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It is no secret that the regional banking sector is under considerable pressure, and Dime Community Bancshares (DCOM - Free Report) has not been excluded. DCOM is a Zacks Rank #5 (Strong Sell) stock, indicating downward trending earnings revisions. DCOM also has some unfavorable banking metrics I want to draw attention to.
Dime Community Bancshares Inc. is the holding company for Dime Community Bank. It provides deposit and loan products and financial services to local businesses, consumers, and municipalities.
DCOM stock is being sold aggressively, considerably underperforming the sector and halving in value over the last five years.
Image Source: Zacks Investment Research
Earnings Results
Dime Community Bancshares experienced some brief solace following its earnings results at the end of April, however that strength was only an opportunity for more selling. DCOM managed to beat earnings estimates, but it wasn’t enough to stop the selling.
Earnings of $0.92 per share beat Zack’s Estimates of $0.82 per share. However, sales of $94.75 million missed estimates of $99 million. It is worth noting that because of the environment, DCOM estimates had been revised considerably lower leading up to the report. So, while earnings beat estimates, they were a much lower target, and sales couldn’t reach even the lower expectations.
Future earnings expectations haven’t improved either. Analysts are in unanimous agreement in downgrading DCOM across timeframes. Q2 earnings have been downgraded by -30% over just the last 60 days. Huge revisions lower in estimates are exactly what bears want to see.
Image Source: Zacks Investment Research
Concerns
The Q1 earnings report also showed some concerning data regarding deposits. As much as 30% of DCOM’s bank deposits were non-insured, leaving it potentially vulnerable in the case of a run on the bank. Deposits did increase from $10.25 billion to $10.57 billion in the quarter though, which is very reassuring.
There was an additional balance sheet metric that caught my attention. A line labeled “accumulated other comprehensive loss (AOCI),” shows a -$98 million loss.
Image Source: Dime Investor Relations
One of the major pieces of data that initially caused concern regarding Silicon Valley Bank before its downfall was unrealized losses on securities. SIVB was holding a ton of long-dated Treasuries on its balance sheet, and when interest rates rose in 2022, the value of those securities dropped. SIVB reported a loss of -$1.8 billion because of this, which led them to try and raise capital through a share offering. It was never completed.
Unrealized losses on securities are included in that AOCI figure, meaning DCOM is holding securities that are underwater. I want to make this extremely clear, SIVB didn’t fail because of its unrealized losses, and neither will Dime Bancshares, but it was and is a concerning figure.
As it currently stands, AOCI as a percentage of total stockholders’ equity is -8.2%. When Silicon Valley Bank went under that number was -11.7%. Again, this isn’t an alarm that should cause the stock to crash, but a red flag.
Valuation
Dime Community Bancshares is currently trading at a one-year forward earnings multiple of 6x, which is below the industry average 8x, and below its four-year median of 9.5x. The tremendous fall in share price is what has caused the valuation to fall so precipitously from last year.
During the most recent quarterly report management announced that they were raising the dividend payment from $0.24 per quarter to $0.25, which they believe reflects a strong financial position. DCOM has an annual dividend yield of 5.9%.
Image Source: Zacks Investment Research
Bottom Line
DCOM is in a very challenging position. Not only is it caught up in one of the worst national bank scares since the Savings and Loan Crisis, but it also displays some concerning financial metrics to back those fears. Fortunately for them, the deposit base remains at the bank quelling the worst fears, but analysts are still bearish. While there is no evidence DCOM should suffer the same fate as SIVB, it is likely to continue to see downward pressure, and should thus be avoided.
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Bear of the Day: Dime Community Bancshares (DCOM)
It is no secret that the regional banking sector is under considerable pressure, and Dime Community Bancshares (DCOM - Free Report) has not been excluded. DCOM is a Zacks Rank #5 (Strong Sell) stock, indicating downward trending earnings revisions. DCOM also has some unfavorable banking metrics I want to draw attention to.
Dime Community Bancshares Inc. is the holding company for Dime Community Bank. It provides deposit and loan products and financial services to local businesses, consumers, and municipalities.
DCOM stock is being sold aggressively, considerably underperforming the sector and halving in value over the last five years.
Image Source: Zacks Investment Research
Earnings Results
Dime Community Bancshares experienced some brief solace following its earnings results at the end of April, however that strength was only an opportunity for more selling. DCOM managed to beat earnings estimates, but it wasn’t enough to stop the selling.
Earnings of $0.92 per share beat Zack’s Estimates of $0.82 per share. However, sales of $94.75 million missed estimates of $99 million. It is worth noting that because of the environment, DCOM estimates had been revised considerably lower leading up to the report. So, while earnings beat estimates, they were a much lower target, and sales couldn’t reach even the lower expectations.
Future earnings expectations haven’t improved either. Analysts are in unanimous agreement in downgrading DCOM across timeframes. Q2 earnings have been downgraded by -30% over just the last 60 days. Huge revisions lower in estimates are exactly what bears want to see.
Image Source: Zacks Investment Research
Concerns
The Q1 earnings report also showed some concerning data regarding deposits. As much as 30% of DCOM’s bank deposits were non-insured, leaving it potentially vulnerable in the case of a run on the bank. Deposits did increase from $10.25 billion to $10.57 billion in the quarter though, which is very reassuring.
There was an additional balance sheet metric that caught my attention. A line labeled “accumulated other comprehensive loss (AOCI),” shows a -$98 million loss.
Image Source: Dime Investor Relations
One of the major pieces of data that initially caused concern regarding Silicon Valley Bank before its downfall was unrealized losses on securities. SIVB was holding a ton of long-dated Treasuries on its balance sheet, and when interest rates rose in 2022, the value of those securities dropped. SIVB reported a loss of -$1.8 billion because of this, which led them to try and raise capital through a share offering. It was never completed.
Unrealized losses on securities are included in that AOCI figure, meaning DCOM is holding securities that are underwater. I want to make this extremely clear, SIVB didn’t fail because of its unrealized losses, and neither will Dime Bancshares, but it was and is a concerning figure.
As it currently stands, AOCI as a percentage of total stockholders’ equity is -8.2%. When Silicon Valley Bank went under that number was -11.7%. Again, this isn’t an alarm that should cause the stock to crash, but a red flag.
Valuation
Dime Community Bancshares is currently trading at a one-year forward earnings multiple of 6x, which is below the industry average 8x, and below its four-year median of 9.5x. The tremendous fall in share price is what has caused the valuation to fall so precipitously from last year.
During the most recent quarterly report management announced that they were raising the dividend payment from $0.24 per quarter to $0.25, which they believe reflects a strong financial position. DCOM has an annual dividend yield of 5.9%.
Image Source: Zacks Investment Research
Bottom Line
DCOM is in a very challenging position. Not only is it caught up in one of the worst national bank scares since the Savings and Loan Crisis, but it also displays some concerning financial metrics to back those fears. Fortunately for them, the deposit base remains at the bank quelling the worst fears, but analysts are still bearish. While there is no evidence DCOM should suffer the same fate as SIVB, it is likely to continue to see downward pressure, and should thus be avoided.