EX-99.1 2 ex_557830.htm EXHIBIT 99.1 ex_586014.htm

Exhibit 99.1

 

ex_586014img001.jpg

 

CONNECTONE BANCORP, INC. REPORTS

THIRD QUARTER 2023 RESULTS;

DECLARES COMMON AND PREFERRED DIVIDENDS

 

Englewood Cliffs, N.J., October 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 Quality

 

The 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 Companys Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission, as supplemented by the Companys 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.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)

 

   

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

 
    (dollars in thousands)  

Selected Financial Data

                                       

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

 
    (dollars in thousands, except for per share data)  

Capital Ratios and Book Value per Share

 

 

 

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

                 

 

 

Balance

   

Interest

   

Rate (7)

   

Balance

   

Interest

   

Rate (7)

   

Balance

   

Interest

   

Rate (7)

 
Interest-earning assets:                                                                        

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.