ConnectOne Bancorp, Inc. Reports Fourth Quarter and Record Full-Year 2021 Results

Englewood Cliffs, New Jersey, UNITED STATES


ENGLEWOOD CLIFFS, N.J., Jan. 27, 2022 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $31.3 million for the fourth quarter of 2021, compared with $32.1 million for the third quarter of 2021 and $25.6 million for the fourth quarter of 2020. Diluted earnings per share were $0.79 for the fourth quarter of 2021 compared with $0.80 for the third quarter of 2021 and $0.64 for the fourth quarter of 2020. The $0.8 million decrease in net income available to common stockholders and $0.01 decrease in diluted earnings per share versus the third quarter of 2021 were primarily due to $1.7 million in preferred dividends, a $1.4 million increase in income tax expense and a $0.2 million decrease in noninterest income, partially offset by a $2.2 million increase in net interest income, a $0.3 million decrease in provision for credit losses and a $0.1 million decrease in noninterest expenses. The $5.7 million increase in net income available to common stockholders and $0.15 increase in diluted earnings per share versus the fourth quarter of 2020 were due to a $9.1 million increase in net interest income, a $0.3 million increase in noninterest income, and a $4.2 million decrease in the provision for credit losses, partially offset by a $1.7 million increase in noninterest expenses, a $4.5 million increase in income tax expense, and $1.7 million in preferred dividends.   Full-year 2021 net income available to common stockholders was $128.6 million, compared to $71.3 million for 2020. Diluted earnings per share for the full-year 2021 was $3.22, compared with $1.79 for 2020.

Pre-tax, pre-provision net revenue (“PPNR”) increased to $46.2 million for the fourth quarter of 2021, reflecting a 4.7% sequential increase from the third quarter of 2021 and a 20.2% increase from the prior year quarter.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne’s strong fourth quarter capped off an exceptional year for our Company. We delivered record financial performance, realized significant organic growth, and continued to leverage our investments in technology to increase our operational efficiency even further. Loans, net of the Paycheck Protection Program (“PPP”), increased by 5.3% sequentially and by 15.4% for the year, while noninterest bearing deposits grew by 7.7% sequentially and by 20.8% for the year. Our performance is a testament to our team’s continued resilience, the diligent execution of our “client first” philosophy and ConnectOne’s stellar reputation among commercial businesses and the real estate industry.”

“We continue to operate efficiently and effectively and our fourth quarter operating performance was highlighted by solid year-over-year net revenue growth, strong earnings and best-in-class efficiency. We also continued to deliver outstanding performance metrics, further solidifying our status as a top performer in the banking industry. This quarter’s PPNR as a percentage of assets was 2.28%, return on assets was 1.63%, the efficiency ratio was 37.0% and return on tangible common equity was 16.0% while tangible book value per share increased 3.6% sequentially, to $20.12.”

Mr. Sorrentino added, “Looking ahead, we’re excited about what the future holds for ConnectOne and continue to see tangible opportunities in 2022 to further maximize long-term shareholder value. We’re projecting strong growth and increased operating leverage, while our margins and efficiency are expected to remain among the best in the industry. We also remain optimistic regarding continued momentum for loan growth in 2022 and believe we’re well positioned to continue to pursue attractive opportunities to expand our valuable franchise.”  

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 common stock dividend of $0.13 per share will be paid on March 1, 2022 to common stockholders of record on February 14, 2022.

A dividend of $0.328125 per share for every depositary share, representing a 1/40th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will be paid on March 1, 2022 to preferred stockholders of record on February 14, 2022.

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2021 was $70.9 million, an increase of $2.1 million, or 3.1%, from the third quarter of 2021 resulting primarily from a 4.1% increase in average loans, and a 2 basis-point widening of the net interest margin to 3.75% from 3.73%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.66% for the fourth quarter of 2021 and 3.63% for the third quarter of 2021. The net interest margin widened primarily as a result of lower average cash balances. Included in interest income in the fourth and third quarters of 2021 was the accretion of PPP fee income of $1.5 million and $3.4 million, respectively. Remaining deferred and unrecognized PPP fees were $4.6 million as of December 31, 2021.

