# EDGAR Filing Document

**Accession Number:** 0000712771
**File Stem:** 0001437749-23-001834
**Filing Date:** 2023-1
**Character Count:** 44456
**Document Hash:** c5488d980d2ab6918992d9cfc3067cef
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-23-001834.hdr.sgml**: 20230126

**ACCESSION NUMBER**: 0001437749-23-001834

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 15

**CONFORMED PERIOD OF REPORT**: 20230126

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230126

**DATE AS OF CHANGE**: 20230126

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** ConnectOne Bancorp, Inc.
- **CENTRAL INDEX KEY:** 0000712771
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **IRS NUMBER:** 521273725
- **STATE OF INCORPORATION:** NJ
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40751
- **FILM NUMBER:** 23553910

**BUSINESS ADDRESS:**
- **STREET 1:** 301 SYLVAN AVENUE
- **CITY:** ENGLEWOOD CLIFFS
- **STATE:** NJ
- **ZIP:** 07632
- **BUSINESS PHONE:** 2018168900

**MAIL ADDRESS:**
- **STREET 1:** 301 SYLVAN AVENUE
- **CITY:** ENGLEWOOD CLIFFS
- **STATE:** NJ
- **ZIP:** 07632

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** CENTER BANCORP INC
- **DATE OF NAME CHANGE:** 19920703

cnob20220929_8k.htm

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

_________________

**FORM 8-K**

_________________

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d)**

 **of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported): January** 26**, 2023**

_______________________________

**CONNECTONE BANCORP, INC.**

(Exact name of registrant as specified in its charter)

_______________________________

---

| | | |
|:---|:---|:---|
| **New Jersey** | **001-40751** | **52-1273725** |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |

---

**301 Sylvan Avenue**

**Englewood Cliffs, **New Jersey 07632**

(Address of Principal Executive Offices) (Zip Code)

**(**201**) **816-8900**

(Registrant's telephone number, including area code)

**N/A**

(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock | CNOB | NASDAQ |
| Depositary Shares (each representing a 1/40th interest in a share of 5.25% Series A Non-Cumulative, perpetual preferred stock) | CNOBP | NASDAQ |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

------

.

&nbsp;&nbsp;&nbsp;&nbsp;**Item 2.02. Results of Operations and Financial Condition.**

On January 26, 2023, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

**Item 9.01. Financial Statements and Exhibits.**

---

| | |
|:---|:---|
| 99.1 | [Press Release dated January <u>26, 2023</u>](ex_467806.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

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**SIGNATURE**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **ConnectOne Bancorp, Inc.** | **ConnectOne Bancorp, Inc.** |
| Date: January 26, 2023 | By:  | <u>/s/ William S. Burns</u> |
|  |  | William S. Burns |
|  |  | Senior Executive Vice President and Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

![ex_467806img001.jpg](ex_467806img001.jpg)

**CONNECTONE BANCORP, INC. REPORTS**

**FOURTH QUARTER AND FULL-YEAR 2022 RESULTS;**

**DECLARES COMMON AND PREFERRED DIVIDENDS**

Englewood Cliffs, N.J., January 26, 2023 (GLOBE NEWSWIRE) – ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the "Company" or "ConnectOne"), parent company of ConnectOne Bank (the "Bank"), today reported net income available to common stockholders of $31.0 million for the fourth quarter of 2022 compared with $27.4 million for the third quarter of 2022 and $31.3 million for the fourth quarter of 2021. Diluted earnings per share were $0.79 for the fourth quarter of 2022 compared with $0.70 in the third quarter of 2022 and $0.79 in the fourth quarter of 2021. The increase in net income available to common stockholders and diluted earnings per share from the third quarter of 2022 was primarily attributable to a $6.7 million decrease in the provision for credit losses due to changes in forecasted macroeconomic factors and a $0.2 million increase in noninterest income, partially offset by a $0.2 million decrease in net interest income, a $1.2 million increase in noninterest expenses and a $1.9 million increase in income tax expenses. The decrease in net income available to common stockholders from the fourth quarter of 2021 was primarily due to a $5.2 million increase in noninterest expenses and a $2.5 million increase in the provision for credit losses, partially offset by a $7.5 million increase in net interest income. Full-year 2022 net income available to common stockholders was $119.2 million, compared to $128.6 million for 2021. Diluted earnings per share for the full-year 2022 was $3.01, compared with $3.22 for 2021.

Frank Sorrentino, ConnectOne's Chairman and Chief Executive Officer stated, "ConnectOne had another successful year as we gained even further traction in all of our markets, delivering solid organic growth and best-in-class efficiency while also investing in our operating platform to support future performance."

"Like many others in the industry, the fourth quarter presented some challenges with respect to deposit retention and cost as competition significantly increased. However, despite this headwind, we delivered solid performance. Metrics remained in the industry's upper quartile. Return on assets was 1.36% for the quarter while our return on tangible common equity was 14.8%. Additionally, ConnectOne's pre-tax, pre-provision net revenue ("PPNR") as a percent of assets again exceeded 2%, the 10th consecutive quarter PPNR has been higher than 2%."

