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ConnectOne Bancorp, Inc. Reports Third Quarter 2023 Results; Declares Common and Preferred Dividends

ENGLEWOOD CLIFFS, N.J., Oct. 26, 2023 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $19.9 million for the third quarter of 2023, compared to $19.9 million for the second quarter of 2023 and $27.4 million for the third quarter of 2022. Diluted earnings per share were $0.51 for the third quarter of 2023, $0.51 for the second quarter of 2023 and $0.70 for the third quarter of 2022. The decreases in net income available to common stockholders and diluted earnings per share from the third quarter of 2022 were primarily due to a $15.8 million decrease in net interest income and a $3.6 million increase in noninterest expenses, partially offset by an $8.5 million decrease in the provision for credit losses, a $0.2 million increase in noninterest income and a $3.2 million decrease in income tax expense.

Pre-tax, pre-provision net revenue (“PPNR”) as a percentage of average assets was 1.24%, 1.31% and 2.17% for the quarters ending September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

“ConnectOne’s operating performance during the 2023 third quarter reflected a commitment to our deep client relationships resulting in a solid balance sheet with the flexibility to support both new and existing clients,” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer. “Despite challenging market conditions, ConnectOne is poised to withstand the current interest rate cycle and we’re well positioned to opportunistically capitalize on new growth opportunities we see today, as well as those expected upon a return to normalcy. Our robust, readily available liquidity position remains nearly 2.5 times our uninsured deposits, net of collateralized and intercompany subsidiary deposits. Further, our tangible common equity ratio, which continues to be a notable challenge for much of the industry due to rising long-term rates, remains above 9%. This key capital ratio is well above peer averages, demonstrating continued effective management of ConnectOne’s capital and AOCI. Additionally, our credit quality metrics remain sound, reflective of prudent underwriting, strong portfolio oversight and a resilient economy.”

“For the quarter, client deposits (which exclude non-reciprocal brokered deposits) increased modestly while the loan portfolio remained relatively flat sequentially.” Mr. Sorrentino added, “As expected, our net interest margin contracted just slightly, as funding costs are showing signs of leveling out. Nevertheless, fierce deposit competition and the continued migration out of non-interest-bearing deposit demand balances suggest we may experience additional, albeit modest, contraction in our net interest margin near-term.”

“Operationally, we continue to leverage our technological advantages and our culture to drive performance. Further, we’re seizing opportunities to strengthen ConnectOne’s team by adding high-performing talent across the board, including revenue-producing areas, while also optimizing operations, staff count and branch footprint.”

Mr. Sorrentino concluded, “As we approach the fourth quarter and focus on navigating the challenges that lie ahead, I believe ConnectOne is well-positioned to capitalize on opportunities in any environment. We remain one of the industry’s most efficient banks nationwide and, by maintaining our long-standing financial discipline, leveraging our results-oriented client-centric culture and continuing to invest in our valuable franchise, ConnectOne is poised for continued success.”

Dividend Declarations

The Company announced that its Board of Directors declared a quarterly cash dividend on its common stock and declared a cash dividend on its outstanding preferred stock.

A cash dividend on common stock of $0.17 will be paid on December 1, 2023, to common stockholders of record on November 15, 2023. A dividend of $0.328125 per depositary share, representing a 1/40th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on December 1, 2023 to preferred stockholders of record on November 15, 2023.

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2023 was $63.2 million, a decrease of $1.4 million, or 2.2%, from the second quarter of 2023 due to a 5 basis-point contraction in the net interest margin to 2.76% from 2.81% and a $138.6 million, or 1.5%, decrease in interest-earning assets. The decrease in average interest-earning assets from the second quarter of 2023 was primarily attributable to a decrease in average cash and cash equivalents of $151.3 million, partially offset by an increase in average loans of $19.9 million. Average brokered deposits (excluding reciprocal client balances) declined by $50.9 million, or 5.3%, from the sequential quarter. While the net interest margin benefitted from a 14 basis-point increase in the loan portfolio yield to 5.63%, the average cost of deposits, including noninterest-bearing demand, increased by 26 basis-points to 2.92% from 2.66% in the second quarter of 2023. Contributing to the increased cost of deposits was a $71.9 million, or 5.3%, decline in average noninterest-bearing deposits.

