ConnectOne Bancorp, Inc. Reports Fourth Quarter and Record Full-Year 2021 Results

Rhea-AI Summary

ConnectOne Bancorp (Nasdaq: CNOB) reported a net income of $31.3 million for Q4 2021, slightly down from $32.1 million in Q3 2021 but up from $25.6 million in Q4 2020. Diluted EPS was $0.79, a decrease from $0.80 in Q3 2021 but an increase from $0.64 in Q4 2020. The company noted a significant net interest income increase of $9.1 million year-over-year, totaling $70.9 million. Asset quality improved, with nonperforming assets at 0.76% of total assets. Full-year net income reached $128.6 million, significantly higher than 2020. A cash dividend of $0.13 per share is set for March 1, 2022, enhancing shareholder returns.

Positive

• Net income increased to $31.3 million for Q4 2021, up from $25.6 million in Q4 2020.
• Full-year 2021 net income reached $128.6 million compared to $71.3 million in 2020.
• Net interest income rose 14.6% from Q4 2020, driven by a 8.2% increase in average loans.
• Asset quality improved with nonperforming assets at 0.76% of total assets.
• The company announced a dividend of $0.13 per share, promoting shareholder value.

Negative

• Net income decreased by $0.8 million compared to Q3 2021.
• Diluted EPS dropped from $0.80 in Q3 2021 to $0.79 in Q4 2021.
• Income tax expense increased to $12.3 million in Q4 2021 from $10.9 million in Q3 2021.
• Noninterest expenses rose to $28.1 million for Q4 2021, reflecting ongoing investments.

ENGLEWOOD CLIFFS, N.J., Jan. 27, 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 $31.3 million for the fourth quarter of 2021, compared with $32.1 million for the third quarter of 2021 and $25.6 million for the fourth quarter of 2020. Diluted earnings per share were $0.79 for the fourth quarter of 2021 compared with $0.80 for the third quarter of 2021 and $0.64 for the fourth quarter of 2020. The $0.8 million decrease in net income available to common stockholders and $0.01 decrease in diluted earnings per share versus the third quarter of 2021 were primarily due to $1.7 million in preferred dividends, a $1.4 million increase in income tax expense and a $0.2 million decrease in noninterest income, partially offset by a $2.2 million increase in net interest income, a $0.3 million decrease in provision for credit losses and a $0.1 million decrease in noninterest expenses. The $5.7 million increase in net income available to common stockholders and $0.15 increase in diluted earnings per share versus the fourth quarter of 2020 were due to a $9.1 million increase in net interest income, a $0.3 million increase in noninterest income, and a $4.2 million decrease in the provision for credit losses, partially offset by a $1.7 million increase in noninterest expenses, a $4.5 million increase in income tax expense, and $1.7 million in preferred dividends.   Full-year 2021 net income available to common stockholders was $128.6 million, compared to $71.3 million for 2020. Diluted earnings per share for the full-year 2021 was $3.22, compared with $1.79 for 2020.

Pre-tax, pre-provision net revenue (“PPNR”) increased to $46.2 million for the fourth quarter of 2021, reflecting a 4.7% sequential increase from the third quarter of 2021 and a 20.2% increase from the prior year quarter.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne’s strong fourth quarter capped off an exceptional year for our Company. We delivered record financial performance, realized significant organic growth, and continued to leverage our investments in technology to increase our operational efficiency even further. Loans, net of the Paycheck Protection Program (“PPP”), increased by 5.3% sequentially and by 15.4% for the year, while noninterest bearing deposits grew by 7.7% sequentially and by 20.8% for the year. Our performance is a testament to our team’s continued resilience, the diligent execution of our “client first” philosophy and ConnectOne’s stellar reputation among commercial businesses and the real estate industry.”

“We continue to operate efficiently and effectively and our fourth quarter operating performance was highlighted by solid year-over-year net revenue growth, strong earnings and best-in-class efficiency. We also continued to deliver outstanding performance metrics, further solidifying our status as a top performer in the banking industry. This quarter’s PPNR as a percentage of assets was 2.28%, return on assets was 1.63%, the efficiency ratio was 37.0% and return on tangible common equity was 16.0% while tangible book value per share increased 3.6% sequentially, to $20.12.”

