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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): April 25, 2019  

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 April 25, 2019, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1. Press release dated April 25, 2019


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: April 25, 2019By: /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 First Quarter 2019 Results

ENGLEWOOD CLIFFS, N.J., April 25, 2019 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $11.6 million for the first quarter of 2019 compared with $18.7 million for the fourth quarter of 2018 and $4.3 million for the first quarter of 2018.  Diluted earnings per share were $0.33 for the first quarter of 2019 compared with $0.58 earned in the fourth quarter of 2018 and $0.13 earned in the first quarter of 2018.  On January 2, 2019, the acquisition of Greater Hudson Bank was completed and thus first quarter 2019 results reflect the operations of the combined entity.  Historical financial information includes only the operations of ConnectOne. 

Adjusted net income amounted to $17.2 million, or $0.49 per diluted share, for the first quarter of 2019; $19.2 million, or $0.59 per diluted share, for the fourth quarter of 2018; and $17.1 million, or $0.53 per diluted share, for the first quarter of 2018.  Adjusted net income for the first quarter of 2019 and fourth quarter of 2018 excludes $5.6 million and $0.7 million, respectively, in merger-related expenses.  Adjusted net income for the first quarter of 2018 excludes $13.4 million in taxi medallion charges.  See supplemental tables for a complete reconciliation of GAAP earnings to adjusted earnings.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne maintained solid momentum executing against key operating objectives during the first quarter. On January 2, 2019 we closed the merger with Greater Hudson Bank, which enhanced our desirable franchise and improved our financial profile in several key areas including core deposit funding and loan diversification. In late January, we successfully converted key systems and, as expected, our quarterly results reflect merger-related expenses. First quarter results were highlighted by continued organic deposit and loan growth, while the deposit-rich Greater Hudson Bank franchise served to decrease our loan to deposit ratio to 108%, from 111% at year-end, and CRE concentration to 475% from 480%. Net interest margin increased by 7 basis points from the sequential quarter, largely a result of purchase accounting adjustments associated with the merger, and our core net interest margin remained flat at 3.25%. For the quarter, excluding merger charges, return on assets and return on tangible common equity totaled 1.18% and 13.69%, respectively. Tangible book value per share increased during the quarter by $0.25 to $14.67, despite dilution related to the merger. Our first quarter provision for loan losses was elevated due to an approximately $3.0 million charge relating to a single loan secured by a commercial office building and, consistent with our loan work-out philosophy, we are aggressively pursuing disposition. Meanwhile, our credit metrics improved significantly since year-end 2018. Nonaccrual loans, excluding taxi medallions, as a percentage of total loans improved to 0.41% from 0.53% at year-end, and our total nonperforming asset ratio improved to 0.79% from 0.95%.”

Mr. Sorrentino added, “Looking ahead, we remain committed to our client first culture and leveraging technology to stay ahead of the competition.  We recently announced the FinTech acquisition of BoeFly, a leading online business lending marketplace, which will enhance our digital offerings, expand noninterest revenue, and offer us opportunities for measured SBA lending. Additionally, based on our strong return on equity metrics and our commitment to creating long-term shareholder value, our Board recently approved a stock repurchase program for up to 1.2 million shares and increased the Company’s quarterly cash dividend on its common stock by 20% to $0.09 per share. Our outlook for the remainder of 2019 is positive and we are well-positioned to capitalize on meaningful growth opportunities throughout our New York and New Jersey metropolitan target market.”

Operating Results

Fully taxable equivalent net interest income for the first quarter of 2019 was $45.5 million, an increase of $4.8 million, or 11.9%, from the fourth quarter of 2018, resulting primarily from an 11.8% increase in average interest-earning assets and a 7 basis-point widening of the net interest margin to 3.34% from 3.27%, both resulting largely from the Greater Hudson Bank acquisition. Included in net interest income were purchase accounting adjustments of $1.2 million during the first quarter of 2019 and $0.1 million during the fourth quarter of 2018.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.25% for both the first quarter of 2019 and the fourth quarter of 2018.  The adjusted net interest margin benefitted from an improved asset-mix, a higher yield earned on loans and growth in noninterest-bearing deposits, offset by higher funding costs, primarily due to continued increased deposit competition.

