Financial Overview - ConnectOne Bancorp, Inc. has over $9.856 billion in assets[22] - The company acquired approximately $0.4 billion in loans and deposits from Greater Hudson Bank in January 2019[15] - Following the merger with Bancorp of New Jersey, the company acquired approximately $0.8 billion in loans and deposits[17] - The bank's largest committed relationship was $173.6 million, with the single largest loan outstanding at $60.0 million as of December 31, 2023[34] - As of December 31, 2023, the company had $6.5 billion in commercial real estate loans, representing 78.1% of total loans receivable[110] - The company's total assets were $9.856 billion as of December 31, 2023, approaching the $10 billion threshold which will subject it to heightened regulatory requirements[143] Revenue and Income - The company offers a broad range of deposit and loan products, generating revenue primarily from net interest income[27] - Net income available to common stockholders for the year ended December 31, 2023 was $81.0 million, a decrease of $38.2 million, or 32.1%, compared to net income of $119.2 million for 2022[199] - Diluted earnings per share for 2023 were $2.07, reflecting a 31.2% decrease from $3.01 for 2022[199] - Fully taxable equivalent net interest income for 2023 totaled $258.3 million, a decrease of $46.3 million, or 15.2%, from 2022[202] - The net interest margin contracted by 87 basis points to 2.82% in 2023 from 3.69% in 2022, primarily due to a 199-basis point increase in the average cost of deposits[202] Loan Portfolio and Risks - Approximately 64.5% of the commercial real estate loans, or $3.8 billion, were originated in the past three years, indicating a significant portion of unseasoned loans[115] - The company may face increased lending risks due to the significant growth in its loan portfolio, particularly in commercial real estate[115] - The ongoing COVID-19 pandemic has created economic uncertainty, potentially impacting the company's loan repayment rates and overall financial condition[105] - The company targets small-to medium-sized businesses, which may be more vulnerable to economic downturns, affecting their ability to repay loans[116] - The company must implement heightened risk management practices due to high concentrations of commercial real estate loans[113] Employee Development and Culture - As of December 31, 2023, the company had 487 full-time employees and 12 part-time and temporary employees[40] - In 2023, 289 employees participated in leadership and mentoring programs within ConnectOne University[43] - The company sponsored two employees to attend the Stonier Graduate School of Banking in 2023[44] - In 2023, 58 employees were promoted into new roles, emphasizing internal growth[49] - The company offers a tuition reimbursement program for up to $5,250 in tuition expenses related to approved business-related coursework[46] Regulatory Environment - The Dodd-Frank Act requires capital rules that apply to bank holding companies, impacting the company's capital requirements[60] - The Economic Growth, Regulatory Relief and Consumer Protection Act increased the asset threshold for stress tests from $10 billion to $250 billion[62] - The company is subject to examination by the Federal Reserve System and must comply with various regulatory requirements[54] - The Company and the Bank are required to maintain a leverage ratio of 4% as part of the New Rules implementing Basel III[71] - The New Rules require a capital conservation buffer of 2.5% composed entirely of CET1, on top of the minimum risk-weighted asset ratios[72] Capital and Financial Management - The Company has a Common Equity Tier 1 Capital Ratio of 7%, a Tier 1 Capital Ratio of 8.5%, and a Total Capital Ratio of 10.5%[77] - The capital conservation buffer required is 2.5%, and failure to maintain it could limit dividend payments and equity repurchases[133] - The Company accrued $2.1 million as of December 31, 2023, related to a special assessment for the Deposit Insurance Fund following the closures of Silicon Valley Bank and Signature Bank[89] - The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods starting January 1, 2024[89] Competition and Market Position - The company faces substantial competition in loan origination and deposit attraction, which may adversely affect profitability[119] - Increased