ENGLEWOOD CLIFFS, N.J., Oct. 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 $21.7 million for the third quarter of 2019 compared with $19.3 million for the second quarter of 2019 and $19.9 million for the third quarter of 2018. Diluted earnings per share were $0.61 for the third quarter of 2019 compared with $0.57 in the second quarter of 2019 and $0.61 in the third quarter of 2018.
Adjusted net income amounted to $21.0 million, or $0.60 per diluted share, for the third quarter of 2019; $20.2 million, or $0.57 per diluted share, for the second quarter of 2019; and $18.6 million, or $0.58 per diluted share, for the third quarter of 2018. Adjusted net income excludes $0.1 million, $0.3 million, and $0.3 million in after-tax merger-related expenses for the third quarter of 2019, second quarter of 2019 and third quarter of 2018, respectively. In addition, adjusted net income excludes $0.9 million in after-tax FDIC small bank assessment credits for the third quarter 2019. Adjusted net income for the second quarter 2019 also excludes an after-tax $0.7 million charge on the prepayment of higher-cost borrowings. See supplemental tables for a complete reconciliation of GAAP earnings to adjusted earnings.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are extremely pleased with our third quarter results, highlighted by record quarterly earnings, meaningful margin expansion and increases in noninterest income, as we continued to drive value during a challenging interest rate and operating environment. We once again delivered solid deposit and loan growth and maintained our strong performance metrics. Average total deposits increased sequentially by $174 million, or 15.4%, on an annualized basis; while average total loans increased by $122 million, or 9.7%, on an annualized basis. Our net interest margin widened by approximately 15 basis points, both on a GAAP and on an adjusted basis, while most of the industry experienced margin contraction. The widening resulted from core growth, improved balance sheet mix and pricing discipline. Return on assets exceeded 1.4% and return on tangible common equity was 16%. Meanwhile, our efficiency ratio remained among the best in the industry at 41.1% and tangible book value per share increased by more than 50 cents during the quarter to $15.60. Tangible book value per share has increased by 12.4% over the past year.”
Mr. Sorrentino added, “In addition to our record third quarter financial performance, we are pleased with the groundwork we're laying for the continued long-term success of the business. Our outlook for the remainder of 2019 and 2020 is extremely positive and we remain well-positioned to capitalize on meaningful growth opportunities throughout our New York and New Jersey metropolitan target market. I’m equally excited about our recently announced in-market acquisition of Bancorp of New Jersey, Inc. This is a financially savvy, accretive acquisition with strong economics to enhance our powerful franchise. Given its commercial business focus, overlapping geographic footprint, shared client base and the considerable synergies that are expected, we believe Bancorp of New Jersey is a natural fit for ConnectOne and the transaction remains on target to close in early 2020.”
Operating Results
Fully taxable equivalent net interest income for the third quarter of 2019 was $48.9 million, an increase of $2.8 million, or 6.1%, from the sequential second quarter of 2019, resulting primarily from a 14 basis-point widening of the net interest margin to 3.44% from 3.30%. Included in net interest income were purchase accounting adjustments of $1.6 million during the third quarter of 2019 and $1.7 million during the second quarter of 2019. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.33% for the third quarter of 2019 and 3.17% for the second quarter of 2019. The net interest margin widened primarily due to improvements on both sides of the balance sheet. Loan portfolio yields increased due to an improved loan mix and higher spreads on new business, while funding costs declined due to solid growth in core deposits coupled with lower rates. In addition, an increase in prepayment penalties, largely a result of early payoffs of commercial real estate loans secured by multifamily properties, contributed approximately 4 basis-points to the increase. Noninterest income increased to $2.1 million in the third quarter of 2019 from $1.9 million in the second quarter of 2019 and $1.3 million in the third quarter of 2018. Included in noninterest income for the third quarter of 2019 were net losses on sale of securities available-for-sale of $0.3 million. Excluding these losses, noninterest income increased $0.4 million from the sequential quarter. This increase was primarily attributable to increases in gains on sale of loans held-for-sale of $0.2 million, deposit loan and other income of $0.2 million and bank owned life insurance of $0.1 million, offset by $0.1 million decrease in net gains on equity securities. At September 30, 2019 approximately $33 million in loans were classified as held-for-sale. Management expects to sell these loans and record a gain in the fourth quarter. Management expects to continue to originate a moderate amount of loans for sale as long as market conditions remain favorable.
Noninterest expenses totaled $20.4 million for third quarter of 2019, $21.6 million for the second quarter of 2019 and $18.1 million for the third quarter of 2018. Included in noninterest expenses for the third and second quarters of 2019 were merger-related expenses of $0.2 million and $0.3 million, respectively. The current quarter included an FDIC assessment credit of $1.3 million while the second quarter of 2019 included a $1.0 million in loss on extinguishment of debt. Excluding merger-related expenses, loss on extinguishment of debt, and the effect of the aforementioned FDIC credit, noninterest expenses increased $1.2 million when compared to the second quarter of 2019. The increase was primarily attributable to increases in compensation expenses related to a larger staff and higher cash and equity-based compensation accruals.
