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ConnectOne Bancorp, Inc. Reports a 14.3% Increase in First Quarter Net Income

ENGLEWOOD CLIFFS, N.J., April 27, 2017 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $11.9 million for the first quarter of 2017, a 14.3% increase from $10.4 million earned during the first quarter of 2016. Diluted earnings per share increased to $0.37 during the current quarter versus $0.34 earned in the prior-year first quarter. During the sequential fourth quarter 2016, the Company reported a loss of $(2.0) million, or $(0.07) per diluted share, due to a $24.0 million charge largely related to transferring the Bank’s taxi medallion portfolio to the held-for-sale category.

Frank Sorrentino, ConnectOne’s Chairman and CEO stated, “ConnectOne has maintained solid momentum executing against key operating objectives and we’re off to a great start in 2017 with strong first quarter results. Gross loan fundings during the quarter were a robust $340 million, strengthened by an increase in lending opportunities due, in part, to escalating regulatory and capacity pressures on our in-market competition. Our loans receivable portfolio increased by nearly $100 million from year-end 2016, still strong, but impacted by anticipated borrower pay-downs in the construction portfolio and pay-offs. Return on average assets reached 1.10%, our return on average tangible equity was in excess of 12%, and our net interest margin widened to 3.40% under GAAP, and to 3.33% excluding the benefit of purchase accounting, reversing a long downward trend due to the protracted low interest rate environment. Our efficiency ratio increased, reflecting typical seasonality for the first quarter, to 44.0%, but is still indicative of an extraordinarily efficient infrastructure. We expect this ratio to remain in the low 40% range. Our outlook for 2017 is positive, as we remain well-positioned to capitalize on organic growth opportunities throughout the New York metropolitan region.”

Operating Results

Fully taxable equivalent net interest income for the first quarter of 2017 was $34.0 million, a decrease of $0.2 million, or 0.5%, from the fourth quarter of 2016, due to 2 fewer days in the current quarter, partially offset by a 4 basis-point widening of the net interest margin to 3.40% from 3.36%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.6 million and $1.0 million during the first quarter of 2017 and fourth quarter of 2016, respectively. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.33% in the first quarter of 2017, widening by 6 basis-points from the fourth quarter 2016 adjusted net interest margin of 3.27%. The increase in the adjusted net interest margin was primarily attributable to higher short-term rates, an improved mix of interest-earning assets and stable rates paid on deposits. Fully taxable equivalent net interest income for the first quarter of 2017 also reflected an increase of $2.0 million, or 6.2%, from the first quarter of 2016, resulting from an 8.7% increase in interest earning assets, partially offset by a 5 basis-point contraction of the net interest margin to 3.40% from 3.45%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.6 million and $1.3 million during the first quarter of 2017 and first quarter of 2016, respectively. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.33% in the first quarter of 2017, widening by 2 basis-points from the first quarter of 2016 adjusted net interest margin of 3.31%. The slight increase in the adjusted net interest margin was primarily attributable to improved mix and rates on our interest-earning assets.

Noninterest income totaled $3.0 million in the first quarter of 2017, $1.6 million in the fourth quarter of 2016 and $1.2 million in the first quarter of 2016. The first quarter of 2017 included net securities gains of $1.6 million. There were no net securities gains during both the fourth quarter of 2016 and first quarter of 2016. Excluding the securities gains, noninterest income decreased approximately $0.2 million from the sequential quarter and increased $0.2 million from the prior year first quarter. The decrease from the sequential quarter was primarily attributable to decreases in deposit fees which are typically lower in the first quarter due to seasonal factors. The increase from the prior year first quarter was primarily attributable to an increase in deposit, loan and other income and BOLI income. Noninterest income also includes annuities and life insurance commissions.

Noninterest expenses totaled $18.2 million for the first quarter of 2017, up $2.9 million from $15.3 million for the fourth quarter of 2016 and up $3.9 million from $14.4 million for the first quarter of 2016. The increase from the sequential quarter was mainly attributable to an increase in the taxi medallion loans held-for-sale valuation allowance of $2.6 million. In addition, increases in salaries and employee benefits expense ($0.3 million), occupancy and equipment expenses ($0.1 million) and other expenses ($0.1 million), partially offset by decreases in professional and consulting expenses ($0.2 million) contributed to the overall increase in noninterest expenses from the fourth quarter of 2016. The increase from the prior year first quarter was mainly attributable to the aforementioned valuation allowance. In addition, increases in salaries and employee benefits ($0.6 million), FDIC insurance premiums ($0.3 million), data processing ($0.1 million), marketing and advertising expenses ($0.1 million) and other expense ($0.2 million) contributed to the overall increase in noninterest expense from the first quarter of 2016. The increases over the prior year first quarter were the result of increased levels of business and staff resulting from organic growth.

Income tax expense was $4.9 million for the first quarter of 2017, compared to an income tax benefit of $(3.4) million for the fourth quarter of 2016 and income tax expense of $4.8 million for the first quarter of 2016. Included in income tax expense for the first quarter of 2017 is a benefit of $133 thousand which resulted from the effect of implementing ASU 2016-09, which relates to the recognition of excess tax benefits in the income statement (formerly through equity) that result from employee share-based payment awards. The effective tax rate for the current quarter was 29.3% versus 31.5% for the prior-year quarter. Excluding any changes to the taxi medallion valuation allowance, the effective tax rate for 2017 is expected to be maintained in the low 30% range.

Asset Quality

The provision for loan and lease losses decreased to $1.1 million in the first quarter of 2017 from $25.2 million in the fourth quarter of 2016, and from $3.0 million in the first quarter of 2016. The decrease from the sequential quarter was largely attributable to additional reserves of approximately $24.0 million specifically allocated to the Bank’s taxi medallion portfolio that occurred during the fourth quarter of 2016, and reflected solid asset quality metrics throughout the Bank’s growing loan receivable portfolio. The decrease from the prior year quarter was largely attributable to decreases in specific reserves.

As of March 31, 2017, loans held-for-sale included loans secured by taxi medallions totaling $61.3 million (net of a valuation allowance of $2.6 million), compared to $65.6 million as of December 31, 2016. The decrease was primarily attributable to the aforementioned valuation allowance, a payoff of two corporate medallions for $1.1 million, and debt service applied to loan carrying values.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $72.4 million at March 31, 2017, $69.4 million at December 31, 2016 and $23.1 million at March 31, 2016. Included in nonperforming assets were taxi medallion loans, totaling $59.0 million at March 31, 2017, $63.0 million at December 31, 2016 and $1.9 million at March 31, 2016. Nonperforming assets as a percent of total assets were 1.62% at March 31, 2017, 1.57% at December 31, 2016, and 0.57% at March 31, 2016. Excluding the taxi medallion loans, nonaccrual loans increased to $12.8 million at March 31, 2017, from $5.7 million at December 31, 2016 and decreased from $19.6 million at March 31, 2016. Nonaccrual loans as a percent of loans receivable, excluding taxi medallion loans, were 0.36% at March 31, 2017, 0.16% at December 31, 2017 and 0.62% at March 31, 2016.

Annualized net charge-offs were (0.01)% (a net recovery) for the first quarter of 2017, 4.23% for the fourth quarter of 2016, and 0.06% for the first quarter of 2016. The allowance for loan and lease losses represented 0.75%, 0.74%, and 0.89% of loans receivable as of March 31, 2017, December 31, 2016 and March 31, 2016, respectively. The allowance as a percentage of nonaccruals, excluding taxi medallion loans, was 210.3% as of March 31, 2017, 449.0% as of December 31, 2016 and 117.9% as of March 31, 2016.

Selected Balance Sheet Items

At March 31, 2017, the Company’s total assets were $4.5 billion, an increase of $34.5 million from December 31, 2016. Total loans at March 31, 2017 were $3.6 billion, reflecting net loan growth (loan originations less pay-downs and pay-offs) of $96 million from December 31, 2016, primarily attributable to increases in multifamily ($85 million), other commercial real estate ($37 million) and residential real estate ($10 million), offset by decreases in construction ($26 million) and commercial and industrial ($12 million).

The Company’s stockholders’ equity was $540 million at March 31, 2017, an increase of $9.2 million from December 31, 2016. The increase in stockholders’ equity was primarily attributable to an increase of $9.5 million in retained earnings, and approximately $0.4 million of equity issuance related to stock-based compensation, partially offset by an increase to accumulated other comprehensive loss of $0.4 million. As of March 31, 2017, the Company’s tangible common equity ratio and tangible book value per share were 9.08% and $12.23, respectively. As of December 31, 2016, the tangible common equity ratio and tangible book value per share were 8.93% and $11.96, respectively. Total goodwill and other intangible assets were approximately $149 million as of March 31, 2017 and December 31, 2016, respectively.

Use of Non-GAAP Financial Measures

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 return on average tangible assets, return on average tangible common equity, operating efficiency ratio, adjusted net interest margin, tangible common equity ratio and tangible book value per common share. 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.

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 20 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 CONDENSED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
March 31, December 31, March 31,
2017 2016 2016
(unaudited) (unaudited)
ASSETS
Cash and due from banks$35,867 $37,150 $34,603
Interest-bearing deposits with banks 126,002 163,249 83,656
Cash and cash equivalents 161,869 200,399 118,259
Investment securities:
Available-for-sale 352,476 353,290 191,331
Held-to-maturity (fair value of $ -, $ -, $229,470) - - 219,373
Loans held-for-sale (net of $2,600, $ -, $ - valuation allowance) 62,255 78,005 -
Loans receivable 3,571,663 3,475,832 3,263,813
Less: Allowance for loan and lease losses 26,901 25,744 29,074
Net loans receivable 3,544,762 3,450,088 3,234,739
Investment in restricted stock, at cost 24,985 24,310 31,487
Bank premises and equipment, net 22,259 22,075 22,652
Accrued interest receivable 12,701 12,965 12,604
Bank owned life insurance 99,063 98,359 79,412
Other real estate owned 580 626 1,696
Goodwill 145,909 145,909 145,909
Core deposit intangibles 2,895 3,088 3,691
Other assets 31,062 37,234 29,847
Total assets$4,460,816 $4,426,348 $4,091,000
LIABILITIES
Deposits:
Noninterest-bearing$671,183 $694,977 $614,507
Interest-bearing 2,684,294 2,649,294 2,278,564
Total deposits 3,355,477 3,344,271 2,893,071
Borrowings 491,226 476,280 646,501
Subordinated debentures (net of $580, $621, $763 in debt issuance costs) 54,575 54,534 54,392
Other liabilities 19,261 20,231 22,309
Total liabilities 3,920,539 3,895,316 3,616,273
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 412,546 412,726 374,287
Additional paid-in capital 11,796 11,407 9,324
Retained earnings 135,939 126,462 112,663
Treasury stock (16,717) (16,717) (16,717)
Accumulated other comprehensive loss (3,287) (2,846) (4,830)
Total stockholders' equity 540,277 531,032 474,727
Total liabilities and stockholders' equity$4,460,816 $4,426,348 $4,091,000

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)
Three Months Ended
03/31/17 12/31/16 03/31/16
Interest income
Interest and fees on loans $38,006 $38,600 $35,017
Interest and dividends on investment securities:
Taxable 1,548 1,389 2,140
Tax-exempt 954 959 883
Dividends 330 336 352
Interest on federal funds sold and other short-term investments 246 215 134
Total interest income 41,084 41,499 38,526
Interest expense
Deposits 5,109 5,135 3,939
Borrowings 2,834 2,957 3,267
Total interest expense 7,943 8,092 7,206
Net interest income 33,141 33,407 31,320
Provision for loan and lease losses 1,100 25,200 3,000
Net interest income after provision for loan and lease losses 32,041 8,207 28,320
Noninterest income
Annuities and insurance commissions 39 51 40
Income on bank owned life insurance 703 715 612
Net gains on sale of loans held-for-sale 21 86 35
Deposit, loan and other income 643 721 515
Net gains on sale of investment securities 1,596 - -
Total noninterest income 3,002 1,573 1,202
Noninterest expenses
Salaries and employee benefits 8,206 7,888 7,599
Occupancy and equipment 2,255 2,122 2,247
FDIC insurance 895 985 595
Professional and consulting 718 901 711
Marketing and advertising 256 222 184
Data processing 1,149 1,106 1,024
Amortization of core deposit intangible 193 193 217
Increase in valuation allowance, loans held-for-sale 2,600 - -
Other expenses 1,977 1,835 1,776
Total noninterest expenses 18,249 15,252 14,353
Income (loss) before income tax expense 16,794 (5,472) 15,169
Income tax expense (benefit) 4,914 (3,448) 4,778
Net income (loss) 11,880 (2,024) 10,391
Less: Preferred stock dividends - - 22
Net income (loss) available to common stockholders $ 11,880 $ (2,024) $ 10,369
Earnings per common share:
Basic $0.37 $(0.07) $0.35
Diluted 0.37 (0.07) 0.34
Dividends per common share $0.075 $0.075 $0.075

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)
As of
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2017 2016 2016 2016 2016
Selected Financial Data
Total assets$4,460,816 $4,426,348 $4,327,804 $4,262,914 $4,091,000
Loans receivable:
Commercial 541,690 554,065 644,430 630,425 601,708
Commercial real estate-other 1,192,074 1,154,154 1,139,641 1,104,214 1,087,388
Commercial real estate-multifamily 1,134,760 1,050,067 961,163 967,555 940,913
Commercial construction 460,611 486,228 471,109 443,277 402,594
Residential 242,883 232,547 229,401 230,497 231,319
Consumer 2,811 2,380 2,879 1,976 1,851
Gross loans 3,574,829 3,479,441 3,448,623 3,377,944 3,265,773
Unearned net origination fees (3,166) (3,609) (3,147) (2,324) (1,960)
Loans receivable 3,571,663 3,475,832 3,445,476 3,375,620 3,263,813
Loans held-for-sale (net of valuation allowance) 62,255 78,005 15,112 360 -
Total loans 3,633,918 3,553,837 3,460,588 3,375,980 3,263,813
Securities available-for-sale 352,476 353,290 338,459 208,266 191,331
Securities held-to-maturity - - - 214,718 219,373
Goodwill and other intangible assets 148,804 148,997 149,190 149,383 149,600
Deposits:
Noninterest-bearing 671,183 694,977 655,683 648,664 614,508
Interest-bearing 547,934 563,740 531,500 523,742 517,809
Savings 188,790 205,551 207,717 210,040 219,865
Money market 977,357 911,867 866,710 866,643 678,222
Time deposits 970,213 968,136 1,007,339 951,904 862,667
Total deposits 3,355,477 3,344,271 3,268,949 3,200,993 2,893,071
Borrowings 491,226 476,280 481,337 496,414 646,501
Subordinated debentures (net of issuance costs) 54,575 54,534 54,490 54,441 54,392
Total stockholders' equity 540,277 531,032 499,588 484,414 474,727
Quarterly Average Balances
Total assets$4,382,314 $4,349,961 $4,344,796 $4,212,307 $4,034,375
Loans receivable:
Commercial 557,347 644,263 632,892 626,902 585,773
Commercial real estate (including multifamily) 2,222,795 2,130,955 2,081,741 2,056,263 2,005,872
Commercial construction 466,455 479,342 462,399 418,769 361,108
Residential 237,418 229,738 229,953 231,553 236,404
Consumer 2,460 2,777 2,771 2,865 2,670
Gross loans 3,486,475 3,487,075 3,409,756 3,336,352 3,191,827
Unearned net origination fees (3,304) (3,151) (2,956) (2,295) (2,397)
Loans receivable 3,483,171 3,483,924 3,406,800 3,334,057 3,189,430
Loans held-for-sale 65,860 4,549 478 395 142
Total loans 3,549,031 3,488,473 3,407,278 3,334,452 3,189,572
Securities available-for-sale 367,940 351,809 269,895 202,103 222,776
Securities held-to-maturity - - 143,146 218,220 194,474
Goodwill and other intangible assets 148,930 149,123 149,317 149,525 149,741
Deposits:
Noninterest-bearing 655,597 666,913 640,323 581,743 609,312
Interest-bearing 549,335 534,127 553,401 528,954 503,896
Savings 199,000 205,477 211,162 215,267 215,491
Money market 958,656 891,764 872,937 791,845 656,557
Time deposits 963,976 985,944 1,007,530 889,561 807,801
Total deposits 3,326,564 3,284,225 3,285,353 3,007,370 2,793,057
Borrowings 442,595 476,925 488,015 639,054 684,469
Subordinated debentures 55,155 55,155 55,155 55,155 55,155
Total stockholders' equity 539,544 511,663 495,141 483,519 482,503
Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2017 2016 2016 2016 2016
Net interest income$33,141 $33,407 $33,024 $32,394 $31,320
Provision for loan and lease losses 1,100 25,200 6,750 3,750 3,000
Net interest income after provision for loan and lease losses 32,041 8,207 26,274 28,644 28,320
Noninterest income
Annuity and insurance commissions 39 51 68 32 40
Income on bank owned life insurance 703 715 615 616 612
Net gains on sale of loans held-for-sale 21 86 56 56 35
Deposit, loan and other income 643 721 706 763 515
Net gains on sale of investment securities 1,596 - 4,131 103 -
Total noninterest income 3,002 1,573 5,576 1,570 1,202
Noninterest expenses
Salaries and employee benefits 8,206 7,888 7,791 7,753 7,599
Occupancy and equipment 2,255 2,122 2,049 2,154 2,247
FDIC insurance 895 985 745 615 595
Professional and consulting 718 901 667 700 711
Marketing and advertising 256 222 293 250 184
Data processing 1,149 1,106 1,002 1,010 1,024
Amortization of core deposit intangible 193 193 193 217 217
Increase in valuation allowance, loans held-for-sale 2,600 - - - -
Other expenses 1,977 1,835 1,811 1,653 1,776
Total noninterest expenses 18,249 15,252 14,551 14,352 14,353
Income (loss) before income tax expense 16,794 (5,472) 17,299 15,862 15,169
Income tax expense (benefit) 4,914 (3,448) 5,443 5,003 4,778
Net income (loss)$11,880 $(2,024) $11,856 $10,859 $10,391
Less: preferred dividends - - - - 22
Net income (loss) available to common stockholders$11,880 $(2,024) $11,856 $10,859 $10,369
Weighted average diluted shares outstanding 32,192,643 30,729,359 30,401,684 30,340,376 30,257,676
Diluted EPS$0.37 $(0.07) $0.39 $0.36 $0.34
Return on Assets Measures
Average assets$4,382,314 $4,349,961 $4,344,796 $4,212,307 $4,034,375
Less: average intangible assets (148,930) (149,123) (149,317) (149,525) (149,741)
Average tangible assets$4,233,384 $4,200,838 $4,195,479 $4,062,782 $3,884,634
Return on avg. assets (GAAP) 1.10% -0.19% 1.09% 1.04% 1.04%
Return on avg. tangible assets (Non-GAAP) (1) 1.15% -0.18% 1.14% 1.09% 1.09%
_____
(1) Net income excluding amortization of intangible assets divided by average tangible assets.
Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2017
2016
2016
2016
2016
Return on Equity Measures
Average common equity$539,544 $511,663 $495,141 $483,519 $473,849
Less: average intangible assets (148,930) (149,123) (149,317) (149,525) (149,741)
Average tangible common equity$390,614 $362,540 $345,824 $333,994 $324,108
Return on avg. common equity (GAAP) 8.93% -1.57% 9.53% 9.03% 8.80%
Return on avg. tangible common equity (non-GAAP) (2) 12.45% -2.10% 13.77% 13.23% 13.03%
Efficiency Measures
Total noninterest expenses$18,249 $15,252 $14,551 $14,352 $14,353
Increase in valuation allowance, loans held-for-sale (2,600) - - - -
Foreclosed property expense (100) (81) (37) 10 (167)
Operating noninterest expense$15,549 $15,171 $14,514 $14,362 $14,186
Net interest income (FTE)$33,956 $34,120 $33,762 $33,112 $31,985
Noninterest income 3,002 1,573 5,576 1,570 1,202
Net gains on sales of investment securities (1,596) - (4,131) (103) -
Operating revenue$35,362 $35,693 $35,207 $34,579 $33,187
Operating efficiency ratio (non-GAAP) (3) 44.0% 42.5% 41.2% 41.5% 42.7%
Net Interest Margin
Average interest-earning assets$4,053,324 $4,038,030 $4,041,020 $3,912,802 $3,728,958
Net interest income (FTE)$33,956 $34,120 $33,762 $33,112 $31,985
Impact of purchase accounting fair value marks (649) (960) (1,045) (1,245) (1,335)
Adjusted net interest income$33,307 $33,160 $32,717 $31,867 $30,650
Net interest margin (GAAP) 3.40% 3.36% 3.32% 3.40% 3.45%
Adjusted net interest margin (non-GAAP) (4) 3.33% 3.27% 3.22% 3.28% 3.31%
_____
(2) Earnings available to common stockholders excluding amortization of intangibles divided by average tangible common equity.
(3) Operating noninterest expense divided by operating revenue.
(4) Adjusted net interest income divided by average interest-earning assets.
As of
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(dollars in thousands, except share data)2017
2016
2016
2016
2016
Capital Ratios and Book Value per Share
Common equity$540,277 $531,032 $499,588 $484,414 $474,727
Less: intangible assets (148,804) (148,997) (149,190) (149,383) (149,600)
Tangible common equity$391,473 $382,035 $350,398 $335,031 $325,127
Total assets$4,460,816 $4,426,348 $4,327,804 $4,262,914 $4,091,000
Less: intangible assets (148,804) (148,997) (149,190) (149,383) (149,600)
Tangible assets$4,312,012 $4,277,351 $4,178,614 $4,113,531 $3,941,400
Common shares outstanding 32,004,471 31,944,403 30,197,318 30,197,318 30,163,078
Common equity ratio (GAAP) 12.11% 12.00% 11.54% 11.36% 11.60%
Tangible common equity ratio (non-GAAP) (5) 9.08% 8.93% 8.39% 8.14% 8.25%
Regulatory capital ratios (Bancorp):
Leverage ratio 9.44% 9.29% 8.49% 8.52% 8.66%
Common equity Tier 1 risk-based ratio 9.79% 9.74% 9.25% 9.10% 9.06%
Risk-based Tier 1 capital ratio 9.92% 9.87% 9.38% 9.23% 9.20%
Risk-based total capital ratio 11.83% 11.78% 11.69% 11.44% 11.36%
Regulatory capital ratios (Bank):
Leverage ratio 10.50% 10.34% 9.57% 9.62% 9.83%
Common equity Tier 1 risk-based ratio 11.03% 10.98% 10.58% 10.43% 10.45%
Risk-based Tier 1 capital ratio 11.03% 10.98% 10.58% 10.43% 10.45%
Risk-based total capital ratio 11.70% 11.63% 11.57% 11.30% 11.24%
Book value per share (GAAP)$16.88 $16.62 $16.54 $16.04 $15.74
Tangible book value per share (non-GAAP) (6) 12.23 11.96 11.60 11.09 10.78
Three Months Ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2017
2016
2016
2016
2016
Net Charge-Off Detail
Net loan charge-offs:
Charge-offs$71 $37,074 $1,910 $77 $512
Recoveries (129) (2) (12) (16) (14)
Net loan charge-offs$(58) $37,072 $1,898 $61 $498
as a % of average total loans (annualized) -0.01% 4.23% 0.22% 0.01% 0.06%
Asset Quality
Nonaccrual taxi medallion loans$59,054 $63,044 $3,637 $3,882 $1,871
Nonaccrual loans, excluding taxi medallion loans 12,790 5,734 7,856 18,029 19,579
Other real estate owned 580 626 626 2,029 1,696
Total nonperforming assets$72,424 $69,404 $12,119 $23,940 $23,146
Performing troubled debt restructurings$10,005 $13,338 $105,338 $97,831 $95,122
Allowance for loan and lease losses ("ALLL")$26,901 $25,744 $37,615 $32,763 $29,074
ALLL, net of taxi specific reserves 26,901 25,744 25,081 25,026 23,087
Nonaccrual loans as a % of loans receivable, excluding taxi medallion loans 0.36% 0.16% 0.24% 0.55% 0.62%
Nonperforming assets as a % of total assets 1.62% 1.57% 0.28% 0.56% 0.57%
ALLL as a % of loans receivable 0.75% 0.74% 1.09% 0.97% 0.89%
ALLL as a % of nonaccrual loans 37.4% 37.4% 327.3% 149.5% 135.5%
ALLL (excluding taxi medallion specific reserves) as a % of nonaccrual loans (excluding taxi medallion loans) 210.3% 449.0% 319.3% 138.8% 117.9%
ALLL (excluding taxi medallion specific reserves) as a % of loans receivable (excluding taxi medallion loans) 0.75% 0.74% 0.75% 0.76% 0.73%
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(5) Tangible common equity divided by tangible assets.
(6) 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
March 31, 2017December 31, 2016March 31, 2016
Average Average Average
Interest-earning assets: Balance Interest
Rate (8) Balance Interest
Rate (8) Balance Interest
Rate (8)
Investment securities (1) (2) $366,473 $3,015 3.34% $346,377 $2,864 3.29% $415,481 $3,499 3.39%
Loans receivable and loans held-for-sale (2) (3) (4) 3,549,031 38,308 4.38 3,488,473 38,797 4.42 3,189,572 35,206 4.44
Federal funds sold and interest-
bearing deposits with banks 115,025 246 0.87 178,845 215 0.48 90,712 134 0.59
Restricted investment in bank stock 22,795 330 5.87 24,335 336 5.49 33,193 352 4.26
Total interest-earning assets 4,053,324 41,899 4.19 4,038,030 42,212 4.16 3,728,958 39,191 4.23
Allowance for loan losses (26,215) (38,932) (27,221)
Noninterest-earning assets 355,205 350,863 332,638
Total assets $4,382,314 $4,349,961 $4,034,375
Interest-bearing liabilities:
Money market deposits 958,656 1,515 0.64 891,764 1,346 0.60 656,557 812 0.50
Savings deposits 199,000 79 0.16 205,477 146 0.28 215,491 157 0.29
Time deposits 963,976 3,091 1.30 985,944 3,199 1.29 807,801 2,535 1.26
Other interest-bearing deposits 549,335 424 0.31 534,127 444 0.33 503,896 435 0.35
Total interest-bearing deposits 2,670,967 5,109 0.78 2,617,312 5,135 0.78 2,183,745 3,939 0.73
Borrowings 442,595 1,985 1.82 476,925 2,105 1.76 684,469 2,413 1.42
Subordinated debentures (5) 55,155 808 5.94 55,155 810 5.84 55,155 811 5.91
Capital lease obligation 2,752 41 6.04 2,783 42 6.00 2,874 43 6.02
Total interest-bearing liabilities 3,171,469 7,943 1.02 3,152,175 8,092 1.02 2,926,243 7,206 0.99
Demand deposits 655,597 666,913 609,312
Other liabilities 15,705 19,210 16,317
Total noninterest-bearing liabilities 671,302 686,123 625,629
Stockholders' equity 539,543 511,663 482,503
Total liabilities and stockholders' equity$4,382,314 $4,349,961 $4,034,375
Net interest income (tax equivalent basis) 33,956 34,120 31,985
Net interest spread (6) 3.17% 3.14% 3.24%
Net interest margin (7) 3.40% 3.36% 3.45%
Tax equivalent adjustment (815) (713) (665)
Net interest income $33,141 $33,407 $31,320
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(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 nonaccrual loans.
(5) Does not reflect netting of debt issuance costs of $580, $621 and $763 for the three months ended March 31, 2017, December 31, 2016 and March 31, 2016, respectively.
(6) 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.
(7) Represents net interest income on a tax equivalent basis divided by average total interest-earning assets.
(8) Rates are annualized.

Investor Contact: William S. Burns Executive VP & CFO 201.816.4474; bburns@cnob.com Media Contact: Jake Ciorciari, MWW 646.376.7042; jciorciari@mww.com

Source:ConnectOne Bancorp, Inc.