ConnectOne Bancorp, Inc. Reports Solid Third Quarter 2021 Results; Declares 18% Increase in Quarterly Common Dividend and Increases Share Repurchase Program by 2 Million Shares


ENGLEWOOD CLIFFS, N.J., Oct. 28, 2021 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $32.1 million for the third quarter of 2021, compared with $32.2 million for the second quarter of 2021 and $24.8 million for the third quarter of 2020. Diluted earnings per share were $0.80 for the third quarter of 2021 compared with $0.81 in the second quarter of 2021 and $0.62 in the third quarter of 2020. The $0.1 million decrease in net income and $0.01 decrease in diluted earnings per share versus the second quarter of 2021 were primarily due an increase in the provision for credit losses of $2.7 million, an increase in noninterest expenses of $1.9 million, and a decrease in noninterest income of $0.5 million, largely offset by an increase in net interest income of $5.2 million. The $7.3 million increase in net income and $0.18 increase in diluted earnings per share versus the third quarter of 2020 were due to an increase in net interest income of $7.7 million, an increase in noninterest income of $0.5 million, and a decrease in the provision for credit losses of $3.9 million, partially offset by increases noninterest expenses of $1.7 million and income tax expense of $3.1 million.

Pre-tax, pre-provision net revenue (“PPNR”) increased to $44.1 million, reflecting a 6.9% sequential increase from the second quarter of 2021 and a 17.3% increase from the prior year quarter.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne continued to successfully execute upon our operating strategies during the third quarter.  We had solid net revenue growth and core loan growth, while our net interest margin widened for the eighth consecutive quarter, and we continued to grow and strengthen core noninterest income sources, including our fintech subsidiary BoeFly.   During the quarter we further fortified our capital position with a $100+ million preferred equity capital raise and, going into the end of the year, our balance sheet is positioned to continue to outperform from gains in market and client share. Operationally, we again delivered outstanding performance metrics. Return on assets was 1.62%, return on tangible common equity was 16.9% and PPNR as a percent of assets increased once again to 2.23%.  Meanwhile, our efficiency ratio remained among the best in the industry at 38.1% and tangible book value per share increased by 4% sequentially and by more than 15% over the past year to $19.43. Average loans, excluding PPP, increased by 6.8% sequentially, as our proactive, client-first approach resulted in robust lending opportunities across our market.”

“Our year-to-date performance has been very strong on all fronts. Today's common stock dividend increase – the second increase the Board approved this year – reflects our growing capital base, the strength and stability of our profitability, and our commitment to driving long-term value for our shareholders,” Mr. Sorrentino added. “Looking ahead, our outlook for the remainder of 2021 is directionally positive. ConnectOne remains well-positioned to capitalize on meaningful growth opportunities and, as we plan for a robust 2022, we look forward to our continued ability to scale.”

Dividend Declaration

The Company announced that its Board of Directors declared a cash dividend on its common stock of $0.13 per share, reflecting an 18% sequential increase in our cash dividend. The dividend, which reflects the second $0.02 increase declared during 2021, will be paid on December 1, 2021 to common shareholders of record on November 15, 2021.  

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2021 was $68.8 million, an increase of $5.3 million, or 8.4%, from the second quarter of 2021 resulting primarily from a 3.7% increase in average interest-earning assets, and a 13 basis-point widening of the net interest margin to 3.73% from 3.60%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.63% for the third quarter of 2021 and 3.49% for the second quarter of 2021. The net interest margin widened as a result of continued improvement in the Bank’s cost and mix of funding sources, an increase in the accretion of Paycheck Protection Program (“PPP”) fee income due to accelerated forgiveness activity, and the recovery of back-interest after the successful resolution of a nonaccrual loan. These items more than offset a declining core yield on loans receivable and investment securities. This was the eighth consecutive quarter that the Bank’s net interest margin widened. Included in interest income in both the third and second quarter of 2021 was the accretion of PPP fee income of $3.4 million and $2.3 million, respectively. Remaining deferred and unrecognized PPP fees were $6.0 million as of September 30, 2021.

