ENGLEWOOD CLIFFS, N.J., April 24, 2015 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the "Company" or "ConnectOne"), parent company of ConnectOne Bank (the "Bank"), today announced results for the first quarter ended March 31, 2015, the third full quarter following the Merger between the Company and the 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.
For the first quarter of 2015 the Company reported net income available to common stockholders of $10.4 million, or $0.34 per diluted share, compared with net income available to common stockholders of $8.0 million, or $0.27 per diluted share, for the fourth quarter of 2014 and $4.4 million, or $0.27 per diluted share, for the first quarter of 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 measure are provided in the accompanying tables.
First quarter 2015 results reflect the following non-core items (on an after-tax basis): $1.1 million of income recorded as a result of purchase accounting, $0.5 million in additional loan loss provision related to the maturity and extension of acquired portfolio loans, $0.3 million in net securities gains, $0.3 million of pension settlement expenses, which have 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 $9.9 million, or $0.33 per diluted share, for the first quarter of 2015, $9.7 million, or $0.32 per diluted share, for the fourth quarter of 2014, and $4.2 million, or $0.25 per diluted share, for the first quarter of 2014. (See Supplemental GAAP and non-GAAP Financial Measures for a reconciliation of GAAP earnings and non-core measures for all periods discussed above.)
Frank Sorrentino, ConnectOne's Chairman and CEO stated, "With the Merger integration behind us, we're off to a fast start in 2015 by delivering solid growth for the first quarter. Our GAAP and core earnings increased, our loan portfolio grew sequentially by more than $100 million, and we significantly strengthened our infrastructure with investments in people and systems. Additionally, our core return on average tangible assets was 1.22% and our core return on tangible equity was 13.75% for the quarter. Meanwhile, our efficiency ratio was 42.0%, a level which we believe is sustainable and places ConnectOne among the most efficient banks in the U.S. Looking ahead, we're excited about plans to strengthen our market presence and supplement current growth opportunities with the scheduled opening of our first New York City location during the second quarter of 2015. We remain committed to building on our track record of success and believe we are well positioned to achieve a strong operating performance for the remainder of the year."
Operating Results
Fully taxable equivalent ("FTE") net interest income for the first quarter of 2015 was $28.9 million, an increase of $16.6 million, or 135.4%, from the same quarter of 2014. This was a result of a 112.4% increase in average interest-earning assets and a 40 basis-point widening of the net interest rate margin, both due to the Merger. Included in net interest income during the first quarter of 2015 was $1.8 million of accretion and amortization of purchase accounting adjustments. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.46% in the first quarter of 2015, 18 basis points higher than the 2014 first quarter adjusted net interest margin of 3.28%. The improvement in the adjusted net interest margin in the first quarter of 2015 versus the same 2014 period was primarily attributable to an improved mix of interest earning assets arising from a greater proportion of average loans in first quarter of 2015 along with a reduction in the average rate paid on borrowings, which resulted from a $70 million debt extinguishment and subsequent refinancing accomplished at the end of the third quarter of 2014. The adjusted net interest margin for the first quarter of 2015 was approximately flat (up 3 basis points) compared with the sequential fourth quarter of 2014; however, assuming a continued low interest rate environment, management expects moderate margin compression over the remainder of 2015.
Noninterest income, excluding net securities gains, totaled $1.0 million in the first quarter of 2015 and $1.1 million for the first quarter of 2014. Securities gains were $0.5 million and $1.4 million for the first quarter of 2015 and 2014, respectively. Non-interest income 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 and represents a relatively small portion of the Bank's total revenue. Although management intends to continue its strategy of de-emphasizing service charges in order to attract new and retain existing clients, it expects fee income to increase modestly in 2015.
Noninterest expenses totaled $12.6 million for the first quarter of 2015 compared with $6.4 million (excluding $1.1 million of Merger-related charges) for the same quarter of 2014. The increase in the first quarter of 2015 was primarily attributable to the Merger as well as an increased level of business and staff resulting from organic growth. The Company's operating efficiency ratio (see Supplemental GAAP and non-GAAP Financial Measures) was 42.0% in the 2015 first quarter, 38.4% in the 2014 fourth quarter, and 48.2% in the 2014 first quarter. The decrease from the year-ago quarter reflects realization of Merger cost savings. The increase in the efficiency ratio from the sequential fourth quarter of 2014 was due to increased infrastructure costs, including increased staff levels, and seasonal factors.
