ConnectOne Bancorp Inc

Previous wording

This report includes forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that involve inherent risks and uncertainties. This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of ConnectOne Bancorp Inc. and its subsidiaries, including statements preceded by, followed by, or that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions may increase significantly; (2) changes in the interest rate environment may reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and credit loss provisions may vary substantially from period to period; (4) general economic conditions may be less favorable than expected; (5) political developments, sovereign debt problems, wars or other hostilities such as the ongoing conflict between Ukraine and Russia and instability in the Middle East, may disrupt or increase volatility in securities markets or other economic conditions; (6) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp is engaged; (7) changes and trends in the securities markets may adversely impact ConnectOne Bancorp; (8) a delayed or incomplete resolution of regulatory issues could adversely impact planning by ConnectOne Bancorp; (9) the impact on reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; (10) the outcome of regulatory and legal investigations and proceedings may not be anticipated, and (11) the impact of the COVID-19 pandemic on our employees and operations, and those of our customers. Further information on other factors that could affect the financial results of ConnectOne Bancorp is included in Item 1a. of ConnectOne Bancorp’s Annual Report on Form 10-K as amended and updated in ConnectOne Bancorp’s other filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from ConnectOne Bancorp, Inc.

Current wording

This report includes forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that involve inherent risks and uncertainties. This report contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of ConnectOne Bancorp Inc. and its subsidiaries, including statements preceded by, followed by, or that include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions may increase significantly; (2) changes in the interest rate environment may reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and credit loss provisions may vary substantially from period to period; (4) general economic conditions may be less favorable than expected; (5) political developments, sovereign debt problems, wars or other hostilities such as the ongoing conflict between Ukraine and Russia and instability in the Middle East, may disrupt or increase volatility in securities markets or other economic conditions; (6) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp is engaged; (7) changes and trends in the securities markets may adversely impact ConnectOne Bancorp; (8) a delayed or incomplete resolution of regulatory issues could adversely impact planning by ConnectOne Bancorp; (9) the impact on reputation risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity could be significant; (10) the outcome of regulatory and legal investigations and proceedings may not be anticipated, and (11) the impact of health emergencies or natural disasters on our employees and operations, and those of our customers. Further information on other factors that could affect the financial results of ConnectOne Bancorp is included in Item 1a. of ConnectOne Bancorp’s Annual Report on Form 10-K as amended and updated in ConnectOne Bancorp’s other filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from ConnectOne Bancorp, Inc.

Previous wording

Net income available to common stockholders for the three months ended March 31, 2024 was $15.7 million compared to $23.4 million for the comparable three-month period ended March 31, 2023. The Company’s diluted earnings per share were $0.41 for the three months ended March 31, 2024 as compared with diluted earnings per share of $0.59 for the comparable three-month period ended March 31, 2023. The $7.7 million decrease in net income available to common stockholders and $0.18 decrease in diluted earnings per share versus the first quarter of 2023 were due to a $6.8 million decrease in net interest income, a $3.0 million increase in 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.

Current wording

Net income available to common stockholders for the three months ended June 30, 2024 was $17.5 million compared to $19.9 million for the comparable three-month period ended June 30, 2023. The Company’s diluted earnings per share were $0.46 for the three months ended June 30, 2024 as compared with diluted earnings per share of $0.51 for the comparable three-month period ended June 30, 2023. The $2.3 million decrease in net income available to common stockholders and the $0.05 decrease in diluted earnings per share versus the second quarter of 2023 were due to a $2.4 million decrease in net interest income and a $2.1 million increase in noninterest expenses, partially offset by a $1.0 million increase in noninterest income, a $0.7 million decrease in income tax expense and a $0.5 million decrease in provision for credit losses.

Previous wording

Fully taxable equivalent net interest income for the three months ended March 31, 2024 decreased by $6.7 million, or 9.9%, from three months ended March 31, 2023. The decrease 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 was primarily attributable to a 114 basis-point increase in the average costs of deposits, partially offset by a 47 basis-point increase in the loan portfolio yield.