Fully taxable equivalent net interest income for the third quarter of 2021 increased by $7.8 million, or 12.7%, from the third quarter of 2020. The increase from the third quarter of 2020 resulted primarily from a 24 basis-point widening of the net interest margin to 3.73% from 3.49%. The widening of the net interest margin resulted from a 60 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 24 basis-point reduction in the yield on average interest-earning assets.

Noninterest income was $4.0 million in the third quarter of 2021, $4.5 million in the second quarter of 2021 and $3.5 million in the third quarter of 2020.   The decrease in noninterest income of $0.5 million from the second quarter of 2021 was primarily attributable to a decrease in deposit, loan and other income of $0.5 million, reflecting lower referral fees related to BoeFly’s participation in the PPP.   The increase of $0.5 million in noninterest income when compared to the third quarter of 2020 was attributable to increases in sale of loans held-for-sale of $0.5 million and deposit, loan and other income of $0.4 million, partially offset by a decrease in BOLI income of $0.3 million and a net loss on equity securities of $0.1 million.

Noninterest expenses totaled $28.2 million for the third quarter of 2021, $26.3 million for the second quarter of 2021 and $26.5 million for the third quarter of 2020. The increase in noninterest expenses of $1.9 million from the second quarter of 2021 was primarily attributable to increases in salaries and employee benefits of $1.5 million, reflecting the Bank’s recent expansion leading to a 5% sequential increase in staff count; other expenses of $0.7 million, partially a result of increased technology investments; and professional and consulting fees of $0.1 million. These increases were partially offset by decreases in occupancy and equipment of $0.3 million and data processing of $0.1 million. The increase in noninterest expenses of $1.7 million from the third quarter of 2020 was primarily attributable to increases in salaries and employee benefits of $1.6 million, other expenses $1.2 million professional and consulting of $0.3 million and marketing and advertising of $0.1 million, partially offset by decreases in FDIC insurance $0.6 million and occupancy and equipment of $0.9 million. The Company’s expense base growth reflects its commitment to organic expansion through investments in people and technology, while remaining focused on maintaining best-in-class operating efficiency.

Income tax expense was $10.9 million for the third quarter of 2021, $10.7 million for the second quarter of 2021 and $7.8 million for the third quarter of 2020. The effective tax rates for the third quarter of 2021, second quarter of 2021 and third quarter of 2020 were 25.3%, 24.8% and 23.9%, respectively. The higher effective tax rate during the third quarter of 2021 when compared to the second quarter of 2021 and third quarter of 2020 was the result of higher levels of income from taxable sources.

Asset Quality

The provision for (reversal of) credit losses was $1.1 million for the third quarter of 2021, $(1.6) million for the second quarter of 2021 and $5.0 million for the third quarter of 2020. The provision for credit losses during the third quarter of 2021 of $1.1 million was the result of strong organic loan growth, partially offset by continued improvement in the macroeconomic outlook. The second quarter of 2021 provision recapture of $1.6 million, reflected an accelerated recovery from the pandemic.  The elevated provision for loan losses during the third quarter of 2020 was due to the economic uncertainties of the COVID-19 pandemic, including consideration of related payment deferrals requested or granted.   As of September 30, 2021, the Bank had 10 loans on deferral, with a total balance of approximately $10 million, down significantly from 79 loans with a total balance of approximately $100 million as of June 30, 2021.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $66.0 million as of September 30, 2021, $61.7 million as of December 31, 2020 and $65.5 million as of September 30, 2020. Nonperforming assets as a percentage of total assets were 0.83% as of September 30, 2021, 0.82% as of December 31, 2020 and 0.88% as of September 30, 2020. The ratio of nonaccrual loans to loans receivable was 1.00%, 0.99% and 1.05%, as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The annualized net loan charge-offs (recoveries) charge-off ratio was 0.10% for the third quarter of 2021, 0.01% for the second quarter of 2021 and (0.03)% for the third quarter of 2020. The current quarter included a $1.4 million charge-off of a commercial real estate loan that previously had a specific credit reserve. The allowance for credit losses represented 1.19%, 1.27%, and 1.19% of loans receivable as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.22%, 1.36%, and 1.29% of loans receivable as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 118.2% as of September 30, 2021, 128.4% as of December 31, 2020 and 113.4% as of September 30, 2020.

