UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See definition of “large accelerated filer”, “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
| Accelerated filer ☐ | Non-accelerated filer ☐ (Do not check if smaller reporting company) | Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Common Stock, no par value: | |
| (Title of Class) | (Outstanding as of May 6, 2022) |
Table of Contents
2
Item 1. Financial Statements
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(unaudited)
| (in thousands, except for share data) | March 31, 2022 | December 31, 2021 | ||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-bearing deposits with banks | ||||||||
| Cash and cash equivalents | ||||||||
| Investment securities | ||||||||
| Equity securities | ||||||||
| Loans held-for-sale | ||||||||
| Loans receivable | ||||||||
| Less: Allowance for credit losses - loans | ||||||||
| Net loans receivable | ||||||||
| Investment in restricted stock, at cost | ||||||||
| Bank premises and equipment, net | ||||||||
| Accrued interest receivable | ||||||||
| Bank owned life insurance | ||||||||
| Right of use operating lease assets | ||||||||
| Other real estate owned | - | |||||||
| Goodwill | ||||||||
| Core deposit intangibles | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing | $ | $ | ||||||
| Interest-bearing | ||||||||
| Total deposits | ||||||||
| Borrowings | ||||||||
| Subordinated debentures, net | ||||||||
| Operating lease liabilities | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred Stock, par value; $ | ||||||||
| Common stock, par value: Authorized | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Treasury stock, at cost | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
3
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (dollars in thousands, except for per share data) | ||||||||
| Interest income | ||||||||
| Interest and fees on loans | $ | $ | ||||||
| Interest and dividends on investment securities: | ||||||||
| Taxable | ||||||||
| Tax-exempt | ||||||||
| Dividends | ||||||||
| Interest on federal funds sold and other short-term investments | ||||||||
| Total interest income | ||||||||
| Interest expense | ||||||||
| Deposits | ||||||||
| Borrowings | ||||||||
| Total interest expense | ||||||||
| Net interest income | ||||||||
| Provision for (reversal of) credit losses | ( | ) | ||||||
| Net interest income after provision for (reversal of) credit losses | ||||||||
| Noninterest income | ||||||||
| Deposit, loan and other income | ||||||||
| Income on bank owned life insurance | ||||||||
| Net gains on sale of loans held-for-sale | ||||||||
| Gain on sale of branches | ||||||||
| Net losses on equity securities | ( | ) | ( | ) | ||||
| Total noninterest income | ||||||||
| Noninterest expenses | ||||||||
| Salaries and employee benefits | ||||||||
| Occupancy and equipment | ||||||||
| FDIC insurance | ||||||||
| Professional and consulting | ||||||||
| Marketing and advertising | ||||||||
| Information technology and communications | ||||||||
| Amortization of core deposit intangibles | ||||||||
| Other components of net periodic pension expense | ( | ) | ( | ) | ||||
| Increase in value of acquisition price | ||||||||
| Other expenses | ||||||||
| Total noninterest expenses | ||||||||
| Income before income tax expense | ||||||||
| Income tax expense | ||||||||
| Net income | ||||||||
| Preferred dividends | ||||||||
| Net income available to common stockholders | $ | $ | ||||||
| Earnings per common share | ||||||||
| Basic | $ | $ | ||||||
| Diluted | ||||||||
See accompanying notes to unaudited consolidated financial statements.
4
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| Three Months Ended March 31, | ||||||||
| (dollars in thousands) | 2022 | 2021 | ||||||
| Net income | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Unrealized holding losses on available-for-sale securities arising during the period | ( | ) | ( | ) | ||||
| Tax effect | ||||||||
| Net of tax | ( | ) | ( | ) | ||||
| Unrealized gains on cash flow hedges | ||||||||
| Tax effect | ( | ) | ( | ) | ||||
| Net of tax | ||||||||
| Reclassification adjustment for realized losses on cash flow hedges included in net income | ||||||||
| Tax effect | ( | ) | ( | ) | ||||
| Net of tax | ||||||||
| Unrealized gains on pension plan | ||||||||
| Tax effect | ( | ) | ||||||
| Net of tax | ||||||||
| Reclassification adjustment for realized losses on pension plan included in net income | ||||||||
| Tax effect | ( | ) | ( | ) | ||||
| Net of tax | ||||||||
| Total other comprehensive loss | ( | ) | ( | ) | ||||
| Total comprehensive income | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
5
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
| (dollars in thousands, except for per share data) | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Total Stockholders’ Equity | |||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
| Cumulative effect of change in accounting principle (see note 1b. “Authoritative Accounting Guidance Presentation”), net of tax | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance as of January 1, 2021 as adjusted for changes in accounting principle | ( | ) | ||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends declared on common stock ($ | ( | ) | ( | ) | ||||||||||||||||||||||||
