ENGLEWOOD CLIFFS, N.J., Jan. 21, 2014 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the "Company" or "ConnectOne"), parent company of ConnectOne Bank (the "Bank"), today reported net income available to common stockholders of $2.9 million for the fourth quarter of 2013, representing a 23.8% increase from $2.3 million earned during the fourth quarter of 2012. Net income available to common stockholders for the full year 2013 was $10.3 million, a 27.3% increase from the prior year.
Diluted earnings per share were $0.55 and $2.09, for the fourth quarter and full-year periods of 2013, respectively, compared with diluted earnings per share of $0.71 and $2.63 for the fourth quarter and full-year 2012, respectively. Diluted earnings per share for 2013 reflect the Company's February 2013 initial public offering and issuance of 1.8 million shares of common stock. Diluted earnings per share for the full-year 2012 reflect preferred dividends of $0.4 million. All shares of preferred were converted into common in 2012 and had no impact on 2013 results.
Frank Sorrentino III, Chairman and CEO of ConnectOne, stated, "2013 marked another record year of significant strategic accomplishments and solid financial performance for ConnectOne Bancorp. In February 2013, we successfully completed our initial public offering. It was extremely well received by the investment community and added approximately $50 million in new capital to expand our business. Financial performance achievements for 2013 included record net income for the full-year and 36% growth in our loan portfolio. In the recently completed fourth quarter 2013, we demonstrated strong momentum in earnings growth by generating diluted earnings per share of $0.55, a 10% increase over our sequential third quarter. Importantly, these stellar performance metrics were achieved despite the sustained low interest rate environment which continues to put pressure on net interest margins."
"ConnectOne Bancorp delivered an outstanding performance in our first year as a public company and we look forward to continuing that momentum into 2014. As we begin the year, our loan and business relationship pipeline remains robust," Mr. Sorrentino added.
Earnings
Fully taxable equivalent ("FTE") net interest income for the fourth quarter of 2013 totaled $11.1 million, an increase of $1.8 million, or 19.9%, from the year ago quarter. The increase in net interest income from the year ago quarter was primarily due to an increase in average interest-earning assets, which grew by 31.8% to $1.2 billion, and was partially offset by a 38 basis points contraction in the net interest margin, from 4.07% in the fourth quarter of 2012 to 3.69% in the fourth quarter of 2013. Average total loans increased by 35.3% to $1.1 billion in the fourth quarter of 2013 from the prior year period. FTE net interest income for the full-year 2013 totaled $40.8 million, an increase of $6.4 million, or 18.4%, from the full-year 2012. The year-over-year increase in net interest income was primarily due to an increase in average interest-earning assets, which grew by 28.6% to $1.1 billion, and was partially offset by a 33 basis points contraction in the net interest margin, from 4.20% in 2012 to 3.87% in the full-year 2013. Average total loans increased by 31.2% to $975.2 million in 2013 from $743.2 million in 2012. The net interest margin for the fourth quarter of 2013 contracted from the sequential third quarter of 2013 by 24 basis points. The contraction in net interest margin was larger than typical due to strong loan growth, a decrease in prepayment fees and an increase in the level of low earning cash balances and investment securities. Management expects net interest income to continue to expand as a result of solid loan growth, while margin compression is likely to moderate in future periods as the Company's loan origination mix changes and the loan portfolio fully re-prices.
Non-interest income represents a relatively small portion of the Bank's total revenue as management has historically made a strategic decision to de-emphasize fee income, focusing instead on customer growth and retention. Non-interest income totaled $0.3 million and $1.2 million for the fourth quarter and full-year 2013, respectively, compared with $0.3 million and $1.1 million for the fourth quarter and full-year 2012, respectively. Bank owned life insurance ("BOLI") income in 2013 and growth in service and card-related fees were essentially offset by declines in gains on sale of residential mortgage loans.