"We also continued to leverage our technological advantages and our culture to drive results. Tangible book value per share increased 3.7% sequentially, 7.9% from a year ago, and has now increased for 11 consecutive quarters. Our efficiency ratio remained below 40% for the quarter, despite a compressed net interest margin and continued investment in our platform and our staff. Even during these challenging conditions, ConnectOne remains one of the industry's most efficient banks nationwide." Mr. Sorrentino added, "Our capital ratios remain strong and, while others in the industry have experienced weakness, our tangible common equity ratio was very solid at 9% at year-end. Further, we enter 2023 with sound credit quality and continued improving credit metrics including delinquencies at their lowest levels in recent history."

"With respect to organic growth, ConnectOne had a record year for both loan originations and deposits. Highlighting our strategy to invest in and further strengthen our origination franchise, ConnectOne's loan portfolio increased 19% year-over-year and deposits grew 16%." Mr. Sorrentino concluded, "We enter 2023 with a strong and resilient balance sheet and remain committed to investing in our franchise to drive results. Coupled with our strong client-centric culture and commitment to efficiency through investment in technology, ConnectOne remains well positioned for continued success."

**Dividend Declarations**

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

A cash dividend on common stock of $0.155 per share will be paid on March 1, 2023, to common stockholders of record on February 17, 2023. A dividend of $0.328125 per depositary share, representing a 1/40<sup>th</sup> interest in the Company's 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on March 1, 2023 to preferred stockholders of record on February 17, 2023.

------

**Operating Results**

Fully taxable equivalent net interest income for the fourth quarter of 2022 was $78.8 million, roughly flat from the third quarter of 2022 due to a 5.5% increase in average interest-earning assets, primarily loans, offset by a 20 basis-point contraction in the net interest margin While the net interest margin benefitted from a 43 bps increase in the loan portfolio yield, to 5.20%, the average cost of deposits, including noninterest bearing demand, increased by 69 basis points to 1.46% from 0.77% in the third quarter of 2022. Loan yields continued to increase as a result of new loan originations combined with repricing and maturities of lower rate interest-earning loans outstanding. Funding cost increases were a result of higher market interest rates combined with increased competition due to a contracting U.S. money supply.

Fully taxable equivalent net interest income for the fourth quarter of 2022 increased by $7.9 million, or 11.1%, from the fourth quarter of 2021. The increase from the fourth quarter of 2021 resulted primarily from a 19.5% increase in average interest earning assets, primarily loans, and was partially offset by a 27 basis-point contraction of the net interest margin to 3.48% from 3.75%. The contraction in the net interest margin resulted from a 141 basis-point increase in the cost of average interest-bearing liabilities, partially offset by an 81 basis-point increase in the yield on average interest-earning assets and a 4.7% increase in average noninterest-bearing demand deposits.

Noninterest income was $3.5 million in the fourth quarter of 2022, $3.3 million in the third quarter of 2022 and $3.8 million in the fourth quarter of 2021. Included in noninterest income were net losses on equity securities of $0.1 million, $0.4 million, and $0.1 million for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. Excluding equity securities losses, adjusted noninterest income was $3.6 million, $3.8 million and $3.9 million for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively. The $0.2 million decrease in adjusted noninterest income for the fourth quarter 2022 versus the third quarter of 2022 was primarily due to decreases in net gains on loans held-for-sale of $0.1 million and deposit, loan and other income of $0.1 million. The $0.3 million decrease in adjusted noninterest income for the fourth quarter 2022 versus the fourth quarter 2021 was primarily due to a decrease in net gains on loans held-for-sale of $1.0 million, partially offset by increases in BOLI income of $0.3 million and deposit, loan and other income of $0.4 million.

Noninterest expenses totaled $33.3 million for the fourth quarter of 2022, $32.1 million for the third quarter of 2022 and $28.1 million for the fourth quarter of 2021. The increase in noninterest expenses of $1.2 million from the third quarter of 2022 was attributable to inflationary pressures including increases in salaries and employee benefits of $0.8 million, professional and consulting expense of $0.2 million, other expenses of $0.1 million and FDIC insurance expenses of $0.1 million. The increase in noninterest expenses of $5.2 million from the fourth quarter of 2021 was attributable to increases in salaries and employee benefits of $5.2 million. The increase in salaries and employee benefits from the prior sequential quarter and prior year quarter was attributable to increased staff in both the revenue and back-office areas of the bank, base salary increases, and incentive compensation accruals.

Income tax expense was $12.3 million for the fourth quarter of 2022, $10.4 million for the third quarter of 2022 and $12.3 million for the fourth quarter of 2021. The effective tax rates for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021 were 27.5%, 26.5% and 27.1%, respectively.

