Investor Relations

Press Release

ConnectOne Bancorp, Inc. Reports Third Quarter 2019 Results

Company Release - 10/24/2019 7:00 AM ET

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, 2019June 30, 2019September 30, 2018 
 Average    Average    Average   
Interest-earning assets:BalanceInterestRate (8) BalanceInterestRate (8) BalanceInterestRate (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.

logo.jpg

Source: ConnectOne Bancorp, Inc.