ex_586014.htm

EX-99.1 2 ex_557830.htm EXHIBIT 99.1 ex_586014.htm

Exhibit 99.1

CONNECTONE BANCORP, INC. REPORTS

THIRD QUARTER 2023 RESULTS;

DECLARES COMMON AND PREFERRED DIVIDENDS

Englewood Cliffs, N.J., October 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 $19.9 million for the third quarter of 2023, compared to $19.9 million for the second quarter of 2023 and $27.4 million for the third quarter of 2022. Diluted earnings per share were $0.51 for the third quarter of 2023, $0.51 for the second quarter of 2023 and $0.70 for the third quarter of 2022. The decreases in net income available to common stockholders and diluted earnings per share from the third quarter of 2022 were primarily due to a $15.8 million decrease in net interest income and a $3.6 million increase in noninterest expenses, partially offset by an $8.5 million decrease in the provision for credit losses, a $0.2 million increase in noninterest income and a $3.2 million decrease in income tax expense.

Pre-tax, pre-provision net revenue (“PPNR”) as a percentage of average assets was 1.24%, 1.31% and 2.17% for the quarters ending September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

“ConnectOne’s operating performance during the 2023 third quarter reflected a commitment to our deep client relationships resulting in a solid balance sheet with the flexibility to support both new and existing clients,” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer. “Despite challenging market conditions, ConnectOne is poised to withstand the current interest rate cycle and we’re well positioned to opportunistically capitalize on new growth opportunities we see today, as well as those expected upon a return to normalcy. Our robust, readily available liquidity position remains nearly 2.5 times our uninsured deposits, net of collateralized and intercompany subsidiary deposits. Further, our tangible common equity ratio, which continues to be a notable challenge for much of the industry due to rising long-term rates, remains above 9%. This key capital ratio is well above peer averages, demonstrating continued effective management of ConnectOne’s capital and AOCI. Additionally, our credit quality metrics remain sound, reflective of prudent underwriting, strong portfolio oversight and a resilient economy.”

“For the quarter, client deposits (which exclude non-reciprocal brokered deposits) increased modestly while the loan portfolio remained relatively flat sequentially.” Mr. Sorrentino added, “As expected, our net interest margin contracted just slightly, as funding costs are showing signs of leveling out. Nevertheless, fierce deposit competition and the continued migration out of non-interest-bearing deposit demand balances suggest we may experience additional, albeit modest, contraction in our net interest margin near-term.”

“Operationally, we continue to leverage our technological advantages and our culture to drive performance. Further, we’re seizing opportunities to strengthen ConnectOne’s team by adding high-performing talent across the board, including revenue-producing areas, while also optimizing operations, staff count and branch footprint.”

Mr. Sorrentino concluded, “As we approach the fourth quarter and focus on navigating the challenges that lie ahead, I believe ConnectOne is well-positioned to capitalize on opportunities in any environment. We remain one of the industry’s most efficient banks nationwide and, by maintaining our long-standing financial discipline, leveraging our results-oriented client-centric culture and continuing to invest in our valuable franchise, ConnectOne is poised for continued success.”

Dividend Declarations

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

A cash dividend on common stock of $0.17 will be paid on December 1, 2023, to common stockholders of record on November 15, 2023. A dividend of $0.328125 per depositary share, representing a 1/40^th interest in the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on December 1, 2023 to preferred stockholders of record on November 15, 2023.

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2023 was $63.2 million, a decrease of $1.4 million, or 2.2%, from the second quarter of 2023 due to a 5 basis-point contraction in the net interest margin to 2.76% from 2.81% and a $138.6 million, or 1.5%, decrease in interest-earning assets. The decrease in average interest-earning assets from the second quarter of 2023 was primarily attributable to a decrease in average cash and cash equivalents of $151.3 million, partially offset by an increase in average loans of $19.9 million. Average brokered deposits (excluding reciprocal client balances) declined by $50.9 million, or 5.3%, from the sequential quarter. While the net interest margin benefitted from a 14 basis-point increase in the loan portfolio yield to 5.63%, the average cost of deposits, including noninterest-bearing demand, increased by 26 basis-points to 2.92% from 2.66% in the second quarter of 2023. Contributing to the increased cost of deposits was a $71.9 million, or 5.3%, decline in average noninterest-bearing deposits.

