Investor Relations

Press Release

ConnectOne Bancorp, Inc. Reports Fourth Quarter and Year-End 2019 Results

Company Release - 1/23/2020 7:00 AM ET

ENGLEWOOD CLIFFS, N.J., Jan. 23, 2020 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $20.8 million for the fourth quarter of 2019 compared with $21.7 million for the third quarter of 2019 and $18.7 million for the fourth quarter of 2018.  Diluted earnings per share were $0.59 for the fourth quarter of 2019 compared with $0.61 for in the third quarter of 2019 and $0.58 for in the fourth quarter of 2018.  Full-year 2019 net income was $73.4 million, compared with $60.4 million for the full-year 2018.  Diluted earnings per share for the full-year 2019 was $2.07, compared with $1.86 for the full-year 2018. 

Adjusted net income amounted to $21.4 million, or $0.61 per diluted share, for the fourth quarter of 2019; $21.1 million, or $0.60 per diluted share, for the third quarter of 2019; and $19.1 million, or $0.59 per diluted share, for the fourth quarter of 2018.  Adjusted net income excludes $0.6 million, $0.1 million, and $0.7 million in after-tax merger-related expenses for the fourth quarter of 2019, third quarter of 2019 and fourth 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.  See supplemental tables for a complete reconciliation of GAAP earnings to adjusted earnings.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer, stated, “This past year was one of strategic growth and outstanding execution for ConnectOne. We delivered record earnings and achieved strong deposit and loan growth. Credit quality remains solid while we also continue to be one of the most efficient banks in the country. We’re also pleased with the groundwork we're laying for our continued long-term success and recently crossed over the $7 billion mark in total assets. On January 2, 2020, we completed the acquisition of the approximately $1.0 billionBancorp of New Jersey, Inc.  A financially savvy acquisition, this in-market transaction enhances our desirable franchise and provides attractive in-market growth opportunities. We’re on track to meet, or exceed, all financial metrics disclosed when the transaction was announced and expect to achieve cost savings in excess of the previously announced 60%.”

Mr. Sorrentino added, “We’re very pleased with our fourth quarter results, which reflected continued strong core performance and excellent execution across the organization. We continue to operate with a return on tangible common equity in excess of 15% and a return on assets of approximately 1.40%. New loan originations were $243 million for the quarter, reflecting strong activity in our C&I segment.  The strong originations, however, were largely offset by elevated loan payoffs, especially in our construction portfolio, which served to reduce sequential growth in total loans to only 2.1% annualized, which is well below our historical trend. Our pipeline remains strong and we continue to target a future growth rate in the 7.5%-10.0% range.  On the funding side, we were particularly pleased with a very much improved deposit mix -- average noninterest-bearing demand deposits increased by more than 16% annualized and time deposits fell by a similar percentage -- and our loan to deposit ratio declined to 107%. Our efficiency ratio was 41.8% and tangible book value per share increased by $0.46 during the quarter to $16.06. Tangible book value per share has increased by 11.3% over the past year. Looking ahead, we remain diligently focused on our strategic priorities, which include solid organic growth in loans and deposits, improvements in operating efficiency through use of technology and superior returns on investor capital.  On the M&A front, we are focused on flawless execution on completed transactions and remain opportunistic regarding potential future deals.”
  
Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2019 was $47.9 million, a decrease of $1.0 million, or 2.0%, from the third quarter of 2019, resulting primarily from an 8 basis-point contraction of the net interest margin to 3.36% from 3.44%.  Included in net interest income were purchase accounting adjustments of $1.5 million during the fourth quarter of 2019 and $1.6 million during the third quarter of 2019.  Excluding purchase accounting adjustments, the adjusted net interest margin was 3.26% for the fourth quarter of 2019, 7 basis points lower than the adjusted net interest margin of 3.33% for the third quarter of 2019.  The adjusted net interest margin contracted primarily due to lower prepayment and other fees on loans, while the decline in adjusted asset yields was largely offset by a lower cost of deposits and an improved funding mix.

Noninterest income was essentially unchanged at $2.2 million for the fourth quarter of 2019 versus $2.1 million in the third quarter of 2019 and higher than the $1.6 million recorded in the fourth quarter of 2018.  The increases from 2018 were due to the acquisitions of Greater Hudson and BoeFly, higher deposit fees, additional BOLI income and increases in gains on the sale of loans.

