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ConnectOne Bancorp, Inc. (CNOB)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 operating EPS was $0.70, a modest beat vs S&P Global consensus of $0.67; reported diluted EPS was $0.78, aided by one-time items (ERTC $6.6M and pension curtailment gain $3.5M, partially offset by ~$2.9M merger costs and $1.0M restructuring) . EPS consensus/actual from S&P Global: $0.67 vs $0.70* (Values retrieved from S&P Global).
  • Revenue beat: S&P Global consensus $110.7M vs actual $115.9M*; topline benefitted from higher net interest income on a wider NIM and noninterest income tailwinds, though recurring noninterest income run-rate is ~ $7M per quarter per CFO .
  • NIM widened 5 bps q/q to 3.11% with “spot” NIM >3.20% at quarter-end; CFO guided Q4 NIM to ~3.25%+ and sees 2026 exit NIM approaching 3.40–3.50, as sub-debt redemption and lower average cash lift margins .
  • Credit remained solid: NPAs 0.28% of assets, annualized NCOs 0.18%, ACL/loans 1.38%; capital strong with TCE ratio 8.36% and TBV/share $22.85; dividend maintained at $0.18 payable Dec 1, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and core spread momentum: NIM rose to 3.11% from 3.06% q/q; “spot” NIM >3.20% and CFO expects ~3.25%+ in Q4 as excess cash declines and high-cost sub-debt was redeemed Sept 15 (“without those two items… Q3 NIM would have been in excess of 3.50%”) .
  • Integration and growth: First full quarter post-merger operating “seamlessly” with healthy deposit/loan pipelines; CEO: “With our first full quarter post-merger, we’re operating seamlessly as one organization… our net interest margin… profitability ratios [improved]” .
  • Noninterest income building blocks: Q3 included ERTC and pension gain, but CFO reiterated recurring noninterest income ~ $7M/quarter and highlighted SBA/BoeFly ramp: “We expect SBA to add significantly to our noninterest income in 2026” .

What Went Wrong

  • Quality of beat partly nonrecurring: Q3 noninterest income of $19.4M included $6.6M ERTC and $3.5M pension curtailment gain; also incurred $2.9M merger expenses and $1.0M restructuring charge .
  • Loan growth tempered by payoffs: Management noted healthy originations (>$465M this quarter), but payoffs muted net growth; expects average loans to rise “>2%” q/q in Q4 .
  • Expense normalization still ahead: Operating noninterest expense run-rate guided to $55–56M for Q4 and $56–57M in 1H26, reflecting post-merger scale and amortization of core deposit intangibles .

Financial Results

Income statement and return metrics (oldest → newest):

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Interest Income ($M)$60.9 $65.8 $78.9 $102.0
Noninterest Income ($M)$4.7 $4.5 $5.2 $19.4
Provision for Credit Losses ($M)$3.8 $3.5 $35.7 $5.5
Noninterest Expenses ($M)$38.6 $39.3 $73.6 $58.7
Net Income to Common ($M)$15.7 $18.7 $(21.8) $39.5
Diluted EPS ($)$0.41 $0.49 $(0.52) $0.78
Operating Diluted EPS ($)$0.42 $0.51 $0.55 $0.70
Net Interest Margin (TE, %)2.67% 2.93% 3.06% 3.11%
ROA (%)0.70% 0.84% (0.73)% 1.16%
Operating ROA (%)0.72% 0.88% 0.89% 1.05%
ROTCE (%)6.93% 8.25% (8.42)% 14.74%
Operating ROTCE (%)7.03% 8.59% 9.29% 12.55%

Consensus vs actual (Q3 2025):

MetricConsensusActual
Primary EPS ($)0.67*0.70*
Revenue ($M)110.7*115.9*

Values retrieved from S&P Global.

KPIs and balance sheet (oldest → newest):

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Loans Receivable ($M)$8,112 $8,201 $11,164 $11,304
Total Deposits ($M)$7,524 $7,767 $11,278 $11,369
NPAs / Assets (%)0.53% 0.51% 0.28% 0.28%
Net Charge-offs (ann.) (%)0.17% 0.17% 0.22% 0.18%
ACL / Loans (%)1.02% 1.00% 1.40% 1.38%
TCE Ratio (%)9.71% 9.73% 8.09% 8.36%
TBV / Share ($)$23.85 $24.16 $21.95 $22.85

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (TE)Q4 2025Sequential +10 bps from Q3; ~3.25% by Q4 “Q4 margin at 3.25% or even above” Slightly raised
Net Interest Margin (TE)2026 exitFurther expansion through 2026 (no specific exit) Approaching 3.40%–3.50% by end of 2026 New specificity
Operating Noninterest ExpenseQ4 2025~$55M range ~$55–56M Maintained
Operating Noninterest Expense1H 2026~$56–57M/quarter ~$56–57M/quarter Maintained
Effective Tax Rate2026~28% expected ~28% (press release) Maintained
Average Loans GrowthQ4 2025—>2% q/q (not annualized) expected New
Loans Growth20265%+ possible 5%+ reiterated Maintained
Capital Return2026Hold off near-term; revisit later Room for dividend increase and opportunistic buybacks Updated positive
Common DividendOngoing$0.18/share (Sep 2, 2025 payment) $0.18/share (Dec 1, 2025 payment) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Margin/NIMQ1: NIM +7 bps to 2.93% ; Q2: 3.06% and guided +10 bps per Q in Q3/Q4 to ~3.25% NIM 3.11% (+5 bps); spot >3.20%; Q4 ~3.25%+; 2026 exit ~3.40–3.50 Improving, upside bias
Deposit mix & fundingQ2: DDA >21%; core deposit growth strong; LDR ~<100% Sequential client deposit growth ~4% annualized; LDR <100% maintained Stable to better
Long Island expansionQ2: Integration success and healthy client onboarding “Meaningful momentum” on Long Island driving pipelines Positive execution
Credit qualityQ1/Q2: NPAs down to 0.28%; ACL/loans up to 1.4% post-merger NPAs 0.28%; NCOs 0.18%; rent-regulated exposure ~$700M with conservative marks Solid/stable
SBA/BoeFlyQ2: Noninterest income baseline ~$6.7M/qtr; SBA buildout underway Recurring noninterest income ~ $7M/qtr; SBA to “add significantly” in 2026; >250 franchisor brands Building for 2026
Capital & buybacksQ2: Defer near-term repurchases; capital ratios strong 2026 room for dividend increase and opportunistic buybacks More constructive
Macro/ratesQ2: 5 bps NIM benefit per 25 bps cut baseline End of QT seen easing deposit competition; loans repricing faster even in down-rate scenario Supportive backdrop
Loan repricing—~$1B repricing in 2026 and another ~$1B in 2027 Visibility improves

Management Commentary

  • “With our first full quarter post-merger, we’re operating seamlessly as one organization… our net interest margin… and profitability ratios [improved].” — Frank Sorrentino, CEO .
  • “Q4 margin at 3.25% or even above… without [sub-debt and elevated cash], the third quarter NIM would have been in excess of 3.50%.” — Bill Burns, CFO .
  • “Recurring [noninterest income] remains about $7 million per quarter… We expect SBA to add significantly… in 2026.” — Bill Burns, CFO .
  • “We expect to have enough room in 2026 for a common dividend increase and opportunistic share repurchase.” — Bill Burns, CFO .

Q&A Highlights

  • Capital allocation: Management expects flexibility in 2026 for dividend increases and opportunistic buybacks, while maintaining prudent growth and upward-trending capital ratios .
  • NIM outlook and rates: CFO reiterated Q4 NIM ~3.25%+ and a path to ~3.40–3.50 by end-2026; end of QT and more liquidity should ease deposit pricing pressure .
  • Deposit/loan dynamics: Strategy prioritizes relationship banking to match deposits with loans, sustaining LDR below 100% .
  • SBA/BoeFly ramp: >250 franchisor brands; pipeline building with expectation of materially higher gain-on-sale contribution in 2026 .
  • Credit/rent-regulated exposure: ~$700M total, ~60% acquired with ~20% mark; portfolio underwritten conservatively with stable performance; NCOs modeled to remain in high-teens to low-20s bps .

Estimates Context

  • Q3 2025 results vs S&P Global consensus: operating EPS $0.70 vs $0.67; revenue $115.9M vs $110.7M; both beats were supported by higher net interest income and select nonrecurring items in noninterest income (ERTC, pension gain) . EPS and revenue consensus/actual from S&P Global: $0.67/$0.70* and $110.7M/$115.9M* (Values retrieved from S&P Global).
  • Estimate revisions likely: upward for NIM trajectory (Q4 ~3.25%+, 2026 ~3.40–3.50), modestly higher noninterest income from SBA in 2026, and stable OpEx run-rate; tax rate assumption ~28% for 2026 should be embedded in models .

Key Takeaways for Investors

  • Beat with improving quality: Core NIM and PPNR trends are the primary drivers; one-timers boosted GAAP EPS, but operating metrics are strengthening .
  • Near-term catalyst: Q4 NIM guidance (~3.25%+) and lower average cash should lift core earnings; watch for acceleration in average loans (>2% q/q) .
  • 2026 setup: Path to higher sustainable margins (~3.40–3.50 exit), accelerating SBA gains, and potential buybacks/dividend increase supports multiple expansion case .
  • Credit is a support, not a risk driver: NPAs 0.28%, NCOs 0.18%, and conservative marks on rent-regulated exposure provide cushion .
  • Valuation narrative: Management views shares as compelling given margin trajectory, improving profitability ratios, and capital flexibility .
  • Risks: Pace of payoffs vs originations could temper loan growth; merger-related amortization and integration optimization continue; macro/CRE uncertainties persist .
  • Actionable focus: Track Q4 NIM print, OpEx adherence to $55–56M, average cash normalization, SBA gain-on-sale ramp, and capital actions signposts into 2026 .

Appendix: Dividends

  • Declared common dividend of $0.18/share payable December 1, 2025 (record date November 14, 2025); preferred dividend also declared .

Notes:

  • All company figures are from ConnectOne’s Q3 2025 earnings press release/Form 8-K and call transcript as cited.
  • EPS and revenue consensus/actual marked with asterisks are from S&P Global; Values retrieved from S&P Global.