Fully taxable equivalent net interest income for the third quarter of 2023 decreased by $15.6 million, or 19.8%, from the third quarter of 2022. The decrease from the third quarter of 2022 resulted primarily from a 92 basis-point decrease in the net interest margin from 3.68% to 2.76%, partially offset by an increase in interest-earning assets of $0.6 billion. The contraction of the net interest margin for the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to a 215 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by an 86 basis-point increase in the loan portfolio yield.

Noninterest income was $3.6 million in the third quarter of 2023, $3.4 million in the second quarter of 2023 and $3.3 million in the third quarter of 2022. Included in noninterest income were net losses on equity securities of $0.3 million, $0.2 million, and $0.4 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. Excluding the equity securities losses, adjusted noninterest income was $3.8 million, $3.6 million and $3.7 million for the third quarter of 2023, second quarter of 2023 and third quarter of 2022, respectively. The $0.2 million increase in adjusted noninterest income for the third quarter of 2023 when compared to the second quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale of $0.1 million and an increase in deposit, loan, and other income of $0.1 million. The net gains on loans held-for-sale consisted primarily of Small Business Administration (“SBA”) loans. The $0.1 million increase in adjusted noninterest income for the third of 2023 when compared to the third quarter of 2022 was primarily due to an increase in net gains on loans held-for-sale, primarily SBA, of $0.4 million and an increase in BOLI of $0.1 million, partially offset by a decrease in deposit, loan, and other income of $0.4 million.

Noninterest expenses totaled $35.8 million for the third quarter of 2023, $35.5 million for the second quarter of 2023 and $32.1 million for the third quarter of 2022. Noninterest expenses increased by $0.3 million from the second quarter of 2023 and was primarily attributable to increases in employee benefit expense accruals of $0.5 million, FDIC insurance expense of $0.1 million and occupancy and equipment of $0.1 million, partially offset by decreases in information technology and communications of $0.2 million, professional and consulting of $0.1 million and other expenses of $0.1 million. The increase in noninterest expenses of $3.6 million from the third quarter of 2022 was primarily attributable to increases in salaries and employee benefits of $1.4 million, FDIC insurance of $1.1 million, information technology and communications of $0.7 million, other expenses of $0.4 million, occupancy and equipment of $0.1 million and marketing and advertising of $0.1 million, partially offset by decreases in professional and consulting of $0.1 million and amortization of core deposit intangibles of $0.1 million. The increase in salaries and employee benefits from the third quarter of 2022 was primarily attributable to increased staff in both the revenue and back-office areas of the Bank as well as company-wide base salary increases. The increase in FDIC insurance expense when compared to the third quarter of 2022 is primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. The increase in information technology and communications when compared to the third quarter of 2022 is primarily attributable to additional investments in technology, equipment, and software.

Income tax expense was $7.2 million for the third quarter of 2023, $7.4 million for the second quarter of 2023 and $10.4 million for the third quarter of 2022. The effective tax rates for the third quarter of 2023, second quarter of 2023 and third quarter of 2022 were 25.2%, 25.8% and 26.5%, respectively. The decrease in the effective tax rate when compared to the second quarter of 2023 and third quarter of 2022 is largely attributable to lower taxable income.

Asset Quality

The provision for credit losses was $1.5 million for the third quarter of 2023, $3.0 million for the second quarter of 2023 and $10.0 million for the third quarter of 2022. The decrease in the provision for credit losses during the third quarter of 2023 when compared to the second quarter of 2023 was primarily attributable to lower specific reserves. The decrease in provision for credit losses during the third quarter of 2023 when compared to the third quarter of 2022 was primarily attributable to changes in forecasted macroeconomic conditions.

