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Section 1: 8-K (FORM 8-K)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): January 25, 2018  

CONNECTONE BANCORP, INC.
(Exact Name of Registrant as Specified in Charter)

New Jersey001-1148652-1273725
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

301 Sylvan Avenue, Englewood Cliffs, New Jersey 07632
(Address of Principal Executive Offices) (Zip Code)

(201) 816-8900
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [ ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On January 25, 2018, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 2.02, including the related information set forth in the Press Release attached hereto and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1. Press release dated January 25, 2018


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 CONNECTONE BANCORP, INC.
   
  
Date: January 25, 2018By: /s/ William S. Burns        
  William S. Burns
  Executive Vice President and Chief Financial Officer
  

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Section 2: EX-99.1 (PRESS RELEASE)

EdgarFiling

EXHIBIT 99.1

ConnectOne Bancorp, Inc. Reports Fourth Quarter 2017 Results; Total Assets Surpass $5 Billion

ENGLEWOOD CLIFFS, N.J., Jan. 25, 2018 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $10.6 million for the fourth quarter of 2017 compared with $13.1 million for the third quarter of 2017 and a $2.0 million loss during the fourth quarter of 2016.  Diluted earnings per share were $0.33 for the current quarter versus $0.41 earned in the third quarter of 2017 and a $0.07 loss in the fourth quarter of 2016. 

Adjusted net income amounted to $16.3 million, or $0.51 earnings per share, for the fourth quarter of 2017; $14.9 million, or $0.46 earnings per share, for the third quarter of 2017; and $12.2 million, or $0.40 earnings per share, for the fourth quarter of 2016.  The fourth quarter 2017 adjusted net income excludes an estimated $5.6 million deferred tax asset (“DTA”) valuation charge related to the Tax Cuts & Jobs Act of 2017 (“Tax Act”). Adjusted net income also excludes taxi medallion after-tax charges of $0.2 million for the fourth quarter 2017, $1.8 million for the third quarter of 2017, and $14.2 million for the fourth quarter 2016.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are proud to announce that ConnectOne achieved another important milestone, crossing over the $5 billion mark in total assets. Driven by organic growth, this reflects a 20.0% year-over-year increase in loans receivable, net of loan sales.  For the fourth quarter, on an annualized basis, average total deposits grew by 19.6%, essentially matching our loan growth.  Deposit pricing competition continues to be fierce; however, we have largely offset the increase in funding costs with higher yields on loans combined with strong growth in noninterest-bearing demand deposits.  Our fourth quarter 2017 adjusted net interest margin, which excludes purchase accounting accretable yield, remained essentially flat on a sequential basis at 3.42%. Meanwhile, tax reform resulted in an estimated DTA write-down of $5.6 million recorded in the fourth quarter of 2017, but will positively impact our earnings in 2018 through a significantly lower effective tax rate.  Excluding the DTA charge for the fourth quarter of 2017, return on average assets exceeded 1.30% and return on tangible common equity exceeded 15%, both record performance metrics for the Company.  We also continue to make significant strides in improving our commercial real estate (“CRE”) concentration metrics.  The drivers, which have reduced the metric by approximately 60 percentage points, include continued momentum in non-CRE loan growth capabilities, the sale of approximately $50 million of non-relationship multifamily loans (which resulted in a gain on sale of approximately $550 thousand), and the previously announced $75 million subordinated debt offering completed in early January 2018.” 

Mr. Sorrentino added, “We enter 2018 sharply focused on our strategic priorities and are well-positioned to continue to improve our performance and increase our competitive advantage. I am confident we will continue to attract additional bankers and support staff to our organization and will continue to invest in our infrastructure.  Our enhanced capabilities and new technologies, coupled with growth in our teams, will serve all our clients well in the coming year.”

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2017 was $40.7 million, an increase of $2.8 million, or 7.4%, from the third quarter of 2017, resulting from an increase in average interest-earning assets of 5.1% and the widening of the net interest margin to 3.51% from 3.44%.  Included in net interest income was accretion and amortization of purchase accounting adjustments of $1.0 million and $0.3 million during the fourth and third quarters of 2017, respectively, with the increase resulting from accelerated purchase accounting income accretion.  Excluding purchase accounting adjustments, the adjusted net interest margin was 3.42% in the fourth quarter of 2017, widening by 1 basis-point from the third quarter 2017 adjusted net interest margin of 3.41%. The increase in net interest margin was primarily attributable to higher yields on loans largely offset by increased deposit funding costs. 

