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ConnectOne Bancorp, Inc. Reports Fourth Quarter and Full-Year 2020 Results

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ConnectOne Bancorp reported a net income of $25.6 million for Q4 2020, up from $24.8 million in Q3 2020 and $20.8 million in Q4 2019. Diluted earnings per share were $0.64 in Q4 2020. Full-year net income was $71.3 million, down from $73.4 million in 2019. The net interest margin increased to 3.50%, with total assets rising to $7.6 billion. The Board reinstated a share repurchase program and declared a $0.09 dividend per share. The loan loss provision for Q4 stood at $5.0 million, consistent with previous quarters.

Positive
  • Q4 2020 net income increased to $25.6 million, a year-over-year rise.
  • Diluted earnings per share improved to $0.64 in Q4 2020.
  • Net interest margin widened to 3.50%, indicating improved profitability.
  • Total assets reached $7.6 billion, reflecting significant growth.
  • Reinstated share repurchase program with 0.6 million shares remaining.
  • Board declared a cash dividend of $0.09 per share.
Negative
  • Full-year net income decreased to $71.3 million from $73.4 million in 2019.
  • Loan loss provisions remained high at $5.0 million in both Q4 and Q3 2020.

ENGLEWOOD CLIFFS, N.J., Jan. 28, 2021 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $25.6 million for the fourth quarter of 2020 compared with $24.8 million for the third quarter of 2020 and $20.8 million for the fourth quarter of 2019.  Diluted earnings per share were $0.64 in the fourth quarter of 2020 compared with $0.62 in the third quarter of 2020 and $0.59 in the fourth quarter of 2019.  Full-year 2020 net income was $71.3 million, compared to $73.4 million for the full-year 2019. Diluted earnings per share for the full-year 2020 was $1.79, compared with $2.07 for the full-year 2019.

Included in net income were provisions for loan losses of $5.0 million for both the fourth and third quarters of 2020 and $2.0 million for the fourth quarter of 2019.  Also included in net income were merger and restructuring expenses of $0.9 million for the fourth quarter of 2019, while there were no such charges in both the fourth and third quarters of 2020.  On a pre-tax, pre-provision and pre-merger charges basis, earnings were $38.0 million for the fourth quarter of 2020, $37.6 million for the third quarter of 2020, and $28.4 million for the fourth quarter of 2019.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer, stated, “ConnectOne had a great finish to the year and I’m extremely pleased with the continued execution of our operating strategies. We reported record pretax, pre-provision earnings, our net interest margin widened for the fourth consecutive quarter, we have begun to reengage in organic loan growth, and our efficiency ratio improved to 39.5%. Even with an additional $5 million in loan loss provisioning, we delivered outstanding performance metrics for the quarter. Return on assets was 1.4% and our return on tangible common equity exceeded 15% while our tangible book value per share increased by $0.62 per share, or nearly 4%, in just one quarter to $17.49. Consistent with the progression we have anticipated, total COVID-19 related deferrals as of year-end fell to $210 million, or approximately 3.5% of total loans.”

“Our hearts go out to those who were impacted by the virus as we also watched our communities demonstrate resilience and strength. I’m equally proud of the role the ConnectOne team played in supporting our clients during this challenging time and grateful to our Board of Directors for their unwavering commitment and guidance,” Mr. Sorrentino added. “We continue to operate our Bank efficiently and effectively and are optimistic that the operating environment will continue to improve throughout 2021, resulting in strong growth, favorable lending spreads, and best-in-class performance metrics for ConnectOne. Over the past year, our capital and reserves have grown significantly, providing us the flexibility to grow both organically and through opportunistic M&A, and to return excess capital to shareholders. As a technology-forward bank, we look forward to furthering our investments in infrastructure, communication tools and digital channels as we position our bank for growth in a post-pandemic environment.”

“Underscoring our solid capital position and our continued confidence in ConnectOne’s future performance, we are pleased to announce that our Board of Directors has reinstated our previously suspended share repurchase program,” Mr. Sorrentino concluded. The Company has approximately 0.6 million shares remaining of the total authorized 1.2 million shares to repurchase.