Mr. Sorrentino added, “Looking ahead, we’re excited about what the future holds for ConnectOne and continue to see tangible opportunities in 2022 to further maximize long-term shareholder value. We’re projecting strong growth and increased operating leverage, while our margins and efficiency are expected to remain among the best in the industry. We also remain optimistic regarding continued momentum for loan growth in 2022 and believe we’re well positioned to continue to pursue attractive opportunities to expand our valuable franchise.”  

Dividend Declarations

The Company announced that its Board of Directors declared a cash dividend on its common stock and a quarterly cash dividend on its preferred stock. A common stock dividend of $0.13 per share will be paid on March 1, 2022 to common stockholders of record on February 14, 2022.

A dividend of $0.328125 per share for every depositary share, representing a 1/40^th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will be paid on March 1, 2022 to preferred stockholders of record on February 14, 2022.

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2021 was $70.9 million, an increase of $2.1 million, or 3.1%, from the third quarter of 2021 resulting primarily from a 4.1% increase in average loans, and a 2 basis-point widening of the net interest margin to 3.75% from 3.73%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.66% for the fourth quarter of 2021 and 3.63% for the third quarter of 2021. The net interest margin widened primarily as a result of lower average cash balances. Included in interest income in the fourth and third quarters of 2021 was the accretion of PPP fee income of $1.5 million and $3.4 million, respectively. Remaining deferred and unrecognized PPP fees were $4.6 million as of December 31, 2021.

Fully taxable equivalent net interest income for the fourth quarter of 2021 increased by $9.1 million, or 14.6%, from the fourth quarter of 2020. The increase from the fourth quarter of 2020 resulted primarily from an 8.2% increase in average loans and a 25 basis-point widening of the net interest margin to 3.75% from 3.50%. The widening of the net interest margin resulted from a 43 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 10 basis-point reduction in the yield on average interest-earning assets.

Noninterest income was $3.8 million in the fourth quarter of 2021, $4.0 million in the third quarter of 2021 and $3.4 million in the fourth quarter of 2020.   The decrease in noninterest income of $0.2 million from the third quarter of 2021 was primarily attributable to a decrease in deposit, loan and other income of $0.2 million, reflecting PPP referral fees at BoeFly during the third quarter.   The increase of $0.3 million in noninterest income when compared to the fourth quarter of 2020 was attributable to increases in deposit, loan and other income of $0.2 million and increases in sale of loans held-for-sale of $0.3 million, partially offset by decreases in BOLI income of $0.1 million and net loss on equity securities of $0.1 million.

Noninterest expenses totaled $28.1 million for the fourth quarter of 2021, $28.2 million for the third quarter of 2021 and $26.4 million for the fourth quarter of 2020. The decrease in noninterest expenses of $0.1 million from the third quarter of 2021 was primarily attributable to a decrease in salaries and employee benefits of $0.3 million and professional and consulting of $0.2 million, partially offset by increases in occupancy and equipment of $0.1 million, FDIC insurance of $0.1 million and marketing and advertising of $0.1 million. The increase in noninterest expenses of $1.7 million from the fourth quarter of 2020 was primarily attributable to increases in salaries and employee benefits of $1.9 million, other expenses of $1.1 million, and marketing and advertising of $0.2 million, partially offset by decreases in occupancy and equipment of $0.9 million, professional and consulting of $0.2 million and FDIC insurance $0.3 million. The Company’s expense base growth reflects its commitment to organic expansion through investments in people and technology, while remaining focused on maintaining best-in-class operating efficiency. The Company expects operating expenses to accelerate in 2022 at an increased pace, largely resulting from wage inflation, increased staffing levels and its ongoing investment in technology.

Income tax expense was $12.3 million for the fourth quarter of 2021, $10.9 million for the third quarter of 2021 and $7.8 million for the fourth quarter of 2020. The effective tax rates for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020 were 27.1%, 25.3% and 23.3%, respectively. The higher effective tax rate during the fourth quarter of 2021 when compared to the third quarter of 2021 and fourth quarter of 2020 was the result of a higher percentage of income being derived from taxable sources.   The effective tax rate for the full-year 2021 was 25.5%. The Company expects its effective tax rate to increase in 2022, as a result of the Company’s revenue growth in existing and new markets.

