Investor Relations

Press Release

ConnectOne Bancorp, Inc. Reports Second Quarter 2020 Results

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

ENGLEWOOD CLIFFS, N.J., July 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 $14.8 million for the second quarter of 2020 compared with $6.0 million for the first quarter of 2020 and $19.3 million for the second quarter of 2019.  Diluted earnings per share were $0.37 in the second quarter of 2020 compared with $0.15 in the first quarter of 2020 and $0.54 in the second quarter of 2019. The increase in net income and diluted earnings per share from the first quarter of 2020 was due to an increase in net interest income, an increase in noninterest income, a decrease in noninterest expenses, and a decrease in provision for loan losses.  Included in net income were merger and restructuring expenses of $5.1 million for the second quarter of 2020, $9.5 million for the first quarter of 2020 and $0.3 million for the second quarter of 2019.  On a pre-tax, pre-provision and pre-merger charges basis, earnings were $37.5 million for the second quarter of 2020, $32.6 million for the first quarter of 2020, and $26.2 million for the second quarter of 2019.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We continue to execute on our priorities of using our full range of banking expertise to support our clients, ensuring the safety and well-being of our employees and maintaining a strong financial position. During the quarter, ConnectOne performed well.  We reported earnings of $0.37 per share, despite an additional $14 million of reserves due to the uncertainty regarding the pandemic, matching our reserves from the first quarter of 2020 and bringing our total reserves for the total portfolio to approximately 1.08%. Tangible book value per share increased to $16.28. Additionally, we had strong pre-tax operating revenue which was in excess of 1.95% of total average assets, placing us among the strongest in the industry.” 

“Operationally, our teams continue to offer essential banking services virtually and, as a technology-forward bank, the investments we’ve made in financial technology and in our infrastructure over the past few years is playing a critical role in positioning ConnectOne’s virtual bank model. Further, we’ve continued to be a resource to the communities we serve by actively participating in the SBA’s Paycheck Protection Program (the “PPP”), funding over $470 million of PPP loans. Additionally, our FinTech subsidiary BoeFly – which connects small- to mid-sized businesses to a network of financial lenders – has significantly increased its relationships with borrowers and banking partners and has participated in the PPP programs in a meaningful way.  We’re operating our Bank efficiently and effectively and I’m proud of the continued resiliency of the ConnectOne team.” 

Mr. Sorrentino added, “Looking ahead, while the nation and the banking industry face considerable uncertainty about the length of the pandemic, we have reason to be optimistic.  ConnectOne has always been a commercial real estate lender with low loss history, we have low exposure to hot button industries and our C&I portfolio has focused on lending in low-risk industries. We’re operating ConnectOne in a disciplined manner, our capital levels are solid, our portfolio is underwritten with low LTVs and reasonable cap rates, and we’re confident that together we will all get through this.  When we come out on the other side, we expect to get back to executing prudent growth trends and strong metrics, as we focused on in the past.”

Dividend Declaration

The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.09 per share. The dividend will be paid on September 1, 2020, to all shareholders of record on August 17, 2020.   

Operating Results

Fully taxable equivalent net interest income for the second quarter of 2020 was $61.3 million, an increase of $5.5 million, or 9.8%, from the first quarter of 2020, and an increase of $15.2 million from the second quarter of 2019.  The increase from the first quarter of 2020 resulted primarily from an 8.8% increase in average interest-earning assets, largely due to PPP loan originations, and a 3 basis-point widening of the net interest margin to 3.44% from 3.41%.  Included in net interest income were purchase accounting adjustments of $3.1 million for the second quarter of 2020 and $3.5 million for the first quarter of 2020.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.27% for the second quarter of 2020 and 3.20% for the first quarter of 2020.  The widening of the adjusted net interest margin resulted primarily from the favorable impact the Fed’s first quarter interest rate reductions had on our funding costs, which more than offset declines in our interest-earning asset yields.  Included in interest income in the second quarter of 2020 was PPP fee income of approximately $3.7 million. The remaining $11.4 million in unamortized fees are expected to be realized over the next two to three quarters. The benefit to the second quarter 2020 net interest margin attributable to the PPP was offset by additional liquidity on the Bank’s balance sheet.