Current wording

Fully taxable equivalent net interest income for the three months ended June 30, 2024 decreased by $2.4 million, or 3.7%, from the three months ended June 30, 2023. The decrease primarily resulted from a nine basis-point decrease in the net interest margin to 2.72% from 2.81%, partially offset by a $63.5 million, or 0.8%, increase in average total loans. The contraction of the net interest margin was primarily attributable to a 73 basis-point increase in the average costs of deposits, partially offset by a 42 basis-point increase in the loan portfolio yield.

Previous wording

Noninterest income totaled $3.9 million for the three months ended March 31, 2024, compared with $2.8 million for the three months ended March 31, 2023. Included in noninterest income for the three months ended March 31, 2024 and March 31, 2023 were net gain (losses) on equity securities of $0.1 million and ($0.2) million, respectively. Excluding these items, noninterest income increased $0.8 million when compared to the three months ended March 31, 2023. The increase was primarily attributable to an increase in net gains on sale of loans held-for-sale, primarily Small Business Administration (“SBA”) loans of $0.5 million, an increase in deposit, loan, and other income of $0.2 million and an increase in bank owned life insurance ("BOLI") income of $0.1 million.

Current wording

Noninterest income totaled $4.4 million for the three months ended June 30, 2024, compared with $3.4 million for the three months ended June 30, 2023. Included in noninterest income for both the three months ended June 30, 2024 and June 30, 2023 were net losses on equity securities of $0.2 million. Noninterest income increased $1.0 million when compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase in net gains on sale of loans held-for-sale of $0.7 million, an increase in deposit, loan, and other income of $0.1 million and an increase in bank owned life insurance ("BOLI") income of $0.1 million.

Previous wording

Noninterest expenses totaled $37.1 million for the three months ended March 31, 2024, compared with $34.9 million for the three months ended March 31, 2023. Noninterest expenses increased by $2.2 million when compared to the three months ended March 31, 2023. The increase was primarily attributable to an increase in information technology and communications of $1.3 million, due to additional investments in technology, equipment, and software, FDIC insurance of $0.9 million, primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate, occupancy and equipment of $0.3 million, marketing and advertising of $0.2 million, and other expense of $0.1 million, partially offset by decreases in professional and consulting of $0.2 million, salaries and employee benefits of $0.1 million and amortization of core deposit intangibles of $0.1 million.

Current wording

Noninterest expenses totaled $74.7 million for the six months ended June 30, 2024, compared with $70.3 million for the six months ended June 30, 2023. Noninterest expenses increased by $4.3 million when compared to the six months ended June 30, 2023. The increase was caused by the items discussed above and primarily reflect increases in information technology and communications of $1.9 million, FDIC insurance of $0.9 million, salaries and employee benefits of $0.9 million, occupancy and equipment of $0.5 million, other expenses of $0.3 million and marketing and advertising of $0.2 million, partially offset by decreases of $0.3 million in professional and consulting and $0.1 million in amortization of core deposit intangibles.

Previous wording

Income tax expense was $5.9 million for the three months ended March 31, 2024, compared to $9.1 million for the three months ended March 31, 2023. The decrease in income tax expense was the result of lower income before income tax expense. The effective tax rate for the three months ended March 31, 2024 and March 31, 2023 was 25.5% and 26.7%, respectively. The decrease in the effective tax rate when compared to the three months ended March 31, 2023 is largely attributable to lower taxable income.

Current wording

Income tax expense was $12.6 million for the six months ended June 30, 2024, compared to $16.5 million for the six months ended June 30, 2023. The decrease in income tax expense was the result of lower income before income tax expense. The effective tax rate for the six months ended June 30, 2024 and June 30, 2023 was 25.7% and 26.3%, respectively. The decrease in the effective tax rate when compared to the six months ended June 30, 2023 is largely attributable to lower taxable income.

