Investor Relations

Press Release

ConnectOne Bancorp, Inc. Reports Second Quarter 2021 Results; Declares Common Dividend

Company Release - 7/29/2021 7:00 AM ET

ENGLEWOOD CLIFFS, N.J., July 29, 2021 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $32.2 million for the second quarter of 2021 compared with $33.0 million for the first quarter of 2021 and $14.8 million for the second quarter of 2020. Diluted earnings per share were $0.81 for the second quarter of 2021 compared with $0.82 in the first quarter of 2021 and $0.37 in the second quarter of 2020. The decrease in net income and diluted earnings per share from the first quarter of 2021 was primarily due to a $4.1 million decrease in the release of provision for credit losses, partially offset by a $1.9 million increase in net interest income, a $1.0 million increase in noninterest income, and a $0.2 million decrease income tax expense. The increase in net income and diluted earnings per share from the second quarter of 2020 was primarily due to a $16.7 million decrease in the provision for credit losses, a $2.2 million increase in net interest income, a $6.8 million decrease in noninterest expenses, offset by an $8.1 million increase in income tax expense.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are extremely pleased with our second quarter results highlighted by strong earnings, continued net interest margin expansion, an increase in noninterest income and best-in-class efficiency. We continued to deliver outstanding performance metrics, further solidifying our status as a top performer in the banking industry. This quarter’s pre-tax, pre-provision earnings as a percent of assets was 2.19%, return on assets was 1.71%, our return on tangible common equity was 17.8% while our tangible book value per share increased another 4% sequentially, to $18.76.”

“Our proactive, client-first approach has resulted in robust lending opportunities across our markets and beyond, delivering strong second quarter loan growth, especially towards the end of period, resulting in annualized sequential loan growth, net of Paycheck Protection Program (“PPP”) forgiveness, in excess of 20%. We remain focused on leveraging our strong technological foundation by investing in infrastructure, communication tools and digital channels to remain well-positioned for continued growth. During the quarter we benefited once again from BoeFly’s involvement in the latest round of PPP, as our fintech subsidiary continues to increase its relationships with borrowers and banking partners, further driving its revenue growth.”

“ConnectOne will continue to pursue attractive opportunities to expand our valuable franchise. While we remain disciplined in our approach to growth, the dislocation in our marketplace--resulting directly from increased M&A activity--provides ConnectOne with meaningful opportunities to expand, grow and leverage our franchise organically.”

Dividend Declaration

The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.11 per share. The dividend will be paid on September 1, 2021 to shareholders of record on August 16, 2021.   

Operating Results

Fully taxable equivalent net interest income for the second quarter of 2021 was $63.4 million, an increase of $1.8 million, or 3.0%, from the first quarter of 2021 resulting primarily from a 0.7% increase in average interest-earning assets, and a 4 basis-point widening of the net interest margin to 3.60% from 3.56%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.49% for the second quarter of 2021 and 3.44% for the first quarter of 2021. The net interest margin widened as a result of continued improvement in the Bank’s cost and mix of funding sources, which more than offset a declining yield on loans and investment securities. This was the seventh consecutive quarter that the Bank’s net interest margin widened. Included in interest income in both the first and second quarters of 2021 was the accretion of PPP fee income of approximately $2.3 million. Remaining deferred and unrecognized PPP fees were $9.4 million as of June 30, 2021.

Fully taxable equivalent net interest income for the second quarter of 2021 increased by $2.2 million, or 3.5%, from the second quarter of 2020. The increase from the second quarter of 2020 resulted primarily from a 16 basis-point widening of the net interest margin to 3.60% from 3.44%, offset by a 1.5% decrease in interest-earning assets, largely due to lower levels of PPP loans.  The widening of the net interest margin resulted from a 53 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 27 basis-point reduction in the yield on average interest-earning assets.