**Asset Quality**

The provision for credit losses was $3.3 million for the fourth quarter of 2022, $10.0 million for the third quarter of 2022 and $0.8 million for the fourth quarter of 2021. The decreased provision for credit losses during the fourth quarter of 2022 reflected changes in forecasted macroeconomic conditions.

------

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $44.7 million as of December 31, 2022, $57.7 million as of September 30, 2022 and $61.7 million as of December 31, 2021. Nonaccrual loans were $44.5 million as of December 31, 2022, $57.5 million as of September 30, 2022 and $61.7 million as of December 31, 2021. Nonperforming assets as a percentage of total assets (the "NPA ratio") were 0.46% as of December 31, 2022, 0.61% as of September 30, 2022 and 0.76% as of December 31, 2021. The NPA ratio declined for the 5<sup>th</sup> consecutive quarter and, excluding taxi medallion loans, was 0.23% as of December 31, 2022. The ratio of nonaccrual loans to loans receivable was 0.55%, 0.73% and 0.90%, as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The annualized net loan charge-offs ratios were 0.22% for the fourth quarter of 2022, 0.02% for the third quarter of 2022 and 0.01% for the fourth quarter of 2021. The current quarter's charge-offs relate to the successful workout of nonaccrual loans identified and reserved for in previous periods. The allowance for credit losses represented 1.12%, 1.16%, and 1.15% of loans receivable as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The allowance for credit losses as a percentage of nonaccrual loans increase to 203.6% as of December 31, 2022 versus 159.6% as of September 30, 2022 and 127.7% as of December 31, 2021.

**Selected Balance Sheet Items**

The Company's total assets were $9.6 billion as of December 31, 2022, an increase of $1.5 billion from December 31, 2021. Loans receivable were $8.1 billion, an increase of $1.3 billion from December 31, 2021. The increase in loans receivable was attributable to organic loan originations.

The Company's total stockholders' equity was $1.2 billion as of December 31, 2022, an increase of $54.5 million from December 31, 2021. The increase in retained earnings of $95.7 million was the primary reason for the overall increase in stockholders' equity, in addition to an increase in additional paid-in capital of $2.9 million, partially offset by a decrease in accumulated other comprehensive income of $31.0 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 $13.1 million. As of December 31, 2022, the Company's tangible common equity ratio and tangible book value per share were 9.04% and $21.71, 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 $215.7 million as of December 31, 2022, and $217.4 million as of December 31, 2021.

**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.

**Fourth Quarter and Full Year 2022 Results Conference Call**

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 26, 2023 to review the Company's financial performance and operating results. The conference call dial-in number is 1-201-689-8471, access code 13735159. 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 <u>https://www.ConnectOneBank.com</u> or at <u>http://ir.connectonebank.com</u>.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, January 26, 2023 and ending on Thursday, February 2, 2023 by dialing 1-412-317-6671, access code 13735159. An online archive of the webcast will be available following the completion of the conference call at <u>https://www.connectonebank.com</u> or at <u>http://ir.connectonebank.com</u>.

------

**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 <u>https://www.connectonebank.com</u>.

**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 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.** 

**<u>Investor Contact</u>:**

**William S. Burns**

**Senior Executive VP & CFO**

**201.816.4474:** <u>bburns@cnob.com</u>

**<u>Media Contact</u>:**

**Shannan Weeks**

**MWW**

**732.299.7890:** <u>sweeks@mww.com</u> 

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| |
|:---|
| **CONNECTONE BANCORP, INC. AND SUBSIDIARIES** |
| **CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION** |
| **(in thousands)** |

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| | | |
|:---|:---|:---|
|  | **December 31** | **December 31,** |
|  | **2022** | **2021** |
|  | **(unaudited)** |  |
| **ASSETS** |  |  |
| Cash and due from banks | $61629 | $54352 |
| Interest-bearing deposits with banks | 206686 | 211184 |
| Cash and cash equivalents | 268315 | 265536 |
| Investment securities | 634884 | 534507 |
| Equity securities | 15811 | 13794 |
| Loans held-for-sale | 13772 | 250 |
| Loans receivable | 8099689 | 6828622 |
| Less: Allowance for credit losses - loans | 90513 | 78773 |
| Net loans receivable | 8009176 | 6749849 |
| Investment in restricted stock, at cost | 46604 | 27826 |
| Bank premises and equipment, net | 27800 | 29032 |
| Accrued interest receivable | 46062 | 34152 |
| Bank owned life insurance | 231328 | 195731 |
| Right of use operating lease assets | 10179 | 11017 |
| Other real estate owned | 264 |  |
| Goodwill | 208372 | 208372 |
| Core deposit intangibles | 7312 | 8997 |
| Other assets | 125069 | 50417 |
| **Total assets** | $9644948 | $8129480 |
| **LIABILITIES** |  |  |
| Deposits: |  |  |
| Noninterest-bearing | $1501614 | $1617049 |
| Interest-bearing | 5855008 | 4715904 |
| Total deposits | 7356622 | 6332953 |
| Borrowings | 857622 | 468193 |
| Subordinated debentures, net | 153255 | 152951 |
| Operating lease liabilities | 11397 | 12417 |
| Other liabilities | 87301 | 38754 |
| **Total liabilities** | 8466197 | 7005268 |
| **COMMITMENTS AND CONTINGENCIES** |  |  |
| **STOCKHOLDERS' EQUITY** |  |  |
| Preferred stock | 110927 | 110927 |
| Common stock | 586946 | 586946 |
| Additional paid-in capital | 30126 | 27246 |
| Retained earnings | 535915 | 440169 |
| Treasury stock | (52799) | (39672) |
| Accumulated other comprehensive loss | (32364) | (1404) |
| **Total stockholders' equity** | 1178751 | 1124212 |
| **Total liabilities and stockholders' equity** | $9644948 | $8129480 |

