ENGLEWOOD CLIFFS, N.J., Oct. 26, 2017 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $13.1 million for the third quarter of 2017 compared with $7.7 million for the second quarter of 2017 and $11.9 million earned during the third quarter of 2016.  Diluted earnings per share were $0.41 for the current quarter versus $0.24 earned in the second quarter of 2017 and $0.39 earned in the third quarter of 2016.

Earnings per share, adjusted for charges related to the taxi medallion portfolio and securities gains, amounted to $0.46 for the third quarter of 2017, as compared with $0.42 for the second quarter of 2017 and $0.40 for the third quarter of 2016. Taxi medallion pretax charges/provisions amounted to $3.0 million, $9.7 million, and $4.8 million during the third quarter 2017, second quarter 2017 and third quarter 2016, respectively. A $4.1 million pretax securities gain was realized during the third quarter of 2016.

Frank Sorrentino, ConnectOne’s Chairman and CEO stated, “Third quarter operating results reflect increasing strong core performance, with return on tangible equity (excluding taxi medallion charges) surpassing 14%.   Key business drivers showed continued momentum with deposit and loan growth achieving near-historic levels. Loans receivable increased by $128 million during the quarter, including non-CRE loans which increased in excess of 20% annualized.  Loan growth since year-end 2016 amounted to $413.5 million or 15.8% on an annualized basis. In addition, we designated approximately $42 million of performing multifamily “non-relationship” loans as held-for-sale, which is anticipated to close in the fourth quarter of 2017 and would result in a modest gain and help to further diversify our loan portfolio.  We also achieved strong progress in increasing core deposits.  For the current quarter, our average core deposits (total deposits excluding time deposits) increased by $125 million, or 20.9% on an annualized basis.  Return on assets for the third quarter, including $3.0 million of taxi charges, was 1.10% and return on tangible equity was 12.8%. When excluding the aforementioned taxi charges, the adjusted return on assets and return on tangible equity was 1.25% and 14.5%, respectively, while our 3.44% net interest margin for the quarter is stabilizing and our efficiency ratio improved to below 40%.”

Mr. Sorrentino added, “Operationally, we are expanding our deposit gathering initiatives with the opening of our first commercial banking office on Long Island, located on the Nassau/Suffolk border in Melville, NY. The new office is the Bank’s second location in New York State and enables ConnectOne to further provide best in class service to existing NY-based customers while also fostering new relationships on Long Island.  ConnectOne has long worked with businesses in the New York metropolitan area to help them reach their goals and grow. Two years ago, we opened our first New York branch in Manhattan, and quickly realized the need for institutions with ConnectOne’s capabilities as a larger bank that can also provide the one-on-one service we specialize in. Our expansion to Long Island is a natural extension of our market focus.”

Mr. Sorrentino continued, “Looking ahead, we remain focused on driving shareholder return by executing against key strategic objectives including diversified loan growth, core deposit funding to match growth, and leveraging our infrastructure through economies of scale and technological advancements.  In addition, strong earnings retention is funding balance sheet growth in excess of 10%. We are diligently building a stronger company and our third quarter and year-to-date results demonstrate our commitment to and success in achieving these goals.”

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2017 was $37.9 million, an increase of $2.1 million, or 5.8%, from the second quarter of 2017, resulting from an increase in average interest-earning assets of 5.0% combined with a little-changed net interest margin, which contracted by 1 basis-point to 3.44% from 3.45%.  Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.3 million during both the third and second quarters of 2017.  Excluding purchase accounting adjustments, the adjusted net interest margin was 3.41% in the third quarter of 2017, contracting by 1 basis-point from the second quarter 2017 adjusted net interest margin of 3.42%. The decrease in net interest margin was primarily attributable to increased deposit funding costs, offset by higher yields on loans. 

Fully taxable equivalent net interest income for the third quarter of 2017 increased by $4.2 million, or 12.3%, from the third quarter of 2016, resulting from an increase in average interest-earning assets of 8.4% and the widening of the net interest margin by 12 basis-points to 3.44% from 3.32%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.3 million and $1.0 million during the third quarter of 2017 and 2016, respectively.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.41% in the third quarter of 2017, widening by 19 basis-points from the third quarter of 2016 adjusted net interest margin of 3.22%. The increase in the adjusted net interest margin was primarily attributable to a higher volume of loans which reduced excess cash balances resulting in an improved asset-mix, partially offset by increased cost in deposit funding and lower yields on securities.   