The Company continues to gain momentum in building core noninterest revenue. Noninterest income was $4.5 million in the second quarter of 2021, $3.4 million in the first quarter of 2021 and $4.6 million in the second quarter of 2020.   Non-core items included, during the current quarter, $0.7 million in BoeFly PPP referral income and $0.2 million in securities gains; during the first quarter 2021, $0.7 million gain on the sale of branches and a $0.2 million loss on equity securities; and during the second quarter 2020, $2.3 million of BoeFly PPP referral income. Excluding the aforementioned non-core items, noninterest income increased to $3.6 million during the second quarter of 2021 from $2.9 million during the first quarter of 2021 and $2.3 million during the second quarter of 2020. Primary contributors to the increase are gains on the sale of commercial and SBA loans, and BoeFly’s growing business volumes.

Noninterest expenses totaled $26.3 million for the second quarter of 2021, $26.5 million for the first quarter of 2021 and $33.1 million for the second quarter of 2020. Noninterest expenses decreased $0.2 million from the first quarter of 2021 which resulted from decreases in FDIC insurance expense of $0.4 million and salaries and employee benefits of $0.3 million, partially offset by increases in other expenses of $0.3 million, professional and consulting expenses of $0.2 million and data processing of $0.1 million.   Included in noninterest expenses during the second quarter of 2020 were merger-related expenses of $5.2 million and an additional $2.3 million in expenses related to the BoeFly acquisition. Excluding these two items, noninterest expenses during the second quarter of 2021 increased by $0.7 million when compared to the second quarter of 2020. This increase is mainly attributable to increases in salaries and employee benefits of $0.8 million, professional and consulting expenses of $0.4 million and other expenses of $0.2 million, partially offset by decreases in FDIC insurance expense of $0.5 million and marketing and advertising expenses of $0.1 million. The Company continues to invest in building its revenue generating capabilities, which is expected to increase non-interest expenses in the second half of 2021. Notwithstanding these expected expense increases, the Company remains focused on maintaining an efficiency ratio of approximately 40% or lower.

Income tax expense was $10.7 million for the second quarter of 2021, $10.9 million for the first quarter of 2021 and $2.5 million for the second quarter of 2020. The effective tax rates for the second quarter of 2021, first quarter of 2021 and second quarter of 2020 were 24.8%, 24.8% and 14.5%, respectively. The higher effective tax rate during the first half of 2021 when compared to the second quarter of 2020 resulted from a lower proportion of income from non-taxable sources. 

Asset Quality

The (reversal of) provision for credit losses was $(1.6) million for the second quarter of 2021, $(5.8) million for the first quarter of 2021 and $15.0 million for the second quarter of 2020. The release of allowance for credit losses during the first two quarters of 2021 was the result of the continually improving macro-economic outlook during the first half of 2021. The elevated provision for loan losses for the second quarter of 2020 was due to the continued economic uncertainties of the COVID-19 pandemic, including consideration of related borrower payment deferrals requested and/or granted to date. As of June 30, 2021, the Bank had 79 loans on deferral, with a total balance of approximately $100 million. Of that total, $24.5 million, or 0.4% of loans receivable, were nonpayment deferrals, while the remaining $75.5 million, or 1.2% of loans receivable, were modifications in which borrowers are making modified principal and interest payments.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $56.2 million as of June 30, 2021, $61.7 million as of December 31, 2020 and $64.6 million as of June 30, 2020. Nonperforming assets as a percentage of total assets were 0.73% as of June 30, 2021, 0.82% as of December 31, 2020 and 0.85% as of June 30, 2020. Nonaccrual loans were $56.2 million as of June 30, 2021, $61.7 million as of December 31, 2020 and $64.6 million as of June 30, 2020, representing a ratio of nonaccrual loans to loans receivable of 0.88%, 0.99% and 1.01%, respectively. The annualized net loan charge-offs (recoveries) charge-off ratio was 0.01% for the second quarter of 2021, (0.00)% for the first quarter of 2021 and 0.03% for the second quarter of 2020. The allowance for credit losses represented 1.23%, 1.27%, and 1.08% of loans receivable as of June 30, 2021, December 31, 2020 and June 30, 2020, respectively.   Excluding PPP loans, the allowance for credit losses represented 1.29%, 1.36%, and 1.17% of loans receivable as of June 30, 2021, December 31, 2020 and June 30, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 140% as of June 30, 2021, 128.4% as of December 31, 2020 and 106.4% as of June 30, 2021.