Noninterest income increased, primarily due to the Greater Hudson Bank acquisition, to $1.7 million in the first quarter of 2019 from $1.6 million in the fourth quarter of 2018 and $1.3 million in the first quarter of 2018.  Noninterest income consists of income on bank owned life insurance, net gains on sales of loans held-for-sale, net gains (losses) on equity securities and deposit service fees, loan fees, and other income. 

Noninterest expenses totaled $28.1 million for first quarter of 2019, $18.3 million for the fourth quarter of 2018 and $16.9 million for the first quarter of 2018.  Included in the first quarter of 2019 and fourth quarter of 2018 were merger-related pretax expenses of $7.6 million and $0.9 million, respectively.  Excluding merger-related expenses, noninterest expenses increased by $3.1 million from the fourth quarter of 2018 due primarily to increases in salaries and employee benefits of $2.0 million, occupancy and equipment expenses of $0.5 million and other expenses of $0.3 million.  These increases are primarily due to the expansion of our franchise through the Greater Hudson Bank acquisition. 

Income tax expense was $2.5 million for the first quarter of 2019, $3.6 million for the fourth quarter of 2018 and $0.4 million for the first quarter of 2018.  The effective tax rates for the first quarter of 2019, fourth quarter of 2018 and first quarter of 2018 were 17.6%, 16.3% and 9.5%, respectively.  The increase in the effective tax rate for the current quarter from the sequential quarter was due to the Company’s estimate of the impact of recent NJ corporate tax legislation, partially offset by a lower percentage of income from taxable sources.

Asset Quality

The provision for loan losses was $4.5 million for the first quarter of 2019, $1.1 million for the fourth quarter of 2018 and $17.8 million for the first quarter of 2018.  The increase from the fourth quarter of 2018 was primarily due to approximately $3.0 million specifically allocated to a single commercial real estate loan.  The first quarter of 2018 included $17.0 million of provision related to the taxi medallion loan portfolio. 

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $47.7 million at March 31, 2019, $51.9 million at December 31, 2018 and $51.1 million at March 31, 2018.  Included in nonperforming assets were taxi medallion loans totaling $27.3 million at March 31, 2019, $28.0 million at December 31, 2018 and $29.4 million at March 31, 2018.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.79% at March 31, 2019, 0.95% at December 31, 2018 and 0.99% at March 31, 2018.  Excluding the taxi medallion loans, nonaccrual loans were $20.4 million at March 31, 2019, $23.8 million at December 31, 2018 and $20.6 million at March 31, 2018, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.41%, 0.53% and 0.49%, respectively.  The annualized net loan charge-off ratio was 0.21% for the first quarter of 2019, 0.08% for the fourth quarter of 2018 and 1.63% for the first quarter of 2018.  The allowance for loan losses represented 0.74%, 0.77%, and 0.77% of loans receivable as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 180.7% as of March 31, 2019, 146.8% as of December 31, 2018 and 157.7% as of March 31, 2018.

Selected Balance Sheet Items

At March 31, 2019, the balance sheet reflected the acquisition of Greater Hudson Bank.  The Company’s total assets were $6.0 billion, an increase of $587 million from December 31, 2018.  Total loans were $5.0 billion, an increase of $432 million from December 31, 2018.  The Company’s stockholders’ equity was $682 million at March 31, 2019, an increase of $68 million from December 31, 2018. The increase in stockholders’ equity was primarily attributable to the acquisition of Greater Hudson Bank, which increased capital by $56 million.  As of March 31, 2019, the Company’s tangible common equity ratio and tangible book value per share were 8.83% and $14.67, respectively.  As of December 31, 2018, the tangible common equity ratio and tangible book value per share were 8.77% and $14.42, respectively. Tangible book value per share increased $0.25, or 1.7%, from the prior sequential quarter.  Total goodwill and other intangible assets were approximately $163 million as of March 31, 2019 and $148 million and December 31, 2018.

