ConnectOne Bancorp, Inc. (NASDAQ:CNOB) Q2 2020 Earnings Conference Call - Final Transcript

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Matthew Breese of Piper Jaffray. Please go ahead.

Good morning.

Good morning, Matt.

Hey, Matt.

Hey, Bill, there's a lot of pluses and minuses to the NIM outlook.

Right.

If we were to just say longer term, a year out, or 18 months out, once we put behind us the deployment of liquidity, PPP, the sub-debt raise, lower deposit costs, where do you think the settling point in this environment for the core NIM is?

Well, like I said before, it's flat to up through this year. And then going into next year, it's going to depend on whether the economy is back, what the shape of the yield curve, how steep it is, where spreads are. And so, it's really hard for me to predict, but I think we'll be starting off at a good place.

Okay. And then, you had some very encouraging data points and deferrals coming due in the cure rate. In the case of those loans that aren't curing and therefore need an additional 90 days or whatever you're providing. Could you just talk about with that book, what is it comprised of most typically and some of the underwriting characteristics in terms of LTVs or debt service coverage? Just want to get a sense for the stuff that needs additional help, what your protection against lost content looks like.

Yeah, well, the majority of it is collateralized loans that were underwritten with good LTVs. And so, we feel we have a lot of cushion in those. And so, look, if there is a loss in those, I don't think it can be much. There's a small portion in C&I. We've stayed away from high-risk. There are strong borrower guarantees. And at the end of the day, there's just probably a small portion in that bucket.

Okay. Okay. And then, my last one is just obviously very strong fees from BoeFly that was matched with an expense. Does that acquisition adjustment -- does that persist for a while, or at some point does that trail off? And if BoeFly continues to perform well, they can drop more to the bottom line? How does that dynamic work?

Yeah. Yes, yes. They drop more to the bottom line. There could be a little bit more adjustment, but it's very small. And so, the success will not be hurt materially by any adjustments to the acquisition price.

Okay. And just following the fee income discussion. So, this quarter I view as more it was one time because of PPP. Should we expect fee income to trend back to that $2.5 million or -- $2.5 million, $2.7 million kind of core run rate in the coming quarters?

Well, it could be a little bit lower from BoeFly, it could be a little bit lower because of the cuts to the economy and less activity going on. But we do feel confident in the