Selected Balance Sheet Items

The Company’s total assets were $7.7 billion, an increase of $162.7 million from December 31, 2020.  Loans receivable were $6.4 billion, an increase of $171.6 million from December 31, 2020. The increase in loans receivable was attributable to higher, non-PPP, loan originations, offset by decreases in PPP loans resulting from forgiveness activity.  As of June 30, 2021, PPP loans totaled $326.8 million, down $70.7 million when compared to $397.5 million as of December 31, 2020.

The Company’s stockholders’ equity was $965.0 million as of June 30, 2021, an increase of $49.7 million from December 31, 2020. The increase in stockholders’ equity was primarily attributable to an increase in retained earnings of $54.3 million, offset by decreases in accumulated other comprehensive income of $3.0 million and an increase in treasury Stock of $2.4 million. As of June 30, 2021, the Company’s tangible common equity ratio and tangible book value per share were 9.97% and $18.76, respectively.   As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $218.3 million as of June 30, 2021 and $219.2 million as of December 31, 2020.

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 2021 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 29, 2021 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13720876. 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 29, 2021 and ending on Thursday, August 5, 2021 by dialing 412-317-6671, access code 13720876. 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:
Will Crockett MWW
703.944.4213;  wcrockett@mww.com

 

           
C ONNECT O NE B ANCORP, I NC. AND S UBSIDIARIES          
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION        
(in thousands)          
           
  June 30,   December 31,   June 30,
    2021       2020       2020  
  (unaudited)       (unaudited)
ASSETS          
Cash and due from banks $ 59,148     $ 63,637     $ 62,764  
Interest-bearing deposits with banks   290,269       240,119       286,597  
Cash and cash equivalents   349,417       303,756       349,361  
           
Investment securities   458,933       487,955       418,426  
Equity securities   13,223       13,387       13,407  
           
Loans held-for-sale   6,159       4,710       11,212  
           
Loans receivable   6,407,904       6,236,307       6,363,267  
Less: Allowance for credit losses - loans   78,684       79,226       68,724  
Net loans receivable   6,329,220       6,157,081       6,294,543  
           
Investment in restricted stock, at cost   22,563       25,099       26,656  
Bank premises and equipment, net   28,811       30,108       31,103  
Accrued interest receivable   34,001       35,317       29,894  
Bank owned life insurance   193,209       165,960       165,056  
Right of use operating lease assets   12,504       16,159       23,771  
Goodwill   208,372       208,372       208,373  
Core deposit intangibles   9,963       10,977       12,232  
Other assets   43,707       88,458       33,150  
Total assets $ 7,710,082     $ 7,547,339     $ 7,617,184  
           
LIABILITIES          
Deposits:          
Noninterest-bearing $ 1,485,952     $ 1,339,108     $ 1,276,070  
Interest-bearing   4,706,561       4,620,116       4,550,791  
Total deposits   6,192,513       5,959,224       5,826,861  
Borrowings   353,462       425,954       667,062  
Subordinated debentures, net   152,800       202,648       202,476  
Lease liabilities   14,235       18,026       27,648  
Other liabilities   32,112       26,177       25,396  
Total liabilities   6,745,122       6,632,029       6,749,443  
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS' EQUITY          
Common stock   586,946       586,946       586,946  
Additional paid-in capital   24,606       23,887       22,069  
Retained earnings   386,280       331,951       288,688  
Treasury stock   (32,682 )     (30,271 )     (30,271 )
Accumulated other comprehensive (loss) income   (190 )     2,797       309  
Total stockholders' equity   964,960       915,310       867,741  
Total liabilities and stockholders' equity $ 7,710,082     $ 7,547,339     $ 7,617,184  
           

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES              
CONSOLIDATED STATEMENTS OF INCOME              
(dollars in thousands, except for per share data)              
               
