Summary of ConnectOne Bancorp, Inc. Q3 2025 Earnings Call

1Key Financial Results and Metrics

Net Interest Margin (NIM): Increased to 3.11%, up from 3.06% in the previous quarter and 2.67% year-over-year. Spot margin at quarter-end exceeded 3.20%.

Return on Assets (ROA): Improved by over 30 basis points to 1.05%.

Pre-Provision Net Revenue (PPNR): Rose to 1.61% of assets, up approximately 50 basis points year-over-year.

Loan Originations: Totaled over $465 million for the quarter, with annualized loan growth matching deposit growth.

Credit Quality: Nonperforming assets at 0.28%, with annualized net charge-offs below 0.20% and 30-day delinquencies at 0.08%.

Capital Ratios: Tangible common equity ratio increased to 8.4%, with tangible book value per share up 5% since the merger.

2Strategic Updates and Business Highlights

Merger Integration: The merger with First of Long Island is fully integrated, enhancing operational efficiency and client engagement.

Deposit Growth: Core deposits grew significantly, with a focus on relationship banking to enhance deposit retention.

BoeFly Growth: The company is seeing positive trends in its SBA lending platform, with expectations for significant contributions to noninterest income in 2026.

Market Focus: Continued emphasis on Long Island as a key growth area, leveraging the merger to strengthen market presence.

3Forward Guidance and Outlook

NIM Expectations: Projected to reach 3.25% or higher in Q4 2025, with potential to approach 3.40% to 3.50% by the end of 2026.

Loan Growth: Anticipated to accelerate in Q4 2025, with expectations of 5%+ growth in 2026, contingent on economic conditions.

Profitability Targets: Aiming for ROA of 1.20% by mid-2026 and potentially reaching 1.30% by year-end 2026.

Capital Deployment: Flexibility for share repurchases and dividend increases anticipated in 2026 due to strong earnings and capital growth.

4Bad News, Challenges, or Points of Concern

Temporary Margin Compression: Current NIM affected by high cash balances and outstanding subordinated debt, which are expected to normalize in future quarters.

Economic Sensitivity: Future loan growth and credit quality may be impacted by broader economic conditions, including potential changes in interest rates and competition for deposits.

Regulatory Environment: Ongoing uncertainty regarding rent-regulated loans and potential impacts from local government elections could pose risks.

5Notable Q&A Insights

Profitability Targets: Management reaffirmed previous targets for ROA and ROTCE, indicating confidence in achieving these metrics.

Impact of Fed Policy: Management expressed optimism that the end of quantitative tightening would support deposit growth and reduce competitive pressures.

Loan Repricing Opportunities: Approximately $1 billion in fixed-rate loans expected to reprice in 2026, presenting a significant opportunity for margin expansion.

Rent-Regulated Loans: Management remains comfortable with their exposure to rent-regulated loans, emphasizing conservative underwriting and strong performance metrics despite regulatory uncertainties. Overall, ConnectOne Bancorp reported a solid quarter with strong financial metrics, successful merger integration, and positive forward guidance, while also acknowledging potential economic and regulatory challenges ahead.