CONNECTONE BANCORP, INC. CNOB
Investor Presentation
February 2024
About ConnectOne Bancorp, Inc.
ConnectOne Bancorp, Inc. is a modern financial services company with $9.9 billion in assets. It operates through its bank subsidiary, ConnectOne Bank, and its fintech subsidiary, BoeFly. ConnectOne Bank is a high-performing commercial bank offering a full suite of products and services with a focus on small to middle-market businesses.
The bank's continuous investments in technology coupled with top talent allow ConnectOne to operate a "branch-lite" model, making for a highly efficient business model. BoeFly is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks.
Founded in 2005
Well-positioned and prepared to cross $10 billion threshold with organic growth
Commercial Clients a Primary Focus
90% of loan portfolio
65% of deposit base
$9.9B
in assets December 31, 2023
Performance & Profitability | $7.5B | ||
Last Twelve Months ("LTM") 0.93% Core Return on Average Assets1 | |||
LTM 1.32% Pre-Provision Net Revenue2 / Avg. Assets | Pennsylvania | in deposits | |
LTM 9.36% ROATCE2 | December 31, 2023 | ||
Strong Culture | |||
Client first and sense of urgency in every business decision from top to | |||
bottom of organization |
Best-in-Class Efficiency
One of the most efficient banks in the U.S. due to structure, use of technology and operating philosophy
$8.3B
in loans December 31, 2023
Source: Company Filings, S&P Global Market Intelligence | ||
1. | As reported by S&P Global Market Intelligence | 2 |
2. | Please refer to Non-GAAP reconciliation in Appendix |
Organic Growth
Opportunities to expand as a result of post-pandemic trends
Densely populated, lucrative markets
Strong demand for personalized service among small to mid-sized business owners
Our target market is largely dominated by the largest institutions in the country, leaving tremendous opportunity for banks catering to middle market businesses
Diverse economy provides numerous avenues for revenue expansion, while also remaining resilient during severe economic downturns
Entered Florida in 2021 primarily to service clients based in NY metro region. Experienced local team onboarded opportunistically through M&A disruption.
3
Dynamic Expansion
Leveraging technology to drive new opportunities
Roots in NY/NJ metro area allow the bank to expand with clients as they build out-of-state outposts
Digital investments coupled with ability to attract top talent allows for dynamic expansion
Banking Hub model allows ConnectOne to expand in a nimble way
Relationship-focused model has proven to be a clear differentiator across markets
Expansion into South Florida
- New office in West Palm Beach, FL supports clients' growth
- Team of 8
- Organic growth accelerating
- Loan origination in excess of $300MM
4
Operating Performance
LTM and 2023 Q4 Financial Highlights
1.32% | 9.3% | 0.93% | 9.4% |
LTM PPNR1 | Tangible Common | LTM Core Return | LTM Return on |
as a % of average | Tangible Common | ||
Equity Ratio | on Assets | ||
assets | Equity | ||
2.83% | 1.45% | 0.43% | 6.6% |
LTM Net Interest | Operating NIE to | Non-performing | YoY |
Margin | Average Assets | Asset Ratio2 | TBV/Share Growth |
Note: See Appendix
1. PPNR represents pre-tax net income excluding the impact of merger and restructuring charges, FDIC special assessment(s) and provision for credit losses. See appendix for a reconciliation of GAAP and non-GAAP measures.
