What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 546 added, 213 removed, 1983 unchanged (28% of the section changed)

21 unchanged sentences

13,772  

Loans receivable

57 unchanged sentences

Authorized 5,000,000 shares;

issued 115,000 shares as of March 31, 2023 and as of December 31, 2022;

outstanding 115,000 shares as of March 31, 2023 and as of December 31, 2022

issued 115,000 shares as of June 30, 2023 and as of December 31, 2022;

outstanding 115,000 shares as of June 30, 2023 and as of December 31, 2022

110,927  

2 unchanged sentences

Authorized 100,000,000 shares;

issued 42,083,240 shares as of March 31, 2023 and 41,942,149 shares as of December 31, 2022;

outstanding 39,179,051 shares as of March 31, 2023 and 39,243,123 as of December 31, 2022

issued 42,120,841 shares as of June 30, 2023 and 41,942,149 shares as of December 31, 2022;

outstanding 38,936,652 shares as of June 30, 2023 and 39,243,123 as of December 31, 2022

586,946  

6 unchanged sentences

535,915  

Treasury stock, at cost 2,904,189 common shares as of March 31, 2023 and 2,699,026 as of December 31, 2022

Treasury stock, at cost 3,184,189 common shares as of June 30, 2023 and 2,699,026 as of December 31, 2022

( 61,877 )  

12 unchanged sentences

Three Months Ended

Six Months Ended

(dollars in thousands, except for per share data)

1 unchanged sentence

Interest and fees on loans

$ 111,048  

$ 81,285  

$ 217,951  

$ 157,310  

Interest and dividends on investment securities:

1 unchanged sentence

Total interest income

121,325  

85,356  

237,422  

164,297  

Interest expense

50,714  

90,801  

10,719  

15,694  

Total interest expense

57,482  

106,495  

18,348  

Net interest income

63,843  

75,591  

130,927  

145,949  

Provision for credit losses

Net interest income after provision for credit losses

60,843  

72,591  

126,927  

141,499  

Noninterest income

3 unchanged sentences

Net losses on equity securities

( 210 )  

( 405 )  

( 401 )  

Total noninterest income

1 unchanged sentence

Salaries and employee benefits

21,751  

19,662  

44,013  

38,445  

Occupancy and equipment

5 unchanged sentences

Other components of net periodic pension expense

( 25 )  

( 143 )  

( 51 )  

Increase in value of acquisition price

1 unchanged sentence

Total noninterest expenses

35,450  

31,703  

70,320  

60,933  

Income before income tax expense

28,831  

44,247  

62,837  

86,979  

Income tax expense

11,889  

16,514  

23,240  

21,394  

32,358  

46,323  

63,739  

Preferred dividends

Net income available to common stockholders

$ 19,885  

$ 30,849  

$ 43,305  

$ 60,721  

Earnings per common share

$ 0.51  

$ 0.78  

$ 1.11  

$ 1.54  

See accompanying notes to unaudited consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

(dollars in thousands)

$ 21,394  

$ 32,358  

$ 46,323  

$ 63,739  

Other comprehensive income (loss):

Unrealized holding gains (losses) on available-for-sale securities arising during the period

Reclassification adjustment for realized gains included in net income

Unrealized (losses) gains on cash flow hedges

Unrealized holding losses on available-for-sale securities arising during the period

( 10,303 )  

( 23,891 )  

( 3,775 )  

15,755  

( 7,348 )  

( 16,275 )  

( 2,865 )  

Unrealized gains on cash flow hedges

14,425  

10,064  

27,284  

( 4,340 )  

( 2,946 )  

( 3,028 )  

10,085  

18,997  

Reclassification adjustment for realized (gains) losses on cash flow hedges

( 3,953 )  

( 8,220 )  

( 37 )  

( 2,764 )  

( 5,747 )  

Unrealized gains on pension plan

Reclassification adjustment for realized losses on pension plan included in net income

Total other comprehensive loss

( 22 )  

( 45 )  

Total other comprehensive income (loss)

( 10,834 )  

( 1,473 )  

Total comprehensive income

$ 21,419  

$ 21,524  

$ 44,850  

$ 46,040  

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Comprehensive

2 unchanged sentences

(Loss) Income

Balance as of December 31, 2022

Balance as of March 31, 2023

$ 110,927  

8 unchanged sentences

Other comprehensive loss, net of tax

Cash dividends paid on preferred stock ($ 0.328125 per depositary share)

( 1,509 )  

Cash dividends paid on common stock ($ 0.17 per share)

( 6,648 )  

Exercise of stock options ( 269 shares)

Restricted stock grants, net of forfeitures ( 37,332 shares)

Share redemption for tax withholdings on performance units and deferred stock units earned

( 1,836 )  

Repurchase of treasury stock ( 270,000 shares)

( 4,225 )  

Stock-based compensation expense

Balance as of June 30, 2023

$ 110,927  

$ 586,946  

$ 30,740  

$ 566,498  

$ ( 61,877 )  

$ ( 33,837 )  

$ 1,199,397  

Three Months Ended June 30, 2022

Comprehensive

Stockholders’

(in thousands, except share data)

(Loss) Income

Balance as of March 31, 2022

$ 110,927  

$ 586,946  

$ 28,484  

$ 464,889  

$ ( 44,458 )  

$ ( 8,269 )  

$ 1,138,519  

32,358  

Other comprehensive loss, net of tax

( 10,834 )  

Cash dividends declared on preferred stock ($ 0.328125 per depositary share)

4 unchanged sentences

Restricted stock grants, net of forfeitures ( 20,715 shares)

Share redemption for tax withholdings on performance units and deferred stock units earned

( 2,133 )  

Repurchase of treasury stock ( 302,315 shares)

( 8,341 )  

Stock-based compensation expense

Balance as of June 30, 2022

$ 110,927  

$ 586,946  

$ 27,536  

$ 489,640  

$ ( 52,799 )  

$ ( 19,103 )  

$ 1,143,147  

Six Months Ended June 30, 2023

Comprehensive

Stockholders’

(in thousands, except share data)

(Loss) Income

Balance as of December 31, 2022

$ 110,927  

$ 586,946  

$ 30,126  

$ 535,915  

$ ( 52,799 )  

$ ( 32,364 )  

$ 1,178,751  

46,323  

Other comprehensive loss, net of tax

( 1,473 )  

Cash dividends paid on preferred stock ($ 0.65625 per depositary share)

( 3,018 )  

Cash dividends paid on common stock ($0.

34 per share)

( 12,722 )  

Exercise of stock options ( 6,742 shares)

Restricted stock grants, net of forfeitures ( 86,534 shares)

Stock grants ( 995 shares)

1 unchanged sentence

Net shares issued in satisfaction performance units earned ( 52,353 shares)

Stock-based compensation expense

Share redemption for tax withholdings on performance units and deferred stock units earned

( 1,836 )  

Repurchase of treasury stock ( 485,163 shares)

( 9,078 )  

Balance as of March 31, 2023

Stock-based compensation expense

Balance as of June 30, 2023

$ 110,927  

5 unchanged sentences

$ 1,199,397  

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Comprehensive

14 unchanged sentences

( 17,699 )  

Cash dividends declared on common stock ($ 0.13 per share)

( 5,152 )  

Cash dividends declared on preferred stock ($ 0.65625 per depositary share)

( 3,018 )  

Cash dividends declared on common stock ($ 0.285 per share)

( 11,250 )  

Exercise of stock options ( 15,086 shares)

1 unchanged sentence

Stock grants ( 153 shares)

Net shares issued in satisfaction of deferred stock units earned ( 31,383 shares)

Net shares issued in satisfaction of restricted stock units earned ( 31,383 shares)

Net shares issued in satisfaction of performance units earned ( 22,350 shares)

Share redemption for tax withholdings on performance units and deferred stock units earned

( 2,133 )  

Repurchase of treasury stock ( 447,108 shares)

1 unchanged sentence

Stock-based compensation expense

Balance as of March 31, 2022

Balance as of June 30, 2022

$ 110,927  

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(dollars in thousands)

13 unchanged sentences

Proceeds from sale of loans held-for-sale

Loss on sale of other real estate owned

Gain on sale of other real estate owned

Increase in cash surrender value of bank owned life insurance

1 unchanged sentence

Amortization of subordinated debentures issuance costs

(Increase) decrease in accrued interest receivable

Increase in accrued interest receivable

Net change in operating leases

Increase in other assets

Increase in other liabilities

(Decrease) increase in other liabilities

Net cash provided by operating activities

6 unchanged sentences

Net increase in loans

Purchase of bank owned life insurance

Purchases of premises and equipment

4 unchanged sentences

Advances of Federal Home Loan Bank (“FHLB”) borrowings

Repayments of FHLB borrowings

Repayment of subordinated debt

Repayments of subordinated debt

Repayments of borrowings

Cash dividends on preferred stock

2 unchanged sentences

Proceeds from exercise of stock options

Share redemption for tax withholdings on performance units and deferred stock units earned

Net cash provided by financing activities

6 unchanged sentences

Supplemental disclosures of noncash activities

Transfer of loans to other real estate owned

Transfer of loans held-for-investment to other real estate owned

Transfer of loans from held-for-sale to held-for-investment

10 unchanged sentences

and, collectively with the Parent Corporation and the Parent Corporation’s subsidiaries, the “Company”).

