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ConnectOne Bancorp, Inc. Reports First Quarter 2022 Results; Tangible Book Value Per Share Increases 2%; Declares 19% Increase in Common Dividend
ソース: Nasdaq GlobeNewswire / 28 4 2022 06:00:03 America/Chicago
ENGLEWOOD CLIFFS, N.J., April 28, 2022 (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 $29.9 million for the first quarter of 2022, compared with $31.3 million for the fourth quarter of 2021 and $33.0 million for the first quarter of 2021. Diluted earnings per share were $0.75 for the first quarter of 2022 compared with $0.79 for the fourth quarter of 2021 and $0.82 for the first quarter of 2021. The $1.4 million decrease in net income available to common stockholders and $0.04 decrease in diluted earnings per share versus the fourth quarter of 2021 were primarily due to a $1.1 million increase in noninterest expenses, a $0.7 million decrease in noninterest income, and a $0.6 million increase to provision for credit losses, partially offset by a $1.0 million decrease in income tax expenses. The $3.1 million decrease in net income available to common stockholders and $0.07 decrease in diluted earnings per share versus the first quarter of 2021 were due to a $7.2 million increase to provision for credit losses, a $2.7 million increase in noninterest expenses, $1.5 million in preferred dividends, a $0.4 million decrease in noninterest income and a $0.5 million increase in income tax expenses, partially offset by a $9.2 million increase in net interest income.
Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 2.17%, 2.28% and 2.06% for the quarters ending March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne had a solid start to 2022. We delivered another quarter of strong operating performance along with significant organic growth and best-in-class efficiency, while also investing in our infrastructure to support future growth and performance. Our efficiency ratio remained below 40% at 38.7%, our PPNR as a percent of average assets remained above 2%, and our return on tangible common equity exceeded 15%, while our net interest margin remained at a near record level. Tangible book value per share increased by 2.0% for the quarter to $20.51.
“Operationally, we’re using the full range of the Company’s banking expertise to enhance client relationships. Loan demand remained strong with annualized core loan growth increasing over 10% sequentially, matched with annualized deposit growth in excess of 14%. We ended the quarter with a strong pipeline, reflecting continued momentum and solid prospects among our clients across all the markets we serve. That also reflects our expansion into new markets which are a natural progression for us, such as Florida where we are gaining nice traction.” Mr. Sorrentino added, “We continue to leverage our technological foundation by investing in infrastructure, new verticals, communication tools and digital channels to remain well-positioned for continued growth.”
“We remain committed to strategically allocating capital to investments that we believe can enhance value for our shareholders. We also announced today yet another increase to our common dividend, the third increase since the start of 2021 -- reflecting ConnectOne’s growing capital base, our strong operating performance and our favorable outlook.” Mr. Sorrentino added, “Looking ahead, we remain confident in our ability to increase our market presence and deliver continued organic growth. Our margins and efficiency are expected to remain among the best in the industry and, even with investments to support our growing businesses, we aim to grow revenues faster than expenses. We’re excited about what the future holds for ConnectOne, we are very optimistic about performance in 2022 and we are well positioned to pursue attractive opportunities to expand our valuable franchise.”
Dividend Declarations
The Company announced that its Board of Directors declared an increased cash dividend on its common stock and a quarterly cash dividend on its preferred stock.
A cash dividend on common stock of $0.155 per share, reflecting a 19.2% sequential increase and a 40.9% increase versus one year ago, will be paid on June 1, 2022 to common stockholders of record on May 16, 2022. A dividend of $0.328125 per share for every depositary share, representing a 1/40th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on June 1, 2022 to preferred stockholders of record on May 16, 2022.
