ENGLEWOOD CLIFFS, N.J., April 25, 2019 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $11.6 million for the first quarter of 2019 compared with $18.7 million for the fourth quarter of 2018 and $4.3 million for the first quarter of 2018. Diluted earnings per share were $0.33 for the first quarter of 2019 compared with $0.58 earned in the fourth quarter of 2018 and $0.13 earned in the first quarter of 2018. On January 2, 2019, the acquisition of Greater Hudson Bank was completed and thus first quarter 2019 results reflect the operations of the combined entity. Historical financial information includes only the operations of ConnectOne.
Adjusted net income amounted to $17.2 million, or $0.49 per diluted share, for the first quarter of 2019; $19.2 million, or $0.59 per diluted share, for the fourth quarter of 2018; and $17.1 million, or $0.53 per diluted share, for the first quarter of 2018. Adjusted net income for the first quarter of 2019 and fourth quarter of 2018 excludes $5.6 million and $0.7 million, respectively, in merger-related expenses. Adjusted net income for the first quarter of 2018 excludes $13.4 million in taxi medallion charges. See supplemental tables for a complete reconciliation of GAAP earnings to adjusted earnings.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne maintained solid momentum executing against key operating objectives during the first quarter. On January 2, 2019 we closed the merger with Greater Hudson Bank, which enhanced our desirable franchise and improved our financial profile in several key areas including core deposit funding and loan diversification. In late January, we successfully converted key systems and, as expected, our quarterly results reflect merger-related expenses. First quarter results were highlighted by continued organic deposit and loan growth, while the deposit-rich Greater Hudson Bank franchise served to decrease our loan to deposit ratio to 108%, from 111% at year-end, and CRE concentration to 475% from 480%. Net interest margin increased by 7 basis points from the sequential quarter, largely a result of purchase accounting adjustments associated with the merger, and our core net interest margin remained flat at 3.25%. For the quarter, excluding merger charges, return on assets and return on tangible common equity totaled 1.18% and 13.69%, respectively. Tangible book value per share increased during the quarter by $0.25 to $14.67, despite dilution related to the merger. Our first quarter provision for loan losses was elevated due to an approximately $3.0 million charge relating to a single loan secured by a commercial office building and, consistent with our loan work-out philosophy, we are aggressively pursuing disposition. Meanwhile, our credit metrics improved significantly since year-end 2018. Nonaccrual loans, excluding taxi medallions, as a percentage of total loans improved to 0.41% from 0.53% at year-end, and our total nonperforming asset ratio improved to 0.79% from 0.95%.”
Mr. Sorrentino added, “Looking ahead, we remain committed to our client first culture and leveraging technology to stay ahead of the competition. We recently announced the FinTech acquisition of BoeFly, a leading online business lending marketplace, which will enhance our digital offerings, expand noninterest revenue, and offer us opportunities for measured SBA lending. Additionally, based on our strong return on equity metrics and our commitment to creating long-term shareholder value, our Board recently approved a stock repurchase program for up to 1.2 million shares and increased the Company’s quarterly cash dividend on its common stock by 20% to $0.09 per share. Our outlook for the remainder of 2019 is positive and we are well-positioned to capitalize on meaningful growth opportunities throughout our New York and New Jersey metropolitan target market.”
Fully taxable equivalent net interest income for the first quarter of 2019 was $45.5 million, an increase of $4.8 million, or 11.9%, from the fourth quarter of 2018, resulting primarily from an 11.8% increase in average interest-earning assets and a 7 basis-point widening of the net interest margin to 3.34% from 3.27%, both resulting largely from the Greater Hudson Bank acquisition. Included in net interest income were purchase accounting adjustments of $1.2 million during the first quarter of 2019 and $0.1 million during the fourth quarter of 2018. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.25% for both the first quarter of 2019 and the fourth quarter of 2018. The adjusted net interest margin benefitted from an improved asset-mix, a higher yield earned on loans and growth in noninterest-bearing deposits, offset by higher funding costs, primarily due to continued increased deposit competition.
Noninterest income increased, primarily due to the Greater Hudson Bank acquisition, to $1.7 million in the first quarter of 2019 from $1.6 million in the fourth quarter of 2018 and $1.3 million in the first quarter of 2018. Noninterest income consists of income on bank owned life insurance, net gains on sales of loans held-for-sale, net gains (losses) on equity securities and deposit service fees, loan fees, and other income.
Noninterest expenses totaled $28.1 million for first quarter of 2019, $18.3 million for the fourth quarter of 2018 and $16.9 million for the first quarter of 2018. Included in the first quarter of 2019 and fourth quarter of 2018 were merger-related pretax expenses of $7.6 million and $0.9 million, respectively. Excluding merger-related expenses, noninterest expenses increased by $3.1 million from the fourth quarter of 2018 due primarily to increases in salaries and employee benefits of $2.0 million, occupancy and equipment expenses of $0.5 million and other expenses of $0.3 million. These increases are primarily due to the expansion of our franchise through the Greater Hudson Bank acquisition.