Nonperforming assets, which include nonaccrual loans and other real estate owned, were $56.1 million as of September 30, 2023, $44.7 million as of December 31, 2022 and $57.7 million as of September 30, 2022. Nonaccrual loans were $56.1 million as of September 30, 2023, $44.5 million as of December 31, 2022 and $57.5 million as of September 30, 2022. Nonperforming assets as a percentage of total assets were 0.58% as of September 30, 2023, 0.46% as of December 31, 2022 and 0.61% as of September 30, 2022. The ratio of nonaccrual loans to loans receivable was 0.69%, 0.55% and 0.73%, as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. Loans delinquent 30-89 days as a percentage of loans receivable were 0.04%, 0.02% and 0.01% as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The annualized net loan charge-offs ratio was 0.12% for the third quarter of 2023, 0.22% for the fourth quarter of 2022 and 0.02% for the third quarter of 2022. The allowance for credit losses represented 1.08%, 1.12%, and 1.16% of loans receivable as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 157.4% as of September 30, 2023, 203.6% as of December 31, 2022 and 159.7% as of September 30, 2022.

Selected Balance Sheet Items

The Company’s total assets were $9.7 billion as of September 30, 2023, an increase of $34 million from December 31, 2022. The increase in total assets was primarily due to an increase in loans receivable of $81 million, partially offset by decreases in investment securities of $53 million. Loans receivable was $8.2 billion as of September 30, 2023 and $8.1 billion as of December 31, 2022. Total deposits were $7.4 billion, an increase of $82 million from December 31, 2022.

The Company’s total stockholders’ equity was $1.2 billion as of September 30, 2023, an increase of $9 million from December 31, 2022. The increase was primarily attributable to an increase in retained earnings of $44 million, partially offset by an increase in accumulated other comprehensive losses of $21 million and an increase in treasury stock of $15 million. The increase in accumulated other comprehensive losses during the third quarter of 2023 resulted from higher interest rates. As of September 30, 2023, the Company’s tangible common equity ratio and tangible book value per share were 9.11% and $22.34, respectively, improved from 9.04% and $21.71, respectively, as of December 31, 2022. Total goodwill and other intangible assets were $214.6 million as of September 30, 2023, and $215.7 million as of December 31, 2022.

Share Repurchase Program

During the third quarter of 2023, the Company repurchased 316,789 shares of common stock at an average price of $19.45, leaving approximately 1.0 million shares authorized for repurchase under the current Board approved repurchase program. 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 plan does not obligate the Company to acquire any particular amount of common stock, and the plan 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 2023 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 26, 2023 to review the Company's financial performance and operating results. The conference call dial-in number is 1-646-307-1583, access code 9727224. 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 26, 2023 and ending on Thursday, November 2, 2023 by dialing 1-647-362-9199, access code 9727224. 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.

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 Vice President & 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)

	September 30,			December 31,			September 30,
	2023			2022			2022
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	56,170		$	61,629		$	58,852
Interest-bearing deposits with banks		197,128			206,686			274,992
Cash and cash equivalents		253,298			268,315			333,844

Investment securities		581,867			634,884			623,629
Equity securities		17,677			15,811			15,563

Loans held-for-sale		-			13,772			8,080

Loans receivable		8,181,109			8,099,689			7,900,450
Less: Allowance for credit losses - loans		88,230			90,513			91,717
Net loans receivable		8,092,879			8,009,176			7,808,733

Investment in restricted stock, at cost		49,387			46,604			45,324
Bank premises and equipment, net		28,432			27,800			28,519
Accrued interest receivable		46,795			46,062			38,940
Bank owned life insurance		236,009			231,328			229,800
Right of use operating lease assets		11,229			10,179			10,196
Other real estate owned		-			264			264
Goodwill		208,372			208,372			208,372
Core deposit intangibles		6,222			7,312			7,721
Other assets		146,718			125,069			119,267
Total assets	$	9,678,885		$	9,644,948		$	9,478,252

