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ConnectOne Bancorp, Inc. Reports Third Quarter 2023 Results; Declares Common and Preferred Dividends
来源: Nasdaq GlobeNewswire / 26 10月 2023 07:00:01 America/New_York
ENGLEWOOD CLIFFS, N.J., Oct. 26, 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 $19.9 million for the third quarter of 2023, compared to $19.9 million for the second quarter of 2023 and $27.4 million for the third quarter of 2022. Diluted earnings per share were $0.51 for the third quarter of 2023, $0.51 for the second quarter of 2023 and $0.70 for the third quarter of 2022. The decreases in net income available to common stockholders and diluted earnings per share from the third quarter of 2022 were primarily due to a $15.8 million decrease in net interest income and a $3.6 million increase in noninterest expenses, partially offset by an $8.5 million decrease in the provision for credit losses, a $0.2 million increase in noninterest income and a $3.2 million decrease in income tax expense.
Pre-tax, pre-provision net revenue (“PPNR”) as a percentage of average assets was 1.24%, 1.31% and 2.17% for the quarters ending September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
“ConnectOne’s operating performance during the 2023 third quarter reflected a commitment to our deep client relationships resulting in a solid balance sheet with the flexibility to support both new and existing clients,” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer. “Despite challenging market conditions, ConnectOne is poised to withstand the current interest rate cycle and we’re well positioned to opportunistically capitalize on new growth opportunities we see today, as well as those expected upon a return to normalcy. Our robust, readily available liquidity position remains nearly 2.5 times our uninsured deposits, net of collateralized and intercompany subsidiary deposits. Further, our tangible common equity ratio, which continues to be a notable challenge for much of the industry due to rising long-term rates, remains above 9%. This key capital ratio is well above peer averages, demonstrating continued effective management of ConnectOne’s capital and AOCI. Additionally, our credit quality metrics remain sound, reflective of prudent underwriting, strong portfolio oversight and a resilient economy.”
“For the quarter, client deposits (which exclude non-reciprocal brokered deposits) increased modestly while the loan portfolio remained relatively flat sequentially.” Mr. Sorrentino added, “As expected, our net interest margin contracted just slightly, as funding costs are showing signs of leveling out. Nevertheless, fierce deposit competition and the continued migration out of non-interest-bearing deposit demand balances suggest we may experience additional, albeit modest, contraction in our net interest margin near-term.”
“Operationally, we continue to leverage our technological advantages and our culture to drive performance. Further, we’re seizing opportunities to strengthen ConnectOne’s team by adding high-performing talent across the board, including revenue-producing areas, while also optimizing operations, staff count and branch footprint.”
Mr. Sorrentino concluded, “As we approach the fourth quarter and focus on navigating the challenges that lie ahead, I believe ConnectOne is well-positioned to capitalize on opportunities in any environment. We remain one of the industry’s most efficient banks nationwide and, by maintaining our long-standing financial discipline, leveraging our results-oriented client-centric culture and continuing to invest in our valuable franchise, ConnectOne is poised for continued success.”
Dividend Declarations
The Company announced that its Board of Directors declared a 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 will be paid on December 1, 2023, to common stockholders of record on November 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 December 1, 2023 to preferred stockholders of record on November 15, 2023.
Operating Results
Fully taxable equivalent net interest income for the third quarter of 2023 was $63.2 million, a decrease of $1.4 million, or 2.2%, from the second quarter of 2023 due to a 5 basis-point contraction in the net interest margin to 2.76% from 2.81% and a $138.6 million, or 1.5%, decrease in interest-earning assets. The decrease in average interest-earning assets from the second quarter of 2023 was primarily attributable to a decrease in average cash and cash equivalents of $151.3 million, partially offset by an increase in average loans of $19.9 million. Average brokered deposits (excluding reciprocal client balances) declined by $50.9 million, or 5.3%, from the sequential quarter. While the net interest margin benefitted from a 14 basis-point increase in the loan portfolio yield to 5.63%, the average cost of deposits, including noninterest-bearing demand, increased by 26 basis-points to 2.92% from 2.66% in the second quarter of 2023. Contributing to the increased cost of deposits was a $71.9 million, or 5.3%, decline in average noninterest-bearing deposits.
