Investor Relations

Press Release

ConnectOne Bancorp, Inc. Reports First Quarter 2020 Results

Company Release - 4/30/2020 7:00 AM ET

ENGLEWOOD CLIFFS, N.J., April 30, 2020 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $6.0 million for the first quarter of 2020 compared with $20.8 million for the fourth quarter of 2019 and $11.6 million for the first quarter of 2019.  Diluted earnings per share were $0.15 for the first quarter of 2019 compared with $0.59 earned in the fourth quarter of 2019 and $0.33 earned in the first quarter of 2019. The decrease in net income and diluted earnings per share from the fourth quarter of 2019 was primarily due to an increase in provision for loan losses of $15.5 million substantially due to the economic uncertainties caused by the COVID-19 pandemic.  On January 2, 2020, the acquisition of Bancorp of New Jersey (“BNJ”) was completed and thus first quarter 2020 results reflect the operations of the combined entity.  Historical financial information includes only the operations of ConnectOne, pre-merger. Included in net income were merger expenses of $9.5 million for the first quarter of 2020, $0.9 million for the fourth quarter of 2019 and $7.6 million for the first quarter of 2019.  On a pre-tax, pre-provision and pre-merger charges basis, earnings were $32.6 million for the first quarter of 2020, $28.4 million for the fourth quarter of 2019, and $26.2 million for the first quarter of 2019.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne continues to navigate through this unprecedented time.  While our priorities are the safety of our employees and supporting our clients through these challenging times, we continue to execute on all our business strategies. As a technology-forward bank, our operations and teams have transitioned quickly to offering essential banking services virtually. Our business is functioning well and I’m proud of the resiliency of the ConnectOne team as we’re using the full range of our Company's banking expertise to help clients.”  

“We’ve also continued to be a resource to the communities we serve by actively participating in the SBA’s Paycheck Protection Program (the “PPP”).  ConnectOne expects to fund a total of approximately $385 million in the initial PPP tranche. Additionally, there are over 1,000 new applications being processed for the second PPP tranche.  Furthermore, our FinTech subsidiary BoeFly – which connects small- to mid-sized businesses to a network of financial lenders – has participated in the PPP in a meaningful way, agenting upwards of $750 million and potentially and significantly increasing its relationships with borrowers and banking partners.”

Mr. Sorrentino added, “While our first quarter results were affected by the current economic environment, we were pleased with our strong overall financial performance notwithstanding the increase in COVID-related reserves. We’re operating ConnectOne in a disciplined manner, continue to watch credit and remain well-positioned to leverage our experience, our solid financial position and our relationship-focused banking model during this crisis.”

Operating Results

Fully taxable equivalent net interest income for the first quarter of 2020 was $55.8 million, an increase of $7.9 million, or 16.4%, from the fourth quarter of 2019, resulting primarily from an 16.3% increase in average interest-earning assets and a 5 basis-point widening of the net interest margin to 3.41% from 3.36%, both resulting largely from the BNJ acquisition. Included in net interest income were purchase accounting adjustments of $3.5 million during the first quarter of 2020 and $1.5 million during the fourth quarter of 2019.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.20% for the first quarter of 2020 and 3.26% for the fourth quarter of 2019.  The adjusted net interest contracted as a result of higher cash balances and from the BNJ acquisition.  The adjusted net interest margin contraction resulting from the BNJ acquisition was mitigated through securities portfolio restructuring and deposit rate reductions effected toward the end of the first quarter of 2020.

Noninterest income increased to $2.9 million in the first quarter of 2020 from $2.2 million in the fourth quarter of 2019 and $1.7 million in the first quarter of 2019.  The increases in noninterest income for the sequential quarter were primarily attributed to increases in net gains on equity securities of $0.2 million, increases in net gains on sale of loans held-for-sale of $0.2 million and increases in deposit, loan and other income of $0.1 million.