Use of Non-GAAP Financial Measures

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

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

First Quarter 2019 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on Thursday, April 25, 2019 to review the Company's financial performance and operating results. The conference call dial-in number is 855-719-5012, access code 7140109. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Investor Relations" link on the Company's website https://www.connectonebank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, April 25, 2019 and ending on Thursday, May 2, 2019 by dialing 719-457-0820, access code 7140109. 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 29 banking offices located in New York and New Jersey.   ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.

Forward-Looking Statements
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the Securities 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 and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Investor Contact:

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

Media Contact:
Thomas Walter, MWWPR
202.600.4532; twalter@mww.com

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES      
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION     
(in thousands)    
       
 March 31, December 31, March 31, 
  2019   2018   2018  
 (unaudited)   (unaudited) 
ASSETS      
Cash and due from banks$  54,520  $  39,161  $  36,396  
Interest-bearing deposits with banks   118,028     133,205     106,391  
    Cash and cash equivalents   172,548     172,366     142,787  
       
Securities available-for-sale   516,539     412,034     424,322  
Equity securities   11,564     11,460     11,607  
       
Loans held-for-sale   368     -     45,886  
       
Loans receivable   4,972,651     4,541,092     4,202,679  
Less: Allowance for loan losses   36,858     34,954     32,529  
  Net loans receivable   4,935,793     4,506,138     4,170,150  
       
Investment in restricted stock, at cost   31,727     31,136     34,622  
Bank premises and equipment, net   20,150     19,062     21,039  
Accrued interest receivable   21,198     18,214     16,020  
Bank owned life insurance   125,300     113,820     111,500  
Right of use operating lease assets   15,311     -     -  
Other real estate owned   -     -     1,076  
Goodwill   156,243     145,909     145,909  
Core deposit intangibles   6,504     1,737     2,195  
Other assets   35,731     30,216     31,255  
   Total assets$  6,048,976  $  5,462,092  $  5,158,368  
       
LIABILITIES      
Deposits:      
    Noninterest-bearing$  833,090  $  768,584  $  739,174  
    Interest-bearing   3,760,908     3,323,508     3,010,413  
       Total deposits   4,593,998     4,092,092     3,749,587  
Borrowings   603,412     600,001     695,032  
Operating lease liabilities   16,719     -     -  
Subordinated debentures (net of $1,517, $1,599 and $1,845 in debt issuance costs)   128,638     128,556     128,310  
Other liabilities   23,814     27,516     21,173  
   Total liabilities   5,366,581     4,848,165     4,594,102  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Common stock   468,571     412,546     412,546  
Additional paid-in capital   16,513     15,542     13,434  
Retained earnings   219,558     211,345     162,510  
Treasury stock   (16,967)    (16,717)    (16,717) 
Accumulated other comprehensive loss   (5,280)    (8,789)    (7,507) 
   Total stockholders' equity   682,395     613,927     564,266  
   Total liabilities and stockholders' equity$  6,048,976  $  5,462,092  $  5,158,368  
       

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF INCOME      
(in thousands, except for per share data)      
       
  Three Months Ended  
 03/31/19 12/31/18 03/31/18 
Interest income      
   Interest and fees on loans$  60,326 $  53,306 $  47,025  
   Interest and dividends on investment securities:      
      Taxable   2,942    2,291    1,887  
      Tax-exempt   1,127    899    814  
      Dividends   457    495    485  
   Interest on federal funds sold and other short-term investments   357    232    264  
      Total interest income   65,209    57,223    50,475  
Interest expense      
   Deposits   15,351    12,398    7,688  
   Borrowings   4,906    4,664    4,640  
     Total interest expense   20,257    17,062    12,328  
       
Net interest income   44,952    40,161    38,147  
   Provision for loan losses   4,500    1,100    17,800  
Net interest income after provision for loan losses   40,452    39,061    20,347  
       
