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ConnectOne Bancorp, Inc. Reports First Quarter 2021 Results; Increases Common Dividend
来源: Nasdaq GlobeNewswire / 29 4月 2021 06:00:03 America/Chicago
ENGLEWOOD CLIFFS, N.J., April 29, 2021 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $33.0 million for the first quarter of 2021 compared with $25.6 million for the fourth quarter of 2020 and $6.0 million for the first quarter of 2020. Diluted earnings per share were $0.82 for the first quarter of 2021 compared with $0.64 in the fourth quarter of 2020 and $0.15 in the first quarter of 2020. The increase in net income and diluted earnings per share from the fourth quarter of 2020 was primarily due to a $5.8 million recapture of credit loss reserves in the current quarter reflecting the impact of the improved economic outlook on the current expected credit losses (“CECL”) accounting estimate, compared with a $5.0 million provision in the fourth quarter of 2020.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne’s strong first quarter results reflected continued margin expansion and industry-leading operating efficiency. While our return on assets and return on tangible common equity expanded significantly to 1.78% and 19.08%, respectively, largely due to the recapture of credit loss reserves, our operating net revenue to average assets also increased, further solidifying our status as a top performer in the banking industry.”
“Operationally, we’re using the full range of the Company’s banking expertise to help our clients and had a robust quarter in terms of overall loan production. While our first quarter loan growth was offset by paydowns, resulting from an excessive amount of liquidity in the marketplace, we’re seeing strong demand, bolstered by an improving operating environment in the New York Metropolitan area. We are very pleased with our existing loan pipeline, which is at the highest level in the Company’s history and expect net loan growth to accelerate in the quarters ahead. Further, as vaccines continue to work their way through our core footprint, we’re anticipating a significant uptick in our client activity in the near future.”
“ConnectOne’s investments in infrastructure, communication tools and digital channels have been instrumental in our success, and we will continue to leverage our strong technological foundation as we further develop our hybrid banking model. We also continue to gain momentum building out our SBA leading platform, which is serving our existing clients and supporting small businesses in the communities where we do business.”
Mr. Sorrentino added, “ConnectOne, as a growth company, is well-positioned to take advantage of an economic turnaround. We are also pleased to announce an increase in our common stock dividend as well as the reinstatement of our share repurchase program reflecting our strong operating performance, our growing capital base, and the confidence we have in ConnectOne’s long-term outlook.”
Dividend Declaration
The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.11 per share. This cash dividend represents a $0.02, or a 22.2% increase from the prior common dividend declared on January 28, 2021. The dividend will be paid on June 1, 2021 to shareholders of record on May 17, 2021.
Operating Results
Fully taxable equivalent net interest income for the first quarter of 2021 was $61.6 million, a decrease of $0.3 million, or 0.4%, from the fourth quarter of 2020, resulting primarily from a 0.3% decrease in average interest-earning assets, and partially offset by a 6 basis-point widening of the net interest margin to 3.56% from 3.50%. While overall interest-earning assets decreased, loans increased approximately $33.3 million when compared to the fourth quarter of 2020, largely due to Paycheck Protection Program (“PPP”) originations. Included in net interest income were purchase accounting adjustments of $2.1 million during the first quarter of 2021 and $2.2 million during the fourth quarter of 2020. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.44% for the first quarter of 2021 and 3.37% for the fourth quarter of 2020. The net interest margin widened as a result of lower cash balances as well as continued improvement in the Bank’s cost and mix of funding sources including the redemption of high-coupon subordinated debt, which more than offset a declining yield on loans and investment securities. This was the sixth consecutive quarter that the Bank’s net interest margin widened. Included in interest income in the first quarter of 2021 was PPP fee income of approximately $2.3 million, compared to $2.4 million in the fourth quarter of 2020. Deferred and unrecognized PPP fees were $9.9 million as of March 31, 2021.