LIABILITIES
Deposits:
Noninterest-bearing	$	1,224,125		$	1,501,614		$	1,665,658
Interest-bearing		6,214,370			5,855,008			5,644,852
Total deposits		7,438,495			7,356,622			7,310,510
Borrowings		887,590			857,622			829,953
Subordinated debentures, net		79,313			153,255			153,179
Operating lease liabilities		12,424			11,397			11,454
Other liabilities		72,909			87,301			24,861
Total liabilities		8,490,731			8,466,197			8,329,957

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock		110,927			110,927			110,927
Common stock		586,946			586,946			586,946
Additional paid-in capital		32,027			30,126			28,756
Retained earnings		579,776			535,915			510,957
Treasury stock		(68,108	)		(52,799	)		(52,799	)
Accumulated other comprehensive loss		(53,414	)		(32,364	)		(36,492	)
Total stockholders' equity		1,188,154			1,178,751			1,148,295
Total liabilities and stockholders' equity	$	9,678,885		$	9,644,948		$	9,478,252

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except for per share data)

	Three Months Ended						Nine Months Ended
	09/30/23			09/30/22			09/30/23			09/30/22
Interest income
Interest and fees on loans	$	115,405		$	90,731		$	333,356		$	248,041
Interest and dividends on investment securities:
Taxable		4,128			4,063			12,386			8,487
Tax-exempt		1,136			1,083			3,475			2,708
Dividends		907			438			2,750			943
Interest on federal funds sold and other short-term investments		2,110			665			9,141			1,098
Total interest income		123,686			96,980			361,108			261,277
Interest expense
Deposits		56,043			13,299			146,844			24,018
Borrowings		5,286			5,520			20,980			13,149
Total interest expense		61,329			18,819			167,824			37,167

Net interest income		62,357			78,161			193,284			224,110
Provision for credit losses		1,500			10,000			5,500			14,450
Net interest income after provision for credit losses		60,857			68,161			187,784			209,660

Noninterest income
Deposit, loan and other income		1,605			1,969			4,553			5,578
Income on bank owned life insurance		1,597			1,521			4,681			4,069
Net gains on sale of loans held-for-sale		633			262			1,232			1,519
Net losses on equity securities		(273	)		(430	)		(674	)		(1,431	)
Total noninterest income		3,562			3,322			9,792			9,735

Noninterest expenses
Salaries and employee benefits		22,251			20,882			66,213			59,041
Occupancy and equipment		2,738			2,600			8,176			7,262
FDIC insurance		1,800			720			4,465			2,051
Professional and consulting		1,834			1,980			5,960			5,896
Marketing and advertising		554			461			1,642			1,238
Information technology and communications		3,487			2,747			10,192			8,414
Amortization of core deposit intangible		347			409			1,090			1,276
Increase in value of acquisition price		-			-			-			1,516
Other expenses		2,773			2,344			8,366			6,382
Total noninterest expenses		35,784			32,143			106,104			93,076

Income before income tax expense		28,635			39,340			91,472			126,319
Income tax expense		7,228			10,425			23,742			33,665
Net income		21,407			28,915			67,730			92,654
Preferred dividends		1,509			1,509			4,527			4,527
Net income available to common stockholders	$	19,898		$	27,406		$	63,203		$	88,127
Earnings per common share:
Basic	$	0.51		$	0.70		$	1.62		$	2.24
Diluted		0.51			0.70			1.61			2.23