Noninterest expenses totaled $35.2 million for first quarter of 2020, $22.2 million for the fourth quarter of 2019 and $28.1 million for the first quarter of 2019.  Included in noninterest expenses were merger related expenses totaling $9.5 million, $0.9 million and $7.6 million, during the first quarter of 2020, fourth quarter of 2019 and first quarter of 2019, respectively.  Excluding merger-related expenses, noninterest expenses increased by $4.2 million from the fourth quarter of 2019 due primarily to increases in salaries and employee benefits of $1.7 million, occupancy and equipment expenses of $1.1 million and other expenses of $0.6 million.  These increases are primarily due to the expansion of our franchise through the BNJ acquisition and reflect approximately one-third of projected cost saves, which are estimated to be approximately 70% of BNJ’s expense base.

Income tax expense was $1.1 million for the first quarter of 2020, $6.2 million for the fourth quarter of 2019 and $2.5 million for the first quarter of 2019.  The effective tax rates for the first quarter of 2020, fourth quarter of 2019 and first quarter of 2019 were 15.1%, 23.0% and 17.6%, respectively. The decrease in the effective tax rate for the current quarter from the sequential quarter was due to a larger proportion of income from nontaxable sources.

Asset Quality

In accordance with the accounting relief provisions of the CARES Act, the Company has postponed the adoption of the current expected credit losses (“CECL”) accounting standards as permitted under regulatory guidance. Management reached this decision due to the complexities of CECL loan loss forecasting exacerbated by the quickly changing economic environment resulting from the COVID-19 pandemic.  Had the Company adopted CECL as of January 1, 2020, the increase to its allowance for loan losses for “Day 1” implementation would have ranged from $4 million to $14 million, excluding the re-allocation of an additional $8 million of non-accretable purchase credit-impaired marks.

The provision for loan losses was $16.0 million for the first quarter of 2020, $0.5 million for the fourth quarter of 2019 and $4.5 million for the first quarter of 2019.  The increase in the loan loss provision in the first quarter of 2020 was largely due to the economic uncertainties of COVID-19, including consideration of related payment deferrals requested and/or granted to date.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $62.4 million at March 31, 2020, $49.5 million at December 31, 2019 and $47.7 million at March 31, 2019. Included in nonperforming assets were taxi medallion loans totaling $23.0 million at March 31, 2020, $23.4 million at December 31, 2019 and $27.3 million at March 31, 2019.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.86% at March 31, 2020, 0.80% at December 31, 2019 and 0.79% at March 31, 2019.  Excluding the taxi medallion loans, nonaccrual loans were $39.3 million at March 31, 2020, $26.1 million at December 31, 2019 and $20.4 million at March 31, 2019, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.66%, 0.51% and 0.41%, respectively. Nonaccruals increased $13.3 million from December 31, 2019 primarily due to a commercial construction relationship of $11.4 million that is well-secured.  The annualized net loan charge-off ratio was 0.01% for the first quarter of 2020, 0.08% for the fourth quarter of 2019 and 0.21% for the first quarter of 2019. The allowance for loan losses represented 0.90%, 0.75%, and 0.74% of loans receivable as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.  The allowance, currently excludes approximately $8 million of purchase accounting credit marks that are expected to be added to the allowance once CECL is implemented, resulting in an additional 13 bps to the allowance as a percent of loans ratio. The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 137.7% as of March 31, 2020, 147.0% as of December 31, 2019 and 180.7% as of March 31, 2019.

Selected Balance Sheet Items

At March 31, 2020, the balance sheet reflected the acquisition of BNJ.  The Company’s total assets were $7.3 billion, an increase of $1.1 billion from December 31, 2019.  Loans receivable were $6.0 billion, an increase of $896 million from December 31, 2019.  The increase in total assets and loans receivable were primarily attributable to the acquisition of BNJ.  The Company’s stockholders’ equity was $854 million at March 31, 2020, an increase of $123 million from December 31, 2019. The increase in stockholders’ equity was primarily attributable to the acquisition of BNJ, which increased capital by $118 million.  As of March 31, 2020, the Company’s tangible common equity ratio and tangible book value per share were 8.96% and $15.93, respectively.  As of December 31, 2019, the tangible common equity ratio and tangible book value per share were 9.38% and $16.06, respectively. Total goodwill and other intangible assets were approximately $221 million as of March 31, 2020 and $168 million and December 31, 2019.