---

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

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Twelve Months Ended** | **Twelve Months Ended** |
|  | **12/31/22** | **12/31/21** | **12/31/22** | **12/31/21** |
| **Interest income** |  |  |  |  |
| Interest and fees on loans | $104952 | $76891 | $352993 | $293546 |
| Interest and dividends on investment securities: |  |  |  |  |
| Taxable | 4225 | 1265 | 12712 | 4413 |
| Tax-exempt | 1185 | 518 | 3893 | 2403 |
| Dividends | 712 | 207 | 1655 | 971 |
| Interest on federal funds sold and other short-term investments | 1395 | 159 | 2493 | 405 |
| Total interest income | 112469 | 79040 | 373746 | 301738 |
| **Interest expense** |  |  |  |  |
| Deposits | 26543 | 5281 | 50561 | 24768 |
| Borrowings | 7917 | 3298 | 21066 | 14092 |
| Total interest expense | 34460 | 8579 | 71627 | 38860 |
| **Net interest income** | 78009 | 70461 | 302119 | 262878 |
| Provision for (reversal of) credit losses | 3300 | 815 | 17750 | (5500) |
| **Net interest income after provision for credit losses** | 74709 | 69646 | 284369 | 268378 |
| **Noninterest income** |  |  |  |  |
| Deposit, loan and other income | 1894 | 1525 | 7472 | 6617 |
| Income on bank owned life insurance | 1528 | 1244 | 5597 | 4771 |
| Net gains on sale of loans held-for-sale | 176 | 1139 | 1695 | 3807 |
| Gain on sale of branches |  |  |  | 674 |
| Net losses on equity securities | (90) | (131) | (1521) | (373) |
| Net gains on sale/redemption of investment securities |  |  |  | 195 |
| Total noninterest income | 3508 | 3777 | 13243 | 15691 |
| **Noninterest expenses** |  |  |  |  |
| Salaries and employee benefits | 21676 | 16483 | 80717 | 64072 |
| Occupancy and equipment | 2603 | 2762 | 9865 | 11638 |
| FDIC insurance | 830 | 625 | 2881 | 2665 |
| Professional and consulting | 2157 | 1996 | 8053 | 8286 |
| Marketing and advertising | 454 | 454 | 1692 | 1318 |
| Information technology and communications | 2694 | 3058 | 11108 | 11267 |
| Amortization of core deposit intangible | 409 | 483 | 1685 | 1981 |
| Increase in value of acquisition price |  |  | 1516 |  |
| Other expenses | 2489 | 2223 | 8871 | 7784 |
| Total noninterest expenses | 33312 | 28084 | 126388 | 109011 |
| **Income before income tax expense** | 44905 | 45339 | 171224 | 175058 |
| Income tax expense | 12348 | 12301 | 46013 | 44705 |
| **Net income** | 32557 | 33038 | 125211 | 130353 |
| Preferred dividends | 1510 | 1717 | 6037 | 1717 |
| **Net income available to common stockholders** | $31047 | $31321 | $119174 | $128636 |
| **Earnings per common share:** |  |  |  |  |
| Basic | $0.79 | $0.79 | $3.03 | $3.24 |
| Diluted | 0.79 | 0.79 | 3.01 | 3.22 |

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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. <br>

