CNOB ConnectOne Bancorp Inc

ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $15.7 million for the first quarter of 2024 compared with $17.8 million for the fourth quarter of 2023 and $23.4 million for the first quarter of 2023. Diluted earnings per share were $0.41 for the first quarter of 2024 compared with $0.46 for the fourth quarter of 2023 and $0.59 for the first quarter of 2023. The decrease in net income available to common stockholders and diluted earnings per share from the fourth quarter of 2023 was primarily due to a $1.5 million decrease in net interest income, a $1.3 million increase to the provision for credit losses, and a $0.4 million decrease in noninterest income, partially offset by a $0.3 million decrease in income tax expense and a $0.8 million decrease in noninterest expenses. The decrease in net income available to common stockholders from the first quarter of 2023 was primarily due to a $6.8 million decrease in net interest income, a $3.0 million increase in the provision for credit losses, and a $2.2 million increase in noninterest expenses, partially offset by a $3.2 million decrease in income tax expense and a $1.1 million increase in noninterest income.

Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 1.10%, 1.15% and 1.46% for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

“ConnectOne moved through the first quarter laser-focused on furthering our relationship-banking model, despite the challenging backdrop. Our team seized opportunities to expand our client base, strengthen our team by adding top-performing talent all while building into new markets.” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer.

“In the first quarter, our team increased client deposit balances sequentially by an annualized 3.2%, driven by 9.9% annualized noninterest-bearing demand deposit growth. Loan balances were down sequentially by an annualized 2.3%, primarily a result of intentionally lower multifamily and other commercial real estate balances, contributing to both a lower loan-to-deposit ratio and lower commercial real estate concentration.” Mr. Sorrentino added, “For the first quarter, while our net interest margin (“NIM”) compressed sequentially by seven basis points, we are already today seeing a gradual expansion of the NIM, even ahead of potential Fed rate cuts.”

“Meanwhile, our tangible common equity ratio remained flat at 9.25%, notwithstanding the repurchase of 282,370 shares during the quarter, and our tangible book value per share increased to $23.26. We’re also pleased to announce a 5.9% increase in our quarterly common stock cash dividend to $0.18, reflecting our ongoing commitment to maximize shareholder value.”

Dividend Declarations

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

A cash dividend on common stock of $0.18 per share, reflecting a 5.9% sequential increase, will be paid on June 3, 2024, to common stockholders of record on May 15, 2024. 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 June 3, 2024 to preferred stockholders of record on May 15, 2024.

Operating Results

Fully taxable equivalent net interest income for the first quarter of 2024 was $61.1 million, a decrease of $1.5 million, or 2.4%, from the fourth quarter of 2023 due to a seven basis-point contraction in the net interest margin to 2.64% from 2.71%, partially offset by a $151.1 million, or 1.6%, increase in average interest-earning assets. The net interest margin contraction was primarily due to a nine basis-point increase in the average cost of deposits, including noninterest-bearing demand, to 3.23%, and an increase in average cash and cash equivalents of $84.0 million, partially offset by a one basis-point increase in the loan portfolio yield to 5.82%. The increase in average interest-earning assets from the fourth quarter of 2023 was primarily attributable to the aforementioned $84.0 million increase in average cash and cash equivalents and a $64.5 million increase in average loans.

Fully taxable equivalent net interest income for the first quarter of 2024 decreased by $6.7 million, or 9.9%, from the first quarter of 2023. The decrease from the first quarter of 2023 resulted primarily from a 36 basis-point decrease in the net interest margin to 2.64% from 3.00%, partially offset by a $149.1 million, or 1.6%, increase in average interest-earning assets. The contraction of the net interest margin for the first quarter of 2024 when compared to the first quarter of 2023 was primarily attributable to a 103 basis-point increase in the average costs of deposits, including noninterest-bearing deposits, partially offset by a 47 basis-point increase in the loan portfolio yield.

