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ConnectOne Bancorp Aims for Steady Loan Growth Amid Merger Integration Progress

Charles HayesThursday, Apr 24, 2025 1:20 pm ET

28min read

ConnectOne Bancorp (NASDAQ: CNOB) has set an ambitious yet cautious 2.5% quarterly loan growth target for Q2 2025 as it navigates the integration of its merger with The First of Long Island Corporation (NASDAQ: FLIC). The merger, expected to close in the second quarter of 2025, will create a regional banking powerhouse with $14 billion in combined assets, positioning ConnectOne as a top-five player on Long Island. This incremental growth goal reflects a blend of strategic optimism and operational realism, as the bank balances integration challenges with opportunities to expand its lending footprint in New York’s bustling commercial and residential markets.

The Merger’s Strategic Foundation

The merger unites ConnectOne’s fintech-driven commercial banking expertise with First of Long Island’s 98-year-old local branch network. Post-closing, the combined entity will operate 62 branches (25 from CNOB and 37 from FLIC), with minimal geographic overlap. This diversification strengthens ConnectOne’s presence in key markets like Long Island’s East End and New York City, areas where First of Long Island’s deep community ties and municipal lending relationships are particularly strong.

The integration plan prioritizes preserving both institutions’ client bases, with no branch closures anticipated. Leadership alignment also signals stability: FLIC CEO Chris Becker will become Vice Chairman of ConnectOne, retaining operational continuity. Regulatory approvals remain a critical hurdle, but both companies have emphasized their commitment to navigating this phase expeditiously.

The Loan Growth Target: Ambition Meets Realism

ConnectOne’s 2.5% Q2 loan growth target—projected to annualize to roughly 10%—aligns with its longer-term goal of reaching $11 billion in loans by 2025. This trajectory hinges on three pillars:
1. Commercial Lending Expansion: The combined bank aims to capitalize on demand for small- to mid-market business loans in New York’s recovering economy. ConnectOne’s fintech subsidiary, BoeFly, will support this effort by streamlining underwriting and customer onboarding.
2. Cross-Selling Synergies: Integrating First of Long Island’s 37 branches with ConnectOne’s 25 will create new opportunities for wealth management and commercial real estate lending, particularly in underserved Long Island submarkets.
3. Operational Efficiency: Projected $15 million in annual cost synergies by 2025 will free capital for loan portfolio growth, while shared technology platforms (e.g., core banking systems) reduce redundant expenses.

Risks and Considerations

While the merger’s strategic logic is compelling, execution risks loom large. Rising interest rates and potential economic slowdowns could dampen loan demand, particularly in rate-sensitive sectors like commercial real estate. Additionally, regulatory scrutiny—especially around branch operations and customer retention—could delay integration timelines.

ConnectOne’s track record offers some reassurance: its Q1 2025 net interest income rose 7% year-over-year, and non-performing loans remain below 1% of total assets, signaling robust credit quality. However, the bank’s loan-to-deposit ratio of 92% suggests it may need to seek external funding or optimize liquidity management to sustain aggressive growth.

Conclusion: A Regional Play with National Implications

ConnectOne’s 2.5% Q2 loan growth target is both a microcosm of its merger-driven ambition and a litmus test for its execution capabilities. With $14 billion in combined assets and a $11 billion loan portfolio, the merged entity is well-positioned to compete in New York’s $1.6 trillion economy, where community banks face mounting pressure from fintechs and megabanks.

The bank’s focus on operational synergies—projected to save $15 million annually—and its commitment to preserving local branches align with investor demands for steady, asset-light growth. If ConnectOne can achieve its 10% annual loan growth target, it could add over $1 billion in loans by 2025, propelling total assets to $14.7 billion—a milestone that would cement its status as a regional banking leader.

Investors should monitor two key metrics: first, the pace of merger-related cost savings, and second, the performance of its core lending businesses in high-growth sectors like commercial real estate. With its blend of fintech agility and community banking roots, ConnectOne’s success could set a template for consolidation in the $20 trillion U.S. banking sector—a sign that small banks, when strategically merged, can still punch above their weight.

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