Previous wording

As of March 31, 2024, gross loans totaled $8.3 billion, a decrease of $47.7 million or -0.6%, compared to December 31, 2023.

Current wording

As of June 30, 2024, gross loans totaled $8.2 billion, a decrease of $189.3 million or 2.3%, compared to December 31, 2023.

Previous wording

In addition, the following tables presents further detail with respect to our owner-occupied and nonowner-occupied borrower concentrations included in the commercial real estate segment.

Current wording

In addition, the following tables present further details with respect to our nonowner-occupied and owner-occupied borrower concentrations included in the commercial real estate segment.

Previous wording

As of March 31, 2024, the Company’s allowance for credit losses for loans was $82.9 million, an increase of $0.9 million from $82.0 million as of December 31, 2023.

Current wording

As of June 30, 2024, the Company’s allowance for credit losses for loans was $82.1 million, an increase of $0.1 million from $82.0 million as of December 31, 2023.

Previous wording

The provision for credit losses, which includes a provision for unfunded commitments, for the three months ended March 31, 2024 and March 31, 2023 was $4.0 million and $1.0 million, respectively. The increase in the provision for credit losses when compared to the comparable period in 2023 reflected increases in changes in macroeconomic forecasts, qualitative factor adjustments and specific reserves.

Current wording

The provision for credit losses, which includes a provision for unfunded commitments, for the three and six months ended June 30, 2024 was $2.5 million and $6.5 million, respectively, compared to $3.0 million and $4.0 million, for the three and six months ended June 30, 2023, respectively. The decrease in the provision for credit losses during the three months ended June 30, 2024, when compared to the comparable period in 2023 reflected decreases to the general reserve and specific reserves. The increase in the provision for credit losses during the six months ended June 30, 2024, when compared to the comparable period in 2023 reflected an increase to specific reserves and a decrease to the general reserve.

Previous wording

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that includes analysis of credit requests and ongoing examination of outstanding loans, delinquencies, and potential problem loans, with particular attention to portfolio dynamics and mix. The Company strives to identify loans experiencing difficulty early on, to record charge-offs promptly based on realistic assessments of current collateral values and cash flows, and to maintain an adequate allowance for credit losses at all times.

Current wording

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans, delinquencies, and potential problem loans, with particular attention to portfolio dynamics and mix. The Company strives to identify loans experiencing difficulty early on, to record charge-offs promptly based on realistic assessments of current collateral values and cash flows, and to maintain an adequate allowance for credit losses at all times.

Previous wording

Nonperforming assets include nonaccrual loans and other real estate owned. Nonaccrual loans represent loans on which interest accruals have been suspended. In general, it is the policy of management to consider the charge-off of uncollectible amounts of loans at the point they become past due 90 days. 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 of approximately 60% and is in the process of collection.

Current wording

Nonperforming assets include nonaccrual loans and other real estate owned. Nonaccrual loans represent loans on which interest accruals have been suspended. In general, it is the policy of management to consider the charge-off of uncollectible amounts of loans at the point they become past due 90 days.

Previous wording

As of March 31, 2024, the principal components of the securities portfolio were federal agency obligations, mortgage-backed securities, obligations of U.S. states and political subdivisions, corporate bonds and notes, asset-backed securities and equity securities. For the three months ended March 31, 2024, average securities, on an amortized cost basis, decreased by $12.6 million to approximately $720.3 million, or 7.7% of average total interest-earning assets, from approximately $732.9 million, or 8.0% of average interest-earning assets, for the three months ended March 31, 2023.

