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.
             
C ONNECT O NE B ANCORP, I NC. AND S UBSIDIARIES   
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.   
                     
C ONNECT O NE B ANCORP, I NC.  
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 %  
_____                    
(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, 2017 December 31, 2016 March 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          
______________________                                          
(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. BurnsExecutive VP & CFO201.816.4474; bburns@cnob.comMedia Contact:Jake Ciorciari, MWW646.376.7042; jciorciari@mww.com