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. 31,			Sep. 30,
	2023			2023			2023			2022			2022
	(dollars in thousands)
Selected Financial Data
Total assets	$	9,678,885		$	9,723,963		$	9,960,467		$	9,644,948		$	9,478,252
Loans receivable:
Commercial	$	1,454,607		$	1,451,400		$	1,392,565		$	1,443,942		$	1,392,037
Paycheck Protection Program ("PPP") loans		9,872			10,845			11,300			11,374			11,458
Commercial real estate		3,288,704			3,237,559			3,245,990			3,170,760			3,087,354
Multifamily		2,559,927			2,604,230			2,600,251			2,641,886			2,624,726
Commercial construction		622,748			596,362			630,469			574,139			537,323
Residential		251,416			254,405			259,166			264,748			256,085
Consumer		936			1,416			1,435			2,312			1,030
Gross loans		8,188,210			8,156,217			8,141,176			8,109,161			7,910,013
Unearned net origination fees		(7,101	)		(7,677	)		(9,057	)		(9,472	)		(9,563	)
Loans receivable		8,181,109			8,148,540			8,132,119			8,099,689			7,900,450
Loans held-for-sale		-			1,089			11,197			13,772			8,080
Total loans	$	8,181,109		$	8,149,629		$	8,143,316		$	8,113,461		$	7,908,530

Investment and equity securities	$	599,544		$	630,769		$	647,026		$	650,695		$	639,192
Goodwill and other intangible assets		214,594			214,941			215,312			215,684			216,093
Deposits:
Noninterest-bearing demand	$	1,224,125		$	1,356,293		$	1,345,265		$	1,501,614		$	1,665,658
Time deposits		2,522,210			2,621,148			2,706,662			2,394,190			1,921,235
Other interest-bearing deposits		3,692,160			3,560,856			3,701,249			3,460,818			3,723,617
Total deposits	$	7,438,495		$	7,538,297		$	7,753,176		$	7,356,622		$	7,310,510

Borrowings	$	887,590		$	827,601		$	852,611		$	857,622		$	829,953
Subordinated debentures, net		79,313			79,187			79,060			153,255			153,179
Total stockholders' equity		1,188,154			1,199,397			1,190,970			1,178,751			1,148,295

Quarterly Average Balances
Total assets	$	9,625,625		$	9,765,582		$	9,700,530		$	9,490,477		$	9,030,589
Loans receivable:
Commercial (including PPP loans)	$	1,471,006		$	1,427,153		$	1,442,180		$	1,456,247		$	1,342,868
Commercial real estate (including multifamily)		5,821,794			5,847,147			5,813,388			5,758,594			5,455,714
Commercial construction		625,640			611,492			606,214			558,086			537,073
Residential		253,114			256,924			261,560			261,969			251,338
Consumer		4,972			6,733			3,894			4,630			2,361
Gross loans		8,176,526			8,149,449			8,127,236			8,039,526			7,589,354
Unearned net origination fees		(7,387	)		(8,591	)		(9,664	)		(9,666	)		(9,178	)
Loans receivable		8,169,139			8,140,858			8,117,572			8,029,860			7,580,176
Loans held-for-sale		171			8,516			13,463			7,933			2,195
Total loans	$	8,169,310		$	8,149,374		$	8,131,035		$	8,037,793		$	7,582,371

Investment and equity securities	$	628,429		$	642,915		$	649,744		$	650,479		$	687,291
Goodwill and other intangible assets		214,822			215,182			215,556			215,951			216,360
Deposits:
Noninterest-bearing demand	$	1,275,325		$	1,347,268		$	1,451,654		$	1,610,044		$	1,682,135
Time deposits		2,606,122			2,658,673			2,357,332			2,035,362			1,525,076
Other interest-bearing deposits		3,723,561			3,640,939			3,565,904			3,558,881			3,686,520
Total deposits	$	7,605,008		$	7,646,880		$	7,374,890		$	7,204,287		$	6,893,731

Borrowings	$	651,112		$	756,303		$	941,266		$	913,960		$	772,561
Subordinated debentures, net		79,230			79,104			103,637			153,205			153,129
Total stockholders' equity		1,202,647			1,197,043			1,191,216			1,165,588			1,160,448

