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ConnectOne reported operating EPS of $0.79 and saw net interest margin expand 12 bps sequentially to 3.39%, maintaining a year-end spot margin target of 3.50%, while loan originations contributed roughly $300 million of growth (annualized ~10%).

Credit metrics remain solid with non-performing assets at 0.29% and criticized/classified loans at 2.26%, although 30–59 day delinquencies rose to 0.81% due to one rent‑stabilized multifamily relationship currently being worked out.

The board approved an 8.3% dividend increase, the company repurchased 90,000 shares this quarter and plans about 100,000 repurchases per quarter, with tangible book value up to $23.93 and reserves providing more than $80 million of cushion on rent‑stabilized exposure.

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ConnectOne Bancorp (NASDAQ:CNOB) executives highlighted what they called a “strong momentum” start to 2026, pointing to loan growth, net interest margin expansion, improving return metrics and continued progress integrating its acquisition of The First of Long Island.

“We kick off 2026 with strong momentum, firing on all cylinders, as demonstrated by our results,” Chairman and CEO Frank Sorrentino said. He added that ConnectOne has “scaled the balance sheet from under $10 billion to nearly $15 billion assets,” broadened its geographic footprint across the New York City metro region and extended into South Florida.

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Senior Executive Vice President and CFO Bill Burns said the company reported operating earnings per share of $0.79 for the first quarter. Burns also cited operating pre-provision net revenue (PPNR) as a percentage of average assets of 1.81%, up 3.5% from the prior quarter and up 35% from a year earlier.

A central theme of management’s remarks was net interest margin improvement. Burns said ConnectOne’s net interest margin expanded 12 basis points sequentially to 3.39%, following a 16 basis point widening in the prior quarter. Burns attributed the increase primarily to contractual loan repricings and improved deposit costs, and said the quarter “exceeded our initial projections.”

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On the balance sheet, Burns said loan originations were strong and that the loan portfolio grew at an annualized rate of approximately 10%, representing about $300 million in growth for the quarter. He said this was “double the pace we saw in each of the two prior quarters,” with the loan pipeline remaining strong. While management anticipates mid-single-digit loan growth net of payoffs for the year, Sorrentino said it “could be a little higher, it could be a little lower,” noting payoffs have “come down a little bit,” helping reported growth.

In response to an analyst question on new loan production, management said the pipeline was “about $635,” and the loans most recently put on were “about $620,” adding that “the spreads are being maintained nicely.” (Management did not specify units on the call.)

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Burns said maintaining deposit growth that keeps pace with loan growth remains a focus. While client deposits grew in the quarter, he said the faster loan growth was funded partly by reductions in cash and investment securities and was “supplemented with some wholesale deposits.”

On margin outlook, Burns said ConnectOne is maintaining its prior guidance for a year-end spot margin of 3.50%. He said the outlook reflects expectations for loans repricing higher, a competitive deposit pricing environment, and a “lower probability of rate cuts, maybe there’s one to come.”

In follow-up discussion, Burns clarified that the 3.50% figure is a spot margin expectation as the company exits the year, and that management is estimating around 3.45% for the fourth quarter, describing that as a conservative view given uncertainty around loan repricing benefits and potential deposit cost increases.

Burns also told analysts deposit costs are planned to be “flat for the year,” with most margin widening expected to come from loan repricing. In another modeling detail, management said fixed-rate loans coming up for repricing run at about $100 million a month, though the amount “fluctuates a little bit.”

Later in the call, management provided an update on purchase accounting accretion: “It was $9.3 million in the most recent quarter,” Burns said, adding it averages about $9 million a quarter for this year and is expected to be about $8 million a quarter in 2027.

Management said overall credit quality remained solid. Burns reported total non-performing assets declined to 0.29% of total assets, while criticized and classified loans fell to an historically low 2.26% of total loans. He also said net charge-offs on the non-PCD portfolio were “exceptionally clean” at 8 basis points annualized, a “recent low.”

At the same time, executives addressed an increase in early-stage delinquencies tied to New York City rent-stabilized multifamily exposure. Burns said 30- to 59-day delinquencies rose to 0.81%, driven by one relationship that is “in the process of working out.” Sorrentino said the increase was due to “an isolated client relationship collateralized by 19 multifamily New York City rent-stabilized properties,” adding that the borrower has a strong multi-year payment track record and that “significant portions of the credit remain fundamentally sound.”