Current wording

As of June 30, 2024, the principal components of the securities portfolio were federal agency obligations, mortgage-backed securities, obligations of U.S. states and political subdivisions, corporate bonds and notes, asset-backed securities and equity securities. For the three months ended June 30, 2024, average securities, on an amortized cost basis, increased by $13.3 million to approximately $739.6 million, or 8.0% of average total interest-earning assets, from approximately $726.3 million, or 7.9% of average interest-earning assets, for the three months ended June 30, 2023. For the six months ended June 30, 2024, average securities, on an amortized cost basis increased by $0.3 million to approximately $729.9 million, or 7.9% of average total interest-earning assets, from approximately $729.6 million, or 7.9% of average interest-earning assets, for the six months ended June 30, 2023.

Previous wording

As of March 31, 2024, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $66.7 million as compared with net unrealized losses of $57.8 million as of December 31, 2023. The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. The Company did not record an allowance for credit losses for available-for-sale securities as of March 31, 2024.

Current wording

As of June 30, 2024, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’ equity, net of tax, amounted to $70.0 million as compared with net unrealized losses of $57.8 million as of December 31, 2023. The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates. Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. The Company did not record an allowance for credit losses for available-for-sale securities as of June 30, 2024.

Previous wording

Based on our model, which was run as of March 31, 2024, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 6.38%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 2.66%. As of December 31, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 9.25%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 5.34%.

Current wording

Based on our model, which was run as of June 30, 2024, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 6.65%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 1.56%. As of December 31, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 9.25%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 5.34%.

Previous wording

Based on our model, which was run as of March 31, 2024, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 3.56%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 1.19%. As of December 31, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 5.68%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 4.29%.

Current wording

Based on our model, which was run as of June 30, 2024, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 2.86%, while a 100 basis-point instantaneous and parallel decrease in interest rates would decrease net interest income by 0.25%. As of December 31, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous and parallel increase in the general level of interest rates would decrease our net interest income by 5.68%, while a 100 basis-point instantaneous and parallel decrease in interest rates would increase net interest income by 4.29%.

Previous wording

An economic value of equity ("EVE") analysis is also used to dynamically model the present value of asset and liability cash flows with instantaneous and parallel rate shocks of up 200 basis points and down 100 basis points. The EVE is likely to be different as interest rates change. Our EVE as of March 31, 2024, would decrease by 12.46% with an instantaneous and parallel rate shock of up 200 basis points, and increase by 4.44% with an instantaneous and parallel rate shock of down 100 basis points. Our EVE as of December 31, 2023, would decrease by 15.09% with an instantaneous and parallel rate shock of up 200 basis points, and increase by 5.75% with an instantaneous and parallel rate shock of down 100 basis-points.

Current wording

An economic value of equity ("EVE") analysis is also used to dynamically model the present value of asset and liability cash flows with instantaneous and parallel rate shocks of up 200 basis points and down 100 basis points. The EVE is likely to be different as interest rates change. Our EVE as of June 30, 2024, would decrease by 12.33% with an instantaneous and parallel rate shock of up 200 basis points, and increase by 2.44% with an instantaneous and parallel rate shock of down 100 basis points. Our EVE as of December 31, 2023, would decrease by 15.09% with an instantaneous and parallel rate shock of up 200 basis points, and increase by 5.75% with an instantaneous and parallel rate shock of down 100 basis-points.

Previous wording

Certain model limitations are inherent in the methodology used in the EVE and net interest income measurements. The models require the making of certain assumptions which may tend to oversimplify the way actual yields and costs respond to changes in market interest rates. The models assume that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured, thus they do not consider the Company’s strategic plans, or any other steps it may take to respond to changes in rates over the forecasted period of time. Additionally, the models assume immediate changes in interest rates, based on yield curves as of a point-in-time, which are reflected in a parallel, instantaneous and uniform manner across all yield curves, when in reality changes may rarely be of this nature. The models also utilize data derived from historical performance and as interest rates change the actual performance of loan prepayments, rate sensitivities, and average life assumptions may deviate from assumptions utilized in the models and can impact the results. Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates. Given the unique nature of the post-pandemic interest rate environment, and the speed with which interest rates have been changing, the projections noted above on the Company’s EVE and net interest income and can be expected to differ from actual results.