2. Excludes loans secured by taxi medallions | 5 |
Core Net Interest Margin
Yields and Costs
5.35% | 5.49% | 5.63% | 5.81% | ||||
5.08% | |||||||
4.68% | 4.80% | 4.59% | 4.80% | ||||
5.44% | 5.61% | ||||||
5.17% | 5.31% | ||||||
4.87% | 3.18% | ||||||
4.49% | 4.47% | 4.55% | 2.92% | ||||
4.20% | 2.72% | ||||||
2.36% | |||||||
1.29% | 1.62% | 1.08% | |||||
0.94% | |||||||
0.58% | |||||||
2018Y2019Y
3.36 %3.27 %
3.28 % 3.35 %
2020Y | 2021Y | 2022Y | 1Q 23 | 2Q 23 | 3Q 23 | 4Q 23 | |||
Loans | Interest-earning Assets | Cost of Funds | |||||||
Net Interest Margin 2
3.46 %
3.66 % 3.69 %
3.10 % | |||
2.86 % | 2.81 % | ||
3.05 % | 3.23 % | ||
2.98 % | 3.00 % | ||
2.81 % | 2.71 % | ||
2.76 % | |||
2.71 % | |||
2018Y | 2019Y | 2020Y | 2021Y | 2022Y | 1Q 23 | 2Q 23 | 3Q 23 | 4Q 23 | ||
Peers | CNOB | |||||||||
Source: Company Filings, S&P Global Market Intelligence
1. | Represents average rates for the full year periods | |
2. | Net Interest Margin and Interest-Earnings Assets are reflected on a fully taxable equivalent basis. | 6 |
3. | Peers include BHLB, BRKL, CUBI, EBTC, EGBN, FFIC, FLIC, INDB, LBAI, OCFC, PFS, PGC, SASR, UVSP & WASH. | |
Robust Profitability and Capital Generation
Return on Average Assets
1.69%
1.43%
1.22% |
1.17% |
0.96% | 1.03% | ||
1.07% | 1.12% | 1.19% 1.17% | 0.89% |
0.88% | |||
0.96% | 0.80% | ||
0.82% | 0.83% | 0.81% | |
0.73% |
2018Y | 2019Y | 2020Y | 2021Y | 2022Y | 1Q 23 | 2Q 23 | 3Q 23 | 4Q 23 |
CNOB | Peers(1) | |||||||
Tangible Book Value per Share Growth
12.0% | |||||||||||||
$25.00 | $23.14 | ||||||||||||
$21.71 | 7.0% | ||||||||||||
$20.00 | $20.12 | ||||||||||||
SharePer | $17.49 | EquityTotal% | |||||||||||
$16.06 | 2.0% | ||||||||||||
$15.00 | $14.42 | ||||||||||||
$ | $10.00 | -3.0% | AOCI | ||||||||||
$5.00 | -8.0% | ||||||||||||
$- | -13.0% | ||||||||||||
2018Y | 2019Y | 2020Y | 2021Y | 2022Y | 4Q 23 | ||||||||
CNOB TBV | Peer AOCI/Total Equity | ||||||||||||
CNOB AOCI/Total Equity | |||||||||||||
Source: Company Filings, S&P Global Market Intelligence
Note: Please refer to Non-GAAP reconciliation in Appendix.
1 As reported by S&P Global Market Intelligence, peers include BHLB, BRKL, CUBI, EBTC, EGBN, FFIC, FLIC, INDB, LBAI, OCFC, PFS, PGC, SASR, UVSP, and WASH.
