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 $31.0 million for the fourth quarter of 2022 compared with $27.4 million for the third quarter of 2022 and $31.3 million for the fourth quarter of 2021. Diluted earnings per share were $0.79 for the fourth quarter of 2022 compared with $0.70 in the third quarter of 2022 and $0.79 in the fourth quarter of 2021. The increase in net income available to common stockholders and diluted earnings per share from the third quarter of 2022 was primarily attributable to a $6.7 million decrease in the provision for credit losses due to changes in forecasted macroeconomic factors and a $0.2 million increase in noninterest income, partially offset by a $0.2 million decrease in net interest income, a $1.2 million increase in noninterest expenses and a $1.9 million increase in income tax expenses. The decrease in net income available to common stockholders from the fourth quarter of 2021 was primarily due to a $5.2 million increase in noninterest expenses and a $2.5 million increase in the provision for credit losses, partially offset by a $7.5 million increase in net interest income. Full-year 2022 net income available to common stockholders was $119.2 million, compared to $128.6 million for 2021. Diluted earnings per share for the full-year 2022 was $3.01, compared with $3.22 for 2021.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne had another successful year as we gained even further traction in all of our markets, delivering solid organic growth and best-in-class efficiency while also investing in our operating platform to support future performance.”

“Like many others in the industry, the fourth quarter presented some challenges with respect to deposit retention and cost as competition significantly increased. However, despite this headwind, we delivered solid performance. Metrics remained in the industry’s upper quartile. Return on assets was 1.36% for the quarter while our return on tangible common equity was 14.8%. Additionally, ConnectOne’s pre-tax, pre-provision net revenue (“PPNR”) as a percent of assets again exceeded 2%, the 10th consecutive quarter PPNR has been higher than 2%.”

“We also continued to leverage our technological advantages and our culture to drive results. Tangible book value per share increased 3.7% sequentially, 7.9% from a year ago, and has now increased for 11 consecutive quarters. Our efficiency ratio remained below 40% for the quarter, despite a compressed net interest margin and continued investment in our platform and our staff. Even during these challenging conditions, ConnectOne remains one of the industry’s most efficient banks nationwide.” Mr. Sorrentino added, “Our capital ratios remain strong and, while others in the industry have experienced weakness, our tangible common equity ratio was very solid at 9% at year-end. Further, we enter 2023 with sound credit quality and continued improving credit metrics including delinquencies at their lowest levels in recent history.” 

“With respect to organic growth, ConnectOne had a record year for both loan originations and deposits. Highlighting our strategy to invest in and further strengthen our origination franchise, ConnectOne’s loan portfolio increased 19% year-over-year and deposits grew 16%.” Mr. Sorrentino concluded, “We enter 2023 with a strong and resilient balance sheet and remain committed to investing in our franchise to drive results. Coupled with our strong client-centric culture and commitment to efficiency through investment in technology, ConnectOne remains well positioned for continued success.”

Dividend Declarations

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

A cash dividend on common stock of $0.155 per share will be paid on March 1, 2023, to common stockholders of record on February 17, 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 March 1, 2023 to preferred stockholders of record on February 17, 2023.

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2022 was $78.8 million, roughly flat from the third quarter of 2022 due to a 5.5% increase in average interest-earning assets, primarily loans, offset by a 20 basis-point contraction in the net interest margin While the net interest margin benefitted from a 43 bps increase in the loan portfolio yield, to 5.20%, the average cost of deposits, including noninterest bearing demand, increased by 69 basis points to 1.46% from 0.77% in the third quarter of 2022. Loan yields continued to increase as a result of new loan originations combined with repricing and maturities of lower rate interest-earning loans outstanding. Funding cost increases were a result of higher market interest rates combined with increased competition due to a contracting U.S. money supply.

Fully taxable equivalent net interest income for the fourth quarter of 2022 increased by $7.9 million, or 11.1%, from the fourth quarter of 2021. The increase from the fourth quarter of 2021 resulted primarily from a 19.5% increase in average interest earning assets, primarily loans, and was partially offset by a 27 basis-point contraction of the net interest margin to 3.48% from 3.75%. The contraction in the net interest margin resulted from a 141 basis-point increase in the cost of average interest-bearing liabilities, partially offset by an 81 basis-point increase in the yield on average interest-earning assets and a 4.7% increase in average noninterest-bearing demand deposits.

