ConnectOne Bancorp has emerged from its transformative combination with The First of Long Island Corporation as a meaningfully larger New York metropolitan community bank, and the second quarter of 2026 marks the first full quarter in which the integrated franchise operated free of acquisition-accounting noise. The period produced the seventh consecutive quarterly expansion of net interest margin, lifting the metric past the level management has cited as a defining benchmark for the franchise. Operating return on average tangible common equity of 13.81% places the company among the more efficient operators in the U.S. community bank universe, a positioning management has emphasized since the deal closed.
The structural tension beneath that headline is a pocket of rent-regulated New York City multifamily credit. A sizable charge-off during the quarter on loans secured by rent-stabilized properties pushed net charge-offs to $21.0M, lifted nonaccrual balances, and required meaningful provision even as the allowance methodology released reserves. Operating earnings power, by contrast, looks intact, with operating net income of $42.2M and operating EPS of $0.84 signaling that the core franchise generates returns well above peer averages once that single asset class is set aside.
The forward question is whether the operating momentum compounds through the second half of the year, with sequential loan growth annualizing near 5% and core deposit growth near 8%. The next several quarters resolve whether a sizable pool of purchased credit-deteriorated rent-regulated loans can be worked through without further drag on provision expense, and whether the franchise can sustain margin expansion as funding costs normalize across the deposit franchise.