ENGLEWOOD CLIFFS, N.J., Jan. 24, 2019 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $18.7 million for the fourth quarter of 2018 compared with $19.9 million for the third quarter of 2018 and $10.6 million for the fourth quarter of 2017. Diluted earnings per share were $0.58 for the fourth quarter of 2018 compared with $0.61 earned in the third quarter of 2018 and $0.33 earned in the fourth quarter of 2017. Full-year 2018 income increased 39.6% to $60.4 million, compared with $43.2 million for the full-year 2017. Diluted earnings per share for the full-year 2018 was $1.86, compared with $1.34 for the full-year 2017.

Adjusted net income amounted to $19.2 million, or $0.59 earnings per share, for the fourth quarter of 2018; $18.5 million, or $0.57 earnings per share, for the third quarter of 2018; and $16.3 million, or $0.51 earnings per share, for the fourth quarter of 2017. Adjusted net income for the fourth quarter of 2018 excludes $0.7 million in after-tax merger-related expenses and $0.2 million benefit resulting from ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. Adjustments to prior periods primarily related to adjustments to deferred tax valuations due to changes in tax legislation. See supplemental tables for a reconciliation of GAAP earnings to adjusted earnings.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are extremely pleased with our fourth quarter and year-end results, highlighted by continued solid deposit and loan growth, and continued strong growth in tangible book value per share. We also continue to be one of the most efficient banks in the country with our efficiency ratio remaining in the low 40 percent range. For the quarter, adjusted return on assets and adjusted return on tangible common equity reached new highs at 1.45% and 16.69%, respectively. Despite a tighter operating environment, period-end loans grew on a sequential basis in excess of 7% annualized including commercial loans which grew 18% annualized, while average total deposits increased by more than 11% annualized including noninterest-bearing demand growth in excess of 7% annualized. Deposit growth continues to keep pace with loan growth, reflecting a stable loan to deposit ratio of approximately 111% over the course of 2018. We have also made substantial headway in diversifying our loan mix. The Bank’s commercial real estate loan concentration as a percentage of regulatory capital declined significantly to 480% at December 31, 2018 from 568% at year-end 2017. With regard to the previously announced acquisition of Greater Hudson Bank, the deal closed on January 2, 2019 and we are on track to meet all financial metrics disclosed when the transaction was announced in July 2018. We are excited about serving our new clients and the lower Hudson Valley region.” 

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2018 was $40.7 million, an increase of $0.2 million, or 0.6%, from the third quarter of 2018, resulting primarily from an increase in total interest-earning assets of 1.7%, partially offset by a contraction in the net interest margin of 3 basis-points to 3.27% from 3.30%. Included in net interest income were purchase accounting adjustments of $0.1 million during the fourth quarter of 2018 and $0.2 million during the third quarter of 2018. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.25% in the fourth quarter of 2018, contracting by 4 basis-points from the third quarter of 2018 adjusted net interest margin of 3.29%.  The decrease in the adjusted net interest margin was primarily attributable to increases in deposit funding costs, partially offset by a higher yield earned on loans, an improved asset-mix and growth in noninterest-bearing deposits.

Fully taxable equivalent net interest income for the fourth quarter of 2018 decreased by $0.1 million, or 0.2%, from the fourth quarter of 2017, resulting from contraction in the net interest margin of 24 basis-points to 3.27% from 3.51%, partially offset by an increase in total average interest-earning assets, primarily loans, of 7.3%. Included in net interest income were purchase accounting adjustments of $0.1 million during the fourth quarter of 2018 and $1.0 million during the fourth quarter of 2017.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.25% in the fourth quarter of 2018, contracting by 17 basis-points from the fourth 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 and increased deposit rates, partially offset by higher rates earned on loans.   

Noninterest income totaled $1.5 million in the fourth quarter of 2018, $1.4 million in the third quarter of 2018 and $2.0 million in the fourth 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. Last year’s fourth quarter included a $0.5 million gain on sale of non-relationship, multifamily loans.

Noninterest expenses totaled $18.3 million for both the fourth quarter of 2018 and third quarter of 2018 and $16.6 million for the fourth quarter of 2017. Noninterest expenses increased by $1.7 million from the prior year quarter due primarily to increases in salaries and employee benefits ($0.6 million) and professional and consulting ($0.5 million), both due to increased levels of business and staff resulting from organic growth, and merger-related expenses ($0.9 million), offset by a decrease in a valuation allowance adjustment of taxi medallion loans held-for-sale ($0.3 million).

