ConnectOne Bancorp, Inc.

ConnectOne Bancorp, Inc. is a modern financial services company operating primarily through its bank subsidiary, ConnectOne Bank, which is a New Jersey-chartered commercial bank. The Company operates in the highly regulated banking industry, competing with numerous commercial banks, savings banks, savings and loan associations, money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, credit unions, and non-bank technology firms (fintech companies). The Company's market area includes the New York Metropolitan area and the Florida market served by its West Palm Beach office and Orlando loan production office.

The banking business is highly competitive. The Company faces substantial competition from institutions with greater financial resources, including larger commercial banks, savings banks, and savings and loan associations. The Company endeavors to compete by providing high quality personal service to clients, client access to decision-makers, and competitive interest rates and fees. The Company seeks to hire and retain quality employees who desire greater responsibility than may be available working for a larger employer.

The Company derives a majority of its revenue from net interest income, which is the difference between the interest received on loans and investment securities and the interest paid on deposits and borrowings. The Company offers a broad range of deposit and loan products and other banking services. Deposits serve as the primary source of funding for interest-earning assets, but also generate noninterest revenue through fees. The Company also generates noninterest revenue associated with residential, commercial and Small Business Administration loan originations, sales, loan servicing, late fees and merchant services.

The Company's loan portfolio is comprised of several segments. Commercial loans are loans made for business purposes, primarily secured by business assets. Commercial real estate loans, the largest component of the gross loan portfolio, totaled $8.1 billion ¹ at December 31, 2025, representing an increase of $2.2 billion ², or 37% ³, from the prior year-end, primarily driven by assets acquired in the FLIC merger. Commercial construction loans are loans to finance the construction of commercial or residential properties. Residential real estate loans saw a substantial increase of $961.3 million ⁴, or 385% ⁵, ending the year at $1.2 billion ⁶. Consumer loans are made to individuals for auto loans, cash reserve, credit cards and installment loans.

The Company offers a full suite of deposit products. Noninterest bearing demand deposit products include 'Totally Free Checking' and 'Simply Better Checking' for consumers and 'Small Business Checking' and 'Analysis Checking' for commercial clients. Interest-bearing checking accounts include 'Consumer Interest Checking' and 'Business Interest Checking'. Money market accounts provide a market rate of interest. Time deposits are for non-retirement and IRA accounts, generally with initial maturities ranging from 31 days to 60 months. The Company also utilizes brokered deposits and reciprocal deposit services through the IntraFi Network LLC and the NBID network. Total deposits were $11.2 billion ⁷ as of December 31, 2025, an increase of $3.4 billion ⁸ from December 31, 2024.

On June 1, 2025 ⁹, the Company completed the acquisition of The First of Long Island Corporation (FLIC). As part of this merger, the Company acquired 36 ¹⁰ branch offices located in Nassau and Suffolk Counties of Long Island, and the boroughs of New York City. In connection with the merger, the Company raised $200 million ¹¹ of capital through the issuance of subordinated debt. The Company did not repurchase any shares during 2025 ¹². As of December 31, 2025, shares remaining for repurchase under the program were 641,118 ¹³.

Net income available to common stockholders for the year ended December 31, 2025 was $74.4 million ¹⁴, an increase of $6.7 million ¹⁵, or 9.8% ¹⁶, compared to net income of $67.8 million ¹⁷ for 2024. Diluted earnings per share were $1.63 ¹⁸ for 2025, a 7.4% ¹⁹ decrease from $1.76 ²⁰ for 2024. Net interest income increased by $105.9 million ²¹, primarily due to a 39 basis-point ²² expansion in the net interest margin to 3.11% ²³ from 2.72% ²⁴ and by a $2.3 billion ²⁵, or 24.9% ²⁶, increase in average interest-earning assets primarily due to the FLIC merger.

A significant growth vector is the expansion of the residential portfolio. As part of a strategic initiative to grow the residential portfolio and increase the volume of loan sales, the Company is building an enhanced lending team focused on originating loans secured by 1-4 family properties and investing in technology to support those efforts. The Company also continues to expand geographically, having opened an office in West Palm Beach in August 2022 and a loan production office in Orlando in 2025.

Another key growth vector is the integration of the FLIC acquisition. The merger added 36 ²⁷ branch offices and a significant loan and deposit base. The Company expects that the integration will allow it to expand its presence in the Long Island and New York City markets. The Company also continues to invest in its fintech subsidiary, BoeFly, which provides a marketplace that connects franchisors, franchisees, and lenders, and has a nationwide presence through its digital business marketplace.

The filing does not contain specific margin or cost outlook targets for future periods.

The filing does not contain a specific operational outlook regarding supply chain, manufacturing capacity, or headcount strategy.

The Company's capital allocation strategy is focused on maintaining a solid capital foundation. The Company raised $200 million ²⁸ of capital through the issuance of subordinated debt in connection with the FLIC merger. The Company has a share repurchase program, but did not repurchase any shares during 2025 ²⁹. As of December 31, 2025, shares remaining for repurchase under the program were 641,118 ³⁰. The Company pays dividends on its common stock and its 5.25% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A.

A significant headwind is the concentration in commercial real estate loans. As of December 31, 2025, the Company had $8.1 billion ³¹ of commercial real estate loans, which represented 70.3% ³² of loans receivable. Based on the regulatory definition, commercial real estate loans represented 434% ³³ of the Bank's Tier 1 capital plus the allowance for credit losses on loans at December 31, 2025. The impact of remote work or hybrid work models on the metropolitan New York area commercial real estate market is uncertain, causing volatility in rents.

Another constraint is the significant portion of the loan portfolio that will reset over the next 24 months. As of December 31, 2025, approximately $2.4 billion ³⁴ of the loan portfolio, primarily originated during the low-interest-rate environment of 2021 and 2022, bears interest at rates that will reset during 2026 and 2027. An increase in interest rates applicable to these loans may negatively impact borrowers, increasing their costs and potentially making it more difficult for them to perform under their loan agreements.

The Company has a significant concentration in commercial real estate loans, which represented 434% ³⁵ of the Bank's Tier 1 capital plus the allowance for credit losses at December 31, 2025. A significant portion of the loan portfolio, approximately $2.4 billion ³⁶, is scheduled to reprice during 2026 and 2027, which could increase financial pressure on borrowers. The Company faces substantial competition from larger financial institutions and non-bank fintech companies, which may have greater financial resources. The Company's growth-oriented business strategy may require additional capital, and there is no assurance that it can be raised on favorable terms. The Company is subject to extensive government regulations, which are subject to change and could increase compliance costs.

Management's message emphasizes the successful integration of the FLIC merger and the resulting growth in assets, loans, and deposits. The tone is forward-looking, highlighting the expansion of the net interest margin and the strategic focus on growing core commercial operating accounts. Management highlights the increase in net interest income of $105.9 million ³⁷ and the 39 basis-point ³⁸ expansion in the net interest margin to 3.11% ³⁹. Key strategic priorities include continuing to grow the residential portfolio, investing in technology, and managing the significant concentration in commercial real estate loans.