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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): July 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. [   ]

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading symbolName of each exchange on which registered
Common stockCNOBNASDAQ

 

 

 
 

Item 2.02. Results of Operations and Financial Condition.

On July 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 July 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: July 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 Second Quarter 2019 Results

ENGLEWOOD CLIFFS, N.J., July 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 $19.3 million for the second quarter of 2019 compared with $11.6 million for the first quarter of 2019 and $17.5 million for the second quarter of 2018.  Diluted earnings per share were $0.54 for the second quarter of 2019 compared with $0.33 in the first quarter of 2019 and $0.54 in the second quarter of 2018. 

Adjusted net income amounted to $20.2 million, or $0.57 per diluted share, for the second quarter of 2019; $17.1 million, or $0.49 per diluted share, for the first quarter of 2019; and $17.5 million, or $0.54 per diluted share, for the second quarter of 2018.  Adjusted net income for the first and second quarters of 2019 excludes $5.6 million and $0.3 million, respectively, in after-tax merger-related expenses.  Adjusted net income for the second quarter 2019 also excludes an after-tax $0.7 million charge on the prepayment of higher-cost borrowings.  See supplemental tables for a complete reconciliation of GAAP earnings to adjusted earnings.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne Bank’s second quarter results were highlighted by continued organic loan growth and solid asset quality.  Total loans grew by nearly 10% sequentially on an annualized basis, with a majority of our growth attributable to higher yielding segments, while multi-family and other CRE lending were essentially flat.  Our net interest margin contracted from the sequential quarter by 4 basis points (8 basis points, adjusted), negatively impacted by several factors including rising costs of funding, a flatter yield curve, prepayments in mortgage backed securities, and slightly lower prepayment fees.  The margin outlook remains challenging. However, we are beginning to see a reduction in deposit costs as well as a benefit from our improved loan mix. We also expect to benefit from a recent repurchase of some of our FHLB borrowings.”

“Our performance metrics continue to reflect across-the-board financial strength,” Mr. Sorrentino added. “Return on assets was about 1.3%, return on tangible common equity was 14.8% and, on an adjusted basis, 15.5%, tangible book value per share increased by $0.34 to $15.01, and our efficiency ratio was 41.4%. Our credit quality remains sound. During the first quarter, as previously reported, we had a charge relating to a single loan secured by a commercial office building. Reflecting our philosophy of addressing issues expeditiously and to build timely resolutions, that situation was resolved favorably during the second quarter – the asset was foreclosed on and sold – resulting in a slight recovery. Additionally, in June, we finalized our previously announced acquisition of BoeFly.  An online business lending marketplace, BoeFly helps to connect small- to medium-sized businesses with professional loan brokers and lenders across the United States.  We already have experienced a strong cultural alignment with their FinTech-focused entrepreneurial team, and remain committed to supporting and enhancing the digital lending platform which is expected to augment fee income and generate profitable SBA lending opportunities.” 

Operating Results

Fully taxable equivalent net interest income for the second quarter of 2019 was $46.1 million, an increase of $0.6 million, or 1.2%, from the first quarter of 2019, resulting primarily from an 1.5% increase in average interest-earning assets, offset by a 4 basis-point contraction of the net interest margin to 3.30% from 3.34%.  Included in net interest income were purchase accounting adjustments of $1.7 million during the second quarter of 2019 and $1.2 million during the first quarter of 2019.  Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.17% for the second quarter of 2019 and 3.25% for the first quarter of 2019.  The net interest margin contracted primarily due to higher funding costs and lower yields on securities, partially offset by higher yields on loans.

Noninterest income increased to $1.9 million in the second quarter of 2019 from $1.7 million in the first quarter of 2019 and $1.3 million in the second 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 $21.6 million for second quarter of 2019, $28.1 million for the first quarter of 2019 and $17.1 million for the second quarter of 2018.  Included in noninterest expenses for the second and first quarters of 2019 were merger-related expenses of $0.3 million and $7.6 million, respectively.  Also included in noninterest expenses for the second quarter of 2019 is $1.0 million in loss on extinguishment of debt.  Excluding merger-related expenses and loss on extinguishment of debt, noninterest expenses decreased by $0.3 million from the first quarter of 2019 reflecting stable staff levels and reduced loan workout expense.