Noninterest income totaled $4.6 million in the second quarter of 2020, $2.9 million in the first quarter of 2020 and $1.9 million in the second quarter of 2019.  The increase in noninterest income of $1.8 million from the first quarter of 2020 was primarily attributed to increases deposit, loan and other income of $1.9 million, which includes loan referral fee income of $2.3 million generated by BoeFly as a result of its participation in the PPP program, which was partially offset by decreases in other deposit and loan fees of $0.4 million.  Additional decreases were in net gains on sale of loans held-for-sale of $0.2 million and net gains on equity securities of $0.1 million, offset by increases in income on bank owned life insurance of $0.2 million.

Noninterest expenses totaled $33.1 million for the second quarter of 2020, $35.1 million for the first quarter of 2020 and $21.6 million for the second quarter of 2019.  Included in noninterest expenses were merger-related charges totaling $5.1 million, $9.5 million and $0.3 million, during the second quarter of 2020, first quarter of 2020 and second quarter of 2019, respectively.  Excluding merger-related charges, noninterest expenses increased by $2.4 million from the first quarter of 2020, primarily attributable to an additional $2.3 million in expenses related to the BoeFly acquisition.

Income tax expense was $2.5 million for the second quarter of 2020, $1.0 million for the first quarter of 2020 and $5.5 million for the second quarter of 2019.  The effective tax rates for the second quarter of 2020, first quarter of 2020 and second quarter of 2019 were 14.5%, 14.8% and 22.2%, respectively.

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.

The provision for loan losses was $15.0 million for the second quarter of 2020, $16.0 million for the first quarter of 2020 and $1.1 million for the second quarter of 2019.  The elevated provision for loan losses for the first two quarters of 2020 was due to the continued economic uncertainties of the COVID-19 pandemic, including consideration of related payment deferrals requested and/or granted to date. The aggregate payment deferrals are expected to decrease by more than 50% to less than $450 million, as we will commence billing on more than $500 million of loans deferred during the second quarter of 2020.  We will continue to work with our borrowers, where necessary, to provide additional support and guidance during this unprecedented difficult operating environment. ConnectOne has relatively low exposure to perceived at-risk industries, such as energy and hospitality.  And, consistent with our extensive experience and low loss history in real estate lending, a large portion of our loan portfolio is well-secured and was underwritten with prudent loan-to-value ratios and cap rates.  Meanwhile, our well-managed commercial lending program, which has avoided higher risk industries, is virtually all borrower recourse.  Nevertheless, as the pandemic crisis persists, there remains potential for increased levels of impaired loans across all segments of the portfolio. 

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $64.6 million at June 30, 2020, $49.5 million at December 31, 2019 and $49.9 million at June 30, 2019. Included in nonperforming assets were taxi medallion loans totaling $23.0 million at June 30, 2020, $23.4 million at December 31, 2019 and $26.5 million at June 30, 2019.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.85% at June 30, 2020, 0.80% at December 31, 2019 and 0.82% at June 30, 2019.  Excluding the taxi medallion loans, nonaccrual loans were $41.6 million at June 30, 2020, $26.1 million at December 31, 2019 and $23.4 million at June 30, 2019, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.66%, 0.51% and 0.46%, respectively.

During the second quarter of 2020, the Bank implemented a series of short-term loan modifications consisting primarily of payment deferrals as requested by borrowers due to the COVID-19 pandemic.  Regulatory agencies previously confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered troubled debt restructurings. As of June 30, 2020, the Bank had 575 deferred loans totaling approximately $937 million.  The majority of these loans were initially deferred for 3-4 months.

