ConnectOne Bancorp's Q2 2025: Unpacking Contradictions in Loan Growth, Credit Quality, and Capital Strategy

Loan growth expectations, reserve levels and credit quality, nonperforming assets and loan quality, capital deployment and share repurchases, capital deployment and CRE concentration management are the key contradictions discussed in ConnectOne Bancorp's latest 2025Q2 earnings call.



Merger Success and Integration:
- ConnectOne Bancorp successfully closed and integrated the First of Long Island Bank merger, resulting in total assets of nearly $14 billion.
- The merger enhanced scale, geographic footprint, and client base, positioning the company for accelerated growth.

Deposit Growth and Loan Demand:
- Noninterest-bearing demand deposits increased by over $100 million since March 31, reflecting an annualized rate of 15%.
- The company experienced strong loan demand across various sectors, including C&I, construction, SBA, and residential lending, driven by the integration of the new market.

Margin Expansion and Capital Strength:
- The net interest margin is expected to expand by 10 basis points for each of the third and fourth quarters of 2025, with a projected margin of about 3.25%.
- The Bancorp's tangible common equity ratio stands above 8%, indicating strong capital position to support growth.

Credit Quality Improvement:
- The nonperforming asset ratio improved to 0.28% from 0.51% a year ago, and the reserve for loan losses increased to 1.4% of loans.
- The improvement in credit quality is attributed to the successful workout of certain impaired loans.