Fully taxable equivalent net interest income for the third quarter of 2023 decreased by $15.6 million, or 19.8%, from the third quarter of 2022. The decrease from the third quarter of 2022 resulted primarily from a 92 basis-point decrease in the net interest margin from 3.68% to 2.76%, partially offset by an increase in interest-earning assets of $0.6 billion. The contraction of the net interest margin for the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to a 215 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by an 86 basis-point increase in the loan portfolio yield.

Noninterest income was $3.6 million in the third quarter of 2023, $3.4 million in the second quarter of 2023 and $3.3 million in the third quarter of 2022. Included in noninterest income were net losses on equity securities of $0.3 million, $0.2 million, and $0.4 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. Excluding the equity securities losses, adjusted noninterest income was $3.8 million, $3.6 million and $3.7 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. The $0.2 million increase in adjusted noninterest income for the third quarter of 2023 when compared to the second quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale of $0.1 million and an increase in deposit, loan, and other income of $0.1 million. The net gains on loans held-for-sale consisted primarily of Small Business Administration (“SBA”) loans. The $0.1 million increase in adjusted noninterest income for the third of 2023 when compared to the third quarter of 2022 was primarily due to an increase in net gains on loans held-for-sale, primarily SBA, of $0.4 million and an increase in BOLI of $0.1 million, partially offset by a decrease in deposit, loan, and other income of $0.4 million.

Noninterest expenses totaled $35.8 million for the third quarter of 2023, $35.5 million for the second quarter of 2023 and $32.1 million for the third quarter of 2022. Noninterest expenses increased by $0.3 million from the second quarter of 2023 and was primarily attributable to increases in employee benefit expense accruals of $0.5 million, FDIC insurance expense of $0.1 million and occupancy and equipment of $0.1 million, partially offset by decreases in information technology and communications of $0.2 million, professional and consulting of $0.1 million and other expenses of $0.1 million. The increase in noninterest expenses of $3.6 million from the third quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $1.4 million, FDIC insurance of $1.1 million, information technology and communications of $0.7 million, other expenses of $0.4 million, occupancy and equipment of $0.1 million and marketing and advertising of $0.1 million, partially offset by decreases in professional and consulting of $0.1 million and amortization of core deposit intangibles of $0.1 million. The increase in salaries and employee benefits from the third quarter of 2022 was primarily attributable to increased staff in both the revenue and back-office areas of the Bank as well as company-wide base salary increases. The increase in FDIC insurance expense when compared to the third quarter of 2022 is primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. The increase in information technology and communications when compared to the third quarter of 2022 is primarily attributable to additional investments in technology, equipment, and software.

Income tax expense was $7.2 million for the third quarter of 2023, $7.4 million for the second quarter of 2023 and $10.4 million for the third quarter of 2022. The effective tax rates for the third quarter of 2023, second quarter of 2023 and third quarter of 2022 were 25.2%, 25.8% and 26.5%, respectively. The decrease in the effective tax rate when compared to the second quarter of 2023 and third quarter of 2022 is largely attributable to lower taxable income.
Asset Quality

The provision for credit losses was $1.5 million for the third quarter of 2023, $3.0 million for the second quarter of 2023 and $10.0 million for the third quarter of 2022. The decrease in the provision for credit losses during the third quarter of 2023 when compared to the second quarter of 2023 was primarily attributable to lower specific reserves. The decrease in provision for credit losses during the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to changes in forecasted macroeconomic conditions.

