ConnectOne Bancorp, Inc. Reports Fourth Quarter and Full-Year 2022 Results; Declares Common and Preferred Dividends


ENGLEWOOD CLIFFS, N.J., Jan. 26, 2023 (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 $31.0 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. Burns
Senior Executive VP & CFO
201.816.4474: bburns@cnob.com

Media Contact:

Shannan Weeks 
MWW 
732.299.7890: sweeks@mww.com 


 

    
CONNECTONE BANCORP, INC. AND SUBSIDIARIES   
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION  
(in thousands)   
    
 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") loans11,374  11,458  18,004  54,301  93,057 
Commercial real estate3,170,760  3,087,354  2,727,120  2,516,065  2,446,807 
Multifamily2,641,886  2,624,726  2,442,603  2,465,337  2,337,712 
Commercial construction574,139  537,323  569,789  539,058  540,178 
Residential264,748  256,085  249,379  250,205  255,269 
Consumer2,312  1,030  1,248  1,140  1,886 
Gross loans8,109,161  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 receivable8,099,689  7,900,450  7,274,573  6,979,595  6,828,622 
Loans held-for-sale13,772  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 assets215,684  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 deposits2,394,190  1,921,235  1,285,409  1,065,814  1,150,109 
Other interest-bearing deposits3,460,818  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' equity1,178,751  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 construction558,086  537,073  544,084  541,642  547,038 
Residential261,969  251,338  247,208  253,589  268,112 
Consumer4,630  2,361  5,029  3,682  4,938 
Gross loans8,039,526  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 receivable8,029,860  7,580,176  7,007,208  6,871,095  6,712,634 
Loans held-for-sale7,933  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 assets215,951  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 deposits2,035,362  1,525,076  1,103,418  1,124,614  1,204,374 
Other interest-bearing deposits3,558,881  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' equity1,165,588  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 losses3,300  10,000  3,000  1,450  815 
Net interest income after provision for credit losses74,709  68,161  72,591  68,908  69,646 
Noninterest income              
Deposit, loan and other income1,894  1,969  1,866  1,743  1,525 
Income on bank owned life insurance1,528  1,521  1,342  1,206  1,244 
Net gains on sale of loans held-for-sale176  262  556  701  1,139 
Net losses gains on equity securities(90) (430) (405) (596) (131)
Total noninterest income3,508  3,322  3,359  3,054  3,777 
Noninterest expenses              
Salaries and employee benefits21,676  20,882  19,519  18,640  16,483 
Occupancy and equipment2,603  2,600  2,733  1,929  2,762 
FDIC insurance830  720  725  606  625 
Professional and consulting2,157  1,980  2,124  1,792  1,996 
Marketing and advertising454  461  426  351  454 
Information technology and communications2,694  2,747  2,801  2,866  3,058 
Amortization of core deposit intangible409  409  434  433  483 
Increase in value of acquisition price-  -  833  683  - 
Other expenses2,489  2,344  2,108  1,930  2,223 
Total noninterest expenses33,312  32,143  31,703  29,230  28,084 
               
Income before income tax expense44,905  39,340  44,247  42,732  45,339 
Income tax expense12,348  10,425  11,889  11,351  12,301 
Net income$32,557  $28,915  $32,358  $31,381  $33,038 
Preferred dividends1,510  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 outstanding39,378,137  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 expense12,348  10,425  11,889  11,351  12,301 
Provision for credit losses3,300  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. assets1.36% 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 income3,508  3,322  3,359  3,054  3,777 
Net losses (gains) on equity securities90  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 outstanding39,243,123  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 ratio10.68% 10.95% 11.63% 11.57% 11.65%
Common equity Tier 1 risk-based ratio10.30  10.20  10.63  10.69  10.64 
Risk-based Tier 1 capital ratio11.66  11.58  12.11  12.21  12.19 
Risk-based total capital ratio14.45  14.45  15.09  15.25  15.26 
               
Regulatory capital ratios (Bank):              
Leverage ratio10.64% 10.91% 11.61% 11.41% 11.43%
Common equity Tier 1 risk-based ratio11.60  11.53  12.08  12.04  11.96 
Risk-based Tier 1 capital ratio11.60  11.53  12.08  12.04  11.96 
Risk-based total capital ratio13.02  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 
OREO264  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 loans11,374  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 receivable0.55% 0.73% 0.84% 0.85% 0.90%
Nonperforming assets as a % of total assets0.46  0.61  0.69  0.72  0.76 
ACL as a % of loans receivable1.12  1.16  1.14  1.15  1.15 
ACL as a % of nonaccrual loans203.6  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, 2022September 30, 2022December 31, 2021 
 Average     Average     Average    
Interest-earning assets:BalanceInterestRate (7) BalanceInterestRate (7) BalanceInterestRate (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.