ConnectOne Bancorp (CNOB) Q2 2024 earnings summary

Executive summary

• Net income available to common stockholders was $17.5 million for Q2 2024, up from $15.7 million in Q1 2024 but down from $19.9 million in Q2 2023; diluted EPS was $0.46, compared to $0.41 in Q1 2024 and $0.51 in Q2 2023.

• Sequential improvement was driven by lower provision for credit losses, higher net interest income, and increased noninterest income, though year-over-year results declined due to lower net interest income, higher noninterest expenses, and increased provision for credit losses.

• Board declared a $0.18 per share common dividend and $0.328125 per depositary share preferred dividend, both payable September 3, 2024.

• Capital and tangible book value per share increased, with tangible book value per share at $23.45 as of June 30, 2024.

• Achieved solid second quarter results, with early signs of an upswing supported by industry tailwinds and disciplined relationship banking focus.

Financial highlights

• Net interest income for Q2 2024 was $61.4 million, up $1.1 million from Q1 2024 but down $2.4 million year-over-year; net interest margin widened to 2.72% from 2.64% sequentially, but down from 2.81% a year ago.

• Noninterest income was $4.4 million, up from $3.8 million in Q1 2024 and $3.4 million in Q2 2023, mainly due to higher gains on loan sales and growth in SBA and BoeFly platforms.

• Noninterest expenses totaled $37.6 million, up $0.5 million sequentially and $2.1 million year-over-year, driven by higher salaries, IT, and FDIC insurance costs.

• Provision for credit losses was $2.5 million, down from $4.0 million in Q1 2024 and $3.0 million in Q2 2023.

• Loan portfolio decreased sequentially due to higher paydowns and payoffs, despite strong origination volume exceeding $1 billion annualized.

Outlook and guidance

• Management expects continued net interest margin expansion, with each Fed rate cut projected to add about 5 basis points; margin could surpass 3% by end of 2025 if trends continue.

• Loan portfolio growth forecasted at 1%-2% for the remainder of 2024, with paydowns expected to normalize.

• Deposit growth projected to outpace loan growth, further lowering the loan-to-deposit ratio.

• Management views the allowance for credit losses as adequate and continues to monitor credit quality, loan growth, and portfolio composition.

• The company maintains strong liquidity and capital positions, with available and unused credit of approximately $3.2 billion as of June 30, 2024.