Dividend Declaration

The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.09 per share. The dividend will be paid on March 1, 2021, to all shareholders of record on February 15, 2021.

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2020 was $61.8 million, an increase of $0.8 million, or 1.4%, from the third quarter of 2020.  The increase from the third quarter of 2020 resulted from a 1.1% increase in average interest-earning assets and a 1 basis-point widening of the net interest margin to 3.50% from 3.49%. The net interest margin widened despite the negative impact of additional liquidity in the quarter, reflecting continued improvement in the Bank’s cost and mix of funding sources as well as the resiliency of our asset yields. Included in interest income in the fourth quarter of 2020 was Paycheck Protection Program (“PPP”) fee income of approximately $2.4 million, compared to $3.5 million in the third quarter of 2020. Deferred PPP fees were $5.7 million as of December 31, 2020.

Fully taxable equivalent net interest income for the fourth quarter of 2020 increased by $13.9 million, or 29.0%, from the fourth quarter of 2019.  The increase from the fourth quarter of 2019 resulted primarily from a 24.3% increase in average interest-earning assets, largely due to PPP originations and the Bancorp of New Jersey (“BNJ”) acquisition, and a 14 basis-point widening of the net interest margin to 3.50% from 3.36%.  The widening of the net interest margin resulted from a 76 basis-point reduction in the cost of funding interest-earning assets, partially offset by a 50 basis-point reduction in the yield on average interest-earning assets.

Noninterest income totaled $3.4 million in the fourth quarter of 2020, $3.5 million in the third quarter of 2020 and $2.2 million in the fourth quarter of 2019.  The decrease in noninterest income of $0.1 million from the third quarter of 2020 was primarily attributable to a decrease in BOLI income of $0.3 million, which resulted from a third quarter 2020 death benefit, offset by an increase in net gains on sale of commercial and residential loans. The increase in noninterest income of $1.2 million from the fourth quarter of 2019 was primarily attributable to an increase in BOLI income and an increase in gains on sale of loans.

Noninterest expenses totaled $26.4 million for the fourth quarter of 2020, $26.5 million for the third quarter of 2020 and $22.2 million for the fourth quarter of 2019.  Included in noninterest expenses were merger-related charges totaling $0.9 million during the fourth quarter of 2019, while there were no such charges in the fourth and third quarters of 2020.  Noninterest expenses decreased by $0.1 million from the third quarter of 2020.  The decrease was primarily the result of lower salaries and employee benefits of $0.5 million due to the final realization of cost saves related to the BNJ acquisition and lower incentive compensation accruals, and a $0.2 million decrease in FDIC insurance expense, partially offset by a $0.6 million increase in professional and consulting, occupancy and other expenses. Noninterest expenses increased by $5.1 million, excluding merger-related charges, from the fourth quarter of 2019.  The increase was primarily the result of the BNJ acquisition which contributed to increases of $1.7 million in salaries and employee benefits, $1.3 million in occupancy and equipment, $0.8 million in professional and consulting and $0.3 million in data processing. 

Income tax expense was $7.8 million for both the fourth and third quarters of 2020 and $6.2 million for the fourth quarter of 2019.  The effective tax rates for the fourth quarter of 2020, third quarter of 2020 and fourth quarter of 2019 were 23.5%, 23.9% and 23.0%, respectively.  The currently estimated effective tax rate for core earnings in 2021 is in the 23%-24% range, assuming no change in statutory rates.

Asset Quality

The Company has postponed the adoption of the current expected credit losses (“CECL”) accounting standard as permitted under the accounting relief provisions of the CARES Act. While management is still evaluating its options, we currently anticipate CECL adoption to occur as of January 1, 2021.