Income tax expense was $6.4 million for the third quarter of 2019, $5.5 million for the second quarter of 2019 and $2.1 million for the third quarter of 2019. The effective tax rates for the third quarter of 2019, first quarter of 2019 and third quarter of 2018 were 22.9%, 22.2% and 9.6%, respectively. Included in income tax expense for the third quarter of 2018 were benefits of $1.4 million resulting from Federal and NJ deferred tax asset adjustments. The increase in the effective tax rate for the current quarter from the sequential quarter was primarily due to a higher proportion of taxable income.
Asset Quality
The provision for loan losses was $2.0 million for the third quarter of 2019, $1.1 million for the second quarter of 2019 and $1.1 million for the third quarter of 2018. The increase in the provision for loan losses was primarily attributable to an increase in charge-offs, which totaled $0.9 million for the quarter.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $52.2 million at September 30, 2019, $51.9 million at December 31, 2018 and $53.0 million at September 30, 2018. Included in nonperforming assets were taxi medallion loans totaling $25.8 million at September 30, 2019, $28.0 million at December 31, 2018 and $28.5 million at September 30, 2018. Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.85% at September 30, 2019, 0.95% at December 31, 2018 and 0.99% at September 30, 2018. Excluding the taxi medallion loans, nonaccrual loans were $25.5 million at September 30, 2019, $23.8 million at December 31, 2018 and $24.5 million at September 30, 2018, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.50%, 0.53% and 0.55%, respectively. The annualized net loan charge-off (recoveries) ratio was 0.07% for the third quarter of 2019, 0.08% for the fourth quarter of 2018 and (0.01)% for the third quarter of 2018. The allowance for loan losses represented 0.76%, 0.77%, and 0.78% of loans receivable as of September 30, 2019, December 31, 2018 and September 30, 2018, respectively. The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 151.9% as of September 30, 2019, 146.8% as of December 31, 2018 and 141.6% as of September 30, 2018.
Selected Balance Sheet Items
At September 30, 2019, the balance sheet reflected the acquisition of Greater Hudson Bank. The Company’s total assets were $6.2 billion, an increase of $699 million from December 31, 2018. Total loans were $5.1 billion, an increase of $602 million from December 31, 2018. Included in total loans were loans held-for-sale of $33.2 million. The Company’s stockholders’ equity was $720 million at September 30, 2019, an increase of $106 million from December 31, 2018. The increase in stockholders’ equity was primarily attributable to the acquisition of Greater Hudson Bank, which increased capital by $56 million, as well as increases in retained earnings of $43 million. As of September 30, 2019, the Company’s tangible common equity ratio and tangible book value per share were 9.21% and $15.60, respectively. As of December 31, 2018, the tangible common equity ratio and tangible book value per share were 8.77% and $14.42, respectively. Tangible book value per share increased $0.59, or 3.9%, from the sequential quarter. Total goodwill and other intangible assets were approximately $168 million as of September 30, 2019 and $148 million and December 31, 2018.
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP/adjusted financial measures including an adjusted net income available to common shareholders. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
Third Quarter 2019 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 24, 2019 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13695130. 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, October 24, 2019 and ending on Thursday, October 31, 2019 by dialing 412-317-6671, access code 13695130. 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 28 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 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) | |||||||||||
September 30, | December 31, | September 30, | |||||||||
2019 | 2018 | 2018 | |||||||||
(unaudited) | (unaudited) | ||||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 54,792 | $ | 39,161 | $ | 37,058 | |||||
Interest-bearing deposits with banks | 139,217 | 133,205 | 118,790 | ||||||||
Cash and cash equivalents | 194,009 | 172,366 | 155,848 | ||||||||
Securities available-for-sale | 425,849 | 412,034 | 410,039 | ||||||||
Equity securities | 11,231 | 11,460 | 11,403 | ||||||||
Loans held-for-sale | 33,245 | - | 270 | ||||||||
Loans receivable | 5,110,471 | 4,541,092 | 4,462,487 | ||||||||
Less: Allowance for loan losses | 38,771 | 34,954 | 34,749 | ||||||||
Net loans receivable | 5,071,700 | 4,506,138 | 4,427,738 | ||||||||