  Three Months Ended   Six Months Ended
  06/30/21   06/30/20   06/30/21   06/30/20
Interest income              
Interest and fees on loans $ 71,101     $ 75,797   $ 141,563     $ 148,733
Interest and dividends on investment securities:              
Taxable   995       1,712     2,083       3,778
Tax-exempt   608       647     1,374       1,460
Dividends   263       442     519       842
Interest on federal funds sold and other short-term investments   84       79     133       578
Total interest income   73,051       78,677     145,672       155,391
Interest expense              
Deposits   6,424       13,597     14,009       30,809
Borrowings   3,618       4,290     7,491       8,511
Total interest expense   10,042       17,887     21,500       39,320
               
Net interest income   63,009       60,790     124,172       116,071
(Reversal of) provision for credit losses   (1,649 )     15,000     (7,415 )     31,000
Net interest income after (reversal of) provision for credit losses   64,658       45,790     131,587       85,071
               
Noninterest income              
Deposit, loan and other income   2,222       3,212     3,390       4,499
Income on bank owned life insurance   1,185       1,128     2,249       2,095
Net gains on sale of loans held-for-sale   847       237     1,554       630
Gain on sale of branches   -       -     674       -
Net gains (losses) on equity securities   23       44     (164 )     222
Net gains on sale/redemption of investment securities   195       -     195       29
Total noninterest income   4,472       4,621     7,898       7,475
               
Noninterest expenses              
Salaries and employee benefits   15,284       14,500     30,849       29,063
Occupancy and equipment   3,187       3,156     6,591       6,627
FDIC insurance   580       1,093     1,515       1,949
Professional and consulting   2,117       1,673     4,073       3,247
Marketing and advertising   278       426     519       730
Data processing   1,603       1,586     3,139       3,059
Merger expenses   -       5,146     -       14,640
Amortization of core deposit intangible   508       652     1,015       1,304
Increase in value of acquisition price   -       2,333     -       2,333
Other expenses   2,702       2,498     5,043       5,169
Total noninterest expenses   26,259       33,063     52,744       68,121
               
Income before income tax expense   42,871       17,348     86,741       24,425
Income tax expense   10,652       2,516     21,523       3,563
Net income $ 32,219     $ 14,832   $ 65,218     $ 20,862
               
Earnings per common share:              
Basic $ 0.81     $ 0.37   $ 1.64     $ 0.53
Diluted   0.81       0.37     1.63       0.52
               

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.

C ONNECT O NE B ANCORP, I NC.                    
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES                  
                     
  As of  
  Jun. 30,   Mar. 31,   Dec. 31,   Sep. 30,   Jun. 30,  
    2021       2021       2020       2020       2020    
Selected Financial Data (dollars in thousands)  
Total assets $ 7,710,082     $ 7,449,639     $ 7,547,339     $ 7,449,559     $ 7,617,184    
Loans receivable:                                
Commercial $ 1,046,965     $ 1,071,418     $ 1,092,404     $ 1,125,273     $ 1,151,025    
Paycheck Protection Program ("PPP") loans   326,788       522,340       397,492       474,022       473,999    
Commercial real estate   2,252,484       2,127,806       2,103,468       2,001,311       1,987,695    
Multifamily   1,914,978       1,698,331       1,712,153       1,703,290       1,723,273    
Commercial construction   587,121       565,872       617,747       614,112       673,893    
Residential   286,907       306,376       322,564       343,376       366,315    
Consumer   6,355       3,364       1,853       1,876       2,001    
Gross loans   6,421,598       6,295,508       6,247,681       6,263,260       6,378,201    
Unearned net origination fees   (13,694 )     (18,317 )     (11,374 )     (12,209 )     (14,934 )  
Loans receivable   6,407,904       6,277,191       6,236,307       6,251,051       6,363,267    
Loans held-for-sale   6,159       6,900       4,710       8,508       11,212    
Total loans $ 6,414,063     $ 6,284,091     $ 6,241,017     $ 6,259,559     $ 6,374,479    
                     
Investment and equity securities $ 472,156     $ 455,223     $ 501,342     $ 466,415     $ 431,833    
Goodwill and other intangible assets   218,335       218,842       219,349       219,977       220,605    
Deposits:                    
Noninterest-bearing demand $ 1,485,952     $ 1,384,961     $ 1,339,108     $ 1,270,021     $ 1,276,070    
Time deposits   1,301,807       1,356,599       1,464,133       1,619,609       1,807,864    
Other interest-bearing deposits   3,404,754       3,209,774       3,155,983       2,909,126       2,742,927    
Total deposits $ 6,192,513     $ 5,951,335     $ 5,959,224     $ 5,798,756     $ 5,826,861    
                     