Fully taxable equivalent net interest income for the fourth quarter of 2017 increased by $6.6 million, or 19.4%, from the fourth quarter of 2016, resulting from an increase in average interest-earning assets of 14.0% and the widening of the net interest margin by 15 basis-points to 3.51% from 3.36%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $1.0 million during the fourth quarter of 2017 and 2016.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.42% in the fourth quarter of 2017, widening by 15 basis-points from the fourth quarter of 2016 adjusted net interest margin of 3.27%. The increase in the adjusted net interest margin was primarily attributable to a lower volume of cash balances resulting in an improved asset-mix, partially offset by increases in deposit funding costs, as well as lower yields on securities.   

Noninterest income totaled $2.0 million in the fourth quarter of 2017, $1.8 million in the third quarter of 2017 and $1.6 million in the fourth quarter of 2016.  The most recent quarter included a $0.5 million gain on sale of non-relationship multifamily loans, and the third quarter 2017 included a $0.3 million bank owned life insurance death benefit. 

Noninterest expenses totaled $16.6 million for the fourth quarter of 2017, a decrease of $2.0 million from $18.6 million for the third quarter of 2017 and an increase of $1.3 million from $15.3 million for the fourth quarter of 2016.  The decrease from the prior sequential quarter was mainly attributable to the valuation allowance adjustment on taxi medallion loans held-for-sale, which declined to $0.3 million in the current quarter from $3.0 million in the third quarter of 2017, offset by increases salaries and employee benefits, primarily bonus accruals for non-executives ($0.5 million) and other expenses ($0.2 million).  The increase in noninterest expenses from the prior year fourth quarter was mainly attributable to increases in salaries and employee benefits ($1.5 million) and a valuation allowance adjustment on taxi medallion loans held-for-sale ($0.3 million), offset by decreases in FDIC insurance expense ($0.1 million), professional and consulting ($0.2 million) and occupancy and equipment expenses ($0.2 million).  The increases over the prior year fourth quarter were the result of increased levels of business and staff resulting from organic growth.

Income tax expense was $12.7 million for the fourth quarter of 2017, compared to $5.6 million for the third quarter of 2017 and a $3.4 million benefit for the fourth quarter of 2016.  Included in income tax expense for the fourth quarter of 2017 is an estimated $5.6 million DTA valuation charge related to the Tax Act.  In addition, there was an approximately $0.2 million income tax benefit recorded during the fourth quarter of 2017, which resulted from the effect of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. At the present time, the Bank is projecting a 2018 effective tax rate of approximately 22%.

Asset Quality

The provision for loan losses was $2.0 million in the fourth quarter of 2017, $1.5 million in the third quarter of 2017 and $25.2 million in the fourth quarter of 2016.  The increase from the prior sequential quarter was largely attributable to higher loan growth.  The prior year quarter included $24.0 of provision for loan losses related to the taxi medallion loan portfolio.

During the fourth quarter of 2017, the Bank’s entire taxi medallion loan portfolio was transferred back to loans held-for-investment from the held-for-sale designation.  As of December 31, 2017, the loans secured by NYC taxi medallions, predominantly corporate medallions, had a carrying value of $46.8 million, compared to $65.6 million as of December 31, 2016.  The decrease was primarily attributable to valuation adjustments related to reduced medallion lease revenues, lower transfer valuations as reported by the New York City Taxi and Limousine Commission, and overall weakness in the NYC taxi industry.  As of December 31, 2017, the medallion loans had a per medallion carrying value of $343,000, compared to $348,000 as of September 30, 2017. 

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $66.2 million at December 31, 2017, $61.2 million at September 30, 2017 and $69.4 million at December 31, 2016. Included in nonperforming assets were taxi medallion loans totaling $46.8 million at December 31, 2017, $47.4 million at September 30, 2017 and $63.0 million at December 31, 2016.  Nonperforming assets as a percentage of total assets were 1.29% at December 31, 2017, 1.26% at September 30, 2017 and 1.57% at December 31, 2016. 

Excluding the taxi medallion loans, nonaccrual loans were $18.8 million at December 31, 2017, $13.8 million at September 30, 2017 and $5.7 million at December 31, 2016.  The increase in nonaccruals from the prior sequential quarter is primarily attributable to one, well-secured, commercial real estate loan that was added to nonaccrual during the quarter, offset by two nonaccrual loans that were paid-off without loss or charge-off.  Excluding taxi medallion loans, nonaccrual loans as a percentage of loans receivable were 0.46% at December 31, 2017, 0.35% at September 30, 2017 and 0.16% at December 31, 2016.