Selected Balance Sheet Items

The Company’s total assets were $7.9 billion, an increase of $402.2 million from December 31, 2020.  Loans receivable were $6.6 billion, an increase of $340.1 million from December 31, 2020. The increase in loans receivable was attributable to higher, non-PPP, loan originations, offset by decreases in PPP loans resulting from forgiveness activity.  As of September 30, 2021, PPP loans totaled $177.8 million, down from $397.5 million as of December 31, 2020 reflecting accelerated forgiveness of the outstanding PPP loans.

The Company’s stockholders’ equity was $1.1 billion as of September 30, 2021, an increase of $183.1 million from December 31, 2020. In August 2021, the Company raised $110.9 million, net of estimated issuance expenses, from the issuance of $115 million in 5.25% fixed rate, non-cumulative, perpetual preferred stock. This issuance was the primary reason for the overall increase in stockholders’ equity, in addition to increases in retained earnings of $82.0 million and additional paid-in capital of $2.0 million, partially offset by a decrease in accumulated other comprehensive income of $3.8 million and an increase in treasury stock of $8.0 million. As of September 30, 2021, the Company’s tangible common equity ratio and tangible book value per share were 9.95% and $19.43, respectively. As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $217.9 million as of September 30, 2021 and $219.3 million as of December 31, 2020.

Share Repurchase Program

During the third quarter of 2021, the Company repurchased approximately 196,000 shares of common stock leaving approximately 315,000 shares remaining authorized for repurchase under the current Board approved repurchase program. In addition, the Board has authorized the repurchase of up to an additional 2,000,000, or approximately 5%, of the Company’s currently outstanding common shares. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plans do not obligate the Company to acquire any particular amount of common stock, and they may be modified or suspended at any time at the Company's discretion. 

Use of Non-GAAP Financial Measures

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

Third Quarter 2021 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 28, 2021 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13723610. 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 28, 2021 and ending on Thursday, November 4, 2021 by dialing 412-317-6671, access code 13723610. 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 its fintech subsidiary, BoeFly. 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 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 Securities Exchange Commission, as supplemented by the Company’s subsequent filings with the 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
Executive VP & CFO
201.816.4474; bburns@cnob.com

Media Contact:
Sutton Resler MWW
571.236.4966:  sresler@mww.com



CONNECTONE BANCORP, INC. AND SUBSIDIARIES      
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION     
(in thousands)      
       
 September 30, December 31,  September 30, 
  2021   2020   2020  
 (unaudited)   (unaudited) 
ASSETS      
Cash and due from banks$49,626  $63,637  $59,422  
Interest-bearing deposits with banks 363,569   240,119   196,697  
Cash and cash equivalents 413,195   303,756   256,119  
       
Investment securities 462,884   487,955   453,015  
Equity securities 13,700   13,387   13,400  
       
Loans held-for-sale 5,596   4,710   8,508  
       
Loans receivable 6,576,439   6,236,307   6,251,051  
Less: Allowance for credit losses - loans 77,986   79,226   74,267  
Net loans receivable 6,498,453   6,157,081   6,176,784  
       