Noninterest expenses totaled $22.2 million for fourth quarter of 2019, $20.4 million for the third quarter of 2019 and $18.3 million for the fourth quarter of 2018.  Included in noninterest expenses were merger-related expenses of $0.9 million and $0.2 million, during the fourth quarter of 2019 and third quarter of 2019, respectively.  The third quarter of 2019 included an FDIC assessment credit of $1.3 million.  Excluding merger-related expenses and the effect of the FDIC credit, noninterest expenses decreased $0.2 million when compared to the third quarter of 2019.  The decrease versus the third quarter 2019 was primarily attributable to decreases in marketing and advertising, occupancy and equipment and FDIC insurance expense, offset by increases in compensation expenses related to a larger staff and higher cash and equity-based compensation accruals. The increase versus the year-ago fourth quarter of 2018 was largely due to the aforementioned acquisitions.

Income tax expense was $6.2 million for the fourth quarter of 2019, $6.4 million for the third quarter of 2019 and $3.6 million for the fourth quarter of 2018.  The effective tax rates for the fourth quarter of 2019, third quarter of 2019 and fourth quarter of 2018 were 23.0%, 22.9% and 16.3%, respectively.  The effective tax rate for the full-year 2019 was 21.9%, compared with 15.2% for the full-year 2018.  The increase in 2019 effective tax rates were primarily due an increase in taxable income and the negative impact of recent tax legislation in New Jersey.

Asset Quality

The provision for loan losses was $0.5 million for the fourth quarter of 2019, while the provision for loan losses was $1.1 million for both the third quarter of 2019 and the fourth quarter of 2018. The decrease in the provision for loan losses was primarily attributable to a decrease in net loan growth. 

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $49.2 million at December 31, 2019, $52.2 million at September 30, 2019 and $51.9 million at December 31, 2018. Included in nonperforming assets were taxi medallion loans totaling $23.4 million at December 31, 2019, $25.8 million at September 30, 2019 and $28.0 million at December 31, 2018.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.80% at December 31, 2019, 0.85% at September 30, 2019 and 0.95% at December 31, 2018.  Excluding the taxi medallion loans, nonaccrual loans were $25.8 million at December 31, 2019, $25.5 million at September 30, 2019 and $23.8 million at December 31, 2018, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.51%, 0.50% and 0.53%, respectively. The annualized net loan charge-off ratio was 0.08% for the fourth quarter of 2019, 0.07% for the third quarter of 2019 and 0.08% for the fourth quarter of 2018. The allowance for loan losses represented 0.75%, 0.76%, and 0.77% of loans receivable as of December 31, 2019, September 30, 2019 and December 31, 2018, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 147.0% as of December 31, 2019, 151.9% as of September 30, 2019 and 146.8% as of December 31, 2018.

Selected Balance Sheet Items

At December 31, 2019, the balance sheet reflected the acquisition of Greater Hudson Bank.  The Company’s total assets were $6.2 billion, an increase of $712 million from December 31, 2018.  Total loans were $5.1 billion, an increase of $606 million from December 31, 2018.  Included in total loans were loans held-for-sale of $33.2 million.  The Company’s stockholders’ equity was $731 million at December 31, 2019, an increase of $117 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 an additional $60 million in retained earnings.  As of December 31, 2019, the Company’s tangible common equity ratio and tangible book value per share were 9.37% and $16.06, 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 $0.45, or 2.9%, from the third quarter of 2019.  Total goodwill and other intangible assets were approximately $168 million as of December 31, 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.

