ConnectOne Bancorp(CNOB) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - ConnectOne Bancorp reported nearly double-digit annualized loan growth, with a total loan book growth of just under 10% for the quarter [6][15] - The return on assets was 1.35%, and the return on tangible common equity was 15.5%, with an efficiency ratio of 41% [15] - Tangible book value per share increased by $0.34 to over $15 per share, and the tangible common equity ratio rose to 8.9% [15] Business Line Data and Key Metrics Changes - Loan growth was driven by construction lending and owner-occupied commercial real estate lending, while multifamily lending remained flat [7][15] - The nonperforming asset ratio improved to 0.74%, down from 0.82% at the end of the previous quarter [21] Market Data and Key Metrics Changes - The net interest margin contracted by four basis points to 3.30%, influenced by competitive pressures on deposit funding and a flat yield curve [17] - The company is taking steps to lower deposit interest rates in anticipation of Federal Reserve cuts, which may provide relief for deposit costs [19] Company Strategy and Development Direction - The company closed the acquisition of BoeFly, an online business lending platform, which is expected to enhance fee income and SBA lending opportunities [10][11] - ConnectOne is focused on expanding its digital foundation and pursuing traditional bank M&A as part of its growth strategy [11][25] - The company is rationalizing its physical footprint by closing branches and converting locations into shared office spaces [13][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging interest rate environment but expressed confidence in maintaining strong financial performance and returns on invested capital [6][15] - The company anticipates continued loan growth in the high single digits for the year, despite a more normalized growth rate expected in construction lending [25][66] Other Important Information - The company has been actively repurchasing stock, with approximately 250,000 shares bought back during the quarter [36] - The effective tax rate is expected to remain around 22% to 23% for the remainder of 2019 [22] Q&A Session Summary Question: What is the outlook for deposit growth for the rest of the year? - Management noted that seasonal factors affected deposit growth but expressed hope for improvement going forward, depending on market conditions [28] Question: What is the outlook for net interest margin (NIM)? - Management indicated that while there are factors affecting NIM, they are cautiously optimistic about maintaining or possibly increasing it [30] Question: What is the exposure to New York City rent-regulated multifamily properties? - The New York City-stabilized portfolio is less than 8% of the total loan portfolio, with LTVs below 59% [32][33] Question: How is the company approaching M&A opportunities? - Management is actively looking for whole bank M&A opportunities within a 100-mile radius of New York City and is also considering nonbank M&A to enhance their digital strategy [42][45] Question: What is the status of the taxi medallion loan portfolio? - The portfolio is stable, with no new taxi loans being issued, and management is evaluating opportunities to lower exposure [67]