The provision for loan losses was $5.0 million for both the fourth and third quarters of 2020, and $0.5 million for the fourth quarter of 2019.  We continue to work with our borrowers, where necessary, to provide additional support and guidance during this unprecedented difficult operating environment. The Bank has relatively low exposure to perceived at-risk industries, such as energy and hospitality and, consistent with our extensive experience and low loss history in real estate lending, a large portion of our loan portfolio is well-secured and was underwritten with prudent loan-to-value ratios, debt service coverage ratios and cap rates.  Meanwhile, our well-managed commercial lending program, which has avoided higher risk industries, is virtually all full recourse. Nevertheless, as the pandemic crisis persists, there remains potential for increased levels of impaired loans across all segments of the portfolio.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $61.7 million as of December 31, 2020, $65.5 million as of September 30, 2020 and $49.5 million as of December 31, 2019. Included in nonperforming assets were taxi medallion loans totaling $23.0 million as of December 31, 2020 and September 30, 2020 and $23.4 million as of December 31, 2019.  Nonperforming assets (including taxi medallion loans) as a percentage of total assets were 0.82% as of December 31, 2020, 0.88% as of September 30, 2020 and 0.80% as of December 31, 2019.  Excluding the taxi medallion loans, nonaccrual loans were $38.2 million as of December 31, 2020, $42.5 million as of September 30, 2020 and $26.1 million as of December 31, 2019, representing a ratio of nonaccrual loans (excluding taxi medallion loans) to loans receivable of 0.62%, 0.68% and 0.51%, respectively.

The annualized net loan charge-off (recovery) ratio was 0.00% for the fourth quarter of 2020, (0.03)% for the third quarter of 2020 and 0.08% for the fourth quarter of 2019. During the third quarter of 2020, the Bank received a $0.8 million recovery on a previously charged-off commercial real estate credit.  The allowance for loan losses represented 1.27%, 1.19%, and 0.75% of loans receivable as of December 31, 2020, September 30, 2020 and December 31, 2019, respectively.  Excluding PPP loans, the allowance for loan losses represented 1.36%, 1.29%, and 0.75% of loans receivable as of December 31, 2020, September 30, 2020 and December 31, 2019, respectively.  The allowance for loan losses as a percentage of nonaccrual loans, excluding taxi medallion loans, was 204.9% as of December 31, 2020, 174.9% as of September 30, 2020 and 147.0% as of December 31, 2019.

Selected Balance Sheet Items

The Company’s total assets were $7.6 billion, an increase of $1.4 billion from December 31, 2019.  Loans receivable were $6.2 billion, an increase of $1.1 billion from December 31, 2019.  The increase in total assets and loans receivable were primarily attributable to the acquisition of BNJ and the origination of PPP loans.  As of December 31, 2020, PPP loans totaled $398 million.

The Company’s stockholders’ equity was $915 million as of December 31, 2020, an increase of $184 million from December 31, 2019. The increase in stockholders’ equity was primarily attributable to the acquisition of BNJ, which increased capital by $118 million, and an increase of $60 million in retained earnings.  As of December 31, 2020, the Company’s tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively.  As of December 31, 2019, the tangible common equity ratio and tangible book value per share were 9.38% and $16.06, respectively. Total goodwill and other intangible assets were approximately $219 million as of December 31, 2020 and $168 million and December 31, 2019.

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.

Fourth Quarter 2020 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 28, 2021 to review the Company's financial performance and operating results.  The conference call dial-in number is 201-689-8471, access code 13714733. 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, January 28, 2021 and ending on Thursday, February 4, 2021 by dialing 412-317-6671, access code 13714733.  An online archive of the webcast will be available following the completion of the conference call at https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

About ConnectOne Bancorp, Inc.

ConnectOne Bancorp, Inc., through its subsidiary, ConnectOne Bank offers a full suite of both commercial and consumer banking and lending products and services through its banking offices located across New York and New Jersey.   ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the Securities Exchange Commission, as supplemented by the Company’s subsequent filings with the Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Investor Contact:

William S. Burns
Executive VP & CFO
201.816.4474; bburns@cnob.com

Media Contact:
Emily Holtzman, MWWPR
631.742.9568; eholtzman@mww.com


CONNECTONE BANCORP, INC. AND SUBSIDIARIES   
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION   
(in thousands)
      
