- Current liquidity including borrowing capacity enhanced to nearly $4 billion or 250% of uninsured and uncollateralized deposits, or approximately 20% of total deposits
- Core client net inflows contributed to a $400 million, or 5.4%, sequential increase in deposits for the quarter
- TCE ratio of 8.9% and CET1 ratio of 10.5% at quarter-end, largely unaffected by rising interest rates
- Net interest margin compressed to 3.00%. Rising interest costs due to liquidity tightening across the industry, an increase in on-balance sheet cash, and the cost of maintaining and growing client relationships contributed to the accelerated decrease of 48 bps
- Resilient profitability: return on assets of 1.04%, return on tangible common equity of 11.1%, and pre-provision net revenue as a % of assets of 1.46%
- Quarterly common dividend increased by 9.7% to $0.17 per share reflecting a dividend payout ratio of 29%
- Repurchased 205,000 shares at an average price of $22.51 during the first quarter and plan to continue repurchase program as market conditions permit
ENGLEWOOD CLIFFS, N.J., April 27, 2023 (GLOBE NEWSWIRE) — ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $23.4 million for the first quarter of 2023, compared with $31.0 million for the fourth quarter of 2022 and $29.9 million for the first quarter of 2022. Diluted earnings per share were $0.59 for the first quarter of 2023 compared with $0.79 for the fourth quarter of 2022 and $0.75 for the first quarter of 2022. The $7.6 million decrease in net income available to common stockholders and $0.20 decrease in diluted earnings per share versus the fourth quarter of 2022 were primarily due to a $10.9 million decrease in net interest income, a $0.7 decrease in noninterest income, and a $1.6 million increase in noninterest expenses, partially offset by a decrease in provision for credit losses of $2.3 million and a $3.3 million decrease in income tax expense. The $6.5 million decrease in net income available to common stockholders and $0.16 decrease in diluted earnings per share versus the first quarter of 2022 were due to a $3.3 million decrease in net interest income, a $0.3 million decrease in noninterest income, and a $5.6 million increase in noninterest expenses, partially offset by a decrease in provision for credit losses of $0.4 million and a $2.3 million decrease in income tax expenses.
Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 1.46%, 2.02% and 2.17% for the quarters ending March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer commented, “Our stated goals of maintaining our client relationships, transforming our infrastructure, and growing smartly were highly evident in this unprecedented quarter. We reached out to our client base with a sense of urgency resulting in net deposit inflows for the quarter; we lowered our uninsured deposits, uncollateralized deposits from approximately 40% at year-end to 20% today; and we improved our aggregate cash position and unused borrowing capacity to nearly $4 billion, fortifying our liquidity backstop. Our tangible common equity ratio remained strong, largely unaffected by rising interest rates reflecting both strong profitability and effective management and hedging of our available for sale securities portfolio. We also remain well-positioned for economic uncertainty, reflecting our high credit standards, diversified relationship-based client philosophy and avoidance of potentially riskier sub-segments.
Mr. Sorrentino added, “During the latter part of 2022, and through the first quarter of 2023, we had success playing offense, deepening client relationships and building core deposits, with inflows during the quarter exceeding outflows. That said, by intentionally addressing increased deposit rate competition earlier than most, we experienced accelerated net interest margin compression which negatively impacted first quarter earnings results. Nonetheless, as we execute our business plan, we continue to be disciplined in our approach and believe that ConnectOne’s long-term profitability outlook remains strong.”
Mr. Sorrentino concluded, “We will continue to execute on some of the market related opportunities that have recently materialized, however, given the current economic outlook, we expect relatively flat loan and expense growth for the remainder of 2023. And although the industry remains burdened by near-term headwinds, I remain extremely confident in the Company’s future as we move through 2023 and eventually transition to a more normalized environment.”
Dividend Declarations
The Company announced that its Board of Directors declared an increased quarterly cash dividend on its common stock and declared a cash dividend on its outstanding preferred stock.
A cash dividend on common stock of $0.17, an increase of 9.7%, will be paid on June 1, 2023, to common stockholders of record on May 15, 2023. A dividend of $0.328125 per depositary share, representing a 1/40th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on June 1, 2023 to preferred stockholders of record on May 15, 2023.
Operating Results
Fully taxable equivalent net interest income for the first quarter of 2023 was $67.8 million, a decrease of $10.9 million, or 13.9%, from the fourth quarter of 2022 due to a 48 basis-point contraction of the net interest margin from 3.48% to 3.00%, partially offset by an increase in interest-earning assets of $202.1 million. The increase in interest-earning assets from the fourth quarter of 2022 was primarily attributable to increases in cash and cash equivalents of $117.8 million and loans of $93.2 million. While the net interest margin benefitted from a 15 basis-point increase in the loan portfolio yield, to 5.35%, the average cost of deposits, including noninterest-bearing demand, increased by 74 basis points to 2.20% from 1.46% in the fourth quarter of 2022. Contributing to the increased cost of deposits was a $158.4 million, or 9.8%, decline in average noninterest-bearing deposits as bank depositors throughout the industry are transitioning funds to interest-earning products. In addition, while we are cognizant of the short-term implications of faster deposit betas, maintaining and growing client deposits and protecting decay rates reflects a more prudent oversight of liquidity and the balance sheet for the longer term.