Fully taxable equivalent net interest income for the fourth quarter of 2021 increased by $9.1 million, or 14.6%, from the fourth quarter of 2020. The increase from the fourth quarter of 2020 resulted primarily from an 8.2% increase in average loans and a 25 basis-point widening of the net interest margin to 3.75% from 3.50%. The widening of the net interest margin resulted from a 43 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 10 basis-point reduction in the yield on average interest-earning assets.

Noninterest income was $3.8 million in the fourth quarter of 2021, $4.0 million in the third quarter of 2021 and $3.4 million in the fourth quarter of 2020.   The decrease in noninterest income of $0.2 million from the third quarter of 2021 was primarily attributable to a decrease in deposit, loan and other income of $0.2 million, reflecting PPP referral fees at BoeFly during the third quarter.   The increase of $0.3 million in noninterest income when compared to the fourth quarter of 2020 was attributable to increases in deposit, loan and other income of $0.2 million and increases in sale of loans held-for-sale of $0.3 million, partially offset by decreases in BOLI income of $0.1 million and net loss on equity securities of $0.1 million.

Noninterest expenses totaled $28.1 million for the fourth quarter of 2021, $28.2 million for the third quarter of 2021 and $26.4 million for the fourth quarter of 2020. The decrease in noninterest expenses of $0.1 million from the third quarter of 2021 was primarily attributable to a decrease in salaries and employee benefits of $0.3 million and professional and consulting of $0.2 million, partially offset by increases in occupancy and equipment of $0.1 million, FDIC insurance of $0.1 million and marketing and advertising of $0.1 million. The increase in noninterest expenses of $1.7 million from the fourth quarter of 2020 was primarily attributable to increases in salaries and employee benefits of $1.9 million, other expenses of $1.1 million, and marketing and advertising of $0.2 million, partially offset by decreases in occupancy and equipment of $0.9 million, professional and consulting of $0.2 million and FDIC insurance $0.3 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. The Company expects operating expenses to accelerate in 2022 at an increased pace, largely resulting from wage inflation, increased staffing levels and its ongoing investment in technology.

Income tax expense was $12.3 million for the fourth quarter of 2021, $10.9 million for the third quarter of 2021 and $7.8 million for the fourth quarter of 2020. The effective tax rates for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020 were 27.1%, 25.3% and 23.3%, respectively. The higher effective tax rate during the fourth quarter of 2021 when compared to the third quarter of 2021 and fourth quarter of 2020 was the result of a higher percentage of income being derived from taxable sources.   The effective tax rate for the full-year 2021 was 25.5%. The Company expects its effective tax rate to increase in 2022, as a result of the Company’s revenue growth in existing and new markets.

Asset Quality

The provision for credit losses was $0.8 million for the fourth quarter of 2021, $1.1 million for the third quarter of 2021 and $5.0 million for the fourth quarter of 2020. The provision for credit losses during the fourth quarter of 2021 and the third quarter of 2021 was the result of strong organic loan growth, while continuing to reflect improvement in the macroeconomic outlook.   The elevated provision for loan losses during the fourth quarter of 2020 was due to the economic uncertainties surrounding the COVID-19 pandemic, including consideration of related payment deferrals requested or granted at that time.   As of December 31, 2021, the Bank had only one commercial real estate loan remaining on deferral under The Cares Act with a balance of $0.5 million.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $61.7 million as of December 31, 2021, $66.0 million as of September 30, 2021 and $61.7 million as of December 31, 2020. The decrease in nonaccrual loans versus the sequential quarter was due to payoffs and loans returning to accrual status. Nonperforming assets as a percentage of total assets were 0.76% as of December 31, 2021, 0.83% as of September 30, 2021 and 0.82% as of December 31, 2020. The ratio of nonaccrual loans to loans receivable was 0.90%, 1.00% and 0.99%, as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The annualized net loan charge-offs ratio was 0.01% for the fourth quarter of 2021, 0.10% for the third quarter of 2021 and 0.00% for the fourth quarter of 2020. The prior sequential 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 1.15%, 1.19%, and 1.27% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.17%, 1.22%, and 1.36% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 127.7% as of December 31, 2021, 118.2% as of September 30, 2021 and 128.4% as of December 31, 2020.