Investment in restricted stock, at cost | 27,946 | 31,136 | 32,486 | ||||||||
Bank premises and equipment, net | 19,754 | 19,062 | 20,998 | ||||||||
Accrued interest receivable | 21,024 | 18,214 | 17,690 | ||||||||
Bank owned life insurance | 137,048 | 113,820 | 113,026 | ||||||||
Right of use operating lease assets | 15,789 | - | - | ||||||||
Other real estate owned | 907 | - | - | ||||||||
Goodwill | 162,574 | 145,909 | 145,909 | ||||||||
Core deposit intangibles | 5,800 | 1,737 | 1,881 | ||||||||
Other assets | 34,393 | 30,216 | 31,353 | ||||||||
Total assets | $ | 6,161,269 | $ | 5,462,092 | $ | 5,368,641 | |||||
LIABILITIES | |||||||||||
Deposits: | |||||||||||
Noninterest-bearing | $ | 828,190 | $ | 768,584 | $ | 758,213 | |||||
Interest-bearing | 3,923,044 | 3,323,508 | 3,230,552 | ||||||||
Total deposits | 4,751,234 | 4,092,092 | 3,988,765 | ||||||||
Borrowings | 512,456 | 600,001 | 629,979 | ||||||||
Operating lease liabilities | 17,148 | - | - | ||||||||
Subordinated debentures (net of $1,353, $1,599 and $1,681 in debt issuance costs) | 128,802 | 128,556 | 128,474 | ||||||||
Other liabilities | 31,469 | 27,516 | 26,552 | ||||||||
Total liabilities | 5,441,109 | 4,848,165 | 4,773,770 | ||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
STOCKHOLDERS' EQUITY | |||||||||||
Common stock | 468,571 | 412,546 | 412,546 | ||||||||
Additional paid-in capital | 20,450 | 15,542 | 14,625 | ||||||||
Retained earnings | 254,159 | 211,345 | 195,101 | ||||||||
Treasury stock | (21,892 | ) | (16,717 | ) | (16,717 | ) | |||||
Accumulated other comprehensive loss | (1,128 | ) | (8,789 | ) | (10,684 | ) | |||||
Total stockholders' equity | 720,160 | 613,927 | 594,871 | ||||||||
Total liabilities and stockholders' equity | $ | 6,161,269 | $ | 5,462,092 | $ | 5,368,641 | |||||
CONNECTONE BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(dollars in thousands, except for per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
09/30/19 | 09/30/18 | 09/30/19 | 09/30/18 | ||||||||||||
Interest income | |||||||||||||||
Interest and fees on loans | $ | 66,796 | $ | 51,699 | $ | 190,646 | $ | 148,218 | |||||||
Interest and dividends on investment securities: | |||||||||||||||
Taxable | 1,916 | 2,154 | 7,431 | 6,191 | |||||||||||
Tax-exempt | 897 | 785 | 3,105 | 2,377 | |||||||||||
Dividends | 502 | 530 | 1,369 | 1,517 | |||||||||||
Interest on federal funds sold and other short-term investments | 278 | 183 | 925 | 607 | |||||||||||
Total interest income | 70,389 | 55,351 | 203,476 | 158,910 | |||||||||||
Interest expense | |||||||||||||||
Deposits | 17,351 | 10,681 | 49,298 | 27,538 | |||||||||||
Borrowings | 4,632 | 4,708 | 15,290 | 14,318 | |||||||||||
Total interest expense | 21,983 | 15,389 | 64,588 | 41,856 | |||||||||||
Net interest income | 48,406 | 39,962 | 138,888 | 117,054 | |||||||||||
Provision for loan losses | 2,000 | 1,100 | 7,600 | 20,000 | |||||||||||
Net interest income after provision for loan losses | 46,406 | 38,862 | 131,288 | 97,054 | |||||||||||
Noninterest income | |||||||||||||||
Income on bank owned life insurance | 915 | 751 | 2,570 | 2,300 | |||||||||||
Net gains on sales of loans held-for-sale | 278 | 2 | 343 | 31 | |||||||||||
Deposit, loan and other income | 1,116 | 676 | 2,816 | 1,893 | |||||||||||
Net gains (losses) on equity securities | 79 | (157 | ) | 340 | (325 | ) | |||||||||
Net losses on sales of securities available-for-sale | (279 | ) | - | (280 | ) | - | |||||||||
Total noninterest income | 2,109 | 1,272 | 5,789 | 3,899 | |||||||||||
Noninterest expenses | |||||||||||||||
Salaries and employee benefits | 12,449 | 10,181 | 36,254 | 29,596 | |||||||||||
Occupancy and equipment | 2,480 | 2,137 | 7,332 | 6,311 | |||||||||||
FDIC insurance | (364 | ) | 735 | 1,216 | 2,350 | ||||||||||
Professional and consulting | 1,499 | 891 | 4,078 | 2,439 | |||||||||||
Marketing and advertising | 473 | 192 | 1,080 | 736 | |||||||||||
Data processing | 1,058 | 1,102 | 3,352 | 3,341 | |||||||||||
Merger expenses | 191 | 375 | 8,084 | 399 | |||||||||||
Loss on extinguishment of debt | - | - | 1,047 | - | |||||||||||
Amortization of core deposit intangibles | 340 | 145 | 1,068 | 483 | |||||||||||
Other expenses | 2,253 | 2,372 | 6,520 | 6,474 | |||||||||||
Total noninterest expenses | 20,379 | 18,130 | 70,031 | 52,129 | |||||||||||
Income before income tax expense | 28,136 | 22,004 | 67,046 | 48,824 | |||||||||||
Income tax expense | 6,440 | 2,102 | 14,434 | 7,144 | |||||||||||
Net income | $ | 21,696 | $ | 19,902 | $ | 52,612 | $ | 41,680 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.61 | $ | 0.62 | $ | 1.49 | $ | 1.30 | |||||||
Diluted | 0.61 | 0.61 | 1.48 | 1.29 | |||||||||||
Dividends per common share | $ | 0.090 | $ | 0.075 | $ | 0.270 | $ | 0.225 | |||||||
ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies.