Fully taxable equivalent net interest income for the first quarter of 2023 decreased by $3.0 million, or 4.3%, from the first quarter of 2022. The decrease from the first quarter of 2022 resulted primarily from a 71 basis-point decrease of the net interest margin from 3.71% to 3.00%, partially offset by an increase in interest-earning assets of $1.4 billion. The contraction of the net interest margin for the first quarter of 2023 when compared to the first quarter of 2022 was primarily attributable to a 189 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by an 85 basis-point increase in the loan portfolio yield.
Noninterest income was $2.8 million in the first quarter of 2023, $3.5 million in the fourth quarter of 2022 and $3.1 million in the first quarter of 2022. Included in noninterest income were net losses on equity securities of $0.2 million, $0.1 million and $0.6 million for the first quarter 2023, fourth quarter 2022 and first quarter 2022, respectively. Excluding the aforementioned items, adjusted noninterest income was $3.0 million, $3.6 million and $3.7 million for the first quarter 2023, fourth quarter 2022 and first quarter 2022, respectively. The $0.6 million decrease in adjusted noninterest income for the current quarter versus the sequential fourth quarter 2022 was primarily due to a decrease in deposit, loan and other income of $0.5 million and a decrease in net gains on sale of loans held-for-sale of $0.1 million. The $0.7 million decrease in adjusted noninterest income for the current quarter versus the first quarter 2022 was primarily due to decreases in net gains on sale of loans held-for-sale of $0.7 million and deposit, loan and other income of $0.3 million, partially offset by increases in bank owned life insurance income of $0.3 million.
Noninterest expenses totaled $34.9 million for the first quarter of 2023, $33.3 million for the fourth quarter of 2022 and $29.2 million for the first quarter of 2022. The increase in noninterest expenses of $1.6 million from the fourth quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $0.6 million, information technology and communications of $0.4 million, other expenses of $0.3 million, occupancy and equipment of $0.2 million and FDIC insurance of $0.1 million. The increase in noninterest expenses of $5.6 million from the first quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $3.6 million, other expenses of $0.8 million, occupancy and equipment of $0.8 million, professional and consulting of $0.4 million, FDIC insurance of $0.3 million, information technology and communications of $0.2, and marketing and advertising of $0.2 million, partially offset by a decrease in acquisition expenses related to BoeFly of $0.7 million. The increase in salaries and employee benefits from the prior sequential quarter and prior year quarter was primarily attributable to new hires and seasonal increases in payroll taxes.
Income tax expense was $9.1 million for the first quarter of 2023, $12.3 million for the fourth quarter of 2022 and $11.4 million for the first quarter of 2022. The effective tax rates for the first quarter of 2023, fourth quarter of 2022 and first quarter of 2022 were 26.7%, 27.5% and 26.6%, respectively.
Asset Quality
The provision for credit losses was $1.0 million for the first quarter of 2023, $3.3 million for the fourth quarter of 2022 and $1.5 million for the first quarter of 2022. The current quarter’s provision primarily reflects modest loan growth and an increase in qualitative factors.
Nonperforming assets, which include nonaccrual loans and other real estate owned, were $47.7 million as of March 31, 2023, $44.7 million as of December 31, 2022 and $59.7 million as of March 31, 2022. Nonaccrual loans were $47.7 million as of March 31, 2023, $44.5 million as of December 31, 2022 and $59.4 million as of March 31, 2022. Nonperforming assets as a percentage of total assets were 0.48% as of March 31, 2023, 0.46% as of December 31, 2022 and 0.72% as of March 31, 2022. The ratio of nonaccrual loans to loans receivable was 0.59%, 0.55% and 0.85%, as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively. The annualized net loan charge-offs ratio was 0.22% for the first quarter of 2023, 0.22% for the fourth quarter of 2022 and 0.01% for the first quarter of 2022. The current quarter’s charge-offs reflect the resolution of certain nonaccrual taxi loans and one owner-occupied commercial real estate loan that were previously reserved for and therefore required no additional loan loss provisioning. The allowance for credit losses represented 1.07%, 1.12%, and 1.15% of loans receivable as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 182.5% as of March 31, 2023, 203.6% as of December 31, 2022 and 134.8% as of March 31, 2022.
Selected Balance Sheet Items
The Company’s total assets were $9,960.5 million as of March 31, 2023, an increase of $315.5 million from December 31, 2022. The increase in total assets was primarily due to increased cash and cash equivalents which were $562.4 million, an increase of $294.1 million from December 31, 2022. Loans receivable were $8.1 billion, an increase of $32.4 million from December 31, 2022. Total deposits were $7.8 billion, an increase of $396.6 million from December 31, 2022.
The Company’s total stockholders’ equity was $1.2 billion as of March 31, 2023, an increase of $12.2 million from December 31, 2022. The increase in retained earnings of $17.3 million was the primary reason for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $1.2 million, partially offset by a decrease in accumulated other comprehensive income of $1.5 million and an increase in treasury stock of $4.9 million. As of March 31, 2023, the Company’s tangible common equity ratio and tangible book value per share were 8.87% and $22.07, respectively. As of December 31, 2022, the tangible common equity ratio and tangible book value per share were 9.04% and $21.71, respectively. Total goodwill and other intangible assets were $215.3 million as of March 31, 2023, and $215.7 million as of December 31, 2022.
