ConnectOne Bancorp Stock Earnings Reports

Q4 2024 Earnings Call

Key Highlights for Investors:

1. Financial Performance:
   • ConnectOne reported a 21% quarter-over-quarter increase in net income available to common shareholders, and a 6% year-over-year increase.
   • The bank experienced solid growth in loans and core deposits.
   • Core deposits rose by over 3% quarter-over-quarter, with a notable increase in noninterest-bearing demand balances.
2. Lending Growth:
   • The loan portfolio recorded a 2% growth quarter-over-quarter, and the bank anticipates this upward momentum to continue into 2025.
   • Current loan pipeline shows strong demand, particularly in business loans, with competitive spreads observed in new loan bookings.
3. Net Interest Margin Improvements:
   • The bank’s net interest margin improved by nearly 20 basis points to 2.86%.
   • Expected margin growth going into 2025 due to ongoing re-pricing of the loan portfolio and declines in the cost of deposits. Projected first quarter margin improvement to approximately 2.90%.
4. Merger Update:
   • The merger with First National Bank of Long Island is on track, expected to close in Q2 2025.
   • The combined entity will operate under the ConnectOne Bank brand and anticipates additional net interest margin growth by about 10 basis points post-merger.
   • The acquisition aims to enhance revenue synergies, specifically within the residential small business administration (SBA) and commercial and industrial (C&I) lending sectors.
5. Expense Management:
   • The bank realized total expenses were down sequentially, despite merger-related costs.
   • A 2-3% increase in operational expenses is projected for the first quarter of 2025, typical for the new year, but efforts to capture cost savings from the merger are ongoing.
6. Credit Quality:
   • Charge-offs and nonaccrual loans were at acceptable levels, with a provision for credit losses of $3.5 million reflecting loan growth and specific reserves.
   • Credit quality metrics remained stable, with delinquency rates low and confidence in credit risk management.
7. Capital Considerations:
   • A capital raise of $175-200 million is anticipated to manage upcoming sub-debt re-pricing, with expectations on how it will impact the balance sheet.
8. Market Position and Strategy:
   • The bank believes it is currently trading at a discount compared to peers, suggesting potential upside for investors.
   • Continued focus on relationship banking is expected to drive growth and strengthen client ties in targeted markets such as New York City, Long Island, and Florida.

Investor Outlook:

ConnectOne Bancorp demonstrates significant financial momentum and stability, particularly with the anticipated merger enhancing both growth and operational efficiencies. The bank’s focus on maintaining strong credit quality and expanding its footprint aligns well with industry trends, providing a positive long-term outlook for shareholders.