Fully taxable equivalent net interest income for the third quarter of 2023 decreased by $15.6 million, or 19.8%, from the third quarter of 2022. The decrease from the third quarter of 2022 resulted primarily from a 92 basis-point decrease in the net interest margin from 3.68% to 2.76%, partially offset by an increase in interest-earning assets of $0.6 billion. The contraction of the net interest margin for the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to a 215 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by an 86 basis-point increase in the loan portfolio yield.
Noninterest income was $3.6 million in the third quarter of 2023, $3.4 million in the second quarter of 2023 and $3.3 million in the third quarter of 2022. Included in noninterest income were net losses on equity securities of $0.3 million, $0.2 million, and $0.4 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. Excluding the equity securities losses, adjusted noninterest income was $3.8 million, $3.6 million and $3.7 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. The $0.2 million increase in adjusted noninterest income for the third quarter of 2023 when compared to the second quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale of $0.1 million and an increase in deposit, loan, and other income of $0.1 million. The net gains on loans held-for-sale consisted primarily of Small Business Administration (“SBA”) loans. The $0.1 million increase in adjusted noninterest income for the third of 2023 when compared to the third quarter of 2022 was primarily due to an increase in net gains on loans held-for-sale, primarily SBA, of $0.4 million and an increase in BOLI of $0.1 million, partially offset by a decrease in deposit, loan, and other income of $0.4 million.
Noninterest expenses totaled $35.8 million for the third quarter of 2023, $35.5 million for the second quarter of 2023 and $32.1 million for the third quarter of 2022. Noninterest expenses increased by $0.3 million from the second quarter of 2023 and was primarily attributable to increases in employee benefit expense accruals of $0.5 million, FDIC insurance expense of $0.1 million and occupancy and equipment of $0.1 million, partially offset by decreases in information technology and communications of $0.2 million, professional and consulting of $0.1 million and other expenses of $0.1 million. The increase in noninterest expenses of $3.6 million from the third quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $1.4 million, FDIC insurance of $1.1 million, information technology and communications of $0.7 million, other expenses of $0.4 million, occupancy and equipment of $0.1 million and marketing and advertising of $0.1 million, partially offset by decreases in professional and consulting of $0.1 million and amortization of core deposit intangibles of $0.1 million. The increase in salaries and employee benefits from the third quarter of 2022 was primarily attributable to increased staff in both the revenue and back-office areas of the Bank as well as company-wide base salary increases. The increase in FDIC insurance expense when compared to the third quarter of 2022 is primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. The increase in information technology and communications when compared to the third quarter of 2022 is primarily attributable to additional investments in technology, equipment, and software.
Income tax expense was $7.2 million for the third quarter of 2023, $7.4 million for the second quarter of 2023 and $10.4 million for the third quarter of 2022. The effective tax rates for the third quarter of 2023, second quarter of 2023 and third quarter of 2022 were 25.2%, 25.8% and 26.5%, respectively. The decrease in the effective tax rate when compared to the second quarter of 2023 and third quarter of 2022 is largely attributable to lower taxable income.
Asset QualityThe provision for credit losses was $1.5 million for the third quarter of 2023, $3.0 million for the second quarter of 2023 and $10.0 million for the third quarter of 2022. The decrease in the provision for credit losses during the third quarter of 2023 when compared to the second quarter of 2023 was primarily attributable to lower specific reserves. The decrease in provision for credit losses during the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to changes in forecasted macroeconomic conditions.