Income tax expense was $5.5 million for the second quarter of 2019, $2.5 million for the first quarter of 2019 and $4.6 million for the second quarter of 2018.  The effective tax rates for the second quarter of 2019, first quarter of 2019 and second quarter of 2018 were 22.2%, 17.6% and 20.8%, respectively. The increase in the effective tax rate for the current quarter from the sequential quarter was primarily due to a higher proportion of taxable income.

Asset Quality

The provision for loan losses was $1.1 million for the second quarter of 2019, $4.5 million for the first quarter of 2019 and $1.1 million for the second quarter of 2018. The first quarter provision included $3.0 million related to one impaired commercial office building credit.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $49.9 million at June 30, 2019, $51.9 million at December 31, 2018 and $50.8 million at June 30, 2018. Included in nonperforming assets were taxi medallion loans totaling $26.5 million at June 30, 2019, $28.0 million at December 31, 2018 and $28.9 million at June 30, 2018.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.82% at June 30, 2019, 0.95% at December 31, 2018 and 0.96% at June 30, 2018.  Excluding the taxi medallion loans, nonaccrual loans were $23.4 million at June 30, 2019, $23.8 million at December 31, 2018 and $20.8 million at June 30, 2018, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.46%, 0.53% and 0.48%, respectively. Nonaccrual loans at June 30, 2019 included a single $4.7 million credit that was paid off in full early in the third quarter. The annualized net loan charge-off ratio was 0.02% for the second quarter of 2019, 0.08% for the fourth quarter of 2018 and 0.00% for the second quarter of 2018. The allowance for loan losses represented 0.74%, 0.77%, and 0.77% of loans receivable as of June 30, 2019, December 31, 2018 and June 30, 2018, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 161.0% as of June 30, 2019, 146.8% as of December 31, 2018 and 161.7% as of June 30, 2018.

Selected Balance Sheet Items

At June 30, 2019, the balance sheet reflected the acquisition of Greater Hudson Bank.  The Company’s total assets were $6.1 billion, an increase of $647 million from December 31, 2018.  Total loans were $5.1 billion, an increase of $549 million from December 31, 2018.  The Company’s stockholders’ equity was $699 million at June 30, 2019, an increase of $85 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 June 30, 2019, the Company’s tangible common equity ratio and tangible book value per share were 8.93% and $15.01, 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 $0.34, or 2.3%, from the sequential quarter.  Total goodwill and other intangible assets were approximately $169 million as of June 30, 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.

Second Quarter 2019 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 25, 2019 to review the Company's financial performance and operating results. The conference call dial-in number is 323-794-2590, access code 4930630. 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 25, 2019 and ending on Thursday, August 1, 2019 by dialing 719-457-0820, access code 4930630. 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 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)    
       
 June 30, December 31, June 30, 
  2019   2018   2018  
 (unaudited)   (unaudited) 
ASSETS      
Cash and due from banks$  51,950  $  39,161  $  56,931  
Interest-bearing deposits with banks   133,700     133,205     119,238  
  Cash and cash equivalents   185,650     172,366     176,169  
       
Securities available-for-sale   441,911     412,034     400,015  
Equity securities   11,152     11,460     11,559  
       
Loans receivable   5,090,492     4,541,092     4,360,854  
Less: Allowance for loan losses   37,698     34,954     33,594  
  Net loans receivable   5,052,794     4,506,138     4,327,260  
       
Investment in restricted stock, at cost   31,767     31,136     32,441  
Bank premises and equipment, net   19,781     19,062     20,389  
Accrued interest receivable   21,272     18,214     16,754  
Bank owned life insurance   126,132     113,820     112,275  
Right of use operating lease assets   16,397     -     -  
Other real estate owned   -     -     1,076  
Goodwill   162,574     145,909     145,909  
Core deposit intangibles   6,140     1,737     2,027  
Other assets   33,496     30,216     29,494  
  Total assets$  6,109,066  $  5,462,092  $  5,275,368  
       