Fourth Quarter 2019 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 23, 2020 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13697726. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Investor Relations" link on the Company's website https://www.connectonebank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, January 23, 2020 and ending on Thursday, January 30, 2020 by dialing 412-317-6671, access code 13697726.   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 37 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) 
    
 December 31, December 31,
  2019   2018 
 (unaudited)  
ASSETS   
Cash and due from banks$65,717  $39,161 
Interest-bearing deposits with banks 135,766   133,205 
Cash and cash equivalents 201,483   172,366 
    
Securities available-for-sale 404,701   412,034 
Equity securities 11,185   11,460 
    
Loans held-for-sale 33,250   - 
    
Loans receivable 5,113,527   4,541,092 
Less: Allowance for loan losses 38,293   34,954 
Net loans receivable 5,075,234   4,506,138 
    
Investment in restricted stock, at cost 27,397   31,136 
Bank premises and equipment, net 19,236   19,062 
Accrued interest receivable 20,949   18,214 
Bank owned life insurance 137,961   113,820 
Right of use operating lease assets 15,137   - 
Goodwill 162,574   145,909 
Core deposit intangibles 5,460   1,737 
Other assets 59,465   30,216 
Total assets$6,174,032  $5,462,092 
    
LIABILITIES   
Deposits:   
Noninterest-bearing$861,728  $768,584 
Interest-bearing 3,905,814   3,323,508 
Total deposits 4,767,542   4,092,092 
Borrowings 500,293   600,001 
Operating lease liabilities 16,449   - 
Subordinated debentures 128,885   128,556 
Other liabilities 29,673   27,516 
Total liabilities 5,442,842   4,848,165 
    
COMMITMENTS AND CONTINGENCIES   
    
STOCKHOLDERS' EQUITY   
Common stock 468,571   412,546 
Additional paid-in capital 21,344   15,542 
Retained earnings 271,782   211,345 
Treasury stock (29,360)  (16,717)
Accumulated other comprehensive loss (1,147)  (8,789)
Total stockholders' equity 731,190   613,927 
Total liabilities and stockholders' equity$6,174,032  $5,462,092 
    


CONNECTONE BANCORP, INC. AND SUBSIDIARIES       
CONSOLIDATED STATEMENTS OF INCOME       
(dollars in thousands, except for per share data)       
        
 Three Months Ended Twelve Months Ended
 12/31/19 12/31/18 12/31/19 12/31/18
Interest income       
Interest and fees on loans$64,833  $53,306 $255,479  $201,524 
Interest and dividends on investment securities:       
Taxable 1,700   2,291  9,131   8,482 
Tax-exempt 824   899  3,929   3,276 
Dividends 409   495  1,778   2,012 
Interest on federal funds sold and other short-term investments 242   232  1,167   839 
Total interest income 68,008   57,223  271,484   216,133 
Interest expense       
Deposits 16,272   12,398  65,570   39,936 
Borrowings 4,305   4,664  19,595   18,982 
Total interest expense 20,577   17,062  85,165   58,918 
        
Net interest income 47,431   40,161  186,319   157,215 
Provision for loan losses 500   1,100  8,100   21,100 
Net interest income after provision for loan losses 46,931   39,061  178,219   136,115 
        
Noninterest income       
Income on bank owned life insurance 914   794  3,484   3,094 
Net gains on sales of loans held-for-sale 169   30  512   61 
Deposit, loan and other income 1,209   691  4,025   2,584 
Net gains (losses) on equity securities (46)  58  294   (266)
Net losses on sales of securities available-for-sale -   -  (280)  - 
Total noninterest income 2,246   1,573  8,035   5,473 
        
Noninterest expenses       
Salaries and employee benefits 12,881   9,988  49,135   39,584 
Occupancy and equipment 2,380   2,001  9,712   8,312 
FDIC insurance 795   765  2,011   3,115 
Professional and consulting 1,428   1,129  5,506   3,568 
Marketing and advertising 273   244  1,353   980 
Data processing 1,151   1,080  4,503   4,421 
Merger expenses 871   936  8,955   1,335 
Loss on extinguishment of debt -   -  1,047   - 
Amortization of core deposit intangibles 340   144  1,408   627 
Other expenses 2,078   2,037  8,598   8,512 
Total noninterest expenses 22,197   18,324  92,228   70,454 
        
Income before income tax expense 26,980   22,310  94,026   71,134 
Income tax expense 6,197   3,638  20,631   10,782 
Net income$20,783  $18,672 $73,395  $60,352 
        
Earnings per common share:       
Basic$0.59  $0.58 $2.08  $1.87 
Diluted 0.59   0.58  2.07   1.86 
        


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
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 2019 2019 2019 2019 2018
  