The annualized net loan charge-off ratio was 0.03% for the second quarter of 2020, 0.08% for the fourth quarter of 2019 and 0.02% for the second quarter of 2019. The allowance for loan losses represented 1.08%, 0.75%, and 0.74% of loans receivable as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.  Excluding PPP loans, allowance for loan losses represented 1.17%, 0.75%, and 0.74% of loans receivable as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.  The allowance for loan losses currently excludes approximately $5 million of purchase accounting credit marks that are expected to be added to the allowance for loan losses once CECL is implemented, resulting in an additional 8 bps to the allowance for loan losses as a percent of loans ratio. The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 165.4% as of June 30, 2020, 147.0% as of December 31, 2019 and 161.0% as of June 30, 2019.

Selected Balance Sheet Items

The Company’s total assets were $7.6 billion, an increase of $1.4 billion from December 31, 2019.  Loans receivable were $6.4 billion, an increase of $1.2 billion from December 31, 2019.  The increase in total assets and loans receivable were primarily attributable to the acquisition of Bancorp of NJ (“BNJ”) and the origination of PPP loans.  We originated over $470 million of PPP loans in the second quarter of 2020. We expect the level of PPP loans to decline significantly over the course of 2020 and into the first quarter of 2021 as the loans are forgiven and paid down by the SBA through the guarantee provisions the CARES Act. 

The Company’s stockholders’ equity was $868 million at June 30, 2020, an increase of $137 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 June 30, 2020, the Company’s tangible common equity ratio and tangible book value per share were 8.75% and $16.28, 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 June 30, 2020 and $168 million and December 31, 2019.

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.

Second Quarter 2020 Results Conference Call

Management will host a conference call and audio webcast at 10:00 a.m. ET on July 30, 2020 to review the Company's financial performance and operating results.  The conference call dial-in number is 412-317-6026, access code 10146235. 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, July 30, 2020 and ending on Thursday, August 6, 2020 by dialing 412-317-6671, access code 10146235. 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)      
       
 June 30, December 31,  June 30, 
 2020 2019 2019 
 (unaudited)   (unaudited) 
ASSETS      
Cash and due from banks$62,764  $65,717  $51,950  
Interest-bearing deposits with banks 286,597   135,766   133,700  
Cash and cash equivalents 349,361   201,483   185,650  
       
Securities available-for-sale 418,426   404,701   441,911  
Equity securities 13,407   11,185   11,152  
       
Loans held-for-sale 11,212   33,250   -  
       
Loans receivable 6,363,267   5,113,527   5,090,492  
Less: Allowance for loan losses 68,724   38,293   37,698  
Net loans receivable 6,294,543   5,075,234   5,052,794  
       
Investment in restricted stock, at cost 26,656   27,397   31,767  
Bank premises and equipment, net 31,103   19,236   19,781  
Accrued interest receivable 29,894   20,949   21,272  
Bank owned life insurance 165,056   137,961   126,132  
Leases 23,771   15,137   16,397  
Goodwill 208,372   162,574   162,574  
Core deposit intangibles 12,233   5,460   6,140  
Other assets 33,150   59,465   33,496  
Total assets$7,617,184  $6,174,032  $6,109,066  
       
LIABILITIES      
Deposits:      
Noninterest-bearing$1,276,070  $861,728  $813,635  
Interest-bearing 4,550,791   3,905,814   3,827,508  
Total deposits 5,826,861   4,767,542   4,641,143  
Borrowings 667,062   500,293   597,317  
Leases 27,648   16,449   17,787  
Subordinated debentures 202,476   128,885   128,720  
Other liabilities 25,396   29,673   24,875  
Total liabilities 6,749,443   5,442,842   5,409,842  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Common stock 586,946   468,571   468,571  
Additional paid-in capital 22,069   21,344   19,777  
Retained earnings 288,688   271,782   235,649  
Treasury stock (30,271)  (29,360)  (21,892) 
Accumulated other comprehensive income (loss) 309   (1,147)  (2,881) 
Total stockholders' equity 867,741   731,190   699,224  
Total liabilities and stockholders' equity$7,617,184  $6,174,032  $6,109,066  
       


