CONNECTONE BN(CNOBP) - 2023 Q3 - Quarterly Report

Financial Performance - Net income available to common stockholders for Q3 2023 was $19.9 million, down from$ 27.4 million in Q3 2022, representing a decrease of 27.4%[150] - Diluted earnings per share for Q3 2023 were $0.51, compared to$ 0.70 for Q3 2022, a decrease of 27.1%[150] - For the nine months ended September 30, 2023, net income available to common stockholders was $63.2 million, down from$ 88.1 million in the same period of 2022, a decrease of 28.2%[151] - Diluted earnings per share for the nine months ended September 30, 2023 were $1.61, compared to$ 2.23 for the same period in 2022, a decrease of 28%[151] Interest Income and Margin - Fully taxable equivalent net interest income for Q3 2023 decreased by $15.6 million, or 19.8%, compared to Q3 2022[153] - The net interest margin contracted to 2.76% in Q3 2023 from 3.68% in Q3 2022, a decrease of 92 basis points[153] - For the nine months ended September 30, 2023, fully taxable equivalent net interest income decreased by$ 30.2 million, or 13.4%, compared to the same period in 2022[154] - The net interest margin for the nine months ended September 30, 2023 was 2.85%, down from 3.76% in the same period of 2022, a decrease of 91 basis points[154] - The company reported a net interest spread of 2.12% for the nine months ended September 30, 2023, compared to 3.51% for the same period in 2022[1][3] Assets and Loans - Total interest-earning assets increased to $9.09 billion in Q3 2023 from$ 8.50 billion in Q3 2022[158] - Total assets as of September 30, 2023 were $9.63 billion, compared to$ 9.03 billion as of September 30, 2022[158] - Total gross loans as of September 30, 2023, amounted to $8.2 billion, reflecting an increase of$ 79.0 million or 1.0% compared to December 31, 2022[171] - Average loans receivable increased to $8,169,139 thousand in Q3 2023 from$ 7,580,176 thousand in Q3 2022, representing an increase of 7.8%[179] Noninterest Income and Expenses - Noninterest income for the nine months ended September 30, 2023, totaled $9.8 million, slightly up from$ 9.7 million for the same period in 2022[166] - Noninterest expenses increased to $106.1 million for the nine months ended September 30, 2023, compared to$ 93.1 million for the same period in 2022, marking a rise of $13.0 million[168] Credit Losses and Charge-offs - The allowance for credit losses for loans was$ 88.2 million as of September 30, 2023, down from $90.5 million as of December 31, 2022[173] - Net charge-offs for the nine months ended September 30, 2023, were$ 8.1 million, compared to $0.9 million for the same period in 2022[175] - Total charge-offs for the nine months ended September 30, 2023, were$ 8,089 thousand, compared to $989 thousand for the same period in 2022, indicating a significant increase in charge-offs[179] - The allowance for credit losses (ACL) as a percentage of loans receivable was 1.08% as of September 30, 2023, down from 1.16% as of September 30, 2022[179] - Provision for credit losses on loans for the nine months ended September 30, 2023, was$ 5,721 thousand, compared to $13,816 thousand for the same period in 2022, indicating a decrease in provisions[179] Market Conditions and Securities - Net unrealized losses on securities available-for-sale increased to$ 87.7 million as of September 30, 2023, from $61.8 million as of December 31, 2022, primarily due to changes in market conditions and interest rates[187] - The average securities portfolio decreased by$ 17.0 million to approximately $723.4 million, or 8.0% of average total interest-earning assets, from 8.7% in the previous year[186] Capital and Liquidity - The Company's stockholders' equity was$ 1.2 billion as of September 30, 2023, an increase of $9 million from December 31, 2022, primarily due to a$ 44 million rise in retained earnings[210] - The tangible common equity ratio improved to 9.11% as of September 30, 2023, up from 9.04% as of December 31, 2022[210] - Cash and cash equivalents totaled $253.3 million as of September 30, 2023, reflecting an increase of$ 15.0 million from December 31, 2022[203] - As of September 30, 2023, liquid assets totaled $515.6 million, representing 5.3% of total assets, down from$ 760.0 million (7.9%) as of December 31, 2022[201] - Total deposits increased by $81.9 million, or 1.1%, to$ 7.4 billion as of September 30, 2023, driven by increases in interest-bearing and NOW deposits[205] - The Company reported a Tier 1 risk-based capital ratio of 11.98% as of September 30, 2023, exceeding the minimum requirement of 6.00%[216] - Total risk-based capital for the Company was $1.197 billion, with a ratio of 13.90% as of September 30, 2023, above the minimum requirement of 8.00%[216] - The Bank's total risk-based capital was$ 1.156 billion, with a ratio of 13.43% as of September 30, 2023, also exceeding the minimum requirement[217] - The Bank had aggregate available and unused credit of approximately $3.3 billion as of September 30, 2023, after accounting for$ 1.5 billion in outstanding borrowings[202] - The Company had outstanding commitments to extend credit of approximately $1.2 billion as of September 30, 2023[202] Interest Rate Sensitivity - The estimated impact of a 200 basis-point increase in interest rates would decrease net interest income by 8.20% over the next year, compared to a decrease of 2.22% estimated as of December 31, 2022[192] - The economic value of equity (EVE) would decrease by 16.49% with an instantaneous rate shock of up 200 basis points as of September 30, 2023[194] Nonaccrual Loans - Nonaccrual loans increased to$ 56,059 thousand as of September 30, 2023, from $44,454 thousand as of December 31, 2022, reflecting a rise of 26.5%[183] - The ratio of nonaccrual loans to total loans receivable rose to 0.69% as of September 30, 2023, compared to 0.55% as of December 31, 2022[184]