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 $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 1/40th 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. BurnsSenior Executive Vice President & CFO201.816.4474: 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.