What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 295 added, 376 removed, 2153 unchanged (24% of the section changed)

4 unchanged sentences

(in thousands, except for share data)

September 30,

(unaudited)  

Cash and due from banks

38 unchanged sentences

11,229  

10,179  

Other real estate owned

34 unchanged sentences

Authorized 5,000,000 shares;

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

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

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

110,927  

2 unchanged sentences

Authorized 100,000,000 shares;

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

issued 42,122,948 shares as of September 30, 2023 and 41,942,149 shares as of December 31, 2022;

outstanding 38,621,970 shares as of September 30, 2023 and 39,243,123 as of December 31, 2022

586,946  

6 unchanged sentences

535,915  

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

Treasury stock, at cost 3,500,978 common shares as of September 30, 2023 and 2,699,026 as of December 31, 2022

( 68,108 )  

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(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

Nine Months Ended

September 30,

(dollars in thousands)

$ 21,394  

$ 32,358  

$ 46,323  

$ 63,739  

Other comprehensive income (loss):

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 )  

Reclassification adjustment for realized gains on cash flow hedges

Unrealized gains on pension plan

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

( 22 )  

( 45 )  

Total other comprehensive income (loss)

( 10,834 )  

( 1,473 )  

Total other comprehensive loss

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 June 30, 2023

Three Months Ended September 30, 2023

Comprehensive

2 unchanged sentences

(Loss) Income

Balance as of March 31, 2023

Balance as of June 30, 2023

$ 110,927  

8 unchanged sentences

Other comprehensive loss, net of tax

( 19,577 )  

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

3 unchanged sentences

Exercise of stock options ( 646 shares)

Net shares issued in satisfaction of deferred stock units earned ( 3,938 shares)

Restricted stock grants, net of forfeitures ( 2,477 shares)

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

( 1,836 )  

Repurchase of treasury stock ( 316,789 shares)

1 unchanged sentence

Stock-based compensation expense

Balance as of June 30, 2023

Balance as of September 30, 2023

$ 110,927  

5 unchanged sentences

$ 1,188,154  

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Comprehensive

2 unchanged sentences

(Loss) Income

Balance as of March 31, 2022

Balance as of June 30, 2022

$ 110,927  

13 unchanged sentences

( 6,089 )  

Exercise of stock options ( 6,312 shares)

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

Balance as of September 30, 2022

$ 110,927  

5 unchanged sentences

$ 1,148,295  

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Comprehensive

16 unchanged sentences

( 4,527 )  

Cash dividends paid on common stock ($0.

34 per share)

Cash dividends paid on common stock ($ 0.51 per share)

( 19,342 )  

3 unchanged sentences

Net shares issued in satisfaction of deferred stock units earned ( 36,006 shares)

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

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

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

3 unchanged sentences

Stock-based compensation expense

Balance as of June 30, 2023

Balance as of September 30, 2023

$ 110,927  

5 unchanged sentences

$ 1,188,154  

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Comprehensive

28 unchanged sentences

Stock-based compensation expense

Balance as of June 30, 2022

Balance as of September 30, 2022

$ 110,927  

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(dollars in thousands)

13 unchanged sentences

Proceeds from sale of loans held-for-sale

Gain on sale of other real estate owned

Loss on sale of other real estate owned

Increase in cash surrender value of bank owned life insurance

4 unchanged sentences

Increase in other assets

(Decrease) increase in other liabilities

Decrease in other liabilities

Net cash provided by operating activities

3 unchanged sentences

Purchase of equity securities

Net redemptions of restricted investment in bank stocks

Net purchases of restricted investment in bank stocks

Cash flow hedge premium payment

Payments on loans held-for-sale

14 unchanged sentences

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

Net cash provided by financing activities

Net cash (used by) provided by financing activities

Net change in cash and cash equivalents

17 unchanged sentences

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, 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.

5 unchanged sentences

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 twenty-four other banking offices.

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.

1 unchanged sentence

business, real estate rental and consumer wages.

Basis of Presentation and Principals of Consolidation

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in conformity with U.S.

49 unchanged sentences

Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No.

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.

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

Nine Months Ended

September 30,

(dollars in thousands, except for per share data)

38 unchanged sentences

$ 2.24  

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

June 30, 2022 .

There were no antidilutive share equivalents during the nine  months ended September 30, 2023  and 

September 30, 2022 .