Selected Balance Sheet Items

The Company’s total assets were $8.1 billion, an increase of $582 million from December 31, 2020.  Loans receivable were $6.8 billion, an increase of $592 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 December 31, 2021, PPP loans totaled $93 million, down from $398 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 December 31, 2021, an increase of $208.9 million from December 31, 2020. In August 2021, the Company raised $110.9 million, net of issuance expenses, from the issuance of $115 million in 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A. This issuance and the increase in retained earnings of $108.2 million were the primary reasons for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $3.4 million, partially offset by a decrease in accumulated other comprehensive income of $4.2 million and an increase in treasury stock of $9.4 million. As of December 31, 2021, the Company’s tangible common equity ratio and tangible book value per share were 10.06% and $20.12, 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 $217.4 million as of December 31, 2021 and $219.3 million as of December 31, 2020.

Share Repurchase Program

During the fourth quarter of 2021, the Company repurchased 41 thousand shares of common stock leaving approximately 2.3 million shares remaining authorized for repurchase under the current Board approved repurchase programs. 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.

Fourth Quarter 2021 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 27, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13725707. 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 27, 2022 and ending on Thursday, February 3, 2022 by dialing 412-317-6671, access code 13725707. 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)    
     
 December 31, December 31,  
  2021   2020  
 (unaudited)   
ASSETS    
Cash and due from banks$54,352  $63,637  
Interest-bearing deposits with banks 211,184   240,119  
     Cash and cash equivalents 265,536   303,756  
     
Investment securities 534,507   487,955  
Equity securities 13,794   13,387  
     
Loans held-for-sale 250   4,710  
     
Loans receivable 6,828,622   6,236,307  
Less: Allowance for credit losses - loans 78,773   79,226  
     Net loans receivable 6,749,849   6,157,081  
     
Investment in restricted stock, at cost 27,826   25,099  
Bank premises and equipment, net 29,032   30,108  
Accrued interest receivable 34,152   35,317  
Bank owned life insurance 195,731   165,960  
Right of use operating lease assets 11,017   16,159  
Goodwill 208,372   208,372  
Core deposit intangibles 8,997   10,977  
Other assets 50,417   88,458  
     Total assets$8,129,480  $7,547,339  
     
LIABILITIES    
Deposits:    
     Noninterest-bearing$1,617,049  $1,339,108  
     Interest-bearing 4,715,904   4,620,116  
          Total deposits 6,332,953   5,959,224  
Borrowings 468,193   425,954  
Subordinated debentures, net 152,951   202,648  
Operating lease liabilities 12,417   18,026  
Other liabilities 38,754   26,177  
     Total liabilities 7,005,268   6,632,029  
     
COMMITMENTS AND CONTINGENCIES    
     
STOCKHOLDERS' EQUITY    
Preferred stock 110,927   -  
Common stock 586,946   586,946  
Additional paid-in capital 27,246   23,887  
Retained earnings 440,169   331,951  
Treasury stock (39,672)  (30,271) 
Accumulated other comprehensive (loss) income (1,404)  2,797  
   Total stockholders' equity 1,124,212   915,310  
   Total liabilities and stockholders' equity$8,129,480  $7,547,339  
     



CONNECTONE BANCORP, INC. AND SUBSIDIARIES        
CONSOLIDATED STATEMENTS OF INCOME        
(dollars in thousands, except for per share data)        
         
 Three Months Ended Twelve Months Ended 
 12/31/21 12/31/20 12/31/21 12/31/20 
Interest income        
     Interest and fees on loans$76,891  $73,123  $293,546  $296,611 
     Interest and dividends on investment securities:        
         Taxable 1,265   1,373   4,413   6,456 
         Tax-exempt 518   649   2,403   2,797 
         Dividends 207   374   971   1,642 
     Interest on federal funds sold and other short-term investments 159   69   405   694 
          Total interest income 79,040   75,588   301,738   308,200 
Interest expense        
     Deposits 5,281   9,630   24,768   52,386 
     Borrowings 3,298   4,587   14,092   17,823 
          Total interest expense 8,579   14,217   38,860   70,209 
         
Net interest income 70,461   61,371   262,878   237,991 
    Provision for (reversal of) credit losses 815   5,000   (5,500)  41,000 
Net interest income after provision for credit losses 69,646   56,371   268,378   196,991 
         
Noninterest income        
     Deposit, loan and other income 1,525   1,300   6,617   7,077 
     Income on bank owned life insurance 1,244   1,314   4,771   5,007 
     Net gains on sale of loans held-for-sale 1,139   841   3,807   2,085 
     Gain on sale of branches -   -   674   - 
     Net (losses) gains on equity securities (131)  (13)  (373)  202 
     Net gains on sale/redemption of investment securities -   -   195   29 
          Total noninterest income 3,777   3,442   15,691   14,400 
         
