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ConnectOne Bancorp, Inc. Reports Second Quarter 2024 Results; Declares Common and Preferred Dividends
Источник: Nasdaq GlobeNewswire / 25 июл 2024 07:00:01 America/New_York
ENGLEWOOD CLIFFS, N.J., July 25, 2024 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq: CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income available to common stockholders of $17.5 million for the second quarter of 2024 compared with $15.7 million for the first quarter of 2024 and $19.9 million for the second quarter of 2023. Diluted earnings per share were $0.46 for the second quarter of 2024 compared with $0.41 for the first quarter of 2024 and $0.51 for the second quarter of 2023.
The increase in net income available to common stockholders and diluted earnings per share from the first quarter of 2024 was primarily due to a $1.5 million decrease to provision for credit losses, a $1.1 million increase in net interest income and a $0.6 million increase in noninterest income, partially offset by a $0.8 million increase in income tax expense and a $0.5 million increase in noninterest expenses. The decrease in net income available to common stockholders from the second quarter of 2023 was primarily due to a $2.4 million decrease in net interest income and a $2.1 million increase in noninterest expenses, partially offset by a $1.0 million increase in noninterest income, a $0.7 million decrease in income tax expense and a $0.5 million decrease to provision for credit losses.
Pre-tax, pre-provision net revenue (“PPNR”) as a percent of average assets was 1.17%, 1.10% and 1.31% for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.
Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “Reflecting a commitment to our relationship-banking business model, ConnectOne’s second quarter performance was solid and, we believe, is in the early stages of an upswing. Pre-tax and pre-provision net revenue increased sequentially by an annualized 17%, our net interest margin widened by 8 basis points, and both our loan to deposit and CRE concentration ratios improved.”
“During the second quarter, client deposit balances increased approximately 7% on an annualized basis, with noninterest-bearing demand deposits remaining flat, driven by meaningful growth from existing clients and successfully onboarding new clients to the bank. And while loan originations are continuing at an annualized run-rate of more than $1 billion, our loan portfolio decreased sequentially. This reflected higher pay-downs and pay-offs than usual and was consistent with our strategy to actively manage non-relationship loans off our balance sheet.”
Mr. Sorrentino concluded, “While ConnectOne remains focused on investing in our valuable franchise, further strengthening our solid balance sheet, enhancing our core funding and improving our loan mix, it also appears banking industry fundamentals may have turned the corner. Either way, we believe that ConnectOne is poised for sustained growth and long-term profitability.”
Dividend Declarations
The Company announced that its Board of Directors declared a cash dividend on both its common stock and its outstanding preferred stock.
A cash dividend on common stock of $0.18 per share will be paid on September 3, 2024, to common stockholders of record on August 15, 2024. A dividend of $0.328125 per depositary share, representing a 1/40th interest in a share of the Company’s 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will also be paid on September 3, 2024 to holders of record on August 15, 2024.
Operating Results
Fully taxable equivalent net interest income for the second quarter of 2024 was $62.3 million, an increase of $1.1 million, or 1.9%, from the first quarter of 2024, due to an eight basis-point widening of the net interest margin to 2.72% from 2.64%, which was partially offset by a $113.2 million, or 1.2%, decrease in average interest-earning assets. The net interest margin widening was primarily due to an eight basis-point increase in the yield on interest-earning assets, while the cost to fund those assets remained essentially flat. The decrease in average interest-earning assets from the first quarter of 2024 was primarily attributable to a $120.0 million decrease in average loans, reflecting a larger than typical volume of loan payoffs, paydowns and sales.
Fully taxable equivalent net interest income for the second quarter of 2024 decreased by $2.4 million, or 3.7%, from the second quarter of 2023. The decrease from the second quarter of 2023 resulted primarily from a nine basis-point decrease in the net interest margin to 2.72% from 2.81%, partially offset by a $63.5 million, or 0.8%, increase in average loans. The contraction of the net interest margin for the second quarter of 2024 when compared to the second quarter of 2023 was primarily attributable to a 64 basis-point increase in the average cost of deposits, including noninterest-bearing deposits, partially offset by a 42 basis-point increase in the loan portfolio yield.