| Exercise of stock options ( | ||||||||||||||||||||||||||||
| Restricted stock grants ( | ||||||||||||||||||||||||||||
| Stock grants ( | ||||||||||||||||||||||||||||
| Net shares issued in satisfaction of restricted stock units earned ( | ||||||||||||||||||||||||||||
| Net shares issued in satisfaction of performance units earned ( | ||||||||||||||||||||||||||||
| Share redemption for tax withholdings on performance units and restricted stock units earned | ( | ) | ( | ) | ||||||||||||||||||||||||
| Repurchase of treasury stock ( | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends declared on common stock ($ | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends declared on preferred stock ($ | ( | ) | ( | ) | ||||||||||||||||||||||||
| Exercise of stock options ( | ||||||||||||||||||||||||||||
| Restricted stock grants, net of forfeitures ( | ||||||||||||||||||||||||||||
| Stock grants ( | ||||||||||||||||||||||||||||
| Net shares issued in satisfaction of restricted stock units earned ( | ||||||||||||||||||||||||||||
| Net shares issued in satisfaction of performance units earned ( | ||||||||||||||||||||||||||||
| Repurchase of treasury stock ( | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
6
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Three Months Ended March 31, | ||||||||
| (dollars in thousands) | 2022 | 2021 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization of premises and equipment | ||||||||
| Provision for (reversal of) credit losses | ( | ) | ||||||
| Amortization of intangibles | ||||||||
| Net accretion of loans | ( | ) | ( | ) | ||||
| Accretion on bank premises | ( | ) | ( | ) | ||||
| Accretion on deposits | ( | ) | ( | ) | ||||
| Amortization (accretion) on borrowings, net | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Losses on equity securities, net | ||||||||
| Gains on sale of loans held-for-sale, net | ( | ) | ( | ) | ||||
| Loans originated for resale | ( | ) | ( | ) | ||||
| Proceeds from sale of loans held-for-sale | ||||||||
| Gain on sale of branches | - | ( | ) | |||||
| Net losses on disposition of other premises and equipment | - | |||||||
| Increase in cash surrender value of bank owned life insurance | ( | ) | ( | ) | ||||
| Amortization of premiums and accretion of discounts on securities available-for-sale | ||||||||
| Amortization of subordinated debentures issuance costs | ||||||||
| Decrease in accrued interest receivable | ||||||||
| Net change in operating leases | ( | ) | ( | ) | ||||
| (Increase) decrease in other assets | ( | ) | ||||||
| Increase in other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Investment securities available-for-sale: | ||||||||
| Purchases | ( | ) | ( | ) | ||||
| Maturities, calls and principal repayments | ||||||||
| Net redemptions of restricted investment in bank stocks | ||||||||
| Payments on loans held-for-sale | - | |||||||
| Net increase in loans | ( | ) | ( | ) | ||||
| Purchases of premises and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of branches | - | |||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Net increase (decrease) in deposits | ( | ) | ||||||
| Advances of Federal Home Loan Bank (“FHLB”) borrowings | - | |||||||
| Repayments of FHLB borrowings | ( | ) | ( | ) | ||||
| Decrease in subordinated debt | - | ( | ) | |||||
| Cash dividends on preferred stock | ( | ) | - | |||||
| Cash dividends paid on common stock | ( | ) | ( | ) | ||||
| Repurchase of treasury stock | ( | ) | ( | ) | ||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
7
(continued)
Supplemental disclosures of cash flow information
| Cash payments for: | ||||||||
| Interest paid on deposits and borrowings | $ | $ | ||||||
| Income taxes | ||||||||
Supplemental disclosures of noncash activities
| Investing: | ||||||||
| Transfer of loans to other real estate owned | $ | $ | ||||||
| Transfer of loans from held-for-investment to held-for-sale | - | |||||||
See accompanying notes to unaudited consolidated financial statements.
8
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1a. Nature of Operations, Principles of Consolidation and Risk and Uncertainties
Nature of Operations
ConnectOne Bancorp, Inc. (the “Parent Corporation”) is incorporated under the laws of the State of New Jersey and is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). The Parent Corporation’s business currently consists of the operation of its wholly-owned subsidiary, ConnectOne Bank (the “Bank” and, collectively with the Parent Corporation and the Parent Corporation’s subsidiaries, the “Company”). The Bank’s subsidiaries include Union Investment Co. (a New Jersey investment company), Twin Bridge Investment Co. (a Delaware investment company), ConnectOne Preferred Funding Corp. (a New Jersey real estate investment trust), Center Financial Group, LLC (a New Jersey financial services company), Center Advertising, Inc. (a New Jersey advertising company), Morris Property Company, LLC, (a New Jersey limited liability company), Volosin Holdings, LLC, (a New Jersey limited liability company), NJCB Spec-1, LLC (a New Jersey limited liability company), Port Jervis Holdings, LLC (a New Jersey limited liability company), BONJ Special Properties, LLC (a New Jersey limited liability company) and BoeFly, Inc. (a New Jersey financial technology company).