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP measures. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
First Quarter 2023 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 27, 2023 to review the Company’s financial performance and operating results. The conference call dial-in number is 1-412-317-5195, access code 10177527. 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 27, 2023 and ending on Thursday, May 4, 2023 by dialing 1-412-317-6671, access code 10177527. 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., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and the Bank’s fintech subsidiary, BoeFly, Inc. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly, Inc. is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. 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 U.S. Securities and Exchange Commission, as supplemented by the Company’s subsequent filings with the U.S. Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Investor Contact:
William S. Burns
Senior Executive VP & CFO
201.816.4474: bburns@cnob.com
Media Contact:
Shannan Weeks
MWW
732.299.7890: sweeks@mww.com
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||
| (in thousands) | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2023 | 2022 | 2022 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 58,063 | $ | 61,629 | $ | 61,849 | ||||||
| Interest-bearing deposits with banks | 504,353 | 206,686 | 249,695 | |||||||||
| Cash and cash equivalents | 562,416 | 268,315 | 311,544 | |||||||||
| Investment securities | 629,001 | 634,884 | 512,030 | |||||||||
| Equity securities | 18,025 | 15,811 | 13,198 | |||||||||
| Loans held-for-sale | 11,197 | 13,772 | 2,742 | |||||||||
| Loans receivable | 8,132,119 | 8,099,689 | 6,979,595 | |||||||||
| Less: Allowance for credit losses – loans | 87,002 | 90,513 | 80,070 | |||||||||
| Net loans receivable | 8,045,117 | 8,009,176 | 6,899,525 | |||||||||
| Investment in restricted stock, at cost | 46,379 | 46,604 | 25,254 | |||||||||
| Bank premises and equipment, net | 29,603 | 27,800 | 28,779 | |||||||||
| Accrued interest receivable | 46,301 | 46,062 | 34,081 | |||||||||
| Bank owned life insurance | 232,859 | 231,328 | 196,937 | |||||||||
| Right of use operating lease assets | 9,541 | 10,179 | 10,400 | |||||||||
| Other real estate owned | – | 264 | 316 | |||||||||
| Goodwill | 208,372 | 208,372 | 208,372 | |||||||||
| Core deposit intangibles | 6,940 | 7,312 | 8,564 | |||||||||
| Other assets | 114,716 | 125,069 | 82,559 | |||||||||
| Total assets | $ | 9,960,467 | $ | 9,644,948 | $ | 8,334,301 | ||||||
| LIABILITIES | ||||||||||||
| Deposits: | ||||||||||||
| Noninterest-bearing | $ | 1,345,265 | $ | 1,501,614 | $ | 1,631,292 | ||||||
| Interest-bearing | 6,407,911 | 5,855,008 | 4,929,113 | |||||||||
| Total deposits | 7,753,176 | 7,356,622 | 6,560,405 | |||||||||
| Borrowings | 852,611 | 857,622 | 412,170 | |||||||||
| Subordinated debentures, net | 79,060 | 153,255 | 153,027 | |||||||||
| Operating lease liabilities | 10,717 | 11,397 | 11,773 | |||||||||
| Other liabilities | 73,933 | 87,301 | 58,407 | |||||||||
| Total liabilities | 8,769,497 | 8,466,197 | 7,195,782 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||
| Preferred stock | 110,927 | 110,927 | 110,927 | |||||||||
| Common stock | 586,946 | 586,946 | 586,946 | |||||||||
| Additional paid-in capital | 31,350 | 30,126 | 28,484 | |||||||||
| Retained earnings | 553,261 | 535,915 | 464,889 | |||||||||
| Treasury stock | (57,652 | ) | (52,799 | ) | (44,458 | ) | ||||||
| Accumulated other comprehensive loss | (33,862 | ) | (32,364 | ) | (8,269 | ) | ||||||
| Total stockholders’ equity | 1,190,970 | 1,178,751 | 1,138,519 | |||||||||
| Total liabilities and stockholders’ equity | $ | 9,960,467 | $ | 9,644,948 | $ | 8,334,301 | ||||||
| CONNECTONE BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
| (dollars in thousands, except for per share data) | ||||||||||||
| Three Months Ended | ||||||||||||
| 03/31/23 | 12/31/22 | 03/31/22 | ||||||||||
| Interest income | ||||||||||||
| Interest and fees on loans | $ | 106,903 | $ | 104,952 | $ | 76,025 | ||||||
| Interest and dividends on investment securities: | ||||||||||||
| Taxable | 4,229 | 4,225 | 1,873 | |||||||||
