ConnectOne Bancorp(US:CNOB)2024-01-25 19:54Financial Data and Key Metrics Changes - The net interest margin compressed sequentially by 5 basis points, with expectations for stabilization and potential widening as the Fed eases its interest rate stance [9][36] - The tangible common equity ratio increased to 9.3% from 9.0% a year ago, while the subsidiary bank leverage ratio rose to 11.20% from 10.60% [17] - The effective tax rate was lower at 24.4% due to a lower level of pre-tax income, with expectations to return to around 26% in 2024 [20] Business Line Data and Key Metrics Changes - There was strong sequential growth in the C&I loan segment of nearly 7% during the fourth quarter, although future growth is expected to be lower [31][15] - Monthly average non-interest bearing demand deposits increased each month from October through January, indicating a potential growth floor [13][34] - Non-interest income from SBA loan sales is expected to continue at about $500,000 per quarter throughout 2024 [38] Market Data and Key Metrics Changes - Client deposits grew sequentially by $100 million, approximately 5% annualized, with non-interest bearing demand deposits increasing by $35 million, an 11.5% annualized increase [34] - The company anticipates modest growth in both Long Island and South Florida markets, with a focus on enhancing its position in these areas [11] Company Strategy and Development Direction - The company remains committed to a client-first operating model, focusing on relationship-based lending and enhancing shareholder value through potential dividend increases [10][33] - Continued hiring of quality talent from other banks is part of the strategy to drive organic growth [10] - The company is focused on maintaining a disciplined approach to credit and spreads while capitalizing on emerging opportunities [9][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2023 due to significant tightening in the banking industry but expressed optimism for 2024, anticipating gradual opportunistic growth [3][44] - The company is prepared to navigate uncertainties, including potential impacts from the Fed's actions and the upcoming presidential election [50][66] - Management highlighted the importance of maintaining strong capital and liquidity levels to support both existing and new clients [30][31] Other Important Information - The company increased its common stock dividend by nearly 10% to $0.17 per share last year and is considering another increase in the next quarter [10] - The annualized operating expense as a percentage of average assets remains below 1.5%, with an expected increase of approximately 5% to 7% in expenses for the upcoming year [16][32] Q&A Session Summary Question: What type of loan growth is expected this coming year? - Management indicated that while C&I growth is expected to slow, there is still strong demand in the construction sector, and they are optimistic about growth opportunities [23][24] Question: Can you provide insights on the NIM dynamics and deposit repricing assumptions? - Management explained that deposit costs are leveling off, and they expect to see margin improvement as assets reprice higher with Fed rate cuts [46][63] Question: What is the outlook for the SBA business and expense growth? - Management confirmed that the SBA business is a capital-efficient growth opportunity, and the 5% to 7% expense growth includes hiring for this segment [99][117] Question: How does the company plan to manage crossing the $10 billion asset threshold? - Management stated that they are building risk controls related to this threshold and do not anticipate significant incremental costs [88][104] Question: What is the current status of the multifamily portfolio and any credit deterioration? - Management reported that the multifamily portfolio is under $100 million and performing well, with no significant credit issues anticipated [112]