CNOB ConnectOne Bancorp Inc

ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $15.7 million for the third quarter of 2024 compared with $17.5 million for the second quarter of 2024 and $19.9 million for the third quarter of 2023. Included in net income available to common stockholders’ was merger and restructuring pre-tax expenses of $0.7 million for the third quarter of 2024, while there were no such charges during the second quarter of 2024 and the third quarter of 2023. Diluted earnings per share were $0.41 for the third quarter of 2024 compared with $0.46 for the second quarter of 2024 and $0.51 for the third quarter of 2023. Return on average assets was 0.70%, 0.79% and 0.88% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. Return on average tangible common equity was 6.93%, 7.98% and 9.11% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

Operating net income available to common stockholders, which excludes non-operating items, was $16.1 million for the third quarter of 2024, $17.9 million for the second quarter of 2024 and $20.4 million for the third quarter of 2023. Operating diluted earnings per share were $0.42 for the third quarter of 2024, $0.47 for the second quarter of 2024 and $0.52 for the third quarter of 2023. Operating return on average assets was 0.72%, 0.80% and 0.90% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. Operating return on average tangible common equity was 7.03%, 8.05% and 9.21% for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. See supplemental tables for a complete reconciliation of GAAP earnings to operating earnings, and other non-GAAP measures.

The decrease in net income available to common stockholders and diluted earnings per share from the second quarter of 2024 was primarily due to a $1.3 million increase in the provision for credit losses, a $1.0 million increase in noninterest expenses, and a $0.6 million decrease in net interest income, partially offset by a $0.7 million decrease in income tax expenses and a $0.3 million increase in noninterest income. The decrease in net income available to common stockholders from the third quarter of 2023 was primarily due to a $2.9 million increase in noninterest expenses, a $2.3 million increase in the provision for credit losses, and a $1.5 million decrease in net interest income, partially offset by a $1.2 million increase in noninterest income and a $1.2 million decrease in income tax expense. The increases in noninterest expenses when compared to the prior sequential quarter and the prior year quarter included the impact of the aforementioned $0.7 million of merger and restructuring expense that occurred during the third quarter of 2024.

“In September, we announced a planned merger with The First of Long Island Corporation, a transaction that we believe will create a truly premier New York-metro community bank,” commented Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer. “Our integration planning is off to a good start, the initial regulatory process is underway, and we’re excited about creating a significantly enhanced platform for continued growth across all markets and communities we serve. Further, the economic environment and interest rate outlook confirms our belief that this combination will deliver meaningful benefits to our communities, clients and shareholders. We look forward to updating you on our progress in the months and quarters ahead.”

Mr. Sorrentino added, “Meanwhile, we remain focused and committed to our client-first culture and relationship banking model. During the first nine months of the year, we have actively reduced non-relationship loans from our balance sheet in an effort to improve our loan-to-deposit ratio, diversify our loan mix, and capitalize on the improving interest rate environment.”

“The net interest margin, for the third quarter, on a core basis was flat; however, as a result of the Fed’s 50 basis-point cut in late September, we ended the quarter with a so-called spot margin upwards of 10 basis points wider. And with our liability-sensitive balance sheet, we are positioned to drive increased profitability through the fourth quarter, into 2025 and post-merger completion.”

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 December 2, 2024, to common stockholders of record on November 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 December 2, 2024 to holders of record on November 15, 2024.

Operating Results

Fully taxable equivalent net interest income for the third quarter of 2024 was $61.7 million, a decrease of $0.5 million, or 0.9%, from the second quarter of 2024, due to a five basis-point contraction of the net interest margin to 2.67% from 2.72%. During the third quarter of 2024, average loans decreased $89.4 million, or 1.1% when compared to the second quarter of 2024. The contraction of the net interest margin was primarily due to an increase in average cash balances during the third quarter of 2024, as well as a decrease in loan prepayment fees and nonaccrual loan interest recapture. The net interest margin is expected to increase by 10 basis points or more in the fourth quarter of 2024 reflecting the Fed’s actual and expected rate cuts along with deployment of excess cash-on-hand.