Income tax expense was $2.5 million for the first quarter of 2019, $3.6 million for the fourth quarter of 2018 and $0.4 million for the first quarter of 2018. The effective tax rates for the first quarter of 2019, fourth quarter of 2018 and first quarter of 2018 were 17.6%, 16.3% and 9.5%, respectively. The increase in the effective tax rate for the current quarter from the sequential quarter was due to the Company’s estimate of the impact of recent NJ corporate tax legislation, partially offset by a lower percentage of income from taxable sources.
The provision for loan losses was $4.5 million for the first quarter of 2019, $1.1 million for the fourth quarter of 2018 and $17.8 million for the first quarter of 2018. The increase from the fourth quarter of 2018 was primarily due to approximately $3.0 million specifically allocated to a single commercial real estate loan. The first quarter of 2018 included $17.0 million of provision related to the taxi medallion loan portfolio.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $47.7 million at March 31, 2019, $51.9 million at December 31, 2018 and $51.1 million at March 31, 2018. Included in nonperforming assets were taxi medallion loans totaling $27.3 million at March 31, 2019, $28.0 million at December 31, 2018 and $29.4 million at March 31, 2018. Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.79% at March 31, 2019, 0.95% at December 31, 2018 and 0.99% at March 31, 2018. Excluding the taxi medallion loans, nonaccrual loans were $20.4 million at March 31, 2019, $23.8 million at December 31, 2018 and $20.6 million at March 31, 2018, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.41%, 0.53% and 0.49%, respectively. The annualized net loan charge-off ratio was 0.21% for the first quarter of 2019, 0.08% for the fourth quarter of 2018 and 1.63% for the first quarter of 2018. The allowance for loan losses represented 0.74%, 0.77%, and 0.77% of loans receivable as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively. The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 180.7% as of March 31, 2019, 146.8% as of December 31, 2018 and 157.7% as of March 31, 2018.
Selected Balance Sheet Items
At March 31, 2019, the balance sheet reflected the acquisition of Greater Hudson Bank. The Company’s total assets were $6.0 billion, an increase of $587 million from December 31, 2018. Total loans were $5.0 billion, an increase of $432 million from December 31, 2018. The Company’s stockholders’ equity was $682 million at March 31, 2019, an increase of $68 million from December 31, 2018. The increase in stockholders’ equity was primarily attributable to the acquisition of Greater Hudson Bank, which increased capital by $56 million. As of March 31, 2019, the Company’s tangible common equity ratio and tangible book value per share were 8.83% and $14.67, respectively. As of December 31, 2018, the tangible common equity ratio and tangible book value per share were 8.77% and $14.42, respectively. Tangible book value per share increased $0.25, or 1.7%, from the prior sequential quarter. Total goodwill and other intangible assets were approximately $163 million as of March 31, 2019 and $148 million and December 31, 2018.
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/adjusted financial measures including an adjusted net income available to common shareholders. 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/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
First Quarter 2019 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on Thursday, April 25, 2019 to review the Company's financial performance and operating results. The conference call dial-in number is 855-719-5012, access code 7140109. 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 25, 2019 and ending on Thursday, May 2, 2019 by dialing 719-457-0820, access code 7140109. 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 29 banking offices located in 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.
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 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 and accounting principles and guidelines. 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.
William S. Burns
Executive VP & CFO
Thomas Walter, MWWPR
|CONNECTONE BANCORP, INC. AND SUBSIDIARIES|
|CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION|
|March 31,||December 31,||March 31,|
|Cash and due from banks||$||54,520||$||39,161||$||36,396|
|Interest-bearing deposits with banks||118,028||133,205||106,391|
|Cash and cash equivalents||172,548||172,366||142,787|
|Less: Allowance for loan losses||36,858||34,954||32,529|
|Net loans receivable||4,935,793||4,506,138||4,170,150|
|Investment in restricted stock, at cost||31,727||31,136||34,622|
|Bank premises and equipment, net||20,150||19,062||21,039|
|Accrued interest receivable||21,198||18,214||16,020|
|Bank owned life insurance||125,300||113,820||111,500|
|Right of use operating lease assets||15,311||-||-|