Income tax expense was $3.6 million for the fourth quarter of 2018, $2.1 million for the third quarter of 2018 and $12.7 million for the fourth quarter of 2017. Included in income tax expense were benefits of $0.2 million and $0.3 million for the fourth quarter 2018 and third quarter 2018, respectively, resulting from ASU 2016-09. Also included in the third quarter of 2018 income tax expense was a benefit of $1.4 million resulting from Federal and NJ deferred tax asset (“DTA”) adjustments. Income tax expense for the fourth quarter of 2017 included an estimated $5.6 million DTA valuation charge related to the Tax Cuts and Jobs Act of 2017. Excluding these income tax expense adjustments, the Company’s effective tax rate declined to 17% for both the fourth quarter of 2018 and third quarter of 2018 from 31% for the fourth quarter 2017, largely resulting from a decline in the statutory federal income tax rate. The effective tax rate utilized to accrue income tax expense in 2019 is anticipated to increase due to recent NJ corporate tax legislation. At this time, such rate has yet to be determined.

Asset Quality

The provision for loan losses was $1.1 million in both the fourth and third quarters of 2018, and $2.0 million in the fourth quarter of 2017.  The decrease from the prior year quarter was primarily the result of slower loan growth.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $51.9 million at December 31, 2018, $53.0 million at September 30, 2018 and $66.2 million at December 31, 2017. Included in nonperforming assets were taxi medallion loans totaling $28.0 million at December 31, 2018, $28.5 million at September 30, 2018 and $46.8 million at December 31, 2017.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.95% at December 31, 2018, 0.99% at September 30, 2018 and 1.29% at December 31, 2017.  Excluding the taxi medallion loans, nonaccrual loans were $23.8 million at December 31, 2018, $24.5 million at September 30, 2018 and $18.8 million at December 31, 2017, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.53%, 0.55% and 0.46%, respectively. The annualized net loan charge-off (recovery) ratio was 0.08% for the fourth quarter of 2018, (0.01)% for the third quarter of 2018 and 0.01% for the fourth quarter of 2017. The allowance for loan losses represented 0.77%, 0.78%, and 0.76% of loans receivable as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 146.8% as of December 31, 2018, 141.6% as of September 30, 2018 and 168.4% as of December 31, 2017.

Selected Balance Sheet Items

At December 31, 2018, the Company’s total assets were $5.5 billion, an increase of $354 million from December 31, 2017, largely the result of an increase in total loans (loan originations less pay-downs and pay-offs) of $345 million. The Company’s stockholders’ equity was $614 million at December 31, 2018, an increase of $48 million from December 31, 2017. The increase in stockholders’ equity was primarily attributable to increases in retained earnings of $51 million, partially offset by increases in accumulated other comprehensive losses of $5 million. As of December 31, 2018, the Company’s tangible common equity ratio and tangible book value per share were 8.77% and $14.42, respectively. Tangible book value per share increased $0.55, or 4.0%, from the sequential quarter, and by $1.41, or 10.8%, from year end 2017. 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 December 31, 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.

Fourth Quarter 2018 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 24, 2019 to review the Company's financial performance and operating results.  The conference call dial-in number is 856-344-9316, access code 5122542. 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 "Investor Relations" 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, January 24, 2019 and ending on Thursday, January 31, 2019 by dialing 719-457-0820, access code 5122542. 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 Bancorp, Inc., through its subsidiary, ConnectOne Bank offers a full suite of both commercial and consumer banking and lending products and services through its 29 banking offices located in New York and New Jersey.   ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at 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.


