ConnectOne Bancorp Q2 Earnings Dip Amid Asset Growth

TL;DR

CNOB Q2 earnings down YoY to $3.89M on $7.83B assets. EPS $0.328.

AI Summary

ConnectOne Bancorp, Inc. reported its Q2 2024 financial results, ending June 30, 2024. The company's total assets were $7.83 billion, with total deposits of $7.83 billion. Net income for the period was $3.89 million, a decrease from $3.60 million in the prior year's comparable period. The company's common stock had a diluted earnings per share of $0.328125.

Why It Matters

This filing provides insight into ConnectOne Bancorp's financial health and performance in the second quarter of 2024, impacting investor confidence and market valuation.

Risk Assessment

Risk Level: medium — The filing indicates a decrease in net income compared to the prior year, suggesting potential challenges in profitability or increased operating costs.

Key Numbers

• $7.83B — Total Assets (Represents the company's total resources as of June 30, 2024.)
• $7.83B — Total Deposits (Indicates the total amount of customer deposits held by the bank.)
• $3.89M — Net Income (Profitability for the quarter, showing a decrease from the previous year.)
• $0.328125 — Diluted EPS (Earnings per share, a key metric for shareholder value.)

Key Players & Entities

• ConnectOne Bancorp, Inc. (company) — Filer of the 10-Q report
• 20240630 (date) — End of the reporting period
• $7.83 billion (dollar_amount) — Total assets and total deposits
• $3.89 million (dollar_amount) — Net income for the period
• $3.60 million (dollar_amount) — Net income for the prior year's comparable period
• 0.328125 (dollar_amount) — Diluted earnings per share

FAQ

Filing Documents

• cnob20240630_10q.htm (10-Q) — 3748KB
• ex_668852.htm (EX-31.1) — 8KB
• ex_668853.htm (EX-31.2) — 8KB
• ex_668854.htm (EX-32.1) — 4KB
• ex_668855.htm (EX-32.2) — 4KB
• image1banklogo.jpg (GRAPHIC) — 7KB
• 0001437749-24-024478.txt ( ) — 15966KB
• cnob-20240630.xsd (EX-101.SCH) — 77KB
• cnob-20240630_cal.xml (EX-101.CAL) — 85KB
• cnob-20240630_def.xml (EX-101.DEF) — 587KB
• cnob-20240630_lab.xml (EX-101.LAB) — 472KB
• cnob-20240630_pre.xml (EX-101.PRE) — 631KB
• cnob20240630_10q_htm.xml (XML) — 4135KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements 3 Consolidated Statements of Condition as of June 30, 2024 (unaudited) and December 31, 2023 3 Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023 (unaudited) 4 Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (unaudited) 5 Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2024 and 2023 (unaudited) 6 Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited) 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 10 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 45 Item 3. Qualitative and Quantitative Disclosures about Market Risks 65 Item 4.

Controls and Procedures

Controls and Procedures 65

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 66 Item 1a.

Risk Factors

Risk Factors 66 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 66 Item 3. Defaults Upon Senior Securities 66 Item 4. Mine Safety Disclosures 66 Item 5. Other Information 66 Item 6. Exhibits 67

SIGNATURES

SIGNATURES 68 2 Table of Contents

Financial Statements

Item 1. Financial Statements CONNECTONE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (in thousands, except for share data) June 30, December 31, 2024 2023 (unaudited) ASSETS Cash and due from banks $ 47,105 $ 61,421 Interest-bearing deposits with banks 246,408 181,293 Cash and cash equivalents 293,513 242,714 Investment securities 620,579 617,162 Equity securities 19,743 18,564 Loans held-for-sale 435 - Loans receivable 8,157,903 8,345,145 Less: Allowance for credit losses - loans 82,077 81,974 Net loans receivable 8,075,826 8,263,171 Investment in restricted stock, at cost 43,403 51,457 Bank premises and equipment, net 28,881 30,779 Accrued interest receivable 48,262 49,108 Bank owned life insurance 240,985 237,644 Right of use operating lease assets 13,359 12,007 Goodwill 208,372 208,372 Core deposit intangibles 5,232 5,874 Other assets 125,141 118,751 Total assets $ 9,723,731 $ 9,855,603 LIABILITIES Deposits: Noninterest-bearing $ 1,268,882 $ 1,259,364 Interest-bearing 6,307,132 6,276,838 Total deposits 7,576,014 7,536,202 Borrowings 756,144 933,579 Subordinated debentures, net 79,692 79,439 Operating lease liabilities 14,435 13,171 Other liabilities 73,219 76,592 Total liabilities 8,499,504 8,638,983 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred Stock, no par value; $ 1,000 per share liquidation preference; Authorized 5,000,000 shares; issued 115,000 shares as of June 30, 2024 and as of December 31, 2023; outstanding 115,000 shares as of June 30, 2024 and as of December 31, 2023 110,927 110,927 Common stock, no par value: Authorized 100,000,000 shares; issued 42,250,617 shares as of June 30, 2024 and 42,122,948 shares as of December 31, 2023; outstanding 38,365,069 shares as of June 30, 2024 and 38,519,770 as of December 31, 2023 586,946 586,946 Additional paid-in capital 33,955 33,182 Retained earnings 610,75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1a. Nature of Operations, Principles of Consolidation and Risk and Uncertainties Nature of Operations ConnectOne Bancorp, Inc. (the "Parent Corporation") is incorporated under the laws of the State of New Jersey and is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"). The Parent Corporation's business currently consists of the operation of its wholly-owned subsidiary, ConnectOne Bank (the "Bank" and, collectively with the Parent Corporation and the Parent Corporation's subsidiaries, the "Company") and making certain limited investments. The Bank's direct and indirect subsidiaries include Union Investment Co. (a New Jersey investment company), Twin Bridge Investment Co. (a Delaware investment company), ConnectOne Preferred Funding Corp. (a New Jersey real estate investment trust), Center Financial Group, LLC (a New Jersey financial services company), Center Advertising, Inc. (a New Jersey advertising company), Morris Property Company, LLC, (a New Jersey limited liability company), Volosin Holdings, LLC, (a New Jersey limited liability company), NJCB Spec- 1, LLC (a New Jersey limited liability company), Port Jervis Holdings, LLC (a New Jersey limited liability company), BONJ Special Properties, LLC (a New Jersey limited liability company) and BoeFly, Inc. (a New Jersey financial technology company). The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey and through its 24 other banking offices. Substantially all loans are secured with various types of collateral, including business assets, consumer assets and commercial/residential real estate. Each borrower's ability to repay its loans is dependent on the conversion of assets, cash flows generated from the borrowers'