Fully taxable equivalent net interest income for the first quarter of 2021 increased by $5.8 million, or 10.4%, from the first quarter of 2020. The increase from the first quarter of 2020 resulted primarily from a 6.4% increase in average interest-earning assets, largely due to PPP originations, and a 15 basis-point widening of the net interest margin to 3.56% from 3.41%. The widening of the net interest margin resulted from a 75 basis-point reduction in the cost of funding interest-earning assets, partially offset by a 49 basis-point reduction in the yield on average interest-earning assets.
Noninterest income was $3.4 million in the first quarter of 2021, $3.4 million in the fourth quarter of 2020 and $2.9 million in the first quarter of 2020. During the first quarter of 2021, the Bank completed the sale of two branches, resulting in a gain of $0.7 million, which was included in noninterest income. Excluding the branch sale, noninterest income decreased by $0.7 million from the fourth quarter of 2020 due primarily to decreases in income on bank owned life insurance of $0.3 million, net gains on equity securities of $0.2 million, net gains on sale of loans held-for-sale of $0.1 million and deposit, loan and other income of $0.1 million. Total noninterest income, excluding the branch sale, decreased $0.1 million from the first quarter of 2020. The decrease was primarily attributable to a decrease in net gains on sale of securities of $0.4 million, partially offset by an increase in net gains on sale of loans held-for-sale of $0.3 million.
Noninterest expenses totaled $26.5 million for first quarter of 2021, $26.4 million for the fourth quarter of 2020 and $35.1 million for the first quarter of 2020. Noninterest expenses increased $0.1 million from the fourth quarter of 2020, with the increases primarily coming from higher salaries and employee benefits of $1.0 million, offset by decreases in occupancy and equipment of $0.3 million, professional and consulting of $0.3 million and other expenses of $0.3 million. The increase in salaries and employee benefits of $1.0 million during the first quarter of 2021 was primarily attributable to seasonal increases in payroll taxes and higher incentive-based, stock compensation expense. Included in noninterest expenses for the first quarter of 2020 were merger related expenses totaling $9.5 million. Excluding merger-related expenses, noninterest expenses increased by $0.9 million from the first quarter of 2020 due primarily to increases in salaries and employee benefits of $1.0 million, professional and consulting of $0.4 million, partially offset by decreases in other expenses of $0.4 million and amortization of core deposit intangible of $0.1 million.
Income tax expense was $10.9 million for the first quarter of 2021, $7.8 million for the fourth quarter of 2020 and $1.0 million for the first quarter of 2020. The effective tax rates for the first quarter of 2021, fourth quarter of 2020 and first quarter of 2020 were 24.8%, 23.3% and 14.8%, respectively. The differences in the tax rates for the periods presented resulted from different proportions of income from non-taxable sources.
Asset Quality
As of January 1, 2021, the Company adopted the CECL accounting standard. As of March 31, 2021, the Company’s allowance for credit losses for loans was $80.6 million, an increase of $1.3 million from $79.2 million as of December 31, 2020. The increase was attributable to the “Day 1” effect of the adoption of the CECL accounting standard, which was $7.1 million, offset by a $5.8 million recapture of credit loss reserves during the first quarter of 2021. The “Day 1” CECL adoption aggregate adjustment was $9.4 million (which includes $2.8 million of allowance for credit losses attributed to unfunded commitments) and was comprised of a $5.2 million reclassification of nonaccretable credit marks and a $4.2 million pre-tax charge to shareholders’ equity.
