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ConnectOne Bancorp, Inc.

CNOBP
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Business Summary

ConnectOne Bancorp, Inc. (CNOB) operates as a modern financial services company primarily through its wholly-owned subsidiary, ConnectOne Bank, with total assets of $14.0 billion . The Bank is a community-based, full-service New Jersey-chartered commercial bank that commenced operations in 2005 . It focuses on providing a full suite of deposit and loan products and services to small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and the Florida market, specifically served by its West Palm Beach office and Orlando loan production office . The company emphasizes a "branch-lite" model, leveraging continuous investments in technology and talent for efficient operations . CNOB generates the majority of its revenue from net interest income, which is the difference between interest earned on loans and investment securities and interest paid on deposits and borrowings . The company also owns BoeFly, Inc., a business-to-business fintech subsidiary that connects franchisors, franchisees, and lenders nationwide through a digital marketplace .

ConnectOne Bancorp's core business model revolves around traditional banking services, offering a broad range of deposit and loan products. Revenue is primarily derived from net interest income, supplemented by noninterest income from various fees such as insufficient funds, stop payments, wire transfers, safe deposit rentals, debit card income, and fees associated with residential, commercial, and Small Business Administration (SBA) loan originations, sales, and servicing . The company's customer segments include small to mid-sized businesses, high net worth individuals, professional practices, and consumer and retail clients . A key strategy involves cross-selling products and offering interest rate concessions on credit products for clients maintaining noninterest-bearing deposit accounts, which helps manage funding costs and supports loan growth .

The company's loan portfolio is segmented into commercial, commercial real estate, commercial construction, residential real estate, and consumer loans . As of December 31, 2025, commercial real estate loans constituted the largest component of the gross loan portfolio, totaling $8.1 billion , representing 70.3% of loans receivable . This segment includes multifamily loans ($3.477 billion ), nonowner-occupied commercial real estate ($2.762 billion ), owner-occupied commercial real estate ($1.572 billion ), and land loans ($349.125 million ). Residential real estate loans amounted to $1.211 billion , commercial loans were $1.566 billion , commercial construction loans totaled $623.902 million , and consumer loans were $2.017 million . The investment securities portfolio, primarily available-for-sale, had a fair value of $1.251 billion as of December 31, 2025 .

For the year ended December 31, 2025, ConnectOne Bancorp reported net income available to common stockholders of $74.4 million , an increase of 9.8% from $67.8 million in 2024 . Diluted earnings per share decreased by 7.4% to $1.63 in 2025 from $1.76 in 2024 . Total assets increased by $4.1 billion to $14.0 billion from $9.9 billion in 2024 . Total loans, including loans held-for-sale, grew by $3.2 billion to $11.5 billion from $8.3 billion in 2024 . Deposits increased by $3.4 billion to $11.2 billion from $7.8 billion in 2024 . The allowance for credit losses for loans was $154.3 million , an increase of $71.6 million, or 86.6%, from $82.7 million in 2024 . The allowance for credit losses for loans as a percentage of loans receivable was 1.35% in 2025, up from 1.00% in 2024 .

Year-over-year comparisons show significant shifts, largely driven by the acquisition of The First of Long Island Corporation (FLIC) on June 1, 2025 . Net interest income increased by $105.9 million , primarily due to a 39 basis-point expansion in the net interest margin to 3.11% from 2.72% in 2024 , and a $2.3 billion, or 24.9%, increase in average interest-earning assets . Noninterest expenses rose by $76.8 million , with merger-related expenses increasing by $32.9 million and salaries and employee benefits by $21.4 million . The provision for credit losses increased by $33.2 million , primarily due to an initial $27.4 million provision associated with the FLIC merger . Noninterest income increased by $18.3 million , benefiting from a $6.6 million Employee Retention Tax Credit and a $3.5 million gain from the curtailment of the FLIC defined benefit pension plan .

A significant operational development during the period was the acquisition of FLIC on June 1, 2025 . This merger added 36 branch offices in Nassau and Suffolk Counties of Long Island and New York City boroughs , approximately $0.4 billion in loans , and $0.4 billion in deposits . The acquisition resulted in $11.9 million in goodwill . The company also integrated 206 former FLIC employees, increasing its employee base by approximately 28% . The company issued $200 million in fixed-to-floating rate subordinated notes on May 15, 2025, with an initial interest rate of 8.125% annually .

Business Outlook

Management's specific guidance for the upcoming period indicates that a 200 basis-point instantaneous increase in the general level of interest rates would decrease net interest income by 4.95% over the next one-year period, while a 100 basis-point instantaneous decrease would increase net interest income by 3.06% . Over the next three years, a 200 basis-point instantaneous increase in interest rates is estimated to decrease net interest income by 0.32%, and a 100 basis-point instantaneous decrease would increase it by 1.04% . The economic value of equity (EVE) is projected to decrease by 7.12% with an instantaneous rate shock of up 200 basis points, and increase by 0.28% with an instantaneous rate shock of down 100 basis points .

