ENGLEWOOD CLIFFS. N.J., April 25, 2024 (GLOBE NEWSWIRE) — ConnectOne Bancorp, Inc. (Nasdaq: CNOB), parent company of ConnectOne Bank, today reported net income available to common stockholders of $15.7 million for the first quarter of 2024 compared with $17.8 million for the fourth quarter of 2023 and $23.4 million for the first quarter of 2023. Diluted earnings per share were $0.41 for the first quarter of 2024 compared with $0.46 for the fourth quarter of 2023 and $0.59 for the first quarter of 2023. The decrease in net income available to common stockholders and diluted earnings per share from the fourth quarter of 2023 was primarily due to a $1.5 million decrease in net interest income, a $1.3 million increase to the provision for credit losses, and a $0.4 million decrease in noninterest income, partially offset by a $0.3 million decrease in income tax expense and a $0.8 million decrease in noninterest expenses. The decrease in net income available to common stockholders from the first quarter of 2023 was primarily due to a $6.8 million decrease in net interest income, a $3.0 million increase in the provision for credit losses, and a $2.2 million increase in noninterest expenses, partially offset by a $3.2 million decrease in income tax expense and a $1.1 million increase in noninterest income.
Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 1.10%, 1.15% and 1.46% for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
“ConnectOne moved through the first quarter laser-focused on furthering our relationship-banking model, despite the challenging backdrop. Our team seized opportunities to expand our client base, strengthen our team by adding top-performing talent all while building into new markets.” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer.
“In the first quarter, our team increased client deposit balances sequentially by an annualized 3.2%, driven by 9.9% annualized noninterest-bearing demand deposit growth. Loan balances were down sequentially by an annualized 2.3%, primarily a result of intentionally lower multifamily and other commercial real estate balances, contributing to both a lower loan-to-deposit ratio and lower commercial real estate concentration.” Mr. Sorrentino added, “For the first quarter, while our net interest margin (“NIM”) compressed sequentially by seven basis points, we are already today seeing a gradual expansion of the NIM, even ahead of potential Fed rate cuts.”
“Meanwhile, our tangible common equity ratio remained flat at 9.25%, notwithstanding the repurchase of 282,370 shares during the quarter, and our tangible book value per share increased to $23.26. We’re also pleased to announce a 5.9% increase in our quarterly common stock cash dividend to $0.18, reflecting our ongoing commitment to maximize shareholder value.”
Dividend Declarations
The Company announced that its Board of Directors declared an increased quarterly cash dividend on its common stock and declared a cash dividend on its outstanding preferred stock.
A cash dividend on common stock of $0.18 per share, reflecting a 5.9% sequential increase, will be paid on June 3, 2024, to common stockholders of record on May 15, 2024. A dividend of $0.328125 per depositary share, representing a 1/40th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on June 3, 2024 to preferred stockholders of record on May 15, 2024.
Operating Results
Fully taxable equivalent net interest income for the first quarter of 2024 was $61.1 million, a decrease of $1.5 million, or 2.4%, from the fourth quarter of 2023 due to a seven basis-point contraction in the net interest margin to 2.64% from 2.71%, partially offset by a $151.1 million, or 1.6%, increase in average interest-earning assets. The net interest margin contraction was primarily due to a nine basis-point increase in the average cost of deposits, including noninterest-bearing demand, to 3.23%, and an increase in average cash and cash equivalents of $84.0 million, partially offset by a one basis-point increase in the loan portfolio yield to 5.82%. The increase in average interest-earning assets from the fourth quarter of 2023 was primarily attributable to the aforementioned $84.0 million increase in average cash and cash equivalents and a $64.5 million increase in average loans.
Fully taxable equivalent net interest income for the first quarter of 2024 decreased by $6.7 million, or 9.9%, from the first quarter of 2023. The decrease from the first quarter of 2023 resulted primarily from a 36 basis-point decrease in the net interest margin to 2.64% from 3.00%, partially offset by a $149.1 million, or 1.6%, increase in average interest-earning assets. The contraction of the net interest margin for the first quarter of 2024 when compared to the first quarter of 2023 was primarily attributable to a 103 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by a 47 basis-point increase in the loan portfolio yield.
Noninterest income was $3.9 million in the first quarter of 2024, $4.2 million in the fourth quarter of 2023 and $2.8 million in the first quarter of 2023. Included in noninterest income were net gains (losses) on equity securities of $0.1 million, $0.6 million, and $(0.2) million for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023, respectively. Excluding the equity securities gains (losses), adjusted noninterest income was $3.8 million, $3.7 million, and $3.0 million for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023, respectively. The $0.1 million increase in adjusted noninterest income for the first quarter of 2024 when compared to the fourth quarter of 2023 was primarily due to a $0.1 million increase in deposit, loan, and other income. The $0.8 million increase in adjusted noninterest income for the first quarter of 2024 when compared to the first quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale, primarily SBA, of $0.5 million, an increase in deposit, loan, and other income of $0.2 million and an increase in BOLI income of $0.1 million.
