just given we’d like to work out some of these credits, and it really depends: in situations you sell the loan and you move on, that’s the best, lowest cost option to the bank; in other situations you take a specific reserve and you do a longer term workout.
I’m not really going to comment on projections for different types of credit quality metrics. What I will say is we feel pretty well reserved. What we have right now, we’ve got pre-tax, pre-provision earnings of 185 basis points. Could be some choppiness the next couple of quarters, but I think by the time we get to the back half of 2027, we feel pretty good about the earning stream of the company, including provisions.
David Conrad (Analyst at KBW)
Great, thank you. And then one more. The operating leverage story here has been pretty remarkable, and you’re at an efficiency ratio roughly around 48%, a little bit better than 48%. I know expenses are going up a little bit for the fourth quarter, but is that sustainable? It feels like it is when you’re talking about, you know, more 30 bps better NIM expansion next year. So, like, how much can you drive that operating leverage?
Avinash Reddy (Chief Operating Officer and CFO)
Yes, I’d use that $66 million as a reasonable run rate for next year. And then if you assume, you know, I don’t know, 3%, 4%-ish, regular merit increase type stuff, look, it depends. Right. I think we’ve done the heavy lifting on the expense side in terms of building out the infrastructure to support the private bank. We’ve opened two new branches, we’ve gone into New Jersey, you know, we’ve added a lot of teams underneath Tom. So I think all of that’s done.
So going forward our goal is to get that 48% down to 45% and then lower than 45% down the road. So I think expenses are what they are. I think with additional scale with the Empire deal, which we’ve not talked about, that should help the efficiency ratio as well, given the fact that a lot of the back office we’re able to support with what we have right here. So we should see that continuing to trend down over time, mainly driven by revenue growth.
David Conrad (Analyst at KBW)
Great, thank you.
Avinash Reddy (Chief Operating Officer and CFO)
Appreciate it.
OPERATOR
Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Matthew Breese. Your line is now open.
Matthew Breese (Analyst)
Hey, good morning. A few questions from me, just starting on the NPA pickup within multifamily. How much of that was tied to the rent-regulated space? And Avi, maybe you could give us just an update on the health of that portfolio from an NPL and delinquency standpoint. And then secondly, you know, I was just curious, I heard you on substandard. What did classified loans do this quarter? Any kind of directional change there?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, sure. So the relationship this quarter, Matt, that was rent regulated. The NPAs that we have in the book are all rent regulated. On the multifamily side, anything that’s free market, you know, we don’t have anything there that’s NPA at this point. I’d say, look, overall we’re monitoring the portfolio very closely. What we really spend a lot of time on is there’s a billion dollars-ish overall of rent regulated, which is over 50%, basically, is how we characterize it.
So that portfolio this past quarter, there was probably around $40 million of decline in that. So we’re seeing a steady decline in that portfolio, specifically in the multifamily portfolio. So classified actually is substandard — that’s the definition. Right. So in that particular portfolio on the multifamily side, we probably have — overall we have around $135 million of substandard last quarter; it’s down to probably $125 million this quarter. So we’re not seeing any pickup there. I think we know our portfolio, we know what we got. Could there be some hits over time? Sure. But by and large it’s very manageable. Our average loan size is around $3.5 million in the overall; our multifamily portfolio on the rent-regulated side, it’s less than that. Our pre-2019 portfolio that we keep our eyes on is down $275 million. So we feel good about that. It’s winding down. It’s not a growth part of our business. We’re not doing any new rent-regulated loans at this point. And I think we’ve reached the point where our earnings power is so strong that we’ll work through anything that comes up over time.
Matthew Breese (Analyst)
Great, I appreciate all that. And then just on deposit costs, Avi, I heard you say it’s coming in better than expected. I’m just curious, as you think about that 3.60% or north NIM by year-end ’27, what kind of deposit beta are you anticipating?
Avinash Reddy (Chief Operating Officer and CFO)
Yes, I think on the first rate hike that happened, Matt, we’ve not seen much over there. There’s obviously clients we’ve moved. I think as we see a pickup in rate increases, you’re going to see the beta be a bit higher on the deposit side. I don’t think it’s going to be any different than on the way down. The one difference I think is that the DDA that we have right now — it’s real DDA, it’s real operating accounts, it’s real stuff that’s been coming into the bank.