LIABILITIES      
Deposits:      
  Noninterest-bearing$  813,635  $  768,584  $  765,150  
  Interest-bearing   3,827,508     3,323,508     3,140,260  
  Total deposits   4,641,143     4,092,092     3,905,410  
Borrowings   597,317     600,001     628,995  
Operating lease liabilities   17,787     -     -  
Subordinated debentures (net of $1,435, $1,599 and $1,763 in debt issuance costs)   128,720     128,556     128,392  
Other liabilities   24,875     27,516     34,014  
  Total liabilities   5,409,842     4,848,165     4,696,811  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Common stock   471,071     412,546     412,546  
Additional paid-in capital   17,277     15,542     13,756  
Retained earnings   235,649     211,345     177,619  
Treasury stock   (21,892)    (16,717)    (16,717) 
Accumulated other comprehensive loss   (2,881)    (8,789)    (8,647) 
  Total stockholders' equity   699,224     613,927     578,557  
  Total liabilities and stockholders' equity$  6,109,066  $  5,462,092  $  5,275,368  
       
       

 

CONNECTONE BANCORP, INC. AND SUBSIDIARIES         
CONSOLIDATED STATEMENTS OF INCOME         
(dollars in thousands, except for per share data)         
          
  Three Months Ended   Six Months Ended   
 06/30/19 06/30/18 06/30/19 06/30/18  
Interest income         
  Interest and fees on loans$  63,524  $  49,494  $  123,850  $  96,519   
  Interest and dividends on investment securities:         
  Taxable   2,573     2,150     5,515     4,037   
  Tax-exempt   1,081     778     2,208     1,592   
  Dividends   410     502     867     987   
  Interest on federal funds sold and other short-term investments   290     160     647     424   
  Total interest income   67,878     53,084     133,087     103,559   
Interest expense         
  Deposits   16,596     9,169     31,947     16,857   
  Borrowings   5,752     4,970     10,658     9,610   
  Total interest expense   22,348     14,139     42,605     26,467   
          
Net interest income   45,530     38,945     90,482     77,092   
  Provision for loan losses   1,100     1,100     5,600     18,900   
Net interest income after provision for loan losses   44,430     37,845     84,882     58,192   
          
Noninterest income         
  Income on bank owned life insurance   833     775     1,655     1,549   
  Net gains on sales of loans held-for-sale   46     12     65     29   
  Deposit, loan and other income   914     601     1,700     1,217   
  Net gains (losses) on equity securities   158     (47)    261     (168)  
  Net losses on sales of securities available-for-sale   (9)    -     (1)    -   
  Total noninterest income   1,942     1,341     3,680     2,627   
          
Noninterest expenses         
  Salaries and employee benefits   11,822     9,736     23,805     19,415   
  Occupancy and equipment   2,357     2,031     4,852     4,174   
  FDIC insurance   825     765     1,580     1,615   
  Professional and consulting   1,370     825     2,579     1,548   
  Marketing and advertising   397     337     607     544   
  Data processing   1,139     1,091     2,294     2,239   
  Merger expenses   331     -     7,893     -   
  Loss on extinguishment of debt   1,047     -     1,047     -   
  Amortization of core deposit intangibles   364     169     728     338   
  Other expenses   1,938     2,107     4,267     4,126   
  Total noninterest expenses   21,590     17,061     49,652     33,999   
          
Income before income tax expense   24,782     22,125     38,910     26,820   
  Income tax expense   5,501     4,598     7,994     5,042   
Net income$  19,281  $  17,527  $  30,916  $  21,778   
          
Earnings per common share:         
  Basic$  0.55  $  0.54  $  0.88  $  0.68   
  Diluted   0.54     0.54     0.87     0.67   
          
Dividends per common share$  0.090  $  0.075  $  0.180  $  0.150   
          
          

 

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 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2019   2019   2018   2018   2018  
Selected Financial Data(dollars in thousands) 
Total assets$  6,109,066  $  6,048,976  $  5,462,092  $  5,368,641  $  5,275,368  
Loans receivable:          
  Commercial$  1,018,951  $  1,012,930  $  925,229  $  886,212  $  808,604  
  Commercial real estate   1,555,542     1,483,852     1,279,502     1,282,766     1,282,426  
  Multifamily   1,589,340     1,608,613     1,562,195     1,504,134     1,480,243  
  Commercial construction   602,213     548,039     465,389     494,206     498,607  
  Residential   326,661     319,214     309,991     295,948     288,449  
  Consumer   2,041     4,157     2,593     2,508     5,637  
  Gross loans   5,094,748     4,976,805     4,544,899     4,465,774     4,363,966  
Unearned net origination fees   (4,256)    (4,154)    (3,807)    (3,287)    (3,112) 
  Loans receivable   5,090,492     4,972,651     4,541,092     4,462,487     4,360,854  
  Loans held-for-sale (net of valuation allowance)   -     368     -     270     -  
Total loans$  5,090,492  $  4,973,019  $  4,541,092  $  4,462,757  $  4,360,854  
           
