ConnectOne Bancorp, Inc.

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Connect One Bank Corp Inc. 4th Quarter 2024 Earnings 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 the star, then the number one on your telephone keypad. To withdraw your questions, press star 1 again. I would now like to turn the conference over to Sia Vanzia, 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 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 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 we appreciate everyone joining us this morning. Now, last year when we entered 2024, we fully recognized the challenges that lay ahead for the industry and for Connect One. Despite that challenging environment, the team here at Connect One persevered by reinforcing our focus on relationship banking, which strengthen our capital loan mix and our core deposits. Now we're well positioned to dramatically improve our financial performance, which is accelerating as we look ahead to 2025. Our efforts also paved the way for our upcoming merger with First National Bank of Long Island. The strategic rationale of this financially attractive transaction remains compelling and has been reinforced in our view by increased economic optimism and a potential for more supportive regulatory environment. The merger is progressing on schedule and we're optimistic closing will occur in the second quarter of 2025. The combined company will operate under the ConnectOne Bank brand on day one with a systems conversion following soon after the legal close. We have teamed up with First of Long Island, proactively getting in front of its clients, anticipating and addressing their preferences, and reinforcing a seamless transition. We're also actively engaging with First of Long Island's team to share ConnectOne's client-first culture, which centers on our relationship banking business model and a sense of urgency in everything we do. Regarding the merger efficiencies, we're already working these into the institutions on a standalone basis, which gives us a strong head start in realizing financial projections. From a systems perspective, an efficient and successful core conversion has been planned. These costs have already been negotiated at very attractive terms and on a timetable that's ready to be quickly implemented. Looking at growth, we continue to see significant revenue synergies. This includes leveraging the Long Island footprint to extend client relationships and enhance our residential, SBA, and C&I lending. And we'll size up to nearly $15 billion in assets and a market capitalization of over $1.2 billion, placing Connect One in a larger, higher valuation peer group. We'll also be able to leverage the benefits of economic and market tailwinds, which have already accelerated due to our liability-sensitive positioning. In short, I'm very excited about the opportunities the transaction offers. We look forward to serving the first of Long Island's clients and leveraging the expertise of its team to extend our reach across New York City, Long Island, and Florida. Turning now to Connect One's standalone fourth quarter performance, our financial results were strong. highlighted by a 21% quarter-over-quarter and a 6% year-over-year increase in quarterly net income available to common shareholders, reflecting the wider net interest margin that we've been anticipating. We've also realized solid growth in both loans and core deposits. ConnectOne's ability to attract deposits is an important strength, one we have nurtured by focusing on our unique client approach while adding talent that fits the ConnectOne team. Fourth quarter deposit activity accelerated, with core deposits increasing more than 3% on a quarter-over-quarter basis, reflecting notable success in non-interest-bearing demand balances. Turning to lending, Connect One delivered quarter-over-quarter loan portfolio growth of 2%, a quarterly growth rate that we expect will continue. While remaining disciplined in our approach, we took advantage of strong market demand, and we entered 2025 with solid momentum and a robust loan pipeline. Credit trends and key metrics remain sound and stable, with all signs indicating this will continue into 2025. Next, the bank's net interest margin improved by nearly 20 basis points during the quarter. Bill, of course, will go into further detail on that, but we benefited significantly from a more than 25 basis point improvement in our cost of deposits. Heading into 2025, we continue to anticipate further margin expansion, and that is with or without any additional Fed rate cuts. Our performance metrics were much improved this quarter. I firmly believe that our unique operating philosophy focused on our culture of client obsession, forging a better place to be while expanding with a 3X vision, together with our strong balance sheet, industry tailwinds, and our pending merger supports our long-term focus on driving shareholder value. And with that,