         
CONNECTONE BANCORP, INC. AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(dollars in thousands, except for per share data)        
         
 Three Months Ended Six Months Ended 
 06/30/20 06/30/19 06/30/20 06/30/19 
Interest income        
Interest and fees on loans$75,797 $63,524  $148,733 $123,850  
Interest and dividends on investment securities:        
Taxable 1,712  2,573   3,778  5,515  
Tax-exempt 647  1,081   1,460  2,208  
Dividends 442  410   842  867  
Interest on federal funds sold and other short-term investments 79  290   578  647  
Total interest income 78,677  67,878   155,391  133,087  
Interest expense        
Deposits 13,597  16,596   30,809  31,947  
Borrowings 4,290  5,752   8,511  10,658  
Total interest expense 17,887  22,348   39,320  42,605  
         
Net interest income 60,790  45,530   116,071  90,482  
Provision for loan losses 15,000  1,100   31,000  5,600  
Net interest income after provision for loan losses 45,790  44,430   85,071  84,882  
         
Noninterest income        
Income on bank owned life insurance 1,128  833   2,095  1,655  
Net gains on sale of loans held-for-sale 237  46   630  65  
Deposit, loan and other income 3,212  914   4,499  1,700  
Net gains on equity securities 44  158   222  261  
Net (losses) gains on sale of securities available-for-sale -  (9)  29  (1) 
Total noninterest income 4,621  1,942   7,475  3,680  
         
Noninterest expenses        
Salaries and employee benefits 14,500  11,822   29,063  23,805  
Occupancy and equipment 3,156  2,357   6,627  4,852  
FDIC insurance 1,093  825   1,949  1,580  
Professional and consulting 1,673  1,370   3,247  2,579  
Marketing and advertising 426  397   730  607  
Data processing 1,586  1,139   3,059  2,294  
Merger and restructuring expenses 5,146  331   14,640  7,893  
Loss on extinguisment of debt -  1,047   -  1,047  
Amortization of core deposit intangible 652  364   1,304  728  
Increase in value of acquisition price 2,333  -   2,333  -  
Other expenses 2,498  1,938   5,169  4,267  
Total noninterest expenses 33,063  21,590   68,121  49,652  
         
Income before income tax expense 17,348  24,782   24,425  38,910  
Income tax expense 2,516  5,501   3,563  7,994  
Net income$14,832 $19,281  $20,862 $30,916  
         
Earnings per common share:        
Basic$0.37 $0.54  $0.53 $0.87  
Diluted 0.37  0.54   0.52  0.87  
         


  
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 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2020   2020   2019   2019   2019  
   
Selected Financial Data(dollars in thousands) 
Total assets$7,617,184  $7,279,327  $6,174,032  $6,161,269  $6,109,066  
Loans receivable:                  
Commercial$1,625,024  $1,203,818  $1,096,224  $1,079,071  $1,018,951  
Commercial real estate 1,987,695   1,981,149   1,559,354   1,551,182   1,555,542  
Multifamily 1,723,273   1,762,651   1,518,400   1,513,216   1,589,340  
Commercial construction 673,893   676,836   620,969   647,261   602,213  
Residential 366,315   387,400   320,019   322,307   326,661  
Consumer 2,001   1,965   3,328   2,436   2,041  
Gross loans 6,378,201   6,013,819   5,118,294   5,115,473   5,094,748  
Unearned net origination fees (14,934)  (4,509)  (4,767)  (5,002)  (4,256) 
Loans receivable 6,363,267   6,009,310   5,113,527   5,110,471   5,090,492  
Loans held-for-sale 11,212   32,425   33,250   33,245   -  
Total loans$6,374,479  $6,041,735  $5,146,777  $5,143,716  $5,090,492  
           