The net charge-off ratio was 0.01% for the fourth quarter of 2017, 0.00% for the third quarter of 2017 and 4.23% for the fourth quarter of 2016. The allowance for loan losses represented 0.76%, 0.77%, and 0.74% of loans receivable as of December 31, 2017, September 30, 2017 and December 31, 2016, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 168.4% as of December 31, 2017, 217.2% as of September 30, 2017and 449.0% as of December 31, 2016.

Selected Balance Sheet Items

At December 31, 2017, the Company’s total assets were $5.1 billion, an increase of $682 million from December 31, 2016. Loans receivable at December 31, 2017 were $4.2 billion, reflecting net loan growth (loan originations less pay-downs and pay-offs) of $696 million (includes $47 million of taxi medallion loans transferred back to loans held-for-investment) from December 31, 2016, primarily attributable to increases in multifamily ($353 million), commercial and industrial ($228 million, including the aforementioned transfer of $47 million of taxi medallion loans), other commercial real estate ($78 million), and residential real estate ($39 million), offset by a slight decrease in construction ($3 million).

The Company’s stockholders’ equity was $565 million at December 31, 2017, an increase of $34 million from December 31, 2016. The increase in stockholders’ equity was primarily attributable to an increase of $34 million in retained earnings and approximately $2 million of equity issuance related to stock-based compensation, offset by increases in other comprehensive losses of $1 million.  As of December 31, 2017, the Company’s tangible common equity ratio and tangible book value per share were 8.41% and $13.01, respectively.  As of December 31, 2016, the tangible common equity ratio and tangible book value per share were 8.93% and $11.96, respectively. Total goodwill and other intangible assets were approximately $148 million and $149 million as of December 31, 2017 and December 31, 2016, respectively.

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP/adjusted financial measures including an adjusted net income available to common shareholders. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends.  These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited.  They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP.  These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Fourth Quarter 2017 Conference Call

Management will host a conference call and audio webcast at 10:00 a.m. ET on January 25, 2018 to review the Company's financial performance and operating results.  The conference call dial-in number is 719-457-2620, access code 1979139. 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 "Shareholders" link on the Company's website www.ConnectOneBank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, January 25, 2018 and ending on Thursday, February 1, 2018 by dialing 719-457-0820, access code 1979139. An online archive of the webcast will be available following the completion of the conference call at www.ConnectOneBank.com or at http://ir.connectonebank.com.

About ConnectOne Bancorp, Inc.

ConnectOne is a New Jersey corporation and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended, and serves as the holding company for ConnectOne Bank ("the Bank"). The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey, and through its 20 other banking offices.

For more information visit https://www.ConnectOneBank.com/.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the Securities Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Investor Contact:

William S. Burns
Executive VP & CFO
201.816.4474; bburns@cnob.com 

Media Contact:
Jake Ciorciari, MWWPR
646.376.7042; jciorciari@mww.com 

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES   
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION  
(in thousands)   
    
 December 31,December 31, 
  2017  2016  
ASSETS   
Cash and due from banks$  52,565 $  37,150  
Interest-bearing deposits with banks   97,017    163,249  
  Cash and cash equivalents   149,582    200,399  
    
Securities available-for-sale   435,284    353,290  
    
Loans held-for-sale   24,845    78,005  
    
Loans receivable   4,171,456    3,475,832  
Less: Allowance for loan losses   31,748    25,744  
  Net loans receivable   4,139,708    3,450,088  
    
Investment in restricted stock, at cost   33,497    24,310  
Bank premises and equipment, net   21,659    22,075  
Accrued interest receivable   15,470    12,965  
Bank owned life insurance   111,311    98,359  
Other real estate owned   538    626  
Goodwill   145,909    145,909  
Core deposit intangibles   2,364    3,088  
Other assets   28,275    37,234  
  Total assets$  5,108,442 $  4,426,348  
    
LIABILITIES   
Deposits:   
  Noninterest-bearing$  776,843 $  694,977  
  Interest-bearing   3,018,285    2,649,294  
    Total deposits   3,795,128    3,344,271  
Borrowings   670,077    476,280  
Subordinated debentures (net of $456 and $621 in debt issuance costs)   54,699    54,534  
Other liabilities   23,101    20,231  
  Total liabilities   4,543,005    3,895,316  
    