Noninterest income totaled $1.8 million in the third quarter of 2017, $1.4 million in the second quarter of 2017 and $5.6 million in the third quarter of 2016.  There were no net securities gains during the third and second quarters of 2017. The third quarter of 2016 included net securities gains of $4.1 million.  Excluding the securities gains, noninterest income increased approximately $0.3 million when compared to the sequential quarter and the prior year third quarter.  The increase was due primarily to a bank owned life insurance death benefit recorded during the third quarter of 2017. 

Noninterest expenses totaled $18.6 million for the third quarter of 2017, down $6.7 million from $25.3 million for the second quarter of 2017 and up $4.1 million from $14.6 million for the third quarter of 2016.  The decrease from the sequential quarter was mainly attributable to the valuation allowance adjustment on taxi medallion loans held-for-sale, which declined to $3.0 million in the current quarter from $9.7 million in the second quarter of 2017.  The increase in noninterest expenses from the prior year third quarter was mainly attributable to the aforementioned $3.0 million taxi medallion valuation allowance; there was no valuation allowance in the prior year’s period.  In addition, increases in salaries and employee benefits ($1.1 million), FDIC insurance premiums ($0.1 million), data processing ($0.2 million), partially offset by decreases in other expense ($0.2 million) and occupancy and equipment expenses ($0.1 million) contributed to the overall increase in noninterest expense from the third quarter of 2016.  The increases over the prior year third quarter were the result of increased levels of business and staff resulting from organic growth.

Income tax expense was $5.6 million for the third quarter of 2017, compared to $2.1 million for the second quarter of 2017 and $5.4 million for the third quarter of 2016.  Included in income tax expense for the first nine months of 2017 is a benefit of $180 thousand, which resulted from the effect of implementing ASU 2016-09, which relates to the recognition of excess tax benefits in the income statement (formerly through equity) that result from employee share-based payment awards. The effective tax rate for the current quarter was 30.0% versus 21.4% for the sequential quarter and 31.5% for the prior year third quarter.  Excluding any changes to the taxi medallion valuation allowance, the effective tax rate for 2017 is expected to be maintained in the low 30% range.

Asset Quality

The provision for loan losses was $1.5 million in both the third and second quarters of 2017, down from $6.8 million in the third quarter of 2016.  The decrease from the prior year quarter was largely attributable to a lower level of specific credit reserves.

As of September 30, 2017, loans held-for-sale included loans secured by NYC taxi medallions, predominantly corporate medallions totaling $47.4 million (net of a $15.3 million valuation allowance), compared to $65.6 million (with no valuation allowance) as of December 31, 2016.  The decrease was primarily attributable to the aforementioned taxi medallion valuation allowance and a payoff of two corporate medallions for $1.1 million.  The increase of the valuation allowance to $15.3 million compared to year-end 2016 was the result of reduced medallion lease revenues, lower transfer valuations as reported by the New York City Taxi and Limousine Commission, and uncertainty surrounding institutional investor interest in the NYC taxi business. The valuation allowance results in a per medallion value of approximately $348,000 as of September 30, 2017, down from approximately $374,000 as of June 30, 2017.  Management continues to find market interest for taxi medallion loans to be extremely limited, especially for relatively smaller portfolios such as the Bank’s.  Management is however experiencing continued success at restructuring loans in the portfolio and is encouraged by the cash flows being generated.  Therefore, Management is currently considering returning the taxi medallion loans to loans held-for-investment.  Although no decision has been made at the present time, if the loans are transferred back, they will be recorded at the held-for-sale valuation at the time of transfer.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $61.2 million at September 30, 2017, $69.4 million at December 31, 2016 and $12.1 million at September 30, 2016. Included in nonperforming assets were taxi medallion loans, totaling $47.4 million at September 30, 2017, $63.0 million at December 31, 2016 and $3.6 million at September 30, 2016.  Nonperforming assets as a percentage of total assets were 1.26% at September 30, 2017, 1.57% at December 31, 2016, and 0.28% at September 30, 2016.  Excluding the taxi medallion loans, nonaccrual loans increased to $13.8 million at September 30, 2017, from $5.7 million at December 31, 2016 and $7.9 million at September 30, 2016.  Nonaccrual loans as a percentage of loans receivable, excluding taxi medallion loans, were 0.35% at September 30, 2017, 0.16% at December 31, 2016 and 0.24% at September 30, 2016.