Investment securities$431,833  $460,101  $415,886  $437,080  $453,063  
Goodwill and other intangible assets 220,605   221,263   168,034   168,374   168,714  
Deposits:          
Noninterest-bearing demand$1,276,070  $979,778  $861,728  $828,190  $813,635  
Time deposits 1,807,864   1,974,400   1,553,721   1,573,736   1,623,948  
Other interest-bearing deposits 2,742,927   2,555,014   2,352,093   2,349,308   2,203,560  
Total deposits$5,826,861  $5,509,192  $4,767,542  $4,751,234  $4,641,143  
           
Borrowings$667,062  $726,856  $500,293  $512,456  $597,317  
Subordinated debentures (net of debt issuance costs) 202,476   128,967   128,885   128,802   128,720  
Total stockholders' equity 867,741   853,710   731,190   720,160   699,224  
           
Quarterly Average Balances          
Total assets$7,684,403  $7,106,027  $6,084,607  $6,059,413  $6,001,669  
Loans receivable:                  
Commercial$1,539,749  $1,146,773  $1,085,640  $1,040,355  $1,024,617  
Commercial real estate (including multifamily) 3,722,966   3,723,991   3,074,889   3,144,978   3,088,231  
Commercial construction 675,698   663,036   642,476   617,106   571,130  
Residential 374,283   390,655   318,413   325,188   322,517  
Consumer 1,898   3,007   4,165   3,525   3,252  
Gross loans 6,314,594   5,927,462   5,125,583   5,131,152   5,009,747  
Unearned net origination fees (13,420)  (4,648)  (5,031)  (4,778)  (4,463) 
Loans receivable 6,301,174   5,922,814   5,120,552   5,126,374   5,005,284  
Loans held-for-sale 31,329   33,655   33,163   991   225  
Total loans$6,332,503  $5,956,469  $5,153,715  $5,127,365  $5,005,509  
           
Investment securities$452,224  $458,642  $427,973  $448,618  $513,814  
Goodwill and other intangible assets 221,039   221,075   168,257   168,598   164,709  
Deposits:          
Noninterest-bearing demand$1,277,428  $955,358  $844,332  $810,247  $800,856  
Time deposits 1,905,165   1,962,714   1,533,425   1,598,378   1,551,014  
Other interest-bearing deposits 2,639,052   2,660,755   2,348,752   2,300,886   2,183,384  
Total deposits$5,821,645  $5,578,827  $4,726,509  $4,709,511  $4,535,254  
           
Borrowings$798,648  $477,121  $452,837  $467,230  $603,260  
Subordinated debentures (net of debt issuance costs) 141,904   128,913   128,830   128,747   128,666  
Total stockholders' equity 868,796   864,241   732,173   714,002   694,978  
           
 Three Months Ended 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2020   2020   2019   2019   2019  
   
 (dollars in thousands, except for per share data) 
Net interest income$60,790  $55,281  $47,431  $48,406  $45,530  
 Provision for loan losses 15,000   16,000   500   2,000   1,100  
Net interest income after provision for loan losses 45,790   39,281   46,931   46,406   44,430  
Noninterest income          
 Income on bank owned life insurance 1,128   967   914   915   833  
 Net gains on sale of loans held-for-sale 237   393   169   278   46  
 Deposit, loan and other income 3,212   1,287   1,209   1,116   914  
 Net gains (losses) on equity securities 44   178   (46)  79   158  
 Net gains (losses) on sale of investment securities -   29   -   (279)  (9) 
Total noninterest income 4,621   2,854   2,246   2,109   1,942  
Noninterest expenses          
 Salaries and employee benefits 14,500   14,563   12,881   12,449   11,822  
 Occupancy and equipment 3,156   3,471   2,380   2,480   2,357  
 FDIC insurance 1,093   856   795   (364)  825  
 Professional and consulting 1,673   1,574   1,428   1,499   1,370  
 Marketing and advertising 426   304   273   473   397  
 Data processing 1,586   1,473   1,151   1,058   1,139  
 Merger and restructuring expenses 5,146   9,494   871   191   331  
 Loss on extinguishment of debt -   -   -   -   1,047  
 Amortization of core deposit intangible 652   652   340   340   364  
 Increase in value of acquisition price 2,333   -   -   -   -  
 Other expenses 2,498   2,671   2,078   2,253   1,938  
Total noninterest expenses 33,063   35,058   22,197   20,379   21,590  
           