The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey and through its twenty-three other banking offices. Substantially all loans are secured with various types of collateral, including business assets, consumer assets and commercial/residential real estate. Each borrower’s ability to repay its loans is dependent on the conversion of assets, cash flows generated from the borrowers’ business, real estate rental and consumer wages.
The preceding unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and, accordingly, do not include all of the information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022, or for any other interim period. The Company’s 2021 Annual Report on Form 10-K should be read in conjunction with these consolidated financial statements.
Basis of Presentation
The consolidated financial statements have been prepared in conformity with GAAP. Some items in the prior year consolidated financial statements were reclassified to conform to current presentation. Reclassifications had no effect on prior year net income or stockholders’ equity.
Use of Estimates
In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated statements of condition and that affect the results of operations for the periods presented. Actual results could differ significantly from those estimates.
Risks and Uncertainties
As previously disclosed, on March 11, 2020 the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to impact the United States and the world. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to, among other things, provide emergency assistance for individuals, families and businesses affected by the COVID-19 pandemic. The COVID-19 pandemic has adversely affected, and continues to adversely affect economic activity globally, nationally and locally. Although economic activity began to accelerate in 2021, and the United States continues to implement a COVID-19 vaccination program, COVID-19, it’s variants and actions taken to mitigate the spread of it have had and may in the future have an adverse impact on the economies and financial markets of many countries and parts of the United States, including the New Jersey/New York metropolitan area in which the Company primarily operates. Although the Company has been able to continue operations while taking steps to ensure the safety of employees and clients, COVID-19 could impact the Company’s operations in the future. The effects of the COVID-19 pandemic may adversely affect the Company’s financial condition and results of operations in future periods. Although state and local governments have lifted many restrictions on conducting business, it is possible that restrictions could be reimposed.
9
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1b. Authoritative Accounting Guidance
Newly Issued, But Not Yet Effective Accounting Standards
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, “Receivables - Troubled Debt Restructurings by Creditors” for entities that have adopted the current expected credit loss (“CECL”) model introduced by ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13”). ASU 2022-02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments—Credit Losses—Measured at Amortized Cost”. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the effect that ASU 2022-02 will have on its consolidated financial statements.
Note 2. Earnings per Common Share
Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No. 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”). The restricted stock awards granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities. The two-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.
Earnings per common share have been computed based on the following:
| Three Months Ended March 31, | ||||||||
| (dollars in thousands, except for per share data) | 2022 | 2021 | ||||||
| Net income available to common stockholders | $ | $ | ||||||
| Earnings allocated to participating securities | ( | ) | ( | ) | ||||
| Income attributable to common stock | $ | $ | ||||||
| Weighted average common shares outstanding, including participating securities | ||||||||
| Weighted average participating securities | ( | ) | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||
| Incremental shares from assumed conversions of options, performance units and restricted shares | ||||||||
| Weighted average common and equivalent shares outstanding | ||||||||
| Earnings per common share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | ||||||||
There were no antidilutive share equivalents for the quarters ended March 31, 2022 and March 31, 2021.
10
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 3. Investment Securities
The Company’s investment securities are classified as available-for-sale as of March 31, 2022 and December 31, 2021. Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in stockholders’ equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of March 31, 2022 and December 31, 2021. Fair value is based upon either quoted market prices, or in certain cases where there is limited activity in the market for a particular instrument, assumptions are made to determine their fair value. See Note 6 of the Notes to Consolidated Financial Statements for a further discussion.
The following tables present information related to the Company’s portfolio of securities available-for-sale as of March 31, 2022 and December 31, 2021.
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Allowance for Investment Credit Losses | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||
| Federal agency obligations | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Residential mortgage pass-through securities | ( | ) | ||||||||||||||||||
| Commercial mortgage pass-through securities | ( | ) | ||||||||||||||||||
| Obligations of U.S. states and political subdivisions | ( | ) | ||||||||||||||||||
| Corporate bonds and notes | ( | ) | ||||||||||||||||||
| Asset-backed securities | ( | ) | ||||||||||||||||||
| Other securities | ||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||
| Federal agency obligations | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Residential mortgage pass-through securities | ( | ) | ||||||||||||||||||
| Commercial mortgage pass-through securities | ( | ) | ||||||||||||||||||
| Obligations of U.S. states and political subdivisions | ( | ) | ||||||||||||||||||
| Corporate bonds and notes | ||||||||||||||||||||
| Asset-backed securities | ( | ) | ||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||
| Other securities | ||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
11
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 3. Investment Securities – (continued)
Investment securities having a carrying value of
approximately $
The following table presents information for investments in securities available-for-sale as of March 31, 2022, based on scheduled maturities. Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call options of the issuer. Securities not due at a single maturity date are shown separately.