Nonperforming assets, which include nonaccrual loans and other real estate owned, were $56.1 million as of September 30, 2023, $44.7 million as of December 31, 2022 and $57.7 million as of September 30, 2022. Nonaccrual loans were $56.1 million as of September 30, 2023, $44.5 million as of December 31, 2022 and $57.5 million as of September 30, 2022.   Nonperforming assets as a percentage of total assets were 0.58% as of September 30, 2023, 0.46% as of December 31, 2022 and 0.61% as of September 30, 2022. The ratio of nonaccrual loans to loans receivable was 0.69%, 0.55% and 0.73%, as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively.   Loans delinquent 30-89 days as a percentage of loans receivable were 0.04%, 0.02% and 0.01% as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The annualized net loan charge-offs ratio was 0.12% for the third quarter of 2023, 0.22% for the fourth quarter of 2022 and 0.02% for the third quarter of 2022. The allowance for credit losses represented 1.08%, 1.12%, and 1.16% of loans receivable as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 157.4% as of September 30, 2023, 203.6% as of December 31, 2022 and 159.7% as of September 30, 2022.

Selected Balance Sheet Items

The Company’s total assets were $9.7 billion as of September 30, 2023, an increase of $34 million from December 31, 2022.  The increase in total assets was primarily due to an increase in loans receivable of $81 million, partially offset by decreases in investment securities of $53 million. Loans receivable was $8.2 billion as of September 30, 2023 and $8.1 billion as of December 31, 2022. Total deposits were $7.4 billion, an increase of $82 million from December 31, 2022.

The Company’s total stockholders’ equity was $1.2 billion as of September 30, 2023, an increase of $9 million from December 31, 2022. The increase was primarily attributable to an increase in retained earnings of $44 million, partially offset by an increase in accumulated other comprehensive losses of $21 million and an increase in treasury stock of $15 million. The increase in accumulated other comprehensive losses during the third quarter of 2023 resulted from higher interest rates. As of September 30, 2023, the Company’s tangible common equity ratio and tangible book value per share were 9.11% and $22.34, respectively, improved from 9.04% and $21.71, respectively, as of December 31, 2022. Total goodwill and other intangible assets were $214.6 million as of September 30, 2023, and $215.7 million as of December 31, 2022.

Share Repurchase Program

During the third quarter of 2023, the Company repurchased 316,789 shares of common stock at an average price of $19.45, leaving approximately 1.0 million shares authorized for repurchase under the current Board approved repurchase program. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and the plan may be modified or suspended at any time at the Company's discretion. 

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP measures. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Third Quarter 2023 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 26, 2023 to review the Company's financial performance and operating results. The conference call dial-in number is 1-646-307-1583, access code 9727224. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Investor Relations" link on the Company's website https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, October 26, 2023 and ending on Thursday, November 2, 2023 by dialing 1-647-362-9199, access code 9727224. An online archive of the webcast will be available following the completion of the conference call at https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

About ConnectOne Bancorp, Inc.

ConnectOne Bancorp, Inc., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and the Bank’s fintech subsidiary, BoeFly, Inc. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly, Inc. is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission, as supplemented by the Company’s subsequent filings with the U.S. Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Investor Contact:
William S. Burns
Senior Executive Vice President & CFO
201.816.4474: bburns@cnob.com

Media Contact:
Shannan Weeks 
MWW 
732.299.7890: sweeks@mww.com 



CONNECTONE BANCORP, INC. AND SUBSIDIARIES      
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION     
(in thousands)      
       
 September 30, December 31,  September 30, 
  2023   2022   2022  
 (unaudited)   (unaudited) 
ASSETS      
Cash and due from banks$56,170  $61,629  $58,852  
Interest-bearing deposits with banks 197,128   206,686   274,992  
     Cash and cash equivalents 253,298   268,315   333,844  
       
Investment securities 581,867   634,884   623,629  
Equity securities 17,677   15,811   15,563  
       
Loans held-for-sale -   13,772   8,080  
       
Loans receivable 8,181,109   8,099,689   7,900,450  
Less: Allowance for credit losses - loans 88,230   90,513   91,717  
     Net loans receivable 8,092,879   8,009,176   7,808,733  
       
Investment in restricted stock, at cost 49,387   46,604   45,324  
Bank premises and equipment, net 28,432   27,800   28,519  
Accrued interest receivable 46,795   46,062   38,940  
Bank owned life insurance 236,009   231,328   229,800  
Right of use operating lease assets 11,229   10,179   10,196  
Other real estate owned -   264   264  
Goodwill 208,372   208,372   208,372  
Core deposit intangibles 6,222   7,312   7,721  
Other assets 146,718   125,069   119,267  
     Total assets$9,678,885  $9,644,948  $9,478,252  
       