Investment securities$  453,063  $  528,103  $  423,494  $  421,442  $  411,574  
Goodwill and other intangible assets   168,714     162,747     147,646     147,791     147,936  
Deposits:          
  Noninterest-bearing demand$  813,635  $  833,090  $  768,584  $  758,213  $  765,150  
  Time deposits   1,623,948     1,544,247     1,366,054     1,322,747     1,315,843  
  Other interest-bearing deposits   2,203,560     2,216,661     1,957,454     1,907,805     1,824,417  
Total deposits$  4,641,143  $  4,593,998  $  4,092,092  $  3,988,765  $  3,905,410  
           
Borrowings$  597,317  $  603,412  $  600,001  $  629,979  $  628,995  
Subordinated debentures (net of debt issuance costs)   128,720     128,638     128,556     128,474     128,392  
Total stockholders' equity   699,224     682,395     613,927     594,871     578,557  
           
Quarterly Average Balances          
Total assets$  6,001,669  $  5,909,061  $  5,261,493  $  5,186,173  $  5,104,661  
Loans receivable:          
  Commercial$  1,024,617  $  1,035,874  $  896,032  $  803,702  $  764,028  
  Commercial real estate (including multifamily)   3,088,231     3,011,692     2,771,239     2,769,908     2,699,012  
  Commercial construction   571,130     524,952     464,556     494,460     494,092  
  Residential   322,517     335,574     304,954     294,758     282,504  
  Consumer   3,252     3,397     4,292     3,205     5,685  
  Gross loans   5,009,747     4,911,489     4,441,073     4,366,033     4,245,321  
Unearned net origination fees   (4,463)    (3,930)    (3,340)    (3,182)    (3,208) 
  Loans receivable   5,005,284     4,907,559     4,437,733     4,362,851     4,242,113  
  Loans held-for-sale   225     124     211     54     30,099  
Total loans$  5,005,509  $  4,907,683  $  4,437,944  $  4,362,905  $  4,272,212  
           
Investment securities$  513,814  $  524,394  $  421,316  $  415,074  $  424,854  
Goodwill and other intangible assets   164,709     162,814     147,741     147,883     148,046  
Deposits:          
  Noninterest-bearing demand$  800,856  $  824,115  $  775,824  $  761,782  $  719,372  
  Time deposits   1,551,014     1,515,249     1,329,743     1,296,165     1,280,471  
  Other interest-bearing deposits   2,183,384     2,236,630     1,915,353     1,854,763     1,765,577  
Total deposits$  4,535,254  $  4,575,994  $  4,020,920  $  3,912,710  $  3,765,420  
           
Borrowings$  603,260  $  486,687  $  477,800  $  531,251  $  613,763  
Subordinated debentures (net of debt issuance costs)   128,666     128,585     128,502     128,420     128,339  
Total stockholders' equity   694,978     680,168     606,378     590,128     574,992  
           
 Three Months Ended 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2019   2019   2018   2018   2018  
  (dollars in thousands, except for per share data)  
Net interest income$  45,530  $  44,952  $  40,161  $  39,962  $  38,945  
 Provision for loan losses   1,100     4,500     1,100     1,100     1,100  
Net interest income after provision for loan losses   44,430     40,452     39,061     38,862     37,845  
Noninterest income          
 Income on bank owned life insurance   833     822     794     751     775  
 Net gains on sales of loans held-for-sale   46     19     30     2     12  
 Deposit, loan and other income   914     786     691     676     601  
 Net gains (losses) on equity securities   158     103     58     (157)    (47) 
 Net (losses) gains on sales of securities available-for-sale   (9)    8     -     -     -  
  Total noninterest income   1,942     1,738     1,573     1,272     1,341  
Noninterest expenses          
 Salaries and employee benefits   11,822     11,983     9,988     10,181     9,736  
 Occupancy and equipment   2,357     2,495     2,001     2,137     2,031  
 FDIC insurance   825     755     765     735     765  
 Professional and consulting   1,370     1,209     1,129     891     825  
 Marketing and advertising   397     210     244     192     337  
 Data processing   1,139     1,155     1,080     1,102     1,091  
 Merger expenses   331     7,562     936     375     24  
 Loss on extinguishment of debt   1,047     -     -     -     -  
 Amortization of core deposit intangibles   364     364     144     145     169  
 Other expenses   1,938     2,329     2,037     2,372     2,083  
  Total noninterest expenses   21,590     28,062     18,324     18,130     17,061  
           