The Bank’s subsidiaries include Union Investment Co.

The Bank’s direct and indirect subsidiaries include Union Investment Co.

(a New Jersey investment company), Twin Bridge Investment Co.

64 unchanged sentences

Three Months Ended

Six Months Ended

(dollars in thousands, except for per share data)

2 unchanged sentences

$ 30,849  

$ 43,305  

$ 60,721  

Earnings allocated to participating securities

( 53 )  

( 70 )  

( 98 )  

Income attributable to common stock

1 unchanged sentence

$ 30,779  

$ 43,207  

$ 60,571  

Weighted average common shares outstanding, including participating securities

1 unchanged sentence

39,379  

39,127  

39,469  

Weighted average participating securities

( 104 )  

( 89 )  

( 88 )  

Weighted average common shares outstanding

1 unchanged sentence

39,290  

39,039  

39,371  

Incremental shares from assumed conversions of options, performance units and restricted shares

2 unchanged sentences

39,466  

39,174  

39,596  

Earnings per common share:

1 unchanged sentence

$ 0.78  

There were no antidilutive share equivalents for the quarters ended March 31, 2023  and 

March 31, 2022 .

$ 1.11  

$ 1.54  

There were no antidilutive share equivalents during the six  months ended June 30, 2023  and 

June 30, 2022 .

CONNECTONE BANCORP, INC.

2 unchanged sentences

Investment Securities

The Company’s investment securities are classified as available-for-sale as of March 31, 2023 and December 31, 2022 .

All of the Company’s investment securities are classified as available-for-sale as of June 30, 2023 and December 31, 2022 .

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 March 31, 2023 and December 31, 2022 .

Accordingly, the carrying value of such securities reflects their fair value as of June 30, 2023 and December 31, 2022 .

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 March 31, 2023 and December 31, 2022 .

The following tables present information related to the Company’s portfolio of securities available-for-sale as of June 30, 2023 and December 31, 2022 .

(dollars in thousands)

March 31, 2023

June 30, 2023

Investment securities available-for-sale:

57 unchanged sentences

Investment Securities –

Investment securities having a carrying value of approximately $ 377.5  million and $ 157.0 million as of March 31, 2023 and December 31, 2022 , respectively, were pledged to secure public deposits, borrowings, repurchase agreements, access to unutilized Federal Reserve Discount Window, Bank Term Funding ("BTF") program borrowings, and access to unutilized Federal Home Loan Bank advances and for other purposes required or permitted by law.

As of March 31, 2023 and December 31, 2022 , there were no holdings of securities of any one issuer, other than the U.S.

Investment securities having a carrying value of approximately $ 354.8  million and $ 157.0  million as of June 30, 2023 and December 31, 2022 , respectively, were pledged to secure public deposits, borrowings, repurchase agreements, access to unutilized Federal Reserve Discount Window, Bank Term Funding ("BTF") program borrowings, and access to unutilized Federal Home Loan Bank advances and for other purposes required or permitted by law.

As of June 30, 2023 and December 31, 2022 , there were no holdings of securities of any one issuer, other than the U.S.

Government and its agencies, in an amount greater than 10% of stockholders’

The following table presents information for investments in securities available-for-sale as of March 31, 2023 , based on scheduled maturities.

The following table presents information for investments in securities available-for-sale as of June 30, 2023 , based on scheduled maturities.

Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call options of the issuer.

Securities not due at a single maturity date are shown separately.

March 31, 2023

June 30, 2023

(dollars in thousands)

19 unchanged sentences

There were 

no  realized gains or losses on securities for the three months ended March 31, 2023 and December 

no  realized gains or losses on securities during the six  months ended June 30, 2023  and June 30, 2022 .

CONNECTONE BANCORP, INC.

3 unchanged sentences

Impairment Analysis of Available--for-sale Debt Securities

The following tables indicate securities in an unrealized loss position for which an allowance for credit losses (“ACL”) has not been recorded, aggregated by investment category and by the length of continuous time individual securities have been in an unrealized loss position as of March 31, 2023 and December 31, 2022 .

March 31, 2023

June 30, 2023

Less than 12 Months

18 unchanged sentences

21,210  

15,420  

Obligations of U.S.

62 unchanged sentences

Investment Securities –

The Company has elected to exclude accrued interest from the amortized cost of its investment securities available-for-sale. Accrued interest receivable for investment securities available-for-sale as of March 31, 2023 and December 31, 2022 , totaled $ 2.2  million and $ 2.4  million, respectively.

The Company has elected to exclude accrued interest from the amortized cost of its investment securities available-for-sale. Accrued interest receivable for investment securities available-for-sale as of June 30, 2023 and December 31, 2022 , totaled $ 2.3  million and $ 2.4  million, respectively.

The Company evaluates securities in an unrealized loss position for impairment related to credit losses on at least a quarterly basis.

4 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis.

Unrealized losses on asset backed securities and state and municipal securities have not been recognized into income because the issuers are of high credit quality, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.

Unrealized losses on asset backed securities and state and municipal securities have not been recognized into income because the issuers are of high credit quality and we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.

The decline in fair value is largely due to changes in interest rates and other market conditions.

1 unchanged sentence

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

No allowance for credit losses for available-for-sale securities was recorded as of March 

No allowance for credit losses for available-for-sale securities was recorded as of June 

Federal agency obligations, residential mortgage-backed pass-through securities and commercial mortgage-backed pass-through securities are issued by U.S.

5 unchanged sentences

Therefore, we concluded that a zero -allowance approach for these investment securities is appropriate.

As part of our overall asset liability management and strategy the Company uses derivative instruments, which can include interest rate swaps, collars, caps, and floors.  The notional amount does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

As part of our overall asset liability management strategy the Company uses derivative instruments, which can include interest rate swaps, collars, caps, and floors.  The notional amount does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements.

Derivative instruments are recognized on the balance sheet at their fair value and are not reported on a net basis.

30 unchanged sentences

No payments are required if the index rate is at, or below, the cap rate on the sold or purchased interest rate cap agreements.

Net interest (income) expense recorded on these swap and interest rate cap transactions totaled approximately ($ 4.3 ) million and $ 0.5  million during the three months ended March 31, 2023  and March 31, 2022, respectively, and is recorded as a component of either interest expense on FHLB Advances or brokered certificates of deposits.

Net interest (income) expense recorded on these swap and interest rate cap transactions totaled approximately ($ 5.0 ) million and ($ 9.3 ) million during the three and six months ended June 30, 2023 , respectively, compared to $ 0.1 million and $ 0.7 million for the three and six months ended 

30, 2022, respectively, and is recorded as a component of either interest expense on FHLB advances or brokered certificates of deposits.

CONNECTONE BANCORP, INC.

3 unchanged sentences

The following table presents the net gains (losses) recorded in other comprehensive income and the Consolidated Statements of Income relating to the cash flow hedge derivative instruments for the periods indicated:

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Amount of gain (loss) recognized in OCI (Effective Portion)

5 unchanged sentences

$ ( 8,221 )  

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Amount of gain (loss) recognized in OCI (Effective Portion)

4 unchanged sentences

$ 27,284  

The following table reflects the cash flow hedges included in the consolidated statements of condition as of March 31, 2023 and December 31, 2022 :

March 31, 2023

The following table reflects the cash flow hedges included in the consolidated statements of condition as of June 30, 2023 and December 31, 2022 :

June 30, 2023

December 31, 2022

12 unchanged sentences

Loans Receivable –

The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred loan fees, as of March 31, 2023 and December 31, 2022 :

March 31, 2023  

The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred loan fees, as of June 30, 2023 and December 31, 2022 :

June 30, 2023  

December 31, 2022  

18 unchanged sentences

$ 8,099,689  

As of both  

March 31, 2023  and December 31, 2022 , loans totaling approximately $ 2.7  billion were pledged to secure borrowings from the FHLB of New York.