competition for deposits may adversely affect the company's ability to generate necessary funds for lending operations[123] - Recent events in the financial services industry have increased competition for deposits and could impact the company's stock price[145] Shareholder and Stock Management - The Company repurchased a total of 904,152 shares during the year ended December 31, 2023, with 933,488 shares remaining for repurchase under the program[179] - The average price paid per share for repurchases in the fourth quarter of 2023 was $21.17[180] - As of December 31, 2023, the Company had 697 stockholders of record[177] - The Company has a share repurchase program authorized for up to 2,000,000 shares, which may be modified or suspended at the Company's discretion[179] Cybersecurity and Risk Management - The Company has not experienced any cybersecurity incidents that have materially affected its business strategy or financial condition to date[165] - The Company's cybersecurity risk management is overseen by the management IT Committee, which includes key executives such as the Chief Compliance Officer and Chief Technology Officer[165] - The Company maintains insurance that may cover expenses and losses incurred from cybersecurity incidents[170] Economic and Market Conditions - A sustained increase in market interest rates could compress the company's net interest margin and adversely affect earnings[150] - The company faces liquidity risks that could impede its ability to meet obligations and capitalize on growth opportunities[126]

Financial Performance - Net income available to common stockholders for Q3 2023 was $19.9 million, down from $27.4 million in Q3 2022, representing a decrease of 27.4%[150] - Diluted earnings per share for Q3 2023 were $0.51, compared to $0.70 for Q3 2022, a decrease of 27.1%[150] - For the nine months ended September 30, 2023, net income available to common stockholders was $63.2 million, down from $88.1 million in the same period of 2022, a decrease of 28.2%[151] - Diluted earnings per share for the nine months ended September 30, 2023 were $1.61, compared to $2.23 for the same period in 2022, a decrease of 28%[151] Interest Income and Margin - Fully taxable equivalent net interest income for Q3 2023 decreased by $15.6 million, or 19.8%, compared to Q3 2022[153] - The net interest margin contracted to 2.76% in Q3 2023 from 3.68% in Q3 2022, a decrease of 92 basis points[153] - For the nine months ended September 30, 2023, fully taxable equivalent net interest income decreased by $30.2 million, or 13.4%, compared to the same period in 2022[154] - The net interest margin for the nine months ended September 30, 2023 was 2.85%, down from 3.76% in the same period of 2022, a decrease of 91 basis points[154] - The company reported a net interest spread of 2.12% for the nine months ended September 30, 2023, compared to 3.51% for the same period in 2022[1][3] Assets and Loans - Total interest-earning assets increased to $9.09 billion in Q3 2023 from $8.50 billion in Q3 2022[158] - Total assets as of September 30, 2023 were $9.63 billion, compared to $9.03 billion as of September 30, 2022[158] - Total gross loans as of September 30, 2023, amounted to $8.2 billion, reflecting an increase of $79.0 million or 1.0% compared to December 31, 2022[171] - Average loans receivable increased to $8,169,139 thousand in Q3 2023 from $7,580,176 thousand in Q3 2022, representing an increase of 7.8%[179] Noninterest Income and Expenses - Noninterest income for the nine months ended September 30, 2023, totaled $9.8 million, slightly up from $9.7 million for the same period in 2022[166] - Noninterest expenses increased to $106.1 million for the nine months ended September 30, 2023, compared to $93.1 million for the same period in 2022, marking a rise of $13.0 million[168] Credit Losses and Charge-offs - The allowance for credit losses for loans was $88.2 million as of September 30, 2023, down from $90.5 million as of December 31, 2022[173] - Net charge-offs for the nine months ended September 30, 2023, were $8.1 million, compared to $0.9 million for the same period in 2022[175] - Total charge-offs for the nine months ended September 30, 2023, were $8,089 thousand, compared to $989 thousand for the same period in 2022, indicating a significant increase in