I think the last time around rates went to 5%, the issue that a lot of banks had was there was a lot of migration out of DDA into interest bearing. We just don’t see that happening this time around. So I think for the second rate hike, if there’s one in October or December, you’ll see a bigger pickup than the first hike. But on the first hike here we ended the quarter with the cost of deposits 1.68%. We’re sitting here today at 1.72%, plus or minus. And yeah, there’ll be a little bit more creep after 1.72%, but not substantial. I do think on the second and third it’ll probably pick up a little bit off of that, which is why if you go back to my guidance on the NIM, we said the first rate hike was probably a couple basis points accretive to NIM, and then once you get to the second one, we’re probably more neutral on NIM at that point.
Matthew Breese (Analyst)
Yeah, that makes sense. And then the other, also tying to the NIM outlook — you guys are sitting on a lot of cash, things up to 14% of total assets. Can you help me out with kind of the deployment strategy there and timeframe for deployment? And within that ROA target you have and the 3.60% NIM guide, what does the cash as a percentage of assets look like?
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, so I think we like the cash position because it keeps us neutral to short-term rates. At this point, in the third quarter we did not buy any securities. So I think we’d like to have a little bit more visibility into where rates end up at before jumping in and buying securities. So I think that 3.60% NIM really doesn’t assume much deployment of the cash position. It’s just off the $2 billion-odd of maturing and repricing loans. If you assume, let’s call it $1.7 billion, $1.8 billion of that you can reprice up 200–225 basis points, that itself should get us 20–25 basis points of NIM off of that.
I think that the cash deployment — that’s something over and above that. But if you come back to our loan growth assumptions, we’ve said low- to mid-single-digit growth on the loan side. And we’re growing deposits faster than low- to mid-single-digit growth. So that would really mean there’s more cash on the balance sheet. Long story short, it doesn’t really capture that. I think that’s upside in the NIM. And another way to look at it is, if we did deploy, the 3.60% is more like 3.83–3.94% if we ran with a loan-to-deposit ratio closer to 90% to 95%.
Matthew Breese (Analyst)
Okay. Do you think cash could build from here? I didn’t really anticipate that, but it sounds like you might be leading me there.
Avinash Reddy (Chief Operating Officer and CFO)
No. Look, if you look at it this quarter, the loan-to-deposit ratio went down even though we grew loans because we grew deposits faster. Right. So it is a possibility, but, you know, we’ll deal with it as it comes.
Stuart Lubow (Chief Executive Officer)
Yeah. Once we get to a point, Matt, where we’re comfortable with our CRE ratio and we’re back in the CRE business today on a selective basis, you’ll see larger loan growth and then the deployment of the cash. But at this point we’re still seeing net runoff on the commercial real estate side, both on the multifamily and, obviously, on the straight commercial real estate. Once that kind of levels out, at that point — and we expect that toward mid to late 2027 — you’ll start to see more significant loan growth and deployment of more cash.
Matthew Breese (Analyst)
Okay, last one for me, Avi. Just on the deal, there’s a few numbers I was hoping you could help me out with — maybe forecasted cost saves, the percentage you’re using for CDI, and then the credit and interest rate marks.
Avinash Reddy (Chief Operating Officer and CFO)
Yeah, so that’s — sorry. Yeah, sure. So deal size is pretty small, right? You know, 4% of our asset base. So, you know, I think overall we expect to run this at a ROA well in excess of 2% at the bank, fully factoring in cost savings. Over there, the rate mark and credit mark, you probably end up somewhere between 4% and 5%, plus or minus, including the rate and credit mark. Obviously rates are elevated, so it depends on what point in time you do it.
We kind of assumed the worst case where the five-year was at 5%. So I think if you include that, probably somewhere between 4.5% and 5% rate and credit put together on it. In terms of the CDI assumption, I would just use 3% on the core deposits on that. And then deal costs — they probably should be in the $12 to $13 million area, plus or minus, on a pre-tax basis.
Matthew Breese (Analyst)
Great. I’ll leave it there. Thank you for taking all my questions. Appreciate it.
Avinash Reddy (Chief Operating Officer and CFO)
Okay, thanks, Matt.
OPERATOR
Thank you. And I’m currently showing no further questions at this time. I’d now like to turn the call back over to Stuart LeBeau for closing remarks.
Stuart LeBeau
Thank you, Shannon. And thank you all. To thank you all and our dedicated employees and our shareholders for their continued support. And we look forward to speaking with you after our fourth quarter.
OPERATOR
This concludes today’s conference. Thank you for your participation. You may now disconnect.
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