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 $29.9 million for the first quarter of 2022, compared with $31.3 million for the fourth quarter of 2021 and $33.0 million for the first quarter of 2021. Diluted earnings per share were $0.75 for the first quarter of 2022 compared with $0.79 for the fourth quarter of 2021 and $0.82 for the first quarter of 2021. The $1.4 million decrease in net income available to common stockholders and $0.04 decrease in diluted earnings per share versus the fourth quarter of 2021 were primarily due to a $1.1 million increase in noninterest expenses, a $0.7 million decrease in noninterest income, and a $0.6 million increase to provision for credit losses, partially offset by a $1.0 million decrease in income tax expenses. The $3.1 million decrease in net income available to common stockholders and $0.07 decrease in diluted earnings per share versus the first quarter of 2021 were due to a $7.2 million increase to provision for credit losses, a $2.7 million increase in noninterest expenses, $1.5 million in preferred dividends, a $0.4 million decrease in noninterest income and a $0.5 million increase in income tax expenses, partially offset by a $9.2 million increase in net interest income.

Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 2.17%, 2.28% and 2.06% for the quarters ending March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “ConnectOne had a solid start to 2022. We delivered another quarter of strong operating performance along with significant organic growth and best-in-class efficiency, while also investing in our infrastructure to support future growth and performance. Our efficiency ratio remained below 40% at 38.7%, our PPNR as a percent of average assets remained above 2%, and our return on tangible common equity exceeded 15%, while our net interest margin remained at a near record level. Tangible book value per share increased by 2.0% for the quarter to $20.51.

“Operationally, we’re using the full range of the Company’s banking expertise to enhance client relationships. Loan demand remained strong with annualized core loan growth increasing over 10% sequentially, matched with annualized deposit growth in excess of 14%. We ended the quarter with a strong pipeline, reflecting continued momentum and solid prospects among our clients across all the markets we serve. That also reflects our expansion into new markets which are a natural progression for us, such as Florida where we are gaining nice traction.” Mr. Sorrentino added, “We continue to leverage our technological foundation by investing in infrastructure, new verticals, communication tools and digital channels to remain well-positioned for continued growth.”

“We remain committed to strategically allocating capital to investments that we believe can enhance value for our shareholders. We also announced today yet another increase to our common dividend, the third increase since the start of 2021 -- reflecting ConnectOne’s growing capital base, our strong operating performance and our favorable outlook.” Mr. Sorrentino added, “Looking ahead, we remain confident in our ability to increase our market presence and deliver continued organic growth. Our margins and efficiency are expected to remain among the best in the industry and, even with investments to support our growing businesses, we aim to grow revenues faster than expenses. We’re excited about what the future holds for ConnectOne, we are very optimistic about performance in 2022 and we are well positioned to pursue attractive opportunities to expand our valuable franchise.”

Dividend Declarations

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

A cash dividend on common stock of $0.155 per share, reflecting a 19.2% sequential increase and a 40.9% increase versus one year ago, will be paid on June 1, 2022 to common stockholders of record on May 16, 2022.   A dividend of $0.328125 per share for every 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 1, 2022 to preferred stockholders of record on May 16, 2022.

Operating Results

Fully taxable equivalent net interest income for the first quarter of 2022 was $70.8 million, virtually unchanged from the fourth quarter of 2021. Average interest-earning assets increased by $244.9 million, or 3.3%, from the fourth quarter of 2021 resulting primarily from a 2.3% increase in average loans. Partially offsetting the benefit from increased average interest-earnings assets was a modest contraction in the net interest margin of 4 basis points to 3.71% from 3.75%. The net interest margin contraction was primarily a result of a 6 basis-point decline in the yield on loans. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.64% for the first quarter of 2022 and 3.66% for the fourth quarter of 2021. Included in interest income in the first quarter of 2022 and fourth quarter of 2021 was the accretion of Paycheck Protection Program (“PPP”) fee income of $2.0 million and $1.5 million, respectively. Remaining deferred and unrecognized PPP fees were $2.6 million as of March 31, 2022.

