8-K: ConnectOne Bancorp Reports Strong Q4 2024 Results and Declares Dividends

ConnectOne Bancorp reported a significant increase in net income for the fourth quarter of 2024, alongside growth in loans and core deposits, and declared both common and preferred stock dividends.

Summary

• ConnectOne Bancorp announced its financial results for the fourth quarter and full year of 2024, showing a net income available to common stockholders of $18.9 million for the quarter, compared to $15.7 million in the previous quarter and $17.8 million in the same quarter of the previous year.
• Diluted earnings per share were $0.49 for the fourth quarter of 2024, up from $0.41 in the third quarter of 2024 and $0.46 in the fourth quarter of 2023.
• Full-year 2024 net income available to common stockholders was $67.8 million, a decrease from $81.0 million in 2023, with diluted earnings per share at $1.76, down from $2.07 in the previous year.
• The company's return on average assets was 0.84% for the fourth quarter of 2024, an increase from 0.70% in the third quarter of 2024 and 0.79% in the fourth quarter of 2023.
• Return on average tangible common equity was 8.27% for the fourth quarter of 2024, up from 6.93% in the third quarter of 2024 and 8.18% in the fourth quarter of 2023.
• Operating net income available to common stockholders was $20.2 million for the fourth quarter of 2024, compared to $16.1 million in the third quarter of 2024 and $19.1 million in the fourth quarter of 2023.
• The company's net interest margin improved to 2.86% in the fourth quarter of 2024, up from 2.67% in the third quarter of 2024.
• The loan portfolio grew by 2.0% and core deposits grew by 3.2% on a quarter-over-quarter basis.
• A cash dividend of $0.18 per share on common stock and $0.328125 per depositary share on preferred stock were declared, payable on March 3, 2025, to shareholders of record on February 18, 2025.
• The company anticipates the merger with The First of Long Island Corporation to close in the second quarter of 2025.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strong quarterly results, margin expansion, and progress on the merger. While there are some negatives, the overall tone is optimistic and forward-looking.

Positives

• The company experienced a significant increase in net income available to common stockholders in the fourth quarter of 2024.
• The net interest margin improved substantially due to a decrease in the cost of deposits.
• Both the loan portfolio and core deposits showed growth on a quarter-over-quarter basis.
• The company's tangible book value increased.
• The merger with The First of Long Island Corporation is on track.
• The company declared dividends on both common and preferred stock.
• The company expects the net interest margin to continue to improve in the next quarter.
• Credit quality trends remain stable.

Negatives

• Full-year 2024 net income available to common stockholders decreased compared to 2023.
• Noninterest income decreased in the fourth quarter of 2024 compared to the third quarter of 2024 due to a decrease in net gains on equity securities and BOLI income.
• Noninterest expenses increased in the fourth quarter of 2024 compared to the fourth quarter of 2023 due to merger expenses and professional and consulting expenses.
• The provision for credit losses increased for the full year 2024 compared to 2023.
• Criticized and classified loans as a percentage of loans receivable increased from 2.23% to 2.66% from September 30, 2024 to December 31, 2024.

Risks

• The company's future performance is subject to changes in interest rates, general economic conditions, and regulatory changes.
• The company faces competition in the financial services market.
• The company's loan and investment portfolios are subject to credit risk.
• The company's merger with The First of Long Island Corporation is subject to regulatory approval and other closing conditions.
• The company's noninterest income is subject to fluctuations in market conditions.

Future Outlook

The company anticipates the merger with The First of Long Island Corporation to close in the second quarter of 2025 and expects the net interest margin to increase to more than 2.90% in the first quarter of 2025.

Management Comments

• Frank Sorrentino, ConnectOne's Chairman and Chief Executive Officer, stated he is extremely pleased with the fourth quarter 2024 financial results.
• Mr. Sorrentino highlighted the 20.5% quarter-over-quarter and 6.2% year-over-year increase in quarterly net income available to common stockholders.
• Mr. Sorrentino noted the significant margin expansion and growth in both loans and core deposits.
• Mr. Sorrentino stated the strategic rationale behind the merger with The First of Long Island Corporation remains highly compelling.
• Mr. Sorrentino concluded that the company remains focused and committed to its client-first culture and relationship banking model.

Industry Context

This announcement reflects a positive trend in the banking sector, with ConnectOne demonstrating strong performance in net income and margin expansion, while also pursuing strategic growth through a merger. This is in line with the industry's focus on improving profitability and expanding market presence.

Comparison to Industry Standards

• ConnectOne's Q4 2024 net interest margin of 2.86% is comparable to other regional banks, but the 20 basis point improvement is notable.
• The company's return on average assets of 0.84% is within the range of peer banks, but the increase from the previous quarter is a positive sign.
• The loan growth of 2.0% and core deposit growth of 3.2% quarter-over-quarter are solid, indicating healthy business activity.
• The planned merger with The First of Long Island Corporation is a strategic move similar to other banks seeking to expand their market share and improve efficiency.
• Compared to larger national banks, ConnectOne's focus on community banking and relationship-based model is a differentiating factor.

Stakeholder Impact

• Shareholders will benefit from the increased net income and dividend payments.
• Employees may experience changes due to the merger with The First of Long Island Corporation.
• Customers will have access to an expanded range of services and locations after the merger.
• Suppliers and creditors will be impacted by the company's overall financial performance and strategic direction.

Next Steps

• The company will continue to work towards closing the merger with The First of Long Island Corporation in the second quarter of 2025.
• The company will focus on maintaining its client-first culture and relationship banking model.
• The company will host a conference call on January 30, 2025, to discuss the results.

Key Dates

Keywords

net income, earnings per share, net interest margin, dividends, merger, loan growth, deposit growth, financial results, banking, credit quality