Nonperforming assets, which include nonaccrual loans and other real estate owned, were $56.1 million as of September 30, 2023, $44.7 million as of December 31, 2022 and $57.7 million as of September 30, 2022. Nonaccrual loans were $56.1 million as of September 30, 2023, $44.5 million as of December 31, 2022 and $57.5 million as of September 30, 2022. Nonperforming assets as a percentage of total assets were 0.58% as of September 30, 2023, 0.46% as of December 31, 2022 and 0.61% as of September 30, 2022. The ratio of nonaccrual loans to loans receivable was 0.69%, 0.55% and 0.73%, as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. Loans delinquent 30-89 days as a percentage of loans receivable were 0.04%, 0.02% and 0.01% as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The annualized net loan charge-offs ratio was 0.12% for the third quarter of 2023, 0.22% for the fourth quarter of 2022 and 0.02% for the third quarter of 2022. The allowance for credit losses represented 1.08%, 1.12%, and 1.16% of loans receivable as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 157.4% as of September 30, 2023, 203.6% as of December 31, 2022 and 159.7% as of September 30, 2022.
Selected Balance Sheet Items
The Company’s total assets were $9.7 billion as of September 30, 2023, an increase of $34 million from December 31, 2022. The increase in total assets was primarily due to an increase in loans receivable of $81 million, partially offset by decreases in investment securities of $53 million. Loans receivable was $8.2 billion as of September 30, 2023 and $8.1 billion as of December 31, 2022. Total deposits were $7.4 billion, an increase of $82 million from December 31, 2022.
The Company’s total stockholders’ equity was $1.2 billion as of September 30, 2023, an increase of $9 million from December 31, 2022. The increase was primarily attributable to an increase in retained earnings of $44 million, partially offset by an increase in accumulated other comprehensive losses of $21 million and an increase in treasury stock of $15 million. The increase in accumulated other comprehensive losses during the third quarter of 2023 resulted from higher interest rates. As of September 30, 2023, the Company’s tangible common equity ratio and tangible book value per share were 9.11% and $22.34, respectively, improved from 9.04% and $21.71, respectively, as of December 31, 2022. Total goodwill and other intangible assets were $214.6 million as of September 30, 2023, and $215.7 million as of December 31, 2022.
Share Repurchase Program
During the third quarter of 2023, the Company repurchased 316,789 shares of common stock at an average price of $19.45, leaving approximately 1.0 million shares authorized for repurchase under the current Board approved repurchase program. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and the plan may be modified or suspended at any time at the Company's discretion.
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.
Third Quarter 2023 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 26, 2023 to review the Company's financial performance and operating results. The conference call dial-in number is 1-646-307-1583, access code 9727224. 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, October 26, 2023 and ending on Thursday, November 2, 2023 by dialing 1-647-362-9199, access code 9727224. 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.