Fully taxable equivalent net interest income for the first quarter of 2022 increased by $9.3 million, or 15.0%, from the first quarter of 2021. The increase from the first quarter of 2021 resulted primarily from a 10.1% increase in average loans and a 15 basis-point widening of the net interest margin to 3.71% from 3.56%. The widening of the net interest margin resulted from a 27 basis-point reduction in the cost of interest-bearing liabilities, partially offset by an 8 basis-point reduction in the yield on average interest-earning assets.

Noninterest income was $3.1 million in the first quarter of 2022, $3.8 million in the fourth quarter of 2021 and $3.4 million in the first quarter of 2021.   Included in noninterest income were net losses on equity securities of $0.6 million, $0.1 million and $0.2 million for the first quarter 2022, fourth quarter 2021 and first quarter 2021, respectively, and a $0.7 million gain on the sale of branches in the first quarter 2021.   Excluding the aforementioned items, adjusted noninterest income was $3.7 million, $3.9 million and $2.9 million for the first quarter 2022, fourth quarter 2021 and first quarter 2021, respectively. The $0.3 million decrease in adjusted noninterest income for the current quarter versus the sequential fourth quarter 2021 was primarily due to a decrease in net gains on sale of loans held-for-sale, partially offset by increased BoeFly income. The $0.7 million increase in adjusted noninterest income for the current quarter versus the first quarter 2021 was primarily due to increases in deposit, loan and other income of $0.4 million, BoeFly income of $0.2 million and BOLI income of $0.1 million.

Noninterest expenses totaled $29.2 million for the first quarter of 2022, $28.1 million for the fourth quarter of 2021 and $26.5 million for the first quarter of 2021. The increase in noninterest expenses of $1.1 million from the fourth quarter of 2021 was primarily attributable to an increase in salaries and employee benefits of $2.2 million and a $0.7 million in increase acquisition expenses related to BoeFly, partially offset by decreases in occupancy and equipment of $0.8 million, which included a $0.9 million favorable dissolution of a merger lease obligation, other expense of $0.3 million, information technology and communications of $0.2 million, professional and consulting of $0.2 million, and marketing and advertising of $0.1 million.   The increase in noninterest expenses of $2.7 million from the first quarter of 2021 was primarily attributable to increases in salaries and employee benefits of $3.1 million, the aforementioned BoeFly expense of $0.7 million, and other expenses of $0.6 million, and information technology and communications of $0.3 million, partially offset by decreases in occupancy and equipment of $1.5 million, including the aforementioned favorable dissolution of merger lease obligation, FDIC insurance of $0.3 million and professional and consulting of $0.2 million. The increase in salaries and employee benefits from the prior sequential quarter and prior year quarter was attributable to new hires, seasonal increases in payroll taxes, as well as higher incentive-based, stock compensation expense.

Income tax expense was $11.4 million for the first quarter of 2022, $12.3 million for the fourth quarter of 2021 and $10.9 million for the first quarter of 2021. The effective tax rates for the first quarter of 2022, fourth quarter of 2021 and first quarter of 2021 were 26.6%, 27.1% and 24.8%, respectively.