The (reversal of) provision for credit losses was $(5.8) million for the first quarter of 2021, $5.0 million for the fourth quarter of 2020 and $16.0 million for the first quarter of 2020. The decrease in provision for credit losses during the first quarter of 2021 when compared to the fourth quarter of 2020 and to the first quarter of 2020 was the result of an improved macro-economic outlook when compared to January 1, 2021, the date of CECL implementation. As of March 31, 2021, the Bank had 102 loans on deferral, with a total balance of $204.2 million. Of that total, $43.1 million, or 0.7% of loans receivable, were nonpayment deferrals, while the remaining $161.1 million, or 2.6% of loans receivable, were modifications in which borrowers are making modified principal and interest payments. The Bank currently anticipates that by June 30, 2021, deferred loans will be reduced by approximately 50%.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $60.9 million as of March 31, 2021, $61.7 million as of December 31, 2020 and $62.4 million as of March 31, 2020. Included in nonperforming assets were taxi medallion loans totaling $23.0 million for all periods presented. Nonperforming assets as a percentage of total assets were 0.82% as of March 31, 2021, 0.82% as of December 31, 2020 and 0.86% as of March 31, 2020. Nonaccrual loans were $60.9 million as of March 31, 2021, $61.7 million as of December 31, 2020 and $62.4 million as of March 31, 2020, representing a ratio of nonaccrual loans to loans receivable of 0.97%, 0.99% and 1.04%, respectively. The annualized net loan (recoveries) charge-off ratio was (0.00)% for the first quarter of 2021, 0.00% for the fourth quarter of 2020 and 0.01% for the first quarter of 2020. The allowance for credit losses represented 1.28%, 1.27%, and 0.90% of loans receivable as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.40%, 1.36%, and 0.90% of loans receivable as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 132.2% as of March 31, 2021, 128.4% as of December 31, 2020 and 86.8% as of March 31, 2020.
Selected Balance Sheet Items
The Company’s total assets were $7.4 billion, a decrease of $0.1 million from December 31, 2020. Loans receivable were $6.3 billion, an increase of $40.9 million from December 31, 2020. The increase in loans receivable was attributable to the origination of PPP loans. As of March 31, 2021, PPP loans totaled $522.3 million.
The Company’s stockholders’ equity was $935.6 million as of March 31, 2021, an increase of $20.3 million from December 31, 2020. The increase in stockholders’ equity was primarily attributable to an increase in retained earnings of $26.5 million, partially offset by a decrease in accumulated other comprehensive income of $3.5 million and an increase in common stock repurchases of $2.4 million. Included in retained earnings, as of March 31, 2021, was the reduction of equity due to the “Day 1” after-tax effect of the adoption of the CECL standard of $2.9 million. As of March 31, 2021, the Company’s tangible common equity ratio and tangible book value per share were 9.91% and $18.02, respectively. As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $219 million as of March 31, 2021 and $219 million as of December 31, 2020.
Share Repurchase Program
During the first quarter of 2021, the Company reinstated its previously approved share repurchase program and repurchased approximately 94,000 shares of common stock leaving a remaining capacity of approximately 511,000 shares in the Board authorized program.