Noninterest income was $4.4 million in the second quarter of 2024, $3.8 million in the first quarter of 2024 and $3.4 million in the second quarter of 2023. Included in noninterest income were net (losses) gains on equity securities of $(0.2) million, $0.1 million, and $(0.2) million for the second quarter of 2024, first quarter of 2024 and second quarter of 2023, respectively. Excluding the equity securities (losses) gains, adjusted noninterest income was $4.6 million, $3.8 million, and $3.6 million for the second quarter of 2024, first quarter of 2024 and second quarter of 2023, respectively. The $0.8 million increase in adjusted noninterest income for the second quarter of 2024 when compared to the first quarter of 2024 was primarily due to a $0.8 million increase in net gains on sale of loans held-for-sale. The $1.0 million increase in adjusted noninterest income for the second quarter of 2024 when compared to the second quarter of 2023 was primarily due to an increase in net gains on loans held-for-sale of $0.7 million, an increase in deposit, loan, and other income of $0.1 million and an increase in BOLI income of $0.1 million.
Noninterest expenses totaled $37.6 million for the second quarter of 2024, $37.1 million for the first quarter of 2024 and $35.5 million for the second quarter of 2023. The $0.5 million increase from the first quarter of 2024 was attributable to increases in salaries and employee benefits of $0.6 million and other expenses of $0.3 million, partially offset by decreases in information and technology communications of $0.2 million, marketing and advertising of $0.1 million and occupancy and equipment of $0.1 million. The $2.1 million increase from the second quarter of 2023 was attributable to increases in salaries and employee benefits of $1.0 million, information technology and communications of $0.6 million, other expenses of $0.3 million, occupancy and equipment of $0.2 million and FDIC insurance of $0.1 million. The increase in salaries and employee benefits when compared to the first quarter of 2024 and the second quarter of 2023 was primarily attributable to increases in incentive-based compensation accruals, partially offset by decreases in payroll tax expenses. The increases in information technology and communications when compared to the first quarter of 2024 and the second quarter of 2023 are attributable to additional investments in technology, equipment, and software.
Income tax expense was $6.7 million for the second quarter of 2024, $5.9 million for the first quarter of 2024 and $7.4 million for the second quarter of 2023. The effective tax rates for the second quarter of 2024, first quarter of 2024 and second quarter of 2023 were 26.0%, 25.5% and 25.8%, respectively.
Asset Quality
The provision for credit losses was $2.5 million for the second quarter of 2024, $4.0 million for the first quarter of 2024 and $3.0 million for the second quarter of 2023. The decrease in the current quarter’s provision for credit losses from the first quarter of 2024 was primarily attributable to a decrease in general reserves that resulted from a decrease in loans receivable.
Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $46.0 million as of June 30, 2024, $52.5 million as of December 31, 2023 and $51.5 million as of June 30, 2023. Nonperforming assets as a percentage of total assets were 0.47% as of June 30, 2024, 0.53% as of December 31, 2023 and 0.53% as of June 30, 2023. The ratio of nonaccrual loans to loans receivable was 0.56%, 0.63% and 0.63%, as of June 30, 2024, December 31, 2023 and June 30, 2023, respectively. The annualized net loan charge-offs ratio was 0.16% for the second quarter of 2024, 0.43% for the fourth quarter of 2023 and 0.05% for the second quarter of 2023. The allowance for credit losses represented 1.01%, 0.98%, and 1.09% of loans receivable as of June 30, 2024, December 31, 2023, and June 30, 2023, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 178.3% as of June 30, 2024, 156.1% as of December 31, 2023 and 173.2% as of June 30, 2023.