CONNECTONE BANCORP, INC.

2 unchanged sentences

Investment Securities

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

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

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

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

(dollars in thousands)

June 30, 2023

September 30, 2023

Investment securities available-for-sale:

21 unchanged sentences

Other securities

Total securities available-for-sale

Total investment securities available-for-sale

$ 704,842  

25 unchanged sentences

Other securities

Total securities available-for-sale

Total investment securities available-for-sale

$ 721,799  

5 unchanged sentences

Investment Securities –

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.

Investment securities having a carrying value of approximately $ 332.5  million and $ 157.0  million as of September 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 Program ("BTFP") borrowings, and access to unutilized Federal Home Loan Bank advances and for other purposes required or permitted by law.

As of September 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 June 30, 2023 , based on scheduled maturities.

The following table presents information for investments in securities available-for-sale as of September 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.

June 30, 2023

September 30, 2023

(dollars in thousands)

15 unchanged sentences

Other securities

Total securities available-for-sale

Total investment securities available-for-sale

$ 704,842  

1 unchanged sentence

There were 

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

no  realized gains or losses on securities during the nine  months ended September 30, 2023  and September 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 June 30, 2023 and December 31, 2022 .

June 30, 2023

September 30, 2023

Less than 12 Months

27 unchanged sentences

( 39 )  

( 41 )  

Asset-backed securities

( 32 )  

( 17 )  

Total temporarily impaired securities

4 unchanged sentences

$ 522,161  

$ ( 120,092 )

December 31, 2022

43 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 June 30, 2023 and December 31, 2022 , totaled $ 2.3  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 September 30, 2023 and December 31, 2022 , totaled $ 2.1  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.

8 unchanged sentences

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 June 

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

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

32 unchanged sentences

The Company expects the hedges to remain fully effective during the remaining term of the swaps. 

The Company previously entered into one  forward starting interest rate cap spread transaction, with a total notional amount of $ 150  million, which became effective on October 1, 2022 and matures in October of 2027 and one additional interest rate cap spread transaction, with a total notional amount of $ 75 million, which became effective in November 2022 and matures in November of 2027.

The Company previously entered into two  forward starting interest rate cap spread transactions, one with a total notional amount of $ 150  million, which became effective on October 1, 2022 and matures in October of 2027 and one interest rate cap spread transaction, with a total notional amount of $ 75 million, which became effective in November 2022 and matures in November of 2027.

 These are designated as cash flow hedges of brokered certificates of deposits, and the interest rate cap spread is indexed to a benchmark of fed funds with payment required on a monthly basis.

3 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 ($ 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.

Net interest income recorded on these swap and interest rate cap transactions totaled approximately $ 5.5  million and $ 14.6  million during the three and nine months ended September 30, 2023 , respectively, compared to $ 1.2  million and $ 0.5  million for the three and nine  months ended September 

30, 2022, respectively, and is recorded as a component of either interest expense on Federal Home Loan Bank 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:

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

5 unchanged sentences

$ ( 13,013 )  

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

4 unchanged sentences

$ 44,253  

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

$ ( 524 )  

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

September 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 June 30, 2023 and December 31, 2022 :

June 30, 2023  

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

September 30, 2023  

December 31, 2022  

18 unchanged sentences

$ 8,099,689  

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  

September 30, 2023  and December 31, 2022 , loans totaling approximately $ 5.7  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 September 30, 2023 and December 31, 2022 :

September 30, 2023  

December 31, 2022  

5 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 June 30, 2023 and December 31, 2022 :

June 30, 2023

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

September 30, 2023

Nonaccrual loans with ACL

4 unchanged sentences

$ 22,159  

$ 24,653  

Commercial real estate

46 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 June 30, 2023 (dollars in thousands):

Term loans amortized cost basis by origination year

12 unchanged sentences

24,256  

26,895  

Total Commercial

62 unchanged sentences

$ 251,416  

$ 1,218  

$ 1,416  

Special mention

8 unchanged sentences

$ 8,070,530  

$ 1,640,671  

$ 8,017,288  

Special mention

136 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 June 30, 2023 and December 31, 2022 :

June 30, 2023

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

September 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 June 30, 2023 and December 31, 2022:

June 30, 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 September 30, 2023 and December 31, 2022:

September 30, 2023

30-59 Days Past Due

24 unchanged sentences

$ 8,188,210  

$ 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:

June 30, 2023

September 30, 2023

Commercial real estate  

34 unchanged sentences

$ 8,188,210  

$ 8,156,217  

December 31, 2022

42 unchanged sentences

Loans and the Allowance for Credit Losses –

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

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

Three Months Ended September 30, 2023

Commercial real estate

2 unchanged sentences

(dollars in thousands)

Balance as of March 31, 2023

Balance as of June 30, 2023

$ 29,326  

7 unchanged sentences

( 88 )  

( 420 )  

( 98 )  

Balance as of June 30, 2023

Balance as of September 30, 2023

$ 27,851  

3 unchanged sentences

$ 88,230  

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Commercial real estate

13 unchanged sentences

( 462 )  

( 374 )  

Balance as of June 30, 2023

Balance as of September 30, 2023

$ 27,851  

3 unchanged sentences

$ 88,230  

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Commercial real estate

2 unchanged sentences

(dollars in thousands)

Balance as of March 31, 2022

$ 25,459  

Balance as of June 30, 2022

$ 28,135  

3 unchanged sentences

$ 82,739  

Provision for (reversal of) credit losses - loans

( 410 )  

Balance as of June 30, 2022

Provision for credit losses - loans

Balance as of September 30, 2022

$ 29,689  

3 unchanged sentences

$ 91,717  

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Commercial real estate

13 unchanged sentences

13,816  

Balance as of June 30, 2022

Balance as of September 30, 2022

$ 29,689  

12 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:

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023  

Term Extension

4 unchanged sentences

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

June 30, 2023

September 30, 2023

Past Due 30-89 Days

2 unchanged sentences

Commercial real estate

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

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

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

3 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 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.

During the nine  months ended September 

30, 2022, the Company modified five  loans with maturity extensions and one loan interest rate reduction.

The one loan that was an interest rate reduction was a commercial real estate loan that included 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 and six months ended June 30, 2023 and 2022 :

three and nine months ended September 30, 2023 and 2022 :

Three Months Ended

September 30,

(dollars in thousands)

2 unchanged sentences

$ 2,324  

Provision for (reversal of) credit losses - unfunded commitments

( 245 )  

(Reversal of) provision for credit losses - unfunded commitments

Balance at end of period

1 unchanged sentence

$ 2,986  

Six Months Ended

Nine Months Ended

September 30,

(dollars in thousands)

2 unchanged sentences

$ 2,352  

Reversal of credit losses - unfunded commitments

(Reversal of) provision for credit losses - unfunded commitments

( 221 )  

8 unchanged sentences

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

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

three and nine months ended September 30, 2023 and 2022 :

Three Months Ended

September 30,

(dollars in thousands)

2 unchanged sentences

$ 9,338  

Provision for (reversal of) credit losses - unfunded commitments

( 245 )  

(Reversal of) provision for credit losses - unfunded commitments

Provision for credit losses

1 unchanged sentence

$ 10,000  

Six Months Ended

Nine Months Ended

September 30,

(dollars in thousands)

2 unchanged sentences

$ 13,816  

Reversal of credit losses - unfunded commitments

(Reversal of) provision for credit losses - unfunded commitments

( 221 )  

15 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 June 30, 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 September 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 June 30, 2023 and December 31, 2022 are as follows:

June 30, 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 September 30, 2023 and December 31, 2022 are as follows:

September 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 six months ended June 30, 2023 and during the year ended December 31, 2022 .

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

Loans Held-for-Sale :

2 unchanged sentences

Management obtains quotes or bids on all or parts of these loans directly from the purchasing financial institutions (Level 2 ).

Other loans held-for-sale are carried at the lower of aggregate cost or estimated fair value. 

Fair value of these loans is determined based on the terms of the loan, such as interest rate, maturity date, reset term, as well as sales of similar assets (Level 3 ).

Other loans held-for-sale are carried at the lower of aggregate cost or estimated fair value. Fair value of these loans is determined based on the terms of the loan, such as interest rate, maturity date, reset term, as well as sales of similar assets (Level 3 ).

CONNECTONE BANCORP, INC.