Asset Quality

The provision for credit losses was $0.8 million for the fourth quarter of 2021, $1.1 million for the third quarter of 2021 and $5.0 million for the fourth quarter of 2020. The provision for credit losses during the fourth quarter of 2021 and the third quarter of 2021 was the result of strong organic loan growth, while continuing to reflect improvement in the macroeconomic outlook.   The elevated provision for loan losses during the fourth quarter of 2020 was due to the economic uncertainties surrounding the COVID-19 pandemic, including consideration of related payment deferrals requested or granted at that time.   As of December 31, 2021, the Bank had only one commercial real estate loan remaining on deferral under The Cares Act with a balance of $0.5 million.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $61.7 million as of December 31, 2021, $66.0 million as of September 30, 2021 and $61.7 million as of December 31, 2020. The decrease in nonaccrual loans versus the sequential quarter was due to payoffs and loans returning to accrual status. Nonperforming assets as a percentage of total assets were 0.76% as of December 31, 2021, 0.83% as of September 30, 2021 and 0.82% as of December 31, 2020. The ratio of nonaccrual loans to loans receivable was 0.90%, 1.00% and 0.99%, as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The annualized net loan charge-offs ratio was 0.01% for the fourth quarter of 2021, 0.10% for the third quarter of 2021 and 0.00% for the fourth quarter of 2020. The prior sequential quarter included a $1.4 million charge-off of a commercial real estate loan that previously had a specific credit reserve. The allowance for credit losses represented 1.15%, 1.19%, and 1.27% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.17%, 1.22%, and 1.36% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 127.7% as of December 31, 2021, 118.2% as of September 30, 2021 and 128.4% as of December 31, 2020.

Selected Balance Sheet Items

The Company’s total assets were $8.1 billion, an increase of $582 million from December 31, 2020.  Loans receivable were $6.8 billion, an increase of $592 million from December 31, 2020. The increase in loans receivable was attributable to higher, non-PPP, loan originations, offset by decreases in PPP loans resulting from forgiveness activity.  As of December 31, 2021, PPP loans totaled $93 million, down from $398 million as of December 31, 2020, reflecting accelerated forgiveness of the outstanding PPP loans.

The Company’s stockholders’ equity was $1.1 billion as of December 31, 2021, an increase of $208.9 million from December 31, 2020. In August 2021, the Company raised $110.9 million, net of issuance expenses, from the issuance of $115 million in 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A. This issuance and the increase in retained earnings of $108.2 million were the primary reasons for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $3.4 million, partially offset by a decrease in accumulated other comprehensive income of $4.2 million and an increase in treasury stock of $9.4 million. As of December 31, 2021, the Company’s tangible common equity ratio and tangible book value per share were 10.06% and $20.12, respectively. As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $217.4 million as of December 31, 2021 and $219.3 million as of December 31, 2020.

Share Repurchase Program

During the fourth quarter of 2021, the Company repurchased 41 thousand shares of common stock leaving approximately 2.3 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.

Fourth Quarter 2021 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 27, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13725707. 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 27, 2022 and ending on Thursday, February 3, 2022 by dialing 412-317-6671, access code 13725707. 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
Executive VP & CFO
201.816.4474; bburns@cnob.com

