GlobeNewswire Inc | Jan 27, 2022 07:00AM EST

January 27, 2022

ENGLEWOOD CLIFFS, N.J., Jan. 27, 2022 (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 $31.3 million for the fourth quarter of 2021, compared with $32.1 million for the third quarter of 2021 and $25.6 million for the fourth quarter of 2020. Diluted earnings per share were $0.79 for the fourth quarter of 2021 compared with $0.80 for the third quarter of 2021 and $0.64 for the fourth quarter of 2020. The $0.8 million decrease in net income available to common stockholders and $0.01 decrease in diluted earnings per share versus the third quarter of 2021 were primarily due to $1.7 million in preferred dividends, a $1.4 million increase in income tax expense and a $0.2 million decrease in noninterest income, partially offset by a $2.2 million increase in net interest income, a $0.3 million decrease in provision for credit losses and a $0.1 million decrease in noninterest expenses. The $5.7 million increase in net income available to common stockholders and $0.15 increase in diluted earnings per share versus the fourth quarter of 2020 were due to a $9.1 million increase in net interest income, a $0.3 million increase in noninterest income, and a $4.2 million decrease in the provision for credit losses, partially offset by a $1.7 million increase in noninterest expenses, a $4.5 million increase in income tax expense, and $1.7 million in preferred dividends. Full-year 2021 net income available to common stockholders was $128.6 million, compared to $71.3 million for 2020. Diluted earnings per share for the full-year 2021 was $3.22, compared with $1.79 for 2020.

Pre-tax, pre-provision net revenue (PPNR) increased to $46.2 million for the fourth quarter of 2021, reflecting a 4.7% sequential increase from the third quarter of 2021 and a 20.2% increase from the prior year quarter.

Frank Sorrentino, ConnectOnes Chairman and Chief Executive Officer stated, ConnectOnes strong fourth quarter capped off an exceptional year for our Company. We delivered record financial performance, realized significant organic growth, and continued to leverage our investments in technology to increase our operational efficiency even further. Loans, net of the Paycheck Protection Program (PPP), increased by 5.3% sequentially and by 15.4% for the year, while noninterest bearing deposits grew by 7.7% sequentially and by 20.8% for the year. Our performance is a testament to our teams continued resilience, the diligent execution of our client first philosophy and ConnectOnes stellar reputation among commercial businesses and the real estate industry.

We continue to operate efficiently and effectively and our fourth quarter operating performance was highlighted by solid year-over-year net revenue growth, strong earnings and best-in-class efficiency. We also continued to deliver outstanding performance metrics, further solidifying our status as a top performer in the banking industry. This quarters PPNR as a percentage of assets was 2.28%, return on assets was 1.63%, the efficiency ratio was 37.0% and return on tangible common equity was 16.0% while tangible book value per share increased 3.6% sequentially, to $20.12.

Mr. Sorrentino added, Looking ahead, were excited about what the future holds for ConnectOne and continue to see tangible opportunities in 2022 to further maximize long-term shareholder value. Were projecting strong growth and increased operating leverage, while our margins and efficiency are expected to remain among the best in the industry. We also remain optimistic regarding continued momentum for loan growth in 2022 and believe were well positioned to continue to pursue attractive opportunities to expand our valuable franchise.

Dividend Declarations

The Company announced that its Board of Directors declared a cash dividend on its common stock and a quarterly cash dividend on its preferred stock. A common stock dividend of $0.13 per share will be paid on March 1, 2022 to common stockholders of record on February 14, 2022.

A dividend of $0.328125 per share for every depositary share, representing a 1/40th interest in the Companys 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, will be paid on March 1, 2022 to preferred stockholders of record on February 14, 2022.

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2021 was $70.9 million, an increase of $2.1 million, or 3.1%, from the third quarter of 2021 resulting primarily from a 4.1% increase in average loans, and a 2 basis-point widening of the net interest margin to 3.75% from 3.73%. Excluding purchase accounting adjustments, the adjusted net interest margin was 3.66% for the fourth quarter of 2021 and 3.63% for the third quarter of 2021. The net interest margin widened primarily as a result of lower average cash balances. Included in interest income in the fourth and third quarters of 2021 was the accretion of PPP fee income of $1.5 million and $3.4 million, respectively. Remaining deferred and unrecognized PPP fees were $4.6 million as of December 31, 2021.