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 2021 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 29, 2021 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13718388. 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 29, 2021 and ending on Thursday, May 6, 2021 by dialing 412-317-6671, access code 13718388. 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 banking offices located across 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, as supplemented by the Company’s subsequent filings with the Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, 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
Executive VP & CFO
201.816.4474; bburns@cnob.comMedia Contact:
Will Crockett MWW
703.944.4213; wcrockett@mww.comCONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands) March 31, December 31, March 31, 2021 2020 2020 (unaudited) (unaudited) ASSETS Cash and due from banks $ 48,250 $ 63,637 $ 59,442 Interest-bearing deposits with banks 211,842 240,119 223,367 Cash and cash equivalents 260,092 303,756 282,809 Securities available-for-sale 442,023 487,955 446,738 Equity securities 13,200 13,387 13,363 Loans held-for-sale 6,900 4,710 32,425 Loans receivable 6,277,191 6,236,307 6,009,310 Less: Allowance for credit losses (loans) 80,568 79,226 54,169 Net loans receivable 6,196,623 6,157,081 5,955,141 Investment in restricted stock, at cost 22,483 25,099 38,554 Bank premises and equipment, net 29,296 30,108 32,864 Accrued interest receivable 35,249 35,317 24,317 Bank owned life insurance 167,024 165,960 163,929 Right of use operating lease assets 13,469 16,159 26,924 Goodwill 208,372 208,372 208,379 Core deposit intangibles 10,470 10,977 12,884 Other assets 44,438 88,458 41,000 Total assets $ 7,449,639 $ 7,547,339 $ 7,279,327 LIABILITIES Deposits: Noninterest-bearing $ 1,384,961 $ 1,339,108 $ 979,778 Interest-bearing 4,566,373 4,620,116 4,529,414 Total deposits 5,951,334 5,959,224 5,509,192 Borrowings 359,710 425,954 726,856 Subordinated debentures, net 152,724 202,648 128,967 Lease liabilities 15,260 18,026 28,731 Other liabilities 34,974 26,177 31,871 Total liabilities 6,514,002 6,632,029 6,425,617 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock 586,946 586,946 586,946 Additional paid-in capital 23,621 23,887 21,746 Retained earnings 358,441 331,951 273,825 Treasury stock (32,682 ) (30,271 ) (30,271 ) Accumulated other comprehensive (loss) income (689 ) 2,797 1,464 Total stockholders' equity 935,637 915,310 853,710 Total liabilities and stockholders' equity $ 7,449,639 $ 7,547,339 $ 7,279,327
CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except for per share data) Three Months Ended 03/31/21 12/31/20 03/31/20 Interest income Interest and fees on loans $ 70,462 $ 73,123 $ 72,936 Interest and dividends on investment securities: Taxable 1,088 1,373 2,066 Tax-exempt 766 649 813 Dividends 256 374 400 Interest on federal funds sold and other short-term investments 49 69 499 Total interest income 72,621 75,588 76,714 Interest expense Deposits 7,585 9,630 17,212 Borrowings 3,873 4,587 4,221 Total interest expense 11,458 14,217 21,433 Net interest income 61,163 61,371 55,281 (Reversal of) provision for credit losses (5,766 ) 5,000 16,000 Net interest income after (reversal of) provision for credit losses 66,929 56,371 39,281 Noninterest income Deposit, loan and other income 1,168 1,300 1,287 Income on bank owned life insurance 1,064 1,314 967 Net gains on sale of loans held-for-sale 707 841 393 Net gains on sale of investment securities - - 29 Gain on sale of branches 674 - - Net (losses) gains on equity securities (187 ) (13 ) 178 Total noninterest income 3,426 3,442 2,854 Noninterest expenses Salaries and employee benefits 15,565 14,581 14,563 Occupancy and equipment 3,404 3,689 3,471 FDIC insurance 935 948 856 Professional and consulting 1,956 2,210 1,574 Marketing and advertising 241 256 304 Data processing 1,536 1,479 1,473 Merger expenses - - 9,494 Amortization of core deposit intangible 507 628 652 Other expenses 2,341 2,611 2,671 Total noninterest expenses 26,485 26,402 35,058 Income before income tax expense 43,870 33,411 7,077 Income tax expense 10,871 7,770 1,047 Net income $ 32,999 $ 25,641 $ 6,030 Earnings per common share: Basic $ 0.83 $ 0.64 $ 0.15 Diluted 0.82 0.64 0.15
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, Sept. 30, June 30, Mar. 31, 2021 2020 2020 2020 2020 Selected Financial Data (dollars in thousands) Total assets $ 7,449,639 $ 7,547,339 $ 7,449,559 $ 7,617,184 $ 7,279,327 Loans receivable: Commercial $ 1,071,418 $ 1,092,404 $ 1,125,273 $ 1,151,025 $ 1,203,818 Paycheck Protection Program ("PPP") loans 522,340 397,492 474,022 473,999 - Commercial real estate 2,127,806 2,103,468 2,001,311 1,987,695 1,981,149 Multifamily 1,698,331 1,712,153 1,703,290 1,723,273 1,762,651 Commercial construction 565,872 617,747 614,112 673,893 676,836 Residential 306,376 322,564 343,376 366,315 387,400 Consumer 3,365 1,853 1,876 2,001 1,965 Gross loans 6,295,508 6,247,681 6,263,260 6,378,201 6,013,819 Unearned net origination fees (18,317 ) (11,374 ) (12,209 ) (14,934 ) (4,509 ) Loans receivable 6,277,191 6,236,307 6,251,051 6,363,267 6,009,310 Loans held-for-sale 6,900 4,710 8,508 11,212 32,425 Total loans $ 6,284,091 $ 6,241,017 $ 6,259,559 $ 6,374,479 $ 6,041,735 Investment securities $ 455,223 $ 501,342 $ 466,415 $ 431,833 $ 460,101 Goodwill and other intangible assets 218,842 219,349 219,977 220,605 221,263 Deposits: Noninterest-bearing demand $ 1,384,961 $ 1,339,108 $ 1,270,021 $ 1,276,070 $ 979,778 Time deposits 1,356,599 1,464,133 1,619,609 1,807,864 1,974,400 Other interest-bearing deposits 3,209,774 3,155,983 2,909,126 2,742,927 2,555,014 Total deposits $ 5,951,334 $ 5,959,224 $ 5,798,756 $ 5,826,861 $ 5,509,192 Borrowings $ 359,710 $ 425,954 $ 506,225 $ 667,062 $ 726,856 Subordinated debentures (net of debt issuance costs) 152,724 202,648 202,552 202,476 128,967 Total stockholders' equity 935,637 915,310 890,736 867,741 853,710 Quarterly Average Balances Total assets $ 7,500,034 $ 7,547,651 $ 7,474,002 $ 7,684,403 $ 7,106,027 Loans receivable: Commercial (including PPP loans) $ 1,531,790 $ 1,557,303 $ 1,610,423 $ 1,539,749 $ 1,146,773 Commercial real estate (including multifamily) 3,805,856 3,704,197 3,679,297 3,722,966 3,723,991 Commercial construction 595,466 615,439 646,281 675,698 663,036 Residential 316,233 332,403 352,426 374,283 390,655 Consumer 2,540 3,309 2,536 1,898 3,007 Gross loans 6,251,885 6,212,651 6,290,963 6,314,594 5,927,462 Unearned net origination fees (13,162 ) (12,023 ) (13,292 ) (13,420 ) (4,648 ) Loans receivable 6,238,723 6,200,628 6,277,671 6,301,174 5,922,814 Loans held-for-sale 4,237 9,003 10,772 31,329 33,655 Total loans $ 6,242,960 $ 6,209,631 $ 6,288,443 $ 6,332,503 $ 5,956,469 Investment securities $ 481,802 $ 469,820 $ 429,947 $ 452,224 $ 458,642 Goodwill and other intangible assets 219,171 219,761 220,391 221,039 221,075 Deposits: Noninterest-bearing demand $ 1,348,585 $ 1,294,447 $ 1,253,235 $ 1,277,428 $ 955,358 Time deposits 1,422,295 1,577,338 1,728,129 1,905,165 1,962,714 Other interest-bearing deposits 3,225,751 3,094,536 2,881,592 2,639,052 2,660,755 Total deposits $ 5,996,631 $ 5,966,321 $ 5,862,956 $ 5,821,645 $ 5,578,827 Borrowings $ 375,511 $ 410,098 $ 467,399 $ 798,648 $ 477,121 Subordinated debentures (net of debt issuance costs) 154,341 202,595 202,502 141,904 128,913 Total stockholders' equity 928,041 906,153 883,364 868,796 864,241 Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2021 2020 2020 2020 2020 (dollars in thousands, except for per share data) Net interest income $ 61,163 $ 61,371 $ 60,549 $ 60,790 $ 55,281 (Reversal of) provision for credit losses (5,766 ) 5,000 5,000 15,000 16,000 Net interest income after provision for credit losses 66,929 56,371 55,549 45,790 39,281 Noninterest income Deposit, loan and other income 1,168 1,300 1,278 3,212 1,287 Income on bank owned life insurance 1,064 1,314 1,598 1,128 967 Net gains on sale of loans held-for-sale 707 841 614 237 393 Net gains on sale of investment securities - - - - 29 Gain on sale of branches 674 - - - - Net (losses) gains on equity securities (187 ) (13 ) (7 ) 44 178 Total noninterest income 3,426 3,442 3,483 4,621 2,854 Noninterest expenses Salaries and employee benefits 15,565 14,581 15,114 14,500 14,563 Occupancy and equipment 3,404 3,689 3,566 3,156 3,471 FDIC insurance 935 948 1,105 1,093 856 Professional and consulting 1,956 2,210 1,926 1,673 1,574 Marketing and advertising 241 256 214 426 304 Data processing 1,536 1,479 1,470 1,586 1,473 Merger expenses - - - 5,146 9,494 Amortization of core deposit intangible 507 628 627 652 652 Increase in value of acquisition price - - - 2,333 - Other expenses 2,341 2,611 2,456 2,498 2,671 Total noninterest expenses 26,485 26,402 26,478 33,063 35,058 Income before income tax expense 43,870 33,411 32,554 17,348 7,077 Income tax expense 10,871 7,770 7,768 2,516 1,047 Net income $ 32,999 $ 25,641 $ 24,786 $ 14,832 $ 6,030 Weighted average diluted shares outstanding 39,788,881 39,726,791 39,653,832 39,611,712 39,510,810 Diluted EPS $ 0.82 $ 0.64 $ 0.62 $ 0.37 $ 0.15 Reconciliation of GAAP Earnings to Pre-tax, Pre-provision and Pre-merger charges Earnings Net income $ 32,999 $ 25,641 $ 24,786 $ 14,832 $ 6,030 Income tax expense 10,871 7,770 7,768 2,516 1,047 Merger charges - - - 5,146 9,494 (Reversal of) provision for credit losses (5,766 ) 5,000 5,000 15,000 16,000 Pre-tax, pre-provision and pre-merger charges earnings $ 38,104 $ 38,411 $ 37,554 $ 37,494 $ 32,571 Return on Assets Measures Average assets $ 7,500,034 $ 7,547,651 $ 7,474,002 $ 7,684,403 $ 7,106,027 Return on avg. assets 1.78 % 1.35 % 1.32 % 0.78 % 0.34 % Return on avg. assets (pre tax, pre-provision and pre-merger charges) 2.06 2.02 2.00 1.96 1.84 Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2021 2020 2020 2020 2020 Return on Equity Measures (dollars in thousands) Average common equity $ 928,041 $ 906,153 $ 883,364 $ 868,796 $ 864,241 Less: average intangible assets (219,171 ) (219,761 ) (220,391 ) (221,039 ) (221,075 ) Average tangible common equity $ 708,870 $ 686,392 $ 662,973 $ 647,757 $ 643,166 Return on avg. common equity (GAAP) 14.42 % 11.26 % 11.16 % 6.87 % 2.81 % Return on avg. tangible common equity (non-GAAP) (1) 19.08 15.12 15.14 9.50 4.06 Efficiency Measures Total noninterest expenses $ 26,485 $ 26,402 $ 26,478 $ 33,063 $ 35,058 Amortization of core deposit intangibles (507 ) (628 ) (627 ) (652 ) (652 ) Merger expenses - - - (5,146 ) (9,494 ) Foreclosed property expense - (2 ) - (5 ) 10 Operating noninterest expense $ 25,978 $ 25,772 $ 25,851 $ 27,260 $ 24,922 Net interest income (tax equivalent basis) $ 61,581 $ 61,840 $ 61,005 $ 61,253 $ 55,781 Noninterest income 3,426 3,442 3,483 4,621 