Media Contact:
Sutton Resler, MWW
571.236.4966:  sresler@mww.com

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
	December 31,				December 31,
		2021				2020
	(unaudited)
ASSETS
Cash and due from banks	$	54,352			$	63,637
Interest-bearing deposits with banks		211,184				240,119
Cash and cash equivalents		265,536				303,756
Investment securities		534,507				487,955
Equity securities		13,794				13,387
Loans held-for-sale		250				4,710
Loans receivable		6,828,622				6,236,307
Less: Allowance for credit losses - loans		78,773				79,226
Net loans receivable		6,749,849				6,157,081
Investment in restricted stock, at cost		27,826				25,099
Bank premises and equipment, net		29,032				30,108
Accrued interest receivable		34,152				35,317
Bank owned life insurance		195,731				165,960
Right of use operating lease assets		11,017				16,159
Goodwill		208,372				208,372
Core deposit intangibles		8,997				10,977
Other assets		50,417				88,458
Total assets	$	8,129,480			$	7,547,339
LIABILITIES
Deposits:
Noninterest-bearing	$	1,617,049			$	1,339,108
Interest-bearing		4,715,904				4,620,116
Total deposits		6,332,953				5,959,224
Borrowings		468,193				425,954
Subordinated debentures, net		152,951				202,648
Operating lease liabilities		12,417				18,026
Other liabilities		38,754				26,177
Total liabilities		7,005,268				6,632,029
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock		110,927				-
Common stock		586,946				586,946
Additional paid-in capital		27,246				23,887
Retained earnings		440,169				331,951
Treasury stock		(39,672	)			(30,271	)
Accumulated other comprehensive (loss) income		(1,404	)			2,797
Total stockholders' equity		1,124,212				915,310
Total liabilities and stockholders' equity	$	8,129,480			$	7,547,339

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
	Three Months Ended								Twelve Months Ended
	12/31/21				12/31/20				12/31/21				12/31/20
Interest income
Interest and fees on loans	$	76,891			$	73,123			$	293,546			$	296,611
Interest and dividends on investment securities:
Taxable		1,265				1,373				4,413				6,456
Tax-exempt		518				649				2,403				2,797
Dividends		207				374				971				1,642
Interest on federal funds sold and other short-term investments		159				69				405				694
Total interest income		79,040				75,588				301,738				308,200
Interest expense
Deposits		5,281				9,630				24,768				52,386
Borrowings		3,298				4,587				14,092				17,823
Total interest expense		8,579				14,217				38,860				70,209
Net interest income		70,461				61,371				262,878				237,991
Provision for (reversal of) credit losses		815				5,000				(5,500	)			41,000
Net interest income after provision for credit losses		69,646				56,371				268,378				196,991
Noninterest income
Deposit, loan and other income		1,525				1,300				6,617				7,077
Income on bank owned life insurance		1,244				1,314				4,771				5,007
Net gains on sale of loans held-for-sale		1,139				841				3,807				2,085
Gain on sale of branches		-				-				674				-
Net (losses) gains on equity securities		(131	)			(13	)			(373	)			202
Net gains on sale/redemption of investment securities		-				-				195				29
Total noninterest income		3,777				3,442				15,691				14,400
Noninterest expenses
Salaries and employee benefits		16,483				14,581				64,072				58,758
Occupancy and equipment		2,762				3,689				11,638				13,882
FDIC insurance		625				948				2,665				4,002
Professional and consulting		1,996				2,210				8,286				7,383
Marketing and advertising		454				256				1,318				1,200
Data processing		1,585				1,479				6,265				6,008
Merger expenses		-				-				-				14,640
Amortization of core deposit intangible		483				628				1,981				2,559
Increase in value of acquisition price		-				-				-				2,333
Other expenses		3,696				2,611				12,786				10,236
Total noninterest expenses		28,084				26,402				109,011				121,001
Income before income tax expense		45,339				33,411				175,058				90,390
Income tax expense		12,301				7,770				44,705				19,101
Net income		33,038				25,641				130,353				71,289
Preferred dividends		1,717				-				1,717				-
Net income available to common stockholders	$	31,321			$	25,641			$	128,636			$	71,289
Earnings per common share:
Basic	$	0.79			$	0.64			$	3.24			$	1.80
Diluted		0.79				0.64				3.22				1.79