Borrowings $ 353,462     $ 359,710     $ 425,954     $ 506,225     $ 667,062    
Subordinated debentures (net of debt issuance costs)   152,800       152,724       202,648       202,552       202,476    
Total stockholders' equity   964,960       935,637       915,310       890,736       867,741    
                     
Quarterly Average Balances                    
Total assets $ 7,566,676     $ 7,500,034     $ 7,547,651     $ 7,474,002     $ 7,684,403    
Loans receivable:                                
Commercial (including PPP loans) $ 1,485,918     $ 1,531,790     $ 1,557,303     $ 1,610,423     $ 1,539,749    
Commercial real estate (including multifamily)   3,925,497       3,805,856       3,704,197       3,679,297       3,722,966    
Commercial construction   553,396       595,466       615,439       646,281       675,698    
Residential   293,633       316,233       332,403       352,426       374,283    
Consumer   3,148       2,540       3,309       2,536       1,898    
Gross loans   6,261,592       6,251,885       6,212,651       6,290,963       6,314,594    
Unearned net origination fees   (13,076 )     (13,163 )     (12,023 )     (13,292 )     (13,420 )  
Loans receivable   6,248,516       6,238,723       6,200,628       6,277,671       6,301,174    
Loans held-for-sale   3,696       4,237       9,003       10,772       31,329    
Total loans $ 6,252,212     $ 6,242,960     $ 6,209,631     $ 6,288,443     $ 6,332,503    
                     
Investment and equity securities $ 450,543     $ 481,802     $ 469,820     $ 429,947     $ 452,224    
Goodwill and other intangible assets   218,662       219,171       219,761       220,391       221,039    
Deposits:                    
Noninterest-bearing demand $ 1,432,707     $ 1,348,585     $ 1,294,447     $ 1,253,235     $ 1,277,428    
Time deposits   1,324,510       1,422,295       1,577,338       1,728,129       1,905,165    
Other interest-bearing deposits   3,320,400       3,225,751       3,094,536       2,881,592       2,639,052    
Total deposits $ 6,077,617     $ 5,996,631     $ 5,966,321     $ 5,862,956     $ 5,821,645    
                     
Borrowings $ 331,633     $ 375,511     $ 410,098     $ 467,399     $ 798,648    
Subordinated debentures (net of debt issuance costs)   152,750       154,341       202,595       202,502       141,904    
Total stockholders' equity   952,019       928,041       906,153       883,364       868,796    
                     
  Three Months Ended  
  Jun. 30,   Mar. 31,   Dec. 31,   Sep. 30,   Jun. 30,  
    2021       2021       2020       2020       2020    
  (dollars in thousands, except for per share data)  
Net interest income $ 63,009     $ 61,163     $ 61,371     $ 60,549     $ 60,790    
Provision for credit losses   (1,649 )     (5,766 )     5,000       5,000       15,000    
Net interest income after provision for credit losses   64,658       66,929       56,371       55,549       45,790    
Noninterest income                    
Deposit, loan and other income   2,222       1,168       1,300       1,278       3,212    
Income on bank owned life insurance   1,185       1,064       1,314       1,598       1,128    
Net gains on sale of loans held-for-sale   847       707       841       614       237    
Gain on sale of branches   -       674       -       -       -    
Net gains (losses) on equity securities   23       (187 )     (13 )     (7 )     44    
Net gains on sale/redemption of investment securities   195       -       -       -       -    
Total noninterest income   4,472       3,426       3,442       3,483       4,621    
Noninterest expenses                    
Salaries and employee benefits   15,284       15,565       14,581       15,114       14,500    
Occupancy and equipment   3,187       3,404       3,689       3,566       3,156    
FDIC insurance   580       935       948       1,105       1,093    
Professional and consulting   2,117       1,956       2,210       1,926       1,673    
Marketing and advertising   278       241       256       214       426    
Data processing   1,603       1,536       1,479       1,470       1,586    
Merger expenses   -       -       -       -       5,146    
Amortization of core deposit intangible   508       507       628       627       652    
Increase in value of acquisition price   -       -       -       -       2,333    
Other expenses   2,702       2,341       2,611       2,456       2,498    
Total noninterest expenses   26,259       26,485       26,402       26,478       33,063    
                     