Selected Financial Data(dollars in thousands)
Total assets$6,174,032  $6,161,269  $6,109,066  $6,048,976  $5,462,092 
Loans receivable:              
Commercial$1,096,224  $1,079,071  $1,018,951  $1,012,930  $925,229 
Commercial real estate1,559,354  1,551,182  1,555,542  1,483,852  1,279,502 
Multifamily1,518,400  1,513,216  1,589,340  1,608,613  1,562,195 
Commercial construction620,969  647,261  602,213  548,039  465,389 
Residential320,019  322,307  326,661  319,214  309,991 
Consumer3,328  2,436  2,041  4,157  2,593 
Gross loans5,118,294  5,115,473  5,094,748  4,976,805  4,544,899 
Unearned net origination fees(4,767) (5,002) (4,256) (4,154) (3,807)
Loans receivable5,113,527  5,110,471  5,090,492  4,972,651  4,541,092 
Loans held-for-sale33,250  33,245  -  368  - 
Total loans$5,146,777  $5,143,716  $5,090,492  $4,973,019  $4,541,092 
               
Investment securities$415,886  $437,080  $453,063  $528,103  $423,494 
Goodwill and other intangible assets168,034  168,374  168,714  162,747  147,646 
Deposits:              
Noninterest-bearing demand$861,728  $828,190  $813,635  $833,090  $768,584 
Time deposits1,553,721  1,573,736  1,623,948  1,544,247  1,366,054 
Other interest-bearing deposits2,352,093  2,349,308  2,203,560  2,216,661  1,957,454 
Total deposits$4,767,542  $4,751,234  $4,641,143  $4,593,998  $4,092,092 
               
Borrowings$500,293  $512,456  $597,317  $603,412  $600,001 
Subordinated debentures (net of debt issuance costs)128,885  128,802  128,720  128,638  128,556 
Total stockholders' equity731,190  720,160  699,224  682,395  613,927 
               
Quarterly Average Balances              
Total assets$6,084,607  $6,059,413  $6,001,669  $5,909,061  $5,261,493 
Loans receivable:              
Commercial$1,085,640  $1,040,355  $1,024,617  $1,035,874  $896,032 
Commercial real estate (including multifamily)3,074,889  3,144,978  3,088,231  3,011,692  2,771,239 
Commercial construction642,476  617,106  571,130  524,952  464,556 
Residential318,413  325,188  322,517  335,574  304,954 
Consumer4,165  3,525  3,252  3,397  4,292 
Gross loans5,125,583  5,131,152  5,009,747  4,911,489  4,441,073 
Unearned net origination fees(5,031) (4,778) (4,463) (3,930) (3,340)
Loans receivable5,120,552  5,126,374  5,005,284  4,907,559  4,437,733 
Loans held-for-sale33,163  991  225  124  211 
Total loans$5,153,715  $5,127,365  $5,005,509  $4,907,683  $4,437,944 
               
Investment securities$427,973  $448,618  $513,814  $524,394  $421,316 
Goodwill and other intangible assets168,257  168,598  164,709  162,814  147,741 
Deposits:              
Noninterest-bearing demand deposits$844,332  $810,248  $800,856  $824,115  $775,824 
Time deposits1,533,425  1,598,378  1,551,014  1,515,249  1,329,743 
Other interest-bearing deposits2,348,752  2,300,886  2,183,384  2,236,630  1,915,353 
Total deposits$4,726,509  $4,709,512  $4,535,254  $4,575,994  $4,020,920 
               
Borrowings$452,837  $467,230  $603,260  $486,687  $477,800 
Subordinated debentures (net of debt issuance costs)128,830  128,747  128,666  128,585  128,502 
Total stockholders' equity732,173  714,002  694,978  680,168  606,378 
               
 Three Months Ended
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 2019 2019 2019 2019 2018
          
