ConnectOne Bancorp, Inc. Reports Second Quarter 2024 Results; Declares Common and Preferred Dividends

By: ConnectOne Bancorp, Inc. via GlobeNewswire

July 25, 2024 at 07:00 AM EDT

ENGLEWOOD CLIFFS, N.J., July 25, 2024 (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 $17.5 million for the second quarter of 2024 compared with $15.7 million for the first quarter of 2024 and $19.9 million for the second quarter of 2023. Diluted earnings per share were $0.46 for the second quarter of 2024 compared with $0.41 for the first quarter of 2024 and $0.51 for the second quarter of 2023.

The increase in net income available to common stockholders and diluted earnings per share from the first quarter of 2024 was primarily due to a $1.5 million decrease to provision for credit losses, a $1.1 million increase in net interest income and a $0.6 million increase in noninterest income, partially offset by a $0.8 million increase in income tax expense and a $0.5 million increase in noninterest expenses. The decrease in net income available to common stockholders from the second quarter of 2023 was primarily due to a $2.4 million decrease in net interest income and a $2.1 million increase in noninterest expenses, partially offset by a $1.0 million increase in noninterest income, a $0.7 million decrease in income tax expense and a $0.5 million decrease to provision for credit losses.

Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 1.17%, 1.10% and 1.31% for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “Reflecting a commitment to our relationship-banking business model, ConnectOne’s second quarter performance was solid and, we believe, is in the early stages of an upswing. Pre-tax and pre-provision net revenue increased sequentially by an annualized 17%, our net interest margin widened by 8 basis points, and both our loan to deposit and CRE concentration ratios improved.”

“During the second quarter, client deposit balances increased approximately 7% on an annualized basis, with noninterest-bearing demand deposits remaining flat, driven by meaningful growth from existing clients and successfully onboarding new clients to the bank. And while loan originations are continuing at an annualized run-rate of more than $1 billion, our loan portfolio decreased sequentially. This reflected higher pay-downs and pay-offs than usual and was consistent with our strategy to actively manage non-relationship loans off our balance sheet.”

Mr. Sorrentino concluded, “While ConnectOne remains focused on investing in our valuable franchise, further strengthening our solid balance sheet, enhancing our core funding and improving our loan mix, it also appears banking industry fundamentals may have turned the corner. Either way, we believe that ConnectOne is poised for sustained growth and long-term profitability.”

Dividend Declarations

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

A cash dividend on common stock of $0.18 per share will be paid on September 3, 2024, to common stockholders of record on August 15, 2024. A dividend of $0.328125 per depositary share, representing a 1/40^th interest in a share of the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on September 3, 2024 to holders of record on August 15, 2024.

Operating Results

Fully taxable equivalent net interest income for the second quarter of 2024 was $62.3 million, an increase of $1.1 million, or 1.9%, from the first quarter of 2024, due to an eight basis-point widening of the net interest margin to 2.72% from 2.64%, which was partially offset by a $113.2 million, or 1.2%, decrease in average interest-earning assets. The net interest margin widening was primarily due to an eight basis-point increase in the yield on interest-earning assets, while the cost to fund those assets remained essentially flat. The decrease in average interest-earning assets from the first quarter of 2024 was primarily attributable to a $120.0 million decrease in average loans, reflecting a larger than typical volume of loan payoffs, paydowns and sales.

Fully taxable equivalent net interest income for the second quarter of 2024 decreased by $2.4 million, or 3.7%, from the second quarter of 2023. The decrease from the second quarter of 2023 resulted primarily from a nine basis-point decrease in the net interest margin to 2.72% from 2.81%, partially offset by a $63.5 million, or 0.8%, increase in average loans. The contraction of the net interest margin for the second quarter of 2024 when compared to the second quarter of 2023 was primarily attributable to a 64 basis-point increase in the average cost of deposits, including noninterest-bearing deposits, partially offset by a 42 basis-point increase in the loan portfolio yield.