7
Non-Interest
Diversification of
SBA Gain on Sale
• | Commercial |
• | Residential |
BoeFly
• | Strong fee income | ||
momentum | • | Interchange fees | |
• | Growing | • | Overdraft fees |
opportunities to | • | Maintenance fees | |
expand product set | Minimal dependency | ||
on income streams | |||
subject to regulatory | |||
pressures |
8
Diversified and Granular Loan Portfolio
($ in millions)
Select Loan Portfolio Details as of December 31, 2023
% of | |||
Segment | $MM | Total | Underwriting Standards |
Construction
$621
7%
- Project feasibility
- Developers background and expertise
- Strict loan to cost advances
- Rental fallback
- Plan and cost review
- Interest reserve
- Personal guarantees with reliance on liquidity
- Bank engineer oversight and inspection
- Leveraging technology using built software in the construction monitoring process
Multifamily
$2,566
31%
- Principals well known in multifamily space
- Successful history of strong investments and management track record
- Loans stressed by: (i) interest rate +200bps and (ii) 10% vacancy
- Breakeven analysis on interest rate, vacancy and cap rate
- Current policy has floor of 5% cap rate
- Leverage proprietary underwriting; do not rely solely on borrower expense estimates
- Limiting cash out refinancing to a 65% LTV
Non-owner Occupied CRE
$2,412 29%
- Principals well known in investment real estate industry with history of low vacancy projects
- Property well positioned for the rental market
- Breakeven analysis on interest rate, vacancy and cap rate
- Personal guarantees with reliance on liquidity
Business Loans
$2,486 30%
- Strong financial controls and well-known accounting firm with satisfactory peer review
- Low leverage balance sheet with good liquidity ratios
- Proven profitability / strong profit margin in stable industry
- Personal guarantees with reliance on liquidity
- Covenant compliance tracking
Other (e.g. 1-4 Family and Consumer): | $256 | 3% |
Total Loans: | $8,341 | 100% |
Source: Company Filings, Regulatory Filings, and Company Designations | 9 |
Note: Numbers may not sum to 100% due to rounding. Total Loans is gross of unearned net origination fees and excludes PPP. |
Loan Portfolio Detail
($ in millions)
Residential/
Consumer, 3%
Business | Other CRE, |
Loans, 30% | 36% |
Multifamily,
31%
Type | Balance | Percentage | Type | Balance | Percentage | |||
CRE - Other / Misc | $ | 690 | 8% | OOC - Other | $ | 253 | 3% | |
CRE - Retail | 637 | 8% | OOC - Warehouse / Industrial | 250 | 3% | |||
CRE - Office | 424 | 5% | OOC - Retail | 210 | 2% | |||
CRE - Warehouse / | OOC - Office / Warehouse or | |||||||
Industrial | 234 | 3% | Mixed Use | 118 | 1% | |||
CRE - Land Loan for Future | ||||||||
Development | 224 | 3% | OOC - Office | 104 | 1% | |||
CRE - Mixed Use | 193 | 2% | Total CRE- Owner Occupied | 935 | 11% | |||
CRE - Land Loan (Land Only) | 10 | <1% | ||||||
Total CRE - Non-Owner | ||||||||
Occupied | 2,412 | 29% | C&I - Other | 432 | 5% | |||
C&I - Service | 348 | 4% | ||||||
Construction - Multifamily | 327 | 4% | Commercial - Schools | 317 | 4% | |||
Construction -Other | 183 | 2% | C&I - Distribution | 121 | 1% | |||
Construction - 1 to 4 Family | 111 | 1% | C&I - CRE | 101 | 1% | |||
Total Construction | 621 | 7% | C&I - Contactors | 92 | 1% | |||
Total CRE - Other | $ | 3,033 | 36% | C&I - Transportation | 72 | <1% | ||
C&I - Other Categories | 68 | <1% | ||||||
Multi Family - 25 to 64 units | $ | 842 | 10% | Total C&I | 1,551 | 19% | ||
Multi Family - 10 to 24 unit | 659 | 8% | Total Business Loans | $ | 2,486 | 30% | ||
Multi Family - 100 units or | ||||||||
more | 431 | 5% | ||||||
Multi Family - 64 units to 99 | Residential - 1st Lien | |||||||
units | 339 | 4% | $ | 212 | 3% | |||
Multi Family - 5 to 9 units | 295 | 4% | Home Equity and Other | 44 | <1% | |||
Total Multifamily | $ | 2,566 | 31% | Total Residential | $ | 256 | 3% | |
Note: Numbers may not sum to 100% due to rounding | 10 |
Source: Company Filings, Regulatory Filings, and Company Designations and loans excludes PPP. |
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Disclaimer
ConnectOne Bancorp Inc. published this content on 14 February 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 March 2024 10:03:28 UTC.