Noninterest income was $3.5 million in the fourth quarter of 2022, $3.3 million in the third quarter of 2022 and $3.8 million in the fourth quarter of 2021. Included in noninterest income were net losses on equity securities of $0.1 million, $0.4 million, and $0.1 million for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. Excluding equity securities losses, adjusted noninterest income was $3.6 million, $3.8 million and $3.9 million for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. The $0.2 million decrease in adjusted noninterest income for the fourth quarter 2022 versus the third quarter of 2022 was primarily due to decreases in net gains on loans held-for-sale of $0.1 million and deposit, loan and other income of $0.1 million. The $0.3 million decrease in adjusted noninterest income for the fourth quarter 2022 versus the fourth quarter 2021 was primarily due to a decrease in net gains on loans held-for-sale of $1.0 million, partially offset by increases in BOLI income of $0.3 million and deposit, loan and other income of $0.4 million.

Noninterest expenses totaled $33.3 million for the fourth quarter of 2022, $32.1 million for the third quarter of 2022 and $28.1 million for the fourth quarter of 2021. The increase in noninterest expenses of $1.2 million from the third quarter of 2022 was attributable to inflationary pressures including increases in salaries and employee benefits of $0.8 million, professional and consulting expense of $0.2 million, other expenses of $0.1 million and FDIC insurance expenses of $0.1 million. The increase in noninterest expenses of $5.2 million from the fourth quarter of 2021 was attributable to increases in salaries and employee benefits of $5.2 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 $12.3 million for the fourth quarter of 2022, $10.4 million for the third quarter of 2022 and $12.3 million for the fourth quarter of 2021. The effective tax rates for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021 were 27.5%, 26.5% and 27.1%, respectively.

Asset Quality

The provision for credit losses was $3.3 million for the fourth quarter of 2022, $10.0 million for the third quarter of 2022 and $0.8 million for the fourth quarter of 2021. The decreased provision for credit losses during the fourth quarter of 2022 reflected changes in forecasted macroeconomic conditions.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $44.7 million as of December 31, 2022, $57.7 million as of September 30, 2022 and $61.7 million as of December 31, 2021. Nonaccrual loans were $44.5 million as of December 31, 2022, $57.5 million as of September 30, 2022 and $61.7 million as of December 31, 2021. Nonperforming assets as a percentage of total assets (the “NPA ratio”) were 0.46% as of December 31, 2022, 0.61% as of September 30, 2022 and 0.76% as of December 31, 2021. The NPA ratio declined for the 5th consecutive quarter and, excluding taxi medallion loans, was 0.23% as of December 31, 2022. The ratio of nonaccrual loans to loans receivable was 0.55%, 0.73% and 0.90%, as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The annualized net loan charge-offs ratios were 0.22% for the fourth quarter of 2022, 0.02% for the third quarter of 2022 and 0.01% for the fourth quarter of 2021. The current quarter’s charge-offs relate to the successful workout of nonaccrual loans identified and reserved for in previous periods. The allowance for credit losses represented 1.12%, 1.16%, and 1.15% of loans receivable as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The allowance for credit losses as a percentage of nonaccrual loans increase to 203.6% as of December 31, 2022 versus 159.6% as of September 30, 2022 and 127.7% as of December 31, 2021.

Selected Balance Sheet Items

The Company’s total assets were $9.6 billion as of December 31, 2022, an increase of $1.5 billion from December 31, 2021. Loans receivable were $8.1 billion, an increase of $1.3 billion from December 31, 2021. The increase in loans receivable was attributable to organic loan originations.

The Company’s total stockholders’ equity was $1.2 billion as of December 31, 2022, an increase of $54.5 million from December 31, 2021. The increase in retained earnings of $95.7 million was the primary reason for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $2.9 million, partially offset by a decrease in accumulated other comprehensive income of $31.0 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 December 31, 2022, the Company’s tangible common equity ratio and tangible book value per share were 9.04% and $21.71, 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 $215.7 million as of December 31, 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.

Fourth Quarter and Full Year 2022 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 26, 2023 to review the Company's financial performance and operating results. The conference call dial-in number is 1-201-689-8471, access code 13735159. 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, January 26, 2023 and ending on Thursday, February 2, 2023 by dialing 1-412-317-6671, access code 13735159. 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)
	December 31				December 31,
		2022				2021
	(unaudited)
ASSETS
Cash and due from banks	$	61,629			$	54,352
Interest-bearing deposits with banks		206,686				211,184
Cash and cash equivalents		268,315				265,536
Investment securities		634,884				534,507
Equity securities		15,811				13,794
Loans held-for-sale		13,772				250
Loans receivable		8,099,689				6,828,622
Less: Allowance for credit losses - loans		90,513				78,773
Net loans receivable		8,009,176				6,749,849
Investment in restricted stock, at cost		46,604				27,826
Bank premises and equipment, net		27,800				29,032
Accrued interest receivable		46,062				34,152
Bank owned life insurance		231,328				195,731
Right of use operating lease assets		10,179				11,017
Other real estate owned		264				-
Goodwill		208,372				208,372
Core deposit intangibles		7,312				8,997
Other assets		125,069				50,417
Total assets	$	9,644,948			$	8,129,480
LIABILITIES
Deposits:
Noninterest-bearing	$	1,501,614			$	1,617,049
Interest-bearing		5,855,008				4,715,904
Total deposits		7,356,622				6,332,953
Borrowings		857,622				468,193
Subordinated debentures, net		153,255				152,951
Operating lease liabilities		11,397				12,417
Other liabilities		87,301				38,754
Total liabilities		8,466,197				7,005,268
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock		110,927				110,927
Common stock		586,946				586,946
Additional paid-in capital		30,126				27,246
Retained earnings		535,915				440,169
Treasury stock		(52,799	)			(39,672	)
Accumulated other comprehensive loss		(32,364	)			(1,404	)
Total stockholders' equity		1,178,751				1,124,212
Total liabilities and stockholders' equity	$	9,644,948			$	8,129,480

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
	Three Months Ended								Twelve Months Ended
	12/31/22				12/31/21				12/31/22				12/31/21
Interest income
Interest and fees on loans	$	104,952			$	76,891			$	352,993			$	293,546
Interest and dividends on investment securities:
Taxable		4,225				1,265				12,712				4,413
Tax-exempt		1,185				518				3,893				2,403
Dividends		712				207				1,655				971
Interest on federal funds sold and other short-term investments		1,395				159				2,493				405
Total interest income		112,469				79,040				373,746				301,738
Interest expense
Deposits		26,543				5,281				50,561				24,768
Borrowings		7,917				3,298				21,066				14,092
Total interest expense		34,460				8,579				71,627				38,860
Net interest income		78,009				70,461				302,119				262,878
Provision for (reversal of) credit losses		3,300				815				17,750				(5,500	)
Net interest income after provision for credit losses		74,709				69,646				284,369				268,378
Noninterest income
Deposit, loan and other income		1,894				1,525				7,472				6,617
Income on bank owned life insurance		1,528				1,244				5,597				4,771
Net gains on sale of loans held-for-sale		176				1,139				1,695				3,807
Gain on sale of branches		-				-				-				674
Net losses on equity securities		(90	)			(131	)			(1,521	)			(373	)
Net gains on sale/redemption of investment securities		-				-				-				195
Total noninterest income		3,508				3,777				13,243				15,691
Noninterest expenses
Salaries and employee benefits		21,676				16,483				80,717				64,072
Occupancy and equipment		2,603				2,762				9,865				11,638
FDIC insurance		830				625				2,881				2,665
Professional and consulting		2,157				1,996				8,053				8,286
Marketing and advertising		454				454				1,692				1,318
Information technology and communications		2,694				3,058				11,108				11,267
Amortization of core deposit intangible		409				483				1,685				1,981
Increase in value of acquisition price		-				-				1,516				-
Other expenses		2,489				2,223				8,871				7,784
Total noninterest expenses		33,312				28,084				126,388				109,011
Income before income tax expense		44,905				45,339				171,224				175,058
Income tax expense		12,348				12,301				46,013				44,705
Net income		32,557				33,038				125,211				130,353
Preferred dividends		1,510				1,717				6,037				1,717
Net income available to common stockholders	$	31,047			$	31,321			$	119,174			$	128,636
Earnings per common share:
Basic	$	0.79			$	0.79			$	3.03			$	3.24
Diluted		0.79				0.79				3.01				3.22

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
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
	2022				2022				2022				2022				2021
Selected Financial Data	(dollars in thousands)
Total assets	$	9,644,948			$	9,478,252			$	8,841,506			$	8,334,301			$	8,129,480
Loans receivable:
Commercial	$	1,443,942			$	1,392,037			$	1,274,280			$	1,161,867			$	1,163,442
Paycheck Protection Program ("PPP") loans	11,374				11,458				18,004				54,301				93,057
Commercial real estate	3,170,760				3,087,354				2,727,120				2,516,065				2,446,807
Multifamily	2,641,886				2,624,726				2,442,603				2,465,337				2,337,712
Commercial construction	574,139				537,323				569,789				539,058				540,178
Residential	264,748				256,085				249,379				250,205				255,269
Consumer	2,312				1,030				1,248				1,140				1,886
Gross loans	8,109,161				7,910,013				7,282,423				6,987,973				6,838,351
Unearned net origination fees	(9,472		)		(9,563		)		(7,850		)		(8,378		)		(9,729		)
Loans receivable	8,099,689				7,900,450				7,274,573				6,979,595				6,828,622
Loans held-for-sale	13,772				8,080				3,182				2,742				250
Total loans	$	8,113,461			$	7,908,530			$	7,277,755			$	6,982,337			$	6,828,872
Investment and equity securities	$	650,695			$	639,192			$	691,934			$	525,228			$	548,301
Goodwill and other intangible assets	215,684				216,093				216,502				216,936				217,369
Deposits:
Noninterest-bearing demand	$	1,501,614			$	1,665,658			$	1,712,875			$	1,631,292			$	1,617,049
Time deposits	2,394,190				1,921,235				1,285,409				1,065,814				1,150,109
Other interest-bearing deposits	3,460,818				3,723,617				3,619,315				3,863,299				3,565,795
Total deposits	$	7,356,622			$	7,310,510			$	6,617,599			$	6,560,405			$	6,332,953
Borrowings	$	857,622			$	829,953			$	874,964			$	412,170			$	468,193
Subordinated debentures (net of debt issuance costs)	153,255				153,179				153,103				153,027				152,951
Total stockholders' equity	1,178,751				1,148,295				1,143,147				1,138,519				1,124,212
Quarterly Average Balances
Total assets	$	9,490,477			$	9,030,589			$	8,322,823			$	8,263,382			$	8,027,169
Loans receivable:
Commercial (including PPP loans)	$	1,456,247			$	1,342,868			$	1,245,812			$	1,231,703			$	1,278,048
Commercial real estate (including multifamily)	5,758,594				5,455,714				4,974,297				4,850,349				4,625,371
Commercial construction	558,086				537,073				544,084				541,642				547,038
Residential	261,969				251,338				247,208				253,589				268,112
Consumer	4,630				2,361				5,029				3,682				4,938
Gross loans	8,039,526				7,589,354				7,016,430				6,880,965				6,723,507
Unearned net origination fees	(9,666		)		(9,178		)		(9,222		)		(9,870		)		(10,873		)
Loans receivable	8,029,860				7,580,176				7,007,208				6,871,095				6,712,634
Loans held-for-sale	7,933				2,195				966				382				5,051
Total loans	$	8,037,793			$	7,582,371			$	7,008,174			$	6,871,477			$	6,717,685
Investment and equity securities	$	650,479			$	687,291			$	567,140			$	536,090			$	481,276
Goodwill and other intangible assets	215,951				216,360				216,786				217,219				217,685
Deposits:
Noninterest-bearing demand	$	1,610,044			$	1,682,135			$	1,607,465			$	1,547,055			$	1,537,316
Time deposits	2,035,362				1,525,076				1,103,418				1,124,614				1,204,374
Other interest-bearing deposits	3,558,881				3,686,520				3,717,531				3,851,558				3,672,311
Total deposits	$	7,204,287			$	6,893,731			$	6,428,414			$	6,523,227			$	6,414,001
Borrowings	$	913,960			$	772,561			$	548,675			$	404,907			$	292,847
Subordinated debentures (net of debt issuance costs)	153,205				153,129				153,053				152,977				152,902
Total stockholders' equity	1,165,588				1,160,448				1,143,092				1,131,968				1,113,524
	Three Months Ended
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
	2022				2022				2022				2022				2021
	(dollars in thousands, except for per share data)
Net interest income	$	78,009			$	78,161			$	75,591			$	70,358			$	70,461
Provision for credit losses	3,300				10,000				3,000				1,450				815
Net interest income after provision for credit losses	74,709				68,161				72,591				68,908				69,646
Noninterest income
Deposit, loan and other income	1,894				1,969				1,866				1,743				1,525
Income on bank owned life insurance	1,528				1,521				1,342				1,206				1,244
Net gains on sale of loans held-for-sale	176				262				556				701				1,139
Net losses gains on equity securities	(90		)		(430		)		(405		)		(596		)		(131		)
Total noninterest income	3,508				3,322				3,359				3,054				3,777
Noninterest expenses
Salaries and employee benefits	21,676				20,882				19,519				18,640				16,483
Occupancy and equipment	2,603				2,600				2,733				1,929				2,762
FDIC insurance	830				720				725				606				625
Professional and consulting	2,157				1,980				2,124				1,792				1,996
Marketing and advertising	454				461				426				351				454
Information technology and communications	2,694				2,747				2,801				2,866				3,058
Amortization of core deposit intangible	409				409				434				433				483
Increase in value of acquisition price	-				-				833				683				-
Other expenses	2,489				2,344				2,108				1,930				2,223
Total noninterest expenses	33,312				32,143				31,703				29,230				28,084
Income before income tax expense	44,905				39,340				44,247				42,732				45,339
Income tax expense	12,348				10,425				11,889				11,351				12,301
Net income	$	32,557			$	28,915			$	32,358			$	31,381			$	33,038
Preferred dividends	1,510				1,509				1,509				1,509				1,717
Net income available to common stockholders	$	31,047			$	27,406			$	30,849			$	29,872			$	31,321
Weighted average diluted common shares outstanding	39,378,137				39,320,674				39,481,689				39,727,606				39,792,937
Diluted EPS	$	0.79			$	0.70			$	0.78			$	0.75			$	0.79
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	32,557			$	28,915			$	32,358			$	31,381			$	33,038
Income tax expense	12,348				10,425				11,889				11,351				12,301
Provision for credit losses	3,300				10,000				3,000				1,450				815
Pre-tax and pre-provision net revenue	$	48,205			$	49,340			$	47,247			$	44,182			$	46,154
Return on Assets Measures
Average assets	$	9,490,477			$	9,030,589			$	8,322,823			$	8,263,382			$	8,027,169
Return on avg. assets	1.36		%		1.27		%		1.56		%		1.54		%		1.63		%
Return on avg. assets (pre-tax and pre-provision)	2.02				2.17				2.28				2.17				2.28
	Three Months Ended
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
	2022				2022				2022				2022				2021
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,165,588			$	1,160,448			$	1,143,097			$	1,131,968			$	1,113,524
Less: average preferred stock	(110,927		)		(110,927		)		(110,927		)		(110,927		)		(110,927		)
Average common equity	$	1,054,661			$	1,049,521			$	1,032,170			$	1,021,041			$	1,002,597
Less: average intangible assets	(215,951		)		(216,360		)		(216,786		)		(217,219		)		(217,685		)
Average tangible common equity	$	838,710			$	833,161			$	815,384			$	803,822			$	784,912
Return on avg. common equity (GAAP)	11.68		%		10.36		%		11.99		%		11.87		%		12.39		%
Return on avg. tangible common equity ("TCE") (non-GAAP) (1)	14.82				13.19				15.32				15.22				16.00
Return on avg. tangible common equity (pre-tax, pre-provision, pre-merger charges)	22.94				23.63				23.39				22.44				23.50
Efficiency Measures
Total noninterest expenses	$	33,312			$	32,143			$	31,703			$	29,230			$	28,084
Amortization of core deposit intangibles	(409		)		(409		)		(434		)		(433		)		(483		)
Operating noninterest expense	$	32,903			$	31,734			$	31,269			$	28,797			$	27,601
Net interest income (tax equivalent basis)	$	78,773			$	78,850			$	76,146			$	70,842			$	70,890
Noninterest income	3,508				3,322				3,359				3,054				3,777
Net losses (gains) on equity securities	90				430				405				596				131
Operating revenue	$	82,371			$	82,602			$	79,910			$	74,492			$	74,798
Operating efficiency ratio (non-GAAP) (2)	39.9		%		38.4		%		39.1		%		38.7		%		36.9		%
Net Interest Margin
Average interest-earning assets	$	8,972,063			$	8,500,316			$	7,807,445			$	7,753,881			$	7,508,973
Net interest income (tax equivalent basis)	$	78,773			$	78,850			$	76,146			$	70,842			$	70,890
Impact of purchase accounting fair value marks	(837		)		(885		)		(1,014		)		(1,179		)		(1,674		)
Adjusted net interest income (tax equivalent basis)	$	77,936			$	77,965			$	75,132			$	69,663			$	69,216
Net interest margin (GAAP)	3.48		%		3.68		%		3.91		%		3.71		%		3.75		%
Adjusted net interest margin (non-GAAP) (3)	3.45				3.64				3.86				3.64				3.66
(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
	Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,				Dec. 31,
	2022				2022				2022				2022				2021
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,178,751			$	1,148,295			$	1,143,147			$	1,138,519			$	1,124,212
Less: preferred stock	(110,927		)		(110,927		)		(110,927		)		(110,927		)		(110,927		)
Common equity	$	1,067,824			$	1,037,368			$	1,032,220			$	1,027,592			$	1,013,285
Less: intangible assets	(215,684		)		(216,093		)		(216,502		)		(216,936		)		(217,369		)
Tangible common equity	$	852,140			$	821,275			$	815,718			$	810,656			$	795,916
Total assets	$	9,644,948			$	9,478,252			$	8,841,506			$	8,334,301			$	8,129,480
Less: intangible assets	(215,684		)		(216,093		)		(216,502		)		(216,936		)		(217,369		)
Tangible assets	$	9,429,264			$	9,262,159			$	8,625,004			$	8,117,365			$	7,912,111
Common shares outstanding	39,243,123				39,243,123				39,243,123				39,518,411				39,568,090
Common equity ratio (GAAP)	11.07		%		10.94		%		11.67		%		12.33		%		12.46		%
Tangible common equity ratio (non-GAAP) (4)	9.04				8.87				9.46				9.99				10.06
Regulatory capital ratios (Bancorp):
Leverage ratio	10.68		%		10.95		%		11.63		%		11.57		%		11.65		%
Common equity Tier 1 risk-based ratio	10.30				10.20				10.63				10.69				10.64
Risk-based Tier 1 capital ratio	11.66				11.58				12.11				12.21				12.19
Risk-based total capital ratio	14.45				14.45				15.09				15.25				15.26
Regulatory capital ratios (Bank):
Leverage ratio	10.64		%		10.91		%		11.61		%		11.41		%		11.43		%
Common equity Tier 1 risk-based ratio	11.60				11.53				12.08				12.04				11.96
Risk-based Tier 1 capital ratio	11.60				11.53				12.08				12.04				11.96
Risk-based total capital ratio	13.02				13.00				13.55				13.55				13.44
Book value per share (GAAP)	$	27.21			$	26.43			$	26.30			$	26.00			$	25.61
Tangible book value per share (non-GAAP) (5)	21.71				20.93				20.79				20.51				20.12
Net Loan (Recoveries) Charge-Off Detail
Net loan charge-offs (recoveries):
Charge-offs	$	4,456			$	413			$	302			$	274			$	458
Recoveries	-				(53		)		(32		)		(32		)		(217		)
Net loan charge-offs	$	4,456			$	360			$	270			$	242			$	241