Noninterest income      
   Income on bank owned life insurance   822    794    774  
   Net gains on sale of loans held-for-sale   19    30    17  
   Deposit, loan and other income   786    691    616  
   Net gains (losses) on equity securities   103    58    (120) 
   Net gains on sale of securities available-for-sale   8    -    -  
      Total noninterest income   1,738    1,573    1,287  
       
Noninterest expenses      
   Salaries and employee benefits   11,983    9,988    9,679  
   Occupancy and equipment   2,495    2,001    2,143  
   FDIC insurance   755    765    850  
   Professional and consulting   1,209    1,129    723  
   Marketing and advertising   210    244    207  
   Data processing   1,155    1,080    1,148  
   Merger expenses   7,562    936    -  
   Amortization of core deposit intangibles   364    144    169  
   Other expenses   2,329    2,037    2,020  
       Total noninterest expenses   28,062    18,324    16,939  
       
Income before income tax expense   14,128    22,310    4,695  
   Income tax expense   2,493    3,638    444  
Net income$  11,635 $  18,672 $  4,251  
       
Earnings per common share:      
   Basic$  0.33 $  0.58 $  0.13  
   Diluted   0.33    0.58    0.13  
       
Dividends per common share$  0.090 $  0.075 $  0.075  
       

 

ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies.   
            
CONNECTONE BANCORP, INC. AND SUBSIDIARIES           
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES          
            
 As of  
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,  
  2019   2018   2018   2018   2018   
                      
Selected Financial Data(dollars in thousands)  
Total assets$  6,048,976  $  5,462,092  $  5,368,641  $  5,275,368  $  5,158,368   
Loans receivable:           
  Commercial$  1,012,930  $  925,229  $  886,212  $  808,604  $  768,640   
  Commercial real estate   1,483,852     1,279,502     1,282,766     1,282,426     1,275,764   
  Multifamily   1,608,613     1,562,195     1,504,134     1,480,243     1,400,420   
  Commercial construction   548,039     465,389     494,206     498,607     479,190   
  Residential   319,214     309,991     295,948     288,449     278,985   
  Consumer   4,157     2,593     2,508     5,637     2,461   
  Gross loans   4,976,805     4,544,899     4,465,774     4,363,966     4,205,460   
Unearned net origination fees   (4,154)    (3,807)    (3,287)    (3,112)    (2,781)  
  Loans receivable   4,972,651     4,541,092     4,462,487     4,360,854     4,202,679   
  Loans held-for-sale (net of valuation allowance)   368     -     270     -     45,886   
Total loans$  4,973,019  $  4,541,092  $  4,462,757  $  4,360,854  $  4,248,565   
            
Securities$  528,103  $  423,494  $  421,442  $  411,574  $  435,929   
Goodwill and other intangible assets   162,747     147,646     147,791     147,936     148,104   
Deposits:           
  Noninterest-bearing demand$  833,090  $  768,584  $  758,213  $  765,150  $  739,174   
  Time deposits   1,544,247     1,366,054     1,322,747     1,315,843     1,255,654   
  Other interest-bearing deposits   2,216,661     1,957,454     1,907,805     1,824,417     1,754,759   
Total deposits$  4,593,998  $  4,092,092  $  3,988,765  $  3,905,410  $  3,749,587   
            
Borrowings$  603,412  $  600,001  $  629,979  $  628,995  $  695,032   
Subordinated debentures (net of debt issuance costs)   128,638     128,556     128,474     128,392     128,310   
Total stockholders' equity   682,395     613,927     594,871     578,557     564,266   
            
Quarterly Average Balances           
Total assets$  5,909,061  $  5,261,493  $  5,186,173  $  5,104,661  $  5,088,823   
Loans receivable:           
  Commercial$  1,074,229  $  941,619  $  850,038  $  808,764  $  820,562   
  Commercial real estate (including multifamily)   2,973,337     2,725,652     2,723,572     2,654,276     2,643,466   
  Commercial construction   524,952     464,556     494,460     494,092     482,391   
  Residential   335,574     304,954     294,758     282,504     275,263   
  Consumer   3,397     4,292     3,205     5,685     4,659   
  Gross loans   4,911,489     4,441,073     4,366,033     4,245,321     4,226,341   
Unearned net origination fees   (3,930)    (3,340)    (3,182)    (3,208)    (3,110)  
  Loans receivable   4,907,559     4,437,733     4,362,851     4,242,113     4,223,231   
  Loans held-for-sale   124     211     54     30,099     24,766   
Total loans$  4,907,683  $  4,437,944  $  4,362,905  $  4,272,212  $  4,247,997   
            
Securities$  524,394  $  421,316  $  415,074  $  424,854  $  437,141   
Goodwill and other intangible assets   162,814     147,741     147,883     148,046     148,215   
Deposits:           
  Noninterest-bearing demand$  824,115  $  775,824  $  761,782  $  719,372  $  724,471   
  Time deposits   1,515,249     1,329,743     1,296,165     1,280,471     1,207,368   
  Other interest-bearing deposits   2,236,630     1,915,353     1,854,763     1,765,577     1,815,122   
Total deposits$  4,575,994  $  4,020,920  $  3,912,710  $  3,765,420  $  3,746,961   
            
Borrowings$  486,687  $  477,800  $  531,251  $  613,763  $  630,117   
Subordinated debentures (net of debt issuance costs)   128,585     128,502     128,420     128,339     115,182   
Total stockholders' equity   680,168     606,378     590,128     574,992     575,029   
            
 Three Months Ended  
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,  
  2019   2018   2018   2018   2018   
                      
  (dollars in thousands, except for per share data)   
Net interest income$  44,952  $  40,161  $  39,962  $  38,945  $  38,147   
 Provision for loan losses   4,500     1,100     1,100     1,100     17,800   
Net interest income after provision for loan losses   40,452     39,061     38,862     37,845     20,347   
Noninterest income           
 Income on bank owned life insurance   822     794     751     775     774   
 Net gains on sale of loans held-for-sale   19     30     2     12     17   
 Deposit, loan and other income   786     691     676     601     616   
 Net gains (losses) on equity securities   103     58     (157)    (47)    (120)  
 Net gains on sale of securities available-for-sale   8     -     -     -     -   
    Total noninterest income   1,738     1,573     1,272     1,341     1,287   
Noninterest expenses           
 Salaries and employee benefits   11,983     9,988     10,181     9,736     9,679   
 Occupancy and equipment   2,495     2,001     2,137     2,031     2,143   
 FDIC insurance   755     765     735     765     850   
 Professional and consulting   1,209     1,129     891     825     723   
 Marketing and advertising   210     244     192     337     207   
 Data processing   1,155     1,080     1,102     1,091     1,148   
 Merger expenses   7,562     936     375     24     -   
 Amortization of core deposit intangibles   364     144     145     169     169   
 Other expenses   2,329     2,037     2,372     2,083     2,020   
    Total noninterest expenses   28,062     18,324     18,130     17,061     16,939   
            
Income before income tax expense   14,128     22,310     22,004     22,125     4,695   
 Income tax expense   2,493     3,638     2,102     4,598     444   
Net income$  11,635  $  18,672  $  19,902  $  17,527  $  4,251   
            
Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:           
Net income$  11,635  $  18,672  $  19,902  $  17,527  $  4,251   
Merger expenses (after taxes)   5,597     739     297     19     -   
Net gains on sale of securities available-for-sale (after taxes)   (6)    -     -     -     -   
Deferred tax valuation charge/adjustment   -     -     (1,408)    -     -   
Tax benefit on employee share-based awards (ASU 2016-09)   (20)    (223)    (297)    (49)    (541)  
Provision related to taxi medallion loans (after taxes)   -     -     -     -     13,430   
Net income-adjusted$  17,206  $  19,188  $  18,494  $  17,497  $  17,140   
            
Weighted average diluted shares outstanding   35,309,503     32,378,739     32,319,060     32,321,150     32,238,048   
            
Diluted EPS (GAAP)$  0.33  $  0.58  $  0.61  $  0.54  $  0.13   
Diluted EPS-adjusted (Non-GAAP) (1)   0.49     0.59     0.57     0.54     0.53   
            
Return on Assets Measures           
Net income-adjusted$  17,206  $  19,188  $  18,494  $  17,497  $  17,140   
            
Average assets$  5,909,061  $  5,261,493  $  5,186,173  $  5,104,661  $  5,088,823   
Less: average intangible assets   (162,814)    (147,741)    (147,883)    (148,046)    (148,215)  
Average tangible assets$  5,746,247  $  5,113,752  $  5,038,290  $  4,956,615  $  4,940,608   
Return on avg. assets (GAAP)   0.80 %   1.41 %   1.52 %   1.38 %   0.34 % 
Return on avg. assets-adjusted (non-GAAP) (2)   1.18     1.45     1.41     1.37     1.37   
_______________           
(1) Represents adjusted earnings available to common stockholders divided by weighted average diluted shares outstanding.    
(2) Adjusted net income divided by average assets.           
            
 Three Months Ended  
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,  
  2019   2018   2018   2018   2018   
                      
Return on Equity Measures(dollars in thousands)  
Net income-adjusted$  17,206  $  19,188  $  18,494  $  17,497  $  17,140   
            
Average common equity$  680,168  $  606,378  $  590,128  $  574,992  $  575,029   
Less: average intangible assets   (162,814)    (147,741)    (147,883)    (148,046)    (148,215)  
Average tangible common equity$  517,354  $  458,637  $  442,245  $  426,946  $  426,814   
            
Return on avg. common equity (GAAP)   6.94 %   12.22 %   13.38 %   12.23 %   3.00 % 
Return on avg. common equity-adjusted (non-GAAP) (3)   10.26     12.55     12.43     12.21     12.09   
Return on avg. tangible common equity (non-GAAP) (4)   9.33     16.24     17.95     16.58     4.15   
Return on avg. tangible common equity-adjusted (non-GAAP) (5)   13.69     16.69     16.68     16.55     16.40   
            
Efficiency Measures           
Total noninterest expenses$  28,062  $  18,324  $  18,130  $  17,061  $  16,939   
Amortization of core deposit intangibles   (364)    (144)    (145)    (169)    (169)  
Merger expenses   (7,562)    (936)    (375)    (24)    -   
Foreclosed property expense   1     (8)    (196)    (11)    (51)  
Operating noninterest expense $  20,137  $  17,236  $  17,414  $  16,857  $  16,719   
            
Net interest income (tax equivalent basis)$  45,523  $  40,678  $  40,444  $  39,409  $  38,610   
Noninterest income   1,738     1,573     1,272     1,341     1,287   
Net gains on sale of securities available-for-sale   (8)    -     -     -     -   
Operating revenue $  47,253  $  42,251  $  41,716  $  40,750  $  39,897   
            
Operating efficiency ratio (non-GAAP) (6)   42.6 %   40.8 %   41.7 %   41.4 %   41.9 % 
            
Net Interest Margin           
Average interest-earning assets$  5,522,934  $  4,941,425  $  4,856,678  $  4,771,523  $  4,799,453   
            
Net interest income (tax equivalent basis)$  45,523  $  40,678  $  40,444  $  39,409  $  38,610   
Impact of purchase accounting fair value marks   (1,233)    (148)    (195)    (680)    (240)  
Adjusted net interest income (tax equivalent basis)$  44,290  $  40,530  $  40,249  $  38,729  $  38,370   
            
Net interest margin (GAAP)   3.34 %   3.27 %   3.30 %   3.31 %   3.26 % 
Adjusted net interest margin (non-GAAP) (7)   3.25     3.25     3.29     3.26     3.24   
______________           
(3) Adjusted earnings available to common stockholders divided by average common equity.        
(4) Earnings available to common stockholders excluding amortization of intangibles assets divided by average tangible common equity.    
(5) Adjusted earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity.  
(6) Operating noninterest expense divided by operating revenue.           
(7) Adjusted net interest margin excludes impact of purchase accounting fair value marks.        
            