Asset Quality

The provision for (reversal of) credit losses was $1.5 million for the first quarter of 2022, $0.8 million for the fourth quarter of 2021 and $(5.8) million for the first quarter of 2021. The provision for credit losses during the first quarter of 2022 and the fourth quarter of 2021 reflected strong organic loan growth and stabilizing macroeconomic forecasts.   The reversal of provision for credit losses during the first quarter of 2021 was the result of an improved macroeconomic forecast when compared to January 1, 2021, the date of CECL implementation.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $59.7 million as of March 31, 2022, $61.7 million as of December 31, 2021 and $60.9 million as of March 31, 2021.   Nonaccrual loans were $59.4 million as of March 31, 2022, $61.7 million as of December 31, 2021 and $60.9 million as of March 31, 2021. Nonperforming assets as a percentage of total assets were 0.72% as of March 31, 2022, 0.76% as of December 31, 2021 and 0.82% as of March 31, 2021. The ratio of nonaccrual loans to loans receivable was 0.85%, 0.90% and 0.97%, as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The annualized net loan charge-offs ratio was 0.01% for the first quarter of 2022, 0.01% for the fourth quarter of 2021 and 0.00% for the first quarter of 2021. The allowance for credit losses represented 1.15%, 1.15%, and 1.28% of loans receivable as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Excluding PPP loans, the allowance for credit losses represented 1.16%, 1.17%, and 1.40% of loans receivable as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 134.8% as of March 31, 2022, 127.7% as of December 31, 2021 and 132.2% as of March 31, 2021.

Selected Balance Sheet Items

The Company’s total assets were $8.3 billion as of March 31, 2022, an increase of $204.8 million from December 31, 2021.  Loans receivable were $7.0 billion, an increase of $151.0 million from December 31, 2021. The increase in loans receivable was attributable to higher, organic, loan originations.

The Company’s total stockholders’ equity was $1.1 billion as of March 31, 2022, an increase of $14.3 million from December 31, 2021. The increase in retained earnings of $24.7 million was the primary reason for the overall increase in stockholders’ equity, in addition to an increase in additional paid-in capital of $1.2 million, partially offset by a decrease in accumulated other comprehensive income of $6.9 million, reflecting the after-tax decline in the fair value of investment securities net of unrealized hedge gains recorded in other assets, and an increase in treasury stock of $4.8 million. As of March 31, 2022, the Company’s tangible common equity ratio and tangible book value per share were 9.99% and $20.51, respectively. As of December 31, 2021, the tangible common equity ratio and tangible book value per share were 10.06% and $20.12, respectively. Total goodwill and other intangible assets were approximately $216.9 million as of March 31, 2022 and $217.4 million as of December 31, 2021.

Share Repurchase Program

During the first quarter of 2022, the Company repurchased 144,793 shares of common stock leaving approximately 2.1 million shares remaining authorized for repurchase under the current Board approved repurchase programs. 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 plans do not obligate the Company to acquire any particular amount of common stock, and they 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 2022 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on April 28, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13728265. 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 28, 2022 and ending on Thursday, May 5, 2022 by dialing 412-317-6671, access code 13728265. 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 its fintech subsidiary, BoeFly. 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 is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the Securities Exchange Commission, as supplemented by the Company’s subsequent filings with the 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 VP & CFO201.816.4474: bburns@cnob.com

Media Contact:Sutton Resler, MWW571.236.4966: sresler@mww.com   

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
	March 31,				December 31,				March 31,
		2022				2021				2021
	(unaudited)								(unaudited)
ASSETS
Cash and due from banks	$	61,849			$	54,352			$	48,250
Interest-bearing deposits with banks		249,695				211,184				211,842
Cash and cash equivalents		311,544				265,536				260,092
Investment securities		512,030				534,507				442,023
Equity securities		13,198				13,794				13,200
Loans held-for-sale		2,742				250				6,900
Loans receivable		6,979,595				6,828,622				6,277,191
Less: Allowance for credit losses - loans		80,070				78,773				80,568
Net loans receivable		6,899,525				6,749,849				6,196,623
Investment in restricted stock, at cost		25,254				27,826				22,483
Bank premises and equipment, net		28,779				29,032				29,296
Accrued interest receivable		34,081				34,152				35,249
Bank owned life insurance		196,937				195,731				167,024
Right of use operating lease assets		10,400				11,017				13,469
Other real estate owned		316				-				-
Goodwill		208,372				208,372				208,372
Core deposit intangibles		8,564				8,997				10,470
Other assets		82,559				50,417				44,438
Total assets	$	8,334,301			$	8,129,480			$	7,449,639
LIABILITIES
Deposits:
Noninterest-bearing	$	1,631,292			$	1,617,049			$	1,384,961
Interest-bearing		4,929,113				4,715,904				4,566,373
Total deposits		6,560,405				6,332,953				5,951,334
Borrowings		412,170				468,193				359,710
Subordinated debentures, net		153,027				152,951				152,724
Operating lease liabilities		11,773				12,417				15,260
Other liabilities		58,407				38,754				34,974
Total liabilities		7,195,782				7,005,268				6,514,002
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock		110,927				110,927				-
Common stock		586,946				586,946				586,946
Additional paid-in capital		28,484				27,246				23,621
Retained earnings		464,889				440,169				358,441
Treasury stock		(44,458	)			(39,672	)			(32,682	)
Accumulated other comprehensive loss		(8,269	)			(1,404	)			(689	)
Total stockholders' equity		1,138,519				1,124,212				935,637
Total liabilities and stockholders' equity	$	8,334,301			$	8,129,480			$	7,449,639