Income before income tax expense 17,348   7,077   26,980   28,136   24,782  
 Income tax expense 2,516   1,047   6,197   6,440   5,501  
Net income$14,832  $6,030  $20,783  $21,696  $19,281  
           
Weighted average diluted shares outstanding 39,611,712   39,510,810   35,245,285   35,262,565   35,397,362  
Diluted EPS$0.37  $0.15  $0.59  $0.61  $0.54  
           
Reconciliation of GAAP Earnings to Pre-tax, Pre-provision and Pre-merger Charges Earnings          
Net income$14,832  $6,030  $20,783  $21,696  $19,281  
Income tax expense 2,516   1,047   6,197   6,440   5,501  
Merger and restructuring expenses 5,146   9,494   871   191   331  
Provision for loan losses 15,000   16,000   500   2,000   1,100  
Pre-tax, pre-provision and pre-merger charges earnings$37,494  $32,571  $28,351  $30,327  $26,213  
           
Return on Assets Measures          
Average assets$7,684,403  $7,106,027  $6,084,607  $6,059,413  $6,001,669  
Return on avg. assets 0.78 % 0.34 % 1.36 % 1.42 % 1.29 %
           
 Three Months Ended 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2020   2020   2019   2019   2019  
                     
Return on Equity Measures(dollars in thousands) 
Average common equity$868,796  $864,241  $732,173  $714,002  $694,978  
Less: average intangible assets (221,039)  (221,075)  (168,257)  (168,598)  (164,709) 
Average tangible common equity$647,757  $643,166  $563,916  $545,404  $530,269  
           
Return on avg. common equity (GAAP) 6.87 % 2.81 % 11.26 % 12.06 % 11.13 %
Return on avg. tangible common equity (non-GAAP) (1) 9.50   4.06   14.79   15.96   14.78  
           
Efficiency Measures          
Total noninterest expenses$33,063  $35,058  $22,197  $20,379  $21,590  
Amortization of core deposit intangibles (652)  (652)  (340)  (340)  (364) 
Merger and restructuring expenses (5,146)  (9,494)  (871)  (191)  (331) 
FDIC small bank assessment credit -   -   -   1,310   -  
Loss on extinguishment of debt -   -   -   -   (1,047) 
Foreclosed property expense (5)  10   8   (90)  -  
Operating noninterest expense$27,260  $24,922  $20,994  $21,068  $19,848  
           
Net interest income (tax equivalent basis)$61,253  $55,781  $47,929  $48,918  $46,092  
Noninterest income 4,621   2,854   2,246   2,109   1,942  
Net (gains) losses on equity securities (44)  (178)  46   (79)  (158) 
Net losses (gains) on sales of securities -   (29)  -   279   9  
Operating revenue$65,830  $58,428  $50,221  $51,227  $47,885  
           
Operating efficiency ratio (non-GAAP) (2) 41.4 % 42.7 % 41.8 % 41.1 % 41.4 %
           
Net Interest Margin          
Average interest-earning assets$7,164,545  $6,584,508$5,663,538$5,649,058$5,607,086
           
Net interest income (tax equivalent basis)$61,253  $55,781  $47,929  $48,918  $46,092  
Impact of purchase accounting fair value marks (3,073)  (3,457)  (1,455)  (1,566)  (1,742) 
Adjusted net interest income (tax equivalent basis)$58,180  $52,324  $46,474  $47,352  $44,350  
           
