ConnectOne Bancorp, Inc.

Good day and welcome to the Connect One Bancorp, Inc. second quarter 2020 earnings conference call. All participants will be in listen-only mode. Did you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Miss Siya Vansia with Connect One. Please go ahead.

Good morning and welcome to today's conference call to review Connect One's results for the second quarter of 2020 and to update you on recent developments. On today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns, Executive Vice President and Chief Financial Officer. The results as well as notice of this conference call on a listen-only basis over the internet were distributed this morning in a press release that has been covered by the financial media. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed today on Form 8K with the SEC and may also be accessed through the company's website at ir.connect1bank.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Thank you, Siya, and good morning, everyone, and thank you for joining us on our conference call today. I hope you and your families have all been safe and healthy. We here at Connect One had a good second quarter, and I'm proud of how Connect One has responded to the current challenges the industry is facing in this uncertain economy. Looking at some of the key quarterly metrics for Connect One, we continue to generate very strong earnings, delivering earnings of 30 cents per share, which included 15 million of reserves, predominantly due to the uncertainty regarding the pandemic. The strength of our organization continues to be demonstrated by our strong pre-tax net operating revenue, which was in excess of 1.95% of total average assets, placing us among the strongest in the industry. We also delivered on an improved net interest margin this quarter, resulting in sequential net interest income growth of 10% and over 30% on a year-over-year basis. While many other banks are experiencing margin contraction, and in some cases significant compression, we continue to demonstrate the ability to drive exceptionally strong organic earnings power. In regard to provisioning, we're essentially matching our reserves from the first quarter. We now have close to $28 million in reserves for issues related to the pandemic, should they arise, bringing our total reserves for loans to approximately 1.08%. Bill will have a little bit more to say about the provision and the reserves a little later on in this presentation. Despite the large reserve build, we still managed to grow our tangible book value per share to $16.28. Overall, we continue to navigate through the pandemic in a solid, forward-looking fashion, which is a testament to the resilience of our team and our relationship banking model. Operationally, we've adopted a comprehensive return-to-work strategy With a heavy focus on leveraging our technology, including reopening our offices with enhanced contactless solutions. While we're taking gradual steps to return to normalcy, we've also learned through this pandemic how to best serve our clients, whether that's in person or through our digital channels. And in turn, our clients have shown less reliance on our physical locations. The investments we've made in financial technology and in our infrastructure over the past few years has played a critical role in competitively positioning Connect One's virtual hybrid bank model, while the environment that COVID created has accelerated the transition to our digital banking products for many of our clients. Additionally, as we move into the future state of banking in the digital world, we're excited to further leverage our strong technological foundation to take advantage of new opportunities. Most recently, we partnered with Encino to launch a virtual portal to digitize the Paycheck Protection Program forgiveness process, which is now available to our borrowers under the program. As you know, we were an active participant in the SBA's Paycheck Protection Program, funding over 470 million of loans. I'm very proud of our team for quickly responding to our clients' needs, especially in this time of crisis. You know, while some banks consider these loans as giving up economics, our Paycheck Protection Program loans are generally done with existing clients, and we believe it's a service necessary to provide in order to ensure the continuity of our clients' businesses. Bill will touch a little bit on the economic impacts of that program momentarily. On another front, FinTech, Bofly also performed very well, providing a new channel for lending in the Paycheck Protection Program. Separately from Connect One, they processed over $400 million in loans to over 15 banks, and we believe their growing momentum will extend beyond the Paycheck Protection Program as skills learned will be applied to pursuing additional opportunities in the future. Bothwide generally has done best in times of higher than normal unemployment when folks who are laid off decide to start a business. And we expect to see a pickup in business there once stabilization begins with the COVID pandemic. We also worked with some of our borrowers by helping them through challenges that have resulted from the pandemic. As of June 30th, we had approximately 930 million in deferments. However, since the end of the second quarter, and many more. Connect One has a very low exposure to the hot-button industries such as transportation, energy, and hospitality, and our portfolio is underwritten with low LTVs and reasonable cap rates. Additionally, overall COVID-19 trends have vastly improved in the Northeast since the onset of the pandemic earlier this year. Multifamily rent collections in the New Jersey market are tracking at approximately 95%, and restaurants in our market have been doing Pretty well in this transition. Home sales in our suburban markets in some cases are at near all-time highs and our construction portfolio is performing very well with projects moving to completion. Since our inception, Connect One has developed its expertise in commercial real estate and has committed to having a well-diversified loan portfolio. While overall loans are down slightly this quarter as a result of our conservative stance given the current environment, We're constantly looking at where we can get the best rate of return relative to the risk that we take in our company. We also take great pride in our team's focus of expanding client relationships, and I'm pleased to note that total average deposits for the second quarter increased by 240 million, which is nearly 20% on an annualized basis. We've always been committed to being good stewards of our shareholders' capital resources, conservative in our financial commitments, and continue to return capital to shareholders through quarterly dividends. This approach has served us well. And in that regard, the board just declared our nine cent per share common dividend along with today's earnings release. While we expect a relatively flat balance sheet for the remainder of 2020, depending on the duration of this pandemic, we believe our balance sheet remains well positioned. We have sound growing capital levels and our position was further strengthened with the recent completion of a $75 million subordinated debt offering. A significant portion of that offering, upwards of $50 million, is intended to pay off existing subordinated debt. So switching gears and taking a look at our acquisition of Bancorp of New Jersey, the final phase of our integration and conversion was completed virtually on May 4th with no delays. The transition's been seamless. and as we previously mentioned, we closed eight branches during the quarter. We also continue to evaluate all of our brick and mortar strategy and plan to close an additional four locations later this year. As we rationalize our physical footprint, we believe that Connect One's performance, especially our operating efficiency, will reflect the benefits of this initiative. In conclusion, we're diligently executing on our priorities and continue to use our full range of banking expertise to support our clients. I'm pleased with our second quarter results and the underlying fundamentals of the company. And with that, as a strategic update, I'd like to now turn the call over to Bill to provide some more details on this quarter's performance. Bill?