Income before income tax expense   42,871       43,870       33,411       32,554       17,348    
Income tax expense   10,652       10,871       7,770       7,768       2,516    
Net income $ 32,219     $ 32,999     $ 25,641     $ 24,786     $ 14,832    
                     
Weighted average diluted shares outstanding   39,735,309       39,788,881       39,726,791       39,653,832       39,611,712    
Diluted EPS $ 0.81     $ 0.82     $ 0.64     $ 0.62     $ 0.37    
                     
Reconciliation of GAAP Earnings to Pre-tax, Pre-provision and Pre-merger charges Earnings            
Net income $ 32,219     $ 32,999     $ 25,641     $ 24,786     $ 14,832    
Income tax expense   10,652       10,871       7,770       7,768       2,516    
Merger charges   -       -       -       -       5,146    
Provision for credit losses   (1,649 )     (5,766 )     5,000       5,000       15,000    
Pre-tax, pre-provision and pre-merger charges earnings $ 41,222     $ 38,104     $ 38,411     $ 37,554     $ 37,494    
                     
Return on Assets Measures                    
Average assets $ 7,566,676     $ 7,500,034     $ 7,547,651     $ 7,474,002     $ 7,684,403    
Return on avg. assets   1.71   %   1.78   %   1.35   %   1.32   %   0.78   %
Return on avg. assets (pre-tax, pre-provision and pre-merger charges)   2.19       2.06       2.02       2.00       1.96    
                     
  Three Months Ended  
  Jun. 30,   Mar. 31,   Dec. 31,   Sep. 30,   Jun. 30,  
    2021       2021       2020       2020       2020    
Return on Equity Measures (dollars in thousands)  
Average common equity $ 952,019     $ 928,041     $ 906,153     $ 883,364     $ 868,796    
Less: average intangible assets   (218,662 )     (219,171 )     (219,761 )     (220,391 )     (221,039 )  
Average tangible common equity $ 733,357     $ 708,870     $ 686,392     $ 662,973     $ 647,757    
                     
Return on avg. common equity (GAAP)   13.57   %   14.42   %   11.26   %   11.16   %   6.87   %
Return on avg. tangible common equity ("TCE") (non-GAAP) (1)   17.82       19.08       15.12       15.14       9.50    
                     
Efficiency Measures                    
Total noninterest expenses $ 26,259     $ 26,485     $ 26,402     $ 26,478     $ 33,063    
Amortization of core deposit intangibles   (508 )     (507 )     (628 )     (627 )     (652 )  
Merger expenses   -       -       -       -       (5,146 )  
Foreclosed property expense   -       -       (2 )     -       (5 )  
Operating noninterest expense $ 25,751     $ 25,978     $ 25,772     $ 25,851     $ 27,260    
                     
Net interest income (tax equivalent basis) $ 63,418     $ 61,581     $ 61,840     $ 61,005     $ 61,253    
Noninterest income   4,472       3,426       3,442       3,483       4,621    
Net gains on sale of branches   -       (674 )     -       -       -    
Net gains on sale/redemption of securities   (195 )     -       -       -       -    
Operating revenue $ 67,695     $ 64,333     $ 65,282     $ 64,488     $ 65,874    
                     
Operating efficiency ratio (non-GAAP) (2)   38.0   %   40.4   %   39.5   %   40.1   %   41.4   %
                     
Net Interest Margin                    
Average interest-earning assets $ 7,059,964     $ 7,008,500     $ 7,031,662     $ 6,962,499     $ 7,164,545    
                     