Fully taxable equivalent net interest income for the fourth quarter of 2021 increased by $9.1 million, or 14.6%, from the fourth quarter of 2020. The increase from the fourth quarter of 2020 resulted primarily from an 8.2% increase in average loans and a 25 basis-point widening of the net interest margin to 3.75% from 3.50%. The widening of the net interest margin resulted from a 43 basis-point reduction in the cost of interest-bearing liabilities, partially offset by a 10 basis-point reduction in the yield on average interest-earning assets.

Noninterest income was $3.8 million in the fourth quarter of 2021, $4.0 million in the third quarter of 2021 and $3.4 million in the fourth quarter of 2020. The decrease in noninterest income of $0.2 million from the third quarter of 2021 was primarily attributable to a decrease in deposit, loan and other income of $0.2 million, reflecting PPP referral fees at BoeFly during the third quarter. The increase of $0.3 million in noninterest income when compared to the fourth quarter of 2020 was attributable to increases in deposit, loan and other income of $0.2 million and increases in sale of loans held-for-sale of $0.3 million, partially offset by decreases in BOLI income of $0.1 million and net loss on equity securities of $0.1 million.

Noninterest expenses totaled $28.1 million for the fourth quarter of 2021, $28.2 million for the third quarter of 2021 and $26.4 million for the fourth quarter of 2020. The decrease in noninterest expenses of $0.1 million from the third quarter of 2021 was primarily attributable to a decrease in salaries and employee benefits of $0.3 million and professional and consulting of $0.2 million, partially offset by increases in occupancy and equipment of $0.1 million, FDIC insurance of $0.1 million and marketing and advertising of $0.1 million. The increase in noninterest expenses of $1.7 million from the fourth quarter of 2020 was primarily attributable to increases in salaries and employee benefits of $1.9 million, other expenses of $1.1 million, and marketing and advertising of $0.2 million, partially offset by decreases in occupancy and equipment of $0.9 million, professional and consulting of $0.2 million and FDIC insurance $0.3 million. The Companys expense base growth reflects its commitment to organic expansion through investments in people and technology, while remaining focused on maintaining best-in-class operating efficiency. The Company expects operating expenses to accelerate in 2022 at an increased pace, largely resulting from wage inflation, increased staffing levels and its ongoing investment in technology.

Income tax expense was $12.3 million for the fourth quarter of 2021, $10.9 million for the third quarter of 2021 and $7.8 million for the fourth quarter of 2020. The effective tax rates for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020 were 27.1%, 25.3% and 23.3%, respectively. The higher effective tax rate during the fourth quarter of 2021 when compared to the third quarter of 2021 and fourth quarter of 2020 was the result of a higher percentage of income being derived from taxable sources. The effective tax rate for the full-year 2021 was 25.5%. The Company expects its effective tax rate to increase in 2022, as a result of the Companys revenue growth in existing and new markets.

Asset Quality

The provision for credit losses was $0.8 million for the fourth quarter of 2021, $1.1 million for the third quarter of 2021 and $5.0 million for the fourth quarter of 2020. The provision for credit losses during the fourth quarter of 2021 and the third quarter of 2021 was the result of strong organic loan growth, while continuing to reflect improvement in the macroeconomic outlook. The elevated provision for loan losses during the fourth quarter of 2020 was due to the economic uncertainties surrounding the COVID-19 pandemic, including consideration of related payment deferrals requested or granted at that time. As of December 31, 2021, the Bank had only one commercial real estate loan remaining on deferral under The Cares Act with a balance of $0.5 million.

Nonperforming assets, which includes nonaccrual loans and other real estate owned (the Bank had no other real estate owned during the periods reported), were $61.7 million as of December 31, 2021, $66.0 million as of September 30, 2021 and $61.7 million as of December 31, 2020. The decrease in nonaccrual loans versus the sequential quarter was due to payoffs and loans returning to accrual status. Nonperforming assets as a percentage of total assets were 0.76% as of December 31, 2021, 0.83% as of September 30, 2021 and 0.82% as of December 31, 2020. The ratio of nonaccrual loans to loans receivable was 0.90%, 1.00% and 0.99%, as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The annualized net loan charge-offs ratio was 0.01% for the fourth quarter of 2021, 0.10% for the third quarter of 2021 and 0.00% for the fourth quarter of 2020. The prior sequential quarter included a $1.4 million charge-off of a commercial real estate loan that previously had a specific credit reserve. The allowance for credit losses represented 1.15%, 1.19%, and 1.27% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. Excluding PPP loans, the allowance for credit losses represented 1.17%, 1.22%, and 1.36% of loans receivable as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. The allowance for credit losses as a percentage of nonaccrual loans was 127.7% as of December 31, 2021, 118.2% as of September 30, 2021 and 128.4% as of December 31, 2020.