Non-interest expenses for the fourth quarter of 2013 increased by $1.2 million, or 26.8%, to $5.8 million from $4.5 million in the prior year fourth quarter. Non-interest expenses for the full-year 2013 increased by $3.2 million, or 18.1%, to $20.7 million from $17.5 million in 2012. The largest factor contributing to the increases in total non-interest expenses was salaries and employee benefits expense, which increased by $0.7 million to $2.8 million in the fourth quarter 2013 from $2.1 million in the fourth quarter 2012, and which increased by $2.0 million to $10.3 million for the full year 2013 from $8.4 million in 2012. The increases were primarily due an increase in the number of full-time equivalent employees and higher incentive-based compensation. Also contributing to higher non-interest expenses were increased costs associated with being a publicly-traded entity, higher legal fees, and a general increase in other operating expenses related to a significantly increased volume of business. In addition, in the fourth quarter of 2013, the Company expensed approximately $0.2 million to reorganize its operating structure in order to create greater tax efficiencies.
Income tax expense was $1.4 million for the fourth quarter 2013 and $6.5 million for the full-year 2013 versus $1.6 million for the fourth quarter 2012 and $5.7 million for the full-year 2012. The effective tax rates were 33.0% and 38.9% for the fourth quarter and the full-year of 2013, respectively, versus 40.3% and 40.4% for the fourth quarter and full-year 2012, respectively. Effective tax rates for 2013 reflect a reorganized operating structure effective October 1, 2013. The Company's effective tax rate is projected to be approximately 36% in future periods, although it is likely to fluctuate depending upon future levels of taxable and non-taxable revenue.
Asset Quality
Asset quality remained solid. Nonperforming assets, which includes nonaccrual loans and other real estate owned, as a percent of total assets declined to 0.84% at December 31, 2013, from 0.90% at both September 30, 2013 and December 31, 2012. The allowance for loan losses was $16.0 million, representing 1.39% of loans receivable and 174.2% of nonaccrual loans at December 31, 2013. At September 30, 2013, the allowance was $14.7 million representing 1.42% of loans receivable and 166.2% of nonaccrual loans, and at December 31, 2012 the allowance was $13.2 million representing 1.56% of loans receivable and 166.8% of nonaccrual loans. The provision for loan losses for the fourth quarter of 2013 increased to $1.4 million from $1.3 million for the third quarter of 2013 and $1.2 million for the fourth quarter of 2012. The provision for loan losses has remained relatively constant reflecting consistent loan growth, but is also contingent upon other factors including, but not limited to, the Company's historical loss experience, macroeconomic conditions and reserves required for specific credits. The annualized rate of net loan charge-offs to average loans was 0.03% for the fourth quarter 2013, 0.25% for the third quarter 2013 and 0.07% for the fourth quarter 2012.
Financial Condition
At December 31, 2013, total assets were $1.2 billion, a $312.7 million increase from December 31, 2012. The increase in total assets was due primarily to a $303.6 million increase, to $1.2 billion, in loans receivable. The growth in assets was funded by a $196.5 million increase in deposits, a $58.0 million increase in Federal Home Loan Bank borrowings, $10.3 million in retained earnings, and $47.8 million in net proceeds from the Company's first quarter 2013 initial public equity offering.
Capital
Stockholders' equity totaled $130.1 million as of December 31, 2013, an increase of $57.8 million from $72.4 million as of year-end 2012, due primarily to retained earnings and the Company's first quarter 2013 equity offering. Accumulated other comprehensive income (loss) declined by $0.6 million as the increase in the general level of interest rates over the course of 2013 resulted in a decline in market values in the Company's relatively small securities portfolio. As of December 31, 2013, the tangible common equity ratio and tangible book value per share were 10.45% and $25.43, respectively. As of December 31, 2012, the Company's tangible common equity ratio and tangible book value per share were 7.76% and $22.77, respectively.
About ConnectOne Bancorp, Inc.
ConnectOne is a New Jersey corporation and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended, that was formed in 2008 to serve as the holding company for ConnectOne Bank ("the Bank"). The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey, and through its seven other banking offices.
For more information visit https://www.connectonebank.com/.