charge-offs[179] - The allowance for credit losses (ACL) as a percentage of loans receivable was 1.08% as of September 30, 2023, down from 1.16% as of September 30, 2022[179] - Provision for credit losses on loans for the nine months ended September 30, 2023, was $5,721 thousand, compared to $13,816 thousand for the same period in 2022, indicating a decrease in provisions[179] Market Conditions and Securities - Net unrealized losses on securities available-for-sale increased to $87.7 million as of September 30, 2023, from $61.8 million as of December 31, 2022, primarily due to changes in market conditions and interest rates[187] - The average securities portfolio decreased by $17.0 million to approximately $723.4 million, or 8.0% of average total interest-earning assets, from 8.7% in the previous year[186] Capital and Liquidity - The Company's stockholders' equity was $1.2 billion as of September 30, 2023, an increase of $9 million from December 31, 2022, primarily due to a $44 million rise in retained earnings[210] - The tangible common equity ratio improved to 9.11% as of September 30, 2023, up from 9.04% as of December 31, 2022[210] - Cash and cash equivalents totaled $253.3 million as of September 30, 2023, reflecting an increase of $15.0 million from December 31, 2022[203] - As of September 30, 2023, liquid assets totaled $515.6 million, representing 5.3% of total assets, down from $760.0 million (7.9%) as of December 31, 2022[201] - Total deposits increased by $81.9 million, or 1.1%, to $7.4 billion as of September 30, 2023, driven by increases in interest-bearing and NOW deposits[205] - The Company reported a Tier 1 risk-based capital ratio of 11.98% as of September 30, 2023, exceeding the minimum requirement of 6.00%[216] - Total risk-based capital for the Company was $1.197 billion, with a ratio of 13.90% as of September 30, 2023, above the minimum requirement of 8.00%[216] - The Bank's total risk-based capital was $1.156 billion, with a ratio of 13.43% as of September 30, 2023, also exceeding the minimum requirement[217] - The Bank had aggregate available and unused credit of approximately $3.3 billion as of September 30, 2023, after accounting for $1.5 billion in outstanding borrowings[202] - The Company had outstanding commitments to extend credit of approximately $1.2 billion as of September 30, 2023[202] Interest Rate Sensitivity - The estimated impact of a 200 basis-point increase in interest rates would decrease net interest income by 8.20% over the next year, compared to a decrease of 2.22% estimated as of December 31, 2022[192] - The economic value of equity (EVE) would decrease by 16.49% with an instantaneous rate shock of up 200 basis points as of September 30, 2023[194] Nonaccrual Loans - Nonaccrual loans increased to $56,059 thousand as of September 30, 2023, from $44,454 thousand as of December 31, 2022, reflecting a rise of 26.5%[183] - The ratio of nonaccrual loans to total loans receivable rose to 0.69% as of September 30, 2023, compared to 0.55% as of December 31, 2022[184]

Financial Performance - Net income available to common stockholders for Q2 2023 was $19.9 million, down from $30.8 million in Q2 2022, representing a decrease of 35.5%[149] - Diluted earnings per share for the six months ended June 30, 2023, were $1.10, compared to $1.53 for the same period in 2022, a decline of 28.1%[150] - Noninterest income for the six months ended June 30, 2023, was $6.2 million, down from $6.4 million in the same period of 2022[1] - Noninterest expenses increased to $70.3 million for the six months ended June 30, 2023, compared to $60.9 million for the same period in 2022[1] Interest Income and Margin - Net interest income for Q2 2023 decreased by $11.5 million, or 15.1%, compared to Q2 2022, primarily due to a 276 basis-point increase in rates paid on interest-bearing deposits[152] - For the six months ended June 30, 2023, net interest income decreased by $14.5 million, or 9.9%, compared to the same period in 2022[153] - The net interest margin contracted to 2.81% in Q2 2023 from 3.91% in Q2 2022, reflecting a 110 basis-point decrease[152] - The net interest margin for the six months ended June 30, 2023, was 2.89%, down from 3.81% in the same period of 2022[1] - The company reported a net interest spread of 2.18% for the six months ended June 30, 2023, compared to 3.62% for