Selected Balance Sheet Items

The Companys total assets were $8.1 billion, an increase of $582 million from December 31, 2020. Loans receivable were $6.8 billion, an increase of $592 million from December 31, 2020.The increase in loans receivable was attributable to higher, non-PPP, loan originations, offset by decreases in PPP loans resulting from forgiveness activity. As of December 31, 2021, PPP loans totaled $93 million, down from $398 million as of December 31, 2020, reflecting accelerated forgiveness of the outstanding PPP loans.

The Companys stockholders equity was $1.1 billion as of December 31, 2021, an increase of $208.9 million from December 31, 2020. In August 2021, the Company raised $110.9 million, net of issuance expenses, from the issuance of $115 million in 5.25% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A. This issuance and the increase in retained earnings of $108.2 million were the primary reasons for the overall increase in stockholders equity, in addition to an increase in additional paid-in capital of $3.4 million, partially offset by a decrease in accumulated other comprehensive income of $4.2 million and an increase in treasury stock of $9.4 million. As of December 31, 2021, the Companys tangible common equity ratio and tangible book value per share were 10.06% and $20.12, respectively. As of December 31, 2020, the tangible common equity ratio and tangible book value per share were 9.50% and $17.49, respectively. Total goodwill and other intangible assets were approximately $217.4 million as of December 31, 2021 and $219.3 million as of December 31, 2020.

Share Repurchase Program

During the fourth quarter of 2021, the Company repurchased 41 thousand shares of common stock leaving approximately 2.3 million shares remaining authorized for repurchase under the current Board approved repurchase programs. The Company may repurchase shares from time-to-time in the open market, in privately negotiated stock purchases or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission and applicable federal securities laws. The share repurchase plans do not obligate the Company to acquire any particular amount of common stock, and they may be modified or suspended at any time at the Company's discretion.

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP measures. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Fourth Quarter 2021 Results Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on January 27, 2022 to review the Company's financial performance and operating results. The conference call dial-in number is 201-689-8471, access code 13725707. 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.comor at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, January 27, 2022 and ending on Thursday, February 3, 2022 by dialing 412-317-6671, access code 13725707. An online archive of the webcast will be available following the completion of the conference call at https://www.connectonebank.com or at http://ir.connectonebank.com.

About ConnectOne Bancorp, Inc.

ConnectOne Bancorp, Inc., is a modern financial services company that operates, through its subsidiary, ConnectOne Bank, and its fintech subsidiary, BoeFly. ConnectOne Bank is a high-performing commercial bank offering a full suite of banking & lending products and services that focus on small to middle-market businesses. BoeFly is a fintech marketplace that connects borrowers in the franchise space with funding solutions through a network of partner banks. ConnectOne Bancorp, Inc. is traded on the Nasdaq Global Market under the trading symbol "CNOB," and information about ConnectOne may be found at https://www.connectonebank.com.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A Risk Factors of the Companys Annual Report on Form 10-K, as filed with the Securities Exchange Commission, as supplemented by the Companys subsequent filings with the Securities and Exchange Commission, and changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, changes in accounting principles and guidelines and the impact of the COVID-19 pandemic on the Company, its employees and operations, and its customers. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Investor Contact:

William S. BurnsExecutive VP & CFO201.816.4474; bburns@cnob.com

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

CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands) December 31, December 31, 2021 2020 (unaudited) ASSETS Cash and due from banks $ 54,352 $ 63,637 Interest-bearing deposits with banks 211,184 240,119 Cash and cash equivalents 265,536 303,756 Investment securities 534,507 487,955 Equity securities 13,794 13,387 Loans held-for-sale 250 4,710 Loans receivable 6,828,622 6,236,307 Less: Allowance for credit losses - loans 78,773 79,226 Net loans receivable 6,749,849 6,157,081 Investment in restricted stock, at cost 27,826 25,099 Bank premises and equipment, net 29,032 30,108 Accrued interest receivable 34,152 35,317 Bank owned life insurance 195,731 165,960 Right of use operating lease assets 11,017 16,159 Goodwill 208,372 208,372 Core deposit intangibles 8,997 10,977 Other assets 50,417 88,458 Total assets $ 8,129,480 $ 7,547,339 LIABILITIES Deposits: Noninterest-bearing $ 1,617,049 $ 1,339,108 Interest-bearing 4,715,904 4,620,116 Total deposits 6,332,953 5,959,224 Borrowings 468,193 425,954 Subordinated debentures, net 152,951 202,648 Operating lease liabilities 12,417 18,026 Other liabilities 38,754 26,177 Total liabilities 7,005,268 6,632,029 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 110,927 - Common stock 586,946 586,946 Additional paid-in capital 27,246 23,887 Retained earnings 440,169 331,951 Treasury stock (39,672 ) (30,271 ) Accumulated other comprehensive (loss) (1,404 ) 2,797 incomeTotal stockholders' equity 1,124,212 915,310 Total liabilities and stockholders' $ 8,129,480 $ 7,547,339 equity

CONNECTONE BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(dollars in thousands, except for per share data) Three Months Ended Twelve Months Ended 12/31/21 12/31/20 12/31/21 12/31/20 Interest income Interest and fees $ 76,891 $ 73,123 $ 293,546 $ 296,611 on loansInterest anddividends on investment securities:Taxable 1,265 1,373 4,413 6,456 Tax-exempt 518 649 2,403 2,797 Dividends 207 374 971 1,642 Interest onfederal funds sold and other 159 69 405 694 short-term investmentsTotal 79,040 75,588 301,738 308,200 interest incomeInterest expense Deposits 5,281 9,630 24,768 52,386 Borrowings 3,298 4,587 14,092 17,823 Total 8,579 14,217 38,860 70,209 interest expense Net interest income 70,461 61,371 262,878 237,991 Provision for 815 5,000 (5,500 ) 41,000 (reversal of) credit lossesNet interest income after 69,646 56,371 268,378 196,991 provision for credit losses Noninterest income Deposit, loan and 1,525 1,300 6,617 7,077 other incomeIncome on bank 1,244 1,314 4,771 5,007 owned life insuranceNet gains on sale 1,139 841 3,807 2,085 of loans held-for-saleGain on sale of - - 674 - branchesNet (losses) gains (131 ) (13 ) (373 ) 202 on equity securitiesNet gains on sale/redemption of investment - - 195 29 securitiesTotal 3,777 3,442 15,691 14,400 noninterest income Noninterest expenses Salaries and 16,483 14,581 64,072 58,758 employee benefitsOccupancy and 2,762 3,689 11,638 13,882 equipmentFDIC insurance 625 948 2,665 4,002 Professional and 1,996 2,210 8,286 7,383 consultingMarketing and 454 256 1,318 1,200 advertisingData processing 1,585 1,479 6,265 6,008 Merger expenses - - - 14,640 Amortization of 483 628 1,981 2,559 core deposit intangibleIncrease in value - - - 2,333 of acquisition priceOther expenses 3,696 2,611 12,786 10,236 Total 28,084 26,402 109,011 121,001 noninterest expenses Income before income tax 45,339 33,411 175,058 90,390 expenseIncome tax expense 12,301 7,770 44,705 19,101 Net income 33,038 25,641 130,353 71,289 Preferred 1,717 - 1,717 - dividendsNet income available to $ 31,321 $ 25,641 $ 128,636 $ 71,289 common stockholders Earnings per common share: Basic $ 0.79 $ 0.64 $ 3.24 $ 1.80 Diluted 0.79 0.64 3.22 1.79

