8-K: ConnectOne Bancorp Reports Solid First Quarter 2025 Results, Declares Dividends Amidst Planned Merger

ConnectOne Bancorp announces its first quarter 2025 results, reporting net income available to common stockholders of $18.7 million and declaring both common and preferred stock dividends.

Summary

• ConnectOne Bancorp reported a net income available to common stockholders of $18.7 million for Q1 2025.
• This compares to $18.9 million in Q4 2024 and $15.7 million in Q1 2024.
• Diluted earnings per share were $0.49 for Q1 2025, consistent with Q4 2024, and up from $0.41 in Q1 2024.
• The company's return on average assets was 0.84% for Q1 2025, the same as Q4 2024, and up from 0.70% in Q1 2024.
• Return on average tangible common equity was 8.25% for Q1 2025, slightly down from 8.27% in Q4 2024, and up from 7.15% in Q1 2024.
• Operating net income available to common stockholders was $19.7 million for Q1 2025.
• The company declared a cash dividend on common stock of $0.18 per share, payable on June 2, 2025, to stockholders of record on May 15, 2025.
• A dividend of $0.328125 per depositary share will also be paid on June 2, 2025 to holders of record on May 15, 2025.
• Fully taxable equivalent net interest income for Q1 2025 was $65.8 million, a 1.6% increase from Q4 2024.
• The net interest margin widened by 7 basis points to 2.93% from 2.86% in the previous quarter.
• Noninterest income was $4.5 million in Q1 2025, compared to $3.7 million in Q4 2024 and $3.8 million in Q1 2024.
• Noninterest expenses were $39.3 million for Q1 2025, compared to $38.5 million for Q4 2024 and $37.1 million for Q1 2024.
• The provision for credit losses was $3.5 million for Q1 2025, consistent with the previous quarter and down from $4.0 million in Q1 2024.
• Nonperforming assets were $49.9 million as of March 31, 2025, representing 0.51% of total assets.
• The company's total assets were $9.759 billion as of March 31, 2025, compared to $9.880 billion as of December 31, 2024.
• Loans receivable were $8.201 billion as of March 31, 2025, and total deposits were $7.767 billion.
• The company's tangible book value per share increased to $24.16 as of March 31, 2025, from $23.92 as of December 31, 2024.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with solid financial results and strategic initiatives like the planned merger. While there are some minor negatives, the overall tone is optimistic and confident.

Positives

• Net income available to common stockholders increased by $3.0 million compared to Q1 2024.
• Net interest margin widened by 7 basis points to 2.93% from the previous quarter.
• Nonaccrual loans decreased to 0.61% of total loans.
• Tangible book value per share increased by more than 3% since announcing the merger with The First of Long Island Corporation.
• The loan to deposit ratio declined to 105.6%.
• Regulatory CRE concentration ratio improved by 15 percentage points to 420%.

Negatives

• Net income available to common stockholders was slightly lower at $18.7 million compared to $18.9 million for the fourth quarter of 2024.
• The loan portfolio contracted slightly since year-end.
• Loans delinquent 30 to 89 days were 0.18% of loans receivable as of March 31, 2025, up from 0.04% as of December 31, 2024 and up from 0.04% as of March 31, 2024.

Risks

• The company is incurring merger-related expenses due to the planned merger with The First of Long Island Corporation.
• There is an increasing industry-wide focus on the impact of potential tariff policy on borrower health in various loan segments.
• Criticized and classified loans as a percentage of loans receivable was 2.79% as of March 31, 2025, up slightly from 2.68% as of December 31, 2024 and up from 1.30% as of March 31, 2024.

Future Outlook

The company anticipates positive momentum in net interest margin to continue through the remainder of the year and into 2026, supporting continued margin expansion, and expects to finalize its planned merger with The First of Long Island Corporation in the second quarter of 2025.

Management Comments

• We are pleased with ConnectOnes solid performance to start the year, demonstrating disciplined execution across the organization, said Frank Sorrentino, Chairman and Chief Executive Officer of ConnectOne.
• We look forward to finalizing our planned merger with The First of Long Island Corporation in the second quarterbringing together two highly compatible relationship focused institutions to create a premier New York Metro community bank, providing attractive opportunities for our combined client base and the markets we serve.
• Our net interest margin widened meaningfully again as expected -increasing 7 basis points during the 2025 first quarter -driven by a strengthened balance sheet and favorable interest rate positioning.
• Although the loan portfolio contracted slightly since year-end, our loan pipeline is robust, backed by solid credits at attractive spreads, and continues to reflect steady, diversified growth.
• Credit quality trends remained stable during the first quarter with nonaccrual loans decreasing to 0.61% of total loans and annualized quarterly charge-offs remaining below 0.18% for the fifth consecutive quarter.
• Although there is an increasing industry-wide focus on the impact of potential tariff policy on borrower health in various loan segments, our direct exposure to import/export-dependent segments is very limited.
• Our ongoing portfolio reviews have shown very limited disruption to date, and we remain confident in the stability and resilience of our credit portfolio.

Industry Context

The announcement comes at a time when the banking industry is closely monitoring interest rate environments, credit quality, and the potential impact of economic policies such as tariffs. ConnectOne's focus on disciplined execution and its planned merger reflect a broader trend of consolidation and strategic positioning within the community banking sector.

Comparison to Industry Standards

• ConnectOne's return on average assets (ROAA) of 0.84% is comparable to other well-managed community banks, but lags behind the top performers that often exceed 1%.
• For example, companies like Signature Bank (prior to its collapse) and New York Community Bancorp have historically targeted ROAAs above 1%.
• The net interest margin of 2.93% is competitive, but banks with a higher proportion of non-interest-bearing deposits or a more efficient funding base may achieve higher margins.
• Banks like First Republic (prior to its acquisition) struggled with NIM compression due to higher funding costs.
• ConnectOne's nonperforming assets ratio of 0.51% is within a healthy range, indicating sound credit quality compared to peers with higher ratios, such as those that experienced significant stress during the 2008 financial crisis.

Stakeholder Impact

• Shareholders will receive cash dividends on both common and preferred stock.
• The planned merger with The First of Long Island Corporation is expected to provide attractive opportunities for the combined client base.
• Employees may experience changes related to the merger, but the company anticipates creating a premier New York Metro community bank.

Next Steps

• Finalizing the planned merger with The First of Long Island Corporation in the second quarter of 2025.
• Continuing to monitor the loan portfolio and credit quality trends.
• Executing on strategies to maintain and expand the net interest margin.

Key Dates

Keywords

ConnectOne Bancorp, financial results, dividends, merger, net income, earnings per share, net interest margin, asset quality, loan portfolio, deposits, nonperforming assets, CRE concentration, tariff policy, credit losses, tangible book value