KBRA affirms Dime Commercial Bancshares ratings, keeps positive outlook

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KBRA affirms Dime ratings

Highlights

KBRA affirmed Dime Commercial Bancshares' senior unsecured debt at BBB and maintained a Positive Outlook on all long-term ratings, citing improved capital and reserve levels.
Dime generated over $3 billion of core deposits since 2023, reducing noncore funding, achieving a loan-to-core deposit ratio of 88%, and lowering deposit costs to 1.61% in 1Q26.
Management projects net interest margin above 3.50% by year-end 2027 from 3.21% in 1Q26, supported by a $3 billion loan repricing pipeline and stronger capital ratios.

Rating action and balance sheet progress

As reported by Kroll Bond Rating Agency, KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, the preferred shares rating of BB+, and the short-term debt rating of K3 for Dime Commercial Bancshares, Inc. It also affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its main subsidiary, Dime Commercial Bank, while maintaining a Positive Outlook on all long-term ratings.

KBRA says the ratings reflect management's execution of deposit gathering and loan portfolio diversification strategies, which have helped strengthen earnings, improve capital and reserve levels, and lower investor commercial real estate concentration. The agency says several key financial metrics now compare favorably with rated peers and expects that trend to continue as the company's balance sheet transformation progresses.

Funding and liquidity remain central strengths in the rating profile. KBRA says Dime has generated more than $3 billion of core deposits since 2023 through its deposit-focused team strategy, allowing the bank to largely eliminate noncore funding sources and materially improve on-balance-sheet liquidity. The loan-to-core deposit ratio stands at 88% as of 1Q26, while cash plus securities equal 24% of total assets.

The funding mix has also become more attractive, with non-interest-bearing deposits accounting for 31% of total deposits and the cost of deposits at 1.61% in 1Q26, or 25 basis points below the rated peer average. KBRA says that improvement comes despite Dime operating in one of the nation's most competitive banking markets.

Profitability outlook and credit risks

The reduction in higher-cost wholesale funding and the improved deposit mix are driving recent expansion in net interest margin and return on assets, with ROA at 0.92% in 1Q26. KBRA adds that repricing of older loans should provide additional support over the next several years, with about $3 billion of loans set to reprice by year-end 2027.

Management expects net interest margin to exceed 3.50% by year-end 2027 from 3.21% in 1Q26, a trajectory that could support earnings performance above peer levels. KBRA says that outcome still depends on relative credit outperformance, even though it views Dime as having a conservative underwriting culture and a history of performing well through the cycle.

The agency says some commercial real estate segments still warrant close monitoring, including New York City rent-regulated multifamily loans, which represent about 10% of total loans as of 1Q26. Although nonperforming assets and net charge-offs remain above historical norms, with the net charge-off ratio averaging about 0.3% over the past six quarters, KBRA says this partly reflects management's proactive handling of problem credits and does not expect further deterioration to materially weaken returns over the medium term.

Capital and reserve levels have also strengthened, with a CET1 ratio of 11.9% and loan loss reserves equal to 0.95% of total loans as of 1Q26. KBRA attributes that improvement to the company's common equity raise in 4Q24, measured balance sheet growth, and stronger earnings retention, while noting that an upgrade is possible over the medium term if profitability improves further and concentration risk declines without a weakening in credit performance or loss-absorbing capacity.

In our earlier article on KBRA’s rating affirmation for Banner Corporation, we highlighted how the agency maintained the company’s existing ratings and Stable Outlook on the back of steady earnings, low funding costs, and conservative capital management. We also noted KBRA’s favorable view of Banner’s proposed all-stock acquisition of Pacific Financial Corporation, which was expected to add low-cost deposits and broaden its footprint in Western Washington and Western Oregon.

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