| March 31, 2022 | ||||||||
| Amortized Cost | Fair Value | |||||||
| (dollars in thousands) | ||||||||
| Securities available-for-sale: | ||||||||
| Due in one year or less | $ | $ | ||||||
| Due after one year through five years | ||||||||
| Due after five years through ten years | ||||||||
| Due after ten years | ||||||||
| Residential mortgage pass-through securities | ||||||||
| Commercial mortgage pass-through securities | ||||||||
| Other securities | ||||||||
| Total securities available-for-sale | $ | $ | ||||||
We had no gross gains or losses from the sale of securities for the three months ended March 31, 2022 and 2021.
12
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 3. Investment Securities – (continued)
Impairment Analysis of Available--for-sale Debt Securities
The following tables indicate gross unrealized losses in an unrealized loss position for which an allowance for credit losses (“ACL”) has not been recorded, aggregated by investment category and by the length of continuous time individual securities have been in an unrealized loss position as of March 31, 2022 and December 31, 2021.
| March 31, 2022 | ||||||||||||||||||||||||
| Total | Less than 12 Months | 12 Months or Longer | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Investment Securities Available-for-Sale: | ||||||||||||||||||||||||
| Federal agency obligations | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||
| Residential mortgage pass-through securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Commercial mortgage pass-through securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Obligations of U.S. states and political subdivisions | ( | ) | ( | ) | ||||||||||||||||||||
| Corporate bonds and notes | ( | ) | ( | ) | ||||||||||||||||||||
| Asset-backed securities | ( | ) | ( | ) | ||||||||||||||||||||
| Total temporarily impaired securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||
| Total | Less than 12 Months | 12 Months or Longer | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Investment Securities Available-for-Sale: | ||||||||||||||||||||||||
| Federal agency obligations | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||
| Residential mortgage pass-through securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Commercial mortgage pass-through securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Obligations of U.S. states and political subdivisions | ( | ) | ( | ) | ||||||||||||||||||||
| Asset-backed securities | ( | ) | ( | ) | ||||||||||||||||||||
| Total Temporarily Impaired Securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
13
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 3. Investment Securities – (continued)
The Company has elected
to exclude accrued interest from the amortized cost of its investment securities available-for-sale. Accrued interest receivable
for investment securities available for sale as of March 31, 2022 and December 31, 2021, totaled $
The Company evaluates securities in unrealized loss position for impairment related to credit losses on at least a quarterly basis. Securities in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses on asset backed securities and state and municipal securities 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. No allowance for credit losses for available-for-sale securities was recorded as of March 31, 2022.
Federal agency obligations, residential mortgage backed pass-through securities and commercial mortgage back pass-through securities are issued by U.S. Government agencies and U.S. Government sponsored enterprises. Although a government guarantee exists on these investments, these entities are not legally backed by the full faith and credit of the federal government, and the current support they receive is subject to a cap as part of the agreement entered into in 2008. Nonetheless, at this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments as the issuers are an integral part of the U.S. housing market in providing liquidity and stability. Therefore, we concluded that a zero-allowance approach for these investment securities is appropriate.
Note 4. Derivatives
The Company utilizes interest rate swap agreements
as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest
rate swap does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount
and the other terms of the individual interest rate swap agreements. An interest rate swap was entered into on April 13, 2017 with
a respective notional amount of $
In addition, during 2021, the Company entered into
9 forward starting pay fixed-rate interest rate swaps, 7 of which have since commenced, with a total notional amount of $
14
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 4. Derivatives – (continued)
Interest expense recorded on these swap transactions
totaled approximately $
Cash Flow Hedge
The following table presents the net losses recorded in other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the following periods:
| Three Months Ended March 31, 2022 | ||||||||||||
| Amount of gain (loss) recognized in OCI (Effective Portion) | Amount of (gain) loss reclassified from OCI to interest income | Amount of gain recognized in other Noninterest income (Ineffective Portion) | ||||||||||
| (dollars in thousands) | ||||||||||||
| Interest rate contracts | $ | $ | $ | |||||||||
| Three Months Ended March 31, 2021 | ||||||||||||
| Amount of gain (loss) recognized in OCI (Effective Portion) | Amount of gain (loss) reclassified from OCI to interest income | Amount of gain recognized in other Noninterest income (Ineffective Portion) | ||||||||||
| (dollars in thousands) | ||||||||||||
| Interest rate contracts | $ | $ | $ | |||||||||
The following table reflects the cash flow hedges included in the consolidated statements of condition as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Interest rate swaps related to FHLB advances included in assets | $ | $ | $ | $ | ||||||||||||
15
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses
Loans Receivable – The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred fees, as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Commercial (1) | $ | $ | ||||||
| Commercial real estate | ||||||||
| Commercial construction | ||||||||
| Residential real estate | ||||||||
| Consumer | ||||||||
| Gross loans | ||||||||
| Net deferred loan fees | ( | ) | ( | ) | ||||
| Total loans receivable | $ | $ | ||||||
| (1) |
As of both March 31, 2022 and December
31, 2021, loan balances of approximately $
Loans held-for-sale - The following table sets forth the composition of the Company’s loans held-for-sale portfolio as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Commercial real estate | $ | $ | ||||||
| Residential real estate | ||||||||
| Total carrying amount | $ | $ | ||||||
Loans Receivable on Nonaccrual Status - The following tables present nonaccrual loans with an ACL and nonaccrual loans without an ACL as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | ||||||||||||
| Nonaccrual loans with ACL | Nonaccrual loans without ACL | Total Nonaccrual loans | ||||||||||
| (dollars in thousands) | ||||||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Commercial construction | ||||||||||||
| Residential real estate | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | $ | |||||||||
16
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
| December 31, 2021 | ||||||||||||
| Nonaccrual loans with ACL | Nonaccrual loans without ACL | Total Nonaccrual loans | ||||||||||
| (dollars in thousands) | ||||||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Commercial construction | ||||||||||||
| Residential real estate | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | $ | |||||||||
Nonaccrual loans and loans 90 days or greater past due and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and loans individually evaluated for impairment.