 (dollars in thousands, except for per share data)
Net interest income$47,431  $48,406  $45,530  $44,952  $40,161 
Provision for loan losses500  2,000  1,100  4,500  1,100 
Net interest income after provision for loan losses46,931  46,406  44,430  40,452  39,061 
Noninterest income              
Income on bank owned life insurance914  915  833  822  794 
Net gains on sales of loans held-for-sale169  278  46  19  30 
Deposit, loan and other income1,209  1,116  914  786  691 
Net gains (losses) on equity securities(46) 79  158  103  58 
Net (losses) gains on sales of securities available-for-sale-  (279) (9) 8  - 
Total noninterest income2,246  2,109  1,942  1,738  1,573 
Noninterest expenses              
Salaries and employee benefits12,881  12,449  11,822  11,983  9,988 
Occupancy and equipment2,380  2,480  2,357  2,495  2,001 
FDIC insurance795  (364) 825  755  765 
Professional and consulting1,428  1,499  1,370  1,209  1,129 
Marketing and advertising273  473  397  210  244 
Data processing1,151  1,058  1,139  1,155  1,080 
Merger expenses871  191  331  7,562  936 
Loss on extinguishment of debt-  -  1,047  -  - 
Amortization of core deposit intangibles340  340  364  364  144 
Other expenses2,078  2,253  1,938  2,329  2,037 
Total noninterest expenses22,197  20,379  21,590  28,062  18,324 
               
Income before income tax expense26,980  28,136  24,782  14,128  22,310 
Income tax expense6,197  6,440  5,501  2,493  3,638 
Net income$20,783  $21,696  $19,281  $11,635  $18,672 
               
Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:              
Net income$20,783  $21,696  $19,281  $11,635  $18,672 
Merger expenses (after taxes)631  134  274  5,597  739 
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)32  (53) (110) (74) (40)
Tax benefit on employee share-based awards (ASU 2016-09)-  -  -  (20) (223)
Net income-adjusted$21,446  $21,056  $20,179  $17,132  $19,148 
               
Weighted average diluted shares outstanding35,245,285  35,262,565  35,397,362  35,309,503  32,378,739 
               
Diluted EPS (GAAP)$0.59  $0.61  $0.54  $0.33  $0.58 
Diluted EPS-adjusted (Non-GAAP) (1)0.61  0.60  0.57  0.49  0.59 
               
Return on Assets Measures              
Net income-adjusted$21,446  $21,056  $20,179  $17,132  $19,148 
               
Average assets$6,084,607  $6,059,413  $6,001,669  $5,909,061  $5,261,493 
Less: average intangible assets(168,257) (168,598) (164,709) (162,814) (147,741)
Average tangible assets$5,916,350  $5,890,815  $5,836,960  $5,746,247  $5,113,752 
Return on avg. assets (GAAP)1.36 % 1.42 % 1.29 % 0.80 % 1.41 %
Return on avg. assets-adjusted (non-GAAP) (2)1.40  1.38  1.35  1.18  1.44 
               
(1) Represents adjusted net income divided by weighted average diluted shares outstanding.
(2) Adjusted net income divided by average assets.
               
 Three Months Ended
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 2019 2019 2019 2019 2018
  
Return on Equity Measures(dollars in thousands)
Net income-adjusted$21,446  $21,056  $20,179  $17,132  $19,148 
               
Average common equity$732,173  $714,002  $694,978  $680,168  $606,378 
Less: average intangible assets(168,257) (168,598) (164,709) (162,814) (147,741)
Average tangible common equity$563,916  $545,404  $530,269  $517,354  $458,637 
               
Return on avg. common equity (GAAP)11.26 % 12.06 % 11.13 % 6.94 % 12.22 %
Return on avg. common equity-adjusted (non-GAAP) (3)11.62  11.70  11.65  10.22  12.53 
Return on avg. tangible common equity (non-GAAP) (4)14.79  15.96  14.78  9.33  16.24 
Return on avg. tangible common equity-adjusted (non-GAAP) (5)15.26  15.49  15.46  13.63  16.65 
               
Efficiency Measures              
Total noninterest expenses$22,197  $20,379  $21,590  $28,062  $18,324 
Amortization of core deposit intangibles(340) (340) (364) (364) (144)
Merger expenses(871) (191) (331) (7,562) (936)
FDIC small bank assessment credit-  1,310  -  -  - 
Loss on extinguishment of debt-  -  (1,047) -  - 
Foreclosed property expense8  (90) -  1  (8)
Operating noninterest expense$20,994  $21,068  $19,848  $20,137  $17,236 
               