Noninterest income was $3.9 million in the first quarter of 2024, $4.2 million in the fourth quarter of 2023 and $2.8 million in the first quarter of 2023. Included in noninterest income were net gains (losses) on equity securities of $0.1 million, $0.6 million, and $(0.2) million for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023, respectively. Excluding the equity securities gains (losses), adjusted noninterest income was $3.8 million, $3.7 million, and $3.0 million for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023, respectively. The $0.1 million increase in adjusted noninterest income for the first quarter of 2024 when compared to the fourth quarter of 2023 was primarily due to a $0.1 million increase in deposit, loan, and other income. The $0.8 million increase in adjusted noninterest income for the first quarter of 2024 when compared to the first quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale, primarily SBA, of $0.5 million, an increase in deposit, loan, and other income of $0.2 million and an increase in BOLI income of $0.1 million.

Noninterest expenses totaled $37.1 million for the first quarter of 2024, $37.8 million for the fourth quarter of 2023 and $34.9 million for the first quarter of 2023. Included in noninterest expenses for the fourth quarter of 2023 was a $2.1 million FDIC special assessment. Excluding the assessment, adjusted noninterest expenses totaled $35.7 million for the fourth quarter of 2023. Noninterest expenses for the first quarter of 2024 increased by $1.3 million when compared to the adjusted noninterest expenses for the fourth quarter of 2023. The increase was primarily attributable to increases in marketing and advertising of $0.4 million, occupancy and equipment of $0.3 million, professional and consulting of $0.3 million, information and technology communications of $0.2 million, and salaries and employee benefits of $0.1 million. Noninterest expenses for the first quarter of 2024 increased by $2.2 million when compared to the first quarter of 2023. The increase was primarily attributable to increases in information technology and communications of $1.3 million, FDIC insurance of $0.9 million, and occupancy and equipment of $0.3 million, partially offset by decreases in professional and consulting of $0.2 million and salaries and employee benefits of $0.1 million. The increases in information technology and communications when compared to the fourth quarter of 2023 and the first quarter of 2023 are attributable to additional investments in technology, equipment, and software. The increase in FDIC insurance expense when compared to the first quarter of 2023 is primarily attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate. The increase in salaries and employee benefits when compared to the prior year quarter was primarily attributable to new hires and seasonal increases in payroll taxes.

Income tax expense was $5.9 million for the first quarter of 2024, $6.2 million for the fourth quarter of 2023 and $9.1 million for the first quarter of 2023. The effective tax rates for the first quarter of 2024, fourth quarter of 2023 and first quarter of 2023 were 25.5%, 24.4% and 26.7%, respectively.

Asset Quality

The provision for credit losses was $4.0 million for the first quarter of 2024, $2.7 million for the fourth quarter of 2023 and $1.0 million for the first quarter of 2023. The increase in the current quarter’s provision for credit losses from the fourth quarter of 2023 reflected increases in changes in macroeconomic forecasts, qualitative factors and specific reserves.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $47.4 million as of March 31, 2024, $52.5 million as of December 31, 2023 and $47.7 million as of March 31, 2023. Nonperforming assets as a percentage of total assets were 0.48% as of March 31, 2024, 0.53% as of December 31, 2023 and 0.48% as of March 31, 2023. The ratio of nonaccrual loans to loans receivable was 0.57%, 0.63% and 0.59%, as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively. As of March 31, 2024, one loan for $23.6 million was past due more than 90 days and still accruing; the loan is well-secured at a loan-to-value ratio of approximately 60% and is in the process of collection. The annualized net loan charge-offs ratio was 0.15% for the first quarter of 2024, 0.43% for the fourth quarter of 2023 and 0.22% for the first quarter of 2023. The allowance for credit losses represented 1.00%, 0.98%, and 1.07% of loans receivable as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 174.7% as of March 31, 2024, 156.1% as of December 31, 2023 and 182.5% as of March 31, 2023.

Criticized and classified loans as a percentage of total loans decreased to 1.30% as of March 31, 2024 versus 1.35% as of December 31, 2023 and 1.74% as of March 31, 2023. Loans delinquent 30 to 89 days were 0.04% of loans as of March 31, 2024 down from 0.30% as of December 31, 2023 and 0.17% as of March 31, 2023.

