ConnectOne Bancorp (CNOB) Q3 2024 earnings summary

Executive summary

• Announced a merger agreement with The First of Long Island Corporation, expected to close in the first half of 2025, creating a combined entity with over $14 billion in assets and $11 billion in loans and deposits.

• Net income available to common stockholders was $15.7M for Q3 2024, down from $19.9M in Q3 2023, with diluted EPS at $0.41, impacted by $0.7M in merger expenses.

• The merger is expected to enhance market reach, improve balance sheet mix, and generate significant revenue and cost synergies, especially in Long Island and Southeast Florida.

• Integration planning for the merger is underway, with positive feedback from stakeholders and minimal client overlap.

• Board declared a $0.18 per share common dividend and $0.328125 per depositary share preferred dividend, both payable December 2, 2024.

Financial highlights

• Net interest income for Q3 2024 was $60.9M, down from $62.4M in Q3 2023; net interest margin contracted to 2.67% from 2.76% year-over-year.

• Noninterest income rose to $4.7M in Q3 2024, up from $3.6M in Q3 2023, driven by gains on equity securities and BOLI benefits.

• Noninterest expenses increased to $38.6M in Q3 2024, up from $35.8M in Q3 2023, reflecting higher technology, compensation, and merger costs.

• Provision for credit losses was $3.8M for Q3 2024, up from $1.5M in Q3 2023.

• Total assets were $9.64B as of September 30, 2024, down from $9.86B at year-end 2023.

Outlook and guidance

• Management expects net interest margin to increase by 10+ basis points in Q4 2024, benefiting from Fed rate cuts and deployment of excess cash.

• Loan growth expected to remain muted for the next one to two quarters, with a return to mid to high single-digit growth by Q2 2025 or sooner.

• Core non-interest income and expenses anticipated to increase modestly in Q4 and early 2025.

• Deposit betas expected to remain high, with an 80% beta assumed for the next rate cut.

• Liability-sensitive balance sheet positions the company for increased profitability into 2025 and post-merger.