The net charge-off (recovery) ratio was (0.00)% for the third quarter of 2017, (0.01)% for the second quarter of 2017 and 0.22% for the third quarter of 2016. The allowance for loan losses represented 0.77%, 0.74%, and 1.09% of loans receivable as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 217.2% as of September 30, 2017, 449.0% as of December 31, 2016 and 319.3% as of September 30, 2016.

Selected Balance Sheet Items

At September 30, 2017, the Company’s total assets were $4.8 billion, an increase of $418 million from December 31, 2016. Loans receivable at September 30, 2017 were $3.9 billion, reflecting net loan growth (loan originations less pay-downs and pay-offs) of $413 million from December 31, 2016, primarily attributable to increases in multifamily ($280 million), other commercial real estate ($100 million), commercial and industrial ($88 million), and residential real estate ($32 million), offset by decreases in construction ($87 million).

The Company’s stockholders’ equity was $558 million at September 30, 2017, an increase of $26.7 million from December 31, 2016. The increase in stockholders’ equity was primarily attributable to an increase of $25.4 million in retained earnings and approximately $1.4 million of equity issuance related to stock-based compensation.  As of September 30, 2017, the Company’s tangible common equity ratio and tangible book value per share were 8.71% and $12.78, respectively.  As of December 31, 2016, the tangible common equity ratio and tangible book value per share were 8.93% and $11.96, respectively. Total goodwill and other intangible assets were approximately $148 million and $149 million as of September 30, 2017 and December 31, 2016, respectively.

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP/adjusted financial measures including an adjusted net income available to common shareholders. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends.  These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited.  They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP.  These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Third Quarter 2017 Conference Call

Management will host a conference call and audio webcast at 10:00 a.m. ET on October 26, 2017 to review the Company's financial performance and operating results.  The conference call dial-in number is 785-424-1809, access code 6217589. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the Company’s website at ir.ConnectOneBank.com

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, October 26, 2017 and ending on Thursday, November 2, 2017 by dialing 719-457-0820, access code 6217589. An online archive of the webcast will be available following the completion of the conference call at ir.ConnectOneBank.com.

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, and serves 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 20 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.

Investor Contact:

William S. Burns
Executive VP & CFO
201.816.4474; bburns@cnob.com

Media Contact:
Jake Ciorciari, MWWPR
646.376.7042; jciorciari@mww.com

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES  
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION  
(in thousands)  
       
 September 30, December 31, September 30, 
  2017   2016   2016  
ASSETS(unaudited)   (unaudited) 
Cash and due from banks$41,114  $37,150  $49,028  
Interest-bearing deposits with banks 100,148   163,249   184,766  
Cash and cash equivalents 141,262   200,399   233,794  
       
Securities available-for-sale 400,516   353,290   338,459  
       
Loans held-for-sale (net of $15,287, $-0-, $-0- valuation allowance) 89,386   78,005   15,112  
       
Loans receivable 3,889,289   3,475,832   3,445,476  
Less: Allowance for loan losses 29,870   25,744   37,615  
Net loans receivable 3,859,419   3,450,088   3,407,861  
       
Investment in restricted stock, at cost 29,672   24,310   24,535  
Bank premises and equipment, net 21,917   22,075   22,112  
Accrued interest receivable 14,841   12,965   12,497  
Bank owned life insurance 110,762   98,359   97,644  
Other real estate owned -   626   626  
Goodwill 145,909   145,909   145,909  
Core deposit intangibles 2,533   3,088   3,281  
Other assets 28,538   37,234   25,974  
Total assets$4,844,755  $4,426,348  $4,327,804  
       
LIABILITIES      
Deposits:      
Noninterest-bearing$719,582  $694,977  $655,683  
Interest-bearing 2,904,187   2,649,294   2,613,266  
Total deposits 3,623,769   3,344,271   3,268,949  
Borrowings 585,124   476,280   481,337  
Subordinated debentures (net of $498, $621, $665 in debt issuance costs) 54,657   54,534   54,490  
Other liabilities 23,514   20,231   23,440  
Total liabilities 4,287,064   3,895,316   3,828,216  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Common stock 412,546   412,726   374,287  
Additional paid-in capital 12,840   11,407   10,409  
Retained earnings 151,851   126,462   130,885  
Treasury stock (16,717)  (16,717)  (16,717) 
Accumulated other comprehensive (loss) income (2,829)  (2,846)  724  
Total stockholders' equity 557,691   531,032   499,588  
Total liabilities and stockholders' equity$4,844,755  $4,426,348  $4,327,804  
       

