EdgarFiling

EX-99.1 2 exh_991.htm PRESS RELEASE EdgarFiling

EXHIBIT 99.1

ConnectOne Bancorp, Inc. Reports Second Quarter 2018 Results

ENGLEWOOD CLIFFS, N.J., July 26, 2018 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the “Company” or “ConnectOne”), parent company of ConnectOne Bank (the “Bank”), today reported net income of $17.5 million for the second quarter of 2018 compared with $4.3 million for the first quarter of 2018 and $7.7 million for the second quarter of 2017. Diluted earnings per share were $0.54 for the second quarter of 2018 versus $0.13 earned in the first quarter of 2018 and $0.24 earned in the second quarter of 2017.

Adjusted net income amounted to $17.5 million, or $0.54 earnings per share, for the second quarter of 2018; $17.1 million, or $0.53 earnings per share, for the first quarter of 2018; and $13.3 million, or $0.41 earnings per share, for the second quarter of 2017. Adjusted net income excludes taxi medallion after-tax charges of $13.4 million for the first quarter 2018 and $5.7 million for the second quarter 2017. In addition, adjusted net income for the first quarter of 2018 excludes $0.5 million of income tax benefit from ASU 2016-19, and $0.1 million for the second quarter 2017.

Frank Sorrentino, ConnectOne’s Chairman and Chief Executive Officer stated, “We are extremely pleased with our second quarter performance, highlighted by record quarterly earnings. In addition, we saw improvement in other metrics including deposit and loan growth, net interest margin, return on assets and tangible common equity, tangible book value per share, and credit quality. Total loans increased by $112 million, or more than 10% on an annualized basis, from the prior quarter-end, while total deposits increased by $156 million, or more than 15% on an annualized basis. Meanwhile, our net interest margin, which had contracted significantly during the first quarter due to market conditions and non-recurring items, widened from the sequential quarter by 5 basis-points including purchase accounting accretion, and by 2 basis-points when excluding such accretion. The increase was largely a result of an increasing yield in the loan portfolio driven by repricing and higher origination rates, and a better overall asset mix, offset by increased funding costs, primarily related to deposits. While net interest margin tightening remains the likely trend largely due to increasing deposit competition, loan spreads have begun to widen, albeit slightly, reflecting both loan mix and discipline. Many of our performance metrics improved during the quarter and remain among the best in our industry. Our efficiency ratio was 41.9%, return on average assets was 1.38%, and return on average tangible common equity was 16.6%, all reflecting underlying strong core performance as we remain focused on maximizing shareholder value.”

Mr. Sorrentino added, “In addition to our strong second quarter financial performance, I’m equally excited about our recently announced merger with Greater Hudson Bank, a premier community bank operating in Rockland, Orange and Westchester Counties in New York. In addition to enhancing our market presence by expanding our footprint into the Hudson Valley, the transaction will provide new opportunities for accretive growth by combining our operating model and our technological capabilities with the Greater Hudson deposit rich franchise. The merger also aligns perfectly with our stated growth strategy, enabling us to more deeply penetrate the New York market and expand the ConnectOne model within the 75-mile radius of New York City in which we operate. It provides our clients with even greater service while also enhancing our commercial lending capabilities, including establishing an SBA platform. We believe Greater Hudson is a strong strategic fit for ConnectOne and the transaction remains on target to close in early 2019.”

Operating Results

Fully taxable equivalent net interest income for the second quarter of 2018 was $39.4 million, an increase of $0.8 million, or 2.1%, from the first quarter of 2018, resulting from a widening of the net interest margin to 3.31% from 3.26%, partially offset by a decrease in total average interest-earning assets of 0.6%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.7 million during the second quarter of 2018 and $0.2 million during the first quarter of 2018. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.26% in the second quarter of 2018, widening by 2 basis-points from the first quarter of 2018 adjusted net interest margin of 3.24%. The increase in the adjusted net interest margin was primarily attributable to a higher yield earned on loans and securities and an improved asset-mix, partially offset by increases in deposit funding costs.