Noninterest income was $4.4 million in the second quarter of 2024, $3.8 million in the first quarter of 2024 and $3.4 million in the second quarter of 2023. Included in noninterest income were net (losses) gains on equity securities of $(0.2) million, $0.1 million, and $(0.2) million for the second quarter of 2024, first quarter of 2024 and second quarter of 2023, respectively. Excluding the equity securities (losses) gains, adjusted noninterest income was $4.6 million, $3.8 million, and $3.6 million for the second quarter of 2024, first quarter of 2024 and second quarter of 2023, respectively. The $0.8 million increase in adjusted noninterest income for the second quarter of 2024 when compared to the first quarter of 2024 was primarily due to a $0.8 million increase in net gains on sale of loans held-for-sale. The $1.0 million increase in adjusted noninterest income for the second quarter of 2024 when compared to the second quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale of $0.7 million, an increase in deposit, loan, and other income of $0.1 million and an increase in BOLI income of $0.1 million.

Noninterest expenses totaled $37.6 million for the second quarter of 2024, $37.1 million for the first quarter of 2024 and $35.5 million for the second quarter of 2023. The $0.5 million increase from the first quarter of 2024 was attributable to increases in salaries and employee benefits of $0.6 million and other expenses of $0.3 million, partially offset by decreases in information and technology communications of $0.2 million, marketing and advertising of $0.1 million and occupancy and equipment of $0.1 million. The $2.1 million increase from the second quarter of 2023 was attributable to increases in salaries and employee benefits of $1.0 million, information technology and communications of $0.6 million, other expenses of $0.3 million, occupancy and equipment of $0.2 million and FDIC insurance of $0.1 million. The increase in salaries and employee benefits when compared to the first quarter of 2024 and the second quarter of 2023 was primarily attributable to increases in incentive-based compensation accruals, partially offset by decreases in payroll tax expenses. The increases in information technology and communications when compared to the first quarter of 2024 and the second quarter of 2023 are attributable to additional investments in technology, equipment, and software.

Income tax expense was $6.7 million for the second quarter of 2024, $5.9 million for the first quarter of 2024 and $7.4 million for the second quarter of 2023. The effective tax rates for the second quarter of 2024, first quarter of 2024 and second quarter of 2023 were 26.0%, 25.5% and 25.8%, respectively.

Asset Quality

The provision for credit losses was $2.5 million for the second quarter of 2024, $4.0 million for the first quarter of 2024 and $3.0 million for the second quarter of 2023. The decrease in the current quarter’s provision for credit losses from the first quarter of 2024 was primarily attributable to a decrease in general reserves that resulted from a decrease in loans receivable.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $46.0 million as of June 30, 2024, $52.5 million as of December 31, 2023 and $51.5 million as of June 30, 2023. Nonperforming assets as a percentage of total assets were 0.47% as of June 30, 2024, 0.53% as of December 31, 2023 and 0.53% as of June 30, 2023. The ratio of nonaccrual loans to loans receivable was 0.56%, 0.63% and 0.63%, as of June 30, 2024, December 31, 2023 and June 30, 2023, respectively. The annualized net loan charge-offs ratio was 0.16% for the second quarter of 2024, 0.43% for the fourth quarter of 2023 and 0.05% for the second quarter of 2023. The allowance for credit losses represented 1.01%, 0.98%, and 1.09% of loans receivable as of June 30, 2024, December 31, 2023, and June 30, 2023, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 178.3% as of June 30, 2024, 156.1% as of December 31, 2023 and 173.2% as of June 30, 2023.

Credit quality metrics remained solid. Criticized and classified loans as a percentage of total loans increased to 1.50% as of June 30, 2024 versus 1.35% as of December 31, 2023 and decreased from 1.70% as of June 30, 2023. Loans delinquent 30 to 89 days were 0.11% of loans as of June 30, 2024 down from 0.30% as of December 31, 2023 and up from 0.04% as of June 30, 2023.

Selected Balance Sheet Items

The Company’s total assets were $9.724 billion as of June 30, 2024, compared to $9.856 billion as of December 31, 2023. Loans receivable were $8.158 billion as of June 30, 2024 and $8.345 billion as of December 31, 2023. Total deposits were $7.576 billion as of June 30, 2024 and $7.536 billion as of December 31, 2023.