COMMITMENTS AND CONTINGENCIES   
    
STOCKHOLDERS' EQUITY   
Common stock   412,546    412,726  
Additional paid-in capital   13,602    11,407  
Retained earnings   160,025    126,462  
Treasury stock   (16,717)   (16,717) 
Accumulated other comprehensive loss   (4,019)   (2,846) 
  Total stockholders' equity   565,437    531,032  
  Total liabilities and stockholders' equity$  5,108,442 $  4,426,348  
    

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES       
CONSOLIDATED STATEMENTS OF INCOME       
(in thousands, except for per share data)       
        
  Three Months Ended  Twelve Months Ended    
 12/31/1712/31/1612/31/1712/31/16   
Interest income       
Interest and fees on loans$  46,945$  38,600 $  168,824$  147,982   
Interest and dividends on investment securities:       
Taxable   1,757   1,389    6,799   7,266   
Tax-exempt   914   959    3,569   3,827   
Dividends   439   336    1,421   1,410   
Interest on federal funds sold and other short-term investments   156   215    711   756   
Total interest income   50,211   41,499    181,324   161,241   
Interest expense       
Deposits   6,953   5,135    23,670   18,667   
Borrowings   3,450   2,957    12,585   12,429   
Total interest expense   10,403   8,092    36,255   31,096   
        
Net interest income   39,808   33,407    145,069   130,145   
Provision for loan losses   2,000   25,200    6,000   38,700   
Net interest income after provision for loan losses   37,808   8,207    139,069   91,445   
        
Noninterest income       
Annuities and insurance commissions   -   51    39   191   
Income on bank owned life insurance   779   715    3,181   2,559   
Net gains on sale of loans held-for-sale   588   86    708   232   
Deposit, loan and other income   657   721    2,680   2,704   
Net gains on sale of investment securities   -   -    1,596   4,234   
Total noninterest income   2,024   1,573    8,204   9,920   
        
Noninterest expenses       
Salaries and employee benefits   9,418   7,888    35,128   31,030   
Occupancy and equipment   1,948   2,122    8,163   8,571   
FDIC insurance   935   985    3,485   2,940   
Professional and consulting   671   901    2,863   2,979   
Marketing and advertising   226   222    996   1,040   
Data processing   1,069   1,106    4,543   4,141   
Amortization of core deposit intangible   169   193    724   820   
Increase in valuation allowance, loans held-for-sale   267   -    15,592   -   
Other expenses   1,863   1,835    7,265   6,986   
Total noninterest expenses   16,566   15,252    78,759   58,507   
        
Income before income tax expense   23,266   (5,472)   68,514   42,858   
Income tax expense   12,686   (3,448)   25,294   11,776   
Net income   10,580   (2,024)   43,220   31,082   
Less: Preferred stock dividends   -   -    -   22   
Net income available to common stockholders$  10,580$  (2,024)$  43,220$  31,060   
        
Earnings per common share:       
Basic$  0.33$  (0.07)$  1.35$  1.02   
Diluted   0.33   (0.07)   1.34   1.01   
        
Dividends per common share$  0.075$  0.075 $  0.300$  0.300   
        

 

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 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,  
  2017   2017   2017   2017   2016   
Selected Financial Data(dollars in thousands) 
Total assets$  5,108,442  $  4,844,755  $  4,681,280  $  4,460,816  $  4,426,348   
Loans receivable:           
  Commercial   781,698     641,613     610,442     541,690     554,065   
  Commercial real estate   1,232,037     1,254,720     1,218,995     1,192,074     1,154,154   
  Multifamily   1,403,256     1,330,485     1,251,962     1,134,760     1,050,067   
  Commercial construction   483,216     399,453     431,049     460,611     486,228   
  Residential   271,795     264,244     251,108     242,883     232,547   
  Consumer   2,808     1,912     2,005     2,811     2,380   
  Gross loans   4,174,810     3,892,427     3,765,561     3,574,829     3,479,441   
Unearned net origination fees   (3,354)    (3,138)    (3,989)    (3,166)    (3,609)  
  Loans receivable   4,171,456     3,889,289     3,761,572     3,571,663     3,475,832   
  Loans held-for-sale (net of valuation allowance)   24,845     89,386     51,124     62,255     78,005   
Total loans$  4,196,301  $  3,978,675  $  3,812,696  $  3,633,918  $  3,553,837   
            