During the first quarter of 2020, the Bancorp repurchased approximately 55,000 shares of common stock leaving a remaining capacity of approximately 605,000 shares in the Board authorized program.  Due to the COVID-19 pandemic, the Company has suspended repurchases of common stock during the COVID-19 pandemic.  

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.

First Quarter 2020 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 30, 2020 to review the Company's financial performance and operating results. The conference call dial-in number is 631-891-4304, access code 10009333. 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, April 30, 2020 and ending on Thursday, May 7, 2020 by dialing 412-317-6671, access code 10009333. 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 banking offices located across 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, 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:
Emily Holtzman, MWWPR
631.742.9568; eholtzman@mww.com



CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
      
 Mar 31, December 31,  Mar 31,
  2020   2019   2019 
 (unaudited)   (unaudited)
ASSETS     
Cash and due from banks$59,442  $65,717  $54,520 
Interest-bearing deposits with banks 223,367   135,766   118,028 
Cash and cash equivalents 282,809   201,483   172,548 
      
Securities available-for-sale 446,738   404,701   516,539 
Equity securities 13,363   11,185   11,564 
      
Loans held-for-sale 32,425   33,250   368 
      
Loans receivable 6,009,310   5,113,527   4,972,651 
Less: Allowance for loan losses 54,169   38,293   36,858 
Net loans receivable 5,955,141   5,075,234   4,935,793 
      
Investment in restricted stock, at cost 38,554   27,397   31,727 
Bank premises and equipment, net 32,864   19,236   20,150 
Accrued interest receivable 24,317   20,949   21,198 
Bank owned life insurance 163,929   137,961   125,300 
Leases 26,924   15,137   15,311 
Goodwill 208,379   162,574   156,243 
Core deposit intangibles 12,884   5,460   6,504 
Other assets 41,000   59,465   35,731 
Total assets$7,279,327  $6,174,032  $6,048,976 
      
LIABILITIES     
Deposits:     
Noninterest-bearing$979,778  $861,728  $833,090 
Interest-bearing 4,529,414   3,905,814   3,760,908 
Total deposits 5,509,192   4,767,542   4,593,998 
Borrowings 726,856   500,293   603,412 
Leases 28,731   16,449   16,719 
Subordinated debentures 128,967   128,885   128,638 
Other liabilities 31,871   29,673   23,814 
Total liabilities 6,425,617   5,442,842   5,366,581 
      
COMMITMENTS AND CONTINGENCIES     
      
STOCKHOLDERS' EQUITY     
Common stock 586,946   468,571   468,571 
Additional paid-in capital 21,746   21,344   16,513 
Retained earnings 273,825   271,782   219,558 
Treasury stock (30,271)  (29,360)  (16,967)
Accumulated other comprehensive loss 1,464   (1,147)  (5,280)
Total stockholders' equity 853,710   731,190   682,395 
Total liabilities and stockholders' equity$7,279,327  $6,174,032  $6,048,976 
      



      
CONNECTONE BANCORP, INC. AND SUBSIDIARIES     
CONSOLIDATED STATEMENTS OF INCOME     
(dollars in thousands, except for per share data)     
      
 Three Months Ended
 3/31/2020 12/31/20193/31/2019
Interest income     
Interest and fees on loans$72,936 $64,833  $60,326
Interest and dividends on investment securities:     
Taxable 2,066  1,700   2,942
Tax-exempt 813  824   1,127
Dividends 400  409   457
Interest on federal funds sold and other short-term investments 499  242   357
Total interest income 76,714  68,008   65,209
Interest expense     
Deposits 17,212  16,272   15,351
Borrowings 4,221  4,305   4,906
Total interest expense 21,433  20,577   20,257
      
Net interest income 55,281  47,431   44,952
Provision for loan losses 16,000  500   4,500
Net interest income after provision for loan losses 39,281  46,931   40,452
      
Noninterest income     
Income on bank owned life insurance 967  914   822
Net gains on sale of loans held-for-sale 393  169   19
Deposit, loan and other income 1,287  1,209   786
Net gains on equity securities 178  (46)  103
Net gains on sale of investment securities 29  -   8
Total noninterest income 2,854  2,246   1,738
      