Fully taxable equivalent net interest income for the second quarter of 2018 increased by $3.6 million, or 10.0%, from the second quarter of 2017, resulting from an increase in total average interest-earning assets of 14.5%, primarily loans, offset by a contraction in the net interest margin of 14 basis-points to 3.31% from 3.45%. Included in net interest income was accretion and amortization of purchase accounting adjustments of $0.7 million during the second quarter of 2018 and $0.3 million during the second quarter of 2017. Excluding these purchase accounting adjustments, the adjusted net interest margin was 3.26% in the second quarter of 2018, contracting by 16 basis-points from the second quarter of 2017 adjusted net interest margin of 3.42%. The decrease in the adjusted net interest margin was primarily attributable to a long-term subordinated debt issuance, a change in the taxable equivalent adjustment due to the Tax Cuts and Jobs Act of 2017, and increased deposit rates, partially offset by higher rates earned on loans.

Noninterest income totaled $1.4 million in the second quarter of 2018, first quarter of 2018 and second quarter of 2017. Noninterest income consists of income on bank owned life insurance, net gains on sales of loans held-for-sale and deposit service fees, loan fees, and other income.

Noninterest expenses totaled $17.1 million for the second quarter of 2018 and first quarter of 2018 and $25.3 million for the second quarter of 2017. Noninterest expenses remained flat when compared to the prior sequential quarter. Noninterest expenses decreased by $8.2 million from the prior year second quarter due primarily to a valuation allowance adjustment on taxi medallion loans held-for-sale of $9.7 million that occurred during the prior year quarter, offset by increases in the current quarter in salaries and employee benefits ($1.1 million) and other expenses ($0.4 million). The increases over the prior year second quarter were the result of increased levels of business and staff resulting from organic growth.

Income tax expense was $4.6 million for the second quarter of 2018, compared to $0.4 million for the first quarter of 2018 and $2.1 million for the second quarter of 2017. Included in income tax expenses for the first quarter of 2018 was an income tax benefit of $0.5 million resulting from the effect of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. At the present time, the Company is projecting a 2018 effective tax rate of approximately 21%, exclusive of ASU 2016-09 benefits.

Asset Quality

The provision for loan losses was $1.1 million in the second quarter of 2018, $17.8 million in the first quarter of 2018 and $1.5 million in the second quarter of 2017. The decrease of $16.7 million from the sequential first quarter was largely attributable to $17.0 million of provision in the first quarter related to the taxi medallion loan portfolio, partially offset by the impact of higher loan growth. The decrease from the prior year quarter was mainly attributable to slightly slower loan growth. The provision related to taxi medallions was due to decreases in the transfer values as reported by the New York City Taxi and Limousine Commission and a reduction in the Bank’s cash flow valuation model.

Nonperforming assets, which includes nonaccrual loans and other real estate owned, were $50.8 million at June 30, 2018, $66.2 million at December 31, 2017 and $63.5 million at June 30, 2017. Included in nonperforming assets were taxi medallion loans totaling $28.9 million at June 30, 2018, $46.8 million at December 31, 2017 and $48.9 million at June 30, 2017. Excluding the taxi medallion loans, nonaccrual loans were $20.8 million at June 30, 2018, $18.8 million at December 31, 2017 and $14.1 million at June 30, 2017, representing a ratio of nonaccrual loans (excluding taxis) to loans receivable of 0.48%, 0.46% and 0.37%, respectively. Nonperforming assets as a percentage of total assets were 0.96% at June 30, 2018, 1.29% at December 31, 2017 and 1.36% at June 30, 2017.

The net loan charge-offs (recoveries) ratio was 0.00% for the second quarter of 2018, 0.01% for the fourth quarter of 2017 and (0.01%) for the second quarter of 2017. The allowance for loan losses represented 0.77%, 0.76%, and 0.76% of loans receivable as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively. The allowance for loan losses as a percentage of nonaccrual loans was 67.6% as of June 30, 2018, 48.4% as of December 31, 2017 and 45.1% as of June 30, 2017. Excluding the taxi medallion loans, allowance for loan losses as a percentage of nonaccrual loans was 161.7% as of June 30, 2018, 168.4% as of December 31, 2017 and 202.1% as of June 30, 2017.