2,854 Gains on sale of branches (674 ) - - - - Net gains on sales of securities - - - - (29 ) Operating revenue $ 64,333 $ 65,282 $ 64,488 $ 65,874 $ 58,606 Operating efficiency ratio (non-GAAP) (2) 40.4 % 39.5 % 40.1 % 41.4 % 42.5 % Net Interest Margin Average interest-earning assets $ 7,008,500 $ 7,031,662 $ 6,962,499 $ 7,164,545 $ 6,584,508 Net interest income (tax equivalent basis) $ 61,581 $ 61,840 $ 61,005 $ 61,253 $ 55,781 Impact of purchase accounting fair value marks (2,074 ) (2,237 ) (2,403 ) (3,073 ) (3,457 ) Adjusted net interest income (tax equivalent basis) $ 59,507 $ 59,603 $ 58,602 $ 58,180 $ 52,324 Net interest margin (GAAP) 3.56 % 3.50 % 3.49 % 3.44 % 3.41 % Adjusted net interest margin (non-GAAP) (3) 3.44 3.37 3.35 3.27 3.20 (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, Sept. 30, June 30, Mar. 31, 2021 2020 2020 2020 2020 Capital Ratios and Book Value per Share (dollars in thousands, except for per share data) Common equity $ 935,637 $ 915,310 $ 890,736 $ 867,741 $ 853,710 Less: intangible assets (218,842 ) (219,349 ) (219,977 ) (220,605 ) (221,263 ) Tangible common equity $ 716,795 $ 695,961 $ 670,759 $ 647,136 $ 632,447 Total assets $ 7,449,639 $ 7,547,339 $ 7,449,559 $ 7,617,184 $ 7,279,327 Less: intangible assets (218,842 ) (219,349 ) (219,977 ) (220,605 ) (221,263 ) Tangible assets $ 7,230,797 $ 7,327,990 $ 7,229,582 $ 7,396,579 $ 7,058,064 Common shares outstanding 39,773,602 39,785,398 39,753,033 39,753,033 39,704,921 Common equity ratio (GAAP) 12.56 % 12.13 % 11.96 % 11.39 % 11.73 % Tangible common equity ratio (non-GAAP) (4) 9.91 9.50 9.28 8.75 8.96 Regulatory capital ratios (Bancorp): Leverage ratio 9.89 % 9.51 % 9.30 % 8.99 % 9.20 % Common equity Tier 1 risk-based ratio 11.38 10.79 10.63 10.04 9.63 Risk-based Tier 1 capital ratio 11.47 10.87 10.72 10.12 9.71 Risk-based total capital ratio 15.14 15.08 14.94 14.32 12.46 Regulatory capital ratios (Bank): Leverage ratio 11.06 % 10.63 % 10.41 % 10.12 % 10.36 % Common equity Tier 1 risk-based ratio 12.82 12.24 12.00 11.38 10.93 Risk-based Tier 1 capital ratio 12.82 12.24 12.00 11.38 10.93 Risk-based total capital ratio 14.62 10.00 13.70 12.96 12.25 Book value per share (GAAP) $ 23.52 $ 23.01 $ 22.41 $ 21.83 $ 21.50 Tangible book value per share (non-GAAP) (5) 18.02 17.49 16.87 16.28 15.93 Net Loan (Recoveries) Charge-Off Detail Net loan (recoveries) charge-offs: Charge-offs $ - $ 900 $ 257 $ 462 $ 115 Recoveries (61 ) (833 ) (800 ) (4 ) (3 ) Net loan (recoveries) charge-offs $ (61 ) $ 67 $ (543 ) $ 458 $ 112 Net loan (recoveries) charge-offs as a % of average loans receivable (annualized) (0.00 )% 0.00 % (0.03 )% 0.03 % 0.01 % Asset Quality Nonaccrual loans $ 60,940 $ 61,696 $ 65,494 $ 64,580 $ 62,373 Performing troubled debt restructurings 25,505 23,655 18,241 20,418 21,293 Allowance for credit losses - loans ("ACL") 80,568 79,226 74,267 68,724 54,169 Loans receivable $ 6,277,191 $ 6,236,307 $ 6,251,051 $ 6,363,267 $ 6,009,310 Less: PPP loans 522,340 397,492 474,022 473,999 - Loans receivable (excluding PPP loans) $ 5,754,851 $ 5,838,815 $ 5,777,029 $ 5,889,268 $ 6,009,310 Nonaccrual loans as a % of loans receivable 0.97 % 0.99 % 1.05 % 1.01 % 1.04 % Nonperforming assets as a % of total assets 0.82 0.82 0.88 0.85 0.86 ACL as a % of loans receivable 1.28 1.27 1.19 1.08 0.90 ACL as a % of loans receivable (excluding PPP loans) 1.40 1.36 1.29 1.17 0.90 ACL as a % of nonaccrual loans 132.2 128.4 113.4 106.4 86.8 (4) Tangible common equity divided by tangible assets. (5) Tangible common equity divided by common shares outstanding at period-end.