Forward-Looking Statements
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company's Annual Report on Form 10-K, as filed with the Securities Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
| CONNECTONE BANCORP, INC. | ||
| CONSOLIDATED BALANCE SHEETS (unaudited) | ||
| (dollars in thousands) | ||
| December 31, | December 31, | |
| 2013 | 2012 | |
| Cash and due from banks | $ 2,907 | $ 3,242 |
| Interest-bearing deposits with banks | 31,459 | 47,387 |
| Cash and cash equivalents | 34,366 | 50,629 |
| Securities available for sale | 27,589 | 19,252 |
| Securities held to maturity, fair value of $1,076 at 2013 and $2,084 at 2012 | 1,027 | 1,985 |
| Loans held for sale | -- | 405 |
| Loans receivable | 1,152,479 | 848,842 |
| Less: Allowance for loan losses | (15,979) | (13,246) |
| Net loans receivable | 1,136,500 | 835,596 |
| Investment in restricted stock, at cost | 7,622 | 4,744 |
| Bank premises and equipment, net | 7,526 | 7,904 |
| Accrued interest receivable | 4,102 | 3,361 |
| Other real estate owned | 1,303 | 433 |
| Goodwill | 260 | 260 |
| Bank owned life insurance | 15,191 | -- |
| Other assets | 7,187 | 5,357 |
| Total assets | $ 1,242,673 | $ 929,926 |
| Liabilities | ||
| Deposits | ||
| Noninterest-bearing | $ 216,883 | $ 170,355 |
| Interest-bearing | 748,924 | 598,963 |
| Total deposits | 965,807 | 769,318 |
| Long-term borrowings | 137,558 | 79,568 |
| Accrued interest payable | 2,762 | 2,803 |
| Capital lease obligation | 3,107 | 3,185 |
| Other liabilities | 3,311 | 2,690 |
| Total liabilities | 1,112,545 | 857,564 |
| Commitments and Contingencies | ||
| Stockholders' Equity | ||
| Common stock, no par value; authorized 10,000,000 shares at December 31, 2013 and December 31, 2012; | ||
| issued and outstanding 5,106,455 at December 31, 2013 and 3,166,217 at December 31, 2012 | 99,315 | 51,205 |
| Retained earnings | 30,931 | 20,661 |
| Accumulated other comprehensive income | (118) | 496 |
| Total stockholders' equity | 130,128 | 72,362 |
| Total liabilities and stockholders' equity | $ 1,242,673 | $ 929,926 |
| CONNECTONE BANCORP, INC. | ||||
| CONSOLIDATED STATEMENTS OF INCOME (unaudited) | ||||
| (dollars in thousands, except per share data) | ||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Interest income | ||||
| Loans receivable, including fees | $ 12,647 | $ 10,550 | $ 46,405 | $ 39,625 |
| Securities | 211 | 245 | 795 | 1,079 |
| Other interest income | 23 | 30 | 103 | 83 |
| Total interest income | 12,881 | 10,825 | 47,303 | 40,787 |
| Interest expense | ||||
| Deposits | 1,288 | 1,199 | 4,798 | 4,777 |
| Long-term borrowings | 479 | 347 | 1,489 | 1,349 |
| Capital lease | 47 | 48 | 189 | 193 |
| Total interest expense | 1,814 | 1,594 | 6,476 | 6,319 |
| Net interest income | 11,067 | 9,231 | 40,827 | 34,468 |
| Provision for loan losses | 1,400 | 1,150 | 4,575 | 3,990 |
| Net interest income after provision for loan losses | 9,667 | 8,081 | 36,252 | 30,478 |
| Non-interest income | ||||
| Service fees | 137 | 129 | 436 | 393 |
| Gains on sales of loans | 24 | 132 | 239 | 470 |
| Income on bank owned life insurance | 147 | -- | 191 | -- |
| Other income | 41 | 65 | 336 | 279 |
| Total non-interest income | 349 | 326 | 1,202 | 1,142 |
| Non-interest expenses | ||||
| Salaries and employee benefits | 2,811 | 2,100 | 10,321 | 8,352 |
| Occupancy and equipment | 805 | 691 | 3,101 | 2,847 |
| Professional fees | 418 | 366 | 1,463 | 1,143 |
| Advertising and promotion | 102 | 137 | 477 | 489 |
| Data processing | 661 | 455 | 2,059 | 1,697 |
| Other expenses | 968 | 799 | 3,230 | 2,960 |