8 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 June 30, 2023 and December 31, 2022 are as follows:

For assets measured at fair value on a nonrecurring basis, the fair value measurements as of September 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:

June 30, 2023  

September 30, 2023  

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

6 unchanged sentences

Commercial real estate

10,376  

Residential real estate

Fair Value Measurements at Reporting Date Using

13 unchanged sentences

Collateral dependent loans –

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 .

Collateral dependent loans as of September 30, 2023 that required a valuation allowance were $ 23.8  million with a related valuation allowance of $ 5.8  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 six months ended June 30, 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 nine months ended September 30, 2023 and for the year ended December 

Municipal Securities  

4 unchanged sentences

Change in unrealized gain

Ending balance, June 30, 2023

Ending balance, September 30, 2023

$ 7,017  

7 unchanged sentences

$ 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 June 30, 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 September 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.

June 30, 2023

September 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.

June 30, 2023

September 30, 2023

(dollars in thousands)

10 unchanged sentences

Commercial real estate

10,376  

Appraisals of collateral value

1 unchanged sentence

-15% to +5% (+4%)  

Residential real estate

Appraisals of collateral value

Adjustment for comparable sales

+21% to +39% (+27%)  

December 31, 2022

25 unchanged sentences

Fair Value Measurements and Fair Value of Financial Instruments – 

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 : 

As of September 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 September 30, 2023 and December 31, 2022 : 

Fair Value Measurements

4 unchanged sentences

(dollars in thousands)

June 30, 2023

September 30, 2023

Financial assets:

109 unchanged sentences

Affected Line item in the Consolidated Statements of Income

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest income (expense) on cash flow hedges

$ 4,793  

$ 1,178  

$ 13,013  

Borrowings and deposits expense

(1,442 )  

(343 )  

(3,915 )  

(159 ) Income tax (expense) benefit

$ 3,351  

$ 9,098  

Amortization of pension plan net actuarial losses

$ ( 74 )  

$ ( 17 )  

$ ( 222 )  

$ ( 49 ) Other components of net periodic pension expense

Income tax benefit

$ ( 52 )  

$ ( 12 )  

$ ( 155 )  

$ ( 35 )  

Total reclassification

$ 3,299  

$ 8,943  

CONNECTONE BANCORP, INC.

2 unchanged sentences

Comprehensive (Loss) Income –

(continued)  

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

June 30, 2023

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

September 30, 2023

December 31, 2022

1 unchanged sentence

Investment securities available-for-sale, net of tax

$ ( 87,748 )  

Cash flow hedge, net of tax

37,128  

32,360  

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

( 2,794 )  

$ ( 53,414 )  

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 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 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 September 30, 2023 .

On May 30, 2023, the Company's stockholders approved an amendment to the Plan that increased 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 

Shares available for grant and issuance under the Plan as of September 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 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  

Weighted-Average Exercise Price  

Weighted Average Remaining Contractual Term (in years)  

Aggregate Intrinsic Value  

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

was $ 1.3  million and $ 3.6  million, respectively. 

Stock-based compensation expense for the three and nine  months ended September 

30, 2022  was $ 1.2  million and $ 3.5  million, respectively.

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

Number of Stock Options

Weighted-Average Exercise Price

Outstanding as of December 31, 2022

2 unchanged sentences

Forfeited/cancelled/expired

Outstanding as of June 30, 2023

( 1,292 )  

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 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.

Outstanding as of September 30, 2023

Exercisable as of September 30, 2023

CONNECTONE BANCORP, INC.

2 unchanged sentences

Stock-Based Compensation –

(continued)  

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

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

Nonvested Shares  

7 unchanged sentences

( 9,090 )  

Nonvested as of June 30, 2023

Nonvested as of September 30, 2023

122,921  

$ 18.41  

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

As of September 30, 2023 , there was approximately $ 1.1  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 1.2  years.

9 unchanged sentences

( 116,192 )  

Unearned as of June 30, 2023

Unearned as of September 30, 2023

164,231  

1 unchanged sentence

$ 23.06  

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.

As of September 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 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.

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

During the nine months ended September 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 six  months ended June 

The net shares issued from vesting of performance units during the nine  months ended September 

30, 2023  were 

52,353  shares.

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.

As of September 30, 2023 , compensation cost of approximately $ 1.8  million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 1.9  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

( 78,544 )  

Unearned as of June 30, 2023

Unearned as of September 30, 2023

188,348  

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

During the nine months ended September 30, 2023 , 78,544  shares vested.