| Tax-exempt | 1,092 | 1,185 | 709 | |||||||||
| Dividends | 898 | 712 | 214 | |||||||||
| Interest on federal funds sold and other short-term investments | 2,975 | 1,395 | 120 | |||||||||
| Total interest income | 116,097 | 112,469 | 78,941 | |||||||||
| Interest expense | ||||||||||||
| Deposits | 40,087 | 26,543 | 5,010 | |||||||||
| Borrowings | 8,926 | 7,917 | 3,573 | |||||||||
| Total interest expense | 49,013 | 34,460 | 8,583 | |||||||||
| Net interest income | 67,084 | 78,009 | 70,358 | |||||||||
| Provision for credit losses | 1,000 | 3,300 | 1,450 | |||||||||
| Net interest income after provision for credit losses | 66,084 | 74,709 | 68,908 | |||||||||
| Noninterest income | ||||||||||||
| Deposit, loan and other income | 1,403 | 1,894 | 1,743 | |||||||||
| Income on bank owned life insurance | 1,531 | 1,528 | 1,206 | |||||||||
| Net gains on sale of loans held-for-sale | 49 | 176 | 701 | |||||||||
| Net losses on equity securities | (191 | ) | (90 | ) | (596 | ) | ||||||
| Total noninterest income | 2,792 | 3,508 | 3,054 | |||||||||
| Noninterest expenses | ||||||||||||
| Salaries and employee benefits | 22,236 | 21,676 | 18,640 | |||||||||
| Occupancy and equipment | 2,761 | 2,603 | 1,929 | |||||||||
| FDIC insurance | 950 | 830 | 606 | |||||||||
| Professional and consulting | 2,194 | 2,157 | 1,792 | |||||||||
| Marketing and advertising | 532 | 454 | 351 | |||||||||
| Information technology and communications | 3,061 | 2,694 | 2,866 | |||||||||
| Amortization of core deposit intangible | 372 | 409 | 433 | |||||||||
| Increase in value of acquisition price | – | – | 683 | |||||||||
| Other expenses | 2,764 | 2,489 | 1,930 | |||||||||
| Total noninterest expenses | 34,870 | 33,312 | 29,230 | |||||||||
| Income before income tax expense | 34,006 | 44,905 | 42,732 | |||||||||
| Income tax expense | 9,077 | 12,348 | 11,351 | |||||||||
| Net income | 24,929 | 32,557 | 31,381 | |||||||||
| Preferred dividends | 1,509 | 1,510 | 1,509 | |||||||||
| Net income available to common stockholders | $ | 23,420 | $ | 31,047 | $ | 29,872 | ||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.60 | $ | 0.79 | $ | 0.76 | ||||||
| Diluted | 0.59 | 0.79 | 0.75 | |||||||||
| 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 | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | ||||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||||
| Selected Financial Data | (dollars in thousands) | |||||||||||||||||||
| Total assets | $ | 9,960,467 | $ | 9,644,948 | $ | 9,478,252 | $ | 8,841,506 | $ | 8,334,301 | ||||||||||
| Loans receivable: | ||||||||||||||||||||
| Commercial | $ | 1,392,565 | $ | 1,443,942 | $ | 1,392,037 | $ | 1,274,280 | $ | 1,161,867 | ||||||||||
| Paycheck Protection Program ("PPP") loans | 11,300 | 11,374 | 11,458 | 18,004 | 54,301 | |||||||||||||||
| Commercial real estate | 3,245,990 | 3,170,760 | 3,087,354 | 2,727,120 | 2,516,065 | |||||||||||||||
| Multifamily | 2,600,251 | 2,641,886 | 2,624,726 | 2,442,603 | 2,465,337 | |||||||||||||||
| Commercial construction | 630,469 | 574,139 | 537,323 | 569,789 | 539,058 | |||||||||||||||
| Residential | 259,166 | 264,748 | 256,085 | 249,379 | 250,205 | |||||||||||||||
| Consumer | 1,435 | 2,312 | 1,030 | 1,248 | 1,140 | |||||||||||||||
| Gross loans | 8,141,176 | 8,109,161 | 7,910,013 | 7,282,423 | 6,987,973 | |||||||||||||||
| Unearned net origination fees | (9,057 | ) | (9,472 | ) | (9,563 | ) | (7,850 | ) | (8,378 | ) | ||||||||||
| Loans receivable | 8,132,119 | 8,099,689 | 7,900,450 | 7,274,573 | 6,979,595 | |||||||||||||||
| Loans held-for-sale | 11,197 | 13,772 | 8,080 | 3,182 | 2,742 | |||||||||||||||
| Total loans | $ | 8,143,316 | $ | 8,113,461 | $ | 7,908,530 | $ | 7,277,755 | $ | 6,982,337 | ||||||||||
| Investment and equity securities | $ | 647,026 | $ | 650,695 | $ | 639,192 | $ | 691,934 | $ | 525,228 | ||||||||||
| Goodwill and other intangible assets | 215,312 | 215,684 | 216,093 | 216,502 | 216,936 | |||||||||||||||
| Deposits: | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,345,265 | $ | 1,501,614 | $ | 1,665,658 | $ | 1,712,875 | $ | 1,631,292 | ||||||||||
| Time deposits | 2,706,662 | 2,394,190 | 1,921,235 | 1,285,409 | 1,065,814 | |||||||||||||||