During April 2023 the Bank increased its unpaid principal balances of loans pledged to $ 5.4 billion, as a result of increasing unutilized borrowing capacity at both the Federal Reserve Bank of New York and the FHLB of New York.

Loans held-for-sale - The following table sets forth the composition of the Company’s loans held-for-sale as of March 31, 2023 and December 31, 2022 :

March 31, 2023  

June 30, 2023  and December 31, 2022 , loans totaling approximately $ 5.5  billion and $ 2.7  billion, respectively, were pledged to secure borrowings from the FHLB of New York and the Federal Reserve Bank of New York. 

Loans held-for-sale - The following table sets forth the composition of the Company’s loans held-for-sale as of June 30, 2023 and December 31, 2022 :

June 30, 2023  

December 31, 2022  

2 unchanged sentences

$ 13,473  

Residential real estate

2 unchanged sentences

$ 13,772  

Loans Receivable on Nonaccrual Status - The following tables present nonaccrual loans with an ACL and nonaccrual loans without an ACL as of March 31, 2023 and December 31, 2022 :

March 31, 2023

Loans Receivable on Nonaccrual Status - The following tables present nonaccrual loans with an ACL and nonaccrual loans without an ACL as of June 30, 2023 and December 31, 2022 :

June 30, 2023

Nonaccrual loans with ACL

4 unchanged sentences

$ 5,824  

$ 24,653  

Commercial real estate

33 unchanged sentences

Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff.

These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date.

These conditions, if not corrected, may weaken the credit quality or inadequately protect the Company’s credit position at some future date.

Assets are classified “Substandard”

10 unchanged sentences

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP.

Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the table below. The following table presents loans by origination and risk designation as of March 31, 2023 (dollars in thousands):

Term loans amortized cost basis by origination year

229 unchanged sentences

The evaluation is determined on an individual basis using the fair value of the collateral as of the reporting date.

The following table presents collateral dependent loans that were individually evaluated for impairment as of March 31, 2023 and December 31, 2022 :

March 31, 2023

The following table presents collateral dependent loans that were individually evaluated for impairment as of June 30, 2023 and December 31, 2022 :

June 30, 2023

Real Estate  

25 unchanged sentences

$ 94,442  

Analysis - The following table provides an analysis of the aging of the loans by class, excluding the effect of net deferred fees, which are past due as of March 31, 2023 and December 31, 2022:

March 31, 2023

Analysis - The following table provides an analysis of the aging of the loans by class, excluding the effect of net deferred fees, which are past due as of June 30, 2023 and December 31, 2022:

June 30, 2023

30-59 Days Past Due

24 unchanged sentences

$ 8,096,127  

$ 8,156,217  

December 31, 2022

30 unchanged sentences

The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated quality, and the related portion of the allowance for credit losses that are allocated to each loan portfolio segment:

March 31, 2023

June 30, 2023

Commercial real estate  

79 unchanged sentences

Loans and the Allowance for Credit Losses –

Activity in the Company’s ACL for loans for the three months ended March 31, 2023 is summarized in the tables below.

Three Months Ended March 31, 2023

Activity in the Company’s ACL for loans for the three and six months ended June 30, 2023 is summarized in the tables below.

Three Months Ended June 30, 2023

Commercial real estate

2 unchanged sentences

(dollars in thousands)

Balance as of December 31, 2022

Balance as of March 31, 2023

$ 26,162  

7 unchanged sentences

( 491 )  

Balance as of March 31, 2023

( 420 )  

( 98 )  

Balance as of June 30, 2023

$ 29,326  

1 unchanged sentence

$ 3,546  

Activity in the Company’s ACL for loans for the three months ended March 

31, 2022 is summarized in the table below.

Three Months Ended March 31, 2022

$ 3,819  

$ 89,205  

Six Months Ended June 30, 2023

Commercial real estate

10 unchanged sentences

( 1,717 )  

(Reversal of) provision for credit losses - loans

( 18 )  

Provision for (reversal of) credit losses - loans

( 172 )  

( 374 )  

Balance as of June 30, 2023

$ 29,326  

$ 52,509  

$ 3,546  

$ 3,819  

$ 89,205  

Three Months Ended June 30, 2022

Commercial real estate

Commercial construction

Residential real estate

(dollars in thousands)

Balance as of March 31, 2022

4 unchanged sentences

$ 80,070  

( 292 )  

Provision for (reversal of) credit losses - loans

( 305 )  

Balance as of June 30, 2022

$ 28,135  

$ 47,562  

$ 3,413  

$ 3,625  

$ 82,739  

Six Months Ended June 30, 2022

Commercial real estate

Commercial construction

Residential real estate

(dollars in thousands)

Balance as of December 31, 2021

$ 25,969  

$ 45,589  

$ 3,580  

$ 3,628  

$ 78,773  

( 341 )  

( 226 )  

Provision for (reversal of) credit losses - loans

( 167 )  

( 57 )  

Balance as of June 30, 2022

$ 28,135  

$ 47,562  

$ 3,413  

$ 3,625  

$ 82,739  

CONNECTONE BANCORP, INC.

7 unchanged sentences

The following table presents the amortized cost basis at the end of the reporting period of the loan modifications to borrowers experiencing financial difficulty:

Three Months Ended

March 31, 2023

Six Months Ended

June 30, 2023

Term Extension

1 unchanged sentence

(dollars in thousands)

The above table consists of one commercial loan on which 3.0 years was added to the life of the modified loan, which did not have a material effect on the cash flows. 

Commercial real estate

The above table consists of loans that added a weighted average of 13  years to the maturity of the modified loans, which did not have a material effect on the cash flows. 

The following table presents the performance of loans that have been modified in the last twelve months:

March 31, 2023

June 30, 2023

Past Due 30-89 Days

1 unchanged sentence

(dollars in thousands)

There were no loans to borrowers experiencing financial difficulty that had a payment default during the three months ended March 31, 2023 and which were modified in the twelve months prior to that default.

Commercial real estate

There were no loans to borrowers experiencing financial difficulty that had a payment default during the six months ended June 

30, 2023 and which were modified in the twelve months prior to that default.

Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure.

2 unchanged sentences

Information on loan modifications prior to the adoption of ASU 2022 - 02 on January 1, 2023 is presented in accordance with the applicable accounting standards in effect at that time.

During the three months ended March 31, 2022, the Company modified two loans that were determined to be troubled debt restructuring, a commercial loan and a commercial real estate loan, with outstanding balances of $ 98 thousand and $ 8.3 million, respectively.

The commercial loan modified as a TDR during the three months ended March 31, 2022 was a maturity extension, while the commercial real estate loan modified as a TDR during the three months ended March 31, 2022 was an interest rate reduction, that was commensurate with a one -time, $ 500,000 , principal paydown.

During the six  months ended June 

30, 2022, the Company modified two loans that were determined to be troubled debt restructurings, a commercial loan and a commercial real estate loan, with outstanding balances of $ 98 thousand and $ 8.3 million, respectively.

The commercial loan modified as a TDR during the six months ended June 30, 2022 was a maturity extension, while the commercial real estate loan modified as a TDR during the six months ended June 30, 2022 was an interest rate reduction, that was commensurate with a one -time $ 500,000  principal paydown.

CONNECTONE BANCORP, INC.

6 unchanged sentences

The following table presents a roll forward of the allowance for credit losses for unfunded commitments for the 

three months ended March 31, 2023 and 2022 :

three and six months ended June 30, 2023 and 2022 :

Three Months Ended

5 unchanged sentences

Provision for (reversal of) credit losses - unfunded commitments

( 245 )  

Balance at end of period

1 unchanged sentence

$ 2,323  

Six Months Ended

(dollars in thousands)

Balance at beginning of period

$ 3,036  

$ 2,351  

Reversal of credit losses - unfunded commitments

( 217 )  

Balance at end of period

$ 2,819  

$ 2,323  

CONNECTONE BANCORP, INC.