 December 31,   December 31,  
 2020  2019 
 (unaudited)    
ASSETS     
Cash and due from banks$             63,637  $          65,717 
Interest-bearing deposits with banks240,119  135,766 
Cash and cash equivalents303,756  201,483 
      
Securities available-for-sale487,955  404,701 
Equity securities13,387  11,185 
      
Loans held-for-sale4,710  33,250 
      
Loans receivable6,236,307  5,113,527 
Less: Allowance for loan losses79,226  38,293 
Net loans receivable6,157,081  5,075,234 
      
Investment in restricted stock, at cost25,099  27,397 
Bank premises and equipment, net30,108  19,236 
Accrued interest receivable35,317  20,949 
Bank owned life insurance165,960  137,961 
Right of use operating lease assets16,159  15,137 
Goodwill208,372  162,574 
Core deposit intangibles10,977  5,460 
Other assets88,458  59,465 
Total assets$        7,547,339  $     6,174,032 
      
LIABILITIES     
Deposits:     
Noninterest-bearing$        1,339,108  $        861,728 
Interest-bearing4,620,116  3,905,814 
Total deposits5,959,224  4,767,542 
Borrowings425,954  500,293 
Operating lease liabilities18,026  16,449 
Subordinated debentures, net of debt issuance costs202,648  128,885 
Other liabilities26,177  29,673 
Total liabilities6,632,029  5,442,842 
      
COMMITMENTS AND CONTINGENCIES     
      
STOCKHOLDERS' EQUITY     
Common stock586,946  468,571 
Additional paid-in capital23,887  21,344 
Retained earnings331,951  271,782 
Treasury stock(30,271) (29,360)
Accumulated other comprehensive income (loss)2,797  (1,147)
Total stockholders' equity915,310  731,190 
Total liabilities and stockholders' equity$        7,547,339  $     6,174,032 



CONNECTONE BANCORP, INC. AND SUBSIDIARIES     
CONSOLIDATED STATEMENTS OF INCOME     
(dollars in thousands, except for per share data)     
            
  Three Months Ended    Twelve Months Ended  
 12-31-20  12-31-19  12-31-20  12-31-19 
Interest income           
Interest and fees on loans$         73,123  $        64,833  $   296,611  $  255,479 
Interest and dividends on investment securities:           
Taxable1,373  1,700  6,456  9,131 
Tax-exempt649  824  2,797  3,929 
Dividends374  409  1,642  1,778 
Interest on federal funds sold and other short-term investments69  242  694  1,167 
Total interest income75,588  68,008  308,200  271,484 
Interest expense           
Deposits9,630  16,272  52,386  65,570 
Borrowings4,587  4,305  17,823  19,595 
Total interest expense14,217  20,577  70,209  85,165 
            
Net interest income61,371  47,431  237,991  186,319 
Provision for loan losses5,000  500  41,000  8,100 
Net interest income after provision for loan losses56,371  46,931  196,991  178,219 
            
Noninterest income           
Income on bank owned life insurance1,314  914  5,007  3,484 
Net gains on sale of loans held-for-sale841  169  2,085  512 
Deposit, loan and other income1,300  1,209  7,077  4,025 
Net (losses) gains on equity securities(13) (46) 202  294 
Net (losses) gains on sale of securities available-for-sale-  -  29  (280)
Total noninterest income3,442  2,246  14,400  8,035 
            
Noninterest expenses           
Salaries and employee benefits14,581  12,881  58,758  49,135 
Occupancy and equipment3,689  2,380  13,882  9,712 
FDIC insurance948  795  4,002  2,011 
Professional and consulting2,210  1,428  7,383  5,506 
Marketing and advertising256  273  1,200  1,353 
Data processing1,479  1,151  6,008  4,503 
Merger and restructuring expenses-  871  14,640  8,955 
Loss on extinguishment of debt-  -  -  1,047 
Amortization of core deposit intangibles628  340  2,559  1,408 
Increase in value of acquisition price-     2,333  - 
Other expenses2,611  2,078  10,236  8,598 
Total noninterest expenses26,402  22,197  121,001  92,228 
            