Selected Balance Sheet Items

The Company’s total assets were $9.854 billion as of March 31, 2024, compared to $9.856 billion as of December 31, 2023. Loans receivable was $8.298 billion as of March 31, 2024 and $8.345 billion as of December 31, 2023. Total deposits were $7.589 billion as of March 31, 2024 and $7.536 billion as of December 31, 2023.

The Company’s total stockholders’ equity was $1.217 billion at both March 31, 2024 and December 31, 2023. Retained earnings increased by approximately $9 million and was offset by increases in treasury stock of $6 million and increases in accumulated other comprehensive loss of $3 million. As of March 31, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.25% and $23.26, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.9 million as of March 31, 2024, and $214.2 million as of December 31, 2023.

Share Repurchase Program

During the first quarter of 2024, the Company repurchased 282,370 shares of common stock at an average price of $20.24, leaving 641,118 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.

First Quarter 2024 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 25, 2024 to review the Company's financial performance and operating results. The conference call dial-in number is 1-646-307-1963, access code 6725677. 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, April 25, 2024 and ending on Thursday, May 2, 2024 by dialing 1-647-362-9199, access code 6725677. 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. BurnsSenior Executive Vice President & CFO201.816.4474: bburns@cnob.com

Media Contact:Shannan WeeksMWW732.299.7890: sweeks@mww.com

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
	March 31,				December 31,				March 31,
		2024				2023				2023
	(unaudited)
ASSETS
Cash and due from banks	$	45,322			$	61,421			$	58,063
Interest-bearing deposits with banks		232,261				181,293				504,353
Cash and cash equivalents		277,583				242,714				562,416
Investment securities		619,397				617,162				629,001
Equity securities		19,457				18,564				18,025
Loans held-for-sale		-				-				11,197
Loans receivable		8,297,957				8,345,145				8,132,119
Less: Allowance for credit losses - loans		82,869				81,974				87,002
Net loans receivable		8,215,088				8,263,171				8,045,117
Investment in restricted stock, at cost		48,931				51,457				46,379
Bank premises and equipment, net		29,827				30,779				29,603
Accrued interest receivable		49,731				49,108				46,301
Bank owned life insurance		239,308				237,644				232,859
Right of use operating lease assets		11,725				12,007				9,541
Goodwill		208,372				208,372				208,372
Core deposit intangibles		5,553				5,874				6,940
Other assets		128,992				118,751				114,716
Total assets	$	9,853,964			$	9,855,603			$	9,960,467
LIABILITIES
Deposits:
Noninterest-bearing	$	1,290,523			$	1,259,364			$	1,345,265
Interest-bearing		6,298,131				6,276,838				6,407,911
Total deposits		7,588,654				7,536,202				7,753,176
Borrowings		877,568				933,579				852,611
Subordinated debentures, net		79,566				79,439				79,060
Operating lease liabilities		12,843				13,171				10,717
Other liabilities		78,724				76,592				73,933
Total liabilities		8,637,355				8,638,983				8,769,497
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		32,866				33,182				31,350
Retained earnings		600,118				590,970				553,261
Treasury stock		(76,116	)			(70,296	)			(57,652	)
Accumulated other comprehensive loss		(38,132	)			(35,109	)			(33,862	)
Total stockholders' equity		1,216,609				1,216,620				1,190,970
Total liabilities and stockholders' equity	$	9,853,964			$	9,855,603			$	9,960,467