Credit Quality Indicators - The Company continuously monitors the credit quality of its loans receivable. In addition to its internal monitoring, the Company utilizes the services of a third-party loan review firm to periodically validate the credit quality of its loans receivable on a sample basis. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies are not corrected.
17
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the table below. The following table presents loans by origination and risk designation as of March 31, 2022 (dollars in thousands):
| Term loans amortized cost basis by origination year | Revolving | Total | ||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Loans | Gross Loans | |||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial Real Estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Construction | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial Construction | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Residential Real Estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Consumer | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
18
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
The following table presents loans by origination and risk designation as of December 31, 2021 (dollars in thousands):
| Term loans amortized cost basis by origination year | Revolving | Total | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2018 | 8.5 | Prior | Loans | Gross Loans | |||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial Real Estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Construction | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Commercial Construction | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Residential Real Estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Total Consumer | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Collateral Dependent Loans: Loans which meet certain criteria are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the fair value of the collateral as of the reporting date. The following table presents collateral dependent loans that were individually evaluated for impairment as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | ||||||||||||
| Real Estate | Other | Total | ||||||||||
| (dollars in thousands) | ||||||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Commercial construction | ||||||||||||
| Residential real estate | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | $ | |||||||||
19
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
| December 31, 2021 | ||||||||||||
| Real Estate | Other | Total | ||||||||||
| (dollars in thousands) | ||||||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Commercial construction | ||||||||||||
| Residential real estate | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | $ | |||||||||
Aging Analysis - The following table provides an analysis of the aging of the loans by class, excluding net deferred fees, that are past due as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | ||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater Past Due and Still Accruing | Nonaccrual | Total Past Due and Nonaccrual | Current | Gross Loans | ||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real Estate | ||||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||||
| Residential real Estate | ||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or Greater Past Due and Still Accruing | Nonaccrual | Total Past Due and Nonaccrual | Current | Gross Loans | ||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real Estate | ||||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||||
| Residential real Estate | ||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
20
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated quality, and the related portion of the allowance for credit losses that are allocated to each loan portfolio segment:
| March 31, 2022 | ||||||||||||||||||||||||
| Commercial | Commercial real estate | Commercial construction | Residential real estate | Consumer | Total | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Allowance for credit losses - loans | ||||||||||||||||||||||||
| Individually evaluated impairment | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Collectively evaluated impairment | ||||||||||||||||||||||||
| Acquired with deteriorated credit quality individually analyzed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross loans | ||||||||||||||||||||||||
| Individually evaluated impairment | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Collectively evaluated impairment | ||||||||||||||||||||||||
| Acquired with deteriorated credit quality individually analyzed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
| Commercial | Commercial real estate | Commercial construction | Residential real estate | Consumer | Total | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Allowance for credit losses - loans | ||||||||||||||||||||||||
| Individually evaluated impairment | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Collectively evaluated impairment | ||||||||||||||||||||||||
| Acquired with deteriorated credit quality individually analyzed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross loans | ||||||||||||||||||||||||
| Individually evaluated impairment | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Collectively evaluated impairment | ||||||||||||||||||||||||
| Acquired with deteriorated credit quality individually analyzed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
21
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
Activity in the Company’s ACL for loans for the three months ended March 31, 2022 is summarized in the table below.
| Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||
| Commercial | Commercial real estate | Commercial construction | Residential real estate | Consumer | Unallocated | Total | ||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||
| (Reversal of) provision for credit losses (loans) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Activity in the Company’s ACL for loans for the three months ended March 31, 2021 is summarized in the table below. The CECL Day 1 row presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to the ACL for loans associated with nonaccretable purchase accounting marks on loans that were classified as PCI as of December 31, 2020.
