ENGLEWOOD CLIFFS, N.J., Oct. 28, 2021 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $32.1 million for the third quarter of 2021, compared with $32.2 million for the second quarter of 2021 and $24.8 million for the third quarter of 2020. Diluted earnings per share were $0.80 for the third quarter of 2021 compared with $0.81 in the second quarter of 2021 and $0.62 in the third quarter of 2020. The $0.1 million decrease in net income and $0.01 decrease in diluted earnings per share versus the second quarter of 2021 were primarily due an increase in the provision for credit losses of $2.7 million, an increase in noninterest expenses of $1.9 million, and a decrease in noninterest income of $0.5 million, largely offset by an increase in net interest income of $5.2 million. The $7.3 million increase in net income and $0.18 increase in diluted earnings per share versus the third quarter of 2020 were due to an increase in net interest income of $7.7 million, an increase in noninterest income of $0.5 million, and a decrease in the provision for credit losses of $3.9 million, partially offset by increases noninterest expenses of $1.7 million and income tax expense of $3.1 million.
Pre-tax, pre-provision net revenue (“PPNR”) increased to $44.1 million, reflecting a 6.9% sequential increase from the second quarter of 2021 and a 17.3% increase from the prior year quarter.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne continued to successfully execute upon our operating strategies during the third quarter. We had solid net revenue growth and core loan growth, while our net interest margin widened for the eighth consecutive quarter, and we continued to grow and strengthen core noninterest income sources, including our fintech subsidiary BoeFly. During the quarter we further fortified our capital position with a $100+ million preferred equity capital raise and, going into the end of the year, our balance sheet is positioned to continue to outperform from gains in market and client share. Operationally, we again delivered outstanding performance metrics. Return on assets was 1.62%, return on tangible common equity was 16.9% and PPNR as a percent of assets increased once again to 2.23%. Meanwhile, our efficiency ratio remained among the best in the industry at 38.1% and tangible book value per share increased by 4% sequentially and by more than 15% over the past year to $19.43. Average loans, excluding PPP, increased by 6.8% sequentially, as our proactive, client-first approach resulted in robust lending opportunities across our market.”
“Our year-to-date performance has been very strong on all fronts. Today's common stock dividend increase – the second increase the Board approved this year – reflects our growing capital base, the strength and stability of our profitability, and our commitment to driving long-term value for our shareholders,” Mr. Sorrentino added. “Looking ahead, our outlook for the remainder of 2021 is directionally positive. ConnectOne remains well-positioned to capitalize on meaningful growth opportunities and, as we plan for a robust 2022, we look forward to our continued ability to scale.”
Dividend Declaration
The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.13 per share, reflecting an 18% sequential increase in our cash dividend. The dividend, which reflects the second $0.02 increase declared during 2021, will be paid on December 1, 2021 to common shareholders of record on November 15, 2021.
Operating Results
Fully taxable equivalent net interest income for the third quarter of 2021 was $68.8 million, an increase of $5.3 million, or 8.4%, from the second quarter of 2021 resulting primarily from a 3.7% increase in average interest-earning assets, and a 13 basis-point widening of the net interest margin to 3.73% from 3.60%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.63% for the third quarter of 2021 and 3.49% for the second quarter of 2021. The net interest margin widened as a result of continued improvement in the Bank’s cost and mix of funding sources, an increase in the accretion of Paycheck Protection Program (“PPP”) fee income due to accelerated forgiveness activity, and the recovery of back-interest after the successful resolution of a nonaccrual loan. These items more than offset a declining core yield on loans receivable and investment securities. This was the eighth consecutive quarter that the Bank’s net interest margin widened. Included in interest income in both the third and second quarter of 2021 was the accretion of PPP fee income of $3.4 million and $2.3 million, respectively. Remaining deferred and unrecognized PPP fees were $6.0 million as of September 30, 2021.
Fully taxable equivalent net interest income for the third quarter of 2021 increased by $7.8 million, or 12.7%, from the third quarter of 2020. The increase from the third quarter of 2020 resulted primarily from a 24 basis-point widening of the net interest margin to 3.73% from 3.49%. The widening of the net interest margin resulted from a 60 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 24 basis-point reduction in the yield on average interest-earning assets.
Noninterest income was $4.0 million in the third quarter of 2021, $4.5 million in the second quarter of 2021 and $3.5 million in the third quarter of 2020. The decrease in noninterest income of $0.5 million from the second quarter of 2021 was primarily attributable to a decrease in deposit, loan and other income of $0.5 million, reflecting lower referral fees related to BoeFly’s participation in the PPP. The increase of $0.5 million in noninterest income when compared to the third quarter of 2020 was attributable to increases in sale of loans held-for-sale of $0.5 million and deposit, loan and other income of $0.4 million, partially offset by a decrease in BOLI income of $0.3 million and a net loss on equity securities of $0.1 million.
Noninterest expenses totaled $28.2 million for the third quarter of 2021, $26.3 million for the second quarter of 2021 and $26.5 million for the third quarter of 2020. The increase in noninterest expenses of $1.9 million from the second quarter of 2021 was primarily attributable to increases in salaries and employee benefits of $1.5 million, reflecting the Bank’s recent expansion leading to a 5% sequential increase in staff count; other expenses of $0.7 million, partially a result of increased technology investments; and professional and consulting fees of $0.1 million. These increases were partially offset by decreases in occupancy and equipment of $0.3 million and data processing of $0.1 million. The increase in noninterest expenses of $1.7 million from the third quarter of 2020 was primarily attributable to increases in salaries and employee benefits of $1.6 million, other expenses $1.2 million professional and consulting of $0.3 million and marketing and advertising of $0.1 million, partially offset by decreases in FDIC insurance $0.6 million and occupancy and equipment of $0.9 million. The Company’s expense base growth reflects its commitment to organic expansion through investments in people and technology, while remaining focused on maintaining best-in-class operating efficiency.