Net interest income (tax equivalent basis)$47,929  $48,918  $46,092  $45,523  $40,678 
Noninterest income2,246  2,109  1,942  1,738  1,573 
Net (gains) losses on equity securities46  (79) (158) (103) (58)
Net losses (gains) on sales of securities available-for-sale-  279  9  (8) - 
Operating revenue$50,221  $51,227  $47,885  $47,150  $42,193 
               
Operating efficiency ratio (non-GAAP) (6)41.8 % 41.1 % 41.4 % 42.7 % 40.9 %
               
Net Interest Margin              
Average interest-earning assets$5,663,538  $5,649,058  $5,607,086  $5,522,934  $4,941,425 
               
Net interest income (tax equivalent basis)$47,929  $48,918  $46,092  $45,523  $40,678 
Impact of purchase accounting fair value marks(1,455) (1,566) (1,742) (1,233) (148)
Adjusted net interest income (tax equivalent basis)$46,474  $47,352  $44,350  $44,290  $40,530 
               
Net interest margin (GAAP)3.36 % 3.44 % 3.30 % 3.34 % 3.27 %
Adjusted net interest margin (non-GAAP) (7)3.26  3.33  3.17  3.25  3.25 
               
(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
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
 2019 2019 2019 2019 2018
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)
Common equity$731,190  $720,160  $699,224  $682,395  $613,927 
Less: intangible assets(168,034) (168,374) (168,714) (162,747) (147,646)
Tangible common equity$563,156  $551,786  $530,510  $519,648  $466,281 
               
Total assets$6,174,032  $6,161,269  $6,109,066  $6,048,976  $5,462,092 
Less: intangible assets(168,034) (168,374) (168,714) (162,747) (147,646)
Tangible assets$6,005,998  $5,992,895  $5,940,352  $5,886,229  $5,314,446 
               
Common shares outstanding35,072,066  35,364,845  35,352,806  35,432,468  32,328,542 
               
Common equity ratio (GAAP)11.84 % 11.69 % 11.45 % 11.28 % 11.24 %
Tangible common equity ratio (non-GAAP) (8)9.38  9.21  8.93  8.83  8.77 
               
Regulatory capital ratios (Bancorp):              
Leverage ratio9.54 % 9.39 % 9.14 % 9.12 % 9.34 %
Common equity Tier 1 risk-based ratio9.95  9.78  9.65  9.68  9.75 
Risk-based Tier 1 capital ratio10.04  9.87  9.74  9.78  9.86 
Risk-based total capital ratio12.95  12.80  12.72  12.80  13.15 
               
Regulatory capital ratios (Bank):              
Leverage ratio10.80 % 10.56 % 10.42 % 10.43 % 10.78 %
Common equity Tier 1 risk-based ratio11.37  10.68  11.12  11.18  11.37 
Risk-based Tier 1 capital ratio11.37  11.23  11.12  11.18  11.37 
Risk-based total capital ratio12.63  11.23  12.40  12.47  12.75 
               
Book value per share (GAAP)$20.85  $20.36  $19.78  $19.26  $18.99 
Tangible book value per share (non-GAAP) (9)16.06  15.60  15.01  14.67  14.42 
               
Net Loan Charge-Off (Recoveries) Detail              
Net loan charge-offs (recoveries) :              
Charge-offs$1,029  $964  $406  $2,676  $920 
Recoveries(22) (37) (146) (80) (25)
Net loan charge-offs (recoveries)$1,007  $927  $260  $2,596  $895 
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)0.08 % 0.07 % 0.02 % 0.21 % 0.08 %
               
Asset Quality              
Nonaccrual taxi medallion loans$23,431  $25,802  $26,498  $27,287  $28,043 
Nonaccrual loans (excluding taxi medallion loans)26,050  25,519  23,419  20,393  23,812 
Other real estate owned-  907  -  -  - 
Total nonperforming assets$49,481  $52,228  $49,917  $47,680  $51,855 
               
Performing troubled debt restructurings$21,410  $19,681  $16,332  $8,191  $11,165 
               
