8-K: ConnectOne Bancorp Reports Strong Q4 2025, NIM Widens

ConnectOne Bancorp, Inc. announced robust fourth quarter and full-year 2025 results, marked by widening net interest margin, solid credit trends, and strategic branch rationalization.

Summary

• Net income available to common stockholders for Q4 2025 was $38.0 million, compared with $39.5 million for Q3 2025 and $18.9 million for Q4 2024.
• Diluted earnings per share for Q4 2025 were $0.75, compared with $0.78 for Q3 2025 and $0.49 for Q4 2024.
• Full-year 2025 net income available to common stockholders was $74.4 million, an increase from $67.8 million for full-year 2024.
• Full-year 2025 diluted earnings per share were $1.63, a decrease from $1.76 for full-year 2024.
• The net interest margin widened by 16 basis points during Q4 2025 to 3.27%, benefiting from an 18 basis-point improvement in the cost of interest-bearing deposits.
• Operating return on average assets advanced by nearly 20 basis points to 1.24% in Q4 2025.
• Operating return on average tangible common equity advanced by 172 basis points to 14.27% in Q4 2025.
• Credit trends remained solid with a nonperforming asset ratio of 0.33% and annualized net charge-offs of 0.17%.
• Loans and client deposits (excluding a $280 million reduction in brokered deposits) both grew sequentially by more than 5% annualized.
• Tangible book value per share increased by an additional 3% during the quarter to $23.52.
• The Company declared a cash dividend of $0.18 per common share and $0.328125 per preferred depositary share, both payable on March 2, 2026.
• Branch rationalization will result in the closure of five retail banking branches in Q1 2026, with associated charges of $1.3 million recorded in Q4 2025.
• Total assets increased to $14.0 billion as of December 31, 2025, from $9.9 billion as of December 31, 2024, primarily due to the merger with First of Long Island Corporation (FLIC).

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong report, highlighting significant improvements in core profitability metrics like NIM and operating returns, coupled with robust credit quality and strategic growth initiatives. The sequential dip in GAAP net income is attributed to non-recurring items, making the underlying operational performance very positive.

Positives

• Net interest margin widened by 16 basis points to 3.27% in Q4 2025, benefiting from improved deposit costs and stable loan yields.
• Operating return on average assets increased to 1.24% in Q4 2025 from 1.05% in Q3 2025, indicating improved operational efficiency.
• Operating return on average tangible common equity increased to 14.27% in Q4 2025 from 12.55% in Q3 2025, demonstrating enhanced shareholder value creation.
• Credit trends remained solid with a nonperforming asset ratio of 0.33% as of December 31, 2025, which is lower than Q4 2024's 0.58%.
• Annualized net charge-offs remained low and stable at 0.17% for Q4 2025.
• Loans and client deposits (excluding brokered deposits) grew sequentially by more than 5% annualized.
• Tangible book value per share increased by 3% during the quarter to $23.52.
• The Company is realizing incremental synergies across the franchise following the merger integration.
• Full-year 2025 net income available to common stockholders increased to $74.4 million from $67.8 million in 2024.
• Allowance for credit losses as a percentage of nonaccrual loans was 336.1% as of December 31, 2025, indicating strong coverage.
• Criticized and classified loans as a percentage of loans receivable decreased to 2.49% as of December 31, 2025, from 2.57% sequentially and from 2.65% year-over-year.

Negatives

• Net income available to common stockholders decreased to $38.0 million in Q4 2025 from $39.5 million in Q3 2025, primarily due to a $13.4 million decrease in noninterest income.
• The decrease in noninterest income was mainly due to nonrecurring benefits in Q3 2025, including a $6.6 million employee retention tax credit and a $3.5 million defined benefit pension plan curtailment gain.
• Diluted EPS decreased to $0.75 in Q4 2025 from $0.78 in Q3 2025.
• Full-year 2025 diluted EPS decreased to $1.63 from $1.76 in 2024.
• Tangible common equity ratio decreased to 8.62% as of December 31, 2025, from 9.49% as of December 31, 2024.
• Tangible book value per share decreased to $23.52 as of December 31, 2025, from $23.92 as of December 31, 2024.
• Nonperforming assets as a percentage of total assets increased sequentially to 0.33% as of December 31, 2025, from 0.28% as of September 30, 2025.
• Loans delinquent 30 to 89 days increased to 0.26% of loans receivable as of December 31, 2025, from 0.08% as of September 30, 2025, and 0.04% as of December 31, 2024, indicating a worsening trend in early-stage delinquencies.

