ConnectOne Bancorp, Inc.

and Chief Executive Officer, and Bill Burns, Senior Executive Vice President and Chief Financial Officer. I'd also like to caution you that we may make forward-looking statements during today's conference calls that are subject to risk and uncertainty. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filing. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed today on Form 8K with the SEC and may also be accessed through the company's website. I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Thanks, Saya, and thank you all for joining us this morning to discuss Connect One's second quarter. which reflects continued momentum in executing our strategy alongside successful integration of the largest merger in our company's history. On June 1st, Connect One Bank officially launched as a unified entity, completing the legal close of our merger, first of Long Island Bank. This milestone marks the beginning of an exciting new chapter for us, one that significantly enhances our scale and positions us to accelerate growth across all our markets. especially on Long Island. In line with Connect One's unique approach to M&A, we deployed a deliberate and focused effort to maximize synergy, both in preparation for and immediately following the close of the combination. The results are already clear, compelling, and a direct reflection on our ability to execute. Yet overwhelmingly strong client retention, demonstrating the success of our integration efforts and the continued loyalty of our combined client base. Steady momentum in new client onboarding as well as meaningful traction on new business opportunities. We had strong core deposit growth, including gains in DDA balances of existing newly acquired relationships. We're also seeing strong loan demand as we combine Connect One's deep expertise with significant growth opportunities across our new market. We entered the back half of 2025 with a solid This includes C&I, construction, SBA, and residential lending. Prior to Bill providing additional details about the merger and its positive impact on our financials and performance metrics, I'd like to emphasize a few things. Our assets now stand at nearly $14 billion, $11.2 billion in loans and $11.3 billion in deposits, while our market capitalization today exceeds $1.2 billion. This quarter, we organically grew client deposits by a record amount, improving our loan-to-deposit ratio to 99% at the end of the second quarter, down from 106% as of March 31st. Noninterest-bearing demand composition now exceeds 21% of total deposits, up from 18% as of year-end, reflecting both the merger and our client-focused, relationship-based approach. Additionally, while this transaction propelled us to above $10 billion asset threshold, Connect One was already well-prepared to cross this hurdle. We've proactively managed the associated regulatory requirements and, as a result, anticipate only modest expense growth while remaining well-positioned to continue our growth trajectory. Next, I'm also extremely pleased to welcome our newest members to our talented team. Deep expertise in community banking aligns with our client-first culture and strategy. I'm equally proud of the commitment and dedication shown by our team immediately coming together as one organization. The energy in our combined team is palpable, and our bench strength and momentum position us to execute on the opportunities in our market. We had a flawless day one brand transition, followed by the successful completion of a full systems conversion just two weeks later. Leading up to and throughout the transition, we placed a strong emphasis on delivering a seamless client experience. We proactively tripled our call center capacity to ensure responsiveness and continuity to address client needs in real time. Our clients were provided with broad access to the team, and I personally met with many, reinforcing our commitment to relationship banking that defines Connect One. As a result, we not only managed the conversion in under 30 days, we did so with excellent client and deposit retention. while also growing balances and setting the stage for enhancing those relationships. Today, we're operating as one unified company, single culture, consistent brand presence, and a shared vision. We're one team, fully aligned, and better positioned than ever to drive organic growth, create long-term shareholder value. And with that, I'll turn it over to Bill.

All right. Thank you, Frank. Good morning to everyone on the call. I want to start. by reiterating that we are truly thrilled with the first Long Island merger. It's strategic in that it expands our geographic footprint and client base. It's also financially disciplined and compelling, strengthens our balance sheet, enhances our key financial metrics, and ultimately boosts our franchise net. Now, with any merger, particularly in the early stages of a transaction that closed mid-quarter, it can be challenging to digest what's going on behind the numbers. Therefore, I want to delve into some key areas to provide greater clarity. But first and foremost, I want to highlight the exceptionally strong deposit and funding trends that ConnectOne is generating right out of the gate. On a combined company basis, non-interest-bearing demand deposits increased by more than 100 million since March 31st, approximately 15 percent annualized. And over the same timeframe, Total deposits are up an annualized 8 percent, which reflects solid performance, but it's even more encouraging that when you factor in a $200 million decline in broker deposits, our true core balances have increased by more than 500 million, or 17 percent annually. And with that robust deposit growth, we've been able to reduce wholesale federal home loan bank borrowings by about 200 million. Another point we want to highlight is the loan-to-deposit ratio. Pre-merger, our first quarter loan-to-deposit ratio was 106, climbing to 101 on a pro forma combined basis on March 31st. Fast forward to today, going to deposit growth, the ratio has improved even further to a couple percentage points below 100. Going forward, we expect to operate at about that 100% threshold. The deposit growth is a testament to the success across the entire organization. particularly healthy contribution of the loan on the market. Many bank mergers often face challenges with positive attrition. However, our unwavering focus on client retention has led to accelerated growth. Let me now turn to our purchase accounting entries. I'm going to aim for full transparency regarding the merger's purchase accounting adjustments, both now and in the future, to ensure our core underlying trends remain clear. The merger has a total loan market of $250 million. That's comprised of a $207 million fair value accretable mark and a $43 million non-accretable mark. Fair value mark of $205 million reflects a 6.6% discount to First of Long Island's $3 billion loan portfolio. A good portion of that is attributable to the $1.1 billion of residential loans we're taking on. They have a relatively longer duration. 