Current wording

Certain model limitations are inherent in the methodology used in the EVE and net interest income measurements. The models require the making of certain assumptions which may tend to oversimplify the way actual yields and costs respond to changes in market interest rates. The models assume that the composition of the Company’s interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured, thus they do not consider the Company’s strategic plans, or any other steps it may take to respond to changes in rates over the forecasted period of time. Additionally, the models assume immediate changes in interest rates, based on yield curves as of a point-in-time, which are reflected in a parallel, instantaneous and uniform manner across all yield curves, when in reality changes may rarely be of this nature. The models also utilize data derived from historical performance and as interest rates change the actual performance of loan prepayments, rate sensitivities, and average life assumptions may deviate from assumptions utilized in the models and can impact the results. Accordingly, although the above measurements provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates. Given the nature and speed with which interest rates change, the projections noted above on the Company’s EVE and net interest income can be expected to differ from actual results.

Previous wording

Liquidity is a measure of a bank’s ability to fund loans, withdrawals or maturities of deposits, and other cash outflows in a cost-effective manner. Our principal sources of funds are deposits, scheduled amortization and prepayments of loan principal, maturities of investment securities, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

Current wording

Management actively monitors and manages its liquidity position to determine any current or potential future liquidity needs. Liquidity is a measure of a bank’s ability to fund loans, withdrawals or maturities of deposits, and other cash outflows in a cost-effective manner. Our principal sources of funds are deposits, scheduled amortization and prepayments of loan principal, maturities of investment securities, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

Previous wording

As of March 31, 2024, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’ withdrawal requirements, and other operational and client credit needs could be satisfied. As of March 31, 2024, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $706.2 million, which represented 7.2% of total assets and 8.3% of total deposits and borrowings, compared to $516.3 million as of December 31, 2023, which represented 5.2% of total assets and 6.1% of total deposits and borrowings. As of March 31, 2024, not included in the above liquid assets were securities with a market value of $110.7 million which were pledged to the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $105.2 million as of March 31, 2024. As of December 31, 2023, not included in the above liquid assets were securities with a market value of $276.0 million which were pledged to either the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”), or the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $300.5 million as of December 31, 2023.

Current wording

As of June 30, 2024, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’ withdrawal requirements, and other operational and client credit needs could be satisfied. As of June 30, 2024, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $731.2 million, which represented 7.5% of total assets and 8.8% of total deposits and borrowings, compared to $516.3 million as of December 31, 2023, which represented 5.2% of total assets and 6.1% of total deposits and borrowings. As of June 30, 2024, not included in the above liquid assets were securities with a market value of $107.2 million which were pledged to the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $102.2 million as of June 30, 2024. As of December 31, 2023, not included in the above liquid assets were securities with a market value of $276.0 million which were pledged to either the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”), or the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $300.5 million as of December 31, 2023.

Previous wording

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of March 31, 2024, had the ability to borrow $2.9 billion. The Bank also has a credit facilities established with the Federal Reserve Bank of New York for direct discount window borrowings based on pledged collateral and had the ability to borrow $1.4 billion as of March 31, 2024. In addition, as of March 31, 2024, the Bank had in place borrowing capacity of $325 million through correspondent banks and other unsecured borrowing lines. As of March 31, 2024, the Bank had aggregate available and unused credit of approximately $3.2 billion, which represents the aforementioned facilities totaling $4.7 billion net of $1.5 billion in outstanding borrowings and letters of credit. As of March 31, 2024, outstanding commitments for the Bank to extend credit were approximately $1.1 billion.

Current wording

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of June 30, 2024, had the ability to borrow $2.8 billion. The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount window borrowings based on pledged collateral and had the ability to borrow $1.4 billion as of June 30, 2024. In addition, as of June 30, 2024, the Bank had in place borrowing capacity of $305 million through correspondent banks and other unsecured borrowing lines. As of June 30, 2024, the Bank had aggregate available and unused credit of approximately $3.2 billion, which represents the aforementioned facilities totaling $4.5 billion net of $1.3 billion in outstanding borrowings and letters of credit. As of June 30, 2024, outstanding commitments for the Bank to extend credit were approximately $1.1 billion.