Investment in restricted stock, at cost 18,106   25,099   28,713  
Bank premises and equipment, net 29,635   30,108   29,922  
Accrued interest receivable 33,610   35,317   34,326  
Bank owned life insurance 194,487   165,960   165,676  
Right of use operating lease assets 11,002   16,159   22,830  
Goodwill 208,372   208,372   208,372  
Core deposit intangibles 9,480   10,977   11,605  
Other assets 50,994   88,458   40,289  
     Total assets$7,949,514  $7,547,339  $7,449,559  
       
LIABILITIES      
Deposits:      
Noninterest-bearing$1,500,754  $1,339,108  $1,270,021  
Interest-bearing 4,897,584   4,620,116   4,528,735  
Total deposits 6,398,338   5,959,224   5,798,756  
Borrowings 253,225   425,954   506,225  
Subordinated debentures, net 152,875   202,648   202,552  
Operating lease liabilities 12,437   18,026   26,726  
Other liabilities 34,206   26,177   24,564  
     Total liabilities 6,851,081   6,632,029   6,558,823  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Preferred stock 110,927   -   -  
Common stock 586,946   586,946   586,946  
Additional paid-in capital 25,851   23,887   22,867  
Retained earnings 413,996   331,951   309,893  
Treasury stock (38,314)  (30,271)  (30,271) 
Accumulated other comprehensive (loss) income (973)  2,797   1,301  
   Total stockholders' equity 1,098,433   915,310   890,736  
   Total liabilities and stockholders' equity$7,949,514  $7,547,339  $7,449,559  
       


CONNECTONE BANCORP, INC. AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(dollars in thousands, except for per share data)        
         
 Three Months Ended Nine Months Ended 
 09/30/21 09/30/20 09/30/21 09/30/20 
Interest income        
Interest and fees on loans$75,092  $74,755  $216,655  $223,488 
Interest and dividends on investment securities:        
Taxable 1,065   1,305   3,148   5,083 
Tax-exempt 511   688   1,885   2,148 
Dividends 245   426   764   1,268 
Interest on federal funds sold and other short-term investments 113   47   246   625 
Total interest income 77,026   77,221   222,698   232,612 
Interest expense        
Deposits 5,478   11,947   19,487   42,756 
Borrowings 3,303   4,725   10,794   13,236 
Total interest expense 8,781   16,672   30,281   55,992 
         
Net interest income 68,245   60,549   192,417   176,620 
Provision for (reversal of) credit losses 1,100   5,000   (6,315)  36,000 
Net interest income after provision for credit losses 67,145   55,549   198,732   140,620 
         
Noninterest income        
Deposit, loan and other income 1,702   1,278   5,092   5,777 
Income on bank owned life insurance 1,278   1,598   3,527   3,693 
Net gains on sale of loans held-for-sale 1,114   614   2,668   1,244 
Gain on sale of branches -   -   674   - 
Net (losses) gains on equity securities (78)  (7)  (242)  215 
Net gains on sale/redemption of investment securities -   -   195   29 
Total noninterest income 4,016   3,483   11,914   10,958 
         
Noninterest expenses        
Salaries and employee benefits 16,740   15,114   47,589   44,177 
Occupancy and equipment 2,656   3,566   8,876   10,193 
FDIC insurance 525   1,105   2,040   3,054 
Professional and consulting 2,217   1,926   6,290   5,173 
Marketing and advertising 345   214   864   944 
Data processing 1,541   1,470   4,680   4,529 
Merger expenses -   -   -   14,640 
Amortization of core deposit intangible 483   627   1,498   1,931 
Increase in value of acquisition price -   -   -   2,333 
Other expenses 3,676   2,456   9,090   7,625 
Total noninterest expenses 28,183   26,478   80,927   94,599 
         
Income before income tax expense 42,978   32,554   129,719   56,979 
Income tax expense 10,881   7,768   32,404   11,331 
Net income$32,097  $24,786  $97,315  $45,648 
         
Earnings per common share:        
Basic$0.81  $0.62  $2.45  $1.15 
Diluted 0.80   0.62   2.43   1.15 
         