	Three Months Ended
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2023			2023			2023			2022			2022
	(dollars in thousands, except for per share data)
Net interest income	$	62,357		$	63,843		$	67,084		$	78,009		$	78,161
Provision for credit losses		1,500			3,000			1,000			3,300			10,000
Net interest income after provision for credit losses		60,857			60,843			66,084			74,709			68,161
Noninterest income
Deposit, loan and other income		1,605			1,545			1,403			1,894			1,969
Income on bank owned life insurance		1,597			1,553			1,531			1,528			1,521
Net gains on sale of loans held-for-sale		633			550			49			176			262
Net losses on equity securities		(273	)		(210	)		(191	)		(90	)		(430	)
Total noninterest income		3,562			3,438			2,792			3,508			3,322
Noninterest expenses
Salaries and employee benefits		22,251			21,726			22,236			21,676			20,882
Occupancy and equipment		2,738			2,677			2,761			2,603			2,600
FDIC insurance		1,800			1,715			950			830			720
Professional and consulting		1,834			1,932			2,194			2,157			1,980
Marketing and advertising		554			556			532			454			461
Information technology and communications		3,487			3,644			3,061			2,694			2,747
Amortization of core deposit intangible		347			371			372			409			409
Other expenses		2,773			2,829			2,764			2,489			2,344
Total noninterest expenses		35,784			35,450			34,870			33,312			32,143

Income before income tax expense		28,635			28,831			34,006			44,905			39,340
Income tax expense		7,228			7,437			9,077			12,348			10,425
Net income	$	21,407		$	21,394		$	24,929		$	32,557		$	28,915
Preferred dividends		1,509			1,509			1,509			1,510			1,509
Net income available to common stockholders	$	19,898		$	19,885		$	23,420		$	31,047		$	27,406

Weighted average diluted common shares outstanding		38,829,681			39,016,839			39,300,733			39,378,137			39,338,943
Diluted EPS	$	0.51		$	0.51		$	0.59		$	0.79		$	0.70

Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	21,407		$	21,394		$	24,929		$	32,557		$	28,915
Income tax expense		7,228			7,437			9,077			12,348			10,425
Provision for credit losses		1,500			3,000			1,000			3,300			10,000
Pre-tax and pre-provision net revenue	$	30,135		$	31,831		$	35,006		$	48,205		$	49,340

Return on Assets Measures
Average assets	$	9,625,625		$	9,765,582		$	9,700,530		$	9,490,477		$	9,030,589
Return on avg. assets		0.88	%		0.88	%		1.04	%		1.36	%		1.27	%
Return on avg. assets (pre-tax and pre-provision)		1.24			1.31			1.46			2.02			2.17

	Three Months Ended
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,
	2023			2023			2023			2022			2022
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,202,647		$	1,197,043		$	1,191,216		$	1,165,588		$	1,160,448
Less: average preferred stock		(110,927	)		(110,927	)		(110,927	)		(110,927	)		(110,927	)
Average common equity	$	1,091,720		$	1,086,116		$	1,080,289		$	1,054,661		$	1,049,521
Less: average intangible assets		(214,822	)		(215,182	)		(215,556	)		(215,951	)		(216,360	)
Average tangible common equity	$	876,898		$	870,934		$	864,733		$	838,710		$	833,161

Return on avg. common equity (GAAP)		7.23	%		7.34	%		8.79	%		11.68	%		10.36	%
Return on avg. tangible common equity ("TCE") (non-GAAP) ⁽¹⁾		9.11			9.28			11.11			14.82			13.19
Return on avg. tangible common equity (pre-tax and pre-provision)		13.74			14.78			16.54			22.94			23.63

Efficiency Measures
Total noninterest expenses	$	35,784		$	35,450		$	34,870		$	33,312		$	32,143
Amortization of core deposit intangibles		(347	)		(371	)		(372	)		(409	)		(409	)
Operating noninterest expense	$	35,437		$	35,079		$	34,498		$	32,903		$	31,734

Net interest income (tax equivalent basis)	$	63,208		$	64,627		$	67,828		$	78,773		$	78,850
Noninterest income		3,562			3,438			2,792			3,508			3,322
Net losses on equity securities		273			210			191			90			430
Operating revenue	$	67,043		$	68,275		$	70,811		$	82,371		$	82,602

