Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| To that end, our teams in South Florida and Long Island continue to build momentum as they capture market share |
| We remain confident that we will return to our historical level of profitability based on the strength of our franchise |
| But the business itself, the core business and what we’re doing with it and how we’re positioning ourselves for the coming challenges in a more normalized interest environment are really exciting |
| I do believe and I hope that came across, we’re very optimistic here at ConnectOne, people are putting a large value on their banking relationship today |
| Importantly, we have the financial strength, balance sheet and capital structure to support this with both strong liquidity and a fortified tangible common equity position |
| We also continue to generate a sound operating profit, which when coupled with our solid capital levels, provides us with the flexibility to repurchase shares, pay dividends, invest in infrastructure and grow prudently |
| So, we’re really happy about the growth that that company is providing and the opportunities that it’s building for us |
| And so, BoeFly has been a great catalyst for the entire organization |
| We’re confident in our direction and optimistic about our position |
| To wrap up, as we move through the fourth quarter and into 2024, let me once again reiterate that we have the financial strength, balance sheet, capital structure and talent to support our future growth |
| As I’ve mentioned before, we are in a liability sensitive position and would benefit materially, I believe, from a decline in short-term rates and an upward sloping yield curve |
| Our operating results remain solid |
| I expect continued growth in the tangible book value per share, a hallmark of ConnectOne Bank |
| So, this strong capital gives us significant financial flexibility |
| As I mentioned in my comments, I’m incredibly optimistic and confident in the direction we’re going in |
| So we’re very happy about where the business is coming from |
| We’re doubling down in the areas that we are the most confident about and cherry picking for the best client relationships and the best loan opportunities |
| And also, I just feel, in this environment, even though we have strong capital, it’s good to show that we continue to build capital |
| And eventually when we get to a period of stable margin, we’re going to be in a very -- ConnectOne is going to be in a very good position to widen margin as short-term rates come down |
| Our liquidity remains very strong by any measure |
| So, overall, I wouldn’t call it bullish, but I would tell you that we’re definitely quite confident and comfortable in our portfolio with CNOB, and I would say for the vast majority of the portfolios that I’m aware of across the industry |
| I think the dynamics around the multifamily business are actually quite good right now, and for the foreseeable future, I think they remain good |
| We believe that the actions we’ve taken over the past 12 to 18 months position the Company for sustainable, profitable and rewarding growth going forward |
| Onto non-interest income, it continues to increase from SBA loan sales and we expect revenue here to accelerate in the fourth quarter and beyond |
| So to wrap things up, we remain very optimistic and committed to building ConnectOne’s highly valuable franchise |
| Demonstrating the diligent execution of our operating model, we continue to support the needs of our clients and build opportunities in new markets and new verticals |
| We have a high quality client base |
| Our pipeline is still quite strong |
| And criticized and classified fell by more than 15% to just 1.4% of total loans, this was the 4th consecutive quarter of improvement |
| ConnectOne’s credit metrics remain stable and sound |
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| And in cases where folks lent on a pro forma rent projection based on that change in going from rent stabilized to market, and that’s not available anymore, and now the interest rate went up, there could be some losses in those portfolios |
| But the demand has definitely come down quite a bit |
| We understand that putting our clients first and putting our people first has a short-term cost in this difficult environment |
| The anomaly there though is the rent stabilized product in New York City that was negatively impacted by the changes in the law in 2019 |
| You can well imagine with all the disruption in the marketplace, there’s just been a lot of people who either were cut loose or found that the new place that they’re at or the reformulated place that they’re at is not meeting their expectations |
| Obviously, as the Fed pricing -- interest rate levels out, that’s going to put pressure on stabilizing deposit costs as well |
| While we’re proud of our determination to serve our clients in this challenging time, it has been a difficult operating environment |
| The non-interest bearing demand fell more than I had thought, but it has leveled out for now |
| And we’re being somewhat cautious looking at different ways of enhancing our underwriting relative to what we see |
| And certainly in a lot of the segments that we were the most active in, we’ve seen less demand |
| Some of those properties are challenged |
| So, our time deposits are very close to leveling out in terms of the costs, but there continues to be pressure on the non-maturity interest bearing accounts |
| Average non-interest-bearing declined by about $70 million, some due to seasonality and it’s more than we had anticipated |
| Bill Burns I haven’t really given guidance on that but there’s -- and I think I mentioned this before that there’s a bias towards a higher rate of tax rate as the tax - basically our REIT is utilized to reduce local -- state and local taxes and there’s always pressure for that number to come down, as the bank gets bigger |
| But that continued pressure of interest rates increasing on those non-maturity deposits causes me to believe that there could still be compression |
| We are cautiously optimistic that deposit costs have nearly maxed out, but there still could be competitive and funding mix pressures, so we could still see a modest amount of margin compression for another quarter |
| And so, when those come up on a refinance and a repricing, there are issues there |
| Onto the net interest margin, which contracted sequentially by 5 basis points and that is in line with our previous guidance |
| And so, when the short term paid off, that caused the rate to go down for the quarter |
| But just wanted to get your updated thoughts on, I guess, past that bottom in the fourth quarter, the type of expansion that you might be expecting next year, if we’re in this higher for longer type of rate scenario? Bill Burns Well, I think higher for longer is a negative for the industry, and that banks benefit from upward sloping yield curves |
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