Net interest income (tax equivalent basis) $ 63,418     $ 61,581     $ 61,840     $ 61,005     $ 61,253    
Impact of purchase accounting fair value marks   (2,012 )     (2,074 )     (2,237 )     (2,403 )     (3,073 )  
Adjusted net interest income (tax equivalent basis) $ 61,406     $ 59,507     $ 59,603     $ 58,602     $ 58,180    
                     
Net interest margin (GAAP)   3.60   %   3.56   %   3.50   %   3.49   %   3.44   %
Adjusted net interest margin (non-GAAP) (3)   3.49       3.44       3.37       3.35       3.27    
                     
(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  
  Jun. 30,   Mar. 31,   Dec. 31,   Sep. 30,   Jun. 30,  
    2021       2021       2020       2020       2020    
Capital Ratios and Book Value per Share (dollars in thousands, except for per share data)  
Common equity $ 964,960     $ 935,637     $ 915,310     $ 890,736     $ 867,741    
Less: intangible assets   (218,335 )     (218,842 )     (219,349 )     (219,977 )     (220,605 )  
Tangible common equity $ 746,625     $ 716,795     $ 695,961     $ 670,759     $ 647,136    
                     
Total assets $ 7,710,082     $ 7,449,639     $ 7,547,339     $ 7,449,559     $ 7,617,184    
Less: intangible assets   (218,335 )     (218,842 )     (219,349 )     (219,977 )     (220,605 )  
Tangible assets $ 7,491,747     $ 7,230,797     $ 7,327,990     $ 7,229,582     $ 7,396,579    
                     
Common shares outstanding   39,794,815       39,773,602       39,785,398       39,753,033       39,753,033    
                     
Common equity ratio (GAAP)   12.52   %   12.56   %   12.13   %   11.96   %   11.39   %
Tangible common equity ratio (non-GAAP) (4)   9.97       9.91       9.50       9.28       8.75    
                     
Regulatory capital ratios (Bancorp):                    
Leverage ratio   10.19   %   9.89   %   9.51   %   9.30   %   8.99   %
Common equity Tier 1 risk-based ratio   11.09       11.36       10.79       10.63       10.04    
Risk-based Tier 1 capital ratio   11.17       11.44       10.87       10.72       10.12    
Risk-based total capital ratio   14.58       15.08       15.08       14.94       14.32    
                     
Regulatory capital ratios (Bank):                    
Leverage ratio   11.34   %   11.06   %   10.63   %   10.41   %   10.12   %
Common equity Tier 1 risk-based ratio   12.42       12.78       12.24       12.00       11.38    
Risk-based Tier 1 capital ratio   12.42       12.78       12.24       12.00       11.38    
Risk-based total capital ratio   14.07       14.55       10.00       13.70       12.96    
                     
Book value per share (GAAP) $ 24.25     $ 23.52     $ 23.01     $ 22.41     $ 21.83    
Tangible book value per share (non-GAAP) (5)   18.76       18.02       17.49       16.87       16.28    
                     
Net Loan (Recoveries) Charge-Off Detail                    
Net loan charge-offs (recoveries):                    
Charge-offs $ 212     $ -     $ 900     $ 257     $ 462    
Recoveries   (14 )     (61 )     (833 )     (800 )     (4 )  
Net loan charge-offs (recoveries) $ 198     $ (61 )   $ 67     $ (543 )   $ 458    
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)   0.01   %   (0.00 ) %   0.00   %   (0.03 ) %   0.03 %  
                     
Asset Quality                    
Nonaccrual loans $ 56,213     $ 60,940     $ 61,696     $ 65,494     $ 64,580    
OREO   -       -       -       -       -    
Nonperforming assets $ 56,213     $ 60,940     $ 61,696     $ 65,494     $ 64,580    
                     
Performing troubled debt restructurings $ 33,021     $ 25,505     $ 23,655     $ 18,241     $ 20,418    
                     
Allowance for credit losses - loans ("ACL")   78,684       80,568       79,226       74,267       68,724    
                     
Loans receivable $ 6,407,904     $ 6,277,191     $ 6,236,307     $ 6,251,051     $ 6,363,267    
Less: PPP loans   326,790       522,340       397,492       474,022       473,999    
Loans receivable (excluding PPP loans) $ 6,081,114     $ 5,754,851     $ 5,838,815     $ 5,777,029     $ 5,889,268    
                     