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
	Three Months Ended
	03/31/22				12/31/21				03/31/21
Interest income
Interest and fees on loans	$	76,025			$	76,891			$	70,462
Interest and dividends on investment securities:
Taxable		1,873				1,265				1,088
Tax-exempt		709				518				766
Dividends		214				207				256
Interest on federal funds sold and other short-term investments		120				159				49
Total interest income		78,941				79,040				72,621
Interest expense
Deposits		5,010				5,281				7,585
Borrowings		3,573				3,298				3,873
Total interest expense		8,583				8,579				11,458
Net interest income		70,358				70,461				61,163
Provision for (reversal of) credit losses		1,450				815				(5,766	)
Net interest income after provision for credit losses		68,908				69,646				66,929
Noninterest income
Deposit, loan and other income		1,743				1,525				1,168
Income on bank owned life insurance		1,206				1,244				1,064
Net gains on sale of loans held-for-sale		701				1,139				707
Gain on sale of branches		-				-				674
Net losses on equity securities		(596	)			(131	)			(187	)
Total noninterest income		3,054				3,777				3,426
Noninterest expenses
Salaries and employee benefits		18,640				16,483				15,565
Occupancy and equipment		1,929				2,762				3,404
FDIC insurance		606				625				935
Professional and consulting		1,792				1,996				1,956
Marketing and advertising		351				454				241
Information technology and communications		2,866				3,058				2,525
Amortization of core deposit intangible		433				483				507
Increase in value of acquisition price		683				-				-
Other expenses		1,930				2,223				1,352
Total noninterest expenses		29,230				28,084				26,485
Income before income tax expense		42,732				45,339				43,870
Income tax expense		11,351				12,301				10,871
Net income		31,381				33,038				32,999
Preferred dividends		1,509				1,717				-
Net income available to common stockholders	$	29,872			$	31,321			$	32,999
Earnings per common share:
Basic	$	0.76			$	0.79			$	0.83
Diluted		0.75				0.79				0.82