Fully taxable equivalent net interest income for the third quarter of 2024 decreased by $1.5 million, or 2.4%, from the third quarter of 2023. The decrease from the third quarter of 2023 resulted primarily from a nine basis-point contraction in the net interest margin to 2.67% from 2.76%. During the third quarter of 2024, average loans decreased by $45.9 million, or 0.6% when compared to the third quarter of 2023. The contraction of the net interest margin for the third quarter of 2024 when compared to the third quarter of 2023 was primarily attributable to a 40 basis-point increase in the average cost of deposits, including noninterest-bearing deposits, partially offset by a 24 basis-point increase in the loan portfolio yield.

Noninterest income was $4.7 million in the third quarter of 2024, $4.4 million in the second quarter of 2024 and $3.6 million in the third quarter of 2023. The $0.3 million increase in noninterest income for the third quarter of 2024 when compared to the second quarter of 2024 was due to a $0.6 million increase in net gains on equity securities, a $0.4 million increase in BOLI death benefits and a $0.2 million increase in other deposit, loan and other income, partially offset a $0.9 million decrease in net gains on sale of loans held-for-sale. The $1.2 million increase in noninterest income for the third quarter of 2024 when compared to the third quarter of 2023 was due to a $0.7 million increase in net gains on equity securities, a $0.4 million increase in BOLI death benefits received, a $0.2 million increase in BOLI income, a $0.1 million increase in BoeFly income, and a $0.1 million increase in other deposit, loan and other income, partially offset by a decrease in net gains on sale of loans held-for-sale of $0.3 million.

Noninterest expenses were $38.6 million for the third quarter of 2024, $37.6 million for the second quarter of 2024 and $35.8 million for the third quarter of 2023. The $1.0 million increase in noninterest expenses for the third quarter of 2024 when compared to the second quarter of 2024 was primarily due to a $0.7 million increase in merger and restructuring expenses, a $0.3 million increase in information and technology communications, a $0.2 million increase in salaries and employee benefits and a $0.2 million increase in professional and consulting fees, partially offset by decreases in other expenses of $0.4 million. The $2.9 million increase in noninterest expenses for the third quarter of 2024 when compared to the third quarter of 2023 was primarily due to a $1.0 million increase in information technology and communications, a $0.7 million increase in merger and restructuring expenses, a $0.7 million increase in salaries and employee benefits, a $0.3 million increase in professional and consulting, a $0.2 million increase in occupancy and equipment and a $0.1 million increase in marketing and advertising, partially offset by a decrease in other expenses of $0.1 million. The increases in information technology and communications when compared to the second quarter of 2024 and the third quarter of 2023 are attributable to additional investments in technology, equipment, and software. The increase in salaries and employee benefits when compared to the second quarter of 2024 was primarily attributable to increases in incentive-based compensation accruals, partially offset by decreases in payroll tax expenses and other employee benefit expenses. The increase in salaries and employee benefits when compared to the third quarter of 2023 was primarily attributable to increases in incentive-based compensation accruals, and an increase in other employee benefit expenses, partially offset by decreases in stock-compensation expenses.

Income tax expense was $6.0 million for the third quarter of 2024, $6.7 million for the second quarter of 2024 and $7.2 million for the third 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%, 26.0% and 25.2%, respectively.