Income before income tax expense   24,782     14,128     22,310     22,004     22,125  
 Income tax expense   5,501     2,493     3,638     2,102     4,598  
Net income$  19,281  $  11,635  $  18,672  $  19,902  $  17,527  
           
Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:          
Net income$  19,281  $  11,635  $  18,672  $  19,902  $  17,527  
Merger expenses (after taxes)   274     5,597     739     297     -  
Loss on extinguishment of debt (after taxes)   732     -     -     -     -  
Net losses (gains) on sales of securities available-for-sale (after taxes)   2     (6)    -     -     -  
Net gains on equity securities (after taxes)   (110)    (74)    (40)    110     33  
Deferred tax valuation charge/adjustment   -     -     -     (1,408)    -  
Tax benefit on employee share-based awards (ASU 2016-09)   -     (20)    (223)    (297)    (49) 
Net income-adjusted$  20,179  $  17,132  $  19,148  $  18,604  $  17,511  
           
Weighted average diluted shares outstanding   35,397,362     35,309,503     32,378,739     32,319,060     32,321,150  
           
Diluted EPS (GAAP)$  0.54  $  0.33  $  0.58  $  0.61  $  0.54  
Diluted EPS-adjusted (Non-GAAP) (1)   0.57     0.49     0.59     0.58     0.54  
           
Return on Assets Measures          
Net income-adjusted$  20,179  $  17,132  $  19,148  $  18,604  $  17,511  
           
Average assets$  6,001,669  $  5,909,061  $  5,261,493  $  5,186,173  $  5,104,661  
Less: average intangible assets   (164,709)    (162,814)    (147,741)    (147,883)    (148,046) 
Average tangible assets$  5,836,960  $  5,746,247  $  5,113,752  $  5,038,290  $  4,956,615  
Return on avg. assets (GAAP)   1.29 %   0.80 %   1.41 %   1.52 %   1.38 %
Return on avg. assets-adjusted (non-GAAP) (2)   1.35     1.18     1.44     1.42     1.38  
           
(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 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2019   2019   2018   2018   2018  
Return on Equity Measures(dollars in thousands) 
Net income-adjusted$  20,179  $  17,132  $  19,148  $  18,604  $  17,511  
           
Average common equity$  694,978  $  680,168  $  606,378  $  590,128  $  574,992  
Less: average intangible assets   (164,709)    (162,814)    (147,741)    (147,883)    (148,046) 
Average tangible common equity$  530,269  $  517,354  $  458,637  $  442,245  $  426,946  
           
Return on avg. common equity (GAAP)   11.13 %   6.94 %   12.22 %   13.38 %   12.23 %
Return on avg. common equity-adjusted (non-GAAP) (3)   11.65     10.22     12.53     12.51     12.22  
Return on avg. tangible common equity (non-GAAP) (4)   14.78     9.33     16.24     17.95     16.58  
Return on avg. tangible common equity-adjusted (non-GAAP) (5)   15.46     13.63     16.65     16.78     16.57  
           
Efficiency Measures          
Total noninterest expenses$  21,590  $  28,062  $  18,324  $  18,130  $  17,061  
Amortization of core deposit intangibles   (364)    (364)    (144)    (145)    (169) 
Merger expenses   (331)    (7,562)    (936)    (375)    -  
Loss on extinguishment of debt   (1,047)    -     -     -     -  
Foreclosed property expense   -     1     (8)    (196)    (11) 
Operating noninterest expense $  19,848  $  20,137  $  17,236  $  17,414  $  16,881  
           