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,
		2022				2021				2021				2021				2021
Selected Financial Data	(dollars in thousands)
Total assets	$	8,334,301			$	8,129,480			$	7,949,514			$	7,710,082			$	7,449,639
Loans receivable:
Commercial	$	1,161,867			$	1,163,442			$	1,116,535			$	1,046,965			$	1,071,418
Paycheck Protection Program ("PPP") loans		54,301				93,057				177,829				326,788				522,340
Commercial real estate		2,516,065				2,446,807				2,354,209				2,252,484				2,127,807
Multifamily		2,465,337				2,337,712				2,113,541				1,914,978				1,698,331
Commercial construction		539,058				540,178				552,896				587,121				565,872
Residential		250,205				255,269				270,793				286,907				306,376
Consumer		1,140				1,886				2,093				6,355				3,364
Gross loans		6,987,973				6,838,351				6,587,896				6,421,598				6,295,508
Unearned net origination fees		(8,378	)			(9,729	)			(11,457	)			(13,694	)			(18,317	)
Loans receivable		6,979,595				6,828,622				6,576,439				6,407,904				6,277,191
Loans held-for-sale		2,742				250				5,596				6,159				6,900
Total loans	$	6,982,337			$	6,828,872			$	6,582,035			$	6,414,063			$	6,284,091
Investment and equity securities	$	525,228			$	548,301			$	476,584			$	472,156			$	455,223
Goodwill and other intangible assets		216,936				217,369				217,852				218,335				218,842
Deposits:
Noninterest-bearing demand	$	1,631,292			$	1,617,049			$	1,500,754			$	1,485,952			$	1,384,961
Time deposits		1,065,814				1,150,109				1,221,911				1,301,807				1,356,599
Other interest-bearing deposits		3,863,299				3,565,795				3,675,673				3,404,754				3,209,774
Total deposits	$	6,560,405			$	6,332,953			$	6,398,338			$	6,192,513			$	5,951,334
Borrowings	$	412,170			$	468,193			$	253,225			$	353,462			$	359,710
Subordinated debentures (net of debt issuance costs)		153,027				152,951				152,875				152,800				152,724
Total stockholders' equity		1,138,519				1,124,212				1,098,433				964,960				935,637
Quarterly Average Balances
Total assets	$	8,263,382			$	8,027,169			$	7,837,997			$	7,566,676			$	7,500,034
Loans receivable:
Commercial (including PPP loans)	$	1,231,703			$	1,278,048			$	1,296,066			$	1,485,918			$	1,531,790
Commercial real estate (including multifamily)		4,850,349				4,625,371				4,312,092				3,925,497				3,805,856
Commercial construction		541,642				547,038				572,920				553,396				595,466
Residential		253,589				268,112				279,063				293,633				316,233
Consumer		3,682				4,938				2,649				3,148				2,540
Gross loans		6,880,965				6,723,507				6,462,790				6,261,592				6,251,885
Unearned net origination fees		(9,870	)			(10,873	)			(13,064	)			(13,076	)			(13,163	)
Loans receivable		6,871,095				6,712,634				6,449,726				6,248,516				6,238,722
Loans held-for-sale		382				5,051				6,226				3,696				4,237
Total loans	$	6,871,477			$	6,717,685			$	6,455,952			$	6,252,212			$	6,242,959
Investment and equity securities	$	536,090			$	481,276			$	465,103			$	450,543			$	481,082
Goodwill and other intangible assets		217,219				217,685				218,170				218,662				219,171
Deposits:
Noninterest-bearing demand	$	1,547,055			$	1,537,316			$	1,495,456			$	1,432,707			$	1,348,585
Time deposits		1,124,614				1,204,374				1,252,818				1,324,510				1,422,295
Other interest-bearing deposits		3,851,558				3,672,311				3,582,261				3,320,400				3,225,751
Total deposits	$	6,523,227			$	6,414,001			$	6,330,535			$	6,077,617			$	5,996,631
Borrowings	$	404,907			$	292,847			$	276,183			$	331,633			$	375,511
Subordinated debentures (net of debt issuance costs)		152,977				152,902				152,825				152,750				154,341
Total stockholders' equity		1,131,968				1,113,524				1,032,191				952,019				928,041
	Three Months Ended
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2022				2021				2021				2021				2021
	(dollars in thousands, except for per share data)
Net interest income	$	70,358			$	70,461			$	68,245			$	63,009			$	61,163
Provision for (reversal of) credit losses		1,450				815				1,100				(1,649	)			(5,766	)
