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ConnectOne Bancorp, Inc. Reports Fourth Quarter and Full-Year 2015 Results; Organic Growth Momentum Continues; Total Assets Surpass $4 Billion

ENGLEWOOD CLIFFS, N.J., Jan. 27, 2016 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today announced results for the fourth quarter ended December 31, 2015, the sixth full quarter following the Merger between the Company and legacy ConnectOne completed on July 1, 2014 (the “Merger”). Financial information prior to July 1, 2014 includes only the operations of the Company, the legal and accounting acquirer in the transaction. Concurrent with the Merger, the combined company changed its name to ConnectOne.

The Company reported net income available to common stockholders of $9.5 million, or $0.31 per diluted share, for the fourth quarter of 2015, compared with net income available to common stockholders of $8.0 million, or $0.27 per diluted share, for the fourth quarter of 2014. Net income available to common stockholders was $41.2 million, or $1.36 per diluted share, for the full-year 2015 compared with $18.5 million, or $0.79 per diluted share, for the full-year 2014.

In addition to the results presented in accordance with generally accepted accounting principles ("GAAP"), ConnectOne routinely supplements its evaluation with an analysis of certain non-GAAP financial measures including net income available to common stockholders excluding non-core items. ConnectOne believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors in understanding our operating performance and trends, and facilitates comparisons with the performance of peers. Reconciliations of non-GAAP disclosures used in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Fourth quarter 2015 results reflect the following non-core items, on an after-tax basis: $0.8 million fair value write-down for the pending disposition of a former Union Center operations building that had been repositioned in 2010 as a lease financing receivable; $0.8 million of income resulting from accretion of purchase accounting fair value marks; $0.7 million of net securities gains; $0.3 million in additional loan loss provision related to the maturity and extension of acquired portfolio loans; $1.5 million in an additional provision associated with the Bank’s New York City taxi medallion loan portfolio; $0.1 million of pension settlement expenses, which had no impact on total stockholders’ equity or book value per share; and $0.1 million in amortization of intangible assets. Excluding non-core items, net income available to common stockholders was $10.8 million, up 10.9% from $9.7 million for the prior year quarter. Excluding non-core items, earnings per diluted share was $0.36 for the fourth quarter of 2015, up from $0.32 for the fourth quarter of 2014.

Frank Sorrentino, ConnectOne’s Chairman and CEO stated, “2015 marked another year of extraordinary accomplishments. Total footings surpassed $4 billion, fueled by 22% growth in our loan portfolio and 32% growth in noninterest-bearing demand deposits. Return on assets and tangible equity exceeded 1.10% and 13.5%, respectively, and our efficiency ratio was approximately 42%, among the best for banks of similar size. Operationally, to support our growth, we increased and enhanced our staff including management, lending and back-office. We opened our first office in New York City last May, and it is already profitable. 2015 was also a year of overcoming challenges and creating opportunities. We faced fierce competition from banks and over-capitalized thrifts, yet we were able to continue our growth trajectory without sacrificing credit quality or yield. In addition, during the year, our stock price came under pressure as result of our exposure to the taxi-medallion industry. Our medallion portfolio, which is relatively modest at approximately 3.3% of total loans, consists only of New York City “yellow” taxi medallions, where business continues to be vibrant and valuations appear to be stabilizing. Nevertheless, the industry will likely remain a source of potential volatility for the foreseeable future and, with that in mind, during the quarter we took an additional reserve, bringing our total specific reserves against the medallion portfolio to approximately 4.5%.”

Operating Results

Fully taxable equivalent net interest income for the fourth quarter of 2015 was $31.1 million, an increase of $2.0 million, or 6.8%, from the same quarter of 2014. This was a result of a 16.2% increase in average interest-earning assets, partially offset by a 31 basis-point contraction in the net interest rate margin. Included in net interest income was accretion and amortization of purchase accounting adjustments of $1.4 million during the fourth quarter of 2015 and $2.5 million in the fourth quarter of 2014. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.29% in the fourth quarter of 2015, 14 basis points lower than the 2014 fourth quarter adjusted net interest margin of 3.43%. The reduction in the adjusted net interest margin in the fourth quarter of 2015 versus the same 2014 period was attributable to a decline in yield on loans combined with an increase in funding costs. The decline in loan yields reflects the impact of a protracted low rate environment, while the increase in the cost of funds was due to an extension of liability duration consistent with management’s conservative approach to interest rate risk. The Bank’s interest rate risk models reflect significant asset sensitivity as of year-end indicating a projected positive impact from rising rates.

Noninterest income increased to $2.4 million in the fourth quarter of 2015 from $2.1 million in the fourth quarter of 2014, primarily due to an increase in net securities gains. Net securities gains increased to $1.1 million in the fourth quarter of 2015 from $0.7 million in the prior year period. Noninterest income also includes bank-owned life insurance income, deposit and loan fees, annuities and life insurance commissions, and gains on sales of residential mortgages in the secondary market. In total, noninterest income represents a relatively small portion of the Bank’s total revenue.

Noninterest expenses totaled $13.6 million for the fourth quarter of 2015 compared with $11.0 million for the same quarter of 2014 after excluding $1.8 million of merger-related charges and a $2.4 million wire fraud charge. The increase in operating expenses for the fourth quarter of 2015 from the prior year period was primarily attributable to increased salaries and employee benefits, occupancy and professional fees associated with the Company’s strong organic growth. The Company’s operating efficiency ratio was 42.8% in the 2015 fourth quarter, 41.9% in the 2015 third quarter and 38.4% in the 2014 fourth quarter.

Income tax expense was $4.6 million and $5.0 million for the fourth quarter of 2015 and 2014, respectively, resulting in effective tax rates of 32.5% and 38.3% for the fourth quarter of 2015 and 2014, respectively. The higher effective tax rate for 2014 reflects a relatively higher percentage of taxable income and lower level of tax-deductible expenses due to the merger.

Asset Quality

The provision for loan losses increased to $5.1 million in the fourth quarter of 2015, compared with $2.5 million in the fourth quarter of 2014. Included in the 2015 provision was $2.5 million in additional provisioning related to the taxi cab medallion loan portfolio and a $1.3 million pre-tax charge related to the pending sale of Union Center’s former operations center that was repositioned as a lease financing receivable. Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $23.3 million at December 31, 2015, $16.1 million at September 30, 2015, and $12.7 million at December 31, 2014. The increase in nonperforming assets at year-end 2015 was largely attributable to credits of one borrower, the sale of which is currently being negotiated. Nonperforming assets as a percent of total assets were 0.58% at December 31, 2015, 0.42% at September 30, 2015, and 0.37% at December 31, 2014. Annualized net charge-offs were 0.00% for the fourth quarter 2015 and 0.07% in the fourth quarter of 2014. The allowance for loan losses was $26.6 million, representing 0.86% of loans receivable and 128.1% of nonaccrual loans at December 31, 2015. At September 30, 2015, the allowance was $21.5 million representing 0.73% of loans receivable and 167.1% of nonaccrual loans and, at December 31, 2014, the allowance was $14.2 million representing 0.56% of loans receivable and 122.0% of nonaccrual loans. In purchase accounting, any allowance for loan losses on an acquired loan portfolio is reversed and a credit risk discount is applied directly to the acquired loan balances. In Management’s opinion, a useful non-GAAP metric is the ratio of allowance for loan losses plus the credit risk discount to total loans receivable. This non-GAAP ratio was 1.28% at December 31, 2015, 1.20% at September 30, 2015, and 1.23% at December 31, 2014.

As of December 31, 2015, taxi medallion loans, all of which are secured by New York City taxi medallions, totaled $103.2 million, of which $99.9 million was current and $3.3 million was past due 30-60 days. Troubled debt restructurings associated with this portfolio totaled $78.5 million. The average loan-to-value ratio of the medallion portfolio was approximately 90% assuming valuations of $800 thousand for corporate and $700 thousand for individual.

Selected Balance Sheet Items

At December 31, 2015, the Company’s total assets were $4.0 billion, an increase of $568 million from December 31, 2014. Loans receivable were $3.1 billion, reflecting net loan growth (loan originations less pay-downs and pay-offs) of $560 million from December 31, 2014, primarily attributable to multi-family ($225 million), other commercial real estate ($107 million), commercial and industrial (“C&I”) ($77 million) and construction ($151 million). Management’s current intent is to maintain a multi-family portfolio concentration in the range of 25-30% of total loans, while growing the C&I and construction segments. The growth in loans was funded with increases in deposits, borrowings and subordinated debt.

The Company’s stockholders’ equity was $477 million at December 31, 2015, an increase of $31 million from December 31, 2014. The increase in stockholders’ equity was due to a $32 million increase in retained earnings and approximately $3 million of equity issuance related to stock-based compensation, including the exercise of options, partially offset by a $4 million decrease in accumulated other comprehensive income, primarily attributable to a decrease in unrealized gains on available for sale securities. As of December 31, 2015, the Company’s tangible common equity ratio and tangible book value per share were 8.18% and $10.51, respectively. As of December 31, 2014, the tangible common equity ratio and tangible book value per share were 8.62% and $9.57, respectively. Total goodwill and other intangible assets were $150 million as of December 31, 2015, a decrease of $0.9 million from December 31, 2014.

About ConnectOne Bancorp, Inc.

ConnectOne is a New Jersey corporation and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended, and serves as the holding company for ConnectOne Bank ("the Bank"). 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 21 other banking offices.

For more information visit https://www.connectonebank.com/.

Forward-Looking Statements

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

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except for share data)December 31, December 31,
2015 2014
(unaudited) (audited)
ASSETS
Cash and due from banks$ 31,291 $ 31,813
Interest-bearing deposits with banks 169,604 95,034
Cash and cash equivalents 200,895 126,847
Investment securities:
Available-for-sale 195,770 289,532
Held-to-maturity (fair value of $230,558 and $231,445) 224,056 224,682
Loans receivable 3,099,007 2,538,641
Less: Allowance for loan and lease losses 26,572 14,160
Net loans receivable 3,072,435 2,524,481
Investment in restricted stock, at cost 32,612 23,535
Bank premises and equipment, net 22,333 20,653
Accrued interest receivable 12,545 11,700
Bank-owned life insurance 78,801 52,518
Other real estate owned 2,549 1,108
Goodwill 145,909 145,909
Core deposit intangibles 3,908 4,825
Other assets 24,908 22,782
Total assets$ 4,016,721 $ 3,448,572
LIABILITIES
Deposits:
Noninterest-bearing$ 650,775 $ 492,515
Interest-bearing 2,140,191 1,983,092
Total deposits 2,790,966 2,475,607
Borrowings 671,587 495,553
Subordinated debentures 55,155 5,155
Other liabilities 21,669 26,038
Total liabilities 3,539,377 3,002,353
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 liquidation value per share, authorized 5,000,000 shares;
issued and outstanding 11,250 shares of Series B preferred stock at December 31, 2015
and December 31, 2014; total liquidation value of $11,250 at December 31, 2015 and
December 31, 2014 11,250 11,250
Common stock, no par value, authorized 50,000,000 shares; issued 32,149,585
shares at December 31, 2015 and 31,758,828 at December 31, 2014; outstanding 30,085,663
shares at December 31, 2015 and 29,694,906 at December 31, 2014 374,287 374,287
Additional paid-in capital 8,527 6,015
Retained earnings 104,606 72,398
Treasury stock, at cost (2,063,922 common shares at December 31, 2015 and
December 31, 2014) (16,717) (16,717)
Accumulated other comprehensive loss (4,609) (1,014)
Total stockholders' equity 477,344 446,219
Total liabilities and stockholders' equity$ 4,016,721 $ 3,448,572


CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except for per share data)
Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
Interest income
Interest and fees on loans $ 33,686 $ 28,988 $ 125,493 $ 77,669
Interest and dividends on investment securities:
Taxable 2,325 2,962 10,665 12,022
Tax-exempt 884 892 3,550 3,742
Dividends 284 227 1,081 636
Interest on federal funds sold and other short-term investments 51 61 178 138
Total interest income 37,230 33,130 140,967 94,207
Interest expense
Deposits 3,776 2,916 13,756 8,260
Borrowings 2,998 1,634 10,058 6,548
Total interest expense 6,774 4,550 23,814 14,808
Net interest income 30,456 28,580 117,153 79,399
Provision for loan and lease losses 5,055 2,474 12,605 4,683
Net interest income after provision for loan and lease losses 25,401 26,106 104,548 74,716
Noninterest income
Annuities and insurance commissions 32 83 242 382
Bank-owned life insurance 620 391 1,782 1,303
Net gains on sale of loans held for sale 51 116 327 182
Deposit, loan and other income 522 768 2,667 2,813
Insurance recovery - - 2,224 -
Net gains on sale of investment securities 1,138 718 3,931 2,818
Total noninterest income 2,363 2,076 11,173 7,498
Noninterest expenses
Salaries and employee benefits 7,205 5,675 27,685 18,829
Occupancy and equipment 1,802 1,654 7,587 5,312
FDIC insurance 575 526 2,110 1,618
Professional and consulting 906 372 2,951 1,661
Marketing and advertising 213 222 847 498
Data processing 1,017 814 3,703 2,575
Merger expenses - 1,816 - 12,388
Loss on extinguishment of debt - - 2,397 4,550
Amortization of core deposit intangible 217 245 917 506
Other expenses 1,644 3,840 6,287 6,867
Total noninterest expenses 13,579 15,164 54,484 54,804
Income before income tax expense 14,185 13,018 61,237 27,410
Income tax expense 4,617 4,995 19,926 8,845
Net income 9,568 8,023 41,311 18,565
Less: Preferred stock dividends 28 28 112 112
Net income available to common stockholders $ 9,540 $ 7,995 $ 41,199 $ 18,453
Earnings per common share:
Basic $ 0.32 $ 0.27 $ 1.38 $ 0.80
Diluted 0.31 0.27 1.36 0.79
Weighted average common shares outstanding:
Basic 30,033,062 29,699,301 29,938,458 23,029,813
Diluted 30,310,905 30,149,244 30,283,966 23,479,074
Dividend per common share $ 0.075 $ 0.075 $ 0.300 $ 0.300


ConnectOne's management believes that the supplemental financial information, including non-GAAP measures, provided below is useful to investors. The non-GAAP measures should not be viewed as a substitute for financial results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP financial measures presented by other companies.
CONNECTONE BANCORP, INC.
SUPPLEMENTAL GAAP AND NON-GAAP FINANCIAL MEASURES
(dollars in thousands, except share data)
Three Months Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2015 2015 2015 2015 2014
Earnings, EPS and Operating Data
Net income (GAAP)$ 9,568 $ 10,842 $ 10,521 $ 10,379 $ 8,023
Less: preferred dividends 28 28 28 28 28
Net income available to common stockholders (GAAP) 9,540 10,814 10,493 10,351 7,995
Net gains on sales of securities (1,138) (2,067) (221) (506) (718)
Partial settlements of pension obligation 106 168 243 559 -
Insurance recovery - - (2,223) - -
Merger-related expenses - - - - 1,816
Loss on debt extinguishment - - 2,397 - -
Amortization of intangible assets 217 217 241 241 245
Provision related to maturity and extension of acquired portfolio loans 512 590 502 757 787
Provision related to taxi cab medallion loans 2,500 2,000 - - -
Provision for pending disposition of Union Center operations bldg. 1,304 - - - -
Charge due to wire fraud - - - - 2,374
Accretion of purchase accounting fair value marks (1,416) (1,340) (1,513) (1,802) (2,491)
Non-core items 2,085 (432) (574) (751) 2,013
Income tax (expense) benefit 852 (176) (234) (307) 294
Non-core items, after taxes 1,233 (256) (340) (444) 1,719
Core earnings available to common stockholders (non-GAAP)$ 10,773 $ 10,558 $ 10,153 $ 9,907 $ 9,714
Weighted average diluted shares outstanding 30,310,905 30,335,571 30,231,480 30,149,469 30,149,244
Diluted EPS (GAAP)$ 0.31 $ 0.36 $ 0.35 $ 0.34 $ 0.27
Core Diluted EPS (Non-GAAP) (1)$ 0.36 $ 0.35 $ 0.34 $ 0.33 $ 0.32
Return on Assets Measures
Core earnings available to common stockholders (non-GAAP)$ 10,773 $ 10,558 $ 10,153 $ 9,907 $ 9,714
Add: preferred dividends 28 28 28 28 28
Core net income (non-GAAP)$ 10,801 $ 10,586 $ 10,181 $ 9,935 $ 9,742
Average assets$ 3,891,885 $ 3,729,503 $ 3,551,597 $ 3,466,820 $ 3,369,402
Less: average intangible assets (149,959) (150,178) (150,407) (150,650) (150,934)
Average tangible assets$ 3,741,926 $ 3,579,325 $ 3,401,190 $ 3,316,170 $ 3,218,468
Return on avg. assets (GAAP) 0.98% 1.15% 1.19% 1.21% 0.94%
Core return on avg. assets (Non-GAAP) (2) 1.10% 1.13% 1.15% 1.16% 1.15%
Return on avg. tangible assets (Non-GAAP) (3) 1.03% 1.22% 1.26% 1.29% 1.01%
Core return on avg. tangible assets (Non-GAAP) (4) 1.15% 1.17% 1.20% 1.22% 1.20%
_______
(1) Represents core earnings available to common stockholders divided by weighted average diluted shares outstanding.
(2) Core net income divided by average assets.
(3) Net income excluding amortization of intangible assets divided by average tangible assets.
(4) Core net income divided by average tangible assets.
Three Months Ended
(dollars in thousands, except share data)Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2015 2015 2015 2015 2014
Return on Equity Measures
Core earnings available to common stockholders$ 10,773 $ 10,558 $ 10,153 $ 9,907 $ 9,714
Average common equity$ 467,669 $ 460,432 $ 452,754 $ 442,970 $ 437,136
Less: average intangible assets (149,959) (150,178) (150,407) (150,650) (150,934)
Average tangible common equity$ 317,710 $ 310,254 $ 302,347 $ 292,320 $ 286,202
Return on avg. common equity (GAAP) 8.09% 9.32% 9.30% 9.48% 7.26%
Core return on avg. common equity (non-GAAP) (5) 9.14% 9.10% 9.00% 9.07% 8.82%
Return on avg. tangible common equity (non-GAAP) (6) 12.07% 13.99% 14.11% 14.56% 11.28%
Core return on avg. tangible common equity (non-GAAP) (7) 13.45% 13.50% 13.47% 13.75% 13.47%
Efficiency Measures
Total noninterest expenses$ 13,579 $ 13,301 $ 14,974 $ 12,631 $ 15,164
Partial settlements of pension obligation (106) (168) (243) (559) -
Merger-related expenses - - - - (1,816)
Loss on debt extinguishment - - (2,397) - -
Charge due to wire fraud - - - - (2,374)
Amortization of intangible assets and fair value marks (217) (217) (241) (241) (218)
Operating non-interest expense $ 13,256 $ 12,916 $ 12,093 $ 11,831 $ 10,756
Net interest income (FTE) 31,102 30,382 29,316 28,906 29,135
Impact of purchase accounting fair value marks (1,384) (1,314) (1,487) (1,776) (2,464)
Noninterest income 2,363 3,819 3,436 1,555 2,076
Less: insurance recovery - - (2,224) - -
Less: net gains on sales of securities (1,138) (2,067) (221) (506) (718)
Operating revenue $ 30,943 $ 30,820 $ 28,820 $ 28,179 $ 28,029
Operating Efficiency Ratio (non-GAAP) (8) 42.8% 41.9% 42.0% 42.0% 38.4%
Net Interest Margin
Average interest earning assets$ 3,582,408 $ 3,441,151 $ 3,266,382 $ 3,182,894 $ 3,082,934
Net interest income (FTE)$ 31,102 $ 30,382 $ 29,316 $ 28,906 $ 29,135
Impact of purchase accounting fair value marks (1,384) (1,314) (1,487) (1,776) (2,464)
Adjusted net interest income$ 29,718 $ 29,068 $ 27,829 $ 27,130 $ 26,671
Net interest margin (GAAP) 3.44% 3.50% 3.60% 3.68% 3.75%
Adjusted net interest margin (non-GAAP) (9) 3.29% 3.35% 3.42% 3.46% 3.43%
_____
(5) Core earnings available to common stockholders divided by average common equity.
(6) Earnings available to common stockholders excluding amortization of intangibles divided by average tangible common equity.
(7) Core earnings available to common stockholders divided by average tangible common equity.
(8) Operating noninterest expense divided by operating revenue.
(9) Adjusted net interest income divided by average interest earning assets.
As of
(dollars in thousands, except share data)Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2015 2015 2015 2015 2014
Capital Ratios and Book Value per Share
Common equity$ 466,094 $ 459,896 $ 452,732 $ 444,944 $ 434,969
Less: intangible assets (149,817) (150,034) (150,252) (150,493) (150,734)
Tangible common equity$ 316,277 $ 309,862 $ 302,480 $ 294,451 $ 284,235
Total assets$ 4,016,721 $ 3,838,253 $ 3,660,057 $ 3,505,891 $ 3,448,572
Less: intangible assets (149,817) (150,034) (150,252) (150,493) (150,734)
Tangible assets$ 3,866,904 $ 3,688,219 $ 3,509,805 $ 3,355,398 $ 3,297,838
Common shares outstanding 30,085,663 30,197,789 30,196,731 29,864,602 29,694,906
Common equity ratio (GAAP) 11.60% 11.98% 12.37% 12.69% 12.61%
Tangible common equity ratio (non-GAAP) (10) 8.18% 8.40% 8.62% 8.78% 8.62%
Regulatory capital ratios (Bancorp):
Leverage ratio 9.07% 9.26% 9.49% 9.45% 9.37%
Common equity Tier 1 risk-based ratio 9.14% 9.33% 9.63% 9.75% n/a
Risk-based Tier 1 capital ratio 9.60% 9.82% 10.14% 10.29% 10.44%
Risk-based total capital ratio 11.77% 11.94% 12.26% 10.82% 10.94%
Regulatory capital ratios (Bank):
Leverage ratio 9.96% 10.22% 10.48% 9.41% 9.33%
Common equity Tier 1 risk-based ratio 10.55% 10.83% 11.19% 10.24% n/a
Risk-based Tier 1 capital ratio 10.55% 10.83% 11.19% 10.24% 10.40%
Risk-based total capital ratio 11.31% 11.47% 11.74% 10.77% 10.90%
Book value per share (GAAP)$ 15.49 $ 15.23 $ 14.99 $ 14.90 $ 14.65
Tangible book value per share (non-GAAP) (11) 10.51 10.26 10.02 9.86 9.57
Asset Quality
Nonaccrual loans$ 20,737 $ 12,888 $ 12,145 $ 14,585 $ 11,610
Other real estate owned 2,549 3,244 1,564 870 1,108
Total nonperforming assets$ 23,286 $ 16,132 $ 13,709 $ 15,455 $ 12,718
Loans past due 90 days and still accruing$ - $ 268 $ - $ 638 $ 1,211
Nonaccrual loans as a % of loans receivable 0.67% 0.44% 0.44% 0.55% 0.46%
Nonperforming assets as a % of total assets 0.58% 0.42% 0.37% 0.44% 0.37%
Allowance for loan losses as a % of nonaccrual loans 128.1% 167.1% 143.9% 109.2% 122.0%
Annualized net charge-offs as a % of average loans 0.00% 0.02% -% 0.01% 0.07%
Total loans receivable$ 3,099,007 $ 2,953,381 $ 2,765,288 $ 2,640,739 $ 2,538,641
Less: acquired loans (866,878) (923,210) (1,060,632) (1,110,859) (1,190,085)
Loans receivable, excluding acquired loans$ 2,232,129 $ 2,030,171 $ 1,704,656 $ 1,529,880 $ 1,348,556
Allowance for loan losses$ 26,572 $ 21,533 $ 17,480 $ 15,933 $ 14,160
Accretable credit risk discount on acquired loans 12,955 13,893 14,331 15,800 17,017
Total allowance for loan losses and accretable credit risk discount on acquired loans$ 39,527 $ 35,426 $ 31,811 $ 31,733 $ 31,177
Allowance for loan losses as a % of loans receivable 0.86% 0.73% 0.63% 0.60% 0.56%
Allowance for loan losses as a % of loans receivable, excluding acquired loans 1.19% 1.06% 1.03% 1.04% 1.05%
Allowance for loan losses and accretable credit risk discount on loans as a % of loans receivable 1.28% 1.20% 1.15% 1.20% 1.23%
_____
(10) Tangible common equity divided by tangible assets.
(11) Tangible common equity divided by common shares outstanding at period-end.


CONNECTONE BANCORP, INC.
NET INTEREST MARGIN ANALYSIS
(dollars in thousands)
For the Three Months Ended
December 31, 2015 December 31, 2014
Average Average Average Average
Interest-earning assets: Balance Interest Rate (7) Balance Interest Rate (7)
Investment securities (1) (2) $ 442,135 $ 3,686 3.31% $ 514,619 $ 4,289 3.31%
Loans receivable (2) (3) (4) 3,045,051 33,855 4.41% 2,467,311 29,108 4.68%
Federal funds sold and interest-
bearing deposits with banks 65,067 51 0.31% 80,716 61 0.30%
Restricted investment in bank stock 30,155 284 3.74% 20,288 227 4.44%
Total interest-earning assets 3,582,408 37,876 4.19% 3,082,934 33,685 4.33%
Allowance for loan losses (22,165) (12,588)
Non-interest earning assets 331,642 299,056
Total assets $ 3,891,885 $ 3,369,402
Interest-bearing liabilities:
Money market deposits $ 756,302 840 0.44% $ 722,729 746 0.41%
Savings deposits 216,149 152 0.28% 228,869 173 0.30%
Time deposits 783,068 2,446 1.24% 668,959 1,652 0.98%
Other interest-bearing deposits 356,115 338 0.38% 369,541 345 0.37%
Total interest-bearing deposits 2,111,634 3,776 0.71% 1,990,098 2,916 0.58%
Borrowings 617,024 2,159 1.39% 422,927 1,548 1.45%
Capital lease obligation 2,904 44 6.01% 3,017 46 6.05%
Subordinated debentures 55,155 795 5.72% 5,155 40 3.08%
Total interest-bearing liabilities 2,786,717 6,774 0.96% 2,421,197 4,550 0.75%
Demand deposits 603,611 481,870
Other liabilities 22,638 17,949
Total noninterest-bearing liabilities 626,249 499,819
Stockholders' equity 478,919 448,386
Total liabilities and stockholders' equity$ 3,891,885 $ 3,369,402
Net interest income (tax equivalent basis) 31,102 29,135
Net interest spread (5) 3.23% 3.59%
Net interest margin (6) 3.44% 3.75%
Tax equivalent adjustment (646) (555)
Net interest income $ 30,456 $ 28,580
(1) Average balances are calculated on amortized cost.
(2) Interest income is presented on a tax equivalent basis using 35% federal tax rate.
(3) Includes loan fee income.
(4) Loans include non-accrual loans.
(5) Represents difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a tax equivalent basis.
(6) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.
(7) Rates are annualized.

Investor Contact: William S. Burns Executive VP & CFO 201.816.4474; bburns@cnob.com Media Contact: Christine Marra, MWW 646.215.6888; cmarra@mww.com

Source:ConnectOne Bancorp, Inc.