| Other interest-bearing deposits | 3,701,249 | 3,460,818 | 3,723,617 | 3,619,315 | 3,863,299 | |||||||||||||||
| Total deposits | $ | 7,753,176 | $ | 7,356,622 | $ | 7,310,510 | $ | 6,617,599 | $ | 6,560,405 | ||||||||||
| Borrowings | $ | 852,611 | $ | 857,622 | $ | 829,953 | $ | 874,964 | $ | 412,170 | ||||||||||
| Subordinated debentures, net | 79,060 | 153,255 | 153,179 | 153,103 | 153,027 | |||||||||||||||
| Total stockholders’ equity | 1,190,970 | 1,178,751 | 1,148,295 | 1,143,147 | 1,138,519 | |||||||||||||||
| Quarterly Average Balances | ||||||||||||||||||||
| Total assets | $ | 9,700,530 | $ | 9,490,477 | $ | 9,030,589 | $ | 8,322,823 | $ | 8,263,382 | ||||||||||
| Loans receivable: | ||||||||||||||||||||
| Commercial (including PPP loans) | $ | 1,442,180 | $ | 1,456,247 | $ | 1,342,868 | $ | 1,245,812 | $ | 1,231,703 | ||||||||||
| Commercial real estate (including multifamily) | 5,813,388 | 5,758,594 | 5,455,714 | 4,974,297 | 4,850,349 | |||||||||||||||
| Commercial construction | 606,214 | 558,086 | 537,073 | 544,084 | 541,642 | |||||||||||||||
| Residential | 261,560 | 261,969 | 251,338 | 247,208 | 253,589 | |||||||||||||||
| Consumer | 3,894 | 4,630 | 2,361 | 5,029 | 3,682 | |||||||||||||||
| Gross loans | 8,127,236 | 8,039,526 | 7,589,354 | 7,016,430 | 6,880,965 | |||||||||||||||
| Unearned net origination fees | (9,664 | ) | (9,666 | ) | (9,178 | ) | (9,222 | ) | (9,870 | ) | ||||||||||
| Loans receivable | 8,117,572 | 8,029,860 | 7,580,176 | 7,007,208 | 6,871,095 | |||||||||||||||
| Loans held-for-sale | 13,463 | 7,933 | 2,195 | 966 | 382 | |||||||||||||||
| Total loans | $ | 8,131,035 | $ | 8,037,793 | $ | 7,582,371 | $ | 7,008,174 | $ | 6,871,477 | ||||||||||
| Investment and equity securities | $ | 649,744 | $ | 650,479 | $ | 687,291 | $ | 567,140 | $ | 536,090 | ||||||||||
| Goodwill and other intangible assets | 215,556 | 215,951 | 216,360 | 216,786 | 217,219 | |||||||||||||||
| Deposits: | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,451,654 | $ | 1,610,044 | $ | 1,682,135 | $ | 1,607,465 | $ | 1,547,055 | ||||||||||
| Time deposits | 2,357,332 | 2,035,362 | 1,525,076 | 1,103,418 | 1,124,614 | |||||||||||||||
| Other interest-bearing deposits | 3,565,904 | 3,558,881 | 3,686,520 | 3,717,531 | 3,851,558 | |||||||||||||||
| Total deposits | $ | 7,374,890 | $ | 7,204,287 | $ | 6,893,731 | $ | 6,428,414 | $ | 6,523,227 | ||||||||||
| Borrowings | $ | 941,266 | $ | 913,960 | $ | 772,561 | $ | 548,675 | $ | 404,907 | ||||||||||
| Subordinated debentures, net | 103,637 | 153,205 | 153,129 | 153,053 | 152,977 | |||||||||||||||
| Total stockholders’ equity | 1,191,216 | 1,165,588 | 1,160,448 | 1,143,092 | 1,131,968 | |||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | ||||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||||
| (dollars in thousands, except for per share data) | ||||||||||||||||||||
| Net interest income | $ | 67,084 | $ | 78,009 | $ | 78,161 | $ | 75,591 | $ | 70,358 | ||||||||||
| Provision for credit losses | 1,000 | 3,300 | 10,000 | 3,000 | 1,450 | |||||||||||||||
| Net interest income after provision for credit losses | 66,084 | 74,709 | 68,161 | 72,591 | 68,908 | |||||||||||||||
| Noninterest income | ||||||||||||||||||||
| Deposit, loan and other income | 1,403 | 1,894 | 1,969 | 1,866 | 1,743 | |||||||||||||||
| Income on bank owned life insurance | 1,531 | 1,528 | 1,521 | 1,342 | 1,206 | |||||||||||||||
| Net gains on sale of loans held-for-sale | 49 | 176 | 262 | 556 | 701 | |||||||||||||||
| Net losses on equity securities | (191 | ) | (90 | ) | (430 | ) | (405 | ) | (596 | ) | ||||||||||
| Total noninterest income | 2,792 | 3,508 | 3,322 | 3,359 | 3,054 | |||||||||||||||
| Noninterest expenses | ||||||||||||||||||||
| Salaries and employee benefits | 22,236 | 21,676 | 20,882 | 19,519 | 18,640 | |||||||||||||||
| Occupancy and equipment | 2,761 | 2,603 | 2,600 | 2,733 | 1,929 | |||||||||||||||
| FDIC insurance | 950 | 830 | 720 | 725 | 606 | |||||||||||||||
| Professional and consulting | 2,194 | 2,157 | 1,980 | 2,124 | 1,792 | |||||||||||||||
| Marketing and advertising | 532 | 454 | 461 | 426 | 351 | |||||||||||||||
| Information technology and communications | 3,061 | 2,694 | 2,747 | 2,801 | 2,866 | |||||||||||||||