A total of 42,538  shares were netted from the vested shares to satisfy employee tax obligations.

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.

The net shares issued from vesting of deferred stock units during the nine months ended September 30, 2023 were 36,006  shares.

As of September 30, 2023 , compensation cost of approximately $ 2.3  million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.5  years.

CONNECTONE BANCORP, INC.

6 unchanged sentences

Affected Line Item in the Consolidated

September 30,

Statements of Income

10 unchanged sentences

$ ( 142 )  

Six Months Ended

Nine Months Ended

Affected Line Item in the Consolidated

September 30,

Statements of Income

11 unchanged sentences

Contributions

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

The Company did not contribute to the Pension Trust during the nine months ended September 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:

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

1 year through less than 2 years

2 years through less than 3 years

25,000  

2 years through less than 3 years

25,000  

22 unchanged sentences

All FHLB advances bear fixed rates.

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. 

The advances as of September 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 September 30, 2023 the Company had remaining borrowing capacity of approximately $ 1.4  billion at FHLB. 

Subordinated Debentures

6 unchanged sentences

The subordinated debentures are redeemable in whole or in part prior to maturity.

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

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 

The floating interest rate on the subordinate debentures was previously 

three -month LIBOR plus 2.85 % and reprices quarterly.

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.

Therefore, 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 %.

The rate as of September 

30, 2023  was 8.48 %.

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 June 30, 2023 and December 31, 2022 .

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

As of September 30, 2023

Issuance Date

2 unchanged sentences

Redeemable by Issuer Beginning

$ 5,000,000  

$1,000 per Capital Security

Floating 3-month LIBOR + 285 Basis Points

Floating 3-month CME Term SOFR + 285 Basis Points + 26.161 Basis Points

As of December 31, 2022

Issuance Date  

Securities Issued  

Liquidation Value  

Coupon Rate  

Maturity  

Redeemable by Issuer Beginning

$1,000 per Capital Security

Floating 3-month CME Term SOFR + 285 Basis Points

On June 10, 2020, the Parent Corporation issued $ 75 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “2020 Notes”).

The 2020 Notes bear interest at 5.75 % annually from, and including, the date of initial issuance to, but excluding, June 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2020.

The 2020 Notes bear interest at 5.75 % annually from, and including, the date of initial issuance up to, but excluding, June 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2020.

From and including June 15, 2025 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2025.

6 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 June 30, 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.

25 unchanged sentences

(4) general economic conditions may be less favorable than expected;

(5) political developments, sovereign debt problems, wars or other hostilities such as the ongoing conflict between Ukraine and Russia, may disrupt or increase volatility in securities markets or other economic conditions;

(5) political developments, sovereign debt problems, wars or other hostilities such as the ongoing conflict between Ukraine and Russia and instability in the Middle East, may disrupt or increase volatility in securities markets or other economic conditions;

(6) legislative or regulatory changes or actions may adversely affect the businesses in which ConnectOne Bancorp is engaged;

13 unchanged sentences

Operating Results Overview

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 income available to common stockholders for the three months ended September 30, 2023 was $19.9 million compared to $27.4 million for the comparable three-month period ended September 30, 2022.

The Company’s diluted earnings per share were $0.51 for the three months ended September 30, 2023 as compared with diluted earnings per share of $0.70 for the comparable three-month period ended September 30, 2022.

The $7.5 million decrease in net income available to common stockholders and $0.19 decrease in diluted earnings per share versus the third quarter of 2022 were due to a $15.8 million decrease in net interest income and a $3.6 million increase in noninterest expenses, partially offset by a $8.5 million decrease in provision for credit losses, a $3.2 million decrease in income tax expense and a $0.2 million increase in noninterest income.

Net income available to common stockholders for the nine months ended September 30, 2023 was $63.2 million compared to $88.1 million for the comparable nine-month period ended September 30, 2022.

The Company’s diluted earnings per share were $1.61 for the nine months ended September 30, 2023 as compared with diluted earnings per share of $2.23 for the comparable nine-month period ended September 30, 2022.

The $24.9 million decrease in net income available to common stockholders and $0.62 decrease in diluted earnings per share versus the nine months ended September 2022 were due to a $30.8 million decrease in net interest income and a $13.0 million increase in noninterest expenses, partially offset by an $8.9 million decrease in provision for credit losses, a $9.9 million decrease in income tax expense and a $0.1 million increase in noninterest income.