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 Vice President & CFO
201.816.4474: bburns@cnob.comMedia Contact:
Shannan Weeks
MWW
732.299.7890: sweeks@mww.com
CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands) September 30, December 31, September 30, 2023 2022 2022 (unaudited) (unaudited) ASSETS Cash and due from banks $ 56,170 $ 61,629 $ 58,852 Interest-bearing deposits with banks 197,128 206,686 274,992 Cash and cash equivalents 253,298 268,315 333,844 Investment securities 581,867 634,884 623,629 Equity securities 17,677 15,811 15,563 Loans held-for-sale - 13,772 8,080 Loans receivable 8,181,109 8,099,689 7,900,450 Less: Allowance for credit losses - loans 88,230 90,513 91,717 Net loans receivable 8,092,879 8,009,176 7,808,733 Investment in restricted stock, at cost 49,387 46,604 45,324 Bank premises and equipment, net 28,432 27,800 28,519 Accrued interest receivable 46,795 46,062 38,940 Bank owned life insurance 236,009 231,328 229,800 Right of use operating lease assets 11,229 10,179 10,196 Other real estate owned - 264 264 Goodwill 208,372 208,372 208,372 Core deposit intangibles 6,222 7,312 7,721 Other assets 146,718 125,069 119,267 Total assets $ 9,678,885 $ 9,644,948 $ 9,478,252 LIABILITIES Deposits: Noninterest-bearing $ 1,224,125 $ 1,501,614 $ 1,665,658 Interest-bearing 6,214,370 5,855,008 5,644,852 Total deposits 7,438,495 7,356,622 7,310,510 Borrowings 887,590 857,622 829,953 Subordinated debentures, net 79,313 153,255 153,179 Operating lease liabilities 12,424 11,397 11,454 Other liabilities 72,909 87,301 24,861 Total liabilities 8,490,731 8,466,197 8,329,957 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 32,027 30,126 28,756 Retained earnings 579,776 535,915 510,957 Treasury stock (68,108 ) (52,799 ) (52,799 ) Accumulated other comprehensive loss (53,414 ) (32,364 ) (36,492 ) Total stockholders' equity 1,188,154 1,178,751 1,148,295 Total liabilities and stockholders' equity $ 9,678,885 $ 9,644,948 $ 9,478,252
CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except for per share data) Three Months Ended Nine Months Ended 09/30/23 09/30/22 09/30/23 09/30/22 Interest income Interest and fees on loans $ 115,405 $ 90,731 $ 333,356 $ 248,041 Interest and dividends on investment securities: Taxable 4,128 4,063 12,386 8,487 Tax-exempt 1,136 1,083 3,475 2,708 Dividends 907 438 2,750 943 Interest on federal funds sold and other short-term investments 2,110 665 9,141 1,098 Total interest income 123,686 96,980 361,108 261,277 Interest expense Deposits 56,043 13,299 146,844 24,018 Borrowings 5,286 5,520 20,980 13,149 Total interest expense 61,329 18,819 167,824 37,167 Net interest income 62,357 78,161 193,284 224,110 Provision for credit losses 1,500 10,000 5,500 14,450 Net interest income after provision for credit losses 60,857 68,161 187,784 209,660 Noninterest income Deposit, loan and other income 1,605 1,969 4,553 5,578 Income on bank owned life insurance 1,597 1,521 4,681 4,069 Net gains on sale of loans held-for-sale 633 262 1,232 1,519 Net losses on equity securities (273 ) (430 ) (674 ) (1,431 ) Total noninterest income 3,562 3,322 9,792 