ConnectOne's management believes that the supplemental financial information,including non-GAAP measures provided below, is useful to investors. Thenon-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable tonon-GAAP financial measures presented by other companies. CONNECTONE BANCORP, INC.SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES As of Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 2021 2021 2021 2021 2020 Selected Financial (dollars in thousands) DataTotal assets $ 8,129,480 $ 7,949,514 $ 7,710,082 $ 7,449,639 $ 7,547,339 Loans receivable: Commercial $ 1,163,442 $ 1,116,535 $ 1,046,965 $ 1,071,418 $ 1,092,404 Paycheck ProtectionProgram ("PPP") 93,057 177,829 326,788 522,340 397,492 loansCommercial real 2,446,807 2,354,209 2,252,484 2,127,806 2,103,468 estateMultifamily 2,337,712 2,113,541 1,914,978 1,698,331 1,712,153 Commercial 540,178 552,896 587,121 565,872 617,747 constructionResidential 255,269 270,793 286,907 306,376 322,564 Consumer 1,886 2,093 6,355 3,364 1,853 Gross loans 6,838,351 6,587,896 6,421,598 6,295,508 6,247,681 Unearned net (9,729 ) (11,457 ) (13,694 ) (18,317 ) (11,374 ) origination feesLoans receivable 6,828,622 6,576,439 6,407,904 6,277,191 6,236,307 Loans held-for-sale 250 5,596 6,159 6,900 4,710 Total loans $ 6,828,872 $ 6,582,035 $ 6,414,063 $ 6,284,091 $ 6,241,017 Investment and $ 548,301 $ 476,584 $ 472,156 $ 455,223 $ 501,342 equity securitiesGoodwill and other 217,369 217,852 218,335 218,842 219,349 intangible assetsDeposits: Noninterest-bearing $ 1,617,049 $ 1,500,754 $ 1,485,952 $ 1,384,961 $ 1,339,108 demandTime deposits 1,150,109 1,221,911 1,301,807 1,356,599 1,464,133 Otherinterest-bearing 3,565,795 3,675,673 3,404,754 3,209,774 3,155,983 depositsTotal deposits $ 6,332,953 $ 6,398,338 $ 6,192,513 $ 5,951,335 $ 5,959,224 Borrowings $ 468,193 $ 253,225 $ 353,462 $ 359,710 $ 425,954 Subordinateddebentures (net of 152,951 152,875 152,800 152,724 202,648 debt issuancecosts)Total stockholders' 1,124,212 1,098,433 964,960 935,637 915,310 equity Quarterly Average BalancesTotal assets $ 8,027,169 $ 7,837,997 $ 7,566,676 $ 7,500,034 $ 7,547,651 Loans receivable: Commercial(including PPP $ 1,278,048 $ 1,296,066 $ 1,485,918 $ 1,531,790 $ 1,557,303 loans)Commercial realestate (including 4,625,371 4,312,092 3,925,497 3,805,856 3,704,197 multifamily)Commercial 547,038 572,920 553,396 595,466 615,439 constructionResidential 268,112 279,063 293,633 316,233 332,403 Consumer 4,938 2,649 3,148 2,540 3,309 Gross loans 6,723,507 6,462,790 6,261,592 6,251,885 6,212,651 Unearned net (10,873 ) (13,064 ) (13,076 ) (13,163 ) (12,023 ) origination feesLoans receivable 6,712,634 6,449,726 6,248,516 6,238,723 6,200,628 Loans held-for-sale 5,051 6,226 3,696 4,237 9,003 Total loans $ 6,717,685 $ 6,455,952 $ 6,252,212 $ 6,242,960 $ 6,209,631 Investment and $ 481,276 $ 465,103 $ 450,543 $ 481,802 $ 469,820 equity securitiesGoodwill and other 217,685 218,170 218,662 219,171 219,761 intangible assetsDeposits: Noninterest-bearing $ 1,537,316 $ 1,495,456 $ 1,432,707 $ 1,348,585 $ 1,294,447 demandTime deposits 1,204,374 1,252,818 1,324,510 1,422,295 1,577,338 Otherinterest-bearing 3,672,311 3,582,261 3,320,400 3,225,751 3,094,536 depositsTotal deposits $ 6,414,001 $ 6,330,535 $ 6,077,617 $ 5,996,631 $ 5,966,321 Borrowings $ 292,847 $ 276,183 $ 331,633 $ 375,511 $ 410,098 Subordinateddebentures (net of 152,902 152,825 152,750 154,341 202,595 debt issuancecosts)Total stockholders' 1,113,524 1,032,191 952,019 928,041 906,153 equity Three Months Ended Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 2021 2021 2021 2021 2020 (dollars in thousands, except for