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||
| Commercial | Commercial real estate | Commercial construction | Residential real estate | Consumer | Unallocated | Total | ||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Day 1 effect of CECL | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of January 1, 2021 as adjusted for changes in accounting principle | ||||||||||||||||||||||||||||
| Charge-offs | ||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||
| (Reversal of) provision for credit losses (loans) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
22
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
Troubled Debt Restructurings
Loans are considered to have been modified in a troubled debt restructuring (“TDRs”) when, except as discussed below, due to a borrower’s financial difficulties, the Company makes certain concessions to the borrower that it would not otherwise consider. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Generally, a nonaccrual loan that has been modified in a troubled debt restructuring remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status.
As of March 31, 2022, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due 90 days or greater and still accruing interest, or whose terms have been modified in troubled debt restructurings.
As of March 31, 2022, TDRs totaled $
The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2022:
| Pre-Modification | Post-Modification | |||||||||||
| Outstanding | Outstanding | |||||||||||
| Number of | Recorded | Recorded | ||||||||||
| Loans | Investment | Investment | ||||||||||
| (dollars in thousands) | ||||||||||||
| Troubled debt restructurings: | ||||||||||||
| Commercial | $ | $ | ||||||||||
| Commercial real estate | ||||||||||||
| Total | $ | $ | ||||||||||
The commercial loan modified as a TDR during the
three months ended March 31, 2022 was a maturity extension, while the commercial real estate loan modified as a TDR during the three months
ended March 31, 2022 was an interest rate reduction, that was commensurate with a one-time, $
The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2021:
| Pre-Modification | Post-Modification | |||||||||||
| Outstanding | Outstanding | |||||||||||
| Number of | Recorded | Recorded | ||||||||||
| Loans | Investment | Investment | ||||||||||
| (dollars in thousands) | ||||||||||||
| Troubled debt restructurings: | ||||||||||||
| Commercial real estate | $ | $ | ||||||||||
| Residential real estate | ||||||||||||
| Total | $ | $ | ||||||||||
The two residential real estate loans modified as TDRs during the three months ended March 31, 2021 were maturity extensions, while the one commercial real estate loan was a recast of a nonaccrual credit.
There were no TDRs for which there was a payment default within twelve months following the modification during the three months ended March 31, 2022 and March 31, 2021.
23
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5. Loans and the Allowance for Credit Losses – (continued)
Allowance for Credit Losses for Unfunded Commitments
The Company has recorded an ACL for unfunded credit commitments, which was recorded in other liabilities. The provision is recorded within the (reversal of) provision for credit losses on the Company’s income statement. The following table presents a rollforward of the allowance for credit losses for unfunded commitments for the three months ended March 31, 2022 and March 31, 2021:
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Balance at beginning of period | $ | $ | ||||||
| Day 1 Effect of CECL | ||||||||
| (Reversal of) provision for credit losses (unfunded commitments) | ( | ) | ( | ) | ||||
| Balance at end of period | $ | $ | ||||||
Components of (Reversal of) Provision for Credit Losses
The following table summarizes the (reversal of) provision for credit losses for the three months ended March 31, 2022 and March 31, 2021:
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Provision for (Reversal of) credit losses (loans) | $ | $ | ( | ) | ||||
| Reversal of credit losses (unfunded commitments) | ( | ) | ( | ) | ||||
| Provision for (Reversal of) credit losses | $ | $ | ( | ) | ||||
24
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
| Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
|
Level 2: Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| ||
| Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (for example, supported with little or no market activity). |
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:
Securities Available-for-Sale and Equity Securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of instruments which would generally be classified within Level 2 of the valuation hierarchy include municipal bonds and certain agency collateralized mortgage obligations. In certain cases where there is limited activity in the market for a particular instrument, assumptions must be made to determine the fair value of the instruments and these are classified as Level 3. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. The Company’s evaluations are based on market data and the Company employs combinations of these approaches for its valuation methods depending on the asset class.
Derivatives: The fair value of derivatives is based on valuation models using observable market data as of the measurement date (level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rate, and volatility factors to
value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.