LIABILITIES      
Deposits:      
     Noninterest-bearing$1,224,125  $1,501,614  $1,665,658  
     Interest-bearing 6,214,370   5,855,008   5,644,852  
          Total deposits 7,438,495   7,356,622   7,310,510  
Borrowings 887,590   857,622   829,953  
Subordinated debentures, net 79,313   153,255   153,179  
Operating lease liabilities 12,424   11,397   11,454  
Other liabilities 72,909   87,301   24,861  
     Total liabilities 8,490,731   8,466,197   8,329,957  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Preferred stock 110,927   110,927   110,927  
Common stock 586,946   586,946   586,946  
Additional paid-in capital 32,027   30,126   28,756  
Retained earnings 579,776   535,915   510,957  
Treasury stock (68,108)  (52,799)  (52,799) 
Accumulated other comprehensive loss (53,414)  (32,364)  (36,492) 
   Total stockholders' equity 1,188,154   1,178,751   1,148,295  
   Total liabilities and stockholders' equity$9,678,885  $9,644,948  $9,478,252  
       



CONNECTONE BANCORP, INC. AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(dollars in thousands, except for per share data)        
         
 Three Months EndedNine Months Ended 
 09/30/23 09/30/22 09/30/23 09/30/22 
Interest income        
     Interest and fees on loans$115,405  $90,731$333,356  $248,041  
     Interest and dividends on investment securities:        
         Taxable 4,128   4,063   12,386   8,487  
         Tax-exempt 1,136   1,083   3,475   2,708  
         Dividends 907   438   2,750   943  
     Interest on federal funds sold and other short-term investments 2,110   665   9,141   1,098  
          Total interest income 123,686   96,980   361,108   261,277  
Interest expense        
     Deposits 56,043   13,299   146,844   24,018  
     Borrowings 5,286   5,520   20,980   13,149  
          Total interest expense 61,329   18,819   167,824   37,167  
         
Net interest income 62,357   78,161   193,284   224,110  
    Provision for credit losses 1,500   10,000   5,500   14,450  
Net interest income after provision for credit losses 60,857   68,161   187,784   209,660  
         
Noninterest income        
     Deposit, loan and other income 1,605   1,969   4,553   5,578  
     Income on bank owned life insurance 1,597   1,521   4,681   4,069  
     Net gains on sale of loans held-for-sale 633   262   1,232   1,519  
     Net losses on equity securities (273)  (430)  (674)  (1,431) 
          Total noninterest income 3,562   3,322   9,792   9,735  
         
Noninterest expenses        
     Salaries and employee benefits 22,251   20,882   66,213   59,041  
     Occupancy and equipment 2,738   2,600   8,176   7,262  
     FDIC insurance 1,800   720   4,465   2,051  
     Professional and consulting 1,834   1,980   5,960   5,896  
     Marketing and advertising 554   461   1,642   1,238  
     Information technology and communications 3,487   2,747   10,192   8,414  
     Amortization of core deposit intangible 347   409   1,090   1,276  
     Increase in value of acquisition price -   -   -   1,516  
     Other expenses 2,773   2,344   8,366   6,382  
          Total noninterest expenses 35,784   32,143   106,104   93,076  
         
Income before income tax expense 28,635   39,340   91,472   126,319  
     Income tax expense 7,228   10,425   23,742   33,665  
Net income 21,407   28,915   67,730   92,654  
     Preferred dividends 1,509   1,509   4,527   4,527  
Net income available to common stockholders$19,898  $27,406  $63,203  $88,127  
Earnings per common share:        
     Basic$0.51  $0.70  $1.62  $2.24  
     Diluted 0.51   0.70   1.61   2.23  



ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies. 
           