Selected Balance Sheet Items

At June 30, 2018, the Company’s total assets were $5.3 billion, an increase of $167 million from December 31, 2017, largely the result of an increase in total loans (loan originations less pay-downs and pay-offs) of $165 million. The Company’s stockholders’ equity was $579 million at June 30, 2018, an increase of $13 million from December 31, 2017. The increase in stockholders’ equity was primarily attributable to increases in retained earnings of $18 million, primarily offset by decreases in other comprehensive losses of $5 million. As of June 30, 2018, the Company’s tangible common equity ratio and tangible book value per share were 8.40% and $13.38, respectively. As of December 31, 2017, the tangible common equity ratio and tangible book value per share were 8.41% and $13.01, respectively. Total goodwill and other intangible assets were approximately $148 million as of June 30, 2018 and December 31, 2017.

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/adjusted financial measures including an adjusted net income available to common shareholders. 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. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Second Quarter 2018 Conference Call

Management will also host a conference call and audio webcast at 10:00 a.m. ET on July 26, 2018 to review the Company's financial performance and operating results. The conference call dial-in number is 334-323-0522, access code 7122269. Please dial in at least five minutes before the start of the call to register. An audio webcast of the conference call will be available to the public, on a listen-only basis, via the "Shareholders" link on the Company's website https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

A replay of the conference call will be available beginning at approximately 1:00 p.m. ET on Thursday, July 26, 2018 and ending on Thursday, August 2, 2018 by dialing 719-457-0820, access code 7122269. An online archive of the webcast will be available following the completion of the conference call at https://www.ConnectOneBank.com or at http://ir.connectonebank.com.

About ConnectOne Bancorp, Inc.

ConnectOne is a New Jersey corporation and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended, and serves as the holding company for ConnectOne Bank ("the Bank"). The Bank is a community-based, full-service New Jersey-chartered commercial bank that was founded in 2005. The Bank operates from its headquarters located at 301 Sylvan Avenue in the Borough of Englewood Cliffs, Bergen County, New Jersey, and through its 21 other banking offices.

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

Forward-Looking Statements

This news release contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those factors set forth in Item 1A – Risk Factors of the Company’s Annual Report on Form 10-K, as filed with the Securities and 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
(in thousands)

	June 30,			December 31,			June 30,
		2018			2017			2017
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	56,931		$	52,565		$	54,305
Interest-bearing deposits with banks		119,238			97,017			92,203
Cash and cash equivalents		176,169			149,582			146,508

Securities available-for-sale		400,015			435,284			402,130
Equity securities		11,559			-			-

Loans held-for-sale		-			24,845			51,124

Loans receivable		4,360,854			4,171,456			3,761,572
Less: Allowance for loan losses		33,594			31,748			28,401
Net loans receivable		4,327,260			4,139,708			3,733,171

Investment in restricted stock, at cost		32,441			33,497			32,152
Bank premises and equipment, net		20,389			21,659			21,630
Accrued interest receivable		16,754			15,470			13,194
Bank owned life insurance		112,275			111,311			99,777
Other real estate owned		1,076			538			580
Goodwill		145,909			145,909			145,909
Core deposit intangibles		2,027			2,364			2,702
Other assets		29,494			28,275			32,403
Total assets	$	5,275,368		$	5,108,442		$	4,681,280

LIABILITIES
Deposits:
Noninterest-bearing	$	765,150		$	776,843		$	695,522
Interest-bearing		3,140,260			3,018,285			2,734,851
Total deposits		3,905,410			3,795,128			3,430,373
Borrowings		628,995			670,077			626,173
Subordinated debentures (net of $1,763, $456 and $539 in debt issuance costs)		128,392			54,699			54,616
Other liabilities		34,014			23,101			23,945
Total liabilities		4,696,811			4,543,005			4,135,107

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock		412,546			412,546			412,546
Additional paid-in capital		13,756			13,602			12,377
Retained earnings		177,619			160,025			141,178
Treasury stock		(16,717	)		(16,717	)		(16,717	)
Accumulated other comprehensive loss		(8,647	)		(4,019	)		(3,211	)
Total stockholders' equity		578,557			565,437			546,173
Total liabilities and stockholders' equity	$	5,275,368		$	5,108,442		$	4,681,280

CONNECTONE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for per share data)