Asset Quality

The provision for credit losses was $3.8 million for the third quarter of 2024, $2.5 million for the second quarter of 2024 and $1.5 million for the third quarter of 2023. The increase in the current quarter’s provision for credit losses from both the second quarter of 2024 and the third quarter of 2023 was primarily due to increases in specific reserves, partially offset by decreases in general reserves.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), was $51.3 million as of September 30, 2024, $52.5 million as of December 31, 2023 and $56.1 million as of September 30, 2023. Nonperforming assets as a percentage of total assets was 0.53% as of September 30, 2024, 0.53% as of December 31, 2023 and 0.58% as of September 30, 2023. The ratio of nonaccrual loans to loans receivable was 0.63%, 0.63% and 0.69%, as of September 30, 2024, December 31, 2023 and September 30, 2023, respectively. The annualized net loan charge-offs ratio was 0.17% for the third quarter of 2024, 0.43% for the fourth quarter of 2023 and 0.12% for the third quarter of 2023. The allowance for credit losses represented 1.02%, 0.98%, and 1.08% of loans receivable as of September 30, 2024, December 31, 2023, and September 30, 2023, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 160.8% as of September 30, 2024, 156.1% as of December 31, 2023 and 157.4% as of September 30, 2023. Criticized and classified loans as a percentage of total loans was 2.23% as of September 30, 2024, up from 1.35% as of December 31, 2023 and up from 1.44% as of September 30, 2023. The increase is primarily due to a loan modification of one CRE relationship that was moved to special mention. Loans delinquent 30 to 89 days was 0.16% of loans as of September 30, 2024, down from 0.30% as of December 31, 2023 and up from 0.04% as of September 30, 2023.

Selected Balance Sheet Items

The Company’s total assets were $9.639 billion as of September 30, 2024, compared to $9.856 billion as of December 31, 2023. Loans receivable were $8.112 billion as of September 30, 2024 and $8.345 billion as of December 31, 2023. Total deposits were $7.524 billion as of September 30, 2024 and $7.536 billion as of December 31, 2023.

The Company’s total stockholders’ equity was $1.239 billion as of September 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 $28.5 million, partially offset by an increase in accumulated other comprehensive losses of approximately $1.6 million and increases in treasury stock of approximately $5.8 million. As of September 30, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.71% and $23.85, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.3 million as of September 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.

Third Quarter 2024 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on October 24, 2024 to review the Company's financial performance and operating results. The conference call dial-in number is 1 (646) 307-1963, access code 5504182. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Investor Relations" link on the Company's website https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, October 24, 2024 and ending on Thursday, October 31, 2024 by dialing 1 (609) 800-9909, access code 5504182. 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 health emergencies and natural disasters 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 MikeWorldWide732.299.7890: sweeks@mww.com

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
	September 30,				December 31,				September 30,
		2024				2023				2023
	(unaudited)								(unaudited)
ASSETS
Cash and due from banks	$	61,093			$	61,421			$	56,170
Interest-bearing deposits with banks		186,155				181,293				197,128
Cash and cash equivalents		247,248				242,714				253,298
Investment securities		646,713				617,162				581,867
Equity securities		20,399				18,564				17,677
Loans receivable		8,111,976				8,345,145				8,181,109
Less: Allowance for credit losses - loans		82,494				81,974				88,230
Net loans receivable		8,029,482				8,263,171				8,092,879
Investment in restricted stock, at cost		42,772				51,457				49,387
Bank premises and equipment, net		29,068				30,779				28,432
Accrued interest receivable		46,951				49,108				46,795
Bank owned life insurance		242,016				237,644				236,009
Right of use operating lease assets		14,211				12,007				11,229
Goodwill		208,372				208,372				208,372
Core deposit intangibles		4,935				5,874				6,222
Other assets		107,436				118,751				146,718
Total assets	$	9,639,603			$	9,855,603			$	9,678,885
LIABILITIES
Deposits:
Noninterest-bearing	$	1,262,568			$	1,259,364			$	1,224,125
Interest-bearing		6,261,537				6,276,838				6,214,370
Total deposits		7,524,105				7,536,202				7,438,495
Borrowings		742,133				933,579				887,590
Subordinated debentures, net		79,818				79,439				79,313
Operating lease liabilities		15,252				13,171				12,424
Other liabilities		38,799				76,592				72,909
Total liabilities		8,400,107				8,638,983				8,490,731
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		34,995				33,182				32,027
Retained earnings		619,497				590,970				579,776
Treasury stock		(76,116	)			(70,296	)			(68,108	)
Accumulated other comprehensive loss		(36,753	)			(35,109	)			(53,414	)
Total stockholders' equity		1,239,496				1,216,620				1,188,154
Total liabilities and stockholders' equity	$	9,639,603			$	9,855,603			$	9,678,885

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
	Three Months Ended							Nine Months Ended
	09/30/24			09/30/23				09/30/24			09/30/23
Interest income
Interest and fees on loans	$	119,280		$	115,405			$	359,513		$	333,356
Interest and dividends on investment securities:
Taxable		4,740			4,128				13,757			12,386
Tax-exempt		1,119			1,136				3,394			3,475
Dividends		1,048			907				3,390			2,750
Interest on federal funds sold and other short-term investments		4,055			2,110				9,802			9,141
Total interest income		130,242			123,686				389,856			361,108
Interest expense
Deposits		63,785			56,043				186,278			146,844
Borrowings		5,570			5,286				20,952			20,980
Total interest expense		69,355			61,329				207,230			167,824
Net interest income		60,887			62,357				182,626			193,284
Provision for credit losses		3,800			1,500				10,300			5,500
Net interest income after provision for credit losses		57,087			60,857				172,326			187,784
Noninterest income
Deposit, loan and other income		1,817			1,605				5,063			4,553
Income on bank owned life insurance		2,145			1,597				5,486			4,681
Net gains on sale of loans held-for-sale		343			633				2,126			1,232
Net losses (gains) on equity securities		432			(273	)			309			(674	)
Total noninterest income		4,737			3,562				12,984			9,792
Noninterest expenses
Salaries and employee benefits		22,957			22,251				67,809			66,213
Occupancy and equipment		2,889			2,738				8,797			8,176
FDIC insurance		1,800			1,800				5,400			4,465
Professional and consulting		2,147			1,834				5,998			5,960
Marketing and advertising		635			554				1,925			1,642
Information technology and communications		4,464			3,487				13,051			10,192
Merger and restructuring		742			-				742			-
Amortization of core deposit intangibles		297			347				939			1,090
Other expenses		2,710			2,773				8,639			8,366
Total noninterest expenses		38,641			35,784				113,300			106,104
Income before income tax expense		23,183			28,635				72,010			91,472
Income tax expense		6,022			7,228				18,588			23,742
Net income		17,161			21,407				53,422			67,730
Preferred dividends		1,509			1,509				4,527			4,527
Net income available to common stockholders	$	15,652		$	19,898			$	48,895		$	63,203
Earnings per common share:
Basic	$	0.41		$	0.51			$	1.27		$	1.62
Diluted		0.41			0.51				1.27			1.61