9,735 Noninterest expenses Salaries and employee benefits 22,251 20,882 66,213 59,041 Occupancy and equipment 2,738 2,600 8,176 7,262 FDIC insurance 1,800 720 4,465 2,051 Professional and consulting 1,834 1,980 5,960 5,896 Marketing and advertising 554 461 1,642 1,238 Information technology and communications 3,487 2,747 10,192 8,414 Amortization of core deposit intangible 347 409 1,090 1,276 Increase in value of acquisition price - - - 1,516 Other expenses 2,773 2,344 8,366 6,382 Total noninterest expenses 35,784 32,143 106,104 93,076 Income before income tax expense 28,635 39,340 91,472 126,319 Income tax expense 7,228 10,425 23,742 33,665 Net income 21,407 28,915 67,730 92,654 Preferred dividends 1,509 1,509 4,527 4,527 Net income available to common stockholders $ 19,898 $ 27,406 $ 63,203 $ 88,127 Earnings per common share: Basic $ 0.51 $ 0.70 $ 1.62 $ 2.24 Diluted 0.51 0.70 1.61 2.23
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 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2023 2023 2023 2022 2022 Selected Financial Data (dollars in thousands) Total assets $ 9,678,885 $ 9,723,963 $ 9,960,467 $ 9,644,948 $ 9,478,252 Loans receivable: Commercial $ 1,454,607 $ 1,451,400 $ 1,392,565 $ 1,443,942 $ 1,392,037 Paycheck Protection Program ("PPP") loans 9,872 10,845 11,300 11,374 11,458 Commercial real estate 3,288,704 3,237,559 3,245,990 3,170,760 3,087,354 Multifamily 2,559,927 2,604,230 2,600,251 2,641,886 2,624,726 Commercial construction 622,748 596,362 630,469 574,139 537,323 Residential 251,416 254,405 259,166 264,748 256,085 Consumer 936 1,416 1,435 2,312 1,030 Gross loans 8,188,210 8,156,217 8,141,176 8,109,161 7,910,013 Unearned net origination fees (7,101 ) (7,677 ) (9,057 ) (9,472 ) (9,563 ) Loans receivable 8,181,109 8,148,540 8,132,119 8,099,689 7,900,450 Loans held-for-sale - 1,089 11,197 13,772 8,080 Total loans $ 8,181,109 $ 8,149,629 $ 8,143,316 $ 8,113,461 $ 7,908,530 Investment and equity securities $ 599,544 $ 630,769 $ 647,026 $ 650,695 $ 639,192 Goodwill and other intangible assets 214,594 214,941 215,312 215,684 216,093 Deposits: Noninterest-bearing demand $ 1,224,125 $ 1,356,293 $ 1,345,265 $ 1,501,614 $ 1,665,658 Time deposits 2,522,210 2,621,148 2,706,662 2,394,190 1,921,235 Other interest-bearing deposits 3,692,160 3,560,856 3,701,249 3,460,818 3,723,617 Total deposits $ 7,438,495 $ 7,538,297 $ 7,753,176 $ 7,356,622 $ 7,310,510 Borrowings $ 887,590 $ 827,601 $ 852,611 $ 857,622 $ 829,953 Subordinated debentures, net 79,313 79,187 79,060 153,255 153,179 Total stockholders' equity 1,188,154 1,199,397 1,190,970 1,178,751 1,148,295 Quarterly Average Balances Total assets $ 9,625,625 $ 9,765,582 $ 9,700,530 $ 9,490,477 $ 9,030,589 Loans receivable: Commercial (including PPP loans) $ 1,471,006 $ 1,427,153 $ 1,442,180 $ 1,456,247 $ 1,342,868 Commercial real estate (including multifamily) 5,821,794 5,847,147 5,813,388 5,758,594 5,455,714 Commercial construction 625,640 611,492 606,214 558,086 537,073 Residential 253,114 256,924 261,560 261,969 251,338 Consumer 4,972 6,733 3,894 4,630 2,361 Gross loans 8,176,526 8,149,449 8,127,236 8,039,526 7,589,354 Unearned net origination fees (7,387 ) (8,591 ) (9,664 ) (9,666 ) (9,178 ) Loans receivable 8,169,139 8,140,858 8,117,572 8,029,860 7,580,176 Loans