ConnectOne Bancorp, Inc.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Connect One Bancorp, Inc. Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I'd now like to turn the conference over to Sia Vancia, Chief Brand and Innovation Officer. Please go ahead.

Good morning, and welcome to today's conference call to review Connect One's results for the fourth quarter of 2023 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 calls that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filing. 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 from companies' earnings release and accompanying tables or schedules, which have been filed today on Form 8K of the SEC and may also be accessed through the company's website. I will now turn the poll over to Frank Sorrentino. Frank, please go ahead.

Frank Sorrentino Thank you, C. Good morning, everyone. Thanks for joining us today. Connect One persevered through an environment marked by significant challenges and risks, as 2023 was a complicated period for the banking industry. The Fed's unprecedented tightening had an adverse effect on industry earnings, including Connect One's, causing a contraction in net interest margins. But our key profitability measures, efficiency, and asset quality ratios were solid. We remained a focused, disciplined, and strong financial institution. I am proud to say, with the continued strength of our balance sheet, our culture, and the commitment of our entire organization, we were able to stay the course and continue the path that has made Connect One a success since our inception nearly 20 years ago. As I've discussed many times over the years, Providing unparalleled support for our clients has always been a strategic priority for Connect One. This isn't anything new, but it's this philosophy, consistent track record, and an approach that I believe positions us to outperform in 2024 and beyond. Now let me turn to some of the recent highlights and the near-term outlook. Throughout the course of the past year, we strengthened our capital and liquidity levels and entered 2024 with a fortified balance sheet that positions us to support both existing and new clients. Reflecting Connect One's long-standing focus on relationship-based lending, during the fourth quarter, we had strong sequential C&I loan growth of nearly 7% and saw positive traction in non-interest-bearing demand deposit trends. Looking ahead, while our loan pipeline remains robust, we will continue to be disciplined while maintaining our sound approach to both credit as well as spreads. Overall, currently anticipate continued gradual opportunistic growth in 2024. Bill will discuss this momentarily. Our fourth quarter net interest margin compressed sequentially and trends seem to be stabilizing. We're seeing a flattening of deposit costs and anticipate that the margin will widen as the Fed eases its interest rate stance. For the year, we were also able to increase our tangible book value per share by more than 6%, a metric that we've consistently increased since Connect One's inception almost 20 years ago. Additionally, while Connect One's efficiency ratio has been impacted by the compressing margins, our annualized operating expenses remain below 1.5% of average assets, placing us among the top tier of efficiency among banks. Turning to credit, Connect One's metrics remain solid, reflecting our high credit standards, our relationship-based client philosophy, and our track record of avoiding riskier subsegments. Additionally, we have been and will continue to be proactive in prudently maintaining reserve levels commensurate with our growth. Bill, obviously, will provide some more on credit metrics in a few minutes. Supporting Connect One's focus on driving superior growth and profitability over the long term We've also continued key technology initiatives. This includes efforts to enhance the client experience while expanding opportunities to support our deposit franchise. Further, to drive future organic growth, we continue to hire quality talent away from other banks, adding to an already experienced team of bankers here at Connect One. Finally, we remain committed to enhancing shareholder value. Last year, we increased our common stock dividend nearly 10% to 17 cents a share and we'll consider another dividend increase in the next quarter. Our stock outperformed much of the industry during 2023, but we still believe it's undervalued and we'll continue share repurchases in 2024. In closing, we firmly believe that Connect One's financial strength, conservative client-centric model, talent base, and a track record of prudent underwriting and profitability position us to capitalize on emerging opportunities to enhance Connect One's valuable franchise. as we plan ahead and remain committed to our client-first operating model to drive deposits, even in a competitive market. We'll look to maintain continued emphasis on growth of our C&I division as our new team members continue to build momentum. And we're also excited about the opportunities to strengthen our position in both Long Island and South Florida. We're projecting modest growth and remain well-positioned to capitalize on opportunities across our markets. And so at this time, I'd ask Bill to review our fourth quarter and year-end financial highlights.