Allowance for loan losses ("ALLL")$38,293  $38,771  $37,698  $36,858  $34,954 
               
Loans receivable$5,113,527  $5,110,471  $5,090,492  $4,972,651  $4,541,092 
Less: taxi medallion loans24,977  27,353  28,054  28,911  28,043 
Loans receivable (excluding taxi medallion loans)$5,088,550  $5,083,118  $5,062,438  $4,943,740  $4,513,049 
               
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans)0.51 % 0.50 % 0.46 % 0.41 % 0.53 %
Nonaccrual loans as a % of loans receivable0.97  1.00  0.98  0.96  1.14 
Nonperforming assets as a % of total assets0.80  0.85  0.82  0.79  0.95 
ALLL as a % of loans receivable0.75  0.76  0.74  0.74  0.77 
ALLL as a % of nonaccrual loans (excluding taxi medallion loans)147.0  151.9  161.0  180.7  146.8 
ALLL as a % of nonaccrual loans77.4  75.5  75.5  77.3  67.4 
               
(8) Tangible common equity divided by tangible assets.
(9) Tangible common equity divided by common shares outstanding at period-end.
               


CONNECTONE BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(dollars in thousands)
 For the Three Months Ended
 December 31, 2019
September 30, 2019
December 31, 2018
 Average         Average         Average        
Interest-earning assets:Balance  Interest  Rate(8)   Balance  Interest  Rate(8)   Balance  Interest  Rate(8)  
Investment securities (1) (2)$423,857  $2,737  2.56%  $445,492  $3,053  2.72%  $433,686  $3,429  3.14% 
Total loans (2) (3) (4)5,153,715  65,118  5.01   5,127,365  67,068  5.19   4,437,944  53,584  4.79  
Federal funds sold and interest-                             
bearing deposits with banks60,705  242  1.58   50,289  278  2.19   44,163  232  2.08  
Restricted investment in bank stock25,261  409  6.42   25,912  502  7.69   25,632  495  7.66  
Total interest-earning assets5,663,538  68,506  4.80   5,649,058  70,901  4.98   4,941,425  57,740  4.64  
Allowance for loan losses(39,094)        (37,704)        (35,036)       
Noninterest-earning assets460,163         448,059         355,104        
Total assets$6,084,607         $6,059,413         $5,261,493        
                              
Interest-bearing liabilities:                             
Time deposits$1,533,425  9,573  2.48   $1,598,378  9,934  2.47   $1,329,743  7,062  2.11  
Other interest-bearing deposits2,348,752  6,699  1.13   2,300,886  7,416  1.28   1,915,353  5,336  1.11  
Total interest-bearing deposits3,882,177  16,272  1.66   3,899,264  17,350  1.77   3,245,096  12,398  1.52  
                              
Borrowings452,837  2,431  2.13   467,230  2,754  2.34   477,800  2,783  2.31  
Subordinated debentures (5)128,830  1,839  5.66   128,747  1,843  5.68   128,502  1,843  5.69  
Capital lease obligation2,348  35  5.91   2,393  36  5.97   2,520  38  5.98  
Total interest-bearing liabilities4,466,192  20,577  1.83   4,497,634  21,983  1.94   3,853,918  17,062  1.76  
                              
Noninterest-bearing demand deposits844,332         810,247         775,824        
Other liabilities41,910         37,530         25,373        
Total noninterest-bearing liabilities886,242         847,777         801,197        
Stockholders' equity732,173         714,002         606,378        
Total liabilities and stockholders' equity$6,084,607         $6,059,413         $5,261,493        
                              
Net interest income (tax equivalent basis)   47,929         48,918         40,678     
Net interest spread (6)      2.97%        3.04%        2.88% 
                              
Net interest margin (7)      3.36%        3.44%        3.27% 
                              
Tax equivalent adjustment   (498)        (512)        (517)    
Net interest income   $47,431         $48,406         $40,161     
                              
 
(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 $1,325, $1,407, and $1,652 for the three months ended December 31, 2019, September 30, 2019 abd December 31, 2018, respectively.
Amortization expense related to debt issuance costs included in interest expense was $82, $82 and $82 for the three months ended December 31, 2019, September 30, 2019 and December 31 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.
                              

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Source: ConnectOne Bancorp, Inc.