per share data) Net interest income $ 70,461 $ 68,245 $ 63,009 $ 61,163 $ 61,371 Provision for(reversal of) 815 1,100 (1,649 ) (5,766 ) 5,000 credit lossesNet interest incomeafter provision for 69,646 67,145 64,658 66,929 56,371 credit lossesNoninterest income Deposit, loan and 1,525 1,702 2,222 1,168 1,300 other incomeIncome on bankowned life 1,244 1,278 1,185 1,064 1,314 insuranceNet gains on saleof loans 1,139 1,114 847 707 841 held-for-saleGain on sale of - - - 674 - branchesNet (losses) gainson equity (131 ) (78 ) 23 (187 ) (13 ) securitiesNet gains on sale/redemption of - - 195 - - investmentsecuritiesTotal noninterest 3,777 4,016 4,472 3,426 3,442 incomeNoninterest expensesSalaries and 16,483 16,740 15,284 15,565 14,581 employee benefitsOccupancy and 2,762 2,656 2,916 3,304 3,689 equipmentFDIC insurance 625 525 580 935 948 Professional and 1,996 2,217 2,117 1,956 2,210 consultingMarketing and 454 345 278 241 256 advertisingData processing 1,585 1,541 1,603 1,536 1,479 Amortization ofcore deposit 483 483 508 507 628 intangibleOther expenses 3,696 3,676 2,973 2,441 2,611 Total noninterest 28,084 28,183 26,259 26,485 26,402 expenses Income before 45,339 42,978 42,871 43,870 33,411 income tax expenseIncome tax expense 12,301 10,881 10,652 10,871 7,770 Net income 33,038 32,097 32,219 32,999 25,641 Preferred dividends 1,717 - - - - Net incomeavailable to common $ 31,321 $ 32,097 $ 32,219 $ 32,999 $ 25,641 stockholders Weighted averagediluted common 39,792,937 39,869,468 39,872,829 39,788,881 39,726,791 shares outstandingDiluted EPS $ 0.79 $ 0.80 $ 0.81 $ 0.82 $ 0.64 Reconciliation of GAAP Earnings to Pre-tax and Pre-provision Net RevenueNet income $ 33,038 $ 32,097 $ 32,219 $ 32,999 $ 25,641 Income tax expense 12,301 10,881 10,652 10,871 7,770 Provision for(reversal of) 815 1,100 (1,649 ) (5,766 ) 5,000 credit lossesPre-tax andpre-provision net $ 46,154 $ 44,078 $ 41,222 $ 38,104 $ 38,411 revenue Return on Assets MeasuresAverage assets $ 8,027,169 $ 7,837,997 $ 7,566,676 $ 7,500,034 $ 7,547,651 Return on avg. 1.63 % 1.62 % 1.71 % 1.78 % 1.35 %assetsReturn on avg.assets (pre-tax and 2.28 2.23 2.19 2.06 2.02 pre-provision) Three Months Ended Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 2021 2021 2021 2021 2020 Return on Equity (dollars in thousands) MeasuresAveragestockholders' $ 1,113,524 $ 980,344 $ 952,019 $ 928,041 $ 906,153 equityLess: average (110,927 ) - - - - preferred stockAverage common $ 1,002,597 $ 980,344 $ 952,019 $ 928,041 $ 906,153 equityLess: average (217,685 ) (218,170 ) (218,662 ) (219,171 ) (219,761 ) intangible assetsAverage tangible $ 784,912 $ 762,174 $ 733,357 $ 708,870 $ 686,392 common equity Return on avg.common equity 12.39 % 12.99 % 13.57 % 14.42 % 11.26 %(GAAP)Return on avg.tangible common 16.00 16.88 17.82 19.08 15.12 equity ("TCE")(non-GAAP) ^(1) Efficiency Measures Total noninterest $ 28,084 $ 28,183 $ 26,259 $ 26,485 $ 26,402 expensesAmortization ofcore deposit (483 ) (483 ) (508 ) (507 ) (628 ) intangiblesForeclosed property - - - - (2 ) expenseOperating $ 27,601 $ 27,700 $ 25,751 $ 25,978 $ 25,772 noninterest expense Net interest income(tax equivalent $ 70,890 $ 68,761 $ 63,418 $ 61,581 $ 61,840 basis)Noninterest income 3,777 4,016 4,472 3,426 3,442 Net gains on sale - - - (674 ) - of branchesNet gains on sale/redemption of - - (195 ) - - investmentsecuritiesOperating revenue $ 74,667 $ 72,777 $ 67,695 $ 64,333 $ 65,282 Operatingefficiency ratio 37.0 % 38.1 % 38.0 % 40.4 % 39.5 %(non-GAAP) ^(2) Net Interest Margin Averageinterest-earning $ 7,508,973 $ 7,321,771 $ 7,059,965 $ 7,008,500 $ 7,031,662assets Net interest income(tax equivalent $ 70,890 $ 68,761 $ 63,418 $ 61,581 $ 61,840 basis)Impact of purchaseaccounting fair (1,674 ) (1,849 ) (2,012 ) (2,074 ) (2,237 ) value marksAdjusted netinterest income $ 69,216 $ 66,912 $ 61,406 $ 59,507 $ 59,603 (tax equivalentbasis) Net interest margin 3.75 % 3.73 % 3.60 % 3.56 % 3.50 %(GAAP)Adjusted netinterest margin 3.66 3.63 3.49 3.44 3.37 (non-GAAP) ^(3) ^(1) Earnings available to common stockholders excluding amortization of intangible assets divided by average tangible common equity.