Noninterest expenses totaled $37.1 million for the first quarter of 2024, $37.8 million for the fourth quarter of 2023 and $34.9 million for the first quarter of 2023. Included in noninterest expenses for the fourth quarter of 2023 was a $2.1 million FDIC special assessment. Excluding the assessment, adjusted noninterest expenses totaled $35.7 million for the fourth quarter of 2023. Noninterest expenses for the first quarter of 2024 increased by $1.3 million when compared to the adjusted noninterest expenses for the fourth quarter of 2023. The increase was primarily attributable to increases in marketing and advertising of $0.4 million, occupancy and equipment of $0.3 million, professional and consulting of $0.3 million, information and technology communications of $0.2 million, and salaries and employee benefits of $0.1 million. Noninterest expenses for the first quarter of 2024 increased by $2.2 million when compared to the first quarter of 2023. The increase was primarily attributable to increases in information technology and communications of $1.3 million, FDIC insurance of $0.9 million, and occupancy and equipment of $0.3 million, partially offset by decreases in professional and consulting of $0.2 million and salaries and employee benefits of $0.1 million. The increases in information technology and communications when compared to the fourth quarter of 2023 and the first quarter of 2023 are attributable to additional investments in technology, equipment, and software. The increase in FDIC insurance expense when compared to the first quarter of 2023 is primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. The increase in salaries and employee benefits when compared to the prior year quarter was primarily attributable to new hires and seasonal increases in payroll taxes.
Income tax expense was $5.9 million for the first quarter of 2024, $6.2 million for the fourth quarter of 2023 and $9.1 million for the first quarter of 2023. The effective tax rates for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023 were 25.5%, 24.4% and 26.7%, respectively.
Asset Quality
The provision for credit losses was $4.0 million for the first quarter of 2024, $2.7 million for the fourth quarter of 2023 and $1.0 million for the first quarter of 2023. The increase in the current quarter’s provision for credit losses from the fourth quarter of 2023 reflected increases in changes in macroeconomic forecasts, qualitative factors and specific reserves.
Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $47.4 million as of March 31, 2024, $52.5 million as of December 31, 2023 and $47.7 million as of March 31, 2023. Nonperforming assets as a percentage of total assets were 0.48% as of March 31, 2024, 0.53% as of December 31, 2023 and 0.48% as of March 31, 2023. The ratio of nonaccrual loans to loans receivable was 0.57%, 0.63% and 0.59%, as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively. As of March 31, 2024, one loan for $23.6 million was past due more than 90 days and still accruing; the loan is well-secured at a loan-to-value ratio of approximately 60% and is in the process of collection. The annualized net loan charge-offs ratio was 0.15% for the first quarter of 2024, 0.43% for the fourth quarter of 2023 and 0.22% for the first quarter of 2023. The allowance for credit losses represented 1.00%, 0.98%, and 1.07% of loans receivable as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 174.7% as of March 31, 2024, 156.1% as of December 31, 2023 and 182.5% as of March 31, 2023.
Criticized and classified loans as a percentage of total loans decreased to 1.30% as of March 31, 2024 versus 1.35% as of December 31, 2023 and 1.74% as of March 31, 2023. Loans delinquent 30 to 89 days were 0.04% of loans as of March 31, 2024 down from 0.30% as of December 31, 2023 and 0.17% as of March 31, 2023.
Selected Balance Sheet Items
The Company’s total assets were $9.854 billion as of March 31, 2024, compared to $9.856 billion as of December 31, 2023. Loans receivable was $8.298 billion as of March 31, 2024 and $8.345 billion as of December 31, 2023. Total deposits were $7.589 billion as of March 31, 2024 and $7.536 billion as of December 31, 2023.
The Company’s total stockholders’ equity was $1.217 billion at both March 31, 2024 and December 31, 2023. Retained earnings increased by approximately $9 million and was offset by increases in treasury stock of $6 million and increases in accumulated other comprehensive loss of $3 million. As of March 31, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.25% and $23.26, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.9 million as of March 31, 2024, and $214.2 million as of December 31, 2023.
Share Repurchase Program
During the first quarter of 2024, the Company repurchased 282,370 shares of common stock at an average price of $20.24, leaving 641,118 shares authorized for repurchase under the current Board approved repurchase program. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and the plan may be modified or suspended at any time at the Company’s discretion.
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with Generally Accepted Accounting Principles (“GAAP”), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP measures. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
About ConnectOne Bancorp, Inc.
ConnectOne Bancorp, Inc., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and the Bank’s fintech subsidiary, BoeFly, Inc. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly, Inc. is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol “CNOB,” and information about ConnectOne may be found at https://www.connectonebank.com.