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF INCOME    
(in thousands, except for per share data)    
           
  Three Months Ended   Nine Months Ended    
 09/30/17 09/30/16 09/30/17 09/30/16   
Interest income          
Interest and fees on loans$43,241 $37,803 $121,879 $109,381   
Interest and dividends on investment securities:          
Taxable 1,695  1,774  5,042  5,879   
Tax-exempt 870  988  2,655  2,867   
Dividends 362  352  982  1,074   
Interest on federal funds sold and other short-term investments 170  261  555  541   
Total interest income 46,338  41,178  131,113  119,742   
Interest expense          
Deposits 6,113  5,159  16,717  13,532   
Borrowings 3,206  2,995  9,135  9,472   
Total interest expense 9,319  8,154  25,852  23,004   
           
Net interest income 37,019  33,024  105,261  96,738   
Provision for loan losses 1,450  6,750  4,000  13,500   
Net interest income after provision for loan losses 35,569  26,274  101,261  83,238   
           
Noninterest income          
Annuities and insurance commissions -  68  39  140   
Income on bank owned life insurance 985  615  2,402  1,843   
Net gains on sale of loans held-for-sale 50  56  120  147   
Deposit, loan and other income 721  706  2,023  1,984   
Net gains on sale of investment securities -  4,131  1,596  4,234   
Total noninterest income 1,756  5,576  6,180  8,348   
           
Noninterest expenses          
Salaries and employee benefits 8,872  7,791  25,710  23,143   
Occupancy and equipment 1,969  2,049  6,215  6,450   
FDIC insurance 840  745  2,550  1,955   
Professional and consulting 740  667  2,192  2,078   
Marketing and advertising 225  293  770  817   
Data processing 1,176  1,002  3,474  3,036   
Amortization of core deposit intangible 169  193  555  627   
Increase in valuation allowance, loans held-for-sale 3,000  -  15,325  -   
Other expenses 1,650  1,811  5,402  5,150   
Total noninterest expenses 18,641  14,551  62,193  43,256   
           
Income before income tax expense 18,684  17,299  45,248  48,330   
Income tax expense 5,607  5,443  12,608  15,224   
Net income 13,077  11,856  32,640  33,106   
Less: Preferred stock dividends -  -  -  22   
Net income available to common stockholders$13,077 $11,856 $32,640 $33,084   
           
Earnings per common share:          
Basic$0.41 $0.39 $1.02 $1.10   
Diluted 0.41  0.39  1.01  1.09   
           
Dividends per common share$0.075 $0.075 $0.225 $0.225   

 

ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies.   
            
CONNECTONE BANCORP, INC.   
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES   
 As of  
 Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,  
  2017   2017   2017   2016   2016   
Selected Financial Data(dollars in thousands)  
Total assets$4,844,755  $4,681,280  $4,460,816  $4,426,348  $4,327,804   
Loans receivable:           
Commercial 641,613   610,442   541,690   554,065   644,430   
Commercial real estate-other 1,254,720   1,218,995   1,192,074   1,154,154   1,139,641   
Multifamily 1,330,485   1,251,962   1,134,760   1,050,067   961,163   
Commercial construction 399,453   431,049   460,611   486,228   471,109   
Residential 264,244   251,108   242,883   232,547   229,401   
Consumer 1,912   2,005   2,811   2,380   2,879   
Gross loans 3,892,427   3,765,561   3,574,829   3,479,441   3,448,623   
Unearned net origination fees (3,138)  (3,989)  (3,166)  (3,609)  (3,147)  
Loans receivable 3,889,289   3,761,572   3,571,663   3,475,832   3,445,476   
Loans held-for-sale (net of valuation allowance) 89,386   51,124   62,255   78,005   15,112   
Total loans$3,978,675  $3,812,696  $3,633,918  $3,553,837  $3,460,588   
            