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
	Three Months Ended
	03/31/24				12/31/23				03/31/23
Interest income
Interest and fees on loans	$	120,088			$	120,636			$	106,903
Interest and dividends on investment securities:
Taxable		4,334				4,280				4,229
Tax-exempt		1,154				1,166				1,092
Dividends		1,125				912				898
Interest on federal funds sold and other short-term investments		2,906				1,963				2,975
Total interest income		129,607				128,957				116,097
Interest expense
Deposits		60,407				59,332				40,087
Borrowings		8,900				7,803				8,926
Total interest expense		69,307				67,135				49,013
Net interest income		60,300				61,822				67,084
Provision for credit losses		4,000				2,700				1,000
Net interest income after provision for credit losses		56,300				59,122				66,084
Noninterest income
Deposit, loan and other income		1,592				1,545				1,403
Income on bank owned life insurance		1,664				1,635				1,531
Net gains on sale of loans held-for-sale		506				472				49
Net gains (losses) on equity securities		86				557				(191	)
Total noninterest income		3,848				4,209				2,792
Noninterest expenses
Salaries and employee benefits		22,131				22,010				22,236
Occupancy and equipment		3,009				2,708				2,761
FDIC insurance		1,800				3,900				950
Professional and consulting		1,928				1,587				2,194
Marketing and advertising		677				323				532
Information technology and communications		4,389				4,148				3,061
Amortization of core deposit intangibles		321				348				372
Other expenses		2,810				2,821				2,764
Total noninterest expenses		37,065				37,845				34,870
Income before income tax expense		23,083				25,486				34,006
Income tax expense		5,878				6,213				9,077
Net income		17,205				19,273				24,929
Preferred dividends		1,509				1,509				1,509
Net income available to common stockholders	$	15,696			$	17,764			$	23,420
Earnings per common share:
Basic	$	0.41			$	0.46			$	0.60
Diluted		0.41				0.46				0.59