Noninterest expenses        
     Salaries and employee benefits 16,483   14,581   64,072   58,758 
     Occupancy and equipment 2,762   3,689   11,638   13,882 
     FDIC insurance 625   948   2,665   4,002 
     Professional and consulting 1,996   2,210   8,286   7,383 
     Marketing and advertising 454   256   1,318   1,200 
     Data processing 1,585   1,479   6,265   6,008 
     Merger expenses -   -   -   14,640 
     Amortization of core deposit intangible 483   628   1,981   2,559 
     Increase in value of acquisition price -   -   -   2,333 
     Other expenses 3,696   2,611   12,786   10,236 
          Total noninterest expenses 28,084   26,402   109,011   121,001 
         
Income before income tax expense 45,339   33,411   175,058   90,390 
     Income tax expense 12,301   7,770   44,705   19,101 
Net income 33,038   25,641   130,353   71,289 
     Preferred dividends 1,717   -   1,717   - 
Net income available to common stockholders$31,321  $25,641  $128,636  $71,289 
         
Earnings per common share:        
     Basic$0.79  $0.64  $3.24  $1.80 
     Diluted 0.79   0.64   3.22   1.79 
         



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, 
  2021   2021   2021   2021   2020  
Selected Financial Data(dollars in thousands) 
Total assets$8,129,480  $7,949,514  $7,710,082  $7,449,639  $7,547,339  
Loans receivable:          
Commercial$1,163,442  $1,116,535  $1,046,965  $1,071,418  $1,092,404  
Paycheck Protection Program ("PPP") loans 93,057   177,829   326,788   522,340   397,492  
Commercial real estate 2,446,807   2,354,209   2,252,484   2,127,806   2,103,468  
Multifamily 2,337,712   2,113,541   1,914,978   1,698,331   1,712,153  
Commercial construction 540,178   552,896   587,121   565,872   617,747  
Residential 255,269   270,793   286,907   306,376   322,564  
Consumer 1,886   2,093   6,355   3,364   1,853  
Gross loans 6,838,351   6,587,896   6,421,598   6,295,508   6,247,681  
Unearned net origination fees (9,729)  (11,457)  (13,694)  (18,317)  (11,374) 
Loans receivable 6,828,622   6,576,439   6,407,904   6,277,191   6,236,307  
Loans held-for-sale 250   5,596   6,159   6,900   4,710  
Total loans$6,828,872  $6,582,035  $6,414,063  $6,284,091  $6,241,017  
           
Investment and equity securities$548,301  $476,584  $472,156  $455,223  $501,342  
Goodwill and other intangible assets 217,369   217,852   218,335   218,842   219,349  
Deposits:          
Noninterest-bearing demand$1,617,049  $1,500,754  $1,485,952  $1,384,961  $1,339,108  
Time deposits 1,150,109   1,221,911   1,301,807   1,356,599   1,464,133  
Other interest-bearing deposits 3,565,795   3,675,673   3,404,754   3,209,774   3,155,983  
Total deposits$6,332,953  $6,398,338  $6,192,513  $5,951,335  $5,959,224  
           
Borrowings$468,193  $253,225  $353,462  $359,710  $425,954  
Subordinated debentures (net of debt issuance costs) 152,951   152,875   152,800   152,724   202,648  
Total stockholders' equity 1,124,212   1,098,433   964,960   935,637   915,310  
           
Quarterly Average Balances          
Total assets$8,027,169  $7,837,997  $7,566,676  $7,500,034  $7,547,651  
Loans receivable:          
Commercial (including PPP loans)$1,278,048  $1,296,066  $1,485,918  $1,531,790  $1,557,303  
Commercial real estate (including multifamily) 4,625,371   4,312,092   3,925,497   3,805,856   3,704,197  
Commercial construction 547,038   572,920   553,396   595,466   615,439  
Residential 268,112   279,063   293,633   316,233   332,403  
Consumer 4,938   2,649   3,148   2,540   3,309  
Gross loans 6,723,507   6,462,790   6,261,592   6,251,885   6,212,651  
Unearned net origination fees (10,873)  (13,064)  (13,076)  (13,163)  (12,023) 
Loans receivable 6,712,634   6,449,726   6,248,516   6,238,723   6,200,628  
Loans held-for-sale 5,051   6,226   3,696   4,237   9,003  
Total loans$6,717,685  $6,455,952  $6,252,212  $6,242,960  $6,209,631  
           