Operating Results
Fully taxable equivalent net interest income for the first quarter of 2022 was $70.8 million, virtually unchanged from the fourth quarter of 2021. Average interest-earning assets increased by $244.9 million, or 3.3%, from the fourth quarter of 2021 resulting primarily from a 2.3% increase in average loans. Partially offsetting the benefit from increased average interest-earnings assets was a modest contraction in the net interest margin of 4 basis points to 3.71% from 3.75%. The net interest margin contraction was primarily a result of a 6 basis-point decline in the yield on loans. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.64% for the first quarter of 2022 and 3.66% for the fourth quarter of 2021. Included in interest income in the first quarter of 2022 and fourth quarter of 2021 was the accretion of Paycheck Protection Program (“PPP”) fee income of $2.0 million and $1.5 million, respectively. Remaining deferred and unrecognized PPP fees were $2.6 million as of March 31, 2022.
Fully taxable equivalent net interest income for the first quarter of 2022 increased by $9.3 million, or 15.0%, from the first quarter of 2021. The increase from the first quarter of 2021 resulted primarily from a 10.1% increase in average loans and a 15 basis-point widening of the net interest margin to 3.71% from 3.56%. The widening of the net interest margin resulted from a 27 basis-point reduction in the cost of interest-bearing liabilities, partially offset by an 8 basis-point reduction in the yield on average interest-earning assets.
Noninterest income was $3.1 million in the first quarter of 2022, $3.8 million in the fourth quarter of 2021 and $3.4 million in the first quarter of 2021. Included in noninterest income were net losses on equity securities of $0.6 million, $0.1 million and $0.2 million for the first quarter 2022, fourth quarter 2021 and first quarter 2021, respectively, and a $0.7 million gain on the sale of branches in the first quarter 2021. Excluding the aforementioned items, adjusted noninterest income was $3.7 million, $3.9 million and $2.9 million for the first quarter 2022, fourth quarter 2021 and first quarter 2021, respectively. The $0.3 million decrease in adjusted noninterest income for the current quarter versus the sequential fourth quarter 2021 was primarily due to a decrease in net gains on sale of loans held-for-sale, partially offset by increased BoeFly income. The $0.7 million increase in adjusted noninterest income for the current quarter versus the first quarter 2021 was primarily due to increases in deposit, loan and other income of $0.4 million, BoeFly income of $0.2 million and BOLI income of $0.1 million.
Noninterest expenses totaled $29.2 million for the first quarter of 2022, $28.1 million for the fourth quarter of 2021 and $26.5 million for the first quarter of 2021. The increase in noninterest expenses of $1.1 million from the fourth quarter of 2021 was primarily attributable to an increase in salaries and employee benefits of $2.2 million and a $0.7 million in increase acquisition expenses related to BoeFly, partially offset by decreases in occupancy and equipment of $0.8 million, which included a $0.9 million favorable dissolution of a merger lease obligation, other expense of $0.3 million, information technology and communications of $0.2 million, professional and consulting of $0.2 million, and marketing and advertising of $0.1 million. The increase in noninterest expenses of $2.7 million from the first quarter of 2021 was primarily attributable to increases in salaries and employee benefits of $3.1 million, the aforementioned BoeFly expense of $0.7 million, and other expenses of $0.6 million, and information technology and communications of $0.3 million, partially offset by decreases in occupancy and equipment of $1.5 million, including the aforementioned favorable dissolution of merger lease obligation, FDIC insurance of $0.3 million and professional and consulting of $0.2 million. The increase in salaries and employee benefits from the prior sequential quarter and prior year quarter was attributable to new hires, seasonal increases in payroll taxes, as well as higher incentive-based, stock compensation expense.
Income tax expense was $11.4 million for the first quarter of 2022, $12.3 million for the fourth quarter of 2021 and $10.9 million for the first quarter of 2021. The effective tax rates for the first quarter of 2022, fourth quarter of 2021 and first quarter of 2021 were 26.6%, 27.1% and 24.8%, respectively.