Securities available-for-sale$400,516  $402,130  $352,476  $353,290  $338,459   
Goodwill and other intangible assets 148,442   148,611   148,804   148,997   149,190   
Deposits:           
Noninterest-bearing demand 719,582   695,522   671,183   694,977   655,683   
Other interest-bearing deposits 1,825,828   1,752,523   1,714,081   1,681,158   1,605,927   
Time deposits 1,078,359   982,328   970,213   968,136   1,007,339   
Total deposits$3,623,769  $3,430,373  $3,355,477  $3,344,271  $3,268,949   
            
Borrowings$585,124  $626,173  $491,226  $476,280  $481,337   
Subordinated debentures (net of issuance costs) 54,657   54,616   54,575   54,534   54,490   
Total stockholders' equity 557,691   546,173   540,277   531,032   499,588   
            
Quarterly Average Balances           
Total assets$4,714,012  $4,495,573  $4,382,314  $4,349,961  $4,344,796   
Loans receivable:           
Commercial 671,525   603,733   557,347   644,263   632,892   
Commercial real estate (including multifamily) 2,502,846   2,337,499   2,222,795   2,130,955   2,081,741   
Commercial construction 418,439   451,038   466,455   479,342   462,399   
Residential 255,755   246,864   237,418   229,738   229,953   
Consumer 2,555   2,929   2,460   2,777   2,771   
Gross loans 3,851,120   3,642,063   3,486,475   3,487,075   3,409,756   
Unearned net origination fees (3,724)  (3,967)  (3,304)  (3,151)  (2,956)  
Loans receivable 3,847,396   3,638,096   3,483,171   3,483,924   3,406,800   
Loans held-for-sale 51,008   61,259   65,860   4,549   478   
Total loans$3,898,404  $3,699,355  $3,549,031  $3,488,473  $3,407,278   
            
Securities available-for-sale 398,635   391,965   367,940   351,809   269,895   
Securities held-to-maturity -   -   -   -   143,146   
Goodwill and other intangible assets 148,553   148,737   148,930   149,123   149,317   
Deposits:           
Noninterest-bearing demand 688,707   667,461   655,597   666,913   640,323   
Other interest-bearing deposits 1,816,162   1,712,875   1,706,991   1,631,368   1,637,500   
Time deposits 1,005,997   976,012   963,976   985,944   1,007,530   
Total deposits$3,510,866  $3,356,348  $3,326,564  $3,284,225  $3,285,353   
            
Borrowings$570,711  $514,161  $442,595  $476,925  $488,015   
Subordinated debentures 55,155   55,155   55,155   55,155   55,155   
Total stockholders' equity 556,620   549,748   539,544   511,663   495,141   
            
 Three Months Ended  
 Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,  
  2017   2017   2017   2016   2016   
  (dollars in thousands, except for per share data)   
Net interest income$37,019  $35,101  $33,141  $33,407  $33,024   
Provision for loan losses 1,450   1,450   1,100   25,200   6,750   
Net interest income after provision for loan losses 35,569   33,651   32,041   8,207   26,274   
Noninterest income           
Annuity and insurance commissions -   -   39   51   68   
Income on bank owned life insurance 985   714   703   715   615   
Net gains on sale of loans held-for-sale 50   49   21   86   56   
Deposit, loan and other income 721   659   643   721   706   
Net gains on sale of investment securities -   -   1,596   -   4,131   
Total noninterest income 1,756   1,422   3,002   1,573   5,576   
Noninterest expenses           
Salaries and employee benefits 8,872   8,632   8,206   7,888   7,791   
Occupancy and equipment 1,969   1,991   2,255   2,122   2,049   
FDIC insurance 840   815   895   985   745   
Professional and consulting 740   734   718   901   667   
Marketing and advertising 225   289   256   222   293   
Data processing 1,176   1,149   1,149   1,106   1,002   
Amortization of core deposit intangible 169   193   193   193   193   
Increase in valuation allowance, loans held-for-sale 3,000   9,725   2,600   -   -   
Other expenses 1,650   1,775   1,977   1,835   1,811   
Total noninterest expenses 18,641   25,303   18,249   15,252   14,551   
            
Income (loss) before income tax expense 18,684   9,770   16,794   (5,472)  17,299   
Income tax expense (benefit) 5,607   2,087   4,914   (3,448)  5,443   
Net income (loss) available to common stockholders$13,077  $7,683  $11,880  $(2,024) $11,856   
            