Investment and equity securities$481,276  $465,103  $450,543  $481,802  $469,820  
Goodwill and other intangible assets 217,685   218,170   218,662   219,171   219,761  
Deposits:          
Noninterest-bearing demand$1,537,316  $1,495,456  $1,432,707  $1,348,585  $1,294,447  
Time deposits 1,204,374   1,252,818   1,324,510   1,422,295   1,577,338  
Other interest-bearing deposits 3,672,311   3,582,261   3,320,400   3,225,751   3,094,536  
Total deposits$6,414,001  $6,330,535  $6,077,617  $5,996,631  $5,966,321  
           
Borrowings$292,847  $276,183  $331,633  $375,511  $410,098  
Subordinated debentures (net of debt issuance costs) 152,902   152,825   152,750   154,341   202,595  
Total stockholders' equity 1,113,524   1,032,191   952,019   928,041   906,153  
           
 Three Months Ended 
 Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 
  2021   2021   2021   2021   2020  
 (dollars in thousands, except for per share data) 
Net interest income$70,461  $68,245  $63,009  $61,163  $61,371  
 Provision for (reversal of) credit losses 815   1,100   (1,649)  (5,766)  5,000  
Net interest income after provision for credit losses 69,646   67,145   64,658   66,929   56,371  
Noninterest income          
Deposit, loan and other income 1,525   1,702   2,222   1,168   1,300  
Income on bank owned life insurance 1,244   1,278   1,185   1,064   1,314  
Net gains on sale of loans held-for-sale 1,139   1,114   847   707   841  
Gain on sale of branches -   -   -   674   -  
Net (losses) gains on equity securities (131)  (78)  23   (187)  (13) 
Net gains on sale/redemption of investment securities -   -   195   -   -  
Total noninterest income 3,777   4,016   4,472   3,426   3,442  
Noninterest expenses          
 Salaries and employee benefits 16,483   16,740   15,284   15,565   14,581  
 Occupancy and equipment 2,762   2,656   2,916   3,304   3,689  
 FDIC insurance 625   525   580   935   948  
 Professional and consulting 1,996   2,217   2,117   1,956   2,210  
 Marketing and advertising 454   345   278   241   256  
 Data processing 1,585   1,541   1,603   1,536   1,479  
 Amortization of core deposit intangible 483   483   508   507   628  
 Other expenses 3,696   3,676   2,973   2,441   2,611  
Total noninterest expenses 28,084   28,183   26,259   26,485   26,402  
           
Income before income tax expense 45,339   42,978   42,871   43,870   33,411  
Income tax expense 12,301   10,881   10,652   10,871   7,770  
Net income 33,038   32,097   32,219   32,999   25,641  
Preferred dividends 1,717   -   -   -   -  
Net income available to common stockholders$31,321  $32,097  $32,219  $32,999  $25,641  
           
Weighted average diluted common shares outstanding 39,792,937   39,869,468   39,872,829   39,788,881   39,726,791  
Diluted EPS$0.79  $0.80  $0.81  $0.82  $0.64  
           
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue        
Net income$33,038  $32,097  $32,219  $32,999  $25,641  
Income tax expense 12,301   10,881   10,652   10,871   7,770  
Provision for (reversal of) credit losses 815   1,100   (1,649)  (5,766)  5,000  
Pre-tax and pre-provision net revenue$46,154  $44,078  $41,222  $38,104  $38,411  
           
Return on Assets Measures          
Average assets$8,027,169  $7,837,997  $7,566,676  $7,500,034  $7,547,651  
Return on avg. assets 1.63 % 1.62 % 1.71 % 1.78 % 1.35 %
Return on avg. assets (pre-tax and pre-provision) 2.28   2.23   2.19   2.06   2.02  
           
 Three Months Ended 
 Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 
  2021   2021   2021   2021   2020  
Return on Equity Measures(dollars in thousands) 
Average stockholders' equity$1,113,524  $980,344  $952,019  $928,041  $906,153  
Less: average preferred stock (110,927)  -   -   -   -  
Average common equity$1,002,597  $980,344  $952,019  $928,041  $906,153  
Less: average intangible assets (217,685)  (218,170)  (218,662)  (219,171)  (219,761) 
Average tangible common equity$784,912  $762,174  $733,357  $708,870  $686,392  
           
Return on avg. common equity (GAAP) 12.39 % 12.99 % 13.57 % 14.42 % 11.26 %
Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 16.00   16.88   17.82   19.08   15.12  
           
Efficiency Measures          
Total noninterest expenses$28,084  $28,183  $26,259  $26,485  $26,402  
Amortization of core deposit intangibles (483)  (483)  (508)  (507)  (628) 
Foreclosed property expense -   -   -   -   (2) 
Operating noninterest expense$27,601  $27,700  $25,751  $25,978  $25,772  
           
Net interest income (tax equivalent basis)$70,890  $68,761  $63,418  $61,581  $61,840  
Noninterest income 3,777   4,016   4,472   3,426   3,442  
Net gains on sale of branches -   -   -   (674)  -  
Net gains on sale/redemption of investment securities -   -   (195)  -   -  
Operating revenue$74,667  $72,777  $67,695  $64,333  $65,282  
           
Operating efficiency ratio (non-GAAP) (2) 37.0 % 38.1 % 38.0 % 40.4 % 39.5 %
           
Net Interest Margin          
Average interest-earning assets$7,508,973  $7,321,771$7,059,965  $7,008,500$7,031,662
           
Net interest income (tax equivalent basis)$70,890  $68,761  $63,418  $61,581  $61,840  
Impact of purchase accounting fair value marks (1,674)  (1,849)  (2,012)  (2,074)  (2,237) 
Adjusted net interest income (tax equivalent basis)$69,216  $66,912  $61,406  $59,507  $59,603  
           
Net interest margin (GAAP) 3.75 % 3.73 % 3.60 % 3.56 % 3.50 %
Adjusted net interest margin (non-GAAP) (3) 3.66   3.63   3.49   3.44   3.37  
           
(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, 
  2021   2021   2021   2021   2020  
Capital Ratios and Book Value per Share(dollars in thousands, except for per share data) 
Stockholders equity$1,124,212  $987,506  $964,960  $935,637  $915,310  
Less: preferred stock (110,927)  -   -   -   -  
Common equity$1,013,285  $987,506  $964,960  $935,637  $915,310  
Less: intangible assets (217,369)  (217,852)  (218,335)  (218,842)  (219,349) 
Tangible common equity$795,916  $769,654  $746,625  $716,795  $695,961  
           
Total assets$8,129,480  $7,949,514  $7,710,082  $7,449,639  $7,547,339  
Less: intangible assets (217,369)  (217,852)  (218,335)  (218,842)  (219,349) 
Tangible assets$7,912,111  $7,731,662  $7,491,747  $7,230,797  $7,327,990  
           
Common shares outstanding 39,568,090   39,602,199   39,794,815   39,773,602   39,785,398  
           
Common equity ratio (GAAP) 12.46 % 12.42 % 12.52 % 12.56 % 12.13 %
Tangible common equity ratio (non-GAAP) (4) 10.06   9.95   9.97   9.91   9.50  
           
Regulatory capital ratios (Bancorp):          
Leverage ratio 11.65 % 11.60 % 10.19 % 9.89 % 9.51 %
Common equity Tier 1 risk-based ratio 10.64   10.73   11.09   11.36   10.79  
Risk-based Tier 1 capital ratio 12.19   12.35   11.17   11.44   10.87  
Risk-based total capital ratio 15.26   15.54   14.58   15.08   15.08  
           
Regulatory capital ratios (Bank):          
Leverage ratio 11.43 % 11.33 % 11.34 % 11.06 % 10.63 %
Common equity Tier 1 risk-based ratio 11.96   12.06   12.42   12.78   12.24  
Risk-based Tier 1 capital ratio 11.96   12.06   12.42   12.78   12.24  
Risk-based total capital ratio 13.44   13.61   14.07   14.55   10.00  
           
Book value per share (GAAP)$25.61  $24.94  $24.25  $23.52  $23.01  
Tangible book value per share (non-GAAP) (5) 20.12   19.43   18.76   18.02   17.49  
           