Asset Quality
The provision for (reversal of) credit losses was $1.5 million for the first quarter of 2022, $0.8 million for the fourth quarter of 2021 and $(5.8) million for the first quarter of 2021. The provision for credit losses during the first quarter of 2022 and the fourth quarter of 2021 reflected strong organic loan growth and stabilizing macroeconomic forecasts. The reversal of provision for credit losses during the first quarter of 2021 was the result of an improved macroeconomic forecast when compared to January 1, 2021, the date of CECL implementation.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $59.7 million as of March 31, 2022, $61.7 million as of December 31, 2021 and $60.9 million as of March 31, 2021. Nonaccrual loans were $59.4 million as of March 31, 2022, $61.7 million as of December 31, 2021 and $60.9 million as of March 31, 2021. Nonperforming assets as a percentage of total assets were 0.72% as of March 31, 2022, 0.76% as of December 31, 2021 and 0.82% as of March 31, 2021. The ratio of nonaccrual loans to loans receivable was 0.85%, 0.90% and 0.97%, as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The annualized net loan charge-offs ratio was 0.01% for the first quarter of 2022, 0.01% for the fourth quarter of 2021 and 0.00% for the first quarter of 2021. The allowance for credit losses represented 1.15%, 1.15%, and 1.28% of loans receivable as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Excluding PPP loans, the allowance for credit losses represented 1.16%, 1.17%, and 1.40% of loans receivable as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 134.8% as of March 31, 2022, 127.7% as of December 31, 2021 and 132.2% as of March 31, 2021.
Selected Balance Sheet Items
The Company’s total assets were $8.3 billion as of March 31, 2022, an increase of $204.8 million from December 31, 2021. Loans receivable were $7.0 billion, an increase of $151.0 million from December 31, 2021. The increase in loans receivable was attributable to higher, organic, loan originations.
The Company’s total stockholders’ equity was $1.1 billion as of March 31, 2022, an increase of $14.3 million from December 31, 2021. The increase in retained earnings of $24.7 million was the primary reason for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $1.2 million, partially offset by a decrease in accumulated other comprehensive income of $6.9 million, reflecting the after-tax decline in the fair value of investment securities net of unrealized hedge gains recorded in other assets, and an increase in treasury stock of $4.8 million. As of March 31, 2022, the Company’s tangible common equity ratio and tangible book value per share were 9.99% and $20.51, respectively. As of December 31, 2021, the tangible common equity ratio and tangible book value per share were 10.06% and $20.12, respectively. Total goodwill and other intangible assets were approximately $216.9 million as of March 31, 2022 and $217.4 million as of December 31, 2021.
Share Repurchase Program
During the first quarter of 2022, the Company repurchased 144,793 shares of common stock leaving approximately 2.1 million shares remaining authorized for repurchase under the current Board approved repurchase programs. 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 plans do not obligate the Company to acquire any particular amount of common stock, and they 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.
First Quarter 2022 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 28, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13728265. 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 28, 2022 and ending on Thursday, May 5, 2022 by dialing 412-317-6671, access code 13728265. 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 its fintech subsidiary, BoeFly. 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 is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.