Net interest income after provision for credit losses		68,908				69,646				67,145				64,658				66,929
Noninterest income
Deposit, loan and other income		1,743				1,525				1,702				2,222				1,168
Income on bank owned life insurance		1,206				1,244				1,278				1,185				1,064
Net gains on sale of loans held-for-sale		701				1,139				1,114				847				707
Gain on sale of branches		-				-				-				-				674
Net (losses) gains on equity securities		(596	)			(131	)			(78	)			23				(187	)
Total noninterest income		3,054				3,777				4,016				4,472				3,426
Noninterest expenses
Salaries and employee benefits		18,640				16,483				16,740				15,284				15,565
Occupancy and equipment		1,929				2,762				2,656				2,916				3,404
FDIC insurance		606				625				525				580				935
Professional and consulting		1,792				1,996				2,217				2,117				1,956
Marketing and advertising		351				454				345				278				241
Information technology and communications		2,866				3,058				3,048				2,636				2,525
Amortization of core deposit intangible		433				483				483				508				507
Increase in value of acquisition price		683				-				-				-				-
Other expenses		1,930				2,223				2,169				1,940				1,352
Total noninterest expenses		29,230				28,084				28,183				26,259				26,485
Income before income tax expense		42,732				45,339				42,978				42,871				43,870
Income tax expense		11,351				12,301				10,881				10,652				10,871
Net income		31,381			$	33,038			$	32,097			$	32,219			$	32,999
Preferred dividends		1,509				1,717				-				-				-
Net income available to common stockholders	$	29,872			$	31,321			$	32,097			$	32,219			$	32,999
Weighted average diluted common shares outstanding		39,727,606				39,792,937				39,869,468				39,872,829				39,788,881
Diluted EPS	$	0.75			$	0.79			$	0.80			$	0.81			$	0.82
Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue
Net income	$	31,381			$	33,038			$	32,097			$	32,219			$	32,999
Income tax expense		11,351				12,301				10,881				10,652				10,871
Provision for (reversal of) credit losses		1,450				815				1,100				(1,649	)			(5,766	)
Pre-tax and pre-provision net revenue	$	44,182			$	46,154			$	44,078			$	41,222			$	38,104
Return on Assets Measures
Average assets	$	8,263,382			$	8,027,169			$	7,837,997			$	7,566,676			$	7,500,034
Return on avg. assets		1.54		%		1.63		%		1.62		%		1.71		%		1.78	%
Return on avg. assets (pre-tax and pre-provision)		2.17				2.28				2.23				2.19				2.06
	Three Months Ended
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2022				2021				2021				2021				2021
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,131,968			$	1,113,524			$	1,032,195			$	952,019			$	928,041
Less: average preferred stock		(110,927	)			(110,927	)			(51,847	)			-				-
Average common equity	$	1,021,041			$	1,002,597			$	980,348			$	952,019			$	928,041
Less: average intangible assets		(217,219	)			(217,685	)			(218,170	)			(218,662	)			(219,171	)
Average tangible common equity	$	803,822			$	784,912			$	762,178			$	733,357			$	708,870
Return on avg. common equity (GAAP)		11.87		%		12.39		%		12.99		%		13.57		%		14.42	%
Return on avg. tangible common equity ("TCE") (non-GAAP) (1)		15.22				16.00				16.88				17.82				19.08
Return on avg. tangible common equity (pre-tax, pre-provision)		22.44				23.50				23.12				22.74				22.00
Efficiency Measures
Total noninterest expenses	$	29,230			$	28,084			$	28,183			$	26,259			$	26,485
Amortization of core deposit intangibles		(433	)			(483	)			(483	)			(508	)			(507	)
Operating noninterest expense	$	28,797			$	27,601			$	27,700			$	25,751			$	25,978
Net interest income (tax equivalent basis)	$	70,842			$	70,890			$	68,761			$	63,418			$	61,581
Noninterest income		3,054				3,777				4,016				4,472				3,426
Net losses (gains) on equity securities		596				131				78				(23	)			187
Net gains on sale/redemption of investment securities		-				-				-				(195	)			-
Operating revenue	$	74,492			$	74,798			$	72,855			$	67,672			$	64,520
Operating efficiency ratio (non-GAAP) (2)		38.7		%		36.9		%		38.0		%		38.1		%		40.3	%
Net Interest Margin