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,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
		2021				2021				2021				2021				2020
Selected Financial Data	(dollars in thousands)
Total assets	$	8,129,480			$	7,949,514			$	7,710,082			$	7,449,639			$	7,547,339
Loans receivable:
Commercial	$	1,163,442			$	1,116,535			$	1,046,965			$	1,071,418			$	1,092,404
Paycheck Protection Program ("PPP") loans		93,057				177,829				326,788				522,340				397,492
Commercial real estate		2,446,807				2,354,209				2,252,484				2,127,806				2,103,468
Multifamily		2,337,712				2,113,541				1,914,978				1,698,331				1,712,153
Commercial construction		540,178				552,896				587,121				565,872				617,747
Residential		255,269				270,793				286,907				306,376				322,564
Consumer		1,886				2,093				6,355				3,364				1,853
Gross loans		6,838,351				6,587,896				6,421,598				6,295,508				6,247,681
Unearned net origination fees		(9,729	)			(11,457	)			(13,694	)			(18,317	)			(11,374	)
Loans receivable		6,828,622				6,576,439				6,407,904				6,277,191				6,236,307
Loans held-for-sale		250				5,596				6,159				6,900				4,710
Total loans	$	6,828,872			$	6,582,035			$	6,414,063			$	6,284,091			$	6,241,017
Investment and equity securities	$	548,301			$	476,584			$	472,156			$	455,223			$	501,342
Goodwill and other intangible assets		217,369				217,852				218,335				218,842				219,349
Deposits:
Noninterest-bearing demand	$	1,617,049			$	1,500,754			$	1,485,952			$	1,384,961			$	1,339,108
Time deposits		1,150,109				1,221,911				1,301,807				1,356,599				1,464,133
Other interest-bearing deposits		3,565,795				3,675,673				3,404,754				3,209,774				3,155,983
Total deposits	$	6,332,953			$	6,398,338			$	6,192,513			$	5,951,335			$	5,959,224
Borrowings	$	468,193			$	253,225			$	353,462			$	359,710			$	425,954
Subordinated debentures (net of debt issuance costs)		152,951				152,875				152,800				152,724				202,648
Total stockholders' equity		1,124,212				1,098,433				964,960				935,637				915,310
Quarterly Average Balances
Total assets	$	8,027,169			$	7,837,997			$	7,566,676			$	7,500,034			$	7,547,651
Loans receivable:
Commercial (including PPP loans)	$	1,278,048			$	1,296,066			$	1,485,918			$	1,531,790			$	1,557,303
Commercial real estate (including multifamily)		4,625,371				4,312,092				3,925,497				3,805,856				3,704,197
Commercial construction		547,038				572,920				553,396				595,466				615,439
Residential		268,112				279,063				293,633				316,233				332,403
Consumer		4,938				2,649				3,148				2,540				3,309
Gross loans		6,723,507				6,462,790				6,261,592				6,251,885				6,212,651
Unearned net origination fees		(10,873	)			(13,064	)			(13,076	)			(13,163	)			(12,023	)
Loans receivable		6,712,634				6,449,726				6,248,516				6,238,723				6,200,628
Loans held-for-sale		5,051				6,226				3,696				4,237				9,003
Total loans	$	6,717,685			$	6,455,952			$	6,252,212			$	6,242,960			$	6,209,631
Investment and equity securities	$	481,276			$	465,103			$	450,543			$	481,802			$	469,820
Goodwill and other intangible assets		217,685				218,170				218,662				219,171				219,761
Deposits:
Noninterest-bearing demand	$	1,537,316			$	1,495,456			$	1,432,707			$	1,348,585			$	1,294,447
Time deposits		1,204,374				1,252,818				1,324,510				1,422,295				1,577,338
Other interest-bearing deposits		3,672,311				3,582,261				3,320,400				3,225,751				3,094,536
Total deposits	$	6,414,001			$	6,330,535			$	6,077,617			$	5,996,631			$	5,966,321
Borrowings	$	292,847			$	276,183			$	331,633			$	375,511			$	410,098
Subordinated debentures (net of debt issuance costs)		152,902				152,825				152,750				154,341				202,595
Total stockholders' equity		1,113,524				1,032,191				952,019				928,041				906,153
	Three Months Ended
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