Net interest margin (GAAP) 3.44 % 3.41 % 3.36 % 3.44 % 3.30 %
Adjusted net interest margin (non-GAAP) (3) 3.27   3.20   3.26   3.33   3.17  
           
(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 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2020   2020   2019   2019   2019  
                     
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data) 
Common equity$867,741  $853,710  $731,190  $720,160  $699,224  
Less: intangible assets (220,605)  (221,263)  (168,034)  (168,374)  (168,714) 
Tangible common equity$647,136  $632,447  $563,156  $551,786  $530,510  
           
Total assets$7,617,184  $7,279,327  $6,174,032  $6,161,269  $6,109,066  
Less: intangible assets (220,605)  (221,263)  (168,034)  (168,374)  (168,714) 
Tangible assets$7,396,579  $7,058,064  $6,005,998  $5,992,895  $5,940,352  
           
Common shares outstanding 39,753,033   39,704,921   35,072,066   35,364,845   35,352,866  
           
Common equity ratio (GAAP) 11.39 % 11.73 % 11.84 % 11.69 % 11.45 %
Tangible common equity ratio (non-GAAP) (4) 8.75   8.96   9.38   9.21   8.93  
           
Regulatory capital ratios (Bancorp):          
Leverage ratio 8.99 % 9.20 % 9.54 % 9.39 % 9.14 %
Common equity Tier 1 risk-based ratio 10.04   9.63   9.95   9.78   9.65  
Risk-based Tier 1 capital ratio 10.12   9.71   10.04   9.87   9.74  
Risk-based total capital ratio 14.32   12.46   12.95   12.80   12.72  
           
Regulatory capital ratios (Bank):          
Leverage ratio 10.12 % 10.36 % 10.81 % 10.68 % 10.42 %
Common equity Tier 1 risk-based ratio 11.38   10.93   11.37   11.23   11.12  
Risk-based Tier 1 capital ratio 11.38   10.93   11.37   11.23   11.12  
Risk-based total capital ratio 12.96   12.25   12.63   12.50   12.40  
           
Book value per share (GAAP)$21.83  $21.50  $20.85  $20.36  $19.78  
Tangible book value per share (non-GAAP) (5) 16.28   15.93   16.06   15.60   15.01  
           
Net Loan Charge-Off (Recoveries) Detail          
Net loan charge-offs (recoveries) :          
 Charge-offs$462  $115  $1,029  $964  $406  
 Recoveries (4)  (3)  (22)  (37)  (146) 
Net loan charge-offs (recoveries)$458  $112  $1,007  $927  $260  
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.03 % 0.01 % 0.08 % 0.07 % 0.02 %
           
Asset Quality          
Nonaccrual taxi medallion loans$23,024  $23,024  $23,431  $25,802  $26,498  
Nonaccrual loans (excluding taxi medallion loans) 41,556   39,349   26,050   25,519   23,419  
Other real estate owned -   -   -   907   -  
Total nonperforming assets$64,580  $62,373  $49,481  $52,228  $49,917  
           
Performing troubled debt restructurings$20,418  $21,293  $21,410  $19,681  $16,332  
           
Allowance for loan losses ("ALLL")$68,724  $54,169  $38,293  $38,771  $37,698  
           
Loans receivable$6,363,267  $6,009,310  $5,113,527  $5,110,471  $5,090,492  
Less: taxi medallion loans 24,603   24,575   24,977   27,353   28,054  
Loans receivable (excluding taxi medallion loans)$6,338,664  $5,984,735  $5,088,550  $5,083,118  $5,062,438  
           
Loans receivable$6,363,267  $6,009,310  $5,113,527  $5,110,471  $5,090,492  
Less: PPP loans 473,750   -   -   -   -  
Loans receivable (PPP loans)$5,889,517  $6,009,310  $5,113,527  $5,110,471  $5,090,492  
           