Income tax expense was $10.9 million for the third quarter of 2021, $10.7 million for the second quarter of 2021 and $7.8 million for the third quarter of 2020. The effective tax rates for the third quarter of 2021, second quarter of 2021 and third quarter of 2020 were 25.3%, 24.8% and 23.9%, respectively. The higher effective tax rate during the third quarter of 2021 when compared to the second quarter of 2021 and third quarter of 2020 was the result of higher levels of income from taxable sources.
Asset Quality
The provision for (reversal of) credit losses was $1.1 million for the third quarter of 2021, $(1.6) million for the second quarter of 2021 and $5.0 million for the third quarter of 2020. The provision for credit losses during the third quarter of 2021 of $1.1 million was the result of strong organic loan growth, partially offset by continued improvement in the macroeconomic outlook. The second quarter of 2021 provision recapture of $1.6 million, reflected an accelerated recovery from the pandemic. The elevated provision for loan losses during the third quarter of 2020 was due to the economic uncertainties of the COVID-19 pandemic, including consideration of related payment deferrals requested or granted. As of September 30, 2021, the Bank had 10 loans on deferral, with a total balance of approximately $10 million, down significantly from 79 loans with a total balance of approximately $100 million as of June 30, 2021.
Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $66.0 million as of September 30, 2021, $61.7 million as of December 31, 2020 and $65.5 million as of September 30, 2020. Nonperforming assets as a percentage of total assets were 0.83% as of September 30, 2021, 0.82% as of December 31, 2020 and 0.88% as of September 30, 2020. The ratio of nonaccrual loans to loans receivable was 1.00%, 0.99% and 1.05%, as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The annualized net loan charge-offs (recoveries) charge-off ratio was 0.10% for the third quarter of 2021, 0.01% for the second quarter of 2021 and (0.03)% for the third quarter of 2020. The current quarter included a $1.4 million charge-off of a commercial real estate loan that previously had a specific credit reserve. The allowance for credit losses represented 1.19%, 1.27%, and 1.19% of loans receivable as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.22%, 1.36%, and 1.29% of loans receivable as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 118.2% as of September 30, 2021, 128.4% as of December 31, 2020 and 113.4% as of September 30, 2020.
Selected Balance Sheet Items
The Company’s total assets were $7.9 billion, an increase of $402.2 million from December 31, 2020. Loans receivable were $6.6 billion, an increase of $340.1 million from December 31, 2020. The increase in loans receivable was attributable to higher, non-PPP, loan originations, offset by decreases in PPP loans resulting from forgiveness activity. As of September 30, 2021, PPP loans totaled $177.8 million, down from $397.5 million as of December 31, 2020 reflecting accelerated forgiveness of the outstanding PPP loans.
The Company’s stockholders’ equity was $1.1 billion as of September 30, 2021, an increase of $183.1 million from December 31, 2020. In August 2021, the Company raised $110.9 million, net of estimated issuance expenses, from the issuance of $115 million in 5.25% fixed rate, non-cumulative, perpetual preferred stock. This issuance was the primary reason for the overall increase in stockholders’ equity, in addition to increases in retained earnings of $82.0 million and additional paid-in capital of $2.0 million, partially offset by a decrease in accumulated other comprehensive income of $3.8 million and an increase in treasury stock of $8.0 million. As of September 30, 2021, the Company’s tangible common equity ratio and tangible book value per share were 9.95% and $19.43, respectively. As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $217.9 million as of September 30, 2021 and $219.3 million as of December 31, 2020.
Share Repurchase Program
During the third quarter of 2021, the Company repurchased approximately 196,000 shares of common stock leaving approximately 315,000 shares remaining authorized for repurchase under the current Board approved repurchase program. In addition, the Board has authorized the repurchase of up to an additional 2,000,000, or approximately 5%, of the Company’s currently outstanding common shares. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plans do not obligate the Company to acquire any particular amount of common stock, and they may be modified or suspended at any time at the Company's discretion.
