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ConnectOne Bancorp, Inc. (CNOB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered stable results with GAAP diluted EPS of $0.49 and operating diluted EPS of $0.51; normalized EPS beat S&P Global consensus by $0.05, while S&P-defined revenue was below consensus by ~$3.0M due to lower “Revenue” (S&P definition) versus estimates . EPS and revenue estimates from S&P Global: EPS est. $0.46 vs actual $0.51*, Revenue est. $69.7M vs actual $66.7M*.
  • Net interest margin widened 7 bps sequentially to 2.93% and 29 bps YoY, driven by a 21 bps decline in average deposit costs; management expects core NIM to reach ~3.00% in Q2 and continue expanding thereafter .
  • Credit quality remained sound: nonaccrual loans fell to 0.61% of loans, NPA dropped to 0.51% of assets, and annualized net charge-offs were 0.17% for the quarter; TCE ratio rose to 9.73% and tangible book value per share increased to $24.16 .
  • Strategic catalyst: merger with The First of Long Island remains on track to close in Q2; cost saves of ~$24M are targeted (phased over ~12 months), sub debt expected pre-close, and longer-term targets include ROTCE ~15% and NIM ≥3.20% upon full phase-in .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and funding cost relief: NIM rose to 2.93% (+7 bps QoQ; +29 bps YoY) as deposit costs fell 21 bps; CFO: “core net interest margin [to] reach 3% this second quarter” .
  • Credit stability: nonaccrual loans decreased to 0.61% of loans; NPA to 0.51% of assets; CFO: “Nonaccrual loans declined by 13% this quarter... expect further declines” .
  • Capital and TBV build: TCE ratio increased to 9.73% and TBV/share rose to $24.16; CEO highlighted TBV/share “increasing by about 4% since the transaction was announced” .

What Went Wrong

  • Loan balances contracted slightly: loans receivable decreased to $8.201B (from $8.275B at YE24) due to elevated CRE payoffs; criticized/classified loans edged up to 2.79% .
  • Expenses uptick: noninterest expense rose to $39.3M (+$0.8M QoQ; +$2.2M YoY), including merger costs ($1.3M) and a $0.3M BOLI restructuring charge .
  • Tax rate higher: effective tax rate increased to 26.1% (vs 23.0% in Q4’24), lifting tax expense to $7.2M .

Financial Results

Quarterly performance vs prior periods

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income ($USD Millions)$60.9 $64.7 $65.8
Noninterest Income ($USD Millions)$4.7 $3.7 $4.5
Net Interest Margin (%)2.67% 2.86% 2.93%
Net Income to Common ($USD Millions)$15.65 $18.86 $18.73
Diluted EPS (GAAP)$0.41 $0.49 $0.49
Operating Diluted EPS (non-GAAP)$0.42 $0.52 $0.51

Year-over-year context (Q1)

MetricQ1 2024Q1 2025
Net Interest Income ($USD Millions)$60.3 $65.8
Noninterest Income ($USD Millions)$3.8 $4.5
Net Income to Common ($USD Millions)$15.70 $18.73
Diluted EPS (GAAP)$0.41 $0.49
Net Interest Margin (%)2.64% 2.93%

Estimates vs actuals

MetricQ4 2024 ConsensusQ4 2024 ActualQ1 2025 ConsensusQ1 2025 Actual
Primary EPS (Normalized)$0.43*$0.52*$0.46*$0.51*
Revenue ($USD)$64.43M*$64.96M*$69.73M*$66.71M*

Values marked with * retrieved from S&P Global.

Loan mix (period-end)

Category ($USD Millions)Q3 2024 (9/30)Q4 2024 (12/31)Q1 2025 (3/31)
Commercial$1,505.7 $1,522.3 $1,483.4
Commercial Real Estate$3,261.2 $3,384.3 $3,356.9
Multifamily$2,482.3 $2,506.8 $2,490.3
Construction$616.1 $616.2 $617.6
Residential$250.2 $249.7 $256.6
Consumer$0.84 $1.14 $1.60
Loans Receivable$8,112.0 $8,274.8 $8,201.1

KPIs

KPIQ3 2024Q4 2024Q1 2025
Tangible Common Equity Ratio (%)9.71 9.49 9.73
Tangible Book Value/Share ($)$23.85 $23.92 $24.16
Nonperforming Assets/Total Assets (%)0.53 0.58 0.51
Nonaccrual Loans/Loans (%)0.63 0.69 0.61
Net Loan Charge-offs (annualized, %)0.17 0.16 0.17
Operating Efficiency Ratio (%)57.0 52.9 53.0
Loan-to-Deposit Ratio (%)——105.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core NIM (%)Q1–Q2 2025“>2.90% in Q1 2025” “~3.00% in Q2; +5 bps/quarter independent of Fed cuts, +5 bps per 25 bp Fed cut; holds post-merger” Raised/Expanded
Loan GrowthQ2 2025; FY 2025—“~2.5% sequential in Q2; ~5% from 12/31 for FY” New
Cost SavesPost-close (12 months)—“~$24M total; may stretch to ~1 year from closing” New
ROTCEPost phase-in—“~15% upon full phase-in” New
ROAPost phase-in—“>1.2% upon full phase-in” New
NIM (Combined)Post phase-in—“≥3.20% including purchase accounting accretion” New
CRE Concentration Target2026—“Reduce below 400% by 2026” New
Tax RateFY 2025“26%–27% projected” No update in Q1 callMaintained
Subordinate DebtPre-close—“Sticking with sub debt; issue prior to closing; market favorable” New
Dividend (Common)Q1 vs Q4$0.18 payable Mar 3, 2025 $0.18 payable Jun 2, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Net Interest MarginQ3: spot margin wider post Fed cut; guided +10 bps in Q4 ; Q4: “>2.90% in Q1 2025” Core NIM 2.93%; guide to ~3.00% in Q2; +5 bps/quarter plus +5 bps/25 bp Fed cut Improving
Deposits/Funding CostsQ4: deposit cost improvement drove NIM; average DDA up CDs (~$1B) repricing over next 6 months; deposit costs expected to decline further with Fed cuts Favorable
Loan Growth/PipelineQ3: loan balances down; pipeline discussed Sequential +2.5% in Q2; ~5% for 2025; Q1 contraction due to CRE payoffs Re-accelerating
Credit QualityQ3/Q4: ACL ~1%; delinquencies low; criticized loans increased modestly Nonaccrual down 13%; 30–89 day delinquencies 0.18%; criticized/classified 2.79% Stable-to-Improving
CRE ConcentrationQ3/Q4: focus on reducing concentration Down to ~420%; target <400% by 2026 De-risking
Merger (FLIC)Q3: announced; positive strategic rationale ; Q4: “close in Q2 2025” On track for late Q2 close; ~$24M cost saves; accretion (5–15 bps NIM) Execution underway
Macro/TariffsQ3/Q4: favorable interest outlook Management sees limited direct exposure; monitoring potential tariff effects Watchful

Management Commentary

  • CEO: “We are pleased with ConnectOne’s solid performance to start the year... Our net interest margin widened meaningfully... increasing 7 basis points during the 2025 first quarter... We anticipate this positive momentum to carry through the remainder of the year and into 2026” .
  • CFO: “Core net interest margin [to] reach 3% this second quarter... guidance of a 5 basis point improvement each quarter... plus an additional 5 basis points for each 25 bps of Fed cuts” .
  • CEO on merger: “...planned merger with First of Long Island... create a premier New York Metro community bank” ; “integration planning... strong early synergies... expected shortly” .
  • CFO on capital and TBV: “TCE ratio stands at 9.73%... TBV/share up 4% YoY to $24.16” .
  • CEO on macro: “direct exposure to import/export-dependent segments is very limited... very limited disruption to date” .

Q&A Highlights

  • Macro/tariffs exposure: Management expects any impact to be “narrow in scope,” with clients finding domestic sourcing alternatives; no dramatic changes observed .
  • Cost saves and timeline: ~$24M targeted; may take ~12 months post-close rather than by Jan 1; margin accretion from deal could add 5–15 bps .
  • Credit repricing: ~$1B repriced since mid-2023 with strong performance; another ~$1B through 2026; downgrades and charge-offs minimal .
  • Margin drivers: Funding costs declining (CD repricing, potential Fed cuts) and adjustable-rate loan yields rising could jointly accelerate NIM .
  • Loan growth cadence: Expect ~2.5% sequential Q2 and ~5% from 12/31 for year; Q1 contraction from payoffs; pipeline robust .
  • Regulatory process: Relationships remain constructive; standard diligence; sub debt funding favored pre-close given improved pricing .

Estimates Context

  • Q1 2025 normalized EPS beat: S&P Global Primary EPS consensus $0.46 vs actual $0.51* (beat by $0.05).
  • Q1 2025 “Revenue” (S&P definition) miss: consensus $69.7M vs actual $66.7M* (~$3.0M below).
  • Q4 2024 normalized EPS also above consensus ($0.43 vs $0.52); “Revenue” slightly above consensus ($64.4M vs $65.0M).
  • Implications: Continued margin expansion and early cost saves support upward EPS revisions; revenue definition differences for banks warrant focusing on NII/NIM trajectory when calibrating models .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Margin expansion is the central driver: deposit cost relief and adjustable-rate loan resets are pushing NIM higher; management guides to ~3.00% in Q2 and further gains thereafter .
  • Credit quality is resilient: nonaccruals and NPAs improved sequentially; delinquencies and charge-offs remain low, reducing downside tail risk .
  • Loan growth should re-accelerate: expect ~2.5% sequential in Q2 and ~5% for FY25 from 12/31; Q1 contraction stemmed from CRE payoffs, not demand weakness .
  • Merger is a near-term catalyst: late-Q2 close targeted with ~$24M cost saves and NIM accretion potential; sub debt funding in place supports capital flexibility .
  • TBV/share compounding and TCE strengthening underscore capital build and valuation support into the combination .
  • Watch estimate frameworks: normalized EPS beat vs S&P suggests upward revisions; model bank-specific drivers (NII, NIM, cost saves) rather than generic “revenue” .
  • Macro watchlist: management sees limited tariff exposure; continued funding repricing and Fed path are key to margin trajectory and earnings power .