25
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used as of March 31, 2022 and December 31, 2021 are as follows:
| March 31, 2022 | ||||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Recurring fair value measurements: Assets | ||||||||||||||||
| Investment securities: | ||||||||||||||||
| Available-for-sale: | ||||||||||||||||
| Federal agency obligations | $ | $ | $ | $ | ||||||||||||
| Residential mortgage pass-through securities | ||||||||||||||||
| Commercial mortgage pass-through securities | ||||||||||||||||
| Obligations of U.S. states and political subdivision | ||||||||||||||||
| Corporate bonds and notes | ||||||||||||||||
| Asset-backed securities | ||||||||||||||||
| Certificates of deposit | ||||||||||||||||
| Other securities | ||||||||||||||||
| Total available-for-sale | ||||||||||||||||
| Equity securities | ||||||||||||||||
| Derivatives | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
26
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
| December 31, 2021 | ||||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Recurring fair value measurements: Assets | ||||||||||||||||
| Investment securities: | ||||||||||||||||
| Available-for-sale: | ||||||||||||||||
| Federal agency obligations | $ | $ | $ | $ | ||||||||||||
| Residential mortgage pass- through securities | ||||||||||||||||
| Commercial mortgage pass-through securities | ||||||||||||||||
| Obligations of U.S. states and political subdivision | ||||||||||||||||
| Corporate bonds and notes | ||||||||||||||||
| Asset-backed securities | ||||||||||||||||
| Certificates of deposit | ||||||||||||||||
| Other securities | ||||||||||||||||
| Total available-for-sale | $ | $ | $ | $ | ||||||||||||
| Equity securities | ||||||||||||||||
| Derivatives | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2022 and during the year ended December 31, 2021.
Assets Measured at Fair Value on a Nonrecurring Basis
The Company may be required periodically to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or impairment write-downs of individual assets. The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis as of March 31, 2022 and December 31, 2021.
Loans Held-for-Sale: Residential mortgage loans, originated and intended for sale in the secondary market, are carried at the lower of aggregate cost or estimated fair value as determined by outstanding commitments from investors. For these loans originated and intended for sale, gains and losses on loan sales (sale proceeds minus carrying value) are recorded in other income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in other income upon sale of the loan. Management obtains quotes or bids on all or parts of these loans directly from the purchasing financial institutions (Level 2).
Other loans held-for-sale are carried at the lower of aggregate cost or estimated fair value. Fair value of these loans is determined based on the terms of the loan, such as interest rate, maturity date, reset term, as well as sales of similar assets (Level 3).
27
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
Collateral Dependent Loans: The Company may record adjustments to the carrying value of loans based on fair value measurements, generally as partial charge-offs of the uncollectible portions of these loans. These adjustments also include certain impairment amounts for collateral dependent loans calculated in accordance with GAAP. Impairment amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated impairment amount applicable to that loan does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable by market participants. However, due to the substantial judgment applied and limited volume of activity as compared to other assets, fair value is based on Level 3 inputs. Estimates of fair value used for collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and are also based on Level 3 inputs.
For assets measured at fair value on a nonrecurring basis, the fair value measurements as of March 31, 2022 and December 31, 2021 are as follows:
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| Assets measured at fair value on a nonrecurring basis: | Carrying Value as of March 31, 2022 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Collateral dependent loans: | (dollars in thousands) | |||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Residential real estate | ||||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| Assets measured at fair value on a nonrecurring basis: | December 31, 2021 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Collateral dependent loans: | (dollars in thousands) | |||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Residential real estate | ||||||||||||||||
Collateral dependent
loans – Collateral dependent loans as of March 31, 2022 that required a valuation allowance were $
28
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
Assets Measured with Significant Unobservable Level 3 Inputs
Recurring basis
The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2022 and for the year ended December 31, 2021:
| Municipal Securities | ||||
| (dollars in thousands) | ||||
| Beginning balance, December 31, 2021 | $ | |||
| Principal paydowns | ( | ) | ||
| Ending balance, March 31, 2022 | $ | |||
| Municipal Securities | ||||
| (dollars in thousands) | ||||
| Beginning balance, December 31, 2020 | $ | |||
| Principal paydowns | ( | ) | ||
| Ending balance, December 31, 2021 | $ | |||
The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021. The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.
| March 31, 2022 | ||||||||||||
| Fair Value | Valuation Techniques | Unobservable Input | Rate | |||||||||
| Securities available-for-sale: | (dollars in thousands) | |||||||||||
| Municipal securities | $ | % | ||||||||||
| December 31, 2021 | ||||||||||||
| Fair Value | Valuation Techniques | Unobservable Input | Rate | |||||||||
| Securities available-for-sale: | (dollars in thousands) | |||||||||||
| Municipal securities | $ | % | ||||||||||
29
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
Nonrecurring basis: The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis for the periods presented. The tables below provide quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy of collateral dependent loans.