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
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2024				2023				2023				2023				2023
Selected Financial Data	(dollars in thousands)
Total assets	$	9,853,964			$	9,855,603			$	9,678,885			$	9,723,963			$	9,960,467
Loans receivable:
Commercial	$	1,561,063			$	1,564,768			$	1,464,479			$	1,462,245			$	1,403,865
Commercial real estate		3,333,488				3,342,603				3,288,704				3,237,559				3,245,990
Multifamily		2,507,893				2,566,904				2,559,927				2,604,230				2,600,251
Commercial construction		646,593				620,496				622,748				596,362				630,469
Residential		254,214				256,041				251,416				254,405				259,166
Consumer		850				1,029				936				1,416				1,435
Gross loans		8,304,101				8,351,841				8,188,210				8,156,217				8,141,176
Net deferred loan fees		(6,144	)			(6,696	)			(7,101	)			(7,677	)			(9,057	)
Loans receivable		8,297,957				8,345,145				8,181,109				8,148,540				8,132,119
Loans held-for-sale		-				-				-				1,089				11,197
Total loans	$	8,297,957			$	8,345,145			$	8,181,109			$	8,149,629			$	8,143,316
Investment and equity securities	$	638,854			$	635,726			$	599,544			$	630,769			$	647,026
Goodwill and other intangible assets		213,925				214,246				214,594				214,941				215,312
Deposits:
Noninterest-bearing demand	$	1,290,523			$	1,259,364			$	1,224,125			$	1,356,293			$	1,345,265
Time deposits		2,623,391				2,531,371				2,522,210				2,621,148				2,706,662
Other interest-bearing deposits		3,674,740				3,745,467				3,692,160				3,560,856				3,701,249
Total deposits	$	7,588,654			$	7,536,202			$	7,438,495			$	7,538,297			$	7,753,176
Borrowings	$	877,568			$	933,579			$	887,590			$	827,601			$	852,611
Subordinated debentures (net of debt issuance costs)		79,566				79,439				79,313				79,187				79,060
Total stockholders' equity		1,216,609				1,216,620				1,188,154				1,199,397				1,190,970
Quarterly Average Balances
Total assets	$	9,860,753			$	9,690,746			$	9,625,625			$	9,765,582			$	9,700,530
Loans receivable:
Commercial (including PPP loans)	$	1,552,360			$	1,510,634			$	1,471,006			$	1,427,153			$	1,442,180
Commercial real estate (including multifamily)		5,890,853				5,874,854				5,821,794				5,847,147				5,813,388
Commercial construction		637,993				630,468				625,640				611,492				606,214
Residential		252,965				253,200				253,114				256,924				261,560
Consumer		5,091				6,006				4,972				6,733				3,894
Gross loans		8,339,262				8,275,162				8,176,526				8,149,449				8,127,236
Net deferred loan fees		(6,533	)			(6,894	)			(7,387	)			(8,591	)			(9,664	)
Loans receivable		8,332,729				8,268,268				8,169,139				8,140,858				8,117,572
Loans held-for-sale		99				31				171				8,516				13,463
Total loans	$	8,332,828			$	8,268,299			$	8,169,310			$	8,149,374			$	8,131,035
Investment and equity securities	$	633,270			$	602,287			$	628,429			$	642,915			$	649,744
Goodwill and other intangible assets		214,133				214,472				214,822				215,182				215,556
Deposits:
Noninterest-bearing demand	$	1,254,201			$	1,248,132			$	1,275,325			$	1,347,268			$	1,451,654
Time deposits		2,567,767				2,495,091				2,606,122				2,658,673				2,357,332
Other interest-bearing deposits		3,696,374				3,747,093				3,723,561				3,640,939				3,565,904
Total deposits	$	7,518,342			$	7,490,316			$	7,605,008			$	7,646,880			$	7,374,890
Borrowings	$	947,003			$	823,123			$	651,112			$	756,303			$	941,266
Subordinated debentures (net of debt issuance costs)		79,483				79,356				79,230				79,104				103,637
Total stockholders' equity		1,220,818				1,198,389				1,202,647				1,197,043				1,191,216
	Three Months Ended
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2024				2023				2023				2023				2023
	(dollars in thousands, except for per share data)
Net interest income	$	60,300			$	61,822			$	62,357			$	63,843			$	67,084
Provision for credit losses		4,000				2,700				1,500				3,000				1,000
Net interest income after provision for credit losses		56,300				59,122				60,857				60,843				66,084
Noninterest income
Deposit, loan and other income		1,592				1,545				1,605				1,545				1,403
Income on bank owned life insurance		1,664				1,635				1,597				1,553				1,531
Net gains on sale of loans held-for-sale		506				472				633				550				49
Net gains (losses) on equity securities		86				557				(273	)			(210	)			(191	)
Total noninterest income		3,848				4,209				3,562				3,438				2,792
Noninterest expenses
Salaries and employee benefits		22,131				22,010				22,251				21,726				22,236
Occupancy and equipment		3,009				2,708				2,738				2,677				2,761
FDIC insurance		1,800				1,800				1,800				1,715				950
Professional and consulting		1,928				1,587				1,834				1,932				2,194
