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ConnectOne Bancorp, Inc. Reports Third Quarter 2022 Results; Declares Common and Preferred Dividends

ENGLEWOOD CLIFFS, N.J., Oct. 27, 2022 (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 $27.4 million for the third quarter of 2022 compared with $30.8 million for the second quarter of 2022 and $32.1 million for the third quarter of 2021. Diluted earnings per share were $0.70 for the third quarter of 2022 compared with $0.78 in the second quarter of 2022 and $0.80 in the third quarter of 2021. The decrease in net income available to common stockholders and diluted earnings per share from the second quarter of 2022 was primarily attributable to a $7.0 million increase in the provision for credit losses due to loan growth and changes in forecasted macroeconomic factors, and a $0.4 million increase in noninterest expenses, partially offset by increases in net interest income of $2.6 million and a $1.5 million decrease in income tax expense. The decrease in net income available to common stockholders and diluted earnings per share from the third quarter of 2021 was primarily due to an $8.9 million increase in the provision for credit losses, a $4.0 million increase in noninterest expenses, $1.5 million in preferred dividends, which were not paid in the 2021 period, and a $0.7 million decrease in noninterest income, partially offset by a $9.9 million increase in net interest income.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne’s solid third quarter results reflect continued execution across the organization and dedication to relationship banking. We achieved record pre-tax, pre-provision earnings, which increased by more than 4% sequentially and by nearly 12% versus a year ago. This increase was driven by strong organic growth, a continued stable net interest margin, and further operating leverage. Credit quality remains sound, with no present signs of weakness, while we provided an additional $10 million in reserves during the third quarter primarily reflecting strong organic loan growth and changes in forecasted macroeconomic factors.” 

“Return on assets was 1.27%, return on tangible common equity was 13.2% and our net interest margin remained robust at 3.68%. Firing on all cylinders, our efficiency ratio remained below 40%, average noninterest-bearing deposits grew sequentially by 4.6%, non-performing asset ratios improved for the fourth consecutive quarter, and tangible book value per share increased for the 10th consecutive quarter. Tangible book value per share has increased more than 30% since the first quarter of 2020 and by nearly 8% from a year ago.”

“During the quarter, total deposits grew by 10.5%, surpassing 8.6% in sequential loan growth and improving our loan to deposit ratio. And while loan rates increased, credit spreads tightened, as we delivered on our business model of serving existing clients, gaining new clients, and solidifying relationships that also bring in deposits. The end result was a healthy 3.4% sequential increase in net interest income as loan growth more than offset both GAAP and core margin compression.” 

Mr. Sorrentino added, “Heading into the fourth quarter, loan yields are increasing, and spreads continue to widen, while the pipeline has moderated. Importantly, and demonstrating the effectiveness of our relationship banking business model, the vast majority of all loans originated this quarter included a deposit relationship. We also look forward to leveraging the investments we’ve made in technology that facilitate enhancements in our infrastructure and workflows, and simultaneously providing new deposit origination opportunities. Demand remains solid as we continue to gain traction across our markets. This reflects our differentiated origination franchise, strength of our operating markets, and recent investments in our people.” 

“Year-to-date, ConnectOne’s results have been very strong, building on our track record of superior performance during turbulent times. We remain one of the most efficient banks in the industry while we continue to leverage our technological advantages and our culture to drive results. Looking ahead, I believe we remain well-positioned to capitalize on opportunities in any environment.”

Dividend Declarations

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

A cash dividend on common stock of $0.155 per share will be paid on December 1, 2022, to common stockholders of record on November 14, 2022. 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, 2022 to preferred stockholders of record on November 15, 2022.