Noninterest expenses     
Salaries and employee benefits 14,563  12,881   11,983
Occupancy and equipment 3,471  2,380   2,495
FDIC insurance 856  795   755
Professional and consulting 1,574  1,428   1,209
Marketing and advertising 304  273   210
Data processing 1,473  1,151   1,155
Merger expenses 9,494  871   7,562
Amortization of core deposit intangible 652  340   364
Other expenses 2,671  2,078   2,329
Total noninterest expenses 35,058  22,197   28,062
      
Income before income tax expense 7,077  26,980   14,128
Income tax expense 1,047  6,197   2,493
Net income$6,030 $20,783  $11,635
      
Earnings per common share:     
Basic$0.15 $0.59  $0.33
Diluted 0.15  0.59   0.33
      



 
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 
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 
  2020   2019   2019   2019   2019  
                     
Selected Financial Data(dollars in thousands) 
Total assets$7,279,327  $6,174,032  $6,161,269  $6,109,066  $6,048,976  
Loans receivable:          
Commercial$1,203,818  $1,096,224  $1,079,071  $1,018,951  $1,012,930  
Commercial real estate 1,981,149   1,559,354   1,551,182   1,555,542   1,483,852  
Multifamily 1,762,651   1,518,400   1,513,216   1,589,340   1,608,613  
Commercial construction 676,836   620,969   647,261   602,213   548,039  
Residential 387,400   320,019   322,307   326,661   319,215  
Consumer 1,965   3,328   2,436   2,041   4,156  
Gross loans 6,013,819   5,118,294   5,115,473   5,094,748   4,976,805  
Unearned net origination fees (4,509)  (4,767)  (5,002)  (4,256)  (4,154) 
Loans receivable 6,009,310   5,113,527   5,110,471   5,090,492   4,972,651  
Loans held-for-sale 32,425   33,250   33,245   -   368  
Total loans$6,041,735  $5,146,777  $5,143,716  $5,090,492  $4,973,019  
           
Investment securities$460,101  $415,886  $437,080  $453,063  $528,103  
Goodwill and other intangible assets 221,263   168,034   168,374   168,714   162,747  
Deposits:          
Noninterest-bearing demand$979,778  $861,728  $828,190  $813,635  $833,090  
Time deposits 1,974,400   1,553,721   1,573,736   1,623,948   1,544,247  
Other interest-bearing deposits 2,555,014   2,352,093   2,349,308   2,203,560   2,216,661  
Total deposits$5,509,192  $4,767,542  $4,751,234  $4,641,143  $4,593,998  
           
Borrowings$726,856  $500,293  $512,456  $597,317  $603,412  
Subordinated debentures (net of debt issuance costs) 128,967   128,885   128,802   128,720   128,638  
Total stockholders' equity 853,710   731,190   720,160   699,224   682,395  
           
Quarterly Average Balances          
Total assets$7,106,027  $6,084,607  $6,059,413  $6,001,669  $5,909,061  
Loans receivable:          
Commercial$1,146,773  $1,085,640  $1,040,355  $1,024,617  $1,035,874  
Commercial real estate (including multifamily) 3,723,991   3,074,889   3,144,978   3,088,231   3,011,692  
Commercial construction 663,036   642,476   617,106   571,130   524,952  
Residential 390,655   318,413   325,188   322,517   335,574  
Consumer 3,007   4,165   3,525   3,252   3,397  
Gross loans 5,927,462   5,125,583   5,131,152   5,009,747   4,911,489  
Unearned net origination fees (4,648)  (5,031)  (4,778)  (4,463)  (3,930) 
Loans receivable 5,922,814   5,120,552   5,126,374   5,005,284   4,907,559  
Loans held-for-sale 33,655   33,163   991   225   124  
Total loans$5,956,469  $5,153,715  $5,127,365  $5,005,509  $4,907,683  
           
Investment securities$458,642  $427,973  $448,618  $513,814  $524,394  
Goodwill and other intangible assets 221,075   168,257   168,598   164,709   162,814  
Deposits:          
Noninterest-bearing demand$955,358  $844,332  $810,247  $800,856  $824,115  
Time deposits 1,962,714   1,533,425   1,598,378   1,551,014   1,515,249  
Other interest-bearing deposits 2,660,755   2,348,752   2,300,886   2,183,384   2,236,630  
Total deposits$5,578,827  $4,726,509  $4,709,511  $4,535,254  $4,575,994  
           