CONNECTONE BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||
As of | |||||||||||||||||||
Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
Selected Financial Data | (dollars in thousands) | ||||||||||||||||||
Total assets | $ | 6,161,269 | $ | 6,109,066 | $ | 6,048,976 | $ | 5,462,092 | $ | 5,368,641 | |||||||||
Loans receivable: | |||||||||||||||||||
Commercial | $ | 1,079,071 | $ | 1,018,951 | $ | 1,012,930 | $ | 925,229 | $ | 886,212 | |||||||||
Commercial real estate | 1,551,182 | 1,555,542 | 1,483,852 | 1,279,502 | 1,282,766 | ||||||||||||||
Multifamily | 1,513,216 | 1,589,340 | 1,608,613 | 1,562,195 | 1,504,134 | ||||||||||||||
Commercial construction | 647,261 | 602,213 | 548,039 | 465,389 | 494,206 | ||||||||||||||
Residential | 322,307 | 326,661 | 319,214 | 309,991 | 295,948 | ||||||||||||||
Consumer | 2,436 | 2,041 | 4,157 | 2,593 | 2,508 | ||||||||||||||
Gross loans | 5,115,473 | 5,094,748 | 4,976,805 | 4,544,899 | 4,465,774 | ||||||||||||||
Unearned net origination fees | (5,002 | ) | (4,256 | ) | (4,154 | ) | (3,807 | ) | (3,287 | ) | |||||||||
Loans receivable | 5,110,471 | 5,090,492 | 4,972,651 | 4,541,092 | 4,462,487 | ||||||||||||||
Loans held-for-sale | 33,245 | - | 368 | - | 270 | ||||||||||||||
Total loans | $ | 5,143,716 | $ | 5,090,492 | $ | 4,973,019 | $ | 4,541,092 | $ | 4,462,757 | |||||||||
Investment securities | $ | 437,080 | $ | 453,063 | $ | 528,103 | $ | 423,494 | $ | 421,442 | |||||||||
Goodwill and other intangible assets | 168,374 | 168,714 | 162,747 | 147,646 | 147,791 | ||||||||||||||
Deposits: | |||||||||||||||||||
Noninterest-bearing demand | $ | 828,190 | $ | 813,635 | $ | 833,090 | $ | 768,584 | $ | 758,213 | |||||||||
Time deposits | 1,573,736 | 1,623,948 | 1,544,247 | 1,366,054 | 1,322,747 | ||||||||||||||
Other interest-bearing deposits | 2,349,308 | 2,203,560 | 2,216,661 | 1,957,454 | 1,907,805 | ||||||||||||||
Total deposits | $ | 4,751,234 | $ | 4,641,143 | $ | 4,593,998 | $ | 4,092,092 | $ | 3,988,765 | |||||||||
Borrowings | $ | 512,456 | $ | 597,317 | $ | 603,412 | $ | 600,001 | $ | 629,979 | |||||||||
Subordinated debentures (net of debt issuance costs) | 128,802 | 128,720 | 128,638 | 128,556 | 128,474 | ||||||||||||||
Total stockholders' equity | 720,160 | 699,224 | 682,395 | 613,927 | 594,871 | ||||||||||||||
Quarterly Average Balances | |||||||||||||||||||
Total assets | $ | 6,059,413 | $ | 6,001,669 | $ | 5,909,061 | $ | 5,261,493 | $ | 5,186,173 | |||||||||
Loans receivable: | |||||||||||||||||||
Commercial | $ | 1,040,355 | $ | 1,024,617 | $ | 1,035,874 | $ | 896,032 | $ | 803,702 | |||||||||
Commercial real estate (including multifamily) | 3,144,978 | 3,088,231 | 3,011,692 | 2,771,239 | 2,769,908 | ||||||||||||||
Commercial construction | 617,106 | 571,130 | 524,952 | 464,556 | 494,460 | ||||||||||||||
Residential | 325,188 | 322,517 | 335,574 | 304,954 | 294,758 | ||||||||||||||
Consumer | 3,525 | 3,252 | 3,397 | 4,292 | 3,205 | ||||||||||||||
Gross loans | 5,131,152 | 5,009,747 | 4,911,489 | 4,441,073 | 4,366,033 | ||||||||||||||
Unearned net origination fees | (4,778 | ) | (4,463 | ) | (3,930 | ) | (3,340 | ) | (3,182 | ) | |||||||||
Loans receivable | 5,126,374 | 5,005,284 | 4,907,559 | 4,437,733 | 4,362,851 | ||||||||||||||
Loans held-for-sale | 991 | 225 | 124 | 211 | 54 | ||||||||||||||
Total loans | $ | 5,127,365 | $ | 5,005,509 | $ | 4,907,683 | $ | 4,437,944 | $ | 4,362,905 | |||||||||
Investment securities | $ | 448,618 | $ | 513,814 | $ | 524,394 | $ | 421,316 | $ | 415,074 | |||||||||
Goodwill and other intangible assets | 168,598 | 164,709 | 162,814 | 147,741 | 147,883 | ||||||||||||||
Deposits: | |||||||||||||||||||
Noninterest-bearing demand | $ | 810,248 | $ | 800,856 | $ | 824,115 | $ | 775,824 | $ | 761,782 | |||||||||
Time deposits | 1,598,378 | 1,551,014 | 1,515,249 | 1,329,743 | 1,296,165 | ||||||||||||||
Other interest-bearing deposits | 2,300,886 | 2,183,384 | 2,236,630 | 1,915,353 | 1,854,763 | ||||||||||||||