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2022 was $78.9 million, an increase of $2.7 million, or 3.6%, from the second quarter of 2022 resulting from an 8.9% increase in average interest-earning assets, primarily loans, and partially offset by a 23 basis-point contraction in the net interest margin to 3.68% from 3.91%. The decrease in the net interest margin primarily reflected two non-core items: a second quarter 2022 $1.5 million recovery on a purchased credit-deteriorated loan and a $2.0 million reduction in the accretion of Paycheck Protection Program (“PPP”) fee income. Excluding those two items, the net interest margin contracted by 5 basis points. The average cost of deposits, after factoring in the 4.6% increase in average noninterest-bearing demand balances, increased by 41 basis points to 0.77% from 0.36% in the second quarter of 2022.

Fully taxable equivalent net interest income for the third quarter of 2022 increased by $10.1 million, or 14.7%, from the third quarter of 2021. The increase from the third quarter of 2021 resulted primarily from a 16.1% increase in average interest earning assets, primarily loans, and was partially offset by a 5 basis-point contraction of the net interest margin to 3.68% from 3.73%. The contraction in the net interest margin resulted from a 56 basis-point increase in the cost of average interest-bearing liabilities, partially offset by a 36 basis-point increase in the yield on average interest-earning assets and a 12.5% increase in average noninterest-bearing demand deposits.

Noninterest income was $3.3 million in the third quarter of 2022, $3.4 million in the second quarter of 2022 and $4.0 million in the third quarter of 2021. Included in noninterest income were net losses on equity securities of $0.4 million, $0.4 million and $0.1 million for the third quarter 2022, second quarter 2022 and third quarter of 2021, respectively. Excluding equity securities losses, adjusted noninterest income was $3.8 million, $3.8 million and $4.1 million for the third quarter 2022, second quarter 2022 and third quarter 2021, respectively. Sequentially, income on bank owned life insurance (“BOLI”) increased by $0.2 million and deposit, loan and other income increased by $0.1 million. These increases to noninterest income during the third quarter of 2022 were offset by a decrease in net gains on sale of loans held-for-sale of $0.3 million. The $0.3 million decrease in adjusted noninterest income for the third quarter 2022 versus the third quarter 2021 was primarily due to a decrease in net gains on loans held-for-sale of $0.8 million, partially offset by increases in deposit, loan and other income of $0.3 million and BOLI income of $0.2 million.

Noninterest expenses totaled $32.1 million for the third quarter of 2022, $31.7 million for the second quarter of 2022 and $28.2 million for the third quarter of 2021. The increase in noninterest expenses of $0.4 million from the second quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $1.4 million and other expenses of $0.2 million, partially offset by a decrease in BoeFly acquisition expense of $0.8 million. The increase in noninterest expenses of $4.0 million from the third quarter of 2021 was primarily attributable to increases in salaries and employee benefits of $4.1 million. The increase in salaries and employee benefits from the prior sequential quarter and prior year quarter was attributable to increased staff in both the revenue and back-office areas of the bank, base salary increases, and incentive compensation accruals.

Income tax expense was $10.4 million for the third quarter of 2022, $11.9 million for the second quarter of 2022 and $10.9 million for the third quarter of 2021. The effective tax rates for the third quarter of 2022, second quarter of 2022 and third quarter of 2021 were 26.5%, 26.9% and 25.3%, respectively.

Asset Quality

The provision for credit losses was $10.0 million for the third quarter of 2022, $3.0 million for the second quarter of 2022 and $1.1 million for the third quarter of 2021. The increased provision for credit losses during the third quarter of 2022 reflected strong organic loan growth and changes in forecasted macroeconomic conditions.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $57.7 million as of September 30, 2022, $61.7 million as of December 31, 2021 and $66.0 million as of September 30, 2021. Nonaccrual loans were $57.5 million as of September 30, 2022, $61.7 million as of December 31, 2021 and $66.0 million as of September 30, 2021. Nonperforming assets as a percentage of total assets were 0.61% as of September 30, 2022, 0.76% as of December 31, 2021 and 0.83% as of September 30, 2021. The ratio of nonaccrual loans to loans receivable was 0.73%, 0.90% and 1.00%, as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively. The annualized net loan charge-offs ratio was 0.02% for the third quarter of 2022, 0.01% for the fourth quarter of 2021 and 0.10% for the third quarter of 2021. The allowance for credit losses represented 1.16%, 1.15%, and 1.19% of loans receivable as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively. Excluding PPP loans, the allowance for credit losses represented 1.16%, 1.17%, and 1.22% of loans receivable as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 159.7% as of September 30, 2022, 127.7% as of December 31, 2021 and 118.2% as of September 30, 2021.