Securities available-for-sale$  435,284  $  400,516  $  402,130  $  352,476  $  353,290   
Goodwill and other intangible assets   148,273     148,442     148,611     148,804     148,997   
Deposits:           
  Noninterest-bearing demand   776,843     719,582     695,522     671,183     694,977   
  Other interest-bearing deposits   1,838,316     1,825,828     1,752,523     1,714,081     1,681,158   
  Time deposits   1,179,969     1,078,359     982,328     970,213     968,136   
Total deposits$  3,795,128  $  3,623,769  $  3,430,373  $  3,355,477  $  3,344,271   
            
Borrowings$  670,077  $  585,124  $  626,173  $  491,226  $  476,280   
Subordinated debentures (net of issuance costs)   54,699     54,657     54,616     54,575     54,534   
Total stockholders' equity   565,437     557,691     546,173     540,277     531,032   
            
Quarterly Average Balances           
Total assets$  4,917,032  $  4,714,012  $  4,495,573  $  4,382,314  $  4,349,961   
Loans receivable:           
  Commercial   761,147     671,525     603,733     557,347     644,263   
  Commercial real estate (including multifamily)   2,566,959     2,502,846     2,337,499     2,222,795     2,130,955   
  Commercial construction   439,629     418,439     451,038     466,455     479,342   
  Residential   268,047     255,755     246,864     237,418     229,738   
  Consumer   3,849     2,555     2,929     2,460     2,777   
  Gross loans   4,039,631     3,851,120     3,642,063     3,486,475     3,487,075   
Unearned net origination fees   (3,485)    (3,724)    (3,967)    (3,304)    (3,151)  
  Loans receivable   4,036,146     3,847,396     3,638,096     3,483,171     3,483,924   
  Loans held-for-sale   57,812     51,008     61,259     65,860     4,549   
Total loans$  4,093,958  $  3,898,404  $  3,699,355  $  3,549,031  $  3,488,473   
            
Securities available-for-sale   417,560     398,635     391,965     367,940     351,809   
Goodwill and other intangible assets   148,383     148,553     148,737     148,930     149,123   
Deposits:           
  Noninterest-bearing demand   712,391     688,707     667,461     655,597     666,913   
  Other interest-bearing deposits   1,855,688     1,816,162     1,712,875     1,706,991     1,631,368   
  Time deposits   1,114,670     1,005,997     976,012     963,976     985,944   
Total deposits$  3,682,749  $  3,510,866  $  3,356,348  $  3,326,564  $  3,284,225   
            
Borrowings$  588,260  $  570,711  $  514,161  $  442,595  $  476,925   
Subordinated debentures   55,155     55,155     55,155     55,155     55,155   
Total stockholders' equity   567,308     556,620     549,748     539,544     511,663   
            
 Three Months Ended 
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,  
  2017   2017   2017   2017   2016   
  (dollars in thousands, except for per share data)   
Net interest income$  39,808  $  37,019  $  35,101  $  33,141  $  33,407   
Provision for loan losses   2,000     1,450     1,450     1,100     25,200   
Net interest income after provision for loan losses   37,808     35,569     33,651     32,041     8,207   
Noninterest income           
 Annuity and insurance commissions   -     -     -     39     51   
 Income on bank owned life insurance   779     985     714     703     715   
 Net gains on sale of loans held-for-sale   588     50     49     21     86   
 Deposit, loan and other income   657     721     659     643     721   
 Net gains on sale of investment securities   -     -     -     1,596     -   
  Total noninterest income   2,024     1,756     1,422     3,002     1,573   
Noninterest expenses           
 Salaries and employee benefits   9,418     8,872     8,632     8,206     7,888   
 Occupancy and equipment   1,948     1,969     1,991     2,255     2,122   
 FDIC insurance   935     840     815     895     985   
 Professional and consulting   671     740     734     718     901   
 Marketing and advertising   226     225     289     256     222   
 Data processing   1,069     1,176     1,149     1,149     1,106   
 Amortization of core deposit intangible   169     169     193     193     193   
 Increase in valuation allowance, loans held-for-sale   267     3,000     9,725     2,600     -   
 Other expenses   1,863     1,650     1,775     1,977     1,835   
  Total noninterest expenses   16,566     18,641     25,303     18,249     15,252   
            
Income (loss) before income tax expense   23,266     18,684     9,770     16,794     (5,472)  
 Income tax expense (benefit)   12,686     5,607     2,087     4,914     (3,448)  
Net income (loss) available to common stockholders$  10,580  $  13,077  $  7,683  $  11,880  $  (2,024)  
            
Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:           
Net income (loss) available to common stockholders$  10,580  $  13,077  $  7,683  $  11,880  $  (2,024)  
Deferred tax asset valuation charge   5,574     -     -     -     -   
Net gains on sales of securities (after taxes)   -     -     -     (1,093)    -   
Provision related to taxi medallion loans (after taxes)   -     -     -     -     14,196   
Increase in valuation allowance, loans held-for-sale (after taxes)   182     1,776     5,719     1,538     -   
Net income available to common stockholders-adjusted$  16,336  $  14,853  $  13,402  $  12,325  $  12,172   
Weighted average diluted shares outstanding   32,252,759     32,182,016     32,255,770     32,192,643     30,729,359   
Diluted EPS (GAAP)$  0.33  $  0.41  $  0.24  $  0.37  $  (0.07)  
Diluted EPS-adjusted (non-GAAP) (1)   0.51     0.46     0.42     0.38     0.40   
            
Return on Assets Measures           
Net income available to common stockholders-adjusted$  16,336  $  14,853  $  13,402  $  12,325  $  12,172   
            
Average assets$  4,917,032  $  4,714,012  $  4,495,573  $  4,382,314  $  4,349,961   
Less: average intangible assets   (148,383)    (148,553)    (148,737)    (148,930)    (149,123)  
Average tangible assets$  4,768,649  $  4,565,459  $  4,346,836  $  4,233,384  $  4,200,838   
Return on avg. assets (GAAP)   0.85 %   1.10 %   0.69 %   1.10 %   (0.19)% 
Return on avg. assets-adjusted (non-GAAP) (2)   1.32     1.25     1.20     1.14     1.11   
Return on avg. tangible assets (non-GAAP) (3)   0.89     1.15     0.72     1.15     (0.18)  
Return on avg. tangible assets-adjusted (non-GAAP) (4)   1.37     1.30     1.25     1.19     1.16   
________________________           
(1) Adjusted net income available to common stockholders divided by weighted average diluted shares outstanding.      
(2) Adjusted net income available to common stockholders divided by average assets.
  
(3) Net income available to common stockholders excluding amortization of intangible assets divided by average tangible assets.
  
(4) Adjusted net income available to common stockholders excluding amortization of intangible assets divided by average tangible assets.
  
            
 Three Months Ended  
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,  
  2017   2017   2017   2017   2016   
Return on Equity Measures(dollars in thousands)  
Net income available to common stockholders-adjusted$  16,336  $  14,853  $  13,402  $  12,325  $  12,172   
            
Average common equity$  567,308  $  556,620  $  549,748  $  539,544  $  511,663   
Less: average intangible assets   (148,383)    (148,553)    (148,737)    (148,930)    (149,123)  
Average tangible common equity$  418,925  $  408,067  $  401,011  $  390,614  $  362,540   
            
Return on avg. common equity (GAAP)   7.40 %   9.32 %   5.61 %   8.93 %   (1.57)% 
Return on avg. common equity-adjusted (non-GAAP) (5)   11.42     10.59     9.78     9.26     9.46   
Return on avg. tangible common equity (non-GAAP) (6)   10.11     12.81     7.80     12.45     (2.10)  
Return on avg. tangible common equity-adjusted (non-GAAP) (7)   15.57     14.54     13.52     12.91     13.48   
            
Efficiency Measures           
Total noninterest expenses$  16,566  $  18,641  $  25,303  $  18,249  $  15,252   
Increase in valuation allowance, loans held-for-sale   (267)    (3,000)    (9,725)    (2,600)    -   
Foreclosed property expense   (32)    (46)    (71)    (100)    (81)  
Operating noninterest expense $  16,267  $  15,595  $  15,507  $  15,549  $  15,171   
            
Net interest income (tax equivalent basis)$  40,744  $  37,929  $  35,839  $  33,956  $  34,120   
Noninterest income   2,024     1,756     1,422     3,002     1,573   
Net gains on sales of investment securities   -     -     -     (1,596)    -   
Operating revenue $  42,768  $  39,685  $  37,261  $  35,362  $  35,693   
            
Operating efficiency ratio (non-GAAP) (8)   38.0 %   39.3 %   41.6 %   44.0 %   42.5 % 
            