Credit quality metrics remained solid. Criticized and classified loans as a percentage of total loans increased to 1.50% as of June 30, 2024 versus 1.35% as of December 31, 2023 and decreased from 1.70% as of June 30, 2023. Loans delinquent 30 to 89 days were 0.11% of loans as of June 30, 2024 down from 0.30% as of December 31, 2023 and up from 0.04% as of June 30, 2023.
Selected Balance Sheet Items
The Company’s total assets were $9.724 billion as of June 30, 2024, compared to $9.856 billion as of December 31, 2023. Loans receivable were $8.158 billion as of June 30, 2024 and $8.345 billion as of December 31, 2023. Total deposits were $7.576 billion as of June 30, 2024 and $7.536 billion as of December 31, 2023.
The Company’s total stockholders’ equity was $1.224 billion as of June 30, 2024 and $1.217 billion as of December 31, 2023. The increase in total stockholders’ equity was primarily attributable to an increase in retained earnings of approximately $20 million, partially offset by increases in accumulated other comprehensive loss of approximately $7 million and increases in treasury stock of approximately $6 million. As of June 30, 2024, the Company’s tangible common equity ratio and tangible book value per share were 9.46% and $23.45, respectively, compared to 9.25% and $23.14, respectively, as of December 31, 2023. Total goodwill and other intangible assets were $213.6 million as of June 30, 2024, and $214.2 million as of December 31, 2023.
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP measures. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.
Second Quarter 2024 Results Conference Call
Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 25, 2024 to review the Company's financial performance and operating results. The conference call dial-in number is 1 (646) 307-1963, access code 8868797. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Investor Relations" link on the Company's website https://www.ConnectOneBank.com or at http://ir.connectonebank.com.
A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, July 25, 2024 and ending on Thursday, August 1, 2024 by dialing 1 (609) 800-9909, access code 8868797. An online archive of the webcast will be available following the completion of the conference call at https://www.ConnectOneBank.com or at http://ir.connectonebank.com.
About ConnectOne Bancorp, Inc.
ConnectOne Bancorp, Inc., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and the Bank’s fintech subsidiary, BoeFly, Inc. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly, Inc. is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.
This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies, and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission, as supplemented by the Company’s subsequent filings with the U.S. Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Investor Contact:
William S. Burns
Senior Executive Vice President & CFO
201.816.4474: bburns@cnob.comMedia Contact:
Shannan Weeks
MWW