^(2) Operatingnoninterest expense divided byoperating revenue.^(3) Adjusted net interest margin excludes impact of purchase accounting fair value marks. As of Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, 2021 2021 2021 2021 2020 Capital Ratios andBook Value per (dollars in thousands, except for per share data) ShareStockholders equity $ 1,124,212 $ 987,506 $ 964,960 $ 935,637 $ 915,310 Less: preferred (110,927 ) - - - - stockCommon equity $ 1,013,285 $ 987,506 $ 964,960 $ 935,637 $ 915,310 Less: intangible (217,369 ) (217,852 ) (218,335 ) (218,842 ) (219,349 ) assetsTangible common $ 795,916 $ 769,654 $ 746,625 $ 716,795 $ 695,961 equity Total assets $ 8,129,480 $ 7,949,514 $ 7,710,082 $ 7,449,639 $ 7,547,339 Less: intangible (217,369 ) (217,852 ) (218,335 ) (218,842 ) (219,349 ) assetsTangible assets $ 7,912,111 $ 7,731,662 $ 7,491,747 $ 7,230,797 $ 7,327,990 Common shares 39,568,090 39,602,199 39,794,815 39,773,602 39,785,398 outstanding Common equity ratio 12.46 % 12.42 % 12.52 % 12.56 % 12.13 %(GAAP)Tangible commonequity ratio 10.06 9.95 9.97 9.91 9.50 (non-GAAP) ^(4) Regulatory capital ratios (Bancorp):Leverage ratio 11.65 % 11.60 % 10.19 % 9.89 % 9.51 %Common equity Tier 10.64 10.73 11.09 11.36 10.79 1 risk-based ratioRisk-based Tier 1 12.19 12.35 11.17 11.44 10.87 capital ratioRisk-based total 15.26 15.54 14.58 15.08 15.08 capital ratio Regulatory capital ratios (Bank):Leverage ratio 11.43 % 11.33 % 11.34 % 11.06 % 10.63 %Common equity Tier 11.96 12.06 12.42 12.78 12.24 1 risk-based ratioRisk-based Tier 1 11.96 12.06 12.42 12.78 12.24 capital ratioRisk-based total 13.44 13.61 14.07 14.55 10.00 capital ratio Book value per $ 25.61 $ 24.94 $ 24.25 $ 23.52 $ 23.01 share (GAAP)Tangible book valueper share 20.12 19.43 18.76 18.02 17.49 (non-GAAP) ^(5) Net Loan(Recoveries) Charge-Off DetailNet loancharge-offs (recoveries):Charge-offs $ 458 $ 1,727 $ 212 $ - $ 67 Recoveries (217 ) (113 ) (14 ) (61 ) (26 ) Net loancharge-offs $ 241 $ 1,614 $ 198 $ (61 ) $ 41 (recoveries)Net loancharge-offs(recoveries) as a % 0.01 % 0.10 % 0.01 % (0.00 ) % 0.00 %of average loansreceivable(annualized) Asset Quality Nonaccrual loans $ 61,700 $ 65,959 $ 56,213 $ 60,940 $ 61,696 OREO - - - - - Nonperforming $ 61,700 $ 65,959 $ 56,213 $ 60,940 $ 61,696 assets Performing troubled $ 43,587 $ 41,256 $ 33,021 $ 25,505 $ 23,655 debt restructurings Allowance forcredit losses - 78,773 77,986 78,684 80,568 79,226 loans ("ACL") Loans receivable $ 6,828,622 $ 6,576,439 $ 6,407,904 $ 6,277,191 $ 6,236,307 Less: PPP loans 93,057 177,829 326,788 522,340 397,492 Loans receivable(excluding PPP $ 6,735,565 $ 6,398,610 $ 6,081,116 $ 5,754,851 $ 5,838,815 loans) Nonaccrual loans asa % of loans 0.90 % 1.00 % 0.88 % 0.97 % 0.99 receivableNonperformingassets as a % of 0.76 0.83 0.73 0.82 0.82 total assetsACL as a % of loans 1.15 1.19 1.23 1.28 1.27 receivableACL as a % of loansreceivable 1.17 1.22 1.29 1.40 1.36 (excluding PPPloans)ACL as a % of 127.7 118.2 140.0 132.2 128.4 nonaccrual loans ^(4) Tangiblecommon equity divided by tangibleassets.^(5) Tangible common equity divided bycommon shares outstanding at period-end.