Marketing and advertising		677				323				554				556				532
Information technology and communications		4,389				4,148				3,487				3,644				3,061
Amortization of core deposit intangible		321				348				347				371				372
Other expenses		2,810				2,821				2,773				2,829				2,764
Total noninterest expenses (excluding FDIC special assessment)		37,065				35,745				35,784				35,450				34,870
FDIC special assessment		-				2,100				-				-				-
Total noninterest expenses		37,065				37,845				35,784				35,450				34,870
Income before income tax expense		23,083				25,486				28,635				28,831				34,006
Income tax expense		5,878				6,213				7,228				7,437				9,077
Net income		17,205				19,273				21,407				21,394				24,929
Preferred dividends		1,509				1,509				1,509				1,509				1,509
Net income available to common stockholders	$	15,696			$	17,764			$	19,898			$	19,885			$	23,420
Weighted average diluted common shares outstanding		38,511,747				38,651,391				38,829,681				39,016,839				39,300,733
Diluted EPS	$	0.41			$	0.46			$	0.51			$	0.51			$	0.59
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	17,205			$	19,273			$	21,407			$	21,394			$	24,929
Income tax expense		5,878				6,213				7,228				7,437				9,077
Provision for credit losses		4,000				2,700				1,500				3,000				1,000
Pre-tax and pre-provision net revenue	$	27,083			$	28,186			$	30,135			$	31,831			$	35,006
Return on Assets Measures
Average assets	$	9,860,753			$	9,690,746			$	9,625,625			$	9,765,582			$	9,700,530
Return on avg. assets		0.70	%			0.79	%			0.88	%			0.88	%			1.04
Return on avg. assets (pre-tax and pre-provision)		1.10				1.15				1.24				1.31				1.46
	Three Months Ended
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2024				2023				2023				2023				2023
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,220,818			$	1,198,389			$	1,202,647			$	1,197,043			$	1,191,216
Less: average preferred stock		(110,927	)			(110,927	)			(110,927	)			(110,927	)			(110,927	)
Average common equity	$	1,109,891			$	1,087,462			$	1,091,720			$	1,086,116			$	1,080,289
Less: average intangible assets		(214,133	)			(214,472	)			(214,822	)			(215,182	)			(215,556	)
Average tangible common equity	$	895,758			$	872,990			$	876,898			$	870,934			$	864,733
Return on avg. common equity (GAAP)		5.69	%			6.48	%			7.23	%			7.34	%			8.79
Return on avg. tangible common equity ("TCE") (non-GAAP) (1)		7.15				8.18				9.11				9.28				11.11
Return on avg. tangible common equity (pre-tax and pre-provision)		12.26				12.92				13.74				14.78				16.54
Efficiency Measures
Total noninterest expenses	$	37,065			$	37,845			$	35,784			$	35,450			$	34,870
Amortization of core deposit intangibles		(321	)			(348	)			(347	)			(371	)			(372	)
FDIC special assessment		-				(2,100	)			-				-				-
Operating noninterest expense	$	36,744			$	35,397			$	35,437			$	35,079			$	34,498
Net interest income (tax equivalent basis)	$	61,111			$	62,627			$	63,208			$	64,627			$	67,828
Noninterest income		3,848				4,209				3,562				3,438				2,792
Net (gains) losses on equity securities		(86	)			(557	)			273				210				191
Operating revenue	$	64,873			$	66,279			$	67,043			$	68,275			$	70,811
Operating efficiency ratio (non-GAAP) (2)		56.6	%			53.4	%			52.9	%			51.4	%			48.7
Net Interest Margin
Average interest-earning assets	$	9,323,291			$	9,172,165			$	9,089,431			$	9,228,079			$	9,174,167
Net interest income (tax equivalent basis)		61,111				62,627				63,208				64,627				67,828
Net interest margin (GAAP)		2.64	%			2.71	%			2.76	%			2.81	%			3.00
(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.
	As of
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2024				2023				2023				2023				2023
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,216,609			$	1,216,620			$	1,188,154			$	1,199,397			$	1,190,970
Less: preferred stock		(110,927	)			(110,927	)			(110,927	)			(110,927	)			(110,927	)
Common equity	$	1,105,682			$	1,105,693			$	1,077,227			$	1,088,470			$	1,080,043
Less: intangible assets		(213,925	)			(214,246	)			(214,594	)			(214,941	)			(215,312	)
Tangible common equity	$	891,757			$	891,447			$	862,633			$	873,529			$	864,731
Total assets	$	9,853,964			$	9,855,603			$	9,678,885			$	9,723,963			$	9,960,467
Less: intangible assets		(213,925	)			(214,246	)			(214,594	)			(214,941	)			(215,312	)
Tangible assets	$	9,640,039			$	9,641,357			$	9,464,291			$	9,509,022			$	9,745,155
Common shares outstanding		38,333,053				38,519,770				38,621,970				38,966,652				39,179,051
Common equity ratio (GAAP)		11.22	%			11.22	%			11.13	%			11.19	%			10.84
Tangible common equity ratio (non-GAAP) (3)		9.25				9.25				9.11				9.19				8.87