Operating efficiency ratio (non-GAAP) ⁽²⁾		52.9	%		51.4	%		48.7	%		39.9	%		38.4	%

Net Interest Margin
Average interest-earning assets	$	9,089,431		$	9,228,079		$	9,174,167		$	8,972,063		$	8,500,316

Net interest income (tax equivalent basis)	$	63,208		$	64,627		$	67,828		$	78,773		$	78,850
Impact of purchase accounting fair value marks		(419	)		(575	)		(839	)		(837	)		(885	)
Adjusted net interest income (tax equivalent basis)	$	62,789		$	64,052		$	66,989		$	77,936		$	77,965

Net interest margin (GAAP)		2.76	%		2.81	%		3.00	%		3.48	%		3.68	%
Adjusted net interest margin (non-GAAP) ⁽³⁾		2.74			2.78			2.96			3.45			3.64

⁽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. 31,			Sep. 30,
	2023			2023			2023			2022			2022
	(dollars in thousands, except for per share data)
Capital Ratios and Book Value per Share
Stockholders equity	$	1,188,154		$	1,199,397		$	1,190,970		$	1,178,751		$	1,148,295
Less: preferred stock		(110,927	)		(110,927	)		(110,927	)		(110,927	)		(110,927	)
Common equity	$	1,077,227		$	1,088,470		$	1,080,043		$	1,067,824		$	1,037,368
Less: intangible assets		(214,594	)		(214,941	)		(215,312	)		(215,684	)		(216,093	)
Tangible common equity	$	862,633		$	873,529		$	864,731		$	852,140		$	821,275

Total assets	$	9,678,885		$	9,723,963		$	9,960,467		$	9,644,948		$	9,478,252
Less: intangible assets		(214,594	)		(214,941	)		(215,312	)		(215,684	)		(216,093	)
Tangible assets	$	9,464,291		$	9,509,022		$	9,745,155		$	9,429,264		$	9,262,159

Common shares outstanding		38,621,970			38,966,652			39,179,051			39,243,123			39,243,123

Common equity ratio (GAAP)		11.13	%		11.19	%		10.84	%		11.07	%		10.94	%
Tangible common equity ratio (non-GAAP) ⁽⁴⁾		9.11			9.19			8.87			9.04			8.87

Regulatory capital ratios (Bancorp):
Leverage ratio		10.86	%		10.62	%		10.60	%		10.68	%		10.95	%
Common equity Tier 1 risk-based ratio		10.64			10.55			10.55			10.30			10.20
Risk-based Tier 1 capital ratio		11.98			11.90			11.92			11.66			11.58
Risk-based total capital ratio		13.90			13.83			13.85			14.45			14.45

Regulatory capital ratios (Bank):
Leverage ratio		11.23	%		10.95	%		10.62	%		10.64	%		10.91	%
Common equity Tier 1 risk-based ratio		12.38			12.26			11.93			11.60			11.53
Risk-based Tier 1 capital ratio		12.38			12.26			11.93			11.60			11.53
Risk-based total capital ratio		13.43			13.33			13.28			13.02			13.00

Book value per share (GAAP)	$	27.89		$	27.93		$	27.57		$	27.21		$	26.43
Tangible book value per share (non-GAAP) ⁽⁵⁾		22.34			22.42			22.07			21.71			20.93

Net Loan (Recoveries) Charge-Off Detail
Net loan charge-offs (recoveries):
Charge-offs	$	2,487		$	1,118		$	4,484		$	4,456		$	413
Recoveries		(8	)		(76	)		(1	)		-			(53	)
Net loan charge-offs (recoveries)	$	2,479		$	1,042		$	4,483		$	4,456		$	360
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)		0.12	%		0.05	%		0.22	%		0.22	%		0.02	%

Asset Quality
Nonaccrual loans	$	56,059		$	51,496		$	47,667		$	44,454		$	57,447
OREO		-			-			-			264			264
Nonperforming assets	$	56,059		$	51,496		$	47,667		$	44,718		$	57,711