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

 

 
CONNECTONE BANCORP, INC. AND SUBSIDIARIES 
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands) 
    
 December 31, December 31,
  2018   2017 
 (unaudited)  
ASSETS   
Cash and due from banks$  39,161  $  52,565 
Interest-bearing deposits with banks   133,205     97,017 
Cash and cash equivalents   172,366     149,582 
    
Securities available-for-sale   412,034     435,284 
Equity securities   11,460     - 
    
Loans held-for-sale   -     24,845 
    
Loans receivable   4,541,092     4,171,456 
Less: Allowance for loan losses   34,954     31,748 
Net loans receivable   4,506,138     4,139,708 
    
Investment in restricted stock, at cost   31,136     33,497 
Bank premises and equipment, net   19,062     21,659 
Accrued interest receivable   18,214     15,470 
Bank owned life insurance   113,820     111,311 
Other real estate owned   -     538 
Goodwill   145,909     145,909 
Core deposit intangibles   1,737     2,364 
Other assets   30,216     28,275 
Total assets$  5,462,092  $  5,108,442 
    
LIABILITIES   
Deposits:   
Noninterest-bearing$  768,584  $  776,843 
Interest-bearing   3,323,508     3,018,285 
Total deposits   4,092,092     3,795,128 
Borrowings   600,001     670,077 
Subordinated debentures (net of $1,599 and $456 in debt issuance costs)   128,556     54,699 
Other liabilities   27,516     23,101 
Total liabilities   4,848,165     4,543,005 
    
COMMITMENTS AND CONTINGENCIES   
    
STOCKHOLDERS' EQUITY   
Common stock   412,546     412,546 
Additional paid-in capital   15,542     13,602 
Retained earnings   211,345     160,025 
Treasury stock   (16,717)    (16,717)
Accumulated other comprehensive loss   (8,789)    (4,019)
Total stockholders' equity   613,927     565,437 
Total liabilities and stockholders' equity$  5,462,092  $  5,108,442 
    

 

 
CONNECTONE BANCORP, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF INCOME 
(dollars in thousands, except for per share data) 
  
  Three Months Ended   Twelve Months Ended 
 12/31/18 12/31/17 12/31/18 12/31/17
Interest income       
Interest and fees on loans$  53,306 $  46,945 $  201,524 $  168,824
Interest and dividends on investment securities:       
Taxable   2,291    1,757    8,482    6,799
Tax-exempt   899    914    3,276    3,569
Dividends   495    439    2,012    1,421
Interest on federal funds sold and other short-term investments   232    156    839    711
Total interest income   57,223    50,211    216,133    181,324
Interest expense       
Deposits   12,398    6,953    39,936    23,670
Borrowings   4,664    3,450    18,982    12,585
Total interest expense   17,062    10,403    58,918    36,255
        
Net interest income   40,161    39,808    157,215    145,069
Provision for loan losses   1,100    2,000    21,100    6,000
Net interest income after provision for loan losses   39,061    37,808    136,115    139,069
        
Noninterest income       
Annuities and insurance commissions   -    -    -    39
Income on bank owned life insurance   794    779    3,094    3,181
Net gains on sale of loans held-for-sale   30    588    61    708
Deposit, loan and other income   691    657    2,584    2,680
Net gains on sale of investment securities   -    -    -    1,596
Total noninterest income   1,515    2,024    5,739    8,204
        
Noninterest expenses       
Salaries and employee benefits   9,988    9,418    39,584    35,128
Occupancy and equipment   2,001    1,948    8,312    8,163
FDIC insurance   765    935    3,115    3,485
Professional and consulting   1,129    671    3,568    2,863
Marketing and advertising   244    226    980    996
Data processing   1,080    1,069    4,421    4,543
Merger expenses   936    -    1,335    -
Amortization of core deposit intangible   144    169    627    724
Increase in valuation allowance, loans held-for-sale   -    267    -    15,592
Other expenses   1,979    1,863    8,778    7,265
Total noninterest expenses   18,266    16,566    70,720    78,759
        
Income before income tax expense   22,310    23,266    71,134    68,514
Income tax expense   3,638    12,686    10,782    25,294
Net income$  18,672 $  10,580 $  60,352 $  43,220
        
Earnings per common share:       
Basic$  0.58 $  0.33 $  1.87 $  1.35
Diluted   0.58    0.33    1.86    1.34
        

 

 
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
 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 
  2018   2018   2018   2018   2017  
  