CONNECTONE BANCORP, INC.          
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES          
           
 As of 
 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 
  2023   2023   2023   2022   2022  
Selected Financial Data(dollars in thousands) 
Total assets$9,678,885  $9,723,963  $9,960,467  $9,644,948  $9,478,252  
Loans receivable:          
  Commercial$1,454,607  $1,451,400  $1,392,565  $1,443,942  $1,392,037  
  Paycheck Protection Program ("PPP") loans 9,872   10,845   11,300   11,374   11,458  
  Commercial real estate 3,288,704   3,237,559   3,245,990   3,170,760   3,087,354  
  Multifamily 2,559,927   2,604,230   2,600,251   2,641,886   2,624,726  
  Commercial construction 622,748   596,362   630,469   574,139   537,323  
  Residential 251,416   254,405   259,166   264,748   256,085  
  Consumer 936   1,416   1,435   2,312   1,030  
  Gross loans 8,188,210   8,156,217   8,141,176   8,109,161   7,910,013  
Unearned net origination fees (7,101)  (7,677)  (9,057)  (9,472)  (9,563) 
   Loans receivable 8,181,109   8,148,540   8,132,119   8,099,689   7,900,450  
   Loans held-for-sale -   1,089   11,197   13,772   8,080  
Total loans$8,181,109  $8,149,629  $8,143,316  $8,113,461  $7,908,530  
           
Investment and equity securities$599,544  $630,769  $647,026  $650,695  $639,192  
Goodwill and other intangible assets 214,594   214,941   215,312   215,684   216,093  
Deposits:          
  Noninterest-bearing demand$1,224,125  $1,356,293  $1,345,265  $1,501,614  $1,665,658  
  Time deposits 2,522,210   2,621,148   2,706,662   2,394,190   1,921,235  
  Other interest-bearing deposits 3,692,160   3,560,856   3,701,249   3,460,818   3,723,617  
Total deposits$7,438,495  $7,538,297  $7,753,176  $7,356,622  $7,310,510  
           
Borrowings$887,590  $827,601  $852,611  $857,622  $829,953  
Subordinated debentures, net 79,313   79,187   79,060   153,255   153,179  
Total stockholders' equity 1,188,154   1,199,397   1,190,970   1,178,751   1,148,295  
           
Quarterly Average Balances          
Total assets$9,625,625  $9,765,582  $9,700,530  $9,490,477  $9,030,589  
Loans receivable:          
  Commercial (including PPP loans)$1,471,006  $1,427,153  $1,442,180  $1,456,247  $1,342,868  
  Commercial real estate (including multifamily) 5,821,794   5,847,147   5,813,388   5,758,594   5,455,714  
  Commercial construction 625,640   611,492   606,214   558,086   537,073  
  Residential 253,114   256,924   261,560   261,969   251,338  
  Consumer 4,972   6,733   3,894   4,630   2,361  
  Gross loans 8,176,526   8,149,449   8,127,236   8,039,526   7,589,354  
Unearned net origination fees (7,387)  (8,591)  (9,664)  (9,666)  (9,178) 
   Loans receivable 8,169,139   8,140,858   8,117,572   8,029,860   7,580,176  
   Loans held-for-sale 171   8,516   13,463   7,933   2,195  
Total loans$8,169,310  $8,149,374  $8,131,035  $8,037,793  $7,582,371  
           
Investment and equity securities$628,429  $642,915  $649,744  $650,479  $687,291  
Goodwill and other intangible assets 214,822   215,182   215,556   215,951   216,360  
Deposits:          
  Noninterest-bearing demand$1,275,325  $1,347,268  $1,451,654  $1,610,044  $1,682,135  
  Time deposits 2,606,122   2,658,673   2,357,332   2,035,362   1,525,076  
  Other interest-bearing deposits 3,723,561   3,640,939   3,565,904   3,558,881   3,686,520  
Total deposits$7,605,008  $7,646,880  $7,374,890  $7,204,287  $6,893,731  
           
Borrowings$651,112  $756,303  $941,266  $913,960  $772,561  
Subordinated debentures, net 79,230   79,104   103,637   153,205   153,129  
Total stockholders' equity 1,202,647   1,197,043   1,191,216   1,165,588   1,160,448  
           
 Three Months Ended 
 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 
  2023   2023   2023   2022   2022  
 (dollars in thousands, except for per share data) 
Net interest income$62,357  $63,843  $67,084  $78,009  $78,161  
 Provision for credit losses 1,500   3,000   1,000   3,300   10,000  
Net interest income after provision for credit losses 60,857   60,843   66,084   74,709   68,161  
Noninterest income          
Deposit, loan and other income 1,605   1,545   1,403   1,894   1,969  
Income on bank owned life insurance 1,597   1,553   1,531   1,528   1,521  
Net gains on sale of loans held-for-sale 633   550   49   176   262  
Net losses on equity securities (273)  (210)  (191)  (90)  (430) 
       Total noninterest income 3,562   3,438   2,792   3,508   3,322  
Noninterest expenses          
 Salaries and employee benefits 22,251   21,726   22,236   21,676   20,882  
 Occupancy and equipment 2,738   2,677   2,761   2,603   2,600  
 FDIC insurance 1,800   1,715   950   830   720  
 Professional and consulting 1,834   1,932   2,194   2,157   1,980  
 Marketing and advertising 554   556   532   454   461  
 Information technology and communications 3,487   3,644   3,061   2,694   2,747  
 Amortization of core deposit intangible 347   371   372   409   409  
 Other expenses 2,773   2,829   2,764   2,489   2,344  
       Total noninterest expenses 35,784   35,450   34,870   33,312   32,143  
           
Income before income tax expense 28,635   28,831   34,006   44,905   39,340  
 Income tax expense 7,228   7,437   9,077   12,348   10,425  
Net income$21,407  $21,394  $24,929  $32,557  $28,915  
 Preferred dividends 1,509   1,509   1,509   1,510   1,509  
Net income available to common stockholders$19,898  $19,885  $23,420  $31,047  $27,406  
           
Weighted average diluted common shares outstanding 38,829,681   39,016,839   39,300,733   39,378,137   39,338,943  
Diluted EPS$0.51  $0.51  $0.59  $0.79  $0.70  
           
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue         
Net income$21,407  $21,394  $24,929  $32,557  $28,915  
Income tax expense 7,228   7,437   9,077   12,348   10,425  
Provision for credit losses 1,500   3,000   1,000   3,300   10,000  
Pre-tax and pre-provision net revenue$30,135  $31,831  $35,006  $48,205  $49,340  
           
Return on Assets Measures          
Average assets$9,625,625  $9,765,582  $9,700,530  $9,490,477  $9,030,589  
Return on avg. assets 0.88 % 0.88 % 1.04 % 1.36 % 1.27 %
Return on avg. assets (pre-tax and pre-provision) 1.24   1.31   1.46   2.02   2.17  
           
 Three Months Ended 
 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 
  2023   2023   2023   2022   2022  
Return on Equity Measures(dollars in thousands) 
Average stockholders' equity$1,202,647  $1,197,043  $1,191,216  $1,165,588  $1,160,448  
Less: average preferred stock (110,927)  (110,927)  (110,927)  (110,927)  (110,927) 
Average common equity$1,091,720  $1,086,116  $1,080,289  $1,054,661  $1,049,521  
Less: average intangible assets (214,822)  (215,182)  (215,556)  (215,951)  (216,360) 
Average tangible common equity$876,898  $870,934  $864,733  $838,710  $833,161  
           
Return on avg. common equity (GAAP) 7.23 % 7.34 % 8.79 % 11.68 % 10.36 %
Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 9.11   9.28   11.11   14.82   13.19  
Return on avg. tangible common equity (pre-tax and pre-provision) 13.74   14.78   16.54   22.94   23.63  
           
Efficiency Measures          
Total noninterest expenses$35,784  $35,450  $34,870  $33,312  $32,143  
Amortization of core deposit intangibles (347)  (371)  (372)  (409)  (409) 
Operating noninterest expense$35,437  $35,079  $34,498  $32,903  $31,734  
           
Net interest income (tax equivalent basis)$63,208  $64,627  $67,828  $78,773  $78,850  
Noninterest income 3,562   3,438   2,792   3,508   3,322  
Net losses on equity securities 273   210   191   90   430  
Operating revenue$67,043  $68,275  $70,811  $82,371  $82,602  
           
Operating efficiency ratio (non-GAAP) (2) 52.9 % 51.4 % 48.7 % 39.9 % 38.4 %
           
Net Interest Margin          
Average interest-earning assets$9,089,431  $9,228,079  $9,174,167  $8,972,063  $8,500,316  
           
Net interest income (tax equivalent basis)$63,208  $64,627  $67,828  $78,773  $78,850  
Impact of purchase accounting fair value marks (419)  (575)  (839)  (837)  (885) 
Adjusted net interest income (tax equivalent basis)$62,789  $64,052  $66,989  $77,936  $77,965  
           
Net interest margin (GAAP) 2.76 % 2.81 % 3.00 % 3.48 % 3.68 %
Adjusted net interest margin (non-GAAP) (3) 2.74   2.78   2.96   3.45   3.64  
           
(1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity.   
(2) Operating noninterest expense divided by operating revenue.          
(3) Adjusted net interest margin excludes impact of purchase accounting fair value marks.         
           
 As of 
 Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 
  2023   2023   2023   2022   2022  
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data) 
Stockholders equity$1,188,154  $1,199,397  $1,190,970  $1,178,751  $1,148,295  
Less: preferred stock (110,927)  (110,927)  (110,927)  (110,927)  (110,927) 
Common equity$1,077,227  $1,088,470  $1,080,043  $1,067,824  $1,037,368  
Less: intangible assets (214,594)  (214,941)  (215,312)  (215,684)  (216,093) 
Tangible common equity$862,633  $873,529  $864,731  $852,140  $821,275  
           
Total assets$9,678,885  $9,723,963  $9,960,467  $9,644,948  $9,478,252  
Less: intangible assets (214,594)  (214,941)  (215,312)  (215,684)  (216,093) 
Tangible assets$9,464,291  $9,509,022  $9,745,155  $9,429,264  $9,262,159  
           
Common shares outstanding 38,621,970   38,966,652   39,179,051   39,243,123   39,243,123  
           
Common equity ratio (GAAP) 11.13 % 11.19 % 10.84 % 11.07 % 10.94 %
Tangible common equity ratio (non-GAAP) (4) 9.11   9.19   8.87   9.04   8.87  
           
Regulatory capital ratios (Bancorp):          
  Leverage ratio 10.86 % 10.62 % 10.60 % 10.68 % 10.95 %
  Common equity Tier 1 risk-based ratio 10.64   10.55   10.55   10.30   10.20  
  Risk-based Tier 1 capital ratio 11.98   11.90   11.92   11.66   11.58  
  Risk-based total capital ratio 13.90   13.83   13.85   14.45   14.45  
           
Regulatory capital ratios (Bank):          
  Leverage ratio 11.23 % 10.95 % 10.62 % 10.64 % 10.91 %
  Common equity Tier 1 risk-based ratio 12.38   12.26   11.93   11.60   11.53  
  Risk-based Tier 1 capital ratio 12.38   12.26   11.93   11.60   11.53  
  Risk-based total capital ratio 13.43   13.33   13.28   13.02   13.00  
           
Book value per share (GAAP)$27.89  $27.93  $27.57  $27.21  $26.43  
Tangible book value per share (non-GAAP) (5) 22.34   22.42   22.07   21.71   20.93  
           
Net Loan (Recoveries) Charge-Off Detail          
Net loan charge-offs (recoveries):          
  Charge-offs$2,487  $1,118  $4,484  $4,456  $413  
  Recoveries (8)  (76)  (1)  -   (53) 
   Net loan charge-offs (recoveries)$2,479  $1,042  $4,483  $4,456  $360  
   Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.12 % 0.05 % 0.22 % 0.22 % 0.02 %
           
Asset Quality          
Nonaccrual loans$56,059  $51,496  $47,667  $44,454  $57,447  
OREO -   -   -   264   264  
Nonperforming assets$56,059  $51,496  $47,667  $44,718  $57,711  
           
Allowance for credit losses - loans ("ACL") 88,230   89,205   87,002   90,513   91,717  
           