the same period in 2022[1] Asset and Loan Growth - Total interest-earning assets increased to $9.23 billion in Q2 2023 from $7.81 billion in Q2 2022, an increase of 18.2%[156] - The average balance of total loans increased to $8.15 billion in Q2 2023 from $7.01 billion in Q2 2022, an increase of 16.3%[156] - Gross loans totaled $8.16 billion as of June 30, 2023, reflecting an increase of $47.1 million or 0.6% from December 31, 2022[1] - Average loans receivable increased to $8,140,859 thousand in Q2 2023 from $7,007,207 thousand in Q2 2022, representing a growth of 16.2%[1] Tax and Expenses - The company reported a $6.7 million decrease in income tax expense for the first half of 2023 compared to the same period in 2022[150] - Noninterest expenses increased by $3.7 million in Q2 2023 compared to Q2 2022, contributing to the decline in net income[149] Credit Quality - The allowance for credit losses for loans was $89.2 million as of June 30, 2023, a decrease of $1.3 million from December 31, 2022[1] - Net charge-offs for the six months ended June 30, 2023, were $5.5 million, compared to $0.5 million for the same period in 2022[1] - Total charge-offs for the six months ended June 30, 2023, were $5,602 thousand, compared to $576 thousand for the same period in 2022, indicating a significant increase in charge-offs[1] - Nonaccrual loans rose to $51,496 thousand as of June 30, 2023, from $44,454 thousand as of June 30, 2022, reflecting an increase of 2.3%[1] - The ratio of annualized net charge-offs to average loans receivable was 0.14% for the six months ended June 30, 2023, compared to 0.01% for the same period in 2022[1] - The allowance for credit losses (ACL) as a percentage of loans receivable was 1.09% as of June 30, 2023, down from 1.14% in the prior year[1] - Nonperforming assets to total assets ratio increased to 0.53% as of June 30, 2023, from 0.46% in the previous year[1] Capital and Liquidity - Total assets of the company as of June 30, 2023, were $9.77 billion, up from $8.32 billion as of June 30, 2022, an increase of 17.5%[156] - Total assets increased to $9.73 billion as of June 30, 2023, compared to $8.29 billion as of June 30, 2022[1] - As of June 30, 2023, liquid assets totaled $591.8 million, representing 6.1% of total assets, down from $760.0 million (7.9%) as of December 31, 2022[198] - Total deposits increased by $181.7 million, or 2.5%, to $7.5 billion as of June 30, 2023, primarily due to increases in time deposits and interest-bearing deposits[202] - Cash and cash equivalents rose to $319.9 million, an increase of $51.6 million from $268.3 million as of December 31, 2022[200] - Stockholders' equity was $1.2 billion as of June 30, 2023, an increase of $20.6 million from December 31, 2022, driven by retained earnings[207] - The tangible common equity ratio improved to 9.19% as of June 30, 2023, up from 9.04% as of December 31, 2022[209] - Tier 1 leverage capital for the Company was $1,023.3 million, representing a ratio of 10.62% as of June 30, 2023, exceeding the minimum requirement of 4.00%[214] - Total risk-based capital for the Bank was $1,145.98 million, with a ratio of 13.33% as of June 30, 2023, above the minimum requirement of 8.00%[215] Market Conditions and Risks - Net unrealized losses on securities available-for-sale amounted to $64.6 million as of June 30, 2023, compared to $61.8 million as of December 31, 2022, due to changes in market conditions[1] - The estimated impact of a 200 basis-point increase in interest rates would decrease net interest income by 1.87% over the next year[1] - The economic value of equity (EVE) would decrease by 12.72% with an instantaneous rate shock of up 200 basis points as of June 30, 2023[1] - The Company had aggregate available and unused credit of approximately $3.3 billion as of June 30, 2023, after accounting for $1.4 billion in outstanding borrowings[199] - The Bank's borrowing capacity included $2.9 billion from the Federal Home Loan Bank and $1.3 billion from the Federal Reserve Bank of New York[199]