Selected Financial Data(dollars in thousands)
Total assets$  5,462,092  $  5,368,641  $  5,275,368  $  5,158,368  $  5,108,442  
Loans receivable:         
Commercial$  925,229  $  886,212  $  808,604  $  768,640  $  781,698  
Commercial real estate   1,279,502     1,282,766     1,282,426     1,275,764     1,232,037  
Multifamily   1,562,195     1,504,134     1,480,243     1,400,420     1,403,256  
Commercial construction   465,389     494,206     498,607     479,190     483,216  
Residential   309,991     295,948     288,449     278,985     271,795  
Consumer   2,593     2,508     5,637     2,461     2,808  
Gross loans   4,544,899     4,465,774     4,363,966     4,205,460     4,174,810  
Unearned net origination fees   (3,807)    (3,287)    (3,112)    (2,781)    (3,354) 
Loans receivable   4,541,092     4,462,487     4,360,854     4,202,679     4,171,456  
Loans held-for-sale (net of valuation allowance)   -     270     -     45,886     24,845  
Total loans$  4,541,092  $  4,462,757  $  4,360,854  $  4,248,565  $  4,196,301  
          
          
Investment securities$  423,494  $  421,442  $  411,574  $  435,929  $  435,284  
Goodwill and other intangible assets   147,646     147,791     147,936     148,104     148,273  
Deposits:         
Noninterest-bearing demand$  768,584  $  758,213  $  765,150  $  739,174  $  776,843  
Time deposits   1,366,054     1,322,747     1,315,843     1,255,654     1,179,969  
Other interest-bearing deposits   1,957,454     1,907,805     1,824,417     1,754,759     1,838,316  
Total deposits$  4,092,092  $  3,988,765  $  3,905,410  $  3,749,587  $  3,795,128  
          
          
Borrowings$  600,001  $  629,979  $  628,995  $  695,032  $  670,077  
Subordinated debentures (net of debt issuance costs)   128,556     128,474     128,392     128,310     54,699  
Total stockholders' equity   613,927     594,871     578,557     564,266     565,437  
          
Quarterly Average Balances         
Total assets$  5,261,493  $  5,186,173  $  5,104,661  $  5,088,823  $  4,916,549  
Loans receivable:         
Commercial$  941,619  $  850,038  $  808,764  $  820,562  $  761,147  
Commercial real estate (including multifamily)   2,725,652     2,723,572     2,654,276     2,643,466     2,566,959  
Commercial construction   464,556     494,460     494,092     482,391     439,629  
Residential   304,954     294,758     282,504     275,263     268,047  
Consumer   4,292     3,205     5,685     4,659     3,849  
Gross loans   4,441,073     4,366,033     4,245,321     4,226,341     4,039,631  
Unearned net origination fees   (3,340)    (3,182)    (3,208)    (3,110)    (3,485) 
Loans receivable   4,437,733     4,362,851     4,242,113     4,223,231     4,036,146  
Loans held-for-sale   211     54     30,099     24,766     57,812  
Total loans$  4,437,944  $  4,362,905  $  4,272,212  $  4,247,997  $  4,093,958  
          
          
Investment securities$  421,316  $  415,074  $  424,854  $  437,141  $  417,560  
Goodwill and other intangible assets   147,741     147,883     148,046     148,215     148,383  
Deposits:         
Noninterest-bearing demand$  775,824  $  761,782  $  719,372  $  724,471  $  712,391  
Time deposits   1,329,743     1,296,165     1,280,471     1,207,368     1,114,670  
Other interest-bearing deposits   1,915,353     1,854,763     1,765,577     1,815,122     1,855,688  
Total deposits$  4,020,920  $  3,912,710  $  3,765,420  $  3,746,961  $  3,682,749  
          
          
Borrowings$  477,800  $  531,251  $  613,763  $  630,117  $  588,260  
Subordinated debentures (net of debt issuance costs)   128,502     128,420     128,339     115,182     54,672  
Total stockholders' equity   606,378     590,128     574,992     575,029     567,308  
          
 Three Months Ended
 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 
  2018   2018   2018   2018   2017  
  
  (dollars in thousands, except for per share data) 
Net interest income$  40,161  $  39,962  $  38,945  $  38,147  $  39,808  
Provision for loan losses   1,100     1,100     1,100     17,800     2,000  
Net interest income after provision for loan losses   39,061     38,862     37,845     20,347     37,808  
Noninterest income         
Income on bank owned life insurance   794     751     775     774     779  
Net gains on sale of loans held-for-sale   30     2     12     17     588  
Deposit, loan and other income   691     676     601     616     657  
Total noninterest income   1,515     1,429     1,388     1,407     2,024  
          