A major growth area for ConnectOne Bancorp is the anticipated re-pricing of a significant portion of its loan portfolio. Approximately $2.4 billion of the loan portfolio, primarily originated during the low-interest-rate environment of 2021 and 2022, is scheduled to contractually reprice during 2026 and 2027 . The company expects this re-pricing to have a favorable impact on its net interest income, net interest margin, and earnings per share . This represents a strategic opportunity to enhance profitability as these loans adjust to current market rates.

The company is also focused on geographic expansion, particularly in the Florida market. It opened an office in West Palm Beach in August 2022 and a loan production office in Orlando in 2025 . This expansion is supported by high-tech tools and services, allowing the Bank to extend its reach and support clients as they move into new markets . The goal is to continue expanding and doing business to support client growth in these robust markets .

Operationally, the company's margin trajectory is expected to benefit from the re-pricing of its loan portfolio. The 39 basis-point expansion in net interest margin to 3.11% in 2025 was driven by stable rates on interest-earning assets despite a declining rate environment, combined with a 58 basis-point decrease in the average cost of deposits and a 43 basis-point decrease in the average cost of borrowings . The company's strategic focus on growing core commercial operating accounts following the FLIC merger is expected to continue improving the overall cost of funds .

Regarding capital allocation, the company did not repurchase any shares during 2025 . As of December 31, 2025, 641,118 shares remained for repurchase under the existing program . The company has a series of outstanding perpetual preferred stock, 5.25% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A . Dividends on this preferred stock must be declared and paid for the most recent dividend period before any dividends can be paid on common stock or common stock repurchases can occur .

Risk Factors

ConnectOne Bancorp faces several material risks. A significant concentration in commercial real estate loans, totaling $8.1 billion or 70.3% of loans receivable as of December 31, 2025, exposes the company to higher credit risk due to dependence on business operations for repayment and balloon payment structures. Regulatory guidance indicates that the company's commercial real estate loans represent 434% of the Bank's Tier 1 capital plus the allowance for credit losses on loans , which is subject to scrutiny and could lead to requirements for increased capital levels or a reduction in concentration . Changes in interest rates pose a risk to net interest income, as different assets and liabilities react differently to market changes, potentially compressing margins if the cost of funds increases more rapidly than asset yields . The development and use of artificial intelligence (AI) present risks related to an uncertain and rapidly evolving legal and regulatory environment, potential for incorrect or biased output, disclosure of sensitive information, and infringement on intellectual property rights, which could lead to liability or reputational harm . Cybersecurity incidents, while not material to date, could have a material effect on operations and reputation given the company's reliance on digital delivery channels . The company's growth strategy, particularly through acquisitions like FLIC, carries integration risks, including challenges in combining cultures, retaining clients, and managing increased noninterest expenses and regulatory capital levels . The company's ability to pay dividends is subject to regulatory limitations, and failure to maintain adequate capital ratios could restrict distributions to the parent company and common stockholders .