Financial Performance - Net income available to common stockholders for Q1 2023 was $23.4 million, down from $29.9 million in Q1 2022, representing a decrease of 21.1%[148] - Diluted earnings per share decreased to $0.59 in Q1 2023 from $0.75 in Q1 2022, a decline of 21.3%[148] - Noninterest income totaled $2.8 million in Q1 2023, down from $3.1 million in Q1 2022, with adjusted noninterest income decreasing by $0.7 million[157] - Noninterest expenses increased to $34.9 million in Q1 2023, up from $29.2 million in Q1 2022, an increase of 19.2%[158] - Income tax expense decreased to $9.1 million in Q1 2023 from $11.4 million in Q1 2022, reflecting lower income before taxes[159] - The effective tax rate for Q1 2023 was 26.7%, slightly up from 26.6% in Q1 2022[159] Loan and Credit Quality - As of March 31, 2023, gross loans totaled $8.1 billion, an increase of $32.0 million or 0.4% compared to December 31, 2022[161] - The composition of the loan portfolio included 71.7% in commercial real estate and 17.3% in commercial loans as of March 31, 2023[161] - As of March 31, 2023, the allowance for credit losses (ACL) for loans was $87.0 million, a decrease of $3.5 million from $90.5 million as of December 31, 2022[163] - The provision for credit losses was $1.0 million for the three months ended March 31, 2023, compared to $1.5 million for the same period in 2022, reflecting modest loan growth[164] - Net charge-offs for the three months ended March 31, 2023, were $4.5 million, significantly higher than $0.2 million for the same period in 2022[165] - The ACL as a percentage of loans receivable was 1.07% as of March 31, 2023, down from 1.12% as of December 31, 2022[165] - Nonaccrual loans amounted to $47.7 million as of March 31, 2023, compared to $44.5 million as of December 31, 2022[172] Asset and Capital Management - Average loans receivable increased to $8.12 billion for the three months ended March 31, 2023, from $6.87 billion in the same period of 2022[168] - The Company's stockholders' equity was $1.2 billion as of March 31, 2023, an increase of $12.2 million from December 31, 2022, primarily due to retained earnings[201] - The tangible common equity ratio as of March 31, 2023, was 8.87%, down from 9.04% as of December 31, 2022[201] - The Bank's total risk-based capital ratio was 13.27% as of March 31, 2023, exceeding the minimum requirement of 8.00%[209] - The Company aims to balance capital retention for future growth while providing attractive long-term returns to stockholders[205] Liquidity and Deposits - As of March 31, 2023, liquid assets totaled $827.7 million, representing 8.1% of total assets and 9.6% of total deposits and borrowings, an increase from $760.0 million (7.9% of total assets) as of December 31, 2022[190] - Total deposits increased by $396.6 million, or 5.4%, to $7.8 billion as of March 31, 2023, driven by increases in time deposits and interest-bearing deposits[195] - Cash and cash equivalents rose to $562.4 million as of March 31, 2023, up $294.1 million from $268.3 million as of December 31, 2022[193] Interest Rate Sensitivity - Fully taxable equivalent net interest income decreased by $3.0 million, or 4.3%, from Q1 2022, primarily due to a 71 basis-point decrease in net interest margin from 3.71% to 3.00%[150] - The net interest income simulation model estimated that a 200 basis-point increase in interest rates would decrease net interest income by 0.63% over the next year[181] - The economic value of equity (EVE) would decrease by 12.16% with a 200 basis-point instantaneous increase in interest rates as of March 31, 2023[183] Other Assets - As of March 31, 2023, net unrealized losses on securities available-for-sale were $57.3 million, down from $61.8 million as of December 31, 2022[176] - The Bank's access to the Federal Reserve Bank of New York increased to $1.2 billion from $0.1 billion as of March 31, 2023, reflecting additional pledged loans[192] - The Company had aggregate available and unused credit of approximately $1.2 billion as of March 31, 2023, after accounting for $1.4 billion in outstanding borrowings[191] - Total goodwill and other intangible assets were approximately $215.3 million as of March 31, 2023, slightly down from $215.7 million as of December 31, 2022[201] - The company maintains a diversified loan portfolio to manage asset quality and credit risk effectively[169]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Fiscal Year Ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Transition Period from to Commission File Number: 001-40751 ConnectOne Bancorp, Inc.(Exact name of registrant as specified in its charter) New Jersey 52-1273725 (Stat ...