Average interest-earning assets	$	7,753,881			$	7,508,973			$	7,321,771			$	7,059,965			$	7,008,500
Net interest income (tax equivalent basis)	$	70,842			$	70,890			$	68,761			$	63,418			$	61,581
Impact of purchase accounting fair value marks		(1,179	)			(1,674	)			(1,849	)			(2,012	)			(2,074	)
Adjusted net interest income (tax equivalent basis)	$	69,663			$	69,216			$	66,912			$	61,406			$	59,507
Net interest margin (GAAP)		3.71		%		3.75		%		3.73		%		3.60		%		3.56	%
Adjusted net interest margin (non-GAAP) (3)		3.64				3.66				3.63				3.49				3.44
(1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity.
(2) Operating noninterest expense divided by operating revenue.
(3) Adjusted net interest margin excludes impact of purchase accounting fair value marks.
	As of
	Mar. 31,				Dec. 31,				Sep. 30,				Jun. 30,				Mar. 31,
		2022				2021				2021				2021				2021
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,138,519			$	1,124,212			$	1,098,433			$	964,960			$	935,637
Less: preferred stock		(110,927	)			(110,927	)			(110,927	)			-				-
Common equity	$	1,027,592			$	1,013,285			$	987,506			$	964,960			$	935,637
Less: intangible assets		(216,936	)			(217,369	)			(217,852	)			(218,335	)			(218,842	)
Tangible common equity	$	810,656			$	795,916			$	769,654			$	746,625			$	716,795
Total assets	$	8,334,301			$	8,129,480			$	7,949,514			$	7,710,082			$	7,449,639
Less: intangible assets		(216,936	)			(217,369	)			(217,852	)			(218,335	)			(218,842	)
Tangible assets	$	8,117,365			$	7,912,111			$	7,731,662			$	7,491,747			$	7,230,797
Common shares outstanding		39,518,411				39,568,090				39,602,199				39,794,815				39,773,602
Common equity ratio (GAAP)		12.33		%		13.83		%		13.82		%		12.52		%		12.56	%
Tangible common equity ratio (non-GAAP) (4)		9.99				10.06				9.95				9.97				9.91
Regulatory capital ratios (Bancorp):
Leverage ratio		11.57		%		11.65		%		11.60		%		10.19		%		9.89	%
Common equity Tier 1 risk-based ratio		10.69				10.64				10.73				11.09				11.36
Risk-based Tier 1 capital ratio		12.21				12.19				12.35				11.17				11.44
Risk-based total capital ratio		15.23				15.26				15.54				14.58				15.08
Regulatory capital ratios (Bank):
Leverage ratio		11.41		%		11.43		%		11.33		%		11.34		%		11.06	%
Common equity Tier 1 risk-based ratio		12.04				11.96				12.06				12.42				12.78
Risk-based Tier 1 capital ratio		12.04				11.96				12.06				12.42				12.78
Risk-based total capital ratio		13.52				13.44				13.61				14.07				14.55
Book value per share (GAAP)	$	26.00			$	25.61			$	24.94			$	24.25			$	23.52
Tangible book value per share (non-GAAP) (5)		20.51				20.12				19.43				18.76				18.02
Net Loan (Recoveries) Charge-Off Detail
Net loan charge-offs (recoveries):
Charge-offs	$	274			$	458			$	1,727			$	212			$	-
Recoveries		(32	)			(217	)			(113	)			(14	)			(61	)
Net loan charge-offs (recoveries)	$	242			$	241			$	1,614			$	198			$	(61	)
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)		0.01		%		0.01		%		0.10		%		0.01		%		(0.00	)%
Asset Quality
Nonaccrual loans	$	59,403			$	61,700			$	65,959			$	56,213			$	60,940
OREO		316				-				-				-				-
Nonperforming assets	$	59,719			$	61,700			$	65,959			$	56,213			$	60,940
Allowance for credit losses - loans ("ACL")		80,070				78,773				77,986				78,684				80,568
Loans receivable	$	6,979,595			$	6,828,622			$	6,576,439			$	6,407,904			$	6,277,191
Less: PPP loans		54,301				93,057				177,829				326,788				522,340
Loans receivable (excluding PPP loans)	$	6,925,294			$	6,735,565			$	6,398,610			$	6,081,116			$	5,754,851
Nonaccrual loans as a % of loans receivable		0.85		%		0.90		%		1.00		%		0.88		%		0.97
Nonperforming assets as a % of total assets		0.72				0.76				0.83				0.73				0.82
ACL as a % of loans receivable		1.15				1.15				1.19				1.23				1.28
ACL as a % of loans receivable (excluding PPP loans)		1.16				1.17				1.22				1.29				1.40
ACL as a % of nonaccrual loans		134.8				127.7				118.2				140.0				132.2
(4) Tangible common equity divided by tangible assets.
(5) Tangible common equity divided by common shares outstanding at period-end.