4 unchanged sentences

The following table summarizes the provision for (reversal of) credit losses for the 

three months ended March 31, 2023 and 2022  :

three and six months ended June 30, 2023 and 2022  :

Three Months Ended

1 unchanged sentence

(dollars in thousands)

Provision for credit losses - loans

Provision for credit losses –

$ 3,245  

$ 2,939  

Provision for (reversal of) credit losses - unfunded commitments

( 245 )  

Provision for credit losses

1 unchanged sentence

$ 3,000  

Six Months Ended

(dollars in thousands)

Provision for credit losses –

$ 4,217  

$ 4,478  

Reversal of credit losses - unfunded commitments

( 217 )  

Provision for credit losses

$ 4,000  

$ 4,450  

Fair Value Measurements and Fair Value of Financial Instruments

11 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 :

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 :

Investment Securities Available-for-Sale and Equity Securities :

12 unchanged sentences

The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third -party pricing services.

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used as of March 31, 2023 and December 31, 2022 are as follows:

March 31, 2023

For financial assets and liabilities measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used as of June 30, 2023 and December 31, 2022 are as follows:

June 30, 2023

Fair Value Measurements at Reporting Date Using

76 unchanged sentences

$ 7,349  

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2023 and during the year ended December 31, 2022 .

There were no transfers between Level 1 and Level 2 during the six months ended June 30, 2023 and during the year ended December 31, 2022 .

Assets Measured at Fair Value on a Nonrecurring Basis

1 unchanged sentence

These adjustments to fair value usually result from the application of lower of cost or fair value accounting or impairment write-downs of individual assets.

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022 .

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022 .

Loans Held-for-Sale :

14 unchanged sentences

Estimates of fair value used for collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and are also based on Level 3 inputs.

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of March 31, 2023 and December 31, 2022 are as follows:

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of June 30, 2023 and December 31, 2022 are as follows:

Fair Value Measurements at Reporting Date Using

Assets measured at fair value on a nonrecurring basis:

March 31, 2023  

June 30, 2023  

Quoted Prices in Active Markets for Identical Assets (Level 1)  

24 unchanged sentences

Collateral dependent loans –

Collateral dependent loans as of March 31, 2023 that required a valuation allowance were $ 30.6  million with a related valuation allowance of $ 7.2  million compared to $ 43.8  million with a related valuation allowance of $ 10.5  million as of December 31, 2022 .

Collateral dependent loans as of June 30, 2023 that required a valuation allowance were $ 28.7  million with a related valuation allowance of $ 6.2  million compared to $ 43.8  million with a related valuation allowance of $ 10.5  million as of December 31, 2022 .

CONNECTONE BANCORP, INC.

4 unchanged sentences

Recurring basis

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 ) for the three months ended March 31, 2023 and for the year ended December 

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 ) for the six months ended June 30, 2023 and for the year ended December 

Municipal Securities  

3 unchanged sentences

Principal paydowns

Change in unrealized gain (loss)

Ending balance, March 31, 2023

Change in unrealized gain

Ending balance, June 30, 2023

$ 7,237  

4 unchanged sentences

Principal paydowns

Changes in unrealized gain (loss)

Changes in unrealized loss

Ending balance, December 31, 2022

$ 7,349  

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 .

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 .

The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy.

March 31, 2023

June 30, 2023

Valuation Techniques

22 unchanged sentences

The tables below provide quantitative information about significant unobservable inputs used in fair value measurements within Level 3 hierarchy of collateral dependent loans.

March 31, 2023

June 30, 2023

(dollars in thousands)

7 unchanged sentences

Appraisals of collateral value

Comparable sales

Adjustment for comparable sales

-10% to +13% (+3%)  

2 unchanged sentences

Appraisals of collateral value

Comparable sales

Adjustment for comparable sales

-15% to +5% (6%)  

1 unchanged sentence

Appraisals of collateral value

Comparable sales

Adjustment for comparable sales

+21% to +39% (+27%)  

26 unchanged sentences

Fair Value Measurements and Fair Value of Financial Instruments – 

As of March 31, 2023 the fair value measurements presented are consistent with Topic 820, Fair Value Measurement , in which fair value represents exit price.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2023 and December 31, 2022 : 

As of June 30, 2023 the fair value measurements presented are consistent with Topic 820, Fair Value Measurement , in which fair value represents exit price.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2023 and December 31, 2022 : 

Fair Value Measurements

4 unchanged sentences

(dollars in thousands)

March 31, 2023

June 30, 2023

Financial assets:

107 unchanged sentences

Amounts Reclassified from Accumulated Other Comprehensive Income

Affected Line item in the Consolidated Statements of Income

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest income (expense) on cash flow hedges

$ 4,267  

$ ( 525 ) Borrowings and brokered certificate of deposits expense

( 1,284 )  

Borrowings and deposits expense

Income tax (expense) benefit

$ 2,983  

$ ( 378 )  

Amortization of pension plan net actuarial losses

$ ( 74 )  

Other components of net periodic pension expense

Income tax benefit

$ ( 51 )  

$ ( 12 )  

Total reclassification

$ 2,932  

$ ( 390 )  

CONNECTONE BANCORP, INC.

2 unchanged sentences

Comprehensive (Loss) Income –

Accumulated other comprehensive loss as of March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023

(continued)  

Accumulated other comprehensive loss as of June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023

December 31, 2022

1 unchanged sentence

Investment securities available-for-sale, net of tax

$ ( 57,292 )  

Cash flow hedge, net of tax

26,328  

32,360  

Defined benefit pension and post-retirement plans, net of tax

( 2,898 )  

$ ( 33,862 )  

Stock-based Compensation  

The Company’s stockholders approved the 2017 Equity Compensation Plan (“the Plan”) on May 23, 2017 .

The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of March 31, 2023 .

The maximum number of shares of common stock or equivalents which may be issued under the Plan, is 750,000 .

Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, restricted share units or performance units.

Shares available for grant and issuance under the Plan as of March 31, 2023  were approximately 

The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of June 30, 2023 .

On May 30, 2023, the Company's stockholders approved an amendment to the Plan that will increase the maximum number of shares issuable by 450,000 .

The maximum number of shares of common stock or equivalents which may be issued under the Plan is now 

Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, deferred stock units or performance units.

Shares available for grant and issuance under the Plan as of June 30, 2023  were approximately 

The Company intends to issue all shares under the Plan in the form of newly issued shares.

8 unchanged sentences

The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably over the vesting period.

Forfeiture rates are not estimated but are recorded as incurred.

Stock-based compensation expense was $ 1.1  million for both the three months ended March 31, 2023 and March 31, 2022.

 Activity under the Company’s options for the three months ended March 31, 2023 was as follows:

Forfeiture rates are not estimated but are recorded as incurred. Stock-based compensation expense for the three and six months ended June 30, 2023 

was $ 1.2  million and $ 2.4  million, respectively. Stock-based compensation expense for the three and six months ended June 30, 2022 

was $ 1.2  million and $ 2.3  million, respectively.

 Activity under the Company’s options for the six months ended June 30, 2023 was as follows:

Number of Stock Options  

6 unchanged sentences

Forfeited/cancelled/expired

Outstanding as of March 31, 2023

Outstanding as of June 30, 2023

$ 5,368  

Exercisable as of March 31, 2023

Exercisable as of June 30, 2023

$ 14.24  

$ 5,368  

The aggregate intrinsic value of outstanding and exercisable options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on March 31, 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023 .

The aggregate intrinsic value of outstanding and exercisable options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on June 30, 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2023 .

This amount changes based on the fair market value of the Company’s stock.

4 unchanged sentences

(continued)  

Activity under the Company’s restricted stock for the three months ended March 31, 2023 was as follows:

Activity under the Company’s restricted stock for the six months ended June 30, 2023 was as follows:

Nonvested Shares  

7 unchanged sentences

( 6,613 )  

Nonvested as of March 31, 2023

Nonvested as of June 30, 2023

125,525  

$ 18.39  

As of March 31, 2023 , there was approximately $ 1.4  million of total unrecognized compensation cost related to nonvested restricted stock granted.

As of June 30, 2023 , there was approximately $ 1.5  million of total unrecognized compensation cost related to nonvested restricted stock granted.

The cost is expected to be recognized over a weighted average period of 1.3  years.