Selected Balance Sheet Items

The Company’s total assets were $9.5 billion as of September 30, 2022, an increase of $1.3 billion from December 31, 2021. Loans receivable were $7.9 billion, an increase of $1.1 billion from December 31, 2021. The increase in loans receivable was attributable to organic loan originations.

The Company’s total stockholders’ equity was $1.1 billion as of September 30, 2022, an increase of $24.1 million from December 31, 2021. The increase in retained earnings of $70.8 million was the primary reason for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $1.5 million, partially offset by a decrease in accumulated other comprehensive income of $35.1 million, reflecting the after-tax decline in the fair value of investment securities net of unrealized hedge gains recorded in other assets, and an increase in treasury stock of $13.1 million. As of September 30, 2022, the Company’s tangible common equity ratio and tangible book value per share were 8.87% and $20.93, respectively. As of December 31, 2021, the tangible common equity ratio and tangible book value per share were 10.06% and $20.12, respectively. Total goodwill and other intangible assets were $216.1 million as of September 30, 2022, and $217.4 million as of December 31, 2021.

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 2022 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 27, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 1-201-689-8471, access code 13733104. 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 27, 2022 and ending on Thursday, November 3, 2022 by dialing 1-412-317-6671, access code 13733104. 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.

Forward-Looking Statements

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 VP & 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,
  2022   2021   2021 
 (unaudited)   (unaudited)
ASSETS     
Cash and due from banks$58,852  $54,352  $49,626 
Interest-bearing deposits with banks 274,992   211,184   363,569 
Cash and cash equivalents 333,844   265,536   413,195 
      
Investment securities 623,629   534,507   462,884 
Equity securities 15,563   13,794   13,700 
      
Loans held-for-sale 8,080   250   5,596 
      
Loans receivable 7,900,450   6,828,622   6,576,439 
Less: Allowance for credit losses - loans 91,717   78,773   77,986 
Net loans receivable 7,808,733   6,749,849   6,498,453 
      
Investment in restricted stock, at cost 45,324   27,826   18,106 
Bank premises and equipment, net 28,519   29,032   29,635 
Accrued interest receivable 38,940   34,152   33,610 
Bank owned life insurance 229,800   195,731   194,487 
Right of use operating lease assets 10,196   11,017   11,002 
Other real estate owned 264   -   - 
Goodwill 208,372   208,372   208,372 
Core deposit intangibles 7,721   8,997   9,480 
Other assets 119,267   50,417   50,994 
     Total assets$9,478,252  $8,129,480  $7,949,514 
      
LIABILITIES     
Deposits:     
Noninterest-bearing$1,665,658  $1,617,049  $1,500,754 
Interest-bearing 5,644,852   4,715,904   4,897,584 
Total deposits 7,310,510   6,332,953   6,398,338 
Borrowings 829,953   468,193   253,225 
Subordinated debentures, net 153,179   152,951   152,875 
Operating lease liabilities 11,454   12,417   12,437 
Other liabilities 24,861   38,754   34,206 
     Total liabilities 8,329,957   7,005,268   6,851,081 
      
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 28,756   27,246   25,851 
Retained earnings 510,957   440,169   413,996 
Treasury stock (52,799)  (39,672)  (38,314)
Accumulated other comprehensive loss (36,492)  (1,404)  (973)
   Total stockholders' equity 1,148,295   1,124,212   1,098,433 
   Total liabilities and stockholders' equity$9,478,252  $8,129,480  $7,949,514 