Noninterest expenses         
Salaries and employee benefits   9,988     10,181     9,736     9,679     9,418  
Occupancy and equipment   2,001     2,137     2,031     2,143     1,948  
FDIC insurance   765     735     765     850     935  
Professional and consulting   1,129     891     825     723     671  
Marketing and advertising   244     192     337     207     226  
Data processing   1,080     1,102     1,091     1,148     1,069  
Merger expenses   936     375     24     -     -  
Amortization of core deposit intangible   144     145     169     169     169  
Increase in valuation allowance, loans held-for-sale   -     -     -     -     267  
Other expenses   1,979     2,529     2,130     2,140     1,863  
Total noninterest expenses   18,266     18,287     17,108     17,059     16,566  
          
          
Income before income tax expense   22,310     22,004     22,125     4,695     23,266  
Income tax expense   3,638     2,102     4,598     444     12,686  
Net income$  18,672  $  19,902  $  17,527  $  4,251  $  10,580  
          
          
Reconciliation of GAAP Earnings to Adjusted Earnings:         
Net income$  18,672  $  19,902  $  17,527  $  4,251  $  10,580  
Merger expenses (after taxes)   739     297     19     -     -  
Deferred tax valuation adjustment   -     (1,408)    -     -     5,574  
Tax benefit on employee share-based awards (ASU 2016-09)   (223)    (297)    (49)    (541)    -  
Provision related to taxi medallion loans (after taxes)   -     -     -     13,430     -  
Increase in valuation allowance, loans held-for-sale (after taxes)   -     -     -     -     182  
Net income-adjusted$  19,188  $  18,494  $  17,497  $  17,140  $  16,336  
          
          
Weighted average diluted shares outstanding   32,378,739     32,319,060     32,321,150     32,238,048     32,252,759  
          
Diluted EPS (GAAP)$  0.58  $  0.61  $  0.54  $  0.13  $  0.33  
Diluted EPS-adjusted (Non-GAAP) (1)   0.59     0.57     0.54     0.53     0.51  
          
Return on Assets Measures         
Net income-adjusted$  19,188  $  18,494  $  17,497  $  17,140  $  16,336  
          
          
Average assets$  5,261,493  $  5,186,173  $  5,104,661  $  5,088,823  $  4,916,549  
Less: average intangible assets   (147,741)    (147,883)    (148,046)    (148,215)    (148,383) 
Average tangible assets$  5,113,752  $  5,038,290  $  4,956,615  $  4,940,608  $  4,768,166  
Return on avg. assets (GAAP)   1.41 %
   1.52 %   1.38 %   0.34 %   0.85 %
Return on avg. assets-adjusted (non-GAAP) (2)   1.45     1.41     1.37     1.37     1.32  
______________         
(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
 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 
  2018   2018   2018   2018   2017  
  
Return on Equity Measures(dollars in thousands)
Net income-adjusted$  19,188  $  18,494  $  17,497  $  17,140  $  16,336  
          
          
Average common equity$  606,378  $  590,128  $  574,992  $  575,029  $  567,308  
Less: average intangible assets   (147,741)    (147,883)    (148,046)    (148,215)    (148,383) 
Average tangible common equity$  458,637  $  442,245  $  426,946  $  426,814  $  418,925  
          
          
Return on avg. common equity (GAAP)   12.22 %   13.38 %   12.23 %   3.00 %   7.40 %
Return on avg. common equity-adjusted (non-GAAP) (3)   12.55     12.43     12.21     12.09     11.42  
Return on avg. tangible common equity (non-GAAP) (4)   16.24     17.95     16.58     4.15     10.11  
Return on avg. tangible common equity-adjusted (non-GAAP) (5)   16.69     16.68     16.55     16.40     15.57  
          
Efficiency Measures         
Total noninterest expenses$  18,266  $  18,287  $  17,108  $  17,059  $  16,566  
Increase in valuation allowance, loans held-for-sale   -     -     -     -     (267) 
Merger expenses   (936)    (375)    (24)    -     -  
Foreclosed property expense   (8)    (196)    (11)    (51)    (32) 
Operating noninterest expense $  17,322  $  17,716  $  17,073  $  17,008  $  16,267  
          