The Company’s total stockholders’ equity was $1.224 billion as of June 30, 2024 and $1.217 billion as of December 31, 2023. The increase in total stockholders’ equity was primarily attributable to an increase in retained earnings of approximately $20 million, partially offset by increases in accumulated other comprehensive loss of approximately $7 million and increases in treasury stock of approximately $6 million. As of June 30, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.46% and $23.45, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.6 million as of June 30, 2024, and $214.2 million as of December 31, 2023.

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.

Second Quarter 2024 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 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 8868797. 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, July 25, 2024 and ending on Thursday, August 1, 2024 by dialing 1 (609) 800-9909, access code 8868797. 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)

	June 30,			December 31,			June 30,
		2024			2023			2023
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	47,105		$	61,421		$	56,286
Interest-bearing deposits with banks		246,408			181,293			263,638
Cash and cash equivalents		293,513			242,714			319,924

Investment securities		620,579			617,162			612,819
Equity securities		19,743			18,564			17,950

Loans held-for-sale		435			-			1,089

Loans receivable		8,157,903			8,345,145			8,148,540
Less: Allowance for credit losses - loans		82,077			81,974			89,205
Net loans receivable		8,075,826			8,263,171			8,059,335

Investment in restricted stock, at cost		43,403			51,457			46,688
Bank premises and equipment, net		28,881			30,779			29,093
Accrued interest receivable		48,262			49,108			46,237
Bank owned life insurance		240,985			237,644			234,412
Right of use operating lease assets		13,359			12,007			8,874
Goodwill		208,372			208,372			208,372
Core deposit intangibles		5,232			5,874			6,569
Other assets		125,141			118,751			132,601
Total assets	$	9,723,731		$	9,855,603		$	9,723,963

LIABILITIES
Deposits:
Noninterest-bearing	$	1,268,882		$	1,259,364		$	1,356,293
Interest-bearing		6,307,132			6,276,838			6,182,004
Total deposits		7,576,014			7,536,202			7,538,297
Borrowings		756,144			933,579			827,601
Subordinated debentures, net		79,692			79,439			79,187
Operating lease liabilities		14,435			13,171			10,007
Other liabilities		73,219			76,592			69,474
Total liabilities		8,499,504			8,638,983			8,524,566

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		33,955			33,182			30,740
Retained earnings		610,759			590,970			566,498
Treasury stock		(76,116	)		(70,296	)		(61,877	)
Accumulated other comprehensive loss		(42,244	)		(35,109	)		(33,837	)
Total stockholders' equity		1,224,227			1,216,620			1,199,397
Total liabilities and stockholders' equity	$	9,723,731		$	9,855,603		$	9,723,963

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)

	Three Months Ended						Six Months Ended
	06/30/24			06/30/23			06/30/24			06/30/23
Interest income
Interest and fees on loans	$	120,145		$	111,048		$	240,233		$	217,951
Interest and dividends on investment securities:
Taxable		4,683			4,029			9,017			8,258
Tax-exempt		1,121			1,247			2,275			2,339
Dividends		1,217			945			2,342			1,843
Interest on federal funds sold and other short-term investments		2,841			4,056			5,747			7,031
Total interest income		130,007			121,325			259,614			237,422
Interest expense
Deposits		62,086			50,714			122,493			90,801
Borrowings		6,482			6,768			15,382			15,694
Total interest expense		68,568			57,482			137,875			106,495

Net interest income		61,439			63,843			121,739			130,927
Provision for credit losses		2,500			3,000			6,500			4,000
Net interest income after provision for credit losses		58,939			60,843			115,239			126,927

Noninterest income
Deposit, loan and other income		1,654			1,545			3,246			2,948
Income on bank owned life insurance		1,677			1,553			3,341			3,084
Net gains on sale of loans held-for-sale		1,277			550			1,783			599
Net losses on equity securities		(209	)		(210	)		(123	)		(401	)
Total noninterest income		4,399			3,438			8,247			6,230

Noninterest expenses
Salaries and employee benefits		22,721			21,726			44,852			43,962
Occupancy and equipment		2,899			2,677			5,908			5,438
FDIC insurance		1,800			1,715			3,600			2,665
Professional and consulting		1,923			1,932			3,851			4,126
Marketing and advertising		613			556			1,290			1,088
Information technology and communications		4,198			3,644			8,587			6,705
Amortization of core deposit intangibles		321			371			642			743
Other expenses		3,119			2,829			5,929			5,593
Total noninterest expenses		37,594			35,450			74,659			70,320