Forward-Looking Statements
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the 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
Senior Executive VP & CFO
201.816.4474: bburns@cnob.comMedia Contact:
Sutton Resler, MWW
571.236.4966: sresler@mww.comCONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands) March 31, December 31, March 31, 2022 2021 2021 (unaudited) (unaudited) ASSETS Cash and due from banks $ 61,849 $ 54,352 $ 48,250 Interest-bearing deposits with banks 249,695 211,184 211,842 Cash and cash equivalents 311,544 265,536 260,092 Investment securities 512,030 534,507 442,023 Equity securities 13,198 13,794 13,200 Loans held-for-sale 2,742 250 6,900 Loans receivable 6,979,595 6,828,622 6,277,191 Less: Allowance for credit losses - loans 80,070 78,773 80,568 Net loans receivable 6,899,525 6,749,849 6,196,623 Investment in restricted stock, at cost 25,254 27,826 22,483 Bank premises and equipment, net 28,779 29,032 29,296 Accrued interest receivable 34,081 34,152 35,249 Bank owned life insurance 196,937 195,731 167,024 Right of use operating lease assets 10,400 11,017 13,469 Other real estate owned 316 - - Goodwill 208,372 208,372 208,372 Core deposit intangibles 8,564 8,997 10,470 Other assets 82,559 50,417 44,438 Total assets $ 8,334,301 $ 8,129,480 $ 7,449,639 LIABILITIES Deposits: Noninterest-bearing $ 1,631,292 $ 1,617,049 $ 1,384,961 Interest-bearing 4,929,113 4,715,904 4,566,373 Total deposits 6,560,405 6,332,953 5,951,334 Borrowings 412,170 468,193 359,710 Subordinated debentures, net 153,027 152,951 152,724 Operating lease liabilities 11,773 12,417 15,260 Other liabilities 58,407 38,754 34,974 Total liabilities 7,195,782 7,005,268 6,514,002 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 110,927 110,927 - Common stock 586,946 586,946 586,946 Additional paid-in capital 28,484 27,246 23,621 Retained earnings 464,889 440,169 358,441 Treasury stock (44,458 ) (39,672 ) (32,682 ) Accumulated other comprehensive loss (8,269 ) (1,404 ) (689 ) Total stockholders' equity 1,138,519 1,124,212 935,637 Total liabilities and stockholders' equity $ 8,334,301 $ 8,129,480 $ 7,449,639
CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except for per share data) Three Months Ended 03/31/22 12/31/21 03/31/21 Interest income Interest and fees on loans $ 76,025 $ 76,891 $ 70,462 Interest and dividends on investment securities: Taxable 1,873 1,265 1,088 Tax-exempt 709 518 766 Dividends 214 207 256 Interest on federal funds sold and other short-term investments 120 159 49 Total interest income 78,941 79,040 72,621 Interest expense Deposits 5,010 5,281 7,585 Borrowings 3,573 3,298 3,873 Total interest expense 8,583 8,579 11,458 Net interest income 70,358 70,461 61,163 Provision for (reversal of) credit losses 1,450 815 (5,766 ) Net interest income after provision for credit losses 68,908 69,646 66,929 Noninterest income Deposit, loan and other income 1,743 1,525 1,168 Income on bank owned life insurance 1,206 1,244 1,064 Net gains on sale of loans held-for-sale 701 1,139 707 Gain on sale of branches - - 674 Net losses on equity securities (596 ) (131 ) (187 ) Total noninterest income 3,054 3,777 3,426 Noninterest expenses Salaries and employee benefits 18,640 16,483 15,565 Occupancy and equipment 1,929 2,762 3,404 FDIC insurance 606 625 935 Professional and consulting 