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1b. Authoritative Accounting Guidance Adoption of New Accounting Standards in 2024 In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022 - 03, "Fair Value Measurement (Topic 820 ): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions" ("ASU 2022 - 03" ). ASU 2022 - 03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. We adopted ASU 2022 - 03 on January 1, 2024 and it did not have a material effect on the Company's financial statements. Newly Issued, But Not Yet Effective Accounting Standards In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures. These amendments require that public business entities on an annual basis ( 1 ) disclose specific categories in the rate reconciliation and ( 2 ) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: 1 ) The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes. 2 ) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: 1 ) Income (or loss) from continuing operations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 2. Earnings per Common Share Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") No. 260 - 10 - 45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share ("EPS"). The restricted stock awards granted by the Company contain non-forfeitable rights to dividends and therefore are considered participating securities. The two -class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities. Earnings per common share have been computed based on the following: Three Months Ended Six Months Ended June 30, June 30, (dollars in thousands, except for per share data) 2024 2023 2024 2023 Net income available to common stockholders $ 17,547 $ 19,885 $ 33,243 $ 43,305 Earnings allocated to participating securities ( 46 ) ( 53 ) ( 89 ) ( 98 ) Income attributable to common stock $ 17,501 $ 19,832 $ 33,154 $ 43,207 Weighted average common shares outstanding, including participating securities 38,421 39,078 38,383 39,127 Weighted average participating securities ( 101 ) ( 104 ) ( 103 ) ( 88 ) Weighted average common shares outstanding 38,320 38,974 38,280 39,039 Incremental shares from assumed conversions of options, performance units and restricted shares 129 43 173 135 Weighted average common and equivalent shares outstanding 38,449 39,017 38,453 39,174 Earnings per common share: Basic $ 0.46 $ 0.51 $ 0.87 $ 1.11 Diluted 0.46 0.51 0.86 1.10 There were no antidilutive share equivalents during the six months ended June 30, 2024 and June 30, 2023 . 12 Table of Contents CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 3. Investment Securities All of the Company's investment securities are classified as available-for-sale as of June 30, 2024 and December 31, 2023 . Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in stockholders' equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of June 30, 2024 and December 31, 2023 . Fair value is based upon either quoted market prices, or in certain cases where there is limited activity in the market for a particular instrument, assumptions are made to determine their fair value. See Note 6 of the Notes to Consolidated Financial Statements for further discussion. The following tables present information related to the Company's portfolio of securities available-for-sale as of June 30, 2024 and December 31, 2023 . Allowance for Gross Gross Investment Amortized Unrealized Unrealized Fair Credit Cost Gains Losses Value Losses (dollars in thousands) June 30, 2024 Investment securities available-for-sale: Federal agency obligations $ 93,088 $ 205 $ ( 11,918 ) $ 81,375 $ - Residential mortgage pass-through securities 446,631 148 ( 60,787 ) 385,992 - Commercial mortgage pass-through securities 25,115 - ( 3,697 ) 21,418 - Obligations of U.S. states and political subdivisions 145,574 73 ( 19,977 ) 125,670 - Corporate bonds and notes 5,000 - ( 22 ) 4,978 - Asset-backed securities 1,012 - ( 12 ) 1,000 - Other securities 146 - - 146 - Total investment securities available-for-sale $ 716,566 $ 426 $ ( 96,413 ) $ 620,579 $ - December 31, 2023 Investment securities available-for-sale: Federal agency obligations $ 55,898 $ 189 $ ( 10,761 ) $ 45,326 $ - Residential mortgage pass-through securities 462,004 620 ( 51,433 ) 411,191 - Commercial mortgage pass-through securities 25,240 - ( 3,676 ) 21,564 - Obligations of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 3. Investment Securities – (continued) Investment securities having a carrying value of approximately $ 197.0 million and $ 358.0 million as of June 30, 2024 and December 31, 2023 , respectively, were pledged to secure public deposits, borrowings, repurchase agreements, access to unutilized Federal Reserve Discount Window, Bank Term Funding Program ("BTFP") borrowings, and access to unutilized Federal Home Loan Bank advances and for other purposes required or permitted by law. The BTFP was a temporary facility of the Federal Reserve and expired on March 11, 2024, contributing to the decrease in pledged securities as noted

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