 As of  
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,  
  2019   2018   2018   2018   2018   
                      
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)  
Common equity$  682,395  $  613,927  $  594,871  $  578,557  $  564,266   
Less: intangible assets   (162,747)    (147,646)    (147,791)    (147,936)    (148,104)  
Tangible common equity$  519,648  $  466,281  $  447,080  $  430,621  $  416,162   
            
Total assets$  6,048,976  $  5,462,092  $  5,368,641  $  5,275,368  $  5,158,368   
Less: intangible assets   (162,747)    (147,646)    (147,791)    (147,936)    (148,104)  
Tangible assets$  5,886,229  $  5,314,446  $  5,220,850  $  5,127,432  $  5,010,264   
            
Common shares outstanding   35,432,468     32,328,542     32,238,264     32,184,047     32,175,233   
            
Common equity ratio (GAAP)   11.28 %   11.24 %   11.08 %   10.97 %   10.94 % 
Tangible common equity ratio (non-GAAP) (8)   8.83     8.77     8.56     8.40     8.31   
            
Regulatory capital ratios (Bancorp):           
  Leverage ratio   9.12 %   9.34 %   9.15 %   8.93 %   8.65 % 
  Common equity Tier 1 risk-based ratio   9.68     9.75     9.50     9.33     9.14   
  Risk-based Tier 1 capital ratio   9.78     9.86     9.61     9.44     9.25   
  Risk-based total capital ratio   12.80     13.15     12.94     12.81     12.66   
            
Regulatory capital ratios (Bank):           
  Leverage ratio   10.43 %   10.78 %   10.64 %   10.43 %   10.20 % 
  Common equity Tier 1 risk-based ratio   11.18     11.37     11.18     11.02     10.91   
  Risk-based Tier 1 capital ratio   11.18     11.37     11.18     11.02     10.91   
  Risk-based total capital ratio   12.47     12.75     12.57     12.42     12.31   
            
Book value per share (GAAP)$  19.26  $  18.99  $  18.45  $  17.98  $  17.54   
Tangible book value per share (non-GAAP) (9)   14.67     14.42     13.87     13.38     12.93   
            
Net Loan Charge-Off (Recoveries) Detail           
Net loan charge-offs (recoveries) :           
 Charge-offs$  2,676  $  920  $  6  $  47  $  17,038   
 Recoveries   (80)    (25)    (61)    (12)    (19)  
  Net loan charge-offs (recoveries)$  2,596  $  895  $  (55) $  35  $  17,019   
  Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)   0.21 %   0.08 %   (0.01)%   0.00 %   1.63 % 
            
Asset Quality           
Nonaccrual taxi medallion loans$  27,287  $  28,043  $  28,482  $  28,944  $  29,405   
Nonaccrual loans (excluding taxi medallion loans)   20,393     23,812     24,533     20,771     20,631   
Other real estate owned   -     -     -     1,076     1,076   
Total nonperforming assets$  47,680  $  51,855  $  53,015  $  50,791  $  51,112   
            
Performing troubled debt restructurings$  8,191  $  9,532  $  11,243  $  12,827  $  14,349   
            
Allowance for loan losses ("ALLL")$  36,858  $  34,954  $  34,749  $  33,594  $  32,529   
            
Loans receivable$  4,972,651  $  4,541,092  $  4,462,487  $  4,360,854  $  4,202,679   
Less: taxi medallion loans   28,911     28,043     28,482     28,944     29,405   
Loans receivable (excluding taxi medallion loans)$  4,943,740  $  4,513,049  $  4,434,005  $  4,331,910  $  4,173,274   
            
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans)   0.41 %   0.53 %   0.55 %   0.48 %   0.49 % 
Nonaccrual loans as a % of loans receivable   0.96     1.14     1.19     1.14     1.19   
Nonperforming assets as a % of total assets   0.79     0.95     0.99     0.96     0.99   
ALLL as a % of loans receivable   0.74     0.77     0.78     0.77     0.77   
ALLL as a % of nonaccrual loans (excluding taxi medallion loans)   180.7     146.8     141.6     161.7     157.7   
ALLL as a % of nonaccrual loans   77.3     67.4     65.5     67.6     65.0   
__________________           
(8) Tangible common equity divided by tangible assets.           
(9) Tangible common equity divided by common shares outstanding at period-end.          