CONNECTONE BANCORP, INC. AND SUBSIDIARIES       
CONSOLIDATED STATEMENTS OF INCOME       
(dollars in thousands, except for per share data)       
        
 Three Months Ended Nine Months Ended
 09/30/22 09/30/21 09/30/22 09/30/21
Interest income       
Interest and fees on loans$90,731  $75,092  $248,041  $216,655 
Interest and dividends on investment securities:       
Taxable 4,063   1,065   8,487   3,148 
Tax-exempt 1,083   511   2,708   1,885 
Dividends 438   245   943   764 
Interest on federal funds sold and other short-term investments 665   113   1,098   246 
Total interest income 96,980   77,026   261,277   222,698 
Interest expense       
Deposits 13,299   5,478   24,018   19,487 
Borrowings 5,520   3,303   13,149   10,794 
Total interest expense 18,819   8,781   37,167   30,281 
        
Net interest income 78,161   68,245   224,110   192,417 
Provision for (reversal of) credit losses 10,000   1,100   14,450   (6,315)
Net interest income after provision for credit losses 68,161   67,145   209,660   198,732 
        
Noninterest income       
Deposit, loan and other income 1,969   1,702   5,578   5,092 
Income on bank owned life insurance 1,521   1,278   4,069   3,527 
Net gains on sale of loans held-for-sale 262   1,114   1,519   2,668 
Gain on sale of branches -   -   -   674 
Net losses on equity securities (430)  (78)  (1,431)  (242)
Net gains on sale/redemption of investment securities -   -   -   195 
Total noninterest income 3,322   4,016   9,735   11,914 
        
Noninterest expenses       
Salaries and employee benefits 20,882   16,740   59,041   47,589 
Occupancy and equipment 2,600   2,656   7,262   8,876 
FDIC insurance 720   525   2,051   2,040 
Professional and consulting 1,980   2,217   5,896   6,290 
Marketing and advertising 461   345   1,238   864 
Information technology and communications 2,747   3,048   8,414   8,209 
Amortization of core deposit intangible 409   483   1,276   1,498 
Increase in value of acquisition price -   -   1,516   - 
Other expenses 2,344   2,169   6,382   5,561 
Total noninterest expenses 32,143   28,183   93,076   80,927 
        
Income before income tax expense 39,340   42,978   126,319   129,719 
Income tax expense 10,425   10,881   33,665   32,404 
Net income 28,915   32,097   92,654   97,315 
Preferred dividends 1,509   -   4,527   - 
Net income available to common stockholders$27,406  $32,097  $88,127  $97,315 
        
Earnings per common share:       
Basic$0.70  $0.81  $2.24  $2.45 
Diluted 0.70   0.80   2.23   2.43 


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. 30, Sep. 30,  
  2022   2022   2022   2021   2021   
Selected Financial Data(dollars in thousands)  
Total assets$9,478,252  $8,841,506  $8,334,301  $8,129,480  $7,949,514   
Loans receivable:           
Commercial$1,392,037  $1,274,280  $1,161,867  $1,163,442  $1,116,535   
Paycheck Protection Program ("PPP") loans 11,458   18,004   54,301   93,057   177,829   
Commercial real estate 3,087,354   2,727,120   2,516,065   2,446,807   2,354,209   
Multifamily 2,624,726   2,442,603   2,465,337   2,337,712   2,113,541   
Commercial construction 537,323   569,789   539,058   540,178   552,896   
Residential 256,085   249,379   250,205   255,269   270,793   
Consumer 1,030   1,248   1,140   1,886   2,093   
Gross loans 7,910,013   7,282,423   6,987,973   6,838,351   6,587,896   
Unearned net origination fees (9,563)  (7,850)  (8,378)  (9,729)  (11,457)  
Loans receivable 7,900,450   7,274,573   6,979,595   6,828,622   6,576,439   
Loans held-for-sale 8,080   3,182   2,742   250   5,596   
Total loans$7,908,530  $7,277,755  $6,982,337  $6,828,872  $6,582,035   
            
Investment and equity securities$639,192  $691,934  $525,228  $548,301  $476,584   
Goodwill and other intangible assets 216,093   216,502   216,936   217,369   217,852   
Deposits:           
Noninterest-bearing demand$1,665,658  $1,712,875  $1,631,292  $1,617,049  $1,500,754   
Time deposits 1,921,235   1,285,409   1,065,814   1,150,109 0 1,221,911   
Other interest-bearing deposits 3,723,617   3,619,315   3,863,299   3,565,795   3,675,673   
Total deposits$7,310,510  $6,617,599  $6,560,405  $6,332,953  $6,398,338   
            
Borrowings$829,953  $874,964  $412,170  $468,193  $253,225   
Subordinated debentures (net of debt issuance costs) 153,179   153,103   153,027   152,951   152,875   
Total stockholders' equity 1,148,295   1,143,147   1,138,519   1,124,212   1,098,433   
            
Quarterly Average Balances           
Total assets$9,030,589  $8,322,823  $8,263,382  $8,027,169  $7,837,997   
Loans receivable:           
Commercial (including PPP loans)$1,342,868  $1,245,812  $1,231,703  $1,278,048  $1,296,066   
Commercial real estate (including multifamily) 5,455,714   4,974,297   4,850,349   4,625,371   4,312,092   
Commercial construction 537,073   544,084   541,642   547,038   572,920   
Residential 251,338   247,208   253,589   268,112   279,063   
Consumer 2,361   5,029   3,682   4,938   2,649   
Gross loans 7,589,354   7,016,430   6,880,965   6,723,507   6,462,790   
Unearned net origination fees (9,178)  (9,222)  (9,870)  (10,873)  (13,064)  
Loans receivable 7,580,176   7,007,208   6,871,095   6,712,634   6,449,726   
Loans held-for-sale 2,195   966   382   5,051   6,226   
Total loans$7,582,371  $7,008,174  $6,871,477  $6,717,685  $6,455,952   
            
Investment and equity securities$687,291  $567,140  $536,090  $481,276  $465,103   
Goodwill and other intangible assets 216,360   216,786   217,219   217,685   218,170   
Deposits:           
Noninterest-bearing demand$1,682,135  $1,607,465  $1,547,055  $1,537,316  $1,495,456   
Time deposits 1,525,076   1,103,418   1,124,614   1,204,374   1,252,818   
Other interest-bearing deposits 3,686,520   3,717,531   3,851,558   3,672,311   3,582,261   
Total deposits$6,893,731  $6,428,414  $6,523,227  $6,414,001  $6,330,535   
            
Borrowings$772,561  $548,675  $404,907  $292,847  $276,183   
Subordinated debentures (net of debt issuance costs) 153,129   153,053   152,977   152,902   152,825   
Total stockholders' equity 1,160,448   1,143,092   1,131,968   1,113,524   1,032,191   
            
 Three Months Ended  
 Sep. 30, Jun. 30, Mar. 31, Dec. 30, Sep. 30,  
  2022   2022   2022   2021   2021   
 (dollars in thousands, except for per share data)  
Net interest income$78,161  $75,591  $70,358  $70,461  $68,245   
Provision for (reversal of) credit losses 10,000   3,000   1,450   815   1,100   
Net interest income after provision for credit losses 68,161   72,591   68,908   69,646   67,145   
Noninterest income           
Deposit, loan and other income 1,969   1,866   1,743   1,525   1,702   
Income on bank owned life insurance 1,521   1,342   1,206   1,244   1,278   
Net gains on sale of loans held-for-sale 262   556   701   1,139   1,114   
Net losses gains on equity securities (430)  (405)  (596)  (131)  (78)  
Total noninterest income 3,322   3,359   3,054   3,777   4,016   
Noninterest expenses           
Salaries and employee benefits 20,882   19,519   18,640   16,483   16,740   
Occupancy and equipment 2,600   2,733   1,929   2,762   2,656   
FDIC insurance 720   725   606   625   525   
Professional and consulting 1,980   2,124   1,792   1,996   2,217   
Marketing and advertising 461   426   351   454   345   
Information technology and communications 2,747   2,801   2,866   3,058   3,048   
Amortization of core deposit intangible 409   434   433   483   483   
Increase in value of acquisition price -   833   683   -   -   
Other expenses 2,344   2,108   1,930   2,223   2,169   
Total noninterest expenses 32,143   31,703   29,230   28,084   28,183   
            
Income before income tax expense 39,340   44,247   42,732   45,339   42,978   
Income tax expense 10,425   11,889   11,351   12,301   10,881   
Net income$28,915  $32,358  $31,381  $33,038  $32,097   
Preferred dividends 1,509   1,509   1,509   1,717   -   
Net income available to common stockholders$27,406  $30,849  $29,872  $31,321  $32,097   
            
Weighted average diluted common shares outstanding 39,320,674   39,481,689   39,727,606   39,792,937   39,869,468   
Diluted EPS$0.70  $0.78  $0.75  $0.79  $0.80   
            
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue          
Net income$28,915  $32,358  $31,381  $33,038  $32,097   
Income tax expense 10,425   11,889   11,351   12,301   10,881   
Provision for (reversal of) credit losses 10,000   3,000   1,450   815   1,100   
Pre-tax and pre-provision net revenue$49,340  $47,247  $44,182  $46,154  $44,078   
            
Return on Assets Measures           
Average assets$9,030,589  $8,322,823  $8,263,382  $8,027,169  $7,837,997   
Return on avg. assets 1.27 % 1.56 % 1.54 % 1.63 % 1.62 % 
Return on avg. assets (pre-tax and pre-provision) 2.17   2.28   2.17   2.28   2.23   
            
 Three Months Ended  
 Sep. 30, Jun. 30, Mar. 31, Dec. 30, Sep. 30,  
  2022   2022   2022   2021   2021   
Return on Equity Measures(dollars in thousands)  
Average stockholders' equity$1,160,448  $1,143,097  $1,131,968  $1,113,524  $1,032,195   
Less: average preferred stock (110,927)  (110,927)  (110,927)  (110,927)  (51,847)  
Average common equity$1,049,521  $1,032,170  $1,021,041  $1,002,597  $980,348   
Less: average intangible assets (216,360)  (216,786)  (217,219)  (217,685)  (218,170)  
Average tangible common equity$833,161  $815,384  $803,822  $784,912  $762,178   
            
Return on avg. common equity (GAAP) 10.36 % 11.99 % 11.87 % 12.39 % 12.99 % 
Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 13.19   15.32   15.22   16.00   16.88   
Return on avg. tangible common equity (pre-tax, pre-provision, pre-merger charges) 23.63   23.39   22.44   23.50   23.12   
            
Efficiency Measures           
Total noninterest expenses$32,143  $31,703  $29,230  $28,084  $28,183   
Amortization of core deposit intangibles (409)  (434)  (433)  (483)  (483)  
Operating noninterest expense$31,734  $31,269  $28,797  $27,601  $27,700   
            
Net interest income (tax equivalent basis)$78,850  $76,146  $70,842  $70,890  $68,761   
Noninterest income 3,322   3,359   3,054   3,777   4,016   
Net losses (gains) on equity securities 430   405   596   131   78   
Operating revenue$82,602  $79,910  $74,492  $74,798  $72,855   
            
Operating efficiency ratio (non-GAAP) (2) 38.4 % 39.1 % 38.7 % 36.9 % 38.0 % 
            
Net Interest Margin           
Average interest-earning assets$8,500,316  $7,807,445  $7,753,881  $7,508,973  $7,321,771   
            
Net interest income (tax equivalent basis)$78,850  $76,146  $70,842  $70,890  $68,761   
Impact of purchase accounting fair value marks (885)  (1,014)  (1,179)  (1,674)  (1,849)  
Adjusted net interest income (tax equivalent basis)$77,965  $75,132  $69,663  $69,216  $66,912   
            
Net interest margin (GAAP) 3.68 % 3.91 % 3.71 % 3.75 % 3.73 % 
Adjusted net interest margin (non-GAAP) (3) 3.64   3.86   3.64   3.66   3.63   
            
(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. 30, Sep. 30,  
  2022   2022   2022   2021   2021   
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)  
Stockholders equity$1,148,295  $1,143,147  $1,138,519  $1,124,212  $1,098,433   
Less: preferred stock (110,927)  (110,927)  (110,927)  (110,927)  (110,927)  
Common equity$1,037,368  $1,032,220  $1,027,592  $1,013,285  $987,506   
Less: intangible assets (216,093)  (216,502)  (216,936)  (217,369)  (217,852)  
Tangible common equity$821,275  $815,718  $810,656  $795,916  $769,654   
            
Total assets$9,478,252  $8,841,506  $8,334,301  $8,129,480  $7,949,514   
Less: intangible assets (216,093)  (216,502)  (216,936)  (217,369)  (217,852)  
Tangible assets$9,262,159  $8,625,004  $8,117,365  $7,912,111  $7,731,662   
            
Common shares outstanding 39,243,123   39,243,123   39,518,411   39,568,090   39,602,199   
            
Common equity ratio (GAAP) 10.94 % 11.67 % 12.33 % 12.46 % 12.42 % 
Tangible common equity ratio (non-GAAP) (4) 8.87   9.46   9.99   10.06   9.95   
            
Regulatory capital ratios (Bancorp):           
Leverage ratio 10.95 % 11.63 % 11.57 % 11.65 % 11.60 % 
Common equity Tier 1 risk-based ratio 10.20   10.63   10.69   10.64   10.73   
Risk-based Tier 1 capital ratio 11.58   12.11   12.21   12.19   12.35   
Risk-based total capital ratio 14.45   15.09   15.25   15.26   15.54   
            
Regulatory capital ratios (Bank):           
Leverage ratio 10.91 % 11.61 % 11.41 % 11.43 % 11.33 % 
Common equity Tier 1 risk-based ratio 11.53   12.08   12.04   11.96   12.06   
Risk-based Tier 1 capital ratio 11.53   12.08   12.04   11.96   12.06   
Risk-based total capital ratio 13.00   13.55   13.55   13.44   13.61   
            
Book value per share (GAAP)$26.43  $26.30  $26.00  $25.61  $24.94   
Tangible book value per share (non-GAAP) (5) 20.93   20.79   20.51   20.12   19.43   
            
Net Loan (Recoveries) Charge-Off Detail           
Net loan charge-offs (recoveries):           
Charge-offs$413  $302  $274  $458  $1,727   
Recoveries (53)  (32)  (32)  (217)  (113)  
Net loan charge-offs (recoveries)$360  $270  $242  $241  $1,614   
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.02 % 0.02 % 0.01 % 0.01 % 0.10 % 
            
Asset Quality           
Nonaccrual loans$57,447  $60,756  $59,403  $61,700  $65,959   
OREO 264   316   316   -   -   
Nonperforming assets$57,711  $61,072  $59,719  $61,700  $65,959   
            
Allowance for credit losses - loans ("ACL") 91,717   82,739   80,070   78,773   77,986   
            