| Amortization of core deposit intangible | 372 | 409 | 409 | 434 | 433 | |||||||||||||||
| Increase in value of acquisition price | – | – | – | 833 | 683 | |||||||||||||||
| Other expenses | 2,764 | 2,489 | 2,344 | 2,108 | 1,930 | |||||||||||||||
| Total noninterest expenses | 34,870 | 33,312 | 32,143 | 31,703 | 29,230 | |||||||||||||||
| Income before income tax expense | 34,006 | 44,905 | 39,340 | 44,247 | 42,732 | |||||||||||||||
| Income tax expense | 9,077 | 12,348 | 10,425 | 11,889 | 11,351 | |||||||||||||||
| Net income | $ | 24,929 | $ | 32,557 | $ | 28,915 | $ | 32,358 | $ | 31,381 | ||||||||||
| Preferred dividends | 1,509 | 1,510 | 1,509 | 1,509 | 1,509 | |||||||||||||||
| Net income available to common stockholders | $ | 23,420 | $ | 31,047 | $ | 27,406 | $ | 30,849 | $ | 29,872 | ||||||||||
| Weighted average diluted common shares outstanding | 39,300,733 | 39,378,137 | 39,320,674 | 39,481,689 | 39,727,606 | |||||||||||||||
| Diluted EPS | $ | 0.59 | $ | 0.79 | $ | 0.70 | $ | 0.78 | $ | 0.75 | ||||||||||
| Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue | ||||||||||||||||||||
| Net income | $ | 24,929 | $ | 32,557 | $ | 28,915 | $ | 32,358 | $ | 31,381 | ||||||||||
| Income tax expense | 9,077 | 12,348 | 10,425 | 11,889 | 11,351 | |||||||||||||||
| Provision for credit losses | 1,000 | 3,300 | 10,000 | 3,000 | 1,450 | |||||||||||||||
| Pre-tax and pre-provision net revenue | $ | 35,006 | $ | 48,205 | $ | 49,340 | $ | 47,247 | $ | 44,182 | ||||||||||
| Return on Assets Measures | ||||||||||||||||||||
| Average assets | $ | 9,700,530 | $ | 9,490,477 | $ | 9,030,589 | $ | 8,322,823 | $ | 8,263,382 | ||||||||||
| Return on avg. assets | 1.04 | % | 1.36 | % | 1.27 | % | 1.56 | % | 1.54 | % | ||||||||||
| Return on avg. assets (pre-tax and pre-provision) | 1.46 | 2.02 | 2.17 | 2.28 | 2.17 | |||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | ||||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||||
| Return on Equity Measures | (dollars in thousands) | |||||||||||||||||||
| Average stockholders’ equity | $ | 1,191,216 | $ | 1,165,588 | $ | 1,160,448 | $ | 1,143,097 | $ | 1,131,968 | ||||||||||
| Less: average preferred stock | (110,927 | ) | (110,927 | ) | (110,927 | ) | (110,927 | ) | (110,927 | ) | ||||||||||
| Average common equity | $ | 1,080,289 | $ | 1,054,661 | $ | 1,049,521 | $ | 1,032,170 | $ | 1,021,041 | ||||||||||
| Less: average intangible assets | (215,556 | ) | (215,951 | ) | (216,360 | ) | (216,786 | ) | (217,219 | ) | ||||||||||
| Average tangible common equity | $ | 864,733 | $ | 838,710 | $ | 833,161 | $ | 815,384 | $ | 803,822 | ||||||||||
| Return on avg. common equity (GAAP) | 8.79 | % | 11.68 | % | 10.36 | % | 11.99 | % | 11.87 | % | ||||||||||
| Return on avg. tangible common equity ("TCE") (non-GAAP) (1) | 11.11 | 14.82 | 13.19 | 15.32 | 15.22 | |||||||||||||||
| Return on avg. tangible common equity (pre-tax, pre-provision, pre-merger charges) | 16.54 | 22.94 | 23.63 | 23.39 | 22.44 | |||||||||||||||
| Efficiency Measures | ||||||||||||||||||||
| Total noninterest expenses | $ | 34,870 | $ | 33,312 | $ | 32,143 | $ | 31,703 | $ | 29,230 | ||||||||||
| Amortization of core deposit intangibles | (372 | ) | (409 | ) | (409 | ) | (434 | ) | (433 | ) | ||||||||||
| Operating noninterest expense | $ | 34,498 | $ | 32,903 | $ | 31,734 | $ | 31,269 | $ | 28,797 | ||||||||||
| Net interest income (tax equivalent basis) | $ | 67,828 | $ | 78,773 | $ | 78,850 | $ | 76,146 | $ | 70,842 | ||||||||||
| Noninterest income | 2,792 | 3,508 | 3,322 | 3,359 | 3,054 | |||||||||||||||
| Net losses on equity securities | 191 | 90 | 430 | 405 | 596 | |||||||||||||||
| Operating revenue | $ | 70,811 | $ | 82,371 | $ | 82,602 | $ | 79,910 | $ | 74,492 | ||||||||||
| Operating efficiency ratio (non-GAAP) (2) | 48.7 | % | 39.9 | % | 38.4 | % | 39.1 | % | 38.7 | % | ||||||||||
| Net Interest Margin | ||||||||||||||||||||
| Average interest-earning assets | $ | 9,174,167 | $ | 8,972,063 | $ | 8,500,316 | $ | 7,807,445 | $ | 7,753,881 | ||||||||||
| Net interest income (tax equivalent basis) | $ | 67,828 | $ | 78,773 | $ | 78,850 | $ | 76,146 | $ | 70,842 | ||||||||||
| Impact of purchase accounting fair value marks | (839 | ) | (837 | ) | (885 | ) | (1,014 | ) | (1,179 | ) | ||||||||||