Net loan charge-offs as a % of average loans receivable (annualized)	0.22		%		0.02		%		0.02		%		0.01		%		0.01		%
Asset Quality
Nonaccrual loans	$	44,454			$	57,477			$	60,756			$	59,403			$	61,700
OREO	264				264				316				316				-
Nonperforming assets	$	44,718			$	57,741			$	61,072			$	59,719			$	61,700
Allowance for credit losses - loans ("ACL")	90,513				91,717				82,739				80,070				78,773
Loans receivable	$	8,099,689			$	7,900,450			$	7,274,573			$	6,979,595			$	6,828,622
Less: PPP loans	11,374				11,458				18,004				54,301				93,057
Loans receivable (excluding PPP loans)	$	8,088,315			$	7,888,992			$	7,256,569			$	6,925,294			$	6,735,565
Nonaccrual loans as a % of loans receivable	0.55		%		0.73		%		0.84		%		0.85		%		0.90		%
Nonperforming assets as a % of total assets	0.46				0.61				0.69				0.72				0.76
ACL as a % of loans receivable	1.12				1.16				1.14				1.15				1.15
ACL as a % of nonaccrual loans	203.6				159.6				136.2				134.8				127.7
(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
	December 31, 2022								September 30, 2022									December 31, 2021
	Average									Average									Average
Interest-earning assets:	Balance			Interest			Rate (7)			Balance			Interest			Rate (7)			Balance			Interest			Rate (7)
Investment securities (1) (2)	$	743,917		$	5,725		3.05	%		$	740,394		$	5,434		2.91	%		$	480,143		$	1,921		1.59	%
Loans receivable and loans held-for-sale (2) (3) (4)		8,037,793			105,402		5.20				7,582,371			91,132		4.77				6,717,685			77,220		4.56
Federal funds sold and interest-
bearing deposits with banks		142,489			1,394		3.88				135,331			665		1.95				291,243			121		0.16
Restricted investment in bank stock		47,864			712		5.90				42,220			438		4.12				19,902			207		4.13
Total interest-earning assets		8,972,063			113,233		5.01				8,500,316			97,669		4.56				7,508,973			79,469		4.20
Allowance for loan losses		(91,621	)								(84,307	)								(79,074	)
Noninterest-earning assets		610,035									614,580									597,270
Total assets	$	9,490,477								$	9,030,589								$	8,027,169
Interest-bearing liabilities:
Time deposits	$	2,035,362			11,601		2.26			$	1,525,076			5,396		1.40				1,204,374			2,717		0.90
Other interest-bearing deposits		3,558,881			14,942		1.67				3,686,520			7,903		0.85				3,672,311			2,563		0.28
Total interest-bearing deposits		5,594,243			26,543		1.88				5,211,596			13,299		1.01				4,876,685			5,280		0.43
Borrowings		913,960			5,665		2.46				772,561			3,297		1.69				292,847			1,102		1.49
Subordinated debentures		153,205			2,217		5.74				153,129			2,196		5.69				152,902			2,167		5.62
Finance lease		1,760			35		7.89				1,813			27		5.91				1,967			30		6.05
Total interest-bearing liabilities		6,663,168			34,460		2.05				6,139,099			18,819		1.22				5,324,401			8,579		0.64
Noninterest-bearing demand deposits		1,610,044									1,682,135									1,537,316
Other liabilities		51,677									48,907									51,928
Total noninterest-bearing liabilities		1,661,721									1,731,042									1,589,244
Stockholders' equity		1,165,588									1,160,448									1,113,524
Total liabilities and stockholders' equity	$	9,490,477								$	9,030,589								$	8,027,169
Net interest income (tax equivalent basis)					78,773									78,850									70,890
Net interest spread (5)							2.96	%								3.34	%								3.56	%
Net interest margin (6)							3.48	%								3.68	%								3.75	%
Tax equivalent adjustment					(764	)								(689	)								(429	)
Net interest income				$	78,009								$	78,161								$	70,461
(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.