Management emphasized the reserve and mark structure on the rent-stabilized portfolio. Burns said the total rent-stabilized portfolio declined over the past year to $675 million, down from $750 million at the close of the merger, through paydowns, payoffs and loan sales. He said $413 million (61%) of the $675 million portfolio came from the First of Long Island acquisition and was marked down through due diligence with “reserves and yield adjustments aggregating to $66 million,” bringing the carrying value for that portion to less than 85 cents on the dollar.

The remaining $263 million originated by ConnectOne represents “just 2.2% of total loans,” Burns said, and carries an elevated reserve of $15 million. Combined with general reserves and purchase accounting marks, Burns said the company has a 12% offset to the aggregate rent-stabilized exposure, providing “more than $80 million in total value absorbing cushion.”

Burns said the provision for loan losses was $5.2 million in the quarter, reflecting strong loan growth and increased qualitative factors tied to the multifamily portfolio, partially offset by improved economic forecasts in the company’s CECL model. He said the allowance for credit losses to loans remains “healthy” at 1.3%.

Asked about LTV metrics for the delinquent rent-regulated credits, management said it could not provide that detail “at this time,” citing a rent-regulated market “in a state of flux” and difficulty determining current LTVs. Burns added that the majority of the rent-regulated portfolio is current and not impaired, and “we feel pretty good about the whole portfolio.”

Burns said operating expenses remained controlled. Excluding merger and restructuring charges, non-interest expense was $55.7 million, and he is targeting 1.5% sequential growth per quarter going forward.

Non-interest income was $6.8 million for the quarter. Burns said SBA gains were approximately $400,000 in the quarter, and that an additional $1.1 million in SBA gains recorded in April put the company ahead of its 2026 target, with “a third generated by BoeFly.”

On capital, Burns said tangible book value per share rose 1.7% to $23.93, approaching the pre-merger level of $24.16. He also cited a tangible common equity ratio at the Bancorp of 8.64 and a bank leverage ratio of 10.81.

Reflecting confidence in earnings and capital generation, Burns said the board approved an 8.3% increase in the common dividend. The company also repurchased 90,000 shares during the quarter at $26.21 per share, and Burns said ConnectOne intends to continue opportunistic repurchases, with more than 500,000 shares remaining under its authorization. In response to a question on capital allocation, Burns said management plans to repurchase about 100,000 shares per quarter for the rest of the year, depending on stock price and growth rates, and expects to keep a relatively low payout ratio even as dividends rise over time with earnings growth.

On geographic expansion, Sorrentino said the company remains “very bullish” on Florida and is growing there in a measured way, increasing its team in the market from “4 or 5 individuals” initially to “past 18 or 19.” He described the Florida production mix as similar to New York—C&I, owner-occupied and non-owner occupied real estate—adding that a portion is tied to existing New York relationships.

Asked about M&A, Sorrentino said the company remains focused on organic growth and leveraging opportunities from the First of Long Island integration, while staying open to conversations. “It’s very difficult to get to a place where something makes a lot of sense,” he said, adding he does not see anything “right at the moment that’s compelling.”

Management also discussed efforts to improve efficiency through technology and AI. Sorrentino said the bank is deploying AI tools to streamline processes and reduce repetitive tasks, and he cited platforms such as nCino, Slack and Google (with Gemini) as examples where AI features can improve productivity and accuracy. He also said vendors are incorporating AI in their platforms and that these changes could help the company “scale faster and better with less human resources.”

In closing remarks, Sorrentino said the company’s “earnings profile is solid and growing,” and that the balance sheet is well positioned, with management aiming to continue improving efficiency and executing on growth opportunities across its markets.

ConnectOne Bancorp is a New Jersey‐based bank holding company whose primary subsidiary, ConnectOne Bank, offers a suite of commercial banking services to small and medium‐sized businesses, professionals and individuals. Established in 2005 and headquartered in Englewood Cliffs, New Jersey, the company seeks to deliver customized lending and deposit solutions through a network of branches across northern New Jersey and the New York metropolitan area.

The company's lending portfolio centers on commercial real estate financing, construction lending, owner‐occupied real estate loans and working capital lines of credit.

The article "ConnectOne Bancorp Q1 Earnings Call Highlights" was originally published by MarketBeat.