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
	Sept. 30,				Jun. 30,				Mar. 31,				Dec. 31,				Sep. 30,
		2024				2024				2024				2023				2023
Selected Financial Data	(dollars in thousands)
Total assets	$	9,639,603			$	9,723,731			$	9,853,964			$	9,855,603			$	9,678,885
Loans receivable:
Commercial	$	1,505,743			$	1,491,079			$	1,561,063			$	1,564,768			$	1,464,479
Commercial real estate		3,261,160				3,274,941				3,333,488				3,342,603				3,288,704
Multifamily		2,482,258				2,499,581				2,507,893				2,566,904				2,559,927
Commercial construction		616,087				639,168				646,593				620,496				622,748
Residential		250,249				256,786				254,214				256,041				251,416
Consumer		835				945				850				1,029				936
Gross loans		8,116,332				8,162,500				8,304,101				8,351,841				8,188,210
Net deferred loan fees		(4,356	)			(4,597	)			(6,144	)			(6,696	)			(7,101	)
Loans receivable		8,111,976				8,157,903				8,297,957				8,345,145				8,181,109
Loans held-for-sale		-				435				-				-				-
Total loans	$	8,111,976			$	8,158,338			$	8,297,957			$	8,345,145			$	8,181,109
Investment and equity securities	$	667,112			$	640,322			$	638,854			$	635,726			$	599,544
Goodwill and other intangible assets		213,307				213,604				213,925				214,246				214,594
Deposits:
Noninterest-bearing demand	$	1,262,568			$	1,268,882			$	1,290,523			$	1,259,364			$	1,224,125
Time deposits		2,614,187				2,593,165				2,623,391				2,531,371				2,522,210
Other interest-bearing deposits		3,647,350				3,713,967				3,674,740				3,745,467				3,692,160
Total deposits	$	7,524,105			$	7,576,014			$	7,588,654			$	7,536,202			$	7,438,495
Borrowings	$	742,133			$	756,144			$	877,568			$	933,579			$	887,590
Subordinated debentures (net of debt issuance costs)		79,818				79,692				79,566				79,439				79,313
Total stockholders' equity		1,239,496				1,224,227				1,216,609				1,216,620				1,188,154
Quarterly Average Balances
Total assets	$	9,742,853			$	9,745,853			$	9,860,753			$	9,690,746			$	9,625,625
Loans receivable:
Commercial	$	1,485,777			$	1,517,446			$	1,552,360			$	1,510,634			$	1,471,006
Commercial real estate (including multifamily)		5,752,467				5,789,498				5,890,853				5,874,854				5,821,794
Commercial construction		628,740				652,227				637,993				630,468				625,640
Residential		252,975				254,284				252,965				253,200				253,114
Consumer		7,887				5,155				5,091				6,006				4,972
Gross loans		8,127,846				8,218,610				8,339,262				8,275,162				8,176,526
Net deferred loan fees		(4,513	)			(5,954	)			(6,533	)			(6,894	)			(7,387	)
Loans receivable		8,123,333				8,212,656				8,332,729				8,268,268				8,169,139
Loans held-for-sale		83				169				99				31				171
Total loans	$	8,123,416			$	8,212,825			$	8,332,828			$	8,268,299			$	8,169,310
Investment and equity securities	$	650,897			$	637,551			$	633,270			$	602,287			$	628,429
Goodwill and other intangible assets		213,502				213,813				214,133				214,472				214,822
Deposits:
Noninterest-bearing demand	$	1,259,912			$	1,256,251			$	1,254,201			$	1,248,132			$	1,275,325
Time deposits		2,625,329				2,587,706				2,567,767				2,495,091				2,606,122
Other interest-bearing deposits		3,747,427				3,721,167				3,696,374				3,747,093				3,723,561
Total deposits	$	7,632,668			$	7,565,124			$	7,518,342			$	7,490,316			$	7,605,008
Borrowings	$	717,586			$	787,256			$	947,003			$	823,123			$	651,112
Subordinated debentures (net of debt issuance costs)		79,735				79,609				79,483				79,356				79,230
Total stockholders' equity		1,234,724				1,220,621				1,220,818				1,198,389				1,202,647
	Three Months Ended
	Sept. 30,				Jun. 30,				Mar. 31,				Dec. 31,				Sep. 30,
		2024				2024				2024				2023				2023
	(dollars in thousands, except for per share data)
Net interest income	$	60,887			$	61,439			$	60,300			$	61,822			$	62,357
Provision for credit losses		3,800				2,500				4,000				2,700				1,500
Net interest income after provision for credit losses		57,087				58,939				56,300				59,122				60,857
Noninterest income
Deposit, loan and other income		1,817				1,654				1,592				1,545				1,605
Income on bank owned life insurance		2,145				1,677				1,664				1,635				1,597
Net gains on sale of loans held-for-sale		343				1,277				506				472				633
Net gains (losses) on equity securities		432				(209	)			86				557				(273	)
Total noninterest income		4,737				4,399				3,848				4,209				3,562
Noninterest expenses
Salaries and employee benefits		22,957				22,721				22,131				22,010				22,251
Occupancy and equipment		2,889				2,899				3,009				2,708				2,738
FDIC insurance		1,800				1,800				1,800				3,900				1,800
Professional and consulting		2,147				1,923				1,928				1,587				1,834
Marketing and advertising		635				613				677				323				554
Information technology and communications		4,464				4,198				4,389				4,148				3,487
Merger and restructuring		742				-				-				-				-
Amortization of core deposit intangible		297				321				321				348				347
Other expenses		2,710				3,119				2,810				2,821				2,773
Total noninterest expenses		38,641				37,594				37,065				37,845				35,784
Income before income tax expense		23,183				25,744				23,083				25,486				28,635
Income tax expense		6,022				6,688				5,878				6,213				7,228
Net income		17,161				19,056				17,205				19,273				21,407
Preferred dividends		1,509				1,509				1,509				1,509				1,509
Net income available to common stockholders	$	15,652			$	17,547			$	15,696			$	17,764			$	19,898
Weighted average diluted common shares outstanding		38,525,484				38,448,594				38,511,747				38,651,391				38,829,681
Diluted EPS (GAAP)	$	0.41			$	0.46			$	0.41			$	0.46			$	0.51
Reconciliation of GAAP Net Income to Operating Net Income:
Net income	$	17,161			$	19,056			$	17,205			$	19,273			$	21,407
Merger and restructuring		742				-				-				-				-
Amoritization of core deposit intangibles		297				321				321				348				347
FDIC special assessment		-				-				-				2,100				-
Net (gains) losses on equity securities		(432	)			209				(86	)			(557	)			273
Tax impact of adjustments		(171	)			(149	)			(66	)			(569	)			(187	)
Operating net income	$	17,597			$	19,437			$	17,374			$	20,595			$	21,840
Preferred dividends		1,509				1,509				1,509				1,509				1,509
Operating net income available to common stockholders	$	16,088			$	17,928			$	15,865			$	19,086			$	20,331
Opearting diluted EPS (non-GAAP)(1)	$	0.42			$	0.47			$	0.41			$	0.49			$	0.52
Return on Assets Measures
Average assets	$	9,742,853			$	9,745,853			$	9,860,753			$	9,690,746			$	9,625,625
Return on avg. assets		0.70	%			0.79	%			0.70	%			0.79	%			0.88	%
Operating return on avg. assets (non-GAAP)(2)		0.72				0.80				0.71				0.84				0.90
_________________________
(1)Operating net income available to common stockholders divided by weighted average diluted shares outstanding.
(2)Operating net income divided by average assets.
	Three Months Ended
	Sept. 30,				Jun. 30,				Mar. 31,				Dec. 31,				Sep. 30,
		2024				2024				2024				2023				2023
Return on Equity Measures	(dollars in thousands)
Average stockholders' equity	$	1,234,724			$	1,220,621			$	1,220,818			$	1,198,389			$	1,202,647
Less: average preferred stock		(110,927	)			(110,927	)			(110,927	)			(110,927	)			(110,927	)
Average common equity	$	1,123,797			$	1,109,694			$	1,109,891			$	1,087,462			$	1,091,720
Less: average intangible assets		(213,502	)			(213,813	)			(214,133	)			(214,472	)			(214,822	)
Average tangible common equity	$	910,295			$	895,881			$	895,758			$	872,990			$	876,898
Return on avg. common equity (GAAP)		5.54	%			6.36	%			5.69	%			6.48	%			7.23	%
Operating return on avg. common equity (non-GAAP)(3)		5.70				6.50				5.75				6.96				7.39
Return on avg. tangible common equity (non-GAAP)(4)		6.93				7.98				7.15				8.18				9.11
Operating return on avg. tangible common equity (non-GAAP)(5)		7.03				8.05				7.12				8.67				9.20
Efficiency Measures
Total noninterest expenses	$	38,641			$	37,594			$	37,065			$	37,845			$	35,784
Merger and restructuring		(742	)			-				-				-				-
Amortization of core deposit intangibles		(297	)			(321	)			(321	)			(348	)			(347	)
FDIC special assessment		-				-				-				(2,100	)			-
Operating noninterest expense	$	37,602			$	37,273			$	36,744			$	35,397			$	35,437
Net interest income (tax equivalent basis)	$	61,710			$	62,255			$	61,111			$	62,627			$	63,208
Noninterest income		4,737				4,399				3,848				4,209				3,562
Net (gains) losses on equity securities		(432	)			209				(86	)			(557	)			273
Operating revenue	$	66,015			$	66,863			$	64,873			$	66,279			$	67,043
Operating efficiency ratio (non-GAAP)(6)		57.0	%			55.7	%			56.6	%			53.4	%			52.9	%
Net Interest Margin
Average interest-earning assets	$	9,206,038			$	9,210,050			$	9,323,291			$	9,172,165			$	9,089,431
Net interest income (tax equivalent basis)		61,710				62,255				61,111				62,627				63,208
Net interest margin (GAAP)		2.67	%			2.72	%			2.64	%			2.71	%			2.76	%
_________________________
(3)Operating net income available to common stockholders divided by average common equity.
(4)Net income available to common stockholders, excluding amortization of intangible assets, divided by average tangible common equity.
(5)Operating net income available to common stockholders, divided by average tangible common equity.
(6)Operating noninterest expense divided by operating revenue.
	As of
	Sept. 30,				Jun. 30,				Mar. 31,				Dec. 31,				Sep. 30,
		2024				2024				2024				2023				2023
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Stockholders equity	$	1,239,496			$	1,224,227			$	1,216,609			$	1,216,620			$	1,188,154
Less: preferred stock		(110,927	)			(110,927	)			(110,927	)			(110,927	)			(110,927	)
Common equity	$	1,128,569			$	1,113,300			$	1,105,682			$	1,105,693			$	1,077,227
Less: intangible assets		(213,307	)			(213,604	)			(213,925	)			(214,246	)			(214,594	)
Tangible common equity	$	915,262			$	899,696			$	891,757			$	891,447			$	862,633
Total assets	$	9,639,603			$	9,723,731			$	9,853,964			$	9,855,603			$	9,678,885
Less: intangible assets		(213,307	)			(213,604	)			(213,925	)			(214,246	)			(214,594	)
Tangible assets	$	9,426,296			$	9,510,127			$	9,640,039			$	9,641,357			$	9,464,291
Common shares outstanding		38,368,217				38,365,069				38,333,053				38,519,770				38,621,970
Common equity ratio (GAAP)		11.71	%			11.45	%			11.22	%			11.22	%			11.13	%
Tangible common equity ratio (non-GAAP)(7)		9.71				9.46				9.25				9.25				9.11
Regulatory capital ratios (Bancorp):
Leverage ratio		11.10	%			10.97	%			10.73	%			10.86	%			10.86	%
Common equity Tier 1 risk-based ratio		11.07				10.90				10.70				10.62				10.64
Risk-based Tier 1 capital ratio		12.42				12.25				12.03				11.95				11.98
Risk-based total capital ratio		14.29				14.10				13.88				13.77				13.90
Regulatory capital ratios (Bank):
Leverage ratio		11.43	%			11.29	%			11.10	%			11.20	%			11.23	%
Common equity Tier 1 risk-based ratio		12.79				12.60				12.43				12.31				12.38
Risk-based Tier 1 capital ratio		12.79				12.60				12.43				12.31				12.38
Risk-based total capital ratio		13.77				13.58				13.41				13.28				13.43
Book value per share (GAAP)	$	29.41			$	29.02			$	28.84			$	28.70			$	27.89
Tangible book value per share (non-GAAP)(8)		23.85				23.45				23.26				23.14				22.34
Net Loan Charge-offs (Recoveries):
Net loan charge-offs (recoveries):
Charge-offs	$	3,559			$	3,595			$	3,185			$	8,960			$	2,487
Recoveries		(53	)			(324	)			(23	)			-				(8	)
Net loan charge-offs	$	3,506			$	3,271			$	3,162			$	8,960			$	2,479
Net loan charge-offs as a % of average loans receivable (annualized)		0.17	%			0.16	%			0.15	%			0.43	%			0.12	%
Asset Quality
Nonaccrual loans	$	51,300			$	46,026			$	47,438			$	52,524			$	56,059
Other real estate owned		-				-				-				-				-
Nonperforming assets	$	51,300			$	46,026			$	47,438			$	52,524			$	56,059
Allowance for credit losses - loans ("ACL")	$	82,494			$	82,077			$	82,869			$	81,974			$	88,230
Loans receivable		8,111,976				8,157,903				8,297,957				8,345,145				8,181,109
Nonaccrual loans as a % of loans receivable		0.63	%			0.56	%			0.57	%			0.63	%			0.69	%
Nonperforming assets as a % of total assets		0.53				0.47				0.48				0.53				0.58
ACL as a % of loans receivable		1.02				1.01				1.00				0.98				1.08
ACL as a % of nonaccrual loans		160.8				178.3				174.7				156.1				157.4
_________________________
(7)Tangible common equity divided by tangible assets.
(8)Tangible common equity divided by common shares outstanding at period-end.

CONNECTONE BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(dollars in thousands)
				For the Quarter Ended
				September 30, 2024								June 30, 2024									September 30, 2023
				Average									Average									Average
Interest-earning assets:				Balance			Interest			Rate(7)			Balance			Interest			Rate(7)			Balance			Interest			Rate(7)
Investment securities(1) (2)				$	736,946		$	6,157		3.32	%		$	739,591		$	6,102		3.32	%		$	723,408		$	5,566		3.05	%
Loans receivable and loans held-for-sale(2) (3) (4)					8,123,416			119,805		5.87				8,212,825			120,663		5.91				8,169,310			115,954		5.63
Federal funds sold and interest-
bearing deposits with banks					304,009			4,056		5.31				212,811			2,841		5.37				158,155			2,110		5.29
Restricted investment in bank stock					41,667			1,048		10.01				44,823			1,217		10.92				38,558			907		9.33
Total interest-earning assets					9,206,038			131,066		5.66				9,210,050			130,823		5.71				9,089,431			124,537		5.44
Allowance for credit losses					(83,355	)								(84,681	)								(89,966	)
Noninterest-earning assets					620,170									620,484									626,160
Total assets				$	9,742,853								$	9,745,853								$	9,625,625
Interest-bearing liabilities:
Time deposits				$	2,625,329			30,245		4.58			$	2,587,706			28,898		4.49			$	2,606,122			25,437		3.87
Other interest-bearing deposits					3,747,427			33,540		3.56				3,721,167			33,188		3.59				3,723,561			30,606		3.26
Total interest-bearing deposits					6,372,756			63,785		3.98				6,308,873			62,086		3.96				6,329,683			56,043		3.51
Borrowings					717,586			4,239		2.35				787,256			5,150		2.63				651,112			3,950		2.41
Subordinated debentures, net					79,735			1,312		6.55				79,609			1,311		6.62				79,230			1,312		6.57
Finance lease					1,349			20		5.90				1,416			21		5.96				1,603			24		5.94
Total interest-bearing liabilities					7,171,426			69,356		3.85				7,177,154			68,568		3.84				7,061,628			61,329		3.45
Noninterest-bearing demand deposits					1,259,912									1,256,251									1,275,325
Other liabilities					76,791									91,827									86,025
Total noninterest-bearing liabilities					1,336,703									1,348,078									1,361,350
Stockholders' equity					1,234,724									1,220,621									1,202,647
Total liabilities and stockholders' equity				$	9,742,853								$	9,745,853								$	9,625,625
Net interest income (tax equivalent basis)								61,710									62,255									63,208
Net interest spread(5)										1.82	%								1.87	%								1.99	%
Net interest margin(6)										2.67	%								2.72	%								2.76	%
Tax equivalent adjustment								(823	)								(816	)								(851	)
Net interest income							$	60,887								$	61,439								$	62,357
_________________________
(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.