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 measures. 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 financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
Third Quarter 2021 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 28, 2021 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13723610. 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 28, 2021 and ending on Thursday, November 4, 2021 by dialing 412-317-6671, access code 13723610. 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., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and its fintech subsidiary, BoeFly. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. 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, as supplemented by the Company’s subsequent filings 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, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. 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:
Sutton Resler MWW
571.236.4966: sresler@mww.com
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||
| (in thousands) | ||||||||||||
| September 30, | December 31, | September 30, | ||||||||||
| 2021 | 2020 | 2020 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 49,626 | $ | 63,637 | $ | 59,422 | ||||||
| Interest-bearing deposits with banks | 363,569 | 240,119 | 196,697 | |||||||||
| Cash and cash equivalents | 413,195 | 303,756 | 256,119 | |||||||||
| Investment securities | 462,884 | 487,955 | 453,015 | |||||||||
| Equity securities | 13,700 | 13,387 | 13,400 | |||||||||
| Loans held-for-sale | 5,596 | 4,710 | 8,508 | |||||||||
| Loans receivable | 6,576,439 | 6,236,307 | 6,251,051 | |||||||||
| Less: Allowance for credit losses - loans | 77,986 | 79,226 | 74,267 | |||||||||
| Net loans receivable | 6,498,453 | 6,157,081 | 6,176,784 | |||||||||
| Investment in restricted stock, at cost | 18,106 | 25,099 | 28,713 | |||||||||
| Bank premises and equipment, net | 29,635 | 30,108 | 29,922 | |||||||||
| Accrued interest receivable | 33,610 | 35,317 | 34,326 | |||||||||
| Bank owned life insurance | 194,487 | 165,960 | 165,676 | |||||||||
| Right of use operating lease assets | 11,002 | 16,159 | 22,830 | |||||||||
| Goodwill | 208,372 | 208,372 | 208,372 | |||||||||
| Core deposit intangibles | 9,480 | 10,977 | 11,605 | |||||||||
| Other assets | 50,994 | 88,458 | 40,289 | |||||||||
| Total assets | $ | 7,949,514 | $ | 7,547,339 | $ | 7,449,559 | ||||||
| LIABILITIES | ||||||||||||
| Deposits: | ||||||||||||
| Noninterest-bearing | $ | 1,500,754 | $ | 1,339,108 | $ | 1,270,021 | ||||||
| Interest-bearing | 4,897,584 | 4,620,116 | 4,528,735 | |||||||||
| Total deposits | 6,398,338 | 5,959,224 | 5,798,756 | |||||||||
| Borrowings | 253,225 | 425,954 | 506,225 | |||||||||
| Subordinated debentures, net | 152,875 | 202,648 | 202,552 | |||||||||
| Operating lease liabilities | 12,437 | 18,026 | 26,726 | |||||||||
| Other liabilities | 34,206 | 26,177 | 24,564 | |||||||||
| Total liabilities | 6,851,081 | 6,632,029 | 6,558,823 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Preferred stock | 110,927 | - | - | |||||||||
| Common stock | 586,946 | 586,946 | 586,946 | |||||||||
| Additional paid-in capital | 25,851 | 23,887 | 22,867 | |||||||||
| Retained earnings | 413,996 | 331,951 | 309,893 | |||||||||
| Treasury stock | (38,314 | ) | (30,271 | ) | (30,271 | ) | ||||||
| Accumulated other comprehensive (loss) income | (973 | ) | 2,797 | 1,301 | ||||||||
| Total stockholders' equity | 1,098,433 | 915,310 | 890,736 | |||||||||
| Total liabilities and stockholders' equity | $ | 7,949,514 | $ | 7,547,339 | $ | 7,449,559 | ||||||
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| (dollars in thousands, except for per share data) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| 09/30/21 | 09/30/20 | 09/30/21 | 09/30/20 | ||||||||||||
| Interest income | |||||||||||||||
| Interest and fees on loans | $ | 75,092 | $ | 74,755 | $ | 216,655 | $ | 223,488 | |||||||
| Interest and dividends on investment securities: | |||||||||||||||
| Taxable | 1,065 | 1,305 | 3,148 | 5,083 | |||||||||||
| Tax-exempt | 511 | 688 | 1,885 | 2,148 | |||||||||||
| Dividends | 245 | 426 | 764 | 1,268 | |||||||||||
| Interest on federal funds sold and other short-term investments | 113 | 47 | 246 | 625 | |||||||||||