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 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’

Fully taxable equivalent net interest income for the three months ended September 30, 2023 decreased by $15.6 million, or 19.8%, from the comparable three-month period ended September 30, 2022.

The decrease from the three months ended September 30, 2022 resulted primarily from a 250 basis-point increase in rate paid on interest-bearing deposits, partially offset by an 88 basis-point increase rate earned on total interest-earning assets and a 92 basis-point contraction of the net interest margin to 2.76% from 3.68%.

Fully taxable equivalent net interest income for the nine months ended September 30, 2023 decreased by $30.2 million, or 13.4%, from the comparable nine-month period ended September 30, 2022.

The decrease from the nine months ended September 30, 2022 resulted primarily from a 254 basis-point increase in rate paid on interest-bearing deposits, partially offset by a 92 basis increase in rate earned on total interest-earning assets and a 91 basis-point contraction of the net interest margin to 2.85% from 3.76%.

The following tables, “Average Statements of Condition with Interest and Average Rates”, present for the three and nine months ended September 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 June 30,

Three Months Ended September 30,

(dollars in thousands)

33 unchanged sentences

Rates are annualized.

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in thousands)

34 unchanged sentences

Noninterest Income

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 income totaled $3.6 million for the three months ended September 30, 2023, compared with $3.3 million for the three months ended September 30, 2022. Included in noninterest income for the three months ended September 30, 2023 and September 30, 2022 were net losses on equity securities of $0.3 million and $0.4 million, respectively. Excluding these items, noninterest income increased $0.1 million when compared to the three months ended September 30, 2022. The increase was primarily attributable to an increase in net gains on sale of loans held-for-sale, primarily Small Business Administration (“SBA”) loans of $0.4 million and an increase in bank owned life insurance ("BOLI") income of $0.1 million, partially offset by a decrease in deposit, loan, and other income of $0.4 million.

Noninterest income totaled $9.8 million for the nine months ended September 30, 2023, compared with $9.7 million for the nine months ended September 30, 2022.

Included in noninterest income were net losses on equity securities of $0.7 million and $1.4 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Excluding these items, noninterest income decreased $0.7 million when compared to the nine months ended September 30, 2022.

The decrease was primarily attributable to a decreases in deposit, loan and other income of $1.0 million and a decrease in net gains on sale of loans held-for-sale, primarily SBA, of $0.3 million, partially offset by an increase in BOLI income of $0.6 million.

Noninterest Expenses

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.

Noninterest expenses totaled $35.8 million for the three months ended September 30, 2023, compared with $32.1 million for the three months ended September 30, 2022.

Noninterest expenses increased by $3.6 million when compared to the three months ended September 30, 2022. The increase was primarily attributable to an increase in salaries and employee benefits of $1.3 million, which was attributable to new hires, an increase in FDIC insurance expense of $1.1 million, which was attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate, an increase in information technology and communication expenses of $0.7 million, which was primarily attributable to additional investments in technology, equipment, and software, an increase in other expenses of $0.4 million, an increase in occupancy and equipment of $0.1 million, an increase in marketing and advertising expenses of $0.1 million and an increase in other components of net periodic pension expense of $0.1 million, partially offset by a decrease in professional and consulting of $0.1 million and a decrease in amortization of core deposit intangibles of $0.1 million.

Noninterest expenses totaled $106.1 million for the nine months ended September 30, 2023, compared to $93.1 million for the nine months ended September 30, 2022.

Noninterest expenses increased by $13.0 million when compared to the nine months ended September 30, 2022. The increase was primarily attributable to an increase in salaries and employee benefits of $6.8 million, which was attributable to new hires, an increase in FDIC insurance expense of $2.4 million, which was attributable to balance sheet growth and a two-basis point increase in the Bank’s initial base rate, an increase in information technology and communication expenses of $1.8 million, which was primarily attributable to additional investments in technology, equipment, and software, an increase in other expenses of $2.0 million, which was primarily attributable to expenses incurred related to derivatives cash collateral during the nine months ended September 30, 2023, an increase in occupancy and equipment of $0.9 million, an increase in marketing and advertising expenses of $0.4 million and an increase in other components of net periodic pension expense of $0.4 million, partially offset by a decrease in BoeFly acquisition expense of $1.5 million and a decrease in amortization of core deposit intangibles of $0.2 million.

Income tax expense was $7.2 million for the three months ended September 30, 2023, compared to $10.4 million for the three months ended September 30, 2022. The decrease in income tax expense was the result of lower income before income tax expense.

The effective tax rate for the three months ended September 30, 2023 and September 30, 2022 was 25.2% and 26.5%, respectively. The decrease in the effective tax rate when compared to the three months ended September 30, 2022 is largely attributable to lower taxable income.

Income tax expense was $23.7 million for the nine months ended September 30, 2023, compared to $33.7 million for the nine months ended September 30, 2022.

The effective tax rate for the nine months ended September 30, 2023 and September 30, 2022 was 26.0% and 26.7%, respectively.

The decrease in the effective tax rate when compared to the nine months ended September 30, 2022 is largely attributable to lower taxable income.

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.

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

Residential real estate

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.

As of September 30, 2023, gross loans totaled $8.2 billion, an increase of $79.0  million or 1.0%, compared to December 31, 2022.

Net loan growth was attributable to organic loan originations.

Allowance for Credit Losses and Related Provision

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.

As of September 30, 2023, the Company’s allowance for credit losses for loans was $88.2 million, a decrease of $2.3 million from $90.5 million as of December 31, 2022.

The decrease was primarily attributable to $8.0 million in net charge-offs, offset by a $5.7 million provision for credit losses.

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 provision for credit losses, which includes a provision for unfunded commitments, for the three and nine months ended September 30, 2023 and September 30, 2022 was $1.5 million and $5.5 million, respectively, compared to $10.0 million and $14.5 million, for the three and nine months ended September 30, 2022, respectively. The decrease in the provision for credit losses when compared to the comparable periods in 2022 was mainly attributable to changes in forecasted macroeconomic conditions.

There were $2.5 million and $8.1 million in net charge-offs for the three and nine months ended September 30, 2023, compared with $0.4 million and $0.9 million in net charge-offs for the three and nine months ended September 30, 2022, respectively.

The increase in net charge-offs for the three ended September 30, 2023 when compared to the comparable prior period resulted from the partial charge-off of one commercial loan that we previously reserved for. 

The increase in net charge-offs for the nine months ended September 30, 2023 when compared to the comparable prior period resulted from the aforementioned partial charge-off during the third quarter of 2023, 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 1.08% as of September 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 June 30, 2023 is adequate to cover credit losses inherent in the loan portfolio.

In management’s view, the level of the ACL as of September 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”

3 unchanged sentences

Three Months Ended

September 30,

(dollars in thousands)

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Net charge-offs

Provision for credit losses - loans

Provision for credit losses –

Balance - end of period

2 unchanged sentences

ACL as a percentage of loans receivable

Six Months Ended

Nine Months Ended

September 30,

(dollars in thousands)

8 unchanged sentences

Net charge-offs

Provision for credit losses - loans

Provision for credit losses –

Balance - end of period

3 unchanged sentences

Asset Quality

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through a review processes that includes analysis of credit requests and ongoing examination of outstanding loans, delinquencies, and potential problem loans, with particular attention to portfolio dynamics and mix.

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that includes analysis of credit requests and ongoing examination of outstanding loans, delinquencies, and potential problem loans, with particular attention to portfolio dynamics and mix.

The Company strives to identify loans experiencing difficulty early on, to record charge-offs promptly based on realistic assessments of current collateral values and cash flows, and to maintain an adequate allowance for credit losses at all times.

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

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

Investment Securities

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

As of September 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 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’

For the three-months ended September 30, 2023, average securities, on an amortized cost basis, decreased by $17.0 million to approximately $723.4 million, or 8.0% of average total interest-earning assets, from approximately $740.4 million, or 8.7% of average interest-earning assets, as of September 30, 2022.

As of September 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 $87.7 million as compared with net unrealized losses of $61.8 million as of December 31, 2022.

1 unchanged sentence

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 June 30, 2023.

This also resulted in a $10.1 million increase in deferred tax assets, attributable to the decline in fair value on securities available-for-sale since December 31, 2022.

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

As of September 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 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%.

Based on our model, which was run as of September 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 8.20%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 4.98%.