Income before income tax expense		25,744			28,831			48,827			62,837
Income tax expense		6,688			7,437			12,566			16,514
Net income		19,056			21,394			36,261			46,323
Preferred dividends		1,509			1,509			3,018			3,018
Net income available to common stockholders	$	17,547		$	19,885		$	33,243		$	43,305

Earnings per common share:
Basic	$	0.46		$	0.51		$	0.87		$	1.11
Diluted		0.46			0.51			0.86			1.10

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
	Jun, 30,			Mar, 31,			Dec, 31,			Sep, 30,			Jun, 30,
		2024			2024			2023			2023			2023
Selected Financial Data	(dollars in thousands)
Total assets	$	9,723,731		$	9,853,964		$	9,855,603		$	9,678,885		$	9,723,963
Loans receivable:
Commercial	$	1,491,079		$	1,561,063		$	1,564,768		$	1,464,479		$	1,462,245
Commercial real estate		3,274,941			3,333,488			3,342,603			3,288,704			3,237,559
Multifamily		2,499,581			2,507,893			2,566,904			2,559,927			2,604,230
Commercial construction		639,168			646,593			620,496			622,748			596,362
Residential		256,786			254,214			256,041			251,416			254,405
Consumer		945			850			1,029			936			1,416
Gross loans		8,162,500			8,304,101			8,351,841			8,188,210			8,156,217
Net deferred loan fees		(4,597	)		(6,144	)		(6,696	)		(7,101	)		(7,677	)
Loans receivable		8,157,903			8,297,957			8,345,145			8,181,109			8,148,540
Loans held-for-sale		435			-			-			-			1,089
Total loans	$	8,158,338		$	8,297,957		$	8,345,145		$	8,181,109		$	8,149,629

Investment and equity securities	$	640,322		$	638,854		$	635,726		$	599,544		$	630,769
Goodwill and other intangible assets		213,604			213,925			214,246			214,594			214,941
Deposits:
Noninterest-bearing demand	$	1,268,882		$	1,290,523		$	1,259,364		$	1,224,125		$	1,356,293
Time deposits		2,593,165			2,623,391			2,531,371			2,522,210			2,621,148
Other interest-bearing deposits		3,713,967			3,674,740			3,745,467			3,692,160			3,560,856
Total deposits	$	7,576,014		$	7,588,654		$	7,536,202		$	7,438,495		$	7,538,297

Borrowings	$	756,144		$	877,568		$	933,579		$	887,590		$	827,601
Subordinated debentures (net of debt issuance costs)		79,692			79,566			79,439			79,313			79,187
Total stockholders' equity		1,224,227			1,216,609			1,216,620			1,188,154			1,199,397

Quarterly Average Balances
Total assets	$	9,745,853		$	9,860,753		$	9,690,746		$	9,625,625		$	9,765,582
Loans receivable:
Commercial (including PPP loans)	$	1,517,446		$	1,552,360		$	1,510,634		$	1,471,006		$	1,427,153
Commercial real estate (including multifamily)		5,789,498			5,890,853			5,874,854			5,821,794			5,847,147
Commercial construction		652,227			637,993			630,468			625,640			611,492
Residential		254,284			252,965			253,200			253,114			256,924
Consumer		5,155			5,091			6,006			4,972			6,733
Gross loans		8,218,610			8,339,262			8,275,162			8,176,526			8,149,449
Net deferred loan fees		(5,954	)		(6,533	)		(6,894	)		(7,387	)		(8,591	)
Loans receivable		8,212,656			8,332,729			8,268,268			8,169,139			8,140,858
Loans held-for-sale		169			99			31			171			8,516
Total loans	$	8,212,825		$	8,332,828		$	8,268,299		$	8,169,310		$	8,149,374