Total deposits | $ | 4,709,512 | $ | 4,535,254 | $ | 4,575,994 | $ | 4,020,920 | $ | 3,912,710 | |||||||||
Borrowings | $ | 467,230 | $ | 603,260 | $ | 486,687 | $ | 477,800 | $ | 531,251 | |||||||||
Subordinated debentures (net of debt issuance costs) | 128,747 | 128,666 | 128,585 | 128,502 | 128,420 | ||||||||||||||
Total stockholders' equity | 714,002 | 694,978 | 680,168 | 606,378 | 590,128 | ||||||||||||||
Three Months Ended | |||||||||||||||||||
Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
(dollars in thousands, except for per share data) | |||||||||||||||||||
Net interest income | $ | 48,406 | $ | 45,530 | $ | 44,952 | $ | 40,161 | $ | 39,962 | |||||||||
Provision for loan losses | 2,000 | 1,100 | 4,500 | 1,100 | 1,100 | ||||||||||||||
Net interest income after provision for loan losses | 46,406 | 44,430 | 40,452 | 39,061 | 38,862 | ||||||||||||||
Noninterest income | |||||||||||||||||||
Income on bank owned life insurance | 915 | 833 | 822 | 794 | 751 | ||||||||||||||
Net gains on sales of loans held-for-sale | 278 | 46 | 19 | 30 | 2 | ||||||||||||||
Deposit, loan and other income | 1,116 | 914 | 786 | 691 | 676 | ||||||||||||||
Net gains (losses) on equity securities | 79 | 158 | 103 | 58 | (157 | ) | |||||||||||||
Net (losses) gains on sales of securities available-for-sale | (279 | ) | (9 | ) | 8 | - | - | ||||||||||||
Total noninterest income | 2,109 | 1,942 | 1,738 | 1,573 | 1,272 | ||||||||||||||
Noninterest expenses | |||||||||||||||||||
Salaries and employee benefits | 12,449 | 11,822 | 11,983 | 9,988 | 10,181 | ||||||||||||||
Occupancy and equipment | 2,480 | 2,357 | 2,495 | 2,001 | 2,137 | ||||||||||||||
FDIC insurance | (364 | ) | 825 | 755 | 765 | 735 | |||||||||||||
Professional and consulting | 1,499 | 1,370 | 1,209 | 1,129 | 891 | ||||||||||||||
Marketing and advertising | 473 | 397 | 210 | 244 | 192 | ||||||||||||||
Data processing | 1,058 | 1,139 | 1,155 | 1,080 | 1,102 | ||||||||||||||
Merger expenses | 191 | 331 | 7,562 | 936 | 375 | ||||||||||||||
Loss on extinguishment of debt | - | 1,047 | - | - | - | ||||||||||||||
Amortization of core deposit intangibles | 340 | 364 | 364 | 144 | 145 | ||||||||||||||
Other expenses | 2,253 | 1,938 | 2,329 | 2,037 | 2,372 | ||||||||||||||
Total noninterest expenses | 20,379 | 21,590 | 28,062 | 18,324 | 18,130 | ||||||||||||||
Income before income tax expense | 28,136 | 24,782 | 14,128 | 22,310 | 22,004 | ||||||||||||||
Income tax expense | 6,440 | 5,501 | 2,493 | 3,638 | 2,102 | ||||||||||||||
Net income | $ | 21,696 | $ | 19,281 | $ | 11,635 | $ | 18,672 | $ | 19,902 | |||||||||
Reconciliation of GAAP Earnings to Earnings Excluding the Following Items: | |||||||||||||||||||
Net income | $ | 21,696 | $ | 19,281 | $ | 11,635 | $ | 18,672 | $ | 19,902 | |||||||||
Merger expenses (after taxes) | 134 | 274 | 5,597 | 739 | 297 | ||||||||||||||
Loss on extinguishment of debt (after taxes) | - | 732 | - | - | - | ||||||||||||||
FDIC small bank assessment credit (after taxes) | (916 | ) | - | - | - | - | |||||||||||||
Net losses (gains) on sales of securities available-for-sale (after taxes) | 195 | 2 | (6 | ) | - | - | |||||||||||||
Net (gains) losses on equity securities (after taxes) | (53 | ) | (110 | ) | (74 | ) | (40 | ) | 110 | ||||||||||
Deferred tax valuation charge/adjustment | - | - | - | - | (1,408 | ) | |||||||||||||
Tax benefit on employee share-based awards (ASU 2016-09) | - | - | (20 | ) | (223 | ) | (297 | ) | |||||||||||
Net income-adjusted | $ | 21,056 | $ | 20,179 | $ | 17,132 | $ | 19,148 | $ | 18,604 | |||||||||
Weighted average diluted shares outstanding | 35,262,565 | 35,397,362 | 35,309,503 | 32,378,739 | 32,319,060 | ||||||||||||||
Diluted EPS (GAAP) | $ | 0.61 | $ | 0.54 | $ | 0.33 | $ | 0.58 | $ | 0.61 | |||||||||
Diluted EPS-adjusted (Non-GAAP) (1) | 0.60 | 0.57 | 0.49 | 0.59 | 0.58 | ||||||||||||||
Return on Assets Measures | |||||||||||||||||||