|Other real estate owned||-||-||1,076|
|Core deposit intangibles||6,504||1,737||2,195|
|Operating lease liabilities||16,719||-||-|
|Subordinated debentures (net of $1,517, $1,599 and $1,845 in debt issuance costs)||128,638||128,556||128,310|
|COMMITMENTS AND CONTINGENCIES|
|Additional paid-in capital||16,513||15,542||13,434|
|Accumulated other comprehensive loss||(5,280||)||(8,789||)||(7,507||)|
|Total stockholders' equity||682,395||613,927||564,266|
|Total liabilities and stockholders' equity||$||6,048,976||$||5,462,092||$||5,158,368|
|CONNECTONE BANCORP, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF INCOME|
|(in thousands, except for per share data)|
|Three Months Ended|
|Interest and fees on loans||$||60,326||$||53,306||$||47,025|
|Interest and dividends on investment securities:|
|Interest on federal funds sold and other short-term investments||357||232||264|
|Total interest income||65,209||57,223||50,475|
|Total interest expense||20,257||17,062||12,328|
|Net interest income||44,952||40,161||38,147|
|Provision for loan losses||4,500||1,100||17,800|
|Net interest income after provision for loan losses||40,452||39,061||20,347|
|Income on bank owned life insurance||822||794||774|
|Net gains on sale of loans held-for-sale||19||30||17|
|Deposit, loan and other income||786||691||616|
|Net gains (losses) on equity securities||103||58||(120||)|
|Net gains on sale of securities available-for-sale||8||-||-|
|Total noninterest income||1,738||1,573||1,287|
|Salaries and employee benefits||11,983||9,988||9,679|
|Occupancy and equipment||2,495||2,001||2,143|
|Professional and consulting||1,209||1,129||723|
|Marketing and advertising||210||244||207|
|Amortization of core deposit intangibles||364||144||169|
|Total noninterest expenses||28,062||18,324||16,939|
|Income before income tax expense||14,128||22,310||4,695|
|Income tax expense||2,493||3,638||444|
|Earnings per common share:|
|Dividends per common share||$||0.090||$||0.075||$||0.075|
|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. AND SUBSIDIARIES|
|SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES|
|Mar. 31,||Dec. 31,||Sept. 30,||June 30,||Mar. 31,|
|Selected Financial Data||(dollars in thousands)|
|Commercial real estate||1,483,852||1,279,502||1,282,766||1,282,426||1,275,764|
|Unearned net origination fees||(4,154||)||(3,807||)||(3,287||)||(3,112||)||(2,781||)|
|Loans held-for-sale (net of valuation allowance)||368||-||270||-||45,886|
|Goodwill and other intangible assets||162,747||147,646||147,791||147,936||148,104|
|Other interest-bearing deposits||2,216,661||1,957,454||1,907,805||1,824,417||1,754,759|
|Subordinated debentures (net of debt issuance costs)||128,638||128,556||128,474||128,392||128,310|
|Total stockholders' equity||682,395||613,927||594,871||578,557||564,266|
|Quarterly Average Balances|
|Commercial real estate (including multifamily)||2,973,337||2,725,652||2,723,572||2,654,276||2,643,466|
|Unearned net origination fees||(3,930||)||(3,340||)||(3,182||)||(3,208||)||(3,110||)|
|Goodwill and other intangible assets||162,814||147,741||147,883||148,046||148,215|
|Other interest-bearing deposits||2,236,630||1,915,353||1,854,763||1,765,577||1,815,122|
|Subordinated debentures (net of debt issuance costs)||128,585||128,502||128,420||128,339||115,182|
|Total stockholders' equity||680,168||606,378||590,128||574,992||575,029|
|Three Months Ended|
|Mar. 31,||Dec. 31,||Sept. 30,||June 30,||Mar. 31,|
|(dollars in thousands, except for per share data)|
|Net interest income||$||44,952||$||40,161||$||39,962||$||38,945||$||38,147|
|Provision for loan losses||4,500||1,100||1,100||1,100||17,800|
|Net interest income after provision for loan losses||40,452||39,061||38,862||37,845||20,347|
|Income on bank owned life insurance||822||794||751||775||774|
|Net gains on sale of loans held-for-sale||19||30||2||12||17|
|Deposit, loan and other income||786||691||676||601||616|
|Net gains (losses) on equity securities||103||58||(157||)||(47||)||(120||)|
|Net gains on sale of securities available-for-sale||8||-||-||-||-|
|Total noninterest income||1,738||1,573||1,272||1,341||1,287|
|Salaries and employee benefits||11,983||9,988||10,181||9,736||9,679|
|Occupancy and equipment||2,495||2,001||2,137||2,031||2,143|
|Professional and consulting||1,209||1,129||891||825||723|
|Marketing and advertising||210||244||192||337||207|
|Amortization of core deposit intangibles||364||144||145||169||169|
|Total noninterest expenses||28,062||18,324||18,130||17,061||16,939|
|Income before income tax expense||14,128||22,310||22,004||22,125||4,695|
|Income tax expense||2,493||3,638||2,102||4,598||444|
|Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:|
|Merger expenses (after taxes)||5,597||739||297||19||-|
|Net gains on sale of securities available-for-sale (after taxes)||(6||)||-||-||-||-|
|Deferred tax valuation charge/adjustment||-||-||(1,408||)||-||-|
|Tax benefit on employee share-based awards (ASU 2016-09)||(20||)||(223||)||(297||)||(49||)||...|