Net interest income (tax equivalent basis)$  46,092  $  45,523  $  40,678  $  40,444  $  39,409  
Noninterest income   1,942     1,738     1,573     1,272     1,341  
Net gains (losses) on equity securities   (158)    (103)    (58)    157     47  
Net losses (gains) on sales of securities available-for-sale   9     (8)    -     -     -  
Operating revenue $  47,885  $  47,150  $  42,193  $  41,873  $  40,797  
           
Operating efficiency ratio (non-GAAP) (6)   41.4 %   42.7 %   40.9 %   41.6 %   41.4 %
           
Net Interest Margin          
Average interest-earning assets$  5,607,086  $  5,522,934  $  4,941,425  $  4,856,678  $  4,771,523  
           
Net interest income (tax equivalent basis)$  46,092  $  45,523  $  40,678  $  40,444  $  39,409  
Impact of purchase accounting fair value marks   (1,742)    (1,233)    (148)    (195)    (680) 
Adjusted net interest income (tax equivalent basis)$  44,350  $  44,290  $  40,530  $  40,249  $  38,729  
           
Net interest margin (GAAP)   3.30 %   3.34 %   3.27 %   3.30 %   3.31 %
Adjusted net interest margin (non-GAAP) (7)   3.17     3.25     3.25     3.29     3.26  
           
(3) Adjusted earnings available to common stockholders divided by average common equity.       
(4) Earnings available to common stockholders excluding amortization of intangible 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 
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 
  2019   2019   2018   2018   2018  
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data) 
Common equity$  699,224  $  682,395  $  613,927  $  594,871  $  578,557  
Less: intangible assets   (168,714)    (162,747)    (147,646)    (147,791)    (147,936) 
Tangible common equity$  530,510  $  519,648  $  466,281  $  447,080  $  430,621  
           
Total assets$  6,109,066  $  6,048,976  $  5,462,092  $  5,368,641  $  5,275,368  
Less: intangible assets   (168,714)    (162,747)    (147,646)    (147,791)    (147,936) 
Tangible assets$  5,940,352  $  5,886,229  $  5,314,446  $  5,220,850  $  5,127,432  
           
Common shares outstanding   35,352,866     35,432,468     32,328,542     32,238,264     32,184,047  
           
Common equity ratio (GAAP)   11.45 %   11.28 %   11.24 %   11.08 %   10.97 %
Tangible common equity ratio (non-GAAP) (8)   8.93     8.83     8.77     8.56     8.40  
           
Regulatory capital ratios (Bancorp):          
  Leverage ratio   9.14 %   9.12 %   9.34 %   9.15 %   8.93 %
  Common equity Tier 1 risk-based ratio   9.65     9.68     9.75     9.50     9.33  
  Risk-based Tier 1 capital ratio   9.74     9.77     9.86     9.61     9.44  
  Risk-based total capital ratio   12.72     12.79     13.15     12.94     12.81  
           
Regulatory capital ratios (Bank):          
  Leverage ratio   10.42 %   10.43 %   10.78 %   10.64 %   10.43 %
  Common equity Tier 1 risk-based ratio   11.12     11.17     11.37     11.18     11.02  
  Risk-based Tier 1 capital ratio   11.12     11.17     11.37     11.18     11.02  
  Risk-based total capital ratio   12.40     12.46     12.75     12.57     12.42  
           
Book value per share (GAAP)$  19.78  $  19.26  $  18.99  $  18.45  $  17.98  
Tangible book value per share (non-GAAP) (9)   15.01     14.67     14.42     13.87     13.38  
           
Net Loan Charge-Off (Recoveries) Detail          
Net loan charge-offs (recoveries) :          
 Charge-offs$  406  $  2,676  $  920  $  6  $  47  
 Recoveries   (146)    (80)    (25)    (61)    (12) 
  Net loan charge-offs (recoveries)$  260  $  2,596  $  895  $  (55) $  35  
  Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)   0.02 %   0.21 %   0.08 %   (0.01)%   0.00 %
           
Asset Quality          
Nonaccrual taxi medallion loans$  26,498  $  27,287  $  28,043  $  28,482  $  28,944  
Nonaccrual loans (excluding taxi medallion loans)   23,419     20,393     23,812     24,533     20,771  
Other real estate owned   -     -     -     -     1,076  
Total nonperforming assets$  49,917  $  47,680  $  51,855  $  53,015  $  50,791  
           