Net Loan (Recoveries) Charge-Off Detail          
Net loan charge-offs (recoveries):          
  Charge-offs$458  $1,727  $212  $-  $67  
  Recoveries (217)  (113)  (14)  (61)  (26) 
   Net loan charge-offs (recoveries)$241  $1,614  $198  $(61) $41  
   Net loan charge-offs (recoveries) as a % of average loans receivable (annualized) 0.01 % 0.10 % 0.01 % (0.00)% 0.00 %
           
Asset Quality          
Nonaccrual loans$61,700  $65,959  $56,213  $60,940  $61,696  
OREO -   -   -   -   -  
Nonperforming assets$61,700  $65,959  $56,213  $60,940  $61,696  
           
Performing troubled debt restructurings$43,587  $41,256  $33,021  $25,505  $23,655  
           
Allowance for credit losses - loans ("ACL") 78,773   77,986   78,684   80,568   79,226  
           
Loans receivable$6,828,622  $6,576,439  $6,407,904  $6,277,191  $6,236,307  
Less: PPP loans 93,057   177,829   326,788   522,340   397,492  
Loans receivable (excluding PPP loans)$6,735,565  $6,398,610  $6,081,116  $5,754,851  $5,838,815  
           
Nonaccrual loans as a % of loans receivable 0.90 % 1.00 % 0.88 % 0.97 % 0.99  
Nonperforming assets as a % of total assets 0.76   0.83   0.73   0.82   0.82  
ACL as a % of loans receivable 1.15   1.19   1.23   1.28   1.27  
ACL as a % of loans receivable (excluding PPP loans) 1.17   1.22   1.29   1.40   1.36  
ACL as a % of nonaccrual loans 127.7   118.2   140.0   132.2   128.4  
           
(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 
 December 31, 2021September 30, 2021December 31, 2020 
 Average     Average     Average    
Interest-earning assets:BalanceInterestRate (7) BalanceInterestRate (7) BalanceInterestRate (7)
Investment securities (1) (2)$480,143 $1,921 1.59% $459,559 $1,712 1.48% $460,471 $2,194 1.90%
Loans receivable and loans held-for-sale (2) (3) (4) 6,717,685  77,220 4.56   6,455,952  75,434 4.64   6,209,631  73,420 4.70 
Federal funds sold and interest-bearing deposits with banks 291,243  121 0.16   387,155  151 0.15   337,172  69 0.08 
Restricted investment in bank stock 19,902  207 4.13   19,105  245 5.09   24,388  374 6.10 
     Total interest-earning assets 7,508,973  79,469 4.20   7,321,771  77,542 4.20   7,031,662  76,057 4.30 
Allowance for credit losses - loans (79,074)     (78,327)     (74,943)   
Noninterest-earning assets 597,270      594,553      584,145    
     Total assets$8,027,169     $7,837,997     $7,540,864    
               
Interest-bearing liabilities:              
 Time deposits 1,204,374  2,717 0.90  $1,252,818 $2,982 0.94   1,577,338  6,682 1.69 
 Other interest-bearing deposits 3,672,311  2,563 0.28   3,582,261  2,495 0.28   3,094,536  2,948 0.38 
     Total interest-bearing deposits 4,876,685  5,280 0.43   4,835,079  5,477 0.45   4,671,874  9,630 0.82 
               
Borrowings 292,847  1,102 1.49   276,183  1,105 1.59   410,098  1,856 1.80 
Subordinated debentures 152,902  2,167 5.62   152,825  2,168 5.63   202,595  2,699 5.30 
Capital lease obligation 1,967  30 6.05   2,018  30 5.90   2,164  32 5.88 
     Total interest-bearing liabilities 5,324,401  8,579 0.64   5,266,105  8,780 0.66   5,286,731  14,217 1.07 
               
Noninterest-bearing demand deposits 1,537,316      1,495,456      1,294,447    
Other liabilities 51,928      44,245      53,533    
     Total noninterest-bearing liabilities 1,589,244      1,539,701      1,347,980    
Stockholders' equity 1,113,524      1,032,191      906,153    
     Total liabilities and stockholders' equity$8,027,169     $7,837,997     $7,540,864    
               
Net interest income (tax equivalent basis)  70,890      68,762      61,840   
Net interest spread (5)  3.56%   3.54%   3.23%
               
Net interest margin (6)  3.75%   3.73%   3.50%
               
Tax equivalent adjustment  (429)     (516)     (469)  
Net interest income $70,461     $68,246     $61,371   
               
               
(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.