Net Interest Margin           
Average interest-earning assets$  4,603,659  $  4,378,537  $  4,168,344  $  4,053,324  $  4,038,030   
            
Net interest income (tax equivalent basis)$  40,744  $  37,929  $  35,839  $  33,956  $  34,120   
Impact of purchase accounting fair value marks   (1,026)    (317)    (316)    (649)    (960)  
Adjusted net interest income$  39,718  $  37,612  $  35,523  $  33,307  $  33,160   
            
Net interest margin (GAAP)   3.51 %   3.44 %   3.45 %   3.40 %   3.36 % 
Adjusted net interest margin (non-GAAP) (9)   3.42     3.41     3.42     3.33     3.27   
_____________________           
(5) Adjusted net income available to common stockholders divided by average common equity.
  
(6) Net income available to common stockholders excluding amortization of intangibles assets divided by average tangible common equity.
  
(7) Adjusted net income available to common stockholders divided by average tangible common equity.
  
(8) Operating noninterest expense divided by operating revenue.   
(9) Adjusted net interest income divided by average interest-earning assets.   
            
 As of  
 Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,  
  2017   2017   2017   2017   2016   
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)  
Common equity$  565,437  $  557,691  $  546,173  $  540,277  $  531,032   
Less: intangible assets   (148,273)    (148,442)    (148,611)    (148,804)    (148,997)  
Tangible common equity$  417,164  $  409,249  $  397,562  $  391,473  $  382,035   
            
Total assets$  5,108,442  $  4,844,755  $  4,681,280  $  4,460,816  $  4,426,348   
Less: intangible assets   (148,273)    (148,442)    (148,611)    (148,804)    (148,997)  
Tangible assets$  4,960,169  $  4,696,313  $  4,532,669  $  4,312,012  $  4,277,351   
            
Common shares outstanding   32,071,860     32,015,317     32,015,317     32,004,471     31,944,403   
            
Common equity ratio (GAAP)   11.07 %   11.51 %   11.67 %   12.11 %   12.00 % 
Tangible common equity ratio (non-GAAP) (10)   8.41     8.71     8.77     9.08     8.93   
            
Regulatory capital ratios (Bancorp):           
  Leverage ratio   8.92 %   9.13 %   9.33 %   9.44 %   9.29 % 
  Common equity tier 1 risk-based ratio   9.15     9.40     9.48     9.79     9.74   
  Risk-based tier 1 capital ratio   9.26     9.52     9.60     9.92     9.87   
  Risk-based total capital ratio   11.04     11.34     11.46     11.83     11.78   
Regulatory capital ratios (Bank):           
  Leverage ratio   9.84 %   10.11 %   10.34 %   10.50 %   10.34 % 
  Common equity tier 1 risk-based ratio   10.21     10.54     10.64     11.03     10.98   
  Risk-based tier 1 capital ratio   10.21     10.54     10.64     11.03     10.98   
  Risk-based total capital ratio   10.90     11.22     11.32     11.70     11.63   
            
Book value per share (GAAP)$  17.63  $  17.42  $  17.06  $  16.88  $  16.62   
Tangible book value per share (non-GAAP) (11)   13.01     12.78     12.42     12.23     11.96   
            
Net Loan Charge-offs Detail           
Net loan charge-offs (recoveries):           
 Charge-offs$  156  $  -  $  10  $  72  $  37,074   
 Recoveries   (34)    (20)    (60)    (129)    (2)  
  Net loan charge-offs$  122  $  (20) $  (50) $  (57) $  37,072   
  Net loan charge-offs as a % of average total loans (annualized)   0.01 %   (0.00)%   (0.01)%   (0.01)%   4.23 % 
            
Asset Quality           
Nonaccrual taxi medallion loans$  46,765  $  47,430  $  48,884  $  59,054  $  63,044   
Nonaccrual loans (excluding taxi medallion loans)   18,848     13,755     14,055     12,790     5,734   
Other real estate owned   538     -     580     580     626   
Total nonperforming assets$  66,151  $  61,185  $  63,519  $  72,424  $  69,404   
            
Performing troubled debt restructurings$  14,920  $  12,749  $  10,221  $  10,005  $  13,338   
            
Allowance for loan losses ("ALLL")$  31,748  $  29,870  $  28,401  $  26,901  $  25,744   
            