732.299.7890: sweeks@mww.comCONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands) June 30, December 31, June 30, 2024 2023 2023 (unaudited) (unaudited) ASSETS Cash and due from banks $ 47,105 $ 61,421 $ 56,286 Interest-bearing deposits with banks 246,408 181,293 263,638 Cash and cash equivalents 293,513 242,714 319,924 Investment securities 620,579 617,162 612,819 Equity securities 19,743 18,564 17,950 Loans held-for-sale 435 - 1,089 Loans receivable 8,157,903 8,345,145 8,148,540 Less: Allowance for credit losses - loans 82,077 81,974 89,205 Net loans receivable 8,075,826 8,263,171 8,059,335 Investment in restricted stock, at cost 43,403 51,457 46,688 Bank premises and equipment, net 28,881 30,779 29,093 Accrued interest receivable 48,262 49,108 46,237 Bank owned life insurance 240,985 237,644 234,412 Right of use operating lease assets 13,359 12,007 8,874 Goodwill 208,372 208,372 208,372 Core deposit intangibles 5,232 5,874 6,569 Other assets 125,141 118,751 132,601 Total assets $ 9,723,731 $ 9,855,603 $ 9,723,963 LIABILITIES Deposits: Noninterest-bearing $ 1,268,882 $ 1,259,364 $ 1,356,293 Interest-bearing 6,307,132 6,276,838 6,182,004 Total deposits 7,576,014 7,536,202 7,538,297 Borrowings 756,144 933,579 827,601 Subordinated debentures, net 79,692 79,439 79,187 Operating lease liabilities 14,435 13,171 10,007 Other liabilities 73,219 76,592 69,474 Total liabilities 8,499,504 8,638,983 8,524,566 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 110,927 110,927 110,927 Common stock 586,946 586,946 586,946 Additional paid-in capital 33,955 33,182 30,740 Retained earnings 610,759 590,970 566,498 Treasury stock (76,116 ) (70,296 ) (61,877 ) Accumulated other comprehensive loss (42,244 ) (35,109 ) (33,837 ) Total stockholders' equity 1,224,227 1,216,620 1,199,397 Total liabilities and stockholders' equity $ 9,723,731 $ 9,855,603 $ 9,723,963 CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except for per share data) Three Months Ended Six Months Ended 06/30/24 06/30/23 06/30/24 06/30/23 Interest income Interest and fees on loans $ 120,145 $ 111,048 $ 240,233 $ 217,951 Interest and dividends on investment securities: Taxable 4,683 4,029 9,017 8,258 Tax-exempt 1,121 1,247 2,275 2,339 Dividends 1,217 945 2,342 1,843 Interest on federal funds sold and other short-term investments 2,841 4,056 5,747 7,031 Total interest income 130,007 121,325 259,614 237,422 Interest expense Deposits 62,086 50,714 122,493 90,801 Borrowings 6,482 6,768 15,382 15,694 Total interest expense 68,568 57,482 137,875 106,495 Net interest income 61,439 63,843 121,739 130,927 Provision for credit losses 2,500 3,000 6,500 4,000 Net interest income after provision for credit losses 58,939 60,843 115,239 126,927 Noninterest income Deposit, loan and other income 1,654 1,545 3,246 2,948 Income on bank owned life insurance 1,677 1,553 3,341 3,084 Net gains on sale of loans held-for-sale 1,277 550 1,783 599 Net losses on equity securities (209 ) (210 ) (123 ) (401 ) Total noninterest income 4,399 3,438 8,247 6,230 Noninterest expenses Salaries and employee benefits 22,721 21,726 44,852 43,962 Occupancy and equipment 2,899 2,677 5,908 5,438 FDIC insurance 1,800 1,715 3,600 2,665 Professional and consulting 1,923 1,932 3,851 4,126 Marketing and advertising 613 556 1,290 1,088 Information technology and communications 4,198 3,644 8,587 6,705 Amortization of core deposit intangibles 321 371 642 743 Other expenses 3,119 2,829 5,929 5,593 Total noninterest expenses 37,594 35,450 74,659 70,320 Income before income tax expense 25,744 