9 unchanged sentences

( 116,192 )  

Unearned as of March 31, 2023

Unearned as of June 30, 2023

164,231  

1 unchanged sentence

$ 23.06  

As of March 31, 2023 , the specific number of shares related to performance units that were expected to vest was 164,231 , determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period.

As of June 30, 2023 , the specific number of shares related to performance units that were expected to vest was 164,231 , determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period.

Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed.

As of March 31, 2023 , the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 233,087 .

During the three months ended March 31, 2023 , 116,192  shares vested.

As of June 30, 2023 , the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 233,087 .

During the six months ended June 30, 2023 , 116,192  shares vested.

A total of 63,839  shares were netted from the vested shares to satisfy employee tax obligations.

The net shares issued from vesting of performance units during the three months ended March 31, 2023 

The net shares issued from vesting of performance units during the six  months ended June 

30, 2023  were 

52,353  shares.

As of March 31, 2023 , compensation cost of approximately $ 2.4  million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 2.3  years.

As of June 30, 2023 , compensation cost of approximately $ 2.1  million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 2.1  years.

A summary of the status of unearned deferred stock units and the changes in deferred stock units during the period is presented in the table below:

7 unchanged sentences

( 70,669 )  

Unearned as of March 31, 2023

Unearned as of June 30, 2023

196,223  

1 unchanged sentence

Any forfeitures would result in previously recognized expense being reversed. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient.

During the three months ended March 31, 2023 , 70,669  shares vested.

During the six months ended June 30, 2023 , 70,669  shares vested.

A total of 38,601  shares were netted from the vested shares to satisfy employee tax obligations.

The net shares issued from vesting of deferred stock units during the three months ended March 31, 2023 were 32,068  shares.

As of March 31, 2023 , compensation cost of approximately $ 3.1  million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.8  years.

The net shares issued from vesting of deferred stock units during the six months ended June 30, 2023 were 32,068  shares.

As of June 30, 2023 , compensation cost of approximately $ 2.6  million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.7  years.

CONNECTONE BANCORP, INC.

18 unchanged sentences

$ ( 143 )  

Six Months Ended

Affected Line Item in the Consolidated

Statements of Income

(dollars in thousands)

Interest cost

Other components of net periodic pension expense

Expected return on plan assets

( 419 )  

( 474 ) Other components of net periodic pension expense

Net amortization

Other components of net periodic pension expense

Total periodic pension income

$ ( 51 )  

$ ( 286 )  

Contributions

The Company did not contribute to the Pension Trust during the three months ended March 31, 2023 .

The Company did not contribute to the Pension Trust during the six months ended June 30, 2023 .

The Company does not plan on contributing amounts to the Pension Trust for the remainder of 2023.

3 unchanged sentences

The Company’s FHLB borrowings and weighted average interest rates are summarized below:

March 31, 2023

June 30, 2023

December 31, 2022

11 unchanged sentences

4 years through 5 years

25,309  

After 5 years

18 unchanged sentences

All FHLB advances bear fixed rates.

The advances as of March 31, 2023 were primarily collateralized by approximately $ 2.1  billion of commercial mortgage loans and securities, net of required over collateralization amounts, under a blanket lien arrangement.

As of March 31, 2023 the Company had remaining borrowing capacity of approximately $ 0.7  billion at FHLB. As of April 2023, the Company increased its collateral for advances to $ 2.9 billion, net of required over collateralization amounts, and increased its remaining borrowing capacity of $ 1.5 billion at FHLB.

The advances as of June 30, 2023 were primarily collateralized by approximately $ 2.8  billion of commercial mortgage loans and securities, net of required over collateralization amounts, under a blanket lien arrangement.

As of June 30, 2023 the Company had remaining borrowing capacity of approximately $ 1.5  billion at FHLB. 

Subordinated Debentures

7 unchanged sentences

The floating interest rate on the subordinate debentures is three -month LIBOR plus 2.85 % and reprices quarterly.

The rate as of March 

The rate as of June 

30, 2023  was 8.15 %.

Upon the cessation of publication of  LIBOR rates  and pursuant to the Federal  LIBOR Act and Federal Reserve regulations implementing the Act, applicable US Dollar LIBOR indexed instruments like the Company’s outstanding $ 5.0 million of MMCapS capital securities  will convert to a new index based on CME Term SOFR, as defined in the LIBOR Act, plus a tenor spread adjustment, which is referred to as the Benchmark Replacement. Effective for quarterly interest rate resets after 

July 3, 2023 the subordinated debentures’ floating rate will be three -month CME Term SOFR plus 2.85 % plus a tenor spread adjust of 0.26161 %.

These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements as the statutory business trust is not consolidated in accordance with FASB ASC 810 - 10.

Distributions on the subordinated debentures owned by the subsidiary trust have been classified as interest expense in the Consolidated Statements of Income.

The following table summarizes the mandatory redeemable trust preferred securities of the Company’s Statutory Trust II as of March 31, 2023 and December 31, 2022 .

The following table summarizes the mandatory redeemable trust preferred securities of the Company’s Statutory Trust II as of June 30, 2023 and December 31, 2022 .

Issuance Date

15 unchanged sentences

s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this analysis is to provide the reader with information relevant to understanding and assessing the Company’s results of operations for the periods presented herein and financial condition as of March 31, 2023 and December 31, 2022.

In order to fully understand this analysis, the reader is encouraged to review the consolidated financial statements and accompanying notes thereto appearing elsewhere in this report.

37 unchanged sentences

We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.

As of March 31, 2023, there have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed in our most recent Annual Report on Form 10-K.

As of June 30, 2023, there have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed in our most recent Annual Report on Form 10-K.

Reference is made to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

1 unchanged sentence

Operating Results Overview

Net income available to common stockholders for the three months ended March 31, 2023 was $23.4 million compared to $29.9 million for the comparable three-month period ended March 31, 2022.

The Company’s diluted earnings per share were $0.59 for the three months ended March 31, 2023 as compared with diluted earnings per share of $0.75 for the comparable three-month period ended March 31, 2022. The $6.5 million decrease in net income available to common stockholders and $0.16 decrease in diluted earnings per share versus the three months ended March 31, 2022 were primarily due to a $3.3 million decrease in net interest income, a $0.3 million decrease in noninterest income and a $5.6 million increase in noninterest expenses, partially offset by a decrease in provision for credit losses of $0.5 million and a $2.3 million decrease in income tax expenses.

Net income available to common stockholders for the three months ended June 30, 2023 was $19.9 million compared to $30.8 million for the comparable three-month period ended June 30, 2022.

The Company’s diluted earnings per share were $0.51 for the three months ended June 30, 2023 as compared with diluted earnings per share of $0.78 for the comparable three-month period ended June 30, 2022.

The $10.9 million decrease in net income available to common stockholders and $0.27 decrease in diluted earnings per share versus the second quarter of 2022 were due to a $11.8 million decrease in net interest income and a $3.7 million increase in noninterest expenses, partially offset by a $4.5 million decrease in income tax expense and $0.1 million increase in noninterest income.

Net income available to common stockholders for the six months ended June 30, 2023 was $43.3 million compared to $60.7 million for the comparable six-month period ended June 30, 2022.

The Company’s diluted earnings per share were $1.10 for the six months ended June 30, 2023 as compared with diluted earnings per share of $1.53 for the comparable six-month period ended June 30, 2022.

The $17.4 million decrease in net income available to common stockholders and $0.43 decrease in diluted earnings per share versus the first half of 2022 were due to a $15.0 million decrease in net interest income, a $9.4 million increase in noninterest expenses, and a $0.2 million decrease in noninterest income, partially offset by a $6.7 million decrease in income tax expense and a $0.5 million decrease in provision for credit losses.

Net Interest Income and Margin

2 unchanged sentences

Net interest margin is defined as net interest income on a tax-equivalent basis as a percentage of total average interest-earning assets.

Fully taxable equivalent net interest income for the three months ended March 31, 2023 decreased by $3.0 million, or 4.3%, from the comparable three-month period ended March 31, 2022.

The decrease from the three months ended March 31, 2022 resulted primarily from a 71 basis-point decrease of the net interest margin from 3.71% to 3.00%, partially offset by an increase in interest-earning assets of $1.4 billion.

The contraction of the net interest margin for the three months ended March 31, 2023 when compared to the three months ended March 31, 2022 was primarily attributable to a 222 basis-point increase in the cost of interest-bearing liabilities, partially offset by 102 basis-point increase in the yield on average interest-earning assets.

The following tables, “Average Statements of Condition with Interest and Average Rates”, present for the three months ended March 31, 2023 and 2022, the Company’s average assets, liabilities and stockholders’

Fully taxable equivalent net interest income for the three months ended June 30, 2023 decreased by $11.5 million, or 15.1%, from the comparable three-month period ended June 30, 2022.

The decrease from the second quarter of 2022 resulted primarily from a 276 basis-point increase in rate paid on interest-bearing deposits, partially offset by 90 basis increase in total interest-earning assets and a 110 basis-point contraction of the net interest margin to 2.81% from 3.91%.

Fully taxable equivalent net interest income for the six months ended June 30, 2023 decreased by $14.5 million, or 9.9%, from the comparable six-month period ended June 30, 2022.

The decrease from the six-month period ended June 30, 2022 resulted primarily from a 254 basis-point increase in interest-bearing deposits, partially offset by 80 basis increase in total interest-earning assets and a 92 basis-point contraction of the net interest margin to 2.89% from 3.81%.

The following tables, “Average Statements of Condition with Interest and Average Rates”, present for the three months ended June 30, 2023 and 2022, the Company’s average assets, liabilities and stockholders’

The Company’s net interest income, net interest spread and net interest margin are also reflected.

Average Statements of Condition with Interest and Average Rates

Three Months Ended March 31,

Three Months Ended June 30,

(dollars in thousands)

33 unchanged sentences

Rates are annualized.

Six Months Ended June 30,

(dollars in thousands)

Interest-earning assets:

Securities (1) (2)

Total loans (2) (3) (4)

Federal funds sold and interest-bearing with banks

Restricted investment in bank stocks

Total interest-earning assets

Noninterest-earning assets:

Allowance for credit losses

Other noninterest-earning assets

Interest-bearing liabilities:

Interest-bearing deposits:

Time deposits

Other interest-bearing deposits

Total interest-bearing deposits

Subordinated debentures

Finance lease

Total interest-bearing liabilities

Demand deposits

Other liabilities

Total noninterest-bearing liabilities

Stockholders’

Total liabilities and stockholders’

Net interest income (tax-equivalent basis)

Net interest spread (5)

Net interest margin (6)

Tax-equivalent adjustment

Net interest income

Average balances are based on amortized cost and include equity securities.

Interest income is presented on a tax-equivalent basis using a 21% assumed tax rate.

Includes loan fee income and accretion of purchase accounting adjustments.

Total loans include loans held-for-sale and nonaccrual loans.

Represents the 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.

Represents net interest income on a tax-equivalent basis divided by average total interest-earning assets.

Rates are annualized.

Noninterest Income

Noninterest income totaled $2.8 million for the three months ended March 31, 2023, compared with $3.1 million for the comparable three-month period ended March 31, 2022. Included in noninterest income for the three months ended March 31, 2023 and March 31, 2022 were net losses on equity securities of $0.2 million and $0.6 million, respectively. Excluding net losses on equity securities, adjusted noninterest income was $3.0 million and $3.7 million for the three months ended March 31, 2023 and March 31, 2022, respectively. The $0.7 million decrease in adjusted noninterest income for the three months ended March 31, 2023 versus the three months ended March 31, 2022 was primarily due to decreases in net gains on sale of loans held-for-sale of $0.7 million and deposit, loan and other income of $0.3 million, partially offset by an increase in bank owned life insurance ("BOLI") income of $0.3 million.

Noninterest income totaled $3.4 million for the three months ended June 30, 2023, compared with $3.3 million for the three months ended June 30, 2022. 

Included in noninterest income for the three months ended June 30, 2023 and June 30, 2022 were net losses on equity securities of $0.2 million and $0.4 million, respectively. 

Excluding these items, noninterest income decreased $0.1 million when compared to the comparable three-month period ended June 30, 2022. 

The decrease was primarily attributable to decreases in deposit, loan and other income of $0.3 million and partially offset by an increase in bank owned life insurance ("BOLI") of $0.2 million.

Noninterest income totaled $6.2 million for the six months ended June 30, 2023, compared with $6.4 million for the six months ended June 30, 2022.

Included in noninterest income were net losses on equity securities of $0.4 million and $1.0 million for the  six months ended June 30, 2023 and six months ended June 2022, respectively. Excluding the aforementioned items, noninterest income was $6.6 million and $7.4 million for the six months ended June 30, 2023 and 2022, respectively.

The $0.8 million decrease in noninterest income excluding the items discussed above for the six months ended June 30, 2023 versus the comparable six-month period ended June 30, 2022 was primarily due to decreases in deposit, loan and other income of $0.7 million and a decrease in net gains on sale of loans held-for-sale of $0.6 million, partially offset by an increase in BOLI of $0.5 million.

Noninterest Expenses

Noninterest expenses totaled $34.9 million for the three months ended March 31, 2023, compared with $29.2 million for the three months ended March 31, 2022.The increase in noninterest expenses of $5.6 million from the three months ended March 31, 2022 was primarily attributable to increases in salaries and employee benefits of $3.5 million, other expenses of $0.8 million, occupancy and equipment of $0.8 million, professional and consulting of $0.4 million, FDIC insurance of $0.3 million, information technology and communications of $0.2 million, marketing and advertising of $0.2 million and amortizations of core deposit intangible of $0.1 million partially offset by a decrease in acquisition expenses related to BoeFly of $0.7 million. The increase in salaries and employee benefits was attributable to increased staff in both the revenue and back-office of the Bank and seasonal increases in payroll taxes.

Income tax expense was $9.1 million for the three months ended March 31, 2023, compared to $11.4 million for the three months ended March 31, 2022. The decrease in income tax expense was the result of lower income before taxes.

The effective tax rate for the three months ended March 31, 2023 and March 31, 2022 was 26.7% and 26.6%, respectively.  

Noninterest expenses totaled $35.4 million for the three months ended June 30, 2023, compared with $31.7 million for the comparable three-month period ended June 30, 2022.

Noninterest expense increased by $3.7 million which was primarily attributable to increases in salaries and employee benefits of $2.1 million attributable to new hires, increases in FDIC insurance expense of $1.0 million, information technology and communication expenses of $0.8 million, other expenses of $0.7 million, marketing and advertising expenses of $0.1 million and other components of net periodic pension expense of $0.1 million, partially offset by decreases in BoeFly acquisition expense of $1.5 million, professional and consulting expenses of $0.2 million and amortization of core deposit intangibles expense of $0.1 million.

Noninterest expenses totaled $70.3 million for the six months ended June 30, 2023, compared to $60.9 million for the six months ended June 30, 2022.

Noninterest expenses increased by $9.4 million and was primarily attributable to increases in salaries and employee benefits of $5.6 million attributable to new hires in both the revenue and back-office areas of the Bank.

Also, contributing to the increase were increases in other expenses of $1.6 million, FDIC insurance expense of $1.3 million, information technology and communications expense of $1.0 million, occupancy and equipment expense of $0.8 million, 

marketing and advertising expense of $0.3 million, professional and consulting expense of $0.2 million, other components of net periodic pension expense of $0.2 million, partially offset by decreases BoeFly acquisition expense of $1.5 million, and amortization of core deposit intangibles of $0.1 million.

Income tax expense was $7.4 million for the three months ended June 30, 2023, compared to $11.9 million for the comparable three-month period ended June 30, 2022. 

The decrease in income tax expense was the result of lower income before taxes.

The effective tax rate for the three months ended June 30, 2023 and June 30, 2022 was 25.8% and 26.9%, respectively. The decrease in the effective tax rate when compared to the three months ended June 30, 2022 is largely attributable to lower taxable income.

Income tax expense was $16.5 million for the six months ended June 30, 2023, compared to $23.2 million for the six months ended June 30, 2022.

The effective tax rate for the three months ended June 30, 2023 and June 30, 2022 was 26.3% and 26.7%, respectively.

The effective tax rate for the first six months ended of 2023 was lower compared to the first six months of June 30, 2022 due to different proportions of income from non-taxable sources.

Financial Condition

1 unchanged sentence

The following table sets forth the composition of our loan portfolio, excluding loans held-for-sale and unearned net origination fees and costs, by loan segment at the periods indicated.

March 31, 2023

June 30, 2023

December 31, 2022

4 unchanged sentences

Residential real estate

As of March 31, 2023, gross loans totaled $8.1 billion, an increase of $32.0  million or 0.4%, as compared to December 31, 2022.