		2021				2021				2021				2021				2020
	(dollars in thousands, except for per share data)
Net interest income	$	70,461			$	68,245			$	63,009			$	61,163			$	61,371
Provision for (reversal of) credit losses		815				1,100				(1,649	)			(5,766	)			5,000
Net interest income after provision for credit losses		69,646				67,145				64,658				66,929				56,371
Noninterest income
Deposit, loan and other income		1,525				1,702				2,222				1,168				1,300
Income on bank owned life insurance		1,244				1,278				1,185				1,064				1,314
Net gains on sale of loans held-for-sale		1,139				1,114				847				707				841
Gain on sale of branches		-				-				-				674				-
Net (losses) gains on equity securities		(131	)			(78	)			23				(187	)			(13	)
Net gains on sale/redemption of investment securities		-				-				195				-				-
Total noninterest income		3,777				4,016				4,472				3,426				3,442
Noninterest expenses
Salaries and employee benefits		16,483				16,740				15,284				15,565				14,581
Occupancy and equipment		2,762				2,656				2,916				3,304				3,689
FDIC insurance		625				525				580				935				948
Professional and consulting		1,996				2,217				2,117				1,956				2,210
Marketing and advertising		454				345				278				241				256
Data processing		1,585				1,541				1,603				1,536				1,479
Amortization of core deposit intangible		483				483				508				507				628
Other expenses		3,696				3,676				2,973				2,441				2,611
Total noninterest expenses		28,084				28,183				26,259				26,485				26,402
Income before income tax expense		45,339				42,978				42,871				43,870				33,411
Income tax expense		12,301				10,881				10,652				10,871				7,770
Net income		33,038				32,097				32,219				32,999				25,641
Preferred dividends		1,717				-				-				-				-
Net income available to common stockholders	$	31,321			$	32,097			$	32,219			$	32,999			$	25,641
Weighted average diluted common shares outstanding		39,792,937				39,869,468				39,872,829				39,788,881				39,726,791
Diluted EPS	$	0.79			$	0.80			$	0.81			$	0.82			$	0.64
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	33,038			$	32,097			$	32,219			$	32,999			$	25,641
Income tax expense		12,301				10,881				10,652				10,871				7,770
Provision for (reversal of) credit losses		815				1,100				(1,649	)			(5,766	)			5,000
Pre-tax and pre-provision net revenue	$	46,154			$	44,078			$	41,222			$	38,104			$	38,411
Return on Assets Measures
Average assets	$	8,027,169			$	7,837,997			$	7,566,676			$	7,500,034			$	7,547,651
Return on avg. assets		1.63		%		1.62		%		1.71		%		1.78		%		1.35		%
Return on avg. assets (pre-tax and pre-provision)		2.28				2.23				2.19				2.06				2.02
	Three Months Ended
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
		2021				2021				2021				2021				2020
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,113,524			$	980,344			$	952,019			$	928,041			$	906,153
Less: average preferred stock		(110,927	)			-				-				-				-
Average common equity	$	1,002,597			$	980,344			$	952,019			$	928,041			$	906,153
Less: average intangible assets		(217,685	)			(218,170	)			(218,662	)			(219,171	)			(219,761	)
Average tangible common equity	$	784,912			$	762,174			$	733,357			$	708,870			$	686,392
Return on avg. common equity (GAAP)		12.39		%		12.99		%		13.57		%		14.42		%		11.26		%
Return on avg. tangible common equity ("TCE") (non-GAAP) (1)		16.00				16.88				17.82				19.08				15.12
Efficiency Measures
Total noninterest expenses	$	28,084			$	28,183			$	26,259			$	26,485			$	26,402
Amortization of core deposit intangibles		(483	)			(483	)			(508	)			(507	)			(628	)
Foreclosed property expense		-				-				-				-				(2	)
Operating noninterest expense	$	27,601			$	27,700			$	25,751			$	25,978			$	25,772
Net interest income (tax equivalent basis)	$	70,890			$	68,761			$	63,418			$	61,581			$	61,840