| March 31, 2022 | |||||||||||
| (dollars in thousands) | Fair Value | Valuation Techniques | Unobservable Input | Range (weighted average) | |||||||
| Commercial | $ | ||||||||||
| Commercial | $ | - | |||||||||
| Commercial real estate | $ | - | |||||||||
| Residential real estate | $ | + | |||||||||
| December 31, 2021 | |||||||||||
| (dollars in thousands) | Fair Value | Valuation Techniques | Unobservable Input | Range (weighed average) | |||||||
| Commercial | $ | ||||||||||
| Commercial | $ | - |
|||||||||
| Commercial real estate | $ | - |
|||||||||
| Residential real estate | $ | - |
|||||||||
30
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
As of March 31, 2022 the fair value measurements presented are consistent with Topic 820, Fair Value Measurement, in which fair value represents exit price. The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2022 and December 31, 2021:
| Fair Value Measurements | ||||||||||||||||||||
| Carrying Amount | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||
| Restricted investments in bank stocks | n/a | n/a | n/a | n/a | ||||||||||||||||
| Equity securities | - | |||||||||||||||||||
| Net loans | ||||||||||||||||||||
| Derivatives | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Noninterest-bearing deposits | ||||||||||||||||||||
| Interest-bearing deposits | - | |||||||||||||||||||
| Borrowings | ||||||||||||||||||||
| Subordinated debentures | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||
| Investment securities available-for-sale | ||||||||||||||||||||
| Restricted investment in bank stocks | n/a | n/a | n/a | n/a | ||||||||||||||||
| Equity securities | ||||||||||||||||||||
| Net loans | ||||||||||||||||||||
| Derivatives | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Noninterest-bearing deposits | ||||||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||||
| Borrowings | ||||||||||||||||||||
| Subordinated debentures | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
31
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Fair Value Measurements and Fair Value of Financial Instruments – (continued)
The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of commitments to originate loans is immaterial and not included in the tables above.
Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.
Fair value estimates are based on existing balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, there are certain significant assets and liabilities that are not considered financial assets or liabilities, such as deferred taxes, premises and equipment, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
Management believes that reasonable comparability between financial institutions may not be likely, due to the wide range of permitted valuation techniques and numerous estimates which must be made, given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.
Note 7. Comprehensive (Loss) Income
Total comprehensive (loss) income includes all changes in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s other comprehensive income is comprised of unrealized holding gains and losses on securities available-for-sale, unrealized gains (losses) on cash flow hedges, obligations for defined benefit pension plan and an adjustment to reflect the curtailment of the Company’s defined benefit pension plan, each net of taxes.
The following table represents the reclassification out of accumulated other comprehensive (loss) for the periods presented (dollars in thousands):
| Details about Accumulated Other Comprehensive Income Components | Amounts Reclassified from Accumulated Other Comprehensive Income | Affected Line item in the Consolidated Statements of Income | ||||||||
| Three Months Ended March 31, | ||||||||||
| 2022 | 2021 | |||||||||
| Net interest income on swaps | $ | ( | ) | $ | ( | ) | Interest expense | |||
| Income tax expense | ||||||||||
| $ | ( | ) | $ | ( | ) | |||||
| Amortization of pension plan net actuarial losses | $ | ( | ) | $ | ( | ) | Other components of net periodic pension expense | |||
| Income tax expense | ||||||||||
| $ | ( | ) | $ | ( | ) | |||||
| Total reclassification | $ | ( | ) | $ | ( | ) | ||||
32
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 7. Comprehensive (Loss) Income – (continued)
Accumulated other comprehensive (loss) as of March 31, 2022 and December 31, 2021 consisted of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Investment securities available-for-sale, net of tax | $ | ( | ) | $ | ( | ) | ||
| Cash flow hedge, net of tax | ||||||||
| Defined benefit pension and post-retirement plans, net of tax | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
Note 8. Stock-based Compensation
The Company’s stockholders approved the 2017
Equity Compensation Plan (“the Plan”) on May 23, 2017. The Plan eliminates all remaining issuable shares under previous plans
and is the only outstanding plan as of March 31, 2022. The maximum number of shares of common stock or equivalents which may be issued
under the Plan, is
Restricted stock, options and restricted stock
units typically have a three-year vesting period starting one year after the date of grant with one-third vesting each year. The options
generally expire
All awards are issued at the fair value of the
underlying shares at the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the
awards at the date of grant, ratably over the vesting period. Forfeiture rates are not estimated but are recorded as incurred. Stock-based
compensation expense for the three months ended March 31, 2022 and March 31, 2021 was $
Activity under the Company’s options for the three months ended March 31, 2022 was as follows:
| Number of Stock Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited/cancelled/expired | ||||||||||||||||
| Outstanding as of March 31, 2022 | $ | |||||||||||||||
| Exercisable as of March 31, 2022 | $ | $ | ||||||||||||||
The aggregate intrinsic value of outstanding and exercisable options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on March 31, 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2022. This amount changes based on the fair market value of the Company’s stock.
33
CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 8. Stock-Based Compensation – (continued)
Activity under the Company’s restricted shares for the three months ended March 31, 2022 was as follows: