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CommunityOne Bancorp Announces Fourth Quarter Core Net Income Excluding Nonrecurring Items of $2.7 Million, 2015 Loan Growth of 14% and Deposit Growth of 9%

CHARLOTTE, N.C., Jan. 29, 2016 (GLOBE NEWSWIRE) -- CommunityOne Bancorp (“Company”) (NASDAQ:COB), the holding company for CommunityOne Bank, N.A. (“Bank”), today announced its unaudited financial results for the quarter ended December 31, 2015. Highlights include:

  • Core net income in 4Q 2015 was $2.7 million ($0.11 per diluted share), an increase of 16% from core net income in 4Q 2014, and was $10.7 million ($0.44 per diluted share) for full year 2015, an increase of 43% from 2014.
  • Net income in 4Q 2015 was $0.4 million ($0.01 per diluted share) and $6.9 million ($0.29 per diluted share) for full year 2015.
  • Loans grew 14% in 2015, and at a 6% annualized rate in 4Q 2015. Organic loans, which exclude purchased residential mortgage pools, grew 19% from 4Q 2014.
  • Year over year Charlotte MSA loan growth was 30%; Raleigh/Durham MSA loan growth was 109%; Greensboro/Winston Salem MSA loan growth was 17%.
  • Deposits grew 9%, low cost core deposits grew 10% and noninterest-bearing deposits grew by $62.6 million, or 19%, during 2015.
  • Net interest income grew 4% from 4Q 2014 to $17.5 million. Net interest margin was 3.29% in 4Q 2015, down 20 basis points from 4Q 2014. Net interest margin was 3.40% for full year 2015, down three basis points from full year 2014.
  • Credit performance was positive during 4Q 2015, as nonperforming loans were 1.2% of total loans, and net recovery of provision for loan losses was $1.0 million in 4Q 2015 and $3.0 million in full year 2015. Net charge-offs were $1.0 million in 4Q 2015, and full year 2015 net charge-offs as a percent of average loans held for investment were 15 basis points, compared to eight basis points in full year 2014.
  • Nonperforming assets fell 23% from a year ago and were 1.5% of total assets.
  • Noninterest income, excluding securities gains and losses and nonrecurring items, grew 15% from 4Q 2014.
  • Noninterest expenses, excluding credit and nonrecurring expenses, were $18.1 million in 4Q 2015, down less than 1% from 4Q 2014. Average full time equivalent employees fell 3% from 4Q 2014.
  • Entered into a definitive merger agreement with Capital Bank Financial Corp on November 22, 2015.


“I continue to be very pleased with our financial trends in the fourth quarter which resulted in our core net income of $10.7 million in 2015, up 43% over 2014. Our whole team worked hard to generate these improved financial results and I could not be prouder of what we accomplished this past year. In addition, we are excited about our pending merger with Capital Bank Financial and look forward to working with Gene Taylor, CEO of Capital, and his entire team to continue to serve our customers in a high quality way,” noted Bob Reid, President and CEO.

Fourth Quarter and Full Year 2015 Financial Results

Results of Operations

Net income was $0.4 million for the fourth quarter of 2015, compared to $144.6 million in the fourth quarter of 2014 and $1.5 million in the third quarter of 2015. Fourth quarter of 2015 included the reversal of $142.5 million of valuation allowance on the Company’s deferred tax assets. Core net income, which excludes nonrecurring income and expenses, was $2.7 million in the fourth quarter of 2015, $0.4 million, or 16%, better than the $2.3 million in the fourth quarter of 2014, and $0.2 million, or 7%, lower than the $2.9 million in the third quarter of 2015. Fully diluted net income per share was $0.01 per share in the fourth quarter of 2015, compared to $6.62 per share and $0.06 per share in the fourth quarter of 2014 and the third quarter of 2015, respectively. Core fully diluted net income per share for the fourth quarter was $0.11 per share, compared to $0.11 and $0.12 in the fourth quarter of 2014 and the third quarter of 2015, respectively.

Net income was $6.9 million, or $0.29 per diluted share, in full year 2015, compared to $150.5 million, or $6.88 per diluted share, in full year 2014. Core net income, which excludes nonrecurring income and expenses, was $10.7 million in full year 2015, an increase of 43% from $7.5 million in full year 2014.

Non-core items in the fourth quarter of 2015 were $2.0 million in merger expenses from the pending merger with Capital Bank Financial and $1.1 million in expenses from the accelerated vesting of restricted stock awards to certain executive officers of the Company. Non-core items in the fourth quarter of 2014 were the deferred tax asset valuation allowance described above and a charge of $1.6 million for six branch closures.

Fourth quarter financial results, as compared to the same quarter last year, reflected continued improvements in the asset quality of the loan portfolio and a $1.0 million recovery of loan loss provision. Net interest income grew $0.7 million, or 4%, from the fourth quarter of 2014 on a $203.4 million, or 15%, increase in average loans, offset by a 24 basis point decline in yield on average earning assets. Core noninterest income, which excludes securities gains and losses and other nonrecurring items, grew $0.7 million, or 15%, from the fourth quarter of 2014 on stronger service charge revenue and growth in mortgage and SBA loan sales. Noninterest expense increased by $1.8 million, or 9%, as compared to the same quarter last year, primarily related to the $3.1 million in non-core merger expenses and restricted stock award accelerated vesting, offset by $1.6 million in branch closure cost accruals recorded in the fourth quarter of 2014.

As compared to the third quarter of 2015, net interest income grew $0.2 million, or 1%, on an increase in average loans of $61.1 million, or 4%, offset by a decrease in the yield on average earning assets of eight basis points. Core noninterest income grew $0.3 million, or 6%, from last quarter on increases in cardholder and merchant services net revenue. Noninterest expense increased by $4.8 million, or 28%, from last quarter, primarily related to $3.1 million in merger related and nonrecurring restricted stock award acceleration expenses, year-end bonus payments and associated payroll taxes, higher other real estate owned (“OREO”) costs, and changes to retiree benefit plans that offset personnel expenses last quarter.

The improved financial performance in 2015 was led by a $4.6 million, or 7%, increase in net interest income from a $184.6 million increase in average loans, a $2.0 million, or 3%, reduction in core noninterest expenses, and a $1.4 million, or 9%, increase in core noninterest income primarily from a $0.7 increase in mortgage and SBA loan sales, offset by a $2.4 million decline in recovery of provision for loan losses.

Loans and Deposits

Strong origination activity continued this quarter across all business lines, reflecting sustained loan demand in our metro markets, portfolio growth across all our businesses, and the impact of personnel additions and market expansion. Loans held for investment grew at an annualized growth rate of 6% during the quarter, with year-end balances impacted by the refinancing of several larger real estate loans into the permanent market. Year to date, loans held for investment grew by $186.0 million, or 14%, exceeding our full year 2015 growth goal of 10-12%. Loans held for investment grew by $21.3 million in the fourth quarter to $1.54 billion, compared to $1.52 billion at the end of the third quarter. Excluding our purchased residential mortgage loan pools, our total organic loan growth was even stronger at $28.7 million during the quarter, an annualized growth rate of 9%. Pass rated loans grew $29.1 million in the fourth quarter, an annualized growth rate of 8%, reflecting continued improvement in the asset quality of the loan portfolio. Loans held for investment to total deposits was 79% in the fourth quarter, improved from 76% a year ago.

Our accelerated loan growth during 2015 was a result of the success of our investments in expanded commercial, commercial real estate and residential mortgage lending capacity in our metro markets of Charlotte, Raleigh/Durham and Greensboro/Winston-Salem, the top three MSAs in terms of population in North Carolina, as well as Charleston, South Carolina, one of the largest and fastest growing markets in that state. At the end of the fourth quarter, the loan portfolio in the three metro North Carolina markets made up 58% of our organic loan portfolio (which excludes our purchased residential mortgage loans), up from 52% a year ago. Key drivers of growth were the Charlotte and Raleigh metro areas with year over year loan portfolio increases of 30% and 109%, respectively.

For the full year, total deposits grew $153.1 million, or 9%, reflecting the enhanced deposit focus during the year. Low cost core deposits, consisting of non-CD deposits, grew $120.1 million during 2015 to $1.33 billion, from $1.21 billion at December 31, 2014. Noninterest-bearing deposits grew $62.6 million, or 19%, in 2015 as a result of growth in commercial relationships and investments in treasury management products.

Net Interest Income

Fourth quarter net interest income was $17.5 million, an increase of $0.7 million, or 4%, as compared to $16.7 million in the fourth quarter of last year, as a result of a $246.7 million increase in average loans and securities, offset by a decrease in net loan yield of 43 basis points from lower rate origination, the fixed/variable loan mix and a $0.2 million reduction in purchased impaired loan accretion. Net interest income was $0.2 million higher as compared to the third quarter of 2015, on an increase in average loans and securities of $70.7 million, offset by the impact of a 12 basis point decline in net loan yield in the fourth quarter driven by reduced new loan origination yields and the fixed/variable loan mix. Accretion, net of contractual interest collected, on purchased impaired loans was $0.5 million in the fourth quarter of 2015, compared to $0.5 million and $0.7 million in the third quarter of 2015 and the fourth quarter of 2014, respectively.

Our net interest margin was 3.29% for the fourth quarter of 2015, down 20 basis points from the fourth quarter of 2014, and down 8 basis points from the third quarter of this year. The decline in net interest margin as compared to the fourth quarter of 2014 was the result of the decline in net loan yields discussed above, offset by an improved asset mix as we grew average loans by $203.4 million (15%) and reduced lower yielding cash balances by $43.4 million, and a 2 basis point decline in the cost of interest bearing liabilities. The decrease in the net interest margin in the fourth quarter of 2015 from the prior quarter was the result of the decline in loan yields discussed above and a 2 basis point increase in the average cost of interest bearing deposits as a result of CD maturity extension and promotional activity in our money market deposit portfolio, offset by an improved asset mix as we grew average loans by $61.1 million. The deposit portfolio continues to perform to our expectations, including the deposit portfolio acquired from CertusBank, N.A. at the end of June. The cost of interest-bearing deposits was 48 basis points during the fourth quarter of 2015, an increase of 2 basis points from the third quarter of 2015 and 1 basis point from the fourth quarter of 2014. The cost of all deposit funding was 39 basis points in the fourth quarter of 2015, unchanged from the fourth quarter of 2014, and 2 basis points higher than the third quarter of 2015.

Net interest income was $68.4 million for the full year 2015, an increase of $4.6 million, or 7%, compared to $63.8 million in 2014, as a result of a $147.7 million, or 6%, increase in average earning assets during the year and an improving asset mix with 72% of average earning assets in loans in 2015, up from 68% in 2014. Offsetting these improvements were a 12 basis point decline in loan yield excluding accretion and a 9 basis point decline in loan yield from a $0.8 million reduction in non-cash loan accretion as a result of expected runoff in the purchased impaired loan portfolio. The Company’s net interest margin was 3.40% in 2015, down 3 basis points from 2014.

Asset Quality and Provision for Loan Losses

Nonperforming assets, including nonaccruing loans, loans over 90 days delinquent and still accruing not accounted for under purchased impaired loan accounting, and OREO and repossessed loan collateral, continued to decline during the fourth quarter. These assets fell to $35.4 million, or 1.5% of total assets, at the end of the fourth quarter, compared to $45.7 million, or 2.1% of total assets, at the end of the fourth quarter a year ago. OREO and repossessed loan collateral fell during the third quarter to $16.6 million, and have been reduced by $3.8 million, or 19%, compared to the same quarter last year. For the fourth quarter, we had OREO write-downs, net of gains on the sale of OREO, of $626 thousand.

The allowance for loan losses was $15.2 million, or 0.98% of loans held for investment, at the end of the fourth quarter, compared to $17.2 million, or 1.13% at the end of the previous quarter. Recovery of provision for loan losses was $1.0 million in the fourth quarter compared to recoveries of provision of $0.1 million and $1.3 million in the third quarter of 2015 and the fourth quarter of 2014, respectively. Net charge-offs in the fourth quarter were $1.0 million, and fourth quarter annualized net charge-offs as a percentage of average loans were 0.26%, compared to an annualized net recovery of 0.04% in the fourth quarter of 2014.

Recovery of provision for loan losses was $3.0 million for full year 2015 compared to a recovery of provision for loan losses of $5.4 million for full year 2014 as asset quality continued to improve. The Company had $2.2 million in net charge-offs in full year 2015, compared to $1.1 million in full year 2014. The full year 2015 net charge-offs as a percentage of average loans held for investment were 0.15%, compared to 0.08% in full year 2014.

Noninterest Income

Total noninterest income was $5.0 million in the fourth quarter. Total noninterest income increased $0.4 million, or 10%, as compared to $4.5 million in the fourth quarter of last year, and was unchanged from the third quarter of 2015 which included a nonrecurring $0.3 million bargain purchase gain on the CertusBank branch acquisition. For the fourth quarter, core noninterest income, which excludes nonrecurring items and gains and losses on securities sales, was also $5.0 million, a 15%, or $0.7 million, increase from the comparable quarter in 2014, and an increase of $0.3 million, or 6%, from last quarter.

Mortgage and SBA loan income increased by 82% in the fourth quarter from the same quarter in 2014, to $0.4 million, driven by $5.3 million in SBA loan origination, a 68% increase in mortgage loan origination and a 55% increase in mortgage loans originated for sale to investors. During the quarter, we originated $66.6 million of mortgage loans, including $26.4 million of loans for sale to investors. Production from our retail non-branch channel was $18.3 million in the quarter, a 345% increase from the same quarter last year.

Fourth quarter total service charges were $0.2 million, or 13%, higher than the same quarter last year on increased overdraft activity in the deposit portfolio and other service charge changes during 2015. Cardholder and merchant services income grew 7% over the same quarter last year on increased transaction volume. Trust and investment services income in the fourth quarter grew 6% from the comparable quarter last year, principally as a result of increased assets under management and increased securities sales commissions.

Core noninterest income increased $1.5 million, or 9%, in full year 2015 to $17.9 million, compared to $16.4 million in full year 2014. Mortgage and SBA loan income increased by 81% from full year 2014, to $1.6 million, driven by $6.5 million in SBA loan origination, a 72% increase in mortgage loan origination and a 65% increase in mortgage loans originated for sale to investors. During 2015, we originated $254.0 million of mortgage loans, including $106.8 million of loans for sale to investors. Production from our retail non-branch channel was $77.1 million in 2015, a 732% increase from 2014. Total service charges, including service charges on deposits and other service charges, grew by $0.4 million, or 5%, and cardholder and merchant services income grew by $0.2 million, or 4%, on increased activity volumes.

Noninterest Expense

Noninterest expense increased by $1.8 million, or 9%, as compared to the same quarter last year, primarily from $2.0 million in non-core merger expenses and $1.1 million in restricted stock award accelerated vesting expense, offset by $1.6 million in branch closure cost accruals recorded in the fourth quarter of 2014. Core noninterest expense, which excludes nonrecurring expenses, was $19.1 million, an increase of $0.2 million, or 1% from the fourth quarter of 2014. Pre-credit and nonrecurring (“PCNR”) noninterest expense, which excludes credit related expenses (OREO and loan collection expenses) in addition to nonrecurring expenses, was $18.1 million in the fourth quarter, a decrease of $0.1 million from the fourth quarter of 2014.

As compared to the third quarter, noninterest expense increased by $4.8 million, or 28%, primarily related to the merger related and nonrecurring restricted stock award acceleration expenses noted above, year-end bonus payments and associated payroll taxes, higher OREO costs, and changes to retiree benefit plans that offset personnel expenses last quarter. PCNR noninterest expense increased by $1.1 million in the fourth quarter from the prior quarter, primarily as a result of year-end bonus payments and associated payroll taxes and changes to retiree benefit plans that offset personnel expenses last quarter.

PCNR noninterest expense to average assets was 3.03% in the fourth quarter, compared to 3.55% in the fourth quarter a year ago. Average full time equivalent employees were 554, down 14, or 3%, from a year ago.

Total noninterest expense in full year 2015 fell $3.0 million, or 4%, primarily on operating cost savings from the branch closures in the first quarter of 2015, a reduction in loan collection costs, and the reduction in net nonrecurring expenses from $4.2 million in 2014 to $3.1 million in 2015, partially offset by increased OREO expenses. Core noninterest expense, which excludes nonrecurring expenses, fell by 3%, or $2.0 million, to $72.4 million in 2015, compared to $74.4 million in 2014, primarily as a result of declines in occupancy, furniture, equipment and data processing expenses as a result of branch closures in the first quarter of 2015, a $0.3 million decline in professional expenses and a $0.3 million decline in FDIC charges from improved asset quality.

Conference Call

A pre-recorded conference call will be held at 11:00 a.m., Eastern time this morning January 29th, 2016. Interested parties should dial in five to ten minutes prior to the scheduled start time to 1-866-235-9913. The webcast may be accessed via the Investor Relations section of the Company’s website at www.community1.com. The webcast replay will be available until January 29, 2017. The teleconference replay will be available one hour after the end of the conference through February 12, 2016. To access the teleconference replay, dial toll free 1-877-344-7529 and provide Conference ID Number 10077663.

About CommunityOne Bancorp

CommunityOne Bancorp is the Charlotte, North Carolina-based bank holding company for CommunityOne Bank, N.A. Founded in 1907 as First National Bank of Asheboro, CommunityOne has grown into a $2.4 billion community bank, operating 45 branches throughout central, southern and western North Carolina, and Loan Production Offices in Raleigh, NC, Winston-Salem, NC, and Charleston, SC. Through its network of branches and LPOs, CommunityOne offers a variety of consumer, mortgage and commercial banking services to retail and business customers, including loans, deposits, treasury management, wealth and online banking. CommunityOne Bancorp's shares are traded on the NASDAQ stock market under the symbol, "COB."

Non-GAAP Financial Measures

Statements in this press release include certain non-GAAP financial measures, which should be read along with the accompanying tables that provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. The non-GAAP financial measures referenced in this press release include: tangible shareholders’ equity, core net income, core net income before tax, core noninterest income, core return on average assets, core net income per share - diluted, core noninterest expense, and PCNR noninterest expense. The Company believes that these non-GAAP financial measures provide information useful to investors in understanding our underlying performance and business trends as they facilitate comparisons with the performance of others in the financial services industry. However, these non-GAAP financial measures should not be considered an alternative to GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP as well as other relevant information when assessing the overall performance and financial condition of the Company.

Forward Looking Statements

Information in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, and usually can be identified by the use of forward-looking terminology, such as “believes,” “expects,” or “are expected to,” “plans,” “projects,” “goals,” “estimates,” “may,” “should,” “could,” “would,” “intends to,” “outlook” or “anticipates,” or variations of these and similar words, or by discussions of strategies that involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, our ability to continue to grow our business internally and through acquisition and successful integration of any acquired entities while controlling our costs; having the financial and management resources in the amount, at the times and on the terms required to support our future business; the accuracy of our assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of real estate and other assets, which could affect repayment of such borrowers' outstanding loans; material changes in the quality of our loan portfolio and the resulting credit related losses and expenses; the accuracy of our assumptions relating to the establishment of our ALL; adverse changes in the value of real estate in our market areas; adverse changes in the housing markets, or an increase in interest rates, either of which may reduce demand for mortgages; changes in interest rates, spreads on earning assets and interest-bearing liabilities, the shape of the yield curve and interest rate sensitivity; a prolonged period of low interest rates; declines in the value of our OREO; the accuracy of our assumptions relating to our ability to use net operating loss carryforwards to reduce future tax payments; the loss of one or more members of executive management and our ability to recruit and retain key lenders and other employees; less favorable general economic conditions, either nationally or regionally; resulting in, among other things, a reduced demand for our credit or other services and thus reduced origination volume; increased competitive pressures in the banking industry or in COB's markets affecting pricing or product and service offerings; our ability to respond to rapid technological developments and changes; disruptions in or manipulations of our operating systems; information security and cyber security risks impacting us or our vendors, including “hacking” and “identity theft,” that could adversely affect our business and our reputation; the loss or disruption of the services provided by one or more of our critical vendors; our ability to achieve our targeted reductions in costs and expenses; the impact of laws and regulatory requirements, including the Basel III capital rules, Bank Secrecy Act requirements, and regulations required by the Dodd-Frank Act; changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; changes in accounting principles and standards; and our success at managing the risks involved in the foregoing.

Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results of the Company will not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to those described in the cautionary language included under the headings “Risk Factors” and in other sections of the Company’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and its quarterly reports on Form 10-Q. The forward looking statements in this press release speak only as of the date of the press release and the Company does not assume any obligation to update them after such date.



Quarterly Results of Operations
(in thousands, except per share data) 4Q 2015 3Q 2015 2Q 2015 1Q 2015 4Q 2014
Interest Income
Interest and fees on loans $ 16,594 $ 16,395 $ 16,006 $ 15,873 $ 15,871
Interest and dividends on investment securities 3,306 3,219 3,116 3,224 3,242
Other interest income 232 216 208 171 158
Total interest income 20,132 19,830 19,330 19,268 19,271
Interest Expense
Deposits 1,876 1,726 1,732 1,731 1,741
Retail repurchase agreements 6 7 5 4 5
Federal Home Loan Bank advances 499 507 488 469 516
Other borrowed funds 287 280 278 290 288
Total interest expense 2,668 2,520 2,503 2,494 2,550
Net interest income before provision for loan losses 17,464 17,310 16,827 16,774 16,721
Recovery of provision for loan losses (992) (64) (788) (1,137) (1,323)
Net interest income after provision for loan losses 18,456 17,374 17,615 17,911 18,044
Noninterest Income
Service charges on deposit accounts 1,726 1,738 1,433 1,434 1,585
Mortgage loan income 439 381 314 465 241
Cardholder and merchant services income 1,385 1,253 1,218 1,125 1,298
Trust and investment services 416 376 403 322 394
Bank owned life insurance 268 381 268 250 350
Other service charges, commissions and fees 472 477 421 383 366
Securities gains, net - - - - 220
Other income 277 394 96 55 89
Total noninterest income 4,983 5,000 4,153 4,034 4,543
Noninterest Expense
Personnel expense 12,767 9,984 10,462 10,594 10,717
Net occupancy expense 1,409 1,591 1,211 1,469 1,526
Furniture, equipment and data processing expense 2,017 2,113 1,875 1,989 2,078
Professional fees 489 572 528 539 671
Stationery, printing and supplies 157 144 141 176 162
Advertising and marketing 112 114 134 186 274
Other real estate owned expense 889 556 506 360 572
Credit/debit card expense 449 558 498 543 568
FDIC insurance 427 413 456 453 422
Merger-related expense 1,986 - - - -
Loan collection expense 132 (76) 313 300 170
Core deposit intangible amortization 371 370 352 352 351
Other expense 1,021 1,088 1,351 1,047 2,935
Total noninterest expense 22,226 17,427 17,827 18,008 20,446
Income before income taxes 1,212 4,947 3,941 3,937 2,141
Income tax expense (benefit) 857 3,430 1,418 1,418 (142,475)
Net Income $ 356 $ 1,517 $ 2,523 $ 2,519 $ 144,616
Weighted average shares outstanding - basic 24,293 24,265 24,202 24,183 21,846
Weighted average shares outstanding - diluted 24,318 24,279 24,215 24,195 21,858
Net income per share - basic$ 0.01 $ 0.06 $ 0.10 $ 0.10 $ 6.62
Net income per share - diluted 0.01 0.06 0.10 0.10 6.62
Core net income per share - diluted 1 0.11 0.12 0.10 0.10 0.11
1 Non-GAAP measure. See Quarterly Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.




Quarterly Balance Sheet
(in thousands) 4Q 2015 3Q 2015 2Q 2015 1Q 2015 4Q 2014
Assets
Cash and due from banks $ 23,852 $ 23,725 $ 24,892 $ 25,715 $ 29,202
Interest-bearing bank balances 15,323 4,281 6,094 22,218 66,680
Investment securities:
Available-for-sale 390,434 375,929 381,367 367,842 350,040
Held-to-maturity 147,967 152,670 156,648 140,559 142,461
Loans held for sale 5,403 4,089 2,767 7,571 2,796
Loans held for investment 1,543,795 1,522,455 1,445,853 1,395,911 1,357,788
Less: Allowance for loan losses (15,195) (17,188) (17,989) (19,008) (20,345)
Net loans held for investment 1,528,600 1,505,267 1,427,864 1,376,903 1,337,443
Premises and equipment, net 44,457 44,846 45,375 43,809 46,782
Other real estate owned 16,583 19,166 19,955 21,040 20,411
Core deposit premiums and other intangibles 5,208 5,443 5,393 5,500 5,681
Goodwill 4,205 4,205 4,205 4,205 4,205
Bank owned life insurance 40,869 40,579 40,499 40,212 39,946
Deferred tax asset, net 141,716 139,917 145,229 144,223 146,432
Other assets 32,648 33,177 33,099 32,137 23,435
Total Assets $ 2,397,265 $ 2,353,294 $ 2,293,387 $ 2,231,934 $ 2,215,514
Liabilities
Deposits:
Noninterest-bearing demand deposits$ 386,329 $ 359,969 $ 352,033 $ 337,417 $ 323,776
Interest-bearing deposits:
Demand, savings and money market deposits 939,878 895,841 889,703 880,721 882,332
Time deposits 621,330 641,069 613,902 589,334 588,312
Total deposits 1,947,537 1,896,879 1,855,638 1,807,472 1,794,420
Retail repurchase agreements 7,219 16,753 11,424 7,837 9,076
Federal Home Loan Bank advances 93,681 90,244 80,708 68,221 68,234
Junior subordinated debentures 56,702 56,702 56,702 56,702 56,702
Long term notes payable 5,415 5,396 5,377 5,358 5,338
Other liabilities 13,673 12,680 13,752 15,392 14,828
Total Liabilities 2,124,227 2,078,654 2,023,601 1,960,982 1,948,598
Shareholders' Equity
Preferred Stock, 10,000,000 authorized
Series A, $10.00 par value, 51,500 issued and no shares outstanding - - - - -
Series B, no par value, 250,000 authorized, no shares issued or outstanding - - - - -
Common stock 490,076 488,306 488,005 487,781 487,603
Accumulated deficit (206,299) (206,653) (208,170) (210,693) (213,212)
Accumulated other comprehensive loss (10,739) (7,013) (10,049) (6,136) (7,475)
Total Shareholders' Equity 273,038 274,640 269,786 270,952 266,916
Total Liabilities and Shareholders' Equity$ 2,397,265 $ 2,353,294 $ 2,293,387 $ 2,231,934 $ 2,215,514



Quarterly Supplemental Data
(in thousands, except per share data) 4Q 2015 3Q 2015 2Q 2015 1Q 2015 4Q 2014
Income Statement Data
Net interest income $ 17,464 $ 17,310 $ 16,827 $ 16,774 $ 16,721
Recovery of provision for loan losses (992) (64) (788) (1,137) (1,323)
Noninterest income 4,983 5,000 4,153 4,034 4,543
Noninterest expense 22,226 17,427 17,827 18,008 20,446
Income before taxes 1,212 4,947 3,941 3,937 2,141
Net income 356 1,517 2,523 2,519 144,616
Period End Balances
Assets $ 2,397,265 $ 2,353,294 $ 2,293,387 $ 2,231,934 $ 2,215,514
Loans held for sale 5,403 4,089 2,767 7,571 2,796
Loans held for investment 1,543,795 1,522,455 1,445,853 1,395,911 1,357,788
Allowance for loan losses (15,195) (17,188) (17,989) (19,008) (20,345)
Goodwill and other intangible assets 9,413 9,648 9,598 9,705 9,886
Deposits 1,947,537 1,896,879 1,855,638 1,807,472 1,794,420
Borrowings 163,017 169,095 154,211 138,118 139,350
Shareholders' equity 273,038 274,640 269,786 270,952 266,916
Average Balances
Assets $ 2,388,160 $ 2,320,627 $ 2,246,949 $ 2,202,247 $ 2,042,109
Loans held for sale 5,771 3,584 3,981 2,781 1,997
Loans held for investment 1,538,487 1,479,587 1,406,827 1,376,053 1,338,877
Allowance for loan losses (16,821) (17,688) (18,970) (20,239) (21,552)
Goodwill and other intangible assets 9,450 9,527 9,458 9,697 10,002
Deposits 1,926,882 1,850,578 1,799,682 1,781,533 1,785,575
Borrowings 173,284 184,942 161,996 138,757 144,315
Shareholders' equity 275,426 271,757 271,229 268,799 99,445
Per Share Data
Net income per share - basic $ 0.01 $ 0.06 $ 0.10 $ 0.10 $ 6.62
Net income per share - diluted 0.01 0.06 0.10 0.10 6.62
Core net income per share - diluted 1 0.11 0.12 0.10 0.10 0.11
Book value (Shareholders' Equity) 11.24 11.31 11.14 11.20 11.04
Tangible book value (Tangible Shareholders' Equity) 1 10.85 10.91 10.75 10.80 10.63
Performance Ratios
Return on average assets 0.06% 0.26% 0.45% 0.46% 28.10%
Core return on average assets 1 0.45% 0.50% 0.45% 0.46% 0.45%
Return on average tangible assets 0.06% 0.26% 0.45% 0.47% 28.23%
Return on average equity 0.51% 2.21% 3.73% 3.80% 576.95%
Net interest margin (tax equivalent) 3.29% 3.37% 3.43% 3.54% 3.49%
PCNR noninterest expense to average assets 1 3.03% 2.92% 3.03% 3.15% 3.55%
Asset Quality Ratios
Allowance for loan losses to loans held for investment 0.98% 1.13% 1.24% 1.36% 1.50%
Net annualized charge-offs (recoveries) to average loans
held for investment
0.26% 0.20% 0.07% 0.06% (0.04%)
Nonperforming assets to total assets 1.5% 1.6% 1.7% 1.9% 2.1%
Classified assets to Tier 1 + ALL 33% 34% 36% 39% 41%
Capital and Other Ratios
CommunityOne Bancorp leverage capital 8.19% 8.43% 8.50% 8.47% 9.78%
CommunityOne Bank, N.A. leverage capital 9.30% 9.53% 9.67% 9.69% 9.94%
CommunityOne Bancorp common equity Tier 1 11.20% 11.64% 11.85% 11.86% N/A
Loans held for investment to deposits 79% 80% 78% 77% 76%
1 Non-GAAP measure. See Quarterly Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.



Annual Results of Operations
(in thousands, except per share data) 2015 2014 2013
Interest Income
Interest and fees on loans $ 64,868 $ 59,183 $ 60,147
Interest and dividends on investment securities 12,865 14,068 14,180
Other interest income 827 605 665
Total interest income 78,560 73,856 74,992
Interest Expense
Deposits 7,065 6,909 8,070
Retail repurchase agreements 22 16 21
Federal Home Loan Bank advances 1,963 2,020 1,376
Other borrowed funds 1,135 1,145 1,092
Total interest expense 10,185 10,090 10,559
Net interest income before provision for loan losses 68,375 63,766 64,433
Provision for (recovery of) loan losses (2,981) (5,371) 523
Net interest income after provision for loan losses 71,356 69,137 63,910
Noninterest Income
Service charges on deposit accounts 6,331 6,351 6,714
Mortgage loan income 1,599 881 2,319
Cardholder and merchant services income 4,981 4,803 4,531
Trust and investment services 1,517 1,495 1,305
Bank owned life insurance 1,167 1,153 1,073
Other service charges, commissions and fees 1,753 1,340 1,315
Securities gains, net - 974 2,772
Other income 822 367 385
Total noninterest income 18,170 17,364 20,414
Noninterest Expense
Personnel expense 43,807 43,682 40,661
Net occupancy expense 5,680 6,112 6,391
Furniture, equipment and data processing expense 7,994 8,336 8,638
Professional fees 2,128 2,470 3,100
Stationery, printing and supplies 618 646 644
Advertising and marketing 546 716 1,135
Other real estate owned expense 2,311 1,758 4,138
Credit/debit card expense 2,048 2,287 2,143
FDIC insurance 1,749 2,068 2,643
Merger-related expense 1,986 - 3,498
Loan collection expense 669 1,576 4,333
Core deposit intangible amortization 1,445 1,407 1,407
Other expense 4,507 7,477 5,750
Total noninterest expense 75,488 78,535 84,481
Income before income taxes 14,038 7,966 (157)
Income tax expense (benefit) 7,124 (142,492) 1,326
Net Income (Loss) $ 6,914 $ 150,458 $ (1,483)
Weighted average shares outstanding - basic 24,236 21,852 21,731
Weighted average shares outstanding - diluted 24,252 21,864 21,731
Net income (loss) per share - basic $ 0.29 $ 6.89 $ (0.07)
Net income (loss) per share - diluted 0.29 6.88 (0.07)
Core net income per share - diluted 1 0.44 0.34 0.04
1 Non-GAAP measure. See Annual Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.



Annual Balance Sheets
(in thousands) 2015 2014 2013
Assets
Cash and due from banks $ 23,852 $ 29,202 $ 31,917
Interest-bearing bank balances 15,323 66,680 35,513
Investment securities:
Available-for-sale 390,434 350,040 414,614
Held-to-maturity 147,967 142,461 151,795
Loans held for sale 5,403 2,796 1,836
Loans held for investment 1,543,795 1,357,788 1,212,248
Less: Allowance for loan losses (15,195) (20,345) (26,785)
Net loans held for investment 1,528,600 1,337,443 1,185,463
Premises and equipment, net 44,457 46,782 50,889
Other real estate owned 16,583 20,411 28,395
Core deposit premiums and other intangibles 5,208 5,681 6,914
Goodwill 4,205 4,205 4,205
Bank owned life insurance 40,869 39,946 39,940
Deferred tax asset, net 141,716 146,432 10,215
Other assets 32,648 23,435 23,336
Total Assets $ 2,397,265 $ 2,215,514 $ 1,985,032
Liabilities
Deposits:
Noninterest-bearing demand deposits $ 386,329 $ 323,776 $ 290,461
Interest-bearing deposits:
Demand, savings and money market deposits 939,878 882,332 875,970
Time deposits 621,330 588,312 582,274
Total deposits 1,947,537 1,794,420 1,748,705
Retail repurchase agreements 7,219 9,076 6,917
Federal Home Loan Bank advances 93,681 68,234 73,283
Junior subordinated debentures 56,702 56,702 56,702
Long term notes payable 5,415 5,338 5,263
Other liabilities 13,673 14,828 13,801
Total Liabilities 2,124,227 1,948,598 1,904,671
Shareholders' Equity
Preferred Stock, 10,000,000 authorized
Series A, $10.00 par value, 51,500 issued and no shares outstanding - - -
Series B, no par value, 250,000 authorized, no shares issued or outstanding - - -
Common stock 490,076 487,603 461,636
Accumulated deficit (206,299) (213,212) (363,670)
Accumulated other comprehensive loss (10,739) (7,475) (17,605)
Total Shareholders' Equity 273,038 266,916 80,361
Total Liabilities and Shareholders' Equity $ 2,397,265 $ 2,215,514 $ 1,985,032


Annual Supplemental Data
(in thousands, except share and per share data) 2015 2014 2013
Income Statement Data
Net interest income $ 68,375 $ 63,766 $ 64,433
Provision for (recovery of) loan losses (2,981) (5,371) 523
Noninterest income 18,170 17,364 20,414
Noninterest expense 75,488 78,535 84,481
Income before income taxes 14,038 7,966 (157)
Net income (loss) 6,914 150,458 (1,483)
Period End Balances
Assets $ 2,397,265 $ 2,215,514 $ 1,985,032
Loans held for sale 5,403 2,796 1,836
Loans held for investment 1,543,795 1,357,788 1,212,248
Allowance for loan losses (15,195) (20,345) (26,785)
Goodwill and other intangible assets 9,413 9,886 11,119
Deposits 1,947,537 1,794,420 1,748,705
Borrowings 163,017 139,350 142,165
Shareholders' equity 273,038 266,916 80,361
Average Balances
Assets $ 2,290,090 $ 2,005,948 $ 2,047,146
Loans held for sale 4,036 1,603 3,693
Loans held for investment 1,450,764 1,268,599 1,158,985
Allowance for loan losses (18,418) (24,770) (27,596)
Goodwill and other intangible assets 9,532 10,476 11,412
Deposits 1,840,096 1,758,471 1,809,575
Borrowings 164,894 143,206 131,710
Shareholders' equity 271,821 91,151 85,576
Per Share Data
Net income (loss) per share - basic $ 0.29 $ 6.89 $ (0.07)
Net income (loss) per share - diluted 0.29 6.88 (0.07)
Core net income per share - diluted 1 0.44 0.34 0.04
Book value (Shareholders' equity) 11.24 11.04 3.68
Tangible book value (Tangible shareholders' equity) 1 10.85 10.63 3.17
Performance Ratios
Return on average assets 0.30% 7.50% (0.07%)
Core return on average assets 0.47% 0.37% 0.04%
Return on average tangible assets1 0.3% 7.6% (0.1%)
Return on average equity 2.5% 165.1% (1.7%)
Return on average tangible equity1 2.71% 207.66% (2.14%)
Net interest margin (tax equivalent) 3.40% 3.43% 3.44%
PCNR noninterest expense to average assets 1 3.03% 3.54% 3.50%
Asset Quality Ratios
Allowance for loan losses to loans held for investment 0.98% 1.50% 2.21%
Net annualized charge-offs (recoveries) to average loans
held for investment
0.15% 0.08% 0.26%
Nonperforming assets to total assets 1.5% 2.1% 3.2%
Classified assets to Tier 1 + ALL 33% 41% 85%
Capital and Other Ratios
CommunityOne Bancorp leverage capital 8.19% 9.78% 5.96%
CommunityOne Bank, N.A. leverage capital 9.30% 9.94% 7.49%
CommunityOne Bancorp common equity Tier 1 11.20% N/A N/A
Loans held for investment to deposits 79% 76% 69%
1 Non-GAAP measure. See Annual Non-GAAP Measures table for reconciliation to the most directly comparable GAAP measure.



Quarterly Non-GAAP Measures
(in thousands) 4Q 2015 3Q 2015 2Q 2015 1Q 2015 4Q 2014
Book Value (Shareholders' Equity) $ 273,038 $ 274,640 $ 269,786 $ 270,952 $ 266,916
Less:
Goodwill (4,205) (4,205) (4,205) (4,205) (4,205)
Core deposit and other intangibles (5,208) (5,443) (5,393) (5,500) (5,681)
Tangible Book Value (Tangible Shareholders'
Equity) (Non-GAAP)
$ 263,625 $ 264,992 $ 260,188 $ 261,247 $ 257,030
Noninterest Expense $ 22,226 $ 17,427 $ 17,827 $ 18,008 $ 20,446
Less nonrecurring:
Branch closure and restructuring expenses - - - - 1,566
Merger-related expense 1,986 - - - -
RSA acceleration 1,142 - - - -
Core Noninterest Expense (Non-GAAP) 4$ 19,098 $ 17,427 $ 17,827 $ 18,008 $ 18,880
Less credit related items:
Other real estate owned expense 889 556 506 360 572
Loan collection expense 132 (76) 313 300 170
PCNR Noninterest Expense (Non-GAAP) 3$ 18,077 $ 16,947 $ 17,008 $ 17,348 $ 18,138
Noninterest Income $ 4,983 $ 5,000 $ 4,153 $ 4,034 $ 4,543
Less nonrecurring:
Bargain purchase gain - 316 - - -
Securities gains, net - - - - 220
Core Noninterest Income (Non-GAAP) 4$ 4,983 $ 4,684 $ 4,153 $ 4,034 $ 4,323
Net Income Before Tax $ 1,212 $ 4,947 $ 3,941 $ 3,937 $ 2,141
Less nonrecurring:
Securities gains, net - - - - 220
Branch closure and restructuring expenses - - - - (1,566)
RSA acceleration (1,142) - - - -
Merger-related expense (1,986) - - - -
Bargain purchase gain - 316 - - -
Total nonrecurring items (3,128) 316 - - (1,346)
Core Net Income Before Tax (Non-GAAP) 4$ 4,340 $ 4,631 $ 3,941 $ 3,937 $ 3,487
Income Tax Expense (Benefit) 857 3,430 1,418 1,418 (142,475)
Less nonrecurring tax items and adjustments:
Tax effect of nonrecurring items 1 (765) 114 - - (444)
DTA valuation allowance release and revaluation - 1,607 - - (142,475)
Income tax at effective rate 2 - - - - (707)
Core Income Tax Expense (Non-GAAP) 4$ 1,622 $ 1,709 $ 1,418 $ 1,418 $ 1,151
Core Net Income (Non-GAAP) 4 $ 2,719 $ 2,922 $ 2,523 $ 2,519 $ 2,336
1 Tax effected at an income tax rate of 33% in 2014 and 36% in 2015. Nonrecurring items in 4Q 2015 include $1.0 mm of nondeductible expenses.
2 Projected income tax expense at 33%. In 2014 all tax items resulted in changes to the DTA valuation allowance.
3 Pre-credit and nonrecurring ("PCNR") expense excludes credit related and nonrecurring expenses.
4 Core measures exclude nonrecurring items.




Annual Non-GAAP Measures
(in thousands) 2015 2014 2013
Book Value (Shareholders' Equity) $ 273,038 $ 266,916 $ 80,361
Less:
Goodwill (4,205) (4,205) (4,205)
Core deposit and other intangibles (5,208) (5,681) (6,914)
Tangible Book Value (Tangible Shareholders' Equity) (Non-GAAP) $ 263,625 $ 257,030 $ 69,242
Noninterest Expense $ 75,488 $ 78,535 $ 84,481
Less nonrecurring :
Branch closure and restructuring expenses - 1,756 675
CEO severance expense - 2,060 -
US Treasury sale expenses - 409 -
Rebranding expense - - 616
Mortgage and litigation recovery - (68) (487)
RSA acceleration 1,142 - -
Merger-related expense 1,986 - 3,498
Core Noninterest Expense (Non-GAAP) 4 $ 72,360 $ 74,378 $ 80,179
Less credit related items:
Other real estate owned expense 2,311 1,758 4,138
Loan collection expense 669 1,576 4,333
PCNR Noninterest Expense (Non-GAAP) 3 $ 69,380 $ 71,044 $ 71,708
Noninterest Income $ 18,170 $ 17,364 $ 20,414
Less nonrecurring:
Bargain purchase gain 316 - -
Securities gains, net - 974 2,772
Core Noninterest Income (Non-GAAP) 4 $ 17,854 $ 16,390 $ 17,642
Net Income (Loss) Before Tax $ 14,038 $ 7,966 $ (157)
Less nonrecurring:
Gain on sales of securities - 974 2,772
Branch closure and restructuring expenses - (1,756) (675)
CEO severance expense - (2,060) -
Bargain purchase gain 316 - -
US Treasury sale expenses - (409) -
Rebranding expense - - (616)
Mortgage and litigation recovery - 68 487
Merger-related expense (1,986) - (3,498)
RSA acceleration (1,142) - -
Total nonrecurring items (2,812) (3,183) (1,530)
Core Net Income Before Tax (Non-GAAP) 4 $ 16,850 $ 11,149 $ 1,373
Income Tax Expense (Benefit) 7,124 (142,492) 1,326
Less nonrecurring tax items and adjustments:
Tax effect of nonrecurring items 1 (651) (1,051) (505)
DTA valuation allowance release and revaluation 1,607 (142,492) 1,326
Income tax at effective rate 2 - (2,629) 52
Core Income Tax Expense (Non-GAAP) 4 $ 6,168 $ 3,680 $ 453
Core Net Income (Non-GAAP) 4 $ 10,682 $ 7,469 $ 920
1 Tax effected at an income tax rate of 33% in 2013 & 2014, and 36% in 2015. Nonrecurring items in 2015 includes $1.0mm in nondeductible
expenses.
2 Projected income tax expense at 33%. In 2013 and 2014 all tax items resulted in changes to the DTA valuation allowance.
3 Pre-credit and nonrecurring ("PCNR") expense excludes credit related and nonrecurring expenses.
4 Core measures exclude nonrecurring items.




For more information: David L. Nielsen, CFO, 980.819.6220 investorrelations@community1.com

Source:CommunityOne Bancorp