Risks

• Changes in interest rates.
• General economic conditions.
• Legislative/regulatory changes.
• Monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board.
• Quality or composition of the loan or investment portfolios.
• Demand for loan products.
• Deposit flows.
• Competition.
• Demand for financial services in the Company's market area.
• Changes in accounting principles and guidelines.
• Impact of health emergencies and natural disasters on the Company, its employees and operations, and its customers.

Future Outlook

Management expects the net interest margin to continue its upward trend during 2026, driven by decreasing deposit and borrowing costs and increasing loan yields. The current pipeline for SBA loans, including those referred from the BoeFly subsidiary, is robust and is expected to result in pretax gains exceeding $4 million during 2026. The effective tax rate for 2026 is estimated to be approximately 28.0%.

Management Comments

• "I'm pleased with ConnectOne's strong fourth quarter performance underscored by robust core earnings and expanding margins."
• "The Bank's net interest margin widened by 16 basis points during the quarter, benefiting from an 18 basis-point improvement in our cost of interest-bearing deposits combined with virtually no change in our loan portfolio yield."
• "Our net interest margin is expected to continue its upward trend during 2026 with deposit and borrowing costs decreasing and loan yields increasing."
• "Loans and client deposits, which exclude a reduction of over $280 million of brokered deposits during the quarter, both grew sequentially by more than 5% annualized, while credit trends remained stable."
• "Performance metrics are gaining momentum, with operating returns on assets advancing by nearly 20 basis points to 1.24%, and average tangible common equity advancing by 172 basis points to 14.27%."
• "Further, our tangible book value per share increased by an additional 3% during the quarter to $23.52."
• "Operationally, with the merger integration behind us, we're continuing to realize incremental synergies across the franchise."
• "ConnectOne's scalable operating model, leading technology and robust business offerings are now driving both greater efficiency and accelerated growth."
• "2025 was a very strong year for ConnectOne and we enter 2026 with solid operating momentum. We look forward to building upon our client-first culture and relationship-driven strategy to drive growth and long-term value creation for all stakeholders."

Industry Context

StockSavvy.ai notes that ConnectOne Bancorp's performance, particularly the widening net interest margin and strong credit quality, positions it favorably within the regional banking sector. The strategic branch rationalization and continued realization of merger synergies reflect a proactive approach to efficiency and growth, aligning with broader industry trends of optimizing physical footprints and leveraging technology for competitive advantage. The growth in client deposits, excluding brokered deposits, indicates strong core customer relationships, a key differentiator in a competitive deposit environment.

Stakeholder Impact

• Shareholders: Positive impact due to strong operating performance, expanding margins, increased tangible book value per share (quarterly), and declared dividends.
• Employees: Potential impact from branch closures (5 branches in Q1 2026), though overall merger integration is behind them.
• Customers: Potential impact from branch closures, but also benefit from a scalable operating model, leading technology, and robust business offerings.
• Creditors: Positive impact due to solid credit trends, strong allowance for credit losses, and stable asset quality.

Next Steps

• Closure of five retail banking branches in Q1 2026.
• Expected continued upward trend in net interest margin during 2026.
• Expected pretax gains exceeding $4 million from SBA loans during 2026.
• Estimated effective tax rate of approximately 28.0% for 2026.
• Building upon client-first culture and relationship-driven strategy to drive growth and long-term value creation for all stakeholders.

Key Dates

Recommendation

The filing indicates strong underlying operational performance with significant expansion in net interest margin and robust operating returns on assets and tangible common equity. Credit quality remains solid, and the company is realizing synergies from its merger. While GAAP net income saw a sequential dip due to non-recurring items, the core business metrics are trending positively, and management's outlook for continued NIM expansion and SBA loan gains in 2026 is encouraging. The strategic branch rationalization further points to efficiency gains. The stock appears undervalued given these strong fundamentals and positive forward guidance.

Keywords

ConnectOne Bancorp, CNOB, Bank, Financial Results, Earnings, Net Interest Margin, Credit Quality, Dividends, Branch Closures, Merger Integration, Commercial Banking, Fintech, BoeFly, SEC Filing, Q4 2025, Full-Year 2025