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 prior quarter and 2.67% year-over-year. Expected to reach 3.25% or higher in Q4 2025.

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

Pre-Provision Net Revenue (PPNR): Rose to 1.61% of assets, a 50 basis point increase year-over-year.

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

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

Successful integration of the merger completed shortly after legal close, enhancing operational efficiency and client engagement.

Continued growth in core deposits, with a focus on relationship banking to ensure deposits align with loan origination.

Strong performance in the Long Island market, leveraging merger benefits to drive growth.

Noninterest income was boosted by nonrecurring items, including a $6.6 million employee retention tax credit and a $3.5 million pension curtailment gain.

3Forward Guidance and Outlook

Expectation of loan growth to accelerate in Q4 2025, with projections for 5%+ growth in 2026.

Anticipated operating ROA of 1.2% by mid-2026, potentially reaching 1.3% by year-end.

Plans to utilize new tax strategies to manage an effective tax rate around 28% for 2026.

Continued focus on building the SBA lending platform, with expectations for significant contributions to noninterest income.

4Bad News, Challenges, or Points of Concern

Elevated cash balances due to deposit growth may compress margins temporarily; expected to normalize in Q4.

Potential backlog in SBA lending due to government shutdown could impact near-term performance.

Competitive pressures in the deposit market may increase as liquidity in the economy grows.

Concerns regarding the rent-regulated loan portfolio, although management remains optimistic about its performance and stability.

5Notable Q&A Insights

Management confirmed that they expect to maintain a loan-to-deposit ratio below 100%, with a focus on high-quality, relationship-driven clients.

Discussion on the potential impact of the end of quantitative tightening by the Fed, suggesting it could lead to increased deposit growth and reduced competitive pressures.

Clarification on the proportion of floating-rate loans (15%) and expectations for significant repricing opportunities in 2026 and 2027.

Management expressed confidence in the rent-regulated loan portfolio, emphasizing conservative underwriting and strong performance metrics despite market uncertainties. Overall, ConnectOne Bancorp demonstrated strong operational performance in Q3 2025, with positive growth metrics and a solid outlook, while also acknowledging potential challenges ahead.