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans) 0.66 % 0.66 % 0.51 % 0.50 % 0.46 %
Nonaccrual loans as a % of loans receivable 1.01   1.04   0.97   1.00   0.98  
Nonperforming assets as a % of total assets 0.85   0.86   0.80   0.85   0.82  
ALLL as a % of loans receivable 1.08   0.90   0.75   0.76   0.74  
ALLL as a % of loans receivable (excluding PPP loans) 1.17   0.90   0.75   0.76   0.74  
ALLL as a % of nonaccrual loans (excluding taxi medallion loans) 165.4   137.7   147.0   151.9   161.0  
ALLL as a % of nonaccrual loans 106.4   86.8   77.4   75.5   75.5  
           
(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  
    June 30, 2020March 31, 2020June 30, 2019  
    Average     Average     Average     
Interest-earning assets: BalanceInterestRate(7) BalanceInterestRate(7) BalanceInterestRate(7) 
Investment securities (1) (2)$443,282 $2,531 2.30% $452,294 $3,095 2.75% $515,022 $3,941 3.07% 
Loans receivable and loans held-for-sale (2) (3) (4)    6,332,503  76,088 4.83   5,956,469  73,220 4.94   5,005,509  63,799 5.11  
Federal funds sold and interest-bearing deposits with banks 357,758  79 0.09   148,429  499 1.35   54,619  290 2.13  
Restricted investment in bank stock 31,002  442 5.73   27,316  400 5.89   31,936  410 5.15  
Total interest-earning assets 7,164,545  79,140 4.44   6,584,508  77,214 4.72   5,607,086  68,440 4.90  
Allowance for loan losses  (53,502)     (38,970)     (37,390)    
Noninterest-earning assets  573,360      560,489      431,973     
Total assets  $7,684,403     $7,106,027     $6,001,669     
                   
Interest-bearing liabilities:               
Time deposits   1,905,165  9,586 2.02   1,962,714  10,371 2.13   1,551,014  9,366 2.42  
Other interest-bearing deposits 2,639,052  4,011 0.61   2,660,755  6,841 1.03   2,183,384  7,230 1.33  
Total interest-bearing deposits 4,544,217  13,597 1.20   4,623,469  17,212 1.50   3,734,398  16,596 1.78  
                   
Borrowings   798,648  2,235 1.13   477,121  2,352 1.98   603,260  3,870 2.57  
Subordinated debentures, net of capitalized costs 141,904  2,021 5.73   128,913  1,834 5.72   128,666  1,845 5.75  
Capital lease obligation  2,257  34 6.06   2,303  35 6.11   2,436  37 6.09  
Total interest-bearing liabilities 5,487,026  17,887 1.31   5,231,806  21,433 1.65   4,468,760  22,348 2.01  
                   
Noninterest-bearing demand deposits 1,277,428      955,358      800,856     
Other liabilities   51,153      54,622      37,075     
Total noninterest-bearing liabilities 1,328,581      1,009,980      837,931     
Stockholders' equity  868,796      864,241      694,978     
Total liabilities and stockholders' equity$7,684,403     $7,106,027     $6,001,669     
                   
Net interest income (tax equivalent basis)  61,253      55,781      46,092    
Net interest spread (5)   3.13%   3.07%   2.89% 
                   
Net interest margin (6)   3.44%   3.41%   3.30% 
                   
Tax equivalent adjustment   (463)     (500)     (562)   
Net interest income  $60,790     $55,281     $45,530    
                   
                   
         
(1) Average balances are calculated on amortized cost.         
(2) Interest income is presented on a tax equivalent basis using 21% federal tax rate.         
(3) Includes loan fee income.         
(4) Loans include nonaccrual loans.         
(5) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis.  
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.  
(7) Rates are annualized.          
                   

 



 


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Source: ConnectOne Bancorp, Inc.