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN ANALYSIS
(dollars in thousands)
				For the Three Months Ended
				March 31, 2022								December 31, 2021									March 31, 2021
				Average									Average									Average
Interest-earning assets:				Balance			Interest			Rate (7)			Balance			Interest			Rate (7)			Balance			Interest			Rate (7)
Investment securities (1) (2)				$	545,203		$	2,771		2.06	%		$	480,143		$	1,921		1.59	%		$	473,181		$	2,058		1.76	%
Loans receivable and loans held-for-sale (2) (3) (4)					6,871,477			76,320		4.50				6,717,685			77,220		4.56				6,242,960			70,676		4.59
Federal funds sold and interest-
bearing deposits with banks					312,224			120		0.16				291,243			121		0.16				269,537			49		0.07
Restricted investment in bank stock					24,977			214		3.47				19,902			207		4.13				22,822			256		4.55
Total interest-earning assets					7,753,881			79,425		4.15				7,508,973			79,469		4.20				7,008,500			73,039		4.23
Allowance for loan losses					(79,763	)								(79,074	)								(81,549	)
Noninterest-earning assets					589,264									597,270									573,083
Total assets				$	8,263,382								$	8,027,169								$	7,500,034
Interest-bearing liabilities:
Time deposits				$	1,124,614			2,154		0.78			$	1,204,374		$	2,717		0.90				1,422,295			5,151		1.47
Other interest-bearing deposits					3,851,558			2,856		0.30				3,672,311			2,563		0.28				3,225,751			2,434		0.31
Total interest-bearing deposits					4,976,172			5,010		0.41				4,876,685			5,280		0.43				4,648,046			7,585		0.66
Borrowings					404,907			1,377		1.38				292,847			1,102		1.49				375,511			1,674		1.81
Subordinated debentures					152,977			2,168		5.75				152,902			2,167		5.62				154,341			2,167		5.69
Capital lease obligation					1,917			28		5.92				1,967			30		6.05				2,115			32		6.14
Total interest-bearing liabilities					5,535,973			8,583		0.63				5,324,401			8,579		0.64				5,180,013			11,458		0.90
Noninterest-bearing demand deposits					1,547,055									1,537,316									1,348,585
Other liabilities					48,386									51,928									43,395
Total noninterest-bearing liabilities					1,595,441									1,589,244									1,391,980
Stockholders' equity					1,131,968									1,113,524									928,041
Total liabilities and stockholders' equity				$	8,263,382								$	8,027,169								$	7,500,034
Net interest income (tax equivalent basis)								70,842									70,890									61,581
Net interest spread (5)										3.53	%								3.56	%								3.33	%
Net interest margin (6)										3.71	%								3.75	%								3.56	%
Tax equivalent adjustment								(484	)								(429	)								(418	)
Net interest income							$	70,358								$	70,461								$	61,163
(1) Average balances are calculated on amortized cost.
(2) Interest income is presented on a tax equivalent basis using 21% federal tax rate.
(3) Includes loan fee income and accretion of purchase accounting adjustments.
(4) Loans include nonaccrual loans.
(5) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing
liabilities and is presented on a tax equivalent basis.
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.
(7) Rates are annualized.