Sign in

You're signed outSign in or to get full access.

CB

ConnectOne Bancorp, Inc. (CNOB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 showed clear inflection: diluted EPS rose to $0.49 (operating $0.52), up 20.5% sequentially and 6.2% year over year, driven by a 19 bps net interest margin expansion to 2.86% and core deposit growth of 3.2% QoQ .
  • Management guided to further NIM expansion to “more than 2.90%” in Q1 2025, with CFO projecting ~2.90% on a core basis (~2.90% reported), supported by lower funding costs and deployment of excess liquidity .
  • Balance sheet momentum improved: loans grew 2% QoQ and noninterest-bearing demand balances rose 3.6% sequentially; loan-to-deposit ratio fell from 108% to 106%, improving funding flexibility .
  • The First of Long Island (FLIC) merger remains on track for Q2 2025; management expects ~+10 bps to spot NIM at close and 2026 targets of ~3.20% NIM, ~1.15% ROA, and 12–13% ROTCE, reinforcing the medium-term re-rating case .
  • Board declared a $0.18 common dividend payable Mar 3, 2025; tone was confident with accelerating operating momentum into 2025 and a potentially more supportive regulatory backdrop .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and funding mix: NIM widened 19 bps QoQ to 2.86% on a 27 bps decline in average deposit costs; management sees Q1 2025 NIM >2.90% as CDs reprice lower and excess cash is deployed .
  • Core funding and loan growth: Core deposits grew 3.2% QoQ, with average noninterest-bearing demand up 3.6% sequentially; period-end loans grew 2% QoQ on improving client confidence and a disciplined focus on relationship business .
  • Merger synergy setup: FLIC integration progressing; CFO expects ~+10 bps NIM at close and 2026 metrics of ~3.20% NIM, ~1.15% ROA, 12–13% ROTCE as cost saves phase in; preliminary expense actions are already underway .

Selected quotes:

  • “I’m extremely pleased…significant margin expansion and growth in both loans and core deposits.” – CEO Frank Sorrentino .
  • “Our reported margin for the quarter was 2.86%…projecting an improvement to approximately 2.90% in the first quarter.” – CFO Bill Burns .

What Went Wrong

  • Noninterest income softened: down to $3.7M from $4.7M QoQ, driven by lower equity securities gains and reduced BOLI death benefits, partially offset by higher gain-on-sale of loans .
  • Classified credit uptick: criticized/classified loans rose to 2.66% of loans (from 2.23% in Q3); nonaccruals increased to 0.69% of loans, though management expects NPLs to trend down as certain assets are sold .
  • Expense noise: GAAP opex included $0.9M merger and $0.5M branch closing costs; CFO guided to a seasonal 2–3% sequential opex increase in Q1 before tapering later in 2025 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Consensus (S&P Global)
Diluted EPS (GAAP)$0.46 $0.41 $0.49 N/A
Operating Diluted EPS (non-GAAP)$0.49 $0.42 $0.52 N/A
Net Interest Income ($M)$61.8 $60.9 $64.7 N/A
Noninterest Income ($M)$4.2 $4.7 $3.7 N/A
Operating Revenue ($M, non-GAAP)$66.3 $66.0 $69.6 N/A
Net Interest Margin (NIM)2.71% 2.67% 2.86% N/A
Operating Efficiency Ratio53.4% 57.0% 52.9% N/A
  • Non-GAAP adjustments in Q4: merger expenses $0.9M, branch closing $0.5M, intangible amortization $0.3M, equity securities loss $0.3M; tax impact −$0.6M; operating EPS $0.52 vs GAAP $0.49 .

KPIs – Balance Sheet and Credit

KPIQ4 2023Q3 2024Q4 2024
Loans Receivable ($B)$8.345 $8.112 $8.275
Total Deposits ($B)$7.536 $7.524 $7.820
Noninterest-Bearing Demand ($B)$1.259 $1.263 $1.422
Borrowings ($B)$0.934 $0.742 $0.688
Nonperforming Assets ($M)$52.5 $51.3 $57.3
NPA / Assets0.53% 0.53% 0.58%
Nonaccrual Loans / Loans0.63% 0.63% 0.69%
ACL / Loans0.98% 1.02% 1.00%
Net Charge-offs (annualized)0.43% 0.17% 0.16%

Loan Mix (Period-End)

Category ($B)Q4 2023Q3 2024Q4 2024
Commercial$1.565 $1.506 $1.522
CRE$3.343 $3.261 $3.384
Multifamily$2.567 $2.482 $2.507
Construction$0.620 $0.616 $0.616
Residential$0.256 $0.250 $0.250

