ConnectOne Bancorp, Inc.

Greetings. Welcome to Connect One Bancorp Incorporated's fourth quarter 2022 earnings call. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I will now turn the conference over to Sia Vantia, Chief Brand and Innovation Officer. Sia, you may begin.

Good morning and welcome to today's conference call to review Connect One's results for the fourth quarter of 2022 and to update you on recent developments. On today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns, Senior Executive Vice President and Chief Financial Officer. I'd also like to caution you that we may make forward-looking statements during today's conference call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings. 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. I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Thank you, Sia, and good morning, everyone. We appreciate you joining us today. Connect One just completed another solid year. We generated high-quality earnings, achieved extraordinary organic growth, gained traction in our markets, and continue to digitize our infrastructure. As we think about our results, I'd like to emphasize our ongoing commitment to supporting our clients' needs. Despite the ups and downs of interest rates or the economy, Connect One's client-centric business model has continuously served us well. And like I've always said, if we do that right and we do things for the right reasons, we'll create long-term shareholder value. And so notwithstanding the challenging economic environment, we once again delivered strong financial performance for the quarter. Return on assets exceeded 1.3%, while our return on tangible common equity was nearly 15%. Our PPNR as a percent of assets exceeded 2%, the 10th consecutive quarter that PPNR has been higher than 2%. Tangible book value per share advanced another 4%. Our efficiency ratio, again, was below 40%. Capital ratios remain strong, and while much of the industry has experienced weakness here, our tangible common equity ratio stands at over 9 percent at year end. We also kept off a record year for both loan originations and deposits. Our loan portfolio increased over 19 percent year over year, while our deposits grew in excess of 16 percent. We're benefiting from the recent investments in our team, infrastructure, and the digitization that we've shared over the last few quarters. and seeing a healthy diversification in our portfolio. Our originations were spread amongst all segments of our markets, including Southeast Florida and Eastern Long Island, with additional synergies driven through both flight in both SBA and non-SBA lending verticals. NIC1's strong performance in 2022 is a testament to the success of our culture, the technological foundation we've built, and our relationship-focused origination franchise. That said, It's important to note that despite consistent performance, each quarter has its own set of challenges and opportunities. Like many banks, we had a challenging quarter with respect to net interest margin. The deposit competition significantly increased, reflecting the Fed's intensified battle with inflation. In addition to the rapid and significant rise in short-term interest rates, quantitative tightening has removed liquidity from the financial markets, even as the economy continues to grow. As a result, by decreasing the money supply, there's an overall decline in deposits within the banking system, and this has led to historically fierce competition for interest-bearing deposits among both large and small banking institutions. With our loan portfolio, while our loan portfolio rates are increasing at a nice pace, around 50 basis points sequentially, credit spreads for bank loans continue to remain low from a historical perspective. And finally, while the inverted yield curve puts additional Albeit temporary pressure on the NIM, we made the decision to maintain and support our client relationships. Main focus on serving our clients, supporting our staff, delivering value to our shareholders, and improving and building upon our distinctive operating platform, all while maintaining our results-oriented, client-centric culture. Our business model has performed well across a variety of economic interest rate environments. We always set ourselves apart by making it easier for our clients to do business with us while empowering them with the latest technology to meet their evolving needs. And we entered 2023 well positioned to build on our strengths and achieve our long-term objectives. Speaking of technology, several of our investments are moving through to implementation and are focused on providing a better experience for our clients while driving increased productivity and efficiency. Our partnership with Mantle to deploy a new modern omni-channel deposit origination platform is underway, and this partnership allows us to expand our reach in supporting commercial, small business, and consumer clients while optimizing our workflows. Our partnership with Nimbus, the launch venture on the new branded business vertical on a lean and nimble cloud-based tool is nearing launch and will provide bespoke banking services designed to meet the demands of high-growth, venture-backed technology companies. Turning to BowFly, our online business lending marketplace, we continue to enhance its infrastructure, add new users, increase our clients' overall workflow efficiency, and drive revenue. Now turning to credit, our credit performance remains strong, and while Bill will provide some additional details shortly, we saw improvement in credit metrics during the fourth quarter. Our MPAs declined by more than 20 percent, Our delinquencies as a percentage of total loans remain near zero, and we continue to prudently maintain reserve levels commensurate with our organic growth and the changing macroeconomic forecast. End of the year with a very strong capital position across all regulatory ratios in addition to the tangible common equity ratio, which has hardly been impacted by AOCI. We've also been investing in our business, and as we enter 2023, I'm excited to build on the early successes we've seen from the launch of our new healthcare team and our expansion into southeast Florida and eastern Long Island markets. With that, we remain confident in our ability to drive value for our shareholders, and similar to previous years, that could include our board evaluating future dividend increases and reinforcing our belief that Connect One shares are undervalued, potentially utilizing share repurchases, all subject to market conditions. So to wrap things up, we're a dynamic highly valuable franchise, and we're pressing forward in leveraging our client-first operating model. Enter 2023 with a deep capital base, strong earnings that can support multiple growth initiatives, and in short, I'm confident that we'll continue to produce opportunities for our clients, our team members, and our shareholders. We look forward to sharing our progress in the quarters ahead, and with that, I'll now turn the call over to Bill.