Noninterest income		3,777				4,016				4,472				3,426				3,442
Net gains on sale of branches		-				-				-				(674	)			-
Net gains on sale/redemption of investment securities		-				-				(195	)			-				-
Operating revenue	$	74,667			$	72,777			$	67,695			$	64,333			$	65,282
Operating efficiency ratio (non-GAAP) (2)		37.0		%		38.1		%		38.0		%		40.4		%		39.5		%
Net Interest Margin
Average interest-earning assets	$	7,508,973			$	7,321,771			$	7,059,965			$	7,008,500			$	7,031,662
Net interest income (tax equivalent basis)	$	70,890			$	68,761			$	63,418			$	61,581			$	61,840
Impact of purchase accounting fair value marks		(1,674	)			(1,849	)			(2,012	)			(2,074	)			(2,237	)
Adjusted net interest income (tax equivalent basis)	$	69,216			$	66,912			$	61,406			$	59,507			$	59,603
Net interest margin (GAAP)		3.75		%		3.73		%		3.60		%		3.56		%		3.50		%
Adjusted net interest margin (non-GAAP) (3)		3.66				3.63				3.49				3.44				3.37
(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
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
		2021				2021				2021				2021				2020
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,124,212			$	987,506			$	964,960			$	935,637			$	915,310
Less: preferred stock		(110,927	)			-				-				-				-
Common equity	$	1,013,285			$	987,506			$	964,960			$	935,637			$	915,310
Less: intangible assets		(217,369	)			(217,852	)			(218,335	)			(218,842	)			(219,349	)
Tangible common equity	$	795,916			$	769,654			$	746,625			$	716,795			$	695,961
Total assets	$	8,129,480			$	7,949,514			$	7,710,082			$	7,449,639			$	7,547,339
Less: intangible assets		(217,369	)			(217,852	)			(218,335	)			(218,842	)			(219,349	)
Tangible assets	$	7,912,111			$	7,731,662			$	7,491,747			$	7,230,797			$	7,327,990
Common shares outstanding		39,568,090				39,602,199				39,794,815				39,773,602				39,785,398
Common equity ratio (GAAP)		12.46		%		12.42		%		12.52		%		12.56		%		12.13		%
Tangible common equity ratio (non-GAAP) (4)		10.06				9.95				9.97				9.91				9.50
Regulatory capital ratios (Bancorp):
Leverage ratio		11.65		%		11.60		%		10.19		%		9.89		%		9.51		%
Common equity Tier 1 risk-based ratio		10.64				10.73				11.09				11.36				10.79
Risk-based Tier 1 capital ratio		12.19				12.35				11.17				11.44				10.87
Risk-based total capital ratio		15.26				15.54				14.58				15.08				15.08
Regulatory capital ratios (Bank):
Leverage ratio		11.43		%		11.33		%		11.34		%		11.06		%		10.63		%
Common equity Tier 1 risk-based ratio		11.96				12.06				12.42				12.78				12.24
Risk-based Tier 1 capital ratio		11.96				12.06				12.42				12.78				12.24
Risk-based total capital ratio		13.44				13.61				14.07				14.55				10.00
Book value per share (GAAP)	$	25.61			$	24.94			$	24.25			$	23.52			$	23.01
Tangible book value per share (non-GAAP) (5)		20.12				19.43				18.76				18.02				17.49
Net Loan (Recoveries) Charge-Off Detail
Net loan charge-offs (recoveries):
Charge-offs	$	458			$	1,727			$	212			$	-			$	67
Recoveries		(217	)			(113	)			(14	)			(61	)			(26	)
Net loan charge-offs (recoveries)	$	241			$	1,614			$	198			$	(61	)		$	41
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)		0.01		%		0.10		%		0.01		%		(0.00	)	%		0.00		%
Asset Quality
Nonaccrual loans	$	61,700			$	65,959			$	56,213			$	60,940			$	61,696
OREO		-				-				-				-				-
Nonperforming assets	$	61,700			$	65,959			$	56,213			$	60,940			$	61,696
Performing troubled debt restructurings	$	43,587			$	41,256			$	33,021			$	25,505			$	23,655
Allowance for credit losses - loans ("ACL")		78,773				77,986				78,684				80,568				79,226
Loans receivable	$	6,828,622			$	6,576,439			$	6,407,904			$	6,277,191			$	6,236,307
Less: PPP loans		93,057				177,829				326,788				522,340				397,492
Loans receivable (excluding PPP loans)	$	6,735,565			$	6,398,610			$	6,081,116			$	5,754,851			$	5,838,815