	Three Months Ended				Six Months Ended
	06/30/18		06/30/17		06/30/18		06/30/17
Interest income
Interest and fees on loans	$	49,494	$	40,632	$	96,519	$	78,638
Interest and dividends on investment securities:
Taxable		2,150		1,799		4,037		3,347
Tax-exempt		778		831		1,592		1,785
Dividends		502		290		987		620
Interest on federal funds sold and other short-term investments		160		139		424		385
Total interest income		53,084		43,691		103,559		84,775
Interest expense
Deposits		9,169		5,495		16,857		10,604
Borrowings		4,970		3,095		9,610		5,929
Total interest expense		14,139		8,590		26,467		16,533

Net interest income		38,945		35,101		77,092		68,242
Provision for loan losses		1,100		1,450		18,900		2,550
Net interest income after provision for loan losses		37,845		33,651		58,192		65,692

Noninterest income
Income on bank owned life insurance		775		714		1,549		1,417
Net gains on sale of loans held-for-sale		12		49		29		70
Deposit, loan and other income		601		659		1,217		1,341
Net gains on sale of investment securities		-		-		-		1,596
Total noninterest income		1,388		1,422		2,795		4,424

Noninterest expenses
Salaries and employee benefits		9,736		8,632		19,415		16,838
Occupancy and equipment		2,031		1,991		4,174		4,246
FDIC insurance		765		815		1,615		1,710
Professional and consulting		825		734		1,548		1,452
Marketing and advertising		337		289		544		545
Data processing		1,091		1,149		2,239		2,298
Amortization of core deposit intangible		169		193		338		386
Increase in valuation allowance, loans held-for-sale		-		9,725		-		12,325
Other expenses		2,154		1,775		4,294		3,752
Total noninterest expenses		17,108		25,303		34,167		43,552

Income before income tax expense		22,125		9,770		26,820		26,564
Income tax expense		4,598		2,087		5,042		7,001
Net income	$	17,527	$	7,683	$	21,778	$	19,563

Earnings per common share:
Basic	$	0.54	$	0.24	$	0.68	$	0.61
Diluted		0.54		0.24		0.67		0.60

Dividends per common share	$	0.075	$	0.075	$	0.150	$	0.150

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

	As of
	June 30,				Mar. 31,				Dec. 31,				Sept. 30,				June 30,
		2018				2018				2017				2017				2017
Selected Financial Data	(dollars in thousands)
Total assets	$	5,275,368			$	5,158,368			$	5,108,442			$	4,844,755			$	4,681,280
Loans receivable:
Commercial		808,604				768,640				781,698				641,613				610,442
Commercial real estate		1,282,426				1,275,764				1,232,037				1,254,720				1,218,995
Multifamily		1,480,243				1,400,420				1,403,256				1,330,485				1,251,962
Commercial construction		498,607				479,190				483,216				399,453				431,049
Residential		288,449				278,985				271,795				264,244				251,108
Consumer		5,637				2,461				2,808				1,912				2,005
Gross loans		4,363,966				4,205,460				4,174,810				3,892,427				3,765,561
Unearned net origination fees		(3,112	)			(2,781	)			(3,354	)			(3,138	)			(3,989	)
Loans receivable		4,360,854				4,202,679				4,171,456				3,889,289				3,761,572
Loans held-for-sale (net of valuation allowance)		-				45,886				24,845				89,386				51,124
Total loans	$	4,360,854			$	4,248,565			$	4,196,301			$	3,978,675			$	3,812,696

Investment securities	$	411,574			$	435,929			$	435,284			$	400,516			$	402,130
Goodwill and other intangible assets		147,936				148,104				148,273				148,442				148,611
Deposits:
Noninterest-bearing demand		765,150				739,174				776,843				719,582				695,522
Time deposits		1,315,843				1,255,654				1,179,969				1,078,359				982,328
Other interest-bearing deposits		1,824,417				1,754,759				1,838,316				1,825,828				1,752,523
Total deposits	$	3,905,410			$	3,749,587			$	3,795,128			$	3,623,769			$	3,430,373

Borrowings	$	628,995			$	695,032			$	670,077			$	585,124			$	626,173
Subordinated debentures (net of issuance costs)		128,392				128,310				54,699				54,657				54,616
Total stockholders' equity		578,557				564,266				565,437				557,691				546,173

Quarterly Average Balances
Total assets	$	5,104,661			$	5,088,823			$	4,916,549			$	4,713,487			$	4,495,008
Loans receivable:
Commercial		808,764				820,562				761,147				671,525				603,733
Commercial real estate (including multifamily)		2,654,276				2,643,466				2,566,959				2,502,846				2,337,499
Commercial construction		494,092				482,391				439,629				418,439				451,038
Residential		282,504				275,263				268,047				255,755				246,864
Consumer		5,685				4,659				3,849				2,555				2,929
Gross loans		4,245,321				4,226,341				4,039,631				3,851,120				3,642,063
Unearned net origination fees		(3,208	)			(3,110	)			(3,485	)			(3,724	)			(3,967	)
Loans receivable		4,242,113				4,223,231				4,036,146				3,847,396				3,638,096
Loans held-for-sale		30,099				24,766				57,812				51,008				61,259
Total loans	$	4,272,212			$	4,247,997			$	4,093,958			$	3,898,404			$	3,699,355

Investment securities		424,854				437,141				417,560				398,635				391,965
Goodwill and other intangible assets		148,046				148,215				148,383				148,553				148,737
Deposits:
Noninterest-bearing demand		719,372				724,471				712,391				688,707				667,461
Time deposits		1,280,471				1,207,368				1,114,670				1,005,997				976,012
Other interest-bearing deposits		1,765,577				1,815,122				1,855,688				1,816,162				1,712,875
Total deposits	$	3,765,420			$	3,746,961			$	3,682,749			$	3,510,866			$	3,356,348

Borrowings	$	613,763			$	630,117			$	588,260			$	570,711			$	514,161
Subordinated debentures (net of issuance costs)		128,339				115,182				54,672				54,630				54,590
Total stockholders' equity		574,992				575,029				567,308				556,620				549,748

	Three Months Ended
	June 30,				Mar. 31,				Dec. 31,				Sept. 30,				June 30,
		2018				2018				2017				2017				2017
	(dollars in thousands, except for per share data)
Net interest income	$	38,945			$	38,147			$	39,808			$	37,019			$	35,101
Provision for loan losses		1,100				17,800				2,000				1,450				1,450
Net interest income after provision for loan losses		37,845				20,347				37,808				35,569				33,651
Noninterest income
Income on bank owned life insurance		775				774				779				985				714
Net gains on sale of loans held-for-sale		12				17				588				50				49
Deposit, loan and other income		601				616				657				721				659
Total noninterest income		1,388				1,407				2,024				1,756				1,422
Noninterest expenses
Salaries and employee benefits		9,736				9,679				9,418				8,872				8,632
Occupancy and equipment		2,031				2,143				1,948				1,969				1,991
FDIC insurance		765				850				935				840				815
Professional and consulting		825				723				671				740				734
Marketing and advertising		337				207				226				225				289
Data processing		1,091				1,148				1,069				1,176				1,149
Amortization of core deposit intangible		169				169				169				169				193
Increase in valuation allowance, loans held-for-sale		-				-				267				3,000				9,725
Other expenses		2,154				2,140				1,863				1,650				1,775
Total noninterest expenses		17,108				17,059				16,566				18,641				25,303

Income before income tax expense		22,125				4,695				23,266				18,684				9,770
Income tax expense		4,598				444				12,686				5,607				2,087
Net income	$	17,527			$	4,251			$	10,580			$	13,077			$	7,683

Reconciliation of GAAP Earnings to Earnings Excluding the Following Items:
Net income	$	17,527			$	4,251			$	10,580			$	13,077			$	7,683
Deferred tax valuation charge		-				-				5,574				-				-
Tax benefit on employee share-based awards (ASU 2016-09)		(49	)			(541	)			-				-				(133	)
Provision related to taxi medallion loans (after taxes)		-				13,430				-				-				-
Increase in valuation allowance, loans held-for-sale (after taxes)		-				-				182				1,776				5,719
Net income-adjusted	$	17,478			$	17,140			$	16,336			$	14,853			$	13,269
Weighted average diluted shares outstanding		32,321,150				32,238,048				32,252,759				32,182,016				32,255,770
Diluted EPS (GAAP)	$	0.54			$	0.13			$	0.33			$	0.41			$	0.24
Diluted EPS-adjusted (Non-GAAP) ⁽¹⁾		0.54				0.53				0.51				0.46				0.41

Return on Assets Measures
Net income-adjusted	$	17,478			$	17,140			$	16,336			$	14,853			$	13,269

Average assets	$	5,104,661			$	5,088,823			$	4,916,549			$	4,713,487			$	4,495,008
Less: average intangible assets		(148,046	)			(148,215	)			(148,383	)			(148,553	)			(148,737	)
Average tangible assets	$	4,956,615			$	4,940,608			$	4,768,166			$	4,564,934			$	4,346,271
Return on avg. assets (GAAP)		1.38		%		0.34		%		0.85		%		1.10		%		0.69		%
Return on avg. assets-adjusted (non-GAAP) ⁽²⁾		1.37				1.37				1.32				1.25				1.18

⁽¹⁾ Represents adjusted earnings available to common stockholders divided by weighted average diluted shares outstanding.
⁽²⁾ Adjusted net income divided by average assets.

	Three Months Ended
	June 30,				Mar. 31,				Dec. 31,				Sept. 30,				June 30,
		2018				2018				2017				2017				2017
Return on Equity Measures	(dollars in thousands)
Net income-adjusted	$	17,478			$	17,140			$	16,336			$	14,853			$	13,269

Average common equity	$	574,992			$	575,029			$	567,308			$	556,620			$	549,748
Less: average intangible assets		(148,046	)			(148,215	)			(148,383	)			(148,553	)			(148,737	)
Average tangible common equity	$	426,946			$	426,814			$	418,925			$	408,067			$	401,011

Return on avg. common equity (GAAP)		12.23		%		3.00		%		7.40		%		9.32		%		5.61		%
Return on avg. common equity-adjusted (non-GAAP) ⁽³⁾		12.19				12.09				11.42				10.59				9.68
Return on avg. tangible common equity (non-GAAP) ⁽⁴⁾		16.58				4.15				10.11				12.81				7.80
Return on avg. tangible common equity-adjusted (non-GAAP) ⁽⁵⁾		16.53				16.40				15.57				14.54				13.39

Efficiency Measures
Total noninterest expenses	$	17,108			$	17,059			$	16,566			$	18,641			$	25,303
Increase in valuation allowance, loans held-for-sale		-				-				(267	)			(3,000	)			(9,725	)
Foreclosed property expense		(11	)			(51	)			(32	)			(46	)			(71	)
Operating noninterest expense	$	17,097			$	17,008			$	16,267			$	15,595			$	15,507

Net interest income (tax equivalent basis)	$	39,409			$	38,610			$	40,744			$	37,929			$	35,839
Noninterest income		1,388				1,407				2,024				1,756				1,422
Operating revenue	$	40,797			$	40,017			$	42,768			$	39,685			$	37,261

Operating efficiency ratio (non-GAAP) ⁽⁶⁾		41.9		%		42.5		%		38.0		%		39.3		%		41.6		%

Net Interest Margin
Average interest-earning assets	$	4,771,523			$	4,799,453			$	4,603,659			$	4,378,537			$	4,168,344

Net interest income (tax equivalent basis)	$	39,409			$	38,610			$	40,744			$	37,929			$	35,839
Impact of purchase accounting fair value marks		(680	)			(240	)			(1,026	)			(317	)			(316	)
Adjusted net interest income (tax equivalent basis)	$	38,729			$	38,370			$	39,718			$	37,612			$	35,523

Net interest margin (GAAP)		3.31		%		3.26		%		3.51		%		3.44		%		3.45		%
Adjusted net interest margin (non-GAAP) ⁽⁷⁾		3.26				3.24				3.42				3.41				3.42

⁽³⁾ Adjusted earnings available to common stockholders divided by average common equity.
⁽⁴⁾ Earnings available to common stockholders excluding amortization of intangibles assets divided by average tangible common equity.
⁽⁵⁾ Adjusted earnings available to common stockholders divided by average tangible common equity.
⁽⁶⁾ Operating noninterest expense divided by operating revenue.
⁽⁷⁾ Adjusted net interest margin excludes impact of purchase accounting fair value marks.

	As of
	June 30,				Mar. 31,				Dec. 31,				Sept. 30,				June 30,
		2018				2018				2017				2017				2017
Capital Ratios and Book Value per Share	(dollars in thousands, except for per share data)
Common equity	$	578,557			$	564,266			$	565,437			$	557,691			$	546,173
Less: intangible assets		(147,936	)			(148,104	)			(148,273	)			(148,442	)			(148,611	)
Tangible common equity	$	430,621			$	416,162			$	417,164			$	409,249			$	397,562

Total assets	$	5,275,368			$	5,158,368			$	5,108,442			$	4,844,755			$	4,681,280
Less: intangible assets		(147,936	)			(148,104	)			(148,273	)			(148,442	)			(148,611	)
Tangible assets	$	5,127,432			$	5,010,264			$	4,960,169			$	4,696,313			$	4,532,669

Common shares outstanding		32,184,047				32,175,233				32,071,860				32,015,317				32,015,317

Common equity ratio (GAAP)		10.97		%		10.94		%		11.07		%		11.51		%		11.67		%
Tangible common equity ratio (non-GAAP) ⁽⁸⁾		8.40				8.31				8.41				8.71				8.77

Regulatory capital ratios (Bancorp):
Leverage ratio		8.93		%		8.65		%		8.92		%		9.13		%		9.33		%
Common equity Tier 1 risk-based ratio		9.33				9.14				9.15				9.40				9.48
Risk-based Tier 1 capital ratio		9.44				9.25				9.26				9.52				9.60
Risk-based total capital ratio		12.81				12.66				11.04				11.34				11.46
Regulatory capital ratios (Bank):
Leverage ratio		10.43		%		10.20		%		9.84		%		10.11		%		10.34		%
Common equity Tier 1 risk-based ratio		11.02				10.91				10.21				10.54				10.64
Risk-based Tier 1 capital ratio		11.02				10.91				10.21				10.54				10.64
Risk-based total capital ratio		12.42				12.31				10.90				11.22				11.32

Book value per share (GAAP)	$	17.98			$	17.54			$	17.63			$	17.42			$	17.06
Tangible book value per share (non-GAAP) ⁽⁹⁾		13.38				12.93				13.01				12.78				12.42

Net Charge-Off (Recoveries) Detail
Net loan charge-offs (recoveries) :
Charge-offs	$	47			$	17,038			$	156			$	-			$	10
Recoveries		(12	)			(19	)			(34	)			(20	)			(60	)
Net loan charge-offs (recoveries)	$	35			$	17,019			$	122			$	(20	)		$	(50	)
Net loan charge-offs (recoveries) as a % of average loans receivable (annualized)		0.00		%		1.63		%		0.01		%		(0.00	)	%		(0.01	)	%

Asset Quality
Nonaccrual taxi medallion loans	$	28,944			$	29,405			$	46,765			$	47,430			$	48,884
Nonaccrual loans (excluding taxi medallion loans)		20,771				20,631				18,848				13,755				14,055
Other real estate owned		1,076				1,076				538				-				580
Total nonperforming assets	$	50,791			$	51,112			$	66,151			$	61,185			$	63,519

Performing troubled debt restructurings	$	12,827			$	14,349			$	14,920			$	12,749			$	10,221

Allowance for loan losses ("ALLL")	$	33,594			$	32,529			$	31,748			$	29,870			$	28,401

Loans receivable	$	4,360,854			$	4,202,679			$	4,171,456			$	3,889,289			$	3,761,572
Less: taxi medallion loans		28,944				29,405				46,765				-				-
Loans receivable (excluding taxi medallion loans)	$	4,331,910			$	4,173,274			$	4,124,691			$	3,889,289			$	3,761,572

Loans held-for-sale (taxi medallion loans)	$	-			$	-			$	-			$	47,430			$	50,891

Nonaccrual loans (excluding taxi medallion loans) as a % of loans receivable (excluding taxi medallion loans)		0.48		%		0.49		%		0.46		%		0.35		%		0.37		%
Nonaccrual loans as a % of loans receivable		1.14				1.19				1.57				1.57				1.67
Nonperforming assets as a % of total assets		0.96				0.99				1.29				1.26				1.36
ALLL as a % of loans receivable		0.77				0.77				0.76				0.77				0.76
ALLL as a % of nonaccrual loans (excluding taxi medallion loans)		161.7				157.7				168.4				217.2				202.1
ALLL as a % of nonaccrual loans		67.6				65.0				48.4				48.8				45.1

⁽⁸⁾ Tangible common equity divided by tangible assets.
⁽⁹⁾ 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
	June 30, 2018								March 31, 2018									June 30, 2017
	Average									Average									Average
Interest-earning assets:	Balance			Interest			Rate ⁽⁸⁾			Balance			Interest			Rate ⁽⁸⁾			Balance			Interest			Rate ⁽⁸⁾
Investment securities ^{(1) (2)}	$	432,493		$	3,136		2.91	%		$	441,563		$	2,917		2.68	%		$	390,462		$	3,079		3.16	%
Total loans ^{(2) (3) (4)}		4,272,212			49,750		4.67				4,247,997			47,272		4.51				3,699,355			40,921		4.44
Federal funds sold and interest-
bearing deposits with banks		35,315			159		1.81				78,194			264		1.37				52,099			139		1.07
Restricted investment in bank stock		31,503			502		6.39				31,699			485		6.21				26,428			290		4.40
Total interest-earning assets		4,771,523			53,547		4.50				4,799,453			50,938		4.30				4,168,344			44,429		4.28
Allowance for loan losses		(32,668	)								(32,113	)								(27,355	)
Noninterest-earning assets		365,806									321,483									354,019
Total assets	$	5,104,661								$	5,088,823								$	4,495,008

Interest-bearing liabilities:
Time deposits	$	1,280,471			5,830		1.83			$	1,207,368			4,788		1.61			$	976,012			3,311		1.36
Other interest-bearing deposits		1,765,577			3,338		0.76				1,815,122			2,900		0.65				1,712,875			2,184		0.51
Total interest-bearing deposits		3,046,048			9,168		1.21				3,022,490			7,688		1.03				2,688,887			5,495		0.82

Borrowings		613,763			3,091		2.02				630,117			2,926		1.88				514,161			2,244		1.75
Subordinated debentures ⁽⁵⁾		128,339			1,840		5.75				115,182			1,674		5.89				54,590			810		5.95
Capital lease obligation		2,589			39		6.04				2,622			40		6.19				2,720			41		6.05
Total interest-bearing liabilities		3,790,739			14,138		1.50				3,770,411			12,328		1.33				3,260,358			8,590		1.06

Noninterest-bearing demand deposits		719,372									724,471									667,461
Other liabilities		19,558									18,912									17,441
Total noninterest-bearing liabilities		738,930									743,383									684,902
Stockholders' equity		574,992									575,029									549,748
Total liabilities and stockholders' equity	$	5,104,661								$	5,088,823								$	4,495,008

Net interest income (tax equivalent basis)					39,409									38,610									35,839
Net interest spread ⁽⁶⁾							3.00	%								2.97	%								3.22	%

Net interest margin ⁽⁷⁾							3.31	%								3.26	%								3.45	%

Tax equivalent adjustment					(463	)								(463	)								(738	)
Net interest income				$	38,946								$	38,147								$	35,101

⁽¹⁾ Average balances are calculated on amortized cost and includes equity securities.
⁽²⁾ Interest income is presented on a tax equivalent basis using a 21% federal tax rate as of June 30, 2018 and March 31, 2018 and a 35% federal tax rate as of June 30, 2017.
⁽³⁾Includes loan fee income.
⁽⁴⁾ Loans include nonaccrual loans.
⁽⁵⁾ Average balances are net of debt issuance costs of $1,816, $1,639, and $565 as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively
Amortization expense related to debt issuance costs included in interest expense was $82, $86 and $41 as of June 30, 2018, March 31, 2018 and
June 30, 2017, 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:
Thomas Walter, MWWPR
202.600.4532; twalter@mww.com