held-for-sale 171 8,516 13,463 7,933 2,195 Total loans $ 8,169,310 $ 8,149,374 $ 8,131,035 $ 8,037,793 $ 7,582,371 Investment and equity securities $ 628,429 $ 642,915 $ 649,744 $ 650,479 $ 687,291 Goodwill and other intangible assets 214,822 215,182 215,556 215,951 216,360 Deposits: Noninterest-bearing demand $ 1,275,325 $ 1,347,268 $ 1,451,654 $ 1,610,044 $ 1,682,135 Time deposits 2,606,122 2,658,673 2,357,332 2,035,362 1,525,076 Other interest-bearing deposits 3,723,561 3,640,939 3,565,904 3,558,881 3,686,520 Total deposits $ 7,605,008 $ 7,646,880 $ 7,374,890 $ 7,204,287 $ 6,893,731 Borrowings $ 651,112 $ 756,303 $ 941,266 $ 913,960 $ 772,561 Subordinated debentures, net 79,230 79,104 103,637 153,205 153,129 Total stockholders' equity 1,202,647 1,197,043 1,191,216 1,165,588 1,160,448 Three Months Ended Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2023 2023 2023 2022 2022 (dollars in thousands, except for per share data) Net interest income $ 62,357 $ 63,843 $ 67,084 $ 78,009 $ 78,161 Provision for credit losses 1,500 3,000 1,000 3,300 10,000 Net interest income after provision for credit losses 60,857 60,843 66,084 74,709 68,161 Noninterest income Deposit, loan and other income 1,605 1,545 1,403 1,894 1,969 Income on bank owned life insurance 1,597 1,553 1,531 1,528 1,521 Net gains on sale of loans held-for-sale 633 550 49 176 262 Net losses on equity securities (273 ) (210 ) (191 ) (90 ) (430 ) Total noninterest income 3,562 3,438 2,792 3,508 3,322 Noninterest expenses Salaries and employee benefits 22,251 21,726 22,236 21,676 20,882 Occupancy and equipment 2,738 2,677 2,761 2,603 2,600 FDIC insurance 1,800 1,715 950 830 720 Professional and consulting 1,834 1,932 2,194 2,157 1,980 Marketing and advertising 554 556 532 454 461 Information technology and communications 3,487 3,644 3,061 2,694 2,747 Amortization of core deposit intangible 347 371 372 409 409 Other expenses 2,773 2,829 2,764 2,489 2,344 Total noninterest expenses 35,784 35,450 34,870 33,312 32,143 Income before income tax expense 28,635 28,831 34,006 44,905 39,340 Income tax expense 7,228 7,437 9,077 12,348 10,425 Net income $ 21,407 $ 21,394 $ 24,929 $ 32,557 $ 28,915 Preferred dividends 1,509 1,509 1,509 1,510 1,509 Net income available to common stockholders $ 19,898 $ 19,885 $ 23,420 $ 31,047 $ 27,406 Weighted average diluted common shares outstanding 38,829,681 39,016,839 39,300,733 39,378,137 39,338,943 Diluted EPS $ 0.51 $ 0.51 $ 0.59 $ 0.79 $ 0.70 Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue Net income $ 21,407 $ 21,394 $ 24,929 $ 32,557 $ 28,915 Income tax expense 7,228 7,437 9,077 12,348 10,425 Provision for credit losses 1,500 3,000 1,000 3,300 10,000 Pre-tax and pre-provision net revenue $ 30,135 $ 31,831 $ 35,006 $ 48,205 $ 49,340 Return on Assets Measures Average assets $ 9,625,625 $ 9,765,582 $ 9,700,530 $ 9,490,477 $ 9,030,589 Return on avg. assets 0.88 % 0.88 % 1.04 % 1.36 % 1.27 % Return on avg. assets (pre-tax and pre-provision) 1.24 1.31 1.46 2.02 2.17 Three Months Ended Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2023 2023 2023 2022 2022 Return on Equity Measures (dollars in thousands) Average stockholders' equity $ 1,202,647 $ 1,197,043 $ 1,191,216 $ 1,165,588 $ 1,160,448 Less: average preferred stock (110,927 ) (110,927 ) (110,927 ) (110,927 ) (110,927 ) Average common equity $ 1,091,720 $ 1,086,116 $ 1,080,289 $ 1,054,661 $ 1,049,521 Less: average intangible assets (214,822 ) (215,182 ) (215,556 ) (215,951 ) (216,360 ) Average tangible common equity $ 876,898 $ 870,934 $ 864,733 $ 838,710 $ 833,161 Return on avg. common equity (GAAP) 7.23 % 7.34 % 8.79 % 11.68 % 10.36 % Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 9.11 9.28 11.11 14.82 13.19 Return on avg. tangible common equity (pre-tax and pre-provision) 13.74 14.78 16.54 22.94 23.63 Efficiency Measures Total noninterest expenses $ 35,784 $ 35,450 $ 34,870 $ 33,312 $ 32,143 Amortization of core deposit intangibles (347 ) (371 ) (372 ) (409 ) (409 ) Operating noninterest expense $ 35,437 $ 35,079 $ 34,498 $ 32,903 $ 31,734 Net interest income (tax equivalent basis) $ 63,208 $ 64,627 $ 67,828 $ 78,773 $ 78,850 Noninterest income 3,562 3,438 2,792 3,508 3,322 Net losses on equity securities 273 210 191 90 430 Operating revenue $ 67,043 $ 68,275 $ 70,811 $ 82,371 $ 82,602 Operating efficiency ratio (non-GAAP) (2) 52.9 % 51.4 % 48.7 % 39.9 % 38.4 % Net Interest Margin Average interest-earning assets $ 9,089,431 $ 9,228,079 $ 9,174,167 $ 8,972,063 $ 8,500,316 Net interest income (tax equivalent basis) $ 63,208 $ 64,627 $ 67,828 $ 78,773 $ 78,850 Impact of purchase accounting fair value marks (419 ) (575 ) (839 ) (837 ) (885 ) Adjusted net interest income (tax equivalent basis) $ 62,789 $ 64,052 $ 66,989 $ 77,936 $ 77,965 Net interest margin (GAAP) 2.76 % 2.81 % 3.00 % 3.48 % 3.68 % Adjusted net interest margin (non-GAAP) (3) 2.74 2.78 2.96 3.45 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 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2023 2023 2023 2022 2022 Capital Ratios and Book Value per Share (dollars in thousands, except for per share data) Stockholders equity $ 1,188,154 $ 1,199,397 $ 1,190,970 $ 1,178,751 $ 1,148,295 Less: preferred stock (110,927 ) (110,927 ) (110,927 ) (110,927 ) (110,927 ) Common equity $ 1,077,227 $ 1,088,470 $ 1,080,043 $ 1,067,824 $ 1,037,368 Less: intangible assets (214,594 ) (214,941 ) (215,312 ) (215,684 ) (216,093 ) Tangible common equity $ 862,633 $ 873,529 $ 864,731 $ 852,140 $ 821,275 Total assets $ 9,678,885 $ 9,723,963 $ 9,960,467 $ 9,644,948 $ 9,478,252 Less: intangible assets (214,594 ) (214,941 ) (215,312 ) (215,684 ) (216,093 ) Tangible assets $ 9,464,291 $ 9,509,022 $ 9,745,155 $ 9,429,264 $ 9,262,159 Common shares outstanding 38,621,970 38,966,652 39,179,051 39,243,123 39,243,123 Common equity ratio (GAAP) 11.13 % 11.19 % 10.84 % 11.07 % 10.94 % Tangible common equity ratio (non-GAAP) (4) 9.11 9.19 8.87 9.04 8.87 Regulatory capital ratios (Bancorp): Leverage ratio 10.86 % 10.62 % 10.60 % 10.68 % 10.95 % Common equity Tier 1 risk-based ratio 10.64 10.55 10.55 10.30 10.20 Risk-based Tier 1 capital ratio 11.98 11.90 11.92 11.66 11.58 Risk-based total capital ratio 13.90 13.83 13.85 14.45 14.45 Regulatory capital ratios (Bank): Leverage ratio 11.23 % 10.95 % 10.62 % 10.64 % 10.91 % Common equity Tier 1 risk-based ratio 12.38 12.26 11.93 11.60 11.53 Risk-based Tier 1 capital ratio 12.38 12.26 11.93 11.60 11.53 Risk-based total capital ratio 13.43 13.33 13.28 13.02 13.00 Book value per share (GAAP) $ 27.89 $ 27.93 $ 27.57 $ 27.21 $ 26.43 Tangible book value per share (non-GAAP) (5) 22.34 22.42 22.07 21.71 20.93 Net Loan (Recoveries) Charge-Off Detail Net loan charge-offs (recoveries): Charge-offs $ 2,487 $ 1,118 $ 4,484 $ 4,456 $ 413 Recoveries (8 ) (76 ) (1 ) - (53 ) Net loan charge-offs (recoveries) $ 2,479 $ 1,042 $ 4,483 $ 4,456 $ 360 Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.12 % 0.05 % 0.22 % 0.22 % 0.02 % Asset Quality Nonaccrual loans $ 56,059 $ 51,496 $ 47,667 $ 44,454 $ 57,447 OREO - - - 264 264 Nonperforming assets $ 56,059 $ 51,496 $ 47,667 $ 44,718 $ 57,711 Allowance for credit losses - loans ("ACL") 88,230 89,205 87,002 90,513 91,717 Loans receivable $ 8,181,109 $ 8,148,540 $ 8,132,119 $ 8,099,689 $ 7,900,450 Less: PPP loans 9,872 10,845 11,300 11,374 11,458 Loans receivable (excluding PPP loans) $ 8,171,237 $ 8,137,695 $ 8,120,819 $ 8,088,315 $ 7,888,992 Nonaccrual loans as a % of loans receivable 0.69 % 0.63 % 0.59 % 0.55 % 0.73 % Nonperforming assets as a % of total assets 0.58 0.53 0.48 0.46 0.61 ACL as a % of loans receivable 1.08 1.09 1.07 1.12 1.16 ACL as a % of nonaccrual loans 157.4 173.2 182.5 203.6 159.7 (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 September 30, 2023 June 30, 2023 September 30, 2022 Average Average Average Interest-earning assets: Balance Interest Rate (7) Balance Interest Rate (7) Balance Interest Rate (7) Investment securities (1) (2) $ 723,408 $ 5,566 3.05 % $ 726,315 $ 5,607 3.10 % $ 740,394 $ 5,434 2.91 % Loans receivable and loans held-for-sale (2) (3) (4) 8,169,310 115,954 5.63 8,149,374 111,501 5.49 7,582,371 91,132 4.77 Federal funds sold and interest- bearing deposits with banks 158,155 2,110 5.29 309,458 4,056 5.26 135,331 665 1.95 Restricted investment in bank stock 38,558 907 9.33 42,932 945 8.83 42,220 438 4.12 Total interest-earning assets $ 9,089,431 124,537 5.44 $ 9,228,079 122,109 5.31 8,500,316 97,669 4.56 Allowance for loan losses (89,966 ) (87,473 ) (84,307 ) Noninterest-earning assets 626,160 624,976 614,580 Total assets $ 9,625,625 $ 9,765,582 $ 9,030,589 Interest-bearing liabilities: Time deposits 2,606,122 25,437 3.87 2,658,673 23,778 3.59 $ 1,525,076 5,396 1.40 Other interest-bearing deposits 3,723,561 30,606 3.26 3,640,939 26,936 2.97 3,686,520 7,903 0.85 Total interest-bearing deposits 6,329,683 56,043 3.51 6,299,612 50,714 3.23 5,211,596 13,299 1.01 Borrowings 651,112 3,950 2.41 756,303 5,438 2.88 772,561 3,297 1.69 Subordinated debentures, net 79,230 1,312 6.57 79,104 1,306 6.62 153,129 2,196 5.69 Finance lease 1,603 24 5.94 1,658 24 5.81 1,813 27 5.91 Total interest-bearing liabilities 7,061,628 61,329 3.45 7,136,677 57,482 3.23 6,139,099 18,819 1.22 Noninterest-bearing demand deposits 1,275,325 1,347,268 1,682,135 Other liabilities 86,025 84,594 48,907 Total noninterest-bearing liabilities 1,361,350 1,431,862 1,731,042 Stockholders' equity 1,202,647 1,197,043 1,160,448 Total liabilities and stockholders' equity $ 9,625,625 $ 9,765,582 $ 9,030,589 Net interest income (tax equivalent basis) 63,208 64,627 78,850 Net interest spread (5) 1.99 % 2.08 % 3.34 % Net interest margin (6) 2.76 % 2.81 % 3.68 % Tax equivalent adjustment (851 ) (784 ) (689 ) Net interest income $ 62,357 $ 63,843 $ 78,161 (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.