Loans receivable$8,181,109  $8,148,540  $8,132,119  $8,099,689  $7,900,450  
Less: PPP loans 9,872   10,845   11,300   11,374   11,458  
Loans receivable (excluding PPP loans)$8,171,237  $8,137,695  $8,120,819  $8,088,315  $7,888,992  
           
Nonaccrual loans as a % of loans receivable 0.69 % 0.63 % 0.59 % 0.55 % 0.73 %
Nonperforming assets as a % of total assets 0.58   0.53   0.48   0.46   0.61  
ACL as a % of loans receivable 1.08   1.09   1.07   1.12   1.16  
ACL as a % of nonaccrual loans 157.4   173.2   182.5   203.6   159.7  
           
(4) Tangible common equity divided by tangible assets.     
(5) Tangible common equity divided by common shares outstanding at period-end.     



CONNECTONE BANCORP, INC.              
NET INTEREST MARGIN ANALYSIS
        
(dollars in thousands)       ��       
                  
    For the Quarter Ended 
    September 30, 2023June 30, 2023September 30, 2022 
    Average     Average     Average    
Interest-earning assets: BalanceInterestRate (7) BalanceInterestRate (7) BalanceInterestRate (7)
Investment securities (1) (2)$723,408 $5,566 3.05% $726,315 $5,607 3.10% $740,394 $5,434 2.91%
Loans receivable and loans held-for-sale (2) (3) (4)    8,169,310  115,954 5.63   8,149,374  111,501 5.49   7,582,371  91,132 4.77 
Federal funds sold and interest-              
  bearing deposits with banks 158,155  2,110 5.29   309,458  4,056 5.26   135,331  665 1.95 
Restricted investment in bank stock 38,558  907 9.33   42,932  945 8.83   42,220  438 4.12 
     Total interest-earning assets$9,089,431  124,537 5.44  $9,228,079  122,109 5.31   8,500,316  97,669 4.56 
Allowance for loan losses  (89,966)     (87,473)     (84,307)   
Noninterest-earning assets  626,160      624,976      614,580    
     Total assets  $9,625,625     $9,765,582     $9,030,589    
                  
Interest-bearing liabilities:              
 Time deposits   2,606,122  25,437 3.87   2,658,673  23,778 3.59  $1,525,076  5,396 1.40 
 Other interest-bearing deposits 3,723,561  30,606 3.26   3,640,939  26,936 2.97   3,686,520  7,903 0.85 
     Total interest-bearing deposits 6,329,683  56,043 3.51   6,299,612  50,714 3.23   5,211,596  13,299 1.01 
                  
Borrowings   651,112  3,950 2.41   756,303  5,438 2.88   772,561  3,297 1.69 
Subordinated debentures, net 79,230  1,312 6.57   79,104  1,306 6.62   153,129  2,196 5.69 
Finance lease   1,603  24 5.94   1,658  24 5.81   1,813  27 5.91 
     Total interest-bearing liabilities 7,061,628  61,329 3.45   7,136,677  57,482 3.23   6,139,099  18,819 1.22 
                  
Noninterest-bearing demand deposits 1,275,325      1,347,268      1,682,135    
Other liabilities   86,025      84,594      48,907    
     Total noninterest-bearing liabilities 1,361,350      1,431,862      1,731,042    
Stockholders' equity  1,202,647      1,197,043      1,160,448    
     Total liabilities and stockholders' equity$9,625,625     $9,765,582     $9,030,589    
                  
Net interest income (tax equivalent basis)  63,208      64,627      78,850   
Net interest spread (5)   1.99%   2.08%   3.34%
                  
Net interest margin (6)   2.76%   2.81%   3.68%
                  
Tax equivalent adjustment   (851)     (784)     (689)  
Net interest income  $62,357     $63,843     $78,161   
                  
(1) Average balances are calculated on amortized cost.             
(2) Interest income is presented on a tax equivalent basis using 21% federal tax rate.          
(3) Includes loan fee income.              
(4) Loans include nonaccrual loans.              
(5) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis.  
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.       
(7) Rates are annualized.               





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