Note: Consensus estimates for Q4 2024 were unavailable from S&P Global today; beats/misses cannot be quantified.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (reported)Q4 2024“Increase by 10+ bps” (from Q3 PR) Actual +19 bps to 2.86% Delivered above prior guide
Net Interest Margin (reported)Q1 2025N/A“>2.90%” expected (cost of funds down, deploy cash) New
Effective Tax RateFY 2025N/A26%–27% New
Merger Close (FLIC)2025N/AExpected Q2 2025 close New/affirmed timeline
NIM uplift from MergerAt CloseN/A~+10 bps to spot NIM (to ~3.10%) New
Longer-term Targets2026N/ANIM ~3.20%, ROA ~1.15%, ROTCE 12–13% New
Common DividendNext PayPrior $0.18 (Q3 PR) $0.18 payable Mar 3, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Margin trajectoryQ2: NIM +8 bps QoQ to 2.72% ; Q3: spot margin widened post-Fed cut, guide +10 bps+ in Q4 NIM +19 bps to 2.86%; guide >2.90% in Q1 2025 Improving
Funding mix/NIBQ2: NIB DDA flat; core funding focus ; Q3: positioning to benefit from lower rates Core deposits +3.2% QoQ; avg NIB up 3.6% seq; cost of deposits −27 bps Improving
Loan growth/mixQ2: de-emphasize non-relationship, portfolio down on payoffs ; Q3: cautious growthLoans +2% QoQ; booked ~7.45% vs runoff ~6.8–6.9%; pipeline ~7.62% rate Improving
Credit qualityQ2/Q3: stable metrics; criticized/classified rose to 2.23% Criticized/classified 2.66%; NPLs up but expected to decline post sales; charge-offs low Mixed (manageable)
Costs/efficiencyQ2/Q3: opex elevated by IT spend/merger charges Q4 includes merger/branch charges; core opex down QoQ; Q1 seasonal +2–3% then taper Improving underlying
Merger with FLICAnnounced Sept; integration planning underway On track Q2 close; +10 bps NIM uplift at close; 2026 targets provided Positive

Management Commentary

  • Strategy and momentum: “Our financial results were strong…reflecting the wider net interest margin…We also realized solid growth in both loans and core deposits.” – CEO .
  • NIM drivers and outlook: “Most of [the 19 bps NIM widening] was due to a steep decline in our average cost of deposits…projecting an improvement to approximately 2.90% in the first quarter.” – CFO .
  • Merger economics: “After closing [FLIC], the transaction will enhance our net interest margin by about another 10 basis points…NIM projection increased to 3.20% [in 2026], operating ROA ~1.15% and ROTCE 12–13%.” – CFO .

Q&A Highlights

  • Loan growth and pricing: Loan growth momentum reflects reduced de-emphasis of non-relationship balances and stronger client confidence; Q4 booked at ~7.45% vs runoff at ~6.8–6.9%; pipeline WA rate ~7.62% .
  • Deposits/NIB: Core NIB demand trending upward and may be accelerating; sequential growth supported by relationship wins and market disruption .
  • Capital/sub debt: Planning ~$175–$200M sub debt issuance to fund $100M deal-linked requirement and refinance $75M repricing later in 2025 .
  • CRE concentration: Mix of owner-occupied and construction; management expects CRE concentration to trend down despite Q4 growth .
  • Credit sensitivity: ~$875M of loans repriced higher performing “remarkably sound”; NPLs expected to decline as certain nonaccruals exit via sales .
  • Merger timing and costs: Close expected in Q2 2025 (timing within quarter TBD); full cost-save cadence not guided yet, but confidence to beat Street expense targets over time .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable today; as a result, we cannot quantify beats/misses versus Street. Given the 19 bps NIM expansion, higher NII, and operating EPS uplift, Street models may need to reflect higher 2025 NIM/NII run-rate and Q1 2025 NIM >2.90% guide, partially offset by softer noninterest income and seasonal opex in Q1 .

Key Takeaways for Investors

  • Margin inflection is underway: deposit costs fell 27 bps, driving a 19 bps NIM lift; management guides to >2.90% in Q1 2025, supporting upward revisions to NII trajectory .
  • Core funding strengthening: 3.2% QoQ core deposit growth and improving NIB trends reduce funding risk and support LDR improvement to 106% from 108% .
  • Loan growth re-accelerating at attractive yields (book ~7.45%, pipeline ~7.62%) with discipline on relationship banking—supportive for spread income even in a flat-rate scenario .
  • Credit risks are manageable: criticized/classified rose to 2.66%, but charge-offs remain low and NPLs are expected to decline as sales are executed; ACL coverage stable around 1.00% .
  • FLIC merger is a meaningful catalyst in 2025: expected +10 bps to spot NIM at close and medium-term targets (3.20% NIM, 1.15% ROA, 12–13% ROTCE) support multiple re-rating potential .
  • Watch near-term opex: Q1 seasonal +2–3% increase before tapering; underlying efficiency improved in Q4 (operating efficiency 52.9%) .
  • Dividend maintained at $0.18; combined with improving earnings power and capital markets plan (sub debt), balance sheet optionality increases into and after merger close .

Citations:

  • Press release and 8-K (Q4 2024 results, detailed financials, dividend, guidance):
  • Earnings call transcript (management tone, guidance, Q&A):
  • Prior quarters for trend (Q3 2024 and Q2 2024 press releases):