ConnectOne Bancorp's 2024 Q4 Call: Diverging Views on Loans, Strategy, and Deposits

These are the key contradictions discussed in ConnectOne Bancorp's latest 2024Q4 earnings call, specifically including: Loan Growth Expectations, Banking Strategy Adjustments, and Deposit Growth:



Strong Financial Performance and Margin Expansion:
- ConnectOne Bancorp reported a 21% increase in quarterly net income available to common shareholders, with a 6% year-over-year increase.
- The bank's net interest margin improved by nearly 20 basis points during the quarter, largely due to a more than 25 basis point improvement in its cost of deposits.
- This was due to a widening net interest margin and solid growth in both loans and core deposits.

Loan and Deposit Growth:
- ConnectOne achieved 2% quarter-over-quarter loan portfolio growth, with an expected continuation of this growth rate entering 2025.
- Core deposits increased by more than 3% on a quarter-over-quarter basis, reflecting notable success in noninterest-bearing demand balances.
- The growth in loans and deposits was attributed to disciplined lending, focusing on high-quality relationship business, and successful deposit initiatives.

Merger with First National Bank of Long Island:
- ConnectOne announced a strategic merger with First National Bank of Long Island, with a planned closing in the second quarter of 2025.
- The combined company is expected to have nearly $15 billion in assets and a market capitalization of over $1.2 billion.
- The merger is expected to enhance the net interest margin by about 10 basis points and increase operating ROA to 1.15, while improving financial performance metrics.

Improved Credit Quality:
- ConnectOne's credit quality remained sound, with charge-offs at a reasonable level and nonaccruals up slightly but trending down.
- Delinquent loans were at 4 basis points, with zero past due more than 60 days, marking an all-time low.
- The improvement in credit quality is attributed to disciplined lending practices and effective management of credit risk.

Capital and Expense Management:
- ConnectOne is projecting a 2% to 3% sequential increase in operating expenses (OpEx) in the first quarter, with expense growth expected to taper off for the remainder of 2025.
- The bank is planning to raise sub debt and anticipates using both sub debt and common stock as sources for a capital raise in the first quarter.
- This disciplined approach to capital and expense management is aimed at supporting the bank's growth and enhancing shareholder value.