Reconciliation of GAAP Earnings to Earnings Excluding Net Securities Gains and Expenses Related to the Taxi Medallion Loans Portfolio           
Net income (loss) available to common stockholders$13,077  $7,683  $11,880  $(2,024) $11,856   
Net gains on sales of securities (after taxes) -   -   (1,093)  -   (2,643)  
Provision related to taxi medallion loans (after taxes) -   -   -   14,196   2,958   
Increase in valuation allowance, loans held-for-sale (after taxes) 1,776   5,719   1,538   -   -   
Net income available to common stockholders-adjusted$14,853  $13,402  $12,325  $12,172  $12,171   
Weighted average diluted shares outstanding 32,182,016   32,255,770   32,192,643   30,729,359   30,401,684   
Diluted EPS (GAAP)$0.41  $0.24  $0.37  $(0.07) $0.39   
Diluted EPS-adjusted (non-GAAP) (1) 0.46   0.42   0.38   0.40   0.40   
            
Return on Assets Measures           
Net income available to common stockholders-adjusted$14,853  $13,402  $12,325  $12,172  $12,171   
            
Average assets$4,714,012  $4,495,573  $4,382,314  $4,349,961  $4,344,796   
Less: average intangible assets (148,553)  (148,737)  (148,930)  (149,123)  (149,317)  
Average tangible assets$4,565,459  $4,346,836  $4,233,384  $4,200,838  $4,195,479   
Return on avg. assets (GAAP) 1.10 % 0.69 % 1.10 % (0.19)% 1.09 % 
Return on avg. assets-adjusted (non-GAAP) (2) 1.25   1.20   1.14   1.11   1.11   
Return on avg. tangible assets (non-GAAP) (3) 1.15   0.72   1.15   (0.18)  1.14   
Return on avg. tangible assets-adjusted (non-GAAP) (4) 1.30   1.25   1.19   1.16   1.16   
__________________           
(1) Adjusted net income available to common stockholders divided by weighted average diluted shares outstanding.   
(2) Adjusted net income available to common stockholders divided by average assets.   
(3) Net income available to common stockholders excluding amortization of intangible assets divided by average tangible assets.   
(4) Adjusted net income available to common stockholders excluding amortization of intangible assets divided by average tangible assets.   
            
 Three Months Ended  
 Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,  
  2017   2017   2017   2016   2016   
Return on Equity Measures(dollars in thousands)  
Net income available to common stockholders-adjusted$14,853  $13,402  $12,325  $12,172  $12,171   
            
Average common equity$556,620  $549,748  $539,544  $511,663  $495,141   
Less: average intangible assets (148,553)  (148,737)  (148,930)  (149,123)  (149,317)  
Average tangible common equity$408,067  $401,011  $390,614  $362,540  $345,824   
            
Return on avg. common equity (GAAP) 9.32 % 5.61 % 8.93 % (1.57)% 9.53 % 
Return on avg. common equity-adjusted (non-GAAP) (5) 10.59   9.78   9.26   9.46   9.78   
Return on avg. tangible common equity (non-GAAP) (6) 12.81   7.80   12.45   (2.10)  13.77   
Return on avg. tangible common equity-adjusted (non-GAAP) (7) 14.54   13.52   12.91   13.48   14.13   
            
Efficiency Measures           
Total noninterest expenses$18,641  $25,303  $18,249  $15,252  $14,551   
Increase in valuation allowance, loans held-for-sale (3,000)  (9,725)  (2,600)  -   -   
Foreclosed property expense (46)  (71)  (100)  (81)  (37)  
Operating noninterest expense$15,595  $15,507  $15,549  $15,171  $14,514   
            
Net interest income (tax equivalent basis)$37,929  $35,839  $33,956  $34,120  $33,762   
Noninterest income 1,756   1,422   3,002   1,573   5,576   
Net gains on sales of investment securities -   -   (1,596)  -   (4,131)  
Operating revenue$39,685  $37,261  $35,362  $35,693  $35,207   
            
Operating efficiency ratio (non-GAAP) (8) 39.3 % 41.6 % 44.0 % 42.5 % 41.2 % 
            
Net Interest Margin           
Average interest-earning assets$4,378,537  $4,168,344  $4,053,324  $4,038,030  $4,041,020   
            