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| |
|:---|
| **CONNECTONE BANCORP, INC.** |
| **SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of** | **As of** | **As of** | **As of** | **As of** |
|  | **Dec. 31,** | **Sep. 30,** | **Jun. 30,** | **Mar. 31,** | **Dec. 31,** |
|  | **2022** | **2022** | **2022** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| <u>**Selected Financial Data**</u> |  |  |  |  |  |
| Total assets | $9644948 | $9478252 | $8841506 | $8334301 | $8129480 |
| Loans receivable: |  |  |  |  |  |
| Commercial | $1443942 | $1392037 | $1274280 | $1161867 | $1163442 |
| Paycheck Protection Program ("PPP") loans | 11374 | 11458 | 18004 | 54301 | 93057 |
| Commercial real estate | 3170760 | 3087354 | 2727120 | 2516065 | 2446807 |
| Multifamily | 2641886 | 2624726 | 2442603 | 2465337 | 2337712 |
| Commercial construction | 574139 | 537323 | 569789 | 539058 | 540178 |
| Residential | 264748 | 256085 | 249379 | 250205 | 255269 |
| Consumer | 2312 | 1030 | 1248 | 1140 | 1886 |
| Gross loans | 8109161 | 7910013 | 7282423 | 6987973 | 6838351 |
| Unearned net origination fees | (9472) | (9563) | (7850) | (8378) | (9729) |
| Loans receivable | 8099689 | 7900450 | 7274573 | 6979595 | 6828622 |
| Loans held-for-sale | 13772 | 8080 | 3182 | 2742 | 250 |
| Total loans | $8113461 | $7908530 | $7277755 | $6982337 | $6828872 |
| Investment and equity securities | $650695 | $639192 | $691934 | $525228 | $548301 |
| Goodwill and other intangible assets | 215684 | 216093 | 216502 | 216936 | 217369 |
| Deposits: |  |  |  |  |  |
| Noninterest-bearing demand | $1501614 | $1665658 | $1712875 | $1631292 | $1617049 |
| Time deposits | 2394190 | 1921235 | 1285409 | 1065814 | 1150109 |
| Other interest-bearing deposits | 3460818 | 3723617 | 3619315 | 3863299 | 3565795 |
| Total deposits | $7356622 | $7310510 | $6617599 | $6560405 | $6332953 |
| Borrowings | $857622 | $829953 | $874964 | $412170 | $468193 |
| Subordinated debentures (net of debt issuance costs) | 153255 | 153179 | 153103 | 153027 | 152951 |
| Total stockholders' equity | 1178751 | 1148295 | 1143147 | 1138519 | 1124212 |
| **<u>Quarterly Average Balances</u>** |  |  |  |  |  |
| Total assets | $9490477 | $9030589 | $8322823 | $8263382 | $8027169 |
| Loans receivable: |  |  |  |  |  |
| Commercial (including PPP loans) | $1456247 | $1342868 | $1245812 | $1231703 | $1278048 |
| Commercial real estate (including multifamily) | 5758594 | 5455714 | 4974297 | 4850349 | 4625371 |
| Commercial construction | 558086 | 537073 | 544084 | 541642 | 547038 |
| Residential | 261969 | 251338 | 247208 | 253589 | 268112 |
| Consumer | 4630 | 2361 | 5029 | 3682 | 4938 |
| Gross loans | 8039526 | 7589354 | 7016430 | 6880965 | 6723507 |
| Unearned net origination fees | (9666) | (9178) | (9222) | (9870) | (10873) |
| Loans receivable | 8029860 | 7580176 | 7007208 | 6871095 | 6712634 |
| Loans held-for-sale | 7933 | 2195 | 966 | 382 | 5051 |
| Total loans | $8037793 | $7582371 | $7008174 | $6871477 | $6717685 |
| Investment and equity securities | $650479 | $687291 | $567140 | $536090 | $481276 |
| Goodwill and other intangible assets | 215951 | 216360 | 216786 | 217219 | 217685 |
| Deposits: |  |  |  |  |  |
| Noninterest-bearing demand | $1610044 | $1682135 | $1607465 | $1547055 | $1537316 |
| Time deposits | 2035362 | 1525076 | 1103418 | 1124614 | 1204374 |
| Other interest-bearing deposits | 3558881 | 3686520 | 3717531 | 3851558 | 3672311 |
| Total deposits | $7204287 | $6893731 | $6428414 | $6523227 | $6414001 |
| Borrowings | $913960 | $772561 | $548675 | $404907 | $292847 |
| Subordinated debentures (net of debt issuance costs) | 153205 | 153129 | 153053 | 152977 | 152902 |
| Total stockholders' equity | 1165588 | 1160448 | 1143092 | 1131968 | 1113524 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
|  | **Dec. 31,** | **Sep. 30,** | **Jun. 30,** | **Mar. 31,** | **Dec. 31,** |
|  | **2022** | **2022** | **2022** | **2022** | **2021** |
|  | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** |
| **Net interest income** | $78009 | $78161 | $75591 | $70358 | $70461 |
| Provision for credit losses | 3300 | 10000 | 3000 | 1450 | 815 |
| Net interest income after provision for credit losses | 74709 | 68161 | 72591 | 68908 | 69646 |
| **Noninterest income** |  |  |  |  |  |
| Deposit, loan and other income | 1894 | 1969 | 1866 | 1743 | 1525 |
| Income on bank owned life insurance | 1528 | 1521 | 1342 | 1206 | 1244 |