Income before income tax expense33,411  26,980  90,390  94,026 
Income tax expense7,770  6,197  19,101  20,631 
Net income$         25,641  $        20,783  $     71,289  $    73,395 
            
Earnings per common share:           
Basic$             0.64  $            0.59  $         1.80  $        2.08 
Diluted0.64  0.59  1.79  2.07 


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
 Dec. 31,  Sept. 30,  June 30,  Mar. 31,  Dec. 31, 
 2020  2020  2020  2020  2019 
               
Selected Financial Data(dollars in thousands)
Total assets$       7,547,339  $   7,449,559  $   7,617,184  $   7,279,327  $   6,174,032 
Loans receivable:              
Commercial$       1,092,404  $   1,125,273  $   1,151,025  $   1,203,818  $   1,096,224 
PPP loans397,492  474,022  473,999  -  - 
Commercial real estate2,103,468  2,001,311  1,987,695  1,981,149  1,559,354 
Multifamily1,712,153  1,703,290  1,723,273  1,762,651  1,518,400 
Commercial construction617,747  614,112  673,893  676,836  620,969 
Residential322,564  343,376  366,315  387,400  320,019 
Consumer1,853  1,876  2,001  1,965  3,328 
Gross loans6,247,681  6,263,260  6,378,201  6,013,819  5,118,294 
Unearned net origination fees(11,374) (12,209) (14,934) (4,509) (4,767)
Loans receivable6,236,307  6,251,051  6,363,267  6,009,310  5,113,527 
Loans held-for-sale4,710  8,508  11,212  32,425  33,250 
Total loans$       6,241,017  $   6,259,559  $   6,374,479  $   6,041,735  $   5,146,777 
               
Investment securities$          501,342  $      466,415  $      431,833  $      460,101  $      415,886 
Goodwill and other intangible assets219,349  219,977  220,605  221,263  168,034 
Deposits:              
Noninterest-bearing demand$       1,339,108  { "@context": "https://schema.org", "@type": "FAQPage", "name": "ConnectOne Bancorp, Inc. Reports Fourth Quarter and Full-Year 2020 Results FAQs", "mainEntity": [ { "@type": "Question", "name": "What were ConnectOne Bancorp's Q4 2020 earnings?", "acceptedAnswer": { "@type": "Answer", "text": "ConnectOne Bancorp reported Q4 2020 net income of $25.6 million." } }, { "@type": "Question", "name": "How much was the diluted earnings per share for CNOB in Q4 2020?", "acceptedAnswer": { "@type": "Answer", "text": "The diluted earnings per share for CNOB in Q4 2020 were $0.64." } }, { "@type": "Question", "name": "What is the net interest margin for ConnectOne Bancorp in Q4 2020?", "acceptedAnswer": { "@type": "Answer", "text": "The net interest margin for ConnectOne Bancorp in Q4 2020 was 3.50%." } }, { "@type": "Question", "name": "Did ConnectOne Bancorp reinstate its share repurchase program?", "acceptedAnswer": { "@type": "Answer", "text": "Yes, ConnectOne Bancorp reinstated its share repurchase program." } }, { "@type": "Question", "name": "What is the cash dividend declared by ConnectOne Bancorp?", "acceptedAnswer": { "@type": "Answer", "text": "The cash dividend declared by ConnectOne Bancorp is $0.09 per share." } } ] }

FAQ

What were ConnectOne Bancorp's Q4 2020 earnings?

ConnectOne Bancorp reported Q4 2020 net income of $25.6 million.

How much was the diluted earnings per share for CNOB in Q4 2020?

The diluted earnings per share for CNOB in Q4 2020 were $0.64.

What is the net interest margin for ConnectOne Bancorp in Q4 2020?

The net interest margin for ConnectOne Bancorp in Q4 2020 was 3.50%.

Did ConnectOne Bancorp reinstate its share repurchase program?

Yes, ConnectOne Bancorp reinstated its share repurchase program.

What is the cash dividend declared by ConnectOne Bancorp?

The cash dividend declared by ConnectOne Bancorp is $0.09 per share.

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ENGLEWOOD CLIFFS