| Total non-interest expenses | 5,765 | 4,548 | 20,651 | 17,488 |
| Income before income tax expense | 4,251 | 3,859 | 16,803 | 14,132 |
| Income tax expense | 1,401 | 1,557 | 6,533 | 5,711 |
| Net income | 2,850 | 2,302 | 10,270 | 8,421 |
| Dividends on preferred shares | -- | -- | -- | 354 |
| Net income available to common stockholders | $ 2,850 | $ 2,302 | $ 10,270 | $ 8,067 |
| Earnings per common share: | ||||
| Basic | $ 0.57 | $ 0.73 | $ 2.15 | $ 2.99 |
| Diluted | 0.55 | 0.71 | 2.09 | 2.63 |
| Weighted average common shares outstanding: | ||||
| Basic | 5,013,394 | 3,158,756 | 4,773,954 | 2,700,772 |
| Diluted | 5,180,522 | 3,261,886 | 4,919,384 | 3,195,944 |
| CONNECTONE BANCORP, INC. | |||
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||
| (dollars in thousands, except per share data) | |||
| Three Months Ended | |||
| December 31, | September 31, | December 31, | |
| 2013 | 2013 | 2012 | |
| Performance ratios: | |||
| Return on average assets | 0.93% | 0.95% | 0.76% |
| Return on average stockholders' equity | 8.73% | 8.10% | 13.89% |
| Net interest margin | 3.69% | 3.93% | 4.07% |
| Efficiency ratio (1) | 50.5% | 48.1% | 47.6% |
| As of | |||
| December 31, | September 31, | December 31, | |
| 2013 | 2013 | 2012 | |
| Capital ratios: | |||
| Leverage ratio | 10.74% | 11.76% | 7.84% |
| Risk-based Tier 1 capital ratio | 11.67% | 12.86% | 9.26% |
| Risk-based total capital ratio | 13.07% | 14.29% | 10.52% |
| Tangible common equity to tangible assets | 10.45% | 11.24% | 7.76% |
| Annualized net loan charge-offs as a % of average loans | 0.03% | 0.25% | 0.07% |
| Tangible book value per common share | $ 25.43 | $ 24.95 | $ 22.77 |
| Asset quality: | |||
| Nonaccrual loans | $ 9,175 | $ 8,822 | $ 7,939 |
| Other real estate owned | 1,303 | 1,303 | 433 |
| Total non-performing assets | $ 10,478 | $ 10,125 | $ 8,372 |
| Performing troubled debt restructured loans | $ 2,934 | $ 2,942 | $ 2,996 |
| Loans past due 90 days and still accruing | -- | 539 | -- |
| Nonaccrual loans as a % of loans receivable | 0.80% | 0.86% | 0.93% |
| Nonperforming assets as a % of total assets | 0.84% | 0.90% | 0.90% |
| Allowance for loan losses as a % of loans receivable | 1.39% | 1.42% | 1.56% |
| Allowance for loan losses as a % of nonaccrual loans | 174.2% | 166.2% | 166.8% |
| (1) Efficiency ratio is not a measure recognized under generally accepted accounting principles and is defined as total non-interest expenses divided by the sum of net interest income and total non-interest income (excluding securities gains/(losses)). | |||
| CONNECTONE BANCORP, INC. | ||||||
| NET INTEREST MARGIN ANALYSIS | ||||||
| (dollars in thousands) | ||||||
| For the Three Months Ended | ||||||
| December 31, 2013 | December 31, 2012 | |||||
| Average | Average | Average | Average | |||
| Interest-earning assets: | Balance | Interest | Rate (7) | Balance | Interest | Rate (7) |
| Investment securities (1) (2) | $ 33,407 | $ 219 | 2.60% | $ 27,728 | $ 245 | 3.52% |
| Loans receivable (3) (4) | 1,105,997 | 12,647 | 4.54% | 817,364 | 10,550 | 5.13% |
| Federal funds sold and interest-bearing deposits with banks | 50,384 | 23 | 0.18% | 57,490 | 30 | 0.21% |
| Total interest-earning assets | 1,189,788 | 12,889 | 4.30% | 902,582 | 10,825 | 4.77% |
| Allowance for loan losses | (15,192) | (12,610) | ||||
| Non-interest earning assets | 36,385 | 17,203 | ||||
| Total assets | $ 1,210,981 | $ 907,175 | ||||
| Interest-bearing liabilities: | ||||||
| Savings, NOW, Money Market, Interest Checking | $ 332,890 | 230 | 0.27% | $ 330,797 | 296 | 0.36% |
| Time deposits | 392,627 | 1,058 | 1.07% | 262,025 | 903 | 1.37% |