Net income-adjusted | $ | 21,056 | $ | 20,179 | $ | 17,132 | $ | 19,148 | $ | 18,604 | |||||||||
Average assets | $ | 6,059,413 | $ | 6,001,669 | $ | 5,909,061 | $ | 5,261,493 | $ | 5,186,173 | |||||||||
Less: average intangible assets | (168,598 | ) | (164,709 | ) | (162,814 | ) | (147,741 | ) | (147,883 | ) | |||||||||
Average tangible assets | $ | 5,890,815 | $ | 5,836,960 | $ | 5,746,247 | $ | 5,113,752 | $ | 5,038,290 | |||||||||
Return on avg. assets (GAAP) | 1.42 | % | 1.29 | % | 0.80 | % | 1.41 | % | 1.52 | % | |||||||||
Return on avg. assets-adjusted (non-GAAP) (2) | 1.38 | 1.35 | 1.18 | 1.44 | 1.42 | ||||||||||||||
_______________ | |||||||||||||||||||
(1) Represents adjusted net income divided by weighted average diluted shares outstanding. | |||||||||||||||||||
(2) Adjusted net income divided by average assets. | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
Return on Equity Measures | (dollars in thousands) | ||||||||||||||||||
Net income-adjusted | $ | 21,056 | $ | 20,179 | $ | 17,132 | $ | 19,148 | $ | 18,604 | |||||||||
Average common equity | $ | 714,002 | $ | 694,978 | $ | 680,168 | $ | 606,378 | $ | 590,128 | |||||||||
Less: average intangible assets | (168,598 | ) | (164,709 | ) | (162,814 | ) | (147,741 | ) | (147,883 | ) | |||||||||
Average tangible common equity | $ | 545,404 | $ | 530,269 | $ | 517,354 | $ | 458,637 | $ | 442,245 | |||||||||
Return on avg. common equity (GAAP) | 12.06 | % | 11.13 | % | 6.94 | % | 12.22 | % | 13.38 | % | |||||||||
Return on avg. common equity-adjusted (non-GAAP) (3) | 11.70 | 11.65 | 10.22 | 12.53 | 12.51 | ||||||||||||||
Return on avg. tangible common equity (non-GAAP) (4) | 15.96 | 14.78 | 9.33 | 16.24 | 17.95 | ||||||||||||||
Return on avg. tangible common equity-adjusted (non-GAAP) (5) | 15.49 | 15.46 | 13.63 | 16.65 | 16.78 | ||||||||||||||
Efficiency Measures | |||||||||||||||||||
Total noninterest expenses | $ | 20,379 | $ | 21,590 | $ | 28,062 | $ | 18,324 | $ | 18,130 | |||||||||
Amortization of core deposit intangibles | (340 | ) | (364 | ) | (364 | ) | (144 | ) | (145 | ) | |||||||||
Merger expenses | (191 | ) | (331 | ) | (7,562 | ) | (936 | ) | (375 | ) | |||||||||
FDIC small bank assessment credit | 1,310 | - | - | - | - | ||||||||||||||
Loss on extinguishment of debt | - | (1,047 | ) | - | - | - | |||||||||||||
Foreclosed property expense | (90 | ) | - | 1 | (8 | ) | (196 | ) | |||||||||||
Operating noninterest expense | $ | 21,068 | $ | 19,848 | $ | 20,137 | $ | 17,236 | $ | 17,414 | |||||||||
Net interest income (tax equivalent basis) | $ | 48,918 | $ | 46,092 | $ | 45,523 | $ | 40,678 | $ | 40,444 | |||||||||
Noninterest income | 2,109 | 1,942 | 1,738 | 1,573 | 1,272 | ||||||||||||||
Net (gains) losses on equity securities | (79 | ) | (158 | ) | (103 | ) | (58 | ) | 157 | ||||||||||
Net losses (gains) on sales of securities available-for-sale | 279 | 9 | (8 | ) | - | - | |||||||||||||
Operating revenue | $ | 51,227 | $ | 47,885 | $ | 47,150 | $ | 42,193 | $ | 41,873 | |||||||||
Operating efficiency ratio (non-GAAP) (6) | 41.1 | % | 41.4 | % | 42.7 | % | 40.9 | % | 41.6 | % | |||||||||
Net Interest Margin | |||||||||||||||||||
Average interest-earning assets | $ | 5,649,058 | $ | 5,607,086 | $ | 5,522,934 | $ | 4,941,425 | $ | 4,856,678 | |||||||||
Net interest income (tax equivalent basis) | $ | 48,918 | $ | 46,092 | $ | 45,523 | $ | 40,678 | $ | 40,444 | |||||||||
Impact of purchase accounting fair value marks | (1,566 | ) | (1,742 | ) | (1,233 | ) | (148 | ) | (195 | ) | |||||||||
Adjusted net interest income (tax equivalent basis) | $ | 47,352 | $ | 44,350 | $ | 44,290 | $ | 40,530 | $ | 40,249 | |||||||||
Net interest margin (GAAP) | 3.44 | % | 3.30 | % | 3.34 | % | 3.27 | % | 3.30 | % | |||||||||
Adjusted net interest margin (non-GAAP) (7) | 3.33 | 3.17 | 3.25 | 3.25 | 3.29 | ||||||||||||||
_______________ | |||||||||||||||||||
(3) Adjusted net income divided by average common equity. | |||||||||||||||||||