Investment and equity securities	$	637,551		$	633,270		$	602,287		$	628,429		$	642,915
Goodwill and other intangible assets		213,813			214,133			214,472			214,822			215,182
Deposits:
Noninterest-bearing demand	$	1,256,251		$	1,254,201		$	1,248,132		$	1,275,325		$	1,347,268
Time deposits		2,587,706			2,567,767			2,495,091			2,606,122			2,658,673
Other interest-bearing deposits		3,721,167			3,696,374			3,747,093			3,723,561			3,640,939
Total deposits	$	7,565,124		$	7,518,342		$	7,490,316		$	7,605,008		$	7,646,880

Borrowings	$	787,256		$	947,003		$	823,123		$	651,112		$	756,303
Subordinated debentures (net of debt issuance costs)		79,609			79,483			79,356			79,230			79,104
Total stockholders' equity		1,220,621			1,220,818			1,198,389			1,202,647			1,197,043

	Three Months Ended
	Jun, 30,			Mar, 31,			Dec, 31,			Sep, 30,			Jun, 30,
		2024			2024			2023			2023			2023
	(dollars in thousands, except for per share data)
Net interest income	$	61,439		$	60,300		$	61,822		$	62,357		$	63,843
Provision for credit losses		2,500			4,000			2,700			1,500			3,000
Net interest income after provision for credit losses		58,939			56,300			59,122			60,857			60,843
Noninterest income
Deposit, loan and other income		1,654			1,592			1,545		��	1,605			1,545
Income on bank owned life insurance		1,677			1,664			1,635			1,597			1,553
Net gains on sale of loans held-for-sale		1,277			506			472			633			550
Net (losses) gains on equity securities		(209	)		86			557			(273	)		(210	)
Total noninterest income		4,399			3,848			4,209			3,562			3,438
Noninterest expenses
Salaries and employee benefits		22,721			22,131			22,010			22,251			21,726
Occupancy and equipment		2,899			3,009			2,708			2,738			2,677
FDIC insurance		1,800			1,800			1,800			1,800			1,715
Professional and consulting		1,923			1,928			1,587			1,834			1,932
Marketing and advertising		613			677			323			554			556
Information technology and communications		4,198			4,389			4,148			3,487			3,644
Amortization of core deposit intangible		321			321			348			347			371
Other expenses		3,119			2,810			2,821			2,773			2,829
Total noninterest expenses (excluding FDIC special assessment)		37,594			37,065			35,745			35,784			35,450

FDIC special assessment		-			-			2,100			-			-
Total noninterest expenses		37,594			37,065			37,845			35,784			35,450

Income before income tax expense		25,744			23,083			25,486			28,635			28,831
Income tax expense		6,688			5,878			6,213			7,228			7,437
Net income		19,056			17,205			19,273			21,407			21,394
Preferred dividends		1,509			1,509			1,509			1,509			1,509
Net income available to common stockholders	$	17,547		$	15,696		$	17,764		$	19,898		$	19,885

Weighted average diluted common shares outstanding		38,448,594			38,511,747			38,651,391			38,829,681			39,016,839
Diluted EPS	$	0.46		$	0.41		$	0.46		$	0.51		$	0.51

Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	19,056		$	17,205		$	19,273		$	21,407		$	21,394
Income tax expense		6,688			5,878			6,213			7,228			7,437
Provision for credit losses		2,500			4,000			2,700			1,500			3,000
Pre-tax and pre-provision net revenue	$	28,244		$	27,083		$	28,186		$	30,135		$	31,831

Return on Assets Measures
Average assets	$	9,745,853		$	9,860,753		$	9,690,746		$	9,625,625		$	9,765,582
Return on avg. assets		0.79	%		0.70	%		0.79	%		0.88	%		0.88	%
Return on avg. assets (pre-tax and pre-provision)		1.17			1.10			1.15			1.24			1.31

	Three Months Ended
	Jun, 30,			Mar, 31,			Dec, 31,			Sep, 30,			Jun, 30,
		2024			2024			2023			2023			2023
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,220,621		$	1,220,818		$	1,198,389		$	1,202,647		$	1,197,043
Less: average preferred stock		(110,927	)		(110,927	)		(110,927	)		(110,927	)		(110,927	)
Average common equity	$	1,109,694		$	1,109,891		$	1,087,462		$	1,091,720		$	1,086,116
Less: average intangible assets		(213,813	)		(214,133	)		(214,472	)		(214,822	)		(215,182	)
Average tangible common equity	$	895,881		$	895,758		$	872,990		$	876,898		$	870,934