CONNECTONE BANCORP, INC. AND SUBSIDIARIES NET INTEREST MARGIN ANALYSIS (dollars in thousands) For the Three Months Ended March 31, 2021 December 31, 2020 March 31, 2020 Average Average Average Interest-earning assets: Balance Interest Rate (7) Balance Interest Rate (7) Balance Interest Rate (7) Investment securities (1) (2) $ 473,181 $ 2,058 1.76 % $ 460,471 $ 2,194 1.90 % $ 452,294 $ 3,095 2.75 % Loans receivable and loans held-for-sale (2) (3) (4) 6,242,960 70,676 4.59 6,209,631 73,420 4.70 5,956,469 73,220 4.94 Federal funds sold and interest- bearing deposits with banks 269,537 49 0.07 337,172 69 0.08 148,429 499 1.35 Restricted investment in bank stock 22,822 256 4.55 24,388 374 6.10 27,316 400 5.89 Total interest-earning assets 7,008,500 73,039 4.23 7,031,662 76,057 4.30 6,584,508 77,214 4.72 Allowance for loan losses (81,549 ) (74,943 ) (38,970 ) Noninterest-earning assets 573,083 584,145 560,489 Total assets $ 7,500,034 $ 7,540,864 $ 7,106,027 Interest-bearing liabilities: Time deposits $ 1,422,295 $ 5,151 1.47 $ 1,577,338 $ 6,682 1.69 1,962,714 10,371 2.13 Other interest-bearing deposits 3,225,751 2,434 0.31 3,094,536 2,948 0.38 2,660,755 6,841 1.03 Total interest-bearing deposits 4,648,046 7,585 0.66 4,671,874 9,630 0.82 4,623,469 17,212 1.50 Borrowings 375,511 1,674 1.81 410,098 1,856 1.80 477,121 2,352 1.98 Subordinated debentures 154,341 2,167 5.69 202,595 2,699 5.30 128,913 1,834 5.72 Capital lease obligation 2,115 32 6.14 2,164 32 5.88 2,303 35 6.11 Total interest-bearing liabilities 5,180,013 11,458 0.90 5,286,731 14,217 1.07 5,231,806 21,433 1.65 Noninterest-bearing demand deposits 1,348,585 1,294,447 955,358 Other liabilities 43,395 53,533 54,622 Total noninterest-bearing liabilities 1,391,980 1,347,980 1,009,980 Stockholders' equity 928,041 906,153 864,241 Total liabilities and stockholders' equity $ 7,500,034 $ 7,540,864 $ 7,106,027 Net interest income (tax equivalent basis) 61,581 61,840 55,781 Net interest spread (5) 3.33 3.23 % 3.07 % Net interest margin (6) 3.56 % 3.50 % 3.41 % Tax equivalent adjustment (418 ) (469 ) (500 ) Net interest income $ 61,163 $ 61,371 $ 55,281 (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 and accretion of purchase accounting adjustments. (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.