ConnectOne Bancorp, Inc.

Greetings, and welcome to the Connect One Bancorp Inc. First Quarter 2021 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, C. Avanti, Chief Brand Innovation Officer for Connect One. You may begin.

Good morning and welcome to today's conference call to review Connect One's results for the first quarter of 2021 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 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 only 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.connectonebank.com. Each listener is encouraged to review these 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.

Well, thank you, Sia, and good morning, everyone. We appreciate you joining us today. As you've seen, Connect One had a strong quarter and continues to build momentum as we move into the post-COVID economy. The first quarter, highlighted by solid financial and operating results and diligent execution against our strategic plan is a strong indicator of the performance we can expect through the rest of the year. Our proactive position, coupled with the improving operating environment, has allowed us to take advantage of many growing market opportunities. This is the third quarter in a row that operating earnings exceeded 2 percent of assets, and notably, that's increased sequentially each quarter. Our loan production was robust. We utilized the full range of the company's banking expertise to support our clients, who are not only financially strong, but have also realized new opportunities through this pandemic. We stand ready to support them as they expand their businesses. At the same time, we saw a large increase in pay downs and payoffs. There are a number of reasons for this, which we believe are short-lived or one-time events. Our strongest clients are sitting on large cash balances due to the liquidity that's in the market, resulting in paydowns on lines of credit. Our pipeline in construction saw unusually large numbers of completions and resulting payoffs as timelines were affected by the early COVID-related shutdowns last year, combined with delayed starts for new projects. Extraordinarily low interest rates through last year caused a higher than usual level of refinances that we chose not to participate in as we remain disciplined in our approach. We're seeing these events normalized. As we begin the second quarter, there appears to be a slowdown in both prepayments and in payoffs. We are seeing strong demand across our markets, further building growth momentum, which can be seen in our existing loan pipeline, which I'm happy to report is at the highest level in the company's history. we continue to expect net loan growth to accelerate in the back half of the year. Now, turning to credit, we continue to see better than anticipated strength, and no doubt we're in a much better position than was originally anticipated at the start of this pandemic. We implemented the CECL accounting standard on January 1st, and Bill will provide a little more detail on this, but in summary, our one-time adjustment was modest. During the quarter, we released a small portion of the reserves built over the past year based on the improving macroeconomic outlook. Our deferment portfolio declined modestly as of the end of the quarter, and the total amount of loans where all payments have been deferred is now less than 50 million, or less than 0.8% of our total loans. Total deferments are expected to decline significantly over the remainder of 2021, and we believe our reserves reflect adequate protection against any potential losses. I'd also like to note that our net interest margin continued to expand during the quarter, the sixth consecutive quarter that margin widened. We're proud of our results this quarter, and we remain disciplined in managing our business as we look forward towards growth. As the vaccines continue to be deployed throughout the New York metropolitan area, we're anticipating a significant uptick in our client activity. We're geared up for meaningful growth for the remainder of the year. And as the economy opens up even more, we're preparing our team to capitalize on increased opportunities. Now, speaking of Connect One's team, they've returned to a work environment, and I'm proud of the work from the office environment, and I'm proud of the resiliency that they demonstrate each and every day to take care of our clients. You have heard us discuss for some time that we're progressively moving towards a hybrid banking model. For us, the early investments we've made in technology and our infrastructure allowed Connect One to be well prepared to respond to the pandemic. We plan to further develop this model and our strong technological foundation as we move into the future state of banking. As always, Connect One remains a growth-oriented company, and with signs of stability and expansion returning, we're well positioned with the capital strength necessary to take advantage of these opportunities and to maintain or even improve our best-in-class performance metrics. some of which are our high returns on capital common equity, the building of tangible book value per share, and improving on our best-in-class efficiency ratio. With those things in mind and with that outlook, today we announce the 22 percent dividend increase to go along with the resumption of our stock repurchases. Over the past couple of years, we've seen notable technological shifts, including reliance on digital platforms, virtual deposits, and online financial tools. We continue to innovate and invest in our infrastructure to enable us to deliver the quality products and services that our clients demand. At the same time, as client behavior evolves, we continue to reduce our retail brick and mortar footprint relative to the size of our balance sheet and client demand. In the first quarter, we further reduced our branch count, completing the previously announced sale of two branches. It's interesting to note that over the past five years, we have doubled the size of our assets, our loans, and deposits, while only increasing the net branch count from 21 to 24, including the integration of two acquisitions. And also, as a quick update, we continue to build our SBA lending platform in our marketplace to serve our existing clients and to support small businesses in the communities where we do business. This initiative has been gaining traction, and we see opportunities over time to generate revenue through an expanded SBA division. Now, turning to BowFly, we see terrific growth in that platform, which is generating more traffic through its proprietary products, BeVerify and the patented BeQual, And this, in turn, will lead to increased fee generation through loan referrals. As we scale and extend Beaufly's competitive position, we're seeing opportunities to further enhance Beaufly's platform and add complementary products to its offerings and build Beaufly into a robust business marketplace. I look forward to updating you on our progress in the quarters ahead. We believe that many more opportunities exist to partner with FinTech companies and to build more value while modernizing financial services. As you may have seen, Connect One has joined with dozens of other banks to participate in the Jam FinTop Bank Tech Fund, a fund dedicated to investing in the future ecosystem for community banks. At Connect One, we've long believed in the power of partnerships. And we believe this opportunity, supported by the country's leading banks, will provide a high level of diversity to further fuel innovation. Finally, a few thoughts regarding M&A. 2021 is already shaping up to be an active year. As in the past, strategic acquisitions are an important component of our long-term growth strategy. Whether we participate directly or not, we see incredible opportunities to attract new talent, add new capabilities, as well as benefit from others' activity. You know, at its core, Connect One is a growth company. We've built a dynamic team that's accustomed to high levels of production, an operational model that can continuously evolve its technology and infrastructure, and the ability to successfully execute franchise-enhancing M&A opportunities. Given our culture and our strong capital position, we're poised to accelerate our strategy and capitalize on market opportunities to drive substantial growth. This is an exciting time for Connect One. We look forward to sharing our progress with you each quarter. And I'll now turn the call over to Bill to provide a little more detail on the quarter's financial performance. Bill?