ConnectOne Bancorp, Inc. Reports First Quarter 2014 Results; Annualized Growth of 32% in Loan Portfolio Since Year-End

ConnectOne Bancorp, Inc. Reports First Quarter 2014 Results; Annualized Growth of 32% in Loan Portfolio Since Year-End  ENGLEWOOD CLIFFS, N.J., April 24, 2014 (GLOBE NEWSWIRE) -- ConnectOne Bancorp, Inc. (Nasdaq:CNOB) (the "Company" or "ConnectOne"), parent company of ConnectOne Bank (the "Bank"), today reported net income of $2.6 million, or $0.50 per diluted share, for the first quarter of 2014, compared with net income of $2.3 million, or $0.56 per diluted share, for the prior year period. First quarter 2014 results include $0.7 million in after-tax merger expenses related to the pending merger-of-equals with Center Bancorp, Inc., announced during the first quarter of 2014. Excluding merger costs, net income was $3.3 million or $0.63 per diluted share, reflecting a 40.7% increase over net income for the first quarter of 2013. See Supplemental Information-Non-GAAP Financial Measures.  Frank Sorrentino III, Chairman and CEO of ConnectOne stated, "We are extremely pleased with our first quarter 2014 financial performance.During the quarter, the Company's loan portfolio grew by $93.5 million, reflecting a 32% annualized growth rate.Net income, excluding merger-related expenses, increased sequentially, by 15.3% over the fourth quarter of 2013. Nonperforming assets declined, representing 0.71% of total assets as of March 31, 2014, while our efficiency ratio for the first quarter 2014 improved to 47.7%. Our merger-of-equals transaction remains on track to close either late in the second quarter or early in the third quarter of 2014."  Earnings  Fully taxable equivalent ("FTE") net interest income for the first quarter of 2014 totaled $11.7 million, an increase of $2.3 million, or 24.7%, from the year ago period.The increase in net interest income was primarily due to a 33.9% increase in average interest-earning assets, which grew to $1.3 billion in the first quarter of 2014.This was partially offset by a 28 basis points contraction in the net interest margin, from 4.01% in the first quarter of 2013 to 3.73% in the first quarter of 2014. Average total loans increased by 35.9% to $1.2 billion in the first quarter of 2014 from the prior year period.Prepayment fees contributed 10 basis points to the net interest margin for the first quarter of 2014, and 7 basis points to the net interest margin for the first quarter of 2013. Management expects net interest income to continue expanding as a result of solid loan growth, while margin compression is likely to moderate in future periods as the Company's loan origination mix changes and the loan portfolio fully re-prices.  Non-interest income represents a relatively small portion of the Bank's total revenue as management has historically made a strategic decision to de-emphasize fee income, focusing instead on customer growth and retention.Non-interest income totaled $0.3 million in each of the first quarters of 2014 and 2013. Bank owned life insurance ("BOLI") income in 2014 (there was no BOLI outstanding during the first quarter of 2013) was largely offset by declines in gains on sale of residential mortgage loans.  Non-interest expenses for the first quarter of 2014 increased by $1.9 million to $6.7 million, from $4.7 million in the prior year period.Non-interest expenses, excluding merger-related expenses, totaled $5.7 million, representing a $1.0 million or 21.3% increase from 2013, and was essentially flat from the linked fourth quarter of 2013.The primary factor contributing to the increases in total non-interest expenses from last year was salaries and employee benefits expense, which increased by $0.6 million to $3.1 million in the first quarter of 2014 from $2.5 million in the first quarter of 2013.The increase was primarily due an increase in the number of full-time equivalent employees and higher incentive-based compensation. Also contributing to higher non-interest expenses were increased costs associated with being a publicly-traded entity, higher professional fees, occupancy costs and a general increase in other operating expenses related to a significantly increased volume of business.Management continues to focus on expense control, balancing its investment in infrastructure with prudent and sustainable growth.  Income tax expense was $1.5 million for the first quarter of 2014 compared with $1.6 million for the first quarter of 2013. The effective tax rates were 36.0% and 41.3% for the first quarters of 2014 and 2013, respectively.The effective tax rate for 2014 reflects a reorganized operating structure effective October 1, 2013.The Company's effective tax rate is projected to be approximately 36% in future periods, although it is likely to fluctuate depending upon future levels of taxable and non-taxable revenue.  Asset Quality  Nonperforming assets, which includes nonaccrual loans and other real estate owned, totaled $9.7 million at March 31, 2014, down from $10.5 million at December 31, 2013 and up from $7.9 million at March 31, 2013. Nonperforming assets as a percent of total assets declined to 0.72% at March 31, 2014 from 0.84% at December 31, 2013 and from 0.79% at March 31, 2013.The allowance for loan losses was $17.0 million, representing 1.37% of loans receivable and 192.5% of nonaccrual loans at March 31, 2014.At December 31, 2013, the allowance was $16.0 million representing 1.39% of loans receivable and 174.2% of nonaccrual loans, and at March 31, 2013 the allowance was $13.6 million representing 1.51% of loans receivable and 181.9% of nonaccrual loans.The provision for loan losses was $1.3 million for the first quarter of 2014, $1.4 million for the fourth quarter of 2013, and $0.9 million for the first quarter 2013.The provision for loan losses has remained relatively constant, although the level is contingent upon many factors including, but not limited to, loan growth, the Company's historical loss experience, macroeconomic conditions and reserves required for specific credits. The annualized rate of net loan charge-offs was 0.08% for the first quarter of 2014, 0.03% for the fourth quarter of 2013 and 0.25% for the first quarter of 2013.  Financial Condition  At March 31, 2014, the Company's total assets were $1.35 billion, a $104.5 million increase from December 31, 2013. The increase in total assets was primarily due to a $93.5 million increase, to $1.25 billion, in loans receivable, an $11.0 million increase, to $45.3 million, in cash and cash equivalents. The growth in assets was funded by a $61.9 million increase in deposits, a $39.7 million increase in Federal Home Loan Bank borrowings, and a $2.6 million increase in retained earnings.  