| Net gains on sale of loans held-for-sale | 176 | 262 | 556 | 701 | 1139 |
| Net losses gains on equity securities | (90) | (430) | (405) | (596) | (131) |
| Total noninterest income | 3508 | 3322 | 3359 | 3054 | 3777 |
| **Noninterest expenses** |  |  |  |  |  |
| Salaries and employee benefits | 21676 | 20882 | 19519 | 18640 | 16483 |
| Occupancy and equipment | 2603 | 2600 | 2733 | 1929 | 2762 |
| FDIC insurance | 830 | 720 | 725 | 606 | 625 |
| Professional and consulting | 2157 | 1980 | 2124 | 1792 | 1996 |
| Marketing and advertising | 454 | 461 | 426 | 351 | 454 |
| Information technology and communications | 2694 | 2747 | 2801 | 2866 | 3058 |
| Amortization of core deposit intangible | 409 | 409 | 434 | 433 | 483 |
| Increase in value of acquisition price |  |  | 833 | 683 |  |
| Other expenses | 2489 | 2344 | 2108 | 1930 | 2223 |
| Total noninterest expenses | 33312 | 32143 | 31703 | 29230 | 28084 |
| **Income before income tax expense** | 44905 | 39340 | 44247 | 42732 | 45339 |
| Income tax expense | 12348 | 10425 | 11889 | 11351 | 12301 |
| **Net income** | $32557 | $28915 | $32358 | $31381 | $33038 |
| Preferred dividends | 1510 | 1509 | 1509 | 1509 | 1717 |
| **Net income available to common stockholders** | $31047 | $27406 | $30849 | $29872 | $31321 |
| Weighted average diluted common shares outstanding | 39378137 | 39320674 | 39481689 | 39727606 | 39792937 |
| Diluted EPS | $0.79 | $0.70 | $0.78 | $0.75 | $0.79 |
| **<u>Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue</u>** |  |  |  |  |  |
| **Net income** | $32557 | $28915 | $32358 | $31381 | $33038 |
| Income tax expense | 12348 | 10425 | 11889 | 11351 | 12301 |
| Provision for credit losses | 3300 | 10000 | 3000 | 1450 | 815 |
| **Pre-tax and pre-provision net revenue** | $48205 | $49340 | $47247 | $44182 | $46154 |
| **<u>Return on Assets Measures</u>** |  |  |  |  |  |
| Average assets | $9490477 | $9030589 | $8322823 | $8263382 | $8027169 |
| Return on avg. assets | 1.36% | 1.27% | 1.56% | 1.54% | 1.63% |
| Return on avg. assets (pre-tax and pre-provision) | 2.02 | 2.17 | 2.28 | 2.17 | 2.28 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
|  | **Dec. 31,** | **Sep. 30,** | **Jun. 30,** | **Mar. 31,** | **Dec. 31,** |
|  | **2022** | **2022** | **2022** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| <u>**Return on Equity Measures**</u> |  |  |  |  |  |
| Average stockholders' equity | $1165588 | $1160448 | $1143097 | $1131968 | $1113524 |
| Less: average preferred stock | (110927) | (110927) | (110927) | (110927) | (110927) |
| Average common equity | $1054661 | $1049521 | $1032170 | $1021041 | $1002597 |
| Less: average intangible assets | (215951) | (216360) | (216786) | (217219) | (217685) |
| Average tangible common equity | $838710 | $833161 | $815384 | $803822 | $784912 |
| Return on avg. common equity (GAAP) | 11.68% | 10.36% | 11.99% | 11.87% | 12.39% |
| Return on avg. tangible common equity ("TCE") (non-GAAP) <sup>(1)</sup> | 14.82 | 13.19 | 15.32 | 15.22 | 16.00 |
| Return on avg. tangible common equity (pre-tax, pre-provision, pre-merger charges) | 22.94 | 23.63 | 23.39 | 22.44 | 23.50 |
| **<u>Efficiency Measures</u>** |  |  |  |  |  |
| Total noninterest expenses | $33312 | $32143 | $31703 | $29230 | $28084 |
| Amortization of core deposit intangibles | (409) | (409) | (434) | (433) | (483) |
| Operating noninterest expense | $32903 | $31734 | $31269 | $28797 | $27601 |
| Net interest income (tax equivalent basis) | $78773 | $78850 | $76146 | $70842 | $70890 |
| Noninterest income | 3508 | 3322 | 3359 | 3054 | 3777 |
| Net losses (gains) on equity securities | 90 | 430 | 405 | 596 | 131 |
| Operating revenue | $82371 | $82602 | $79910 | $74492 | $74798 |
| Operating efficiency ratio (non-GAAP) <sup>(2)</sup> | 39.9% | 38.4% | 39.1% | 38.7% | 36.9% |
| **<u>Net Interest Margin</u>** |  |  |  |  |  |
| Average interest-earning assets | $8972063 | $8500316 | $7807445 | $7753881 | $7508973 |
| Net interest income (tax equivalent basis) | $78773 | $78850 | $76146 | $70842 | $70890 |
| Impact of purchase accounting fair value marks | (837) | (885) | (1014) | (1179) | (1674) |
| Adjusted net interest income (tax equivalent basis) | $77936 | $77965 | $75132 | $69663 | $69216 |
| Net interest margin (GAAP) | 3.48% | 3.68% | 3.91% | 3.71% | 3.75% |
| Adjusted net interest margin (non-GAAP) <sup>(3)</sup> | 3.45 | 3.64 | 3.86 | 3.64 | 3.66 |

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| |
|:---|
| <sup>(1)</sup> Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity. |
| <sup>(2)</sup> Operating noninterest expense divided by operating revenue. |
| <sup>(3)</sup> Adjusted net interest margin excludes impact of purchase accounting fair value marks. |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of** | **As of** | **As of** | **As of** | **As of** |
|  | **Dec. 31,** | **Sep. 30,** | **Jun. 30,** | **Mar. 31,** | **Dec. 31,** |
|  | **2022** | **2022** | **2022** | **2022** | **2021** |
|  | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** | **(dollars in thousands, except for per share data)** |
| <u>**Capital Ratios and Book Value per Share**</u> |  |  |  |  |  |
| Stockholders equity | $1178751 | $1148295 | $1143147 | $1138519 | $1124212 |
| Less: preferred stock | (110927) | (110927) | (110927) | (110927) | (110927) |
| Common equity | $1067824 | $1037368 | $1032220 | $1027592 | $1013285 |
| Less: intangible assets | (215684) | (216093) | (216502) | (216936) | (217369) |
| Tangible common equity | $852140 | $821275 | $815718 | $810656 | $795916 |
| Total assets | $9644948 | $9478252 | $8841506 | $8334301 | $8129480 |
| Less: intangible assets | (215684) | (216093) | (216502) | (216936) | (217369) |
| Tangible assets | $9429264 | $9262159 | $8625004 | $8117365 | $7912111 |
| Common shares outstanding | 39243123 | 39243123 | 39243123 | 39518411 | 39568090 |
| Common equity ratio (GAAP) | 11.07% | 10.94% | 11.67% | 12.33% | 12.46% |
| Tangible common equity ratio (non-GAAP) <sup>(4)</sup> | 9.04 | 8.87 | 9.46 | 9.99 | 10.06 |
| Regulatory capital ratios (Bancorp): |  |  |  |  |  |
| Leverage ratio | 10.68% | 10.95% | 11.63% | 11.57% | 11.65% |
| Common equity Tier 1 risk-based ratio | 10.30 | 10.20 | 10.63 | 10.69 | 10.64 |
| Risk-based Tier 1 capital ratio | 11.66 | 11.58 | 12.11 | 12.21 | 12.19 |
| Risk-based total capital ratio | 14.45 | 14.45 | 15.09 | 15.25 | 15.26 |
| Regulatory capital ratios (Bank): |  |  |  |  |  |
| Leverage ratio | 10.64% | 10.91% | 11.61% | 11.41% | 11.43% |
| Common equity Tier 1 risk-based ratio | 11.60 | 11.53 | 12.08 | 12.04 | 11.96 |
| Risk-based Tier 1 capital ratio | 11.60 | 11.53 | 12.08 | 12.04 | 11.96 |
| Risk-based total capital ratio | 13.02 | 13.00 | 13.55 | 13.55 | 13.44 |
| Book value per share (GAAP) | $27.21 | $26.43 | $26.30 | $26.00 | $25.61 |
| Tangible book value per share (non-GAAP) <sup>(5)</sup> | 21.71 | 20.93 | 20.79 | 20.51 | 20.12 |
| **<u>Net Loan (Recoveries) Charge-Off Detail</u>** |  |  |  |  |  |
| Net loan charge-offs (recoveries): |  |  |  |  |  |
| Charge-offs | $4456 | $413 | $302 | $274 | $458 |
| Recoveries |  | (53) | (32) | (32) | (217) |
| Net loan charge-offs | $4456 | $360 | $270 | $242 | $241 |
| Net loan charge-offs as a % of average loans receivable (annualized) | 0.22% | 0.02% | 0.02% | 0.01% | 0.01% |
| **<u>Asset Quality</u>** |  |  |  |  |  |
| Nonaccrual loans | $44454 | $57477 | $60756 | $59403 | $61700 |
| OREO | 264 | 264 | 316 | 316 |  |
| Nonperforming assets | $44718 | $57741 | $61072 | $59719 | $61700 |
| Allowance for credit losses - loans ("ACL") | 90513 | 91717 | 82739 | 80070 | 78773 |
| Loans receivable | $8099689 | $7900450 | $7274573 | $6979595 | $6828622 |
| Less: PPP loans | 11374 | 11458 | 18004 | 54301 | 93057 |
| Loans receivable (excluding PPP loans) | $8088315 | $7888992 | $7256569 | $6925294 | $6735565 |
| Nonaccrual loans as a % of loans receivable | 0.55% | 0.73% | 0.84% | 0.85% | 0.90% |
| Nonperforming assets as a % of total assets | 0.46 | 0.61 | 0.69 | 0.72 | 0.76 |
| ACL as a % of loans receivable | 1.12 | 1.16 | 1.14 | 1.15 | 1.15 |
| ACL as a % of nonaccrual loans | 203.6 | 159.6 | 136.2 | 134.8 | 127.7 |