Borrowings$477,121  $452,837  $467,230  $603,260  $486,687  
Subordinated debentures (net of debt issuance costs) 128,913   128,830   128,747   128,666   128,585  
Total stockholders' equity 864,241   732,173   714,002   694,978   680,168  
           
 Three Months Ended 
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 
  2020   2019   2019   2019   2019  
                     
 (dollars in thousands, except for per share data) 
Net interest income$55,281  $47,431  $48,406  $45,530  $44,952  
Provision for loan losses 16,000   500   2,000   1,100   4,500  
Net interest income after provision for loan losses 39,281   46,931   46,406   44,430   40,452  
Noninterest income          
Income on bank owned life insurance 967   914   915   833   822  
Net gains on sale of loans held-for-sale 393   169   278   46   19  
Deposit, loan and other income 1,287   1,209   1,116   914   786  
Net gains (losses) on equity securities 178   (46)  79   158   103  
Net gains (losses) on sale of investment securities 29   -   (279)  (9)  8  
Total noninterest income 2,854   2,246   2,109   1,942   1,738  
Noninterest expenses          
Salaries and employee benefits 14,563   12,881   12,449   11,822   11,983  
Occupancy and equipment 3,471   2,380   2,480   2,357   2,495  
FDIC insurance 856   795   (364)  825   755  
Professional and consulting 1,574   1,428   1,499   1,370   1,209  
Marketing and advertising 304   273   473   397   210  
Data processing 1,473   1,151   1,058   1,139   1,155  
Merger expenses 9,494   871   191   331   7,562  
Loss on extinguishment of debt -   -   -   1,047   -  
Amortization of core deposit intangible 652   340   340   364   364  
Other expenses 2,671   2,078   2,253   1,938   2,329  
Total noninterest expenses 35,058   22,197   20,379   21,590   28,062  
           
Income before income tax expense 7,077   26,980   28,136   24,782   14,128  
Income tax expense 1,047   6,197   6,440   5,501   2,493  
Net income$6,030  $20,783  $21,696  $19,281  $11,635  
           
Weighted average diluted shares outstanding 39,510,810   35,245,285   35,262,565   35,397,362   35,309,503  
Diluted EPS$0.15  $0.59  $0.61  $0.54  $0.33  
           
Reconciliation of GAAP Earnings to Pre-tax, Pre-provision and Pre-merger charges Earnings          
Net income$6,030  $20,783  $21,696  $19,281  $11,635  
Income tax expense 1,047   6,197   6,440   5,501   2,493  
Merger charges 9,494   871   191   331   7,562  
Provision for loan losses 16,000   500   2,000   1,100   4,500  
Pre-tax, pre-provision and pre-merger charges earnings$32,571  $28,351  $30,327  $26,213  $26,190  
           
Return on Assets          
Average assets$7,106,027  $6,084,607  $6,059,413  $6,001,669  $5,909,061  
Return on average assets 0.34 % 1.36 % 1.42 % 1.29 % 0.80 %
           
 Three Months Ended 
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 
  2020   2019   2019   2019   2019  
                     
Return on Equity Measures(dollars in thousands) 
Average common equity$864,241  $732,173  $714,002  $694,978  $680,168  
Less: average intangible assets (221,075)  (168,257)  (168,598)  (164,709)  (162,814) 
Average tangible common equity$643,166  $563,916  $545,404  $530,269  $517,354  
           
Return on average common equity (GAAP) 2.81 % 11.26 % 12.06 % 11.13 % 6.94 %
Return on average tangible common equity (non-GAAP) (1) 4.06   14.79   15.96   14.78   9.33  
           
Efficiency Measures          
Total noninterest expenses$35,058  $22,197  $20,379  $21,590  $28,062  
Amortization of core deposit intangibles (652)  (340)  (340)  (364)  (364) 
Merger expenses (9,494)  (871)  (191)  (331)  (7,562) 
FDIC small bank assessment credit -   -   1,310   -   -  
Loss on extinguishment of debt -   -   -   (1,047)  -  
Foreclosed property expense 10   8   (90)  -   1  
Operating noninterest expense$24,922  $20,994  $21,068  $19,848  $20,137  
           