Return on avg, common equity (GAAP)		6.36	%		5.69	%		6.48	%		7.23	%		7.34	%
Return on avg. tangible common equity ("TCE") (non-GAAP) ⁽¹⁾		7.98			7.15			8.18			9.11			9.28
Return on avg, tangible common equity (pre-tax and pre-provision)		12.78			12.26			12.92			13.74			14.78

Efficiency Measures
Total noninterest expenses	$	37,594		$	37,065		$	37,845		$	35,784		$	35,450
Amortization of core deposit intangibles		(321	)		(321	)		(348	)		(347	)		(371	)
FDIC special assessment		-			-			(2,100	)		-			-
Operating noninterest expense	$	37,273		$	36,744		$	35,397		$	35,437		$	35,079

Net interest income (tax equivalent basis)	$	62,255		$	61,111		$	62,627		$	63,208		$	64,627
Noninterest income		4,399			3,848			4,209			3,562			3,438
Net losses (gains) on equity securities		209			(86	)		(557	)		273			210
Operating revenue	$	66,863		$	64,873		$	66,279		$	67,043		$	68,275

Operating efficiency ratio (non-GAAP) ⁽²⁾		55.7	%		56.6	%		53.4	%		52.9	%		51.4	%

Net Interest Margin
Average interest-earning assets	$	9,210,050		$	9,323,291		$	9,172,165		$	9,089,431		$	9,228,079
Net interest income (tax equivalent basis)		62,255			61,111			62,627			63,208			64,627
Net interest margin (GAAP)		2.72	%		2.64	%		2.71	%		2.76	%		2.81	%

^{(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
	Jun, 30,			Mar, 31,			Dec, 31,			Sep, 30,			Jun, 30,
		2024			2024			2023			2023			2023
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,224,227		$	1,216,609		$	1,216,620		$	1,188,154		$	1,199,397
Less: preferred stock		(110,927	)		(110,927	)		(110,927	)		(110,927	)		(110,927	)
Common equity	$	1,113,300		$	1,105,682		$	1,105,693		$	1,077,227		$	1,088,470
Less: intangible assets		(213,604	)		(213,925	)		(214,246	)		(214,594	)		(214,941	)
Tangible common equity	$	899,696		$	891,757		$	891,447		$	862,633		$	873,529

Total assets	$	9,723,731		$	9,853,964		$	9,855,603		$	9,678,885		$	9,723,963
Less: intangible assets		(213,604	)		(213,925	)		(214,246	)		(214,594	)		(214,941	)
Tangible assets	$	9,510,127		$	9,640,039		$	9,641,357		$	9,464,291		$	9,509,022

Common shares outstanding		38,365,069			38,333,053			38,519,770			38,621,970			38,966,652

Common equity ratio (GAAP)		11.45	%		11.22	%		11.22	%		11.13	%		11.19	%
Tangible common equity ratio (non-GAAP) ⁽³⁾		9.46			9.25			9.25			9.11			9.19

Regulatory capital ratios (Bancorp):
Leverage ratio		10.97	%		10.73	%		10.86	%		10.86	%		10.62	%
Common equity Tier 1 risk-based ratio		10.93			10.70			10.62			10.64			10.55
Risk-based Tier 1 capital ratio		12.28			12.03			11.95			11.98			11.90
Risk-based total capital ratio		14.13			13.88			13.77			13.90			13.83

Regulatory capital ratios (Bank):
Leverage ratio		11.29	%		11.10	%		11.20	%		11.23	%		10.95	%
Common equity Tier 1 risk-based ratio		12.63			12.43			12.31			12.38			12.26
Risk-based Tier 1 capital ratio		12.63			12.43			12.31			12.38			12.26
Risk-based total capital ratio		13.61			13.41			13.28			13.43			13.33

Book value per share (GAAP)	$	29.02		$	28.84		$	28.70		$	27.89		$	27.93
Tangible book value per share (non-GAAP) ⁽⁴⁾		23.45			23.26			23.14			22.34			22.42