1,792 1,996 1,956 Marketing and advertising 351 454 241 Information technology and communications 2,866 3,058 2,525 Amortization of core deposit intangible 433 483 507 Increase in value of acquisition price 683 - - Other expenses 1,930 2,223 1,352 Total noninterest expenses 29,230 28,084 26,485 Income before income tax expense 42,732 45,339 43,870 Income tax expense 11,351 12,301 10,871 Net income 31,381 33,038 32,999 Preferred dividends 1,509 1,717 - Net income available to common stockholders $ 29,872 $ 31,321 $ 32,999 Earnings per common share: Basic $ 0.76 $ 0.79 $ 0.83 Diluted 0.75 0.79 0.82
ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies. CONNECTONE BANCORP, INC. SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES As of Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2022 2021 2021 2021 2021 Selected Financial Data (dollars in thousands) Total assets $ 8,334,301 $ 8,129,480 $ 7,949,514 $ 7,710,082 $ 7,449,639 Loans receivable: Commercial $ 1,161,867 $ 1,163,442 $ 1,116,535 $ 1,046,965 $ 1,071,418 Paycheck Protection Program ("PPP") loans 54,301 93,057 177,829 326,788 522,340 Commercial real estate 2,516,065 2,446,807 2,354,209 2,252,484 2,127,807 Multifamily 2,465,337 2,337,712 2,113,541 1,914,978 1,698,331 Commercial construction 539,058 540,178 552,896 587,121 565,872 Residential 250,205 255,269 270,793 286,907 306,376 Consumer 1,140 1,886 2,093 6,355 3,364 Gross loans 6,987,973 6,838,351 6,587,896 6,421,598 6,295,508 Unearned net origination fees (8,378 ) (9,729 ) (11,457 ) (13,694 ) (18,317 ) Loans receivable 6,979,595 6,828,622 6,576,439 6,407,904 6,277,191 Loans held-for-sale 2,742 250 5,596 6,159 6,900 Total loans $ 6,982,337 $ 6,828,872 $ 6,582,035 $ 6,414,063 $ 6,284,091 Investment and equity securities $ 525,228 $ 548,301 $ 476,584 $ 472,156 $ 455,223 Goodwill and other intangible assets 216,936 217,369 217,852 218,335 218,842 Deposits: Noninterest-bearing demand $ 1,631,292 $ 1,617,049 $ 1,500,754 $ 1,485,952 $ 1,384,961 Time deposits 1,065,814 1,150,109 1,221,911 1,301,807 1,356,599 Other interest-bearing deposits 3,863,299 3,565,795 3,675,673 3,404,754 3,209,774 Total deposits $ 6,560,405 $ 6,332,953 $ 6,398,338 $ 6,192,513 $ 5,951,334 Borrowings $ 412,170 $ 468,193 $ 253,225 $ 353,462 $ 359,710 Subordinated debentures (net of debt issuance costs) 153,027 152,951 152,875 152,800 152,724 Total stockholders' equity 1,138,519 1,124,212 1,098,433 964,960 935,637 Quarterly Average Balances Total assets $ 8,263,382 $ 8,027,169 $ 7,837,997 $ 7,566,676 $ 7,500,034 Loans receivable: Commercial (including PPP loans) $ 1,231,703 $ 1,278,048 $ 1,296,066 $ 1,485,918 $ 1,531,790 Commercial real estate (including multifamily) 4,850,349 4,625,371 4,312,092 3,925,497 3,805,856 Commercial construction 541,642 547,038 572,920 553,396 595,466 Residential 253,589 268,112 279,063 293,633 316,233 Consumer 3,682 4,938 2,649 3,148 2,540 Gross loans 6,880,965 6,723,507 6,462,790 6,261,592 6,251,885 Unearned net origination fees (9,870 ) (10,873 ) (13,064 ) (13,076 ) (13,163 ) Loans receivable 6,871,095 6,712,634 6,449,726 6,248,516 6,238,722 Loans held-for-sale 382 5,051 6,226 3,696 4,237 Total loans $ 6,871,477 $ 6,717,685 $ 6,455,952 $ 6,252,212 $ 6,242,959 Investment and equity securities $ 536,090 $ 481,276 $ 465,103 $ 450,543 $ 481,082 Goodwill and other intangible