Previous wording

Cash and cash equivalents totaled $277.6 million as of March 31, 2024, increasing by $34.9 million from $242.7 million as of December 31, 2023. Operating activities provided $20.5 million in net cash. Investing activities used $33.1 million in net cash, primarily reflecting a decrease in loans partially offset by an increase in securities. Financing activities used $18.7 million in net cash, primarily reflecting a net decrease of $56.0 million in repayment of FHLB borrowings and partially offset by an increase of $52.5 million in deposits.

Current wording

Cash and cash equivalents totaled $293.5 million as of June 30, 2024, increasing by $50.8 million from $242.7 million as of December 31, 2023. Operating activities provided $42.8 million in net cash. Investing activities provided $169.2 million in net cash, primarily reflecting an increase in loans. Financing activities used $161.2 million in net cash, primarily reflecting $177.4 million in net repayments of FHLB borrowings and partially offset by an increase of $39.9 million in deposits.

Previous wording

The increase in average time deposits of $210 million for the first quarter of 2024 was primarily attributed to increases of $90 million in nonreciprocal brokered time deposits, $54 million in CDARs, $39 million in retail time deposits and $27 million in internet listing services. The Bank continues to increase its utilization of nonreciprocal brokered time deposits to enhance balance sheet liquidity and because it served as a favorable alternative to other borrowings.

Current wording

The decrease in average time deposits of $71.0 million during the second quarter of 2024 was primarily attributed to decreases in CDARs of $124 million, nonreciprocal brokered time deposits of $94 million and internet listing services of $16 million, partially offset by an increase in retail time deposits of $163 million. The Bank continues its utilization of nonreciprocal brokered time deposits to enhance balance sheet liquidity as it remains a favorable alternative to other borrowings.

Previous wording

Average total deposits increased by $142 million, or 1.9%, to $7.5 billion for the first quarter of 2024 from $7.4 billion for the first quarter of 2023. The increase in total average deposits was primarily attributed to an increase in time deposits of $210 million, demand, interest-bearing and NOW of $66 million and savings deposits of $65 million, partially offset by a decrease in noninterest-bearing demand deposits of $198 million.

Current wording

Average total deposits increased by $30 million, or 0.4%, during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. The increase in total average deposits was primarily attributed to increases in savings deposits of $92 million, time deposits of $69 million, and interest-bearing and NOW deposits of $17 million, partially offset by decreases in noninterest-bearing demand deposits of $148 million.

Previous wording

Total deposits increased by $53 million, or 0.7%, to $7.6 billion as of March 31, 2024 from $7.5 billion as of December 31, 2023. The increase in total deposits was primarily attributed to increases in time deposits of $92 million, savings deposits of $41 million and noninterest-bearing demand deposits of $31 million, partially offset by decreases in demand, interest-bearing & NOW of $111 million.

Current wording

Total deposits increased by $40 million, or 0.5%, to $7.6 billion as of June 30, 2024 from $7.5 billion as of December 31, 2023. The increase in total deposits was primarily attributed to increases in savings deposits of $83 million, time deposits of $62 and noninterest-bearing demand deposits of $9 million, partially offset by decreases in demand, interest-bearing demand deposits & NOW deposits of $114 million.

Previous wording

Total demand, interest-bearing & NOW deposits as of March 31, 2024 include $1.2 billion in ICS reciprocal deposits, compared to $1.1 billion as of December 31, 2023. Total time deposits as of March 31, 2024 include $68 million in CDARS, compared to $96 million as of December 31, 2023.