Nonaccrual loans as a % of loans receivable (excluding taxi medallion loans)   0.46 %   0.35 %   0.37 %   0.36 %   0.16 % 
Nonperforming assets as a % of total assets   1.29     1.26     1.36     1.62     1.57   
ALLL as a % of loans receivable   0.76     0.77     0.76     0.75     0.74   
ALLL as a % of nonaccrual loans   48.4     48.8     45.1     37.4     37.4   
ALLL (excluding taxi medallion loans specific reserves) as a % of nonaccrual loans (excluding taxi medallion loans)   168.4     217.2     202.1     210.3     449.0   
            
Loans receivable$  4,171,456  $  3,889,289  $  3,761,572  $  3,571,663  $  3,475,832   
Less: taxi medallion loans   (46,765)    -      -      -      -    
Loans receivable (excluding taxi medallion loans)$  4,124,691  $  3,889,289  $  3,761,572  $  3,571,663  $  3,475,832   
            
Loans held-for-sale, taxi medallion loans$  -  $  47,430  $  50,891  $  61,319  $  65,596   
_____________________           
(10) Tangible common equity divided by tangible assets.   
(11) Tangible common equity divided by common shares outstanding at period-end.
  

 

CONNECTONE BANCORP, INC.              
NET INTEREST MARGIN ANALYSIS              
(dollars in thousands)                
    For the Three Months Ended 
    December 31, 2017September 30, 2017December 31, 2016
    Average     Average     Average    
Interest-earning assets: BalanceInterestRate (8)  BalanceInterestRate (8)  BalanceInterestRate (8) 
Investment securities (1) (2) $  417,954 $  3,162   3.00% $  397,077 $  3,033   3.03% $  346,377 $  2,864   3.29%
Total loans (2) (3) (4)     4,093,958    47,389   4.59     3,898,404    43,683   4.45     3,488,473    38,797   4.42 
Federal funds sold and interest-              
bearing deposits with banks    61,933    156   1.00     53,820    170   1.25     178,845    215   0.48 
Restricted investment in bank stock   29,814    440   5.86     29,236    362   4.91     24,335    336   5.49 
  Total interest-earning assets   4,603,659    51,147   4.41     4,378,537    47,248   4.28     4,038,030    42,212   4.16 
Allowance for loan losses    (30,478)       (28,999)       (38,932)   
Noninterest-earning assets    343,851        364,474        350,863    
  Total assets  $  4,917,032     $  4,714,012     $  4,349,961    
                  
Interest-bearing liabilities:               
Time deposits     1,114,670    4,172   1.48     1,005,997    3,593   1.42     985,944    3,199   1.29 
Other interest-bearing deposits   1,855,688    2,780   0.59     1,816,162    2,520   0.55     1,631,368    1,936   0.47 
  Total interest-bearing deposits   2,970,358    6,952   0.93     2,822,159    6,113   0.86     2,617,312    5,135   0.78 
                  
Borrowings     588,260    2,597   1.75     570,711    2,353   1.64     476,925    2,105   1.76 
Subordinated debentures (5)    55,155    814   5.86     55,155    813   5.85     55,155    810   5.84 
Capital lease obligation    2,655    40   5.98     2,688    40   5.90     2,783    42   6.00 
  Total interest-bearing liabilities   3,616,428    10,403   1.14     3,450,713    9,319   1.07     3,152,175    8,092   1.02 
                  
Noninterest-bearing demand deposits   712,391        688,707        666,913    
Other liabilities     20,905        17,972        19,210    
  Total noninterest-bearing liabilities   733,296        706,679        686,123    
Stockholders' equity    567,308        556,620        511,663    
  Total liabilities and stockholders' equity$  4,917,032     $  4,714,012     $  4,349,961    
                  
Net interest income (tax equivalent basis)    40,744        37,929        34,120   
Net interest spread (6)     3.27%     3.21%     3.14%
                  
Net interest margin (7)     3.51%     3.44%     3.36%
                  
Tax equivalent adjustment     (936)       (910)       (713)  
Net interest income   $  39,808     $  37,019     $  33,407   
                  
(1) Average balances are calculated on amortized cost.  
(2) Interest income is presented on a tax equivalent basis using 35% federal tax rate.
 
(3) Includes loan fee income.
 
(4) Loans include nonaccrual loans.
 
(5) Does not reflect netting of debt issuance costs of $483, $525 and $649 for the three months ended December 31, 2017 September 30, 2017 and December 31, 2016, 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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