Income tax expense was $5.0 million and $1.6 million for the first quarter of 2015 and 2014, respectively, resulting in effective tax rates of 32.6% and 26.8% for the first quarter of 2015 and 2014, respectively. The increase in the effective tax rate for 2015 reflects a decline in the percentage of tax-exempt income to total pretax income. The effective tax rate for the remainder of 2015 is expected to remain fairly constant.
Asset Quality
The provision for loan losses increased to $1.8 million in the first quarter of 2015, compared with $0.6 million in the first quarter of 2014. The increases primarily resulted from higher loan growth and the maturity and extension of acquired portfolio loans.
Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $15.5 million at March 31, 2015, $12.7 million at December 31, 2014, and $3.6 million at March 31, 2014. Nonperforming assets as a percent of total assets was 0.44% at March 31, 2015, 0.37% at December 31, 2014, and 0.22% at March 31, 2014. Annualized net charge-offs were 0.01% for the first quarter 2015 and 0.13% in the first quarter of 2014. The allowance for loan losses was $15.9 million, representing 0.60% of loans receivable and 109.2% of nonaccrual loans at March 31, 2015. At December 31, 2014, the allowance was $14.2 million representing 0.56% of loans receivable and 122.0% of nonaccrual loans, and at March 31, 2014, the allowance was $10.6 million representing 1.08% of loans receivable and 311.9% 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 1.20% at March 31, 2015, 1.23% at December 31, 2014, and 1.12% at March 31, 2014. (See Supplemental GAAP and non-GAAP Financial Measures).
Selected Balance Sheet Items
At March 31, 2015, the Company's total assets were $3.5 billion, an increase of $0.1 billion from December 31, 2014. Loans were $2.6 billion, an increase of $0.1 billion from December 31, 2014, funded with cash and increases in deposits and borrowings.
The Company's stockholders' equity was $456.2 million at March 31, 2015, an increase of $10.0 million from December 31, 2014. The increase in stockholders' equity was due to an $8.1 million increase in retained earnings, a $0.8 million increase in other comprehensive income (primarily an increase in unrealized gains on available for sale securities and pension plan actuarial gains), and approximately $1.1 million of equity issuance related to stock-based compensation, including the exercise of options.
As of March 31, 2015, the Company's tangible common equity ratio and tangible book value per share were 8.78% and $9.86, 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 $150.5 million as of March 31, 2015, a decrease of $0.2 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 23 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. | ||
| CONSOLIDATED STATEMENTS OF CONDITION | ||
| (in thousands, except for share data) | ||
|
March 31, |
December 31, | |
| 2015 | 2014 | |
| (unaudited) | (audited) | |
| ASSETS | ||
| Cash and due from banks | $ 30,127 | $ 31,813 |
| Interest-bearing deposits with banks | 58,416 | 95,034 |
| Cash and cash equivalents | 88,543 | 126,847 |
| Investment securities: | ||
| Securities available-for-sale | 276,121 | 289,532 |
| Securities held-to-maturity, fair value of $240,264 and $231,445 | 231,720 | 224,682 |
| Loans held for sale | 1,392 | -- |
| Loans receivable | 2,640,739 | 2,538,641 |
| Less: Allowance for loan losses | (15,933) | (14,160) |
| Net loans receivable | 2,624,806 | 2,524,481 |
| Investment in restricted stock, at cost | 24,874 | 23,535 |
| Bank premises and equipment, net | 20,358 | 20,653 |
| Accrued interest receivable | 11,513 | 11,700 |
| Bank-owned life insurance | 52,904 | 52,518 |
| Other real estate owned | 870 | 1,108 |
| Goodwill | 145,909 | 145,909 |
| Core deposit intangibles | 4,584 | 4,825 |
| Other assets | 22,297 | 22,782 |
| Total assets | $ 3,505,891 | $ 3,448,572 |
| LIABILITIES & STOCKHOLDERS' EQUITY | ||
| Liabilities | ||
| Deposits: | ||
| Noninterest-bearing | $ 479,652 | $ 492,515 |
| Interest-bearing | 2,016,359 | 1,983,092 |
| Total deposits | 2,496,011 | 2,475,607 |
| Borrowings | 525,148 | 495,553 |
| Subordinated debentures | 5,155 | 5,155 |
| Accounts payable and accrued liabilities | 23,383 | 26,038 |
| Total liabilities | 3,049,697 | 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 March 31, 2015 and December 31, 2014; total liquidation value of $11,250 at March 31, 2015 and December 31, 2014 | 11,250 | 11,250 |
| Common stock, no par value, authorized 50,000,000 shares; issued 31,928,524 shares at March 31, 2015 and 31,758,558 at December 31, 2014; outstanding 29,864,602 shares at March 31, 2015 and 29,694,636 at December 31, 2014 | 374,287 | 374,287 |
| Additional paid-in capital | 7,084 | 6,015 |
| Retained earnings | 80,526 | 72,398 |
| Treasury stock, at cost (2,063,922 common shares at March 31, 2015 and December 31, 2014) | (16,717) | (16,717) |
| Accumulated other comprehensive loss | (236) | (1,014) |
| Total stockholders' equity | 456,194 | 446,219 |
| Total liabilities and stockholders' equity | $ 3,505,891 | $ 3,448,572 |
| CONNECTONE BANCORP, INC. | ||
| CONSOLIDATED STATEMENTS OF INCOME (unaudited) | ||
| (dollars in thousands, except share data) | ||
| Three Months Ended March 31, | ||
| 2015 | 2014 | |
| Interest income | ||
| Interest and fees on loans | $ 29,314 | $ 10,111 |
| Interest and dividends on investment securities: | ||
| Taxable | 2,910 | 3,016 |
| Nontaxable | 883 | 1,056 |
| Dividends | 220 | 154 |
| Interest on federal funds sold and other short-term investments | 43 | -- |
| Total interest income | 33,370 | 14,337 |
| Interest expense | ||
| Deposits | 3,025 | 1,316 |
| Borrowings | 2,053 | 1,411 |
| Total interest expense | 5,078 | 2,727 |
| Net interest income | 28,292 | 11,610 |
| Provision for loan losses | 1,825 | 625 |
| Net interest income after provision for loan losses | 26,467 | 10,985 |
| Noninterest income | ||
| Annuity and insurance commissions | 86 | 100 |
| Bank-owned life insurance | 386 | 255 |
| Net gains on sale of loans held for sale | 114 | 36 |
| Deposit, loan and other income | 463 | 715 |
| Net gains on sale of investment securities | 506 | 1,415 |
| Total noninterest income | 1,555 | 2,521 |
| Noninterest expenses | ||
| Salaries and employee benefits | 6,628 | 3,332 |
| Occupancy and equipment | 2,082 | 1,080 |
| FDIC insurance | 560 | 300 |
| Professional and consulting | 494 | 255 |
| Marketing and advertising | 194 | 40 |
| Data processing | 900 | 345 |
| Merger-related expenses | -- | 1,060 |
| Amortization of core deposit intangible | 241 | -- |
| Other expenses | 1,532 | 1,084 |
| Total noninterest expenses | 12,631 | 7,496 |
| Income before income tax expense | 15,391 | 6,010 |
| Income tax expense | 5,012 | 1,612 |
| Net income | 10,379 | 4,398 |
| Less: Preferred stock dividends | 28 | 28 |
| Net income available to common stockholders | $ 10,351 | $ 4,370 |
| Earnings per common share: | ||
| Basic | $ 0.35 | $ 0.27 |
| Diluted | 0.34 | 0.27 |
| Weighted average common shares outstanding: | ||
| Basic | 29,756,855 | 16,350,183 |
| Diluted | 30,148,966 | 16,405,540 |
| Dividend per common share | $ 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) | |||||
| Three Months Ended | |||||
| March 31, | Dec. 31, | Sept. 30, | June 30, | March 31, | |
| 2015 | 2014 | 2014 | 2014 | 2014 | |
| Earnings, EPS and Operating Data | |||||
| Net income (GAAP) | $ 10,379 | $ 8,023 | $ 1,766 | $ 4,378 | $ 4,398 |
| Less: preferred dividends | 28 | 28 | 28 | 28 | 28 |
| Net income available to common stockholders (GAAP) | 10,351 | 7,995 | 1,738 | 4,350 | 4,370 |
| Net gains on sales of securities | (506) | (718) | (111) | (574) | (1,415) |
| Partial settlement of pension obligation | 559 | -- | -- | -- | -- |
| Merger-related expenses | -- | 1,816 | 8,784 | 729 | 1,060 |
| Loss on debt extinguishment | -- | -- | 4,550 | -- | -- |
| Amortization of intangible assets | 241 | 245 | 248 | 6 | 6 |
| Provision related to maturity and extension of acquired portfolio loans | 757 | 787 | 336 | -- | -- |
| Charge due to wire fraud | -- | 2,374 | -- | -- | -- |
| Accretion of purchase accounting fair value marks | (1,802) | (2,491) | (2,892) | 7 | (14) |
| Non-core items | (751) | 2,013 | 10,915 | 168 | (363) |
| Income tax (expense) benefit | (307) | 294 | 4,044 | 59 | (143) |
| Non-core items, after taxes | (444) | 1,719 | 6,871 | 109 | (220) |
| Core earnings available to common stockholders (non-GAAP) | $ 9,907 | $ 9,714 | $ 8,609 | $ 4,459 | $ 4,150 |
| Weighted average diluted shares outstanding | 30,148,966 | 30,149,244 | 30,115,520 | 16,430,376 | 16,405,540 |
| Diluted EPS (GAAP) | 0.34 | $ 0.27 | $ 0.06 | $ 0.26 | $ 0.27 |
| Core Diluted EPS (Non-GAAP) (1) | 0.33 | $ 0.32 | $ 0.29 | $ 0.27 | $ 0.25 |
| Return on Assets Measures | |||||
| Core earnings available to common stockholders (non-GAAP) | $ 9,907 | $ 9,714 | $ 8,609 | $ 4,459 | $ 4,150 |
| Add: preferred dividends | 28 | 28 | 28 | 28 | 28 |
| Core net income (non-GAAP) | $ 9,935 | $ 9,742 | $ 8,637 | $ 4,487 | $ 4,178 |
| Average assets | $ 3,466,820 | $ 3,369,402 | $ 3,350,599 | $ 1,657,440 | $ 1,676,936 |
| Less: average intangible assets | 150,650 | 150,934 | 151,142 | 16,819 | 16,825 |
| Average tangible assets | $ 3,316,170 | $ 3,218,468 | $ 3,199,457 | $ 1,640,621 | $ 1,660,111 |
| Return on avg. assets (GAAP) | 1.21% | 0.94% | 0.21% | 1.06% | 1.06% |
| Core return on avg. assets (Non-GAAP) (2) | 1.16% | 1.15% | 1.02% | 1.09% | 1.01% |
| Return on avg. tangible assets (Non-GAAP) (3) | 1.29% | 1.01% | 0.24% | 1.06% | 1.05% |
| Core return on avg. tangible assets (Non-GAAP) (4) | 1.22% | 1.20% | 1.07% | 1.10% | 1.02% |
| __________ | |||||
| (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) | March 31, | Dec. 31, | Sept. 30, | June 30, | March 31, |
| 2015 | 2014 | 2014 | 2014 | 2014 | |
| Return on Equity Measures | |||||
| Core earnings available to common stockholders | $ 9,907 | $ 9,714 | $ 8,609 | $ 4,459 | $ 4,150 |
| Average common equity | $ 442,970 | $ 437,136 | $ 432,331 | $ 165,301 | $ 161,934 |
| Less: average intangible assets | 150,650 | 150,934 | 151,142 | 16,819 | 16,825 |
| Average tangible common equity | $ 292,320 | $ 286,202 | $ 281,189 | $ 148,482 | $ 145,109 |
| Return on avg. common equity (GAAP) | 9.48% | 7.26% | 1.59% | 10.56% | 10.94% |
| Core return on avg. common equity (non-GAAP) (5) | 9.07% | 8.82% | 7.90% | 10.82% | 10.39% |
| Return on avg. tangible common equity (non-GAAP) (6) | 14.56% | 11.28% | 2.66% | 11.63% | 11.96% |
| Core return on avg. tangible common equity (non-GAAP) (7) | 13.75% | 13.47% | 12.15% | 12.04% | 11.60% |
| Efficiency Measures | |||||
| Total noninterest expenses | $ 12,631 | $ 15,164 | $ 25,400 | $ 6,744 | $ 7,496 |
| Partial settlement of pension obligation | (559) | -- | -- | -- | -- |
| Merger-related expenses | -- | (1,816) | (8,784) | (729) | (1,060) |
| Loss on debt extinguishment | -- | -- | (4,550) | -- | -- |
| Charge due to wire fraud | -- | (2,374) | -- | -- | -- |
| Amortization of intangible assets and fair value marks | (241) | (218) | (224) | (6) | (7) |
| Operating non-interest expense | $ 11,831 | $ 10,756 | $ 11,842 | $ 6,009 | $ 6,429 |
| Net interest income (FTE) | 28,906 | 29,135 | 28,146 | 12,252 | 12,255 |
| Impact of purchase accounting fair value marks | (1,776) | (2,464) | (2,868) | 7 | (14) |
| Noninterest income | 1,555 | 2,076 | 1,173 | 1,724 | 2,521 |
| Less: net gains on sales of securities | (506) | (718) | (111) | (574) | (1,415) |
| Operating revenue | $ 28,179 | $ 28,029 | $ 26,340 | $ 13,409 | $ 13,347 |
| Operating Efficiency Ratio (non-GAAP) (8) | 42.0% | 38.4% | 45.0% | 44.8% | 48.2% |
| Net Interest Margin | |||||
| Average interest earning assets | $ 3,182,894 | $ 3,082,934 | $ 3,050,564 | $ 1,491,297 | $ 1,498,610 |
| Net interest income (FTE) | $ 28,906 | $ 29,135 | $ 28,146 | $ 12,252 | $ 12,282 |
| Impact of purchase accounting fair value marks | (1,776) | (2,464) | (2,868) | 7 | (14) |
| Adjusted net interest income | $ 27,130 | $ 26,671 | $ 25,278 | $ 12,259 | $ 12,268 |
| Net interest margin (GAAP) | 3.68% | 3.75% | 3.66% | 3.29% | 3.28% |
| Adjusted net interest margin (non-GAAP) (9) | 3.46% | 3.43% | 3.29% | 3.29% | 3.28% |
| __________ | |||||
| (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) | March 31, | Dec. 31, | Sept. 30, | June 30, | March 31, |
| 2015 | 2014 | 2014 | 2014 | 2014 | |
| Capital Ratios and Book Value per Share | |||||
| Common equity | $ 444,944 | $ 434,969 | $ 429,650 | $ 167,028 | $ 162,563 |
| Less: intangible assets | (150,493) | (150,734) | (150,979) | (16,815) | (16,821) |
| Tangible common equity | $ 294,451 | $ 284,235 | $ 278,671 | $ 150,213 | $ 145,742 |
| Total assets | $ 3,505,891 | $ 3,448,572 | $ 3,356,257 | $ 1,665,809 | $ 1,676,160 |
| Less: intangible assets | (150,493) | (150,734) | (150,979) | (16,815) | (16,821) |
| Tangible assets | $ 3,355,398 | $ 3,297,838 | $ 3,205,278 | $ 1,648,994 | $ 1,659,339 |
| Common shares outstanding | 29,864,602 | 29,694,906 | 29,644,037 | 16,413,490 | 16,369,012 |
| Common equity ratio (GAAP) | 12.69% | 12.61% | 12.80% | 10.03% | 9.70% |
| Tangible common equity ratio (non-GAAP) (10) | 8.78% | 8.62% | 8.69% | 9.11% | 8.78% |
| Regulatory capital ratios: | |||||
| Leverage ratio | 9.37% | 9.37% | 9.23% | 10.08% | 9.79% |
| Risk-based total | 10.74% | 10.94% | 11.07% | 13.43% | 13.22% |
| Book value per share (GAAP) | $ 14.90 | $ 14.65 | $ 14.49 | $ 10.18 | $ 9.93 |
| Tangible book value per share (non-GAAP) (11) | 9.86 | 9.57 | 9.40 | 9.15 | 8.90 |
| Asset Quality | |||||
| Nonaccrual loans | $ 14,585 | $ 11,610 | $ 6,083 | $ 4,032 | $ 3,409 |
| Other real estate owned | 870 | 1,108 | 1,442 | 220 | 220 |
| Total non-performing assets | $ 15,455 | $ 12,718 | $ 7,525 | $ 4,252 | $ 3,629 |
| Performing troubled debt restructurings | $ 1,731 | $ 1,763 | $ 1,876 | $ 1,586 | $ 5,706 |
| Loans past due 90 days and still accruing | 638 | 1,211 | -- | 144 | 237 |
| Nonaccrual loans as a % of loans receivable | 0.55% | 0.46% | 0.25% | 0.40% | 0.35% |
| Nonperforming assets as a % of total assets | 0.44% | 0.37% | 0.22% | 0.26% | 0.22% |
| Allowance for loan losses as a % of nonaccrual loans | 109.2% | 122.0% | 199.2% | 268.5% | 311.9% |
| Annualized net charge-offs as a % of average loans | 0.01% | 0.07% | 0.03% | 0.04% | 0.13% |
| Total loans receivable | $ 2,640,739 | $ 2,538,641 | $ 2,426,765 | $ 1,006,256 | $ 987,529 |
| Acquired loans | 1,110,859 | 1,190,085 | 1,286,482 | 29,821 | 32,643 |
| Loans receivable, excluding acquired loans | $ 1,529,880 | $ 1,348,556 | $ 1,140,283 | $ 976,435 | $ 954,886 |
| Allowance for loan losses | $ 15,933 | $ 14,160 | $ 12,118 | $ 10,825 | $ 10,633 |
| Accretable credit risk discount on acquired loans | 15,800 | 17,017 | 18,835 | 371 | 429 |
| Total allowance for loan losses and accretable credit risk discount on acquired loans | $ 31,733 | $ 31,177 | $ 30,953 | $ 11,196 | $ 11,062 |
| Allowance for loan losses as a % of loans receivable | 0.60% | 0.56% | 0.50% | 1.08% | 1.08% |
| Allowance for loan losses as a % of loans receivable, excluding acquired loans | 1.04% | 1.05% | 1.06% | 1.11% | 1.11% |
| Allowance for loan losses and accretable credit risk discount on loans as a % of loans receivable | 1.20% | 1.23% | 1.28% | 1.11% | 1.12% |
| __________ | |||||
| (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 | ||||||
| March 31, 2015 | March 31, 2014 | |||||
| Average | Average | Average | Average | |||
| Interest-earning assets: | Balance | Interest | Rate (7) | Balance | Interest | Rate (7) |
| Investment securities (1) (2) | $ 509,931 | $ 4,268 | 3.39% | $ 526,526 | $ 4,682 | 3.56% |
| Loans receivable (2) (3) (4) | 2,571,552 | 29,453 | 4.65% | 963,098 | 10,214 | 4.24% |
| Federal funds sold and interest-bearing deposits with banks | 76,138 | 43 | 0.23% | -- | -- | -- % |
| Restricted investment in bank stock | 25,273 | 220 | 3.54% | 8,986 | 113 | 5.03% |
| Total interest-earning assets | 3,182,894 | 33,984 | 4.33% | 1,498,610 | 15,009 | 4.01% |
| Allowance for loan losses | (14,749) | (10,358) | ||||
| Non-interest earning assets | 298,675 | 188,684 | ||||
| Total assets | $ 3,466,820 | $ 1,676,936 | ||||
| Interest-bearing liabilities: | ||||||
| Money market deposits | $ 707,474 | 722 | 0.41% | $ 430,086 | 519 | 0.48% |
| Savings deposits | 222,613 | 162 | 0.29% | 162,621 | 127 | 0.31% |
| Time deposits | 688,989 | 1,818 | 1.07% | 171,145 | 368 | 0.86% |
| Other interest-bearing deposits | 349,628 | 323 | 0.37% | 349,361 | 302 | 0.35% |
| Total interest-bearing deposits | 1,968,704 | 3,025 | 0.62% | 1,113,213 | 1,316 | 0.47% |
| Borrowings | 534,052 | 1,968 | 1.49% | 146,500 | 1,372 | 3.75% |
| Capital lease obligation | 2,989 | 45 | 6.10% | -- | -- | -- % |
| Subordinated debentures | 5,155 | 40 | 3.14% | 5,155 | 39 | 3.03% |
| Total interest-bearing liabilities | 2,510,900 | 5,078 | 0.82% | 1,264,868 | 2,727 | 0.86% |
| Demand deposits | 481,500 | 225,407 | ||||
| Other liabilities | 20,200 | 13,477 | ||||
| Total noninterest-bearing liabilities | 501,700 | 238,884 | ||||
| Stockholders' equity | 454,220 | 173,184 | ||||
| Total liabilities and stockholders' equity | $ 3,466,820 | $ 1,676,936 | ||||
| Net interest income (tax equivalent basis) | 28,906 | 12,282 | ||||
| Net interest spread (5) | 3.51% | 3.15% | ||||
| Net interest margin (6) | 3.68% | 3.28% | ||||
| Tax equivalent adjustment | (614) | (672) | ||||
| Net interest income | $ 28,292 | $ 11,610 | ||||
| __________ | ||||||
| (1) Average balances are calculated on amortized cost. | ||||||
| (2) Interest income is presented on a tax equivalent basis using 35 percent 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. | ||||||