CONNECTONE BANCORP, INC. AND SUBSIDIARIESNET INTEREST MARGIN ANALYSIS(dollars in thousands) For the Three Months Ended December 31, 2021 September 30, 2021 December 31, 2020 Average Average Average Interest-earning Balance Interest Rate ^ Balance Interest Rate ^ Balance Interest Rate ^assets: (7) (7) (7)Investment securities ^ $ 480,143 $ 1,921 1.59 % $ 459,559 $ 1,712 1.48 % $ 460,471 $ 2,194 1.90 %(1) (2)Loans receivable andloans held-for-sale ^ 6,717,685 77,220 4.56 6,455,952 75,434 4.64 6,209,631 73,420 4.70 (2) (3) (4)Federal funds sold andinterest-bearing 291,243 121 0.16 387,155 151 0.15 337,172 69 0.08 deposits with banksRestricted investment 19,902 207 4.13 19,105 245 5.09 24,388 374 6.10 in bank stockTotal 7,508,973 79,469 4.20 7,321,771 77,542 4.20 7,031,662 76,057 4.30 interest-earning assetsAllowance for credit (79,074 ) (78,327 ) (74,943 ) losses - loansNoninterest-earning 597,270 594,553 584,145 assetsTotal assets $ 8,027,169 $ 7,837,997 $ 7,540,864 Interest-bearing liabilities:Time deposits 1,204,374 2,717 0.90 $ 1,252,818 $ 2,982 0.94 1,577,338 6,682 1.69 Otherinterest-bearing 3,672,311 2,563 0.28 3,582,261 2,495 0.28 3,094,536 2,948 0.38 depositsTotalinterest-bearing 4,876,685 5,280 0.43 4,835,079 5,477 0.45 4,671,874 9,630 0.82 deposits Borrowings 292,847 1,102 1.49 276,183 1,105 1.59 410,098 1,856 1.80 Subordinated debentures 152,902 2,167 5.62 152,825 2,168 5.63 202,595 2,699 5.30 Capital lease 1,967 30 6.05 2,018 30 5.90 2,164 32 5.88 obligationTotalinterest-bearing 5,324,401 8,579 0.64 5,266,105 8,780 0.66 5,286,731 14,217 1.07 liabilities Noninterest-bearing 1,537,316 1,495,456 1,294,447 demand depositsOther liabilities 51,928 44,245 53,533 Totalnoninterest-bearing 1,589,244 1,539,701 1,347,980 liabilitiesStockholders' equity 1,113,524 1,032,191 906,153 Totalliabilities and $ 8,027,169 $ 7,837,997 $ 7,540,864 stockholders' equity Net interest income 70,890 68,762 61,840 (tax equivalent basis)Net interest spread ^ 3.56 % 3.54 % 3.23 %(5) Net interest margin ^ 3.75 % 3.73 % 3.50 %(6) Tax equivalent (429 ) (516 ) (469 ) adjustmentNet interest income $ 70,461 $ 68,246 $ 61,371 ^(1) Average balances are calculated on amortized cost.^(2) Interest income is presented on a tax equivalent basis using 21% federal tax rate.^(3) Includes loan fee income and accretion of purchase accounting adjustments.^(4) Loans include nonaccrual loans.^(5) Represents difference between the average yield on interest-earning assetsand the average cost of interest-bearingliabilities and is presented on a taxequivalent basis.^(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.^(7) Rates are annualized.