Performing troubled debt restructurings$  16,332  $  8,191  $  11,165  $  11,243  $  12,827  
           
Allowance for loan losses ("ALLL")$  37,698  $  36,858  $  34,954  $  34,749  $  33,594  
           
Loans receivable$  5,090,492  $  4,972,651  $  4,541,092  $  4,462,487  $  4,360,854  
Less: taxi medallion loans   28,054     28,911     28,043     28,482     28,944  
Loans receivable (excluding taxi medallion loans)$  5,062,438  $  4,943,740  $  4,513,049  $  4,434,005  $  4,331,910  
           
Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans)   0.46 %   0.41 %   0.53 %   0.55 %   0.48 %
Nonaccrual loans as a % of loans receivable   0.98     0.96     1.14     1.19     1.14  
Nonperforming assets as a % of total assets   0.82     0.79     0.95     0.99     0.96  
ALLL as a % of loans receivable   0.74     0.74     0.77     0.78     0.77  
ALLL as a % of nonaccrual loans (excluding taxi medallion loans)   161.0     180.7     146.8     141.6     161.7  
ALLL as a % of nonaccrual loans   75.5     77.3     67.4     65.5     67.6  
           
(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 
    June 30, 2019March 31, 2019June 30, 2018 
    Average    Average    Average   
Interest-earning assets: BalanceInterestRate (8)  BalanceInterestRate (8)  BalanceInterestRate (8) 
Investment securities (1) (2) $  515,022 $  3,941   3.07% $  531,083 $  4,369   3.34% $  432,493 $  3,136   2.91%
Total loans (2) (3) (4)     5,005,509    63,799   5.11     4,907,683    60,597   5.01     4,272,212    49,750   4.67 
Federal funds sold and interest-              
  bearing deposits with banks    54,619    290   2.13     57,690    357   2.51     35,315    159   1.81 
Restricted investment in bank stock   31,936    410   5.15     26,478    457   7.00     31,503    502   6.39 
  Total interest-earning assets   5,607,086    68,440   4.90     5,522,934    65,780   4.83     4,771,523    53,547   4.50 
Allowance for loan losses    (37,390)       (35,499)       (32,668)   
Noninterest-earning assets    431,973        421,626        365,806    
  Total assets  $  6,001,669     $  5,909,061     $  5,104,661    
                  
Interest-bearing liabilities:               
 Time deposits  $  1,551,014    9,366   2.42  $  1,515,249    8,303   2.22  $  1,280,471    5,830   1.83 
 Other interest-bearing deposits   2,183,384    7,230   1.33     2,236,630    7,048   1.28     1,765,577    3,338   0.76 
  Total interest-bearing deposits   3,734,398    16,596   1.78     3,751,879    15,351   1.66     3,046,048    9,168   1.21 
                  
Borrowings     603,260    3,870   2.57     486,687    3,024   2.52     613,763    3,091   2.02 
Subordinated debentures (5)    128,666    1,845   5.75     128,585    1,845   5.82     128,339    1,840   5.75 
Capital lease obligation    2,436    37   6.09     2,479    37   6.05     2,589    39   6.04 
  Total interest-bearing liabilities   4,468,760    22,348   2.01     4,369,630    20,257   1.88     3,790,739    14,138   1.50 
                  
Noninterest-bearing demand deposits   800,856        824,115        719,372    
Other liabilities     37,075        35,148        19,558    
  Total noninterest-bearing liabilities   837,931        859,263        738,930    
Stockholders' equity    694,978        680,168        574,992    
  Total liabilities and stockholders' equity$  6,001,669     $  5,909,061     $  5,104,661    
                  
Net interest income (tax equivalent basis)    46,092        45,523        39,409   
Net interest spread (6)     2.89%     2.95%     3.00%
                  
Net interest margin (7)     3.30%     3.34%     3.31%
                  
Tax equivalent adjustment     (562)       (571)       (463)  
Net interest income   $  45,530     $  44,952     $  38,946   
                  
(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 $1,489, $1,570 and $1,816 for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.  
  Amortization expense related to debt issuance costs included in interest expense was $82, $82 and $82 for the three months ended June 30, 2019, March 31, 2019   
  and June 30, 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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