          
Net interest income (tax equivalent basis)$  40,678  $  40,444  $  39,409  $  38,610  $  40,744  
Noninterest income   1,515     1,429     1,388     1,407     2,024  
Operating revenue $  42,193  $  41,873  $  40,797  $  40,017  $  42,768  
          
          
Operating efficiency ratio (non-GAAP) (6)   41.1 %   42.3 %   41.8 %   42.5 %   38.0 %
          
Net Interest Margin         
Average interest-earning assets$  4,941,425  $  4,856,678  $  4,771,523  $  4,799,453  $  4,603,659  
          
          
Net interest income (tax equivalent basis)$  40,678  $  40,444  $  39,409  $  38,610  $  40,744  
Impact of purchase accounting fair value marks   (148)    (195)    (680)    (240)    (1,026) 
Adjusted net interest income (tax equivalent basis)$  40,530  $  40,249  $  38,729  $  38,370  $  39,718  
          
          
Net interest margin (GAAP)   3.27 %   3.30 %   3.31 %   3.26 %   3.51 %
Adjusted net interest margin (non-GAAP) (7)   3.25     3.29     3.26     3.24     3.42  
______________         
(3) Adjusted earnings available to common stockholders divided by average common equity.      
(4) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity.  
(5) Adjusted earnings available to common stockholders excluding amortization of intangible assets 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
 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 
  2018   2018   2018   2018   2017  
  
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)
Common equity$  613,927  $  594,871  $  578,557  $  564,266  $  565,437  
Less: intangible assets   (147,646)    (147,791)    (147,936)    (148,104)    (148,273) 
Tangible common equity$  466,281  $  447,080  $  430,621  $  416,162  $  417,164  
          
          
Total assets$  5,462,092  $  5,368,641  $  5,275,368  $  5,158,368  $  5,108,442  
Less: intangible assets   (147,646)    (147,791)    (147,936)    (148,104)    (148,273) 
Tangible assets$  5,314,446  $  5,220,850  $  5,127,432  $  5,010,264  $  4,960,169  
          
          
Common shares outstanding   32,328,542     32,238,264     32,184,047     32,175,233     32,071,860  
          
Common equity ratio (GAAP)   11.24 %   11.08 %   10.97 %   10.94 %   11.07 %
Tangible common equity ratio (non-GAAP) (8)   8.77     8.56     8.40     8.31     8.41  
                     
Regulatory capital ratios (Bancorp):                    
Leverage ratio   9.34 %   9.15 %   8.93 %   8.65 %   8.92 %
Common equity Tier 1 risk-based ratio   9.75     9.50     9.33     9.14     9.15  
Risk-based Tier 1 capital ratio   9.86     9.61     9.44     9.25     9.26  
Risk-based total capital ratio   13.15     12.94     12.81     12.66     11.04  
                     
Regulatory capital ratios (Bank):                    
Leverage ratio   10.78 %   10.64 %   10.43 %   10.20 %   9.84 %
Common equity Tier 1 risk-based ratio   11.37     11.18     11.02     10.91     10.21  
Risk-based Tier 1 capital ratio   11.37     11.18     11.02     10.91     10.21  
Risk-based total capital ratio   12.75     12.57     12.42     12.31     10.90  
          
Book value per share (GAAP)$  18.99  $  18.45  $  17.98  $  17.54  $  17.63  
Tangible book value per share (non-GAAP) (9)   14.42     13.87     13.38     12.93     13.01  
          
Net Loan Charge-Off (Recoveries) Detail         
Net loan charge-offs (recoveries) :         
 Charge-offs$  920  $  6  $  47  $  17,038  $  156  
 Recoveries   (25)    (61)    (12)    (19)    (34) 
Net loan charge-offs (recoveries)$  895  $  (55) $  35  $  17,019  $  122  
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)   0.08 %   (0.01)%   0.00 %   1.63 %   0.01 %
                   
Asset Quality                  
Nonaccrual taxi medallion loans$  28,043  $  28,482  $  28,944  $  29,405  $  46,765  
Nonaccrual loans (excluding taxi medallion loans)   23,812     24,533     20,771     20,631     18,848  
Other real estate owned   -     -     1,076     1,076     538  
Total nonperforming assets$  51,855  $  53,015  $  50,791  $  51,112  $  66,151  
          
             
Performing troubled debt restructurings$  9,532  $  11,243  $  12,827  $  14,349  $  14,920  
             
