On July 25, 2024, ConnectOne Bancorp Inc (CNOB, Financial) released its 8-K filing for the second quarter of 2024. The company reported net income available to common stockholders of $17.5 million, or $0.46 per diluted share, surpassing the analyst estimate of $0.41 per share. This compares to $15.7 million, or $0.41 per diluted share, in the first quarter of 2024, and $19.9 million, or $0.51 per diluted share, in the second quarter of 2023.
ConnectOne Bancorp Inc is a holding company that provides banking services through its subsidiary, ConnectOne Bank. The company offers lending, depository, and related financial services to commercial, industrial, and governmental customers, operating as a community bank. It generates revenue primarily from net interest income.
Performance and Challenges
ConnectOne Bancorp Inc's performance in the second quarter of 2024 was marked by a sequential increase in net income and earnings per share, driven by a $1.5 million decrease in provision for credit losses, a $1.1 million increase in net interest income, and a $0.6 million increase in noninterest income. However, these gains were partially offset by a $0.8 million increase in income tax expense and a $0.5 million increase in noninterest expenses.
Compared to the second quarter of 2023, the company experienced a decrease in net income, primarily due to a $2.4 million decrease in net interest income and a $2.1 million increase in noninterest expenses. These challenges highlight the importance of managing interest margins and controlling operational costs in a competitive banking environment.
Financial Achievements
Despite the challenges, ConnectOne Bancorp Inc achieved several financial milestones. The company's pre-tax, pre-provision net revenue (PPNR) as a percent of average assets was 1.17% for the second quarter of 2024, up from 1.10% in the first quarter of 2024, though down from 1.31% in the second quarter of 2023. This improvement underscores the company's ability to generate revenue before accounting for credit losses and taxes.
Income Statement Highlights
Fully taxable equivalent net interest income for the second quarter of 2024 was $62.3 million, a 1.9% increase from the first quarter of 2024. This increase was due to an eight basis-point widening of the net interest margin to 2.72%, despite a 1.2% decrease in average interest-earning assets. However, net interest income decreased by $2.4 million, or 3.7%, from the second quarter of 2023, primarily due to a nine basis-point decrease in the net interest margin.
Noninterest income rose to $4.4 million in the second quarter of 2024, up from $3.8 million in the first quarter of 2024 and $3.4 million in the second quarter of 2023. This increase was driven by higher net gains on the sale of loans held-for-sale.
Balance Sheet and Cash Flow
As of June 30, 2024, ConnectOne Bancorp Inc's total assets were $9.724 billion, slightly down from $9.856 billion as of December 31, 2023. Loans receivable decreased to $8.158 billion from $8.345 billion, reflecting higher loan paydowns and payoffs. Total deposits increased marginally to $7.576 billion from $7.536 billion.
The company's total stockholders' equity was $1.224 billion as of June 30, 2024, up from $1.217 billion as of December 31, 2023. This increase was primarily due to higher retained earnings, partially offset by increases in accumulated other comprehensive loss and treasury stock.
Asset Quality
The provision for credit losses was $2.5 million for the second quarter of 2024, down from $4.0 million in the first quarter of 2024 and $3.0 million in the second quarter of 2023. Nonperforming assets were $46.0 million as of June 30, 2024, down from $52.5 million as of December 31, 2023. The allowance for credit losses represented 1.01% of loans receivable as of June 30, 2024.
Dividend Declarations
ConnectOne Bancorp Inc announced a cash dividend of $0.18 per share on its common stock, payable on September 3, 2024, to stockholders of record on August 15, 2024. Additionally, a dividend of $0.328125 per depositary share on its preferred stock will also be paid on September 3, 2024.
Analysis
ConnectOne Bancorp Inc's second-quarter performance demonstrates its resilience and ability to navigate a challenging economic environment. The increase in net interest income and reduction in credit loss provisions are positive indicators of the company's financial health. However, the decrease in net interest income compared to the previous year highlights the need for continued focus on managing interest margins and operational efficiency.
Overall, ConnectOne Bancorp Inc appears well-positioned for sustained growth and long-term profitability, supported by its solid balance sheet and strategic initiatives to enhance core funding and improve loan mix.
Explore the complete 8-K earnings release (here) from ConnectOne Bancorp Inc for further details.