Net interest income (tax equivalent basis)$55,781  $47,929  $48,918  $46,092  $45,523  
Noninterest income 2,854   2,246   2,109   1,942   1,738  
Net (gains) losses on equity securities (178)  46   (79)  (158)  (103) 
Net losses (gains) on sales of securities (29)  -   279   9   (8) 
Operating revenue$58,428  $50,221  $51,227  $47,885  $47,150  
           
Operating efficiency ratio (non-GAAP) (2) 42.7 % 41.8 % 41.1 % 41.4 % 42.7 %
           
Net Interest Margin          
Average interest-earning assets$6,584,508  $5,663,538  $5,649,058  $5,607,086  $5,522,934  
           
Net interest income (tax equivalent basis)$55,781  $47,929  $48,918  $46,092  $45,523  
Impact of purchase accounting fair value marks (3,457)  (1,455)  (1,566)  (1,742)  (1,233) 
Adjusted net interest income (tax equivalent basis)$52,324  $46,474  $47,352  $44,350  $44,290  
           
Net interest margin (GAAP) 3.41 % 3.36 % 3.44 % 3.30 % 3.34 %
Adjusted net interest margin (non-GAAP) (3) 3.20   3.26   3.33   3.17   3.25  
           
(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 
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 
  2020   2019   2019   2019   2019  
                     
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data) 
Common equity$853,710  $731,190  $720,160  $699,224  $682,395  
Less: intangible assets (221,263)  (168,034)  (168,374)  (168,714)  (162,747) 
Tangible common equity$632,447  $563,156  $551,786  $530,510  $519,648  
           
Total assets$7,279,327  $6,174,032  $6,161,269  $6,109,066  $6,048,976  
Less: intangible assets (221,263)  (168,034)  (168,374)  (168,714)  (162,747) 
Tangible assets$7,058,064  $6,005,998  $5,992,895  $5,940,352  $5,886,229  
           
Common shares outstanding 39,704,921   35,072,066   35,364,845   35,352,806   35,443,933  
           
Common equity ratio (GAAP) 11.73 % 11.84 % 11.69 % 11.45 % 11.28 %
Tangible common equity ratio (non-GAAP) (4) 8.96   9.38   9.21   8.93   8.83  
           
Regulatory capital ratios (Bancorp):          
Leverage ratio 9.20 % 9.54 % 9.39 % 9.14 % 9.12 %
Common equity Tier 1 risk-based ratio 9.59   9.95   9.78   9.65   9.68  
Risk-based Tier 1 capital ratio 9.67   10.04   9.87   9.74   9.77  
Risk-based total capital ratio 12.41   12.95   12.80   12.72   12.79  
           
Regulatory capital ratios (Bank):          
Leverage ratio 10.36 % 10.81 % 10.68 % 10.42 % 10.43 %
Common equity Tier 1 risk-based ratio 10.88   11.37   11.23   11.12   11.17  
Risk-based Tier 1 capital ratio 10.88   11.37   11.23   11.12   11.17  
Risk-based total capital ratio 12.20   12.63   12.50   12.40   12.46  
           
Book value per share (GAAP)$21.50  $20.85  $20.36  $19.78  $19.25  
Tangible book value per share (non-GAAP) (5) 15.93   16.06   15.60   15.01   14.66  
           
Net Loan Charge-Off (Recoveries) Detail          
Net loan charge-offs (recoveries) :          
Charge-offs$115  $1,029  $964  $406  $2,676  
Recoveries (3)  (22)  (37)  (146)  (80) 
Net loan charge-offs (recoveries)$112  $1,007  $927  $260  $2,596  
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.01 % 0.08 % 0.07 % 0.02 % 0.21 %
           
Asset Quality          
Nonaccrual taxi medallion loans$23,024  $23,431  $25,802  $26,498  $27,287  
Nonaccrual loans (excluding taxi medallion loans) 39,349   26,050   25,519   23,419   20,393  
Other real estate owned -   -   907   -   -  
Total nonperforming assets$62,373  $49,481  $52,228  $49,917  $47,680  
           
