Safe and Sound

ConnectOne Bank

Englewood Cliffs, NJ
4
Star Rating
ConnectOne Bank is an Englewood Cliffs, NJ-based, FDIC-insured bank dating back to 2005. Regulatory filings show the bank having equity of $595.2 million on assets of $4.68 billion, as of June 30, 2017.

With 286 full-time employees in 21 offices in multiple states, the bank currently holds loans and leases worth $3.78 billion, including real estate loans of $3.26 billion. U.S. bank customers currently have $3.44 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, ConnectOne Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three key criteria Bankrate used to evaluate U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is useful. It works as a cushion against losses and affords protection for depositors during times of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.
ConnectOne Bank came in below the national average of 13.38 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. ConnectOne Bank's Tier 1 capital ratio was 10.64 percent, exceeding the 6 percent level considered adequate by regulators, but under the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, ConnectOne Bank held equity amounting to 12.72 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.

A bank with a large number of these kinds of assets may eventually have to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a future failure.

ConnectOne Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, below the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of June 30, 2017, 1.80 percent of ConnectOne Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on ConnectOne Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, reduce a bank's ability to do those things.

ConnectOne Bank underperformed the average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. ConnectOne Bank's most recent annualized quarterly return on equity was 7.20 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank earned net income of $21.2 million on total equity of $595.2 million. The bank reported an annualized return on average assets, or ROA, of 0.94 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.