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,  
  2021   2021   2021   2020   2020   
Selected Financial Data(dollars in thousands)  
Total assets$7,949,514  $7,710,082$7,449,639  $7,547,339$7,449,559 
Loans receivable:           
Commercial$1,116,535  $1,046,965$1,071,418  $1,092,404$1,125,273 
Paycheck Protection Program ("PPP") loans 177,829   326,788   522,340   397,492   474,022   
Commercial real estate 2,354,209   2,252,484   2,127,806   2,103,468   2,001,311   
Multifamily 2,113,541   1,914,978   1,698,331   1,712,153   1,703,290   
Commercial construction 552,896   587,121   565,872   617,747   614,112   
Residential 270,793   286,907   306,376   322,564   343,376   
Consumer 2,093   6,355   3,364   1,853   1,876   
Gross loans 6,587,896   6,421,598   6,295,508   6,247,681   6,263,260   
Unearned net origination fees (11,457)  (13,694)  (18,317)  (11,374)  (12,209)  
Loans receivable 6,576,439   6,407,904   6,277,191   6,236,307   6,251,051   
Loans held-for-sale 5,596   6,159   6,900   4,710   8,508   
Total loans$6,582,035  $6,414,063  $6,284,091  $6,241,017  $6,259,559   
            
Investment and equity securities$476,584  $472,156  $455,223  $501,342  $466,415   
Goodwill and other intangible assets 217,852   218,335   218,842   219,349   219,977   
Deposits:           
Noninterest-bearing demand$1,500,754  $1,485,952  $1,384,961  $1,339,108  $1,270,021   
Time deposits 1,221,911   1,301,807   1,356,599   1,464,133   1,619,609   
Other interest-bearing deposits 3,675,673   3,404,754   3,209,774   3,155,983   2,909,126   
Total deposits$6,398,338  $6,192,513  $5,951,335  $5,959,224  $5,798,756   
            
Borrowings$253,225  $353,462  $359,710  $425,954  $506,225   
Subordinated debentures (net of debt issuance costs) 152,875   152,800   152,724   202,648   202,552   
Total stockholders' equity 1,098,433   964,960   935,637   915,310   890,736   
            
Quarterly Average Balances           
Total assets$7,837,997  $7,566,676  $7,500,034  $7,547,651  $7,474,002   
Loans receivable:           
Commercial (including PPP loans)$1,296,066  $1,485,918  $1,531,790  $1,557,303  $1,610,423   
Commercial real estate (including multifamily) 4,312,092   3,925,497   3,805,856   3,704,197   3,679,297   
Commercial construction 572,920   553,396   595,466   615,439   646,281   
Residential 279,063   293,633   316,233   332,403   352,426   
Consumer 2,649   3,148   2,540   3,309   2,536   
Gross loans 6,462,790   6,261,592   6,251,885   6,212,651   6,290,963   
Unearned net origination fees (13,064)  (13,076)  (13,163)  (12,023)  (13,292)  
Loans receivable 6,449,726   6,248,516   6,238,723   6,200,628   6,277,671   
Loans held-for-sale 6,226   3,696   4,237   9,003   10,772   
Total loans$6,455,952  $6,252,212  $6,242,960  $6,209,631  $6,288,443   
            
Investment and equity securities$465,103  $450,543  $481,802  $469,820  $429,947   
Goodwill and other intangible assets 218,170   218,662   219,171   219,761   220,391   
Deposits:           
Noninterest-bearing demand$1,495,456  $1,432,707  $1,348,585  $1,294,447  $1,253,235   
Time deposits 1,252,818   1,324,510   1,422,295   1,577,338   1,728,129   
Other interest-bearing deposits 3,582,261   3,320,400   3,225,751   3,094,536   2,881,592   
Total deposits$6,330,535  $6,077,617  $5,996,631  $5,966,321  $5,862,956   
            