Management Priorities

Management's message to shareholders emphasizes a growth-oriented business strategy, as evidenced by the recent acquisition of The First of Long Island Corporation (FLIC) and the resulting increase in assets and deposits. They highlight the importance of attracting and retaining skilled employees and integrating acquired workforces, noting the successful integration of 206 former FLIC employees in 2025 . Management is focused on leveraging technology to maintain a "branch-lite" and efficient operating model, while also expanding into new markets like Florida . They anticipate a favorable impact on net interest income, net interest margin, and earnings per share from the re-pricing of approximately $2.4 billion of the loan portfolio during 2026 and 2027 . The company's strategic priorities include continuing to expand and support clients as they grow, maintaining high asset quality, and managing interest rate risk through various strategies, including balancing asset and liability mixes and utilizing interest rate swap and cap agreements . Management also acknowledges the critical role of reputation in business success and strives to conduct business in a manner that enhances it .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Narrative Description of the Business
  2. [2] Item 1a, Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies — Nature of Operations
  3. [3] Item 1, Business — Narrative Description of the Business
  4. [4] Item 1, Business — Narrative Description of the Business
  5. [5] Item 7, MD&A — Overview and Strategy
  6. [6] Item 1, Business — Narrative Description of the Business
  7. [7] Item 1, Business — Products and Services
  8. [8] Item 7, MD&A — Loan Portfolio
  9. [9] Item 7, MD&A — Overview and Strategy
  10. [10] Item 1a, Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies — Loans
  11. [11] Item 7, MD&A — Loan Portfolio
  12. [12] Item 1A, Risk Factors — Risks Applicable to Our Business: We have a significant concentration in commercial real estate loans.
  13. [13] Item 7, MD&A — Loan Portfolio
  14. [14] Item 7, MD&A — Loan Portfolio
  15. [15] Item 7, MD&A — Loan Portfolio
  16. [16] Item 7, MD&A — Loan Portfolio
  17. [17] Item 7, MD&A — Loan Portfolio
  18. [18] Item 7, MD&A — Loan Portfolio
  19. [19] Item 7, MD&A — Loan Portfolio
  20. [20] Item 7, MD&A — Loan Portfolio
  21. [21] Item 7, MD&A — Investments
  22. [22] Item 7, MD&A — Operating Results Overview
  23. [23] Item 7, MD&A — Operating Results Overview
  24. [24] Item 7, MD&A — Operating Results Overview
  25. [25] Item 7, MD&A — Operating Results Overview
  26. [26] Item 7, MD&A — Financial Condition Overview
  27. [27] Item 7, MD&A — Financial Condition Overview
  28. [28] Item 7, MD&A — Financial Condition Overview
  29. [29] Item 7, MD&A — Financial Condition Overview
  30. [30] Item 7, MD&A — Financial Condition Overview
  31. [31] Item 7, MD&A — Financial Condition Overview
  32. [32] Item 7, MD&A — Allowance for Credit Losses and Related Provision
  33. [33] Item 7, MD&A — Allowance for Credit Losses and Related Provision
  34. [34] Item 7, MD&A — Allowance for Credit Losses and Related Provision
  35. [35] Item 7, MD&A — Allowance for Credit Losses and Related Provision
  36. [36] Item 7, MD&A — Operating Results Overview
  37. [37] Item 7, MD&A — Operating Results Overview
  38. [38] Item 7, MD&A — Operating Results Overview
  39. [39] Item 7, MD&A — Operating Results Overview
  40. [40] Item 7, MD&A — Operating Results Overview
  41. [41] Item 7, MD&A — Operating Results Overview
  42. [42] Item 7, MD&A — Operating Results Overview
  43. [43] Item 7, MD&A — Operating Results Overview
  44. [44] Item 7, MD&A — Operating Results Overview
  45. [45] Item 7, MD&A — Operating Results Overview
  46. [46] Item 7, MD&A — Operating Results Overview
  47. [47] Item 7, MD&A — Operating Results Overview
  48. [48] Item 7, MD&A — Operating Results Overview
  49. [49] Item 1, Business — Historical Development of Business
  50. [50] Item 1, Business — Historical Development of Business
  51. [51] Item 1, Business — Historical Development of Business
  52. [52] Item 1, Business — Historical Development of Business
  53. [53] Item 2, Business Combination
  54. [54] Item 1, Business — Human Capital
  55. [55] Item 7, MD&A — Subordinated Debentures
  56. [56] Item 7, MD&A — Interest Rate Sensitivity Analysis
  57. [57] Item 7, MD&A — Interest Rate Sensitivity Analysis
  58. [58] Item 7, MD&A — Interest Rate Sensitivity Analysis
  59. [59] Item 7, MD&A — Loan Portfolio Repricing
  60. [60] Item 7, MD&A — Loan Portfolio Repricing
  61. [61] Item 7, MD&A — Loan Portfolio Repricing
  62. [62] Item 1, Business — Our Market Area
  63. [63] Item 1, Business — Our Market Area
  64. [64] Item 1, Business — Our Market Area
  65. [65] Item 7, MD&A — Net Interest Income
  66. [66] Item 7, MD&A — Net Interest Income
  67. [67] Item 7, MD&A — Deposits
  68. [68] Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Share Repurchase Program
  69. [69] Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Share Repurchase Program
  70. [70] Item 1, Business — Dividend Restrictions
  71. [71] Item 1, Business — Dividend Restrictions
  72. [72] Item 1A, Risk Factors — Risks Applicable to Our Business: We have a significant concentration in commercial real estate loans.
  73. [73] Item 1A, Risk Factors — Risks Applicable to Our Business: We have a significant concentration in commercial real estate loans.
  74. [74] Item 1A, Risk Factors — Risks Applicable to Our Business: We have a significant concentration in commercial real estate loans.
  75. [75] Item 1A, Risk Factors — Risks Applicable to Our Business: We have a significant concentration in commercial real estate loans.
  76. [76] Item 1A, Risk Factors — Risks Applicable to the Banking Industry Generally: Changes in interest rates, as well as other actions the Federal Reserve may take may adversely affect our earnings and financial condition.
  77. [77] Item 1A, Risk Factors — Risks Applicable to Our Business: The development and use of artificial intelligence (“AI”) present risks and challenges that may adversely impact our business.
  78. [78] Item 1C, Cybersecurity — Cybersecurity Risk Management, Strategy and Governance
  79. [79] Item 1A, Risk Factors — Risks Applicable to Our Business: We have grown and may continue to grow through acquisitions.
  80. [80] Item 1A, Risk Factors — Risks Applicable to Our Business: The Bank’s ability to pay dividends is subject to regulatory limitations, which, to the extent that the Company requires such dividends in the future, may affect the Company’s ability to honor its obligations and pay dividends.
  81. [81] Item 1, Business — Human Capital
  82. [82] Item 1, Business — Our Market Area
  83. [83] Item 7, MD&A — Loan Portfolio Repricing
  84. [84] Item 7, MD&A — Loan Portfolio Repricing
  85. [85] Item 7, MD&A — Interest Rate Sensitivity Analysis
  86. [86] Item 1A, Risk Factors — Risks Applicable to Our Business: Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

Analysis on 5/20/2026