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 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%.

Based on our model, which was run as of September 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 5.89%, while a 100 basis-point instantaneous decrease in interest rates would increase net interest income by 4.68%.

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 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 non-maturity deposits.

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

Our EVE as of September 30, 2023, would decrease by 16.49% with an instantaneous rate shock of up 200 basis points, and increase by 8.66% 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 changes in overall market interest rates, updates to certain model assumptions, changes in short and intermediate-term fixed rate funding and by the deposit mix shift into certificates of deposit, from both noninterest-bearing and interest-bearing non-maturity deposits.

The following table illustrates the most recent results for EVE and one-year NII sensitivity as of September 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 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’

As of September 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 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.

June 30, 2023

As of September 30, 2023, liquid assets (cash and due from banks, interest-bearing deposits with banks and unencumbered investment securities) were $515.6 million, which represented 5.3% of total assets and 6.2% 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 September 30, 2023, not included in the above liquid assets were securities with a market value of $231.6 million which were pledged to either the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”), or the Federal Home Loan Bank, which support aggregate unutilized borrowing capacity of $262.8 million as of September 30, 2023.

The Bank is a member of the Federal Home Loan Bank of New York and, based on available qualified collateral as of September 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 and had the ability to borrow $1.5 billion as of September 30, 2023.

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

As of September 30, 2023, the Bank had aggregate available and unused credit of approximately $3.3 billion, which represents the aforementioned facilities totaling $4.8 billion net of $1.5 billion in outstanding borrowings and letters of credit.

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

Cash and cash equivalents totaled $253.3 million as of September 30, 2023, increasing by $15.0 million from $268.3 million as of December 31, 2022. Operating activities provided $64.6 million in net cash. Investing activities used $75.7 million in net cash, primarily reflecting an increase in loans and investment securities.

Financing activities used $3.9 million in net cash, primarily reflecting a decrease of $2.4 billion in repayment of borrowings and $75 million in repayment of subordinated debt, partially offset by $2.4 billion in advances of FHLB borrowings and an increase in deposits of $82.1 million.

Total deposits increased by $81.9 million, or 1.1%, to $7.4 billion as of September 30, 2023 from December 31, 2022.

The increase was primarily due to increases in interest-bearing and NOW deposits and time 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.

September 30, 2023

December 31, 2022

7 unchanged sentences

The subordinated debentures are redeemable in whole or part.

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

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%.

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

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 converted as of June 30, 2023 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%.

The rate as of September 30, 2023 was 8.48%. 

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

The 2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance to, but excluding, September 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on September 15 and December 15 of each year, commencing December 15, 2020.

The 2020 Notes bear interest at 5.75% annually from, and including, the date of initial issuance up to, but excluding, September 15, 2025 or the date of earlier redemption, payable semi-annually in arrears on September 15 and December 15 of each year, commencing December 15, 2020.

From and including September 15, 2025 through maturity or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the Second Supplemental Indenture), plus 560.5 basis points, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2025.

2 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 the current three-month LIBOR rate plus 284 basis points. 

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

Stockholders ’

The Company’s stockholders’

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

equity was $1.2 billion as of September 30, 2023, an increase of $9 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 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 $214.9 million and $215.7 million, as of June 30, 2023 and December 31, 2022, respectively.

equity was primarily attributable to an increase in retained earnings of $44 million, partially offset by an increase in accumulated other comprehensive losses of $21 million and an increase in treasury stock of $15 million. The increase in accumulated other comprehensive losses during 2023 resulted from higher interest rates. As of September 30, 2023, the Company’s tangible common equity ratio and tangible book value per share were 9.11% and $22.34, respectively, which improved from 9.04% and $21.71, respectively, as of December 31, 2022. Total goodwill and other intangible assets were $214.6 million as of September 30, 2023, and $215.7 million as of December 31, 2022.

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

June 30, 2023

September 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 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).

The following is a summary of regulatory capital amounts and ratios as of September 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 June 30, 2023

As of September 30, 2023

(dollars in thousands)

7 unchanged sentences

To Be Well-Capitalized Under Prompt Corrective Action Provisions

As of June 30, 2023

As of September 30, 2023

(dollars in thousands)

3 unchanged sentences

Total risk-based capital

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

As of September 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 3.40% above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Risk Based Capital Ratio which was 2.93% 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