| Total interest income | 77,026 | 77,221 | 222,698 | 232,612 | |||||||||||
| Interest expense | |||||||||||||||
| Deposits | 5,478 | 11,947 | 19,487 | 42,756 | |||||||||||
| Borrowings | 3,303 | 4,725 | 10,794 | 13,236 | |||||||||||
| Total interest expense | 8,781 | 16,672 | 30,281 | 55,992 | |||||||||||
| Net interest income | 68,245 | 60,549 | 192,417 | 176,620 | |||||||||||
| Provision for (reversal of) credit losses | 1,100 | 5,000 | (6,315 | ) | 36,000 | ||||||||||
| Net interest income after provision for credit losses | 67,145 | 55,549 | 198,732 | 140,620 | |||||||||||
| Noninterest income | |||||||||||||||
| Deposit, loan and other income | 1,702 | 1,278 | 5,092 | 5,777 | |||||||||||
| Income on bank owned life insurance | 1,278 | 1,598 | 3,527 | 3,693 | |||||||||||
| Net gains on sale of loans held-for-sale | 1,114 | 614 | 2,668 | 1,244 | |||||||||||
| Gain on sale of branches | - | - | 674 | - | |||||||||||
| Net (losses) gains on equity securities | (78 | ) | (7 | ) | (242 | ) | 215 | ||||||||
| Net gains on sale/redemption of investment securities | - | - | 195 | 29 | |||||||||||
| Total noninterest income | 4,016 | 3,483 | 11,914 | 10,958 | |||||||||||
| Noninterest expenses | |||||||||||||||
| Salaries and employee benefits | 16,740 | 15,114 | 47,589 | 44,177 | |||||||||||
| Occupancy and equipment | 2,656 | 3,566 | 8,876 | 10,193 | |||||||||||
| FDIC insurance | 525 | 1,105 | 2,040 | 3,054 | |||||||||||
| Professional and consulting | 2,217 | 1,926 | 6,290 | 5,173 | |||||||||||
| Marketing and advertising | 345 | 214 | 864 | 944 | |||||||||||
| Data processing | 1,541 | 1,470 | 4,680 | 4,529 | |||||||||||
| Merger expenses | - | - | - | 14,640 | |||||||||||
| Amortization of core deposit intangible | 483 | 627 | 1,498 | 1,931 | |||||||||||
| Increase in value of acquisition price | - | - | - | 2,333 | |||||||||||
| Other expenses | 3,676 | 2,456 | 9,090 | 7,625 | |||||||||||
| Total noninterest expenses | 28,183 | 26,478 | 80,927 | 94,599 | |||||||||||
| Income before income tax expense | 42,978 | 32,554 | 129,719 | 56,979 | |||||||||||
| Income tax expense | 10,881 | 7,768 | 32,404 | 11,331 | |||||||||||
| Net income | $ | 32,097 | $ | 24,786 | $ | 97,315 | $ | 45,648 | |||||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | 0.81 | $ | 0.62 | $ | 2.45 | $ | 1.15 | |||||||
| Diluted | 0.80 | 0.62 | 2.43 | 1.15 | |||||||||||
| 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 | |||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 30, | Sep. 30, | |||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||||||||
| Selected Financial Data | (dollars in thousands) | ||||||||||||||||||||
| Total assets | $ | 7,949,514 | $ | 7,710,082 | $ | 7,449,639 | $ | 7,547,339 | $ | 7,449,559 | |||||||||||
| Loans receivable: | |||||||||||||||||||||
| Commercial | $ | 1,116,535 | $ | 1,046,965 | $ | 1,071,418 | $ | 1,092,404 | $ | 1,125,273 | |||||||||||
| Paycheck Protection Program ("PPP") loans | 177,829 | 326,788 | 522,340 | 397,492 | 474,022 | ||||||||||||||||
| Commercial real estate | 2,354,209 | 2,252,484 | 2,127,806 | 2,103,468 | 2,001,311 | ||||||||||||||||
| Multifamily | 2,113,541 | 1,914,978 | 1,698,331 | 1,712,153 | 1,703,290 | ||||||||||||||||
| Commercial construction | 552,896 | 587,121 | 565,872 | 617,747 | 614,112 | ||||||||||||||||
| Residential | 270,793 | 286,907 | 306,376 | 322,564 | 343,376 | ||||||||||||||||
| Consumer | 2,093 | 6,355 | 3,364 | 1,853 | 1,876 | ||||||||||||||||
| Gross loans | 6,587,896 | 6,421,598 | 6,295,508 | 6,247,681 | 6,263,260 | ||||||||||||||||
| Unearned net origination fees | (11,457 | ) | (13,694 | ) | (18,317 | ) | (11,374 | ) | (12,209 | ) | |||||||||||
| Loans receivable | 6,576,439 | 6,407,904 | 6,277,191 | 6,236,307 | 6,251,051 | ||||||||||||||||
| Loans held-for-sale | 5,596 | 6,159 | 6,900 | 4,710 | 8,508 | ||||||||||||||||
| Total loans | $ | 6,582,035 | $ | 6,414,063 | $ | 6,284,091 | $ | 6,241,017 | $ | 6,259,559 | |||||||||||
| Investment and equity securities | $ | 476,584 | $ | 472,156 | $ | 455,223 | $ | 501,342 | $ | 466,415 | |||||||||||
| Goodwill and other intangible assets | 217,852 | 218,335 | 218,842 | 219,349 | 219,977 | ||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,500,754 | $ | 1,485,952 | $ | 1,384,961 | $ | 1,339,108 | $ | 1,270,021 | |||||||||||
| Time deposits | 1,221,911 | 1,301,807 | 1,356,599 | 1,464,133 | 1,619,609 | ||||||||||||||||
| Other interest-bearing deposits | 3,675,673 | 3,404,754 | 3,209,774 | 3,155,983 | 2,909,126 | ||||||||||||||||
| Total deposits | $ | 6,398,338 | $ | 6,192,513 | $ | 5,951,335 | $ | 5,959,224 | $ | 5,798,756 | |||||||||||
| Borrowings | $ | 253,225 | $ | 353,462 | $ | 359,710 | $ | 425,954 | $ | 506,225 | |||||||||||
| Subordinated debentures (net of debt issuance costs) | 152,875 | 152,800 | 152,724 | 202,648 | 202,552 | ||||||||||||||||
| Total stockholders' equity | 1,098,433 | 964,960 | 935,637 | 915,310 | 890,736 | ||||||||||||||||
| Quarterly Average Balances | |||||||||||||||||||||
| Total assets | $ | 7,837,997 | $ | 7,566,676 | $ | 7,500,034 | $ | 7,547,651 | $ | 7,474,002 | |||||||||||
| Loans receivable: | |||||||||||||||||||||
| Commercial (including PPP loans) | $ | 1,296,066 | $ | 1,485,918 | $ | 1,531,790 | $ | 1,557,303 | $ | 1,610,423 | |||||||||||
| Commercial real estate (including multifamily) | 4,312,092 | 3,925,497 | 3,805,856 | 3,704,197 | 3,679,297 | ||||||||||||||||
| Commercial construction | 572,920 | 553,396 | 595,466 | 615,439 | 646,281 | ||||||||||||||||
| Residential | 279,063 | 293,633 | 316,233 | 332,403 | 352,426 | ||||||||||||||||
| Consumer | 2,649 | 3,148 | 2,540 | 3,309 | 2,536 | ||||||||||||||||
| Gross loans | 6,462,790 | 6,261,592 | 6,251,885 | 6,212,651 | 6,290,963 | ||||||||||||||||
| Unearned net origination fees | (13,064 | ) | (13,076 | ) | (13,163 | ) | (12,023 | ) | (13,292 | ) | |||||||||||
| Loans receivable | 6,449,726 | 6,248,516 | 6,238,723 | 6,200,628 | 6,277,671 | ||||||||||||||||
| Loans held-for-sale | 6,226 | 3,696 | 4,237 | 9,003 | 10,772 | ||||||||||||||||
| Total loans | $ | 6,455,952 | $ | 6,252,212 | $ | 6,242,960 | $ | 6,209,631 | $ | 6,288,443 | |||||||||||
| Investment and equity securities | $ | 465,103 | $ | 450,543 | $ | 481,802 | $ | 469,820 | $ | 429,947 | |||||||||||
| Goodwill and other intangible assets | 218,170 | 218,662 | 219,171 | 219,761 | 220,391 | ||||||||||||||||
| Deposits: | |||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,495,456 | $ | 1,432,707 | $ | 1,348,585 | $ | 1,294,447 | $ | 1,253,235 | |||||||||||
| Time deposits | 1,252,818 | 1,324,510 | 1,422,295 | 1,577,338 | 1,728,129 | ||||||||||||||||
| Other interest-bearing deposits | 3,582,261 | 3,320,400 | 3,225,751 | 3,094,536 | 2,881,592 | ||||||||||||||||
| Total deposits | $ | 6,330,535 | $ | 6,077,617 | $ | 5,996,631 | $ | 5,966,321 | $ | 5,862,956 | |||||||||||
| Borrowings | $ | 276,183 | $ | 331,633 | $ | 375,511 | $ | 410,098 | $ | 467,399 | |||||||||||
| Subordinated debentures (net of debt issuance costs) | 152,825 | 152,750 | 154,341 | 202,595 | 202,502 | ||||||||||||||||
| Total stockholders' equity | 1,032,191 | 952,019 | 928,041 | 906,153 | 883,364 | ||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 30, | Sep. 30, | |||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||||||||
| (dollars in thousands, except for per share data) | |||||||||||||||||||||
| Net interest income | $ | 68,245 | $ | 63,009 | $ | 61,163 | $ | 61,371 | $ | 60,549 | |||||||||||
| Provision for (reversal of) credit losses | 1,100 | (1,649 | ) | (5,766 | ) | 5,000 | 5,000 | ||||||||||||||
| Net interest income after provision for credit losses | 67,145 | 64,658 | 66,929 | 56,371 | 55,549 | ||||||||||||||||
| Noninterest income | |||||||||||||||||||||
| Deposit, loan and other income | 1,702 | 2,222 | 1,168 | 1,300 | 1,278 | ||||||||||||||||
| Income on bank owned life insurance | 1,278 | 1,185 | 1,064 | 1,314 | 1,598 | ||||||||||||||||
| Net gains on sale of loans held-for-sale | 1,114 | 847 | 707 | 841 | 614 | ||||||||||||||||
| Gain on sale of branches | - | - | 674 | - | - | ||||||||||||||||
| Net (losses) gains on equity securities | (78 | ) | 23 | (187 | ) | (13 | ) | (7 | ) | ||||||||||||
| Net gains on sale/redemption of investment securities | - | 195 | - | - | - | ||||||||||||||||
| Total noninterest income | 4,016 | 4,472 | 3,426 | 3,442 | 3,483 | ||||||||||||||||
| Noninterest expenses | |||||||||||||||||||||
| Salaries and employee benefits | 16,740 | 15,284 | 15,565 | 14,581 | 15,114 | ||||||||||||||||
| Occupancy and equipment | 2,656 | 2,916 | 3,404 | 3,689 | 3,566 | ||||||||||||||||
| FDIC insurance | 525 | 580 | 935 | 948 | 1,105 | ||||||||||||||||
| Professional and consulting | 2,217 | 2,117 | 1,956 | 2,210 | 1,926 | ||||||||||||||||
| Marketing and advertising | 345 | 278 | 241 | 256 | 214 | ||||||||||||||||
| Data processing | 1,541 | 1,603 | 1,536 | 1,479 | 1,470 | ||||||||||||||||
| Amortization of core deposit intangible | 483 | 508 | 507 | 628 | 627 | ||||||||||||||||
| Other expenses | 3,676 | 2,973 | 2,341 | 2,611 | 2,456 | ||||||||||||||||
| Total noninterest expenses | 28,183 | 26,259 | 26,485 | 26,402 | 26,478 | ||||||||||||||||
| Income before income tax expense | 42,978 | 42,871 | 43,870 | 33,411 | 32,554 | ||||||||||||||||
| Income tax expense | 10,881 | 10,652 | 10,871 | 7,770 | 7,768 | ||||||||||||||||
| Net income | $ | 32,097 | $ | 32,219 | $ | 32,999 | $ | 25,641 | $ | 24,786 | |||||||||||
| Weighted average diluted common shares outstanding | 39,869,468 | 39,872,829 | 39,788,881 | 39,726,791 | 39,653,832 | ||||||||||||||||
| Diluted EPS | $ | 0.80 | $ | 0.81 | $ | 0.82 | $ | 0.64 | $ | 0.62 | |||||||||||
| Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue | |||||||||||||||||||||
| Net income | $ | 32,097 | $ | 32,219 | $ | 32,999 | $ | 25,641 | $ | 24,786 | |||||||||||
| Income tax expense | 10,881 | 10,652 | 10,871 | 7,770 | 7,768 | ||||||||||||||||
| Provision for (reversal of) credit losses | 1,100 | (1,649 | ) | (5,766 | ) | 5,000 | 5,000 | ||||||||||||||
| Pre-tax and pre-provision net revenue | $ | 44,078 | $ | 41,222 | $ | 38,104 | $ | 38,411 | $ | 37,554 | |||||||||||
| Return on Assets Measures | |||||||||||||||||||||
| Average assets | $ | 7,837,997 | $ | 7,566,676 | $ | 7,500,034 | $ | 7,547,651 | $ | 7,474,002 | |||||||||||
| Return on avg. assets | 1.62 | % | 1.71 | % | 1.78 | % | 1.35 | % | 1.32 | % | |||||||||||
| Return on avg. assets (pre-tax and pre-provision) | 2.23 | 2.19 | 2.06 | 2.02 | 2.00 | ||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 30, | Sep. 30, | |||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||||||||
| Return on Equity Measures | (dollars in thousands) | ||||||||||||||||||||
| Average common equity | $ | 980,344 | $ | 952,019 | $ | 928,041 | $ | 906,153 | $ | 883,364 | |||||||||||
| Less: average intangible assets | (218,170 | ) | (218,662 | ) | (219,171 | ) | (219,761 | ) | (220,391 | ) | |||||||||||
| Average tangible common equity | $ | 762,174 | $ | 733,357 | $ | 708,870 | $ | 686,392 | $ | 662,973 | |||||||||||
| Return on avg. common equity (GAAP) | 12.99 | % | 13.57 | % | 14.42 | % | 11.26 | % | 11.16 | % | |||||||||||
| Return on avg. tangible common equity ("TCE") (non-GAAP) (1) | 16.88 | 17.82 | 19.08 | 15.12 | 15.14 | ||||||||||||||||
| Efficiency Measures | |||||||||||||||||||||
| Total noninterest expenses | $ | 28,183 | $ | 26,259 | $ | 26,485 | $ | 26,402 | $ | 26,478 | |||||||||||
| Amortization of core deposit intangibles | (483 | ) | (508 | ) | (507 | ) | (628 | ) | (627 | ) | |||||||||||
| Foreclosed property expense | - | - | - | (2 | ) | - | |||||||||||||||
| Operating noninterest expense | $ | 27,700 | $ | 25,751 | $ | 25,978 | $ | 25,772 | $ | 25,851 | |||||||||||
| Net interest income (tax equivalent basis) | $ | 68,761 | $ | 63,418 | $ | 61,581 | $ | 61,840 | $ | 61,005 | |||||||||||
| Noninterest income | 4,016 | 4,472 | 3,426 | 3,442 | 3,483 | ||||||||||||||||
| Net gains on sale of branches | - | - | (674 | ) | - | - | |||||||||||||||
| Net gains on sale/redemption of investment securities | - | (195 | ) | - | - | - | |||||||||||||||
| Operating revenue | $ | 72,777 | $ | 67,695 | $ | 64,333 | $ | 65,282 | $ | 64,488 | |||||||||||
| Operating efficiency ratio (non-GAAP) (2) | 38.1 | % | 38.0 | % | 40.4 | % | 39.5 | % | 40.1 | % | |||||||||||
| Net Interest Margin | |||||||||||||||||||||
| Average interest-earning assets | $ | 7,321,771 | $ | 7,059,965 | $ | 7,008,500 | $ | 7,031,662 | $ | 6,962,499 | |||||||||||
| Net interest income (tax equivalent basis) | $ | 68,761 | $ | 63,418 | $ | 61,581 | $ | 61,840 | $ | 61,005 | |||||||||||
| Impact of purchase accounting fair value marks | (1,849 | ) | (2,012 | ) | (2,074 | ) | (2,237 | ) | (2,403 | ) | |||||||||||
| Adjusted net interest income (tax equivalent basis) | $ | 66,912 | $ | 61,406 | $ | 59,507 | $ | 59,603 | $ | 58,602 | |||||||||||
| Net interest margin (GAAP) | 3.73 | % | 3.60 | % | 3.56 | % | 3.50 | % | 3.49 | % | |||||||||||
| Adjusted net interest margin (non-GAAP) (3) | 3.63 | 3.49 | 3.44 | 3.37 | 3.35 | ||||||||||||||||
| (1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity. | |||||||||||||||||||||
| (2) Operating noninterest expense divided by operating revenue. | |||||||||||||||||||||
| (3) Adjusted net interest margin excludes impact of purchase accounting fair value marks. | |||||||||||||||||||||
| As of | |||||||||||||||||||||
| Sep. 30, | Jun. 30, | Mar. 31, | Dec. 30, | Sep. 30, | |||||||||||||||||
| 2021 | 2021 | 2021 | 2020 | 2020 | |||||||||||||||||
| Capital Ratios and Book Value per Share | (dollars in thousands, except for per share data) | ||||||||||||||||||||
| Common equity | $ | 987,506 | $ | 964,960 | $ | 935,637 | $ | 915,310 | $ | 890,736 | |||||||||||
| Less: intangible assets | (217,852 | ) | (218,335 | ) | (218,842 | ) | (219,349 | ) | (219,977 | ) | |||||||||||
| Tangible common equity | $ | 769,654 | $ | 746,625 | $ | 716,795 | $ | 695,961 | $ | 670,759 | |||||||||||
| Total assets | $ | 7,949,514 | $ | 7,710,082 | $ | 7,449,639 | $ | 7,547,339 | $ | 7,449,559 | |||||||||||
| Less: intangible assets | (217,852 | ) | (218,335 | ) | (218,842 | ) | (219,349 | ) | (219,977 | ) | |||||||||||
| Tangible assets | $ | 7,731,662 | $ | 7,491,747 | $ | 7,230,797 | $ | 7,327,990 | $ | 7,229,582 | |||||||||||
| Common shares outstanding | 39,602,199 | 39,794,815 | 39,773,602 | 39,785,398 | 39,754,051 | ||||||||||||||||
| Common equity ratio (GAAP) | 12.42 | % | 12.52 | % | 12.56 | % | 12.13 | % | 11.96 | % | |||||||||||
| Tangible common equity ratio (non-GAAP) (4) | 9.95 | 9.97 | 9.91 | 9.50 | 9.28 | ||||||||||||||||
| Regulatory capital ratios (Bancorp): | |||||||||||||||||||||
| Leverage ratio | 11.60 | % | 10.19 | % | 9.89 | % | 9.51 | % | 9.30 | % | |||||||||||
| Common equity Tier 1 risk-based ratio | 10.73 | 11.09 | 11.36 | 10.79 | 10.63 | ||||||||||||||||
| Risk-based Tier 1 capital ratio | 12.35 | 11.17 | 11.44 | 10.87 | 10.72 | ||||||||||||||||
| Risk-based total capital ratio | 15.54 | 14.58 | 15.08 | 15.08 | 14.94 | ||||||||||||||||
| Regulatory capital ratios (Bank): | |||||||||||||||||||||
| Leverage ratio | 11.33 | % | 11.34 | % | 11.06 | % | 10.63 | % | 10.41 | % | |||||||||||
| Common equity Tier 1 risk-based ratio | 12.06 | 12.42 | 12.78 | 12.24 | 12.00 | ||||||||||||||||
| Risk-based Tier 1 capital ratio | 12.06 | 12.42 | 12.78 | 12.24 | 12.00 | ||||||||||||||||
| Risk-based total capital ratio | 13.61 | 14.07 | 14.55 | 10.00 | 13.70 | ||||||||||||||||
| Book value per share (GAAP) | $ | 24.94 | $ | 24.25 | $ | 23.52 | $ | 23.01 | $ | 22.41 | |||||||||||
| Tangible book value per share (non-GAAP) (5) | 19.43 | 18.76 | 18.02 | 17.49 | 16.87 | ||||||||||||||||
| Net Loan (Recoveries) Charge-Off Detail | |||||||||||||||||||||
| Net loan charge-offs (recoveries): | |||||||||||||||||||||
| Charge-offs | $ | 1,727 | $ | 212 | $ | - | $ | 67 | $ | 257 | |||||||||||
| Recoveries | (113 | ) | (14 | ) | (61 | ) | (26 | ) | (800 | ) | |||||||||||
| Net loan charge-offs (recoveries) | $ | 1,614 | $ | 198 | $ | (61 | ) | $ | 41 | $ | (543 | ) | |||||||||
| Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) | 0.10 | % | 0.01 | % | (0.00 | ) | % | 0.00 | % | (0.03 | ) | % | |||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual loans | $ | 65,959 | $ | 56,213 | $ | 60,940 | $ | 61,696 | $ | 65,494 | |||||||||||
| OREO | - | - | - | - | - | ||||||||||||||||
| Nonperforming assets | $ | 65,959 | $ | 56,213 | $ | 60,940 | $ | 61,696 | $ | 65,494 | |||||||||||
| Performing troubled debt restructurings | $ | 41,256 | $ | 33,021 | $ | 25,505 | $ | 23,655 | $ | 18,241 | |||||||||||
| Allowance for credit losses - loans ("ACL") | 77,986 | 78,684 | 80,568 | 79,226 | 74,267 | ||||||||||||||||
| Loans receivable | $ | 6,576,439 | $ | 6,407,904 | $ | 6,277,191 | $ | 6,236,307 | $ | 6,251,051 | |||||||||||
| Less: PPP loans | 177,829 | 326,788 | 522,340 | 397,492 | 474,022 | ||||||||||||||||
| Loans receivable (excluding PPP loans) | $ | 6,398,610 | $ | 6,081,116 | $ | 5,754,851 | $ | 5,838,815 | $ | 5,777,029 | |||||||||||
| Nonaccrual loans as a % of loans receivable | 1.00 | % | 0.88 | % | 0.97 | % | 0.99 | % | 1.05 | ||||||||||||
| Nonperforming assets as a % of total assets | 0.83 | 0.73 | 0.82 | 0.82 | 0.88 | ||||||||||||||||