| Adjusted net interest income (tax equivalent basis) | $ | 66,989 | $ | 77,936 | $ | 77,965 | $ | 75,132 | $ | 69,663 | ||||||||||
| Net interest margin (GAAP) | 3.00 | % | 3.48 | % | 3.68 | % | 3.91 | % | 3.71 | % | ||||||||||
| Adjusted net interest margin (non-GAAP) (3) | 2.96 | 3.45 | 3.64 | 3.86 | 3.64 | |||||||||||||||
| (1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity. | ||||||||||||||||||||
| (2) Operating noninterest expense divided by operating revenue. | ||||||||||||||||||||
| (3) Adjusted net interest margin excludes impact of purchase accounting fair value marks. | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | ||||||||||||||||
| 2023 | 2022 | 2022 | 2022 | 2022 | ||||||||||||||||
| Capital Ratios and Book Value per Share | (dollars in thousands, except for per share data) | |||||||||||||||||||
| Stockholders equity | $ | 1,190,970 | $ | 1,178,751 | $ | 1,148,295 | $ | 1,143,147 | $ | 1,138,519 | ||||||||||
| Less: preferred stock | (110,927 | ) | (110,927 | ) | (110,927 | ) | (110,927 | ) | (110,927 | ) | ||||||||||
| Common equity | $ | 1,080,043 | $ | 1,067,824 | $ | 1,037,368 | $ | 1,032,220 | $ | 1,027,592 | ||||||||||
| Less: intangible assets | (215,312 | ) | (215,684 | ) | (216,093 | ) | (216,502 | ) | (216,936 | ) | ||||||||||
| Tangible common equity | $ | 864,731 | $ | 852,140 | $ | 821,275 | $ | 815,718 | $ | 810,656 | ||||||||||
| Total assets | $ | 9,960,467 | $ | 9,644,948 | $ | 9,478,252 | $ | 8,841,506 | $ | 8,334,301 | ||||||||||
| Less: intangible assets | (215,312 | ) | (215,684 | ) | (216,093 | ) | (216,502 | ) | (216,936 | ) | ||||||||||
| Tangible assets | $ | 9,745,155 | $ | 9,429,264 | $ | 9,262,159 | $ | 8,625,004 | $ | 8,117,365 | ||||||||||
| Common shares outstanding | 39,179,051 | 39,243,123 | 39,243,123 | 39,243,123 | 39,518,411 | |||||||||||||||
| Common equity ratio (GAAP) | 10.84 | % | 11.07 | % | 10.94 | % | 11.67 | % | 12.33 | % | ||||||||||
| Tangible common equity ratio (non-GAAP) (4) | 8.87 | 9.04 | 8.87 | 9.46 | 9.99 | |||||||||||||||
| Regulatory capital ratios (Bancorp): | ||||||||||||||||||||
| Leverage ratio | 10.60 | % | 10.68 | % | 10.95 | % | 11.63 | % | 11.57 | % | ||||||||||
| Common equity Tier 1 risk-based ratio | 10.55 | 10.30 | 10.20 | 10.63 | 10.69 | |||||||||||||||
| Risk-based Tier 1 capital ratio | 11.92 | 11.66 | 11.58 | 12.11 | 12.21 | |||||||||||||||
| Risk-based total capital ratio | 13.85 | 14.45 | 14.45 | 15.09 | 15.25 | |||||||||||||||
| Regulatory capital ratios (Bank): | ||||||||||||||||||||
| Leverage ratio | 10.62 | % | 10.64 | % | 10.91 | % | 11.61 | % | 11.41 | % | ||||||||||
| Common equity Tier 1 risk-based ratio | 11.93 | 11.60 | 11.53 | 12.08 | 12.04 | |||||||||||||||
| Risk-based Tier 1 capital ratio | 11.93 | 11.60 | 11.53 | 12.08 | 12.04 | |||||||||||||||
| Risk-based total capital ratio | 13.28 | 13.02 | 13.00 | 13.55 | 13.55 | |||||||||||||||
| Book value per share (GAAP) | $ | 27.57 | $ | 27.21 | $ | 26.43 | $ | 26.30 | $ | 26.00 | ||||||||||
| Tangible book value per share (non-GAAP) (5) | 22.07 | 21.71 | 20.93 | 20.79 | 20.51 | |||||||||||||||
| Net Loan (Recoveries) Charge-Off Detail | ||||||||||||||||||||
| Net loan charge-offs (recoveries): | ||||||||||||||||||||
| Charge-offs | $ | 4,484 | $ | 4,456 | $ | 413 | $ | 302 | $ | 274 | ||||||||||
| Recoveries | (1 | ) | – | (53 | ) | (32 | ) | (32 | ) | |||||||||||
| Net loan charge-offs (recoveries) | $ | 4,483 | $ | 4,456 | $ | 360 | $ | 270 | $ | 242 | ||||||||||
| Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) | 0.22 | % | 0.22 | % | 0.02 | % | 0.02 | % | 0.01 | % | ||||||||||
| Asset Quality | ||||||||||||||||||||
| Nonaccrual loans | $ | 47,667 | $ | 44,454 | $ | 57,477 | $ | 60,756 | $ | 59,403 | ||||||||||
| OREO | – | 264 | 264 | 316 | 316 | |||||||||||||||
| Nonperforming assets | $ | 47,667 | $ | 44,718 | $ | 57,741 | $ | 61,072 | $ | 59,719 | ||||||||||
| Allowance for credit losses – loans ("ACL") | 87,002 | 90,513 | 91,717 | 82,739 | 80,070 | |||||||||||||||
| Loans receivable | $ | 8,132,119 | $ | 8,099,689 | $ | 7,900,450 | $ | 7,274,573 | $ | 6,979,595 | ||||||||||
| Less: PPP loans | 11,300 | 11,374 | 11,458 | 18,004 | 54,301 | |||||||||||||||