Allowance for credit losses - loans ("ACL")		88,230			89,205			87,002			90,513			91,717

Loans receivable	$	8,181,109		$	8,148,540		$	8,132,119		$	8,099,689		$	7,900,450
Less: PPP loans		9,872			10,845			11,300			11,374			11,458
Loans receivable (excluding PPP loans)	$	8,171,237		$	8,137,695		$	8,120,819		$	8,088,315		$	7,888,992

Nonaccrual loans as a % of loans receivable		0.69	%		0.63	%		0.59	%		0.55	%		0.73	%
Nonperforming assets as a % of total assets		0.58			0.53			0.48			0.46			0.61
ACL as a % of loans receivable		1.08			1.09			1.07			1.12			1.16
ACL as a % of nonaccrual loans		157.4			173.2			182.5			203.6			159.7

⁽⁴⁾ Tangible common equity divided by tangible assets.

⁽⁵⁾ Tangible common equity divided by common shares outstanding at period-end.

CONNECTONE BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(dollars in thousands)

	For the Quarter Ended
	September 30, 2023									June 30, 2023									September 30, 2022
	Average									Average									Average
	Balance			Interest			Rate ⁽⁷⁾			Balance			Interest			Rate ⁽⁷⁾			Balance			Interest			Rate ⁽⁷⁾
Interest-earning assets:
Investment securities ^{(1) (2)}	$	723,408		$	5,566			3.05	%	$	726,315		$	5,607			3.10	%	$	740,394		$	5,434			2.91	%
Loans receivable and loans held-for-sale ^{(2) (3) (4)}		8,169,310			115,954			5.63			8,149,374			111,501			5.49			7,582,371			91,132			4.77
Federal funds sold and interest- bearing deposits with banks		158,155			2,110			5.29			309,458			4,056			5.26			135,331			665			1.95
Restricted investment in bank stock		38,558			907			9.33			42,932			945			8.83			42,220			438			4.12
Total interest-earning assets	$	9,089,431			124,537			5.44		$	9,228,079			122,109			5.31			8,500,316			97,669			4.56
Allowance for loan losses		(89,966	)								(87,473	)								(84,307	)
Noninterest-earning assets		626,160									624,976									614,580
Total assets	$	9,625,625								$	9,765,582								$	9,030,589

Interest-bearing liabilities:
Time deposits		2,606,122			25,437			3.87			2,658,673			23,778			3.59		$	1,525,076			5,396			1.40
Other interest-bearing deposits		3,723,561			30,606			3.26			3,640,939			26,936			2.97			3,686,520			7,903			0.85
Total interest-bearing deposits		6,329,683			56,043			3.51			6,299,612			50,714			3.23			5,211,596			13,299			1.01

Borrowings		651,112			3,950			2.41			756,303			5,438			2.88			772,561			3,297			1.69
Subordinated debentures, net		79,230			1,312			6.57			79,104			1,306			6.62			153,129			2,196			5.69
Finance lease		1,603			24			5.94			1,658			24			5.81			1,813			27			5.91
Total interest-bearing liabilities		7,061,628			61,329			3.45			7,136,677			57,482			3.23			6,139,099			18,819			1.22

Noninterest-bearing demand deposits		1,275,325									1,347,268									1,682,135
Other liabilities		86,025									84,594									48,907
Total noninterest-bearing liabilities		1,361,350									1,431,862									1,731,042
Stockholders' equity		1,202,647									1,197,043									1,160,448
Total liabilities and stockholders' equity	$	9,625,625								$	9,765,582								$	9,030,589

Net interest income (tax equivalent basis)					63,208									64,627									78,850
Net interest spread ⁽⁵⁾								1.99	%								2.08	%								3.34	%

Net interest margin ⁽⁶⁾								2.76	%								2.81	%								3.68	%

Tax equivalent adjustment					(851	)								(784	)								(689	)
Net interest income				$	62,357								$	63,843								$	78,161

⁽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.

⁽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.