CNOB ConnectOne Bancorp Inc

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. BurnsSenior Executive VP & CFO201.816.4474: 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, 2022									June 30, 2022										September 30, 2021
				Average										Average										Average
Interest-earning assets:				Balance			Interest				Rate (7)			Balance			Interest				Rate (7)			Balance			Interest				Rate (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.