| ACL as a % of loans receivable | 1.19 | 1.23 | 1.28 | 1.27 | 1.19 | ||||||||||||||||
| ACL as a % of loans receivable (excluding PPP loans) | 1.22 | 1.29 | 1.40 | 1.36 | 1.29 | ||||||||||||||||
| ACL as a % of nonaccrual loans | 118.2 | 140.0 | 132.2 | 128.4 | 113.4 | ||||||||||||||||
| (4) Tangible common equity divided by tangible assets. | |||||||||||||||||||||
| (5) Tangible common equity divided by common shares outstanding at period-end. | |||||||||||||||||||||
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| NET INTEREST MARGIN ANALYSIS | |||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||
| Average | Average | Average | |||||||||||||||||||||||||||
| Interest-earning assets: | Balance | Interest | Rate (7) | Balance | Interest | Rate (7) | Balance | Interest | Rate (7) | ||||||||||||||||||||
| Investment securities (1) (2) | $ | 459,559 | $ | 1,712 | 1.48 | % | $ | 444,461 | $ | 1,765 | 1.59 | % | $ | 420,362 | $ | 2,176 | 2.06 | % | |||||||||||
| Loans receivable and loans held-for-sale (2) (3) (4) | 6,455,952 | 75,434 | 4.64 | 6,252,212 | 71,348 | 4.58 | 6,288,443 | 75,028 | 4.75 | ||||||||||||||||||||
| Federal funds sold and interest- | |||||||||||||||||||||||||||||
| bearing deposits with banks | 387,155 | 151 | 0.15 | 341,885 | 84 | 0.10 | 227,617 | 47 | 0.08 | ||||||||||||||||||||
| Restricted investment in bank stock | 19,105 | 245 | 5.09 | 21,407 | 263 | 4.93 | 26,077 | 426 | 6.50 | ||||||||||||||||||||
| Total interest-earning assets | 7,321,771 | 77,542 | 4.20 | 7,059,965 | 73,460 | 4.17 | 6,962,499 | 77,677 | 4.44 | ||||||||||||||||||||
| Allowance for credit losses - loans | (78,327 | ) | (80,548 | ) | (69,381 | ) | |||||||||||||||||||||||
| Noninterest-earning assets | 594,553 | 587,259 | 580,884 | ||||||||||||||||||||||||||
| Total assets | $ | 7,837,997 | $ | 7,566,676 | $ | 7,474,002 | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||
| Time deposits | 1,252,818 | 2,983 | 0.94 | $ | 1,324,510 | $ | 3,963 | 1.20 | 1,728,129 | 8,174 | 1.88 | ||||||||||||||||||
| Other interest-bearing deposits | 3,582,261 | 2,495 | 0.28 | 3,320,400 | 2,461 | 0.30 | 2,881,592 | 3,773 | 0.52 | ||||||||||||||||||||
| Total interest-bearing deposits | 4,835,079 | 5,478 | 0.45 | 4,644,910 | 6,424 | 0.55 | 4,609,721 | 11,947 | 1.03 | ||||||||||||||||||||
| Borrowings | 276,183 | 1,105 | 1.59 | 331,633 | 1,419 | 1.72 | 467,399 | 1,992 | 1.70 | ||||||||||||||||||||
| Subordinated debentures | 152,825 | 2,168 | 5.63 | 152,750 | 2,168 | 5.69 | 202,502 | 2,700 | 5.30 | ||||||||||||||||||||
| Capital lease obligation | 2,018 | 30 | 5.90 | 2,066 | 31 | 6.02 | 2,211 | 33 | 5.94 | ||||||||||||||||||||
| Total interest-bearing liabilities | 5,266,105 | 8,781 | 0.66 | 5,131,359 | 10,042 | 0.78 | 5,281,833 | 16,672 | 1.26 | ||||||||||||||||||||
| Noninterest-bearing demand deposits | 1,495,456 | 1,432,707 | 1,253,235 | ||||||||||||||||||||||||||
| Other liabilities | 44,245 | 50,591 | 55,570 | ||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 1,539,701 | 1,483,298 | 1,308,805 | ||||||||||||||||||||||||||
| Stockholders' equity | 1,032,191 | 952,019 | 883,364 | ||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 7,837,997 | $ | 7,566,676 | $ | 7,474,002 | |||||||||||||||||||||||
| Net interest income (tax equivalent basis) | 68,761 | 63,418 | 61,005 | ||||||||||||||||||||||||||
| Net interest spread (5) | 3.54 | % | 3.39 | % | 3.18 | % | |||||||||||||||||||||||
| Net interest margin (6) | 3.73 | % | 3.60 | % | 3.49 | % | |||||||||||||||||||||||
| Tax equivalent adjustment | (516 | ) | (409 | ) | (456 | ) | |||||||||||||||||||||||
| Net interest income | $ | 68,245 | $ | 63,009 | $ | 60,549 | |||||||||||||||||||||||
| (1) Average balances are calculated on amortized cost. | |||||||||||||||||||||||||||||
| (2) Interest income is presented on a tax equivalent basis using 21% federal tax rate. | |||||||||||||||||||||||||||||
| (3) Includes loan fee income and accretion of purchase accounting adjustments. | |||||||||||||||||||||||||||||
| (4) Loans include nonaccrual loans. | |||||||||||||||||||||||||||||
| (5) 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. | |||||||||||||||||||||||||||||
| (6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. | |||||||||||||||||||||||||||||
| (7) Rates are annualized. | |||||||||||||||||||||||||||||