(4) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity. | |||||||||||||||||||
(5) Adjusted net income 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 | |||||||||||||||||||
Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
Capital Ratios and Book Value per Share | (dollars in thousands, except for per share data) | ||||||||||||||||||
Common equity | $ | 720,160 | $ | 699,224 | $ | 682,395 | $ | 613,927 | $ | 594,871 | |||||||||
Less: intangible assets | (168,374 | ) | (168,714 | ) | (162,747 | ) | (147,646 | ) | (147,791 | ) | |||||||||
Tangible common equity | $ | 551,786 | $ | 530,510 | $ | 519,648 | $ | 466,281 | $ | 447,080 | |||||||||
Total assets | $ | 6,161,269 | $ | 6,109,066 | $ | 6,048,976 | $ | 5,462,092 | $ | 5,368,641 | |||||||||
Less: intangible assets | (168,374 | ) | (168,714 | ) | (162,747 | ) | (147,646 | ) | (147,791 | ) | |||||||||
Tangible assets | $ | 5,992,895 | $ | 5,940,352 | $ | 5,886,229 | $ | 5,314,446 | $ | 5,220,850 | |||||||||
Common shares outstanding | 35,364,845 | 35,352,866 | 35,443,933 | 32,328,542 | 32,238,264 | ||||||||||||||
Common equity ratio (GAAP) | 11.69 | % | 11.45 | % | 11.28 | % | 11.24 | % | 11.08 | % | |||||||||
Tangible common equity ratio (non-GAAP) (8) | 9.21 | 8.93 | 8.83 | 8.77 | 8.56 | ||||||||||||||
Regulatory capital ratios (Bancorp): | |||||||||||||||||||
Leverage ratio | 9.39 | % | 9.14 | % | 9.12 | % | 9.34 | % | 9.15 | % | |||||||||
Common equity Tier 1 risk-based ratio | 9.78 | 9.65 | 9.68 | 9.75 | 9.50 | ||||||||||||||
Risk-based Tier 1 capital ratio | 9.87 | 9.74 | 9.77 | 9.86 | 9.61 | ||||||||||||||
Risk-based total capital ratio | 12.80 | 12.72 | 12.79 | 13.15 | 12.94 | ||||||||||||||
Regulatory capital ratios (Bank): | |||||||||||||||||||
Leverage ratio | 10.56 | % | 10.42 | % | 10.43 | % | 10.78 | % | 10.64 | % | |||||||||
Common equity Tier 1 risk-based ratio | 10.68 | 11.12 | 11.17 | 11.37 | 11.18 | ||||||||||||||
Risk-based Tier 1 capital ratio | 11.23 | 11.12 | 11.17 | 11.37 | 11.18 | ||||||||||||||
Risk-based total capital ratio | 11.23 | 12.40 | 12.46 | 12.75 | 12.57 | ||||||||||||||
Book value per share (GAAP) | $ | 20.36 | $ | 19.78 | $ | 19.25 | $ | 18.99 | $ | 18.45 | |||||||||
Tangible book value per share (non-GAAP) (9) | 15.60 | 15.01 | 14.66 | 14.42 | 13.87 | ||||||||||||||
Net Loan Charge-Off (Recoveries) Detail | |||||||||||||||||||
Net loan charge-offs (recoveries) : | |||||||||||||||||||
Charge-offs | $ | 964 | $ | 406 | $ | 2,676 | $ | 920 | $ | 6 | |||||||||
Recoveries | (37 | ) | (146 | ) | (80 | ) | (25 | ) | (61 | ) | |||||||||
Net loan charge-offs (recoveries) | $ | 927 | $ | 260 | $ | 2,596 | $ | 895 | $ | (55 | ) | ||||||||
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) | 0.07 | % | 0.02 | % | 0.21 | % | 0.08 | % | (0.01 | )% | |||||||||
Asset Quality | |||||||||||||||||||
Nonaccrual taxi medallion loans | $ | 25,802 | $ | 26,498 | $ | 27,287 | $ | 28,043 | $ | 28,482 | |||||||||
Nonaccrual loans (excluding taxi medallion loans) | 25,519 | 23,419 | 20,393 | 23,812 | 24,533 | ||||||||||||||
Other real estate owned | 907 | - | - | - | - | ||||||||||||||
Total nonperforming assets | $ | 52,228 | $ | 49,917 | $ | 47,680 | $ | 51,855 | $ | 53,015 | |||||||||
Performing troubled debt restructurings | $ | 19,681 | $ | 16,332 | $ | 8,191 | $ | 11,165 | $ | 11,243 | |||||||||
Allowance for loan losses ("ALLL") | $ | 38,771 | $ | 37,698 | $ | 36,858 | $ | 34,954 | $ | 34,749 | |||||||||
Loans receivable | $ | 5,110,471 | $ | 5,090,492 | $ | 4,972,651 | $ | 4,541,092 | $ | 4,462,487 | |||||||||
Less: taxi medallion loans | 27,353 | 28,054 | 28,911 | 28,043 | 28,482 | ||||||||||||||
Loans receivable (excluding taxi medallion loans) | $ | 5,083,118 | $ | 5,062,438 | $ | 4,943,740 | $ | 4,513,049 | $ | 4,434,005 | |||||||||
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans) | 0.50 | % | 0.46 | % | 0.41 | % | 0.53 | % | 0.55 | % | |||||||||