Capital  Stockholders' equity totaled $133.0 million as of March 31, 2014, an increase of $2.9 million from $130.1 million as of December 31, 2013, primarily due to the retention of earnings. As of March 31, 2014, the tangible common equity ratio and tangible book value per share were 9.85% and $25.92, respectively.As of December 31, 2013, the Company's tangible common equity ratio and tangible book value per share were 10.45% and $25.43, respectively.  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, that was formed in 2008 to serve 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 eight other banking offices.  For more information visit https://www.connectonebank.com/.  Additional Information for Stockholders  In connection with the proposed merger, Center Bancorp, Inc. ("Center") has filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that includes a joint proxy statement of Center and ConnectOne and a prospectus of Center, as well as other relevant documents concerning the proposed transaction.Center and ConnectOne will each mail the joint proxy statement/prospectus to its stockholders subsequent to the Registration Statement on Form S-4 being declared effective. SHAREHOLDERS OF CENTER AND CONNECTONE ARE URGED TO READ CAREFULLY THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when available) and other filings containing information about Center and ConnectOne at the SEC's website at www.sec.gov. The joint proxy statement/prospectus (when available) and the other filings may also be obtained free of charge at Center's website at www.centerbancorp.com under the tab "Investor Relations," and then under the heading "SEC Filings" or at ConnectOne's website at www.connectonebank.com under the tab "Investor Relations," and then under the heading "SEC Filings."  Center, ConnectOne and certain of their respective directors and executive officers, under the SEC's rules, may be deemed to be participants in the solicitation of proxies of Center and ConnectOne's shareholders in connection with the proposed merger. Information regarding the directors and executive officers of Center and their ownership of Center common stock is set forth in the proxy statement for Center's 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on April 15, 2013. Information regarding the directors and executive officers of ConnectOne and their ownership of ConnectOne common stock is set forth in the proxy statement for ConnectOne's 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on April 8, 2013. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.  This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.  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,                                                     2014         2013                                                     (unaudited)   ASSETS                                                            Cash and due from banks                              $3,005     $2,907 Interest-bearing deposits with banks                 42,325      31,459 Cash and cash equivalents                           45,330      34,366                                                                  Securities available for sale                        27,199      27,589 Securities held to maturity, fair value of $943 at   898         1,027 2014 and $1,077 at 2013 Loans held for sale                                  792         575                                                                  Loans receivable                                     1,245,363   1,151,904 Less: Allowance for loan losses                      (17,035)    (15,979) Net loans receivable                                1,228,328   1,135,925                                                                  Investment in restricted stock, at cost              9,411       7,622 Bank premises and equipment, net                     7,385       7,526 Accrued interest receivable                          4,235       4,102 Other real estate owned                              870         1,303 Goodwill                                             260         260 Bank-owned life insurance                            15,334      15,191 Deferred taxes                                       7,539       7,614 Other assets                                         142         128 Total assets                                        $1,347,723 $1,243,228                                                                  LIABILITIES & STOCKHOLDERS' EQUITY                                Liabilities                                                       Deposits                                                          Noninterest-bearing                                 $236,872   $216,804 Interest-bearing                                    790,884     749,003 Total deposits                                      1,027,756   965,807 FHLB Borrowings                                      177,301     137,558 Accrued interest payable                             2,836       2,762 Capital lease obligation                             3,081       3,107 Other liabilities                                    3,741       3,866 Total liabilities                                   1,214,715   1,113,100                                                                  Commitments and Contingencies                                                                                                      Stockholders' Equity                                              Common stock and surplus, no par value; authorized                10,000,000 shares at March 31, 2014 and December 31, 2013; issued and                 outstanding 5,122,047 at March 31, 2014 and 5,106,455 at December 31, 2013   99,466      99,315 Retained earnings                                    33,539      30,931 Accumulated other comprehensive income (loss)        3           (118) Total stockholders' equity                          133,008     130,128 Total liabilities and stockholders' equity           $1,347,723 $1,243,228                                                                 CONNECTONE BANCORP, INC.                                        CONSOLIDATED STATEMENTS OF INCOME (unaudited)                    (dollars in thousands, except per share data)                                                                                                                                 Three Months Ended March 31,                                                2014            2013 Interest income                                                 Loans receivable, including fees               $13,455       $10,696 Securities                                     227            195 Other interest income                          22             21 Total interest income                          13,704         10,912 Interest expense                                                Deposits                                       1,401          1,146 FHLB borrowings                                561            334 Capital lease                                  47             48 Total interest expense                         2,009          1,528                                                                Net interest income                             11,695         9,384 Provision for loan losses                       1,300          925 Net interest income after provision for loan   10,395         8,459 losses                                                                Non-interest income                                             Service fees                                   87             100 Gains on sales of loans                        41             83 Income on bank owned life insurance            144            -- Other income                                   77             76 Total non-interest income                      349            259                                                                Non-interest expenses                                           Salaries and employee benefits                 3,091          2,480 Occupancy and equipment                        829            729 Professional fees                              378            271 Advertising and promotion                      99             103 Data processing                                517            447 Merger related expenses                        923            -- Other expenses                                 835            711 Total non-interest expenses                    6,672          4,741                                                                Income before income tax expense                4,072          3,977 Income tax expense                              1,464          1,641 Net income                                      $2,608        $2,336                                                                Earnings per common share:                                      Basic                                          $0.52         $0.58 Diluted                                        0.50           0.56 Weighted average common shares outstanding:                     Basic                                          5,035,521      4,055,908 Diluted                                        5,216,599      4,178,214                                                                     CONNECTONE BANCORP, INC.                                            CONSOLIDATED FINANCIAL HIGHLIGHTS                                   (dollars in thousands, except per share data)                                                                    Three Months Ended                                              March 31, December 31, March 31,                                              2014      2013         2013 Performance ratios:                                                 Return on average assets                     0.82%     0.93%        0.99% Return on average stockholders' equity       7.98%     8.73%        9.77% Net interest margin                          3.73%     3.69%        4.01% Efficiency ratio (1)                         47.7%     50.5%        49.2%                                                                                                                 As of                                              March 31, December 31, March 31,                                              2014      2013         2013 Capital ratios:                                                     Leverage ratio                               10.25%    10.74%       12.74% Risk-based Tier 1 capital ratio              10.96%    11.67%       14.18% Risk-based total capital ratio               12.20%    13.07%       15.43% Tangible common equity to tangible assets    9.85%     10.45%       12.15% (1)                                                                    Annualized net loan charge-offs as a % of     0.08%     0.03%        0.25% average loans                                                                    Tangible book value per common share (1)      $25.92  $25.43     $24.33                                                                    Asset quality:                                                      Nonaccrual loans                             $8,848  $9,175     $7,498 Other real estate owned                      870      1,303       433 Total non-performing assets                  $9,718  $10,478    $7,931                                                                    Performing troubled debt restructured loans  $2,925  $2,934     $2,996 Loans past due 90 days and still accruing    --       --          --                                                                    Nonaccrual loans as a % of loans receivable  0.71%     0.80%        0.83% Nonperforming assets as a % of total assets  0.72%     0.84%        0.79% Allowance for loan losses as a % of loans    1.37%     1.39%        1.51% receivable Allowance for loan losses as a % of          192.5%    174.2%       181.9% nonaccrual loans                                                                    (1) See Supplemental Information - Non-GAAP Financial Measures on following page.                                                                  CONNECTONE BANCORP, INC.                                         SUPPLEMENTAL INFORMATION - NON-GAAP                              FINANCIAL MEASURES (dollars in thousands, except per share                          data)                                        Three Months Ended                                        March 31,    December 31, March 31,                                        2014         2013         2013 Efficiency Ratio                                                 Non-interest expense                    $6,672     $5,765     $4,741 Less: merger related expenses           (923)       --          -- Adjusted non-interest expense           $5,749     $5,765     $4,741 (numerator)                                                                 Net interest income                     11,695      11,067      9,384 Non-interest income                     349         349         259 Less: gains on sales of securities      --          --          -- Adjusted operating revenue              $12,044    $11,416    $9,643 (denominator)                                                                 Efficiency Ratio                        47.7%        50.5%        49.2%                                                                 Diluted EPS excluding merger-related                             expenses Income before income tax expense        $4,072     $4,251     $3,977 Income tax expense                      1,464       1,401       1,641 Net income                              2,608       2,850       2,336 Merger related expenses                 923         --          -- Income tax benefit                      245         --          -- Merger related expenses (after tax)     678         --          -- Net income excluding merger related     $3,286     $2,850     $2,336 expenses                                                                 Diluted shares                          5,216,599   5,180,522   4,178,214 Diluted EPS, as reported                $0.50      $0.55      $0.56 Diluted EPS, excluding merger related   $0.63      $0.55      $0.56 expenses Return on average assets, as reported   0.82%        0.93%        0.99% Return on average assets excluding      1.03%        0.93%        0.99% merger related expenses Return on average stockholders' equity, 7.98%        8.73%        9.77% as reported Return on average stockholders' equity  10.06%       8.73%        9.77% excluding merger related expenses                                                                                                        As of                                        March 31,    December 31, March 31,                                        2014         2013         2013                                                                 Tangible Common Equity and Tangible                              Common Equity/Tangible Assets Common equity                           $133,008   $130,128   $122,439 Less: intangible assets                 (260)       (260)       (260) Tangible common equity                  $132,748   $129,868   $122,179                                                                 Total assets                            $1,347,723 $1,243,228 $1,005,771 Less: intangible assets                 (260)       (260)       (260) Tangible assets                         $1,347,463 $1,242,968 $1,005,511                                                                 Tangible Common Equity/Tangible Assets 9.85%        10.45%       12.15%                                                                 Tangible Book Value per Common Share                             Book value per common share             $25.97     $25.48     $24.38 Less: effects of intangible assets      (0.05)      (0.05)      (0.05) Tangible Book Value per Common Share    $25.92     $25.43     $24.33                                                                    CONNECTONE BANCORP,                                                INC. NET INTEREST MARGIN                                                ANALYSIS (dollars in                                                        thousands)                    For the Three Months Ended                    March 31, 2014                 March 31, 2013                    Average              Average Average           Average Interest-earning    Balance      Interest  Rate    Balance    Interest Rate assets:                                    (7)                         (7) Investment          $37,122    $233    2.55%   $25,216  $195   3.14% securities (1) (2) Loans receivable    1,186,847   13,455   4.60%   873,557   10,696  4.97% (3) (4) Federal funds sold                                                 and interest- bearing deposits   48,463      22       0.18%   51,431    21      0.17% with banks Total interest-earning    1,272,432   13,710   4.37%   950,204   10,912  4.66% assets Allowance for loan  (16,450)                    (13,545)           losses Non-interest        37,977                      19,364             earning assets Total assets       $1,293,959                 $956,023                                                                            Interest-bearing                                                   liabilities: Savings, NOW, Money Market, Interest    $340,125   225      0.27%   $329,906 259     0.32% Checking Time deposits       436,820     1,176    1.09%   277,882   887     1.29% Total interest-bearing    776,945     1,401    0.73%   607,788   1,146   0.76% deposits                                                                   Borrowings          166,226     561      1.37%   76,019    334     1.78% Capital lease       3,098       47       6.15%   3,172     48      6.14% obligation Total interest-bearing    946,269     2,009    0.86%   686,979   1,528   0.90% liabilities Noninterest-bearing 209,303                     164,403            deposits Other liabilities   5,897                       7,706              Stockholders'       132,490                     96,935             equity Total liabilities and stockholders'   $1,293,959                 $956,023          equity                                                                   Net interest                                                       income/interest rate spread (5)                $11,701 3.51%             $9,384 3.76% Tax equivalent                  (6)                       --      effect Net interest income             $11,695                  $9,384  as reported                                                                   Net interest margin                      3.73%                     4.01% (6)                                                                   (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 receivable 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 fully tax equivalent basis. (6) Represents net interest income divided by average total interest-earning assets. (7) Rates are annualized.  CONTACT: Investor Contact:          William S. Burns          Executive VP & CFO          201.816.4474; bburns@cnob.com                   Media Contact:          Rachel Gerber, MWW          646.215.6889; rgerber@mww.com  
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