assets 217,219 217,685 218,170 218,662 219,171 Deposits: Noninterest-bearing demand $ 1,547,055 $ 1,537,316 $ 1,495,456 $ 1,432,707 $ 1,348,585 Time deposits 1,124,614 1,204,374 1,252,818 1,324,510 1,422,295 Other interest-bearing deposits 3,851,558 3,672,311 3,582,261 3,320,400 3,225,751 Total deposits $ 6,523,227 $ 6,414,001 $ 6,330,535 $ 6,077,617 $ 5,996,631 Borrowings $ 404,907 $ 292,847 $ 276,183 $ 331,633 $ 375,511 Subordinated debentures (net of debt issuance costs) 152,977 152,902 152,825 152,750 154,341 Total stockholders' equity 1,131,968 1,113,524 1,032,191 952,019 928,041 Three Months Ended Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2022 2021 2021 2021 2021 (dollars in thousands, except for per share data) Net interest income $ 70,358 $ 70,461 $ 68,245 $ 63,009 $ 61,163 Provision for (reversal of) credit losses 1,450 815 1,100 (1,649 ) (5,766 ) Net interest income after provision for credit losses 68,908 69,646 67,145 64,658 66,929 Noninterest income Deposit, loan and other income 1,743 1,525 1,702 2,222 1,168 Income on bank owned life insurance 1,206 1,244 1,278 1,185 1,064 Net gains on sale of loans held-for-sale 701 1,139 1,114 847 707 Gain on sale of branches - - - - 674 Net (losses) gains on equity securities (596 ) (131 ) (78 ) 23 (187 ) Total noninterest income 3,054 3,777 4,016 4,472 3,426 Noninterest expenses Salaries and employee benefits 18,640 16,483 16,740 15,284 15,565 Occupancy and equipment 1,929 2,762 2,656 2,916 3,404 FDIC insurance 606 625 525 580 935 Professional and consulting 1,792 1,996 2,217 2,117 1,956 Marketing and advertising 351 454 345 278 241 Information technology and communications 2,866 3,058 3,048 2,636 2,525 Amortization of core deposit intangible 433 483 483 508 507 Increase in value of acquisition price 683 - - - - Other expenses 1,930 2,223 2,169 1,940 1,352 Total noninterest expenses 29,230 28,084 28,183 26,259 26,485 Income before income tax expense 42,732 45,339 42,978 42,871 43,870 Income tax expense 11,351 12,301 10,881 10,652 10,871 Net income 31,381 $ 33,038 $ 32,097 $ 32,219 $ 32,999 Preferred dividends 1,509 1,717 - - - Net income available to common stockholders $ 29,872 $ 31,321 $ 32,097 $ 32,219 $ 32,999 Weighted average diluted common shares outstanding 39,727,606 39,792,937 39,869,468 39,872,829 39,788,881 Diluted EPS $ 0.75 $ 0.79 $ 0.80 $ 0.81 $ 0.82 Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue Net income $ 31,381 $ 33,038 $ 32,097 $ 32,219 $ 32,999 Income tax expense 11,351 12,301 10,881 10,652 10,871 Provision for (reversal of) credit losses 1,450 815 1,100 (1,649 ) (5,766 ) Pre-tax and pre-provision net revenue $ 44,182 $ 46,154 $ 44,078 $ 41,222 $ 38,104 Return on Assets Measures Average assets $ 8,263,382 $ 8,027,169 $ 7,837,997 $ 7,566,676 $ 7,500,034 Return on avg. assets 1.54 % 1.63 % 1.62 % 1.71 % 1.78 % Return on avg. assets (pre-tax and pre-provision) 2.17 2.28 2.23 2.19 2.06 Three Months Ended Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2022 2021 2021 2021 2021 Return on Equity Measures (dollars in thousands) Average stockholders' equity $ 1,131,968 $ 1,113,524 $ 1,032,195 $ 952,019 $ 928,041 Less: average preferred stock (110,927 ) (110,927 ) (51,847 ) - - Average common equity $ 1,021,041 $ 1,002,597 $ 980,348 $ 952,019 $ 928,041 Less: average intangible assets (217,219 ) (217,685 ) (218,170 ) (218,662 ) (219,171 ) Average tangible common equity $ 803,822 $ 784,912 $ 762,178 $ 733,357 $ 708,870 Return on avg. common equity (GAAP) 11.87 % 12.39 % 12.99 % 13.57 % 14.42 % Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 15.22 16.00 16.88 17.82 19.08 Return on avg. tangible common equity (pre-tax, pre-provision) 22.44 23.50 23.12 22.74 22.00 Efficiency Measures Total noninterest expenses $ 29,230 $ 28,084 $ 28,183 $ 26,259 $ 26,485 Amortization of core deposit intangibles (433 ) (483 ) (483 ) (508 ) (507 ) Operating noninterest expense $ 28,797 $ 27,601 $ 27,700 $ 25,751 $ 25,978 Net interest income (tax equivalent basis) $ 70,842 $ 70,890 $ 68,761 $ 63,418 $ 61,581 Noninterest income 3,054 3,777 4,016 4,472 3,426 Net losses (gains) on equity securities 596 131 78 (23 ) 187 Net gains on sale/redemption of investment securities - - - (195 ) - Operating revenue $ 74,492 $ 74,798 $ 72,855 $ 67,672 $ 64,520 Operating efficiency ratio (non-GAAP) (2) 38.7 % 36.9 % 38.0 % 38.1 % 40.3 % Net Interest Margin Average interest-earning assets $ 7,753,881 $ 7,508,973 $ 7,321,771 $ 7,059,965 $ 7,008,500 Net interest income (tax equivalent basis) $ 70,842 $ 70,890 $ 68,761 $ 63,418 $ 61,581 Impact of purchase accounting fair value marks (1,179 ) (1,674 ) (1,849 ) (2,012 ) (2,074 ) Adjusted net interest income (tax equivalent basis) $ 69,663 $ 69,216 $ 66,912 $ 61,406 $ 59,507 Net interest margin (GAAP) 3.71 % 3.75 % 3.73 % 3.60 % 3.56 % Adjusted net interest margin (non-GAAP) (3) 3.64 3.66 3.63 3.49 3.44 (1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity. (2) Operating noninterest expense divided by operating revenue. (3) Adjusted net interest margin excludes impact of purchase accounting fair value marks. As of Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2022 2021 2021 2021 2021 Capital Ratios and Book Value per Share (dollars in thousands, except for per share data) Stockholders equity $ 1,138,519 $ 1,124,212 $ 1,098,433 $ 964,960 $ 935,637 Less: preferred stock (110,927 ) (110,927 ) (110,927 ) - - Common equity $ 1,027,592 $ 1,013,285 $ 987,506 $ 964,960 $ 935,637 Less: intangible assets (216,936 ) (217,369 ) (217,852 ) (218,335 ) (218,842 ) Tangible common equity $ 810,656 $ 795,916 $ 769,654 $ 746,625 $ 716,795 Total assets $ 8,334,301 $ 8,129,480 $ 7,949,514 $ 7,710,082 $ 7,449,639 Less: intangible assets (216,936 ) (217,369 ) (217,852 ) (218,335 ) (218,842 ) Tangible assets $ 8,117,365 $ 7,912,111 $ 7,731,662 $ 7,491,747 $ 7,230,797 Common shares outstanding 39,518,411 39,568,090 39,602,199 39,794,815 39,773,602 Common equity ratio (GAAP) 12.33 % 13.83 % 13.82 % 12.52 % 12.56 % Tangible common equity ratio (non-GAAP) (4) 9.99 10.06 9.95 9.97 9.91 Regulatory capital ratios (Bancorp): Leverage ratio 11.57 % 11.65 % 11.60 % 10.19 % 9.89 % Common equity Tier 1 risk-based ratio 10.69 10.64 10.73 11.09 11.36 Risk-based Tier 1 capital ratio 12.21 12.19 12.35 11.17 11.44 Risk-based total capital ratio 15.23 15.26 15.54 14.58 15.08 Regulatory capital ratios (Bank): Leverage ratio 11.41 % 11.43 % 11.33 % 11.34 % 11.06 % Common equity Tier 1 risk-based ratio 12.04 11.96 12.06 12.42 12.78 Risk-based Tier 1 capital ratio 12.04 11.96 12.06 12.42 12.78 Risk-based total capital ratio 13.52 13.44 13.61 14.07 14.55 Book value per share (GAAP) $ 26.00 $ 25.61 $ 24.94 $ 24.25 $ 23.52 Tangible book value per share (non-GAAP) (5) 20.51 20.12 19.43 18.76 18.02 Net Loan (Recoveries) Charge-Off Detail Net loan charge-offs (recoveries): Charge-offs $ 274 $ 458 $ 1,727 $ 212 $ - Recoveries (32 ) (217 ) (113 ) (14 ) (61 ) Net loan charge-offs (recoveries) $ 242 $ 241 $ 1,614 $ 198 $ (61 ) Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.01 % 0.01 % 0.10 % 0.01 % (0.00 )% Asset Quality Nonaccrual loans $ 59,403 $ 61,700 $ 65,959 $ 56,213 $ 60,940 OREO 316 - - - - Nonperforming assets $ 59,719 $ 61,700 $ 65,959 $ 56,213 $ 60,940 Allowance for credit losses - loans ("ACL") 80,070 78,773 77,986 78,684 80,568 Loans receivable $ 6,979,595 $ 6,828,622 $ 6,576,439 $ 6,407,904 $ 6,277,191 Less: PPP loans 54,301 93,057 177,829 326,788 522,340 Loans receivable (excluding PPP loans) $ 6,925,294 $ 6,735,565 $ 6,398,610 $ 6,081,116 $ 5,754,851 Nonaccrual loans as a % of loans receivable 0.85 % 0.90 % 1.00 % 0.88 % 0.97 Nonperforming assets as a % of total assets 0.72 0.76 0.83 0.73 0.82 ACL as a % of loans receivable 1.15 1.15 1.19 1.23 1.28 ACL as a % of loans receivable (excluding PPP loans) 1.16 1.17 1.22 1.29 1.40 ACL as a % of nonaccrual loans 134.8 127.7 118.2 140.0 132.2 (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, 2022 December 31, 2021 March 31, 2021 Average Average Average Interest-earning assets: Balance Interest Rate (7) Balance Interest Rate (7) Balance Interest Rate (7) Investment securities (1) (2) $ 545,203 $ 2,771 2.06 % $ 480,143 $ 1,921 1.59 % $ 473,181 $ 2,058 1.76 % Loans receivable and loans held-for-sale (2) (3) (4) 6,871,477 76,320 4.50 6,717,685 77,220 4.56 6,242,960 70,676 4.59 Federal funds sold and interest- bearing deposits with banks 312,224 120 0.16 291,243 121 0.16 269,537 49 0.07 Restricted investment in bank stock 24,977 214 3.47 19,902 207 4.13 22,822 256 4.55 Total interest-earning assets 7,753,881 79,425 4.15 7,508,973 79,469 4.20 7,008,500 73,039 4.23 Allowance for loan losses (79,763 ) (79,074 ) (81,549 ) Noninterest-earning assets 589,264 597,270 573,083 Total assets $ 8,263,382 $ 8,027,169 $ 7,500,034 Interest-bearing liabilities: Time deposits $ 1,124,614 2,154 0.78 $ 1,204,374 $ 2,717 0.90 1,422,295 5,151 1.47 Other interest-bearing deposits 3,851,558 2,856 0.30 3,672,311 2,563 0.28 3,225,751 2,434 0.31 Total interest-bearing deposits 4,976,172 5,010 0.41 4,876,685 5,280 0.43 4,648,046 7,585 0.66 Borrowings 404,907 1,377 1.38 292,847 1,102 1.49 375,511 1,674 1.81 Subordinated debentures 152,977 2,168 5.75 152,902 2,167 5.62 154,341 2,167 5.69 Capital lease obligation 1,917 28 5.92 1,967 30 6.05 2,115 32 6.14 Total interest-bearing liabilities 5,535,973 8,583 0.63 5,324,401 8,579 0.64 5,180,013 11,458 0.90 Noninterest-bearing demand deposits 1,547,055 1,537,316 1,348,585 Other liabilities 48,386 51,928 43,395 Total noninterest-bearing liabilities 1,595,441 1,589,244 1,391,980 Stockholders' equity 1,131,968 1,113,524 928,041 Total liabilities and stockholders' equity $ 8,263,382 $ 8,027,169 $ 7,500,034 Net interest income (tax equivalent basis) 70,842 70,890 61,581 Net interest spread (5) 3.53 % 3.56 % 3.33 % Net interest margin (6) 3.71 % 3.75 % 3.56 % Tax equivalent adjustment (484 ) (429 ) (418 ) Net interest income $ 70,358 $ 70,461 $ 61,163 (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. 