Nonaccrual loans as a % of loans receivable		0.90		%		1.00		%		0.88		%		0.97		%		0.99
Nonperforming assets as a % of total assets		0.76				0.83				0.73				0.82				0.82
ACL as a % of loans receivable		1.15				1.19				1.23				1.28				1.27
ACL as a % of loans receivable (excluding PPP loans)		1.17				1.22				1.29				1.40				1.36
ACL as a % of nonaccrual loans		127.7				118.2				140.0				132.2				128.4
(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
	December 31, 2021								September 30, 2021									December 31, 2020
	Average									Average									Average
Interest-earning assets:	Balance			Interest			Rate (7)			Balance			Interest			Rate (7)			Balance			Interest			Rate (7)
Investment securities (1) (2)	$	480,143		$	1,921		1.59	%		$	459,559		$	1,712		1.48	%		$	460,471		$	2,194		1.90	%
Loans receivable and loans held-for-sale (2) (3) (4)		6,717,685			77,220		4.56				6,455,952			75,434		4.64				6,209,631			73,420		4.70
Federal funds sold and interest-bearing deposits with banks		291,243			121		0.16				387,155			151		0.15				337,172			69		0.08
Restricted investment in bank stock		19,902			207		4.13				19,105			245		5.09				24,388			374		6.10
Total interest-earning assets		7,508,973			79,469		4.20				7,321,771			77,542		4.20				7,031,662			76,057		4.30
Allowance for credit losses - loans		(79,074	)								(78,327	)								(74,943	)
Noninterest-earning assets		597,270									594,553									584,145
Total assets	$	8,027,169								$	7,837,997								$	7,540,864
Interest-bearing liabilities:
Time deposits		1,204,374			2,717		0.90			$	1,252,818		$	2,982		0.94				1,577,338			6,682		1.69
Other interest-bearing deposits		3,672,311			2,563		0.28				3,582,261			2,495		0.28				3,094,536			2,948		0.38
Total interest-bearing deposits		4,876,685			5,280		0.43				4,835,079			5,477		0.45				4,671,874			9,630		0.82
Borrowings		292,847			1,102		1.49				276,183			1,105		1.59				410,098			1,856		1.80
Subordinated debentures		152,902			2,167		5.62				152,825			2,168		5.63				202,595			2,699		5.30
Capital lease obligation		1,967			30		6.05				2,018			30		5.90				2,164			32		5.88
Total interest-bearing liabilities		5,324,401			8,579		0.64				5,266,105			8,780		0.66				5,286,731			14,217		1.07
Noninterest-bearing demand deposits		1,537,316									1,495,456									1,294,447
Other liabilities		51,928									44,245									53,533
Total noninterest-bearing liabilities		1,589,244									1,539,701									1,347,980
Stockholders' equity		1,113,524									1,032,191									906,153
Total liabilities and stockholders' equity	$	8,027,169								$	7,837,997								$	7,540,864
Net interest income (tax equivalent basis)					70,890									68,762									61,840
Net interest spread (5)							3.56	%								3.54	%								3.23	%
Net interest margin (6)							3.75	%								3.73	%								3.50	%
Tax equivalent adjustment					(429	)								(516	)								(469	)
Net interest income				$	70,461								$	68,246								$	61,371
(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.

FAQ

What were ConnectOne Bancorp's Q4 2021 earnings results?

ConnectOne Bancorp reported a net income of $31.3 million for Q4 2021, with diluted earnings per share at $0.79.

How did ConnectOne's net income in 2021 compare to 2020?

In 2021, ConnectOne's net income was $128.6 million, significantly higher than the $71.3 million reported in 2020.

What is the cash dividend amount declared by ConnectOne for March 2022?

ConnectOne announced a cash dividend of $0.13 per share, payable on March 1, 2022.

What were the nonperforming asset ratios for ConnectOne as of December 2021?

As of December 31, 2021, nonperforming assets were 0.76% of total assets.

What factors contributed to the decrease in net income from Q3 to Q4 2021?

The decrease in net income was primarily due to a rise in income tax expense and preferred dividends.