ConnectOne Bancorp, Inc.

ConnectOne reported second-quarter net income available to common of $40.2 million, or $0.80 per share, versus $36.3 million, or $0.72 per share, in the first quarter. Operating PPNR improved to 1.94% from 1.81% in Q1 and 1.52% a year ago. Net interest margin widened to 3.42%, up 3 basis points sequentially; non-interest income was $7.9 million, up more than $1 million sequentially; and operating expenses were $55.3 million versus $55.7 million last quarter, producing a 42.7% efficiency ratio versus 45.4% in Q1 and 49.2% a year ago. Loans grew at an annualized 5% sequential pace and client deposits rose 8% annualized, led by 20% annualized growth in non-interest-bearing demand deposits. For credit, a $13.8 million charge-off on the rent-stabilized relationship was partially offset by a $9.2 million reserve release, bringing provision for loan losses to $8.3 million versus $5.2 million last quarter; non-performing assets increased to 0.55% of total assets from 0.29%. Tangible book value per share rose 3.1% sequentially to $24.66, tangible common equity reached 8.78%, and the common dividend remained $0.195 per share. Management maintained year-end spot margin guidance of 3.50%, expects similar repricing dynamics over the next two quarters and into 2027, and said loan growth should remain in the mid-single digits for 2026.

Frank Sorrentino framed the quarter as continued acceleration since the Long Island acquisition, emphasizing stronger revenue and earnings, healthy deposit and loan growth, and expanding returns. He repeatedly pointed to a client-centric strategy, disciplined relationship lending, and technology modernization, including a partnership with nCino that has cut time spent on some manual processes by more than 50%. His tone was constructive and confident, while still noting attention to the Fed, the broader economy, and the need to keep de-risking the CRE mix over time.

Bill Burns focused on margin expansion, balance-sheet growth, and credit actions. He highlighted the 3.42% NIM, the benefit from roughly $700 million of loan repricing year to date at a 255 basis point weighted-average rate increase on retained loans, and said deposit costs have begun to rise, with CD rates at 4% now, though he still expects repricing benefits to outweigh higher funding costs. On capital, he cited tangible book value per share of $24.66, tangible common equity of 8.78%, 90,000 shares repurchased year to date at an average price of $26.21, 550,000 shares remaining under authorization, and a steady $0.195 dividend; he also said the payout ratio is in the mid-20% range.

Analysts pressed on the rent-stabilized multifamily credit, and management said $20 million of the $63.8 million relationship was brought current, $44 million was transferred to non-accrual, and $13.8 million was charged off, with an additional $4 million provision hit after reserve usage. They said they expect to work the credit out over the next year and are exploring a possible bulk sale, though no size was given. Questions also focused on loan growth, CRE concentration, deposit costs, and M&A; management said loan growth should stay in the mid-single digits, CRE will keep trending down over time but the bank will remain in the business, deposit costs are rising only slightly for now, and organic growth remains the current priority over acquisitions. On the rent-freeze issue, Frank said it could be a negative if it persists for several years and should be closely monitored.