 

CONNECTONE BANCORP, INC.              
NET INTEREST MARGIN ANALYSIS              
(dollars in thousands)    
    For the Three Months Ended 
    March 31, 2019December 31, 2018March 31, 2018 
    Average     Average     Average    
Interest-earning assets: BalanceInterestRate (8)  BalanceInterestRate (8)  BalanceInterestRate (8) 
Investment securities (1) (2) $  531,083 $  4,369   3.34 % $  433,686 $  3,429   3.14 % $  441,563 $  2,917   2.68 %
Total loans (2) (3) (4)     4,907,683    60,597   5.01     4,437,944    53,584   4.79     4,247,997    47,272   4.51 
Federal funds sold and interest-              
  bearing deposits with banks    57,690    357   2.51     44,163    232   2.08     78,194    264   1.37 
Restricted investment in bank stock   26,478    457   7.00     25,632    495   7.66     31,699    485   6.21 
  Total interest-earning assets   5,522,934    65,780   4.83     4,941,425    57,740   4.64     4,799,453    50,938   4.30 
Allowance for loan losses    (35,499)       (35,036)       (32,113)   
Noninterest-earning assets    421,626        355,104        321,483    
  Total assets  $  5,909,061     $  5,261,493     $  5,088,823    
                  
Interest-bearing liabilities:               
 Time deposits  $  1,515,249    8,303   2.22  $  1,329,743    7,062   2.11  $  1,207,368    4,789   1.61 
 Other interest-bearing deposits   2,236,630    7,048   1.28     1,915,353    5,336   1.11     1,815,122    2,900   0.65 
  Total interest-bearing deposits   3,751,879    15,351   1.66     3,245,096    12,398   1.52     3,022,490    7,689   1.03 
                  
Borrowings     486,687    3,024   2.52     477,800    2,783   2.31     630,117    2,926   1.88 
Subordinated debentures (5)    128,585    1,845   5.82     128,502    1,843   5.69     115,182    1,674   5.89 
Capital lease obligation    2,479    37   6.05     2,520    38   5.98     2,622    39   6.03 
  Total interest-bearing liabilities   4,369,630    20,257   1.88     3,853,918    17,062   1.76     3,770,411    12,328   1.33 
                  
Noninterest-bearing demand deposits   824,115        775,824        724,471    
Other liabilities     35,148        25,373        18,912    
  Total noninterest-bearing liabilities   859,263        801,197        743,383    
Stockholders' equity    680,168        606,378        575,029    
  Total liabilities and stockholders' equity$  5,909,061     $  5,261,493     $  5,088,823    
                  
Net interest income (tax equivalent basis)    45,523        40,678        38,610   
Net interest spread (6)     2.95 %     2.88 %     2.97 %
                  
Net interest margin (7)     3.34 %     3.27 %     3.26 %
                  
Tax equivalent adjustment     (571)       (517)       (463)  
Net interest income   $  44,952     $  40,161     $  38,147   
                  
(1) Average balances are calculated on amortized cost and includes equity securities.                 
(2) Interest income is presented on a tax equivalent basis using a 21% federal tax rate.            
(3) Includes loan fee income.               
(4) Loans include nonaccrual loans.              
(5) Average balances are net of debt issuance costs of $1,570, $1,653, and $1,639 for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively.  
  Amortization expense related to debt issuance costs included in interest expense was $83, $82 and $86 for the three months ended March 31, 2019, December 31, 2018  
  and March 31, 2018, respectively.              
(6) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing        
  liabilities and is presented on a tax equivalent basis.              
(7) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.         
(8) Rates are annualized.               
                  

 

 

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