28,831 48,827 62,837 Income tax expense 6,688 7,437 12,566 16,514 Net income 19,056 21,394 36,261 46,323 Preferred dividends 1,509 1,509 3,018 3,018 Net income available to common stockholders $ 17,547 $ 19,885 $ 33,243 $ 43,305 Earnings per common share: Basic $ 0.46 $ 0.51 $ 0.87 $ 1.11 Diluted 0.46 0.51 0.86 1.10 ConnectOne's management believes that the supplemental financial information, including non-GAAP measures provided below, is useful to investors, The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies, CONNECTONE BANCORP, INC, SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES As of Jun, 30, Mar, 31, Dec, 31, Sep, 30, Jun, 30, 2024 2024 2023 2023 2023 Selected Financial Data (dollars in thousands) Total assets $ 9,723,731 $ 9,853,964 $ 9,855,603 $ 9,678,885 $ 9,723,963 Loans receivable: Commercial $ 1,491,079 $ 1,561,063 $ 1,564,768 $ 1,464,479 $ 1,462,245 Commercial real estate 3,274,941 3,333,488 3,342,603 3,288,704 3,237,559 Multifamily 2,499,581 2,507,893 2,566,904 2,559,927 2,604,230 Commercial construction 639,168 646,593 620,496 622,748 596,362 Residential 256,786 254,214 256,041 251,416 254,405 Consumer 945 850 1,029 936 1,416 Gross loans 8,162,500 8,304,101 8,351,841 8,188,210 8,156,217 Net deferred loan fees (4,597 ) (6,144 ) (6,696 ) (7,101 ) (7,677 ) Loans receivable 8,157,903 8,297,957 8,345,145 8,181,109 8,148,540 Loans held-for-sale 435 - - - 1,089 Total loans $ 8,158,338 $ 8,297,957 $ 8,345,145 $ 8,181,109 $ 8,149,629 Investment and equity securities $ 640,322 $ 638,854 $ 635,726 $ 599,544 $ 630,769 Goodwill and other intangible assets 213,604 213,925 214,246 214,594 214,941 Deposits: Noninterest-bearing demand $ 1,268,882 $ 1,290,523 $ 1,259,364 $ 1,224,125 $ 1,356,293 Time deposits 2,593,165 2,623,391 2,531,371 2,522,210 2,621,148 Other interest-bearing deposits 3,713,967 3,674,740 3,745,467 3,692,160 3,560,856 Total deposits $ 7,576,014 $ 7,588,654 $ 7,536,202 $ 7,438,495 $ 7,538,297 Borrowings $ 756,144 $ 877,568 $ 933,579 $ 887,590 $ 827,601 Subordinated debentures (net of debt issuance costs) 79,692 79,566 79,439 79,313 79,187 Total stockholders' equity 1,224,227 1,216,609 1,216,620 1,188,154 1,199,397 Quarterly Average Balances Total assets $ 9,745,853 $ 9,860,753 $ 9,690,746 $ 9,625,625 $ 9,765,582 Loans receivable: Commercial (including PPP loans) $ 1,517,446 $ 1,552,360 $ 1,510,634 $ 1,471,006 $ 1,427,153 Commercial real estate (including multifamily) 5,789,498 5,890,853 5,874,854 5,821,794 5,847,147 Commercial construction 652,227 637,993 630,468 625,640 611,492 Residential 254,284 252,965 253,200 253,114 256,924 Consumer 5,155 5,091 6,006 4,972 6,733 Gross loans 8,218,610 8,339,262 8,275,162 8,176,526 8,149,449 Net deferred loan fees (5,954 ) (6,533 ) (6,894 ) (7,387 ) (8,591 ) Loans receivable 8,212,656 8,332,729 8,268,268 8,169,139 8,140,858 Loans held-for-sale 169 99 31 171 8,516 Total loans $ 8,212,825 $ 8,332,828 $ 8,268,299 $ 8,169,310 $ 8,149,374 Investment and equity securities $ 637,551 $ 633,270 $ 602,287 $ 628,429 $ 642,915 Goodwill and other intangible assets 213,813 214,133 214,472 214,822 215,182 Deposits: Noninterest-bearing demand $ 1,256,251 $ 1,254,201 $ 1,248,132 $ 1,275,325 $ 1,347,268 Time deposits 2,587,706 2,567,767 2,495,091 2,606,122 2,658,673 