Nonaccrual loans as a % of loans receivable   0.88   %   0.97   %   0.99   %   1.05   %   1.01    
Nonperforming assets as a % of total assets   0.73       0.82       0.82       0.88       0.85    
ACL as a % of loans receivable   1.23       1.28       1.27       1.19       1.08    
ACL as a % of loans receivable (excluding PPP loans)   1.29       1.40       1.36       1.29       1.17    
ACL as a % of nonaccrual loans   140.0       132.2       128.4       113.4       106.4    
                     
(4) Tangible common equity divided by tangible assets.                    
(5) Tangible common equity divided by common shares outstanding at period-end.                
                     



CONNECTONE BANCORP, INC. AND SUBSIDIARIES                          
NET INTEREST MARGIN ANALYSIS                            
(dollars in thousands)                            
  For the Three Months Ended  
  June 30, 2021 March 31, 2021 June 30, 2020  
  Average         Average         Average      
Interest-earning assets: Balance Interest Rate (7)   Balance Interest Rate (7)   Balance Interest Rate (7)
Investment securities (1) (2) $ 444,460   $ 1,765   1.59 %   $ 473,181   $ 2,058   1.76 %   $ 443,282   $ 2,531   2.30 %
Loans receivable and loans held-for-sale (2) (3) (4)   6,252,212     71,348   4.58       6,242,960     70,676   4.59       6,332,503     76,088   4.83  
Federal funds sold and interest-bearing deposits with banks   341,885     84   0.10       269,537     49   0.07       357,758     79   0.09  
Restricted investment in bank stock   21,407     263   4.93       22,822     256   4.55       31,002     442   5.73  
Total interest-earning assets   7,059,964     73,460   4.17       7,008,500     73,039   4.23       7,164,545     79,140   4.44  
Allowance for loan losses   (80,548 )           (81,549 )           (53,502 )      
Noninterest-earning assets   587,259             573,083             573,360        
Total assets $ 7,566,675           $ 7,500,034           $ 7,684,403        
                             
Interest-bearing liabilities:                            
Time deposits   1,324,510     3,963   1.20     $ 1,422,295   $ 5,151   1.47       1,905,165     9,586   2.02  
Other interest-bearing deposits   3,320,400     2,461   0.30       3,225,751     2,434   0.31       2,639,052     4,011   0.61  
Total interest-bearing deposits   4,644,910     6,424   0.55       4,648,046     7,585   0.66       4,544,217     13,597   1.20  
                             
Borrowings   331,633     1,419   1.72       375,511     1,674   1.81       798,648     2,235   1.13  
Subordinated debentures   152,750     2,168   5.69       154,341     2,167   5.69       141,904     2,021   5.73  
Capital lease obligation   2,066     31   6.02       2,115     32   6.14       2,257     34   6.06  
Total interest-bearing liabilities   5,131,359     10,042   0.78       5,180,013     11,458   0.90       5,487,026     17,887   1.31  
                             
Noninterest-bearing demand deposits   1,432,707             1,348,585             1,277,428        
Other liabilities   50,590             43,395             51,153        
Total noninterest-bearing liabilities   1,483,297             1,391,980             1,328,581        
Stockholders' equity   952,019             928,041             868,796        
Total liabilities and stockholders' equity $ 7,566,675           $ 7,500,034           $ 7,684,403        
                             
Net interest income (tax equivalent basis)     63,418             61,581             61,253      
Net interest spread (5)     3.39         3.33         3.13 %
                             
Net interest margin (6)     3.60 %       3.56 %       3.44 %
                             
Tax equivalent adjustment     (409 )           (418 )           (463 )    
Net interest income   $ 63,009           $ 61,163           $ 60,790      
                             
                             
(1) Average balances are calculated on amortized cost.                          
(2) Interest income is presented on a tax equivalent basis using 21% federal tax rate.
(3) Includes loan fee income and accretion of purchase accounting adjustments.
(4) Loans include nonaccrual loans.
(5) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis.
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.
(7) Rates are annualized.

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Source: ConnectOne Bancorp, Inc.