Current wording

Total demand, interest-bearing & NOW deposits as of June 30, 2024 include $1.2 billion in ICS reciprocal deposits, compared to $1.1 billion as of December 31, 2023. Total time deposits as of June 30, 2024 include $61 million in CDARS, compared to $96 million as of December 31, 2023.

Previous wording

Included in time deposits were nonreciprocal brokered deposits of $920 million as of March 31, 2024, which were relatively flat when compared to $917 million as of December 31, 2023.

Current wording

Included in time deposits were nonreciprocal brokered deposits of $890 million as of June 30, 2024, which were relatively flat when compared to $917 million as of December 31, 2023.

Previous wording

As of March 31, 2024, we held $648 million of time deposits with balances in excess of $250,000. The following table provides information on the maturity distribution of the time deposits with balances in excess of $250,000 as of March 31, 2024:

Current wording

As of June 30, 2024, we held $730 million of time deposits with balances in excess of $250,000. The following table provides information on the maturity distribution of the time deposits with balances in excess of $250,000 as of June 30, 2024:

Previous wording

During December 2003, Center Bancorp Statutory Trust II, a statutory business trust and wholly owned subsidiary of the Parent Corporation issued $5.0 million of MMCapS capital securities to investors due on January 23, 2034. The trust loaned the proceeds of this offering to the Company and received in exchange $5.2 million of the Parent Corporation’s subordinated debentures. The subordinated debentures are redeemable in whole or part prior to maturity. Upon the cessation of publication of LIBOR rates and pursuant to the Federal LIBOR Act and Federal Reserve regulations implementing the Act, the MMCapS capital securities converted as of June 30, 2023 to a new index based on CME Term SOFR, as defined in the LIBOR Act, plus a tenor spread adjustment, which is referred to as the Benchmark Replacement. Effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures’ floating rate will be three-month CME Term SOFR plus 2.85% plus a tenor spread adjust of 0.26161%. The rate as of March 31, 2024 was 8.43%.

Current wording

During December 2003, Center Bancorp Statutory Trust II, a statutory business trust and wholly owned subsidiary of the Parent Corporation issued $5.0 million of MMCapS capital securities to investors due on January 23, 2034. The trust loaned the proceeds of this offering to the Company and received in exchange $5.2 million of the Parent Corporation’s subordinated debentures. The subordinated debentures are redeemable in whole or part prior to maturity. Upon the cessation of publication of LIBOR rates and pursuant to the Federal LIBOR Act and Federal Reserve regulations implementing the Act, the MMCapS capital securities converted as of June 30, 2023 to a new index based on CME Term SOFR, as defined in the LIBOR Act, plus a tenor spread adjustment, which is referred to as the Benchmark Replacement. Effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures' floating rate will be three-month CME Term SOFR plus 2.85% plus a tenor spread adjustment of 0.26161%. The rate as of June 30, 2024 was 8.44%.

Previous wording

The Company’s stockholders’ equity remained relatively flat at approximately $1.2 billion at both March 31, 2024, and December 31, 2023. Retained earnings increased by $9 million, and was offset by increases in treasury stock of $6 million and accumulated other comprehensive losses 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.

Current wording

The Company’s stockholders’ equity remained relatively flat at approximately $1.2 billion at both June 30, 2024, and December 31, 2023. Retained earnings increased by $20 million and was offset by increases in treasury stock of $6 million and accumulated other comprehensive losses of $7 million. As of June 30, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.46% and $23.45, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.6 million as of June 30, 2024, and $214.2 million as of December 31, 2023.

Previous wording

As of March 31, 2024, both the Company and Bank satisfy the capital conservation buffer requirements applicable to them. The lowest ratio at the Company is the Total Risk Based Capital Ratio which was 3.38% above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 2.91% above the minimum buffer ratio.

Current wording

As of June 30, 2024, both the Company and Bank satisfy the capital conservation buffer requirements applicable to them. The lowest ratio at the Company is the Total Risk Based Capital Ratio which was 3.60% above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 3.08% above the minimum buffer ratio.