Loans receivable$7,900,450  $7,274,573  $6,979,595  $6,828,622  $6,576,439   
Less: PPP loans 11,458   18,004   54,301   93,057   177,829   
Loans receivable (excluding PPP loans)$7,888,992  $7,256,569  $6,925,294  $6,735,565  $6,398,610   
            
Nonaccrual loans as a % of loans receivable 0.73 % 0.84 % 0.85 % 0.90 % 1.00   
Nonperforming assets as a % of total assets 0.61   0.69   0.72   0.76   0.83   
ACL as a % of loans receivable 1.16   1.14   1.15   1.15   1.19   
ACL as a % of loans receivable (excluding PPP loans) 1.16   1.14   1.16   1.17   1.22   
ACL as a % of nonaccrual loans 159.7   136.2   134.8   127.7   118.2   
            
(4) Tangible common equity divided by tangible assets.           
(5) Tangible common equity divided by common shares outstanding at period-end.          


CONNECTONE BANCORP, INC. AND SUBSIDIARIES              
NET INTEREST MARGIN ANALYSIS               
(dollars in thousands)                
    For the Three Months Ended  
    September 30, 2022June 30, 2022September 30, 2021  
    Average     Average     Average     
Interest-earning assets: BalanceInterestRate (7) BalanceInterestRate (7) BalanceInterestRate (7) 
Investment securities (1) (2)$740,394  $5,434 2.91% $610,465  $3,710 2.44% $459,559  $1,712 1.48% 
Loans receivable and loans held-for-sale (2) (3) (4)    7,582,371   91,132 4.77   7,008,174   81,597 4.67   6,455,952   75,434 4.64  
Federal funds sold and interest-               
bearing deposits with banks 135,331   665 1.95   157,201   312 0.80   387,155   151 0.15  
Restricted investment in bank stock 42,220   438 4.12   31,605   291 3.69   19,105   245 5.09  
     Total interest-earning assets 8,500,316   97,669 4.56   7,807,445   85,910 4.41   7,321,771   77,542 4.20  
Allowance for loan losses  (84,307)     (81,012)     (78,327)    
Noninterest-earning assets  614,580      596,390      594,553     
     Total assets  $9,030,589     $8,322,823     $7,837,997     
                   
Interest-bearing liabilities:               
Time deposits  $1,525,076   5,396 1.40  $1,103,418  $2,179 0.79   1,252,818   2,983 0.94  
Other interest-bearing deposits 3,686,520   7,903 0.85   3,717,531   3,530 0.38   3,582,261   2,495 0.28  
     Total interest-bearing deposits 5,211,596   13,299 1.01   4,820,949   5,709 0.47   4,835,079   5,478 0.45  
                   
Borrowings   772,561   3,297 1.69   548,675   1,849 1.35   276,183   1,105 1.59  
Subordinated debentures  153,129   2,196 5.69   153,053   2,178 5.71   152,825   2,168 5.63  
Finance lease   1,813   27 5.91   1,865   28 6.02   2,018   30 5.90  
     Total interest-bearing liabilities 6,139,099   18,819 1.22   5,524,542   9,764 0.71   5,266,105   8,781 0.66  
                   
Noninterest-bearing demand deposits 1,682,135      1,607,465      1,495,456     
Other liabilities   48,907      47,719      44,245     
     Total noninterest-bearing liabilities 1,731,042      1,655,184      1,539,701     
Stockholders' equity  1,160,448      1,143,097      1,032,191     
     Total liabilities and stockholders' equity$9,030,589     $8,322,823     $7,837,997     
                   
Net interest income (tax equivalent basis)   78,850       76,146       68,761    
Net interest spread (5)   3.34%   3.70%   3.54% 
                   
Net interest margin (6)   3.68%   3.91%   3.73% 
                   
Tax equivalent adjustment    (689)      (555)      (516)   
Net interest income   $78,161      $75,591      $68,245    
                   
(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 and accretion of purchase accounting adjustments.             
(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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