Dime Community shares surge 13% on debt redemption, buyback plan
Actions expected to boost EPS as bank leverages capital ratio exceeding 16%
Dime Community Bancshares shares surged 13.2% to $34.10 on Monday after the New York-based regional bank announced plans to redeem $40 million of subordinated debt and reauthorize a share repurchase program covering 3.6% of its outstanding stock.
The dual capital management initiatives, announced in a press release, are expected to be accretive to earnings per share and demonstrate the company's confidence in its financial strength. Dime's board authorized the repurchase of up to 1,566,947 common shares, representing approximately 3.6% of the 43.9 million shares currently outstanding.
The bank intends to redeem all $40 million of its 5.75% Fixed-to-Floating Rate Subordinated Debentures due 2030 at par value on March 30, 2026, funding the transaction with cash on hand. The debentures, originally issued in 2015, will be retired four years ahead of maturity, eliminating the fixed 5.75% annual interest expense.
"These actions reflect our continued confidence in Dime's financial strength and long-term prospects," said Stuart H. Lubow, CEO and President. He highlighted that the company's Total Capital Ratio exceeds 16%, providing flexibility to manage capital efficiently while supporting organic growth.
Monday's rally builds on strong momentum from Dime's fourth-quarter earnings reported last week. The bank delivered adjusted EPS of $0.79, beating analyst estimates of $0.71, while revenue reached $123.8 million against expectations of $117.8 million. The earnings beat prompted several analyst price target increases, with Stephens raising its target to $36 from $33 and DA Davidson upgrading to $39 from $37 while maintaining a Buy rating.
The stock's advance brings Dime close to its 52-week high of $34.86, more than 50% above its yearly low of $22.43 set in October. The shares now trade at a trailing price-to-earnings ratio of 13.9 times, slightly above the forward P/E of 13.0, suggesting investors are pricing in continued earnings growth.
Analysts remain broadly positive on the regional bank. Of five analysts covering Dime, two rate it Strong Buy, two recommend Buy, and one advises Hold, with an average price target of $38.60, representing approximately 13% upside from current levels. The bank also offers a 2.95% dividend yield, having paid its most recent dividend on January 23.
Dime Community Bancshares, the holding company for Dime Community Bank, operates with approximately $15 billion in assets and holds the number one deposit market share among community banks on Greater Long Island. The company's focus on commercial and residential lending, combined with wealth management services, has positioned it as a key player in the New York metropolitan area's community banking sector.
The timing of Monday's announcements aligns with a broader trend among regional banks returning capital to shareholders as the Federal Reserve's interest rate policy stabilizes. By retiring high-cost debt and repurchasing shares when the stock trades below book value—currently at 1.06 times price-to-book—Dime aims to enhance shareholder returns through improved earnings quality and reduced share count.
The share repurchase authorization comes without specific timing commitments, with the company stating that actual purchases will depend on market conditions, regulatory approvals, and other factors. The program provides management flexibility to execute buybacks opportunistically, particularly if market volatility creates attractive entry points.