As of June 30, 2023, gross loans totaled $8.2 billion, an increase of $47.1  million or 0.6%, as compared to December 31, 2022.

Net loan growth was attributable to organic loan originations.

Allowance for Credit Losses and Related Provision

As of March 31, 2023, the Company’s allowance for credit losses for loans was $87.0 million, a decrease of $3.5 million from $90.5 million as of December 31, 2022.

As of June 30, 2023, the Company’s allowance for credit losses for loans was $89.2 million, a decrease of $1.3 million from $90.5 million as of December 31, 2022.

The decrease was primarily attributable to $5.5 million in net charge-offs, offset by a $4.2 million provision for credit losses.

The provision for credit losses was $1.0 million for the three months ended March 31, 2023 and $1.5 million for the three months ended March 31, 2022. 

The provision for credit losses during the three months ended March 31, 2023 reflects modest loan growth and an increase in qualitative factors.

There were $4.5 million net charge-offs for the three months ended March 31, 2023, compared with $0.2 million in net charge-offs for the three months ended March 31, 2022. 

The net charge-offs for the three months ended March 31, 2023 reflect the resolution of certain nonaccrual taxi loans and one owner-occupied commercial real estate loan that were previously reserved for and, therefore, required no additional loan loss provisioning.

The ACL as a percentage of loans receivable amounted to 1.07% as of March 31, 2023 and 1.12% as of 

December 31, 2022. 

The provision for credit losses, which includes provision for unfunded commitments, for the three and six months ended June 30, 2023 was $3.0 million and $4.0 million, respectively, compared to $3.0 million and $4.5 million, for the three and six months ended June 30, 2022, respectively.

There were $1.0 million and $5.5 million in net charge-offs for the three months and six months ended June 30, 2023, compared with $0.3 million and $0.5 million in net charge-offs for the three and six months ended June 30, 2022, respectively.

The increase in net charge-offs for the three and six months ended June 30, 2023 when compared to the comparable prior period resulted from the resolution of certain nonaccrual taxi loans and one owner-occupied commercial real estate loan that were previously reserved for and, therefore, required no additional loan loss provisioning. 

The ACL as a percentage of loans receivable amounted to 1.09% as of June 30, 2023 compared to 1.12% as of December 31, 2022.

The level of the allowance for the respective periods of 2023 and 2022 reflects the credit quality within the loan portfolio, loan growth, the changing composition of the commercial and residential real estate loan portfolios and other related factors.

In management’s view, the level of the ACL as of March 31, 2023 is adequate to cover credit losses inherent in the loan portfolio.

In management’s view, the level of the ACL as of June 30, 2023 is adequate to cover credit losses inherent in the loan portfolio.

Management’s judgment regarding the adequacy of the allowance constitutes a “Forward-Looking Statement”

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Commercial real estate

Residential real estate

Total charge-offs

Residential real estate

Total recoveries

5 unchanged sentences

ACL as a percentage of loans receivable

Six Months Ended

(dollars in thousands)

Average loans receivable

Analysis of the ACL:

Balance - beginning of quarter

Commercial real estate

Residential real estate

Total charge-offs

Residential real estate

Total recoveries

Net charge-offs

Provision for credit losses - loans

Balance - end of period

Ratio of annualized net charge-offs during the period to average loans receivable during the period

Loans receivable

ACL as a percentage of loans receivable

Asset Quality

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Nonperforming assets include nonaccrual loans and other real estate owned.

Nonaccrual loans represent loans of which interest accruals have been suspended.

Nonaccrual loans represent loans on which interest accruals have been suspended.

In general, it is the policy of management to consider the charge-off of uncollectible amounts of loans at the point they become past due 90 days.

The following table sets forth, as of the dates indicated, the amount of the Company’s nonperforming assets:

March 31, 2023

June 30, 2023

December 31, 2022

6 unchanged sentences

Investment Securities

As of March 31, 2023, the principal components of the securities portfolio were federal agency obligations, mortgage-backed securities, obligations of U.S.

As of June 30, 2023, the principal components of the securities portfolio were federal agency obligations, mortgage-backed securities, obligations of U.S.

states and political subdivisions, corporate bonds and notes, asset-backed securities and equity securities.

For the three-months ended March 31, 2023, average securities decreased $11.0 million to approximately $732.9 million, or 8.0% of average total interest-earning assets, from approximately $743.9 million, or 8.3% of average interest-earning assets, at December 31, 2022.

As of March 31, 2023, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’

equity, net of tax, amounted to $57.3 million as compared with net unrealized losses of $61.8 million as of December 31, 2022.

The decrease in unrealized losses is predominately attributable to changes in market conditions and interest rates.

For the three-months ended June 30, 2023, average securities, on an amortized cost basis, increased by $115.6 million to approximately $726.3 million, or 7.9% of average total interest-earning assets, from approximately $610.5 million, or 7.8% of average interest-earning assets, as of June 30, 2022.

As of June 30, 2023, net unrealized losses on securities available-for-sale, which are carried as a component of accumulated other comprehensive loss and included in stockholders’

equity, net of tax, amounted to $64.6 million as compared with net unrealized losses of $61.8 million as of December 31, 2022.

The increase in unrealized losses is predominately attributable to changes in market conditions and interest rates.

Unrealized losses have not been recognized into income because the issuers are of high credit quality, we do not intend to sell, and it is likely that we will not be required to sell the securities prior to their anticipated recovery.  The decline in fair value is largely due to changes in interest rates and other market conditions.

The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. The Company did not record an allowance for credit losses for available-for-sale as of March 31, 2023.

Interest Rate Sensitivity Analysis

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We currently utilize net interest income simulation and economic value of equity (“EVE”) models to measure the potential impact to the Bank of future changes in interest rates.

As of March 31, 2023 and December 31, 2022, the results of the models were within guidelines prescribed by our Board of Directors.

As of June 30, 2023 and December 31, 2022, the results of the models were within guidelines prescribed by our Board of Directors.

If model results were to fall outside prescribed ranges, action, including additional monitoring and reporting to the Board, would be required by the ALCO and the Bank’s management.

The net interest income simulation model attempts to measure the change in net interest income over the next one-year period, and over the next three-year period on a cumulative basis, assuming certain changes in the general level of interest rates.

Based on our model, which was run as of March 31, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 0.63%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 2.79%.

Based on our model, which was run as of June 30, 2023, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 1.87%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 1.75%.

As of December 31, 2022, we estimated that over the next one-year period a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.22%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 2.01%.

Based on our model, which was run as of March 31, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 3.11%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 3.01%.

Based on our model, which was run as of June 30, 2023, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 1.91%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 4.08%.

As of December 31, 2022, we estimated that over the next three years, on a cumulative basis, a 200 basis-point instantaneous increase in the general level of interest rates would decrease our net interest income by 2.66%, while a 100 basis-point instantaneous decrease in interest rates would decrease net interest income by 3.99%.

1 unchanged sentence

The economic value of equity is likely to be different as interest rates change.

Our EVE as of March 31, 2023, would decrease by 12.16% with an instantaneous rate shock of up 200 basis points, and decline by 0.49% with an instantaneous rate shock of down 100 basis points. 

Our EVE as of June 30, 2023, would decrease by 12.72% with an instantaneous rate shock of up 200 basis points, and increase by 0.04% with an instantaneous rate shock of down 100 basis points. 

Our EVE as of December 31, 2022, would decrease by 10.51% with an instantaneous rate shock of up 200 basis points, and decrease by 1.13% with an instantaneous rate shock of down 100 basis-points.

The change in interest rate sensitivity was impacted by an increases in our cash on hand position and in short and intermediate-term fixed rate funding, partially offset by the deposit mix shift into certificates of deposit, from both noninterest-bearing and interest-bearing nonmaturity deposits.

The following table illustrates the most recent results for EVE and one-year NII sensitivity as of March 31, 2023.

The following table illustrates the most recent results for EVE and one-year NII sensitivity as of June 30, 2023.

Interest Rates

29 unchanged sentences

While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flow and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

As of March 31, 2023, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’

As of June 30, 2023, the amount of liquid assets remained at a level management deemed adequate to ensure that, on a short and long-term basis, contractual liabilities, depositors’

withdrawal requirements, and other operational and client credit needs could be satisfied.