Performing troubled debt restructurings$21,293  $21,410  $19,681  $16,332  $8,191  
           
Allowance for loan losses ("ALLL")$54,169  $38,293  $38,771  $37,698  $36,858  
           
Loans receivable$6,009,310  $5,113,527  $5,110,471  $5,090,492  $4,972,651  
Less: taxi medallion loans 24,575   24,977   27,353   28,054   28,911  
Loans receivable (excluding taxi medallion loans)$5,984,735  $5,088,550  $5,083,118  $5,062,438  $4,943,740  
           
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans) 0.66 % 0.51 % 0.50 % 0.46 % 0.41 %
Nonaccrual loans as a % of loans receivable 1.04   0.97   1.00   0.98   0.96  
Nonperforming assets as a % of total assets 0.86   0.80   0.85   0.82   0.79  
ALLL as a % of loans receivable 0.90   0.75   0.76   0.74   0.74  
ALLL as a % of nonaccrual loans (excluding taxi medallion loans) 137.7   147.0   151.9   161.0   180.7  
ALLL as a % of nonaccrual loans 86.8   77.4   75.5   75.5   77.3  
_____________          
(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 
 March 31, 2020December 31, 2019March 31, 2019 
 Average     Average     Average    
Interest-earning assets:BalanceInterestRate(8) BalanceInterestRate(8) BalanceInterestRate(8)
Investment securities (1) (2)$452,294 $3,095 2.75% $423,857 $2,737 2.56% $531,083 $4,369 3.34%
Loans receivable and loans held-for-sale (2) (3) (4) 5,956,469  73,220 4.94   5,153,715  65,118 5.01   4,907,683  60,597 5.01 
Federal funds sold and interest-              
bearing deposits with banks 148,429  499 1.35   60,705  242 1.58   57,690  357 2.51 
Restricted investment in bank stock 27,316  400 5.89   25,261  409 6.42   26,478  457 7.00 
Total interest-earning assets 6,584,508  77,214 4.72   5,663,538  68,506 4.80   5,522,934  65,780 4.83 
Allowance for loan losses (38,970)     (39,094)     (35,499)   
Noninterest-earning assets 560,489      460,163      421,626    
Total assets$7,106,027     $6,084,607     $5,909,061    
               
Interest-bearing liabilities:              
Time deposits 1,962,714  10,371 2.13  $1,533,425  9,573 2.48  $1,515,249  8,303 2.22 
Other interest-bearing deposits 2,660,755  6,841 1.03   2,348,752  6,699 1.13   2,236,630  7,048 1.28 
Total interest-bearing deposits 4,623,469  17,212 1.50   3,882,177  16,272 1.66   3,751,879  15,351 1.66 
               
Borrowings 477,121  2,352 1.98   452,837  2,431 2.13   486,687  3,024 2.52 
Subordinated debentures (5) 128,913  1,834 5.72   128,830  1,839 5.66   128,585  1,845 5.82 
Capital lease obligation 2,303  35 6.11   2,348  35 5.91   2,479  37 6.05 
Total interest-bearing liabilities 5,231,806  21,433 1.65   4,466,192  20,577 1.83   4,369,630  20,257 1.88 
               
Noninterest-bearing demand deposits 955,358      844,332      824,115    
Other liabilities 54,622      41,910      35,148    
Total noninterest-bearing liabilities 1,009,980      886,242      859,263    
Stockholders' equity 864,241      732,173      680,168    
Total liabilities and stockholders' equity$7,106,027     $6,084,607     $5,909,061    
               
Net interest income (tax equivalent basis)  55,781      47,929      45,523   
Net interest spread (6)  3.07%   2.97%   2.95%
               
Net interest margin (7)  3.41%   3.36%   3.34%
               
Tax equivalent adjustment  (500)     (498)     (571)  
Net interest income $55,281     $47,431     $44,952   
_____________               
(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 nonaccrual loans.
(5) Average balances are net of debt issuance costs of $1,240, $1,325, and $1,570 for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019, respectively. Amortization expense related to debt issuance costs included in interest expense was $82, $82 and $83 for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019, 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.