Borrowings$276,183  $331,633  $375,511  $410,098  $467,399   
Subordinated debentures (net of debt issuance costs) 152,825   152,750   154,341   202,595   202,502   
Total stockholders' equity 1,032,191   952,019   928,041   906,153   883,364   
            
 Three Months Ended  
 Sep. 30, Jun. 30, Mar. 31, Dec. 30, Sep. 30,  
  2021   2021   2021   2020   2020   
 (dollars in thousands, except for per share data)  
Net interest income$68,245  $63,009  $61,163  $61,371  $60,549   
Provision for (reversal of) credit losses 1,100   (1,649)  (5,766)  5,000   5,000   
Net interest income after provision for credit losses 67,145   64,658   66,929   56,371   55,549   
Noninterest income           
Deposit, loan and other income 1,702   2,222   1,168   1,300   1,278   
Income on bank owned life insurance 1,278   1,185   1,064   1,314   1,598   
Net gains on sale of loans held-for-sale 1,114   847   707   841   614   
Gain on sale of branches -   -   674   -   -   
Net (losses) gains on equity securities (78)  23   (187)  (13)  (7)  
Net gains on sale/redemption of investment securities -   195   -   -   -   
Total noninterest income 4,016   4,472   3,426   3,442   3,483   
Noninterest expenses           
Salaries and employee benefits 16,740   15,284   15,565   14,581   15,114   
Occupancy and equipment 2,656   2,916   3,404   3,689   3,566   
FDIC insurance 525   580   935   948   1,105   
Professional and consulting 2,217   2,117   1,956   2,210   1,926   
Marketing and advertising 345   278   241   256   214   
Data processing 1,541   1,603   1,536   1,479   1,470   
Amortization of core deposit intangible 483   508   507   628   627   
Other expenses 3,676   2,973   2,341   2,611   2,456   
Total noninterest expenses 28,183   26,259   26,485   26,402   26,478   
            
Income before income tax expense 42,978   42,871   43,870   33,411   32,554   
Income tax expense 10,881   10,652   10,871   7,770   7,768   
Net income$32,097  $32,219  $32,999  $25,641  $24,786   
            
Weighted average diluted common shares outstanding 39,869,468   39,872,829   39,788,881   39,726,791   39,653,832   
Diluted EPS$0.80  $0.81  $0.82  $0.64  $0.62   
            
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue         
Net income$32,097  $32,219  $32,999  $25,641  $24,786   
Income tax expense 10,881   10,652   10,871   7,770   7,768   
Provision for (reversal of) credit losses 1,100   (1,649)  (5,766)  5,000   5,000   
Pre-tax and pre-provision net revenue$44,078  $41,222  $38,104  $38,411  $37,554   
            
Return on Assets Measures           
Average assets$7,837,997  $7,566,676  $7,500,034  $7,547,651  $7,474,002   
Return on avg. assets 1.62 % 1.71 % 1.78 % 1.35 % 1.32 % 
Return on avg. assets (pre-tax and pre-provision) 2.23   2.19   2.06   2.02   2.00   
            
 Three Months Ended  
 Sep. 30, Jun. 30, Mar. 31, Dec. 30, Sep. 30,  
  2021   2021   2021   2020   2020   
Return on Equity Measures(dollars in thousands)  
Average common equity$980,344  $952,019  $928,041  $906,153  $883,364   
Less: average intangible assets (218,170)  (218,662)  (219,171)  (219,761)  (220,391)  
Average tangible common equity$762,174  $733,357  $708,870  $686,392  $662,973   
            
Return on avg. common equity (GAAP) 12.99 % 13.57 % 14.42 % 11.26 % 11.16 % 
Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 16.88   17.82   19.08   15.12   15.14   
            
Efficiency Measures           
Total noninterest expenses$28,183  $26,259  $26,485  $26,402  $26,478   
Amortization of core deposit intangibles (483)  (508)  (507)  (628)  (627)  
Foreclosed property expense -   -   -   (2)  -   
Operating noninterest expense$27,700  $25,751  $25,978  $25,772  $25,851   
            
Net interest income (tax equivalent basis)$68,761  $63,418  $61,581  $61,840  $61,005   
Noninterest income 4,016   4,472   3,426   3,442   3,483   
Net gains on sale of branches -   -   (674)  -   -   
Net gains on sale/redemption of investment securities -   (195)  -   -   -   
Operating revenue$72,777  $67,695  $64,333  $65,282  $64,488   
            
Operating efficiency ratio (non-GAAP) (2) 38.1 % 38.0 % 40.4 % 39.5 % 40.1 % 
            
Net Interest Margin           
Average interest-earning assets$7,321,771  $7,059,965  $7,008,500  $7,031,662  $6,962,499   
            
Net interest income (tax equivalent basis)$68,761  $63,418  $61,581  $61,840  $61,005   
Impact of purchase accounting fair value marks (1,849)  (2,012)  (2,074)  (2,237)  (2,403)  
Adjusted net interest income (tax equivalent basis)$66,912  $61,406  $59,507  $59,603  $58,602   
            
Net interest margin (GAAP) 3.73 % 3.60 % 3.56 % 3.50 % 3.49 % 
Adjusted net interest margin (non-GAAP) (3) 3.63   3.49   3.44   3.37   3.35   
            
(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,  
  2021   2021   2021   2020   2020   
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data)  
Common equity$987,506  $964,960  $935,637  $915,310  $890,736   
Less: intangible assets (217,852)  (218,335)  (218,842)  (219,349)  (219,977)  
Tangible common equity$769,654  $746,625  $716,795  $695,961  $670,759   
            
Total assets$7,949,514  $7,710,082  $7,449,639  $7,547,339  $7,449,559   
Less: intangible assets (217,852)  (218,335)  (218,842)  (219,349)  (219,977)  
Tangible assets$7,731,662  $7,491,747  $7,230,797  $7,327,990  $7,229,582   
            
Common shares outstanding 39,602,199   39,794,815   39,773,602   39,785,398   39,754,051   
            
Common equity ratio (GAAP) 12.42 % 12.52 % 12.56 % 12.13 % 11.96 % 
Tangible common equity ratio (non-GAAP) (4) 9.95   9.97   9.91   9.50   9.28   
            
Regulatory capital ratios (Bancorp):           
Leverage ratio 11.60 % 10.19 % 9.89 % 9.51 % 9.30 % 
Common equity Tier 1 risk-based ratio 10.73   11.09   11.36   10.79   10.63   
Risk-based Tier 1 capital ratio 12.35   11.17   11.44   10.87   10.72   
Risk-based total capital ratio 15.54   14.58   15.08   15.08   14.94   
            
Regulatory capital ratios (Bank):           
Leverage ratio 11.33 % 11.34 % 11.06 % 10.63 % 10.41 % 
Common equity Tier 1 risk-based ratio 12.06   12.42   12.78   12.24   12.00   
Risk-based Tier 1 capital ratio 12.06   12.42   12.78   12.24   12.00   
Risk-based total capital ratio 13.61   14.07   14.55   10.00   13.70   
            
Book value per share (GAAP)$24.94  $24.25  $23.52  $23.01  $22.41   
Tangible book value per share (non-GAAP) (5) 19.43   18.76   18.02   17.49   16.87   
            
Net Loan (Recoveries) Charge-Off Detail           
Net loan charge-offs (recoveries):           
Charge-offs$1,727  $212  $-  $67  $257   
Recoveries (113)  (14)  (61)  (26)  (800)  
Net loan charge-offs (recoveries)$1,614  $198  $(61) $41  $(543)  
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.10 % 0.01 % (0.00)% 0.00 % (0.03)% 
            
Asset Quality           
Nonaccrual loans$65,959  $56,213  $60,940  $61,696  $65,494   
OREO -   -   -   -   -   
Nonperforming assets$65,959  $56,213  $60,940  $61,696  $65,494   
            
