ConnectOne Bancorp(US:CNOB)2023-07-30 10:08Financial Data and Key Metrics Changes - The net interest margin compressed sequentially by about 19 basis points, largely due to shifts from non-interest bearing demand accounts to interest bearing accounts [34][48] - Tangible common equity increased to 9.19% as of June 30, remaining well above peer averages, and tangible book value per share increased for the 13th consecutive quarter to $22.34, up 40% over that period [28] - The non-performing asset ratio increased slightly to 0.53 from 0.48 quarter-over-quarter, but decreased from 0.69 year-over-year [56] Business Line Data and Key Metrics Changes - The loan portfolio remained mostly flat for the quarter, although there was a healthy 17% annualized growth rate in Commercial and Industrial (C&I) loans [16][27] - Non-interest income is expected to grow, particularly from the SBA lending platform, which reported $500,000 in gains this quarter [36][75] - The company has minimal exposure to office real estate, with New York City office loans representing less than 1% of total loans [49] Market Data and Key Metrics Changes - Client deposits increased, contributing to a top-tier uninsured deposit coverage ratio of about 250% [10][17] - The company is well-positioned for growth opportunities in key markets such as Long Island and South Florida, while expecting a decrease in multifamily lending due to lower purchase demand [74][75] Company Strategy and Development Direction - The company is focused on integrating key technology and infrastructure investments to enhance client experience and drive organic growth [51] - Despite industry headwinds, the company remains committed to its long-term strategic priorities and believes the current environment presents opportunities for investment [32][76] - The company plans to continue stock repurchases at a similar pace for the duration of 2023, as its stock is trading below tangible book value [81] Management's Comments on Operating Environment and Future Outlook - Management noted that interest rates and Fed policy have dampened demand, leading to less purchase activity and business combinations [21] - The outlook for overall loan growth remains relatively flat, but management anticipates a potential increase in demand as the economy stabilizes [30][90] - Management expressed cautious optimism regarding the stability of demand deposits and the potential for growth in non-interest income [132] Other Important Information - The company has onboarded about a dozen client-facing team members in both new and existing markets to support future growth [75] - The company is actively seeking credit enhancements such as additional collateral and personal guarantees to maintain sound loan performance [50] Q&A Session Summary Question: What is the expected expense growth for 2023? - Management indicated an expected expense growth of approximately 5% on an annualized basis [80] Question: Can you elaborate on the opportunities arising from market dislocation? - Management noted they are in between the first and second phases of market disruption, taking advantage of talent acquisition and expanding their C&I operations [62] Question: What is the outlook for net interest income? - Management believes they are at a floor for net interest income and expect growth from SBA and BoeFly contributions [126] Question: How does the company view the current credit metrics? - Management expressed confidence in their credit quality, noting that delinquencies remain low and clients are reasonable in working with the bank [129]