Nonaccrual loans as a % of loans receivable | 1.00 | 0.98 | 0.96 | 1.14 | 1.19 | ||||||||||||||
Nonperforming assets as a % of total assets | 0.85 | 0.82 | 0.79 | 0.95 | 0.99 | ||||||||||||||
ALLL as a % of loans receivable | 0.76 | 0.74 | 0.74 | 0.77 | 0.78 | ||||||||||||||
ALLL as a % of nonaccrual loans (excluding taxi medallion loans) | 151.9 | 161.0 | 180.7 | 146.8 | 141.6 | ||||||||||||||
ALLL as a % of nonaccrual loans | 75.5 | 75.5 | 77.3 | 67.4 | 65.5 | ||||||||||||||
_______________ | |||||||||||||||||||
(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 | ||||||||||||||||||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||||
Interest-earning assets: | Balance | Interest | Rate (8) | Balance | Interest | Rate (8) | Balance | Interest | Rate (8) | |||||||||||||||||
Investment securities (1) (2) | $ | 445,492 | $ | 3,053 | 2.72 | % | $ | 515,022 | $ | 3,941 | 3.07 | % | $ | 423,566 | $ | 3,147 | 2.95 | % | ||||||||
Total loans (2) (3) (4) | 5,127,365 | 67,068 | 5.19 | 5,005,509 | 63,799 | 5.11 | 4,362,905 | 51,973 | 4.73 | |||||||||||||||||
Federal funds sold and interest-bearing deposits with banks | 50,289 | 278 | 2.19 | 54,619 | 290 | 2.13 | 42,164 | 183 | 1.72 | |||||||||||||||||
Restricted investment in bank stock | 25,912 | 502 | 7.69 | 31,936 | 410 | 5.15 | 28,043 | 530 | 7.50 | |||||||||||||||||
Total interest-earning assets | 5,649,058 | 70,901 | 4.98 | 5,607,086 | 68,440 | 4.90 | 4,856,678 | 55,833 | 4.56 | |||||||||||||||||
Allowance for loan losses | (37,704 | ) | (37,390 | ) | (33,943 | ) | ||||||||||||||||||||
Noninterest-earning assets | 448,059 | 431,973 | 363,438 | |||||||||||||||||||||||
Total assets | $ | 6,059,413 | $ | 6,001,669 | $ | 5,186,173 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||
Time deposits | $ | 1,598,378 | 9,934 | 2.47 | $ | 1,551,014 | 9,366 | 2.42 | $ | 1,296,165 | 6,477 | 1.98 | ||||||||||||||
Other interest-bearing deposits | 2,300,886 | 7,416 | 1.28 | 2,183,384 | 7,230 | 1.33 | 1,854,763 | 4,204 | 0.90 | |||||||||||||||||
Total interest-bearing deposits | 3,899,264 | 17,350 | 1.77 | 3,734,398 | 16,596 | 1.78 | 3,150,928 | 10,681 | 1.34 | |||||||||||||||||
Borrowings | 467,230 | 2,754 | 2.34 | 603,260 | 3,870 | 2.57 | 531,251 | 2,839 | 2.12 | |||||||||||||||||
Subordinated debentures (5) | 128,747 | 1,843 | 5.68 | 128,666 | 1,845 | 5.75 | 128,420 | 1,831 | 5.66 | |||||||||||||||||
Capital lease obligation | 2,393 | 36 | 5.97 | 2,436 | 37 | 6.09 | 2,554 | 38 | 5.90 | |||||||||||||||||
Total interest-bearing liabilities | 4,497,634 | 21,983 | 1.94 | 4,468,760 | 22,348 | 2.01 | 3,813,153 | 15,389 | 1.60 | |||||||||||||||||
Noninterest-bearing demand deposits | 810,247 | 800,856 | 761,782 | |||||||||||||||||||||||
Other liabilities | 37,530 | 37,075 | 21,110 | |||||||||||||||||||||||
Total noninterest-bearing liabilities | 847,777 | 837,931 | 782,892 | |||||||||||||||||||||||
Stockholders' equity | 714,002 | 694,978 | 590,128 | |||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 6,059,413 | $ | 6,001,669 | $ | 5,186,173 | ||||||||||||||||||||
Net interest income (tax equivalent basis) | 48,918 | 46,092 | 40,444 | |||||||||||||||||||||||
Net interest spread (6) | 3.04 | % | 2.89 | % | 2.96 | % | ||||||||||||||||||||
Net interest margin (7) | 3.44 | % | 3.30 | % | 3.30 | % | ||||||||||||||||||||
Tax equivalent adjustment | (512 | ) | (562 | ) | (482 | ) | ||||||||||||||||||||
Net interest income | $ | 48,406 | $ | 45,530 | $ | 39,962 | ||||||||||||||||||||
_______________
(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.
(3) Includes loan fee income.
(4) Loans include loans held-for-sale and nonaccrual loans.
(5) Average balances are net of debt issuance costs of $1,407, $1,489, and $1,735 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. Amortization expense related to debt issuance costs included in interest expense was $82, $82 and $82 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, 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.