Regulatory capital ratios (Bancorp):
Leverage ratio		10.73	%			10.86	%			10.86	%			10.62	%			10.60
Common equity Tier 1 risk-based ratio		10.69				10.62				10.64				10.55				10.55
Risk-based Tier 1 capital ratio		12.03				11.95				11.98				11.90				11.92
Risk-based total capital ratio		13.88				13.77				13.90				13.83				13.85
Regulatory capital ratios (Bank):
Leverage ratio		11.10	%			11.20	%			11.23	%			10.95	%			10.62
Common equity Tier 1 risk-based ratio		12.43				12.31				12.38				12.26				11.92
Risk-based Tier 1 capital ratio		12.43				12.31				12.38				12.26				11.92
Risk-based total capital ratio		13.41				13.28				13.43				13.33				13.27
Book value per share (GAAP)	$	28.84			$	28.70			$	27.89			$	27.93			$	27.57
Tangible book value per share (non-GAAP) (4)		23.26				23.14				22.34				22.42				22.07
Net Loan Charge-offs (Recoveries):
Net loan charge-offs (recoveries):
Charge-offs	$	3,185			$	8,960			$	2,487			$	1,118			$	4,484
Recoveries		(23	)			-				(8	)			(76	)			(1	)
Net loan charge-offs	$	3,162			$	8,960			$	2,479			$	1,042			$	4,483
Net loan charge-offs as a % of average loans receivable (annualized)		0.15	%			0.43	%			0.12	%			0.05	%			0.22
Asset Quality
Nonaccrual loans	$	47,438			$	52,524			$	56,059			$	51,496			$	47,667
Other real estate owned		-				-				-				-				-
Nonperforming assets	$	47,438			$	52,524			$	56,059			$	51,496			$	47,667
Allowance for credit losses - loans ("ACL")	$	82,869			$	81,974			$	88,230			$	89,205			$	87,002
Loans receivable		8,297,957				8,345,145				8,181,109				8,148,540				8,132,119
Nonaccrual loans as a % of loans receivable		0.57	%			0.63	%			0.69	%			0.63	%			0.59
Nonperforming assets as a % of total assets		0.48				0.53				0.58				0.53				0.48
ACL as a % of loans receivable		1.00				0.98				1.08				1.09				1.07
ACL as a % of nonaccrual loans		174.7				156.1				157.4				173.2				182.5
(3) Tangible common equity divided by tangible assets
(4) 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
	March 31, 2024										December 31, 2023											March 31, 2023
	Average											Average											Average
Interest-earning assets:	Balance				Interest				Rate (7)			Balance				Interest				Rate (7)			Balance				Interest				Rate (7)
Investment securities (1) (2)	$	720,303			$	5,794			3.24	%		$	723,433			$	5,757			3.16	%		$	732,929			$	5,620			3.11	%
Loans receivable and loans held-for-sale (2) (3) (4)		8,332,828				120,592			5.82				8,268,299				121,130			5.81				8,131,035				107,348			5.35
Federal funds sold and interest-
bearing deposits with banks		218,212				2,906			5.36				134,168				1,963			5.80				260,297				2,975			4.64
Restricted investment in bank stock		51,948				1,126			8.72				46,265				912			7.82				49,906				898			7.30
Total interest-earning assets	$	9,323,291				130,418			5.63			$	9,172,165				129,762			5.61				9,174,167				116,841			5.17
Allowance for credit losses		(84,005	)										(88,861	)										(90,182	)
Noninterest-earning assets		621,467											607,442											616,545
Total assets	$	9,860,753										$	9,690,746										$	9,700,530
Interest-bearing liabilities:
Time deposits		2,567,767				28,038			4.39				2,495,091				26,486			4.21			$	2,357,332				17,267			2.97
Other interest-bearing deposits		3,696,374				32,369			3.52				3,747,093				32,846			3.48				3,565,904				22,820			2.60
Total interest-bearing deposits		6,264,141				60,407			3.88				6,242,184				59,332			3.77				5,923,236				40,087			2.74
Borrowings		947,003				7,567			3.21				832,123				6,467			3.08				941,266				7,322			3.15
Subordinated debentures, net		79,483				1,311			6.63				79,356				1,313			6.56				103,638				1,579			6.18
Finance lease		1,483				22			5.97				1,546				23			5.90				1,714				25			5.92
Total interest-bearing liabilities		7,292,110				69,307			3.82				7,155,209				67,135			3.72				6,969,854				49,013			2.85
Noninterest-bearing demand deposits		1,254,201											1,248,132											1,451,654
Other liabilities		93,624											98,016											87,807
Total noninterest-bearing liabilities		1,347,825											1,346,148											1,539,461
Stockholders' equity		1,220,818											1,198,389											1,191,215
Total liabilities and stockholders' equity	$	9,860,753										$	9,699,746										$	9,700,530
Net interest income (tax equivalent basis)						61,111											62,627											67,828
Net interest spread (5)									1.80	%										1.89	%										2.31	%
Net interest margin (6)									2.64	%										2.71	%										3.00	%
Tax equivalent adjustment						(811	)										(805	)										(744	)
Net interest income					$	60,300										$	61,822										$	67,084
(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.