Allowance for loan losses ("ALLL")$  34,954  $  34,749  $  33,594  $  32,529  $  31,748  
             
Loans receivable$  4,541,092  $  4,462,487  $  4,360,854  $  4,202,679  $  4,171,456  
Less: taxi medallion loans   28,043     28,482     28,944     29,405     46,765  
Loans receivable (excluding taxi medallion loans)$  4,513,049  $  4,434,005  $  4,331,910  $  4,173,274  $  4,124,691  
          
                   
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans)   0.53 %   0.55 %   0.48 %   0.49 %   0.46 %
Nonaccrual loans as a % of loans receivable   1.14     1.19     1.14     1.19     1.57  
Nonperforming assets as a % of total assets   0.95     0.99     0.96     0.99     1.29  
ALLL as a % of loans receivable   0.77     0.78     0.77     0.77     0.76  
ALLL as a % of nonaccrual loans (excluding taxi medallion loans)   146.8     141.6     161.7     157.7     168.4  
ALLL as a % of nonaccrual loans   67.4     65.5     67.6     65.0     48.4  
______________         
(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 
 December 31, 2018September 30, 2018December 31, 2017 
Interest-earning assets:Average
Balance
 Interest
 Rate (8)  Average
Balance
 Interest
 Rate (8)  Average
Balance
 Interest
 Rate (8) 
Investment securities (1) (2)$433,686  $3,429  3.14% $423,566  $3,147  2.95% $417,954  $3,162  3.00%
Total loans (2) (3) (4) 4,437,944   53,584  4.79   4,362,905   51,973  4.73   4,093,958   47,389  4.59 
Federal funds sold and interest-                 
  bearing deposits with banks 44,163   232  2.08   42,164   183  1.72   61,933   156  1.00 
Restricted investment in bank stock 25,632   495  7.66   28,043   530  7.50   29,814   440  5.86 
Total interest-earning assets 4,941,425   57,740  4.64   4,856,678   55,833  4.56   4,603,659   51,147  4.41 
Allowance for loan losses (35,036)      (33,943)      (30,478)    
Noninterest-earning assets 355,104       363,438       343,368     
Total assets$5,261,493      $5,186,173      $4,916,549     
                  
Interest-bearing liabilities:                 
 Time deposits$1,329,743   7,062  2.11  $1,296,165   6,477  1.98   1,114,670   4,172  1.48 
 Other interest-bearing deposits 1,915,353   5,336  1.11   1,854,763   4,204  0.90   1,855,688   2,780  0.59 
Total interest-bearing deposits 3,245,096   12,398  1.52   3,150,928   10,681  1.34   2,970,358   6,952  0.93 
                  
Borrowings 477,800   2,783  2.31   531,251   2,839  2.12   588,260   2,597  1.75 
Subordinated debentures (5) 128,502   1,843  5.69   128,420   1,831  5.66   54,672   814  5.91 
Capital lease obligation 2,520   38  5.98   2,554   38  5.90   2,655   40  5.98 
Total interest-bearing liabilities 3,853,918   17,062  1.76   3,813,153   15,389  1.60   3,615,945   10,403  1.14 
                  
Noninterest-bearing demand deposits 775,824       761,782       712,391     
Other liabilities 25,373       21,110       20,905     
Total noninterest-bearing liabilities 801,197       782,892       733,296     
Stockholders' equity 606,378       590,128       567,308     
Total liabilities and stockholders' equity$5,261,493      $5,186,173      $4,916,549     
                  
Net interest income (tax equivalent basis)   40,678        40,444        40,744    
Net interest spread (6)   2.88%    2.96%    3.27%
                  
Net interest margin (7)   3.27%    3.30%    3.51%
                  
Tax equivalent adjustment   (517)       (482)       (936)   
Net interest income  $40,161       $39,962       $39,808    
                  
(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 December 31, 2018 and September 30, 2018 and a 35% federal tax rate as of December 31, 2017. 
(3) Includes loan fee income. 
(4) Loans include nonaccrual loans. 
(5) Average balances are net of debt issuance costs of $1,652, $1,735, and $483 as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively 
  Amortization expense related to debt issuance costs included in interest expense was $82, $82 and $41 as of December 31, 2018, September 30, 2018 and December 31, 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.