| Total interest-bearing deposits | 725,517 | 1,288 | 0.70% | 592,822 | 1,199 | 0.80% |
| Borrowings | 133,105 | 479 | 1.43% | 79,691 | 347 | 1.73% |
| Capital lease obligation | 3,122 | 47 | 5.97% | 3,197 | 48 | 5.97% |
| Total interest-bearing liabilities | 861,744 | 1,814 | 0.84% | 675,710 | 1,594 | 0.94% |
| Noninterest-bearing deposits | 215,642 | 160,607 | ||||
| Other liabilities | 4,148 | 4,923 | ||||
| Stockholders' equity | 129,447 | 65,935 | ||||
| Total liabilities and stockholders' equity | $ 1,210,981 | $ 907,175 | ||||
| Net interest income/interest rate spread (5) | $ 11,075 | 3.46% | $ 9,231 | 3.83% | ||
| Tax equivalent effect | (8) | -- | ||||
| Net interest income as reported | 11,067 | $ 9,231 | ||||
| Net interest margin (6) | 3.69% | 4.07% | ||||
| (1) Average balances are calculated on amortized cost. | ||||||
| (2) Interest income is presented on a tax equivalent basis using 35 percent federal tax rate | ||||||
| (3) Includes loan fee income. | ||||||
| (4) Loans receivable include non-accrual loans. | ||||||
| (5) Represents difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. | ||||||
| (6) Represents net interest income divided by average total interest-earning assets. | ||||||
| (7) Rates are annualized. | ||||||
| CONNECTONE BANCORP, INC. | ||||||
| NET INTEREST MARGIN ANALYSIS | ||||||
| (dollars in thousands) | ||||||
| For the Twelve Months Ended | ||||||
| December 31, 2013 | December 31, 2012 | |||||
| Average | Average | Average | Average | |||
| Interest-earning assets: | Balance | Interest | Rate | Balance | Interest | Rate |
| Investment securities (1) (2) | $ 28,425 | $ 811 | 2.85% | $ 31,009 | $ 1,079 | 3.48% |
| Loans receivable (3) (4) | 975,217 | 46,405 | 4.76% | 743,178 | 39,625 | 5.33% |
| Federal funds sold and interest-bearing deposits with banks | 51,894 | 103 | 0.20% | 46,902 | 83 | 0.18% |
| Total interest-earning assets | 1,055,536 | 47,319 | 4.48% | 821,089 | 40,787 | 4.97% |
| Allowance for loan losses | (14,267) | (11,196) | ||||
| Non-interest earning assets | 25,607 | 21,558 | ||||
| Total assets | $ 1,066,876 | $ 831,451 | ||||
| Interest-bearing liabilities: | ||||||
| Savings, NOW, Money Market, Interest Checking | $ 332,513 | 987 | 0.30% | $ 313,475 | 1,397 | 0.45% |
| Time deposits | 329,765 | 3,811 | 1.16% | 229,150 | 3,380 | 1.48% |
| Total interest-bearing deposits | 662,278 | 4,798 | 0.72% | 542,625 | 4,777 | 0.88% |
| Borrowings | 91,949 | 1,489 | 1.62% | 77,473 | 1,349 | 1.74% |
| Capital lease obligation | 3,150 | 189 | 6.00% | 3,224 | 193 | 5.99% |
| Total interest-bearing liabilities | 757,377 | 6,476 | 0.86% | 623,322 | 6,319 | 1.01% |
| Noninterest-bearing deposits | 191,233 | 138,155 | ||||
| Other liabilities | 3,631 | 4,345 | ||||
| Stockholders' equity | 114,635 | 65,629 | ||||
| Total liabilities and stockholders' equity | $ 1,066,876 | $ 831,451 | ||||
| Net interest income/interest rate spread (5) | $ 40,843 | 3.63% | $ 34,468 | 3.95% | ||
| Tax equivalent effect | (16) | -- | ||||
| Net interest income as reported | 40,827 | $ 34,468 | ||||
| Net interest margin (6) | 3.87% | 4.20% | ||||
| (1) Average balances are calculated on amortized cost. | ||||||
| (2) Interest income is presented on a tax equivalent basis using 35 percent federal tax rate | ||||||
| (3) Includes loan fee income. | ||||||
| (4) Loans receivable include non-accrual loans. | ||||||
| (5) Represents difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. | ||||||
| (6) Represents net interest income divided by average total interest-earning assets. | ||||||