43 million non-accredible mark on 270 million of PCD loans largely reflects portion of First of Long Island's New York City regulated portfolio. When you combine that non-accredible mark with the accretable mark on the PCD loans, those loans are now being carried on our balance sheet at about 70 cents of the dollar. I want to remind you that First of Long Island had a long standing track record of seeing credit quality Nearly all of the rent-regulated loans are performing. Nevertheless, under GAAP, conservatively and appropriately allocated a healthy reserve due to the higher cap rates currently being applied to the subsegment. Now, earnings accretion will be considerable. We are projecting them to be approximately 9.8 million per quarter for 2025, climbing to 9.2 million per quarter in 26, and 7.9 million per quarter in 27. I'LL ADDRESS THE IMPACT OF THE INCREASION ON OUR MARGINS HERE. NOW THE PROVISION AND ALLOWANCE, I'M GOING TO TALK ABOUT THAT A LITTLE BIT. THE TOTAL PROVISION FOR CREDIT LOSSES FOR THE SECOND QUARTER WAS $35.7 MILLION, INCLUDING A DAY ONE PROVISION, FIRST OF LONG ISLAND, $27.4 MILLION, AND AN OPERATING PROVISION OF $8.3 MILLION. NOW THAT $8.3 MILLION IS HIGHER THAN USUAL FOR CONNECT ONE, BUT IT'S LARGELY DUE TO UPWARD ADJUSTMENTS IN OUR QUANTITATIVE LOSS FACTORS resulting from the merger, particularly attributable to the longer-duration loan portfolio required. So in my view, the impact to CECL modeling is more or less a one-time adjustment. As such, all things equal, we expect lower levels of quarterly . As many of you are aware, there is a pending rule change that would eliminate the day-one provisioning. We will be able to reverse that charge in the future should it become effective. That would flow through earnings and add about 15 basis points to the CECL. Let me review the merger charges and cost saves so far. So far we've recognized $40 million in aggregate merger charges, and my expectation is we'll record up to an additional $10 million over the next quarter or two. Target was approximately $52 million, so expect to remain below that after the full recognition. In terms of cost saves, we are on track. First thing I want to explain is that the second quarter was a mixed bag. just one month of a combined expense base and specific emergency charges. Calibrating for those items, our expense base is what I've expected. Going forward, as a 100% combined company, 2025 quarterly expenses projected in the $55 million range, while in 26, the quarterly run rate is likely to be slightly higher, 56 to 57 million. And these projections are consistent. The achievement are 35% previously . Just the other income line for a moment. Pre merger connect one standalone was running at four to five million on a merge basis. That's going to go up to six point seven million per quarter for the next few quarters. What thing can you build of our SBA business market? Well, we also expect both lie to be an increasing source of gains on sale. Let me talk a little about the net interest margin. You know, as always, there are many moving parts, but overall we expect continued expansion. THOSE MOVING PARTS INCLUDE THE MERGER AND PURCHASE ACCOUNTING, ORGANIC WIDENING AS OUR DEPOSIT MIX AND LOW PRICING CONTINUE, SUBDEBT ISSUANCE WE JUST DID AND REDEMPTIONS COMING UP AND SET RATE CUTS. SO A LOT OF MOVING PARTS THERE. OUR COMPETITIONS CALL FOR AN APPROXIMATE INCREASE TO OUR MARGIN OF 10 BASIS POINTS FOR EACH OF THE THIRD AND FOURTH QUARTERS VERSUS THE 3.06 REPORTED TO. THAT RESULTS IN AN INTEREST MARGIN OF ABOUT 325 FOR THE further expansion expected from 26. That estimate assumes just one rate cut in 25. In terms of projected turn on assets and return on tangible common equity, we're still comfortable with the previously announced 1.2% ROA, 15% return on tangible common equity as we enter 26, but we will refresh that analysis once we have a full quarter behind us. I'm hopeful for an even better outlook. The metrics saw significant improvement due to the merger and the work out in sale of certain impaired loans. Our non-performing asset ratio improved dramatically, just 0.28 percent from 0.51 percent a year ago. The ACL at the percentage of loans jumped to 1.4 percent from just 1 percent, although the significant increase reflects the non-accreditable mark. Charge-offs remained in a reasonable range at 22 basis order. There's no significant increase expected. CRE concentration ratio, as expected, it ticked up slightly to 438%. With the merger, reduced CRE composition in the loan portfolio and higher earnings projections, we anticipate a sub-400 level by the end of 2020. I know you'll have questions about loan growth. Frank spoke to it a little bit. Organically speaking, the loan portfolio has recently remained relatively flat, largely due to elevated payoffs. Having said that, we continue to see solid demand. The pipeline continues to grow. And along those lines, our capital remains strong to support growth. The Bancorp Tangible Common Equity Ratio stands above 8% at 8.1, will trend upwards with strong levels of sustained earnings, while the Bank CT Ratio today remains above 12%, down just a little from before the acquisition, and that reflects, first of all, lower risk-rated assets . With that, I'll turn it back over to Frank, and we'll take some of your questions.