| Loans receivable (excluding PPP loans) | $ | 8,120,819 | $ | 8,088,315 | $ | 7,888,992 | $ | 7,256,569 | $ | 6,925,294 | ||||||||||
| Nonaccrual loans as a % of loans receivable | 0.59 | % | 0.55 | % | 0.73 | % | 0.84 % | 0.85 | % | |||||||||||
| Nonperforming assets as a % of total assets | 0.48 | 0.46 | 0.61 | 0.69 | 0.72 | |||||||||||||||
| ACL as a % of loans receivable | 1.07 | 1.12 | 1.16 | 1.14 | 1.15 | |||||||||||||||
| ACL as a % of nonaccrual loans | 182.5 | 203.6 | 159.6 | 136.2 | 134.8 | |||||||||||||||
| (4) Tangible common equity divided by tangible assets. | ||||||||||||||||||||
| (5 )Tangible common equity divided by common shares outstanding at period-end. | ||||||||||||||||||||
| CONNECTONE BANCORP, INC. | ||||||||||||||||||||||||||
| NET INTEREST MARGIN ANALYSIS | ||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||||||||||||||||
| Average | Average | Average | ||||||||||||||||||||||||
| Interest-earning assets: | Balance | Interest | Rate(7) | Balance | Interest | Rate(7) | Balance | Interest | Rate(7) | |||||||||||||||||
| Investment securities (1) (2) | $ | 732,929 | $ | 5,620 | 3.11 | % | $ | 743,917 | $ | 5,725 | 3.05 | % | $ | 545,203 | $ | 2,771 | 2.06 | % | ||||||||
| Loans receivable and loans held-for-sale (2) (3) (4) | 8,131,035 | 107,348 | 5.35 | 8,037,793 | 105,402 | 5.20 | 6,871,477 | 76,321 | 4.50 | |||||||||||||||||
| Federal funds sold and interest- | ||||||||||||||||||||||||||
| bearing deposits with banks | 260,297 | 2,975 | 4.64 | 142,489 | 1,394 | 3.88 | 312,224 | 120 | 0.16 | |||||||||||||||||
| Restricted investment in bank stock | 49,906 | 898 | 7.30 | 47,864 | 712 | 5.90 | 24,977 | 214 | 3.47 | |||||||||||||||||
| Total interest-earning assets | $ | 9,174,167 | 116,841 | 5.17 | 8,972,063 | 113,233 | 5.01 | 7,753,881 | 79,426 | 4.15 | ||||||||||||||||
| Allowance for loan losses | (90,182 | ) | (91,621 | ) | (79,763 | ) | ||||||||||||||||||||
| Noninterest-earning assets | 616,545 | 610,035 | 589,264 | |||||||||||||||||||||||
| Total assets | $ | 9,700,530 | $ | 9,490,477 | $ | 8,263,382 | ||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||
| Time deposits | 2,357,332 | 17,267 | 2.97 | 2,035,362 | 11,601 | 2.26 | 1,124,614 | 2,154 | 0.78 | |||||||||||||||||
| Other interest-bearing deposits | 3,565,904 | 22,820 | 2.60 | 3,558,881 | 14,942 | 1.67 | 3,851,558 | 2,856 | 0.30 | |||||||||||||||||
| Total interest-bearing deposits | 5,923,236 | 40,087 | 2.74 | 5,594,243 | 26,543 | 1.88 | 4,976,172 | 5,010 | 0.41 | |||||||||||||||||
| Borrowings | 941,266 | 7,322 | 3.15 | 913,960 | 5,665 | 2.46 | 404,907 | 1,377 | 1.38 | |||||||||||||||||
| Subordinated debentures, net | 103,637 | 1,579 | 6.18 | 153,205 | 2,217 | 5.74 | 152,977 | 2,168 | 5.75 | |||||||||||||||||
| Finance lease | 1,714 | 25 | 5.92 | 1,760 | 35 | 7.89 | 1,917 | 29 | 6.14 | |||||||||||||||||
| Total interest-bearing liabilities | 6,969,853 | 49,013 | 2.85 | 6,663,168 | 34,460 | 2.05 | 5,535,973 | 8,584 | 0.63 | |||||||||||||||||
| Noninterest-bearing demand deposits | 1,451,654 | 1,610,044 | 1,547,055 | |||||||||||||||||||||||
| Other liabilities | 87,807 | 51,677 | 48,386 | |||||||||||||||||||||||
| Total noninterest-bearing liabilities | 1,539,461 | 1,661,722 | 1,595,441 | |||||||||||||||||||||||
| Stockholders’ equity | 1,191,216 | 1,165,588 | 1,131,968 | |||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 9,700,530 | $ | 9,490,477 | $ | 8,263,382 | ||||||||||||||||||||
| Net interest income (tax equivalent basis) | 67,828 | 78,773 | 70,842 | |||||||||||||||||||||||
| Net interest spread (5) | 2.31 | % | 2.96 | % | 3.53 | % | ||||||||||||||||||||
| Net interest margin (6) | 3.00 | % | 3.48 | % | 3.71 | % | ||||||||||||||||||||
| Tax equivalent adjustment | (744 | ) | (764 | ) | (484 | ) | ||||||||||||||||||||
| Net interest income | $ | 67,084 | $ | 78,009 | $ | 70,358 | ||||||||||||||||||||
| (1) | Average balances are calculated on amortized cost. |
| (2) | Interest income is presented on a tax equivalent basis using 21% federal tax rate. |
| (3) | Includes loan fee income. |
| (4) | Loans include nonaccrual loans. |
| (5) | Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis. |
| (6) | Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. |
| (7) | Rates are annualized. |