Other interest-bearing deposits 3,721,167 3,696,374 3,747,093 3,723,561 3,640,939 Total deposits $ 7,565,124 $ 7,518,342 $ 7,490,316 $ 7,605,008 $ 7,646,880 Borrowings $ 787,256 $ 947,003 $ 823,123 $ 651,112 $ 756,303 Subordinated debentures (net of debt issuance costs) 79,609 79,483 79,356 79,230 79,104 Total stockholders' equity 1,220,621 1,220,818 1,198,389 1,202,647 1,197,043 Three Months Ended Jun, 30, Mar, 31, Dec, 31, Sep, 30, Jun, 30, 2024 2024 2023 2023 2023 (dollars in thousands, except for per share data) Net interest income $ 61,439 $ 60,300 $ 61,822 $ 62,357 $ 63,843 Provision for credit losses 2,500 4,000 2,700 1,500 3,000 Net interest income after provision for credit losses 58,939 56,300 59,122 60,857 60,843 Noninterest income Deposit, loan and other income 1,654 1,592 1,545 1,605 1,545 Income on bank owned life insurance 1,677 1,664 1,635 1,597 1,553 Net gains on sale of loans held-for-sale 1,277 506 472 633 550 Net (losses) gains on equity securities (209 ) 86 557 (273 ) (210 ) Total noninterest income 4,399 3,848 4,209 3,562 3,438 Noninterest expenses Salaries and employee benefits 22,721 22,131 22,010 22,251 21,726 Occupancy and equipment 2,899 3,009 2,708 2,738 2,677 FDIC insurance 1,800 1,800 1,800 1,800 1,715 Professional and consulting 1,923 1,928 1,587 1,834 1,932 Marketing and advertising 613 677 323 554 556 Information technology and communications 4,198 4,389 4,148 3,487 3,644 Amortization of core deposit intangible 321 321 348 347 371 Other expenses 3,119 2,810 2,821 2,773 2,829 Total noninterest expenses (excluding FDIC special assessment) 37,594 37,065 35,745 35,784 35,450 FDIC special assessment - - 2,100 - - Total noninterest expenses 37,594 37,065 37,845 35,784 35,450 Income before income tax expense 25,744 23,083 25,486 28,635 28,831 Income tax expense 6,688 5,878 6,213 7,228 7,437 Net income 19,056 17,205 19,273 21,407 21,394 Preferred dividends 1,509 1,509 1,509 1,509 1,509 Net income available to common stockholders $ 17,547 $ 15,696 $ 17,764 $ 19,898 $ 19,885 Weighted average diluted common shares outstanding 38,448,594 38,511,747 38,651,391 38,829,681 39,016,839 Diluted EPS $ 0.46 $ 0.41 $ 0.46 $ 0.51 $ 0.51 Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net Revenue Net income $ 19,056 $ 17,205 $ 19,273 $ 21,407 $ 21,394 Income tax expense 6,688 5,878 6,213 7,228 7,437 Provision for credit losses 2,500 4,000 2,700 1,500 3,000 Pre-tax and pre-provision net revenue $ 28,244 $ 27,083 $ 28,186 $ 30,135 $ 31,831 Return on Assets Measures Average assets $ 9,745,853 $ 9,860,753 $ 9,690,746 $ 9,625,625 $ 9,765,582 Return on avg. assets 0.79 % 0.70 % 0.79 % 0.88 % 0.88 % Return on avg. assets (pre-tax and pre-provision) 1.17 1.10 1.15 1.24 1.31 Three Months Ended Jun, 30, Mar, 31, Dec, 31, Sep, 30, Jun, 30, 2024 2024 2023 2023 2023 Return on Equity Measures (dollars in thousands) Average stockholders' equity $ 1,220,621 $ 1,220,818 $ 1,198,389 $ 1,202,647 $ 1,197,043 Less: average preferred stock (110,927 ) (110,927 ) (110,927 ) (110,927 ) (110,927 ) Average common equity $ 1,109,694 $ 1,109,891 $ 1,087,462 $ 1,091,720 $ 1,086,116 Less: average intangible assets (213,813 ) (214,133 ) (214,472 ) (214,822 ) (215,182 ) Average tangible common equity $ 895,881 $ 895,758 $ 872,990 $ 876,898 $ 870,934 Return on avg, common equity (GAAP) 6.36 % 5.69 % 6.48 % 7.23 % 7.34 % Return on avg. tangible common equity ("TCE") (non-GAAP) (1) 7.98 7.15 8.18 9.11 9.28 Return on avg, tangible common equity (pre-tax and pre-provision) 12.78 12.26 12.92 13.74 14.78 Efficiency Measures Total noninterest expenses $ 37,594 $ 37,065 $ 37,845 $ 35,784 $ 35,450 Amortization of core deposit intangibles (321 ) (321 ) (348 ) (347 ) (371 ) FDIC special assessment - - (2,100 ) - - Operating noninterest expense $ 37,273 $ 36,744 $ 35,397 $ 35,437 $ 35,079 Net interest income (tax equivalent basis) $ 62,255 $ 61,111 $ 62,627 $ 63,208 $ 64,627 Noninterest income 4,399 3,848 4,209 3,562 3,438 Net losses (gains) on equity securities 209 (86 ) (557 ) 273 210 Operating revenue $ 66,863 $ 64,873 $ 66,279 $ 67,043 $ 68,275 Operating efficiency ratio (non-GAAP) (2) 55.7 % 56.6 % 53.4 % 52.9 % 51.4 % Net Interest Margin Average interest-earning assets $ 9,210,050 $ 9,323,291 $ 9,172,165 $ 9,089,431 $ 9,228,079 Net interest income (tax equivalent basis) 62,255 61,111 62,627 63,208 64,627 Net interest margin (GAAP) 2.72 % 2.64 % 2.71 % 2.76 % 2.81 % (1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity, (2) Operating noninterest expense divided by operating revenue, As of Jun, 30, Mar, 31, Dec, 31, Sep, 30, Jun, 30, 2024 2024 2023 2023 2023 Capital Ratios and Book Value per Share (dollars in thousands, except for per share data) Stockholders equity $ 1,224,227 $ 1,216,609 $ 1,216,620 $ 1,188,154 $ 1,199,397 Less: preferred stock (110,927 ) (110,927 ) (110,927 ) (110,927 ) (110,927 ) Common equity $ 1,113,300 $ 1,105,682 $ 1,105,693 $ 1,077,227 $ 1,088,470 Less: intangible assets (213,604 ) (213,925 ) (214,246 ) (214,594 ) (214,941 ) Tangible common equity $ 899,696 $ 891,757 $ 891,447 $ 862,633 $ 873,529 Total assets $ 9,723,731 $ 9,853,964 $ 9,855,603 $ 9,678,885 $ 9,723,963 Less: intangible assets (213,604 ) (213,925 ) (214,246 ) (214,594 ) (214,941 ) Tangible assets $ 9,510,127 $ 9,640,039 $ 9,641,357 $ 9,464,291 $ 9,509,022 Common shares outstanding 38,365,069 38,333,053 38,519,770 38,621,970 38,966,652 Common equity ratio (GAAP) 11.45 % 11.22 % 11.22 % 11.13 % 11.19 % Tangible common equity ratio (non-GAAP) (3) 9.46 9.25 9.25 9.11 9.19 Regulatory capital ratios (Bancorp): Leverage ratio 10.97 % 10.73 % 10.86 % 10.86 % 10.62 % Common equity Tier 1 risk-based ratio 10.93 10.70 10.62 10.64 10.55 Risk-based Tier 1 capital ratio 12.28 12.03 11.95 11.98 11.90 Risk-based total capital ratio 14.13 13.88 13.77 13.90 13.83 Regulatory capital ratios (Bank): Leverage ratio 11.29 % 11.10 % 11.20 % 11.23 % 10.95 % Common equity Tier 1 risk-based ratio 12.63 12.43 12.31 12.38 12.26 Risk-based Tier 1 capital ratio 12.63 12.43 12.31 12.38 12.26 Risk-based total capital ratio 13.61 13.41 13.28 13.43 13.33 Book value per share (GAAP) $ 29.02 $ 28.84 $ 28.70 $ 27.89 $ 27.93 Tangible book value per share (non-GAAP) (4) 23.45 23.26 23.14 22.34 22.42 Net Loan Charge-offs (Recoveries): Net loan charge-offs (recoveries): Charge-offs $ 3,595 $ 3,185 $ 8,960 $ 2,487 $ 1,118 Recoveries (324 ) (23 ) - (8 ) (76 ) Net loan charge-offs $ 3,271 $ 3,162 $ 8,960 $ 2,479 $ 1,042 Net loan charge-offs as a % of average loans receivable (annualized) 0.16 % 0.15 % 0.43 % 0.12 % 0.05 % Asset Quality Nonaccrual loans $ 46,026 $ 47,438 $ 52,524 $ 56,059 $ 51,496 Other real estate owned - - - - - Nonperforming assets $ 46,026 $ 47,438 $ 52,524 $ 56,059 $ 51,496 Allowance for credit losses - loans ("ACL") $ 82,077 $ 82,869 $ 81,974 $ 88,230 $ 89,205 Loans receivable 8,157,903 8,297,957 8,345,145 8,181,109 8,148,540 Nonaccrual loans as a % of loans receivable 0.56 % 0.57 % 0.63 % 0.69 % 0.63 % Nonperforming assets as a % of total assets 0.47 0.48 0.53 0.58 0.53 ACL as a % of loans receivable 1.01 1.00 0.98 1.08 1.09 ACL as a % of nonaccrual loans 178.3 174.7 156.1 157.4 173.2 (3) Tangible common equity divided by tangible assets (4) Tangible common equity divided by common shares outstanding at period-end CONNECTONE BANCORP, INC. NET INTEREST MARGIN ANALYSIS (dollars in thousands) For the Quarter Ended June 30, 2024 March 31, 2024 June 30, 2023 Average Average Average Interest-earning assets: Balance Interest Rate (7) Balance Interest Rate (7) Balance Interest Rate (7) Investment securities (1) (2) $ 739,591 $ 6,102 3.32 % $ 720,303 $ 5,794 3.24 % $ 726,315 $ 5,607 3.10 % Loans receivable and loans held-for-sale (2) (3) (4) 8,212,825 120,663 5.91 8,332,828 120,592 5.82 8,149,374 111,501 5.49 Federal funds sold and interest- bearing deposits with banks 212,811 2,841 5.37 218,212 2,906 5.36 309,458 4,056 5.26 Restricted investment in bank stock 44,823 1,217 10.92 51,948 1,126 8.72 42,932 945 8.83 Total interest-earning assets $ 9,210,050 130,823 5.71 $ 9,323,291 130,418 5.63 9,228,079 122,109 5.31 Allowance for credit losses (84,681 ) (84,005 ) (87,473 ) Noninterest-earning assets 620,484 621,467 624,976 Total assets $ 9,745,853 $ 9,860,753 $ 9,765,582 Interest-bearing liabilities: Time deposits 2,587,706 28,898 4.49 2,567,767 28,038 4.39 $ 2,658,673 23,778 3.59 Other interest-bearing deposits 3,721,167 33,188 3.59 3,696,374 32,369 3.52 3,640,939 26,936 2.97 Total interest-bearing deposits 6,308,873 62,086 3.96 6,264,141 60,407 3.88 6,299,612 50,714 3.23 Borrowings 787,256 5,150 2.63 947,003 7,567 3.21 756,303 5,438 2.88 Subordinated debentures, net 79,609 1,311 6.62 79,483 1,311 6.63 79,104 1,306 6.62 Finance lease 1,416 21 5.96 1,483 22 5.97 1,658 24 5.81 Total interest-bearing liabilities 7,177,154 68,568 3.84 7,292,110 69,307 3.82 7,136,677 57,482 3.23 Noninterest-bearing demand deposits 1,256,251 1,254,201 1,347,268 Other liabilities 91,827 93,624 84,594 Total noninterest-bearing liabilities 1,348,078 1,347,825 1,431,862 Stockholders' equity 1,220,621 1,220,818 1,197,043 Total liabilities and stockholders' equity $ 9,745,853 $ 9,860,753 $ 9,765,582 Net interest income (tax equivalent basis) 62,255 61,111 64,627 Net interest spread (5) 1.87 % 1.80 % 2.08 % Net interest margin (6) 2.72 % 2.64 % 2.81 % Tax equivalent adjustment (816 ) (811 ) (784 ) Net interest income $ 61,439 $ 60,300 $ 63,843 (1) Average balances are calculated on amortized cost. (2) Interest income is presented on a tax equivalent basis using 21% federal tax rate. (3) Includes loan fee income. (4) Loans include nonaccrual loans. (5) Represents difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and is presented on a tax equivalent basis. (6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets. (7) Rates are annualized. 