Net interest income (tax equivalent basis)$37,929  $35,839  $33,956  $34,120  $33,762   
Impact of purchase accounting fair value marks (317)  (316)  (649)  (960)  (1,045)  
Adjusted net interest income$37,612  $35,523  $33,307  $33,160  $32,717   
            
Net interest margin (GAAP) 3.44 % 3.45 % 3.40 % 3.36 % 3.32 % 
Adjusted net interest margin (non-GAAP) (9) 3.41   3.42   3.33   3.27   3.22   
_____________           
(5) Adjusted net income available to common stockholders divided by average common equity.   
(6) Net income available to common stockholders excluding amortization of intangibles assets divided by average tangible common equity.   
(7) Adjusted net income available to common stockholders divided by average tangible common equity.   
(8) Operating noninterest expense divided by operating revenue.   
(9) Adjusted net interest income divided by average interest-earning assets.   
            
 As of  
 Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,  
  2017   2017   2017   2016   2016   
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)  
Common equity$557,691  $546,173  $540,277  $531,032  $499,588   
Less: intangible assets (148,442)  (148,611)  (148,804)  (148,997)  (149,190)  
Tangible common equity$409,249  $397,562  $391,473  $382,035  $350,398   
            
Total assets$4,844,755  $4,681,280  $4,460,816  $4,426,348  $4,327,804   
Less: intangible assets (148,442)  (148,611)  (148,804)  (148,997)  (149,190)  
Tangible assets$4,696,313  $4,532,669  $4,312,012  $4,277,351  $4,178,614   
            
Common shares outstanding 32,015,317   32,015,317   32,004,471   31,944,403   30,197,318   
            
Common equity ratio (GAAP) 11.51 % 11.67 % 12.11 % 12.00 % 11.54 % 
Tangible common equity ratio (non-GAAP) (10) 8.71   8.77   9.08   8.93   8.39   
            
Regulatory capital ratios (Bancorp):           
Leverage ratio 9.13 % 9.33 % 9.44 % 9.29 % 8.49 % 
Common equity tier 1 risk-based ratio 9.40   9.48   9.79   9.74   9.25   
Risk-based tier 1 capital ratio 9.52   9.60   9.92   9.87   9.38   
Risk-based total capital ratio 11.34   11.46   11.83   11.78   11.69   
Regulatory capital ratios (Bank):           
Leverage ratio 10.11 % 10.34 % 10.50 % 10.34 % 9.57 % 
Common equity tier 1 risk-based ratio 10.54   10.64   11.03   10.98   10.58   
Risk-based tier 1 capital ratio 10.54   10.64   11.03   10.98   10.58   
Risk-based total capital ratio 11.22   11.32   11.70   11.63   11.57   
            
Book value per share (GAAP)$17.42  $17.06  $16.88  $16.62  $16.54   
Tangible book value per share (non-GAAP) (11) 12.78   12.42   12.23   11.96   11.60   
            
Net Loan Charge-offs Detail           
Net loan charge-offs (recoveries):           
Charge-offs$-  $10  $72  $37,074  $1,910   
Recoveries (20)  (60)  (129)  (2)  (12)  
Net loan charge-offs$(20) $(50) $(57) $37,072  $1,898   
Net loan charge-offs as a % of average total loans (annualized) (0.00)% (0.01)% (0.01)% 4.23 % 0.22 % 
            
Asset Quality           
Nonaccrual taxi medallion loans$47,430  $48,884  $59,054  $63,044  $3,637   
Nonaccrual loans (excluding taxi medallion loans) 13,755   14,055   12,790   5,734   7,856   
Other real estate owned -   580   580   626   626   
Total nonperforming assets$61,185  $63,519  $72,424  $69,404  $12,119   
            
Performing troubled debt restructurings$12,749  $10,221  $10,005  $13,338  $105,338   
            
Allowance for loan losses ("ALLL")$29,870  $28,401  $26,901  $25,744  $37,615   
ALLL, net of taxi specific reserves 29,870   28,401   26,901   25,744   25,081   
            
Nonaccrual loans as a % of loans receivable (excluding taxi medallion loans) 0.35 % 0.37 % 0.36 % 0.16 % 0.24 % 
Nonperforming assets as a % of total assets 1.26   1.36   1.62   1.57   0.28   
ALLL as a % of loans receivable 0.77   0.76   0.75   0.74   1.09   
ALLL as a % of nonaccrual loans 48.8   45.1   37.4   37.4   327.3   
ALLL (excluding taxi medallion loans specific reserves) as a % of nonaccrual loans (excluding taxi medallion loans) 217.2   202.1   210.3   449.0   319.3   
ALLL (excluding taxi medallion specific reserves) as a % of loans receivable (excluding taxi medallion loans) 0.77   0.76   0.75   0.74   0.73   
            
Loans receivable$3,889,289  $3,761,572  $3,571,663  $3,475,832  $3,445,476   
Less: taxi medallion loans -   -   -   -   (102,735)  
Loans receivable (excluding taxi medallion loans)$3,889,289  $3,761,572  $3,571,663  $3,475,832  $3,342,741   
            
Loans held-for-sale, taxi medallion loans$47,430  $50,891  $61,319  $65,596  $-   
__________________           
(10) Tangible common equity divided by tangible assets.   
(11) Tangible common equity divided by common shares outstanding at period-end.   

 

CONNECTONE BANCORP, INC.
  
NET INTEREST MARGIN ANALYSIS
  
(dollars in thousands)
  
    For the Three Months Ended  
    September 30, 2017June 30, 2017September 30, 2016 
    Average      Average      Average      
Interest-earning assets: BalanceInterest Rate (8)  BalanceInterest Rate (8)  BalanceInterest Rate (8)  
Investment securities (1) (2) $397,077  $3,033  3.03% $390,462  $3,079  3.16% $406,802  $3,293  3.22% 
Total loans (2) (3) (4)   3,898,404   43,683  4.45   3,699,355   40,921  4.44   3,407,278   38,010  4.44  
Federal funds sold and interest-                  
bearing deposits with banks  53,820   170  1.25   52,099   139  1.07   202,106   261  0.51  
Restricted investment in bank stock   29,236     362  4.91     26,428     290  4.40     24,834     352  5.64  
Total interest-earning assets 4,378,537   47,248  4.28   4,168,344   44,429  4.28   4,041,020   41,916  4.13  
Allowance for loan losses  (28,999)      (27,355)      (34,052)     
Noninterest-earning assets  364,474       354,584       337,828      
Total assets  $4,714,012      $4,495,573      $4,344,796      
                      
Interest-bearing liabilities:                   
Time deposits   1,005,997   3,593  1.42   976,012   3,311  1.36   1,007,530   3,323  1.31  
Other interest-bearing deposits   1,816,162     2,520  0.55     1,712,875     2,184  0.51     1,637,500     1,836  0.45  
Total interest-bearing deposits 2,822,159   6,113  0.86   2,688,887   5,495  0.82   2,645,030   5,159  0.78  
                      
Borrowings   570,711   2,353  1.64   514,161   2,244  1.75   488,015   2,139  1.74  
Subordinated debentures (5)  55,155   813  5.85   55,155   810  5.89   55,155   814  5.87  
Capital lease obligation    2,688     40  5.90     2,720     41  6.05     2,814     42  5.94  
Total interest-bearing liabilities 3,450,713   9,319  1.07   3,260,923   8,590  1.06   3,191,014   8,154  1.02  
                      
Noninterest-bearing demand deposits 688,707       667,461       640,323      
Other liabilities   17,972       17,441       18,318      
Total noninterest-bearing liabilities 706,679       684,902       658,641      
Stockholders' equity  556,620       549,748       495,141      
Total liabilities and stockholders' equity$4,714,012      $4,495,573      $4,344,796      
                      
Net interest income (tax equivalent basis)   37,929        35,839        33,762     
Net interest spread (6)    3.21%    3.22%    3.11% 
                      
Net interest margin (7)    3.44%    3.45%    3.32% 
                      
Tax equivalent adjustment    (910)       (738)       (738)    
Net interest income    $37,019       $35,101       $33,024     
                      
________________________  
(1) Average balances are calculated on amortized cost.   
(2) Interest income is presented on a tax equivalent basis using 35% federal tax rate.
 
(3) Includes loan fee income.
  
(4) Loans include nonaccrual loans.
  
(5) Does not reflect netting of debt issuance costs of $525, $565 and $697 for the three months ended September 30, 2017,
  
June 30, 2017 and September 30, 2016, respectively.
  
(6) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing
  
liabilities and is presented on a tax equivalent basis.
  
(7) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.
  
(8) Rates are annualized.