Net Loan Charge-offs (Recoveries):
Net loan charge-offs (recoveries):
Charge-offs	$	3,595		$	3,185		$	8,960		$	2,487		$	1,118
Recoveries		(324	)		(23	)		-			(8	)		(76	)
Net loan charge-offs	$	3,271		$	3,162		$	8,960		$	2,479		$	1,042
Net loan charge-offs as a % of average loans receivable (annualized)		0.16	%		0.15	%		0.43	%		0.12	%		0.05	%

Asset Quality
Nonaccrual loans	$	46,026		$	47,438		$	52,524		$	56,059		$	51,496
Other real estate owned		-			-			-			-			-
Nonperforming assets	$	46,026		$	47,438		$	52,524		$	56,059		$	51,496

Allowance for credit losses - loans ("ACL")	$	82,077		$	82,869		$	81,974		$	88,230		$	89,205
Loans receivable		8,157,903			8,297,957			8,345,145			8,181,109			8,148,540

Nonaccrual loans as a % of loans receivable		0.56	%		0.57	%		0.63	%		0.69	%		0.63	%
Nonperforming assets as a % of total assets		0.47			0.48			0.53			0.58			0.53
ACL as a % of loans receivable		1.01			1.00			0.98			1.08			1.09
ACL as a % of nonaccrual loans		178.3			174.7			156.1			157.4			173.2

^{(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
	June 30, 2024								March 31, 2024									June 30, 2023
	Average									Average									Average
Interest-earning assets:	Balance			Interest			Rate ⁽⁷⁾			Balance			Interest			Rate ⁽⁷⁾			Balance			Interest			Rate ⁽⁷⁾
Investment securities ^{(1) (2)}	$	739,591		$	6,102		3.32	%		$	720,303		$	5,794		3.24	%		$	726,315		$	5,607		3.10	%
Loans receivable and loans held-for-sale ^{(2) (3) (4)}		8,212,825			120,663		5.91				8,332,828			120,592		5.82				8,149,374			111,501		5.49
Federal funds sold and interest-
bearing deposits with banks		212,811			2,841		5.37				218,212			2,906		5.36				309,458			4,056		5.26
Restricted investment in bank stock		44,823			1,217		10.92				51,948			1,126		8.72				42,932			945		8.83
Total interest-earning assets	$	9,210,050			130,823		5.71			$	9,323,291			130,418		5.63				9,228,079			122,109		5.31
Allowance for credit losses		(84,681	)								(84,005	)								(87,473	)
Noninterest-earning assets		620,484									621,467									624,976
Total assets	$	9,745,853								$	9,860,753								$	9,765,582

Interest-bearing liabilities:
Time deposits		2,587,706			28,898		4.49				2,567,767			28,038		4.39			$	2,658,673			23,778		3.59
Other interest-bearing deposits		3,721,167			33,188		3.59				3,696,374			32,369		3.52				3,640,939			26,936		2.97
Total interest-bearing deposits		6,308,873			62,086		3.96				6,264,141			60,407		3.88				6,299,612			50,714		3.23

Borrowings		787,256			5,150		2.63				947,003			7,567		3.21				756,303			5,438		2.88
Subordinated debentures, net		79,609			1,311		6.62				79,483			1,311		6.63				79,104			1,306		6.62
Finance lease		1,416			21		5.96				1,483			22		5.97				1,658			24		5.81
Total interest-bearing liabilities		7,177,154			68,568		3.84				7,292,110			69,307		3.82				7,136,677			57,482		3.23

Noninterest-bearing demand deposits		1,256,251									1,254,201									1,347,268
Other liabilities		91,827									93,624									84,594
Total noninterest-bearing liabilities		1,348,078									1,347,825									1,431,862
Stockholders' equity		1,220,621									1,220,818									1,197,043
Total liabilities and stockholders' equity	$	9,745,853								$	9,860,753								$	9,765,582

Net interest income (tax equivalent basis)					62,255									61,111									64,627
Net interest spread ⁽⁵⁾							1.87	%								1.80	%								2.08	%

Net interest margin ⁽⁶⁾							2.72	%								2.64	%								2.81	%

Tax equivalent adjustment					(816	)								(811	)								(784	)
Net interest income				$	61,439								$	60,300								$	63,843

^{(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.}

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