As of March 31, 2023, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $827.7 million, which represented 8.1% of total assets and 9.6% of total deposits and borrowings, compared to $760.0 million as of December 31, 2022, which represented 7.9% of total assets and 9.3% of total deposits and borrowings.

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of March 31, 2023, had the ability to borrow $2.1 billion. The Bank also has a credit facility established with the Federal Reserve Bank of New York for direct discount window borrowings with capacity based on pledged collateral of $73.7 million.

In addition, as of March 31, 2023, the Bank had in place borrowing capacity of $410 million through correspondent banks and other unsecured borrowing lines.

As of March 31, 2023, the Bank had aggregate available and unused credit of approximately $1.2 billion, which represents the aforementioned facilities totaling $2.6 billion net of $1.4 billion in outstanding borrowings and letters of credit.

As of March 31, 2023, outstanding commitments for the Bank to extend credit were approximately $1.2 billion.

During April 2023 the Bank increased its availability at both the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York, by a total of approximately $2.0 billion, primarily through the additional pledging of previously unencumbered and unpledged loans.

The Bank’s access to the Federal Reserve Bank of New York, for both discount window and BTF access, was increased to $1.2 billion, from $0.1 billion as of March 31, 2023, primarily reflecting loans now pledged with unpaid principal balances of approximately $1.4 billion.

The Bank’s access to the Federal Home Loan Bank was increased to $2.9 billion, from $2.1 billion as of March 31, 2023, primarily reflecting increased loans pledged with unpaid principal balances of approximately $1.2 billion.

Cash and cash equivalents totaled $562.4 million as of March 31, 2023, increasing by $294.1 million from $268.3 million as of December 31, 2022.  Operating activities provided $16.4 million in net cash.  Investing activities used $26.6 million in net cash, primarily reflecting an increase in loans and investment securities.

 Financing activities provided $304.3 million in net cash, primarily reflecting an increase in deposits of $396.7 million and partially offset by repayment of subordinated debt of $75.0 million.

Total deposits increased by $396.6 million, or 5.4%, to $7.8 billion as of March 31, 2023 from December 31, 2022.

As of June 30, 2023, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $591.8 million, which represented 6.1% of total assets and 7.1% of total deposits and borrowings, compared to $760.0 million as of December 31, 2022, which represented 7.9% of total assets and 9.3% of total deposits and borrowings. As of June 30, 2023, not included in the above liquid assets were securities with a market value of $249.5 million which were pledged to either the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”), or the Federal Home Loan Bank, which carry aggregate unutilized borrowing capacity of $272.9 million as of June 30, 2023.

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of June 30, 2023, had the ability to borrow $2.9 billion. The Bank also has two credit facilities established with the Federal Reserve Bank of New York for direct discount window borrowings and BTFP capacity based on pledged collateral had the ability to borrow $1.3 billion.

In addition, as of June 30, 2023, the Bank had in place borrowing capacity of $390 million through correspondent banks and other unsecured borrowing lines.

As of June 30, 2023, the Bank had aggregate available and unused credit of approximately $3.3 billion, which represents the aforementioned facilities totaling $4.6 billion net of $1.4 billion in outstanding borrowings and letters of credit.

As of June 30, 2023, outstanding commitments for the Bank to extend credit were approximately $1.2 billion.

Cash and cash equivalents totaled $319.9 million as of June 30, 2023, increasing by $51.6 million from $268.3 million as of December 31, 2022.  Operating activities provided $37.6 million in net cash.  Investing activities used $36.3 million in net cash, primarily reflecting an increase in loans and investment securities.

 Financing activities provided $50.3 million in net cash, primarily reflecting an increase in FHLB advances of $1.4 billion and deposits of $181.9 million and partially offset by repayment of borrowings of $1.4 billion.

Total deposits increased by $181.7 million, or 2.5%, to $7.5 billion as of June 30, 2023 from December 31, 2022.

The increase was primarily due to increases in time deposits and interest-bearing and NOW deposits partially offset by a decrease in demand, noninterest-bearing deposits and savings deposits. The following table sets forth the composition of our deposit base by the periods indicated.

March 31, 2023

June 30, 2023

December 31, 2022

8 unchanged sentences

The floating interest rate on the subordinated debentures is three-month LIBOR plus 2.85% and re-prices quarterly.

The rate as of March 31, 2023 was 7.65%.

The rate as of June 30, 2023 was 8.15%.

Upon the cessation of publication of  LIBOR rates  and pursuant to the Federal  LIBOR Act and Federal Reserve regulations implementing the Act, applicable US Dollar LIBOR indexed instruments like the Company’s outstanding $5.0 million of MMCapS capital securities  will convert to a new index based on CME Term SOFR, as defined in the LIBOR Act, plus a tenor spread adjustment, which is referred to as the Benchmark Replacement. Effective for quarterly interest rate resets after July 3, 2023 the subordinated debentures’ floating rate will be three-month CME Term SOFR plus 2.85% plus a tenor spread adjust of 0.26161%.

Had the interest rate contractually reset on June 30, 2023, the three-month term CME Term SOFR would have been 5.27%, and, based upon the benchmark replacement interest rate formula, that would compute an interest rate of 8.38%.

During June 2020, the Parent Corporation issued $75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2020 Notes”).

4 unchanged sentences

The net proceeds from the sale of the Notes were used in the first quarter of 2018 for general corporate purposes, which included the Parent Corporation contributing $65 million of the net proceeds to the Bank in the form of debt and common equity.

The Notes were non-callable for five years, had a stated maturity of February 1, 2028 and bore interest at a rate that reset quarterly to then current three-month LIBOR rate plus 284 basis points. 

The Notes were non-callable for five years, had a stated maturity of February 1, 2028 and bore interest at a rate that reset quarterly to the current three-month LIBOR rate plus 284 basis points. 

The 2018 Notes were redeemed in full on February 1, 2023.

1 unchanged sentence

The Company’s stockholders’

equity was $1.2 billion as of March 31, 2023, an increase of $12.2 million from December 31, 2022.

equity was $1.2 billion as of June 30, 2023, an increase of $20.6 million from December 31, 2022.

The increase in stockholders’

equity was primarily attributable to retained earnings, in addition to an increase in additional paid-in capital, partially offset by a decrease in accumulated other comprehensive income, 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.

As of March 31, 2023, the Company’s tangible common equity ratio and tangible book value per share were 8.87% and $22.07, respectively.

As of June 30, 2023, the Company’s tangible common equity ratio and tangible book value per share were 9.19% and $22.34, respectively.

As of December 31, 2022, the tangible common equity ratio and tangible book value per share were 9.04% and $21.71, respectively.

Total goodwill and other intangible assets were approximately $215.3 million and $215.7 million, as of March 31, 2023 and December 31, 2022, respectively.

Total goodwill and other intangible assets were approximately $214.9 million and $215.7 million, as of June 30, 2023 and December 31, 2022, respectively.

The following table shows the reconciliation of common equity to tangible common equity and the tangible common equity ratio.

March 31, 2023

June 30, 2023

December 31, 2022

16 unchanged sentences

The Company and the Bank are subject to regulatory guidelines establishing minimum capital standards that involve quantitative measures of assets, and certain off-balance sheet items, as risk-adjusted assets under regulatory accounting practices.

The following is a summary of regulatory capital amounts and ratios as of March 31, 2023 for the Company and the Bank, compared with minimum capital adequacy requirements and the regulatory requirements for classification as a well-capitalized depository institution (for the Bank).

The following is a summary of regulatory capital amounts and ratios as of June 30, 2023 for the Company and the Bank, compared with minimum capital adequacy requirements and the regulatory requirements for classification as a well-capitalized depository institution (for the Bank).

ConnectOne Bancorp, Inc.

1 unchanged sentence

To Be Well-Capitalized Under Prompt Corrective Action Provisions

As of March 31, 2023

As of June 30, 2023

(dollars in thousands)

7 unchanged sentences

To Be Well-Capitalized Under Prompt Corrective Action Provisions

As of March 31, 2023

As of June 30, 2023

(dollars in thousands)

3 unchanged sentences

Total risk-based capital

As of March 31, 2023, both the Company and Bank satisfy the capital conservation buffer requirements applicable to them.

As of June 30, 2023, both the Company and Bank satisfy the capital conservation buffer requirements applicable to them.

The lowest ratio at the Company is the Total Risk Based Capital Ratio which was 3.34% above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 2.83% above the minimum buffer ratio.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements