ConnectOne Bancorp’s Net Interest Margin Expands to 3.11% as Credit Quality Remains Robust After FLIC Merger

Net Interest Margin Hits 3.11% and Operating Efficiency Improves

ConnectOne Bancorp’s third quarter of 2025 marks its first full period following the completion of its merger with The First of Long Island Corporation (FLIC). The company posted a notable increase in net interest margin to 3.11%, up five basis points from last quarter and an impressive 44 basis points year-over-year. The expansion comes alongside strong average interest-earning asset growth, up 25.8% sequentially and 43.1% from the prior year, both driven by the FLIC integration. Additionally, ConnectOne’s pre-provision net operating revenue to average assets climbed to 1.61% from 1.52% last quarter and 1.13% a year ago, reflecting improved operating efficiency.

Credit Quality Remains Sound and Nonperforming Assets Fall to 0.28% of Total Assets

Credit metrics showed further resilience, even as ConnectOne’s total assets swelled to $14.0 billion after the merger. Nonperforming assets dropped to just 0.28% of total assets, while annualized net charge-offs held at a conservative 0.18%. The ratio of allowance for credit losses to loans receivable increased to 1.38%, bolstered by the addition of FLIC's portfolio and prudent provisioning. Criticized and classified loans accounted for 2.59% of the total loan book, indicating no broad deterioration despite substantial portfolio expansion. Asset quality stability remains a foundation as the bank broadens its footprint.

Strong Profitability and Growth Post-Merger

For the third quarter, ConnectOne delivered net income available to common stockholders of $39.5 million (diluted EPS: $0.78), a stark turnaround from last quarter’s merger-related loss and up sharply from $15.7 million in the prior year’s quarter. Nonrecurring items played a notable role, with a $6.6 million Employee Retention Tax Credit and a $3.5 million pension plan gain partially offsetting $2.9 million in merger expenses. Even after adjusting for these, operating performance was robust, and the company continued to post solid operating returns on average assets and tangible common equity.

The loan and deposit books also saw sequential growth—client deposits up at an annualized rate of 4.0% since June 30, while loans climbed more than 5%. Tangible common equity remains healthy at 8.36%, and the total risk-based capital ratio stands at a solid 13.88%, underscoring management’s focus on prudent balance sheet strength and long-term shareholder value.

Dividend Declarations Highlight Continued Shareholder Commitment

The Board of Directors declared a $0.18 per share common dividend and a $0.328125 per share dividend for Series A preferred shares, both payable December 1, 2025 to shareholders of record as of November 14. This continued payout is notable given the ongoing integration of FLIC and illustrates confidence in ongoing cash generation and capital management.

Key Balance Sheet Data Demonstrate Post-Merger Scale

What Should Investors Watch Going Forward?

ConnectOne Bancorp’s successful merger execution, growing net interest margin, and solid credit fundamentals create a positive setup for the next few quarters. Nonrecurring boosts to this quarter’s earnings—such as tax credits and pension gains—won’t repeat, but the sustained underlying profitability, loan and deposit expansion, and healthy efficiency ratio point to continued progress. Asset quality will remain a key watchpoint, but for now, metrics suggest the integration has not led to a rise in risk.

Investors should follow future trends in margin expansion, organic growth in the enlarged franchise, and ongoing discipline in credit and cost control. With conference call details already available, this could be an ideal time for those interested to listen in for further management color on growth strategy and post-merger synergy realization.

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