ENGLEWOOD CLIFFS, N.J., July 26, 2018 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $17.5 million for the second quarter of 2018 compared with $4.3 million for the first quarter of 2018 and $7.7 million for the second quarter of 2017. Diluted earnings per share were $0.54 for the second quarter of 2018 versus $0.13 earned in the first quarter of 2018 and $0.24 earned in the second quarter of 2017.
Adjusted net income amounted to $17.5 million, or $0.54 earnings per share, for the second quarter of 2018; $17.1 million, or $0.53 earnings per share, for the first quarter of 2018; and $13.3 million, or $0.41 earnings per share, for the second quarter of 2017. Adjusted net income excludes taxi medallion after-tax charges of $13.4 million for the first quarter 2018 and $5.7 million for the second quarter 2017. In addition, adjusted net income for the first quarter of 2018 excludes $0.5 million of income tax benefit from ASU 2016-19, and $0.1 million for the second quarter 2017.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are extremely pleased with our second quarter performance, highlighted by record quarterly earnings. In addition, we saw improvement in other metrics including deposit and loan growth, net interest margin, return on assets and tangible common equity, tangible book value per share, and credit quality. Total loans increased by $112 million, or more than 10% on an annualized basis, from the prior quarter-end, while total deposits increased by $156 million, or more than 15% on an annualized basis. Meanwhile, our net interest margin, which had contracted significantly during the first quarter due to market conditions and non-recurring items, widened from the sequential quarter by 5 basis-points including purchase accounting accretion, and by 2 basis-points when excluding such accretion. The increase was largely a result of an increasing yield in the loan portfolio driven by repricing and higher origination rates, and a better overall asset mix, offset by increased funding costs, primarily related to deposits. While net interest margin tightening remains the likely trend largely due to increasing deposit competition, loan spreads have begun to widen, albeit slightly, reflecting both loan mix and discipline. Many of our performance metrics improved during the quarter and remain among the best in our industry. Our efficiency ratio was 41.9%, return on average assets was 1.38%, and return on average tangible common equity was 16.6%, all reflecting underlying strong core performance as we remain focused on maximizing shareholder value.”
Mr. Sorrentino added, “In addition to our strong second quarter financial performance, I’m equally excited about our recently announced merger with Greater Hudson Bank, a premier community bank operating in Rockland, Orange and Westchester Counties in New York. In addition to enhancing our market presence by expanding our footprint into the Hudson Valley, the transaction will provide new opportunities for accretive growth by combining our operating model and our technological capabilities with the Greater Hudson deposit rich franchise. The merger also aligns perfectly with our stated growth strategy, enabling us to more deeply penetrate the New York market and expand the ConnectOne model within the 75-mile radius of New York City in which we operate. It provides our clients with even greater service while also enhancing our commercial lending capabilities, including establishing an SBA platform. We believe Greater Hudson is a strong strategic fit for ConnectOne and the transaction remains on target to close in early 2019.”
Operating Results
Fully taxable equivalent net interest income for the second quarter of 2018 was $39.4 million, an increase of $0.8 million, or 2.1%, from the first quarter of 2018, resulting from a widening of the net interest margin to 3.31% from 3.26%, partially offset by a decrease in total average interest-earning assets of 0.6%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.7 million during the second quarter of 2018 and $0.2 million during the first quarter of 2018. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.26% in the second quarter of 2018, widening by 2 basis-points from the first quarter of 2018 adjusted net interest margin of 3.24%. The increase in the adjusted net interest margin was primarily attributable to a higher yield earned on loans and securities and an improved asset-mix, partially offset by increases in deposit funding costs.
Fully taxable equivalent net interest income for the second quarter of 2018 increased by $3.6 million, or 10.0%, from the second quarter of 2017, resulting from an increase in total average interest-earning assets of 14.5%, primarily loans, offset by a contraction in the net interest margin of 14 basis-points to 3.31% from 3.45%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.7 million during the second quarter of 2018 and $0.3 million during the second quarter of 2017. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.26% in the second quarter of 2018, contracting by 16 basis-points from the second quarter of 2017 adjusted net interest margin of 3.42%. The decrease in the adjusted net interest margin was primarily attributable to a long-term subordinated debt issuance, a change in the taxable equivalent adjustment due to the Tax Cuts and Jobs Act of 2017, and increased deposit rates, partially offset by higher rates earned on loans.
Noninterest income totaled $1.4 million in the second quarter of 2018, first quarter of 2018 and second quarter of 2017. Noninterest income consists of income on bank owned life insurance, net gains on sales of loans held-for-sale and deposit service fees, loan fees, and other income.
Noninterest expenses totaled $17.1 million for the second quarter of 2018 and first quarter of 2018 and $25.3 million for the second quarter of 2017. Noninterest expenses remained flat when compared to the prior sequential quarter. Noninterest expenses decreased by $8.2 million from the prior year second quarter due primarily to a valuation allowance adjustment on taxi medallion loans held-for-sale of $9.7 million that occurred during the prior year quarter, offset by increases in the current quarter in salaries and employee benefits ($1.1 million) and other expenses ($0.4 million). The increases over the prior year second quarter were the result of increased levels of business and staff resulting from organic growth.
Income tax expense was $4.6 million for the second quarter of 2018, compared to $0.4 million for the first quarter of 2018 and $2.1 million for the second quarter of 2017. Included in income tax expenses for the first quarter of 2018 was an income tax benefit of $0.5 million resulting from the effect of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. At the present time, the Company is projecting a 2018 effective tax rate of approximately 21%, exclusive of ASU 2016-09 benefits.
Asset Quality
The provision for loan losses was $1.1 million in the second quarter of 2018, $17.8 million in the first quarter of 2018 and $1.5 million in the second quarter of 2017. The decrease of $16.7 million from the sequential first quarter was largely attributable to $17.0 million of provision in the first quarter related to the taxi medallion loan portfolio, partially offset by the impact of higher loan growth. The decrease from the prior year quarter was mainly attributable to slightly slower loan growth. The provision related to taxi medallions was due to decreases in the transfer values as reported by the New York City Taxi and Limousine Commission and a reduction in the Bank’s cash flow valuation model.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $50.8 million at June 30, 2018, $66.2 million at December 31, 2017 and $63.5 million at June 30, 2017. Included in nonperforming assets were taxi medallion loans totaling $28.9 million at June 30, 2018, $46.8 million at December 31, 2017 and $48.9 million at June 30, 2017. Excluding the taxi medallion loans, nonaccrual loans were $20.8 million at June 30, 2018, $18.8 million at December 31, 2017 and $14.1 million at June 30, 2017, representing a ratio of nonaccrual loans (excluding taxis) to loans receivable of 0.48%, 0.46% and 0.37%, respectively. Nonperforming assets as a percentage of total assets were 0.96% at June 30, 2018, 1.29% at December 31, 2017 and 1.36% at June 30, 2017.
The net loan charge-offs (recoveries) ratio was 0.00% for the second quarter of 2018, 0.01% for the fourth quarter of 2017 and (0.01%) for the second quarter of 2017. The allowance for loan losses represented 0.77%, 0.76%, and 0.76% of loans receivable as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively. The allowance for loan losses as a percentage of nonaccrual loans was 67.6% as of June 30, 2018, 48.4% as of December 31, 2017 and 45.1% as of June 30, 2017. Excluding the taxi medallion loans, allowance for loan losses as a percentage of nonaccrual loans was 161.7% as of June 30, 2018, 168.4% as of December 31, 2017 and 202.1% as of June 30, 2017.
Selected Balance Sheet Items
At June 30, 2018, the Company’s total assets were $5.3 billion, an increase of $167 million from December 31, 2017, largely the result of an increase in total loans (loan originations less pay-downs and pay-offs) of $165 million. The Company’s stockholders’ equity was $579 million at June 30, 2018, an increase of $13 million from December 31, 2017. The increase in stockholders’ equity was primarily attributable to increases in retained earnings of $18 million, primarily offset by decreases in other comprehensive losses of $5 million. As of June 30, 2018, the Company’s tangible common equity ratio and tangible book value per share were 8.40% and $13.38, respectively. As of December 31, 2017, the tangible common equity ratio and tangible book value per share were 8.41% and $13.01, respectively. Total goodwill and other intangible assets were approximately $148 million as of June 30, 2018 and December 31, 2017.
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.
Second Quarter 2018 Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 26, 2018 to review the Company's financial performance and operating results. The conference call dial-in number is 334-323-0522, access code 7122269. 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 "Shareholders" link on the Company's website https://www.ConnectOneBank.com or at http://ir.connectonebank.com.
A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, July 26, 2018 and ending on Thursday, August 2, 2018 by dialing 719-457-0820, access code 7122269. An online archive of the webcast will be available following the completion of the conference call at https://www.ConnectOneBank.com or at http://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 21 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 and 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. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||
| (in thousands) | ||||||||||||
| June 30, | December 31, | June 30, | ||||||||||
| 2018 | 2017 | 2017 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 56,931 | $ | 52,565 | $ | 54,305 | ||||||
| Interest-bearing deposits with banks | 119,238 | 97,017 | 92,203 | |||||||||
| Cash and cash equivalents | 176,169 | 149,582 | 146,508 | |||||||||
| Securities available-for-sale | 400,015 | 435,284 | 402,130 | |||||||||
| Equity securities | 11,559 | - | - | |||||||||
| Loans held-for-sale | - | 24,845 | 51,124 | |||||||||
| Loans receivable | 4,360,854 | 4,171,456 | 3,761,572 | |||||||||
| Less: Allowance for loan losses | 33,594 | 31,748 | 28,401 | |||||||||
| Net loans receivable | 4,327,260 | 4,139,708 | 3,733,171 | |||||||||
| Investment in restricted stock, at cost | 32,441 | 33,497 | 32,152 | |||||||||
| Bank premises and equipment, net | 20,389 | 21,659 | 21,630 | |||||||||
| Accrued interest receivable | 16,754 | 15,470 | 13,194 | |||||||||
| Bank owned life insurance | 112,275 | 111,311 | 99,777 | |||||||||
| Other real estate owned | 1,076 | 538 | 580 | |||||||||
| Goodwill | 145,909 | 145,909 | 145,909 | |||||||||
| Core deposit intangibles | 2,027 | 2,364 | 2,702 | |||||||||
| Other assets | 29,494 | 28,275 | 32,403 | |||||||||
| Total assets | $ | 5,275,368 | $ | 5,108,442 | $ | 4,681,280 | ||||||
| LIABILITIES | ||||||||||||
| Deposits: | ||||||||||||
| Noninterest-bearing | $ | 765,150 | $ | 776,843 | $ | 695,522 | ||||||
| Interest-bearing | 3,140,260 | 3,018,285 | 2,734,851 | |||||||||
| Total deposits | 3,905,410 | 3,795,128 | 3,430,373 | |||||||||
| Borrowings | 628,995 | 670,077 | 626,173 | |||||||||
| Subordinated debentures (net of $1,763, $456 and $539 in debt issuance costs) | 128,392 | 54,699 | 54,616 | |||||||||
| Other liabilities | 34,014 | 23,101 | 23,945 | |||||||||
| Total liabilities | 4,696,811 | 4,543,005 | 4,135,107 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Common stock | 412,546 | 412,546 | 412,546 | |||||||||
| Additional paid-in capital | 13,756 | 13,602 | 12,377 | |||||||||
| Retained earnings | 177,619 | 160,025 | 141,178 | |||||||||
| Treasury stock | (16,717 | ) | (16,717 | ) | (16,717 | ) | ||||||
| Accumulated other comprehensive loss | (8,647 | ) | (4,019 | ) | (3,211 | ) | ||||||
| Total stockholders' equity | 578,557 | 565,437 | 546,173 | |||||||||
| Total liabilities and stockholders' equity | $ | 5,275,368 | $ | 5,108,442 | $ | 4,681,280 | ||||||
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
| (dollars in thousands, except for per share data) | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||
| 06/30/18 | 06/30/17 | 06/30/18 | 06/30/17 | |||||||||
| Interest income | ||||||||||||
| Interest and fees on loans | $ | 49,494 | $ | 40,632 | $ | 96,519 | $ | 78,638 | ||||
| Interest and dividends on investment securities: | ||||||||||||
| Taxable | 2,150 | 1,799 | 4,037 | 3,347 | ||||||||
| Tax-exempt | 778 | 831 | 1,592 | 1,785 | ||||||||
| Dividends | 502 | 290 | 987 | 620 | ||||||||
| Interest on federal funds sold and other short-term investments | 160 | 139 | 424 | 385 | ||||||||
| Total interest income | 53,084 | 43,691 | 103,559 | 84,775 | ||||||||
| Interest expense | ||||||||||||
| Deposits | 9,169 | 5,495 | 16,857 | 10,604 | ||||||||
| Borrowings | 4,970 | 3,095 | 9,610 | 5,929 | ||||||||
| Total interest expense | 14,139 | 8,590 | 26,467 | 16,533 | ||||||||
| Net interest income | 38,945 | 35,101 | 77,092 | 68,242 | ||||||||
| Provision for loan losses | 1,100 | 1,450 | 18,900 | 2,550 | ||||||||
| Net interest income after provision for loan losses | 37,845 | 33,651 | 58,192 | 65,692 | ||||||||
| Noninterest income | ||||||||||||
| Income on bank owned life insurance | 775 | 714 | 1,549 | 1,417 | ||||||||
| Net gains on sale of loans held-for-sale | 12 | 49 | 29 | 70 | ||||||||
| Deposit, loan and other income | 601 | 659 | 1,217 | 1,341 | ||||||||
| Net gains on sale of investment securities | - | - | - | 1,596 | ||||||||
| Total noninterest income | 1,388 | 1,422 | 2,795 | 4,424 | ||||||||
| Noninterest expenses | ||||||||||||
| Salaries and employee benefits | 9,736 | 8,632 | 19,415 | 16,838 | ||||||||
| Occupancy and equipment | 2,031 | 1,991 | 4,174 | 4,246 | ||||||||
| FDIC insurance | 765 | 815 | 1,615 | 1,710 | ||||||||
| Professional and consulting | 825 | 734 | 1,548 | 1,452 | ||||||||
| Marketing and advertising | 337 | 289 | 544 | 545 | ||||||||
| Data processing | 1,091 | 1,149 | 2,239 | 2,298 | ||||||||
| Amortization of core deposit intangible | 169 | 193 | 338 | 386 | ||||||||
| Increase in valuation allowance, loans held-for-sale | - | 9,725 | - | 12,325 | ||||||||
| Other expenses | 2,154 | 1,775 | 4,294 | 3,752 | ||||||||
| Total noninterest expenses | 17,108 | 25,303 | 34,167 | 43,552 | ||||||||
| Income before income tax expense | 22,125 | 9,770 | 26,820 | 26,564 | ||||||||
| Income tax expense | 4,598 | 2,087 | 5,042 | 7,001 | ||||||||
| Net income | $ | 17,527 | $ | 7,683 | $ | 21,778 | $ | 19,563 | ||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.54 | $ | 0.24 | $ | 0.68 | $ | 0.61 | ||||
| Diluted | 0.54 | 0.24 | 0.67 | 0.60 | ||||||||
| Dividends per common share | $ | 0.075 | $ | 0.075 | $ | 0.150 | $ | 0.150 | ||||
| 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 | |||||||||||||||||||||
| June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||||
| Selected Financial Data | (dollars in thousands) | ||||||||||||||||||||
| Total assets | $ | 5,275,368 | $ | 5,158,368 | $ | 5,108,442 | $ | 4,844,755 | $ | 4,681,280 | |||||||||||
| Loans receivable: | |||||||||||||||||||||
| Commercial | 808,604 | 768,640 | 781,698 | 641,613 | 610,442 | ||||||||||||||||
| Commercial real estate | 1,282,426 | 1,275,764 | 1,232,037 | 1,254,720 | 1,218,995 | ||||||||||||||||
| Multifamily | 1,480,243 | 1,400,420 | 1,403,256 | 1,330,485 | 1,251,962 | ||||||||||||||||
| Commercial construction | 498,607 | 479,190 | 483,216 | 399,453 | 431,049 | ||||||||||||||||
| Residential | 288,449 | 278,985 | 271,795 | 264,244 | 251,108 | ||||||||||||||||
| Consumer | 5,637 | 2,461 | 2,808 | 1,912 | 2,005 | ||||||||||||||||
| Gross loans | 4,363,966 | 4,205,460 | 4,174,810 | 3,892,427 | 3,765,561 | ||||||||||||||||
| Unearned net origination fees | (3,112 | ) | (2,781 | ) | (3,354 | ) | (3,138 | ) | (3,989 | ) | |||||||||||
| Loans receivable | 4,360,854 | 4,202,679 | 4,171,456 | 3,889,289 | 3,761,572 | ||||||||||||||||
| Loans held-for-sale (net of valuation allowance) | - | 45,886 | 24,845 | 89,386 | 51,124 | ||||||||||||||||
| Total loans | $ | 4,360,854 | $ | 4,248,565 | $ | 4,196,301 | $ | 3,978,675 | $ | 3,812,696 | |||||||||||
| Investment securities | $ | 411,574 | $ | 435,929 | $ | 435,284 | $ | 400,516 | $ | 402,130 | |||||||||||
| Goodwill and other intangible assets | 147,936 | 148,104 | 148,273 | 148,442 | 148,611 | ||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Noninterest-bearing demand | 765,150 | 739,174 | 776,843 | 719,582 | 695,522 | ||||||||||||||||
| Time deposits | 1,315,843 | 1,255,654 | 1,179,969 | 1,078,359 | 982,328 | ||||||||||||||||
| Other interest-bearing deposits | 1,824,417 | 1,754,759 | 1,838,316 | 1,825,828 | 1,752,523 | ||||||||||||||||
| Total deposits | $ | 3,905,410 | $ | 3,749,587 | $ | 3,795,128 | $ | 3,623,769 | $ | 3,430,373 | |||||||||||
| Borrowings | $ | 628,995 | $ | 695,032 | $ | 670,077 | $ | 585,124 | $ | 626,173 | |||||||||||
| Subordinated debentures (net of issuance costs) | 128,392 | 128,310 | 54,699 | 54,657 | 54,616 | ||||||||||||||||
| Total stockholders' equity | 578,557 | 564,266 | 565,437 | 557,691 | 546,173 | ||||||||||||||||
| Quarterly Average Balances | |||||||||||||||||||||
| Total assets | $ | 5,104,661 | $ | 5,088,823 | $ | 4,916,549 | $ | 4,713,487 | $ | 4,495,008 | |||||||||||
| Loans receivable: | |||||||||||||||||||||
| Commercial | 808,764 | 820,562 | 761,147 | 671,525 | 603,733 | ||||||||||||||||
| Commercial real estate (including multifamily) | 2,654,276 | 2,643,466 | 2,566,959 | 2,502,846 | 2,337,499 | ||||||||||||||||
| Commercial construction | 494,092 | 482,391 | 439,629 | 418,439 | 451,038 | ||||||||||||||||
| Residential | 282,504 | 275,263 | 268,047 | 255,755 | 246,864 | ||||||||||||||||
| Consumer | 5,685 | 4,659 | 3,849 | 2,555 | 2,929 | ||||||||||||||||
| Gross loans | 4,245,321 | 4,226,341 | 4,039,631 | 3,851,120 | 3,642,063 | ||||||||||||||||
| Unearned net origination fees | (3,208 | ) | (3,110 | ) | (3,485 | ) | (3,724 | ) | (3,967 | ) | |||||||||||
| Loans receivable | 4,242,113 | 4,223,231 | 4,036,146 | 3,847,396 | 3,638,096 | ||||||||||||||||
| Loans held-for-sale | 30,099 | 24,766 | 57,812 | 51,008 | 61,259 | ||||||||||||||||
| Total loans | $ | 4,272,212 | $ | 4,247,997 | $ | 4,093,958 | $ | 3,898,404 | $ | 3,699,355 | |||||||||||
| Investment securities | 424,854 | 437,141 | 417,560 | 398,635 | 391,965 | ||||||||||||||||
| Goodwill and other intangible assets | 148,046 | 148,215 | 148,383 | 148,553 | 148,737 | ||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Noninterest-bearing demand | 719,372 | 724,471 | 712,391 | 688,707 | 667,461 | ||||||||||||||||
| Time deposits | 1,280,471 | 1,207,368 | 1,114,670 | 1,005,997 | 976,012 | ||||||||||||||||
| Other interest-bearing deposits | 1,765,577 | 1,815,122 | 1,855,688 | 1,816,162 | 1,712,875 | ||||||||||||||||
| Total deposits | $ | 3,765,420 | $ | 3,746,961 | $ | 3,682,749 | $ | 3,510,866 | $ | 3,356,348 | |||||||||||
| Borrowings | $ | 613,763 | $ | 630,117 | $ | 588,260 | $ | 570,711 | $ | 514,161 | |||||||||||
| Subordinated debentures (net of issuance costs) | 128,339 | 115,182 | 54,672 | 54,630 | 54,590 | ||||||||||||||||
| Total stockholders' equity | 574,992 | 575,029 | 567,308 | 556,620 | 549,748 | ||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||||
| (dollars in thousands, except for per share data) | |||||||||||||||||||||
| Net interest income | $ | 38,945 | $ | 38,147 | $ | 39,808 | $ | 37,019 | $ | 35,101 | |||||||||||
| Provision for loan losses | 1,100 | 17,800 | 2,000 | 1,450 | 1,450 | ||||||||||||||||
| Net interest income after provision for loan losses | 37,845 | 20,347 | 37,808 | 35,569 | 33,651 | ||||||||||||||||
| Noninterest income | |||||||||||||||||||||
| Income on bank owned life insurance | 775 | 774 | 779 | 985 | 714 | ||||||||||||||||
| Net gains on sale of loans held-for-sale | 12 | 17 | 588 | 50 | 49 | ||||||||||||||||
| Deposit, loan and other income | 601 | 616 | 657 | 721 | 659 | ||||||||||||||||
| Total noninterest income | 1,388 | 1,407 | 2,024 | 1,756 | 1,422 | ||||||||||||||||
| Noninterest expenses | |||||||||||||||||||||
| Salaries and employee benefits | 9,736 | 9,679 | 9,418 | 8,872 | 8,632 | ||||||||||||||||
| Occupancy and equipment | 2,031 | 2,143 | 1,948 | 1,969 | 1,991 | ||||||||||||||||
| FDIC insurance | 765 | 850 | 935 | 840 | 815 | ||||||||||||||||
| Professional and consulting | 825 | 723 | 671 | 740 | 734 | ||||||||||||||||
| Marketing and advertising | 337 | 207 | 226 | 225 | 289 | ||||||||||||||||
| Data processing | 1,091 | 1,148 | 1,069 | 1,176 | 1,149 | ||||||||||||||||
| Amortization of core deposit intangible | 169 | 169 | 169 | 169 | 193 | ||||||||||||||||
| Increase in valuation allowance, loans held-for-sale | - | - | 267 | 3,000 | 9,725 | ||||||||||||||||
| Other expenses | 2,154 | 2,140 | 1,863 | 1,650 | 1,775 | ||||||||||||||||
| Total noninterest expenses | 17,108 | 17,059 | 16,566 | 18,641 | 25,303 | ||||||||||||||||
| Income before income tax expense | 22,125 | 4,695 | 23,266 | 18,684 | 9,770 | ||||||||||||||||
| Income tax expense | 4,598 | 444 | 12,686 | 5,607 | 2,087 | ||||||||||||||||
| Net income | $ | 17,527 | $ | 4,251 | $ | 10,580 | $ | 13,077 | $ | 7,683 | |||||||||||
| Reconciliation of GAAP Earnings to Earnings Excluding the Following Items: | |||||||||||||||||||||
| Net income | $ | 17,527 | $ | 4,251 | $ | 10,580 | $ | 13,077 | $ | 7,683 | |||||||||||
| Deferred tax valuation charge | - | - | 5,574 | - | - | ||||||||||||||||
| Tax benefit on employee share-based awards (ASU 2016-09) | (49 | ) | (541 | ) | - | - | (133 | ) | |||||||||||||
| Provision related to taxi medallion loans (after taxes) | - | 13,430 | - | - | - | ||||||||||||||||
| Increase in valuation allowance, loans held-for-sale (after taxes) | - | - | 182 | 1,776 | 5,719 | ||||||||||||||||
| Net income-adjusted | $ | 17,478 | $ | 17,140 | $ | 16,336 | $ | 14,853 | $ | 13,269 | |||||||||||
| Weighted average diluted shares outstanding | 32,321,150 | 32,238,048 | 32,252,759 | 32,182,016 | 32,255,770 | ||||||||||||||||
| Diluted EPS (GAAP) | $ | 0.54 | $ | 0.13 | $ | 0.33 | $ | 0.41 | $ | 0.24 | |||||||||||
| Diluted EPS-adjusted (Non-GAAP) (1) | 0.54 | 0.53 | 0.51 | 0.46 | 0.41 | ||||||||||||||||
| Return on Assets Measures | |||||||||||||||||||||
| Net income-adjusted | $ | 17,478 | $ | 17,140 | $ | 16,336 | $ | 14,853 | $ | 13,269 | |||||||||||
| Average assets | $ | 5,104,661 | $ | 5,088,823 | $ | 4,916,549 | $ | 4,713,487 | $ | 4,495,008 | |||||||||||
| Less: average intangible assets | (148,046 | ) | (148,215 | ) | (148,383 | ) | (148,553 | ) | (148,737 | ) | |||||||||||
| Average tangible assets | $ | 4,956,615 | $ | 4,940,608 | $ | 4,768,166 | $ | 4,564,934 | $ | 4,346,271 | |||||||||||
| Return on avg. assets (GAAP) | 1.38 | % | 0.34 | % | 0.85 | % | 1.10 | % | 0.69 | % | |||||||||||
| Return on avg. assets-adjusted (non-GAAP) (2) | 1.37 | 1.37 | 1.32 | 1.25 | 1.18 | ||||||||||||||||
| (1) Represents adjusted earnings available to common stockholders divided by weighted average diluted shares outstanding. | |||||||||||||||||||||
| (2) Adjusted net income divided by average assets. | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||||
| Return on Equity Measures | (dollars in thousands) | ||||||||||||||||||||
| Net income-adjusted | $ | 17,478 | $ | 17,140 | $ | 16,336 | $ | 14,853 | $ | 13,269 | |||||||||||
| Average common equity | $ | 574,992 | $ | 575,029 | $ | 567,308 | $ | 556,620 | $ | 549,748 | |||||||||||
| Less: average intangible assets | (148,046 | ) | (148,215 | ) | (148,383 | ) | (148,553 | ) | (148,737 | ) | |||||||||||
| Average tangible common equity | $ | 426,946 | $ | 426,814 | $ | 418,925 | $ | 408,067 | $ | 401,011 | |||||||||||
| Return on avg. common equity (GAAP) | 12.23 | % | 3.00 | % | 7.40 | % | 9.32 | % | 5.61 | % | |||||||||||
| Return on avg. common equity-adjusted (non-GAAP) (3) | 12.19 | 12.09 | 11.42 | 10.59 | 9.68 | ||||||||||||||||
| Return on avg. tangible common equity (non-GAAP) (4) | 16.58 | 4.15 | 10.11 | 12.81 | 7.80 | ||||||||||||||||
| Return on avg. tangible common equity-adjusted (non-GAAP) (5) | 16.53 | 16.40 | 15.57 | 14.54 | 13.39 | ||||||||||||||||
| Efficiency Measures | |||||||||||||||||||||
| Total noninterest expenses | $ | 17,108 | $ | 17,059 | $ | 16,566 | $ | 18,641 | $ | 25,303 | |||||||||||
| Increase in valuation allowance, loans held-for-sale | - | - | (267 | ) | (3,000 | ) | (9,725 | ) | |||||||||||||
| Foreclosed property expense | (11 | ) | (51 | ) | (32 | ) | (46 | ) | (71 | ) | |||||||||||
| Operating noninterest expense | $ | 17,097 | $ | 17,008 | $ | 16,267 | $ | 15,595 | $ | 15,507 | |||||||||||
| Net interest income (tax equivalent basis) | $ | 39,409 | $ | 38,610 | $ | 40,744 | $ | 37,929 | $ | 35,839 | |||||||||||
| Noninterest income | 1,388 | 1,407 | 2,024 | 1,756 | 1,422 | ||||||||||||||||
| Operating revenue | $ | 40,797 | $ | 40,017 | $ | 42,768 | $ | 39,685 | $ | 37,261 | |||||||||||
| Operating efficiency ratio (non-GAAP) (6) | 41.9 | % | 42.5 | % | 38.0 | % | 39.3 | % | 41.6 | % | |||||||||||
| Net Interest Margin | |||||||||||||||||||||
| Average interest-earning assets | $ | 4,771,523 | $ | 4,799,453 | $ | 4,603,659 | $ | 4,378,537 | $ | 4,168,344 | |||||||||||
| Net interest income (tax equivalent basis) | $ | 39,409 | $ | 38,610 | $ | 40,744 | $ | 37,929 | $ | 35,839 | |||||||||||
| Impact of purchase accounting fair value marks | (680 | ) | (240 | ) | (1,026 | ) | (317 | ) | (316 | ) | |||||||||||
| Adjusted net interest income (tax equivalent basis) | $ | 38,729 | $ | 38,370 | $ | 39,718 | $ | 37,612 | $ | 35,523 | |||||||||||
| Net interest margin (GAAP) | 3.31 | % | 3.26 | % | 3.51 | % | 3.44 | % | 3.45 | % | |||||||||||
| Adjusted net interest margin (non-GAAP) (7) | 3.26 | 3.24 | 3.42 | 3.41 | 3.42 | ||||||||||||||||
| (3) Adjusted earnings available to common stockholders divided by average common equity. | |||||||||||||||||||||
| (4) Earnings available to common stockholders excluding amortization of intangibles assets divided by average tangible common equity. | |||||||||||||||||||||
| (5) Adjusted earnings available to common stockholders divided by average tangible common equity. | |||||||||||||||||||||
| (6) Operating noninterest expense divided by operating revenue. | |||||||||||||||||||||
| (7) Adjusted net interest margin excludes impact of purchase accounting fair value marks. | |||||||||||||||||||||
| As of | |||||||||||||||||||||
| June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||||
| Capital Ratios and Book Value per Share | (dollars in thousands, except for per share data) | ||||||||||||||||||||
| Common equity | $ | 578,557 | $ | 564,266 | $ | 565,437 | $ | 557,691 | $ | 546,173 | |||||||||||
| Less: intangible assets | (147,936 | ) | (148,104 | ) | (148,273 | ) | (148,442 | ) | (148,611 | ) | |||||||||||
| Tangible common equity | $ | 430,621 | $ | 416,162 | $ | 417,164 | $ | 409,249 | $ | 397,562 | |||||||||||
| Total assets | $ | 5,275,368 | $ | 5,158,368 | $ | 5,108,442 | $ | 4,844,755 | $ | 4,681,280 | |||||||||||
| Less: intangible assets | (147,936 | ) | (148,104 | ) | (148,273 | ) | (148,442 | ) | (148,611 | ) | |||||||||||
| Tangible assets | $ | 5,127,432 | $ | 5,010,264 | $ | 4,960,169 | $ | 4,696,313 | $ | 4,532,669 | |||||||||||
| Common shares outstanding | 32,184,047 | 32,175,233 | 32,071,860 | 32,015,317 | 32,015,317 | ||||||||||||||||
| Common equity ratio (GAAP) | 10.97 | % | 10.94 | % | 11.07 | % | 11.51 | % | 11.67 | % | |||||||||||
| Tangible common equity ratio (non-GAAP) (8) | 8.40 | 8.31 | 8.41 | 8.71 | 8.77 | ||||||||||||||||
| Regulatory capital ratios (Bancorp): | |||||||||||||||||||||
| Leverage ratio | 8.93 | % | 8.65 | % | 8.92 | % | 9.13 | % | 9.33 | % | |||||||||||
| Common equity Tier 1 risk-based ratio | 9.33 | 9.14 | 9.15 | 9.40 | 9.48 | ||||||||||||||||
| Risk-based Tier 1 capital ratio | 9.44 | 9.25 | 9.26 | 9.52 | 9.60 | ||||||||||||||||
| Risk-based total capital ratio | 12.81 | 12.66 | 11.04 | 11.34 | 11.46 | ||||||||||||||||
| Regulatory capital ratios (Bank): | |||||||||||||||||||||
| Leverage ratio | 10.43 | % | 10.20 | % | 9.84 | % | 10.11 | % | 10.34 | % | |||||||||||
| Common equity Tier 1 risk-based ratio | 11.02 | 10.91 | 10.21 | 10.54 | 10.64 | ||||||||||||||||
| Risk-based Tier 1 capital ratio | 11.02 | 10.91 | 10.21 | 10.54 | 10.64 | ||||||||||||||||
| Risk-based total capital ratio | 12.42 | 12.31 | 10.90 | 11.22 | 11.32 | ||||||||||||||||
| Book value per share (GAAP) | $ | 17.98 | $ | 17.54 | $ | 17.63 | $ | 17.42 | $ | 17.06 | |||||||||||
| Tangible book value per share (non-GAAP) (9) | 13.38 | 12.93 | 13.01 | 12.78 | 12.42 | ||||||||||||||||
| Net Charge-Off (Recoveries) Detail | |||||||||||||||||||||
| Net loan charge-offs (recoveries) : | |||||||||||||||||||||
| Charge-offs | $ | 47 | $ | 17,038 | $ | 156 | $ | - | $ | 10 | |||||||||||
| Recoveries | (12 | ) | (19 | ) | (34 | ) | (20 | ) | (60 | ) | |||||||||||
| Net loan charge-offs (recoveries) | $ | 35 | $ | 17,019 | $ | 122 | $ | (20 | ) | $ | (50 | ) | |||||||||
| Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) | 0.00 | % | 1.63 | % | 0.01 | % | (0.00 | ) | % | (0.01 | ) | % | |||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual taxi medallion loans | $ | 28,944 | $ | 29,405 | $ | 46,765 | $ | 47,430 | $ | 48,884 | |||||||||||
| Nonaccrual loans (excluding taxi medallion loans) | 20,771 | 20,631 | 18,848 | 13,755 | 14,055 | ||||||||||||||||
| Other real estate owned | 1,076 | 1,076 | 538 | - | 580 | ||||||||||||||||
| Total nonperforming assets | $ | 50,791 | $ | 51,112 | $ | 66,151 | $ | 61,185 | $ | 63,519 | |||||||||||
| Performing troubled debt restructurings | $ | 12,827 | $ | 14,349 | $ | 14,920 | $ | 12,749 | $ | 10,221 | |||||||||||
| Allowance for loan losses ("ALLL") | $ | 33,594 | $ | 32,529 | $ | 31,748 | $ | 29,870 | $ | 28,401 | |||||||||||
| Loans receivable | $ | 4,360,854 | $ | 4,202,679 | $ | 4,171,456 | $ | 3,889,289 | $ | 3,761,572 | |||||||||||
| Less: taxi medallion loans | 28,944 | 29,405 | 46,765 | - | - | ||||||||||||||||
| Loans receivable (excluding taxi medallion loans) | $ | 4,331,910 | $ | 4,173,274 | $ | 4,124,691 | $ | 3,889,289 | $ | 3,761,572 | |||||||||||
| Loans held-for-sale (taxi medallion loans) | $ | - | $ | - | $ | - | $ | 47,430 | $ | 50,891 | |||||||||||
| Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans) | 0.48 | % | 0.49 | % | 0.46 | % | 0.35 | % | 0.37 | % | |||||||||||
| Nonaccrual loans as a % of loans receivable | 1.14 | 1.19 | 1.57 | 1.57 | 1.67 | ||||||||||||||||
| Nonperforming assets as a % of total assets | 0.96 | 0.99 | 1.29 | 1.26 | 1.36 | ||||||||||||||||
| ALLL as a % of loans receivable | 0.77 | 0.77 | 0.76 | 0.77 | 0.76 | ||||||||||||||||
| ALLL as a % of nonaccrual loans (excluding taxi medallion loans) | 161.7 | 157.7 | 168.4 | 217.2 | 202.1 | ||||||||||||||||
| ALLL as a % of nonaccrual loans | 67.6 | 65.0 | 48.4 | 48.8 | 45.1 | ||||||||||||||||
| (8) Tangible common equity divided by tangible assets. | |||||||||||||||||||||
| (9) 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 | ||||||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||||||||
| Interest-earning assets: | Balance | Interest | Rate (8) | Balance | Interest | Rate (8) | Balance | Interest | Rate (8) | |||||||||||||||||||||
| Investment securities (1) (2) | $ | 432,493 | $ | 3,136 | 2.91 | % | $ | 441,563 | $ | 2,917 | 2.68 | % | $ | 390,462 | $ | 3,079 | 3.16 | % | ||||||||||||
| Total loans (2) (3) (4) | 4,272,212 | 49,750 | 4.67 | 4,247,997 | 47,272 | 4.51 | 3,699,355 | 40,921 | 4.44 | |||||||||||||||||||||
| Federal funds sold and interest- | ||||||||||||||||||||||||||||||
| bearing deposits with banks | 35,315 | 159 | 1.81 | 78,194 | 264 | 1.37 | 52,099 | 139 | 1.07 | |||||||||||||||||||||
| Restricted investment in bank stock | 31,503 | 502 | 6.39 | 31,699 | 485 | 6.21 | 26,428 | 290 | 4.40 | |||||||||||||||||||||
| Total interest-earning assets | 4,771,523 | 53,547 | 4.50 | 4,799,453 | 50,938 | 4.30 | 4,168,344 | 44,429 | 4.28 | |||||||||||||||||||||
| Allowance for loan losses | (32,668 | ) | (32,113 | ) | (27,355 | ) | ||||||||||||||||||||||||
| Noninterest-earning assets | 365,806 | 321,483 | 354,019 | |||||||||||||||||||||||||||
| Total assets | $ | 5,104,661 | $ | 5,088,823 | $ | 4,495,008 | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||
| Time deposits | $ | 1,280,471 | 5,830 | 1.83 | $ | 1,207,368 | 4,788 | 1.61 | $ | 976,012 | 3,311 | 1.36 | ||||||||||||||||||
| Other interest-bearing deposits | 1,765,577 | 3,338 | 0.76 | 1,815,122 | 2,900 | 0.65 | 1,712,875 | 2,184 | 0.51 | |||||||||||||||||||||
| Total interest-bearing deposits | 3,046,048 | 9,168 | 1.21 | 3,022,490 | 7,688 | 1.03 | 2,688,887 | 5,495 | 0.82 | |||||||||||||||||||||
| Borrowings | 613,763 | 3,091 | 2.02 | 630,117 | 2,926 | 1.88 | 514,161 | 2,244 | 1.75 | |||||||||||||||||||||
| Subordinated debentures (5) | 128,339 | 1,840 | 5.75 | 115,182 | 1,674 | 5.89 | 54,590 | 810 | 5.95 | |||||||||||||||||||||
| Capital lease obligation | 2,589 | 39 | 6.04 | 2,622 | 40 | 6.19 | 2,720 | 41 | 6.05 | |||||||||||||||||||||
| Total interest-bearing liabilities | 3,790,739 | 14,138 | 1.50 | 3,770,411 | 12,328 | 1.33 | 3,260,358 | 8,590 | 1.06 | |||||||||||||||||||||
| Noninterest-bearing demand deposits | 719,372 | 724,471 | 667,461 | |||||||||||||||||||||||||||
| Other liabilities | 19,558 | 18,912 | 17,441 | |||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 738,930 | 743,383 | 684,902 | |||||||||||||||||||||||||||
| Stockholders' equity | 574,992 | 575,029 | 549,748 | |||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 5,104,661 | $ | 5,088,823 | $ | 4,495,008 | ||||||||||||||||||||||||
| Net interest income (tax equivalent basis) | 39,409 | 38,610 | 35,839 | |||||||||||||||||||||||||||
| Net interest spread (6) | 3.00 | % | 2.97 | % | 3.22 | % | ||||||||||||||||||||||||
| Net interest margin (7) | 3.31 | % | 3.26 | % | 3.45 | % | ||||||||||||||||||||||||
| Tax equivalent adjustment | (463 | ) | (463 | ) | (738 | ) | ||||||||||||||||||||||||
| Net interest income | $ | 38,946 | $ | 38,147 | $ | 35,101 | ||||||||||||||||||||||||
| (1) Average balances are calculated on amortized cost and includes equity securities. | ||||||||||||||||||||||||||||||
| (2) Interest income is presented on a tax equivalent basis using a 21% federal tax rate as of June 30, 2018 and March 31, 2018 and a 35% federal tax rate as of June 30, 2017. | ||||||||||||||||||||||||||||||
| (3) Includes loan fee income. | ||||||||||||||||||||||||||||||
| (4) Loans include nonaccrual loans. | ||||||||||||||||||||||||||||||
| (5) Average balances are net of debt issuance costs of $1,816, $1,639, and $565 as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively | ||||||||||||||||||||||||||||||
| Amortization expense related to debt issuance costs included in interest expense was $82, $86 and $41 as of June 30, 2018, March 31, 2018 and | ||||||||||||||||||||||||||||||
| June 30, 2017, 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. | ||||||||||||||||||||||||||||||
Investor Contact:
William S. Burns
Executive VP & CFO
201.816.4474; bburns@cnob.com
Media Contact:
Thomas Walter, MWWPR
202.600.4532; twalter@mww.com