Why Dime Commercial Bancshares Stock Rocked the Market Today
Key Points
It's also acquiring a peer lender.
The deal for ES Bancshares is valued at $58 million.
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One of Tuesday's better-performing bank stocks was one of the sector's more low-key companies. Dime Commercial Bancshares (NYSE:DCOM) saw its shares zoom 6% higher on Tuesday, while the S&P 500 index could only muster a 0.3% gain. An encouraging quarterly earnings report and the announcement of a fresh acquisition drove investors into the stock that day.
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Double-digit rises for Dime
Dime's third-quarter total revenue rose by 19% year over year to more than $135 million. This, despite the New York-based bank's loans falling marginally over that stretch to under $10.8 billion. Deposits, on the other hand, increased 7% to $12.8 billion.
On the bottom line, attributable net income not under generally accepted accounting principles (non-GAAP, or adjusted) leaped almost 50% higher to $39.1 million ($0.91 per share).
In the earnings release, Dime said its cautious approach was paying off. It quoted CEO Stuart Lubow as saying that "Our balance sheet, with $2.2 billion of cash and an 83% loan-to-deposit ratio, was intentionally constructed keeping in mind the potential for an elevated interest rate environment. We believe this highly liquid balance sheet uniquely positions Dime versus our local peers."
Buying a peer
Dime is aiming to grow by acquiring one of those peers. Also on Tuesday, the company announced it had signed a deal to purchase ES Bancshares (OTC:ESBS). The transaction, which Dime said would bolster its presence in the New York City boroughs of Brooklyn and Staten Island, is to be effected through a mix of cash and Dime Stock totaling around $58 million.
Both pieces of news are encouraging, with Dime doing a good job lifting the bottom line despite a loan book that isn't growing hotly, and seizing an opportunity to capture market share in its region (the ES Bancshares deal is priced at only around 1.1 times that company's tangible book value per share).
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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