ConnectOne Bancorp, Inc.

Hello, and welcome to Connect One Bancorp third quarter 2024 earnings call. Please note that all lines are in listen-only mode. At this time, it is now my pleasure to turn the call over to Sia Vancea, Chief Brand and Innovation Officer. You may begin.

Good morning, and welcome to today's conference call to review Connect One's results for the third quarter of 2024 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 the 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 we appreciate everyone joining us this morning. So throughout 2024, we've remained committed to our strategic priorities, including supporting our clients, extending our competitive position, driving profitable growth, and investing in our valuable franchise. Before discussing our third quarter performance, I'd like to take a moment to review our recently announced merger agreement with First of Long Island Corporation. A prudently structured transaction brings two strong complementary financial institutions that are well positioned in their respective markets. Expected to close during the first half of 2025, we believe it's a compelling, financially disciplined transaction that creates meaningful synergies and a significantly enhanced platform for continued growth. The feedback so far has been excellent. Since the announcement, I've personally heard from many clients and shareholders from both companies, and the response has been overwhelmingly positive. With the transaction, Connect One will size up to more than $14 billion in assets and $11 billion in loans and deposits. In addition, we'll have an improved balance sheet mix and expanded market reach. The transaction increases our pro forma market cap to $1.3 billion, placing us in a larger, higher valuation peer group, while also leveraging the benefits of economic and market tailwinds already expected for our liability-sensitive positioning. Like ConnectOne, First of Long Island is commercially focused with a highly compatible client-first culture and a strong credit track record. The teams are energized and we expect to have a smooth process with integration planning already well underway. This combination meaningfully enhances Connect One's presence on Long Island, a region we've been organically focusing on over the past few years. As a result of the merger, the combined franchise in Nassau and Suffolk counties will immediately establish us as one of the top community banks on Long Island, furthering our position as a premier New York metro community bank. In addition, the transaction is ripe with potential revenue synergies. There's minimal client overlap, and First of Long Island's client base and operating area is likely to be a sizable source of new business opportunities, both spread and fee-based. Some of those areas will include additional products and services, including residential mortgage origination and SBA lending. deeper commercial lending expertise, which will round out their C&I relationships and offer robust treasury solutions to enhance commercial deposits. And finally, just like at Connect One, there are numerous opportunities to leverage geographical synergies between our Southeast Florida team and First of Long Island clients who have a presence in Florida. Next. Turning to our 2024 third quarter operating performance, we remained laser-focused and committed to our client-first culture and relationship banking model. As we previously reported, we've been actively reducing our non-relationship loans from our balance sheet during the first nine months of 2024, and these efforts have served to improve our loan-to-deposit ratio and lower our CRE concentration. As such, there was a slight reduction in our portfolio this quarter, which really doesn't tell the whole story. Loan originations remain solid, and we continue to build a steady and diversified loan pipeline. Going forward, we expect loan growth may be relatively muted, slightly up or slightly down during the next two quarters, and beyond that, we see a return to mid to high single-digit growth. Meanwhile, we continue to grow our core deposits through both existing and new client relationships. Average client deposits since the second quarter were up by approximately $100 million, $130 million, or 8% on an annualized basis, partially offset by a decline in average broker deposits of $60 million, and non-interest-bearing DBA continues trending upward. At the same time, the third quarter net interest margin on a core basis was flat. However, We ended the quarter with a spot margin wider, upwards of 10 basis points wider, as a result of the Fed's 50 basis point cut in September. Bill will provide some more detail on our current margin expansion in a few minutes. We're highly confident that Connect One is well positioned to drive increased profitability through the fourth quarter and into 2025 and post-merger completion. Turning credit, coming off a transition away from a zero-loss environment, the industry is starting to see isolated instances of credit impairment. At Connect One, we fared well, reflecting solid and consistent underwriting standards while also maintaining a proactive approach to portfolio management and selective credit resolutions. This lending and credit philosophy has served us very well. With that as a strategic overview, I'm going to turn the call over to Bill. Bill, take it away.