Performing troubled debt restructurings$41,256  $33,021  $25,505  $23,655  $18,241   
            
Allowance for credit losses - loans ("ACL") 77,986   78,684   80,568   79,226   74,267   
            
Loans receivable$6,576,439  $6,407,904  $6,277,191  $6,236,307  $6,251,051   
Less: PPP loans 177,829   326,788   522,340   397,492   474,022   
Loans receivable (excluding PPP loans)$6,398,610  $6,081,116  $5,754,851  $5,838,815  $5,777,029   
            
Nonaccrual loans as a % of loans receivable 1.00 % 0.88 % 0.97 % 0.99 % 1.05   
Nonperforming assets as a % of total assets 0.83   0.73   0.82   0.82   0.88   
ACL as a % of loans receivable 1.19   1.23   1.28   1.27   1.19   
ACL as a % of loans receivable (excluding PPP loans) 1.22   1.29   1.40   1.36   1.29   
ACL as a % of nonaccrual loans 118.2   140.0   132.2   128.4   113.4   
            
(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, 2021June 30, 2021September 30, 2020 
    Average     Average     Average    
Interest-earning assets: BalanceInterestRate (7) BalanceInterestRate (7) BalanceInterestRate (7)
Investment securities (1) (2)$459,559 $1,712 1.48% $444,461 $1,765 1.59% $420,362 $2,176 2.06%
Loans receivable and loans held-for-sale (2) (3) (4)    6,455,952  75,434 4.64   6,252,212  71,348 4.58   6,288,443  75,028 4.75 
Federal funds sold and interest-              
bearing deposits with banks 387,155  151 0.15   341,885  84 0.10   227,617  47 0.08 
Restricted investment in bank stock 19,105  245 5.09   21,407  263 4.93   26,077  426 6.50 
     Total interest-earning assets 7,321,771  77,542 4.20   7,059,965  73,460 4.17   6,962,499  77,677 4.44 
Allowance for credit losses - loans (78,327)     (80,548)     (69,381)   
Noninterest-earning assets  594,553      587,259      580,884    
     Total assets  $7,837,997     $7,566,676     $7,474,002    
                  
Interest-bearing liabilities:              
Time deposits   1,252,818  2,983 0.94  $1,324,510 $3,963 1.20   1,728,129  8,174 1.88 
Other interest-bearing deposits 3,582,261  2,495 0.28   3,320,400  2,461 0.30   2,881,592  3,773 0.52 
     Total interest-bearing deposits 4,835,079  5,478 0.45   4,644,910  6,424 0.55   4,609,721  11,947 1.03 
                  
Borrowings   276,183  1,105 1.59   331,633  1,419 1.72   467,399  1,992 1.70 
Subordinated debentures  152,825  2,168 5.63   152,750  2,168 5.69   202,502  2,700 5.30 
Capital lease obligation  2,018  30 5.90   2,066  31 6.02   2,211  33 5.94 
     Total interest-bearing liabilities 5,266,105  8,781 0.66   5,131,359  10,042 0.78   5,281,833  16,672 1.26 
                  
Noninterest-bearing demand deposits 1,495,456      1,432,707      1,253,235    
Other liabilities   44,245      50,591      55,570    
     Total noninterest-bearing liabilities 1,539,701      1,483,298      1,308,805    
Stockholders' equity  1,032,191      952,019      883,364    
     Total liabilities and stockholders' equity$7,837,997     $7,566,676     $7,474,002    
                  
Net interest income (tax equivalent basis)  68,761      63,418      61,005   
Net interest spread (5)   3.54%   3.39%   3.18%
                  
Net interest margin (6)   3.73%   3.60%   3.49%
                  
Tax equivalent adjustment   (516)     (409)     (456)  
Net interest income  $68,245     $63,009     $60,549   
                  
                  
(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.