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<sup>(4)</sup> Tangible common equity divided by tangible assets. <br> <sup>(5)</sup> Tangible common equity divided by common shares outstanding at period-end.

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| |
|:---|
| **CONNECTONE BANCORP, INC. AND SUBSIDIARIES** |
| **NET INTEREST MARGIN ANALYSIS** |
| **(dollars in thousands)** |

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** |
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **September 30, 2022** | **September 30, 2022** | **September 30, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Average** |  |  | **Average** |  |  | **Average** |  |  |
|  | **Balance** | **Interest** | **Rate** <sup>(7)</sup>** | **Balance** | **Interest** | **Rate** <sup>(7)</sup>** | **Balance** | **Interest** | **Rate** <sup>(7)</sup>** |
| **Interest-earning assets:** |  |  |  |  |  |  |  |  |  |
| Investment securities <sup>(1) (2)</sup> | $743917 | $5725 | 3.05% | $740394 | $5434 | 2.91% | $480143 | $1921 | 1.59% |
| Loans receivable and loans held-for-sale <sup>(2) (3) (4)</sup> | 8037793 | 105402 | 5.20 | 7582371 | 91132 | 4.77 | 6717685 | 77220 | 4.56 |
| Federal funds sold and interest-bearing deposits with banks | 142489 | 1394 | 3.88 | 135331 | 665 | 1.95 | 291243 | 121 | 0.16 |
| Restricted investment in bank stock | 47864 | 712 | 5.90 | 42220 | 438 | 4.12 | 19902 | 207 | 4.13 |
| **Total interest-earning assets** | 8972063 | 113233 | 5.01 | 8500316 | 97669 | 4.56 | 7508973 | 79469 | 4.20 |
| Allowance for loan losses | (91621) |  |  | (84307) |  |  | (79074) |  |  |
| Noninterest-earning assets | 610035 |  |  | 614580 |  |  | 597270 |  |  |
| **Total assets** | $9490477 |  |  | $9030589 |  |  | $8027169 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |  |  |  |
| Time deposits | $2035362 | 11601 | 2.26 | $1525076 | 5396 | 1.40 | 1204374 | 2717 | 0.90 |
| Other interest-bearing deposits | 3558881 | 14942 | 1.67 | 3686520 | 7903 | 0.85 | 3672311 | 2563 | 0.28 |
| **Total interest-bearing deposits** | 5594243 | 26543 | 1.88 | 5211596 | 13299 | 1.01 | 4876685 | 5280 | 0.43 |
| Borrowings | 913960 | 5665 | 2.46 | 772561 | 3297 | 1.69 | 292847 | 1102 | 1.49 |
| Subordinated debentures | 153205 | 2217 | 5.74 | 153129 | 2196 | 5.69 | 152902 | 2167 | 5.62 |
| Finance lease | 1760 | 35 | 7.89 | 1813 | 27 | 5.91 | 1967 | 30 | 6.05 |
| **Total interest-bearing liabilities** | 6663168 | 34460 | 2.05 | 6139099 | 18819 | 1.22 | 5324401 | 8579 | 0.64 |
| Noninterest-bearing demand deposits | 1610044 |  |  | 1682135 |  |  | 1537316 |  |  |
| Other liabilities | 51677 |  |  | 48907 |  |  | 51928 |  |  |
| **Total noninterest-bearing liabilities** | 1661721 |  |  | 1731042 |  |  | 1589244 |  |  |
| Stockholders' equity | 1165588 |  |  | 1160448 |  |  | 1113524 |  |  |
| **Total liabilities and stockholders' equity** | $9490477 |  |  | $9030589 |  |  | $8027169 |  |  |
| Net interest income (tax equivalent basis) |  | 78773 |  |  | 78850 |  |  | 70890 |  |
| Net interest spread <sup>(5)</sup> |  |  | 2.96% |  |  | 3.34% |  |  | 3.56% |
| Net interest margin <sup>(6)</sup> |  |  | 3.48% |  |  | 3.68% |  |  | 3.75% |
| Tax equivalent adjustment |  | (764) |  |  | (689) |  |  | (429) |  |
| Net interest income |  | $78009 |  |  | $78161 |  |  | $70461 |  |

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| |
|:---|
| <sup>(1)</sup> Average balances are calculated on amortized cost. |
| <sup>(2)</sup> Interest income is presented on a tax equivalent basis using 21% federal tax rate. |
| <sup>(3)</sup> Includes loan fee income and accretion of purchase accounting adjustments. |
| <sup>(4)</sup> Loans include nonaccrual loans. |
| <sup>(5)</sup> 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. |
| <sup>(6)</sup> Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. |
| <sup>(7)</sup> Rates are annualized. |

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