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, 2018 | September 30, 2018 | December 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. | ||||||||||||||||||||||||||||||||